Morning Report: Janet Yellen testifying today

Stocks are flattish this morning as economic data and earnings pile in. Bonds and MBS are down.

Janet Yellen will testify in front of the House Financial Services Committee this morning at 10:00. Her prepared remarks are here. She is basically saying the economy is expected to re-accelerate after the Q1 weakness, and if that plays out as expected, the Fed will probably make the move off the zero bound later this year. The rest of the testimony will generally consist of Republicans trying to get her to say that government spending and taxes are too high, and Democrats trying to get her to say that income inequality is the biggest threat to our planet today.

Mortgage Applications fell 1.9% last week, as purchases fell 7.5% and refis rose 3.7%.

Inflation at the wholesale level came in a little hotter than expected – 0.4% on the headline number, and 0.3% on the ex-food and energy number.

Industrial Production rose 0.3% in June, a little better than the 0.2% expectation. Capacity Utilization rose to 78.4% from 78.2% last month. Manufacturing Production was flat. The Empire Manufacturing Index came in at 3.86. So manufacturing rebounded a little after a dismal start to the year.

Bank of America reported better than expected earnings this morning. Mortgage origination increased 40%.

26 Responses

  1. Do you anticipate the Iran treaty playing into markets at all? Or is it merely political theater?

    @Kevin: frist! Hah!!

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  2. At the margin, it might affect North Sea Brent oil markets, but the US is primarily based on WTI, except for some of the East Coast refineries.

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  3. As a resident of Westchester County, I am very familiar with this issue. We have been fighting it tooth and nail. Luckily, I live in an area with well / septic, so probably no chance of low income housing coming my way.

    I hope it turns into a wedge between Democrats. I have no illusions that Westchester County will stay deep blue, but I hope we can keep giving the SJW obama administration the Heisman…

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    • This is interesting to me from an historical perspective. When we fought busing in Austin in the 70s, we did so by pointing out to the federal court that HUD kept building low income housing in the poorest part of town, thus fueling HEW’s argument for busing. Our then federal judge ordered dispersal of public housing and managed to shorten the life of our busing order by several years.

      However, the public housing in middle class Austin never looked like it did in the barrios. No fences and no government housing signs, and no federal prison type construction, just duplexes scattered and fit into the neighborhoods as if they belonged. It did not cause a revolution but it did let a couple of HSs improve their basketball teams notably.

      San Antonio still has clearly marked public housing even in middle class neighborhoods. It is fenced off and signed, like a ghetto in the sea of lawns.

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  4. Heh.

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  5. were was the ovation? the all star game? WTF is that . banned for life. he had no business being honored

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  6. This may actually be good news for the consumer as Marilyn Tavenner’s ability to destroy everything she touches is second only to Jamie Gorelick.

    http://www.politico.com/story/2015/07/marilyn-tavenner-to-ahip-120152.html

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  7. David Burge ‏@iowahawkblog 4h4 hours ago

    Breaking: 54-year old man irritated by the first hard question he’s ever heard in the first job he’s ever had

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    • I listened to the entire press conference and he took questions from both friendly and hostile reporters. He remained polite, even when he was irritated. It was on POTUS and if you get Sirius/XM you could listen tonight.

      Garrett’s question was stupid and BHO’s fuller answer – that tying hostage release to the nuke deal would obviously have allowed Iran leverage to raise the stakes by taking or using hostages – should have laid the question to a deserved rest.

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      • Mark:

        Garrett’s question was stupid

        Why?

        BHO’s fuller answer – that tying hostage release to the nuke deal would obviously have allowed Iran leverage to raise the stakes by taking or using hostages – should have laid the question to a deserved rest.

        Interesting. Making a deal with Iran while allowing them to keep US hostages they’ve already taken is somehow worse for Iran and better for the U.S. than demanding the hostages be released before making the exact same deal. Maybe I am stupid, but someone is going to have to explain to me the logic in that.

        Seems to me that the way to reduce the leverage Iran gains by taking and holding hostages is to refuse to negotiate in any way at all over anything at all unless and until the hostages are released, not negotiate as if they don’t even have the hostages.

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        • Obama’s fuller response:

          “If the question is why we did not tie the negotiations to their release, think about the logic that that creates. Suddenly Iran realizes, ‘You know what, maybe we can get additional concessions out of the Americans by holding these individuals,'” Obama said. “It makes it much more difficult for us to walk away.”

          This is complete crazy talk. In what conceivable way would it be “more difficult” to walk away from a deal without gaining the release of the hostages if one was content to actually cut a deal without gaining the release of the hostages?

          The only sensible conclusion one can draw is that the nuke deal was more important to Obama than the release of the hostages, and he did not want the release of the hostages to be a sticking point preventing him from cutting a deal.

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        • Public pressure from family, friends, and Congresspersons would be intense. Negotiating separate unrelated issues is possible, but always logarithmically more difficult.

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        • Mark:

          Public pressure from family, friends, and Congresspersons would be intense.

          Not if you refuse to negotiate until their release is agreed. Or even if you make it your final demand after everything else has already been agreed. Again, demanding the release of the hostages could only have made it more difficult to reach an agreement, not more difficult to walk away from one.

