TOP STORIES:
Regulators
Fold; Lift 'Skin-In-The-Game' Rules To Keep Housing Bubble Dreams A - (www.zerohedge.com) Following the debacle of free-and-easy mortgage
money to anyone who could fog a mirror in the run-up to the last housing bubble
(remember that was just 6 years ago), regulators proposed 'skin-in-the-game'
rules which forced banks to hold certain amounts of the loans they made (as
opposed to securitizing and selling off that yieldy risk to the next greater
fool). Makes sense. However, in a major U-turn, with interest rates
rising, mortgage rates spiking, and home prices now collapsing once again, it
would appear the very same congress has folded. As the WSJ reports, more stringent lending
standards on top of the market environment leave the watchdogs, which include
the Fed and the FDIC, wanting to loosen a proposed requirement that banks
retain a portion of the mortgage securities they sell to investors (representing
a victory for an unusual alliance of banks and consumer advocates that opposed
the new rules). Undermining the initial goal of imposing market discipline,
former FDIC Chair Sheil Bair noted, "My sense is that Washington has
lost its political will for serious reform of the securitization market." Indeed
it has, Sheila.
Interest
Rates Play Havoc with Banks, Bonds and Borrowers - (mandelman.ml-implode.com) Within hours of Ben’s recent comments, the Fed
was tapering off on any talk of tapering in an effort to soothe the savage
beasts of the bond market who were fast becoming bearish. Of course,
rising interest rates have to be expected… eventually. Back in 2000, the
yield on the 10-year Treasury was roughly six percent. A decade before
that the yield on these same bonds was almost nine percent. Contrast those
numbers with where things were at the beginning of last August when the yield
on 10-year Treasuries was a paltry 1.48%. Was anyone thinking that number
would go down from there? This week, however, with investors still jittery and
feverish from Bernanke’s scary speech, Treasuries hit 2.70%, and analysts
appeared close to panic-stricken over the possibility of breaking through the
2.75% threshold. Luckily, the Fed’s back-pedaling led to the yield on
Treasuries settling back down to a much more comfortable 2.58%. If all of the
gyrations over a few tenths of a point here and there makes you feel like our
financial markets are perilous to say the very least… you’re dead on
right to feel that way. Can you envision what would happen if rates were
to return to historical levels, like six to nine percent? To the talking
heads on CNBC, based on how they reacted to the recent upticks, it might feel
just about like the end of the world would feel.
Deja
Vu On Margin Debt - (www.businessinsider.com)
Deutsche Bank has a monster
note out on margin debt that has been making the rounds. The conclusion
of the note is rather simple – today’s euphoric borrowing on margin to buy
stocks is reminiscent of past bubbly equity market periods (see here for more). The note reviews
commentary from the 1999 & 2007 periods and compares it to what’s being
said today. They found some eerie similarities: We prepared a collection
of press articles which were published around the key events during the past
financial crises as displayed in Figure 2 on page 2 above. Our key finding is
straight forward. Irrespective of the publishing date, the articles read alike
throughout the two major crisis periods, i.e. the “new technologies market
equity bubble” (1999-00) and the “Great/Global Financial Crisis” (2007-08) (see
Figure 6 on page 5 and Figure 7 on page 6). Most interestingly, litrally the
same content can be found in todays’ press as displayed in Figure 8 on page 7).
Universal phrases include: “A rising stock market encouraged more
investors to go into debt to buy stocks, sending margin debt levels past their
all-time high”.
Want a job? Good luck finding full-time work - (money.cnn.com) More people are landing jobs these days, but
they are often part-time or temp work. The number of Americans finding
part-time jobs has surged this year, with more than four times as many getting
only part-time work as opposed to full-time jobs, according to Labor Department
data. That's the opposite of what happened last year, when full-time hires far
outstripped part-time ones. At the same time, the ranks of temps has exploded:
A record 2.7 million people held these positions in June, up from 2.5 million a
year ago. It will be very interesting to see if this continued in July. The
government will report the latest figures about the job market on Friday. While
companies have been beefing up their temporary and part-time payrolls in recent
years, the trend has accelerated in 2013, with an especially large jump in
part-time hiring in June.
U.S.
Deepens Scrutiny of Banks' Roles in Commodities - (www.nytimes.com) Wall Street banks face the prospect of
increased scrutiny of their commodity businesses as U.S. regulators and
lawmakers on Tuesday pressed for a closer look at their roles in owning
warehouses and in trading everything from oil to metals. Under pressure from a
handful of lawmakers to explain why banks including JPMorgan Chase & Co.
and Goldman Sachs have been allowed to own warehouses and trade physical
commodities, regulators have scrambled this month to demonstrate that they are
tackling the issue. On Tuesday, Securities and Exchange Commission Chairwoman
Mary Jo White said for the first time that the SEC was looking into the
question of insider trading, a concept that has never been formally applied to
the broad commodity markets. Meanwhile a leading lawmaker called on the
Commodity Futures Trading Commission (CFTC) to explain what kind of oversight
it had of metals warehouses within the London Metals Exchange (LME) network,
many now owned by big banks and traders. Metals users testified before a Senate
panel last week that the owners are driving up costs by moving slowly to deliver
the metal.
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