Morning Report – Annaly Capital’s view on interest rates 2/27/14

Vital Statistics:

Last Change Percent
S&P Futures 1841.5 -0.4 -0.02%
Eurostoxx Index 3122.4 -25.8 -0.82%
Oil (WTI) 102.8 0.3 0.24%
LIBOR 0.236 0.003 1.20%
US Dollar Index (DXY) 80.49 0.061 0.08%
10 Year Govt Bond Yield 2.65% -0.01%
Current Coupon Ginnie Mae TBA 106 0.0
Current Coupon Fannie Mae TBA 104.8 0.1
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.37
Markets are flat this morning after a mixed bag of economic data. Durable Goods Orders came in better than expected, but initial jobless claims were a bit high. Bonds and MBS are rallying.
Some interesting tidbits on the Annaly conference call. Annaly is a big buyer of mortgage backed securities.
  • Regarding the Fed: “I think they will continue to taper come hell or high water; with respect to the Fed target, I think that’s another story altogether. They have already backed down a little bit.”
  • Regarding MBS and tapering: “The market has sobered up a little bit about the implications of that lack of demand.”
<p>Annaly expects to boost their leverage ratio to 7x over the next several quarters, which is high for them. It is an aggressive bet that (a) MBS have gone down about as far as they are going to go, and (b) short term interest rates are going nowhere for the near and intermediate term. In other words, Annaly thinks the top in mortgage rates is in for the next few years.</p>
<p>The House will consider a reform of the CFPB to bring some sort of accountability to the agency. Right now, it is funded from the Fed and there is no Congressional oversight of the agency. The plan would be to replace the single, non-accountable director with a five member commission, subject the agency to the normal appropriations process and prevents the CFPB from undermining the safety and soundness of U.S. financial institutions through regulatory overreach. Probably DOA in the Senate if it even gets there, but a marker has been laid down. At some point, the CRA types are going to get annoyed that more credit isn’t being extended to their preferred constituencies and it is possible they might put 2 and 2 together and realize that the CFPB is being a drag on credit creation.</p>
<p>New Home Sales increased to an annualized pace of 468k, much higher than expected. December’s numbers were revised upward. Average selling prices have been increasing for the builders due to low inventory and increasing activity at the higher price points. At some point, they won’t be able to raise prices the same way and will have to pump out more homes in order to drive the top line. Remember, we used to consider 1.5 million housing starts per year normalcy. The most recent starts number of 880k was the sort of number we used to find at the depths of recessions. We have been barely keeping up with obsolescence, and we have a tremendous amount of pent-up demand.</p>

53 Responses

  1. Frist!

    Punks.

    I’m back baby! Meeting status: over!

    Like

  2. Maybe a new HUAC is necessary eh asshole?

    Like

  3. @Troll: Maybe a new HUAC is necessary eh asshole?

    But it’s okay, this time, because it’s for the right reasons.

    Like

  4. I’m fascinated the nullification of CT’s law. I suspect, once the weather is better, so e organized public flouting of the law. Will be interesting to watch the level
    Of hack-booted-ness CT police agencies will embrace. 10 bucks says Federal authorities assist the state in confiscation.

    Pity the AG won’t refuse to defend the law to Holder, all I need to a R President willing to nominate an AG that won’t defend the 1936 Federal firearms restrictions under a new challenge and it’s full auto and grenade launchers for everyone!

    I actually support that, btw.

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  5. Belt-feed and air cooled.

    Like

  6. Divided government & gridlock works:

    “We have an answer: The nation’s budget wars have reduced the deficit by $3.3 trillion
    By Lori Montgomery
    February 27 at 12:13 pm”

    http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/27/we-have-an-answer-the-nations-budget-wars-have-reduced-the-deficit-by-3-3-trillion/?hpid=z1

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  7. Wtf Vlad? Do you really think we’ll send bombers?

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  8. @Scott, love the comments below complaining about it. How dare someone mention that policy has costs!

