Morning Report – What to watch for with the FOMC 1/29/14

Vital Statistics:

S&P Futures 1775.5 -18.0 -1.02%
Eurostoxx Index 3010.7 -27.9 -0.92%
Oil (WTI) 96.97 -0.4 -0.45%
LIBOR 0.236 -0.001 -0.21%
US Dollar Index (DXY) 80.71 0.137 0.17%
10 Year Govt Bond Yield 2.72% -0.03%
Current Coupon Ginnie Mae TBA 105.8 0.2
Current Coupon Fannie Mae TBA 104.5 0.3
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.33
Markets are getting slammed this morning on weakness in Europe and emerging markets currencies. Bonds are rallying on the risk-off trade. We should hear from the Fed at 2:00.
The Street is predicting that the Fed will decrease asset purchases by 10 billion a month, equally split between MBS and Treasuries. I would be surprised if they mention the turmoil in emerging markets, and it probably won’t affect their thinking regarding QE unless credit begins to tighten. I don’t think anyone expected the Fed to stick the landing with regard to extricating themselves from the asset markets, so sell-offs like these should be expected.
The WSJ has a good write-up on what to look for in the statement today. It also looks at the new voting members that will accompany Janet Yellen. If anything the Federal Reserve Board will become slightly more hawkish, especially with the addition of Philly Fed President (and my ex faculty adviser) Charles Plosser and Dallas Fed Head Richard Fisher.
I don’t see emerging markets affecting the U.S economy all that much. That said, Canada’s real estate bubble is bigger than ours and is ripe to burst. Most mortgages in Canada are guaranteed by the government or by the Ontario Teachers Fund, so it won’t have the soft of fallout that 2008 had, but there could be still be some issues that could roil credit markets. Luckily for the Canadians, their government doesn’t view housing as an vehicle for social engineering.
Mortgage Applications fell .2% last week, which was a holiday-shortened week. A short week + a 6 basis point drop in rates = a wash. Purchases increased while refis fell.
There were 41,000 completed foreclosures in December, according to CoreLogic. This is a decrease of 4% month-over-month and 14% year-over-year. Approximately 847,000 homes were in some stage of foreclosure as of the end of the year, versus 1.2 million a year ago. The foreclosure inventory remains the highest in the judicial states.

42 Responses

  1. frist

    that is all

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  2. Maybe I will be able to afford Vancouver after the bust.

    If we won the lottery, Rosanne and I would buy a summer home in either Flagstaff, Asheville, or Madison, WI. But our dream summer home would be in Vancouver.

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  3. I’d buy one on a bluff overlooking Lake Powell in Page Arizona.

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  4. Few places are as perfect in the summer and absolutely horrid in the winter as Madison, WI.

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  5. Uh oh.

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  6. FOMC as anticipated… $10 bil / month taper. Unanimous decision

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  7. This was written in earnest sincerity.

    Breathtaking.

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  8. See, 2008 election or ten combat tours and a traumatic head injury sustained in combat. Same-same.

    That story could also apply to Obama himself: Nothing in his seven years on the national political stage (2007-2014) has come easy.

    http://firstread.nbcnews.com/_news/2014/01/29/22495197-first-thoughts-on-the-road-again?lite

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  9. Stop digging.

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  10. Stanley Greenberg correctly identifies the real purpose and target of the State of the Union.

    http://www.democracycorps.com/attachments/article/966/DCorps%20SOTU%202014%20Memo.pdf

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    • jnc:

      Stanley Greenberg correctly identifies the real purpose and target of the State of the Union.

      Low/no information voters?

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  11. “As voters told us in follow-up focus groups, they were skeptical of the President heading into this speech. But his heavy emphasis on improving the economy at the pocketbook level— especially for women—won these voters over. The president made major gains on these key economic metrics and on looking out for the interests of women”

    unbelievable.

    I’ll be honest, I didnt’ watch. I’ve got the transcript to go through later for things that might be of interest.

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  12. This is objectively funny.

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  13. Nova, the question is did it do enough to motivate them to vote in the midterms?

    I say no.

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  14. Here’s a fun take on the VA senate race.

    http://cookpolitical.com/story/6653

    I’ll add, that if Warner does lose, it’s a long night for Democratic Senate candidates.

