Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Arcanaut
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1677.5 | 6.3 | 0.38% |
| Eurostoxx Index | 2685.7 | 20.0 | 0.75% |
| Oil (WTI) | 106 | 0.0 | -0.04% |
| LIBOR | 0.266 | 0.000 | 0.00% |
| US Dollar Index (DXY) | 82.5 | -0.002 | 0.00% |
| 10 Year Govt Bond Yield | 2.47% | -0.06% | |
| Current Coupon Ginnie Mae TBA | 104.4 | -1.1 | |
| Current Coupon Fannie Mae TBA | 104.2 | 0.4 | |
| RPX Composite Real Estate Index | 201.6 | -0.9 | |
| BankRate 30 Year Fixed Rate Mortgage | 4.48 |
Markets are higher this morning after good earnings out of Bank of America. Mortgage Applications fell 2.6% last week, a surprise given that rates fell. Bonds and MBS are up. The initial reaction to the prepared remarks is positive.
Today is Bernanke’s semiannual Humphrey-Hawkins testimony in front of Congress, which begins at 10:00. The first thing to note is that this can be market moving, so don’t be surprised if we get some volatility around rates. The burning questions concern the end of QE, although expect a lot of Congressional questions on banking regulation and Too Big To Fail. The prepared remarks are here.
The comment that seems to have everyone buying bonds is the statement that ending quantitative easing is “not on a preset course.” Remember that was what hit the markets so hard the last time Bernanke spoke in front of Congress – he implied that the Fed expects unemployment to fall to 7% by the end of the year, and if the economy performs as expected, they will begin tapering QE this year. This statement seems to be a softening of that stance. This has pushed the 10 year to 2.47%.
Housing starts came in at a disappointing 836,000 annual pace. Building Permits fell as well. When you look at the internals, it was multi-fam which drove the decrease. Single family starts dropped by 5k, while 5+ units fell from 322k to 236k. Multi-fam in the South took the biggest hit. May was revised upward. I wouldn’t read too much into this as far as purchase business goes – the weekly MBA purchase application index rose last week, and the homebuilders have been optimistic so far. Also note that homebuilder sentiment hit the highest levels since Jan 2006.
The Senate reached a filibuster deal yesterday, and Richard Cordray was confirmed as head of the Consumer Financial Protection Bureau (CFPB). Republicans had been holding up the vote in an attempt to force changes to the agency – to make it a bipartisan committee vs a single head and to subject it to the normal Congressional appropriations process. Will it affect anything in our area? I am guessing not.
Filed under: Morning Report |
All Things in Moderation 
Here is one of the better recent advocacy pieces for Keynesian policy. Nothing most people here don’t already know, but I thought it managed to be both concise and thorough. The glaring omission is a discussion of MMT.
http://www.salon.com/2013/07/16/lets_close_the_curtain_on_the_age_of_austerity_partner/
LikeLike
Good point by Taranto on Holder’s moronic Nation of Cowards speech.
http://m.us.wsj.com/articles/a/SB10001424127887324348504578609952817408558?mg=reno64-wsj
What Holder wants is for people to sit quietly while be lectured by the man who got Marc Rich pardoned.
LikeLike
Credit where credit is due. This is the best thing to come out of the administration in a while:
LikeLike
I agree with JNC about Hagel’s announcement and because I have always held him in high regard I feel vindicated by this move. His two predecessors in this Admin – Gates, the best executive officer possible, and Panetta – strong in his own right – left big footprints to fill. Gates started the winnowing of the impossibly complicated security sprawl and the reorganization of DoD left in the hands of private contractors by Rummy. Panetta got us to where the DoD is supposed to be finally auditable in 2017. Hagel has a full plate but I am optimistic about his abilities.
FWIW, Rummy’s reliance on contractors made sense if he thought our two wars were going to be completed within one budget cycle. It would have avoided built in ratcheted bloat had that been the case. But if Rummy actually thought that we would be out of AFG and Iraq by 2004 he may have been the only sentient person who was that optimistic. If you know you are going to need these services for more than one budget cycle, or for a decade, contracting is an enormous waste compared with expanding the government. After all, Hagel is about to prove that the DoD can be cut back, when hostilities cease.
LikeLike
Defense Secretary Chuck Hagel said Tuesday that he has ordered a 20 percent cut in the number of top brass and senior civilians at the Pentagon by 2019, the latest attempt to shrink the military bureaucracy after years of heady growth.
