Morning Report: Incomes and spending rise 3/31/17

Vital Statistics:

Last Change
S&P Futures 2362.3 -2.3
Eurostoxx Index 380.3 -0.2
Oil (WTI) 50.3 -0.1
US dollar index 90.5
10 Year Govt Bond Yield 2.42%
Current Coupon Fannie Mae TBA 102.06
Current Coupon Ginnie Mae TBA 103.36
30 Year Fixed Rate Mortgage 4.13

Stocks are lower this morning as investors take some profits after a good quarter. Bonds and MBS are flat.

Personal Incomes rose 0.4% MOM while consumer spending rose 0.2%. The savings rate increased 0.2% to 5.6%. The PCE Index (the Fed’s preferred measure of inflation) rose 2.1% YOY, while the core index, which strips out some volatile commodity prices rose 1.8%.

The Chicago PMI Index rose slightly in March as new orders rose and employment fell.

Consumer sentiment retreated slightly in March, according to the University of Michigan Consumer Sentiment survey. Note that the spread between the “soft” economic data (like sentiment indices) and the “hard” economic data (like actual spending numbers) has never been higher. This is probably being driven by expectations of regulatory relief.

Dallas Fed President Robert Kaplan is worried about Washington and the effect policy will have on consumer spending. The fear is that any sort of protectionism via a cross-border tax or policies that could increase health care inflation would crimp spending, especially for older folks. Of course there is a demographic effect happening as well – older people tend to spend less. Their kids are still just starting out, but they will hit their peak spending years soon enough. And before everyone starts wringing their hands over the savings rate, it is still pretty low by historical standards:

Want a good statistic to demonstrate how tight the housing market is? 57% of all realtors have been involved in a sale with at least 10 offers on a single property in the past year. In fact, only 2% have not experienced a bidding war in the last year. We are starting to see home sales contingent on the seller finding a place to buy.  This is part of the problem for the first time homebuyer: The move-up buyer can’t find (or afford) a better place so they are staying put.

William Dudley of the NY Fed prefers the Fed go slowly in reducing the size of its balance sheet. So far, the consensus is that the Fed will just let maturing bonds roll off and not re-invest those proceeds back into the market. Dudley wants to be even more cautious than that, and taper the re-investment, which would mean they would start by reinvesting only half of maturing proceeds back into the market, and then stop altogether later. Regardless of how the Fed handles it, any sort of balance sheet change should have a minimal effect on MBS spreads. If QE had a de minimus effect on spreads then ending the reinvestment policy should have little to no effect. Note Dudley is also concerned about the effect this will have on long term rates, which could restrict credit.

25 Responses

  1. The Wyoming supreme court has ruled that local judges cannot even say that they will not officiate a gay marriage. You read that right. They ruled not simply that they can’t refuse to do so, but that to even articulate an objection to doing so is now considered a violation of judicial ethics.

    Click to access 2017WY25.pdf

    In the wake of Windsor and Obergefell, along with subsequent laws restricting the religious freedom of those who object to SSM, it was entirely predictable that those who perform marriages would eventually be compelled by the state to either perform SSM marriages against their will or relinquish the authority to perform marriages at all. So predictable that a few of us predicted that very thing a couple years ago, right here at ATiM.

    Liked by 1 person

  2. Like

    • This was the guy who did some 22 tweet screed on how we could legally make Hillary president.

      Edit: He’s a musician, BTW…


  3. Scott and I had an email discussion of “substantive due process” off line in which I agreed that I did not like or respect that line of cases and their progenitors, dating back to Dred Scott, because they were so ill defined and unrelated to the meaning of the phrase “due process”, then or now.

    I did not want to fill this blog with our conversation that had not seemingly interested anyone but the two of us.

    However, I pointed out that I probably would have joined the concurrence in Griswold that would have found a 9th amendment unenumerated freedom for a married couple to use birth control in their own homes.

    Scott wrote that he thought that using the 9th amendment to find liberties against a state as opposed to the federal government was every bit as sloppy and dangerous to federal – state relations as “substantive due process”.

