Morning report: complacency reigns 5/9/17

Vital Statistics:

Last Change
S&P Futures 2397.5 2.5
Eurostoxx Index 396.1 2.0
Oil (WTI) 46.4 -0.1
US dollar index 90.5  
10 Year Govt Bond Yield 2.39%
Current Coupon Fannie Mae TBA 102.6
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 4.05

Markets are flattish on no real news. Bonds and MBS are flat as well.

Bond yields have been moving higher after the French election. Given that the result was not really a surprise there shouldn’t be too much in the way of follow through, but Euro bonds are selling off, which will translate into rising yields in the US on the relative value trade.

Job openings were flat in March at 5.74 million, which was slightly above estimates. The quits rate, which is a key indicator was up slightly YOY at 2.4% or about 3.1 million workers.

Small Business Optimism slipped in April, according to the NFIB Small Business Optimism Index. We are still at historically high readings, but the dimming prospect of tax reform in DC has hit the future expectations components of the index. The bright spot was hiring, as firms added .19 workers on average in April. 33% of respondents reported job openings they could not fill, which is the highest since 2000. Finding quality workers is a significant concern for many employers, although sales and regulatory issues are the biggest problems.

Radian’s Green River unit, which provides broker price opinions on residential real estate is the subject of a SEC probe. The feds are looking to see if BPOs were inflated on some bond deals where the interest was paid from the REO to rental trade. BPOs are cheaper than appraisals and are based on “drive by” evaluations. Many bond ratings agencies haircut BPO values in their assessments. If it turns out BPOs are inflated, it will probably have a dampening effect on bonds used to finance the activity. The plus side is that if private equity firms begin to unwind the trade, it will add some much needed supply to the market, especially at the lower price points.

Seriously delinquent loans and and foreclosure rates continue to fall, according to CoreLogic. The past due percentage dropped to 5%, the lowest level in 10 years. This is a decline from 5.5% a year ago. While rates have dropped nationally, they remain elevated in New York and New Jersey as well as some Mid-Atlantic states. We are seeing the biggest increases in the oil states.

Fannie and Freddie are looking at lending to borrowers with manufactured homes. FHFA needs to approve the program which is intended to increase credit to low-income borrowers, especially in rural areas.

The Fannie Mae Home Sentiment Index increased in April. Respondents are more constructive on real estate prices and the stability of their job situation, which was the catalyst to push the index up. The number of people who though now was a good time to buy increased by 5 percentage points. Respondents are also forecasting a 3% increase in home prices over the next 12 months.

5 things your appraiser wishes you knew. A big one is that the return on some home improvement projects are relatively low. A new kitchen will help, but you will be lucky to see a fraction of that expenditure translate into a higher home price. Pools are even worse. The biggest one? Finishing a basement. Most appraisers aren’t allowed to even count that square footage so that investment is valueless, at least as far as the appraisal is concerned.

Fear in the market is the lowest since 1993. The VIX index, which measures the price of options protection has been in the single digits lately. Does that portend anything? The old saw is “VIX is low, time to go. When VIX is high, time to buy.” VIX can stay low for extended periods, so the first part of that adage probably isn’t the greatest advice. Earnings growth has generally been good so far, which supports markets.

Want to really measure complacency in the market? Remember the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) which were the ne’er do wells of the European sovereign market? You can now lend money to the Greek government for the princely rate of 5.5%. They peaked at 27% or so. That said, German Bund continues to experience higher yields, and you can now get 44 basis points for tying up your money with Angela Merkel for the next 10 years. Gotta pay her 66 for two though.

The mortgage interest deduction is being targeted by the left, who claim it increases inequality. This debate will get interesting as it creates an unusual alliance between limited government flat tax types, and social justice types. IMO, the mortgage interest deduction is simply too popular to eliminate but we could see a cap on it, which would probably hit homes at the high end the most.

