Morning Report: GDP revised upward 11/29/16

Vital Statistics:

Last Change
S&P Futures 2200.8 0.0
Eurostoxx Index 340.0 0.2
Oil (WTI) 45.3 -1.8
US dollar index 91.7 0.3
10 Year Govt Bond Yield 2.34%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.14

Stocks are flat this morning as GDP surprises to the upside but oil falls as OPEC appears unable to cut production. Bonds and MBS are down.

Third quarter GDP was revised upward to 3.2% from the advance estimate of 2.9%. We will get one more revision to this number in a few weeks. Upward revisions in consumption drove the increase, while residential investment remains a drag. Business capital investment remains weak as well. The PCE Price index rose 1.4%, which means inflation remains below the Fed’s target rate. We have had a meaningful rebound in GDP after a run of 3 weak quarters.

gdp

The Case-Shiller index (considered to be the Dow Jones Industrial Average of real estate indices) surpassed its July 2006 peak in September. The index is up 5.1% YOY. The press release includes a cool table that shows the returns on real estate versus the returns on the stock market and compares those to income growth. Since 1975, real estate has increased almost 5%, and stocks have increased 8%. Since 2000, real estate has outperformed stocks. While stocks have have been a higher returning investment overall, they are typically much more volatile, and you can’t live in an ETF. Also, the press releases doesn’t address the tax benefits of real estate, which would certainly affect the analysis and improve the relative performance of real estate.

asset-returns

Corporate profits rebounded in the third quarter, rising 5.2% YOY after a 3 consecutive negative quarters. The divergence between stock prices (rising) and profits (falling) was creating an untenable situation in the stock market.

Ben Carson is reportedly going to be the next Secretary of HUD. Realtor.com has the potential implications. Though his background is in medicine, Carson does appear to follow housing: here is an editorial he wrote just over a year ago. The editorial covers fair housing issues, however doesn’t address the state of the mortgage market, and how to bring private capital back into the market. At the moment, the taxpayer bears the credit risk of the vast majority of new mortgages. Suffice it to say it doesn’t look like fair housing issues will be front and center at the new HUD, the way they have for the past 8 years.

Donald Trump named Georgia Congressman Tim Price as secretary of health and human services. Trump is meeting with Mitt Romney again for the Secretary of State position.

Consumer confidence rose sharply in November, according to the Conference Board, increasing to 107.1 from 100.8 in October. This index is back to pre-recession levels. Separately, Cyber Monday sales look to have increased 9.4% YOY.

Foreclosure starts fell to 56,500 in October, the lowest level in 12 years, according to Black Knight Financial Services. Delinquencies had a small uptick MOM, but are down YOY. Prepay speeds ticked down, but are still up markedly YOY.

Demand for houses fell in October, according to Redfin. The number of people requesting tours and submitting offers fell. Tight inventory remains the biggest issue – the number of homes listed was down almost 10% from a year ago.

51 Responses

  1. Frist!

    Just joking I am. Or am I?

    Like

  2. So, they want to start taxing Netflix, Hulu, HBO Go . . . basically all the streaming video services.

    http://www.nytimes.com/2016/11/28/us/california-today-netflix-tax-video-streaming.html?_r=0

    If that doesn’t sound like a slippery slope, I don’t know what does.

    Like

    • KW:

      It is unfair, some say, that people who get video through cable television are taxed while those who have shifted over to internet streaming services are not.

      (some say…gotta love that weasely formulation)

      If it is unfair, then the simple solution is to stop taxing people who get video through cable television.

      Like

      • As if fairness, not decreasing revenues, is the issue.

        Looking forward to an exciting business of individuals in other states signing up for Netflix and then allowing users in taxed areas to use their account, so that soon nobody in those areas officially has a Netflix account. Maybe they’ll monitor where video comes from, ending up with an exciting new service providing anonymous encrypted video routing.

        They’d have to start taxing houses by how much data they use.

        Like

    • Sounds like a great thing for Trump to tweet about.

      Liked by 1 person

    • But Vox is run by the best and brightest minds of the millennial and generation-Y generations!

      Like

    • Without paper money, the Fed could arrange things so money in your bank account would literally disappear over time if not spent. People would then have no choice but to rush out and try to buy durable goods (cars, home repairs, furniture) as the next-best means of saving. That increase in economic activity would spur hiring and reduce unemployment until the Fed started to raise rates again to cool things down and prevent inflation from getting out of hand.

      Totally eliminating paper money would have some potentially dire consequences for privacy, but would also conceivable allow us to eliminate recessions altogether.

      Best. Minds. Ever.

      What could go wrong?

      Like

  3. Sure the Republicans will soon control the Presidency, the House and the Senate, but progressives can still make the producers of Hamilton even richer as a way to stand up to Trump.

    “Hamilton Brings In a Record-Breaking $3.3 Million in Ticket Sales After Mike Pence
    By Marissa Martinelli”

    http://www.slate.com/blogs/browbeat/2016/11/29/hamilton_breaks_broadway_records_again_with_3_3_million_in_ticket_sales.html

    Like

  4. Someone gets it:

    “Donald Trump’s economic adviser Stephen Moore told a group of top Republicans last week that they now belong to a fundamentally different political party.

    Moore surprised some of the Republican lawmakers assembled at their closed-door whip meeting last Tuesday when he told them they should no longer think of themselves as belonging to the conservative party of Ronald Reagan.

