Mel's Blog

January 11, 2012 Market News

January 11th, 2012 9:32 AM by Mel Samick

Tim Tebow has dominated NFL headlines, including last night's stunning victory over the Steelers, and his name has perhaps launched a new English word, "tebowing." What does it mean? To "tebow" is "to get down on a knee and start praying, even if everyone else around you is doing something completely different." That's according to, your new internet home for tebowing. This trend of tebowing has reached a frenzy and so don't be surprised by someone doing an impromptu tebow act in a public place. A few high school teens in N.Y. were suspended recently for such an act.

The markets were somewhat pleasantly surprised by the strong unemployment data on Friday. U.S. unemployment declined to the lowest level in almost three years, lifting hopes that 2012 may bring a stronger recovery to the U.S. economy. The employment report on Friday showed the unemployment rate falling to 8.5 percent, new jobs up by 200,000, rising hourly wages, and an expanded work week. At present, the U.S. economic outlook appears to be improving with many positive reports showing signs of steady growth. The stock markets are supporting this outlook with mild gains this year. The biggest risks are the slow U.S. housing recovery and the crisis in Europe.

The Federal Reserve sent a letter to the Congressional Banking Committees stating that tight mortgage-lending standards threaten to hold back the economy. The letter asserts that restoring the health of the housing market is a necessary part of a broader strategy for economic recovery. The Fed signaled support for more aggressive use of Fannie Mae and Freddie Mac to strengthen the housing recovery. This assessment goes contrary to the recent hike in guarantee fees, and in essence mortgage rates, by Congress, to fund a payroll tax extension. Renewed MBS purchases would be complimentary to another push on housing policy, which is also getting more attention again. NY Fed President Dudley gave a detailed speech on housing policy last week. His speech offers a number of proposals, including expansion of the HARP refinance program and new tax credits for home purchases, but the one that is most likely to see the light of day is support for turning distressed homes owned by the agencies into rental homes. Some experts believe that this could result in a boost to home price growth of up to 1 percentage point over the next couple of years. Potential homebuyers are still postponing their plans and prefer to rent while the cost to rent a home in the U.S. continues to rise while the cost to buy a home is at record lows. The national apartment vacancy rate fell to 5.2% in 4Q11, the lowest level since late 2001. This is what is causing an increase in rental rates.

The US economic outlook has improved a bit. Some of the positive economy reports include:

·       The rate of unemployment fell to 8.5 percent in December, down from an upwardly revised 8.7 percent in November.

·       Non-farm payrolls were up 200,000, which is double the 100,000 improvement in November.

·       Factory orders rose 1.8% in November after falling 0.2 percent in October.

·       The ISM manufacturing index for December was 53.9, up from 52.7 in November.

·       Growth in construction spending in November was 1.2 percent after a 0.2 percent decline in October.

GDP growth in Q4 2011 is forecasted to be above 3.0 percent, much higher than virtually anyone had thought in the dark days of the debt ceiling debacle back in August. And Friday's employment report was generally on the stronger side, especially in the household survey which showed hourly earnings were up 0.2 percent, after being flat in November. As a result of all this, several analysts have raised their Q1 GDP estimate to 2 percent and cut the forecast for the unemployment rate in late 2012 to 8.5 percent. Another positive relief is the overall lowering of debt at consumer levels despite growing government debt. Consumers were seen paying down their debts in the fourth-quarter across an increasing number of loan categories, according to the American Bankers Association. Sometimes slow and steady wins the race, provided it is consistent.


Information provided by NYCB Capital Markets

Posted in:General
Posted by Mel Samick on January 11th, 2012 9:32 AM



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