REPRINTED WITHOUT PERMISSION 7-2-13

Why They Fought
By DAVID BROOKS

Tuesday is the 150th anniversary of the second day of the Battle of Gettysburg. In his eloquent new account, “Gettysburg: the Last Invasion,” the historian Allen Guelzo describes the psychology of the fighters on that day.

A battlefield is “the lonesomest place which men share together,” a soldier once observed. At Gettysburg, the men were sometimes isolated within the rolling clouds of gun smoke and unnerved by what Guelzo calls “the weird harmonic ring of bullets striking fixed bayonets.” They were often terrified, of course, sometimes losing bladder and bowel control. (Aristophanes once called battle “the terrible one, the tough one, the one upon the legs.”)

But, as Guelzo notes, the Civil War was fought with “an amateurism of spirit and an innocence of intent, which would be touching if that same amateurism had not also contrived to make it so bloody.”

Discipline was loose. Civil War soldiers were not used to subordinating themselves within large organizations. One veteran observed that in battle “men standing in line got in paroxysms of laughter.” But many were motivated by the sense that they were living up to some high moral ideal. Words like “gallant,” “valor” and “chivalric” dot their descriptions of each other’s behavior. Upon being taken prisoner, one Union soldier shook his captors’ hands and congratulated them on the “most splendid charge of the war.”

Another officer remembered battle as a “supreme minute to you; you are in ecstasies.” A Union artillery officer confessed that throughout Gettysburg “somehow or other I felt a joyous exaltation, a perfect indifference to circumstances, through the whole of that three days’ fight, and I have seldom enjoyed three days more in my life.”

In our current era, as the saying goes, we take that which is lower to be more real. We generally believe that soldiers under the gritty harshness of war are not thinking about high ideals like gallantry. They are just trying to get through the day or protect their buddies. Since World War I, as Hemingway famously put it, abstract words like “honor” and “glory” and “courage” often seem obscene and pretentious. Studies of letters sent home by soldiers in World War II suggest that grand ideas were remote from their daily concerns.

But Civil War soldiers were different. In his 1997 book “For Cause and Comrades,” James M. McPherson looked at the private letters Civil War soldiers sent to their loved ones. As McPherson noted, they ring with “patriotism, ideology, concepts of duty, honor, manhood and community.”

The soldiers were intensely political. Newspapers were desperately sought after in camp. Between battles, several regiments held formal debates on subjects like the constitutional issues raised by the war. “Ideological motifs almost leap from many pages of these documents,” McPherson reports. “It is government against anarchy, law against disorder,” a Philadelphia printer wrote, explaining his desire to fight.

The letters were also explicitly moralistic. “The consciousness of duty was pervasive in Victorian America,” McPherson writes. The letters were studded with the language of personal honor, and, above all, a desire to sacrifice, as one soldier put it, “personal feelings and inclinations to … my duty in the hour of danger.”

One of the most famous letters was written not at Gettysburg but on July 14, 1861, on the eve of the First Battle of Bull Run. It was written by Sullivan Ballou, an officer from Rhode Island. Ballou had lost his own parents when he was young and, having known “the bitter fruit of orphanage myself,” he declared himself loath to die in battle and leave his small children fatherless.

“My love for you is deathless,” he wrote to his wife. “It seems to bind me to you with mighty cables that nothing but Omnipotence could break; yet my love of country comes over me like a strong wind and bears me irresistibly on with all these chains to the battlefield.”

It’s not just love of country that impels him, but a feeling of indebtedness to the past: “I know how strongly American Civilization now leans upon the triumph of the Government, and how great a debt we owe to those who went before us through the blood and suffering of the Revolution. And I am willing — perfectly willing — to lay down all my joys in this life, to help maintain this Government, and to pay that debt.”

These letter writers, and many of the men at Gettysburg, were not just different than most of us today because their language was more high flown and earnest. There was probably also a greater covenantal consciousness, a belief that they were born in a state of indebtedness to an ongoing project, and they would inevitably be called upon to pay these debts, to come square with the country, even at the cost of their lives.

Makes today’s special interest politics look kind of pathetic.

Morning Report – Highest home price appreciation since Feb 2006 7/2/13

Vital Statistics:

  Last Change Percent
S&P Futures  1606.5 -0.2 -0.01%
Eurostoxx Index 2597.2 -25.4 -0.97%
Oil (WTI) 98.8 0.8 0.83%
LIBOR 0.273 0.000 -0.07%
US Dollar Index (DXY) 83.42 0.368 0.44%
10 Year Govt Bond Yield 2.48% 0.00%  
Current Coupon Ginnie Mae TBA 102.8 0.1  
Current Coupon Fannie Mae TBA 101.5 -0.1  
RPX Composite Real Estate Index 204.5 -0.8  
BankRate 30 Year Fixed Rate Mortgage 4.34    

 

Markets are flattish on no real news. Later on today, we will get the ISM New York, Factory Orders, IBD / TIPP Economic Optimism and Vehicle Sales. None of these releases should be market moving. Bonds and MBS are flat.
 
The Fed votes on the Finalized Basel III rules today. For originators, the most important part of this will be the treatment of mortgage servicing rights. Basel III requires banks to over-reserve for MSRs once they reach a threshold point as a percent of capital. MSRs had been under pressure for quite some time in anticipation of the rule, but now that rates are rising, you are starting to see cheeky bids for newly-originated MSRs. For LO’s, the value of MSRs affects the value of SRPs which influences your ratesheet.
 
The CoreLogic Home Price index rose 12.2% in May, which was the highest price increase since Feb 2006. Excluding distressed sales, prices rose 11.6%. Home prices nationwide remain 20.4% below their peak which was set in April 2006. The Pending Home Price Index indicates that prices are expected to rise even more (13.2%) in June. These sales would have had contract signings before interest rates started backing up, so you can’t read too much into how higher rates are affecting home prices, but the pending home price index is encouraging. 
 
12 month home price appreciation:
  • Arizona – 16.9%
  • California – 20.2%
  • Connecticut – 3.8%
  • Florida – 11.1%
  • Nevada – 26%
  • New York – 9.8%
  • North Carolina – 5.6%
  • Tennessee – 5.3%
  • Texas – 8.5%
In anticipation of Friday’s jobs report, here is a cool little widget courtesy of the Federal Reserve Bank of Atlanta. The jobs calculator shows you how many jobs need to be created to get the unemployment rate down to a target rate. You can play with the labor force participation rate, population growth rate, etc. If you  take Ben Bernanke at his word that the Fed will end QE when unemployment hits 7%, you can use the calculator to figure out whether we are on pace or not.
 
Finally, I did an interview on Capital Markets Today where I discussed the recent rise in rates and its implications for housing and the economy. Check it out.