Morning Report – Was Wednesday the capitulation? 10/17/14

Markets are higher as yesterday’s rally carries through. Bonds and MBS are down.

Housing Starts came in at 1.02 million, while building permits came in at 957k. Normalcy is 1.5 million, and that doesn’t even take into account population growth. We should be seeing starts coming at double what they are. Single family starts came in at 646k. Single fam has been relatively stable, while multi-fam has been extremely volatile.

Fed Head James Bullard made some dovish comments yesterday,which really turned around the market. The statement that got everyone’s attention was his suggestion that the Fed should consider maintaining QE for the time being. However, his point was not really all that dramatic – just that given the volatility in the markets, (coming primarily from Europe) and the fact that inflation expectations are falling with commodity prices, it might make sense to end QE at the December meeting, not the October one. He also stated that he believes we are a couple of jobs reports away from reaching historical norms in unemployment and the fundamentals of the economy are strong. He is not suggesting that we delay increasing interest rates, which is what people were hoping. Note that the Fed Funds futures moved pretty dramatically this week as they re-assessed their forecast for the first interest rate hike. The central tendency moved to late 2015 from mid 2015.

Wednesday’s pre-market bottom in the 10 year is feeling more and more like a capitulation. Look at the intra-day chart of the 10 year bond yield this week. It looked like a perfect storm of flight-to-safety, convexity buying, shorts throwing in the towel, and algo trading. The thing was trading like a tech stock. Again, I think of the roller coaster metaphor for the market – dizzying climbs, sickening drops, you end up in the same place where you started with less money in your pocket.

26 Responses

  1. Funny… The Freedom Socialist Party wants a $20 minimum wage, but is only offering $13 an hour for part-timers.

    http://reason.com/blog/2014/10/16/socialists-push-for-20-minimum-wage-but

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  2. I got really crazy this week (I have an excuse) and used the drop as a buying opportunity…………:)

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  3. Congrats lmsinca.

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  4. It’s good for now………we’ll see though! Glad you enjoyed your trip to Texas and the visit with Mark and Roseanne. I’ve been laid up with another case of food poisoning from last week but I’m feeling better finally. I will never eat chicken again for the rest of my life………….period!

    Oh, and I’m wearing a sweatshirt today……and socks…………first cool day we’ve had!

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  5. You’ll be disappointed in me NoVA. I broke down on privacy vs convenience and signed up for both EZ-Pass and Global Entry today.

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  6. you can’t drive without EZ-Pass.

    do you travel that frequently to make Global Entry worth it?

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  7. Yes because it also includes the TSA Pre-Check for the expedited lines with no shoe removal which is now at my home airport.

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  8. Naked Capitalism nicely boils down the AIG trial:

    “The Starr International v. the United States of America suit is, at its core, about whether an insolvent borrower still has the right to the protection of law. ”

    http://www.nakedcapitalism.com/2014/10/aig-bailout-trial-deadbeat-borrower-defense.html

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  9. see, i’m torn. it’s like i’m shredded wheat.

    The libertarian in me hates the privacy intrusion.
    The elitist in me loves the short line away from the masses.

    I flew to Vegas once with my brother, who is in the defense industry and frequently travels internationally. if he’s not flying charter/private, it’s business class and better. and he’s got some sort of pass that got us through TSA with barely a second glance.

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    • Frequent flyers on SWA with light carry-on [read computer only] get the fast lane. I do.

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    • nova:

      see, i’m torn. it’s like i’m shredded wheat.

      The libertarian in me hates the privacy intrusion.
      The elitist in me loves the short line away from the masses.

      The libertarian in you shouldn’t be exercised about it. It isn’t a privacy intrusion. It is a free exchange, a quid pro quo. You provide information in exchange for more convenience. You don’t have to give up the information if you don’t want to. It is perfectly compatible with libertarian ideals. You have a choice.

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  10. “and he’s got some sort of pass that got us through TSA with barely a second glance.”

    That’s the one.

    http://www.dhs.gov/comparison-chart

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  11. We get the TSA pre-check with United automatically too. I didn’t know if it was because we’re OLD or because of the frequent flyer miles.

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  12. Offensive pass interference my ass.

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    • nova:

      Offensive pass interference my ass.

      I thought the same thing. If that is offensive interference, then every time a team throws one of those wide out screen passes where one receiver steps back off the line while the other blocks for him, offensive interference should be called. The announcers kept calling it a pick, but a pick is when you take out the guy guarding someone else. He was “blocking” the guy guarding him, and it was the defender who initiated contact trying to stop him from getting off the line. The receiver just took the bump and held his ground. Bad call.

      Regardless, ND looked very good. If they win out they should make the playoff.

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  13. Pity Steve Jobs didn’t live to see this.

    “To Siri, With Love
    How One Boy With Autism Became B.F.F.’s With Apple’s Siri

    By JUDITH NEWMAN
    OCT. 17, 2014”

    http://www.nytimes.com/2014/10/19/fashion/how-apples-siri-became-one-autistic-boys-bff.html

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  14. Started using Uber. It lives up to the hype.

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  15. Uber or UberX?

    been very happen with both. but you should check out valleywag (a gawker site) for the bad press on it. they seem to hate it. but they also seem to be communists.

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  16. I thought defensive hold or incidental contact.
    Heard on ESPN radio this morning that FSU talked to refs after a similar play in the first half. i don’t have a problem with that, but the refs should tell the other team what they will be focusing on.

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  17. Nova, I believe it was Uber X. Just some guy in a Nissan Altima.

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  18. That’s X.

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    • Mark:

      You may be interested in this. Somewhat, although not explicitly, related to our discussion of Burke and classsical liberalism.

      http://thefederalist.com/2014/10/20/how-john-adams-helps-explain-the-american-mind/

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      • Thanks, Scott. That is a worthwhile read. Adams was a lawyer’s lawyer and he had the clearest sense of how to actually create a system of separation of powers because he understood how people actually think, feel, and act. I probably only read Burke’s own writings in the context of his criticism of the French Revolution – I cannot now name another set of essays from memory. I read McCullough’s book and again and again we see Adams as no dreamer about the perfectability of human nature, but as an architect of the possible with a passion for fair play.

        I am going to give this a second read.

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  19. ” You provide information in exchange for more convenience. You don’t have to give up the information if you don’t want to”

    this is true. but should I have to give that up at all to travel?

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    • nova:

      but should I have to give that up at all to travel?

      Well, you only have to give it up for more convenient access to travel. You can still travel without doing so, you just either have to wait in longer lines or take a different mode of travel. But even if your premise was correct, my answer would be sure, if the person giving you access to travel wants you to.

      Imagine if, instead of using the TSA, individual airlines used their own, private security which operated in exactly the same way that the TSA does. And then the airlines offered you access to special express security checks if you provided them with certain information, the same that the TSA now offers. Would you consider such a business arrangement to be somehow anti-libertarian or objectionable? I wouldn’t.

      I think the onerous security procedures that the government demands before allowing people to fly are, from a libertarian point of view, an imposition not on the rights of passengers but on the rights of airlines to establish their own security procedures. Passengers should have to go through whatever security procedures the provider of the service, ie the airlines, require. If a passenger doesn’t want to, then he can avoid using the service. The fact that the government tells airlines what security procedures they must follow is, from a libertarian perspective, a burden on airlines, not passengers.

      Like

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