Morning Report: Ben Carson will run HUD 12/5/16

Vital Statistics:

Last Change
S&P Futures 2200.0 8.0
Eurostoxx Index 341.6 2.2
Oil (WTI) 52.2 0.5
US dollar index 91.3 0.0
10 Year Govt Bond Yield 2.41%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.14

Markets are higher this morning on no real news. Bonds and MBS are down.

Slow news day, for the most part.

The week after the jobs report is usually pretty data-light and this week is no exception. Today is the last day of Fed-Speak until the FOMC meeting next week. Bonds will probably be driven more by overseas developments than anything going on the US.

The Markit PMI Services index slipped in November to 54.6 from 54.8 the month before. The ISM Non-Manufacturing PMI improved as well to a strong reading of 57.2.

Donald Trump will nominate Dr. Ben Carson as the Secretary of Housing and Urban Development. Carson is expected to reverse the Obama Administration’s aggressive enforcement of fair housing laws, including the use of disparate impact. Suffice it to say, fair housing is going to take a backseat to reforming the GSEs and the mortgage market.

Tight credit remains a driving factor in today’s mortgage market as credit is loose for some people at the high end and tight for everyone else. In fact, PIMCO estimates that between 1 and 1.4 million people who were eligible for a mortgage in 2002 (before the big subprime explosion) are unable to get a mortgage today under the new rules and regulations. The knock on effects (like tight inventory and lackluster homebuilding) remain as headwinds to the economy as a whole. This not only includes mortgage credit to borrowers, but also bank credit to small homebuilders etc.

Bond funds continue to experience withdrawals in the biggest bond bust since the Taper Tantrum.

36 Responses

  1. BTW, what was happening at HUD during the Bush years? A continuation of Clinton policy, pretty much?


    • unfortunately, yes. although obama went all-in on the practice of forcing local governments to change their zoning laws.

      Liked by 1 person

      • So this is a case where having a Republican in the Whitehouse might actually changed what HUD is doing, then? Or might the entrenched bureaucracy keep much change from happening?


        • What is to prevent Carson from directing his agency lawyers to settle every AFFH lawsuit for a dollar and no admission of guilt?

          Liked by 1 person

        • I’m asking you! I have no idea. He could do that, with nothing but cries of “racism” from the media, pundits, and Democrats to worry about?


        • The pundits, media, and Democrats are going to cry “racism” no matter what he does, so who cares?

          I wonder what the lawyers here think about that..


  2. Kevin, did you like the season finale of Westworld?


    • Oh, yeah. First, I was largely vindicated in all my theorizing. Dolores was Wyatt, the “new narrative” Ford had been working on was the uprising in the park (and Maeve’s escape), MiB was William, etc. And MiB owns most of the park. I also called Arnold being shot by Dolores as being what Teddy remembered as the general being shot by Wyatt. Also, the maze was exactly what I expected.

      The conversion of William to being so hostile and dismissive of Dolores seemed a little abrupt. “She let a stranger pick up her can! I hate her now!”

      Primarily because he’s clearly bright enough to realize that Dolores being reset after having died was inevitable, and he’d have to try and recreate the circumstances of their trek to the maze in order to stimulate the same awakening. I’m assuming there’s a longer story there of him trying to wake her up, and maybe the next season will cover that. Ed Harris will be back, and Dolores may need to recall at some point numerous times that maybe William tried to “wake her up” again, to no avail.

      Stuff that I’m guessing will be held for next season (hopefully not future seasons) has to be the faith of father Abernathy, loaded up with the entirety of the park’s code and presumably one of the army of people that MiB sees at the end of the episode. Also, I think Stubbs and Elsie and Ghost Nation have to play a larger role—I’m guessing next season.I was hoping for something more solid with Elsie and Stubbs but I get that this is just part 1 of a 5 or 6 part series.

      I’m wondering how they move on with the other parks, such as “Samurai World” or “Shogun World”, as hinted at towards the end of the episode. Are those parks rebelling? Isolated and continuing as active theme park While Westworld rebels? Lots of questions, there.

      Hate to see Ford get killed. Hopkin’s was so great on the show.

      On the whole, I think it’s been a great show, and really well done for something so ambitious.

      Hate that we have to wait over a year for the next season. But it is what it is. Rick and Morty does us the same way.


      • BTW, for a while I theorized that Logan was MiB and William was concealed deep within the park (in the “maze”, perhaps) engineering the upcoming robot revolution and Logan was trying to find him (as MiB) but I gave that up completely about a quarter into the 9th episode.


      • “Hate to see Ford get killed. Hopkin’s was so great on the show. ‘

        I think making it a fixed commitment as opposed to an unlimited one is what allowed them to get actors of Hopkins’ caliber to begin with.

