RCM Comment: For today’s read I have put together a selection of stories for your amusement. One story is a fantasy, one a horror and one a Greek tragedy. Let’s make this Audience Participation Day: The first person to send me a comment labeling the stories correctly will receive a genuine Rosenthal Capital Management polo shirt. Good luck…

ECONX Consumer Confidence Picking Up
The Conference Board’s Consumer Confidence Index for May increased sharply to 54.9 from 40.8 in April. The May number is the highest since last September, but still trails the 58.1 reading seen a year ago. The index for May showed that consumers are feeling much better about the outlook… The Expectations Index, which drove the overall reading for May, surged to 72.3 from 51.0 in April and is well ahead of the 47.3 reading from a year ago. The Present Situations Index, meanwhile, moved up to 28.9 from 25.5 and is still well below the year-ago reading of 74.2. Looking six months out, a larger number of respondents than in April feel business conditions will be better (23.1 vs. 15.7) (Of course, these same people had no idea the economy would collapse when this reading was taken a year ago), that more jobs will be available (20.0 vs. 14.2) and that income will increase (10.2 vs. 8.3). Strikingly, fewer respondents have plans to buy a home (2.3 vs. 2.6). Also, it is believed the inflation average 12 months hence will be 5.6% versus 5.9% in April…

Face-lift for foreclosure prevention – Washington Post
Washington Post reports the Obama administration is attempting to revive a stalled government foreclosure prevention program that could restore equity to hundreds of thousands of borrowers whose home values have plummeted. After eight months, the program, known as Hope for Homeowners, has helped just one borrower secure a more affordable loan. President Obama signed legislation last week simplifying and lowering the cost of the program for lenders and borrowers. Lenders that participate also are eligible for incentive payments from government bailout funds. Most striking is that Hope for Homeowners has attracted unexpected backers: Investors who had refused to consider the program’s requirement that they forgive some of a borrower’s mortgage balance if the home is worth less than is owed, known as being underwater, are now trumpeting that provision. “Institutional investors that own securities backed by mortgages are extremely keen to write down principal in exchange for the borrower refinancing into a Hope for Homeowners loan,” said Tom Deutsch, deputy executive director of the industry group American Securitization Forum.

Dallas Fed President says don’t monetize the debt – WSJ
WSJ reports Dallas Federal Reserve Bank Richard Fisher says he is always on the lookout for rising prices. But that’s not what’s worrying the bank’s president right now. His bigger concern these days would seem to be what he calls “the perception of risk” that has been created by the Fed’s purchases of Treasury bonds, mortgage-backed securities and Fannie Mae paper. Mr. Fisher acknowledges that events in the financial markets last year required some unusual Fed action in the commercial lending market. But he says the longer-term debt, particularly the Treasurys, is making investors nervous. The looming challenge, he says, is to reassure markets that the Fed is not going to be “the handmaiden” to fiscal profligacy. “I think the trick here is to assist the functioning of the private markets without signaling in any way, shape or form that the Federal Reserve will be party to monetizing fiscal largess, deficits or the stimulus program.” The very fact that a Fed regional bank president has to raise this issue is not very comforting. It conjures up images of Argentina. And as Mr. Fisher explains, he’s not the only one worrying about it. He has just returned from a trip to China, where “senior officials of the Chinese government grill[ed] me about whether or not we are going to monetize the actions of our legislature.” He adds, “I must have been asked about that a hundred times in China.”