Update #2/ week of December 14, 2009

Good Morning Everyone and Happy Tuesday! Well, we were looking for a lack luster week, and we have it in equity markets so far. Unfortunately, a surprise spike in PPI has hit the credit markets like a kick in the stomach. Our pricing is about (.500) worse in rebate from yesterday morning. Wells Fargo joins the group of banking giants to request the opportunity to pay back the TARP funds before the end of the year. All of these banks want to get out from under the thumb of the government and pay their executives big bonuses at the end of the year. This is why we’re seeing a mad rush to get all the TARP money paid back.

The PPI has been pretty tame in the last several months indicating that the prices to be passed along to the consumers will be tame also. The Producers Price Index spiked 1.8% in November far above the anticipated .8% increase month over month. This caught a lot of traders by surprise. Much of this, though is due to food and energy, ‘cause when you take those out of the mix, the rise is only .5% -- still stronger than the .2% expected. This is, of course, the Producers report of what they are paying now for materials, and implies that this increase in what they had to pay will be passed along to the consumer. This will cause inflation to rise, and inflation is a very bad thing for banks. This is why we have a sudden jolt in pricing today.

Otherwise, in other economic related news, New York’s Empire Manufacturing Index slowed to almost a crawl (if that) with a reading of 25.5 – a bit off from the 24.0 expected and the 23.51 posting in November. That’s quite a miss! But, they’re all the way on the other corner of the country, so who cares. Industrial production increased .8% besting the .5% anticipated. Capacity Utilization for November reported a 71.3%, pretty much in line with the 71.1% anticipated.
With kind of a mixed bag of reports this morning, the equity markets are pretty much flat, but as we mentioned at the top of the page . . . credit markets got hammered early. We’ll look for things to settle down in credit markets throughout the day, too, as they seem to already be doing. I’ll be in the office all day today available for your loan scenario or pricing question. Have a terrific Tuesday!