Brent Nyitray
Fairlington Blade
Let the mutherfuker burn!
jnc4p
Kevin S. Willis
Michigoose
lmsinca
markinaustin
Memetrics
novahockey
quarterback
ScottC
yellojktVital Statistics:
| Last | Change | Percent | |
| S&P Futures | 1671.7 | -13.1 | -0.78% |
| Eurostoxx Index | 2904.9 | -23.4 | -0.80% |
| Oil (WTI) | 102.9 | -0.9 | -0.89% |
| LIBOR | 0.243 | 0.001 | 0.21% |
| US Dollar Index (DXY) | 79.99 | -0.128 | -0.16% |
| 10 Year Govt Bond Yield | 2.61% | -0.04% | |
| Current Coupon Ginnie Mae TBA | 105.6 | 0.1 | |
| Current Coupon Fannie Mae TBA | 105.2 | 0.2 | |
| RPX Composite Real Estate Index | 200.7 | -0.2 | |
| BankRate 30 Year Fixed Rate Mortgage | 4.26 |
Markets are lower as the government shutdown stretches into Week 2. Bonds and MBS are rallying. Earnings season kicks off with Alcoa tomorrow. We will hear from JP Morgan and Wells on Friday.
On Wednesday, we will get the minutes from the September FOMC meeting. Should make very interesting reading, although the shutdown pretty much means tapering is off the table for a while.
Back of the envelope calculations: The drop in government spending is about 13% from the shutdown because most government functions, specifically entitlements, are still being done. So, on a 3.8 trillion budget, 13% amounts to just a hair under 500 billion for the year, or about 9.5 billion a week. On a 16 trillion GDP, that amounts to 6 basis points of GDP. Tack on a government spending multiplier of 1.3 and you get about 8 basis points of fiscal drag for each week the government is shut down.
Ginnie Mae has denied rumors that the Ginnie Mae I MBS is about to be sunsetted. Ginnie Mae I securities have usually traded at a premium to Ginnie II MBS but have been trading at a discount since May when rates started backing up. The other security which is rumored to be going away is the Freddie Mac (or Gold) MBS. This would simplify the MBS market into conforming and Ginnie.
The debt ceiling debate is going to get ugly. The Administration has said it will not negotiate on the debt ceiling. John Boehner has said he doesn’t have the votes to pass a clean debt ceiling increase. While it seems easy to just decide which checks to write and which ones not to, it is actually a knotty piece of re-programming at Treasury to do that. And with the government shut down, it is even more difficult. Still nobody thinks the US will fail to make interest and principal payments. The Bipartisan Policy Center has a really good breakdown on the shutdown and debt ceiling issue
Filed under: Morning Report |
All Things in Moderation 
Snort.
@freddoso: Shutdown theater means you can’t find pics of missing children, but you can see some really cool pics of Saturn: http://t.co/fhtFrlU2qr
Stupid Wingnuts!
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racist
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Someone at Goldman didn’t get the default memo.
@danholler: interesting bit from Goldman: “Treasury payments are made through the Fedwire system, which could allow easier segregation.” #NotDefault
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“John Boehner has said he doesn’t have the votes to pass a clean debt ceiling increase.”
He’d be better served to prove this by holding a vote, rather than just assert it.
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J, he’s talking about Hastert rule majority. Also, LOTS of R’s dot want to be primaried and be accused of a cave with a vote for a clean bill even if it’s a test vote.
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The quotes in this article are priceless
http://www.mercurynews.com/nation-world/ci_24248486/obamacares-winners-and-losers-bay-area
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McWing:
My favorite: “Of course, I want people to have health care,” Vinson said. “I just didn’t realize I would be the one who was going to pay for it personally.”
The perfect encapsulation of politically implemented “compassion”.
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This is my favorite.
Covered California spokesman Dana Howard maintained that in public presentations the exchange has always made clear that there will be winners and losers under Obamacare.
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Synergy!
FDA officials did not benefit financially from their participation in the meetings, the agency said. But two later went on to work as pharmaceutical consultants and more than this, the critics said, the e-mails portray an agency that, by allowing itself to get caught up in a panel that seemed to promise influence for money, had blurred the line between the regulators and the regulated.
I bet they are important!