        And I also like it when they can write story arcs for characters with an definitive end already set. Makes the writing tighter vs having to leave things open ended based on whether or not there’s going to be a next season.

        Liked by 1 person

        • In the case of Westworld, I know they stopped production for several months to develop the overall story arc for the entire life of the show. So I’m not sure that’s the biggest issue, there, as the ability to be able to offer Hopkins a fixed commitment. Ed Harris is signed up for season 2, at least. I assume Jeffrey Wright is going to be present next season, too, as the creators have said the show will be about the same basic characters every season.

          I’m guessing some tertiary characters or secondary characters may play bigger roles in future seasons. There’s been lots of hints that father Abernathy may become an important figure in later seasons. I’m guessing Stubbs and Elsie may become more central characters in future seasons, as well, as I’m assuming neither of them are dead.


  3. Adam Corralla recently did a bit on his podcast about why he watches commercials, while everybody around him tells him that they’ve got DVR now and never watches commercials.

    He says that nothing tells you about where a culture is like, like their commercials. The examples he cites are this Yuban commercial from the 70s:

    He laughs at the whole idea of a wife making her husband coffee in this day and age. But says it represented where the culture was at, for the most part, at the time.

    This is reflective of present day advertising, where the argument is owning a Toyota SUV means you are compassionate:

    He goes on to talk about how Subaru commercials are about love now, when car advertisements used to be all about ride, truck commercials used to be about ground clearance, etc. Just an interesting POV.


  4. So what do you guys think about the Taiwan call? Why are we supposed to doing what China says in that regard? How is that different from doing what Russia says?

    Why wouldn’t we talk to Taiwan?


    • I’m glad that the usual suspects have their hair on fire about it.


    • I suspect over the next 4 years we will see a lot of things that “just aren’t done” being done. And we’ll probably discover that a lot of them “just aren’t done” simply because no one bothered to do them before.

      I remember hearing about some social experiment with monkeys that was done once. (Could be apocryphal, and I may have some details not quite correct, but it sounded like it should have happened even if it didn’t.) The experiment apparently involved setting up cage with a banana hanging from the ceiling, and boxes that would allow a monkey to climb up and grab the banana. But if the monkey did grab the banana, the monkey would be sprayed with a jet stream of water. After introducing several monkeys to the cage, and having several of them sprayed with water, the monkeys all just stopped trying to grab the banana, knowing what would happen. Then they started to introduce new monkeys, one at a time, to the cage every so often. And the same thing would happen each time. Not knowing about the water spray, the new monkey would naturally try to climb up to grab the banana, but all the other monkeys would work and fight to prevent the new monkey from doing so. After a while, the new monkey would just stop trying to grab it, even though they had never been hit with the water. Then they started taking monkeys from the original group out, until all that was left were monkeys that had never actually seen what happened when the banana was grabbed, but instead had only been prevented from grabbing it by the other monkeys. Then they started to reintroduce new monkeys. Sure enough, all of the remaining monkeys would work and fight to prevent the new monkey from grabbing the banana. even though they had no idea why they were doing it – and even though the spray had been turned off and any of them could have just grabbed the banana and had a nice meal.

      I think with Trump we have a new monkey that is either too dumb or too smart not to ignore the other monkeys and grab the banana so he can see for himself what happens.

      Liked by 1 person

      • Oh God. Those poor monkeys. They turned them into Safety Moms.

        Sometimes you need to grab that banana because it’s going to hurt. Or the pain is worth it.


    • I think Theissen is spot on:

      “Trump’s call with the Taiwanese president sent a message not only to Beijing, but also to the striped-pants foreign-policy establishment in Washington. It is telling how so many in that establishment immediately assumed Trump had committed an unintended gaffe. “Bottomless pig-ignorance” is how one liberal foreign-policy commentator described Trump’s decision to speak with Tsai. Trump just shocked the world by winning the presidential election, yet they still underestimate him. The irony is that the hyperventilation in Washington has far outpaced the measured response from Beijing. When American foreign-policy elites are more upset than China, perhaps it’s time for some introspection.

      The hypocrisy is rank. When President Obama broke with decades of U.S. policy and extended diplomatic recognition to a murderous dictatorship in Cuba, the foreign-policy establishment swooned. Democrats on Capitol Hill praised Obama for taking action that was “long overdue.” Former President Jimmy Carter raved about how Obama had “shown such wisdom,” while the New York Times gushed that Obama was acting “courageously” and “ushering in a transformational era for millions of Cubans who have suffered as a result of more than 50 years of hostility between the two nations.”

      But when Trump broke with decades of U.S. diplomatic practice and had a phone call with the democratically elected leader of Taiwan, he was declared a buffoon.”

      This isn’t about Trump vs China or China vs Taiwan. This is about Trump vs the establishment, again.

