Morning Report: Productivity Rises 12/6/16

Vital Statistics:

Last Change
S&P Futures 2207.5 3.0
Eurostoxx Index 343.2 2.0
Oil (WTI) 50.7 -1.1
US dollar index 91.0 0.0
10 Year Govt Bond Yield 2.39%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.11

Stocks are lower this morning on no real news. Bonds and MBS are up.

Non-farm productivity improved to 3.1% in the third quarter, breaking out of a long slump. Unit labor costs increased 0.7%. Note that productivity and costs have been kind of oscillating around the zero point for the past several years. This is why wage growth has been going nowhere. New policies in terms of regulatory relief and tax reform could help improve productivity according to St. Louis Fed Head James Bullard.

Donald Trump has been discussing a potential 35% tariff on good imported from companies that offshore jobs. Not sure if this is even going to be legal, let alone legislatively possible. Tariffs are generally good for no one, except perhaps union workers. The last time we had a cocktail of tariffs and Fed tightening (1930), the economic result was nothing to write home about. While Reagan did impose tariffs against Japan, the results were mixed at best.

Economic confidence improved markedly in November, according to Gallup and is now at post-crisis highs. It will be interesting to see whether this translates into higher holiday spending. Separately, it could bode well for the Spring selling season, which is just around the corner (basically starts around Super Bowl Sunday).

economic confidence gallup.PNG

Luxury homebuilder Toll Brothers announced better than expected numbers this morning. Deliveries were up 29% in dollars and 22% in units, however we are seeing a moderation in inflation. Average selling prices rose 5.5% to $834k, which is well below the double-digit ASP inflation we have been seeing, especially at the high end. They discussed the Millennials and how they are targeting them: “With the millennial generation now entering their thirties and forming families, we are starting to benefit from the desire for home ownership from the affluent leading edge of this huge demographic wave. In FY 2016, approximately 22% of our settlements included one primary buyer thirty-five years of age or under. (emphasis mine). We are currently courting these customers with our core suburban homes, urban condos and rental apartment properties. We are also introducing a new product line, T|Select by Toll Brothers, which incorporates the elegance and style of a higher-end Toll Brothers home but with fewer structural options, a quicker delivery time and a slightly lower price.”

Home prices rose 1.1% MOM and are up 6.7% YOY, according to CoreLogic. The coasts remain largely overvalued, while the interior is mainly undervalued.

While rising rates are creating worries in the mortgage banking sector of the economy, banks have been on a tear since the election, outperforming the S&P 500 by 11 percentage points. This means the Street is forecasting a big increase in credit and profitability which should offset some of the doom and gloom amongst mortgage bankers. The “tell” will be the return of the private label securitization market, and the follow-on return of the first time homebuyer. Shops that focus on purchase activity should be optimistic about the future.

39 Responses

  1. Frist!

    “Productivity Rises”

    Thanks, President Elect Trump!


    • That’s o of my favorite songs.

      In the words of the esteemed Mr. McWingNut, I denounce myself.

      And what’s in the drink? Alcohol.

      Liked by 1 person

      • nova:

        That’s o of my favorite songs.

        Mine too. That’s what really drew my attention.

        And what’s in the drink? Alcohol.

        If we wanted to, it would be easy to debunk their absurd interpretation. He actually does ask for consent (“Mind if I move in closer”), and she willingly stays (“maybe just a half a drink more”), and her supposed reluctance to stay is based entirely on what others expect (mother, father, sister, aunt), in the context of traditional, societal views of how a girl is supposed to act (“The neighbors might think”). A real feminist should be happy she stayed and thumbed her nose at judgmental societal norms.

        But for goodness sake…it’s a lighthearted song about how romance worked in the 1940s, not freakin’ date rape. Gimme a break.

        Liked by 1 person

        • it’s like you actually listened to the song in the context of when it was written. how Originalist of you.

