Morning Report – Strong ISM numbers 8/5/14

Markets are lower on no real news. Bonds and MBS are down small.

The ISM Non-Manufacturing Index increased to 58.7 in July, a strong number. In fact, this is the highest reading since inception (with the caveat the index started in Jan 2008). Employment ticked up again, and new orders are accelerating. Prices are not increasing.

Factory orders increased 1.1% as well, but the IBD / TIPP economic optimism index declined.

The Fed Senior Loan Officer Survey is out, and it discusses non-QM lending. The majority of banks reported that the rule had no effect on prime conforming mortgages (unsurprising since if it is conforming, it is QM compliant), but about half the respondents indicated QM reduced approval rates on applications for prime jumbo loans and non-traditional mortgages. That said, it is clear from the charts below that credit is easing, and demand is picking up.


Yet another unintended consequence of financial regulation – closing costs for mortgages have increased 6% YOY and in some places are up 20% +.

Home prices are up 1% month-over-month, and are within 13% of their April 2006 peak, according to CoreLogic.

The out-of-office email reply, deconstructed.

Obama to business: Stop complaining!

60 Responses

  1. Moved this from yesterday’s thread. It’s relevant to the morning report because Anadarko’s stock jumped up really well yesterday on the news.

    This was good news for Colorado. Our daughter is promoting her prospect which is the best land opportunity for the entire company she works for which includes prospects in Texas. She’s on the verge of accepting partial ownership/drilling bids (in the 2 billion range) in the next week or two so this was a very big deal for her. It’s a huge opportunity for CO and they recognized the need for environmental protections (her company has a good environmental record believe it or not) and they were able to keep the anti-fracking initiative off the ballot for now. She’s still a liberal working in the oil industry because she loves it……LOL

    This also means she’ll be able to stay in Colorado (she doesn’t want to move to TX) for the foreseeable future as they won’t even begin drilling her wells until sometime next year.

    “We are pleased an agreement could be reached and that we can balance protections for Colorado families with responsible energy development,” said Mara Sheldon, spokesperson for Coloradans for Safe and Clean Energy, the group behind environmental and local control initiatives 88 and 89. Her group plans to withdraw its initiatives Tuesday.

    Blue ribbon commission

    The deal centers on the establishment of an 18-member blue-ribbon commission that will include representatives of the the drilling and construction industries, the agricultural community, conservationists and local government officials and civic leaders. The commission will make recommendations to the state legislature, which plans to work on a measure to address the next session, which begins in January.

    The commission will be chaired by Gwen Lacelt, the La Plata County commissioner, and Randy Cleveland, the president of XTO Energy.

    “The work of this task force will provide an alternative to ballot initiatives that, if successful, would have regulated the oil and gas industry through the rigidity of constitutional amendments and posed a significant threat to Colorado’s economy,” Hickenlooper announced in a conference at the state capital today.

    State House Majority Leader Dicky Lee Hullinghorst, a Democrat from Boulder where hydraulic fracturing activity has expanded dramatically in recent years drawing great citizen push-back, worked intensely with Hickenlooper over the last two months on the compromise. She lauded the deal announced today as the best way to head off a bitter and expensive battle at the polls.


  2. Re: closing cost. I bailed on a refi opportunity. they wanted to collect escrow for taxes and insurance. that’s fine. they couldn’t roll over the existing account, but were going to use it pay down the balance of the existing loan. also fine.

    but they wanted to add the new funds for the new escrow account to the balance of the new loan. this seemed odd to me and I walked. is that common?


  3. That doesn’t sound right. You should at least get a check for your old escrow funds.


  4. they kept changing the GFE after i noticed something. after i while, i figured something wasn’t right.


  5. what type of loan? jumbo? fannie?


  6. high balance conforming

    current servicer called and wanted to knock .25 of my rate with no costs to me as preemptive effort to keep me from shopping. and at every turn, there seemed to be a cost to me.


  7. Any suggestions on the best way to finance the addition of a pool?



  8. McWing……………home equity loan is probably the best and cheapest way.

    I agree with Lulu – but if your current loan is at a higher than current market rate I would consider a refi for the total amount at some point. Also, credit unions are real good for this. Mark


  9. loan or line of credit, lms?

    we used a HELOC to redo the basement. but that made more sense for us than a lump sum loan. it’s given us some flexibility with some other expenses too.


  10. Yes, a line of credit. You can always convert it to a fixed rate if the interest rates creep up but start with a LOC…………….IMO.


  11. We thought about that for our solar project but decided to just cash out IRA money and use the tax credit to pay the taxes. We’re old enough though that we don’t pay the penalty. We just didn’t want another loan.


  12. you had to pay taxes? early withdraw?

    edit — oh you mean the regular income taxes


  13. Ok, thanks. One issue with a Home Equity Loan / Refi is that I bought this house new w/a VA loan with less then $5k down. I’m pretty sure that it hast appreciated *that* much in a year. Further, I rolled the $8k VA funding fee into the loan. That VA fee percentage increases each time you use your VA benefit and I’m on my 4th so it’s like 3-4% of the house.

    So, what do y’all think the second best way is to finance a pool?😄😁

    And thank you for your responses so far!