77 Responses

  1. Why they voted for Trump, part 2000.

    https://www.prri.org/research/white-working-class-attitudes-economy-trade-immigration-election-donald-trump/

    I love this framing: Fears about cultural displacement. White working-class voters who say they often feel like a stranger in their own land

    Maybe they don’t fear Lena Dunham and the pussyhat left as much as they find them annoying..

    Like

  2. A big one is that the return on some home improvement projects are relatively low. A new kitchen will help, but you will be lucky to see a fraction of that expenditure translate into a higher home price. Pools are even worse. The biggest one? Finishing a basement. Most appraisers aren’t allowed to even count that square footage so that investment is valueless, at least as far as the appraisal is concerned.

    I’m lucky I don’t have a basement then, I guess. But houses in this area built after 1950-something never have basements, maybe 1940-something. The only houses that have basements built afterwards are custom builds where they basement is requested. Not quite sure why that is. I notice newer houses in other areas that have basements are often in hilly locations, and the “basement” actually opens up to the back even though it’s underground in the front of the house.

    What home improvements give the best bang for the buck, I wonder? If you have a mortgage, seems to me the biggest real bang for your buck is living in your house until you can accumulate a fair amount of equity. That’s always been my failure. We’ve tend to move around the 10 year mark. The 20 year mark would be a lot more beneficial.

    Like

    • If your kitchen and bathrooms are showing their age, then that is a good value-enhancing project. You definitely won’t get your money back putting top of the line sub-zero appliances in your kitchen, but updating it to make it look up-to-date will go a long way…

      Liked by 1 person

      • Agree with Brent about “updating” but it becomes easy to overdo.

        Remember that your potential buyer has her own style ideas. With that in mind, some attention to lawn and foundation plants for street appeal, and fresh paint and carpet inside give the biggest bang for the buck. But go for neutral colors so that the buyer can imagine her own deft touch.

        Clean the gutters. Replace any rotted wood. Make sure the floor level is well above the ground level. Fix leaks. This is mainly DIY stuff, but it adds up. When the house looks dirty and smells bad it doesn’t sell, when it looks and smells clean it does.

        If you have pets you probably don’t smell them any more. Others will, however.

        Kev, if you have a cat, put it in a plastic bag and drop it in the Mississippi.

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        • Remember that your potential buyer has her own style ideas.

          Apropos of nothing at all, when exactly did grammar rules change such that feminine pronouns became the default pronoun when speaking of a hypothetical person of unknown/undeclared sex? This seems to be a standard thing these days.

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        • Nope, not guilty. In my experience it is usually women who veto house purchases on style issues. YMMV. I meant to be gender specific.

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        • Mark:

          I meant to be gender specific.

          OK. Increasingly I’ve seen more and more people use feminine pronouns for non-specific gender references where the masculine would have been used in the past, and I think I’ve seen you do it here several times before too, so I just assumed this was just another instance of some new standard.

          Like

        • I use him/her and s/he sometimes.

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        • Mark:

          I had in mind instances like this:

          Technically, if an electronic ballot has been tampered with it will be impossible to tell whether the voter changed her mind or Putin’s hackers did.

          https://all-things-in-moderation.com/2016/11/28/morning-report-home-prices-within-1-of-peak/#comment-97691

          Whenever I hear or see it, it always sticks out because it sounds so unnatural to me. Just not what I am used to. And I seem to notice it more and more these days.

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        • …whether the voter changed her mind or Putin’s hackers did.

          Another gender specific reference – in my ‘ute it was said that

          “It is a woman’s privilege to change her mind.”

          Turns out the saying goes back to 1616.
          ——–
          Please don’t go looking for other places where I might have used it inclusively; I’m sure I may have done so, although I generally agree that the inclusive masculine works well enough in ordinary communication.

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        • Mark:

          Please don’t go looking for other places…

          No worries…I just wanted to confirm that I wasn’t imagining things.

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        • Well, in most cases it’s the broad buying the house, the dude just wants good wifi for porn.