          There’s an actual song about data rape that Sublime did. Called Date Rape.


        • nova:

          There’s an actual song about data rape that Sublime did. Called Date Rape.

          Very subliminal.

          Liked by 1 person

        • There is no question of consent being pre-granted in the song. Any sane woman would do anything Dean Martin asked, if he did it in semi-drunken song.

          One of my favorite versions is actually by Leon Redbone and Zooey Deschanel for the movie “Elf”


    • This is incredibly erotic. Chicks dig legaleze, yo.

      Liked by 1 person

      • I think I might stay (you need to sign this consent form)
        I’d like a drink (please, you need to stay sober)
        Because intoxication invalidates . . . any signed form of consent!
        You know, I’m thinking I might go . . .


    • I’ve also wanted to re-write that song to reflect a more modern sensibility (or, at least, my sensibility). I think everybody should be okay with it.

      I really can’t stay (then get the hell out)
      I’ve go to go away (the door’s right there)
      This evening has been (glad you came by)
      So very nice (I’ll get your coat now hit the door)

      My mother will start to worry (wait, you live with your mother?)
      My father will be pacing the floor (why didn’t you say that before?)

      So really I’d better scurry (sounds good why wait?)
      But maybe just a half a drink more (no, you’ve got to go home)

      The neighbors might think (I’ve met them; not likely)
      Say, what’s in this drink? (give me my glass back, please)

      I wish I knew how (I’ve got some TV to watch now)
      To break this spell (by leaving that usually works well)

      I ought to say no, no, no sir (I thought you were gonna go go go now)
      At least I’m gonna say that I tried (do or do not, there is no try)

      I really can’t say (so go away)

      Whaddaya think? Updated for everybody.

      As for the article:

      The couple also said they hoped the song would raise awareness of the need for consent, given the problem of sexual assault on college campuses.
      “It’s not just a rare thing — it happens all the time, everywhere.

      All the time. Everywhere. Constantly. Predatory men, attacking women ALL THE TIME.

      Eh, I’m with the misanthropes. It’s time to stop reproducing.


    • One the stories linked to, from that article, is the oddly appropriate “Sex Is About To Get A Whole Lot Less Fun”

      Why, because:

      That’s because Trump has tapped Tom Price, an anti-abortion and anti-contraception congressman from Georgia

      Really? Tom Price has come out against contraception? Where?

      How is this stuff not fake news?


  2. Scott Adams latest on filling cabinet positions based on how well it supports the brand. I suspect he is correct that this is how Trump’s decision making process is working.

    Liked by 1 person

  3. Vox shows the absurdity of the media’s double standards.

    “To Ellison’s defenders, these attacks aren’t merely misguided — they reek of Islamophobia. Ellison was the first Muslim American ever elected to Congress, and he’s now running to lead the opposition party to Donald Trump. The fact that he’s facing unsubstantiated accusations of harboring secret animus toward Jews, in their view, reveals more about the bigoted suspicion of Muslims than it does about Ellison.”

    There’s plenty of direct quotes available about Ellison. The argument that the allegations are unsubstantiated isn’t a fact at all.

    The contrast with the treatment of Bannon is telling.


    • I’m beginning to transition from referring to the MSM as biased news to fake news. Because it’s really becoming less manipulating facts and quotes and omissions to build a narrative, and outright lying. Which I know there has always been some of, but it seems to be an an upwards trajectory, where reporting is becoming indistinguishable from opinion which is becoming indistinguishable from outright fiction.

      Maybe it’s always been that way and I’ve been giving them too much credit.


    • It was guaranteed to happen. The problem, to a huge swath of the left, is that they aren’t being vociferous and editorial enough, often enough, or loud enough. They consider such suggestions that objectivity is desirable to be practically traitorous.

      NYT will continue to be the Democrats’ Paper of Record.


    • jnc:

      An elector scheme that might actually have a shot, at the cost of infuriating half the country.