    I am of the opinion that it might get to the same place in many cases, but that if you take the 9th Amendment to mean what it says:

    The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

    and the phrase

    No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States;

    from section 1 of the 14th A together that in fact you can extend individual freedoms against government to mandate individual freedoms in each state no less than what those freedoms are against the federal government.

    Scott sees it as an argument which has the same result as “substantive due process” and puts too much unchecked power in the judiciary to unbalance federal-state relations in favor of DC.

    I think that while that fear is warranted, it is trumped by giving the “privileges and immunities” clause the breadth of meaning the Civil War result actually demanded. WRT individual liberties, no state could offer less than the federal government.

    And my own retort to the potential expansiveness of the unwritten liberties of the 9th A is that the framers thought they hadn’t covered the waterfront on individual liberty and that jurisprudence that treats it like a dead letter is, if anything, anti-originalist.

    Scott wondered why I had resorted to email to continue the conversation. If y’all think this is a waste of space, other than Scott, I will go back to email. I just have never seen anyone here as interested in this stuff as he and I are.


    • I know almost nothing about law, but I find reading your conversations interesting, even though I probably only understand 10% of what you are discussing…


    • Mark:

      I just have never seen anyone here as interested in this stuff as he and I are.

      I do admit that my interest in these topics is probably a bit oddly intense for a non-lawyer. What can I say. I am in the wrong profession.

      BTw, I just watched an interview with Scalia. It’s about 50 minutes long and well worth watching in its entirety, but you should definitely watch two parts in particular. Most relevant to your comment above starts at 42:25, where Scalia speaks directly about the 9th amendment and how it should be understood.

      Also worth noting, in light of your earlier lament about the lack of near unanimous Senate votes for SCOTUS nominations, is Scalia’s response to a question about what the nomination and Senate approval process has become for a Supreme Court justice. Spoiler alert: he both hates it and thinks it is exactly what it should be in light of what SCOTUS has become under living constitutionalism.


      • The Scalia interview was fun. I think it is correct to tie 9th A to natural law concepts, which would mitigate against same sex marriage, of course.

        There are plenty of non-Catholic natural law advocates who say that at the time of the founding, natural law took the fetus to be part of the mother. That off hand remark by Scalia is HIS view of natural law, one schooled in Catholicism, which itself did not think early abortions were sinful in 1789 or 1793. Augustine and Aquinas viewed the early fetus like a vegetable and without a soul. I don’t believe the RCC actually changed position on that until after the Civil War.

        Such are the vagaries of natural law arguments.


        • Mark:

          There are plenty of non-Catholic natural law advocates who say that at the time of the founding, natural law took the fetus to be part of the mother.

          Perhaps, but more important, I think, is whether at the time of the founding anyone took the federal government to have the authority to prevent states from regulating abortion as they saw fit. That seems highly unlikely to me.

          (FYI I will comment on your Privileges and Immunities comment a bit later, when I have time to compose a coherent response.)


        • We have established that there was no federal authority to prevent states from regulating abortion in 1793.


    • Not at all, I enjoy the hell out of it


    • Mark:

      I think that while that fear is warranted, it is trumped by giving the “privileges and immunities” clause the breadth of meaning the Civil War result actually demanded. WRT individual liberties, no state could offer less than the federal government.

      Why do you think the Civil War result demanded that? The Civil War was definitely not fought over civil liberties or the degree to which states could regulate them. It was fought only over the right of a state to secede. I see no reason to think that the northern states thought they were either fighting the war or ratifying the 13th and 14th amendments in order to reduce their own law-making power and essentially reduce their own state constitutions to irrelevancy.

      As I mentioned in my e-mail, the very purpose of the Bill of Rights was to reiterate and make perfectly clear that the constitutional power of the federal government was meant to be narrow and limited relative to the states. To then say that the BoR should be incorporated to apply to the states as well is to essentially flip that purpose on its head, and to greatly increase the power of the federal government, particularly the federal judiciary, relative to the states, and to make virtually all state law subject to federal judicial approval. There is no way that the 14th was understood to do that by those who ratified it.


    • Mark:

      From a textual/originalist point of view I don’t think it makes sense to read the P&I clause to be incorporating the Bill of Rights because “rights” means something different from either “privileges” or “immunities”. Indeed, a privilege is very specifically not a right.

