Morning Report: Retail Sales come in better than expected 5/13/16

Stocks are lower this morning on no real news. Bonds and MBS are up small.

Retail Sales increased 1.3% month-over-month, topping Wall Street forecasts. Autos, grocery and online led the charge. Ex-autos, gas and building materials, it increased 0.9%. We have had a laundry list of retailers miss earnings lately (Macy’s, JC Penney, Kohls, Nordstrom), so investors were probably expecting the worst. Given all of the weak economic data lately, this is one decent data point. We are seeing some sell-side firms take up Q2 GDP estimates on the number.

The chart below is retail sales as a percentage of GDP. It is not a seasonally adjusted number, so holiday spending accounts for the spikes. However, you can see that post the real estate crash, retail sales have been a much smaller percentage of GDP than they were for the 90s and the bubble years. Perhaps spending during the 90s and the bubble years was driven by the cash-out refi and now that is gone. If so, that would certainly help explain why growth has been so tepid. Or it simply means the Great American Deleveraging Process has further to go.

Inflation at the wholesale level remains well below the Fed’s target. The Producer Price Index rose 0.2% in April and is up 0.9% year-over-year.

Business inventories climbed 0.4% in March, while consumer sentiment jumped.

Janet Yellen doesn’t rule out the possibility of negative interest rates, however they would be a last resort.

The National Association of Homebuilders estimates that 14 million people are priced out of the housing market due to government regulation.

48 Responses

  1. From the NYT:

    “Trump Says Voters Don’t Have Right to See His Tax Returns

    By MAGGIE HABERMAN 11:49 AM ET

    Donald J. Trump on Friday defended his decision not to release the returns, and when asked what effective tax rate he pays, he said: “It’s none of your business.””

    More precisely, he told George Stephanopoulous and by extension the media, that they don’t have a right. But the media still view themselves as the tribunes of the voters.

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  2. I don’t really care about seeing Trump’s tax return. Or anybody’s, for that matter.

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  3. Janet Yellen doesn’t rule out the possibility of negative interest rates, however they would be a last resort.

    I will ask the same question I asked the other day, but in a different way.

    In a competitive market, interest rates should equilibrate with anticipated business profitability. Forcing interest rates artificially low should chase money into equities or entire businesses or productive real property. That is, until the artificial stimulus causes demand for these productive assets to exceed supply and then bubbles follow.

    I would think the insurance industry is heavily moving into long term productive assets.

    Meanwhile, consumers are encouraged to spend, not save.

    Am I reading this correctly? Are central banks manipulating toward a possible Niagara Falls on a raft?

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    • aren’t drag queens like 1% of the gay population, which is like 1% of the population or something?

      Their numbers are miniscule – I guess this is all just a big virtue-signalling exercise…

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      • “I guess this is all just a big virtue-signalling exercise…”

        Bingo. They are all Bruce Springsteen now.

        It will be interesting to see which minority group is latched onto for the next big campaign. I’m thinking that pedophiles & polygamy are probably still out though.

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      • An earlier report published in April 2011 by the Williams Institute estimated that 3.8 percent of Americans identified as gay/lesbian, bisexual, or transgender: 1.7 percent as lesbian or gay, 1.8 percent as bisexual, and 0.3 percent as transgender.

        So more than .01%, but a statistical blip, nonetheless. Although the number will go up, as being a transexual is something easily glommed on to. I’m amazed at the number of millennial almost-men claiming to be bisexual, despite pretty much being constantly heterosexual. It’s the millennial version of being a metrosexual or something. So I could see the claimed numbers of bisexual and transgender type people going up if you confined it to millennials. Anything to be part of a movement.

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

        It’s multi-sided virtue signaling. There was no value to the NC law, except as an exercise of moral virtue signaling. And the risks which the law was designed to mitigate are even smaller than the overall transgender population.

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        • KW:

          It’s multi-sided virtue signaling. There was no value to the NC law, except as an exercise of moral virtue signaling.

          I totally disagree with that. The NC law protected businesses in Charlotte from being targeted for frivolous discrimination lawsuits as a result of the Charlotte law. And it also codified the standard policy for the use of bathrooms and locker rooms in public schools that had been in place for decades, a codification that has become necessary precisely because of the increasing threat of lawsuits from the trans lobby.

          HB2 most definitely served a real, legal purpose, and was not just moral posturing. Or, frankly, moral posturing in any way at all.

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        • Had any frivolous lawsuits been filed on the basis of the Charlotte law?

