Today's ReadsInteresting readings from today
The Fed surprised the market by promising to keep the rates low "at least through late 2014". Chairman Bernanke gave subtle hint that it may initiate QE3 at the post-FOMC press conference although there is disagreement among economists on whether the Fed will actually go for it. The reason for the Fed becoming more dovish was a reduction in their outlook for growth and inflation (but no unemployment rate) for 2012-13.
The painstaking negotiation between Greece and the bondholders continues. It was supposed to be over before last weekend ahead of the EuroFin meeting but that didn't happen (surprise?). Looks like there is broad agreement on the outline but disagreement over the details particularly how much "average" interest should be paid on the new debt - Greece wants 3.50% while bondholders want 4% but they might split the difference at 3.75%. It will be interesting to find out the final outcome, hopefully in the next few days. There pretty cool references on this top including,
(1) From BBC, Pretty nifty graphics on debt by major countries
(2) From FT, An Interative Timeline of Greek debt crisis
(3) From HSBC Global Research, "FAQ on Greek Debt Swap" published back in August 2011.
In his, State of the Union address, President Obama proposed relief to homeowners through mortgage refinancing but the likelihood this proposal becoming a law is minimal. This looks errily like HARP, which allows homeowners with negative equity to refinance without paying mortgage insurance but goes one step further, which is that it allows Non-Agency mortagage borrowers to refinance also without penalty. This could be bad for mortgage REITs but it is offset by the Fed's commitment to keep the rates low and possibly initiate QE3, which will likely focus on Agency MBS securities. The President's proposal could also bring relief on loan-level price adjustment (LLPAs) that Fannie Mae charges.
Notwithstanding today's worse than expected weekly jobless claims, the trend has been heading south. But it has not improved fast enough to dent the poverty rate in the country. According to the USDA that administers the Supplemental Nutrition Assistance Program (SNAP) aka Food Stamp, 44 million American receive that aid amounting to $134/month on average. Companies like SBUX, SVU, FDO and of course WMT are positioning themselves to get the most of $71.8 billion Food Stamp money - they already get 85% share.
