The St. Louis Fred® on the cutting edge of data slap chop

I’m a big fan of the St. Louis Federal Reserve Fred® economic data website and they’ve developed and increase their access to more data through mobile apps and my favorite Microsoft® Excel® add-in’s and now they’ve added another feature to their arsenal of data medium offerings. This new offering surrounding their “Primary Mortgage Market Survey data” where one can view a data table or even more intuitively a slew of graphs based on filters parceled out by region or as an aggregate of Freddie Mac data allows user to gain access to key data and immediately refabricate the data into nice charts where recession times are shaded and percentage changes could be amended on the fly. Again a big two thumbs up to the folks at the St. Louis Fed for being at the cuff of leading with analytics.

http://m.research.stlouisfed.org/fred/release.php?rid=190

Is BOA preparing for Bankruptcy?

On Oct 19^th Reuters released an article title: “Is Bank of America preparing for a Chapter 11.” This story circulated the financial press like wild fire and although the author Christopher Whalen related some the of recent facts on how BOA had to foot over a $10 billion plus legal settlement and the recent decision of charging some customers $5 per month for using their debt card which in his opinion spurred the Occupy Wall Street movement. He does point out a recent administrative move of the bank moving all of the derivatives from Merrill Lynch subsidiary to the lead bank. Such move has drawn upon on wanted attention to the bank on the possibility of moving the risk to the Bank Holding Company at book value for the opportunity of FDIC coverage. Click here for the Bloomberg article about this.

Although many large institutions have done this move in the past, the question of timing comes to light on why now. I’m sure many investors such as Warren Buffet and the like might want to know as well. In my opinion BOA being a 2^nd largest bank by asset size in the United States I would highly doubt the FDIC would want to exposed to such a failure. However, there have been calls in place both on youtube and other social media to make a run on the bank in November 5^th and December 7^th of this year. Here is the original article from Reuters and below the 6 month stock price chart for BOA.

Source: http://www.reuters.com/article/2011/10/19/idUS200361147020111019

Time for the Fed to get their Dancing Shoes

At the upcoming meeting at Kansas City Fed's in Jackson Hole, Wyoming on August 26th – 28th, Bernanke and the Fed members announced at the same meeting in 2010 the QE2 program and many investors reacted to it by pushing down the long term bonds such as the 10yr and 30yr (see below).

However, ever since last month’s announcement of the Fed to keep rates low until 2013 investors have pushed down the 10yr and 30yr to historic lows. In 1961 the Fed put in place Operation Twist to artificially flatten the yield curve in order promote capital inflows and strengthen the dollar. However, the down fall of the program in 1961 was the duration of its intent.

Now with hopefully learning from the trails of 1961 the Fed might implement a form of QE3 by instilling another Operation Twist but with a few more enhancements. Since the intent of such a program is to instill capital inflows by more lending and tighten the short term rates the Fed might adopt to flatten out the long term rates between 10-30yr but how much lower can these yields go. Already the market currently has pushed them to historic lows and the ramifications are being felt throughout the banking sector as a refinance race has been kicked off and prepayments are inching up almost on a weekly basis.

The Federal Reserve Bank of San Francisco published a paper in Feb 2011 talking about the effects of operation twist on the last QE measure (take a look). Hopefully this week will come quick and with it a plan.

Is it true that Apple has more cash on hand than the Federal Government?

On Thursday July 28^th it became apparent and widely spoken that the innovators of the iPhone and other i products has more cash on reserve approximately, $75.88 billion than the US federal government operating balance of $73.77 billion. The government’s number is a different take from Apple’s since the operating balance of $73.77 billion represents the gap from reaching the current debt ceiling of $14.29 trillion. Apple has made huge head waves in terms of market capitalization and currently sits at number two behind Exxon Mobil at $363.25 billion. Let’s see if Apple can lend some of its cash to the government and become Uncle Sam’s bank. I highly doubt it.

http://business.financialpost.com/2011/07/28/u-s-balance-now-less-than-apple-cash/

Big loss for the US Treasury

On June 27^th the US Treasury Department announced the resignation of a top agency official; Jeffrey Goldstein, he will leave the domestic finance department at the end of July. He was overseeing the Dodd-Frank Act implementation and the chief architect of the Financial Stability Oversight Council. The reason released by the Treasury of his leave is because he wants to spend more time with his family, which is the yardstick reason many US government officials are given to resign. Goldstein, was a managing director of the World Bank and was a key person for the government’s involvement with Fannie Mae and Freddie Mac. Before he took the position of US Treasury official two years ago he had to pay at least $10.5 million to several investment partnerships according to his ethics filing. This doesn’t show a boast of confidence in the implementation and strategy for Dodd-Frank Act and the future of the US Treasury given a top official has left in such short time frame.

http://www.reuters.com/article/2011/06/28/usa-treasury-goldstein-idUSN1E75Q1ZG20110628

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aD6yvvScHUPM

Who's buying Treasuries?

Back on March 18^th 2011 I posted a chart showing that Bill Gross one of the largest bond managers of Pimco, has been dumping his Treasury holdings. This new chart shows that QE2 has been mainly funded (63%) by our very own Federal Reserve through their POMO program (see the 2^nd chart). So essentially the majority of the U.S. budget deficit is funded by central banks and with a sub 3% 10-year note who knows who else would buy bonds with the AFP reporting that the U.S. is already defaulting on their debt: http://ca.news.yahoo.com/china-ratings-house-says-us-defaulting-report-054309883.html

It seems from the 10-year breaking the 3% level that the treasury market might be pricing in some type of support for a QE3. I guess time will tell...

Fed takes on some TIPS

With the marginally dismal employment numbers and rumors flying around that housing is entering a second dip in which JPMorgan analysts revised their forecast for a housing bottom to occur sometime near mid 2011 at a peak trough decline of 34%. So with these somewhat uncertainties the Federal Reserve Bank of New York bought $1.44 billion in inflation-indexed Treasury debt today Tuesday June 7^th 2011 accounting for 19% of the dealer offered $7.77 billion in 2013-2041 Treasury Inflation Protected Securities. A significant headwind circulating the headlines around world are that energy and food prices are rising across the board due to inflation creeping in and staying around for the summer of 2011. So with this recent purchase does it mean that the Fed will continue to purchase more TIPS and continue quantitative easing measures? Here’s a simple Tip for our Fed stop spending money we don’t have. Here’s a look at the TIPS (an ETF tracked by Barclays) and the 10-year since 5/31/11’s announcement of the 9.1% unemployment rate: