Links: 2013-02-27

News links for 27 February 2013

Calculated Risk: New Home Sales at 437,000 SAAR in January

“The months of supply decreased in January to 4.1 months from 4.8 months in December.

The all time record was 12.1 months of supply in January 2009.”

Consumer Confidence Index® | The Conference Board

These are better numbers but they are recessionary when compared to past downturns.

“Consumers’ assessment of present day conditions improved in February. Those claiming business conditions are “good” rose to 18.1 percent from 16.1 percent, while those stating business conditions are “bad” decreased to 27.8 percent from 28.4 percent. Consumers’ appraisal of the labor market was mixed. Those saying jobs are “plentiful” increased to 10.5 percent from 8.5 percent, while those claiming jobs are “hard to get” edged up to 37.0 percent from 36.6 percent.”

Consumer Confidence: Better Than Forecast, But Still at Recession Levels

“Let’s take a step back and put Lynn Franco’s interpretation in a larger perspective. The table here shows the average consumer confidence levels for each of the five recessions during the history of this monthly data series, which dates from June 1977. The latest number reflects a recessionary mindset. It is virtually spot on the 69.4 average confidence of recessionary months.”

The 50-DMA Is Closing in Fast Crossing Wall Street

“The S&P 500 has been above its 50-day moving average since the start of the year. But due to the recent downturn, the index is getting very close to dipping below the 50-DMA.”

Bernanke’s Testimony Today Crossing Wall Street

This is the full text of Ben Bernake’s prepared remarks.

Bernanke Says Fed May Never Sell MBS – Real Time Economics – WSJ

““We could exit without ever selling, by letting [mortgage backed securities] run off,” he said. “That would be one strategy.””

Bernanke Defends Asset Buying as Benefits Outweigh Risks – Bloomberg

This is it exactly. Bernanke says that QE has risks but given the Fed’s dual mandate, he believes the benefits outweigh them.

Supreme Court Rejects Challenge to Surveillance Law – NYTimes.com

“The Supreme Court on Tuesday turned back a challenge to a federal law that broadened the government’s power to eavesdrop on international phone calls and e-mails.

The decision, by a 5-to-4 vote that divided along ideological lines, probably means the Supreme Court will never rule on the constitutionality of that 2008 law.

“Absent a radical sea change from the courts, or more likely intervention from the Congress, the coffin is slamming shut on the ability of private citizens and civil liberties groups to challenge government counterterrorism policies, with the possible exception of Guantánamo,” said Stephen I. Vladeck, a law professor at American University.”

Ron Johnson: John Boehner Would Lose Speakership If He Caves On Taxes To Avert Sequester

“”I don’t quite honestly think that Speaker Boehner would be speaker if that happens,” Johnson told Fox News of Boehner caving on taxes as part of a sequester replacement package. “I think he would lose his speakership.”

Johnson’s comments raise questions about Boehner’s leadership post for the second time in as many months. Similar claims were made during fiscal cliff talks in December, when some accused Boehner of being more concerned with protecting his job as speaker than with brokering a deal. The pressure on Boehner intensified after his proposal to avoid the fiscal cliff was rejected by members of his own party.”

Apple Stock-Split Rumor Pushes Shares Higher – MarketBeat – WSJ

I would see a share split as a negative sign now since Apple is declining. It would strike me as manipulation or desperation to get more retail buyers. I don’t see it.

“In a research note published this afternoon, Laurence Balter, an analyst at Oracle Investment Research, advocated for a split. Balter gained some traction in August when he recommended investors sell Apple shares. His call came about one month before the stock peaked.”

Calculated Risk: A few Comments on New Home Sales

For me, the most interest ing thing about housing in the US is how the housing recovery underpins asset values. People are no re-financing. A friend emailed me last night telling me their family plans to take advantage of low rates by refinancing. That will keep the recovery going, though I still question the quality of this longer-term.

It’s time to abolish the FHFA | Felix Salmon

“I’ve heard of regulators being captured by the organizations they’re supposed to be regulating — that happens all too frequently. But the situation at the FHFA seems to be even worse: it looks as though it has been captured by the banks which are extracting rents from the regulated organizations.

Indeed, it’s hard to think of a single good reason why the FHFA should exist at all.”

