Rick Scott: Jennifer Carroll will help me get state moving again
Rick Scott announced State Rep. Jennifer Carroll as his running mate this morning during a news conference outside Jacksonville Naval Air Station and said she can help him get Florida’s economy moving again.
Scott stressed Carroll’s background, which includes 20 years in the Navy and experience as a businesswoman.
“We are going to have a lieutenant governor who goes out and talks to busineses every day to ask, ‘What can we do for you?’ ’’ Scott said.
Scott would not answer if he started talking with Carroll, a supporter of Scott’s primary opponent, Bill McCollum, before last week’s primary.
“We aren’t going to talk about everything we did,” Scott said.
At a Tuesday night campaign stop, Scott said he had selected his running mate and it was someone he had vetted for a long time.
Many politicians from around the area say that politically, the 51-year-old Republican lawmaker makes sense as Scott’s running mate.
“I just really think she adds a lot to the ticket. She is African-American, she is a female, and she is really sharp,” said state Sen. Stephen Wise, R-Jacksonville.
Rep. Mike Weinstein, R-Jacksonville, said her background working the halls of the Legislature makes her a good pick.
“The governor runs the executive [branch], but it would be a great advantage if the lieutenant governor knows the Legislature,” he said.
Carroll served as the deputy majority leader in 2003 and as the House majority whip, or the party’s chief vote counter, from 2004 to 2006.
Carroll served as chair of the African-Americans for McCollum steering committee and was in attendance at a recent McCollum rally in Jacksonville.
Florida high court strikes 3 amendments from ballot
TALLAHASSEE – The Florida Supreme Court sliced three proposed constitutional amendments from the ballot Tuesday and threw out a challenge to two more, setting the boundaries for the November vote.
In a series of opinions released Tuesday afternoon, justices struck down a legislative redistricting amendment, a measure challenging the federal health care law and a property tax measure. They also ordered a lower court to dismiss a challenge to a pair of citizen-initiative redistricting proposals, meaning the votes on those measures will go forward.
All three redistricting amendments deal with the rules lawmakers will face when they begin crafting the districts for legislative and congressional districts following the results of the 2010 Census.
Amendments 5 and 6, sponsored by the group Fair Districts Florida, are aimed at barring lawmakers from drawing politically gerrymandered districts. The Legislature countered with its own proposal, Amendment 7, arguing that the citizen proposals could endanger some districts drawn to preserve “communities of interest” or allow minority voters to elect representatives of their choice – a charge Fair Districts denies.
On a 5-2 vote, the court ruled that Amendment 7 would have allowed lawmakers to ignore a long-standing constitutional requirement that districts be contiguous, but that the ballot summary didn’t state that.
“This is a matter that should have been clearly and unambiguously stated in the ballot language. Failing this clear explanation, the voters will be unaware of the valuable right – the right to have districts composed of contiguous territory – which may be lost if the amendment is adopted,” the majority ruled.
Justices Barbara Pariente, Fred Lewis, Peggy Quince, Jorge Labarga and E.C. Perry joined the majority.
In a dissent, Chief Justice Charles Canady said the majority misread the amendment and was overstepping its bounds.
“The majority’s decision unduly interferes with a process that is fundamental to our constitutional system of democratic governance,” Canady wrote in an opinion joined by Justice Ricky Polston.
Incoming House Speaker Dean Cannon, R-Winter Park, said he respected the court.
“However, it’s terribly disappointing to have the work of the legislative branch demolished by a co-equal branch of government, especially when there’s no express authority in the constitution for their doing so,” he said.
In the case dealing with the citizen amendments, the court ordered the dismissal of a case filed by U.S. Reps. Corrine Brown, a Democrat from Jacksonville, and Mario Diaz-Balart, a Republican from Miami.
Brown and Diaz-Balart challenged Amendment 6, which deals with congressional districts. Legislators later successfully asked the circuit court hearing the case to add a challenge to Amendment 5, dealing with legislative districts.
Threat of ’serial attacks’
The court ruled that hearing the case after the Supreme Court already upheld the ballot language in an earlier advisory opinion would “encourage serial attacks on citizen initiatives.”
Four justices – Canady, Lewis, Quince and Labarga – joined the decision, Polston joined parts of it while saying the circuit court should hear parts of the case the Supreme Court didn’t touch on in its earlier decision, and Pariente and Perry recused themselves.
