Morning Report – Where’s the beef? 9/3/14

Markets are stronger this morning as tensions ease in Ukraine. Bonds and MBS are down small.

The ISM New York Index fell to 57 from 68, while factory orders rose 10.5%.

Luxury builder Toll Brothers reported earnings this morning. The luxury end of the market is doing just fine, with deliveries up 53% in dollars and 36% in units. ASPs increased 12% to 732k. Net signed contracts fell however, and the average price for signed contracts increased only 1.4% year-over-year, Perhaps we have seen the point where buyers are finally balking at higher prices.

Mortgage Applications rose .2% last week. Purchases fell 1.5% while refis rose 1.4%. Refis are back up to 57% of total number of loans.

Part of the reason why purchases are slipping is due to seasonality, however mortgage rates have not been falling with Treasury rates. The average 30 year fixed rate mortgage has been stuck in the same 4.1% to 4.2% range for the past 3 months, while the 10 year has rallied from 2.6% to 2.34%. The last time rates were this low, the average 30 year fixed rate mortgage was 3.93%. I think there are two things going on here – first I think banks view this move in rates as being driven by overseas events and therefore temporary. Second, I think that lenders are taking more risk than they were a year ago, which means higher rates on average.

Have you noticed that chocolate bars are getting smaller? That your “pint” is no longer a pint at your local watering hole? Welcome to shrinkflation, a state of affairs where companies maintain the same price, but give you a little less. We saw this movie before in the 1970s and 1980s, which was captured quite eloquently in Wendy’s “Where’s the Beef” ad campaign. This actually started in the 1970s, and shows that inflation can take two forms – price increases and quantity (or quality) decreases.

47 Responses

    • An interesting take on Obama:

      The ability to read other people comes more easily if you’re interested in others, curious to learn what makes them tick. It comes harder or not at all if you’re transfixed with your image of yourself.

      Which seems to be the case with Barack Obama. Not only is he not much interested in the details of public policy, as Jay Cost argues persuasively in a recent article for the Weekly Standard. He is also, as even his admirers concede, not much inclined to schmooze with other politicians, even his fellow Democrats.

      That goes double for Republicans. House Speaker Rep. John Boehner, R-Ohio, is one of the most transparent and least guileful politicians I’ve encountered. The late Sen. Edward Kennedy and liberal Rep. George Miller, D-Calif., had no difficulty reaching agreement with him on the 2001 No Child Left Behind Act.

      But Obama has gotten nowhere with him.

      Like

    • McWing:

      Good discussion over the last couple days. Thanks.

      Like

  1. I may or may not have an answer for you. Timing and motivation come into play.

    Plus the moon is in the seventh house and Jupiter aligns with Mars.

    Liked by 1 person

  2. I found this Pro Publica piece on a Mississippi judge to be very informative and up to Pro Publica’s normal standards of fair play. In Judge Pickering’s own words.

    I would be derelict if I did not mention one other thing. Political dialogue in our nation has reached an all-time low. It is bitter and acrimonious. The battle over the confirmation of judges contributed greatly to the lack of collegiality that exists in the U.S. Senate today. It is one thing to talk disparagingly about a bill or an issue, but it is something altogether different when an attempt is made to destroy or dehumanize another human being. Harry Reid (though not the only one and not the one who attacked me most viciously) has contributed to this as much or more than anyone else. We need to start calling out those who make malicious, divisive statements just as we call out those who make intemperate racial statements. If we cannot discuss serious political issues with civility we are not likely to find a solution. The need to restore civility in our political discussions is one of the paramount needs we face as a nation. We cannot solve many of our pressing problems until this is done.

    http://www.propublica.org/article/a-son-of-mississippi-considers-his-legacy-on-race

    I really wish everyone, on both sides of the aisle (including Harry Reid), would take heed of this advice.

    Like

    • lms:

      I wonder just how much different it really is today relative to times past. With regard to judicial confirmations, it probably has changed a lot, but I suspect that just reflects the fact that the judiciary has become a lot more politicized as it has transformed into a policy making branch of the government. With regard to the wider political atmosphere both in Congress and in the nation at large, I wouldn’t be surprised if the vitriol and lack of civility between the 2 parties that we see today has been fairly common throughout history.