          Like

  3. Profile in courage:

    https://www.jfklibrary.org/Events-and-Awards/Profile-in-Courage-Award/Award-Recipients.aspx

    “I hope that current members of Congress recall that it actually doesn’t take a lot of courage to aid those who are already powerful, already comfortable, already influential. But it does require some courage to champion the vulnerable and the sick and the infirm, those who often have no access to the corridors of power.”

    Cause nothing is more courageous than proposing to give away free shit paid for by someone else.

    Liked by 1 person

    • Bingo on that.

      I can see how arguing for helping the poor or vulnerable can be said to have numerous virtues, but how it could possibly considered a “courageous” position in this day and age . . . that’s crazy talk.

      Like

  4. They’ve lost it:

    “Why Yale Graduate Students Are on a Hunger Strike

    Jennifer Klein
    ON CAMPUS MAY 9, 2017”

    Hunger strike as performance art. What happened to regular strikes?

    They are exactly right on the merits vs Yale though since they got certified. It’s hilarious watching intra-liberal higher education vs labor fights.

    Like

    • If these colleges are dumping all of the teaching work on minimum wage grad students, then why has tuition been increasing at 3x the rate of inflation for a generation?

      Where is the money going?

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      • Brent:

        Where is the money going?

        Sushi stalls in the food hall, apartment style dorm rooms, spectacular student centers with games, exercise machines and coffee shops, etc. Purchases of surrounding property to expand the size of campus and build new buildings that will accommodate ever more tuition-paying students. (Although, to be fair a huge number of the students aren’t actually tuition paying, at least not the full sticker price.)

        Like

        • Don’t forget administrator compensation and staffing increases.

          Doesn’t count as greed though since they are non-profits.

          Like

        • jnc:

          Don’t forget administrator compensation and staffing increases.

          Yes, of course. What first class university could survive without a growing and fully staffed office of Diversity and Inclusion?

          https://www.google.com/search?q=office+of+diversity+university&oq=office+of+diversity+university&aqs=chrome..69i57j0l5.1559j0j9&sourceid=chrome&ie=UTF-8

          Like

        • Yeah, I guess the spartan Soviet – era Eastern Bloc style dorms I lived in at the People’s Republic of Madison are no longer in style..

          Liked by 1 person

        • This a universal trend. My daughter’s state university has a lot of this (probably in lesser quantities) and more on the way. Tuition is like 10% of Yale’s.

          That’s being said, they also tend to have TAs doing most of the work of running the class, direct student’s questions to the TAs, etc. Sweet gig if you can get it!

          Like

        • Yeah, I guess the spartan Soviet – era Eastern Bloc style dorms I lived in at the People’s Republic of Madison are no longer in style..

          They just tore down some spartan dorms from the 50s or 60s, I think, at UofM where my eldest daughter is going, in order to make way for the multi-million dollar sports complex (that some other financing issues has apparently delayed construction on, but I’m sure it will happen at some point). The ones my daughter stay in aren’t apartment-style, quite, but they are nice enough (although not quite worth the rent). But construction wise I could see why they would have been pricey to build, and the security is thick. You’ve got to go through like 5 different security doors to eventually get to your hall.

          The student center is something else. Those things are frickin’ malls. The student book store is like a Borders (RIP). Then there’s a dining hall in addition to all the food available at the student center (which includes a Panda Express and a Dunkin Donuts, among other things).

          Like

        • Is there a Chick Fil A, or is that considered too Christianist?

          Liked by 1 person

        • KW:

          The ones my daughter stay in aren’t apartment-style, quite, but they are nice enough (although not quite worth the rent).

          This is another thing universities have cottoned on to, and is driving a lot of the building. They are foregoing a lot of revenue when kids move off campus. If they build attractive on-campus housing, they can keep the kids paying them the inflated rents instead of it going to local slum-lords.

          Liked by 1 person

        • “Is there a Chick Fil A, or is that considered too Christianist?”

