Morning Report – Super Mario Pleases the markets 1/22/15

Posted on January 22, 2015 by Brent Nyitray

Markets are higher this morning after the European Central Bank announced a 1.1 trilllion euro quantitative easing program. Bonds and MBS have been all over the map this morning, but are rallying at the moment.

The ECB QE program will consist of 60 billion euros a month, ending in September 2016. Draghi is walking a fine line here, trying to increase inflation and growth while at the same time mollify German voters that he is coming to the rescue of their Southern brethren. FWIW, I think Germany doth protest too much – their manufacturers have to love seeing the Euro get whacked. Such is the symbiotic relationship of the European monetary union – the profligate Southern European countries get to borrow at lower rates than they otherwise would, and the Northern European exporters get a depressed Euro which makes them more competitive.

The formal announcement was very similar to what was leaked yesterday in terms of amount – 50 billion for 2 years vs 60 billion for 18 months. The markets were looking for something like 500 billion euros in QE, so it is an upside surprise. Bonds are rallying in Europe, with the German Bund challenging its lows of 42 basis points. US Treasuries are being taken along for the ride.

Initial Jobless Claims fell to 307k, but are still the second week above 300k. Good numbers nonetheless. The Bloomberg Consumer Comfort Index slipped to 44.7 from 45.4 last week.

Home Prices rose .8% in November, higher than expected according to the FHFA. On a year-over-year basis, prices are up 5.3% and are within 4.5% of their April 2007 peak. On a seasonally adjusted basis, New England was negative while the West Coast was highly positive. Note that the FHFA Home Price Index only looks at houses with conforming mortgages, which makes it a subset of the overall real estate market.

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21 Responses

  1. ScottC, on January 22, 2015 at 10:41 am said:

    FYI, today is the 42nd anniversary of what is possibly the worst Supreme Court decision since Dred Scott, and certainly one which has perverted our political process in ways that continue to this very day.

    BTW, I am currently reading a book called Abuse of Discretion, and it has been quite enlightening. I’ve learned quite a lot about the process of how Roe and its underappreciated sister case Doe came to be.

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  2. jnc4p, on January 22, 2015 at 11:19 am said:

    Roe loses out to Wickard v Filburn in terms of worst Supreme Court decision since Dred Scott.

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    • ScottC, on January 22, 2015 at 12:24 pm said:

      jnc:

      Roe loses out to Wickard v Filburn in terms of worst Supreme Court decision since Dred Scott.

      A matter of judgement, of course, but I'm skeptical. At least the principle underlying Wickard, the constitutional power to regulate interstate commerce, actually does exist in the Constitution, even if the court proved willing to disingenuously (mis)construe what constitutes commerce (much less interstate commerce) in order to achieve the result it wanted. But the principle on which Roe rests, a constitutional right to privacy, can be found literally no where except in the fanciful imaginations of scheming, imperial justices. The constitutional justification for Roe was literally invented from whole cloth by the justices who claimed it existed. Even people who are unqualified supporters of a right to abortion have admitted that the ruling was pure nonsense.

      This is what Edward Lazarus, law clerk to Roe author Harry Blackmum (and someone who is "utterly committed to the right to choose") had to say about Roe:

      As a matter of constitutional interpretation and judicial method, Roe borders on the indefensible…Justice Blackmun’s opinion provides essentially no reasoning in support of its holding. And in the almost 30 years since Roe’s announcement, no one has produced a convincing defense of Roe on its own terms.”

      Plus Wickard didn’t produce anything close the perverse effect on that nation’s political atmosphere that Roe has. There is no Wickard litmus test for Supreme Court nominations, nor are there routine claims about a “war on wheat growers” every election cycle. As much damage as Wickard has done to the nation, I’m still voting for Roe as far and away the worst.

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      • ScottC, on January 22, 2015 at 12:44 pm said:

        Also, at least Wickard left the regulation of non-wheat growers in the hands of the political/democratic process, even if it was plainly the wrong level of government doing the regulating. Roe removed the regulation of abortion from the political/democratic process altogether, giving SCOTUS and SCOTUS alone the power to regulate abortion as it sees fit. A much bigger and more egregious power grab than Wickard was.

