Thoughts From Joe - September 27, 2013September 27, 2013 Posted by: Joe Morgan, CFA
Top EightCongress works toward a budget solution prior to October 17th. The Senate passed a stopgap measure on Friday to keep the government open without cutting funding to the health care law. Politics as usual on Capitol Hill. This fall's budget drama will be much less impactful than 2011's which ended with the Sequestration deal.
Home prices continue to rise according to the Case-Shiller index. Prices rose 1 percent in July and are up 12.4 percent over the previous 12 months. These data do not yet include the recent rise in mortgage rates, but it is unlikely any significant reversal is in the cards, given much of the recent activity is driven by investors.
General Motors returned to "investment grade" status by Moody's. Moody's upgraded the auto company to Baa3 from Ba1 today based on U.S. and Chinese sales projections and the company's high cash balances. After eight years as a junk-rated company, it has been a long round trip.
TARP funds are still owed by 113 banks. Small banks around the country still owe $2.7 billion as a result of the 2008 bailout fund. Bailouts are long and painful for all parties involved, as they should be.
The Fed readies one of its QE exit tools. The Fed's Fixed Rate Full-Allotment Reverse Repo (FRFARRP) program is intended to allow the Fed to lay off their Treasury positions to the market - primarily money market mutual funds. Effectively, the Fed will reissue Treasuries it has purchased by borrowing against them in the short-term markets. This will add much-needed supply for short-term investors but also puts the short-term markets under control of the Fed. The Fed needs to exit and relinquish its influence over market pricing. This will, instead, increase the government's power.
Lending continues to decline in Europe. Total loans outstanding to companies and households fell 2 percent last month compared to a year ago. This is the largest drop since the euro was introduced and the 16thmonth of consecutive declines. Maybe Europe is "growing" but it sure isn't healthy.
J.P. Morgan is paying the price for being a healthy bank - or so says the WSJ. This editorial does a good job of describing the bank's...Read More