Morning Report – On the Waterfront 2/18/15

Markets are lower as Greece seeks to limit some of the reforms being demanded from other Euro area members as a condition to extending the country’s 240 billion euro rescue package past February. Bonds and MBS are up small.

Mortgage Applications fell 13.2% last week as purchases fell 7.1% and refis fell 16%. It looks like mortgage rates didn’t move tremendously, at least according to the Bankrate 30 year fixed rate mortgage numbers. Mortgage rates had lagged the move downward in the 10 year, so it is unsurprising they are lagged the move back up. It appears they are beginning to move up with bond yields this week, however.

Housing starts fell 2% in January to an annualized pace of 1.065 million units. Building permits fell .7% to an annualized pace of 1.053 million.

Inflation remains muted at the wholesale level, with the Producer Price Index falling .8% month-over-month. Stripping out food and energy, it fell .1%, month over month, and increased 1.6% year over year.

Industrial Production rose .2% in January, and capacity utilization fell from 79.7% to 79.4%.

Speaking of inflation, there is a labor dispute between the longshoremen and the ports on the West Coast. We are starting to see some stirrings from labor unions, which could mean we are finally seeing the start of wage inflation. That said, the two labor unions involved are in industries which are in the middle of dramatic change. Ports are becoming more and more automated, and quite frankly do not need as many workers as they used to. The longshoreman are simply trying to delay the inevitable and are fighting over work rules that require two people supervise an automated crane. The steelworkers decided to pick a fight just as oil prices are falling and a labor surplus in the oil patch is being generated. Neither side has much in the way of negotiating leverage. That said, it will be interesting to see if they win.

Another data point for the energy patch: Buffett sold all of his Exxon Mobil and ConocoPhillips.

The minutes from the last Fed meeting should be released around 2:00 pm EST, so there is a chance for some bond market volatility around that time.

While it seems like Democrats and Republicans are in a death match struggle over the direction of this country and the days of genteel civility are in the past, here is some perspective. Turkey’s President Recep Tayyip Erdogan has filed a lawsuit against the head of Turkey’s central bank, Erdem Basci, charging him with mismanaging the country’s interest rate policy and not lowering rates as demanded by the government. He faces two years in jail.

10 Responses

  1. I bet Obama wishes he could throw some opponents in jail. If only he were Turkish!

    Frist? On phone, not always easy to tell.

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    • Obama’s op-Ed today in the LA Times.

      http://www.latimes.com/opinion/op-ed/la-oe-obama-terrorism-conference-20150218-story.html

      The world must continue to lift up the voices of Muslim clerics and scholars who teach the true peaceful nature of Islam.

      How does Obama, a self-proclaimed Christian, have the slightest notion of what the “true” nature of Islam is?

      More broadly, groups like al Qaeda and ISIL exploit the anger that festers when people feel that injustice and corruption leave them with no chance of improving their lives.

      What evidence is there that this is even remotely true, that people join violent Muslim groups out of a desire to improve their own lives by correcting “injustice”?

      Efforts to counter violent extremism will only succeed if citizens can address legitimate grievances through the democratic process and express themselves through strong civil societies.

      Does this president really think that the likes of ISIL and Al Qaeda are populated with people who prefer and are willing to respect democratic processes and civil society? Does anyone here actually believe these simple-minded and naive notions?

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  2. “Efforts to counter violent extremism will only succeed if citizens can address legitimate grievances through the democratic process and express themselves through strong civil societies.”

    There is general evidence to support this thesis in times and places other than the Arab world right now, so I do not discount it completely. Unfortunately, the more likely essence is that Wahhabism-Salafism breeds nihilism and W-S is the growing strain of Islam, in part thanks to the monetary beneficence of the Saud family.

    So I share your general skepticism about his having identified a root cause, but in a magical world where all the Arabs had western and not Salafist educations and they all had good jobs ISIS would have a tough time recruiting. In fact, this is why Iran is likely to be more stable than a Saud influenced country. The fundies there are not quite as crazy as the Wahhabists and the number of western educated and decently employed males is a greater proportion of the pop than in Saudi Arabia or Yemen.

    Which is probably damnation by faint praise.

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    • Mark:

      There is general evidence to support this thesis in times and places other than the Arab world right now, so I do not discount it completely.

      I don’t discount it completely as a generality. But in the specific instance towards which this president is applying it, I do discount it completely. And in this specific instance, I think it is a dangerous evasion of reality.

      Obama is simply not equipped to deal with this particular policy problem, either ideologically or intellectually. The sooner he is gone from office, the better off the nation will be.

      I have a lot of stories to illustrate, but I suspect in BHO’s case he has known many Muslims who are not fundies and he wants to think they are an active majority even outside the west.

