Morning Report: Dow 20,000 1/25/17

Vital Statistics:

Last Change
S&P Futures 2284.3 10.0
Eurostoxx Index 366.3 4.4
Oil (WTI) 52.8 -0.4
US dollar index 91.1 0.0
10 Year Govt Bond Yield 2.49%
Current Coupon Fannie Mae TBA 102.1
Current Coupon Ginnie Mae TBA 103.2
30 Year Fixed Rate Mortgage 4.16

Global stocks are rallying on no real news. The Dow hit 20,000 this morning (CNBC is probably breaking out the champagne as we speak) Bonds and MBS are down on the “risk on” trade.

Mortgage applications increased 4% last week as purchases rose 6% and refis rose 0.2%. This is a 7 month high for purchases.

Home prices increased 0.5% in November, and are up 6.1% YOY, according to the FHFA House Price Index. Geographically, the Pacific and Mountain states continue to lead the way, while the East Coast lags, however prices are decelerating out West and accelerating in the East. Prices have more than recouped the losses from the bubble years and are hitting new highs.

fhfa-regional

Further slicing and dicing the home price data, the luxury end of the market continues to lag, while the lower price points are accelerating. Know where is getting killed in this segment? Washington DC. This shift makes sense as the Millennial generation is beginning to reach the family-forming stage and needs starter homes. Starter homes should be a fertile area for the builders over the next decade or so. We are even beginning to see a reduction in the NIMBY-ism in places like California, which face acute housing shortages.

Treasury Secretary Steve Mnuchin supports an independent central bank and is not a member of the “audit the Fed” crowd. Congressional Republicans have been pushing for more Congressional oversight of monetary policy, however independence from politicians is critical for the Fed to do its job. Politicizing the Fed is a recipe for inflation because no politician likes a recession and sometimes they are necessary to suppress inflation. In fact, the last time Congress got involved with monetary policy was the dual mandate, which requires the Fed to minimize unemployment while controlling inflation. Sounds like a reasonable policy, however in practice it has resulted in asset bubble after asset bubble.

House flipping is back to bubble-era levels. Home flippers accounted for 6.1% of sales in 2016, the highest level since 2006 when the number hit 7.3% of sales. Scarce inventory is making a good environment for house flipping, with strong home price appreciation. Eventually builders will begin to meet this demand, however for the moment, home price gambling is a big trade in places like Las Vegas.

Donald Trump met with automotive CEOs yesterday to talk about regulation and bringing jobs back to the US. He cited environmental regulations as a big disincentive to manufacture in the US. Note that there are currently about 300,000 regulations controlling manufacturing in the US. Separately, Trump allowed the permitting process for the Keystone XL and Dakota Access pipelines to begin again.

38 Responses

  1. “India banned 86 percent of its cash in November. It’s causing suffering for the poor.
    India’s experiment with rooting out corruption has come at a cost.
    Updated by Zeeshan Aleem
    Jan 25, 2017, 10:30am EST ”

    http://www.vox.com/world/2017/1/25/14375372/india-demonetization-cash-ban-modi-economy

    AKA India took policy advice from Vox.

    http://www.vox.com/new-money/2016/10/20/13321168/cash-crime-hundreds-rogoff

    Liked by 1 person

    • There will always be an underground economy, and the government’s attempts to control it will invariably create more problems than they solve.

      Liked by 1 person

  2. Liked by 2 people

    • We don’t want to investigate or require an ID because there might theoretically be some old minority woman why managed to get through life without driving, flying, buying cigarettes or beer, going to school, or having a job.

      Cause we can’t disenfrachise her.

      Liked by 1 person

  3. There’s this “we’ve got them right where we want them” attitude from the progressive press that i don’t get.

    Liked by 1 person

  4. No idea if this is really true, but….

    Hillary Clinton is considering another run for president – and is mulling the idea of launching a television talk show to soften the ground for 2020.

    Clinton would be 73 years old if she were to challenge President Donald Trump – again – and win the White House the next time around.

    Launching a TV program now would make her America’s second-oldest female news or talk show host on the small screen, after only Joy Behar of ‘The View.’

    Author Ed Klein wrote Wednesday on his blog that according to a Clinton insider, the former secretary of state is open to the idea.

