Morning Report: FOMC minutes show Fed is preparing to back off on tightening 2/18/16

Stocks are higher this morning after oil continues its rally. Bonds and MBS are flat

Initial Jobless Claims fell from 269k to 262k., while the Philly Fed improved to -2.8.

The Bloomberg Consumer Comfort Index fell slightly to 44.3 from 44.5 the prior week. The Economic Expectations index fell markedly from 47 to 42.5.

The Index of Leading Economic Indicators improved slightly in January from -0.3% to -0.2%.

Mortgage Delinquencies fell from 4.99% to 4.77% and foreclosures fell from 1.88% to 1.77% in the fourth quarter, according to the MBA.

The FOMC minutes were released yesterday, and for the most part they were a non-event as far as the markets were concerned. The Fed did spend some time talking about the slowdown in China, and the reverberations in the markets. A number of officials are beginning to think the inflation forecasts are too high. In addition, the stresses in the financial system act as a tightening even if rates go nowhere. The Fed seems to be setting the stage for a cut in the GDP and inflation forecasts at the March meeting, as well as a pause in tightening. Separately, the OECD took down its forecast for global growth to 3.0% from 3.3%.

Mortgage REIT MFA Financial reported earnings this morning. They continue to position their portfolio of MBS more towards credit risk and less towards interest rate risk. When the private label securitization market comes back, REITs like MFA will be the big buyers of non-QM paper. Their appetite for non-agency MBS will be the key driver bringing back the widespread use of products that don’t fit in the agency box.

FHFA Chairman Mel Watt says that the GSE’s lack of capital is the most serious risk to the mortgage market right now. He says that guarantee fees have increased 25 basis points since 2009 and they are now “appropriate.” He also said that the current state of conservatorship is “not a desirable end state” and said that the GSE’s protection from market forces “presents itself in multiple decisions, including pricing.”

50 Responses

  1. He is Frist!

    The he, in this case, is gender neutral. But I am a dude. Just to make that clear.

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    • BTW, I just searched the constitution for the words “he” and “him” and in literally every instance the term refers to a person holding office. At no point does the term refer to a voter, so even if one assumes the terms were not gender neutral I don’t see how the use of the words could possibly imply anything regarding who could and could not vote.

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      • Even so, “he” and “him” were used in gender neutral form, so if office holders were restricted to males, that would have been made explicit as one of the qualifications, as the other necessary qualifications were made explicit.

        No Person except a natural born Citizen, or a Citizen of the United States at the time of the Adoption of this Constitution, shall be eligible to the Office of President; neither shall any person be eligible to that Office who shall not have attained to the Age of thirty five Years, and been fourteen Years a Resident within the United States.

        Nothing about race. Nothing about gender. Unless you’re an unreconstructed originalist, arguing that it must be interpreted to reflect and enforce the mores and standards of the time, there is literally no reason to find anything in the constitution that would make a women serving as president, or a woman voting, “unconstitutional”.

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        • KW:

          Even so, “he” and “him” were used in gender neutral form, so if office holders were restricted to males, that would have been made explicit as one of the qualifications, as the other necessary qualifications were made explicit.

          I agree.

          BTW, according to wikipedia’s timeline of women’s suffrage, women were actually allowed to vote in New Jersey between 1790 and 1807, and most states allowed women to vote in at least some elections (including in some cases federal elections) even before the 19th amendment came into effect. This alone proves that the constitution was not understood to have barred women from voting.

          https://en.wikipedia.org/wiki/Timeline_of_women%27s_suffrage_in_the_United_States

          Liked by 1 person

        • Correct. The language was simply ambiguous enough to allow the SCOTUS to decide women had no inalienable right to self-representation when challenged in court, or the sitting court at the time read it into the penumbras and emanations. Requiring an amendment, which the framers knew would happen, which is why the ability to amend the constitution is in there in the first place.

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      • The initial argument wasn’t about who could vote.

        It was basically about whether the Constitution, as originally written and interpreted under Scalia’s theory of originalism, prevents a woman from being elected President.

        My argument that it does not basically matches this:

        https://www.washingtonpost.com/news/volokh-conspiracy/wp/2015/10/28/a-woman-as-president-the-gender-neutral-constitution/

        A chunk of it is a pedantic parsing of pronoun usage, i.e. does the use of “he” mean only men in reference to the President, or is it being used as a generic pronoun.