      A brilliant idea that won’t be embraced because the D’s don’t actually believe all their own rhetoric.


    • As Alexander Hamilton explained, the electoral college provides a backstop in the event voters select a dangerously unfit candidate.

      Fake news. That’s not what Alexander Hamilton “explained”. He didn’t ever want a popular vote. The people of the state (or the state legislature) were to choose electors, and the electors would choose the president. One and done. He never thought the people could be trusted (i.e., majority vote), not to mention it was not a practical system at the time. If it had been up to him completely, it’s unlikely he would have wanted the people involved in the process of selecting a president at all, and would have been fully supportive of a powerful, monarchical, autocratic president.

      This is contemporary journalism. I think the electoral college should be there to prevent people like Trump from becoming president, so that’s what I’m going to say it’s there for, and quote Alexander Hamilton so it sounds like that’s what he said. Hamilton is big on broadway right now. Winning!

      If Democrats believe Trump poses a unique threat to the republic

      I imagine they do. If they don’t believe Trump poses a unique threat to the Democratic party, they are delusional. They should do it for that reason alone.


    • Yeah. Everyone is supposed to have a deep understanding of fake news now (even though, as this story obliquely points out, reporters are not exactly immune to manufacturing their own quasi-fake news if it fits the narrative). I’m not surprised Flynn doesn’t fact check everything. It’s been tough for me to rap my mind around how dominant both conspiracy theorizing and fake news has become, especially in the past year or so.

      Flynn may have other issues, but I give him a pass for this one. His son, too, to some extent, but he really needs to drop it.


      • The Fix actually bothers to get to the bottom of it:

        “But in this case, it is not fair to tie Flynn Sr. directly to what happened Sunday afternoon in Washington. Critics will argue this is a distinction without a difference — that Flynn fomented rumors that contributed to the perception that the Clintons were involved in all manner of unholy things. But when it comes to combating fake news, it’s worth being as specific and accurate as possible.”

        Waldman just repeats the lies. He’s no different than the fake news he’s condemning. I think what really bothers Waldman is Flynn’s view on the threat posed by the Islamists, but he knows that won’t have traction with the general public so he as to go to 11 with the PizzaGate BS.

        What’s really funny is why they think that Trump would give a fuck about who they think is qualified for an appointed position, given that the person they most view as not qualified for public office is Trump himself.

        Liked by 1 person

      • The problem with all the young folks and fake news is that they [you?] were not around to listen to Bill Stern’s evening sportscasts on the radio. From Stern I learned that Anchors Aweigh, The Notre Dame Victory Song, and She’s a Grand Old Flag were all written in one evening when George M. Cohan was MC at a football awards dinner where the winners from Navy and ND were musicians, so he took them up to his hotel room to write songs.

        Also, I learned that Lincoln did not die right away, or without speaking, but whispered to Abner Doubleday on his deathbed the words that would inspire him to invent baseball as a national pastime to bring the nation together.

        Edison was deaf because he got beaned in a sandlot baseball game by Jesse James.

        Circa 1951, all 8 yos in America were full of useful historical anecdotes that involved sports and giants of American history and culture that must have bedeviled our schoolteachers. He had a new whopper every night, dramatically delivered, in a style I can still mimic.

        At least mostsome of the stuff he said about Ted Williams was true. TW was the man John Wayne imitated in the movies.

        Liked by 1 person

        • I was not around, it is true. 😉

          But all those facts you mentioned sound legit.


        • You liked those? I never heard this next one but it was one my dad and my uncle used to laugh about. He apparently told a story about a guy who had his legs and arms amputated and then won a Big 10 swim championship.

          You would have loved this guy. He had a male chorus and an organ to help him dramatize his whoppers.

          He was easily the most popular sportscaster in America and he did the sports newsreels in the movies.

