Morning Report – Hey my rate went up and bonds didn’t move, what gives? 12/17/13

Vital Statistics:

Last Change Percent
S&P Futures 1782.3 2.0 0.11%
Eurostoxx Index 2961.3 -17.4 -0.59%
Oil (WTI) 97.44 0.0 -0.04%
LIBOR 0.244 0.002 0.62%
US Dollar Index (DXY) 80.13 0.059 0.07%
10 Year Govt Bond Yield 2.87% -0.01%
Current Coupon Ginnie Mae TBA 104.7 0.0
Current Coupon Fannie Mae TBA 103.4 0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.48
Markets are little changed this morning ahead of the start of the FOMC meeting. Consumer Prices were unch’d.
The GSEs are planning on reducing the upper limits sometime next fall.  They are thinking of dropping the high cost ceiling from 625k to 600k and the overall ceiling from 417k to 400k. They are inviting public comment. Setting new purchase limits “furthers the goal of contracting the market presence of Fannie Mae and Freddie Mac gradually over time, one of the key objectives of FHFA’s strategic plan.”
Fannnie Mae and Freddie Mac also released their new pricing adjustments today, (Fannie is hereFreddie is here) which increases costs for borrowers in 2014. The first part is a g-fee increase of 10bp. The second is a series of LLPAs to better reflect credit risk. Note the Adverse Charge goes away for all states except CT, FL, NY, and NJ. However, when you include the new LLPAs, conforming loan rates are going up. Mortgage News Daily put out this handy chart showing the new adjustments. Note that these are not the actual adjustments – they are the change in adjustments. Note that higher LTV loans with FICOs over 680 are getting socked.

Toss in the potential effects of QE tapering and conforming loans just got a lot more expensive. LOs get ready for this new pricing regime.

A total of 791,000 homes returned to positive equity in the third quarter, according to CoreLogic. This leaves a total of 6.4 million homes (or about 13% of all mortgaged homes) with negative equity. This compares to 7.2 million homes (or 14.7%) a year ago. You can see the distribution of negative equity MSAs in the chart below:

The budget deal is looking more and more likely to pass the Senate. That doesn’t necessarily mean smooth sailing ahead – Republican lawmakers who are angry about the budget deal are spoiling for a fight over the debt ceiling. CNBC also has a lay of the land. The big strategic question for the GOP remains obamacare – if it continues to flail and have issues, do Republicans go along with a debt ceiling increase for fear of changing the subject, or would they view this as an opportunity to slay the unpopular ACA dragon once and for all?

When people think of Detroit, they often think of the hapless Lions, but also the Packard Plant, which went dormant in 1956 and is ruins remain a testament to urban decay and is a symbol of Rust Belt miseryIt just got bought for $405,000. He plans to revitalize Detroit’s East Side. Good luck with that…

60 Responses

  1. Budget deal will pass. cloture vote later this morning.

    McCain
    Flake
    Johnson
    Collins
    Hatch

    will vote for cloture.

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  2. Then our long national nightmare will be over.

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  3. NoVA, any idea/rumors on what will be tied to the debt ceiling extension?

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    • jnc:

      I remain interested in clarifying whether you think no charitable donations should be deductible for the purposes of income tax, or if you think certain charitable donations should be deductible, while others should not be.

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  4. not really … there’s rumbling of deficit reduction to be named later. i think there’s a lot of burnout.
    but i don’t think GOP leadership has the stomach for it. i think it any deficit measures get tied into FY 2015. but that’s just a guess.

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  5. cloture reached. right now its 66-33

    final 67-33

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  6. So there’s a Kaiser study making the rounds this morning the addresses how states that decline to expand Medicaid are creating a coverage gap.
    http://kff.org/disparities-policy/issue-brief/the-impact-of-the-coverage-gap-in-states-not-expanding-medicaid-by-race-and-ethnicity/

    It doesn’t address that nobody wants to treat Medicaid patients.

    http://www.healthline.com/health-news/policy-without-more-doctors-medicaid-patients-will-fill-ers-092013

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  7. Shouldn’t any discussion of Medicaid expansion, any discussion, include this?

    http://m.nationalreview.com/corner/348287/game-changing-oregon-medicaid-study

    If not, why?

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  8. It also seems that Medicaid’s asset recovery provisions are starting to trickle into the news.

    It’s like people who knew nothing about these programs thought they’d be a good fit for everyone.

