Morning Report: Home purchase sentiment slips 11/8/16

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Last Change
S&P Futures 2123.5 -6.0
Eurostoxx Index 333.4 -0.4
Oil (WTI) 44.7 -0.2
US dollar index 88.1 0.1
10 Year Govt Bond Yield 1.82%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 3.61

Markets are flattish as Americans head to the polls. Bonds and MBS are flat.

The NFIB Small Business Optimism index improved in October, however it remains below historical norms. Labor markets remain tight: 55% of all respondents tried to hire in the past month, and 48% reported few or no qualified candidates. A net 25% of all respondents reported increasing employee compensation. A net 19% plan to increase wages over the next six months, which is among the strongest post-recession numbers. Earnings trends are negative, however which means companies are unable to pass along cost increases to customers, at least not yet. Overall, a net 7% of all respondents expect the economy to worsen over the next 6 months.

Job openings were little changed in September, according to the BLS’s JOLTS jobs report. JOb openings were at 5.5 million, while separations were 4.9 million. The quits rate was unchanged, while layoffs decreased. The quits rate is the best indicator for wage growth going forward.

There were 36,000 completed foreclosures in September, according to CoreLogic. The current foreclosure inventory is about 340,000 homes, which is down 31% from a year ago and represents about 0.9% of all homes with a mortgage. The seriously delinquent rate fell to 2.6% which is the lowest since late 2007. Foreclosures remain concentrated in the judicial states.

Fannie Mae’s Home Purchase Sentiment Index slipped in October to 81.7 from 82.8 the month before. Sentiment about the direction of home prices over the next 12 months slipped to a net 31% of bullish respondents from 34% in September. The most surprising statistic out of this survey was the decline in the number of people who say their net income is significantly higher: A net 4% said it was significantly higher versus 12% a month ago. Not sure what is happening there, and it doesn’t comport with some of the other labor indicators we have been seeing, but there it is. Overall, respondents think the economy is on the wrong track by a wide margin: 56% to 36%.

Dodd-Frank and the Volcker rule have reduced the market-making functions of banks. Historically, when a large customer like a mutual fund would want to sell a large order of Treasuries, they would call up someone like J.P. Morgan, who would buy the bonds and then try and sell them to their customers. The specialist on the floor of the NYSE did something similar. If a big buyer (or seller) came in for Apple stock and created an imbalance, the specialist would send out an imbalance notification to the newswires in hopes of attracting investors to take the other side. This had the effect of taking volatility out of the market. That function doesn’t really exist anymore, and the net result will be more volatility. It won’t matter until the next crash, and many investors who call their brokers asking to sell will find a no-bid market. Know where this could get particularly ugly? Munis.

74 Responses

  1. Liked by 1 person

    • After I was done voting today, they asked me if I wanted a sticker. I said no thanks. I have no particular desire to be associated with the ballot that I cast.

      This was pure drudgery today.

      As an aside, they did all paper ballots with a scanner to read them so there’s a full paper trail in my precinct.

      Liked by 1 person

      • That’s how they’re doing them here as well. It created some problems with the primary back in April, because they switched to the paper ballot about the week before the election, but it sounds like it’s going pretty smoothly this time around.

        Liked by 1 person

  2. Voted for Gary this morning.. Couldn’t bring myself to vote for Schumer even though it probably would be good for my industry…

    Liked by 1 person

  3. They oughtta know.

    Like

  4. Rolling Stone hit for $1M by jury. AOK.

    Liked by 1 person

  5. I’m watching the PBS NewsHour. They are really afraid.

    NoVA, I take no pleasure that you and I may have been right about this. If Trump gets Michigan, I think he wins.

    Liked by 2 people

  6. NBC is already blaming comey

    Liked by 1 person

  7. Well, the Scalia gambit in the Senate sure paid off if Trump wins…

    Liked by 1 person

  8. I confess that the one good thing I thought would come from a Trump victory was enjoying the meltdown on PL.

    I’m not enjoying it as much as I thought I would. Probably because the most obnoxious posters don’t have the guts to show up tonight.

    Liked by 1 person

    • Same.

      Liked by 1 person

    • Enjoy. I never thought that the country was this fucking stupid.

