Morning Report – Disappointing Durable Goods 1/28/14

Vital Statistics:

Last Change Percent
S&P Futures 1780.8 5.1 0.29%
Eurostoxx Index 3024.4 9.8 0.32%
Oil (WTI) 96.37 0.7 0.68%
LIBOR 0.236 0.000 0.00%
US Dollar Index (DXY) 80.52 -0.001 0.00%
10 Year Govt Bond Yield 2.75% 0.01%
Current Coupon Ginnie Mae TBA 105.5 0.1
Current Coupon Fannie Mae TBA 104.3 0.0
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.34
Stocks are higher this morning in spite of some weak economic data and disappointing sales out of Apple. Ford reported good numbers. Bonds and MBS are flat. Later on today we will get consumer confidence and Richmond Fed.
The FOMC starts its two day meeting today, which will be swan song for the Bernank.
Durable Goods orders came in at -4.3% vs. the Street expectation at +1.8%. This continues the trend we have seen of data suggesting a weak December. It is possibly weather-related, or tax related. Capital Goods orders were weaker than expected as well.
Continuing that trend, new home sales were weaker in December as well. New home sales fell to an annualized 414,000 pace in December from a downward-revised 445,000 pace in November.
Case-Shiller rose 13.71% year-over-year although it reported its first month-over-month decline in prices. Most experts think the torrid pace of the last couple of years will not be repeated in 2014 as increasing prices and increasing rates take their toll.  Prices are back to mid 2004 levels.

Homebuilder D.R. Horton reported first quarter earnings that topped estimates. Orders increased 4% in Q1. Gross margins continue to expand as average sales prices jump 10%. It has been a tale of two markets as there is strong demand from the move-up buyer and the first time homebuyer struggles to get a foot on the first rung of the ladder. The stock is up a few percent pre-open. We will get a better read on the first time homebuyer later this week when PulteGroup reports.

63 Responses

  1. Ahem.

    Frist!

    Heh.

    Like candy from a baby.

    Like

  2. My favorite Davis meme is the “after she loses big, it’s actually a good thing, b/c she’ll learn from it and be stronger.”

    whatever. Obama pulled 3.2 million votes in Texas. Presumably 1 of those voters is a perfectly capable, competent woman who holds the exact policy positions as Davis. and has the benefit of not being a liar.

    Like

    • McWing:

      A excellent Hayekian view of Davos.

      Another good article. Exactly what is wrong with any kind of central planning, whether governmental or quasi-governmental.

      Like

  3. Brent

    Since I’m off politics right now I’m really enjoying your real estate insider stuff and updates. For some reason it’s interesting to me………….LOL. Our rental has jumped up in price but our home hasn’t really seen the same gains percentage wise. I’m wondering if the lower end is gaining ground more quickly than higher end homes and if that’s typical for the rest of the country?

    I know it’s a boring question but I am curious.

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  4. Lulu, what you are seeing makes sense. The lower end of the market was clobbered the hardest, so it would make sense that it would rebound the fastest.

    I think most of those stuck in houses at the high end of the market had the werewithall to wait it out and so there was less selling pressure at the luxury segment.

    BTW, PL is now pretty tough to deal with nowadays without the ignore feature.. R30 has now become Cao’s mini-me…

    Like

  5. Thanks Troll.

    I’ll add my standard line: Regulatory capture is inevitable. You reduce the influence of corporate by reducing the power that government wields over it. Everything else is doomed to failure. Unless you want to wall off the regulators completely and eliminate the first amendment. Which I think is the PL solution.

    Like

    • nova:

      Regulatory capture is inevitable. You reduce the influence of corporate by reducing the power that government wields over it.

      This basic truism seems so obvious to me that I no longer believe that anyone who advocates for greater regulation is actually concerned with regulatory capture, no matter what they say.

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      • Question: Why do members of the party opposite to the president’s bother attending the SOTU? It is not, in any real sense, a report on the actual state of the union. It is largely just a partisan political rally designed to hype the policies of the president, not the report that is actually called for by the constitution. That is especially true under this president, but has generally been the case regardless of party for some time. So why would members of the out-party voluntarily suffer through the spectacle?