    Like

  9. Uh, Ed Schultz just said that R’s are against immigration because they are addicted to cheap labor. Apparently allowing unrestricted immigration drives wages up.

    I shit you not.

    The things you learn.

    Like

  10. “Apparently allowing unrestricted immigration drives wages up.”

    Well sure. without job-lock everyone else will be writing novels or enrolling in interpretative basket weaving class. I imagine these new immigrants will want to start small and enroll in identity politics 101 while working part time. either way, the last one out the labor pool is a sucker!

    Like

    • Who is Ed Shulz?

      That comment makes no sense unless he means it is cheaper to hire illegals then to hire, say, registered braceros, like the entire SW needs.

      Like

  11. The left thinks the laws of supply and demand behave however they want them to behave when discussing the labor market…

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  12. got a link to the ed schultz nonsense? I would love to see it..

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  13. Ed Schultz is a Progressive radio show host. He also has a show on MSNBC. He makes Ted Baxter blush.

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  14. Sorry Brent, I was listening to him on Sirius.

    I apologize for my shameful epistemic closure.

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  15. Don’t let it happen again, bagger

    Like

  16. Fascinating for a paranoid wingnut.

    • Dec. 14, 2012: The liberal media outlet ProPublica receives Crossroads GPS’s 2010 application for tax-exempt status from the IRS. Because the group’s tax-exempt status had not been recognized, the application was confidential. ProPublica publishes the full application. It later reports that it received nine confidential pending applications from IRS agents, six of which it published. None of the applications was from a left-leaning organization.

    http://m.us.wsj.com/articles/SB10001424052702303426304579401513939340666?mobile=y

    Is there a Progressive here that thinks this is defensible?

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  17. Scott, federal = pro is not literally in the Constitution but is considered ancillary to fundamental fairness [due process] by the Supremes.

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    • For QB – an old Volokh article I had forgotten…

      http://www.volokh.com/2012/02/07/same-sex-marriage-bans-and-sex-discrimination/

      Like

    • Mark:

      Scott, federal = pro is not literally in the Constitution but is considered ancillary to fundamental fairness [due process] by the Supremes.

      Ok, so that brings me back to my previous question: why isn’t the application by the court of different standards of scrutiny for different classes of people a violation of this ancillary to fundamental fairness?

      Like

      • IDK. The middle standard of scrutiny has always puzzled me. Rational basis makes sense. Strict scrutiny for statutory classes makes sense on the face of the legislative power. “Intermediate scrutiny” for statutory classifications is strange, to me.

        IOW, I have less problem with lawful rational basis distinctions being the global norm and strict scrutiny being required by statute in exceptional cases according to the wisdom of the legislature. Presumably the legislature will not select a category to distinguish unless there was a history of discrimination based on an immutable characteristic unrelated to skills, talent, knowledge, previous conduct, etc. But if it does, than what is the Court’s guideline?

        It is bothersome at many levels. I can see a lege or Congress prohibiting discrimination based on genetic testing. Would that per se not be a rational basis? Would the Court uphold that against a life insurance company?

        It is way more difficult and ad hoc than the leges or the courts are willing to admit.

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        • Mark:

          It is way more difficult and ad hoc than the leges or the courts are willing to admit.

          Thanks. That seems to be the case to me, too.

          BTW, in my view the only possible “exceptional cases” that could justify anything beyond a rational basis is racial discrimination, because of the unique history of the US. Routinely creating an ever increasing number of “exceptions” just makes a mockery of the notion of equal protection. It is in fact the opposite of equal protection. It is special protection for specially designated classes.

          One additional problem I see, which is reflected in your question about genetic testing and insurance companies, is that the 14th amendment explicitly applies to state governments, not non-governmental actors. So I don’t understand how an insurance company’s discrimination can be subject to any kind of “scrutiny”, strict or otherwise. And I don’t think a federal law prohibiting such non-governmental discrimination could be said to be an “enabling statute” for the 14th amendment. If the feds claim the power to ban such discrimination under the “appropriate legislation” clause of the 14th, then I don’t see how a court could in good conscience uphold such a law, because it is plainly not needed to enforce the 14th.

