Morning Report: FOMC day 4/27/16

Stocks are lower this morning after some tough earnings reports, especially out of Apple. Bonds and MBS are up.

Last night 5 primaries were run in the Northeast. Bernie is pretty much done and Trump is declaring himself the presumptive nominee.

Mortgage Applications fell 4.1% last week as purchases fell 2.4% and refis fell 5%.

Pending Home Sales rose 1.4% month-over-month and increased 2.9% year-over-year, according to the NAR. This is the highest level in a year. Only the West reported a decline in contract activity. The surprise drop in rates is easing some of the affordability issues caused by higher prices.

The FOMC decision should be released around 2:00 pm today. Be careful locking loans around that time. If the Fed intends to raise rates at the June meeting, they will probably telegraph it in the statement. Financial conditions have definitely improved since earlier this year. Here is the latest analysis of the situation.

For anyone who is on the fence about renting versus buying, show them this poll: Renters are twice as likely as owners to worry about not being able to pay housing costs. Given the tight inventory for housing, you are seeing mid single-digit increases in rents. Granted, house price appreciation has been in the same neighborhood, however that has been offset by falling rates. Many younger renters are still under the impression that they need 20% down to buy a home.

Venezuela is in such bad shape that it doesn’t have the money to pay for its money. Like Weimar Germany, citizens need a wheelbarrow to buy a loaf of bread: the largest note is a 100 bolivar note, which is worth about one cigarette. Making all that cash isn’t cheap, and Venezuela doesn’t have the money to pay the firms that make it.

34 Responses

  1. So much for Trump never breaking 50%.

    “Mr. Trump had the more convincing performance on Tuesday: He swept all five primaries, winning landslides of more than 30 percentage points over his rivals, Senator Ted Cruz of Texas and Gov. John Kasich of Ohio. His routs represented a breakthrough: He received more than half the vote in every state, after months of winning most primaries by only pluralities.”


    • Liberals everywhere were praying Trump would get the nomination, because he can’t possibly win. So they should all be celebrating now, right?


      • I cannot easily accept that any of y’all are gleeful about the con artist because of how pissed off or happy anyone else might be about his popularity.

        Every one of you is too smart for that. There are legitimate conservative choices out there. Cruz is too far right for my vote, and he isn’t likable and he called the basket a “ring” in hoops crazy Indiana, but he is smart – smart enough that every lawyer he has dealt with admires his abilities. For me, his strengths do not play well for a POTUS who must deal with a huge and diverse nation. Meanwhile, Kasich has been a successful governor of a key swing state, as well as a powerful former congressman and former budget guru, but he is dull entertainment compared with the 24/7 coverage of the con artist.

        HRC is, as far as I am concerned, dishonest and unlikable, and has bought into the wrong headed D ideas on immigration, but she does have, now, a good working knowledge of FP. That’s something.

        BS offers nothing but rage at the machine disguised as compassion and is possibly even more into fantasyland than the con artist. Comparing the depth of holes whose bottoms I cannot see is difficult.

        But some of you are gloating about the con artist, who might even win the Presidency. Kev, NoVA, you can’t be serious.


        • What if you think we’re doomed as a country and are facing massive disruption? If so, wouldn’t it be better for the disruption to happen now rather than later? What’s the advantage of putting off the disruption?


        • The stark advantage of putting off a disruption is that it is not happening now.

          The next advantage is that I have time to work against it, but then I die.

          The next advantage is that it might not happen in the lives of me, my children, and my grandchildren, if it doesn’t happen now.

          The next advantage is that something unknown – national common sense, a not-too-fantastic energy breakthrough like making carbon rods from CO2, or hydrogen power; or perhaps colonizing the Moon, or world peace, might change the course of future history.

          Why break now what might not break for a long time? The aftermath of the break would be painful in either case, and demonstrating that it would be more painful later than now is impossible.


        • Describe for me why I should defer so that it benefits your personal circumstances?

          Also, describe how the debt is paid down without massive economic disruption?


        • I should say, describe how deferring for your benefit helps me.


        • …describe how deferring for your benefit helps me.

          I don’t see how my examples couldn’t work in your favor as well as mine.

          …describe how the debt is paid down without massive economic disruption?

          Slowly. Also, if it is held relatively constant, or even grows slower than the economy, at some time in the future it becomes small change. Some time a long time from now.


        • Can you provide a modern example of success of paying down a debt greater than 100% of GDP?


        • The statement you are replying to is a reference to the numerous comments that Trump was the most beatable candidate (and, early on, even movements on the left to actually cross-over and vote for Trump to “poison pill” the Republicans). I cautioned them to be careful what they wish for, because they just might “poison pill” Trump into the Whitehouse.