Andy Rubin shuts Google retail store rumors down, says feelings toward Firefox are “friendly”

“Rubin says Android was originally built because there was no open option, but things are changing. Ubuntu has come with a very intriguing suite of its own even if it has no major backers yet, and, well, there’s Firefox now. Tizen is still floating about, but for now it seems like more of an enthusiast project than anything. The options exist, and Google’s happy that there will be others challenging the very space that helped Android’s rise to prominence in the first place.

Competition is always exciting, and the users are the ones who ultimately win out in the end. We love us some Android, of course, and we’re excited to see how these other players will challenge Google to innovate and keep the interest of the mobile world for years to come.”

Google’s Andy Rubin Says No Need for Android Retail Stores – Ina Fried – Mobile – AllThingsD

“Despite reports that Google has been eyeing real estate for physical stores, Android chief Andy Rubin says the company really doesn’t need its own retail effort.

A few years ago, consumers needed to touch and feel devices, but these days they can often get the information they need to make a purchase decision by talking to friends and reading reviews.

“They don’t have to go in the store and feel it anymore,” Rubin said, during a roundtable with reporters at Mobile World Congress on Tuesday.”

iTunes, other digital providers boost music industry to first revenue growth in 13 years

“Once ravaged by free file-sharing, the global music industry appears to be on the comeback, as digital download services such as Apple’s iTunes boosted music revenues to $16.5 billion in 2012, the first year of industry growth since 1999.”

Top 40 hedge fund managers earn $16.7bn – Telegraph

“Michael Hintze of CQS Management, was London’s highest ranked hedge fund manager on the list. The Australian-born financier and philanthropist, who is also one of the Conservative Party’s biggest donors, earned $350m after generating 36pc returns on his flagship fund. Mr Hintze, who is a key sponsor of London’s Victoria & Albert Museum, has credited the Bank of England’s quantitative easing programme an crucial driver of the stock market rally.

But he was just number 11 on Forbes’ list. David Tepper who runs New Jersey-based Appaloosa Management earned $2.2bn, according to the research. Mr Tepper started buying shares in stricken banks, like Bank of America, at the apex of the financial crisis. His $15bn fund returned another 30pc last year boosting Mr Tepper’s reputation of being among the best investors of all time.”

The coming dollar bull run | Capital City | IFRe

“The dollar is up a bit less than 4.0% over a year against a trade-weighted currency basket, in substantial part because of economic weakness, fragility and radical policy in places like Japan, Europe and Britain.

It is remarkable that we should be entertaining the idea of an extended dollar bull run on the eve of “sequestration”, a program of mandatory federal budget cuts that highlights both US fiscal and political weakness.

Currencies are a relative game, however, and things elsewhere, as you may have heard, are not so hot.”

Mossberg’s Mailbox – When an iPad Isn’t Enough – Walt Mossberg – Mossberg’s Mailbox – AllThingsD

Walt Mossberg suggests this gentleman consider the Surface Pro after he found the iPad “useless for my purposes”. This mirrors what I wrote yesterday about what the Surface Pro can be used for. This is the perfect device to combine notebooks and tablets in one. And Microsoft needs to think about getting other manufacturers to make similar devices with Windows installed.

El Gobierno informa a Bruselas que el déficit público de 2012 fue del 6,7% | Economía | EL PAÍS

The Spanish government has released its 2012 numbers and the deficit has come in at 6.7%, above the target of 6.3%.

BBC News – Italy’s borrowing costs surge after election stalemate

“Italy sold the new 10-year government bonds at a yield of 4.83%, up from 4.17% at its last sale in January. The new five-year bond was sold at a yield of 3.59%, up from 2.94% in January.”

BBC News – Teleworking: The myth of working from home

“Yahoo has banned its staff from “remote” working. After years of many predicting working from home as the future for everybody, why is it not the norm?”

As sequester looms, public attention flags – CBS News

“With dramatic, across-the-board “sequestration” cuts slated to take effect Friday, most Americans believe the consequences of those reductions will have a “major effect” on the state of the U.S. economy, according to a new poll by Pew Research Center/Washington Post. But even as Americans overwhelming express negativity over how those cuts would impact the nation’s economy, the same survey indicates a sense of public fatigue over this latest in a series of dramatic fiscal debates coming out of Washington: Only 1 in 4 Americans say they’re following the story closely.”