      Like

    • McWing:

      Wow!

      I saw that at Ace. It is pretty egregious, but I would bet you similar things go on pretty routinely even at the likes of the NYT and WaPo. Agenda journalism is all too common.

      Like

  3. I don’t know Scott. The current congressional climate seems to have begun with Clinton’s run but maybe I just don’t remember correctly before that. I think there have been other periods historically (Lincoln’s presidency for example) when things were probably worse. I admit that except for a couple of Presidential campaigns I pretty much stayed away from the Federal branches of government and focused primarily on the local, so I may not have a very good perspective.

    I also think the internet has really allowed just regular old citizens like us to say things we wouldn’t normally say to another person face to face.

    I remember Kennedy’s campaign very well but from the perspective of a child and I only remember wondering why so many people seemed to hate him because he was a Catholic……………seems weird now. I also remember quite a bit of the Civil Rights movement, but also as a child primarily.

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  4. JNC and I got into a “what is a public good” discussion. you’d think that people that base their ideology around that term would know what it means.

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    • nova:

      JNC and I got into a “what is a public good” discussion. you’d think that people that base their ideology around that term would know what it means.

      In my experience most people seem to interpret a public good to be anything that might conceivably redound to the benefit of “society” at large. Which isn’t particularly useful as a differentiater since nearly anything you can think of could be construed in some way to be a public good in that sense.

      Like

  5. that would have made some sense. i actually got a “if congress appropriates money for it, it’s a public good.”

    Like

    • nova:

      that would have made some sense. i actually got a “if congress appropriates money for it, it’s a public good.”

      lol. And I imagine the discussion began with what justifies congressional appropriation of money…anything that is a public good!

      Like

  6. The Psychiatric community and LBJ campaign declared Goldwater insane.

    That might ruffle some feathers.

    Question, what is the value to the public of comity in politics and between politicians?

    Seriously?

    Like

  7. Well, we know from David Brock that Hack Sargent will print anything.

    Like

  8. “In my experience most people seem to interpret a public good to be anything that might conceivably redound to the benefit of “society” at large.”

    I nominate beer to be a public good. And I demand free or at least subsidized beer.

    Like

    • Brent:

      I nominate beer to be a public good.

      Prohibition demonstrated that the lack of availability of alcohol clearly redounds to the detriment of society at large. Hence, its availability is a clear public good. Bring on the subsidies.

      Like

  9. Question, what is the value to the public of comity in politics and between politicians?

    The issue in politics is much the same as the issue in journalism that you highlighted. It’s one thing to disagree with someone, it’s quite another to lie about them or their position or even just make up potential consequences of a particular policy or law being presented. I don’t trust liars………………do you?

    It’s my belief we can always disagree on issues without raising the question of someone’s integrity, honesty, patriotism, commitment to the law or whatever specter is being raised because there is divisiveness over the issue or nomination, as in the case of the judge.

    I haven’t always managed this very well myself so it’s more of a personal goal for me than anything I actually expect to see change in either politics or journalism.

    I think there’s enough disagreement between political parties that we don’t need to exacerbate it with lies, innuendo, fake intrigue, personal aspersions etc……….but what the hell do I know about it anyway? We couldn’t do it here, even when we wanted to and actually tried, so it’s highly doubtful we’ll see much change in the halls of Congress. I conclude that’s the way most of us like it.

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    • lms:

      It’s my belief we can always disagree on issues without raising the question of someone’s integrity, honesty, patriotism, commitment to the law or whatever specter is being raised because there is divisiveness over the issue or nomination, as in the case of the judge.

      What if someone actually is being dishonest or not acting with integrity? Should that be ignored for the sake of comity? (I’m not asking rhetorically…maybe the answer really is yes. I imagine it depends on the circumstances.)

      Like

  10. Lying people can be quite charming and friendly, especially the good ones. That’s a completely different issue then comity isn’t it?

    I’ve been mean to people and didn’t lie once. I’ve been sweet to people and lied through my teeth. Comity is a strategy, no?

    So, the question is still, what is the value of comity in politics and politicians?