          I evoked the now-forgotten movement to have Republicans cross-over (or register as Democrats, where necessary) to vote for Barack Obama because he was “unelectable”. Rush Limbaugh was a huge proponent of this, as were other conservative pundits with large audiences. They saw him as the easy-to-beat candidate, and whether it played a role in his eventual victory or not, it certainly demonstrates that partisans on one side are terrible at predicting which candidates on the other side are “electable”.

          I like the potential of Trump as a change agent and as a wild card. I think it’s actually impossible to know what kind of president he will be, so there is a 50/50 chance he might accomplish something positive. Many of the things that deeply concern others don’t bother me at all, and I’m prone to roll my eyes at the concern: I have an admittedly emotional objection to worrying over how foreign states will see us if we elect someone they find boorish.

          I’m voting for Gary Johnson, so it’s not like I’m deep in the Trump camp. And there is always a risk that a Trump presidency will be spectacularly awful, but I am interested in what a non-politician in the office of president may be able to do, or not do. Especially if he gets a hostile congress.

          There are many things Trump says that I agree with, though he sometimes walks them back. I like the idea of reducing America’s role as a world policeman. I expect deporting 11 million illegal immigrants might (or, I at least hope) becomes a strategy to make e-Verify actually do what it’s supposed to. And so on.

          Also, I think every politician is a conman, pretty much, so it’s a matter of deciding which conman I find more palatable. I actually would prefer Kasich of the other’s running, if I were to vote Republican, but that’s not going to happen. Ultimately, there’s no candidate running whose policies dovetail with my own mix of conservative and liberal ideas that I call “pragmatism” (although self-identifying yourself as a pragmatist is difficult, as of course I feel my positions are pragmatic, because I’m the one who holds them). Given that, I feel no need to resist a Trump presidency right now. It may turn out to be awful, but it might actually be all right.

          Although, again, my lack of objection and the existence of my interest in a Trump presidency, and the fact I will not be crestfallen should he win, is not a ringing endorsement. I’m still voting for Gary Johnson.

          Should he win, I will get some pleasure from telling the folks who were advocating that lefties try to get Trump the GOP nomination because he could “never win” a bit of an I told you so. But that’s just a perk, I don’t want him to win just so I can enjoy a little schadenfreude.


        • OK, Kev, I get what you were saying, but I do not think there is a 50-50 chance of his being anything but a failed president. Were i to vote tomorrow, I would vote for Gary johnson, and this time not as a protest, but because I think, with a D Senate and a House in the hands of either party, he would be the best candidate for the office.

          Judging by the NM experience with a D Lege, his brakes on spending would be what we would need in the WH, along with his libertarian principles on personal liberty. He negotiated NM into a budget surplus, IIRC.

          There is no way to certainly guess this in any case, but if I knew the Rs were holding both houses I might vote for HRC.

          I guess I am more of a gridlock fan than most.

          Scott – those “mandates” were not enforced by anything but social pressure, once again. When a child is finally born, the community does not shun it.


        • Mark:

          Scott – those “mandates” were not enforced by anything but social pressure, once again.

          I understand, but I am shocked that they existed in any form. Again, I cannot fathom what moral principle would call for a rape victim to abort a resulting pregnancy. I can imagine one that would allow it, but not one that would require, or even recommend, it.


        • Mark:

          but I do not think there is a 50-50 chance of his being anything but a failed president.

          I’ve never quite understood the notion of a “failed presidency”. Is it a failed presidency if the president fails to implement policies that he wants to implement? Or is it failed if the policies he does implement don’t have the effect that he expects them to have? Or is it failed if the policies have exactly the effects he expects them to have, but it turns out people don’t like those effects?

          What are the goals or metrics by which a presidency can be measured to be a success or failure?

          I don’t look at presidencies as successes or failures. I look at them as moving the country in a positive direction or a negative direction. And that measurement is, almost exclusively, a function of ideology. On that measure, I agree with you that the prospects of Trump moving the country in a positive direction are significantly less than 50-50. But they are also at least a little bit greater than virtually anyone who might be nominated by the D’s, and certainly much greater than either of the 2 possibilities this year.


        • “I guess I am more of a gridlock fan than most.”

          Welcome to the club.


  2. Worth a note:

    “Why Hillary Clinton Should Fear Donald Trump
    He might be easy to beat, but his unrestrained attacks could taint her presidency.
    By Jeet Heer
    April 27, 2016

    Axelrod and Plouffe are exactly right: Trump is a very dangerous opponent, one who can derail the political process even if he loses.