          Like

  18. Starting to feel 2010ish if hack Sargent spent all day whistling past the graveyard. He forgot his mandated immigration post.

    Like

  19. We agree that Reid cannot hold vote on this due to his recent comments, right?

    http://thehill.com/business-a-lobbying/199389-centrist-democrats-seek-votes-on-obamacare-fixes

    If not, why not.

    Like

  20. Gawd would Shrink get butthurt when I would ask him what about the Nazi’s made them right-wing.

    http://blogs.telegraph.co.uk/news/danielhannan/100260720/whenever-you-mention-fascisms-socialist-roots-left-wingers-become-incandescent-why/

    A completely disingenuous d-bag.

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  21. Scott,

    One additional problem I see, which is reflected in your question about genetic testing and insurance companies, is that the 14th amendment explicitly applies to state governments, not non-governmental actors. So I don’t understand how an insurance company’s discrimination can be subject to any kind of “scrutiny”, strict or otherwise. And I don’t think a federal law prohibiting such non-governmental discrimination could be said to be an “enabling statute” for the 14th amendment. If the feds claim the power to ban such discrimination under the “appropriate legislation” clause of the 14th, then I don’t see how a court could in good conscience uphold such a law, because it is plainly not needed to enforce the 14th.

    Correct. This is why the civil rights acts are based (allegedy) on the Commerce Clause. The 14th does not apply to private actors, and the enforcement power of Congress does not reach them. Congress therefore rationalized that regulating private discrimination can be rationalized as regulating interstate commerce.

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  22. Ok, so that brings me back to my previous question: why isn’t the application by the court of different standards of scrutiny for different classes of people a violation of this ancillary to fundamental fairness?

    In theory, I think the answer is that the different standards apply to different classifications rather than different classes. I.e., you look at what kind of classification a law makes and determine the level of scrutiny from there.

    Like

    • qb:

      Thanks for the reply.

      Congress therefore rationalized that regulating private discrimination can be rationalized as regulating interstate commerce.

      Ah, the tried and true commerce clause ploy. I should have guessed that is what they would have used. One wonders why the Framers even bothered with the rest of the constitution, so all-encompassing is the commerce clause itself.

      In theory, I think the answer is that the different standards apply to different classifications rather than different classes. I.e., you look at what kind of classification a law makes and determine the level of scrutiny from there.

      But isn’t that just semantics? Classifications are designed to identify certain people to the exclusion of others. And given that the only way that the issue can come before a court is if an actual person claims injury due to the discrimination, the application of different standards to different classifications necessarily means that different people get a different standard of justice, depending on their classification. To me that in itself is obviously discriminatory, and cannot be said to be applying protection equally.

      Like

  23. ” One wonders why the Framers even bothered with the rest of the constitution, so all-encompassing is the commerce clause itself.”

    The whole Prohibition amendment ratification was apparently one big unnecessary exercise since presumably Congress could already prohibit alcohol under the Commerce Clause.

    Like

    • jnc:

      The whole Prohibition amendment ratification was apparently one big unnecessary exercise since presumably Congress could already prohibit alcohol under the Commerce Clause.

      Well perhaps the commerce clause has “evolved” since then, meaning something totally different today.

      Sometimes I think SCOTUS acts like one of those translation websites where you can type in an English phrase and the website translates it into a foreign language and then back to English, resulting in something totally unrecognizable from what was originally put in. The constitution says one thing, but once going through the SCOTUS grinder, it appears to say something entirely different.

      (FYI, I actually put into the above translator the phrase “Congress shall make no law” and it came back as “Congress should make, which”)

      Like

      • EJ Dionne epitomizes how completely bereft of understanding (or maybe even care) the left is of the constitution and the philosophical values from which it derived. Consider this from a recent column about the controversial Arizona law vetoed by the governor. The following is only the worst of the many idiotic things in the column:

        For both pragmatic and principled reasons, supporters of marriage equality have already gone out of their way to respect the objections of many faiths to blessing homosexual unions. In November 2012, Maryland’s voters approved gay marriage by a majority of 52 percent to 48 percent. Key to this victory (and to victories elsewhere) was the willingness of marriage equality’s supporters to acknowledge the freedom of religious institutions to run their own affairs.