“Douglas Throckmorton, a deputy director of the agency, said in an interview that strict rules of transparency and funding apply to the public-private partnerships that the agency engages in and that these efforts are important for the government and the industry.”
If everybody’s getting paid, who’s gonna complain?
Dworkin said the scientific guidelines the group produced were of high quality and that “we are not aware of a single negative comment that has been published.” The goal of the group was to publish “consensus” statements on scientific matters related to testing the drugs.
Just don’t call it “Pay to Play!”
But he has touted the influence of the group, known by the acronym IMMPACT. A 2007 PowerPoint presentation he put together was called “The Impact of IMMPACT” and recognizes the group’s influence on FDA thinking. The presentation describes the committee as “a wealth of opportunity for communication” that was advancing the science and “approving new analgesic drug products.”
Oops.
“20k is small change, and they can justify it easily if they want to be at the table,” Dworkin wrote to Turk in July 2003, after an Eli Lilly representative bridled at the price. “Everybody has been very happy with [the meetings] and they are getting a huge amount for very little money (impact on FDA thinking, exposure to FDA thinking, exposure to academic opinion leaders and their expertise, journal article authorship, etc.) and they know it.”
Again, this is not “Pay to Play!” Swearsies!
“I don’t know how we will bury the post doc funds if we are too specific,” Turk says in another.
Exactly!
Dworkin responded in an e-mail: “It is difficult to imagine how an open meeting would develop consensus recommendations.”
http://m.washingtonpost.com/business/economy/pharmaceutical-firms-paid-to-attend-meetings-of-panel-that-advises-fda-e-mails-show/2013/10/06/a02a2548-2b80-11e3-b139-029811dbb57f_story.html?hpid=z1
What is really tragic are the barriers to entry being created and the surprise that rational people have over this. It’s the nature of bureaucracy. Want less corruption? Have the government do fewer things.
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Interesting interview with Antonin Scalia.
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“J, he’s talking about Hastert rule majority. Also, LOTS of R’s dot want to be primaried and be accused of a cave with a vote for a clean bill even if it’s a test vote.”
Actually, no he said “pass the House”, and there’s also a majority of the Republican caucus that would do this as well if it were put to a vote.
He’s just lying.
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“The quotes in this article are priceless”
That was good.
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“So you’re a stouthearted one.
I try to be. I try to be an honest originalist!”
But he’s not. See Gonzales v. Raich. I wish the interviewer had called him on that.
http://en.wikipedia.org/wiki/Gonzales_v._Raich
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Ok j, I read it wrong, sorry.
I do think Boehner will bend over this week.
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If it really couldn’t pass the House, then the best thing he could do would be to put it up for a vote and let it go down.
It would strengthen his negotiating hand. If you have the votes, then you take a vote.
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I don’t agree with all of it, but Stanley Greenberg’s latest is worth a read:
Click to access dcor%20rpp%20fg%20memo%20100313%20final.pdf
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jnc:
Taranto has a few things to say about that Greenberg report.
There must be a word for somebody who does what Stan Greenberg did here, which is to smear and attempt to marginalize a whole group of people, without evidence and based on the color of their skin.
Ideally, it should be a word that carries as much sting as “racist.”
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There’s a front page story in the WSJ today, unfortunately behind the firewall, which is a good example of how the media creates narratives. The article is headlined:
Top Bankers Warn on U.S. Debt Proposal: Finance Executives Warn Any Effort to Pay Bond Interest Before Other Obligations Could Pose Risk to Markets
The article is ostensibly about a meeting between Wall Street CEOs, Obama admin officials, and Republican congressmen, and as the headline suggests, it is framed as top bankers’ criticism of the notion of prioritizing debt. But if you actually pay attention, you will discover that the article only quotes one person specifically criticizing the notion of prioritization, and that person is Obama spokeman Jay Carney, whose complete falsehood, “Prioritization is default,” is allowed to stand uncontested in the article. Two other people, both market economists neither of which was in fact a top Wall Street CEO present at the meetings in question, are also presented as criticizing the notion of prioritization, but if you actually read their quotations in isolation, away from the prefacing spin presented by the reporter, it is possible (and I would say probable), that what they were really talking about was the economic effects of delaying any payments, not specifically the notion of prioritizing interest payments.
