Morning Report: Green on the Screen as China cuts rates 8/25/15

Markets are higher this morning after the People’s Bank of China cut interest rates and required reserves. Bonds and MBS are down.

The Chinese Government is going back to the big levers to try and support asset prices – using rate cuts and reserve requirement cuts. They are also using pension fund money to buy stocks and have prohibited insiders and large investors from selling. John Hilsenrath from the Wall Street Journal described China this way: China is like a CDO. You don’t know what’s inside, how well it performs or where the leverage is until it’s under stress. I think that is a very apt description.

The FHFA House Price Index rose 0.2% in June, lower than expectations. The S&P Case-Shiller index of real estate prices fell 0.12% in June but is up 5% year-over-year.

New Home sales rose to an annualized pace of 507k in July, slightly lower than expectations. Surprisingly, consumer confidence rose in a big way to 101.5 from 91.

McMansion builder Toll Brothers reported numbers this morning which missed analyst estimates. Revenues and deliveries both declined. Average selling prices actually declined – first time we have seen that out of the builders. That said, signed contracts were up 30% in dollars and 12% in units as ASPs rise to $834k from $717k last year at this time. The stock is up half a buck pre-open, but then again pretty much everything is green this morning.

During the big sell-off in the markets, Treasuries only moved grudgingly higher. I had been reading that the Middle East (which is getting crushed by low oil prices) was selling the 10 year in a big way. Interestingly, TBAs and mortgage rates have been fading the move in the bond markets. People have been moving back their timing estimates for the first rate hike and bonds are not reacting much to it.

For those that are market history buffs, here is a cool chart showing the economy from the American Revolution through WWII.

40 Responses

  1. Curious what the lefty position on Immigration is. What do the luminaries at PL think?

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    • McWing:

      Curious what the lefty position on Immigration is.

      Presumably the more people they can add to the welfare state rolls, the better.

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  2. My guess: the Sanders types are pro Union anti immigrant.

    The limousine liberals are likely as open border as you, George!

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  3. Curious what the lefty position on Immigration is. What do the luminaries at PL think?

    Public: People who have been living here and following the laws deserve to be able to stay, you racist bagger you.

    Private: If we can turn Texas purple we’ll never lose another election.

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  4. Ok, thanks. I’m guessing at PL that the Union/Sanders position is racist?

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  5. Why happiness and liberalism don’t mix…

    http://spectator.org/articles/63870/liberalism-and-happiness-don%E2%80%99t-mix

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  6. Curious what the lefty position on Immigration is.

    This lefty thinks that immigration is a good thing. I also agree with jnc that the problem is a combination of open borders with a welfare state; having said that, I don’t know what the best solution is.

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    • Curioser and curioser. Apparently Lois Lerner sent and/or received e-mails relating to IRS business at an e-mail under the name “Toby Miles”.

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  7. Phony scandal.

    Of course it is, you double-digit IQ, mouth-breathing, trailer trash bagger you..

    This is how the left won. Does anyone think that a President Cruz could stop the IRS from trying to throw elections? Or tell the EPA to back off of enforcing obama’s mandates? Or tell HUD to drop its lawsuit against Westchester County? The progressive mentality has been accepted as the institutional mission of these agencies, and they are accountable to no one. I seriously wonder if a Republican president could rein them in.

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  8. I’m curious if any of our Progressive or Moderate readers think the Federal Bureacracy is to large and or out of control. If so, can it be reined in?

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    • As a moderate I feel constrained to answer your question, George.

      The answer is yes.

      There have been many studies of the fed bureaucracy but the ones I lean on have been published by Tom Peters and also Peter Drucker. The Cabinet has become a shadow and the Executive is run from the West Wing often through the “fourth branch” – the non-Cabinet agencies. The consolidation of power in the WW is part of the Imperial Presidency, which we have seen plenty of from the last two POTUSes.

      The management goal would be to reduce the number of Cabinet officers to fewer than ten so that as a group it could actually work, and the power be shifted back from the wonks in the West Wing in each Admin.

