Morning Report: Investor optimism at a 16 year high 3/24/17

Vital Statistics:

Last Change
S&P Futures 2344.5 4.5
Eurostoxx Index 376.0 -1.3
Oil (WTI) 47.5 -0.7
US dollar index 90.0  
10 Year Govt Bond Yield 2.41%
Current Coupon Fannie Mae TBA 102.06
Current Coupon Ginnie Mae TBA 103.32
30 Year Fixed Rate Mortgage 4.17

Stocks are higher this morning after durable goods orders came in strong. Bonds and MBS are flat

We have a lot of Fed-speak today with 5 speakers, mainly in the morning.

Durable Goods orders rose 1.7% last month versus a 1.5% expectation. Aircraft orders drove the increase. Ex-transportation they rose 0.4%. The only disappointing part was capital goods orders, which fell 0.1% versus expectations of a 0.1% gain. Capital Goods orders is a proxy for business capital investment, and this number shows that while business may be more optimistic for the future, they aren’t putting their money where their mouth is quite yet.

Donald Trump challenged the GOP to either pass health care reform today or to forget it. Health care reform is being fought by both Democrats (who oppose any cuts whatsoever) and the GOP Freedom caucus (who oppose the program on general principles). Here are some of the proposed amendments and negotiation points. Health care reform is a critical piece of his planned infrastructure spending plan, so if that goes, then it will be much smaller than advertised and tax reform will probably have to be revenue-neutral. Note that revenue-neutral tax reform could still do a lot for the economy just by getting rid of the distortions caused by the tax code. At the margin, the failure to pass health care reform should make the Fed slightly less hawkish.

Regardless of the state of health care reform, Treasury Secretary Steve Mnuchin says tax reform will get done by the August recess.

Investor optimism is at a 16 year high, according to Wells Fargo. Interestingly, this is not based on taxes, as more people expect their taxes to increase (39%) than decrease (29%). Investors are also sanguine about the Fed’s proposed interest rate hikes, with equal percentages thinking they will be good, bad, or have no effect. 60% say now is a good time to invest, which is the highest number since 2011, when Wells started tracking that number. Note that extremely high investor sentiment can be a contrary indicator, however betting on that is usually a losing trade.

Suburbs and exurbs are again out-growing cities and their near suburbs, according to new Census data. This trend was upended during the post-bubble years as young Millennials stayed in the city.

40 Responses

  1. Even more from the you-can’t-parody-feminists files: “Why Guys Get Turned on When You Orgasm—and Why That’s a Bad Thing.”

    It’s not enough that men are already having more orgasms than women. To make matters worse, a new study published in the Journal of Sex Research found — aside from deriving pleasure from their own orgasms, obviously — men also derive a specific sort of masculine pleasure from making female partners orgasm. The researchers in the study, Sara Chadwick and Sari van Anders, refer to this incredibly predictable phenomenon as a “masculinity achievement.”…

    In a separate statement from Chadwick and van Anders, they explained why it’s a bad thing for men to gain masculinity points for bringing female partners to orgasm. “One reason is that it might pressure some heterosexual men to feel like they have to ‘give’ women orgasms, as if orgasm is something men pulled out of a hat and presented to women,” they wrote. “This ties into cultural ideas of women as passive recipients of whatever men give them.”

    Liked by 1 person

  2. Good piece:

    “How Paul Ryan played Donald Trump
    Sometimes the swamp drains you.

    Updated by Ezra Klein
    Mar 24, 2017, 8:10am EDT”


    • I wonder what they consider a minority? Asians and Indians are highly represented in science. Or are they the wrong kind of minority?


      • “If we exclude most of the minorities that are represented in the sciences, minorities are hugely under-represented.”


      • “Or are they the wrong kind of minority?”


        “In 2016, the National Science Foundation reported a substantial pay gap between non-Asian minorities and white STEM workers at every level of educational attainment: “On average, minority salary levels are 19 percent lower than those of whites and Asians at the bachelor’s level, 20 percent lower at the master’s level, and 16 percent lower at the doctoral level,” the NSF found.”

        Congrats. They are honorary white people now. I.e. non-victims.


  3. NoVA, did you think that Wyden-Bennett was a better idea than ACA? It was certainly simpler and (I think) cheaper.

    I get that you might, in libertarian principle, want at least the federal government out of health care. But as a professional lobbyist, you must have analyzed W-B. And as a choice between two, I want to know your professional assessment of it against the ACA.

    I could only tell that it was a 15-20 times shorter bill, easier to read, and not full of contradictions. But would it have worked better/cheaper than what Baucus gave us?


  4. Good take I think:

    “Donald Trump is extremely bad at making deals
    Why is the health bill failing? Look at Trump Steaks, Trump University, Trump eyeglasses, Trump Suits…

    Updated by Ezra Klein
    Mar 24, 2017, 2:20pm EDT

    This is Trump’s pattern: He licenses his brand and lets others worry about the details of the products. Trump’s partners often end up going out of business and his customers often end up disappointed, but Trump makes some money, and he gets his name out there, and it’s all good.

    This was Trump’s approach to the health care bill, too. He let someone else worry about the product and he simply licensed his name, marketing support, and political capital. Trump didn’t know what was in the Affordable Health Care Act, and he didn’t much care. It broke his promises to ensure health care for everyone, to protect Medicaid from cuts, to lower deductibles, and to guarantee choices of doctors and plans — but he didn’t pay attention to any of that. In private, Trump was apparently bored by the subject and eager to move onto tax reform.”


  5. He’s not giving up


  6. Would it be productive for the players [insurance, health care professions, hospitals, drug companies] to get on one page and back W-B as a more cost effective and delivery system effective approach, and to my recollection less federally dominated approach, and sell the leadership [of both parties] on it?

    It was a short enough bill [60-70 pp. in the iterations I recall reading] that Congresspersons could actually read it.

    They could call it TrumpCare or RyanCare. I couldn’t care less. Then Rs could honestly say they repealed and replaced ObamaCare, and even get some bipartisan support for it.


    • My two favorite titled bills in the now closed hopper of the TX Lege:

      1] Relating to the taking of certain feral hogs and coyotes using a hot air balloon

      2] Relating to the regulation of men’s health and safety; creating a civil penalty for unregulated masturbatory emissions

      George, does #2 suggest to you that someone in the Lege thinks we now have regulated masturbatory emissions?


    • I think at this point the relevant players are more focused on figuring out how to maximize their returns out of the current system than worried about reform.

      There probably won’t be another opportunity to actually reform health insurance/care for 10 plus years.


  7. What happens when it dawns on Trump that the job of being President isn’t fun?


  8. The blind spots in this article are so funny. And how come people treat Norm Ornstein as some sort of sage non-political expert? The dude is just another left wing hack.


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