Morning Report: Awaiting the Fed 6/15/16

Stocks are higher this morning as we await the FOMC decision at 2:00 pm today. Bonds and MBS are flat.

Bonds had a sensational rally yesterday, with the 10 year yield falling to 1.57% and the German Bund going negative before giving it all back. The Bund is basically at zero this morning.

The FOMC decision is due out at 2:00 pm EST today. No one is expecting a rate increase, but we the press release and press conference might have some market-moving news. We will also get new a new Fed Funds dot graph and updated forecasts for inflation, unemployment, and GDP growth. Here is a primer on what to look for.

Mortgage Applications fell 2.4% last week as purchases fell 4.9% and refis fell 0.7%. Refis accounted for 55% of the total number of loans.

Inflation remains in check at the wholesale level, as the producer price index rose 0.4% MOM and fell 0.1% YOY. Ex food and energy, the PPI was up 1.2%, much lower than the Fed’s 2% target rate.

Paul Singer of Elliott discusses central banks and how all of their policies have been slowing growth and exacerbating inequality. He is bearish on stocks, bullish on gold. Separately, Jeffrrey Gundlach of DoubleLine says that central bankers are losing control.

Completed foreclosures ticked up to 37,000 in April from 36,000 a month ago, however they are down 16% YOY. The foreclosure inventory is just over 400,000 homes, which works out to be 1.1% of all homes with a mortgage. This number is down 23.4% from a year ago. Foreclosure inventory remains concentrated in the Northeast, Florida, and the sand states.

iServe got a nice mention in Rob Chrisman’s blog this morning. If you want to learn more about VA loans, we conduct seminars all over the US with our VA expert. We serve those that served.

In other economic news, the New York State Empire Manufacturing Index rebounded in June, while industrial production and manufacturing production fell in May. Motor vehicles (which can be volatile) accounted for a big part of the drop. Capacity Utilization fell to 74.9%. Interestingly, more CEOs intend to increase capital expenditures than they did in the first quarter.

22 Responses

  1. Frist!

    Orlando Shooter obviously going to kill people:

    http://www.foxnews.com/us/2016/06/13/owner-gay-club-says-orlando-gunman-reached-out-to-him-on-facebook.html

    G4S is gonna have to answer some questions:

    http://www.bloomberg.com/news/articles/2016-06-12/orlando-shooter-worked-for-security-firm-with-government-ties

    The conspiracy chatter is that the shooter may have been encouraged by the FBI:

    http://www.thelastamericanvagabond.com/conspiracy/5-reasons-question-official-story-orlando-shooting/

    “While the right-wing media blames Muslims and the left-wing media blame guns, perhaps it would be more effective if thinking individuals would examine the possibilities that this attack was a false flag incident designed to push an agenda that would benefit those in power in some way or other. Out of this attack we will no doubt see another push for the evisceration of the Second Amendment and other civil liberties as well as increased hype regarding ISIS as a threat to the American way of life and a greater attempt at justification for foreign adventures.”

    Seems to me it would be hard to engineer such false flag operations without occasionally messing them up and leaving unambiguous evidence. The Nixon Whitehouse couldn’t even break into an office without making a mess of it. Seducing mentally unstable young men to murder people without leaving a trail of evidence seems doubtful. But who knows?

    Does seem the FBI didn’t want to do anything about the Florida shooter …

    http://www.redstate.com/streiff/2016/06/13/orlando-shooter-terrorist-connections-ignored-fbi/

    Which, if they were trying to set him up for an arrest where he was getting stung, or being mislead by him to believe he was going to help them get some other terrorist . . . I dunno, seem like they ignored a lot of they had no other intentions for him.

    Maybe it was supposed to go down like this:

    https://theintercept.com/2015/07/13/another-terror-arrest-another-mentally-ill-man-armed-fbi/

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    • “and the left-wing media blame guns”

      See below. Actually they have moved on to blaming Republicans and “society”.

      Trump himself may not have been able to improve his political standing solely based on the attacks, but I suspect he will improve based on the left’s reaction to it.

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  2. The New York State Empire Manufacturing Index is a statewide index only?

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  3. The NYT is shameless, truly.

    http://www.nytimes.com/2016/06/15/opinion/the-corrosive-politics-that-threaten-lgbt-americans.html?_r=2

    While the precise motivation for the rampage remains unclear, it is evident that Mr. Mateen was driven by hatred toward gays and lesbians. Hate crimes don’t happen in a vacuum. They occur where bigotry is allowed to fester, where minorities are vilified and where people are scapegoated for political gain. Tragically, this is the state of American politics, driven too often by Republican politicians who see prejudice as something to exploit, not extinguish.

    Speaking of scapegoating people for political gain….

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  4. Vox is so cute:

    “In reality, the Fed’s constant chatter about raising rates is itself an important cause of the economy’s sluggish performance. Markets and business leaders pay close attention to Fed statements. When Yellen signals that higher interest rates — and, consequently, slower growth — are imminent, companies respond by cutting investment spending. The result is a self-defeating feedback loop.”

    http://www.vox.com/2016/6/15/11943558/fed-interest-rate-hike

    I’ve never been in any business meeting where the Fed’s interest rate discussions were even brought up in the context of whether or not to spend money, especially for things like “investments”.

    Tax considerations yes, along with timing, cash flow and funds availability. But zilch to do with a quarter point one way or the other.

    Edit: It gets worse

    “To understand why Fed statements can have such a big impact, it’s helpful to think about things from the perspective of a business considering whether to start building a new factory. One thing the company’s CEO will likely do is ask an economist for a forecast of economic conditions. It makes more sense to open a factory if the economy is on the verge of a major boom than a recession.”

    Nope there too. These people are literally completely ignorant of business decision making.

    Liked by 1 person

    • Do they think it takes a week to build a factory?

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    • He conflates raising the Fed Funds rate to 50 basis points with contractionary monetary policy. In reality, the Fed is just going from super-duper double secret expansionary monetary policy to super-duper single secret expansionary monetary policy…

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      • And of course things like minimum wage increases, overtime rules, mandatory health insurance don’t impact these decisions at all.

        Just Fed policy. Because the CEO’s resident economist who he consults with before making business decisions told him it would stunt future growth in the whole economy, regardless of the specific market that they are targeting.

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    • Trump should pick him as VP.

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    • “So, most Muslims think I’m unacceptable. Fine. I also think their religion is unacceptable. And not just “radicals” and “extremists” — their entire, barbaric, backwards ideology. 100 million people live in Muslim countries where homosexuality is punishable by death.”

      Talk about your inconvenient truths. That is a great, great link. But, of course, pretty much everyone on the left I’ve ever seen dismisses Milo out of hand.

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  5. Is Chris Murphy the first Senator to “filibuster” a non-existent bill?

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    • I am guessing the filibuster has been used to coerce the Majority Leader to bring a minority bill to the floor before this. But if not, I don’t see how this would be considered an unusual tactic to force a bill to the floor.

      It will probably be futile, if the Majority Leader strongly opposes the measure when it is debated.

      Like

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