Morning Report: Globalism wins in France 5/8/17

Vital Statistics:

Last Change
S&P Futures 2395.0 -2.8
Eurostoxx Index 393.7 -0.9
Oil (WTI) 46.2 0.0
US dollar index 89.9  
10 Year Govt Bond Yield 2.37%
Current Coupon Fannie Mae TBA 102.6
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 4.05

Stocks are lower after Emmanuel Macron won the French election. Bonds and MBS are flat.

The election in France is perceived as a rejection of Trumpism (or whatever you want to call it). It was a return to the globalist left. Seems to be a little “buy the rumor, sell the fact” going on in the markets.

James Bullard is saying that the Fed Funds rate is close to where the Taylor Rule calculation would recommend they be set. The economy is in a low growth regime, but the labor force is in a high growth regime. As long as the labor market is still taking up slack, we won’t see much in the way of wage growth, which should keep the Fed from having to normalize too quickly. Depending on how you set some of the variables, the correct Fed Funds rate is anywhere from 67 basis points to 155 basis points.

The week after the jobs report is generally pretty data-light so we shouldn’t have that much in the way of market-moving data. The biggest chance of market-moving data is Friday when we get retail sales and the consumer price index. We do have Fed-speak every day except for Thursday.

Where are robots more likely to replace workers? It turns out that the upper Midwest is ground zero, however parts of the Northeast are as well. Out West, we see very little of it. This could partially explain why the real estate markets out West are red-hot, while markets in the Rust belt and the Northeast are tepid at best. Automation means jobs are being lost, which results in a declining population. For decades now, the general trend of population growth has been similar to what you would see if you picked up the United States by Maine, dangled it and shook it. Of course robots are a symptom of a bigger problem – some of these industries have high cost structures, and they will either automate or go out of business. Note that the West may not be immune – the next shoe to drop will be artificial intelligence and machine learning which will replace a lot of white collar workers as it develops.


Compare this to the CoreLogic real estate heat map:

corelogic MSAs

Definitely seems to be a correlation between overvalued (red) and undervalued (green) real estate markets and the presence of automation. It makes sense. If people are leaving the green areas, you would expect to have a harder time selling a home (or easier time buying) than in places that are experiencing an increase in population.

Buffetapalooza or Capitalist Woodstock (the Berkshire Hathaway shareholders’ meeting) was over the weekend in Omaha, where you can sing with the Fruit of the Loom guys, eat at Warren’s favorite steak house, eat Sees candy, etc. He did have a few words about Wells’s scandal (BRK is WFC’s biggest shareholder).

26 Responses

  1. Why ESPN became The View for sports:

    ESPN has recently faced public scrutiny beyond its control, an experience that has humbled the cable giant. Late last month the company cut ties with 100 employees, many of them front-facing television talent. The layoffs sparked a deluge of media coverage examining ESPN’s decline and future. The consensus opinion blamed the network’s woes on overly expensive live-sports contracts and subscriber losses attributed to cable “cord-cutting.”

    That’s accurate but incomplete. What has truly impeded ESPN from overcoming its financial mistakes and inability to adapt to technological advances? The decadelong culture war ESPN lost to Deadspin, a snarky, politically progressive sports blog launched by Gawker’s Nick Denton in 2005.

    While the mainstream media has failed to document the extent of Deadspin’s rout of ESPN, I haven’t. I worked at ESPN twice, BD and AD. Before Deadspin (2001-06) and After Deadspin (2013-15).

    The Mark Shapiro era defined my initial stint at the network. Mr. Shapiro—a youthful, abrasive, risk-taking senior vice president in charge of programming and production—conceived much of the programming that defines the network to this day. He invented “Pardon the Interruption” and “Around the Horn.” He also paired Stephen A. Smith and Skip Bayless, televised “Mike and Mike” and “The World Series of Poker,” hired Colin Cowherd, and landed ESPN’s NBA package.

    “Mark built a culture at ESPN,” said former ESPN executive Jim Cohen in an interview. “It’s always easy to do the predictable. If the predictable doesn’t work, no one is going to question you, because it’s what you were supposed to do. A lot of people in that newsroom laughed out loud when we started ‘PTI.’ They said it had no chance at succeeding.”