        The PL caricature of originalism was that the use of “he” as a pronoun was determinative, especially given the widespread limitations on women voting at the time. Some of them are so indoctrinated with the feminist language critiques that they are literally unaware of the generic use of “he”.

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        • In a comment on the previous post, I point to movement to treat “he” as gender neutral, based on the idea that Latin was the platonic language and represented the grammatical ideal. Jefferson was a polymath and a lover of classic languages, and would have understood the use of “he” without an explicit reference to “males” or a specific male to be gender neutral, as would have Madison (who began his studies of Latin at age 12, and spoke Latin, Greek and Hebrew). I doubt he was confused at to the general use of “he” as gender neutral when not specifically referring to “males” or a specific man. It’s easy in our present day to not understand how important Latin was to the grammar of educated men in revolutionary America.

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        • jnc:

          It was basically about whether the Constitution, as originally written and interpreted under Scalia’s theory of originalism, prevents a woman from being elected President.

          Belva Ann Lockwood appeared on the presidential ballot in 1884 and 1888, and received votes. As far as I know, there were no lawsuits attempting to prevent her from being placed on the ballot and (potentially) being elected on the grounds that the Constitution disallowed women from holding office. And Jeanette Rankin actually was elected to and served in the House in 1916, prior to the 19th amendment taking effect. So it seems that even historically there is no indication that anyone thought the Constitution as written barred women from holding office.

          https://en.wikipedia.org/wiki/Belva_Ann_Lockwood

          https://en.wikipedia.org/wiki/Jeannette_Rankin

          Liked by 1 person

    • Darn you, Kevin Willis, and your gender-bending gif!

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  2. Also, I will include the link to the Star Wars podcast I recently appeared on, for any of those who missed it in the last series of messages, but desire to hear my mellifluous voice expound upon the virtues of The Force Awakens.

    http://the-newsbox.com/a-touch-of-madness-podcast/

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  3. Guess what happens when someone else pays for your health insurance:

    http://www.vox.com/2016/2/18/11045458/big-data-pregnancy-birth-control

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    • “Guess what happens when someone else pays for your health insurance:”

      Utopia, right? And we live forever.

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    • “”I bet I could better predict your risk of a heart attack by where you shop and where you eat than by your genome””

      Highly unlikely. Genetics are primary in risk of almost everything. If you can predict something better by lifestyle choices (outside of seriously extreme lifestyle choices, like shooting heroin or weighing 400 lbs) then you just aren’t sequencing the genome right, or lack sufficient data to correctly parse the provided information (yet). There’s a reason why health forms ask you about the diseases and conditions of your relatives. They tell you a lot. But not nearly as much as your own genome.

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      • Yes and no. If you don’t know the genes involved, and the specific changes in them that raise your health risk, you can’t use genetics to predict (e.g.) someone’s risk of a heart attack.

        Epigenetics studies the changes to genes caused by lifestyle choices, and has been the sexy new thing for a few years now.

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        • Everyone believes in eugenics deep down. I.e. the idea that you can engineer a better human.

          It will be the next luxury good.

          Liked by 1 person

        • “Yes and no. If you don’t know the genes involved, and the specific changes in them that raise your health risk, you can’t use genetics to predict (e.g.) someone’s risk of a heart attack.”

          Thus the “or lack sufficient data to correctly parse the provided information (yet).” Also, admittedly, some genes are so homogenous that lifestyle makes a solid and easier to interpret indicator. But the specificity of having a completely deconstructed and tagged genome will ultimately be far superior, as we will be able to tell people with near 100% certainty what their lifestyle risks are, in terms of food and chemical consumption.

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        • Eugenics, schmoogenics. I’m waiting for dopamine mapping, so you can engineer your pleasure centers to reward you (and drive you) in whatever way you please. It will transform dieting, getting in shape, work productivity and time wasted on the Internet debating pointlessly. 😉

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    • “Mr. Obama’s vote a decade ago to block Justice Alito was “symbolic,” while current Republican opposition to Mr. Obama filling the vacancy is “reflexive” and unfair, said White House press secretary Josh Earnest.”

      Just like his vote against raising the debt ceiling.

