Morning Report – Lots of housing data this week 3/17/14

Vital Statistics:

Last Change Percent
S&P Futures 1841.7 8.8 0.48%
Eurostoxx Index 3027.9 23.3 0.77%
Oil (WTI) 98.14 -0.8 -0.76%
LIBOR 0.234 0.000 -0.17%
US Dollar Index (DXY) 79.45 0.000 0.00%
10 Year Govt Bond Yield 2.66% 0.01%
Current Coupon Ginnie Mae TBA 105.8 -0.1
Current Coupon Fannie Mae TBA 104.4 0.0
RPX Composite Real Estate Index 200.7 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.28
Markets are higher this morning on no real news. Bonds and MBS are down on the risk-on trade.
We have lots of housing data this week, starting with the NAHB sentiment numbers later today, housing starts and building permits tomorrow, and existing home sales on Friday. We will also have earnings announcements from Lennar and KB Home. The big things I will be listening for in the earnings announcements will be (a) color on the traffic for the Spring Selling Season, and (b) how much of an increase in ASPs (average selling prices). I think we may be at the point where buyers are balking at higher prices and that means that builders will have to sell more units to move the needle on the top line. This means more sales, and stronger economic growth. A return to normalcy in home construction has been one of the last pieces of the puzzle in this economic recovery.
95.5% of Crimeans want to join Russia, according to a vote. This referendum certainly ups the ante in the volatile Ukranian situation. The White House has insisted the referendum was illegal and would not be accepted. The EU is meeting today to discuss sanctions.
Some manufacturing economic data this morning:  Industrial Production rose .6%, much higher than expected. Manufacturing Production rose .8%, and capacity utilization ticked up to 78.8%. The New York Fed Empire State Manufacturing Survey showed manufacturing is improving, albeit slowly, in the New York State region. All good numbers – the Industrial Production numbers are subject to variations based on the weather and mining (think fracking), but the manufacturing number is strong too. Definitely positive data.
Here is the draft of the bipartisan Senate Housing Finance Reform Bill. Fannie and Fred go away and the Federal Mortgage Insurance Corporation is established. Private capital will take the first 10% loss on MBS and then FMIC bears the rest. The HUD affordable housing goals go away, but we still will be in the social engineering business, except it will be lenders paying for it with a 10 basis point fee on all origination. Of course this will simply get passed on to borrowers. The FMIC will get to dole out the funds.

58 Responses

  1. Big Chinese real estate developer collapses… Sounds like the bursting real estate bubble is going critical.

    http://www.bloomberg.com/news/2014-03-17/chinese-developer-with-3-5-billion-yuan-in-debt-said-to-collapse.html

    Like

  2. That was the knock on Bush, he looked into Putin’s soul or whatever. What’s Obama’s excuse?

    American officials realize that they misjudged Mr. Putin and are working to predict his next move, the senior official said. “We have misread Putin. He is not going to give up,” the official said.

    http://m.us.wsj.com/articles/SB10001424052702304914904579441563920333966?mod=WSJ_hp_LEFTTopStories&mobile=y

    Heckuva job Barry!

    Like

    • Interesting…a lawsuit has been filed essentially challenging the legality of amateur college athletics. I’m definitely torn on this one. Not sure what the correct answer is.

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      • There is a way to look at Division 1 revenue sports without crossing the “amateur” line or invoking the NLRA, which does not apply to student-athletes at this time. Kessler seems to have left that open.

        The economic incentive behind litigation for many college athletes today is that the schollie, although generous by many standards, does not cover the full cost of school. The meals and laundry money allowance is meager. Kessler has taken this to another level than O’Bannon has [and that suit is marching along, thank you]. Grad scitech students get stipends sufficient to cover their actual living costs – probably around $2.5K+ per month here in Austin [plus tuition and fees]. If Kessler can get the Big 5 conferences and the NCAA to permit schools to pay up to a ceiling of local total costs for years of attendance, so that USC can pay more than Kansas State [it costing twice as much to live in L.A. as it does in Manhattan, Kansas] he will have won a victory that preserves the notion of “amateurism.”

        This is a part of his anti-trust claim, although he is asking for no caps, in seeking further relief. If “no cap” is the result then the notion of “amateurism” will die with it.

        As successful as Kessler has been, there is always the possibility he will be blown out on a competing public policy theory. I can think of one: Title 9. The revenue sport are expected to support all the non-revenue sports, which usually include all the distaff sports.