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        • KW:

          Had any frivolous lawsuits been filed on the basis of the Charlotte law?

          I’m not sure, but it is unlikely since there was less than 4 weeks between the passage of the Charlotte ordinance and the signing of HB2.

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        • Thus, I understand the argument that it was preventative legislation, and a response to legislation that should have not been created in the first place (and that there was no need for) but I still consider the entire argument not one particularly worth having.

          Not going to participate in the Target boycott, in other words. 😉

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        • KW:

          …but I still consider the entire argument not one particularly worth having.

          With regard to private businesses and organizations, I very much agree. They should be left to their own devices, although if someone is trying to establish a policy (either way) via government edict, to avoid the topic is really just to acquiesc to them.

          However, with regard to government entities, and in particular with regard to public schools, I don’t see how the issue can be avoided. It is a simple fact of modern reality that an increasing number of kids are openly presenting themselves as trans, and that this poses an unavoidable question to those who administer to schools that they never had to address before, namely how to treat these openly trans people with regard to locker rooms and bathrooms. You may prefer that individual schools or school districts be left figure it out for themselves, which would be my view as well, but that in itself is a policy preference that lies at the heart of the controversy. And, as above, to avoid the issue as not worthy of debate is to simply acquiesce to those who insist not only on what the policy should be, but who should be imposing that policy.

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        • You want to fix this, the right should agitate for unisex bathrooms, with stalls removed (just a line of commodes) in ALL private and public schools in Ca, NY, MA, VA and Md.

          Problem Solved. Let the blue states be the vanguard, it’s a position of honor.

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        • Removing urinals is the single worst industrial design idea of the 21st C., so far. And you had it first!

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        • McWing:

          Problem Solved. Let the blue states be the vanguard, it’s a position of honor.

          In my view the problem that needs to be fixed via political activism is the problem of federal abuse of power. If the Feds would just stay out of this and stop trying to impose a policy, particularly by deliberately misconstruing existing law, then localities would solve their own problems.

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        • Unfortunately, no one made the states take Fed money and that’s the leverage they’re using.

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        • McWing:

          Unfortunately, no one made the states take Fed money and that’s the leverage they’re using.

          That is a fair point. But the Feds did make states (or at least their taxpayers) pay money, and taking the Fed distribution is the only way to claw at least some of it back.

          But frankly even within the context of the Feds system of blackmail, what Obama is doing is an obvious abuse of power. Apparently not only can federal funds be withheld if states don’t follow the laws passed by congress, apparently federal funds can be withheld if states don’t follow the laws that congress hasn’t passed, but which Obama wishes it had.

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  4. I never realized how deep the “fake Native American” charge against Warren bothers liberals. Another epic PL meltdown.

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    • I don’t understand why it’s an issue for them. Certain folks never seem to be able to say: yeah, she fudged a job application to take advantage of the environment, so what? Get over it. Maybe she heard it before. Maybe she thought it was true. Who knows? Who cares? Now, as to the policy she’s interested in, that’s a different thing . . .

      But apparently mentioning that I really like the song “Indian Reservation” in the context of someone else mocking Warren’s absurd Indian heritage claim is “disappointing”. Or something.

      Even if she is 1/38th Cherokee, she wasn’t raised on a reservation, she wasn’t raised as part of any kind of Native American culture . . . there’s nothing about her that is remotely Native American.

      Donald Trump can probably claim to be 1/32nd Native American or Mexican, for all we know. It’s not relevant criteria. Except, I guess, to those obsessed with Identity Politics.

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  5. Apparently the difference between being a bomb thrower and the establishment these days is $30 billion a year.

    http://www.theatlantic.com/politics/archive/2016/05/house-freedom-caucus/482487/

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  6. I just saw Loretta Lynch’s statement accompanying the administration’s new “guidance” on the treatment of transgender under Title IX. Lynch said:

    There is no room in our schools for discrimination of any kind, including discrimination against transgender students on the basis of their sex,

    Yet Title IX explicitly makes room for discrimination against everyone on the basis of sex. It says:

    Notwithstanding anything to the contrary contained in this chapter, nothing contained herein shall be construed to prohibit any educational institution receiving funds under this Act, from maintaining separate living facilities for the different sexes.

    We are living with a lawless administration. And that is not just hyperbole.