    Mr. Cohen added that since Mr. Shapiro left the network, no one has had the guts to take similar risks. But was it a lack of guts or a lack of opportunity?

    Deadspin significantly elevated the price of implementing change at ESPN. The often-caustic blog mastered search-engine optimization and Twitter ’s ability to gin up faux outrage. Its writers trolled ESPN talent and executives, getting plenty of attention along the way. The site particularly delighted in exposing alleged sexual malfeasance among ESPN employees.

    In 2007 Deadspin editor Will Leitch posted a story suggesting popular anchor Stuart Scott attempted to arrange an assignation with a woman at a Super Bowl party. Scott, who died in 2015, was married at the time, and the story was based solely on a Deadspin correspondent looking over Scott’s shoulder and seeing a text that read: “Lemme know.”

    In 2009 Deadspin editor A.J. Daulerio—angered that ESPN PR misled him about “Baseball Tonight” analyst Steve Phillips’s dismissal over an affair with an intern—published a string of unconfirmed rumors about sexual misconduct among ESPN employees. A 2011 Deadspin post alleging lewd conduct by a top ESPN executive while seated next to sideline reporter Erin Andrews justifiably spread fear throughout the channel’s leadership.

    On the plus side, Deadspin’s exposure helped end ESPN’s sexually charged frat-house atmosphere. But it also extinguished the network’s risk-taking culture and infused it with strict obedience to progressive political correctness.

    During ESPN’s presentation to advertisers last year, Deadspin’s Kevin Draper wrote a post that all but declared the blog’s victory over the media giant. In the piece, “ESPN’s Vision of Its Future Is Good for Sports Fans, for Now” the writer celebrated the network’s firing of Curt Schilling and the “targeting” of nonwhite and female viewers.

    “The old-school viewers were put in a corner and not appreciated with all these other changes,” veteran ESPN anchor Linda Cohn said during an April radio interview when asked if ESPN’s liberal bent hurt the network. “If anyone wants to ignore that fact, then they’re blind.”

    Rather than sue Mr. Denton’s bullying internet pirates into submission the way tech billionaire Peter Thiel did, ESPN chose to acquiesce and adopt progressive ideology and diversity as groundbreaking business innovations. ESPN is the exact network Deadspin desired. It’s diverse on its surface, progressive in its point of view, and more concerned with spinning media narratives than with the quality of its product.

    The channel has become too handcuffed by politics to protect its most experienced and loyal employees. It’s a massive symbol of everything that fueled Donald Trump’s bid for the presidency.

    ESPN NFL reporter Ed Werder, one of the most prominent faces among the layoffs last month, said in a podcast that he heard quality of work would not be a consideration when employees were let go. He lamented that “it seemed to me that quality work should be the only consideration.” Not in this America, the one ruled by social-media perception and dismissive of the real world.

    Mr. Whitlock is a co-host of “Speak for Yourself” on Fox Sports 1.


    • the comments on this article are funny. There are some people who really, really, really hate this take on it.


    • I think this is the crux right here: ” and adopt progressive ideology and diversity as groundbreaking business innovations”

      And they just aren’t. From any angle. At this point, starting a conservative AM talker would not be a groundbreaking business innovation for the same reason. It was, once. Just as Fox News was groundbreaking at the time. The it’s not a ground breaking business innovation if everybody has already done it, and you’re one of the last. At best, it’s just something you had to do anyway, and isn’t going to help you in the marketplace at all. Or just completely irrelevant to your product, which I think is a fair thing to say in the world of sports reportage and commentary. And worst, it alienates your existing market and loses customers.

      “he heard quality of work would not be a consideration when employees were let go”

      The only consideration should be “where are the profits being made”?

      Or it’s not really a business, it’s a very expensive hobby.


      • IMO, ESPN fears a boycott of its properties / media from an army of triggered soccer moms over ESPN not being woke enough than they are about ESPN’s declining ratings.

        Liked by 1 person

  2. Juiceboxers on how to increase taxes by simplification…


    • Brent, that CNBC article certainly makes clear how Rs own tax reform partly by default.


    • How can Democrats beat Republicans on tax reform? By winning the House and the Senate back, I guess. I mean, shouldn’t they control at least one branch of government to beat the Republicans on tax reform?