      Like

      • Optimistic! But stupidity isn’t the problem, it’s division. Until addressed generally this is what we will get. People enjoy their tribes to much to give them up.

        Like

      • I never thought that the country was this fucking stupid.

        Really? It seems to me the entire progressive project is grounded in a belief in the stupidity of everyone else,

        Liked by 1 person

      • ‘Goose –

        This same country twice elected BHO by a majority and now gives him a 56% approval rating.

        Same country.

        Same country is quickly voting to decriminalize marijuana.

        There isn’t a rhyme or reason to this other than that HRC was not the right choice for the Ds, and you did not think so and neither did anyone here.

        Assuming DJT wins, and all the stuff you fear except WW3 happens, the nation will probably survive. Trouble is, Russia is already taking advantage [see Estonia], and while someone can probably keep DJT’s hands off the nukes, I hope, I don’t expect a series of rational FP decisions. I also think the economy may actually tank.

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      • I knew he could win, hence why I ended up voting for HRC.
        I didn’t see him outperforming by this much.

        Liked by 1 person

  9. To all of you who have for years either complacently or gleefully watched as the left has concentrated more and more power with the Feds, particularly with the executive branch, I have a question….are you happy now?

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  10. If Romney had been elected 4 years ago, Trump would not now be President. I wonder if all of those who didn’t vote for Romney and now so fear a Trump presidency have any 2012 regrets.

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  11. It should be an interesting 4 years with the House, Senate and Presidency in Republican hands. I’m worried about a lot of things right now but primarily health care and the deficit this morning. Foreign policy is always dicey in a transition but apparently the Russians are pleased…………uggghhhh

    I agree with Mark that Hillary was not the right candidate, she never was and leadership and the talking heads were fooling themselves that she would walk away with the election. But I did think she would win. I said a long time ago that the election was hers to lose and that’s exactly what she did.

    Anyway, the people voted and so we’ll see what happens. Those of you who thought it was outrageous when we elected a little known candidate from Illinois, with very little experience, I wonder how embarrassing this is going to be to us as a nation.

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    • lms:

      I wonder how embarrassing this is going to be to us as a nation.

      I lived overseas for 15 years and saw other political systems up close and personal, so I long ago ceased to care about what the rest of the world thinks of the politicians we elect.

      Liked by 1 person

    • Lulu, The Rs ostensibly are being given an opportunity to govern. The Berlusconi replicant the nation just elected may not be able to pull off “petty self aggrandizing con artist” against even his “own” Party in Congress, such being the nature of our system until now. Politics is so strange.

      The POTUS has a relatively free hand in FP and in judicial nominations and Cabinet appointments. If DJT loses a multi-million dollar fraud verdict later this month in San Diego, will good people refuse to serve in the Cabinet? Will DJT’s obvious ill temper lead us into a dangerous foreign adventure? How will DJT satisfy his major Russian investors? If the empire of the Trump name crumbles, how will DJT respond as POTUS? We truly have never seen this before. His potential list of judicial nominees were not hacks, but respected conservative judges, I’ll give him that. I assume his older sister helps him there.

      I think your concerns about health care insurance and the deficit, going forward, are legit, although it must be said they would have been legit had HRC and the Ds won, as well.

      IT is also fair to assume the Rs will actually build their Congressional strength in 2018. Not being one who lauds political strategy over the nation’s well being, I wish the next Administration moderate success. And I am praying for no disasters.

      Scott – counter factuals are fun, but that’s all they are. If wishes were horses, beggars would ride.

      Looking forward, do the Ds continue with 70 and 80 YO leaders and no bench? Or do they realize that their candidates actually must be attractive and baggage free, both politically and personally? Do the Rs pass a flurry of repeal legislation, and dismantle or cripple their least favorite agencies? Will they support DJT on debt financed infrastructure projects, THE GREAT WALL, and the expanded V.A.?

      These sorts of questions will be answered, probably inconsistently, over the next two years, I suspect. But counterfactuals about the past? That’s for fantasy writers.

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      • mark:

        But counterfactuals about the past? That’s for fantasy writers.

        The emotion we call regret is entirely the function of counterfactual thoughts. And it is a truly unique human being who has never experienced feelings of regret.