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  11. Well the original point, which I didn’t quote from the interview was the fact that Democrats lied about his history on race issues. I don’t think comity only for it’s own sake is necessarily that valuable but I guess I’m probably old enough to have been taught a certain amount of common courtesy, even when I disagree or don’t actually like someone, is required in our public persona. I guess that stuck…………….nice work DAD.

    If I can prove someone’s lying, I will, in all likelihood though, call them a liar to their face and in public.

    I do believe there is a point to be made that our national dialogue has regressed to the point of having consequences though. Whether that can be described as comity or non-comity I don’t know. Can intentionally lying in order to seed doubt be considered comity if it’s done with a smile? I have no clue.

    Like

  12. I do believe there is a point to be made that our national dialogue has regressed to the point of having consequences though.

    What do you think the consequences are, or will be?

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  13. McWing

    What do you think the consequences are, or will be?

    I don’t pretend to have a crystal ball (don’t tell my kids), but unless we have a single party Presidency and both chambers of Congress, a terrifying thought, I don’t see any of our urgent issues being addressed or solved any time in the near future.

    I think that’s already been proven during Obama’s Presidency. He was more than willing I think, to work on some sort of what was called a Grand Bargain (much to the chagrin of progressives) to curtail the growth of both SS and Medicare but even though both were a goal of Republicans, no takers. John Boehner can barely control his own caucus, there’s very little chance that the tax code will be revised in my life time and that’s assuming I live at least another 20 years (my doc thinks I’ll make it to the nineties but I’m not really sure I want to). There is absolutely no will among the right and left apparently to work together to solve our immigration issues, which is literally leaving millions of potential citizens or deportees in limbo. Boehner said recently that Immigration will be on the table again next year…………..anyone believe anything will actually be accomplished? I don’t.

    Apparently Obamacare actually did curtail the near term growth of Medicare, a good thing no matter how you look at it I think, and Republicans are already (via Karl Rove) demagoguing that issue. I think that’s really one of the worst things that came out of the HC debate.

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  14. Thanks Lms, I just have to vehemently disagree. I don’t think a single one if the issues listed will be fixed by comity, public spiritedness and bi-partisan cooperative action. I can’t fathom how one cannot come to the obvious conclusion that every problem you just listed exists because of bipartisan legislation. Therefore, the only logical conclusion one can draw to to hope vote and actively seek to elect politicians who will not cooperate with other politicians. Our system is broken precisely because the the checks and balance of our Constitutional form of governemnt have been co-opted by comity and bi-partisan ship. It should be virtually impossible to get a Majority of 535 legislators and one President to agree on anything.

    Like

  15. McWing, I’m sorry but I’m confused by your statements.

    every problem you just listed exists because of bipartisan legislation. Therefore, the only logical conclusion one can draw to to hope vote and actively seek to elect politicians who will not cooperate with other politicians.

    Okay, then how do we go about solving these problems, assuming you think they are problems if,

    It should be virtually impossible to get a Majority of 535 legislators and one President to agree on anything.

    Are you suggesting one party rule or not?

    Like

  16. Interestingly enough I just read this fascinating piece, some of which is obvious to me and some of which I might need to think about a little more. I do think it’s very pertinent to ATiM and what we originally tried to do here. We’re hard wired to argue.

    Scott, you’ll like this section in particular.

    Early cognition was simple pattern recognition in response to stimuli; find a reflex that works and figure out the details later (this is why you involuntarily jump when you hear sudden loud noises). The way in which we currently process information is only a few steps more removed from that: our behavior is still founded upon the recognition of patterns and the selection of appropriate responses to those patterns. Over time, these behaviors become ingrained in networks of neurons that are activated more efficiently as the same, or similar, stimuli are presented.

    The kicker here is that these networks of neurons need not be internally consistent, hence our varied reactions when logically identical situations are presented in different frames. The same person can be equally moved in opposite directions when it comes to supporting or opposing expanding the social safety net when it’s phrased as “aiding the poor” or “expanding welfare,” as the two phrases activate different arrays of neural networks. You can call that hypocritical, but you also have to call it natural, and we’re all susceptible to similar hypocrisies.