    • George – just build a very small pool. Pay cash out of pocket. You only want it to cool off in, not to swim laps. 16 feet by 8 feet. Might be able to find a fiberglass shell, hire some diggers, and plumb it yourself. Houston has no zoning but your subdivision probably requires fencing, and don’t put the pool near the easement.
      little pool


  14. if you need to go the financing route and can’t tap home equity ….

    1. personal unsecured loan from the bank or one of the online brokers. maybe lending tree

    2. credit cards — which is a really bad idea, IMHO

    3 save until you can pay cash and/or can tap some equity.

    4 –edit — your contractor/pool guy might offer financing.


  15. oh – and call your insurance company and get a quote for the new rate w/ pool. also check fencing and setback requirements. you are basically putting a liability in your backyard (a big hole) and filling it with more liability (water). at great expense.


  16. Hagan (D) barely leading challenger Thom Tillis (R) in a three way U.S. Senate race, 41% to 39%, with Libertarian Sean Haugh at 7%. In a head-to-head match up, Tillis leads by two points, 45% to 43%.


  17. What Nova said. We bought our house with a pool so didn’t have to go through all of that. Insurance isn’t that much of an issue though. Personal loans at the bank are difficult to come by unless it’s a business loan. Perhaps a credit union?


  18. Thanks all. I had a pool in AZ that Pulte threw in when I bought that house but it did increase my insurance. I did have to put self-closing mechanism on all my doors and gate, including a sliding screen door (which was really expensive). The city inspector was a complete PRICK who failed me because my screen door closed “to slowly.” He wouldn’t let me fix it by turning a screw and increasing the tension. He made me wait two weeks for another inspection before I could fill the pool. Finally, on October 1st I passed and was allowed to fill it. I swam ONE TIME before the water got too cold. I couldn’t swim in it again until May the following year.

    I’ve vowed, should I ever run into him at some point, to water-board his petty tyrant bureaucrat ass.


  19. Great news for the students in this district, It’s not them it’s you!


  20. Worth a read:

    “The right’s horrifying edge: History shows surprising pattern about its demise

    If you think GOP has moved so far right they can’t possibly recover, historian Rick Perlstein has a lesson for you

    Joan Walsh
    Tuesday, Aug 5, 2014 07:45 AM EST”


  21. One of my friends put in a pretty reasonably priced pool years ago that was about 8 by 16 with some sort of a jet at one end that created a current to swim against……….I loved that thing. I could swim all day and never get anywhere. 🙂

    Mark, had my first ocean swim last Sunday……………1.5 miles.


  22. And this is the sort of pool I want:


  23. hello fellow gussied up republican!


  24. Lol jnc, it needs a dolphin or two.


  25. also long as dolphin is defined as bikini models.


  26. Yeah, it’s the usual stuff over at PL, but Rand Paul did give them the ammunition with the foreign aid flip flop and the rider on the transportation bill.


  27. Thanks Mark, food for thought.


  28. there are fair criticism to make. but the “it’s a pretend philosophy” thing is exceedingly grating.


  29. Here’s hoping Roberts goes down in Kansas tonight.



  30. “novahockey, on August 5, 2014 at 1:10 pm said:

    there are fair criticism to make. but the “it’s a pretend philosophy” thing is exceedingly grating.”

    I just take it as proof that she lacks the ability to debate it on the merits and write her off. The screeching by the left about libertarianism just shows it’s influence in the debate.


  31. Nova and jnc, do either of you know if there is a definitive study re low/no cost birth control and effects on either medicaid or other welfare programs for children and families?

    I get the other preventive cost vs treatment cost analysis. I think preventive should pretty much be based upon risk which could be age or family history related.


  32. I think the left fears a Republican party unencumbered by social issue baggage…


  33. lms — wer’e about to find out. CMS is in talks with state medicaid programs and child welfare types about increase contraception use.


    i’d have to dig around for study.


  34. Thanks Nova. I’m always curious about some of these intuitive ideas, you know, whether they really pan out or not.


  35. I tend to doubt it will make a big difference. I don’t think that cost is the big inhibitor of birth control use that the left seems to think that it is.

    Over the counter access to the morning after pill might make a difference.


  36. There was a study that showed that making birth control pills available over the counter made a difference in usage.

    Key quote:

    “The results suggest that access is a key determinant of contraceptive continuation, Potter said.

    “Removing unnecessary barriers to access — such as limits on the number of pill packs dispensed or even possibly the prescription requirement — could have an important impact on reducing unintended pregnancy,” Potter said.”

    The left defines access as the individual having to bear the cost. I’d say those of us on the libertarian right would define it as having to get permission from someone, i.e a doctor or pharmacist.


  37. jnc, I don’t necessarily disagree with the “over the counter” idea although I’d like to see more scientific proof that it is safe.

    I was primarily wondering about cost specifically because of what you said. I’d like to know for sure if cost had a specific bearing on usage and wondered if there had been a study done on that and the effects on medicaid etc.