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    • Lawless for the sake of lawlessness. As I have said before, it’s a non-solution in search of a non-problem. Or an effort to make a solution for something largely imaginary that will create future problems. 😉

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  7. Worth a read:

    http://thefederalist.com/2016/05/14/how-racism-and-nativism-enabled-the-new-deal/

    In normal times, when many of the New Deal measures failed and the weak recovery of 1934-1937 sputtered into renewed recession, the collectivist changes would have been seen as failures. Even if those changes had not been abandoned, the increased collectivization and bureaucratization of the nation would have created a drag on the economy after the Second World War and would likely have been jettisoned, just as war economy measures were after the First World War.

    The New Deal survived where progressive changes of the previous generations were rolled back for two reasons: segregation and nativism. As Cowie notes, Roosevelt united a once-fractious Democratic Party behind his New Deal plan by acquiescing in Jim Crow segregation. Cowie presents the South’s racial collectivism and the North’s economic collectivism as two unrelated issues, portraying the former as an idea of the Right, the latter of the Left, but both are collectivism, and both were essential components of the New Deal. The jobs most often performed by black Southerners—farm work and domestic service—were excluded from the new laws’ protection.

    Hard times forced segregationist congressmen to acquiesce in collectivism, but only in whites-only collectivism. Accepting Jim Crow, the New Deal was born in sin. When Roosevelt tried to purge his coalition of segregationists, his congressional support began to crumble just as the country tipped back into recession.

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    • I have read this view before, and I am sure cozying to segregation was intentional on FDR’s part, to placate the southern Ds. But as to the specifics of the failure to include farm workers under the protections of the NLRA I do not think that was racially motivated. In the 1930s there were more than 6m farms in America and more than 20% of the labor force was on farms. Numbers wise, they were largely on the plains, but they were everywhere from CT to CA, MN to MS.

      There were too many farms and ranches and too big a nation to imagine enforcing compliance, and so many farms used relatives and neighbor high school kids as temps, and the work was so seasonal, that self-reporting would have led to a deluge of paper work that could not have been processed. That was the thinking until after WW2, when it started to become apparent that DC could build a bureaucracy big enough to handle it, and farm workers’ movements began to arise in the upper midwest and CA.

      That southern field hands were largely black was, in this case, a merely gratuitous [for FDR] coincidence.

      [IMHO]

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      • The Ag Extension Act set up USDA agents in the land grant AG schools – this was WW1.

        But it wasn’t until after WW2 that there were county agents in virtually every county in America [I dunno about NYC and other total urban counties, probably just one on Staten Island].

        The service was a huge resource to us as farmers. OTOH, the county agent could get pretty familiar with practices on a couple of hundred farms. The federal presence became present, so to speak.

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    • Yeah, but how did he treat Trannies?

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  8. http://www.washingtonexaminer.com/holes-seen-in-clinton-foundation-records/article/2591335

    Nothing to see here. Just move a long. But they’re helping the children!

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  9. The exact opposite of what they should be doing:

    “These children are facing a massive adjustment, and maintaining their birth language and culture is key to every child’s identity. According to the Intercultural Development Research Association, a positive self-concept, which stems from the maintenance of the birth language, is crucial when adapting to a new language and culture. A growing body of research shows that for integration to be successful, Europe—and the U.S.—must embrace the languages and culture of those who immigrate there.”

    The do gooders are idiots:

    “She asked the parents she met whether they planned to read to their children in Arabic to ensure they maintain their native language. “But,” she says, “they all said they wanted their children to speak Dutch as quickly as possible, and that they would be only speaking Dutch with them at home.”
    “They should be speaking the language of their culture and not feeling bad about doing it.”

    There is a wealth of research that points to the value of immigrant parents maintaining their first language at home with their children, although some educators feel it makes their jobs harder. McCormack says she hears this often back in the U.S. “People will complain that they have students in their class that only speak Spanish at home,” she says, “and I’ll say, ‘Good, that’s what they should be doing; they should be speaking the language of their culture and not feeling bad about doing it.’””

    http://www.theatlantic.com/education/archive/2016/05/balancing-integration-and-assimilation-during-the-refugee-crisis/482757/

    If they aren’t going to “identify” as Dutch, then they shouldn’t expect to be able to live in the Netherlands.

    Liked by 1 person

    • “A growing body of research shows that for integration to be successful, Europe—and the U.S.—must embrace the languages and culture of those who immigrate there.””

      you have to have a lot of letters after your name to think something that stupid.

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      • Too true, NoVA. If the American experience proves anything, it is that having English as a national language and a requirement for naturalization was the only way to make e pluribus unum.

        The national language could be French in France, but since they stupidly made it the official language so that bureaucrats determine what words are truly French they are in a position to lose the advantage of a living language.

