Morning Report: Janet Yellen gets more dovish 6/21/16

Markets are up this morning as the market frets about Brexit and Janet Yellen speaks. Bonds and MBS are up small.

The latest polls for Brexit are mixed, and the bottom line is that it is too close to call. If the UK leaves the EU, the most likely effect will be a flight to safety, which would mean global flows to US Treasuries, lowering rates. Some of the forecasts I am seeing would be a sub 1.4% on the 10 year if the UK leaves, or a return to the old 1.7% – 1.9% range if they stay. FWIW, spread betting is common in the UK, and the markets there are much deeper than the political betting sites in the US. Right now, the spread betting markets are assigning a 25% probability of Brexit.

Janet Yellen adjusted her language to be slightly more dovish ahead of her testimony today in front of the Senate Banking Committee. She is exhibiting a little more uncertainty over whether the economy is ready to return to moderate growth. Not sure what changed in the last week or so, but there you go.

Homebuilder Lennar beat estimate this morning as the housing market continues to improve and wage growth begins to appear. Interestingly, they are pulling back a little from the market, it appears: “As this year’s spring selling season improved over last year, our second quarter new orders increased 10% to 7,962 homes year-over-year, while our home deliveries and home sales revenue also increased to 6,724 homes and $2.4 billion, respectively.  As the recovery has continued to mature, we have remained focused on our strategy of moderating our growth rate in community count and home sales, as well as on our soft-pivot land strategy, targeting land acquisitions with a shorter average life.” For some reason, the builders don’t seem to trust this recovery in housing.

Perhaps Lennar’s reticence comes from the attitudes of consumers. A recent survey shows housing affordability remains a big problem. That said, perceptions of real estate as a good long-term investment are improving. They should, since rental inflation is generally outpacing house price appreciation and the buy-rent decision is skewed heavily towards buying. That said, consumers are becoming more pessimistic that the housing crisis is over.

Good breakdown on how big of a boost homebuilding is for the economy. Unfortunately, the only discussion of housing in DC revolves around how hard we should be slugging the banks.

14 Responses

  1. Frist!

    It was a 4chan trollprank from 2014, but seems believable, doesn’t it? 😉


  2. Generally, I like Snopes as a fact-checking source, but it’s not reliable when it comes to political fact checking, as I suspected:


  3. Fun fair lending fact: In New York, it is officially part of the “fair lending laws” that a mortgage banker may not

    “make any inquiry of an applicant concerning his or her capacity to reproduce, or his or her advocacy of any form of birth control or family planning”

    “discriminate against a married person for not taking their spouse’s surname.”

    As a professional mortgage banker, I can safely say that I have never seen questions about birth control or using your maiden name, aside from verifying your official name. No lender would ever ask about birth control for a credit application.. It is about as relevant to the credit decision as your favorite color.

    I wonder how those clauses got in there. Did some feminist lobby browbeat legislators to include this language to fix a non-existent problem? Are they just looking for official affirmation that it is ok to use birth control and not take your husband’s name?

    Liked by 1 person

    • Addressing problems that do not exist usually means that a legislature or a lobby group or an executive branch is

      1] avoiding actual responsibility to do something useful, and

      2] grandstanding for some audience of either voters or donors to which it is tied, without actually doing any real damage to anyone, because nothing has happened.

      Liked by 1 person

    • Interesting article in the WSJ about toy companies making more gender-neutral toys. They want boys playing with superheroine dolls.

      “The White House Council on Women and Girls in April hosted a conference about how toys are the early shapers of children’s ideas about jobs and their roles in society. It invited companies to showcase how they are revamping toy brands to appeal to both boys and girls.”

      So obviously this is a directive straight from the Whte House. You would think obama has better things to worry about.


      • “The White House Council on Women and Girls” is a West Wing creature and not empowered to do anything but make “suggestions”. There is no regulatory power associated with it. Takes up no POTUS or national security time.

        IOW, bully pulpit stuff at most.


        • fair enough.. still not a valid role of government…


        • From the White House website:

          The Council on Women and Girls, established in March 2009, establishes a coordinated federal response to issues that particularly impact the lives of women and girls, and ensures that federal programs and policies address and take into account the distinctive concerns of women and girls — including women of color and those with disabilities.

          I’m glad they added that “including” clause at the end. Otherwise I would have been sure it was only taking into account the concerns of women and girls of no color and those without disabilities.

          Our government is a total joke.

          Liked by 1 person

        • I served on these kinds of panels at the state level in the 70s. And yes, this stuff is as close to joke as any gummint related function gets.

          A story: at my precinct convention one year the precinct did not elect Governor Preston Smith, who was present and a resident of the courthouse precinct, to the County convention, an oversight, which I corrected. In fact, I asked for a unanimous vote that we permit the Governor to go to County in my place, and duly embarrassed, all agreed.

          So Preston appointed me to every one of these panels for two years. Volunteer work, but they did pay per diem for trips to far flung parts of TX, where the Gov could show how much he cared by having me and two other 30 somethings listen patiently to EVERYTHING.

          We were, of course, utterly powerless. We did make suggestions. Hoo Ha.


  4. I laughed.


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