          Liked by 1 person

  4. McWing, did you read this Scott Adams post?

    If you ask me how scared I am of climate changes ruining the planet, I have to say it is near the bottom of my worries. If science is right, and the danger is real, we’ll find ways to scrub the atmosphere as needed. We always find ways to avoid slow-moving dangers. And if the risk of climate change isn’t real, I will say I knew it all along because climate science matches all of the criteria for a mass hallucination by experts.

    Lord, I love that man. I know Scott’s not his biggest fan but I thought I already loved him just from Dilbert. Now, it’s a total man-crush. I’d totally bromance him.


    • KW:

      I know Scott’s not his biggest fan…

      I actually think his political analysis is pretty interesting and compelling, for what it is. I just think that what it is is something less than what his big fans seem to think it is.

      To me it is interesting purely as an academic exercise. But there seems to be a sense among his big fans that if other people "got it" the way Adams does, particularly the media, it would and should somehow alter their behavior. And I just don't understand that. Knowing that Trump is a Master Persuader and one of the greatest CEOs of all time, and viewing his behavior through those "filters", doesn't change, for example, the fact that the Carrier deal is classic crony capitalism. And just because someone in the media, rather than praising Trump for his masterful CEO persuading tactics, points out that the deal was indeed crony capitalism and therefore should raise objections, doesn't mean that they "don't get it". It just means that they are focused on the substance of what Trump does as a matter of national interest, rather than simply on the propaganda effects of what he does as a matter of Trump’s personal political fortunes.

      And as an actual participant in the political process myself, I personally think the substance of what he does as it relates to the national interest is far more important information to know and understand. Which is the one thing I actually think that Adams gets wrong in his analysis. He says that the substance, the facts, is irrelevant to how people respond to Trump. He is probably right with regard to a crucial demographic of people, but as a more general matter I think he is demonstrably wrong.

      BTW, with regard to his climate change comments, I couldn’t agree more. I think he has it exactly right.


      • @scottc1: “To me it is interesting purely as an academic exercise. But there seems to be a sense among his big fans that if other people “got it” the way Adams does, particularly the media, it would and should somehow alter their behavior.”

        Can’t speak to the general population, but I don’t think most people are going to “get it”, and, if it was broadly gotten, it would be used primarily to create an environment of more manipulation through such persuasion techniques, not less. But that literature on persuasion has been coming out en masse since the beginning of the twentieth century. A lot of seminal stuff came out in the 80s and 90s. If people were going to get it they would have gotten it by now.

        “And just because someone in the media, rather than praising Trump for his masterful CEO persuading tactics, points out that the deal was indeed crony capitalism and therefore should raise objections, doesn’t mean that they “don’t get it”.”

        In isolation, that’s true. I think it’s the more general approach of the MSM Adam’s is addressing: the headlines and most of the content are about saying that the deal with Carrier is bad all the way around, which comes out like: look at all the good reasons we’re saying keeping jobs in America and keeping our voters employed is bad!

        From a strictly policy/political-junkie take, it makes sense. The clips on most of the media shows, and most of the pundits, are busying using a lot of words to say Trump shouldn’t keeping American jobs in America, because who cares if American’s have jobs, the world is flat, dammit. Adam doesn’t deconstruct the crony capitalism, I’m guessing, because he believes such things are constant and he doesn’t really care.

        It seems to be to be about, in many ways, not just how Trump brands such deals, but how the media is so easily manipulated into making the argument that keeping jobs in America is a bad thing. They have logical reasons for why such crony capitalism is bad, but the emotional heft of the message is: Trump is bad for keeping jobs in America. That’s a bad thing.

        I made the argument at PlumLine that the correct critique would be exclusively about the other jobs, in terms of making a persuasive argument. The critics should be saying: But these jobs are still going to Mexico, this plan is still losing 300 jobs. Can’t you do something about that, Mr. Trump? Can’t you?

