Morning Report – Calm before the storm

Markets are lower this morning after some earnings misses. Bonds and MBS are down. Argentina missed a bond payment

Initial Jobless Claims climbed back above 300k last week, however Challenger’s announced job cuts number increased 24%. The ISM Milwaukee index rose to 63.87. However the Chicago Purchasing Managers index slumped by 10 points in July, coming in way below expectations.

The FOMC statement was slightly more hawkish than previous statements as the Fed edges more towards normalization. Bonds rallied slightly on the statement, but gave it back towards the end of the day.

Tomorrow is a big day with the jobs report and the ISM report. Plus, it is a summer Friday, which means thinly-staffed desks and probably some added volatility. I would not want to be floating going into tomorrow’s numbers.

The homeownership rate in the US fell again last quarter, to 64.7%, the lowest rate in almost 20 years. Separately, the rental vacancy rate fell to 7.5%. The Millennial generation is still stuck renting because they are lugging high levels of student loan debt and are facing a tight credit environment for the first time homebuyer.

Chart: Homeownership rate 1965 – Present
homeownership rate bbg

20 Responses

  1. What’s your take on the Argentina situation?

    It all hangs on whether or not Argentina would have to pay other creditors in full. If so, they’ll have to default. The fraction of bonds held by speculators is manageable.

    Mind you, having defaulted once, they could have stopped borrowing. It amazes me that a century ago, Argentina had per capita incomes equal to Western Europe. What a wasted century.

    BB

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  2. I worked for Paul Singer at Elliott for seven years…

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  3. I should note that I’m not using speculator in a pejorative sense of the word. Hedge funds picked up Argentine debt at around 20 – 25 cents on the dollar and gambled that they could get a better settlement. It appears to be working so far.

    BB

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  4. Jeebus, if this is the calm before the storm, I should have sold some shares yesterday while I had the chance……………yikes!

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  5. To be honest I am kind of perplexed by the reaction in the market and employment cost index. Aren’t increasing wages a GOOD thing?

    Think about what increasing wages and ZIRP means for the economy, at least in the short term. You get all the benefits of inflation without the bad side effects (higher interest rates).

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  6. un fucking believable.

    pick your battles you can win. fuck!

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    • un fucking believable.

      pick your battles you can win. fuck!

      NoVA, I was just kidding about your being cute and all that.

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  7. I am too Brent!

    BTW, House Republicans killed their own immigration bills.

    NoVA, is that true what Boehner said…………..amazing if so.

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  8. novahockey, on July 31, 2014 at 1:02 pm said: Edit Comment
    un fucking believable.
    pick your battles you can win. fuck!

    I missed what this was in reference too, the border bill?

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  9. Pretty sure it was the border bill. NoVa had the comment of the day earlier on Plum Line. Hopefully, he won’t mind my repeating it here.

    Gentlemen, you asked for a miracle. I give you the G O P.

    BB

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  10. Yep. House Republican Leadership are idiots.

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  11. sorry mark. the incompetence here is just aggravating.

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  12. Cross posted from PL:

    “NoVAHockey
    3:01 PM EST
    okay — the house is in recess subject to the call of the chair. so not on vacation yet. and they’ve turned off the camera.

    apparently they’re trying to put together something that can pass.”

    jnc4p
    3:13 PM EST
    “they’ve turned off the camera. ”

    The Shit just got real.

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  13. Lost in the border kerfuffle is that the House and Senate have not agreed on a transportation bill.

    http://www.washingtonpost.com/local/trafficandcommuting/house-gop-turns-table-on-senate-transportation-bill/2014/07/31/df293460-18be-11e4-9e3b-7f2f110c6265_story.html

    Evidently the House isn’t the only one to screw up. The Senate left a $2B hole in their package.

    BB

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  14. I think the Senate will pass the house transportation bill.

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    • Anybody have any suggestions?

      Treasury stays Senate pay checks for the duration.

      That’s a no-brainer, George.

      Like

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