      And also once again it shows the value of Trump being able to Tweet around the press. The “why can we sell them billions in arms, but I can’t accept a phone call” Tween was perfect.

      Every time they have one of these hysterical reactions, it benefits Trump.

      Liked by 1 person

      • On the phone call, who called who?


        • Supposedly the Taiwanese President called Trump to congratulate him on the election, but there seems to be some dispute there in the reporting.

          I think the difference is this time Trump took the call vs past presidents.


        • jnc:

          I think the difference is this time Trump took the call vs past presidents.

          That is what I was wondering…did Bush and Obama get a call that they ignored? Seems rather ungracious if you ask me.


        • Or they handed it off to an aide. As Trump noted, the billions in arms sales was what mattered.

          He’s just dropping the pretense.


    • “I suspect over the next 4 years we will see a lot of things that “just aren’t done” being done. And we’ll probably discover that a lot of them “just aren’t done” simply because no one bothered to do them before.”

      Precisely. Why exactly is the 1979 One China policy so sacrosanct in 2017?

      Liked by 1 person

      • And I thought “because this is the way we’ve always done it . . . at least, since 1979” was the conservative position. 😉

        That’s my question also. Why is the policy so sacrosanct? And can we assume China may take cues as to how to respond from our own press and foreign policy establishments freak out?

        Essentially, attempting to undermine Trump right before claiming Trump is undermining Democracy?


      • jnc:

        Why exactly is the 1979 One China policy so sacrosanct in 2017

        The Electoral College? Antiquated and must go!

        One China Policy? Now and forever!

        Liked by 1 person

    • Good piece on the Trump Taiwan call:

      “America’s overreaction to Trump’s Taiwan call is dangerous
      By John Pomfret
      December 5 at 12:27 PM”


  5. This is a perfect example of the MSM and pundits not getting it:

    “DAVID BROOKS: Well, first of all, there will be 1,000 people who will have Christmas. That’s true. But there will be a lot of people who will be paying for that.

    Second of all, you will have a less efficient economy, so there will be less job creation. Third, when companies ship jobs overseas, they don’t like just take the factory and then move it abroad. They gradually do what is in their economic best interests, which is to scale back production here or flatline it and scale it up there.

    If the economics is still favoring a job in Mexico over a job in Indiana, Carrier will still be doing it, but they will be getting a lot of taxpayer money, and we will have a sludgier economy.”

    None of what David Brooks said is self evidently true. If anything it’s easier to make the opposite case, namely that a more efficient economy has fewer jobs and that what Carrier was doing was exactly taking the factory and moving it abroad.

    The benefits of a more efficient economy are higher production and higher standards of living, not automatically creating more jobs. Embracing a policy make work & middle men is less productive and efficient but creates more jobs.

    Liked by 1 person

  6. Worth a read on Trump & Carrier.

    “Donald Trump’s Carrier deal could make American capitalism better
    By Steven Pearlstein
    December 2

    Determined not to let any Trump action go unchallenged, the media has been full of comments from economists (including Larry Summers and Justin Wolfers) that Donald Trump’s intervention to save jobs at Carrier’s Indiana facility is just a showman’s one-off — that it can’t be easily replicated and will be ultimately ineffective in changing the job prospects in a country that creates and destroys a couple of million jobs every month. This is simply not the way things are done in a country that values free markets and the rule of law.

    Methinks they are missing the story.”

    Liked by 1 person

    • Donald Trump understands better. He knows that he and his new commerce secretary will have to engage in a few more bouts of well-publicized arm twisting before the message finally sinks in in the C-Suite. He may even have to make an example of a runaway company by sending in the tax auditors or the OSHA inspectors or cancelling a big government contract. It won’t matter that, two years later, these highly publicized retaliations are thrown out by a federal judge somewhere. Most companies won’t want to risk such threats to their “brands.” They will find a way to conform to the new norm, somewhat comforted by the fact that their American competitors have been forced to do the same.

      That’s what I was thinking, but I am not a professional economist. But I felt like the critics were missing the point, too: it’s not something he has to do personally with every company in the country. 5 times should be enough to make the point, with concomitant tweets and youtube videos.


    • He is forgetting about the hostile takeover. That is the enforcement mechanism for maximizing shareholder value.


      • I don’t think he is. He’s just pointing out that there’s probably a middle option between the corporate bloat of the 1970’s and early 1980’s and the relentless outsourcing and offshoring today.

        Pearlstein has argued previously that there are other stakeholders in a corporation besides just the shareholders and that maximizing shareholder returns is not in fact always required as a fiduciary duty to the exclusion of other considerations.


  7. Are we going to get an analysis like this about the number one item in the federal budget, healthcare spending? Like, are we going to figure out how many desk jobs Medicare supports versus how many it actually needs?


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