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  3. jnc4p, on January 22, 2015 at 11:20 am said:

    NoVA – The Weekly Standard has the perfect term for the Aletheias of the world:

    “Hipster Marxism”

    http://www.weeklystandard.com/articles/hipster-marxism_697848.html

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  4. novahockey, on January 22, 2015 at 11:40 am said:

    http://kaiserhealthnews.org/news/once-same-sex-couples-couldnt-wed-now-some-employers-say-they-must/

    Interesting fallout of gay marriage. get married if you want to keep your domestic partner benefits.

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  5. novahockey, on January 22, 2015 at 11:40 am said:

    That’s fantastic, JNC. I think SMN really got under his skin.

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  6. jnc4p, on January 22, 2015 at 1:12 pm said:

    “A matter of judgement, of course, but I’m skeptical. At least the principle underlying Wickard, the constitutional power to regulate interstate commerce, actually does exist in the Constitution, even if the court proved willing to disingenuously (mis)construe what constitutes commerce (much less interstate commerce) in order to achieve the result it wanted. But the principle on which Roe rests, a constitutional right to privacy, ”

    That’s worse. They intentionally rewrote an explicit provision in Wickard to mean the opposite of what it plainly says. What that means is that even amending the Constitution isn’t a sufficient way to stop an activist court.

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  7. jnc4p, on January 22, 2015 at 2:23 pm said:

    OT: Even Ezra calls BS on the 1% own all of the world’s wealth argument, and for the right reason:

    “To see the problem, here’s another version of the same number: the combined wealth of my two nephews is already more than the bottom 30 percent of the world combined. And they don’t have jobs, or inheritances. They just have a piggy bank and no debt.

    Oxfam presents the statistic, which is derived from data published in Credit Suisse’s Global Wealth Databook (pdf), as a measure of wealth. But it’s technically a measure of net worth: assets minus debts. As such, what it’s picking up isn’t just massive inequality in wealth, but also massive inequality in the ability to access credit.

    So for the purposes of Oxfam’s calculation, a farmer in China’s rural Sichuan province with no debt but also very little money is wealthier than an American who just graduated from medical school with substantial debt but also a hefty, six-figure income. By any sensible standard, the medical student is richer, but because her student debt still outweighs her financial assets, the net worth measure counts her as poorer than the Chinese peasant.”

    http://www.vox.com/2015/1/22/7871947/oxfam-wealth-statistic

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  8. novahockey, on January 22, 2015 at 2:26 pm said:

    Those guys in the Vox picture are sharp dressers .

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  10. novahockey, on January 22, 2015 at 3:02 pm said:

    they can’t be intolerant. only we — White Males — can be.

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  11. Let the mutherfuker burn!, on January 22, 2015 at 9:23 pm said:

    Were children involved?

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    • ScottC, on January 23, 2015 at 6:26 am said:

      I’m wondering what everyone else thinks of the Patriots’ Deflategate?

      Personally I think they are cheaters and so should get a fairly significant and meaningful penalty.

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    • ScottC, on January 23, 2015 at 11:30 am said:

      McWing:

      Scott, the don’t want to know.

      Yeah, that is probably true.

      Mich:

      I think they should have to forfeit and the Colts go to the Super Bowl. That, of course, is not going to happen.

      Yeah, definitely not going to happen. Personally I’d vote for a Brady and/or Belichik suspension from the game, but that isn’t any more likely to happen.

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  13. Michigoose, on January 23, 2015 at 10:31 am said:

    Personally I think they are cheaters and so should get a fairly significant and meaningful penalty.

    I think they should have to forfeit and the Colts go to the Super Bowl. That, of course, is not going to happen.

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  14. Michigoose, on January 23, 2015 at 11:42 am said:

    Personally I’d vote for a Brady and/or Belichik suspension from the game

    This I could also go for. . . but, as you said, it won’t happen. Whatever the NFL ends up deciding to do, I predict it will only affect pre-season games next year, which means that it won’t mean diddly squat. I wonder if this will elevate Patriots dislike to the level of Cowboys dislike?

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  15. Michigoose, on January 24, 2015 at 8:50 am said:

    @Scott:

    In the shower this morning I came up with a good penalty for Deflategate: make the Patriots play the Pro Bowl tomorrow against all the players who were selected for the game. Then they can play the Super Bowl next weekend.

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