          And I still don’t know why Garrett’s question was stupid.

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        • BTW, can anyone explain how it is that Obama can commit the U.S. to an agreement with a foreign power without congressional approval?

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        • Thanks. So Obama has yet again expanded the use of unilateral executive power.

          The amount of un-/a-constitutional activity that goes on in our government never ceases to amaze me.

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        • This use of executive agreements is not new on BHO’s watch. They were common more than 130 years ago, and have been the overwhelming main method of FP agreements for 70 years. The article make that clear.

          George Washington was the first POTUS to use one.

          But a good question is always when should an agreement have been, or should have become, a Treaty, requiring advise and consent? My own view is that since executive agreements can be broken by the next President on a whim, a 15 year long deal like this one should have been a Treaty. OTOH, the Rs are probably happier knowing this can be walked away from. Lindsey Graham said as much today.

          I think Congress’ willingness to defer to POTUS is most egregious wrt the war power, but some of that is going on here, too.

          Addendum: all the parties to the negotiation including Iran are signatories to the Nuclear Non Proliferation Treaty. If this is simply an enforcement adjunct aimed at a signatory, I think an executive agreement is OK.

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        • Mark:

          This use of executive agreements is not new on BHO’s watch. They were common more than 130 years ago, and have been the overwhelming main method of FP agreements for 70 years. The article make that clear.

          Yes, but the article doesn’t make it clear that they have routinely been used for FP agreements of this scale and import. In fact quite the opposite:

          “One way to spin this is: ‘Presidents do this all the time, there are thousands of executive agreements out there. Why is Congress worked up about this one?’” Mr. Ramsey said. “But the answer is, typically, the executive agreements you see are routine, low-level, ‘how-to-get-along’ things, whereas this agreement is a pretty big deal.”

          This sounds to me like exactly the kind of incrementalist use of executive power that has become Obama’s stock in trade. Remember, as he himself proclaimed, he’s got a pen and a phone and he’s going to use them. I don’t think we should be making excuses for the growth of the imperial presidency.

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        • “But the answer is, typically, the executive agreements you see are routine, low-level, ‘how-to-get-along’ things, whereas this agreement is a pretty big deal.”

          I generally agree with that and already said so.

          I did offer an addendum because the Nuclear Non Proliferation Treaty offers a permit for parties to impose various measures on a recalcitrant party, and perhaps this could be viewed in that light. IIRC, Israel, Pakistan, and India are not parties to that Treaty. Those nations could thus not be at the table for this, although they have nukes and are within missile range of Iran.

          NNPT as applied to Iran:

          Each non-nuclear-weapon State Party to the Treaty undertakes to accept safeguards, as set forth in an agreement to be negotiated and concluded with the International Atomic Energy Agency in accordance with the Statute of the International Atomic Energy Agency and the Agency’s safeguards system, for the exclusive purpose of verification of the fulfilment of its obligations assumed under this Treaty with a view to preventing diversion of nuclear energy from peaceful uses to nuclear weapons or other nuclear explosive devices.

          The negotiating nations are presumably acting as the founding members of the IAEA.

          I haven’t fully parsed this and don’t vouch for this interpretation, but I think it is a possibility. It also would help explain, viewed as an IAEA negotiation, under the NNPT, why nothing else was on the table between any of the negotiating nations.

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        • Mark:

          I generally agree with that and already said so.

          And I think it is an indication that O has yet again expanded the use of unilateral executive power.

          It also would help explain, viewed as an IAEA negotiation, under the NNPT, why nothing else was on the table between any of the negotiating nations.

          If that was indeed the explanation for not negotiating the release of the hostages, it seems extremely odd to me that Obama wouldn’t have simply said so in response to Garrett’s question.

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        • If that was indeed the explanation for not negotiating the release of the hostages, it seems extremely odd to me that Obama wouldn’t have simply said so in response to Garrett’s question.

          Agreed. So I wonder if this didn’t begin with IAEA suggested sanctions to its NNPT nations, but which actually began with US “suggestion” to UK and Russia that NPPT impose sanctions. So I am guessing a mixed bag of tricks led us here.

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        • So a little reading shows US imposed unilateral sanctions in ’79 and’95 but Security Council, on behalf of IAEA [presumably the 5 SC members] imposed nuke related sanctions in 2006. So separating US sanctions from NNPT and IAEA sanctions might have been theoretically possible. Maybe Graham meant something like that yesterday. I don’t know.

          Addendum: wiki has a chart of IAEA/UN sanctions, EU separate sanctions, and USA separate sanctions. It cites this article from the WSJ:
          Solomon, Jay (June 26, 2015). “Shift Clouds Iran Nuclear Deal”. Wall Street Journal: A9.

          Perhaps you can retrieve it.

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        • Yeah, I can see it. There are 3 different sanction regimes. It is not clear from the chart that any of them are associated with the NNPT, even the UN’s, although of the 3 regimes that seems the most likely one to have been implemented under the NNPT umbrella.

          Still, I don’t think it ought to be on us to develop a post-hoc justification for Obama’s negotiating tactics or his claim of authority to make this deal. If it was based on NNPT, he would have said so. He didn’t, I so I assume it isn’t.

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