      If the ratifiers wanted to extend the Bill of Rights to cover state action, why didn’t they just say so? And if the P&I clause was understood by those who wrote it to do that, why would they then take the redundant step of explicitly identifying one of them, the 5th Amendment rights?


      • The Comity clause in Article IV [“privileges AND immunities”] was written by the original founders to keep each state from treating citizens of another state as aliens. Madison wrote about it at length and for him that meant that all basic freedoms [life, liberty, property, happy pursuit] a citizen had in one state he could rely upon in another. Hamilton said it was the basis for the Union.

        When the drafters of the 14th A. wrote their language they were well aware that extending the clause to include the privileges and immunities of citizens of the United States meant that Congress could enforce the B of R for citizens and against the states. That was their expressed intent in debate.

        The argument in legal circles is simply whether or not the language can be self activating – whether citizens can enforce the BoR in a courtroom without an authorizing statute. The Civil Rights Acts were of course authorizing statutes. Congress could have mandated the Griswold result. But could a federal court, without an enabling statute? That’s the debate, not whether states can operate outside federally granted Ps & Is to citizens.

        How do Ps&Is differ from legal rights? Well, it is historically understood that some legal rights are not Ps or Is.
        But the right to fundamental fairness in court proceedings, the right to sue, the right to contract, the right to life, liberty, and property, generally, cannot be discriminated against by a state. However, the right to vote in a state election can be limited to residents of the state, and hunting and fishing licenses can be limited to state residents. The right to sit on a jury or grand jury or to run for office can be limited to state residents.

        So it turns out that the Founders and the courts thereafter considered Ps & Is as the most basic “rights”.


        • Mark:

          When the drafters of the 14th A. wrote their language they were well aware that extending the clause to include the privileges and immunities of citizens of the United States meant that Congress could enforce the B of R for citizens and against the states. That was their expressed intent in debate.

          Why do you think so?

          You might find this analysis interesting. Start on page 117 to get to the interesting part.

          Your view seems to rest on the assumption that the use of the phrase “citizens of the United States” rather than “citizens of the several states”, as it existed in the Comity Clause, was meant to expand the Comity Clause to guarantee more rights. But this analysis suggests, sensibly in my view, that the historical context shows that in fact it was meant to expand the Comity Clause to guarantee the same rights for more people.

          Prior to the Civil War, even free blacks were routinely denied “privileges and immunities” in many states, under the claim that they were not citizens of any state. A significant part of the anti-slavery movement was an effort to get states to recognize the Comity Clause rights of blacks, and part of that effort included reading the phrase “citizens of the several states” in the Comity Clause to mean “citizens of the United States” and thus bring free blacks under its application. This became standard rhetoric for the anti-slavery movement when trying to justify application of the Comity Clause to blacks. And, indeed, after the Civil War but prior to the drafting of the 14th amendment, a “Privileges and Immunities Bill” was brought up to the House in an effort to use Congressional legislation to bring effect to the Comity Clause with regard to blacks. The author of that bill, Congressman Shellaberger, said explicitly that it “aims at nothing beyond” enforcement of the Comity Clause, stating:

          It protects no one except such as seek to or are attempting to go either temporarily or for abode from their own State into some other. It does not attempt to enforce the enjoyment of the rights of a citizen within his own State, against the wrongs of his fellow-citizens of his own State after the injured party has become or when he is a citizen of the State where the injury is done. This is because the bill is confined to the enforcement of this single clause of the Constitution.

          Notably and in line with abolitionist rhetoric, the bill used the “citizens of the United States” language in order to accomplish this end.

          The bill ultimately failed, but before it failed the 14th Amendment had been proposed and the language of the failed P&I bill regarding the enforcement of the Comity Clause was incorporated into it.