          There is not, but it’s not because it’s too Christian . . . not at the University of Memphis. It’s not friendly to Christianity so much as it’s not hostile, generally. A Chik-fil-A would not be impossible. There’s some sort of Baptist recruiting/ministering place that serves college students across from my daughter’s dorm, on campus. On the whole, I really like UofM.

          Like

    • What I really want to see is someone make the argument that the students are engaged in “appropriation” of hunger strikes in that they aren’t prisoners with no other options, like in Guantánamo.

      Liked by 1 person

  5. JNC and NoVA, what is your first take on Comey’s firing?

    The exaggerated testimony re: Abedin was handy leverage, but I cannot see that as the actual reason. Can you?

    Like

    • No, this gives Trump the ability to name a FBI head who will focus on leak investigations instead of him while also being able to turn the Democrats attacks on Comey back against them in rebuttal.

      Like

      • Do the congressional investigatory committees continue their looksees into the Russian connection?

        Sessions won’t appoint a Special Counsel and that seems to me to foreclose the only route to an independent investigation.

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        • I think the Senate one does at least. Keep in mind that subpoenas were just issued by a grand jury for Flynn’s financial records too.

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        • There is also this.

          My own experience with investigative police forces [FBI and Texas Rangers, particularly] is that the investigators themselves do not take kindly to being muzzled.

          In fact, they openly rebel and go public. It might take a while, but if Comey’s replacement is seen within the FBI as stifling fruitful lines of inquiry, we will know about it.

          This is anecdotal, to be sure, but look for it.

          A prominent example of what I am suggesting:

          It took the Rangers almost three years to fight through the stifling of their investigation into rampant sexual abuse of children in the Texas youth detention facilities. They were refused FBI lab help by the US Attorney for the Western District. They were refused grand juries by local DAs. They were refused publication of their findings by AG Abbott and Gov. Perry. So they finally simultaneously released all of their investigation results to the Houston Post, the San Antonio Express, and the DaMN and the TYC scandal finally got aired and prosecuted.

          From Texas Monthly:

          By contrast, Brian Burzynski, whose best efforts were thwarted for two years, can hold his head high. The Texas Ranger was often at a loss for words during his emotional testimony at a legislative hearing in March. “I saw kids with fear in their eyes because they knew they were trapped,” he said. “Perhaps their families failed them. TYC definitely failed them. I promised each one of those victims that I would do everything in my power as a Texas Ranger to ensure that justice would be served and that this didn’t happen again.”

          This is what professional investigators live for and stake their reputations and careers upon.

          Like

    • This is a pretty good take:

      “It’s a neat trick: stymie the Russia investigation by siding with Hillary Clinton. Put another way, what if you had a Saturday Night Massacre and liberals cheered because they hated Archibald Cox?”

      https://lawfareblog.com/nightmare-scenario-trump-fires-comey-one-man-who-would-stand-him

      Like

      • The allusions to the Saturday Night Massacre strike me as a tad overwrought. The firing of Cox was actually against the law in the context of his appointment as a special prosecutor (which is why the first two guys Nixon asked to do it resigned instead of complying…hence the “massacre”), and it came against the backdrop of both mounds of public evidence regarding an actual crime originating in the White House and a legal battle between Cox and Nixon over Nixon’s refusal to provide specific evidence, ie the Nixon tapes. It also effectively put an end to the investigation being headed by Cox.

        Firing Comey is perfectly within the Trump’s remit, it came (at least ostensibly) on the recommendation of the top two DOJ officials rather than over their objections, and there is virtually no public evidence of any “collusion” between the Trump campaign and Russia, the apparent subject of the investigation. And, perhaps most importantly, the firing doesn’t actually put an end to the investigation at all.

        So I am not buying the whole Saturday Night Massacre analogy.

        BTW, are we assuming that Rosenstein is a political hack who produced his recommendation to oust Comey at Trump’s direction, ie that his recommendation was politically manufactured and not a genuine recommendation? I honestly know nothing about Rosenstein so I have no way of making a judgment on that.

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  6. Trump has a unique ability to expose as hypocrites EVERY politician that gets near him, friend or foe.