    This part made me laugh:

    She thinks being the host of a popular TV show would energize the Democratic Party base and her tens of millions of fans,’ the unnamed source said, according to Klein.

    As if hosting a “popular” TV show is just a matter of deciding to do it. It’s like that old Steve Martin joke about how to make a million dollars without paying taxes: Step 1 – make a million dollars.

    http://www.dailymail.co.uk/news/article-4156564/Hillary-television-groundwork-White-House-run.html#ixzz4WnlwUiQN

    Liked by 1 person

    • *pulling out hair*

      NooooOOOOOOOOOOooooooooo!!!!!!!!!!!111!!!!!eleven!!

      Liked by 1 person

      • by 2020, it will certainly be her turn

        Liked by 1 person

        • That’s not nice (to me).

          Like

        • What’s the slogan going to be this time? “This Time I’m Really With Her”?

          If she runs again, and doesn’t get different people to run her campaign, she’s going to lose (again). And hopefully her campaign slogan is more “hope and change-y” or “Make American Great-y” than her “I’m With Her” version of “I Like Ike”.

          Like

      • Mich:

        *pulling out hair*

        It's pretty hard to fathom the depth of narcissism and hunger for power that drives anyone to seek the presidency in the first place. But to do it again after being rejected twice, the second time in such a thoroughly humiliating manner? At the age of 74? I have to assume this story is idle gossip. She wouldn't have another go….would she?

        Liked by 1 person

        • it’s like an athlete that doesn’t know its over.

          Like

        • nova:

          it’s like an athlete that doesn’t know its over.

          As POTUS would tweet…sad!

          Like

        • it’s like an athlete that doesn’t know its over

          Or Michael Jordan taking up baseball

          Like

        • She might. I don’t think the health concerns are irrational, and 4 years is a longer time than some people think, especially in your 70s and later. But she could run again and potentially win. The “I can’t wait until she’s president!” millenials who no doubt protested but couldn’t be bothered to show up to vote probably will vote because there’s a fresh example of what happens when they don’t. Some disaffected BernieBros could come back to the fold. She could replace her previous campaign team with people who want to run a campaign aimed at a broad-swath of voters and what she’ll do for them, abandoning the “I’m With Her” ethos os the 2016 campaign, which was awful, but was still enough for her to win a majority of the popular vote and might have gotten her the electoral college had she shown some of Trump’s campaign persistence.

          It would be the largest-popular-vote-win-but-still-lost-the-electoral-college thing that makes her run.

          The problem is, primaries are very, very hard on candidates who lost the race for the presidency the last time around. It would be an uphill battle for her to even get close to the nomination.

          Like

        • KW:

          It would be an uphill battle for her to even get close to the nomination.

          Exactly. In a two person, partisan race anything can happen (as we have seen!). But I just cannot imagine the Dem party machinery allowing her to win the nomination again.

          Liked by 1 person

        • @kjmmurphy: “Or Michael Jordan taking up baseball”

          And that seemed like such a good idea, too.

          Like

    • “She thinks being the host of a popular TV show would energize the Democratic Party base and her tens of millions of fans,’ the unnamed source said, according to Klein.”

      If you cant’ beat him, join him. Clearly what was missing is that Clinton wasn’t as much of a celebrity as Trump was.

      Liked by 1 person

      • Trump, Bernie almost took it except for the system being rigged in HRC’s favor . . .

        Eh, populism isn’t it. The economy? Eh. Jobs? Meh. It’s gotta be a lack of a reality television show. Trump had one of those.

        Like

    • Air America.

      That’s them just deciding to creat a hugely successful AM talker.

      Like

  5. Calexit on the table:

    One in every three California residents supports the most populous U.S. state’s peaceful withdrawal from the union, according to a new Reuters/Ipsos opinion poll, many of them Democrats strongly opposed to Trump’s ascension to the country’s highest office.

    http://hotair.com/archives/2017/01/24/one-third-of-californians-support-calexit/

    Unfortunately Reuters/Ipsos did not poll the rest of the country on whether California should secede. I’m thinking it breaks 50%.