    You’ll notice that this depiction of human cognition violates one of the principles required of rational actors, namely that the actor respond to situations which will produce identical outcomes in identical ways. A rational actor should be indifferent to framing effects concerning political issues, but we all know that’s not the case (“gay marriage” vs. “marriage equality,” “abortion” vs. “reproductive health,” etc.). The reason why these effects persist is that they are literally activating different parts of our brains and, therefore, the incoming political information is processed differently.

    And this too.

    In other words, the brain evolved to be emotional and efficient at the expense of being logical or consistent. While this form of cognition is essential for survival, it is also prone to error, which can be disastrous in more complex situations, as we essentially sacrificed objectivity and consistency for decisiveness. What makes the tradeoff evolutionarily sustainable is a social environment in which errors are called out and corrected. Emotional, internally inconsistent, pattern-seeking humans are interdependent on each other to tell them when they’re wrong. In this way, large-scale rationality emerges from individual-level non-rationality.

    And then of course, this is the part I liked.

    But don’t we suck at arguing?

    Well, kinda. But we’re good enough to make it work.

    In a twist of sad irony, it seems as though the reasons why we have to argue are also the reasons why we argue so inefficiently. That our brain processes political information via an emotional, associative process instead of a cool, calculated one means that we are unlikely to readily admit when we’re wrong. To that point, when a team of researchers set about using hard data to challenge participants’ beliefs concerning politically-charged information, they found that the more mathematically competent you were, the less likely you were to change your mind in the face of evidence. For the participants, and fitting with the model of the brain outlined above, conclusions came first, and those who understood data were able to rationalize their positions more effectively than participants who couldn’t explain away the numbers.

    And this is why Reddit (and, I’m sorry to say, the comments section on this article) isn’t the saving grace of American democracy. Just because you have two people who disagree with each other talking doesn’t mean that the result will be in any way productive. However, argumentation oriented towards amicable compromise and agreeable outcomes is both possible and useful on a large scale.

    http://americablog.com/2014/09/evolved-argue.html

    Like

    • lms:

      Emotional, internally inconsistent, pattern-seeking humans are interdependent on each other to tell them when they’re wrong.

      Yeah, but no one ever listens to me when I tell them. 🙂

      Like

  17. Okay, then how do we go about solving these problems, assuming you think they are problems if,

    My apologies. I thought it was obvious that there is no Federal solution. Not is it a possibility to roll ant of these things back. Gridlock is therefore the only solution. It needs to fundamentally break and be re-written.

    Like

  18. I’m just going to say this and get it over with. I think we still have a chance here at ATiM, on a much smaller scale than we originally anticipated, to have a discussion, or argument even, and disagree somewhat agreeably. We’re all here because we’re passionate about politics and arguing, but we also have to be willing to admit when, and if, we might be wrong and when, and if, our political agenda gets in the way of logic or consistency. I don’t know if we can do it, and it’s honestly a little scary to be one of the only liberals here right now, but I’m willing to try if the rest of you remaining handful are willing to try.

    I attempted going back to the PL and it still just doesn’t work for me as I’m so disappointed in other liberals and the discussions lead nowhere meaningful, IMO.

    Like

  19. I’m not suggesting one-party rule. I stating that the Constitution was written to make it very hard to pass legislation. It was done because humans can’t be trusted with power. Comity and bi-partisanship subvert that and the results are objectively disastrous.

    Like

    • I’m actually with McWing on this. The idea that the federal government is somehow broken or not working properly or efficiently when it isn’t “solving our problems” is premised upon accepting that it is the right/responsibility of the federal government to be a problem solver. I reject that notion. Gridlock isn’t a bug, it is a feature.

      Like

  20. McWing

    I thought it was obvious that there is no Federal solution. Not is it a possibility to roll ant of these things back. Gridlock is therefore the only solution. It needs to fundamentally break and be re-written.

    What needs to be re-written……………the Constitution? Are you waiting for a complete breakdown of society/government and some sort of anarchy solution? If so, how practical do you think that is and will that eventually solve these specific problems I mentioned?

    I’m not necessarily against gridlock, sometimes it’s better than the alternative, but I do hope to find a solution to at least some of these problems in my lifetime without the complete breakdown of the federal government. Call me crazy…………!