        Having both a national language and immigrants allows the national language to grow willy-nilly, so that even Yankees know what salsa is. Not necessarily what is good salsa, of course.

        Liked by 1 person

      • This is also why Democrats are having a hard time selling their immigration plan. Everyone knows that deep down, the left is just as anti-assimilation into the popular US culture as the author is. They are fundementally opposed to the current US culture as capitalist, based on white supremacy, imperialist, etc and are looking forward to the day when the country is majority minority so that they have the day of jubilee. They just get bent out of shape when the other side recognizes that and acts accordingly.

        The Balkans aren’t a successful model for a multicultural society that respects minority rights.

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  10. “A growing body of research shows that for integration to be successful, Europe—and the U.S.—must embrace the languages and culture of those who immigrate there.”

    That’s so obviously wrong, one has to wonder what contortions the research has to be bent into to make it conclude something so clearly, absolutely wrong.

    Language Balkanization accomplishes nothing.

    ““She asked the parents she met whether they planned to read to their children in Arabic to ensure they maintain their native language. “But,” she says, “they all said they wanted their children to speak Dutch as quickly as possible, and that they would be only speaking Dutch with them at home.”
    “They should be speaking the language of their culture and not feeling bad about doing it.””

    So, the parents in the actual situation and making the actual decisions are wrong, but the theoretical academicians no what’s best for the children. Ugh.

    Hopefully, the parents continue to understand that it’s not a bad idea to have a multi-lingual child, but it’s a very bad idea to handicap that child in the learning of their native language.

    That being said, these days ESL students can take Spanish courses intended for English speakers, and ace those classes and bend up their GPA by taking Advanced Spanish, for example . . . which would be the equivalent of an English speaker taking a remedial English class and having it treated as an AP class.

    What’s more, those advanced Spanish classes frequently move to “only Spanish spoken in the classroom” fairly early on in the class, putting native English speakers—those who the class was ostensibly designed for—at a clear disadvantage to the native Spanish speakers, often leaving the native English speakers behind as the native Spanish speakers leap to the top of the class. Mostly just that one class, admittedly, but . . . affluence infects the human race with idiocy. That’s my conclusion. 😉

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  11. Heh.

    On March 20, Trump also attacked Warren, a former Harvard Law School professor, telling the Times, “I think it’s wonderful because the Indians can now partake in the future of the country. She’s got about as much Indian blood as I have. Her whole life was based on a fraud. She got into Harvard and all that because she said she was a minority.”

    http://www.ajc.com/news/news/national/trump-calls-elizabeth-warren-pocahontas-new-york-t/nrNQB/

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  12. I’ve been saying this for ages:

    http://thefederalist.com/2016/05/17/bathroom-bills-stall-amid-shower-of-criticism/

    When did this war begin — this war that has replaced freedom with compulsion (masquerading as tolerance) as the highest value in American society? Probably (HEALTH ALERT: Doctors recommend assuming the seated position before reading this sentence) in 1964, when the Civil Rights Act with the public-accommodation provision that Sen. Barry Goldwater objected to was enacted. Goldwater voted against it and argued, essentially, that Americans would lose their freedom not to associate with people they didn’t like. In the heyday of the civil-rights era, when the issue was equality for blacks, Goldwater’s was not a winning argument. Now that it is, it may be too late.

    Following the Supreme Court’s decision on homosexual marriage last year, a number of states passed, or tried to pass, bills making exceptions for people with particular religious objections and exempting them from having to serve homosexuals (e.g., baking cakes for their weddings). But religion was never a sufficient reason, as those who thought it was a high-card argument discovered. The culture vandals (a.k.a. the progressive Left) don’t much care about religion. They aren’t going to let oddball religions rewrite society’s general rules so as to exempt themselves from obeying them. What, you say, Roman Catholicism (with 69 million U.S. members) is an oddball religion? Well, yes. To the culture vandals all religions are oddball.

    The proper ground for allowing people not to serve homosexuals is the general (classical liberal, and First Amendment) rule of the right to associate or not to associate, not an exception to a rule of the prescriptive progressive state. It follows, therefore, that people should be free not to associate with other people for any reason, whether they’re homosexuals or Zoroastrians.

    Exactly correct. The public accommodation provision in the CRA represented an exception to, not an application of, American principles of freedom. And every person who applies the logic of that provision as if it were a principle to be applied to new circumstances is, it must be said, an enemy of those American principles of freedom.

    Like

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