        I seriously think the R’s should boycott this ridiculous charade, just like the more sensible SCOTUS justices do.

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  6. Brent, re the PL, I gave that up last year. I used to check in and read occasionally but haven’t even done that in ages. The PL was a lot of fun in the early days but with my waning interest in politics, and shortage of time, it’s just too much effort for the return anymore.

    I am glad you guys are carrying on here though! Wish I had more time but I really don’t. I saw Kevin was around last week, that’s a good thing, and Mark too!

    I think you’re right about the RE market. I’m always curious if CA is an outlier or part of the normal fluctuations that all markets have in response to a down turn. I mean, I KNOW we’re not normal, but you get my drift…………hahaha

    Like

  7. Lulu, California IS different… Here is an article I wrote back in April about home price appreciation.. It is amazing how different the sand states are compared to the rest of the country:

    http://marketrealist.com/2013/04/real-estate-price-appreciation-widely-dispersed-by-location/

    Like

  8. Thanks Brent, I’ll give it a read later. I love CA and get it totally though. I’m surprised everyone doesn’t want to live here.

    Like

  9. well, if you see government as “all of us doing great things together!” it’s incredibly pessimistic and dispiriting.

    but if you don’t start from that premise …..

    Like

    • nova:

      well, if you see government as “all of us doing great things together!” it’s incredibly pessimistic and dispiriting.

      What I find incredibly dispiriting is that so many people seriously view government in such an obviously wrong way. Government isn’t the manifestation of “all of us” doing anything. If “all of us” want to do something, we don’t need government to do it. Government is needed precisely and only when “some of us” don’t want to do something that others of “us” want to force them to do anyway.

      Like

  10. “Thanks Brent, I’ll give it a read later. I love CA and get it totally though. I’m surprised everyone doesn’t want to live here.”

    I lived there for 4 years and I understand… That said, California ain’t cheap…

    Like

  11. Theory: It’s a media event that proves irresistible to the personality type that runs for office, regardless of party.

    Why do any SCOTUS members go, and doesn’t their attendance imply partisanship?

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    • McWing:

      Why do any SCOTUS members go, and doesn’t their attendance imply partisanship?

      I don’t know why any of them go, but that they do is not, I don’t think, an indication of partisanship. The ones who go seem to go no matter who is president, and the one’s who don’t go also skip it regardless of who is president.

      Like

  12. I still find PL entertaining for some reason. Our favorite actual communist is back.

    Also, if it’s as reported, the Farm Bill is a win vs current policy

    “They have touted the bill’s overall savings and the elimination of a $5 billion-a-year farm subsidy called direct payments, which are now paid to farmers whether they farm or not.

    The bill would continue to heavily subsidize major crops — corn, soybeans, wheat, rice and cotton — while shifting many of those subsidies toward more politically defensible insurance programs. That means farmers would have to incur losses before they received a payout.

    The bill also would overhaul dairy policy and create a new insurance program for dairy farmers. The proposed program would do away with current price supports and allow farmers to purchase a new kind of insurance that pays out when the gap between the price they receive for milk and their feed costs narrows.

    But the new dairy program would not include a so-called stabilization program that would have dictated production cuts when oversupply drives down prices. The idea was to break the cycle in which milk prices drop and farmers produce more to pay their bills, flooding the market and forcing prices down further. But House Speaker John Boehner, R-Ohio, strongly opposed the stabilization idea, calling it “Soviet-style.””

    http://www.huffingtonpost.com/2014/01/27/farm-bill-agreement_n_4676618.html

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  13. “lmsinca, on January 28, 2014 at 1:33 pm said:

    Thanks Brent, I’ll give it a read later. I love CA and get it totally though. I’m surprised everyone doesn’t want to live here.”

    Jerry Brown remains my favorite Democrat currently. Austerity worked.