Excellent move. Then the next good one would be to do what GHWB had the DoD do after Gulf War I and offer incentive pay for more junior people to leave the military.
LikeLike
“Then the next good one would be to do what GHWB had the DoD do after Gulf War I and offer incentive pay for more junior people to leave the military.”
I’m not so sure about that. From a lot of what I’ve read, and from some personal anecdotes, my impression is that decision gutted the company commander level junior officers.
The real issue is that the force needs to be sized to the missions it will be undertaking, not sized based on politics.
LikeLike
JNC and Kelley and Brent and George, doesn’t incentivizing junior officers to leave work a hardship on the junior officer heavy USAF, as compared with the USN, Army, and USMC?
LikeLike
I had actually forgotten about that, jnc. But the problem is that they do need to thin the company and field grade officer levels, too, and currently their only method for doing that is to deny promotion (which, depending on the rank, can take upwards of 5 years). In a perfect world they’d do an analysis, figure out how big a force they need, and then say, “OK, we’ll pay the first 10 colonels, 25 LTC, 75 MAJ and 150 CPT who want to leave” rather than waiting for 5 – 10 years as those people age past their promotion dates and are forced out.
LikeLike
Mark:
work a hardship on the junior officer heavy USAF
I’m not sure how they did it last time, but there would be nothing stopping them incentivizing by branch rather than DoD-wide that I can think of.
LikeLike
incentivizing by branch
Got it. Thinking before acting. Novel concept!
LikeLike
AFAIF, you could do away w/90% of the officer’s. it never made sense why one has to be an officer to be a pilot, tank commander or platoon leader. It’s merely credentialing and elitism.
LikeLike
“But the problem is that they do need to thin the company and field grade officer levels, too, and currently their only method for doing that is to deny promotion”
True. It could also be an issue of going too far in that direction after Bush left and Clinton came in.
LikeLike
At least in the Navy, we were reducing the number of ships naturally as newer classes could handle multiple missions. This reduced the number of needed billets to begin with, so I don’t think it hurt the Navy at all.
LikeLike
It probably was, jnc. Also, it was predominantly the better officers (at least, anecdotally from those I knew who got out) who left.
Of course, I’m probably biased on the quality. 🙂
LikeLike
“What Holder wants is for people to sit quietly while be lectured by the man who got Marc Rich pardoned.”
I think I got the lecture notes delivered about a gazillion times already…
LikeLike
I’m a racist! Loud and Proud!
http://m.cnsnews.com/news/article/sebelius-obamacare-opponents-those-who-opposed-civil-rights
To think I pay her to break the law!
LikeLike
Just for fun – find your alma mater, or multiple schools attended, on the London Times list:
http://www.timeshighereducation.co.uk/world-university-rankings/2012-13/world-ranking
These rankings favor English speaking nations and research universities.
LikeLike
“My father was a congressman from Cincinnati who voted for each of those critical civil rights laws”
Medicare and Medicaid are not civil rights laws.
LikeLike
“…contracting is an enormous waste compared with expanding the government.”
Ummmm….not really. Contracting is infinitely more flexible in that contracts can be cut on a moments notice, they are of a limited duration, they allow the gov a much greater pool to talents to utilize, they are able to obtain high quality and unique talent that does not fit into the government pay slot. From a software development POV, it allows the gov to utilize ITresources which can get costly (application environments, maintenance, disaster recovery, software, hardware, etc) The problem with expanding the government is that it is really hard to reverse that, as you discussion of cutting the officers shows.
I say that, of course, as someone that has spent their working career as a government contractor…
LikeLike
Dave! – Hi. Where ya been?
I favor contracting for discrete projects. One budget cycle. But DoD outsourcing every support function for ten years was far more expensive than having soldiers cook their own food, for example. I was comparing the cost of an extended war. If it had been two short wars, we would have been way ahead on contracting.
LikeLike
@jnc4p: “Medicare and Medicaid are not civil rights laws.’
I’m not sure, but I think saying that makes you a racist, somehow. Welcome to the new normal!
LikeLike
I’m way past that. I defended the jury verdict in the Zimmerman trial.
LikeLike
I went to PL today for the first time in a month.
LikeLike
@markinaustin: How was it? Following the article as cnsnews.com on Sebelius saying that opponents of Obamacare oppose civil rights, I was struck by the comments section. Liars! Sniveling cowards! Skanks! Libtards! Bagger drivel!