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  9. Oh my.

    There’s a bad side and a good side to this. The bad side is obvious: Many white people are so scared of being seen as racist that they’re not willing to talk about simple facts — and, ironically, they end up being seen as racist as a result. Many whites’ sensitivity to racism may have gone so far past the point of diminishing returns that it actively harms their relations with blacks. They place so much importance on demonstrating that black people don’t make them nervous that black people make them nervous.

    http://www.realclearpolicy.com/blog/2013/12/17/the_stigma_of_racism_777.html

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  10. The left wants to rebrand social security and medicare as not entitlements. New PC term: federal retirement benefits…

    http://publiceditor.blogs.nytimes.com/2013/12/13/is-entitlements-the-best-word-for-social-security-and-medicare/

    Like

    • I don’t mind at all that SS and Medicare are called entitlements… I feel I am entitled to them since with every paycheck I received for 32 years included my “investing in my retirement and my retirement health care costs” plans. I do not see them as “federal retirement benefits” as that ‘suggests” my “entitled benefits” are simply another “federal welfare plan”.

      And for All: Kathy LaFortune, my Congressman Bridenstine’s SS Help group “case worker” has successfully submitted a Congressional Request to SS to move my Judicial Review to the front of the line. Although my attorney told me they would submit my Judicial Request to SS by the end of the week last week, as of Friday they still had not. But, as soon as they do, hopefully I will either be approved by the review group, or, I will appear before a SS Judge in short time.

      I am so anxious for this to happen as every day that goes by, I only get worse. For example, due to a serious back “strain” I incurred in the late 80’s, I was removing some of those large computer printout paper boxes from my office following a major implementation and I severely strained every muscle in my back and my doctor explained it was so bad that for the rest of my life I could easily strain my back muscles simply by rolling over in my sleep, and so I did strain my upper back muscles on the right side as I attempted to get out of bed on Saturday morning. Today is the first day I have been able to use my right arm. This is something I battle quite frequently especially since my cervical spinal stenosis has worsened as it has. Tension and pain from my neck travels to my upper back and shoulders, irritating those muscles, making them more susceptible to being strained.

      Like I said, I am so anxious for this judicial review to happen. While being approved won’t magically make my disabilities go away, I know that at least having a paycheck instead of an empty freezer and empty cupboards, and stressing about what bills can/cannot be made, a huge stress will be taken from me and perhaps with that peace of mind, my body can relax and in some cases, even heal a bit. I will keep you all posted.

      Like

    • Mark:

      Not sure if you saw it, but a New York judge has rendered a summary judgement in favor of the plaintiffs (a group of religious organizations) and against Sebelius in a free exercise of religion case revolving around the contraceptive/sterilization mandate in O-care. Apart from the ruling, which was interesting in itself, I thought it was somewhat relevant to our previous discussion on unconstitutional rule by regulatory agencies.

      The relevant part of ACA as passed by Congress says that group health plans must “at a minimum provide coverage for and shall not impose any cost sharing requirements for…[women’s] preventative care and screenings . . . as provided for in comprehensive guidelines supported by the Health Resources and Services Administration[.]” However, at the time of passage of ACA, there were no such HRSA guidelines concerning women’s preventative care and screenings. So Congress essentially passed a provision that had no content, in the process giving the executive branch full authority to fill it in with whatever content it wanted. In other words, what will and won’t be mandated by the law is entirely in the power of the executive branch. I don’t see how that can possibly be construed as anything other than the executive branch making new law, something that the constitution does not empower the executive branch to do. This is exactly the kind of law that I object to as unconstitutionally created, and to which we are increasingly subject.

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      • This is a very interesting study, and mirrors my own anecdotal experience with my kids:

        Scientists had a group of white adult volunteers play a game of Guess Who? — where players start with a lineup of faces and try to find the correct one by asking yes/no questions — with partners who were either white or black.

        The lineup they were given was half-black and half-white, so asking about race was a great way to eliminate a lot of possibilities quickly. And yet 43 percent of the subjects failed to ask when the person answering the questions was white, and 79 percent didn’t ask when the person was black. Perhaps because their discomfort showed, the whites who didn’t ask about race were more likely to be seen as racist by outside observers (who for some reason were all white). Conducting the experiment with children revealed that this fear sets in around age 10.