      I wonder what Obama would have to say about the notion of a “true” nature of Christianity if one were to suggest that he was perverting it, and therefore no “true” representative of Christianity, by advocating for and making every political effort to maintain the legality of abortion on demand. Somehow I am guessing that suddenly religion would become quite subjective and open to many different interpretations, and his interpretation of Christian doctrine would be considered just as legitimate and “true” as anyone else’s.

      There is little point in pretending that Islamic religious doctrine is not primary to what is driving the likes of Al Qaeda and ISIL. Whether or not such groups are acting on the “true” nature of Islam is a) something neither I nor Obama is qualified to pontificate on and b) neither here nor there. If the wider Muslim communities reject them, then they are perfectly free to join the west in condemning and fighting against those groups, and they ought not need to be cajoled into it with obsequious and constant reminders from us that we are not against them. Indeed, if it is really true that the “peaceful” Muslim community is the real vanguard of “true” Islam, and that AQ and ISIS are acting on a perversion of it, then I think it is far more incumbent upon them to to make it plain to us that they are not at war with us than vice versa. If it is true that these Mulsims you speak of already embrace western democracy and culture and reject the extremism of AQ et al, then we need not market ourselves and constantly reassure them. They need to reassure us.

      BTW, I don’t share your faith in the power of western education to overcome Islamic extremism. Plenty of the members of AQ and ISIS, including OBL himself, were educated in the west and it didn’t stop them. At some point we have to acknowledge that it isn’t necessarily a lack of understanding of western values and culture that produces violence against it, but rather a perfect understanding, and subsequent rejection, of it that produces violence against it.

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  3. Also, I know many Muslims and have represented many of their businesses. If your exposure to Islam in America comes in a place where the Imam of the largest Muslim congregation is imbued with western ideals and who preaches equal opportunity for women, if you knew my clients, you would want to think they must be the true representatives of the religion, not the Salafists. In fact, they left their homelands to avoid the fundies and to thrive in the west.

    I have a lot of stories to illustrate, but I suspect in BHO’s case he has known many Muslims who are not fundies and he wants to think they are an active majority even outside the west. I don’t know if that is true after a century of the spread of Wahhabism.

    For example, pre-Wahabbist madrassas, Nigerian Muslims and Christians lived in true peace. Then the Saud family funded “free” education for Nigerian Muslims in Salafist Wahabbist Madrassas and it went to hell in a handbasket.

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  4. @Scottc1: “How does Obama, a self-proclaimed Christian, have the slightest notion of what the “true” nature of Islam is?”

    Like anything (especially religious), the “true” nature is whatever the prevailing sense of a particular group is, to those people in that group. I daresay many Christian groups have very different opinions of what the true nature of Christianity is, but, by and large, the Spanish Inquisition-types don’t have a lot of followers at this point.

    Put in other words, Obama is, like many on the left and even the right, busy trying to sell Islamists of all stripes on the idea that Islamic terrorists and war in the name of Islam is negative, and truly consistent with Islam, yada yada. But Martin Luther style reformations usually have to happen from within the church, not from without. I expect Obama knows his lecturing isn’t going to accomplish much, but aside from drone strikes, there aren’t a lot of tools in the toolbox.

    Or, it’s a politically expedient but practically useless bit of posturing.

    “What evidence is there that this is even remotely true, that people join violent Muslim groups out of a desire to improve their own lives by correcting “injustice”?”

    Also, when injustice involves precepts like the idea that infidels are suffered to live, it may not be possible to correct the said injustices to the satisfaction of radical Islam.

    There is a whole soup of things that goes into the making of radical religious extremists. And the solution to producing a more Western style country with jobs and opportunities and education is not a lecture followed by a check.

    “Does this president really think that the likes of ISIL and Al Qaeda are populated with people who prefer and are willing to respect democratic processes and civil society?”

    I think he’s saying that’s the way to address the issues of the rank-and-file Muslim on the street, which remains naive. I don’t think he’s suggesting ISIL and al Qaeda are anything but terrorists agitating for a global caliphate or at least a local theocracy with the regular sacrifice of infidels.

    But his recipe for Islam is basically the same as saying that what would really help me is if I won the lottery. While true, it is not a practical, real-world solution in any sense.

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  5. MiA: …but in a magical world where all the Arabs had western and not Salafist educations and they all had good jobs ISIS would have a tough time recruiting.

    KW:…what would really help me is if I won the lottery.

    We are in utter agreement.

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  6. A kind view is that his message is for only those Muslims who agree with him. Which would likely be most American Muslims who are now an actual voting bloc of millions.

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  7. George W. Bush spouted off a lot of the same blather about democracy and the peaceful majority of Muslims. Nothing has changed. I wonder who they think is evening listening at this point.

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