Morning Report – Einhorn is short fracking Cinco de Mayo 2015

Stocks are lower this morning on economic data. Bonds and MBS are getting slammed.
Bonds in the US have been buffeted by the volatility in the European bond markets as optimism and pessimism over a bailout wax and wane. The German Bund is now trading at 51 basis points after hitting 7.5 bps about two weeks ago. The snapback has been vicious and caught a lot of people on the wrong side of the boat.
Chart: German 10 year bond yield:

The ISM Services Index rose to 57.8 in April from 56.5 in March. These are strong numbers, which should bode well for the jobs report on Friday.
Economic optimism fell, however from 51.3 to 49.7. While a lot of things figure into these sentiment statistics, they are very sensitive to gasoline prices.
Oil is back over $60 a barrel as the supply glut begins to dry up. This could bump up the inflation numbers a bit, which would be good news for the Fed, as long as it is stays muted and inflation holds around 2%. If it goes above, get ready for all the “The Fed is Behind The Curve” handwringing. That would be Hillary’s nightmare scenario.
Speaking of inflation, Warren Buffet would short the 30 year bond if he had a cost-effective way to do it.
Note David Einhorn took aim at fracking (and specifically Pioneer Natural Resources) with regard to profitability at a value investing conference.
Banks generally eased credit slightly last month, according to the Fed’s Senior Loan Officer Survey. In resi, it looks like the biggest change was the easing of overlays for government / conforming loans.

9 Responses

  1. A very thoughtful article on the deeper implications of the movement to re-define marriage, or, as the article calls it, de-sexed marriage.

    http://thefederalist.com/2015/05/05/how-same-sex-marriage-makes-orphans-of-us-all/

    Once an archetype is removed from law, the principles the archetype embodied and held in place have lost their authority as conceptual polestars. Thus “our ability to make [effective] arguments of a certain kind” vanishes. Conversely, those ideas that the archetype classified beyond the pale are now loosed to overhaul the affected area of law in terms of their rival precepts. “[T]he demise of an archetype sends a powerful message about a change in the character of the relevant law.”

    If, in the name of “equality,” the Supreme Court this summer constitutionalizes a national mandate for de-sexed marriage, it is unclear how the Court thereafter could avoid cleansing its own case law of its “unequal” preferential treatment of biological parents. Or how Congress in the exercise of its Fourteenth Amendment Section Five enforcement authority won’t be within its rights to banish from state domestic relations law those policies based on biological bond favoritism or that otherwise imply a legally cognizable significance to kinship relations. A ruling that traditional marriage law is illegal invites an avalanche.

    Former Chief Justice Warren Burger observed that “in constitutional adjudication some steps, which, when taken were thought to approach ‘the verge,’ have become the platform for yet further steps. A certain momentum develops in constitutional theory and it can be a ‘downhill thrust’ easily set in motion but difficult to retard or stop.” Indeed, history itself (as Michael Hanby writes) might be conceived of as “the train of cause and effect set in motion by our deeds but escaping our control.”

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  2. Good Ex-IM bank debate on yesterday’s Hugh Hewitt show. On the side of the Angels is Tim Carney, on the other side is some former Ex-Im goon as well as Hewitt.

    http://www.hughhewitt.com/the-export-import-bank-debate/

    As a side note, Hugh Hewitt must be a paid agitator for the Republican Party because he’s Foreign Affairs / Defense Spending All the Time. Dude makes Lindsey Graham blush.

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  3. Elizabeth Warren is just as dishonest as the rest of the politicians:

    http://www.washingtonpost.com/blogs/fact-checker/wp/2015/05/05/warrens-false-claim-that-auto-dealer-markups-cost-consumers-26-billion-a-year/?hpid=z5

    Which of course makes her more effective.

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    • jnc:

      Elizabeth Warren is just as dishonest as the rest of the politicians

      I think she is actually worse than your average politician. She is pretty shameless.

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    • We already knew her propensity to make up stuff. This is just another turd on the pile.

      Funny thing is when I list her recent turds, doggedly repeated and uncorrected by her, for my liberal friends, there are some who act as if she is merely exaggerating to make a [presumably valid] point.

      I don’t think it makes her more effective, JNC.

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  4. Not Fauxahontas! I refuse to believe it!

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  5. McWing. please. her name is Lieawatha

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  6. “I don’t think it makes her more effective, JNC.”

    Yes it does. Look at her stature within the Democratic Party. Being constrained by factual accuracy vis-a-vis her arguments on Glass-Steagall, the CFPB, and the AIG bailout, etc would seriously diminish her ability to make simple, convincing and completely false arguments for her position.

    See Mencken:

    “For every complex problem there is an answer that is clear, simple, and wrong”

    She doesn’t do this out of ignorance. It’s a sophisticated understanding of messaging and an intentional strategy.

    “there are some who act as if she is merely exaggerating to make a [presumably valid] point.”

    Precisely. That’s the goal, to fool some and get a pass from the rest.

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  7. It’s interesting to see that *** Senator Ma’am hang her hat on the Federalism principal here.

    http://www.bna.com/despite-clearing-committee-n17179926074/

    It’s not weird that I agree with her though. It’s a states rights issue.

    Like

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