Morning Report: Markets reverse ahead of the FOMC 12/15/15

Markets are higher this morning as oil and credit markets have an up day. Bonds and MBS are getting whacked.

There is no news in particular driving the rally in oil and other financial assets. Markets don’t go up in a straight line and they don’t go down in one either. Another possibility is that market participants are positioning themselves ahead of the Fed rate hike.

The problems in the credit markets are centered in distressed credits. The carnage is concentrated in the energy sector. For those keeping score at home, if you want to track how things are going, check out the Ishares high yield ETF HYG. The chart is below. You can see how it has been rolling over. I included the financial crisis years for perspective.

Blackrock believes the problems in the distressed markets are not systemic – in other words, don’t look for a repeat of 2008.

In economic data this morning, the consumer price index was flat on a month-over-month basis. Ex-food and energy, it increased 0.2%. On a year-over-year basis, it increased 2% ex- food and energy, which is right in line with the Fed’s target. The Bloomberg Real Average Hourly Earnings index increased to 1.6% annualized, up from an upward-revised 2.4% last week. Maybe, just maybe, wage inflation is upon us.

The Empire Manufacturing Index improved to -4.6, indicating that things are still tough in the manufacturing sector. Blame the dollar.

Homebuilder sentiment fell in December to 61 from 62. The index hit a 10 year high in October, so the sentiment is still pretty positive. The builders all reported pretty strong increases in orders and backlog, so it looks like 2016 could be a better year for the builders. The Spring Selling Season is about 2 months away. Note we will get numbers out of Lennar on Friday.

A survey of economists says that mortgage rates are going up. Probably a no-brainer, given the Fed is hiking rates. Does that mean a bad year for the housing sector? Not necessarily. Certainly an increase in rates is going to make lives tough for the refi shops. However if rates are rising because of a strengthening economy, that is probably great news for the purchase business as Millennials leave expensive rentals and buy property.

Mortgage fraud is making a comeback, according to CoreLogic. As credit loosens and purchase activity increases, you are going to see more risk of it.

22 Responses

  1. Frist. . .

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    • What could go wrong?

      http://www.telegraph.co.uk/news/politics/SNP/11714854/Scottish-Government-under-pressure-over-state-guardian-plan.html

      The Scottish Government is under intense pressure to revisit its controversial plan to appoint a “state guardian” for every child after teachers, parents and politicians attacked the policy…

      The legislation, part of the Children and Young People (Scotland) Act, is due to come into force in August 2016 and will see a named person, usually a health visitor or head teacher, nominated for one million children under 18. They will be expected to assess a child’s “wellbeing” against eight key indicators, including factors such as whether they are safe, healthy, included and respected.

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  2. After Spencer was born, the state sent over a worker a couple of times to check in on us and make sure that everything was okay..

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  3. Jesus, that’s fucked up.

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  4. heckuva job, Time

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  5. This is hilarious. I agreed to take an online survey for the NYT, and this is the very first question:

    What is your gender?
    (Select ONE)

    Male

    Female

    Not listed here (Specify)

    I said “Wookiee”. I wonder how that will categorize me.

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  6. Trans-terrestrial

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  7. 😀

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  8. It would almost be worth it for Trump to win, just to see the PL meltdown.

    Sort of like from Pulp Fiction.

    “Vincent: Boy, I wish I could’ve caught him doing it. I’d have given anything to catch that asshole doing it. It’d been worth him doing it just so I could’ve caught him doing it.”

    http://m.imdb.com/title/tt0110912/quotes?qt=qt0447191

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  9. I stepped away just to take a break. I see i’ve missed nothing.

    but this tendency to describe everything i don’t like as fascist is just ignorant. and to put in on someone like Trump, who is the exact opposite of some sort of “collective is more important than the individual” and “we all march in the same direction” as one, is just ridiculous.

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  10. Vox gets that.

    http://www.vox.com/policy-and-politics/2015/12/10/9886152/donald-trump-fascism

    The other funny thing about PL is their tendency to view themselves as the middle of the political spectrum and elected Senators like Cruz as extreme outliers. Historically ignorant to say the least.

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  11. @Scottc1: “The legislation, part of the Children and Young People (Scotland) Act, is due to come into force in August 2016 and will see a named person, usually a health visitor or head teacher, nominated for one million children under 18. They will be expected to assess a child’s “wellbeing” against eight key indicators, including factors such as whether they are safe, healthy, included and respected.”

    First step on having all citizen-consumer-workerbees raised for their government appointed career paths in the state pod farm.

    Ain’t going to happen here. I’ll tell you that much.

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  12. @jnc4p: “It would almost be worth it for Trump to win, just to see the PL meltdown.”

    What do you mean almost? That’s why Trump totally has my vote. It will be 110% worth it.

    That being said, catch the new meme? “Trump isn’t funny anymore.” I must have heard a dozen “Trump was funny, but now . . . ” and “At first, Trump was a joke, but now . . .” and “This isn’t a joke anymore. It’s deadly serious. Trump . . . ” and so on. Talking points went out, or the Fellow Traveler’s Hive Mind all synched up or something.

    They are all wrong. Trump remains hugely entertaining.

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  13. Is “Bitter Tulip” a Cons Frapeed sock puppet?

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  14. @jnc4p: “The other funny thing about PL is their tendency to view themselves as the middle of the political spectrum and elected Senators like Cruz as extreme outliers. Historically ignorant to say the least.”

    Presently ignorant. People who get 20% and 30% in polls, people who have won national elections, people who are moderate compared to significantly large numbers of their base are not extreme or extremist by definition. It’s an effort (unconscious) or just indicative of the loosely organized way their brains file things that they would put mass-shooting lunatics and suicide-bombing-terrorists and David Koresh and Timothy McVeigh in the same class as a bloviating business man and straight-forward opportunistic right wing politician.

    The same classification system for liberals would have Hillary, Bernie, and Obama put in the exact same box as Mao and Stalin. No different! All left wing extremists!

    But words like “racist” and “extremist” have become words they people generally believe will stick without any evidence other than their assertion (and perhaps some out-of-context anecdotes). Thus, they are applied liberally to political enemies, but I think they only speak to the fellow travelers. When you call everyone an extremist or racist, the word ceases to have any meaning when you say it. ScottC1 suggest someone is a racist, or MarkInAustin suggests someone is a racist, I’ll sit up and take note. Your average PlumLine commentor says it, I yawn.

    If YelloJacket describes someone as far left or a socialist, I’ll tend to assume it’s a credible assertion, where as if some of the name-changing right wing plumb trollers do it, it’s just them saying that thing they always say.

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  15. @michigoose: “Is “Bitter Tulip” a Cons Frapeed sock puppet?”

    Haven’t seen him (haven’t been there today, or yesterday, really) but generally you have to know if there is a right wing poster using a similar name or the same avatar. As far as I have observed, Cons Frappeed thinks showing up obviously sock-puppeting right-wing trollers is fancy or something.

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  16. Gotta be. Cons picks up an argument that Bitter Tulip started without a hitch. Who knows why. Interwebz!

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  17. I was figuring that the use of “Pubs” is a tell.

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