Morning Report – Second Quarter GDP revised upward

Markets are lower this morning on tensions in Ukraine. Bonds and rallying as well. 

 

Some strong economic data this morning, with the second revision to 2Q GDP coming in at 4.2%. Consumption rose to 2.5% and the PCE price index (the Fed’s preferred inflation indicator) came in at 2.1%, with the core at the Fed’s target rate of 2%. 

 

Initial jobless Claims came in at 298,000, another strong number. The Bloomberg Consumer Comfort Index rose to a 5 week high. 

 

Pending Home Sales rose 3.3% in July, but are down 2.7% year-over-year.

 

The Ellie Mae Origination Insight Report is out. Refis dropped to 32% of all loans in July. FHA accounted for 20%, Conventional 64%, VA 11% and other 5%. The average FICO dropped to 727.

 

Fannie Mae has taken down their estimate for housing in 2015. They dropped their estimates for housing starts and new home sales by 17%. People hoping that 2015 is the breakout year in housing are going to be disappointed.

 

New rules on PMI could raise rates on average 15 basis points. 

 

The elderly are finding the amount they owe on their mortgages increasing. Not sure how much of this is due to reverse mortgages. The mortgage-burning party seems to be a thing of the past.

 

Consumers have confidence, but not the cash to do anything about it. This is why the consumer confidence numbers look good, but spending numbers are not. Asset prices can only do so much – the chief driver of spending is wages, not asset prices. In fact, home equity extraction during the bubble years masked the overall weakness in wage growth. 

9 Responses

  1. Bernstein argues for the US actively trying to end the status of the dollar as the reserve currency. He basically dismisses any concerns over the interest rate impact to debt.

    “Dethrone ‘King Dollar’

    By JARED BERNSTEIN
    AUG. 27, 2014

    WASHINGTON — THERE are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?

    But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.”

    http://www.nytimes.com/2014/08/28/opinion/dethrone-king-dollar.html?ref=opinion

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  2. KDW just American Me’s the political prosecution of Rick Perry. His description of the Delay reversal as an example of the political nature of PIU’s R persecution is good.

    The judge in the DeLay case wrote that the evidence suggested very strongly that DeLay had gone out of his way to comply with the law rather than to subvert it, and noted that the jury had been grievously misinformed about the substantive legal matter in question. (DeLay was charged with “laundering” legally obtained campaign funds, a legal impossibility inasmuch as only ill-gotten gains can be “laundered.”) (And never mind that DeLay also was charged with breaking a law that had not been passed at the time he was accused of having broken it — insert your own Terminator-inspired time-travel joke.)

    Here’s the gist of the KBH trial.

    After conducting a warrantless raid on Hutchison’s office, the prosecution declined to even present a case against her at trial. The way it works is this: Prosecutors know that evidence gathered in a warrantless raid probably will be ruled inadmissible at trial, but they do not really care — they figure that they’ll get something embarrassing enough that they can coerce their victim into some kind of plea deal before the case makes it to court. When Hutchison did not fold, the case went to trial, where it was dismissed in, if memory serves, about eleven minutes.

    It cannot be rational to have faith in the PIU’s prosecution of high profile Texas R’s.

    http://www.nationalreview.com/corner/386533/libel-texas-kevin-d-williamson

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  3. I like the random shooter theory on that case in Texas. Someone comes by the scene, handles it, and moves on.

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  4. “The elderly are finding the amount they owe on their mortgages increasing. Not sure how much of this is due to reverse mortgages. The mortgage-burning party seems to be a thing of the past.”

    Yup. I’ll liked have a new 30 year mortgage soon, which would put me at 75/76 when it would be paid off. If I don’t already have another new mortgage that I’d have to wait until I was 90 to pay off.

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  5. Texas thing was probably the Equalizer. Or Jack Reacher. Something like that, some random stranger righting the wrongs that otherwise would not be righted. Also, it’s Texas. Lot of random firing of guns, maybe it was just an accident. Whose to say? It’s just one of those inexplicable tragedies.

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  6. I have a 3.75% mortgage. I have told my wife that if I ever get hit by a beer truck to not pay it off early.

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  7. Reverse mortgages are one of the biggest rip-offs out there. Sky high fees to get back in debt after a lifetime of working to get out of debt.

    I’m sitting at 3.875%. Considered doing a refi last year, but my lender offered to drop the rate no questions asked. Wish I would have done it a year earlier. Ah well. I’m effectively paying half the going rent in my neighborhood for my housing costs.

    BB

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  8. I wonder how much the government loses on reverse mortgages. Gotta be a lot.

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