        Should prove interesting. O’Bannon’s case will get decided first, and I think there is a fair chance the players will retain some rights in their names and images. The big game maker thought the chances were good enough that it settled out with the O’Bannon plaintiffs for many millions of $$. To be clear, I have not read the settlement and do not know if it has future promises of honoring the players’ names and images, or whether that was made contingent on the result of the case against the NCAA.

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        • Mark:

          The O’Bannon case is a lot easier for me…I think O’Bannon should definitely win that one. But on the Kessler case, I am really at odds. I am sympathetic to the idea that the athletes are creating value for the schools, and ought to have the right to negotiate a return from that value. But I also think 1) the schools have a right to set whatever terms they want on attendance at the school (and participation on their athletic teams) and 2) the NCAA has a right to set whatever terms it wants on schools for membership into the NCAA. What is interesting to me is that both the players and the schools are probably on the same side, in that they are both willing to negotiate some kind of increased “pay” for the athletes. (Otherwise we wouldn’t see so much cheating.)

          I probably ultimately fall on the side of the NCAA. I think that a lot, probably even most, of the revenue that college athletics produces comes from both the NCAA brand and the individual school brand names, not from individual athletes. There’s a reason March Madness is such a huge business relative to, say, the minor league baseball playoffs. And the NCAA has a right to protect that business/brand as it sees fit. There is nothing preventing someone from forming a minor league for basketball or football players, and trying to recruit the top high school athletes by paying them cash, convincing them to forgo college scholarships and all the rules that come with it. Well, nothing except demand for the product, which is telling.

          BTW, the increasing proliferation of “one and done” athletes is making this less of an issue going forward. The individual athletes that really are worth a lot of money won’t be hanging around long in college anyway.

          Like

        • Mark:

          That is pretty interesting. I wonder about it, though. Does it really make sense that, as AG Levi said, “the Attorney General and the Solicitor General stand before the Supreme Court as its officers and not solely as advocates”? They are part of the executive branch, not the judicial branch. When the court is deciding an issue between the government and another party, doesn’t the government deserve an advocate just as dedicated to their client’s position as the other party?

          Like

        • doesn’t the government deserve an advocate

          Scott – that is merely a result of the professional dual nature of attorneys at law and the triple nature of prosecutorial ethics. All must advocate for their clients within a proscribed framework, first, but are officers of the court, second. The triple nature of the prosecutor is that in representing all of the citizens of the jurisdiction s/he inescapably to some degree must give some deference to more than one view.

          Thus an AG has an obligation to defend the Constitution and laws of the US, and as an officer of the court must answer truthfully to the Court, and as a member of the executive must give some deference to the administration’s view of the law.

          This is a tightrope that can be walked or shied away from, but sometimes the canyon must be crossed, and the dueling briefs is one method of dealing with the chasm, rather than taking equivocal positions in a single brief, or “selling out” one perspective that one is supposed to represent in favor of another that one is supposed to represent.

          Assigning the different potential positions to different lawyers in the office is not a logistical problem in that we were all trained to argue more than one side of an issue.

          As JNC wrote, this certainly can be a satisfactory way meet the multiple professional obligations of the office.

          Like

        • Mark:

          The triple nature of the prosecutor is that in representing all of the citizens of the jurisdiction s/he inescapably to some degree must give some deference to more than one view.

          Yeah, it is a bit of a conundrum. As a representative of the citizens one is implicitly therefore a representative of the very people bringing suit against the government.

          Like

  3. Because as every right thinking person knows, left-wing groups have already bought Congress fair and square!

    Going on offense means, first, building on what Senate Majority Leader Harry Reid is undertaking in his campaign against the Koch brothers and other right-wing millionaires trying to buy themselves a Congress.

    http://m.washingtonpost.com/opinions/ej-dionne-the-politics-of-hopelessness/2014/03/16/077f6d86-abe0-11e3-98f6-8e3c562f9996_story.html?hpid=z5

    Like

  4. Nobel prize winner prison raped by facts.

    http://www.smartertimes.com/1164/krugman-tarp-and-the-tea-party

    Koch brothers hit hardest.

    Like

  5. Wow! That Johnson ad from Scott’s “50” link is incredible. Vote Johnson or we will all die in nuclear war.

    Like

    • nova:

      That Johnson ad from Scott’s “50″ link is incredible. Vote Johnson or we will all die in nuclear war.

      If I remember my history correctly, it was hugely controversial at the time and only aired once. But once was enough.