        I had this exact experience with my kids a few years ago. I asked about the name of one of their classmates, the one black face in an overwhelmingly white school, and, trying to describe who I was asking about in the most identifiable way possible, I referred to him as “the black guy”. One of my daughters was taken aback, saying “Dad, that’s racist.” I believe the ensuing conversation disabused her of that notion.

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  11. Thank you for the update, Geanie. hope it works out.

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  12. Public Citizen is on CSPAN 2 right now say deregulation caused the housing crisis.

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  13. Public Citizen is on CSPAN 2 right now say deregulation caused the housing crisis.

    Who is public citizen and why does he think deregulation caused a housing bubble?

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  14. Frank Wolf and Jim Matheson are not seeking reelection.

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  15. I liked how Blanche Lincoln was the “anti regulation” side.

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  16. I tell ya, reading up on BitCoin/Silk Road is some interesting shit. There are some very smart people outside of what might be considered “traditional” lifestyles and occupation.

    My eyes have been opened.

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  17. “no charitable donations should be deductible for the purposes of income tax,”

    This. Zero deductions at all.

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  18. Good luck with your review Geanie. If any case seems worthy of disability, yours certainly does based on your description of it.

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  19. “The left wants to rebrand social security and medicare as not entitlements. New PC term: federal retirement benefits…”

    God this bullshit shows the lack of self awareness at the Times.

    “Since the negative meaning is very likely not intended, it would be better – as Mr. Leonhardt suggests – to use the words “federal retirement benefits.” That’s longer and a bit clunky, which is never a virtue in a newspaper article, but it has the benefit of being more neutral.”

    Leonhardt just went through the exercise of why these programs are in fact entitlements and the idea that “federal retirement benefits” is somehow neutral is absurd. “Federal retirement benefits” describes what an employee of the Federal government can expect to receive upon retirement as part of their compensation package.

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  20. oh, Warren is on the floor about some “equal employment for all act.”

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  21. She’s should just say, if you need an employee, the government will supply one for you.
    interviews and screening in any way, shape or form are unfair.

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  22. PL post on it. She wants to ban the use of credit reports in job interviews.

    http://www.washingtonpost.com/blogs/plum-line/wp/2013/12/17/elizabeth-warren-sheds-light-on-washingtons-failure/

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  23. what happened to yello. or his he just trolling? which, let’s be honest, can be a lot of fun.

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  24. PL effect?

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  25. maybe. I found it wasn’t fun anymore. and i was getting angry.
    i probably should have left on better terms, but here we are.

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  26. Or Reich is halfway to my position.

    Edit: I agree with Reich’s core logic moreso than the NRO article, but to be honest I didn’t think it was particularly well written. I think Scott’s rebuttals here were better than the NRO writing.

    I simply take Reich’s position to it’s logical conclusion.

    Like

    • jnc:

      Or Reich is halfway to my position…I simply take Reich’s position to it’s logical conclusion.

      Not to belabor the point, but really I don’t think either of those is really true. Reich totally rejects the principles and notions of fairness/justice that lead inexorably to your conclusion (with which, of course, I totally agree.) While you reject a tax code that privileges some types of donations over others, Reich embraces it. While you desire a tax code that operates in the absence of value judgements about which donations are and are not real “charity”, Reich demands a tax code that requires such value judgments (but only to the extent that such judgements agree with his own). Although you and Reich may agree on the outcome of a particular, specific instance, the difference between you and Reich is like, for example, the difference between a person who says a particular government affirmative action policy favoring blacks is wrong because the government should not discriminate on the basis of race, and a person who says the same policy is wrong because the government should only discriminate in favor of white people. Yes, the two agree that the policy is wrong, but for diametrically opposed reasons.

      Reich’s position is unprincipled and pernicious, and ought to be rejected as such, not embraced, even if it happens to accidentally stumble upon the right result in a few particular instances.

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  27. Scott, this may amuse you. Last night on PL Cao was trying to be insulting to me about a debate I got into with Shrink on the nature of government vis-a-vis the economy, specifically the proposition that the economy was a creation of the government and not separate from it in any meaningful sense.

    His view of an insult to Libertarians:

    “Libertarians are different. They’re obsessively consistent, relentlessly logical…”

    http://www.washingtonpost.com/blogs/plum-line/wp/2013/12/16/happy-hour-roundup-253/

    I’ll own that.

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  28. quoting: “Libertarians are deeply defective people and they only appear to make sense if you let them artifically narrow the argument and accept things in their terms. We really need a HUAC level crusade against them.”