Brown and Diaz-Balart denounced the ruling in a joint statement issued late Tuesday.
“I wholeheartedly believe that Amendment 6 is merely a subtle attempt to dilute minority representation on a federal level,” Brown said. “… This amendment is nothing more than a deceitful attempt to turn the clock back to the days before 1992, when Florida did not have any African-American representation in Congress.”
House Democratic Leader Franklin Sands, D-Weston, hailed both redistricting decisions.
“The Florida Supreme Court today checked the arrogant abuse of power by Republican legislative leaders by ensuring that voters will have a reasonable opportunity to improve our state’s redistricting process,” he said.
Health care mandates stay
The health care amendment would have barred mandates for health care services in Florida, potentially challenging a provision in the federal health care law requiring citizens to buy insurance.
The state had asked the court to replace the entire amendment for a ballot summary it conceded was misleading, but the court ruled 5-2 that it would not, instead setting aside an unpublished 2004 opinion that allowed a summary to be replaced with the amendment itself.
“Our role in this process is as a reviewer of constitutional validity, not as an editor or author,” the court held.
In a dissent, Canady said the court should have followed the state’s advice.
“The courts should act with restraint when we are asked to interpose judicial power to bar the people from voting on a proposal submitted to them by their elected representatives,” he wrote, in a dissent joined by Polston.
The property tax measure, dealing with a break for non-homesteaded property, was also a 5-2 decision with Canady and Polston dissenting.
Incoming Senate President Mike Haridopolos, R-Merritt Island, questioned all four decisions.
“It is a sad day when more than 60 percent of the elected representatives of the people of the state of Florida can’t get ballot measures approved by the court, but special interest groups can,” he said.
brandon.larrabee@jacksonville.com,
Del Rio and Garrard are still sensing a Jaguars breakthrough
Forget David Garrard’s ill-timed interception, the nine penalties, the struggles in the red zone and the running game and the failure of the first-string defensive line to get any sacks.
Even though the starters trailed 13-9 late in the third quarter in Tampa Saturday night before the backups pulled out a 19-13 victory, coach Jack Del Rio was upbeat after the game.
So was Garrard. “This offense is definitely ready to start the season,” he said. “This team is ready to start the season.”
The regular season starts in 13 days against the Denver Broncos. There’s one more preseason game, Thursday night at EverBank Field against Atlanta.
And Del Rio is pleased about the progress the Jaguars have made.
“I’m seeing positive signs,” he said. “I thought our tackling was a little better. We will continue to work on it. I am convinced that this football team has, at every turn, [when] demands have been placed on them, [they] have responded and worked. They are embracing the core team values that we have laid out.”
Del Rio added, “They are giving it up for each other. They are challenging each other. They are working hard. They are committed to excellence. I’m proud of the way we are approaching things. I know as a football team, we are getting better.”
The Jaguars appear to have good chemistry and now the question is whether they’ll be ready for a fast start. After the opener, they play at San Diego and home against Philadelphia and Indianapolis.
Del Rio will move a step closer to starting the season today when he indicated he will name his 22 starters. He did add that even though Brad Meester didn’t play much against the Bucs, he will be the starting center.
The Jaguars wanted to give backup center Uche Nwaneri, who will start at guard, work at center while Vince Manuwai and Justin Smiley received a longer look at the guard positions.
They are locked in a battle for the second guard spot with Kynan Forney, who didn’t play.
Deciding the winner of that battle could be one of Del Rio’s toughest decisions.
Manuwai lost the starting position earlier in camp when he had back issues, but he’s healthy now and back in the mix.
“I can’t control what happens,” Manuwai said, “I think I played pretty well, but whatever happens, happens.”
Manuwai said he’s having no problems with his knee after suffering a torn anterior cruciate ligament in 2008.
Once the five starters are picked on the offensive line, they will have two weeks to get the continuity a line needs to begin the season.
Del Rio didn’t seem concerned that the Jaguars rushed only 11 times for 33 yards in the first half on Saturday night against the Bucs because the offense has been spending so much time working on its passing game.
Del Rio also has to make a decision at safety, but Reggie Nelson returned to the starting lineup and was praised by the coach for being more disciplined.
He appears to have a good chance to keep the job.