        And it shouldn’t be that hard to make the argument that he isn’t doing enough to save jobs. They don’t care about crony capitalism. Their behavior during the Obama years made that perfectly clear. So they should have no moral objection to saying Trump just isn’t doing enough to save even more jobs, that he’s letting Carrier just get away with keeping a handful of jobs here while letting hundreds more still go away.

        Yet, with a wonkishness that is both hypocritical (they were all in for Solyndra and TARP and on and on) and blind to how they sound when they believe they are making these awesomely persuasive critiques, they are actings as a PR arm for Trump.

        Which is, actually, to me, a much, much more interesting story that politicians being politicians and Trump being Trump.


        • KW:

          I think it’s the more general approach of the MSM Adam’s is addressing

          Their approach to what exactly, and what approach would you or Adams recommend they adopt? I am genuinely curious. Do you seriously think that the media should simply stop reporting on policy because “facts don’t matter” to people, and spend all its time reporting on how brilliant or not brilliant the tactics being used are as propaganda techniques? I seriously don’t understand what you and Adams think the rest of the media “should” be doing.

          From a strictly policy/political-junkie take, it makes sense.

          It seems to me that it makes absolutely no sense from a policy junkie’s point of view. Policy junkies actually think that policy matters. Adams’ take completely ignores policy as being irrelevant. “Doesn’t matter what policy Trump is selling, just look how well he is selling it!!!”

          To me it makes sense only from a campaign manager’s or a propagandist’s point of view. “I don’t care what you are trying to sell, but I can tell how best to trick people into buying it.”

          The clips on most of the media shows, and most of the pundits, are busying using a lot of words to say Trump shouldn’t keeping American jobs in America, because who cares if American’s have jobs, the world is flat, dammit.

          I’m smart enough to understand that, even if that is how some politically disengaged people take it, that isn’t what is actually being said. I assume that everyone else here is as well.

          …and blind to how they sound when they believe they are making these awesomely persuasive critiques…

          As an active participant in the political process who needs to be making my own decisions about who to vote for and what policies to prefer, what is important to me is not how awesomely unpersuasive the critiques might be to other people who probably won’t be reading them anyway, but rather whether or not the critique is valid as a substantive matter.

          I am just bewildered by people who have spent the last 5 years with me arguing about the merits of this or that policy now suddenly and enthusiastically embracing the view that policy is irrelevant, and anyone who spends time talking about policy “doesn’t get it”. I, er, don’t get it.


        • KW:

          I think perhaps my disagreement with you over Adams can be reduced to the following:

          I think Adams’ analysis is compelling as an explanation of Trump’s success. I do not think it is compelling as a critique of media coverage of Trump’s campaign. Nothing that Adams says, as correct as he may be, suggests to me that the media reporting on Trump or Trump’s policy initiatives should be different.


        • @scottc1: ” I seriously don’t understand what you and Adams think the rest of the media “should” be doing.”

          Other than reporting data without bias, I have no opinion on what the media should be doing. But I find Adam’s analysis of what they are doing pretty much dead on. I do think they are missing something, but folks like Trump (who I am convinced is acting intuitively, rather than strategically) are hard to quantify in terms of the standard narrative.

          So I think they miss when they are being effectively manipulated, for the most part. Of a few folks in the press talk about it.

          ” Adams’ take completely ignores policy as being irrelevant. “

          I think it’s relevant insofar as whether or not a policy actually comes to fruition, or not. For the most part, when it comes to winning elections or building a narrative for the press and winning the hearts and minds of most voters, I don’t think policy is that important. But what sways them emotionally is important in regards to what policies come to fruition, and who is pushing them.

          “I assume that everyone else here is as well.”

          I don’t disagree, but it is fascinating to me how many people in the MSM, the pundit class, etc. do seem to be missing it. And it is interesting to me to observe if they are getting it profoundly wrong, and it matters at election time, or if they are getting it wrong but it doesn’t really matter and nobody will care ultimately. Generally, I’ve found the MSM is not terribly accurate or unbiased, but it doesn’t seem to matter excessively, and the people they are hostile towards don’t ever seem to successfully use their own wait against them. Donald Trump appears to be a different kind of entity and this regards, which may make the next 4 years different from what we might typically expect during a Republican presidency.