While I don’t participate, because I’m not going to pay money to do it, I think Ricochet! has the right idea: charge everybody who wants to comment a nominal fee a month (in this case, they charge whatever a cup of coffee at Starbucks flagship Seattle store costs). The idea being that people will tend to be better behaved when they have skin in the game.
Our solution seems to work reasonably well, too.
LikeLike
Kev – My suggestion that Rummy might have thought the wars were only going to last a year or two justified contracting in his mind brought hoots from those who could read his mind and knew he was merely feathering the nest of rich friends.
I pointed out that in private business contracting works for projects but not for long term undertakings.
To Dave! I am taking his livelihood, to Bernie and Shrink I am naive to think Rummy ever had a fiscally motivated idea.
LikeLike
Good article from WSJ about the growing role the fed plays in funding ostensibly private charities.
http://online.wsj.com/article/SB10001424127887324021104578553093991335514.html?mod=WSJ_Opinion_LEADTop
LikeLike
“I’m a racist! Loud and Proud!”
Sheesh…. If you don’t support obamacare, you’re Bull Connor…
LikeLike
Bad old pipelines (from the Houston Chronicle)
http://fuelfix.com/blog/2013/07/17/exxon-secrecy-over-ruptured-pipeline-may-mask-national-danger/
LikeLike
Brent, were you OCS? NROTC? Kelley – same question!
When I went off to NOCS in ’68 a LS classmate of mine, Bob S., entered with me. B/c he had a pilot’s license the officers at Newport wanted him to commit to flight school after the 18 wks of OCS. Bob refused. Like me he had hopes of being a JAG. [Funny – almost none of my LS friends, including the law review types and a national moot court winner, actually ended up in JAG. 1 Marine fighter pilot, 1 Army transport pilot, 1 Army artillery officer, 1 Army supply officer. A classmate who first became an FBI Special Agent became a JAG later, special dispensation for a special agent, I guess]. So Bob S. couched his refusal to consider flight school in vehement terms and lost his weekends to marching guard duty as a result. But he was #1 in that OCS class and got nav/comm duty in the Med and the south Atlantic for most of the war and never was in the Pacific fleet.
My friend who was an artillery officer is still an active partner in a high end boutique firm in Houston, George.
My friends who served in ‘Nam before LS included some colorful folks. Glenn A. became Perot’s head of security and I am pretty sure led the Iran rescue that worked for Perot. Sal R., the linguist/intel officer who spoke the VN dialects, refused promotion to Col. to come to LS. He was a Cuban born Jew who had played DB for the U. of RI. He still practices law in EP. He is one of the quickest studies I have ever met, if not the quickest.
LikeLike
Mark, I was NROTC. Did it to pay for my out-of-state tuition at UW-Madison, which at the time was an eye-popping $3,000 a semester.
LikeLike
speaking of the military officers .. I ran into a high school friend who I haven’t seen in almost 20 years. at a party for a mutual friend. He did 6 tours between Iraq an Afghanistan before leaving the Marines as an infantry Captain. on this last tour, he said he told his men “shoot who you have to. screw hearts and minds. my goal is to get you guys home. i’ll lie if I have to”
LikeLike
That was my youngest daughter’s plan when she went off to UCLA as a ChemE – NROTC paid the out-of-state tuition and more, equalizing it with UT for her. I’ve told the story before – because of obvious scheduling conflicts there was no way for her to get a commission and a BS in Ch.E. in less than six years. All of her friends in NROTC who stuck it out in engineering [mainly aerospace] took six there. So she quit after a year, transferred to UT as a chemist, got her BS, worked a year in a pharm lab, went to Pharm School and is now a PharmD. Ironically, it was the wife of her training officer at UCLA who put her on the path to Pharmacy. She was a Navy Pharmacist.
She still has friends who have stayed “in”.
LikeLike
Mark: ROTC last two years at MSU after going through Basic Training the summer between sophomore and junior years. Turned down the scholarship offered because I wasn’t sure if I wanted to commit to going active duty when I graduated.
We all know what happened.
LikeLike
NoVA:
Your friend’s comment doesn’t surprise me in the least!
LikeLike
“We all know what happened.”
Pity you couldn’t get it retroactively applied.
LikeLike
“. on this last tour, he said he told his men “shoot who you have to. screw hearts and minds. my goal is to get you guys home. i’ll lie if I have to””
I think I know who he can start with:
LikeLike
Mark, does she have a job yet?
LikeLike
Yep, JNC, and she just bought a house, today. I went to the closing with her which is why I was thinking of this.
LikeLike