Morning Report – Lots of data this week 8/25/14

Markets are higher this morning on no real news. Bonds and MBS are up small.

Lots of economic data this week: Tomorrow we get durable goods, the FHFA Home Price Index and Case-Shiller. Thursday, we get the second revision to second quarter GDP, and Friday we get Personal Income and Personal Spending.

On GDP, note that the Street is forecasting the advance estimate of +4.0% gets revised downward to +2.4%. If that ends up being the case, we will have had almost no GDP growth for the first half of 2014.

Why have the strategists gotten it so wrong with their bond market predictions? (Mea Culpa – include me in that camp). One explanation is that they are looking only at the US and ignoring the weakness emanating out of Europe. The second explanation is that inflation just cannot be found – the rally in the dollar has depressed commodity prices and there is little to no upward pressure on wages. This also might help explain why the Fed is considering hitting some bids with its paper once QE ends.

Another corporate inversion story: Burger King is apparently in talks to buy Canadian-based Tim Horton’s. Note Walgreen’s decided to scrap their plans for moving their headquarters and the stock got demolished.

The takeaway from Jackson Hole? Labor markets need to heal more before the economy can weather higher interest rates. Wage growth is flat right now. In order to get to the Fed’s 2% target on inflation, we would need to see wage growth of around 4%, because productivity-driven increases are non-inflationary. This just goes to show how far we have to go. That said, the economic staff at the Fed has taken down its estimate of the potential non-inflationary GDP growth, so there might not be as much slack as people think.

Think home flipping is dead? Think again.

12 Responses

  1. I thought it was depressing.

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  2. “And when you say the name Al Sharpton, the word integrity does not come to mind.”

    Understatement of the year..

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  3. I can’t stand Al Sharpton and saw a pic of him leading a protest march this past weekend and about gagged.

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  4. The amusing part is how some of his criticisms echo those from the right:

    “The rule of law doesn’t mean anything.

    But, no: MSNBC, state press, it’s all Obama propaganda, and Sharpton is the worst. Sharpton said explicitly, I will never say a critical word about the president under any condition. That’s why he can’t stand what I’m saying. He can’t stand what I do because, for him, it’s an act of racial traitorship to be critical of the president.”

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  5. I wish I could find it amusing but I really just find it all pretty sad. I didn’t vote for him because I thought he was a progressive, I voted for him because I thought he had a moral fortitude that unfortunately seemed to disappear right after the Inauguration. I was hoping he actually could unite Americans behind a few issues, the main one for me was revamping our health care system.

    I should have known better I suppose. And I agree with West re HRC. I dread her Presidency.

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  6. Nothing new has come out in terms of grounds or linkage of Perry to trying to derail the ethics investigation? That affidavit that was linked the other day seemed to undercut the prosecutions case.

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    • That affidavit that was linked the other day seemed to undercut the prosecutions case.

      It was a strong defensive preemptive move. We of course do not know what the SP actually has. He presented a ton of witnesses to the GJ.

      Perry had the choice of holding the constitutional attack until after trial as an ace in the hole, but raising it now puts the final development of the case off for a long time, it seems to me. The pretrial motion, framed as a habeas corpus, must be dealt with through appeals before anything else. R trial judge, R majority on the Austin court of Appeals, R majority on the Court of Criminal Appeals at the top. If Perry loses all the way up I will think all arguments about partisanship will be dead. Of course there are lots of Rs in TX who plain don’t like Perry. But seriously, I have never thought this was a partisan game [although local politics might certainly have played – QB suggested the SP may be grandstanding for personal glory].

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