      He is so full of shit. Probably the worst vote I have ever cast in my entire life.

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  4. Worth a read

    “This Ex-Soldier Writes About War Like You’ve Never Read Before

    A conversation with ​Youngblood ​author Matt Gallagher.
    By Robert Bateman
    Feb 18, 2016”

    http://www.esquire.com/news-politics/politics/news/a42225/matt-gallagher-youngblood/

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  5. CNN: Pope suggests Trump ‘is not Christian’

    http://www.cnn.com/2016/02/18/politics/pope-francis-trump-christian-wall/index.html

    A person who thinks only about building walls, wherever they may be, and not building bridges, is not Christian. This is not in the gospel.

    Next time the Pope is in his office, he should look around and ask himself what that big thing is surrounding Vatican City and why it is there.

    I assume the Cardinals will soon be coming to the same conclusion about their election of Francis that jnc has arrived at regarding his 2008 vote. Too bad the Pope doesn’t face term limits.

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  6. Good piece:

    Replacing a Justice Shouldn’t Be So Excruciating
    Feb 16, 2016 4:39 PM EST
    By Megan McArdle

    http://www.bloombergview.com/articles/2016-02-16/replacing-a-justice-shouldn-t-be-so-excruciating

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    • jnc:

      Good piece:

      I agree with nearly everything McArdle says. In fact I have said most of it myself right here in the past. But I think she is dead wrong to dismiss the roots of the problem with a “Who cares?” and “everybody does it now”. The problem is, at its root, an ideological one, and everyone doesn’t do it. Consider:

      If the right got its way and stacked the court with 9 Scalias, the high stakes issues that now play out in the courts would instead be played out in legislatures, mostly at the state level. If the left got its way and stacked the court with 9 Wise Latinas, there would be even more high stakes issues than there are now and they would all play out in the courts. That is not an indication that both sides are playing the same game.

      If there is any hope of reversing the disturbing trend driving issues out of the realm of the states and elected legislatures and into the realm of the feds and unelected judges, we must face the reality that it is not being driven simply by human nature, but is instead particular to a specific ideology.

      It’s tough to fix a problem if you don’t understand what is causing it.

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      • I know Sotomayor’s quote bothers you, I was thinking, I wonder if she thinks she has wisdom due to being a Latina, or if she thinks she’s wise and a Latina. Finally, does she feel wiser than, say, an Asian because she thinks Latinas are inherently wiser than Asians?

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        • I would love to hear the reaction if Alito said the Court needed a smart white guy…

          Liked by 1 person

        • McWing:

          I was thinking, I wonder if she thinks she has wisdom due to being a Latina, or if she thinks she’s wise and a Latina. Finally, does she feel wiser than, say, an Asian because she thinks Latinas are inherently wiser than Asians?

          My guess is that she hasn’t spent one ounce of intellectual capital actually thinking about the racist implications of her silly, silly claim. She said it because that is the kind of thing that PC liberal elites say to make their audiences feel better about themselves, not because it makes any intellectual sense whatsoever.

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        • “She said it because that is the kind of thing that PC liberal elites say to make their audiences feel better about themselves, not because it makes any intellectual sense whatsoever.”

          Correct! Give that man a kewpie doll.

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        • “I would love to hear the reaction if Alito said the Court needed a smart white guy…”

          I’d have been fine with it.

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      • It’s being driven in part by human nature . . . due to the incentives inherent in the present political process. If you are a given side of a debate, and also a partisan and looking out for your individual self-interest, why would you want to allow one side to secure an overwhelming advantage that you, on principle, do not take advantage of when you can? The human nature part is you have no incentive to play by the rules, so to speak, with the rules are obviously not enforced. When you see a strategy that clearly gives one side an advantage, you want to both take advantage of that strategy for your side and do whatever you can to limit the other sides ability to leverage that strategy.

        Also, human nature makes things that a true ideologue would consider bad in principal to be acceptable when “the right people” are doing it. There is very much a “yes, but it’s me, and I’ll do it right” in the human psyche when it comes to exercising power that, in other circumstances, they would argue against.

        In DC, we also have a problem with a number of partisan politicians not being true ideologues. This may be worse on the Republican side, but I suspect it’s true of both sides. Securing their own power, advancing their personal agendas, and building their own personal fiefdoms and legislating their own personal opinions are what is motivating, not adhering to principals in some objective, rational way.