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  15. Sample size of 44… 23 women (of which 16 were single) and 21 men…

    I would also say any polls that concern the SOTU invariably oversample D’s simply because the party faithful tend to watch these things…

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  16. also known as “obama’s base”

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  17. I think warner might actually be in a race … i’ll explain why later.

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  18. If we won the lottery, Rosanne and I would buy a summer home in either Flagstaff, Asheville, or Madison, WI. But our dream summer home would be in Vancouver.

    I’d buy one on any west facing beach in Southern CA, preferably one that isn’t too crowded.

    I only watched part of the speech, I’m still working on becoming a low/no information voter!

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    • lms:

      I only watched part of the speech, I’m still working on becoming a low/no information voter!

      If you had watched the whole thing you would be well on your way.

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  19. LOL Scott! I take a circuit training class on Tues and Thurs nights until 6 so got home and took a shower during the speech, had a bite to eat during the speech, and then put a movie on, also during the speech.

    I can’t quite explain my lack of political interest other than to say that it all seems sort of pointless and my opinions don’t really matter in the least or affect anything in the least. It’s sort of liberating in a way!

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  20. @limsinca: “I can’t quite explain my lack of political interest other than to say that it all seems sort of pointless and my opinions don’t really matter in the least or affect anything in the least. It’s sort of liberating in a way!”

    Hah! I know how you feel. I tend to agree. And I always knew my opinions don’t really matter that much, but I was just more interested a few years ago. Basically since I was a kid up until a few years ago. Then it just . . . faded. What I can influence (and it’s precious little) became more important. Occasionally I yack about politics but I don’t pay much attention. I watched a little of the State of the Union and I thought it was terrible. Watched a little bit of the Republican response, and I thought it was all right, and probably better at being relatable to the general public (what I saw) . . . but, like most of The State of the Union, short on substance.

    I will probably pay more attention and talk about it more in the months before the 2014 elections, then the 2016 elections. Then forget about it.

    I think part of it is the politicians. I really don’t care for most of the Republicans or most of the Democrats, so who am I going to root for? Engagement in politics is, for most people, like sports: you have to love your team and really want to root for them and get so mad that you can spit on the opposition. When it doesn’t look like anyone is wearing the white hat and your choices are between bad and equally-bad-in-a-different-way, it’s hard to stay engaged.

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    • Hi Kev –

      When it doesn’t look like anyone is wearing the white hat and your choices are between bad and equally-bad-in-a-different-way, it’s hard to stay engaged.

      Thinking the one you’ve decided to support is an honest person is also a great leap of faith. I notice on blogs that Rs gloat over crooked Ds and Ds have fits of schadenfreude over crooked Rs. But for those of us who cannot quite ID with a party we just notice the Rs and Ds who are exposed as crooks of one sort or another pretty much on a weekly basis.

      I am fairly sure our R Land Commish, for whom I have always voted, is honest. More sure than I am of anyone else in statewide office here, which is damnation by faint praise. I think George would agree that Jerry Patterson is remarkable – he even took his D opponent around the state with him last time for two weeks so that in case he lost his opponent would have some idea of what the Land Commish does. Politically I agree with him on what he did as Land Commish – make TX the biggest windpower producer in America, steward TX public lands, and shepherd the rapid response plans/teams for hurricanes and tornados that no other state has, as far as I know. He is now running for LG against 3 other Rs who are all trying to get to the right of each other, and while he is the most conservative in ways I don’t like [open carry on campus and no abortions for rape or incest] I will vote for him b/c the other three Rs in the primary are all snake oil, I think.

      But I would be both disappointed and not very surprised if Patterson had, say, taken bribes or some such in the past. There is no pol in elected office I would completely trust.

      BTW, were I in CA, my sense that Jerry Brown is beyond purchase would guide me until I found out otherwise.

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  21. @novahockey: ““As voters told us in follow-up focus groups, they were skeptical of the President heading into this speech. But his heavy emphasis on improving the economy at the pocketbook level— especially for women—won these voters over. The president made major gains on these key economic metrics and on looking out for the interests of women”

    I tend to agree that’s not credible. I did not watch the whole thing, so maybe it would have all clicked if I had, but I saw the same old, same old. “They went into the store not planning to buy, but when the sales person pointed out it was the same shit in a different package, they decided they’d buy it, because . . . well, who knows why?”