      While I would not touch Justice, State, Defense, and Treasury, the rest of the Cabinet is fair game for consolidation. As a lawyer, I often dealt with competing regulations that contradicted the mandates of the other. There are two ways around this that could be implemented easily. First, there could be mandatory and computerized interagency cooperation, and second there could just be fewer agencies.

      But here is a hint: DHLS has done nothing but spawn a bigger bureaucracy with less oversight of security than we ever had before. That Cabinet Department should be disbanded and its useful parts be placed in the Departments where they were previously.

      I won’t detail all the ways that the Cabinet could be consolidated, but the literature is out there from the best management gurus of our time. Thus I think the process of “reining in” could be done as an unraveling over time, mirroring the raveling process that preceded it.

      I also think it has to be from the technocratic management guru world that this is done, or else it will become just another “whose ox” can to kick down the road.

      We could look at the Base Closing Commission as a model here.

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  9. New comment – a link that I think JNC will like.

    Stratfor is a security analyst/consultant firm here in Austin. This is their take on Ehud Barak’s discussion of Iran and Israel not having bombed them, previously.

    http://tinyurl.com/StratforOnBarak

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    • Mark,

      Very interesting link re Israel. But while the author suggests that Barak intentionally allowed his comments to be made public, he doesn’t really explain what motivated him to do so. The analysis of the meaning of his comments is compelling, but I still don’t understand why he would want them to be public knowledge.

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      • Scott, I am guessing as a multiple signal/message.

        1] The accord is not an issue. It will work or not. Just as sanctions were not the issue. They would work or not.

        2] If Iran mounts nukes on missiles Israel will attack immediately.

        Everyone should get where the actual RED LINE is.

        Or something like that.

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  10. Thanks Mark! Next question, will it happen?

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    • I think it is more likely than having 1950s UK style government careening back and forth from left wing Ds centralizing everything to right wing Rs deregulating everything on 4-8 year swings as a new permanent feature/glitch. I think we will get that Atlee-Eden and back again type swing soon and like the UK get sick of it, so the compromise will be s-l-o-w-l-y forcing a smaller govt to be more responsive.

      An outbreak of peace would help, of course. And I won’t live long enough to see it.

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  11. 455 comments because about .001% of the population are Objectivists?

    http://www.dailykos.com/story/2015/08/25/1415271/-This-One-Weird-Pic-DESTROYS-Ayn-Rand

    Progressives really, really don’t understand the right, let alone Objectivism.

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  12. Worth watching, Trump’s masterful here and they both got what they wanted, Ramo’s gets to look like he’s standing up to him and Trump gains 5 more points.

    http://www.realclearpolitics.com/video/2015/08/25/trump_vs_jorge_ramos_on_birthright_citizenship_wall_building_a_building_thats_95_stories_tall_more_difficult.html

    You’d be forgiven for thinking it was a setup, it’s almost too perfect.

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  13. Because women can’t get mammogram referrals anywhere else.

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  14. I saw that photo of the man with the “less gov” shirt in the Post with my Sunday coffee. and my first thought was “the lefty internet is going to mess their shorts” and still not understand the idea of a public vs. private good.

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  15. “I don’t understand the overreaction to this stuff.”

    contempt for the common man. if we judge both the facts and the law? without the proper credentials? madness.

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  16. @mcwing: “I’m curious if any of our Progressive or Moderate readers think the Federal Bureacracy is to large and or out of control. ”

    As generally moderate and sometimes RWNJ, I think the Federal Bureaucracy is too large (while the drag on the economy created by oppressive regulation is hard to measure [except in specific instances]) there’s one clear indication the Federal Bureaucracy is too large: how much we spend. If we could afford the size and scope of government, it wouldn’t be “too large” (although there would be the regulations thing to address).

    It also is the very definition of “out of control”: it is impossible to reign in significantly, and the Republicans arguing that they will do so (while always promising to expand the government in some other area where it is more palatable to the conservative base) are largely tilting at windmills.