    Like

  14. jnc

    Jerry Brown remains my favorite Democrat currently. Austerity worked.

    The other half of the equation is raising taxes. Or is that always considered part of the equation? I generally think of austerity as cutting spending. Maybe that’s not the technical definition though.

    Funny, my husband and I were talking about Meg Whitman this morning and her run for the governorship. I reminded him that money can’t buy popularity and that if she’d spent some of her own money building a company and putting Californians back to work first she could have made money instead of wasting it and then breezed into office on her own coattails.

    Added: He said she was too manly………….lol

    Like

    • lms:

      I reminded him that money can’t buy popularity and that if she’d spent some of her own money building a company and putting Californians back to work first she could have made money instead of wasting it and then breezed into office on her own coattails.

      Just like Mitt Romney! Oh, wait….

      BTW, from Whitman’s wikipedia entry: “Whitman served as president and chief executive officer of eBay from 1998 to 2008. During her 10 years with the company, she oversaw its expansion from 30 employees and $4 million in annual revenue to more than 15,000 employees and $8 billion in annual revenue.”

      eBay is based in San Jose, California.

      Like

  15. Serious question about Jerry Brown. Has he ever held a private sector job? I thought after his first governorship he did, then was mayor of Oakland. Is that right or did he run some charitable foundation?

    Asking for a friend.

    Like

    • McWing:

      According to his wikipedia entry, he graduated from law school in 1969 and then worked for2 years, between 1969 and 1971, for a law firm. After that it has been politics (with a brief respite to study Buddism) for his entire life.

      Like

  16. ” I’m surprised everyone doesn’t want to live here.””

    It’s a long way from family. but closer to vegas. hmm.

    Like

    • nova:

      It’s a long way from family. but closer to vegas. hmm.

      To me the most attractive thing about CA is that as a resident you get to deduct your outrageously high state taxes from what you owe on federal taxes. So you get to vote for all kinds of federal programs without having to pay as much for them as everyone else.

      Like

  17. Thanks Scott. I can type and drive but no Wiki and drive.

    No one ever died from to much safety.

    Like

  18. Scott, I was comparing the money she spent on her campaign to what she could have done with her own money instead. Some people think running a big company is like running a state or country and that should have worked in her favor but CA was in pretty dire straits when she ran and the only way to translate that across would have been to endear herself to Californians first. Ebay was there when she took over and while it certainly grew it was already performing. It’s not like she came in and saved the day. I think people here trusted Brown and he didn’t overwhelm us with slick staging and advertising and memorized lines like she tried to do. I think people resented the amount of personal money she spent on her campaign. Hence, my idea of a better way to spend her own money. It may not have worked either, we’ll never know.

    Like

    • lms:

      Some people think running a big company is like running a state or country and that should have worked in her favor but CA was in pretty dire straits when she ran and the only way to translate that across would have been to endear herself to Californians first.

      I guess I just see CA as the archetypal liberal state, and liberals are rarely endeared to people who run big businesses, especially when those people are not liberals themselves. And, while I don’t doubt it is true, I don’t understand why people, especially liberals, would resent someone spending their personal fortune on running for office when so much objection is made, again especially by liberals, to the alternative, ie soliciting funds from other wealthy interests like corporations.

      Believe me, I am all for money being spent in more productive ways than on political campaigns. Alas, with so much government regulation, it is unavoidable.

      Like

  19. Lms, you really should read the Davos link I put up earlier.Very related to your comment.

    Like

  20. “The other half of the equation is raising taxes. Or is that always considered part of the equation? I generally think of austerity as cutting spending. Maybe that’s not the technical definition though.”

    Depends on who you ask. I usually use the European definition which is cutting spending and raising taxes to balance a budget.

    Often American progressives will only count cutting spending as austerity.

    Like

  21. it’s “strict economy” — tax increases with spending cuts.

    Like

  22. Heh.

    http://talkingpointsmemo.com/livewire/claire-mccaskill-rand-paul-monica-lewinsky-bill-clinton

    I wonder if she still doesn’t want Bill Clinton around her daughter? Or promise to endorse Hillary and then endorse her opponent?