Dear Mr. Dimon, Is Your Bank Getting Corporate Welfare? – Bloomberg

“JPMorgan receives a government subsidy worth about $14 billion a year, according to research published by the International Monetary Fund and our own analysis of bank balance sheets. The money helps the bank pay big salaries and bonuses. More important, it distorts markets, fueling crises such as the recent subprime-lending disaster and the sovereign-debt debacle that is now threatening to destroy the euro and sink the global economy.

How can all this be? Let’s take it step by step.”

BBC News – JP Morgan to cut up to 19,000 jobs

“JP Morgan Chase has said it plans to cut up to 19,000 jobs by the end of next year in its mortgage and community banking businesses.

The US bank revealed plans to reduce headcount by 3,000-4,000 at its consumer and community banking unit, and by 13,000-15,000 at its mortgage banking unit, in a presentation.

It expects about 4,000 losses to come this year, mainly through attrition, a spokeswoman said.”

Home prices climb in December, best yearly gain since 2006 | Reuters

“The S&P/Case Shiller composite index of 20 metropolitan areas rose 0.9 percent in December on a seasonally adjusted basis, topping expectations for a gain of 0.5 percent.

Prices in the 20 cities jumped 6.8 percent year-over-year, ahead of expectations for 6.6 percent and the best yearly gain since July 2006.

Atlanta and Detroit racked up their biggest yearly increases since 1991, when they were first tracked. Prices in the cities climbed 9.9 percent and 13.6 percent, respectively. New York was the only region to decline on a yearly basis, down 0.5 percent.”

China to tighten shadow banking rules – FT.com

“China is to rein in its fast-growing shadow banking system by requiring banks to provide extensive disclosures about the off-balance sheet investment products that they sell to customers, according to people briefed on the new rules.

The Chinese shadow banking system – credit flows beyond traditional bank loans – has increased fourfold in size since 2008 to about Rmb20tn ($3.2tn), or 40 per cent of gross domestic product. These flows were crucial in reviving the country’s growth last year, but banking analysts and rating agencies have warned that they pose an increasingly serious risk to Chinese economic stability.”

Goldman to begin fresh round of job cuts – sources | Capital City | IFRe

“Goldman Sachs Group Inc will begin a fresh round of job cuts as early as this week, sources familiar with the matter said on Monday, with its equities-trading business bracing for bigger cuts than fixed-income trading.

Last year, Goldman’s return-on-equity was 10.7%, an improvement from 2011, but still well below pre-financial crisis highs above 30%. Schwartz said he does not see Goldman’s returns last year as “aspirational for the long term.”

“I think the industry will migrate to higher returns because they will have to,” Schwartz said, adding that it might be “a question of excess capacity coming out of the industry over a period of time.””

Trade protectionism looms next as central banks exhaust QE – Telegraph

This is utter bollocks. As I have written here many times in the past, the release valve is the currency. The Fed controls short rates and exerts a dominant force on rates across the curve via inflation expectations. If the Fed wants to tackle inflation that comes from rising import costs or overheating domestic markets, then it can do so, but it has nothing to do with bond vigilantes. This kind of hackery is embarrassing. These people are fully out of paradigm.

AEP is right that the Fed would want to hold onto its bonds and that does have implications for their policy flexibility.

“In America, the Fed would face huge pressure to hold onto its bonds rather than crystalize losses as yields rise — in other words, to recoil from unwinding QE at the proper moment. The authors argue that it would be tantamount to throwing in the towel on inflation, the start of debt monetisation, or “fiscal dominance”. Markets would be merciless. Bond vigilantes would soon price in a very different world.”

Apple Stock Tanks Again — Getting Close To A New Low – Business Insider

“Here are some of the issues with Apple’s stock:

First, Apple’s earnings are no longer growing. On the contrary, this quarter, Apple’s earnings are expected to shrink year over year. Investors don’t pay a lot for the stocks of companies where earnings are shrinking.

Second, several reports have suggested that Apple has been cutting orders for this quarter for its most important product, the iPhone. “

The Drone War Doctrine We Still Know Nothing About – ProPublica

“The focus on American citizens overshadows a far more common, and less understood, type of strike: those that do not target American citizens, Al Qaeda leaders, or, in fact, any other specific individual.