      Like

  6. Is this what happened to flight 370?

    https://plus.google.com/app/basic/stream/z13cv1gohsmbv5jmy221vrfyiz3vdhbop04

    Problem is, this rests on information from Malaysia. Has it proven to be trustworthy?

    Like

    • Oklahoma fighting back against the unconstitutional power of the EPA.

      I think the executive branch should have zero power to designate new species as being endangered and therefore to prohibit actions that would ostensibly endanger them further. The relative value of losing a species versus losing other benefits that might endanger the species is a political question that must be weighed by elected representatives, not unelected bureaucrats. If lawmakers think that the existence of the prairie chicken is more important to the nation than the economic benefits of oil and gas exploration, which requires restrictions on business to protect that value, then they should be on record as doing so, and be judged by the people accordingly.

      Like

  7. Public Policy Polling survey in Colorado finds Sen. Mark Udall (D-CO) starts out with a 2 point lead over Rep. Cory Gardner (R-CO) in the U.S. Senate race, 42% to 40%.

    It’s all obamacare and negative POTUS job performance ratings that’s doing this.

    Like

  8. “In the most direct challenge yet to the NCAA’s longstanding economic model, high-profile sports labor attorney Jeffrey Kessler filed an antitrust claim Monday in a New Jersey federal court on behalf of a group of college basketball and football players, arguing the association has unlawfully capped player compensation at the value of an athletic scholarship.”

    For me it’s an easy call. The NCAA shouldn’t be able to dictate these terms. Even more so since it’s operating as a tax exempt non-profit and managing to avoid being covered by a lot of other laws (ex. workers comp) in the process.

    The whole thing is corrupt bullshit.

    This long form piece goes into it a lot better.

    http://www.theatlantic.com/magazine/archive/2011/10/the-shame-of-college-sports/308643/

    Like

    • jnc:

      …and managing to avoid being covered by a lot of other laws (ex. workers comp) in the process.

      So, just to understand, you think athletes should qualify as “workers” who are then covered by worker’s comp laws?

      Like

  9. @ScottC: I think endangered species protection should be limited to a network of zoos meant to preserve/breed/provide natural environments for endangered species, so that humanity does not lose them (for the ongoing edification of humanity). I don’t think thousands of acres ought to be off limits for farming or whatever because a snail only lives there, as far as we know.

    Like

    • Kevin:

      I don’t think thousands of acres ought to be off limits for farming or whatever because a snail only lives there, as far as we know.

      Agreed. In fact I’m sure only a tiny minority of people would think so, which goes some way towards showing how rule by regulatory agency, as we have now, is very much anti-democratic. Laws that would never get past a legitimate representative legislative body get promulgated nonetheless by unaccountable bureaucrats.

      Like

  10. you know what’s good. a filet mignon. cooked in butter. and wrapped in bacon.

    I ruined a porterhouse the other night. turned my back and left in the oven for a few extra minutes. it was okay, but I had to mourn the lost potential

    Like

    • nova:

      you know what’s good. a filet mignon. cooked in butter. and wrapped in bacon.

      Butter and bacon….two things that can make even the most tasty food even better.

      Like

  11. Brent, still think it will take another generation for the bubble mentality to return?

    http://money.msn.com/top-stocks/post–3-reasons-to-tap-home-equity-to-buy-stocks

    Like

  12. Brent, still think it will take another generation for the bubble mentality to return?

    Well, in this case, you are swapping out one asset (real estate equity) for another asset (stocks). I would consider this less risky than buying stocks on margin, which has been around forever and doesn’t necessarily indicate a bubble.

    Like

  13. “ScottC, on March 18, 2014 at 11:12 am said:

    jnc:

    …and managing to avoid being covered by a lot of other laws (ex. workers comp) in the process.

    So, just to understand, you think athletes should qualify as “workers” who are then covered by worker’s comp laws?”

    I’m fine with them being independent contractors, but the NCAA is trying to have it both ways by refusing to pay them, actively obstructing another entity from paying them and then washing their hands of any liability for injuries related to the sports they are playing that provide income and profits to the NCAA.

    I support the concept of right to work whether it’s a union interfering with free employment or a non-profit association like the NCAA.

    Like

    • jnc:

      I support the concept of right to work whether it’s a union interfering with free employment or a non-profit association like the NCAA.

      Well the first question I have is does it really make sense to view athletes as being employed, either as “workers” or independent contractors? Do you include all athletes, or just athletes in revenue producing sports? Is a women’s lacrosse player at Tufts owed “workers comp” if she gets injured? How about a BC club rugby player who gets hurt playing against Harvard’s rugby team? Are all of these kids the equivalent of employees?