So where does the framing that the top CEOs are warning against prioritizing debt payments derive from? From unnamed “people familiar with the meetings”. Obama admin people, perhaps?
It seems very probable that the executives in the meeting were warning about the economic effects of HAVING to prioritize debt payments due to a failure to reach an agreement on the debt ceiling, not warning against the effects of prioritization itself. I guarantee you that not one of those executives thinks that, in the event of a failure to raise the ceiling, prioritization should not happen. I think this narrative was spoon fed by Obama to a cooperative reporter, and she just accomodated him.
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@jimgeraghty: Reminder: Back in 2006, raising the debt ceiling passed 52 to 48, with ALL Democrats voting against. http://t.co/1zhK1GNPDL
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Thanx for that link, JNC.
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An observation:
Journalists, pundits, etc., refer to GOP “strategists.” I don’t think that currently there is any such animal; there are GOP tacticians, but I have yet to hear of an actual Republican strategy in the last several years.
Democrats have strategies, the GOP has tactics. Tactics may win battles, but they do not win wars.
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Steve Pearlstein piece that’s worth a read:
http://www.washingtonpost.com/entertainment/movies/two-new-documentaries-critique-our-economic-problems/2013/09/26/2b7f02e6-25f3-11e3-b75d-5b7f66349852_story.html
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jnc (from Pearlstein):
You also can’t come away from the film with anything but admiration for Robert Reich…
I’d be willing to bet against that.
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BTW, speaking of documentaries, I watched one last night on Netflix called Hating Breitbart. Pretty interesting.
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@jnc:
Evidently, just as you and NoVA don’t really understand Libertarianism, I don’t really understand tactics and strategy.
Heh.
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“@jnc:
Evidently, just as you and NoVA don’t really understand Libertarianism, I don’t really understand tactics and strategy.
Heh.”
Everyone has been using the term tactic for it, Greg especially.
One of the great things about PL is it’s use as a recruiting tool for libertarianism due the representative sample of progressives there.
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To give Reich his due, he’s about as good of an advocate for his positions as you can find. I got to watch him and Charles Krauthammer debate the American Social Contract live and it was quite good. Much better than the usual cable TV shouting matches.
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One of the great things about PL is it’s use as a recruiting tool for libertarianism due the representative sample of progressives there.
You know you’re just exerting your WMP there, right?!
And I agree with you on Reich; have you seen that he’s got a documentary out now? I hadn’t heard anything about it until he was on (I think) Chris Hayes’ show.
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Sorry, I thought I was oppressing the working classes as is a given in the Marxist view of all social relations.
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Reich’s documentary is what Steve Pearlstein was reviewing in the linked article. It’s what Scott was commenting on.
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And Michi, you’ve seen what happens when you start throwing around your MFP (Military Female Privilege) indiscriminately.
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what Steve Pearlstein was reviewing
D’oh! My bad for not clicking.
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And Michi, you’ve seen what happens when you start throwing around your MFP (Military Female Privilege) indiscriminately.
Heh. You should’ve seen what I edited out of a couple comments to Dezzie!
I found it quite amusing when, immediately after her saying “I think that you and jnc thiink. . .” she told me that I have NO IDEA what she’s thinking. Ah well, so it goes on PL. . .
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I saw, and he’s right on that section. It was disappointing as Greenberg is usually better than that.
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The conclusion seems completely anodyne as well:
“Could Pose Risk to Markets”
Every time Ben Bernanke gives public testimony, it “Could Pose Risk to Markets”
The closer we get to October 17th, the more this narrative will change.
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jnc:
Every time Ben Bernanke gives public testimony, it “Could Pose Risk to Markets”
LOL. Excellent point.
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BTW, is anyone else bothered by the notion that the economic well-being of the nation is so dependent upon such massive levels of government spending and borrowing? That we face economic armageddon if the government is forced to function on just the (not insignificant) tax revenues it collects? If all that is true, I think it is even more of an indiction that government spending is out of control and needs to be reined in.
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indiction = indictment or indication? Doesn’t matter much.
In either case, I am not disturbed by annual deficits in down years but only by deep deficits over a business cycle. I think long term revenue must be higher and “permanent” expenses lower.
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indication
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Mark:
In either case, I am not disturbed by annual deficits in down years but only by deep deficits over a business cycle.