        Ignoring the ham-handed rhetorical device about “marriage equality”, just think about that claim for a moment. Acknowledging the freedom of religious institutions to run their own affairs, which is quite literally a founding principle of the nation, is in Dionne’s warped view “going out of the way” to appease religious interests. Staggering.

        He goes on to ask “what more could religious opponents of gay marriage ask for?”, and laments that fact that they do indeed want more, such as “that religious florists, caterers and photographers should not have to work weddings they don’t believe should be taking place.” Just think about the implications of that lament. Not only does Dionne think that florists, caterers, and photographers should, by force of law, have to work for weddings they disapprove of, he thinks the notion is so self-evidently proper that he is amazed that anyone could possibly think otherwise.

        It would be one thing if Dionne was just a crank, but his views are shared by a wide swath of the electorate. Indeed Dionne himself highlights poll results to show that a majority of people agree with him. They actually believe that forcing someone to cater to someone they don’t wish to cater to is an act of obvious justice. No doubt this belief is informed by the civil rights era and laws aimed at ending racial discrimination, which are inevitably offered up as analogies in any discussion about this kind of thing, but it betrays an ignorance that such laws were (and are) actually contrary to the notions of freedom and justice on which the nation was founded. They represented exceptions to ordinary notions of freedom and justice, required only because of the unique history of governmental discrimination against blacks.

        Now we see the danger involved in making such exceptions, and why even some well-meaning people were opposed to them at the time. Eventually it produces an electorate (and, perhaps even worse, a political and judicial class) for whom the exception becomes the rule, thereby turning notions of justice and freedom upside down. “Freedom” and “justice” now means compelling people through the force of law to associate with others whom they do not wish to associate with.

        This is totally crazy. Welcome to the Twilight Zone.

        Like

  24. Scott – Criminal as well

    “The incredible stock-picking ability of SEC employees
    By Jia Lynn Yang
    February 27 at 3:44 pm”

    http://www.washingtonpost.com/blogs/wonkblog/wp/2014/02/27/the-incredible-stock-picking-ability-of-sec-employees/

    Like

  25. @ScottC: “I like this idea. The cost of ACA should be a line item on every receipt issued by every business to every consumer.”

    Phone company has been doing this for a while now. As I recall, at one point the government made a stink about it (because it was the phone company deciding to break out those taxes and fees, not a mandate) and then quieted down when it became clear they were trying to hide the taxes from the public, as if they were ashamed of their money-confiscating ways, and so they dropped it.

    But, like the cost of parking or the goods we consume where we don’t figure in the price of lost time or global warming or whatever, so we never have the “true cost” and it’s all being subsidized by mother earth or something, even if we noted what each company was paying, it would not encompass the true overall cost, which is likely to be much more (unless a miracle occurs).

    Like

  26. It’s obvious we need a new Zblue Ribbon Panel for something.

    Anything.

    Like

  27. @Troll: “Gawd would Shrink get butthurt when I would ask him what about the Nazi’s made them right-wing.”

    What makes them right wing is that lefties don’t like right-wingers and nobody likes Nazis so . . . viola! Right-wingers are nazis.

    Nazism was steeped in the socialism of the time, and their approach to the free market was definitely much more European socialist than American capitalist.

    Part of the problem is the spectrum that is generally accepted from left to right: totalitarian communism to socialism to socialist-capitalism to Eisenhower-conservatism to Reagan-era conservatism to fascism, when the real spectrum is communism to liberalism to conservatism to libertarianism to anarchy.

    Essentially, the argument is that fascism is to conservatism as communism is to liberalism, and I don’t think that’s accurate.