    Like

  23. Oh my.

    Like

    • McWing:

      Which of these great ideas Obama is laying out did he not have when he had a veto-proof majority in Congress?

      I didn’t watch one minute of Obama tonight, but I can say with complete confidence that anyone who takes anything he said tonight seriously needs to have their head examined.

      Like

      • I don’t understand how it makes any sense that a man who tricks his girlfriend into aborting their 7-week old fetus can face a federal murder charge if a woman who knowingly aborts the same 7-week old fetus does not.

        Like

        • Scott, you would have voted in the Congress against the UBVoVA on the grounds that if a prospective mother[“PM”] and her doctor are permitted to destroy the PM’s fetus, then it should be that anyone else can do it as well, regardless of the desires of the PM and the advice of her Doc.

          LMS, CA is the outstanding state to visit in the 48 (HI is unique). I am so glad I have excuses to visit often. SF is my fave and SD has no weather. Ocean, mountains, forests, farms, ranches, and deserts abound. There is so much to love about CA.

          OTOH, raging fires, earthquakes, mudslides, and water shortages [only the last of which scare me here in TX], plus the outrageous Cost of Living make CA a place to visit, or a place to be born, but not a place to move to unless one has secured a beginning salary above $175K.

          I wonder how different my life would have been if I had taken that first job out of law school that I was offered in 1967, in SF. I remember that a small townhome of about 1100 sq. ft. with a one car garage cost $60K there, where the same size home centrally located in Austin cost $10K.

          Austin is bigger than SF today, and I am guessing the 6-1 price differential is only about 3-1 now, but I cannot imagine that life would have been better in SF than it has been in Austin.

          I still love to visit, ‘though.

          Like

        • Mark:

          Scott, you would have voted in the Congress against the UBVoVA on the grounds that if a prospective mother[“PM”] and her doctor are permitted to destroy the PM’s fetus, then it should be that anyone else can do it as well, regardless of the desires of the PM and the advice of her Doc.

          Of course not. There are many other, much more reasonable, reasons to have voted against it, such as 1) it makes no sense to purport to protect a class of people from violence but then except from the law the single most common act of violence that is inflicted upon them, 2) federal law taken as a whole should be consistent and coherent rather than self contradictory and 3) decisions about how to legally recognize the rights of the unborn constitutionally rest with state governments, not the federal government.

          BTW, if a woman has a right to decide whether to abort her own child, and someone else makes the decision to do so against her desires, then she is the victim of wrong doing, not the fetus, and the wrong doing cannot sensibly be labelled “murder”. Also, it makes no sense at all to describe the fetus as the “victim” of violence, but only if the violence is inflicted against the wishes of its mother. It’s like saying that a girl who is sexually abused isn’t actually a victim of sexual abuse if her mother approves of the abuse. The fetus either has a right not to have violence inflicted on it, or it doesn’t. The desires of the mother are not relevant to the question.

          Like

        • BTW, if a woman has a right to decide whether to abort her own child, and someone else makes the decision to do so against her desires, then she is the victim of wrong doing, not the fetus, and the wrong doing cannot sensibly be labelled “murder”

          Yes, Scott, this is absolutely correct and I was being whimsical because the viewpoint from the fetus was imposed by conservative legislators as a fence around what they saw as the cancer of Roe.

          Consistency, the hobgoblin of small minds, would require always electing one party to Congress and having that one party never change its views. It certainly will never be the result of a human political system.

          Addendum – In a serious vein, the idea that without nexus to a federal reservation or a trip across state lines this is a federal crime at all is bothersome.

          In an appeal, the defense should raise the failure of nexus to commerce as denying a necessary and proper use of congressional power to create this criminal statute.

          Like

        • Mark:

          In a serious vein, the idea that without nexus to a federal reservation or a trip across state lines this is a federal crime at all is bothersome.

