Monday, June 14, 2010

Washington- Benefits rules from the White House due on Mon; State assistance 50 Billion(Sounds like Stimulus)

· Muni debt update – neg. WSJ article – says investors are ignoring warning signs in the ~$3T muni market, “raising the risk of a reckoning”….several municipalities are struggling financially….but muni prices aren’t reflecting any problems  (WSJ)     
· Muni debt market update – WSJ oped – “Governments have loaded up on debt, stretched out repayment times, and used slick maneuvers to avoid constitutional borrowing limits… State and local borrowing as a percentage of the country's GDP has risen to an all-time high of 22% in 2010 from 15%, with projections that it will reach 24% by 2012”   WSJ    
· Muni debt market update – NY State is preparing for a shutdown of the government in case an emergency spending bill fails to pass – Bloomberg 
· Banks set to lose swaps fight – the FT says banks are set to lose a major lobbying fight and will be forced to spin off their swaps trading desks; Paul Volcker has softened his opposition to the Lincoln amendment (FT)   
· Trading restrictions – deal close in Senate to enhance the “Volcker Rules” language and incorporate elements of the Lincoln derivatives legislation – Barney Frank told Reuters on Friday that the final bill will likely contain some form of the Merkley-Levin approach to the Volcker rule.  Reuters 
· Fed’s Bullard says the European sov debt crisis won’t delay Fed actions; Bullard says Europe isn’t large enough to derail the global economic recovery; inflation is contained now but could become a risk in the medium term – Reuters 
· Auto sales – optimism re rebounding auto sales fading; the bulk of the sales improvement so far this year has come from sales to rental car companies and other commercial fleets; consumer sales have been more tepid; consumer optimism has shown signs of retrenching; the top sales analyst at Ford said the company is seeing evidence that consumers are deferring decisions on major purchases – DJ
· Long Beach port in California shows surprise jump in traffic - The Long Beach and Los Angeles ports released preliminary figures for May Fri. Long Beach showed a 25 percent increase in container traffic from a year ago. Imports rose nearly 27 percent. Exports grew 15 percent, the highest level in two years.  Perhaps most interesting is that so-called "empties" jumped in May. Empties are ships heading out from the port empty to be filled with goods from Asia and brought back to American store shelves.  At the Long Beach port, empties rose 35 percent in May, but at the Port of Los Angeles, they were up 58 percent.  CNBC
· US housing – banks are picking up the pace on housing short sales (selling a property for less than the value of the mortgage); BoA tells CNBC they are focusing on short sales more than ever before.  Banks are becoming proactive w/shortsales.
· Defense industry braces for cuts to weapons purchasing budgets; while the Pentagon has already unveiled plans to cut $100B from its budget over the next 5 years, the focus has been on enhancing operating efficiencies; however, many think weapons budgets will be the next to see scrutiny (WSJ) 
· Corporate taxes – Dems are taking aim at several rules that grant tax breaks to corporations’ overseas earnings; some changes have already been included in legislation that is pending before the senate (the same bill would extend unemployment benefits and raise tax rates on carried interest) (WSJ) 
· Commercial real estate – now isn’t the time to hike CRE taxes; while the proposed carried interest tax increase has received the most press related to its impact on PE and HF managers, more than half of the impacted taxable pool will be in the world of CRE.  The tax would hurt real estate valuations and could imperil bank capital as $1.5T worth of CRE debt comes due in the next 5 years.  WSJ     
· Benefits rules from the White House due on Mon – the White House on Monday will issue new rules that strongly discourage employers from cutting health insurance benefits or increasing the costs of coverage to employees – NYT
· Health Care benefits – Obama facing rare defeat in Congress as it appears unlikely that the Senate will sign off on the president’s plan to extend unemployment benefits – CNBC 
· State assistance – Obama has urged Congress to pass legislation that would provide up to  $50B in aid for states to help offset the “devastating impact” of local budget cuts (NYT)
· High-speed traders – the CFTC has proposed a rule requiring futures markets to improve access to their exchanges, an attempt to eliminate advantages for customers who pay to have priority access; “the provision would ensure that cost is not used as a means to deny access to some market participants” – Bloomberg 
· For-profit education (this was out during trading on Fri) – the White House will delay the release of a proposed rule (dubbed gainful  employment) that would cut federal financial aid flowing to for-profit colleges (the for-profit education names traded higher on the news) – Bloomberg
· Fin Reg Reform – credit cards – opposition to the Durbin bill mounts – Rep Schultz has persuaded more than 80 colleagues to oppose a Senate plan to regulate debit-card “swipe” fees.  Bloomberg

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