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  29. “They’re obsessively consistent, relentlessly logical”

    We are Spock.

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  30. Perfect headline:

    “Haters gonna hate. But they plan to vote Republican.
    By Sean Sullivan and Scott Clement
    December 17 at 6:30 am”

    http://www.washingtonpost.com/blogs/the-fix/wp/2013/12/17/haters-gonna-hate-but-they-plan-to-vote-republican/

    Like

  31. “Reich’s position is unprincipled and pernicious, and ought to be rejected as such, not embraced, even if it happens to accidentally stumble upon the right result in a few particular instances.”

    Or once you start eliminating some of the deductions, it becomes easier to build support for whacking the rest of them as the political consensus starts to collapse.

    Same logic with breaking out the Farm subsidies from SNAP.

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    • jnc:

      Or once you start eliminating some of the deductions, it becomes easier to build support for whacking the rest of them as the political consensus starts to collapse.

      I guess that is possible in theory, but it seems to me highly unlikely to work in practice.

      At least now there is some measure of an objective standard involved that limits the power of the political class. There are certain known legal standards that qualify any organization as a charity regardless of its specific mission, and donations to those organizations qualify for deductions. Politicians are not granted the authority to pick and choose which charities should get the preferential treatment. What Reich (and you?) would do would basically give the political class more power to decide which charities should and should not get preferential treatment. To then expect that the political class will ultimately give up this power in favor of a principle that eliminates deductions altogether runs counter to virtually everything we know about how politicians operate.

      Like

  32. what happened to yello. or his he just trolling?

    If you mean his snarkiness lately, I suspect it’s because (1) he’s been on the road for work the last two weeks, and hasn’t really had time to get on much, and (2) there has been an infestation of posters from both the left and the right who are doing nothing to aid in the conversation. . . so people have been sniping at them.

    My favorite currently is CoreyInSavannah, who told me that I was a murderer for hire last night, and that soldiers are scum.

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  33. Someone should tell Ygleses that General Electric and American Telephone and Telegraph are mature companies that don’t have a lot of growth potential. That is why they return money to shareholders through dividends as opposed to pursuing a ramp up of new businesses.

    WaPo did another article Sunday night complaining about stock buybacks. Did a JournoList missive go out directing the troops to start bitching about corporate capital allocation decisions?

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  34. Did a JournoList missive go out

    JournoList doesn’t exist any more. . .

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  35. I’m sure there is some alternate way they work to coordinate messaging..

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  36. Funny.

    Take Byron Dorgan, the former Democratic senator. In his 2006 book he complained of “legions of lobbyists” bringing “barrels of political donations.” Dorgan’s wife, Kimberly, has since 1999 been a lobbyist for the life insurance industry. At least five of Dorgan’s former chiefs of staff are lobbyists. Lobbyists were his second largest source of campaign contributions, according to data from the Center for Responsive Politics. And today, Dorgan is the co-chair of the “government relations practice” at lobbying firm Arent Fox.

    http://m.washingtonexaminer.com/why-lawmakers-love-lobbyists-and-hate-outside-groups/article/2540867?custom_click=rss&utm_source=twitterfeed&utm_medium=twitter

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  37. My guess is less than a million get enrolled in private insurance by Jan 1 and at most 3 million by the end of April. That leaves 4 million plus who got fucked over because of The Abomination.

    Yeah, totally worth it.

    http://www.cnn.com/2013/12/17/politics/obamacare-private-exchanges/

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  38. Oh my.

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  39. “My favorite currently is CoreyInSavannah”

    wow. i’ve can’t recall seeing her on PL, but i ran across that handle on the education page once.

    It ended as you’d expect: I deserve to have child services visit my home and remove my son. over a disagreement on curriculum standards.

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  40. That’s the heart of it, no? That the public will find out?

    The newspaper also reported that Merkel was particularly angry that, based on the disclosures, “the NSA clearly couldn’t be trusted with private information, because they let Snowden clean them out.”

    Never confuse malice with incompetence.

    http://www.theguardian.com/world/2013/dec/17/merkel-compares-nsa-stasi-obama

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  41. huh. this is basically the point i was trying to make uptread

    http://www.bloomberg.com/news/2013-12-13/why-i-try-not-to-write-bad-reviews.html

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  42. “I’m sure there is some alternate way they work to coordinate messaging.”