          I don’t understand. What is the “this” that you are referring to?

          My understanding of the UBVoVA did not create any new crimes that weren’t already federal crimes. It simply recognized unborn babies as possible victims of those crimes. If it is not “bothersome” that the feds would define it as a federal crime to commit act X against a born person, why does it become “bothersome” for the feds to define the same act X as a federal crime if committed against an unborn person?

          Like

        • Scott, it isn’t just this extension of the Act. There is precious little constitutional support for federally criminalizing any conduct that is not commercial or military or against the nation [espionage, treason, etc.] or committed on a federal reservation, or against federal employees or property. Murder, theft, rape, committed by civilians within one state are very difficult to justify as fed crimes. Takes a commerce nexus like RICO or drug trafficking to be clearly potentially federal. But the feds have been very intrusive into criminalizing “stuff”. Recently some members of the Supremes have begun to question this. So it is worth the defense attorney’s time to make it a point in his brief that this was purely an intrastate matter and not subject to federal authority. [Unless it wasn’t, or the PM was a postal worker, or some such].

          Like

        • Mark:

          Got it. I thought you were remarking specifically about the UBVoVA.

          Having said that, if it is the case (as the Supremes think it is – see ACA) that the absence of any conduct at all can be construed to be “commercial” conduct, then virtually any type of actual conduct can be construed to be commercial. After all, an act which effects the health of any person has an impact on health care costs (among others), which are now clearly under the remit of the feds. If the feds can force me to buy insurance because my failure to do so will effect “interstate commerce” by effecting the price of insurance, then surely it can prevent people from, say, attacking or raping others on precisely the same grounds.

          Like

  24. She forgot “Racist.”

    Like

  25. Why is it a fetus with no rights in one instance and a human being with rights. In another?

    Like

    • Yes, if fetuses had consciousness, self awareness, and voices, they could conceivably have votes, and then George could run for the Lege.

      One answer to George’s question is that the conservative majority in the House heard the faint echoes of squeaking from the fetuses and protected them from persons other than their prospective moms [PMs] and the PMs’ doctors and their lobbies. The Supremes had previously noted that fetuses had some rights, particularly as property of their PMs, for instance, but not as persons until they were viable outside the mom, a kind of judicial hairsplitting that makes no sense standing alone but is one of the results one can obtain from reading too much history of the law.

      The Supremes could never remove protection for fetuses against persons who did not own them. See?

      What surprises me about this very conservative law is that it gives the fetus protection against its putative dad. I suppose this stems from the ancient notion that “your mom is a matter of law, but your pa is a question of fact.”

      Like

      • Mark:

        What surprises me about this very conservative law is that it gives the fetus protection against its putative dad.

        Does this really “surprise” you? I can’t imagine why. The conservative advocates of the law obviously would like to have protected the fetus from anyone who would commit violence against it, but the Supremes would have tossed it if they had, so they offered the most protection they could given the realities of Roe. Which meant including everyone except the mother. I find that entirely predictable, not surprising at all.

        Like

  26. I don’t think consistency is valued, troll.

    Like

  27. Mark, I don’t understand your comment. I’m with Scott in that it is a State decision not a Federal one. Further, I think that rights develop as the fetus gestates. Viability outside the womb would be a point at which the State has some obligation to protect the fetus.

    Like

    • George – see my addendum. I was flippant about the dichotomy because it only happened when conservatives found a place to fence in Roe. That this statute is an infringement on the police powers of each state is a serious possibility. If I do understand what you wrote at 9:27 AM, I agree.

      Like

  28. Consistency, the hobgoblin of small mind

    I don’t see how that’s accurate. Consistency for it’s own sake sure … but it seems in this case it’s simply a matter of convenience.

    Like

  29. Ha. it’s like 10 degrees here. my sense of humor must be frozen. I’ll have to turn the engine over and let it warm up

    (also, great to see you on the board)

    Like

  30. Anyone else following the story in Atlanta? I keep a 72-hour kit in the car. but i’m weird that way.

    Like

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