Morning Report – The Fed has learned nothing from 2008 5/11/15

Stocks are flattish on no real news. Bonds and MBS are down.

The week after the jobs report is usually pretty data-light and this week is no exception. The highlights will be retail sales on Wednesday and industrial data on Friday.

Bonds will be vulnerable to shifts in the wind due to a few big deadlines in Greece this week. To put the Greek situation in perspective, over the past 3 weeks, the German 10 year yield has gone from 7.5 basis points in yield to 77 basis points in yield intraday last week. This is what has been pushing down Treasuries. Last week the 10 year briefly traded over 2.3% in yield.

The Fed may not pursue a path of steady consecutive 25 basis point increases in the Fed Funds rate when they start hiking rates. Interestingly, the article posits that the Fed wants to learn the lesson of the last hike cycle – in which they tightened too predictably, and which some believe caused the real estate bubble. If the Fed truly believes that rate hikes caused the real estate bubble, and everything was fine in the markets before then, it shows we have learned absolutely nothing from 2008.

26 Responses

  1. it shows we have learned absolutely nothing from 2008

    Is this unusual, or is the Fed usually better about remembering the lessons of history?

    Oh, and frist!

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  2. The Fed (and the thinkers that shape policy right now) steadfastly believe the real estate bubble was not caused by easy money.

    I find it interesting that the Fed recognizes it has a problem when there is too much money chasing too few goods (inflation), but denies there can be a situation where too much money is chasing too few assets (bubbles).

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  3. probably because they are benefiting from the bubble in the form of higher home values. what bubble?” my neighborhood is doing great!

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  4. The media’s ultimate sin.

    But why did Ukip do so well? Because in the five years leading up to the election, the rightwing press lent it, and its policies, credence.

    http://www.theguardian.com/media/greenslade/2015/may/11/yes-right-wing-newspaper-coverage-did-cause-ed-milibands-downfall

    Heard some idiot local reporter on Sunday’s local political show and she had won a Pulitzer. Good for her I thought until she said that a reporters primary job is to create change.

    Does anybody here agree with that? If that’s the case can there be “objectivity” that the lame-stream media touts?

    I’m genuinely curious if one can create change, er, objectively?

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  5. What’s everybody’s opinion of MMT?

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  6. “Good for her I thought until she said that a reporters primary job is to create change”

    No. although i can say that as a journalism student, that was the divide. you were either supposed to do neutral reporting to the best of your ability, or be an advocate.

    i say, if you’re an advocate, you’re no longer a journalist but a lobbyist. just be honest about it.

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  7. Did J-school even entertain the idea the media is biased left or was the idea treated as complete heresy?

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  8. The reason I ask about MMT is that I keep coming across academic economists on Twitter who keep touting it. It seems insane but bacteria caused ulcer’s were once thought insane.

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  9. heresy — corporate owned, so how could it be left.
    off to meeting, more later.

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    • heresy — corporate owned, so how could it be left.

      But we are the ones who are epistemically closed.

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  10. as if the editors that determine what is news or how to frame it are answering to stockholders….

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  11. The ironic thing about media companies is that they usually have two classes of stock: supervoting shares for the families, and nonvoting stock for everyone else. The only reason to do that is to have editorial control by the founding families.

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  12. Brent, out of curiosity have you heard of, or noticed yourself, that there are at least areas where homes are selling well above their appraised value or asking price? One daughter bought a home here finally in an upscale neighborhood in Moreno Valley but had to offer quite a bit more $$$$ and other considerations.

    Our CO daughter has made about 5 offers so far on houses in Golden and lost out on each one………….the offers are as much as $50 K above the asking price and things like free rent back for a month and all sorts of other things are being offered.

    Is it just area specific do you know or a trend?

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  13. lms, inventory is really tight right now… I think right now, the number of homes for sale equates to something like a 4.5 month supply. A balanced market is more like 6.5 months.

    For the most part, we are seeing this in places like the West Coast, the mountain states, and DC. Basically the very desirable areas. The rest of the country is more balanced, however the Northeast is picking up at long last.

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  14. I wonder w/oil prices down, if we’ll see an increase in inventory. I’m convinced that any (snort) economic recovery we’ve experienced in the U.S. has been energy sector driven. It’s now in a slack mode due to low oil prices and there are layoffs as well as a slowdown in energy company spending.

    What do you think Brent?

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  15. I don’t know when I’m going to see it but I cannot remember being this excited to see a movie as I am about seeing Mad Max: Fury Road. Probably was more excited about seeing The Empire Strikes Back, Prometheus would be third.

    DO NOT GIVE ME YOUR STAR TREK REBOOT BULLSHIT!

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  16. Re: J-school. i had a professor who was upset we didn’t protest. but this was the late 90s. what did we have to protest. faculty was split between those who were experienced journalists who were very much of the “find the truth, not your truth) and professors who saw the field as a place to right the wrongs of the world.

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  17. This DKos comment in a post about Fauxahontas’s “war” with Obama on TPP is funny for obvious reasons.

    “* [new] That’s the neolib standard line…..(1+ / 0-)
    …..that somehow, more education will create job opportunities.

    Bill Clinton was big into that shit.

    So here I am…..a BA from the University of Michigan, a ton of debt and the only jobs are minimum wage and no benefits. Boy, that NAFTA really worked out swell! Same goes for my useless degree.

    If he is still in competition come Mich. primary, I’ll be voting for Bernie Sanders

    This space for rent — Cheap!

    by jds1978 on Mon May 11, 2015 at 11:32:16 AM PDT”

    http://www.dailykos.com/story/2015/05/11/1383985/-Verbal-battle-between-Sen-Warren-and-President-Obama-continues-over-fast-track-trade-legislation#comments

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    • …..that somehow, more education will create job opportunities.

      I’ve always been baffled by the view that making higher education available to more and more people will somehow in itself produce economic benefits and higher paying jobs. A college education was a benefit to the receiver of it primarily because it served to distinguish him from most other people. The more common a college education is, the less it distinguishes the possessor of it. Hence, the less value it has.

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  18. “BA from the University of Michigan”

    ha. go Irish. loser.

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  19. Read an article a while back that pointed to a correlation/coincidence between the outlawing of pre-employment IQ tests and the subsequent rise of the requirement of college degree as a condition of employment.

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  20. “BA from the University of Michigan”

    ha. go Irish. loser.

    Ha. Go Spartans! Hoser.

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  21. Thanks Brent!

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  22. Troll, re oil.. Oil has been steadily recovering since bottoming in March. Seeing stories in the news that the analysts think the industry’s adjustment to these prices is more or less done.

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  23. True enough Brent, but doesn’t still demonstrate my larger point that energy production, particularly from Texas is what’s driving the economy, and not cheap energy prices? What economic benefits have we seen with very low oil prices these past several months?

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  24. Just realized how unfalsifiable I am. Maybe I oughta go into the AGW business.

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