I am not sure what constitutes a “deep” deficit for you, but the US consistently runs deficits regardless of the business cylce. In the 73 years since 1940, we’ve run a federal deficit in all but 12 of them, with 7 of those 12 coming in the first 20 years. I think deficits have a high correlation to two things. Wars and progressive social policies. Wars end. Progressive social policies, unfortunately, do not. They only seem to expand.
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If the business cycle was on an uptick generally I would want to see surplus over it, if it were relatively steady over a five year view I would want balance, and if it were somewhat negative over a five year period I would find deficit acceptable. A Depression or a war would excuse deficit as well.
And I agree that we have not managed this over time.
However, Scott, in the fifties we ran 2% deficits and now we are running 35% deficits. In fact we are getting worse and the worst jump in a non-war non-recession presidency was Reagan’s. The new normal after RWR was way worse than the old normal.
In a rational world we would ratchet down expenses over time and change the tax code to provide more revenue. But we govern by committee of the whole and it won’t ever work in what remains of my lifetime. We would be better off in any Admin with Congress appointing a group like Simpson-Bowles and staffing them with finance types to set a spending and revenue program based on a five year cycle. Not gonna happen.
Crashing the spending all at once seems reckless to me.
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Mark:
In fact we are getting worse and the worst jump in a non-war non-recession presidency was Reagan’s.
The biggest jump in Reagan’s deficit came between 1982 and 1983 (his peak deficit year). We were in a recession until November 1982. That doesn’t seem to me like a “non-recession” deficit. Arguably it wasn’t even a non-war deficit. But you are certainly right that things are getting worse. As a percentage of GDP, Reagan’s deficit peaked in 1983 at 5.9%, the only year in his entire presidency in which the deficit was greater than 5%. Obama hasn’t had a single year of his presidency in which the deficit has been less than 5%. And we’ve been out of recession for over 4 years.
Crashing the spending all at once seems reckless to me.
I agree. In fact I don’t know anyone who wouldn’t agree. The trouble is this: What if the choice to be made is not between a crash in spending all at once and a long-term program of gradual and targetted spending cuts, but is instead between a crash in spending all at once and a long-term program of gradual but entirely fake and sure-to-be-ignored-in-the-future spending cuts? Then the question is not which is and which is not reckless, but rather which is the least reckless. And even your own assessment, ie that what needs to be done is “not gonna happen”, suggests that thinking we face the latter choice isn’t exactly crazy.
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Scott, I would propose the Base closing model if I were in Congress. If I were Speaker or Majority Leader I would also insist that Budget and Ways and Means actually met every day until they reported out something. And Carter had about a 14% hole his worst budget year while RWR ran the hole from 20% up to 30% by 1986. Big change. I am figuring “hole” = deficit/receipts. It isn’t quite as stark if you figure deficit/outlays. But you get the idea.
We are in general agreement about how this ought to be done, except: I would not try to force a wrenching adjustment as a superior idea to drift in the wrong direction. Color me an optimist that drift can be changed. After I am dead.
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I think the point about it being “so dependent upon such massive levels of government spending and borrowing?” actually takes it further than the popular narrative has it.
The line that’s been feed to the public by Democrats and Republicans since the New Deal is that the government can control the economy and that enacting proper government policy by voting for them can counteract the business cycle, which is viewed as a problem.
The American People are entitled to an economy that always grows and stock and real estate prices that only go one direction: up.
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“You should’ve seen what I edited out of a couple comments to Dezzie!”
I’ve been AWOL. I’ve never blocked anyone, but she’s not making it easy.
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Scott, the Taranto column was really good yesterday.
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Color me an optimist that drift can be changed.
What evidence is there of the drift ever changing?
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What evidence is there of the drift ever changing?
Not a lot – but so far I gotta give Jerry Brown credit for squeezing a lot of the fat out of CA’s budget. That is my best shot.
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Jack Lew testifying in front of congress:
“Prioritization is just another word for default.”
It would be difficult to overstate how incredibly irresponsible this administration is. It is intentionally trying to stoke market fears of a US default on its debt for political gain. By publicly saying that the treasury will not honor our debt unless the debt ceiling is raised, Obama/Lew are arguably in violation of the 14th amendment.
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