      Like

  14. They sure are good at adjusting the law to address the political problems:

    “Obama administration wants fewer people to get insurance cancellation notices
    By Jason Millman
    March 17 at 12:05 pm

    After insurance policy cancellations created a huge political headache for the Obama administration last fall, the administration has offered a plan to reduce the cancellations going forward.

    The administration has proposed laxer standards for defining what constitutes a modification of an existing insurance policy instead of the cancellation of a health plan.

    The proposal came in a batch of HHS rules and guidance issued around 7:15 pm on a Friday.”

    http://www.washingtonpost.com/blogs/wonkblog/wp/2014/03/17/obama-administration-wants-fewer-people-to-get-insurance-cancellation-notices/

    Like

  15. They sure are good at adjusting the law to address the political problems:

    Of course. They know they’ll never get called out for it because their heart is in the right place.

    Like

  16. ” laxer standards for defining what constitutes”

    see, you got to keep your plan.

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  17. “or just athletes in revenue producing sports? ”

    This. It’s not the collegiate fencing club where you pay dues to join.

    Like

    • jnc:

      This. It’s not the collegiate fencing club where you pay dues to join.

      The women’s lacrosse player is not paying dues to join. In fact at a D-1 school she is probably on scholarship just like the football player.

      It’s not clear to me why athletes in revenue producing sports should be considered as something different than athletes in non-revenue producing sports. Lots of organizations use revenues from one area to subsidize other areas, which is exactly what goes on with college athletics. The employees in the subsidized area are no less employees than are the employees in the revenue producing area. So I am curious on what grounds you would distinguish them in this case. What makes the 3rd string qb who sits on the bench for 4 years “employed” while the starting goalie on the hockey team is just another amateur student-athlete?

      Like

  18. http://www.bbc.com/news/world-europe-26637296

    the shooting has started in the Ukraine.

    Like

  19. “So I am curious on what grounds you would distinguish them in this case”

    TV deals.

    Like

    • nova:

      TV deals.

      Any TV deals? So if Hockey East has a TV deal with a New England cable station, does that mean all D-1 hockey players at any school are now “employees” of the school? Or does the NCAA itself need to have a TV deal? What if the NCAA TV deal is just to broadcast the Frozen Four, but no other games throughout the year? Women’s basketball has TV deals, but it isn’t a revenue producing sport (except perhaps at a tiny number of schools). Should women’s basketball players be considered employees but men’s lacrosse players not?

      Like

      • jnc/nova:

        To be clear, I am not saying that the NCAA model is necessarily a good one, and perhaps it should allow players to get paid something by the schools. But I am skeptical that it is an issue appropriate for the federal government to decide based on employment or anti-trust law. Besides which, I don’t think there is any sensible way the law can distinguish between which athletes it will favor with legal “right to work” protection and which athletes it will disfavor.

        BTW, if the NCAA shouldn’t be able to require that athletes not be paid, why should it be able to require athletes to compete for only 4 years? If one is a violation of the “right to work” surely the latter is as well.

        Like

  20. “But I am skeptical that it is an issue appropriate for the federal government to decide based on employment or anti-trust law. ”

    The NCAA crosses state lines and has a tax exemption. That’s a pretty good basis for Federal involvement.

    Like

    • jnc:

      That’s a pretty good basis for Federal involvement.

      I’m fairly libertarian. I don’t think that just because the government is allowed by the constitution to involve itself in something is a legitimate justification for that involvement.

      And I remain curious as to how or why you distinguish between the 3rd string quarterback on the football team at Richmond University and the starting goaltender for the hockey team at Boston College. The fact that football is a revenue producing sport for the NCAA while hockey isn’t doesn’t seem like a reasonable one to me.

      Like

  21. Heh.

    Like

  22. “And I remain curious as to how or why you distinguish between the 3rd string quarterback on the football team at Richmond University and the starting goaltender for the hockey team at Boston College.”

    I don’t have to. Either should be free to be paid by the college. Only in certain cases does an outside organization (the NCAA) have to interfere to prevent the normal market outcome, and that’s telling.

    Like

    • jnc:

      Either should be free to be paid by the college.