    I think it’s interesting to report change, one way or the other, so a desire for that narrative shapes how the interpret data and the questions they ask. I also think many in the media want Obama to do well, so are going to unconsciously craft a narrative of victory for him pretty much all the time. Unless it’s Fox news.

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  22. @Troll: “Nova, the question is did it do enough to motivate them to vote in the midterms?”

    The answer will be no. I don’t have to pay a lot of attention to politics to say that with utter confidence. I also don’t have to feel that the Tea Party is popular or that the Republicans are doing a good job fielding candidates and working at dethroning incumbents. Even popular presidents without the albatross of the ACA around their neck are likely to lose seats in the house and senate during 2nd term midterms. It’s typical. And there is not a war or a huge economic boom to change that, or incredible presidential Charisma oozing out the Whitehouse.

    If Republicans don’t pick up seats across the board, it will be because incumbents in both parties are getting handed their walking papers. That’s my prediction. You can take that to the bank. But I wouldn’t deposit it just yet. 😉

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  23. BTW, worse winter weather in forever (and I could not, in good conscious, call myself even a classical conservative if I did not say: Global warming, much?) and we still can’t get a decent snow storm down here. It’s cold, colder than it’s been since I was in junior high school, but where’s my snow? I don’t want constant snow, but an occasionally serious snow storm (there have been a few 4 and 5 inch accumulation snow storms in the past 15 years, but we haven’t had a serious snow storm since I was in college, and I don’t count the ice storm in 1993 or the one in 2000-ish, though they shut down the city . . . ice ain’t snow!).

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  24. I’m all for shitcanning incumbents!

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  25. Remember — every time an incumbent loses, an angel gets his wings.

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  26. I think it’s Obama successfully executing the Clinton “small ball” playbook to motivate some of his base and various swing voters who aren’t that political.

    I didn’t think it would work, but Greenberg knows what he’s doing when it comes to polling and focus groups.

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  27. Henry Waxman is retiring.

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  28. Henry Waxman is retiring.

    Who will take over the reins as the democratic attack dog in the House?

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  29. They’ll have to hash out who will take over as ranking on the E&C. Dingell is still there, but it won’t be him. Waxman pushed him out, and i’m half certain there’s a weekend at bernies thing going on. next in line is Frank Pallone (NJ), Bobby Rush (IL) and Anna Eshoo (CA)

    So Dingell might want it, pelosi won’t want him to have it. Pallone is next up. and he’ll want it.

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  30. Oh, forgot to add re: Waxman’s retirement.

    Think he’d retire if there was a chance he’d be a committee chair next session?

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  31. NoVA, you have an opinion on the final Farm Bill trade offs?

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  32. I haven’t followed it too closely. but IIRC it repealed the direct payments and cut food stamps, but not through eligiblity changes. and it seems that everyone is hacked off a little bit. that’s typically a better indicator than everyone happy about it.

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  33. @markinaustin: ” But for those of us who cannot quite ID with a party we just notice the Rs and Ds who are exposed as crooks of one sort or another pretty much on a weekly basis.”

    It’s like discovering Spiderman occasionally steals a little cash on the side when he’s stopping a bank robbery. Or finding out half the guys on your favorite ball throwing sports franchise are doping.

    “There is no pol in elected office I would completely trust.”

    Yeah, but it’s not just that. It seems like precious few of them are interested in anything that looks like governing, at least to me. It’s all posturing and fighting and not a lot of advancing of policies. It did not escape my notice (as someone who celebrated the R sweep in 2010) that the entire party had run on “jobs, jobs, jobs” and completely lost interest in the topic once sworn in. Not so much that they didn’t magically create jobs, but that they immediately went to social stuff and attempts to stymie Obama for political points (maybe that was supposed to be good for employment numbers?). Not that the Democrats seem to have any ideas beyond extending unemployment.

    But maybe they do. I’m just not paying close enough attention.

    I confess, I find Jerry Brown appealing, and perhaps the best governor California could hope for right now. Governor Moonbeam turns out to be pragmatic and open-eyed in many ways, and that’s the best that California could hope for.

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  34. I think Brown benefits tremendously from his perspective from having done the job before as a younger man. In many ways, this is an opportunity for a do over for him with the benefit of hindsight, which is something very few people ever get.

    Like

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