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      • Mark, I’ll trust your judgement on judicial nominees.
        contrary to opinion here I don’t mind a more conservative court.

        What were the estimates of deficit under Trump’s economic policy…………4T? I doubt a Pres. Clinton could have gotten away with that and hopefully some of the fiscal conservatives in Congress won’t let a Pres Trump get away with it either.

        Bush and Obama both expanded executive power so I’m not sure what that means along ideological lines Scott. And thinking a Romney win would somehow have made things better by preventing a Trump presidency is fanciful thinking and trying to define complete unknown factors.

        I hope some of the R’s who resisted Trump will be able to rein him in but that remains to be seen.

        I am most nervous about two things really and these are more personal than ideological. If Obamacare is rolled back we’re back to square one re issues such as pre-existing conditions and I don’t trust R’s to get that right. And I’m worried about some of the social issues I care about especially regarding the LGBT community.

        And yes I hope D’s reevaluate the type of candidates they present to the country.

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        • lms:

          contrary to opinion here I don’t mind a more conservative court.

          Me too!

          And thinking a Romney win would somehow have made things better by preventing a Trump presidency is fanciful thinking and trying to define complete unknown factors.

          Others might calling it trying to learn from past mistakes.

          I hope some of the R’s who resisted Trump will be able to rein him in…

          Me too.

          If Obamacare is rolled back we’re back to square one re issues such as pre-existing conditions and I don’t trust R’s to get that right.

          Why not press for the politicians in your state to “get it right”, rather than relying on federal politicians from other states?

          And I’m worried about some of the social issues I care about especially regarding the LGBT community.

          Trump is probably the most socially liberal Republican president the left could conceivably have hoped for. What exactly are you worried Trump might do?

          Liked by 1 person

        • Obamacare is never going away unfortunately, the hundreds of billions of (borrowed) dollars we hand over to health insurance companies every year will continue forever.

          Like

        • BTW, McWing, I’m not gonna lie…it was kind of fun putting “AU H2O” on the write-in line.

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        • I’d love to see the expression of the precinct captain as he read that vote!

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        • Why not press for the politicians in your state to “get it right”, rather than relying on federal politicians from other states?

          Well yes, and I’ve done that for years. Hoping CA will figure out a way to keep some of the provisions of our Covered California in place. Our daughter has insurance finally and pays what most healthy adults pay for their insurance.

          Also, it’s my understanding that he opposes gay marriage and any extraordinary protection for gays facing persecution in their country of origin as far as immigration here. Just a couple of things off the top of my head. Not sure how socially liberal he really is especially when there is a socially conservative Congress he may not want to oppose on certain issues. Remains to be seen I guess.

          Like

        • lms:

          Also, it’s my understanding is that he opposes gay marriage…

          As an issue, that is entirely out of the control of the executive branch. Currently the issue is controlled by SCOTUS, and if it ever corrected itself, it would be controlled by state legislatures. The president is irrelevant to how the issue might play out.

          Like

        • As an issue, that is entirely out of the control of the executive branch. Currently the issue is controlled by SCOTUS, and if it ever corrected itself, it would be controlled by state legislatures. The president is irrelevant to how the issue might play out.

          Well then I suppose I should be grateful the executive branch hasn’t managed to control that too. I wouldn’t describe him as socially liberal though even if he is slightly more socially liberal than other Republicans. Maybe I should care more about his judicial nominee for SC.

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        • lms:

          Maybe I should care more about his judicial nominee for SC.

          That’s what I care most about. Whether or not the constitution is already beyond saving is a legitimate question, but assuming it isn’t…. there is no guarantee, of course, that he will nominate good people, but there is also no guarantee that he will nominate bad people which distinguishes him from HRC in a very significant way.

          Like

    • If you think that Keynesian economics works, and if Trump does get a huge infrastructure spending and tax cut package passed, it could be a completely different outcome than anyone is thinking right now.

      Krugman would totally meltdown if Trump got credit for juicing the economy via Keynesian stimulus.

      Like

      • Yes that would be interesting. A Republican congress and president testing Keynesian economic policies. Is a tax cut really part of Keynesian policy though?