    To be sure, any Republican opponent is likely to try to make hay of the various scandals and pseudo-scandals that surround the Clintons. Cruz, whose campaign manager is widely known for vicious attacks, would certainly dredge them up. The difference with Trump is that he’s unusually ruthless about such attacks, and rarely hides behind surrogates. He doesn’t engage in Bush family–style underhandedness—there will be no whisper campaigns and Swift Boaters. Trump might use Roger Stone, but he’s likely to give some sanction under his own name, as he did when he tweeted an unflattering photo of Cruz’s wife.

    When Trump has gone birther against Barack Obama or Ted Cruz, he’s done so personally. This means that his attacks enter the mainstream of political discourse more quickly and stay there permanently. Clinton will end up facing the same dilemma that hurt Jeb Bush, Marco Rubio, and the other Republican candidates: If she responds to Trump’s attacks, she’ll sink to his level, but if she ignores them she may look weak or evasive.”


    “A Rough Night for Democratic Revolutionaries
    Donna Edwards and Joe Sestak went up against Chuck Schumer on Tuesday. It was no contest.
    By David Dayen
    April 27, 2016

    Call it the revenge of the establishment. In two high-profile, down-ballot Democratic primaries on Tuesday, the favored candidates of the party mainstream emerged victorious. The wins by U.S. Senate candidates Chris Van Hollen in Maryland and Katie McGinty in Pennsylvania will bolster the hand of Chuck Schumer, the next Democratic leader in the Senate, who is working furiously to shape the caucus he’ll control in his image.

    It’s very clear that Schumer played a role in both races, and that other cases of outsiders running in Senate primaries against insiders—think Alan Grayson in Florida against Patrick Murphy—had better watch their back. Schumer wants a pliant caucus, and with progressives fascinated by the shiny object of the presidency, he’s been able to maneuver with a relatively free hand.”


  3. So, i was wating for my thai take out and caught trumps foreign policy speech on closed caption. from what i could tell, he’s to the left of clinton on military/FP issue.

    that could make things interesting.

    i’m not voting for him, but i’m coming around to hoping he wins.


  4. NoVA, this could almost be as good as Oprah:

    “Opinion: Susana Martinez, the Yin to Donald Trump’s Yang?”


  5. Interesting story:

    A white Ohio woman sued a sperm bank in federal court on Friday for mistakenly giving her, and her white same-sex partner, sperm from an African-American donor, court documents showed.

    This raises a couple of questions. First, are the women racists for objecting to having a mixed race baby? Second, had they discovered that the donor was black prior to giving birth, would it have been morally acceptable to have aborted the baby simply because it was mixed race?


    • Why Federal Court? I am assuming diversity of citizenship jurisdiction, because there is no federal question I can imagine.

      Scott – assuming a private contract, there would be no violation of any civil rights law or the constitution to contract for specific characteristics from the sperm donors [Anglo, chicano, black, east Asian, IQ of donor, northern European, south Asian, whatever]. Thus no issue here except breach of contract.

      No contract, or no contractual clause on ethnicity/race? Probably a losing law suit.

      The tougher question, in either case, is what happens to the kid?

      In my religion abortion is sometimes mandatory – rape, incest; sometimes preferable – health of mother or severely damaged fetus; and sometimes considered wrong – purely elective. How wrong? Not wrong enough to be condemned as sin or crime, but wrong enough to be counseled against by family and Rabbi, and frowned on by community. It’s a formulation I grew up with, so I always find these discussions difficult. So I would find the abortion decision in your example to be immoral. I would do all I could to talk the prospective parents to a different decision, e.g., adoptive placement if they could not raise a black child with affection, but if the woman aborted I would move on.


      • Mark:

        In my religion abortion is sometimes mandatory – rape, incest

        Really? I cannot fathom a moral principle which would require the victim of a rape to get an abortion even if she didn’t want to.


        • You are closer than I to a correct understanding – I looked it up. Traditionally, rape or incest gave the mother automatic communal permission, not a mandate. Still, it was an easier “permission” then would have been granted for health of the mother or lethal or serious defect in the fetus, because that was more subjective in early times, and probably today in many cases.

          Also, that second group of permissions is not uniformly agreed either in Jewish history or by various groups of Jews at various times.


        • Mark:

          Traditionally, rape or incest gave the mother automatic communal permission, not a mandate.

          That makes more intuitive sense to me.


    • “would it have been morally acceptable to have aborted the baby simply because it was mixed race?”

      Sure, because it’s an exercise in narcissism in the first place. What they really wanted was a way to fuse their own DNA together to have their own child, but this was the closest available substitute.

      These sperm banks have always been about the commodification of children. That’s why you can pick based on IQ, looks, education, etc. Deep down, everyone believes in eugenics.


      • jnc:

        Sure, because it’s an exercise in narcissism in the first place.

        I agree that it is an exercise in narcissism, but I am not sure why that alone makes it morally acceptable.

        Deep down, everyone believes in eugenics.

        For the record, I don’t.


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