    Liked by 1 person

    • Amazing how much time we spend fantasizing. The Federal government will never let California secede. This isn’t #brexit. There’d be a huge bill to California on the upfront for a peaceful succession, as they’d need to buy all the federal property within their borders. Which includes military bases, which would have to continue to operate as they do, under the auspices of the Federal government, or the secession would never happen. Same for the ports–I don’t think the federal government would ever let them out of US jurisdiction. It would become a US colony, functionally. A quasi-independent government with the trappings of independence, but never fully independent.

      Also, a lot of tax revenue from California. I don’t think the Feds will be willing to give that up, either

      Like

  6. Planned Parenthood, provider of “women’s health” services (wink, wink).

    My favorite: “I mean, I know it’s called Planned Parenthood, it’s kind of deceiving…”

    Like

    • Hah.

      Alternate facts. They’re not just for Republicans.

      … given that federal dollars to Planned Parenthood don’t go to abortions, though, then what do they go to? Breast cancer screenings?

      Another thing I wonder about with PP: is this all about ideological positioning? About maintaining mindshare with the public? About just winning the argument that the government should be funding them?

      In this country, Trump (and GOP) defunding PP will almost certainly result in twice the amount or three times the amount of money coming in via “anger donations” for several years, if not indefinitely. This is entirely predictable. Donations they can spend on whatever the frap they want to. No strings attached. So a better deal for them, and a worse deal for defenders of fetal rights.

      But it’s not about results, it’s about winning ideological battles.

      Now, what if Trump suggested a plan to permanently and forever defund PP, but offered to expand Medicare to universally cover prenatal services (but not abortions). I’m guessing there’d be a way to work DNCs into that, because prenatal services ought to include them for cases where the fetus has died but the woman has not miscarried. Still, the concept is: if it’s really about the availablity of prenatal services, people unhappy with the defunding of PP should be all for it.

      Expand Medicare to universal coverage of prenatal services and breast cancer screenings. Likely be a drop in the bucket and way more comprehensive than 500 mil to PP.

      Like

      • KW:

        In this country, Trump (and GOP) defunding PP will almost certainly result in twice the amount or three times the amount of money coming in via “anger donations” for several years, if not indefinitely.

        That doesn’t seem likely to me. Currently government subsidies account for roughly $530 million of PP’s $1.3bn in revenues. Private contributions account for about $400 million. So private contributions would have to more than double in order to simply recoup government funds. Even that seems optomistic, much less that that private contributions would triple or quadruple from what they currently are.

        if it’s really about the availablity of prenatal services

        It’s not. Pre-natal services are available elsewhere. It’s about exposing PP’s public relations propaganda for what it is.

        Like

        • You may be right, but I’m still going to bet on a big bump in donations. I’m going with the perhaps overly-partisan theory that the left primarily donates real money out of moral outrage that conservatives somewhere got something they wanted. 🙂

          Like

  7. Delusions about SCOTUS precedent aren’t how you effectively oppose Trump.

    As long as they keep putting their faith in things like this, Democrats have no chance.

    Liked by 1 person

    • There’s just something magic about Trump. It’s like all the people opposed to him think the best way to resist is to do the stupidest, most self-defeating things possible, or fantasize about things that will never, ever happen. He’s cast some sort of spell on them. It seems like the people least likely to want Trump as president for 8 years are doing the most to ensure he gets re-elected in 2020.

      Keith Olberman recently posted a video telling Trump it was time to resign now. So many on the left are expecting impeachment proceedings any day (which will give us Pence, who they will then also want to impeach, which will give us whoever Pence picked as VP . . . and it will be bigots and sexists all the way down).

      Like

  8. I thought that this piece hits it well on the head.

    The word I heard a lot in Washington this week was “Orwellian,” but in fact that’s not what this is. What George Orwell explored, in both “Politics and the English Language” and “1984,” was the kind of vague, statist language with which repressive regimes might disguise their intentions and lull the populace.

    This is something even Orwell didn’t spend a lot of time contemplating — the official voice of the government citing highly specific figures and sources that seem to have been completely invented or, at best, purposely misconstrued. This is our government saying: “Go ahead and disprove it. Nobody will listen, anyway.”

    To be clear, as I’ve written many times, we in the media bear a lot of the responsibility here. For decades now, since the advent of cable news, we’ve embraced triviality and partisanship, turning political coverage into a mix of soap opera and shouting match. The public trusts us less today than ever before, and it’s hard to blame them.