    Like

  21. Scott

    Yeah, but no one ever listens to me when I tell them. 🙂

    I knew you would love that part of the piece I linked (so funny it’s from a typically leftie publication). But might I suggest you ask yourself why no one ever listens to me.

    Don’t you sort of love the part that we’re hard wired to argue though? I did.

    Like

  22. What needs to be re-written……………the Constitution?

    Yes.

    Are you waiting for a complete breakdown of society/government and some sort of anarchy solution? If so, how practical do you think that is and will that eventually solve these specific problems I mentioned?

    It’s inevitable. I just want it to happen now versus when I’m 70. I don’t think there is or should be a Federal solution to anything you mentioned excepting Immigration, which should be to grant citizenship to all comers when asked.

    Like

  23. McWing

    What needs to be re-written……………the Constitution?

    Yes.

    Who would you trust to re-write it? And I’m sorry, I respect your opinions but I really do think they are outside of the norm so I seriously doubt you’ll get anywhere with them. I have an issue, right or wrong, with politics that are outside of possibilities. I tried it myself in my younger political years by being involved with both an Independent campaign and a Libertarian campaign……………….complete waste of time and money.

    At my age now, I prefer to look at the reality of our political system and work within the realm of actual possibilities. That doesn’t mean however that I like it!

    Like

  24. Scott

    Gridlock isn’t a bug, it is a feature.

    Okay, and this is actually something jnc and I agreed on quite awhile ago.

    I’m not necessarily against gridlock, sometimes it’s better than the alternative, but I do hope to find a solution to at least some of these problems in my lifetime without the complete breakdown of the federal government. Call me crazy…………

    Like

    • lms:

      but I do hope to find a solution to at least some of these problems in my lifetime without the complete breakdown of the federal government.

      I think any such solution must begin with a proper respect for federalism, and an understanding of the limits of the power of the federal government, both constitutionally and practically.

      Like

  25. Who would you trust to re-write it?

    I’d pick 50 names at random and lock them in a building in Philadelphia in July. I’d also turn off the power.

    And I’m sorry, I respect your opinions but I really do think they are outside of the norm so I seriously doubt you’ll get anywhere with them.

    Agreed, but I think collapse is inevitable and I’d rather have it happen now then when I’m 70.

    I have an issue, right or wrong, with politics that are outside of possibilities. I tried it myself in my younger political years by being involved with both an Independent campaign and a Libertarian campaign……………….complete waste of time and money.

    I bet it enriched your life and gave you insights and knowledge you didn’t have before. Even if you only learned it was a waste of time, you learned something. Again, the “possibilities” are, in my opinion, inevitables.

    Like

  26. McWing

    I’d pick 50 names at random and lock them in a building in Philadelphia in July. I’d also turn off the power.

    Very cynical IMO. If our future depended on their conclusions, is that really where you would go? It sounds very haphazard to me.

    I bet it enriched your life and gave you insights and knowledge you didn’t have before.

    No, not really, it just made me a little more cynical than I already was. I don’t know if that is good or bad !

    Like

  27. Very cynical IMO. If our future depended on their conclusions, is that really where you would go? It sounds very haphazard to me.

    Interesting. I find it the opposite of cynical. Yes, It’s really how I would go.

    Like

  28. SCOTUS analysis of the recess appointments decision that makes the case for the opposite of what it advocates.

    http://www.nytimes.com/2014/09/04/opinion/tragedy-or-triumph.html?ref=opinion

    Like

  29. McWing

    Interesting. I find it the opposite of cynical. Yes, It’s really how I would go.

    I suppose in a way that doesn’t really surprise me considering that you also advocate for a women’s right to choose abortion up until the moment of birth. I think, for the most part you are seriously outside of the norm as far as political opinions are concerned. It’s interesting to me that you are even more radical than most of the radical left wingers I am familiar with……………congrats!

    Edited to add that the last sentence was meant to be funny but this morning it doesn’t sound funny to me. I apologize if I sounded like a jerk. Off the the gym to let my trainer punish me…………..;). I don’t consider the Founding Fathers random people btw.

    Like

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