The rest of the positions seem set, but the big question is how healthy they’ll be once the season starts.
Del Rio was encouraged that they didn’t suffer any new injuries against the Bucs. Tight end Marcedes Lewis came out with an ankle injury, but Del Rio said he could have played if it had been a regular-season game.
They’ve had to deal with a rash of injuries in camp. Running back Maurice Jones-Drew and all three starting linebackers sat out the Tampa Bay game.
The Jaguars, who cut to 75 Tuesday and 53 next Saturday, also have to decide how to fill out the roster.
Fullback Brock Bolen, who ran seven times for 26 yards in the second half, and John Matthews, who caught a 27-yard touchdown pass for the go-ahead score, both helped themselves in Del Rio’s eyes.
“I think the two guys have been terrific,” Del Rio said. “I think both of them deserve a good, hard look and we are going to make sure we do that as an organization.”
vito.stellino@jacksonville.com, (904) 359-4279
0 CommentsEconomic Outlook: August jobs data crucial to investors, lawmakers
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — Where are the jobs? That’s what everyone wants to know — from Main Street to Wall Street to 1600 Pennsylvania Ave., where President Barack Obama resides.
The government will present another snapshot of the labor market Friday when it reports employment data for August. The picture isn’t looking any prettier.
Economists surveyed by MarketWatch forecast the U.S. gained a meager 49,000 private-sector jobs after factoring out the layoff of temporary Census workers. The jobless rate could tick up to 9.6% from 9.5%, a number that would look far worse if it included the people who are too discouraged to look for work.
Also on tap next week: data on consumer spending and the health of the manufacturing sector. Based on MarketWatch’s survey of economists, consumer spending likely rose 0.3% in August, while the Institute for Supply Management’s survey of manufacturers probably fell to 53.5% from 55.5%. See MarketWatch’s Economic Calendar.
| date | report | Consensus | previous |
|---|---|---|---|
| Aug. 30 | Personal income | 0.3% | 0.0% |
| Aug. 30 | Consumer spending | 0.3% | 0.0% |
| Aug. 31 | Chicago PMI | 57.0% | 62.3% |
| Aug. 31 | Consumer confidence | 50.0 | 50.4 |
| Sept. 1 | ISM | 53.5% | 55.5% |
| Sept. 1 | Construction spending | -0.6% | 0.1% |
| Sept. 1 | Motor vehicle sales | 11.5 mln | 11.5 mln |
| Sept. 2 | Jobless claims | 470,000 | 473,000 |
| Sept. 2 | Productivity | -2.0% | -1.0% |
| Sept. 2 | Factory orders | 0.4% | -1.2% |
| Sept. 2 | Pending home sales | -1.3% | -2.6% |
| Sept. 3 | Nonfarm payrolls | -105,000 | -131,000 |
| Sept. 3 | Private-sector payrolls | 30,000 | 71,000 |
| Sept. 3 | Unemployment rate | 9.6% | 9.5% |
| Sept. 3 | Average hourly earnings | 0.1% | 0.2% |
| Sept. 3 | ISM services | 53.2% | 54.3% |
97017
The consumer-spending report is to be issued Monday, while ISM data comes out Wednesday. Those surveys are merely an appetizer, however, for the crucial jobs report on Friday.
While any hiring is better than none, the U.S. needs to add almost 150,000 jobs a month to absorb the natural increase in the working population and drive down the unemployment rate. Some 8.2 million Americans lost their jobs during the height of the recession in 2008 and 2009. What’s far from clear is who will do the hiring.
“What is going to be the source of growth that pushes the economy forward?” asked Jim Baird, chief investment strategist of Plante Moran Financial Advisors in Michigan. “Unfortunately, that’s the million-dollar question.”
Battle over jobs
So far this year, the economy has added an average of 90,000 private-sector jobs a month, with government payrolls basically flat. If those trends hold, the U.S. would be on track to add just over a million jobs in 2010, calculates economist Brian Levitt of Oppenheimer Funds.
Even hitting that number is by no means certain. The economy appears to have hit another soft patch, based on the latest data, so it’s hard to figure out where the new jobs will come from.
Read about slower growth in the second quarter.
“The prospect of high unemployment for a long period of time remains a central concern of policy,” Federal Reserve Chairman Ben Bernanke said in a major address this week.