      Poison pill it? Eh, I’ll read the article, see what wisdom they have to share.


      • The Democrats will never ever support even revenue-neutral tax reform and raising taxes is a nonstarter for Republicans. They will need to run the table and have a filibuster proof Senate to ever raise taxes again.

        the fact that obama blinked on letting the bush tax cuts expire tells you all you need to know about the true appetite for raising taxes…

        I would do another 10 year tax cut, pass it on party lines, and dare the democrats to let it expire when 10 years comes up. even if they only let them expire on the top 1%, it is still a win. I’ll make those trades all day.


        • Heh. As I noted below, the proposed ways for Democrats to “beat” Republicans on tax reform are clinically insane.

          Hopefully the Republicans won’t squander this opportunity . . . hell, what am I saying? Of course they will.


    • How they are totally not going to beat Republicans on tax reform:

      Naturally, the pitch doesn’t mention the rich households who’ll get the bulk of the tax cuts at all, or even really big businesses that will enjoy a massive rate cut.

      I love this. Right after complaining about the admitted vagueness of the Republican plan so far, they follow up with that awesomely vague criticism. Why are tax cuts on rich households bad? Why are tax cuts on big businesses bad? How much are the tax cuts and are they a targeted? What do they effect? Might the tax cuts encourage domestic spending? How rich are the rich households? Are they so rich they don’t purchase domestic luxury goods, but just use the money to light their cigars, or buy cars at local dealerships, or contract local workers to work on their houses, or otherwise stimulate the local economy? I don’t know, because they just said “rich households will enjoy the bulk of the tax cuts” (what does this even mean? Percentage wise, number of tax cuts, or just sheer dollar amount). And presumably it’s bad, because they are rich.

      Treasury Secretary Steve Mnuchin and Paul Ryan are going around telling people they’ll be able to fill out their taxes on postcard

      And that will last for exactly one year, maybe, and apply to some minority of the population. Run a small business from your home? Bet you aren’t using the postcard.

      That being said, I helped my daughter to her taxes for a modest amount of money made working at a retailer. That shouldn’t even require a postcard, seriously. A couple of checkboxes and you should be done.

      And for years, Democrats haven’t really had a good answer to this, because Democrats don’t tend to propose tax plans much at all.

      Hah! Because they have one plan: raise taxes. It’s not popular. Ask Walter Mondale. They can’t do overt stuff.

      In a number of countries, like Japan and the UK, the vast majority of people don’t have to file tax returns at all. Instead, through a system known as “precision withholding,” the government takes exactly the right amount out of every paycheck. If they find that a mistake was made — not accounting for a charitable donation or mortgage interest, for example — they find that mistake in charity and bank records, and they fix it for you.

      The author is apparently not aware which country he lives in. The Democrats proposing something like that would be suicide for them as a party. A few individual politicians in highly progressive districts could get away with it, but the party as a whole could never, ever, ever.

      In early March, Kokuzeicho sends a postcard to every citizen that sets forth all this information: how much you earned, how much tax you owe, how much tax you’ve already paid through withholding. If you’ve paid in more tax than you owe, Kokuzeicho deposits the refund amount in your bank account; if you did not withhold enough, the agency takes the tax that’s due from your bank account. …

      OMG. Japan also doesn’t have a Sovereign Citizen movement or the Tea Party and never elected a Donald Trump or a Dubya for that matter. We are not that kind of country. This would be spun as giving the government carte blanch to suck all of your money out of your bank account.

      with the help of predatory tax services companies like H&R Block and Intuit (the makers of TurboTax)

      They are characterized as “predatory” because they lobby congress to keep the tax code complicated. Despite charging almost nothing for their software (certainly, less than a CPA) and giving away basic services for free to millions of Americans.

      I don’t think the author understands what the word “predatory” means.

      He then goes on to propose a lot of options that would allow the Republicans to tear the Democrats to shreds. Not sure what the thinking is here.


      • Liberals were in favor of social engineering via the tax code before they were against it.

        Liked by 1 person

      • “Not sure what the thinking is here.”

        The same as withholding. If you never see it, you won’t miss it.