In these attacks, known as “signature strikes,” drone operators fire on people whose identities they do not know based on evidence of suspicious behavior or other “signatures.” According to anonymously sourced media reports, such attacks on unidentified targets account for many, or even most, drone strikes.

Despite that, the administration has never publicly spoken about signature strikes. Basic questions remain unanswered.

What is the legal justification for signature strikes? What qualifies as a “signature” that would prompt a deadly strike? Do those being targeted have to pose a threat to the United States? And how many civilians have been killed in such strikes?”

A Plea for Growth to Europe’s Politicians – Forbes

“An alternative to relying on supply-side reforms to offset austerity is for countries that have a bit more room for fiscal manoeuvre to adopt a more expansive policy approach via fiscal stimulus.  This would mean countries with current account surpluses adopting policies that would consciously reduce these surpluses.  However, at present, these countries are instead planning further fiscal consolidation.

Perhaps the clearest statement of the policy approach of the euro area’s surplus countries was Bundesbank President Jens Weidmann’s speech last year titled “Rebalancing Europe”.  Weidmann believes that any attempt to reduce the current account surpluses of Germany and other “core” Euro area countries would be a bad idea.  Instead, he views Europe’s route to success as being one in which we compete with the US and China to run current account surpluses across the euro area.

For me, this position echoes the “mercantilist” approach that economists from Adam Smith onwards have rejected.  The euro area’s balance with the rest of the world has generally been close to balance. It has moved slightly into surplus lately but there is no reason to equate euro area current account surpluses with economic success.”

Calculated Risk: Case-Shiller: Comp 20 House Prices increased 6.8% year-over-year in December

“Data through December 2012, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, showed that all three headline composites ended the year with strong gains. The national composite posted an increase of 7.3% for 2012. The 10- and 20-City Composites reported annual returns of 5.9% and 6.8% in 2012. Month-over-month, both the 10- and 20-City Composites moved into positive territory with gains of 0.2%; more than reversing last month’s losses.”

Euro debt crisis looms again as Italians defy EU austerity demands – Telegraph

“It is unclear whether the European Central Bank (ECB) can continue to stand behind the Italian debt market under its Outright Monetary Transactions (OMT) scheme if there is no party able to deliver on austerity cuts and reforms demanded by Berlin and Brussels.

“People have forgotten that the OMT cannot be triggered without a vote in the German Bundestag. This is going to be a huge problem, and we may be back to the political stand-off between the North and South of Europe,” said Mr Persson.”

Italy shatters some comfortable eurozone assumptions | Gavyn Davies

“In Sunday’s election, at least a quarter of the electorate abstained, and another quarter voted for a party which is anti-austerity, anti-euro and anti-corruption, not necessarily in that order. Almost a third of the electorate still supports Silvio Berlusconi, who also ran on an anti-euro, anti-austerity ticket, with tax cuts thrown in. It is a stretch to imagine that this combustible mixture would end in a clear vote for the euro, and for “austerity”, in the event of an “ultimatum election” of the Greek variety.

Much will therefore hinge on the German attitude towards Italy in the months ahead. It will be very hard indeed for Angela Merkel to find much common ground with the anti-reformist government likely to emerge from the present Italian impasse. A grand coalition would represent a mix of two political strands, both of which she thoroughly abhors. Furthermore, she will certainly be under pressure from the Bundesbank to cut Italy very little slack in its fiscal targets. After all, Jens Weidmann was complaining only yesterday that France should stick to its fiscal targets more rigidly, despite the worrying economic data that have been emerging from the eurozone this year.

Still, Mrs Merkel may have some room for political manoeuvre within Germany, even in the months before her election in October. A majority of the German electorate may well support the Bundesbank’s basic views about fiscal austerity in the rest of the eurozone, but it is hard to imagine that this can be turned into a coherent political force before October. “

Why Marissa Mayer’s ban on remote working at Yahoo could backfire badly — Tech News and Analysis

“Yahoo says that its new edict banning remote working is necessary to build the right kind of culture. But how is making things less appealing for potential employees going to help Yahoo become more innovative?”