See full story on Bernanke’s speech.
No kidding. In Washington, Republicans have repeatedly attacked Obama’s policies, including the massive $814 billion stimulus and the overhaul of the health-care and financial markets. They say his policies not only failed to boost the economy but caused so much uncertainty that businesses are afraid to hire.
Several prominent chief executives from companies such as Verizon Communications Inc.
/quotes/comstock/13*!vz/quotes/nls/vz
(VZ
29.84,
+0.34,
+1.15%)
and Intel Corp.
/quotes/comstock/15*!intc/quotes/nls/intc
(INTC
18.37,
+0.19,
+1.05%)
have weighed in with similar complaints. Intel CEO Paul Otellini, who’s normally measured in his public comments, said this week that the uncertainty is the worst he’s ever seen. “I think this [economic-policy team] does not understand what it takes to create jobs,” he said.
Although Bernanke has tried to walk a fine line politically, he suggested that executives like Otellini might have a point. “Firms are reluctant to add permanent employees, citing slow growth of sales and elevated economic and regulatory uncertainty,” he said.
Economic Outlook: August jobs data crucial to investors, lawmakers
How Rick Scott ended up with the GOP nomination for governor
The ballroom at the Hilton in Altamonte Springs was all but empty when incoming Senate President Mike Haridopolos ventured in to talk to the remaining reporters.
It was not long after Attorney General Bill McCollum, whom Haridopolos supported in the Republican primary for governor, had told supporters that he was still waiting for all the votes to be counted after a bitter fight with health-care executive Rick Scott. But by the time Haridolopos, R-Merritt Island, walked into the ballroom, it was clear that Scott would prevail.
Haridopolos was asked how Scott had defeated McCollum and essentially the entire Republican establishment. He quickly turned to a truckload of television ads Scott had run in a personally funded spending spree unequaled in state politics.
“$60 million is $60 million,” Haridopolos said.
But political observers say it was more than simply the money that propelled Scott across the finish line, despite the opposition of most of the state’s elected GOP leadership, outside organizations like the Florida Chamber of Commerce and a 30-year veteran of the Florida political scene.
“I can’t remember a candidate who took on not only an established candidate but the entire infrastructure of a party – and won,” said Matthew Corrigan, a political science professor at the University of North Florida.
An anti-incumbent wave, a strong message and, yes, the money, all helped Scott pull off what is the most stunning election upset of the political season so far.
“You have to say that his message resonated, you have to talk about the resources he had, you have to talk about the tireless effort he made in the campaign,” said Sen. John Thrasher of St. Augustine, who doubles as chairman of the Republican Party of Florida. While he clashed with Scott over some of the businessman’s campaign ads, Thrasher did not endorse a candidate in the primary.
Not a ‘career politician’
McCollum is only the latest in a line of “career politicians” to go down to defeat in races across the country.
“In a different political environment, his [Scott's] candidacy might not have worked,” said Aubrey Jewett, a political science professor at the University of Central Florida.
But that wasn’t enough, said Lenny Curry, chairman of the Republican Party in Duval County.
“Many of the candidates that are running against incumbents are missing two elements: a message and money,” said Curry, who also did not endorse a candidate. “You’ve got to offer the public more than, ‘Throw the bums out.’”
Still, the anti-incumbency mood in a way might have inoculated Scott against the most serious threat to his campaign: a Medicare fraud scandal at Columbia/HCA, which Scott founded, in which the company ultimately paid the largest fine of its kind in U.S. history. Shortly before the election, questions began emerging about Solantic, a company Scott founded after leaving Columbia, and Scott’s poll numbers started dropping. In the end, he won anyway.
“Voters were more willing to give all of that a pass based on the fact that he is not a career politician, and he is part of the solution rather than the problem,” said Chris Ingram, a Republican political consultant who didn’t work for either campaign.
As recently as the day before the vote, McCollum’s campaign was cautiously optimistic the attorney general would win. While polls were divided, the final Mason-Dixon poll in the state, a bellwether in other elections, gave McCollum the lead.
“I can’t remember when Mason-Dixon’s been wrong in a race,” Corrigan said.
A resonating message
But that poll had been taken before a weekend barrage of advertising attacking McCollum on everything from congressional pay raises during his 20 years in Washington to a seemingly confused position on the Arizona measure cracking down on illegal immigration to ties between McCollum and disgraced former state GOP Chairman Jim Greer – ties, McCollum allies and Thrasher said, that were grossly exaggerated.