    I have no doubt whatsoever that there are daily, possibly twice daily conference calls between the WH communications staff* and selected writers. That’s the nature of partisan journalism.

    *or RNC, etc. on the other side.

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  43. “At least now there is some measure of an objective standard involved that limits the power of the political class. There are certain known legal standards that qualify any organization as a charity regardless of its specific mission, and donations to those organizations qualify for deductions. “

    That’s just crazy. Part of what Reich argues about in the existing arrangement and I happen to agree with is that the current “objective standard” is being violated in that one of the supposed characteristics of a charitable contribution is that the donor isn’t supposed to receive anything of value for the donation. That’s clearly being violated left and right here in the examples he provides.

    Narrowing the category of what’s considered a charity isn’t “give[ing] the political class more power to decide which charities should and should not get preferential treatment” anymore so than the current situation. It’s just drawing the line narrower rather than more expansive.

    Like

    • jnc:

      Part of what Reich argues about in the existing arrangement and I happen to agree with is that the current “objective standard” is being violated in that one of the supposed characteristics of a charitable contribution is that the donor isn’t supposed to receive anything of value for the donation.

      At no point that I can see does Reich make such an argument. The closest he comes to any mention of such a thing at all is when he suggests – in a parenthetical aside – that some schools give preferential admission treatment to legacies and donors. But other than this parenthetical, his entire focus is on whether or not a charity services “the poor”, not whether or not the donor is getting something of value.

      He objects to deductions for donations to Ivy League schools because “they’re not known for educating large numbers of poor young people” and because “they’re less likely to graduate aspiring social workers and legal defense attorneys than aspiring investment bankers and corporate lawyers.” He objects to deductions for donations to Lincoln Center because “Poor New Yorkers rarely attend concerts at Lincoln Center.”

      He doesn’t like the idea that a donation which results in “the family name engraved on a new wing of an art museum, symphony hall, or ivied dorm” might be tax deductible. But he leaves no doubt that he would be perfectly fine with the deduction for a donation which resulted in, say, the newly named Warren Buffet Shelter for the Homeless.

      He also argues, in typical liberal fashion, that there is no difference between a tax deduction and government spending, and hence such tax deductions represent a government “handout” to the wealthy. That is a total abuse of terms and concepts, and is complete nonsense.

      Reich is not making an argument even remotely like the one you would have him make. He’s engaging in nothing more than typical, progressive class warfare which, yes, prefers to increase rather than limit the power of the political elite. Call me crazy (heh), but I think it is far more important to oppose the fundamental ideology driving the likes of Reich than to ignore it just because it happens to result in a preferable result in some narrow, immediate circumstance. The previously mentioned narrow policy agreement between one who opposes government discrimination as a matter of principle, and one who opposes government discrimination only when it adversely effects white people is, I think, instructive on this point.

      Narrowing the category of what’s considered a charity isn’t “give[ing] the political class more power to decide which charities should and should not get preferential treatment” anymore so than the current situation.

      Doing it in the way that Reich would have it done certainly would. Right now there are certain kinds of missions that qualify for the tax exemption…charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals. Reich is not all that specific about how he would change it, but the clear impression is that as long as they were providing services to the correct kind of people, ie “poor” people, in the “right” amounts, they meet with his approval. But that is clearly a subjective judgement. Who gets to make that judgement? The political elite, of course. So Reich would give the political elite even more room to make personal value judgements regarding whether or not an organization gets exempt status than they already have.

      Like

  44. “Brent Nyitray, on December 17, 2013 at 8:00 pm said:

    Someone should tell Ygleses that General Electric and American Telephone and Telegraph are mature companies that don’t have a lot of growth potential. That is why they return money to shareholders through dividends as opposed to pursuing a ramp up of new businesses.”

    He doesn’t care. Note that his argument isn’t about the shareholders or the companies. It’s about what’s best for the “economy”, i.e. his political agenda.

    Like

  45. i’ve can’t recall seeing her on PL

    She’s only shown up twice that I’ve seen (but I haven’t been on much lately). The first time she was being trolled by somebody who evidently has followed her around to various blogs and commented about her (yes, about her, rather than the topic on the blog). Then the last time she went into a long anti-military tirade and flamed blpeyton (retired Marine) and me for daring to claim that we are human. jnc stuck in a few good words in his usual measured way and she flamed him, too.

    Such is life on PL sometimes. . .

    Like

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