Thoughts

We are back in a bull market of complacency, a condition that existed before the Japanese nuclear crisis.

For the third time this week, the Treasury's auction (of seven-year notes this time) was weak. Thomas Hoenig of the Kansas City Fed delivered a predictably hawkish speech today.

The yield came in at 2.895% against an expectation of 2.873%, with a bid-to-cover at 2.79 (compared to prior auctions averaging 2.88) and with indirect bidders in line with the past five or six auctions.

Hoenig, who is retiring as president of the Kansas City Fed, delivered a predictably hawkish speech, in which he believes the Fed is too easy and that the federal funds rate deserves to be at 1%. He sees the Fed as partially responsible for higher commodity prices around the world and views Fed policy as at risk of causing another bubble.

Is crude's weakness market-friendly? I honestly don't know anymore.

Mortgage Applications Drop

Mortgage applications dropped by 7.5% last week, reversing modest strength in the previous seven-day period.

Refinancing activity dropped by nearly two-thirds of total applications, bringing it to the second-lowest refinance share since May 2010.

More Fiscal Woes for Local and State Governments

The fiscal problems at our local and state governments are playing out around the country.

Defaults? No.

Austerity? Yes.