“It seems like the McCollum campaign, the last three days or so, just wasn’t as pervasive as the Scott campaign,” Corrigan said.
Scott’s focus on jobs also appeared to pay off. Curry thinks it helped Scott in Northeast Florida. Duval County, the region’s largest county, had an unemployment rate higher than the state rate in July, according to the state’s workforce agency. Scott carried Duval by 17 percentage points.
“Rick Scott talked about jobs, and he had business experience, and I think that resonated with people,” Curry said.
In fact, Scott carried eight of the 10 counties with the highest unemployment rates in the state in July, often by huge margins.
And Scott was quicker in seizing on hot-button issues, like the immigration law and the controversial Islamic center two blocks from the site of the attack on the World Trade Center.
“They were very nimble and quick on the current issues,” Corrigan said.
In the end, a stronger message might have separated Scott from Jeff Greene, the billionaire investor crushed Tuesday by U.S. Rep. Kendrick Meek in the Democratic primary for U.S. Senate. Like Scott, Greene had poured millions of dollars of his own fortune into the race. Corrigan also noted that Scott’s on-the-ground network seemed to be more effective than Greene’s.
“Greene just spent money on TV commercials,” he said.
Jewett also noted, admittedly tongue in cheek, that another small factor might have been the difference in the spending.
“Quite frankly, Greene spent a lot of money,” he said, “but he didn’t spend $50 million.”
brandon.larrabee@jacksonville. com, (678) 977-3709
0 CommentsEconomic Report: Consumer confidence inches up in August
By Jeffry Bartash, MarketWatch
WASHINGTON (MarketWatch) — Consumer confidence rose slightly in August but still remains weak, according to a report released Friday.
Consumer confidence as measured by a Reuters/University of Michigan final poll improved to 68.9 in August from 67.8 in July. Economists polled by MarketWatch expected an increase to 69.0.
Yet the closely watched Michigan survey stands well below June’s reading of 76.0. David Rosenberg, chief economist at Gluskin Sheff, has calculated that the average reading during recessions is about 74, with the average during expansions around 91.
The Big Interview with Robert Shiller
Robert Shiller, Professor of Economics at Yale University, sits down with Simon Constable to discuss the sharp falloff in home sales, the likelihood of a double-dip recession and what the Federal Reserve should do to stimulate the U.S. economy.
A slew of data over the past month indicates that the U.S. recovery has slowed after a brief surge earlier in the year.
On Friday, for example, the federal government reported the economy grew just 1.6% in the second quarter, down from an original reading of 2.4%. The economy expanded at a much faster 3.75 clip in the first quarter.
The unemployment rate, meanwhile, remains near a 27-year high at 9.5%, further depressing consumer confidence about the future.
The University of Michigan’s consumer expectations index finished at 62.9 in August, up slightly from 62.3 in July. The index is 3.2% lower compared to a year earlier.
“Optimism has been the primary characteristic of American consumers during the past half century,” said economist Richard Curtin, who’s in charge of the survey. “Now economic uncertainty reigns.”
The current conditions index, on the other hand, was a much healthier 78.3, compared to 76.5 in July, suggesting little deterioration in the condition of most consumers.
Jeffry Bartash is a reporter for MarketWatch in Washington.
The Fed: Bernanke talks tough on deflation
By Greg Robb, MarketWatch
JACKSON HOLE, Wyoming (MarketWatch) — Federal Reserve Board Chairman Ben Bernanke said Friday that the central bank would not sit idly and let the U.S. economy sink into a period of deflation.
“The Federal Open Market Committee will strongly resist deviations from price stability in the downward direction,” Bernanke said in a speech opening the Fed’s annual summer policy retreat.
See related First Take on Bernanke speech.
The Fed would be “vigilant and proactive” if inflation falls by a significant amount, he said, though he downplayed concern that the economy would fall back into another downturn, or a double-dip recession.
The Big Interview with Robert Shiller
Robert Shiller, Professor of Economics at Yale University, sits down with Simon Constable to discuss the sharp falloff in home sales, the likelihood of a double-dip recession and what the Federal Reserve should do stimulate the U.S. economy.