    And so it was probably inevitable that some Barnum-esque figure would come along to exploit that mistrust, to effectively say it’s his word against ours, knowing that our word as an industry isn’t worth a bunch of bitcoins.

    But maybe someone should remind Conway and Spicer — well, OK, I’ll do it — that they don’t actually work for the Trump campaign or the Trump Organization anymore. They work for us. Their jobs exist to serve the public that pays them, and creating “alternative facts” for the sole purpose of validating the president’s insecurities isn’t in the job description.

    Like

    • Mich:

      I still don’t think he really gets it.

      To be clear, as I’ve written many times, we in the media bear a lot of the responsibility here. For decades now, since the advent of cable news, we’ve embraced triviality and partisanship, turning political coverage into a mix of soap opera and shouting match.

      The problem isn’t really that the media has embraced partisanship. It is that many, perhaps most, in the media have actually been partisans while pretending not to be. The media has been lying to its audience for years about not pursuing an ideological agenda, and it continues to do so. That is why it isn’t trusted, and it is also why it shouldn’t be trusted.

      Like

    • That’s pretty spot on.

      “Trump’s approach to reality is probably a lot like the ethos in Hollywood when they tell you something is “based on a true story.” It’s true as long as it’s believable. It’s a lie only if it isn’t plausible.”

      What Bai won’t admit is that this is uncomfortably close to Bill Clinton’s relationship with the truth as well.

      Trump didn’t spring out of nowhere. He’s the latest step in a long decline. A healthy political system would never have produced him in the first place.

      Liked by 1 person

      • “What Bai won’t admit is that this is uncomfortably close to Bill Clinton’s relationship with the truth as well.”

        The primary difference between Sean Spicer and most former press secretaries is that he will come out of the gate misrepresenting and lying about stuff, and taking the press to task for not playing ball. Previously, the acceptable method was to wait until reporters asked questions to start lying. Which was fine and expected.

        Ah, the good old days.

        Liked by 1 person

  9. @kjmmurphy:

    This is something even Orwell didn’t spend a lot of time contemplating — the official voice of the government citing highly specific figures and sources that seem to have been completely invented or, at best, purposely misconstrued.

    It’s been awhile, but I’m pretty sure Orwell both contemplated it and included minor examples in 1984. Obviously, thoughtcrimes and sexcrimes and newspeak and doublethink were the bigger anchors of his dystopian state, but there were direct lies both about the endless war with Eastasia/Eurasia and examples of state productivity. As well as the fact that the most well-known enemy of the state (Emmanuel Goldstein) was, in fact, an invention of the state.

    A not insignificant component of the first part of 1984 involves the redacting of historical texts, news reports, and photographs to make “history” comport with the current party line of the state.

    I think the author needs to re-read 1984 with an eye to the invention of facts and the purposeful misconstruing of facts (something not new to press secretaries, or politicians, or the press for that matter, but perhaps Trump is enlarging the scale by which it is done).

    for decades now, since the advent of cable news, we’ve embraced triviality and partisanship, turning political coverage into a mix of soap opera and shouting match

    More accurately, this has been going on to some degree since pre-revolutionary America. Once a free press was established constitutionally, it was open season on partisan shouting matches in the press. The term “yellow journalism” comes from the 1800s after all.

    But maybe someone should remind Conway and Spicer — well, OK, I’ll do it — that they don’t actually work for the Trump campaign or the Trump Organization anymore. They work for us.

    Someone probably should have told Josh Earnest and Jay Carney as well (and, well, keep going as far back as you like in the line of Whitehouse press secretaries). They all take their direction from the president, serve at the pleasure of the president, have been combative with the press (plenty of examples of Josh Earnest battling with reporters, though none of him directly calling anybody #fakenews that I saw) and spin their answers and lie (although, to be fair, they at least try and vague things up). Although, come to think of it, Josh Earnest called Russia Today a Russian propaganda arm or something like that, I think, and well before the whole “Russia hacked the election” thing.

    The Trump admin looks to be amping it up and doing a little “outside the box” thinking, but the fundamental function of the press secretary does not seem substantially different. Although Earnest and Carney at least waited for reporters to ask specific uncomfortable questions before taking the press to the woodshed.

    Like

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