    They now belong to Trump’s populist working-class party, he said.”

    http://thehill.com/homenews/campaign/307462-trump-adviser-tells-house-republicans-youre-no-longer-reagans-party

    Like

  5. Worth a read

    “The Day After: Obama on His Legacy, Trump’s Win and the Path Forward
    By Jann S. Wenner”

    http://www.rollingstone.com/politics/features/obama-on-his-legacy-trumps-win-and-the-path-forward-w452527

    Like

    • If it’s RS, you know you can trust it!

      Like

      • From the article:

        Rolling Stone has had a wonderful relationship with Obama over the years. I first met him at the beginning of his 2008 campaign, when he came up to my office for dinner. We backed him when he was up and when he was down. He viewed Rolling Stone readers as part of his base. A year ago, we went to Alaska with him and toured the melting glaciers. With extraordinary pride, we watched him ride the wave of history.

        In other words, just the kind of sycophants that one would expect to provide a penetrating, challenging, and brutally honest interview with the Prez. Sort of like Breitbart interviewing Trump.

        Like

    • jnc:

      Worth a read

      Same old story. The problem isn’t the policies, which are fantastic. It’s the messaging. We need to tell a better story, to make those ignorant rubes understand how we are making their lives better.

      Like

  6. Like

  7. It’s amazing how much the PL commentariat has misread this election and thing they’re still in the drivers seat.

    Like

    • I’m impressed that they were pretty much universally wrong about the outcome of the election, but now believe they are predicting what Trump and everybody in the Trump administration is going to do, and exactly how the economy is going to perform, and almost everything else with 100% accuracy. There’s no sense that, hey, maybe since we were wrong about the outcome of the election, we might be wrong about some of this.

      I suppose they might be more likely to feel that way if Clinton had lost decisively in the popular vote. Although JCD on No Agenda has made the observation more than once (which I have not independently confirmed) that it’s California that propels her to national vote victory, ultimately, and if you remove California Trump wins the popular vote of the remaining 49 states.

      Like

      • KW:

        Although JCD on No Agenda has made the observation more than once (which I have not independently confirmed) that it’s California that propels her to national vote victory, ultimately, and if you remove California Trump wins the popular vote of the remaining 49 states.

        I mentioned the same thing the day after the election.

        https://all-things-in-moderation.com/2016/11/08/morning-report-home-purchase-sentiment-slips-11816/#comment-96988

        Like

        • So you did! Corked! Weeks ago, it turns out. 😉

          I noticed the popular vote complainers aren’t phrasing it as: “And we should be letting California and New York decide who the president is! One person, one vote, right?”

          Like

        • And California = LA and San Francisco. Nowhere else matters in the state.

          Liked by 1 person

      • I’d predict that if California secedes, there will never be a progressive president again.

        The Democratic party would have to totally reconstitute itself nationally.

        Same thing probably for the Republicans if Texas seceded.

        Like

        • Obviously the absence of those two states would have effects other than simply on the electoral math, not the least of which would be that other states would be emboldened to join them, but…

          Without California in 2012, Obama would have had 277 electoral college votes, with 242 needed to win.

          Without Texas in 2016, Trump would have had 268 electoral college votes, with 250 needed to win.

          Like

        • And I stand corrected.

          Liked by 1 person

        • I wonder how that breaks down with the popular vote. Without Texas, we already know Trump still doesn’t win the popular vote. But without California in 2012, would he have lose the popular vote? Or been darn close to losing it? Should look into that but can’t right now.

          Like

    • “CMS Waivers: How do they work?”

      “Do you have to care what the other party thinks of your cabinet appointees if you have eliminated the filibuster?”

      Like

  8. @kevinwillis1:

    I trust that you aren’t in any fire danger?

    Like

    • Oh, no. Gatlinburg is on the other side of the state. And is a much lovelier city than Memphis.

      But it’s sad to see. I love Gatlinburg. Although we often swap it for other locations, one of our timeshares is in Gatlinburg and we’ve spent three vacations in it, including a Thanksgiving about 9 years ago, and I’ve always enjoyed it. Not a place I would have ever thought of being at risk for forest fires . . . although, of course, there are plenty of forests.

      I’m sure they will recover, but it’s about the worst time of year this could happen. It’s always packed, but Thanksgiving through New Years is, of course, their busiest time of year.

      Thanks for asking! Given how far away it is (drive another 40 minutes and in your in North Carolina) it didn’t occur to me that anybody would think of me in relation to the fires. But it’s basically the entire width of the state away.

      Liked by 1 person

  9. KW:

    I gotta say, great tip on the No Agenda podcast. I just finished another one and laughed my ass off. They are really good. Thanks for recommending it.

    Liked by 1 person

  10. Lulz

    Like

  11. A good read. The Real War on Science by John Tierney.

    http://www.city-journal.org/html/real-war-science-14782.html

    Like

  12. just something for friends:

    https://www.cms.gov/CCIIO/Programs-and-Initiatives/State-Innovation-Waivers/Section_1332_state_Innovation_Waivers-.html

    now, the key to all this is that the regs really decided what is and isn’t allowed. and who is writing those as of next year?

    You want to block grant Medicaid. Obamacare gives you the keys to do it.

    BAHAHAHAA ..

    Like

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