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    • KW:

      If we could afford the size and scope of government, it wouldn’t be “too large”

      I disagree with this. Government exists to serve a specific, limited purpose, not to expand to the largest point “we” can afford (however that might be measured) at any given time. Given the productive capacity of the US as a whole, “we” can afford a federal government with a size and scope much, much larger than it both needs and is supposed to be. To me whether it is too large has virtually nothing to do with whether it can be afforded.

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    • Kev, you and I are on common ground about retrenching govt. Somehow, like with Base Closure, it has to be done by management gurus, not the political parties. But it surely is necessary.

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  17. Tilting at windmills or lying?

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  18. “novahockey, on August 26, 2015 at 8:09 am said:

    I saw that photo of the man with the “less gov” shirt in the Post with my Sunday coffee. and my first thought was “the lefty internet is going to mess their shorts” and still not understand the idea of a public vs. private good.”

    Anything short of Sweden is Somalia.

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  19. Don’t you fucking simpleton baggers understand that if you use the roads, that means you must uncritically support everything the Progressive Left wants or else you are a hypocrite?

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  20. @gbowden41: “Tilting at windmills or lying?”

    I think there are people out there who believe they can reign in government, or that the politicians they vote for can, but it never happens. And pretty much every one in Washington ends up seeing the appeal of spending more on their projects or expanding the government when it’s under their enlightened purview. And then it’s difficult to cut the government elsewhere, because they need those people to cooperate . . .

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  21. jnc4p: “Anything short of Sweden is Somalia.”

    Lot of gun owners in Sweden. Just sayin’.

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  22. @Scottc1: “I disagree with this. Government exists to serve a specific, limited purpose, not to expand to the largest point “we” can afford (however that might be measured) at any given time.”

    I know you disagree. I think a government that exists to serve a specific (and by implication largely unchanging) purpose is unlikely to ever manifest in a world populated by human beings, where it is human beings that must create and run the government. Similarly, I think any government that can fund itself by deficit spending (and is run by humans) will expand far beyond even my personal yardstick of “able to operate on income”.

    “To me whether it is too large has virtually nothing to do with whether it can be afforded”

    I don’t object to a big government, especially in terms of spending, if the money is there. In principle. In practice, a big part of big government is onerous regulation, so the more capable a government is of micromanaging and regulating the lives of its citizens becomes a problem.

    But the reality is that governments get larger, and how large and out of control they become is directly connected to how much money they can collect, and how much debt they can accumulate. Every effort to curtail the size of the government will either fail or succeed only slightly and only temporarily. So my yardstick of “affordable” is mostly just a thought experiment, or an arbitrary point that makes sense to me. In reality, it will never be observed.

    We will always have a federal bureaucracy much larger than we should . . . no matter if use my yardstick or yours. Which doesn’t touch on the regulatory state, which is simply out of control, irrespective of the cost of administering it. Yet is similarly intransigent: repeal regulations of any kind, and there are some fresh victims whose only protection was those onerous regulations.

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    • KW:

      I think a government that exists to serve a specific (and by implication largely unchanging) purpose is unlikely to ever manifest in a world populated by human beings..

      Sorry, I thought we were discussing the model of what government should look like, not the odds of realizing it.

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  23. @Scottc1: “Two reporters shot and killed in Roanoke, VA while conducting a live interview.”

    I’m guessing the real explanation is gun-crazy America. Also, since there is no law requiring that every citizen be paid a living wage, the shooter was disgruntled for having been fired.

    Hollywood, the only segment of our society that really ever suggests that problems are solved by shooting people (at least, outside of a war zone), is not a factor.

    That being said, I’d be interested to find out what medications the guy was taking. That often seems to be something left out of these stories. Was he on antidepressants? We’ve got a whole category of drugs that “improve” our brains at a very granular level, and where the side-effects can be potentially very subtle. But also destructive.

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  24. @ScottC1: If we’re discussing a model agreement, I think I’d prefer a larger one than you, for a number of reasons, in terms of size but I suspect we’d generally agree on size in terms of regulation and mandates. But I would like a government with a robust space program. Cleaning the Interstates. Putting exits everywhere. That sort of thing.

    Alas, I don’t think either of us are going to get our model government, either of which I suspect would ultimately be better than what we have.

    Like

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