Morning Report – 3Q GDP boosted by government spending 11/25/14

Stocks are higher after a strong GDP report. Bonds and MBS are flat

The second revision to Q3 GDP came in at +3.9%, an increase from the initial estimate of +3.5%. Personal consumption rose 2.2%. The core PCE index (which is the inflation measure the Fed prefers to use) came in at 1.4%, so inflation is still well below what the Fed would like to see. The big contributing factor to GDP was government spending, which increased 9.9%.

Home price appreciation seems to be flattening, however, as the FHFA home price index was flat on a month-over-month basis. Case-Shiller rose .34%, however. The CoreLogic home price index noted that price appreciation was slowing at the high end, however prices were still rising pretty quickly at the low end (9.4% vs. 4.5%).

Chart: Case-Shiller Home Price Index

The big institutional investors are slowing down their purchases of distressed properties, as they have yet to show the huge profits they promised to their own investors. They have a big backlog of homes to renovate and rent, and skilled construction labor is hard to come by these days. I always suspected that the execution of this trade was going to be more difficult and expensive than people were figuring it would be.

The Supreme Court will hear oral arguments on the FHA disparate impact case on Jan 21. This is an important fair lending issue, as the Obama Administration moved to make proving lending discrimination as strictly a numbers game – in other words, the CFPB does not have to prove intent to discriminate. If your numbers don’t line up with the population, you are guilty, no questions asked. This one has wended its ways through the lower courts and has made it to the Supreme Court.

29 Responses

  1. The NYT actually has a good editorial on the problems with the administration’s foreign policy.

    “A Problem Beyond Mr. Hagel

    By THE EDITORIAL BOARD
    NOV. 24, 2014”

    http://www.nytimes.com/2014/11/25/opinion/a-problem-beyond-mr-hagel.html?ref=opinion

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    • Ha! I made my comment before reading the NYT link. I must have been correct.

      Actually, I think you suggested something similar the other day, but I was too busy to get into it.

      I still think watching last week’s appearance of Hagel on Charlie Rose is worth watching – although it is now poignant.

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  2. Brent, do you think gas prices have affected consumer spending? That’s what we’re hearing from our customers anecdotally.

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  3. lms, yes I do. the overall spending numbers don’t change, but it allows them to spend more on other things.

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  4. Brent, what’s the concensus on the inevitable downward revision of the 3rd quarter GDP? I’m guessing 1.8 pts.

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    • Mark:

      Given the notorious ease with which prosecutors are generally able to get a grand jury to indict the people they want to indict, a common theme in the wake of the grand jury’s decision not to indict Darren Wilson in Ferguson seems to be that this is just another example of the how the system is biased towards and protects policemen. I, however, suspect exactly the opposite. My guess is that after seeing the real evidence, the prosecutor decided that indicting Wilson would be a miscarriage of justice, which in normal cases would mean he wouldn’t even bring it to a grand jury, but in the politically and racially charged environment surrounding the Ferguson shooting, he took it to them anyway in order to avoid the inevitable charges of corruption, and let them make the call.

      Is this possible/likely? Any thoughts?

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      • Scott, on Ferguson, I simply don’t know and would have to read the entire GJ transcript to venture an opinion.

        I assume that forensics could show at what distance the fatal shot was fired. I assume that will be the focus of the Fed Civil Rights inquiry, if it is “established” the deceased was neither running away nor running toward the shooter.

        There is apparently enough historic enmity in the community to keep the citizenry on edge and by the flip of the same token, keep the police on a hair trigger.

        If you pour through the GJ investigation/hearings let me know what you think.

        As a general observation, police accused by the community [as opposed to by internal affairs] are treated gently by D.A.s because prosecutors rely on the partnership with the police, and that will never change.
        It simply cannot.

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  5. The State of the Union disinvite idea made it to Politico:

    “GOP aides and lawmakers say they expect the leadership to consider additional legislation to address the executive order, but there have been no decisions made on what those bills would look like. There are lots of ideas: Texas Sen. Ted Cruz has signaled he would hold up some of Obama’s executive branch nominees, others privately have been musing about shutting the government down, refusing to invite the president to give his State of the Union address or censuring the president. Many in congressional leadership think these ideas are nonsensical, since it will not serve any practical purpose.”

    http://www.politico.com/story/2014/11/republican-leaders-shutdown-immigration-113149.html

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    • jnc:

      Many in congressional leadership think these ideas are nonsensical, since it will not serve any practical purpose.

      Better a symbolic measure with no practical purpose than no measure at all. Besides, since when has a body that passes non-binding resolutions with regularity, including one so utterly important as recognizing March 14 as National Pi Day, considered symbolic measures to be “non-sensical” because of their failure to serve a practical purpose? If the above is true, it shows how totally empty of imagination the congressional leadership really is. Pathetic.

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  6. Scott – yes. Handing it off to the Grand Jury without much direction was an exercise in passing the buck.

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  7. It’s not that they’re unimaginative, it’s that they’re in agreement with the President along with being afraid of labeled racist.

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    • McWing:

      It’s not that they’re unimaginative, it’s that they’re in agreement with the President along with being afraid of labeled racist.

      The racist part makes sense, but if they really are in agreement with the President, the SOTU idea is a fantastic one. It allows them to poke Obama in the eye without actually changing the policy.

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      • Yet more evidence that the NIH is both over-funded and just another tool for leftist ideology.

        http://freebeacon.com/issues/feds-paid-5-million-to-start-commune-for-hipsters-that-dont-smoke/

        The National Institutes of Health (NIH) is spending nearly $5 million to get hipsters to quit smoking by starting “commune” dance parties in bars across California.

        Researchers at the University of California, San Francisco (UCSF) are using taxpayer dollars to bring anti-tobacco marketing into bars by selling posters and t-shirts, including those that deride the views of neoconservatives, saying the political philosophy is as bad as world hunger.

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  8. Uh oh. Salon’s on to me now:

    “GOP plots pathetic new ways to pester Obama: Don’t let him give a State of the Union! ”

    http://www.salon.com/2014/11/25/wingnuts_plot_pathetic_new_ways_to_pester_obama_dont_let_him_give_a_state_of_the_union/

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  9. Best thing that ever happened for the national Republican party was the DNC kicking Howard Dean out.

    http://www.salon.com/2014/11/25/people_yelled_and_carried_on_howard_dean_on_how_he_remade_the_dnc_and_dems_new_path_forward/

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  10. Interesting?

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  11. Good long form piece in the Atlantic on the current state of fraternities.

    http://www.theatlantic.com/features/archive/2014/02/the-dark-power-of-fraternities/357580/

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  12. As noted in the article, you can’t for public universities due to Federal law.

    The other thing of course that’s noted in the article is that if you banned them there goes your alumni donations and recruitment efforts.

    Your daughter is at W&M?

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  13. Building momentum:

    “Will the GOP scrap Obama’s State of the Union address?
    11/26/14 09:06 AM—Updated 11/26/14 09:18 AM
    By Steve Benen”

    http://www.msnbc.com/rachel-maddow-show/will-the-gop-scrap-obamas-state-the-union-address

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  14. Remember, this is a good thing as we were told that the middle class is over treated.

    http://dailycaller.com/2014/11/28/gallup-peak-number-of-americans-delaying-medical-care-over-costs/

    Feature, not bug.

    And only a Bagger thinks the prior status quo was better.

    Bagger’s like Chuck Schumer and Senator Fauxcohontas.

    Like

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