        Much of the ideology in play in Washington seems to be be the ideology of “to a hammer, everything looks like a nail”. Judicial activism is acceptable because big government and intrusive government is acceptable as part of a share ideology of most politicians. The problem is when the wrong people exercise these powers for the wrong reasons. I think this comes to bear with the general public, as well. If Facebook memes are any indicator, they all seems to share a “it’s okay if it’s my side doing it” type of thinking, and it’s bad if the other side is doing it. Liberals rail against large and intrusive government when the government is doing something it doesn’t like. An excellent example is drug testing for welfare benefits (something I am opposed to, as I see it as yet another pointless and costly expansion of government)—the left is opposed to this spend program that increases government reach entirely. Yet most on the left are entirely fine with, say, the government mandating calorie and nutritional information on every fast food menu, or even using diet and lifestyle as a review for health insurance qualifications (some, let us say).

        You will hear very few of them arguing for the right of privacy when it comes to domestic terrorists, or Sovereign Citizens, or even Newt Gingrich on his cell phone. And so forth and so on. Human nature plays a role, in no small part because pure ideologues do not populate DC so much as a large number of partisans who are ideologues only when it is convenient and consistent with their individual interests.

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        • KW:

          It’s being driven in part by human nature

          Of course. Generally speaking people do not do what it is not in their nature to do. But to discount the role that adopted ideology plays is to ignore the real problem.

          Yes, it is natural that when one’s adversary is able to ignore the rules with impunity to his own advantage, there exists the incentive for one to also begin ignoring the rules when it suits. But that is not what is going on with the Supreme Court. In response to the left’s efforts to pack the court with judges who will ignore the constitution and impose a liberal agenda by judicial fiat, the right has not attempted to pack the court with judges who will ignore the constitution and impose a conservative agenda by judicial fiat. It has attempted to pack the court with judges who will start enforcing the rules.

          The lockstep liberals on the court argue that all states must redefine marriage to include same-sex couples. If conservative judges were playing the same game from the conservative side, they would argue that all states cannot redefine marriage to include same-sex couples. But that is not what they argue. They argue that there is nothing in the constitution either way, and so it is up to the states. The “conservative” view does not preclude a policy preferred by liberals.

          The lockstep liberals argue that all states must allow abortion. If the conservatives judges were playing the same game, they would argue that all states must outlaw abortion. But that is not what they argue. They argue that the constitution is silent on the issue, and therefore it is up to individual states to decide for themselves. Again, the “conservative” view does not preclude a policy preferred by liberals.

          It just isn’t true that the right and the left are doing the same things in an effort to advance their respective policy preferences. With regard to the courts and the constitution, the left is trying to ignore the “rules” by utilizing a method of constitutional interpretation that renders it devoid of objective meaning. The right is doing no such thing. Scalia and the Wise Latina are absolutely not doing the same thing in the service of different ideologies. The fundamental problem identified by McArdle is not a result of what “everyone” does. It is the consequence of leftist ideology with regard to both the constitution and with the relative valuation of results vs process.

          I guess I understand the “moderate” impulse to say “everyone does it”, but I think it is wrong more often than it is right, and it is definitely not an accurate view with regard to the SCOTUS problems highlighted by McArdle.

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    • The fellow arguing with me offered the opinion that this issue was really, really important. I agreed, and repeated that it was still probably not really mandated by the Constitution. He explained, more slowly and loudly, how important this issue was. I said yes, but that doesn’t mean that it’s in the Constitution. The world is filled with many splendid ideas which are not covered by the Constitution. The chap I was arguing with looked befuddled, and then proceeded to reiterate how important this issue was. He was, I must point out, a Harvard-educated lawyer.

      Clearly, she must have been discussing the issue with someone on Plumline.

      The point is that we didn’t. For most people, “constitutional right” simply doesn’t describe anything at all beyond “things I think are so important that my political opponents should be unilaterally disarmed.”

      Could not agree more had I written that myself.

      It’s a recipe for extreme reactions, like voting for Donald Trump or worse.

      Yup. “This issue is too important for you to have a say in it. Wait, why are you supporting that demagogue, Trump?”

      Like

  7. Like

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