    I think it’s arguable that slavery and it’s continuation reflected a certain conservatism *of the time*, an abolition clearly reflected a progressivism *of the time*. However, if one accepts that premise, then it should also be said that Hitler’s final solution, and the entire Eugenics movement, was a product of the progressivism of the time. Just as Lenin then Stalins gulags where a productive of contemporary progressivism (including the blind eye that western progressives turned to the murder, torture and imprisonment they knew was happening was a product of the progressivism of the time).

    I don’t think Hitler’s empire-building or militarism was a product of progressivism or socialism, but it was enabled by them.

    Like

  28. @Troll: “and it’s full auto and grenade launchers for everyone!”

    The problem is one nut job will launch a dozen grenades at an elementary school packed with special-needs children on play-with-a-puppy day, and ruin grenade launchers for everybody else.

    Like

  29. @ScottC: “Yes…but is the SEC a criminal enterprise?”

    I think that pretty much goes without saying.

    Like

  30. Is there a Progressive here that thinks this is defensible?

    I can think of the defenses for ProPublica’s selective disclosures. Public’s right to know. These are bad people so they need to be taken out. This proves something bad about them or a conflict of interest than no liberal groups have, so it makes sense that we just release the confidential information of these pro-conservative groups. It was an accident, my finger slipped. It was just a joke, conservatives have no sense of humor.

    Hey, we’re a fucking partisan group trying to build up liberals and liberal causes and destroy conservatives. It’s what we fucking do.

    Like

  31. I was thinking of the leaking and targeting of the (snicker) non-scandal. Not the publishing. Pro-Publica is getting trashed by the left ironically for it’s Abomination coverage.

    Like

  32. I think Jewish baker should be forced to make I Hate Jews and Love the Holocoust cakes for the Nazi party of America, don’t you?

    Like

  33. Cosign your Dionne comment, Scott. Excellent.

    Like

  34. But isn’t that just semantics? Classifications are designed to identify certain people to the exclusion of others. And given that the only way that the issue can come before a court is if an actual person claims injury due to the discrimination, the application of different standards to different classifications necessarily means that different people get a different standard of justice, depending on their classification. To me that in itself is obviously discriminatory, and cannot be said to be applying protection equally.

    This is a really deep subject. In theory, on its face, I think it isn’t just semantics. If you think of a classification this way: it means some criteria on which you can put everyone into categories, or, in other words, a particular way of dividing the population. The point of EP is supposed to be that, unless the standard can be met, you have to treat everyone the same, regardless of which side of that line they are on. So, in theory, everyone is treated the same regardless of the distinction at issue.

    It is true that, you could say that someone challenging a classification given lower scrutiny could complain that he doesn’t have the benefit of a stricter standard that might apply in another case. But the answer to that would be that everyone is still subject to the same treatment under that classification. Indeed, he would have the benefit of a higher standard if he were complaining about a different classification.

    The larger problem is introduced by the fact that lawmakers and judges in fact do not treat everyone equally within classifications. That’s the problem with affirmative action and quotas. As a white male, you in fact don’t get the same benefit of EP either as to race or sex that minorities or women do. Indeed, some radical “scholars” argue that EP does not even protect white people. That is grotesque.

    Like

    • qb:

      In theory, on its face, I think it isn’t just semantics.

      OK, I think I understand. So the thinking is that the same standard is used for everyone with regard to racial discrimination, and the same standard is used for everyone with regard to, say, sexual orientation discrimination, even though the standard applied with regard to racial discrimination is different to that applied to sexual orientation. But I still don’t understand how or where the constitution justifies the creation of two (or three) different standards.

      The larger problem is introduced by the fact that lawmakers and judges in fact do not treat everyone equally within classifications.

      Yeah. Judges ignoring even their own claimed standards in order to achieve a preferred result is a perennial problem.

      Like

  35. Scott, yes, you said it better than I did. And I agree that the use of different standards is extra-constitutional and problematic. It originates in the fact that every law inherently “discriminates.” Why doesn’t progressive taxation violate EP? So the Court eventually became embroiled in how to apply it to all sorts of laws and “classifications.”

    Like

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