          “I am just bewildered by people who have spent the last 5 years with me arguing about the merits of this or that policy now suddenly and enthusiastically embracing the view that policy is irrelevant”

          I think we’re talking over each other, then. I’m not suggesting that policy is ultimately irrelevant. But in terms of who wins elections and who actually accomplishes policy goals, I think it is mostly irrelevant. I don’t think many people in DC are objectively evaluating policies on their merits when they are voting for them. I don’t think voters do, either. I don’t think Trump won on the strength of his policy ideas, nor do I think HRC won the popular vote on the strength of her policy ideas. The post-Trump-victory protests haven’t been about his espoused policies, such as they are, but about fictional future dystopias they convince themselves he represents.

          And I don’t think that’s new, but what seems new to me is Trump. He seems to have a natural, almost entirely non-strategic, ability to manipulate the left (or, his opposition, generally) into saying things and taking positions that make them look awful while convincing themselves they are doing the reverse. I find this a fascinating turn of events, and worthy of analysis.

          This is no way suggests that I think in general that policy and the boring nuts-and-bolts of governing or objective issues analysis isn’t valid and important. I don’t.

          But I find it hard to argue that Trump won on policy, or is manipulating the press so easily due to his policies. I’m sure much of the criticism of the Carrier deal is entirely valid in it’s own right, but it’s interesting to me that so much of it comes off as sour grapes or outright hostility to American workers (with a dash of globalist fetishism thrown in), and those providing many of those critiques are doing it with the intention of undermining Trump. It’s like watching people drive backwards while believing they are driving forwards. Some feel a compulsion to wonder just what’s going on in their brains that they think this is a good approach.

          And I’m not saying people who spend time paying attention to policy don’t get it. Although I think some of the folks in the MSM have an agenda beyond objective analysis of policy, and are trying to hobble The Donald and perhaps elevate the Next Great Liberal Hope. Those are the folks who don’t get it. And given they are generally regarded (or, at least, self-regarded) as the Smartest People in the Room, and objectively devoted to Science and Facts™, and interesting to watch and analyze.

          I do think that, most of the time, advancing a policy is less about the policy than the presentation. Most of the people I’ve read are trying to advocate for an ideology, and they are doing such an awful job of it that I’m fascinated to try and understand how Trump is making this happen.


        • KW:

          But I find Adam’s analysis of what they are doing pretty much dead on.

          Maybe I haven’t read enough of him, but most of the analysis I have read has been him analyzing what Trump is doing, not what the media is doing. From what I have seen he just dismisses the media as “missing the story” because it isn’t focused on the same story that he is.

          For the most part, when it comes to…winning the hearts and minds of most voters, I don’t think policy is that important

          Is it important to you as a voter?

          An open question: If policy doesn’t matter so much to most voters, ie winning votes is primarily about persuasion techniques, and Trump is a Master Persuader, how is that most voters, 54% of them, were not persuaded to vote for him?


  5. On the Air Force One contract:

    “It would not be unprecedented for a new president to scrap a major defense contract over cost concerns soon after taking office. Trump need only look to President Obama for guidance. In May 2009, the Obama administration cancelled a contract that the Bush administration had signed with Lockheed Martin to build a new fleet for Marine One, the presidential helicopter. The price had ballooned to $13 billion.

    Then as now, the new president—along with Defense Secretary Robert Gates—wanted to send a message that he was serious about tackling wasteful spending at a time when the Obama administration was implementing an $800 billion economic stimulus package. Trump also wants Congress to pass an infrastructure bill that, he has said, could cost as much as $1 trillion.”

    Liked by 1 person

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