          It is true that, during the ratifying debates for the 14 Amendment, a few representatives made allusions to enforcing the Bill of Rights against the states, but to say that it was generally understood or assumed seems to be an overstatement, and again context recommends against drawing the broad conclusion you draw. In the context of history, the problem that the Amendment was trying to address was specifically the unequal legal treatment of blacks relative to other citizens by some states, not a sense that states were somehow imposing on any “fundamental rights” of citizens as a general matter. In other words, it was meant to provide equal protection for blacks, not new protection for whites. The fact is that the primary political rights guaranteed within the Bill of Rights, freedom of religion, expression, and the right to bear arms, were almost universally already protected by state constitutions and taken for granted by whites. Blacks, however, were deprived of such state protections and the way in which they were being deprived of that protection was by a denial of access to citizenship and due process. So the solution to the problem of discriminatory access for blacks to political rights, such as those in the 1st and 2nd amendment, was to guarantee them enforcement of the Comity and due process clauses as citizens. Give blacks Comity Clause and due process protection, and the protection of their political rights would necessarily follow.

          And, not coincidentally, it turns out that the 14th Amendment did indeed explicitly incorporate Comity clause and 5th amendment protections. In the context of history and the actual issue being resolved, this understanding seems to me to make much more sense. It would have been odd for the ratifiers to have believed that the P&I clause implicitly incorporated the entire BoR, and then felt it necessary to redundantly point out that this meant the 5th’s due process protection, too, don’t you think?


        • Download this Law Review article for another view, Scott.

          There is much overlap here. I take my position on this from Bingham’s comments on his final draft.

          Bingham began by insisting the amendment did not “take away from any State any right
          that belongs to it.” 118 The purpose of the amendment was simply “to arm the
          Congress of the United States . . . with the power to enforce the bill of rights as
          it stands in the Constitution today. It ‘hath that extent—no more.’” 119


          Gentlemen admit the force of the provisions in the bill of rights, that the
          citizens of the United States shall be entitled to all the privileges and
          immunities of citizens of the United States in the several States, and that no
          person shall be deprived of life, liberty, or property without due process of
          law; but they say, “We are opposed to its enforcement by act of Congress
          under an amended Constitution as proposed.” That is the sum and substance
          of all the argument that we have heard on this subject. Why are gentlemen
          opposed to the enforcement of the bill of rights, as proposed? 121
          Bingham rejected the idea that the Tenth Amendment reserved to the states
          the right to violate the provisions of the Bill of Rights:
          Who ever before heard that any State had reserved to itself the right, under the
          Constitution of the United States, to withhold from any citizen of the United
          States within its limits, under any pretext whatever, any of the privileges of a
          citizen of the United States, or to impose upon him, no matter from what State
          he may have come, any burden contrary to that provision of the Constitution
          which declares that the citizen shall be entitled in the several States to all the
          immunities of a citizen of the United States. 122
          Bingham mocked his colleagues for claiming they were “not opposed to the
          bill of rights,” but only opposed to their federal enforcement. 123 If states had no
          authority to violate the Bill of Rights, “how can the right of a State be impaired
          by giving to the people of the United States by constitutional amendment the
          power by congressional enactment to enforce this provision of their Constitu-
          tion?” 124

          but also:

          Such enforcement was essential, argued Bingham, in light of Chief
          Justice Marshall’s Supreme Court’s ruling in Barron v. Baltimore which held
          that federal courts could not enforce the Bill of Rights against the states. 125

          So I take Bingham at his word, he wrote it , he wanted Congress to have the power to enforce the BoR against the states, and that’s what was intended.

          But he explicitly recognized that Congress should have that power because the federal courts, certainly previously, did not.


  4. I’d like to suggest a game, what is the most hysterical paragraph is this editorial.

    Although his policies are, for the most part, variations on classic Republican positions (many of which would have been undertaken by a President Ted Cruz or a President Marco Rubio), they become far more dangerous in the hands of this imprudent and erratic man.

    Cause, reasons!

    To hear lefties bitch about this Boggles.The.Fucking.Mind.

    undermine the very idea of objective truth.

    Isn’t their real complaint that he’s not as a convincing liar as previous Presidents?

    H O L Y S H I T !

    tate legislators must pass laws to protect their citizens and their policies from federal meddling

    If only there was a name for this…


  5. NYT is shocked to discover that Republicans don’t vote on the basis of social spending, even when it affects them directly


  6. heh


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