        Here in CA the voters voted to extend a tax increase on people making over $250K in order to fund our continuing infrastructure projects and Medi-CAL spending. One of the props I voted against. It was supposed to be a temporary increase not a 26 year increase. I’m not in that income tax bracket so I wasn’t voting based on my own income level.

        Like

        • “Is a tax cut really part of Keynesian policy though?”

          Yes, if you actually read Keynes himself. The usual distinction is a temporary tax cut like the one that was done for Social Security taxes, or things like cash for clunkers or cash for calkers temporary deductions for specific things.

          Permanent reduction of marginal income tax rates is considered supply side.

          Like

        • jnc, I wasn’t under the impression those were the types of cuts he was proposing but maybe I missed something. 🙂

          Like

        • Lulu, Brent can correct me, but in 1946 both spending and cutting taxes were considered Keynesian tools for stimulus.

          We are now in a post-Kenesian world where having run deficits almost perpetually means that running a deficit is figuratively like pissing in the Pacific. It isn’t even likely that a deficit today ends up with the “created” money in American hands. You use your tax saving to buy a UHD TV and that money goes to Samsung in S. Korea.

          Think of it this way: Keynes actually believed in surplus during good times and deficit during bad times so that the peaks and valleys of an economy would be lessened. That isn’t where we are. We just have deficits, at least since Clinton-Gingrich.

          Personally, I still like counter-cyclical spending, but the new wave of post-Kenesians think there is no limit to what can be done with printing money.

          I would hazard a guess that actually doubling the gasoline tax to pay for fixing roads and bridges would work without too much pain. But neither party wants to do that taxation part, which was Perot’s idea in ’92.

          Liked by 1 person

        • Mark:

          We just have deficits, at least since Clinton-Gingrich.

          We haven’t had any sustained period without deficit spending since FDR became president. See the third chart, about halfway down the page.

          http://www.usgovernmentspending.com/debt_deficit_history

          I would hazard a guess that actually doubling the gasoline tax to pay for fixing roads and bridges would work without too much pain.

          In terms of inflation adjusted dollar amounts, federal revenues are at historic highs on both an absolute and a per capita basis.
          The deficit is not driven by a lack of revenues. It is driven by over-spending.

          Like

        • Scott – because the federal roads, bridges, and tunnels are supposed to be Highway Trust Fund issues paid by the over-the-road taxes, I treat this as a separate question from general revenues and general expenditures.

          The Highway Trust Fund may be in deficit right now. IDK.

          Like

      • I don’t see Tea Party Republicans going along with a big Keynsian-style infrastructure program…

        Liked by 1 person

        • I don’t see Trump caring. He already beat Cruz.

          For his first six months, I think he can get what he wants.

          Liked by 1 person

        • Not enough of them. There are plenty of big spending R and D ploticians in the House. They’re gonna spend like they did under Bush.

          Liked by 1 person

        • The difference this time is that the Tea Party Republicans voters are Trumps voters.

          He can go directly over their heads to make the case to the Republican base, and for a period of time, the base is going to go with Trump, not the current members of Congress.

          Liked by 1 person

        • I guess an infrastructure spending program would be a good way to mend fences with the Democrats..

          I am just depressed that the expansion of government will continue apace…

          Liked by 1 person

        • Brent –

          What would you think about [say] doubling the gasoline tax to pay for the repair of the interstate roads and bridges and tunnels?

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        • Mark. I don’t see Republicans going for increased taxes..

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        • you know what Rs want more than anything? to win. and they did that. so if they can take credit for an FDR style public works program, so be it.

          Liked by 1 person

  12. text from a D friend in CLE, OH.

    “reality show character elected president partially due to a dude who couldn’t stop sending strangers pictures of his dick might be the most american thing to ever happen.”

    Like

    • I’m curious….do people here think that Comey’s letter to the House last week really had a significant effect on how people voted? I am skeptical, but I have no data points or evidence for thinking so. Just a sense that support for Trump has been underestimated all along. I’m curious what others think.

      Like

      • It gave some cover to people who didn’t matter anyway — college educated whites.

        Like

      • Comey probably had no discernible effect.