He said the economy would continue to grow at a slow pace in the last four months of the year and the pace of growth would pick-up in 2011.
See related story on second-quarter growth.
“I expect the economy to continue to expand in the second half of this year, albeit at a relatively modest pace,” he said.
And despite the weak second quarter, “the preconditions for a pickup in growth in 2011 appear to remain in place,” he added.
U.S. stocks turned lower after the Bernanke speech was published, though his speech also coincided with a revenue downgrade by the world’s leading chipmaker, Intel. By late morning, stocks were broadly higher again.
See Market Snapshot.
Bernanke: Fed still has tools
Bernanke said there was only a low risk of deflation. But he acknowledged that inflation has dropped to a level slightly below that which FOMC participants view “as most conducive to a healthy economy in the long run.”
He spoke at length about the tools left in his toolkit to fight deflation and promised to use them if the outlook deteriorated significantly.
Responding almost directly to an op-ed published Thursday by ex-Fed vice chairman Alan Blinder saying the Fed was running low on ammo, Bernanke said: “The issue at this stage is not whether we have the tools to help support economic activity and guard against disinflation. We do. As I will discuss next, the issue is instead whether, at any given juncture, the benefits of each tool, in terms of additional stimulus, outweigh the associated costs or risks of using the tool.”
At the top of his list of options — more purchases of Treasurys by the Fed. Bernanke said these purchases would ease financial market conditions.
He said the central bankers thought that buying Treasurys was the proper course of action. But added “we do not rule out changing the reinvestment strategy if circumstances warrant.”
Bernanke said the FOMC “has not agreed on specific criteria or triggers for further action.”
In early August, the Federal Open Market Committee took a baby step toward further quantitative easing by deciding to hold the size of the Fed’s balance sheet constant through reinvesting principal repayments from mortgage securities into Treasurys. Bernanke described that option Friday as avoiding “an undesirable passive tightening of policy that might otherwise have occurred.”
The economy is slowing at a time when the Fed has already cut interest rates to close to zero. Since March 2009, the Fed has promised to keep rates low for an “extended period.”
Bernanke said Friday the FOMC would consider modifying the language to communicate to investors that it plans to keep the federal funds rate low for a longer period than is currently priced in markets.
He also said the Fed could lower the rate of interest it pays banks on the reserves they park at the central bank, though he stressed that the effect in isolation would likely be relatively small.
One policy option Bernanke rebuffed was to increase medium-term inflation goals above levels consistent with price stability. “I see no support for this option on the FOMC,” the central bank chief said.
He didn’t mention buying private assets like credit-card receivables or corporate debt, as some economists, including Blinder, suggest.
Greg Robb is a senior reporter for MarketWatch in Washington.
Rick Scott wins GOP governor primary
ALTAMONTE SPRINGS — Health-care executive and health-care reform nemesis Rick Scott narrowly defeated Attorney General Bill McCollum for the GOP gubernatorial nomination Tuesday night.
“With a deep sense of humility, I’m here tonight to accept the Republican nomination for the office of governor of our great state of Florida,” Scott said, proclaiming victory in a sentence that was interrupted by the cheers of supporters. “The people of Florida have spoken, and I like what they’ve said.”
McCollum’s campaign said he was planning to issue a statement early today, conceding. The attorney general admitted earlier in the evening that he was behind, but said there were still enough uncounted votes in South Florida to swing the election.
Related:
Credit Markets: Mortgage market knocked by ‘mega-refi’ talk
By Alistair Barr, MarketWatch
SAN FRANCISCO (MarketWatch) — The market for mortgage-backed securities has had a good run this year, but it’s taken a hit in recent days on growing talk of a “mega-refi” program that could let homeowners refinance home loans more easily at lower rates.
On Tuesday, Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co., proposed a refinance program where homeowners with Fannie Mae
/quotes/comstock/11k!fnma
(FNMA
0.36,
-0.01,
-1.88%)
and Freddie Mac
/quotes/comstock/11k!fmcc
(FMCC
0.40,
-0.01,
-1.25%)
fixed mortgages could cut interest rates on their loans from about 6% to current rates well below 5%.
The future of Fannie and Freddie
Nick Timiraos talks to Simon Constable and David Weidner about the future role the federal government is likely to play in the mortgage market, including the future roles of Freddie Mac and Fannie Mae. Plus, analyzing today’s market rally.