        It’s leveraging American laziness to be able to raise taxes at will with minimal backlash.


        • jnc:

          It’s leveraging American laziness to be able to raise taxes at will with minimal backlash.



        • Not referring to the supposed embrace of tax simplification so much as the offers being made: a VAT tax? Japanese-style “government just decides how much to take and debits your bank account” strategies?

          As an executable strategy in this country that would not (in addition to failing to pass) deeply hurt the Democrat party . . . I’m not seeing it.

          Getting rid of “married filing jointly”, institute carbon taxes and sugar taxes . . .

          Mark-to-market asset tax! Taxing corporations on their global profits . . . I mean, really, these are not strategies that are going to play well in the political arena, or stand much serious chance of success in the US (at least currently). If he was trying to sell it as a “California-only” strategy, I could see it.

          I’m more asking why he thinks these, in any way, constitute a strategy by which the Democrats can beat the Republicans on tax reform?


        • It is the EZ pass method of raising taxes. You never even read the toll now that your EZ pass just handles it. If you had to throw an extra quarter into the basket every day you would notice it.

          Which is why some argue we should do away with tax withholding altogether. If people were forced to actually write a 5 digit check to the IRS every year, they would be much less likely to support higher taxes.


        • Brent:

          Which is why some argue we should do away with tax withholding altogether.

          That's me.


    • Human beings don’t resist hate. They court it like a lover. They wallow in it. They’ll tell people they hope they get brain cancer and die because they cut them off in traffic or disagree with them about a movie or sports team.

      I hope his next rare address (next week, presumably) is about how Americans need to clap if they believe in fairies.


  3. The WaPo ran this story: White House fires its chief usher — the first woman in that job and received 2500 comments mainly from folks suggesting she was terminated because she was black, or because she was a female, or because she was both; while others suggested she was the source of leaks.

    None of this speculation was supported by evidence or even surmise from the article itself.

    So I wrote the following comment:

    If we are going to speculate in advance of the facts, an exercise Sherlock Holmes abhorred, we should start from a universal known.

    Trump and his entities have many connections and contacts and even ownership interests of hotels and entertainment businesses.

    There are probably several persons from the corporate Trump world who will serve at the pleasure of President Trump, while others with positions amenable to removal will be removed to make way.

    I am no fan of Trump, but this does not strike me as a devious, down, or dirty decision, given what we know about the connections of the Trump group to the gaudiest levels of the hospitality business.

    I have no illusions as to how that comment will be received.


    • Race or sex or both are the first things people look to, because those are the easiest ways to establish victimhood without providing any real evidence. If other factors were better ways of demonstrating victimhood, that would be the focus.

      When it comes to playing politics and ideologies as team sports, there’s little application of Occam’s razor. The quickest explanation is that Trump and his organization have a long history of firing people, all the time, based on purely mercurial reasons. As you say, that he has lots of people in his Rolodex that he knows that he’d like to give a job around him in the Whitehouse also seems pretty straightforward.

      The argument is ultimately that anybody who has any identifiable attribute can’t be fired or replaced without the explanation being the most victim-worthy identifiable attribute. If it hadn’t been sex and race, it could have been age, or health, or something else that could have made discrimination the culprit. When someone like Trump comes in, they’ll have to codify that to enforce it, because he’s not going to honor the “traditions”.

      I’m sure your comment will be received in the calm and thoughtful way it was meant, and not as deeply embedded crypto-racism. 🙂


    • I suspect I have been shadowbanned from WaPo. I can write comments, but nobody but me sees them…


      • You mean, everybody has ignored you, or someone has the power to shadowban in the comments section? Presumably someone who participates or one of the blog authors who doesn’t like your points. Do you pay money? I haven’t been in a while, but traditionally I just do private browsing to get in after my “5 articles” are up. Maybe they’ve done something about that. 😉


        • If i log in on a browser that isn’t signed onto my account i don’t see my comments. But i have received no correspondence from WaPo that I have been banned or anything…


        • Heh. Someone has the power to shadowban. That’s got to be something the moderators or blog authors can do. Maybe universally in the comments sections? Sheesh, they suck.


      • I haven’t seen any from you on PL in a while.

        But never underestimate Washington Post technical problems.

        Liked by 1 person

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