        HRC won the popular vote, but lost PA, OH, WI, and MI to the fantasy of bringing low skilled high pay jobs back for HS dropouts.

        I think it was about that simple.

        Liked by 1 person

        • Mark:

          HRC won the popular vote

          Pet peeve of mine….why do we even talk about the national “popular vote”? It is a meaningless number, indicative of virtually nothing at all. The election is a state by state vote, not a national vote, and that fact dictates both how candidates campaign and how voters vote. If the national popular vote was meaningful, might Trump have campaigned more or differently in places like California, and might that have had an effect on how many votes he got there? Of course. Right here at ATiM we had several people openly engaged in strategic voting based strictly on their assessment not of any national popular vote, but rather their own individual states. How many millions of times were similar strategic decisions made by people across the nation? How many R’s in New York or D’s in Texas didn’t even bother to vote at all, knowing that their personal vote could have no effect on the inevitable outcome given the political demographics of the state?

          Really, I wish the media and everyone else would stop talking about the “popular vote” as if it were a meaningful metric. /rant

          Like

        • Currently a 235,000 vote difference, less than Gore’s margin, if I’m not mistaken.

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        • Another comment on the whole “popular vote” business. The difference between HRC and DJT in CA was 2.5 million votes. The diff between them nationally is (currently) 220k votes. So, ex-Callifornia, HRC loses the “popular vote” to DJT by over 2 million votes. And if we exclude NY too, HRC loses the “popular vote” by 3.5 million votes.

          So in terms of a national election, exactly what significance should be attached to the fact that HRC is overwhelmingly more popular in just two states, one on each coast (and in fact overwhelmingly more popular in a few urban centers of those states) than she is in the rest of the country as a whole?

          Like

        • @Scottc1: “Pet peeve of mine….why do we even talk about the national “popular vote”? It is a meaningless number, indicative of virtually nothing at all.”

          We talk about the popular vote because a lack of real civics education means that most people have an intuitive, gut sense that the person who wins the popular vote should win the presidency, and if they don’t then there’s something “wrong” with the system.

          This is beneficial to whoever wins the popular vote but loses the election. So they will talk about it, and talk about it a lot. The argument is that it’s some ridiculous, archaic rules set up by a bunch of old dead white men that led to the wrong person winning the presidency. This doesn’t explain the house or senate or state legislatures or governorships so much, but forget about that.

          My belief is the Democrats will trying to reform the electoral vote, and if they ever achieve electoral vote reform (such as state votes are divided by popular vote percentages), it will be just in time for the trend to reverse, and Republicans will become more likely to win the popular vote but lost the electoral vote, only the Democrats changed the system for them just in time.

          Like

        • KW:

          I understand the cynical, politically partisan reason for doing it. My question is aimed at non-partisans.

          Like

        • @Scottc1: “My question is aimed at non-partisans.”

          I think I sort of addressed that, in that there is a general sense that a system where the “loser” of the overall vote loses has some defect that should be addressed. You are less likely to care if you a partisan and it all favors your side, but it’s not merely partisan to feel that when one side or the other keeps losing the electoral vote but slightly winning the popular vote there is some problem with the system.

          I think there’s also a belief that the electoral college is an anachronism and no longer necessary. Seems it would be much less of a horse race, though, if it were purely popular vote. You could countdown as polls closed, but only when the entire popular vote was counted would you know the winner for sure.

          The popular vote is illustrative of an interesting point—the country is, statistically, split down the middle. Not perfectly but not far from it. The electoral vote can mask that. As a data point, it is kind of interesting, if not directly relevant to who ought to be president.

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      • I don’t think it mattered, especially after he followed it up with the same recommendation as previously.

        Trump way over performed the polling, rendering any shift that was due to Comey informing Congress about the newly discovered E-mails moot.

        But given how well Trump did, I think a revelation after the election that the information was suppressed would have been even more damaging than originally thought.

        Liked by 1 person

  13. Ray Patterson: Oh gosh. You know, I’m not much on speeches, but it’s so gratifying to… leave you wallowing in the mess you’ve made. You’re screwed, thank you, bye.
    Moe: He’s right. He ain’t much on speeches.

    S9E22

    Liked by 1 person

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