A program like this could provide a stimulus of $50 billion to $60 billion for the U.S. economy, while boosting house prices, Gross said during a conference in Washington, D.C., on the future of the mortgage market.
Read about the conference here.
Speculation about a mega-refi program has been growing. Treasury bond yields have slumped in recent months and mortgage rates have fallen to record lows. But refinance activity hadn’t picked up much until recently. That’s muted the impact of lower rates and sparked discussions of ways to tackle the problem.
A major wave of mortgage refinancing could reduce borrowers’ monthly interest payments, leaving more money in their pockets for spending. That, in turn, could boost economic growth.
However, lots of refis would be bad for mortgage-backed securities investors. That’s because older securities with higher interest rates would be paid off at face value then replaced with newer bonds with lower coupons.
“Bill Gross’s statement in favor of a mega-refi program is probably the major story for mortgage traders,” said Steve Kuhn, who oversees mortgage investments at hedge fund firm Pine River Capital Management LP.
A week ago, Fannie Mae mortgage-backed securities with 6% coupons were trading at 109. These bonds are now trading at about 107 3/4, Kuhn noted.
“The market is more concerned this refi event could happen sometime,” he added in an interview.
Mortgage securities have rallied this year as interest rates fell and refinancing activity remained lackluster.
A mortgage security with a 6% coupon looks more attractive as yields on comparable bonds drop. With access to cheap borrowing, mortgage traders have been able to buy these mortgage securities and generate healthy returns.
“A 6% yield looks very good and you can get funding at LIBOR in the mortgage market and buy that. The trade could earn almost 6% a year in theory, partly because funding costs are so low,” Kuhn said.
An index of hedge funds that trade mortgages jumped more than 12% in the first seven months of 2010, making it the best-performing strategy so far this year, according to HedgeFund.net. The average hedge fund tracked by HedgeFund.net is up less than 2% in the same period.
But if a lot of refinancing happens, investors who paid 109 for a mortgage bond with a 6% coupon would in theory be repaid at par, or 100.
“Investors could lose as much as 9 percentage points if everyone refinanced very quickly,” Kuhn said.
The mortgage market is currently pricing in about a 20% chance that a mega-refi program happens, he added.
If a plan is unveiled, it would probably take about six months to get going. So investors may still be willing to pay about 103 for Fannie and Freddie mortgage securities with 6% coupons, Kuhn explained.
With funding costs close to zero, investors would be able to make about 3 percentage points over half a year. Then the refis would kick in and investors would be repaid at par, or 100.
Alistair Barr is a reporter for MarketWatch in San Francisco.
Garden Q&A: Be patient, a fringe tree is a slow grower
I transplanted a fringe tree a couple of years ago that I had potted. It bloomed some in the spring and looks healthy, but doesn’t seem to grow much. Do you think something is wrong?
Everything about your description tells me you have a healthy tree. What you also have is a tree that pretty much grows like a snail moves – slowly.
Chionanthus virginicus, also known as the fringe tree or old-man’s-beard, does indeed grow slowly – 6 to 10 inches a year, maybe a bit more if you fertilize it. While you don’t get the instant gratification effect that you might get with faster growing trees, you have a potentially beautiful specimen.
It is a deciduous tree and as it emerges with new growth in the spring, it puts on a show with its bright white, slightly fragrant flowers. As the tree matures and produces more flowers, it can look like the tree is covered with hundreds of thin strands of silky cotton.
The tree eventually grows 12 to 20 feet in height with a spread of 10 to 12 feet. Consider this tree a lucky find for your landscape as they can be difficult to locate.
My son gave me a plant, which he calls a native hibiscus. If I send you a picture, can you help me learn more about it? Also, it is getting spindly, and I want to know if I can prune it.
I didn’t know what a native hibiscus was until I did some research. The leaves do not resemble the oval type shape that I am used to seeing on hibiscus. What you have is the native Hibiscus coccineus, commonly known as the swamp mallow. As you have experienced, it grows upright, narrowly and reaches a height of 4 to 6 feet. It is a perennial, and, if affected by a freeze, should recover.
Since yours is in a pot, you might want to protect it during freezing weather. Yes, you can prune it now as it should have plenty of time to put on healthy growth before winter comes.
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