    I’m also curious to see the outcome of TX closing most abortion clinics and what that will mean, not only to women seeking other avenues of abortion, but also if it increases the burden on the state re welfare. I doubt we’ll know the answer to any of these question any time soon so we continue to speculate I guess.


  38. “jnc, I don’t necessarily disagree with the “over the counter” idea although I’d like to see more scientific proof that it is safe. ”

    Here you go:

    In December 2012, the American College of Obstetricians and Gynecologists (ACOG) officially recommended that birth control pills be converted to OTC status in America.


  39. Thanks I’ve heard that before but never read the actual publication. I wonder what religious conservatives would do with this proposal and also this,

    “the possibility of pharmacists inappropriately refusing to provide OCs”

    I can imagine what would happen if they tried to sell Emergency Contraception over the counter.


  40. Question, is it wise to encourage birth control in a welfare state? Don’t we need an expanding population to sustain the various Ponzi, er social insurance programs?


  41. I thought the goal was to reduce the welfare state.


  42. That’s my goal. But I think you need a growing population to sustain a growing economy. I don’t know how a static or shrinking economy is viable when a welfare state exists let alone when one doesn’t. I cannot think of one example of a thriving static or shrinking economy.


  43. McWing, I’m on my way to a swim meet. I’ll answer later. My first big race in months.


  44. I’m stunned at the failure of this example of central planning.

    Literally speechless.


  45. Walgreen’s decides to stay.


    Money quote: “There are a lot of investors out there that are suggesting, and want us to at least consider an inversion. Frankly, it’s my fiduciary responsibility to explore all structures and all options and weigh the risk-reward scenarios with all of the above, as we are,”

    The only “risk” associated with an inversion trade is retribution from the government. They were clearly threatened by the administration…


    • I thought this post over at Ace was pretty interesting:

      I think 88% of all persuasion actually just takes place on this subconscious, emotional level of affinity. The arguments put forward don’t usually convince the other person; rather, simple human affinity convinces the other person.

      If you’ve convinced him, he may repeat your words when he makes the argument himself; but the actual words you said to him will be have been a very minor contribution to his being convinced.

      Andrew Breitbart actually consciously went out of his way to hire people for his site that didn’t look like the average conservative.

      Like Dana Loesch. Some kind of Goth Girl, right? Not very typical.

      It wasn’t that he didn’t like how the average conservative looked.

      It’s that he sensed — correctly, I think — that conservatism needed not just different kinds of arguments but different kinds of people making those arguments.

      I think he figured that the people who would be convinced by a sort of standard conservative figure already had been convinced by a sort of standard conservative figure, and if you wanted to reach people who hadn’t been convinced yet, you had to look look for people they’d accept as Sort of Like Me.


  46. McWing

    I cannot think of one example of a thriving static or shrinking economy..

    I can’t either but I don’t see how shrinking the welfare state via access to low cost birth control, or just access to over the counter birth control, would necessarily shrink the economy. It seems to me that families, especially poor ones, with fewer kids would be more productive and less reliant on welfare. I doubt that BC is the answer to all of our prayers in this regard but I don’t think it can hurt!

    And anyway, I thought your prescription for this problem was open borders.


  47. It is, plus more domestic procreation. But, as a Liberal, are you not bothered by immigration in so far as it essentially robs other countries of their viable working class? Meaning those with gumption to leave for the unknown are just the type of people that would be able to turn their birth countries into viable entities. Would Mexico still be a narco-state if we didn’t absorb a significant chunk of their population? Is a knowing brain-drain from Africa to the US, moral?

    If the answer is for you is no, then is ready and easy access to birth control the best thing for long-term welfare state viability? I say no.


  48. But, as a Liberal, are you not bothered by immigration in so far as it essentially robs other countries of their viable working class?

    IMO, NAFTA already robbed Mexico of it’s viable working class. We pretty much killed their agricultural business.

    As to your other questions, why not absorb the best and brightest from other countries? if they want to come and their assimilation can benefit us, I’m fine with it. I guess I don’t really think of “brain-drains” in a moral sense. Why deny people with intelligence and the desire to improve their lives the opportunity? That doesn’t mean I think we should strictly limit immigration to a certain type though.

    As I said, I doubt that BC for the poor or working poor will solve all our problems. I think it’s a good cost/benefit prescription though. But again, I’m not sure the jury is in on that. That’s one of the things I’m trying to figure out.


  49. I’m all for open borders / instant citizenship but that doesn’t I don’t think we have and will continue to condemn many countries to failed state status. I’m morally conflicted about that. These failed states constitute a further drain on our resources versus being a dynamic trading partner.


  50. This gets me a little misty eyed.

    “@aterkel: Justin Amash: “I want to say to lobbyist Pete Hoekstra, you’re a disgrace”” // & this was a victory speech


  51. “I want to say to lobbyist Pete Hoekstra, you’re a disgrace. I’m glad we could hand you one more loss before you fade into total obscurity and irrelevance.”

    — Rep. Justin Amash (R-MI), quoted by WOOD-TV, in an unusually harsh primary victory speech.


  52. doh. sorry troll. completely missed it.


  53. @Troll: “Any suggestions on the best way to finance the addition of a pool?”

    Sell a kidney. You don’t need both of them.


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