      Well, originally you seemed to be equating athletes to “workers” with your references to “workers comp” and the right to work. Part of your objection seemed to be that the NCAA doesn’t pay workers comp to athletes that get injured. I don’t think the equation of athletes to workers in this regard makes sense. Again, do you think a woman lacrosse player who gets injured playing lacrosse deserves “workers comp”? And if not, why, then, should a male basketball player get it?

      If your objection is simply over the rule disallowing payment, then I would say that the college is free to pay them, and they are free to accept it. They just can’t then be members of the NCAA. I don’t see why you think the NCAA shouldn’t be allowed by the government to establish the rules that its members must follow to remain members.

      Your description of the NCAA as an “outside organization” is plain wrong. It isn’t an outside organization at all.

      Like

  23. True?

    Like

  24. World’s angriest belly dancer responds to her critics.

    http://www.salon.com/2014/03/18/i_still_cant_stand_white_belly_dancers/

    I’m now convinced she’s just trolling for attention.

    With regards to the whole Ryan (& Charles Murray) as racists arguments, Ta-Nehisi Coates makes an interesting observation:

    “A number of liberals reacted harshly to Ryan. I’m not sure why. What Ryan said here is not very far from what Bill Cosby, Michael Nutter, Bill Clinton, and Barack Obama said before him. The idea that poor people living in the inner city, and particularly black men, are “not holding up their end of the deal” as Cosby put it, is not terribly original or even, these days, right-wing. From the president on down there is an accepted belief in America—black and white—that African-American people, and African-American men, in particular, are lacking in the virtues in family, hard work, and citizenship:

    If Cousin Pookie would vote, if Uncle Jethro would get off the couch and stop watching SportsCenter and go register some folks and go to the polls, we might have a different kind of politics.

    Cousin Pookie and Uncle Jethro voted at higher rates than any other ethnic group in the country. They voted for Barack Obama. Our politics have not changed. Neither has Barack Obama’s rhetoric. Facts can only get in the way of a good story.”

    http://www.theatlantic.com/politics/archive/2014/03/the-secret-lives-of-inner-city-black-males/284454/

    Like

  25. I think the dueling briefs is probably the best compromise when an administration is defending a law passed previously that they view as unconstitutional.

    Like

  26. Scott — I dont have anything intelligent to say regarding the NCAA. My “Tv deals” was meant as a one-off knee jerk response.

    Like

    • nova:

      I dont have anything intelligent to say regarding the NCAA. My “Tv deals” was meant as a one-off knee jerk response.

      No worries.

      BTW, one thing that I initially said that, upon reflection, was probably wrong was that the athletes and the universities are on the same side (and in opposition to the NCAA) in wanting to pay athletes. More likely is that the coaches, and perhaps the athletic departments (and booster organizations), at universities want to to pay players, but I suspect that most universities, as represented by presidents, chancellors, administrators, and/or boards, probably are as opposed to the idea as is the NCAA itself. After all, the NCAA is essentially a “club” the rules of which are decided by its members, so if the schools themselves (as a group) wanted to pay athletes, they could just change the rules to allow it.

      Like

  27. I’d argue it’s a better solution than refusing to defend the law and then playing games with standing to preempt the issue.

    Edit: and reading that piece irritated me again about how Bork’s nomination was attacked in the manner in which it was. I think he would have made an excellent Justice and produced some superbly reasoned opinions.

    Like

    • jnc:

      I’d argue it’s a better solution than refusing to defend the law and then playing games with standing to preempt the issue.

      Yes, that makes sense. BTW, I’ve probably said this before the I think the left’s reaction to the Bork nomination was a watershed event and has had an enormous impact on our politics since then. Any sliver of respect I might have been able to muster for Ted Kennedy is wiped out when thinking about that time.

      Like

  28. Speaking of Bork, it’s been fun watching the Left turn on Ginsberg. Resign before you die!

    Like

  29. No, it’s resign before Democrats lose the Senate.

    Like

    • jnc:

      No, it’s resign before Democrats lose the Senate.

      Did these kinds of electorally strategic resignations from the court always exist in history? I sense it is a modern phenomenon and and good indication of how politicized the court has become, but I guess it could have always happened and I am just not aware of it.

      Like

  30. I believe that they did, but the interesting thing is that the Democrats & progressives are attacking one of their own.

    Republicans will never call on Scalia or Thomas to resign just so they can get to appoint a replacement during a Republican President’s term.

    Like

    • jnc:

      Republicans will never call on Scalia or Thomas to resign just so they can get to appoint a replacement during a Republican President’s term.

      They might call on Kennedy, though. 🙂

      Like

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