    The country owes his a debt of gratitude for that.

    Case in point, here’s Sally Yates touting Rod Rosenstein.

    Yesterday.

    http://dailycaller.com/2017/05/08/sally-yates-undercuts-democrats-argument-for-a-special-prosecutor-in-trump-russia-probe-video/

    Like

  7. And the Democrats fixed so that they can’t filibuster Comey’s replacement.

    Heckuva job Harry

    Like

  8. So, Comey is gone. Why am I not reassured that his replacement will be any better?

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  9. I keep hearing from the left that the problem with Comey’s firing is the timing. “Why now? If he was going to fire him, why didn’t he do it in January when he took office?”

    Does anyone think the D’s wouldn’t be making the exact same accusations about interfering with an investigation had he done it then rather than now?

    Like

    • The timing and stated rationale are peculiar, Scott, and several prominent Rs think so too. But you are correct that firing an FBI chief who is investigating your pals and perhaps you will be questioned as suspicious by anyone who is sentient, even if they are Democrats.

      Like

      • Mark:

        But you are correct that firing an FBI chief who is investigating your pals and perhaps you will be questioned as suspicious by anyone who is sentient, even if they are Democrats.

        My point was kind of the opposite…that the particular details are pretty much irrelevant to Dem’s raising suspicions.

        But anyway, as even you seem to suggest below, if Comey was fired in an attempt to bury an investigation into any collaboration with the Russians over the DNC hacking, it seems highly unlikely to be effective.

        Like

    • Trump’s lying about it, as usual, but Democrats don’t have much of a leg to stand on after calling for his replacement since last summer.

      He gave them exactly what they asked for.

      Like

    • Love the fact that Colber’s clapping seals fucked up by cheering when he said Comey was fired.

      Like

  10. Is the argument that Comey helped get Trump elected by colluding with the Ruskies? And then Trump fired him because Comey was getting to close to the evidence of his own collusion? And Trump feels confident that after publicly humiliating Comey, he won’t spill his guts because…?

    Like

    • Is the argument that Comey helped get Trump elected by colluding with the Ruskies?

      I haven’t heard that posed by anyone.

      And then Trump fired him because Comey was getting to close to the evidence of his (you mean DJT’s collusion here, correct?) own collusion?

      One plausible inference, and certainly the first one that springs to mind for anyone who doesn’t like Trump.

      And Trump feels confident that after publicly humiliating Comey, he won’t spill his guts because…?

      Any answer posed to this question without knowledge of the facts of the investigation or the workings of the DJT mind would be snide BS, as you well know. Suffice to say, others in positions of authority have thought that they could stifle investigators; as I have suggested below, it often fails because investigators by nature don’t like to be stifled.

      Like

      • What other conclusion can one draw when Democrats have been saying that A: Comey threw the election to Trump and, B: the “Russians hacked the election”?

        We aren’t as consumers of “news” supposed to reach that conclusion? Really?

        I get assuming the worst of someone’s motives, I do it all the time. It seems to me though, that the leap of impulsivity one has to believe Trump possesses to think he fired Comey without regard to all the dirt Comey supposedly has on Trump’s alleged Ruskie collusion defies common sense, no?

        Like

        • I think Trump is trying to play the media the same way he did during the campaign, but it’s not working because there’s no other campaign to play them off against and they’ve gone from horse race coverage & exposing hypocrisy between the candidates as the default framing back to everything could be a scandal & being by default adversarial to the administration.

          Like

        • You think that the Trump admin has seen media as anything other than adversarial? I don’t.

          I think Trump fired Comey because he either has wanted to, and Yates’ testimony saying she supports Rosenstein gave him cover or he trusted Sessions and Rosenstein when they came to him saying Comey should be shitcanned.

          I think one issue the media is having is that there were zero leaks on this. That really, really bothers them.

          What’s the argument for keeping Comey?

          Like

        • George, take the NYT story FWIW, but it claims Comey had just asked Rosenstein for more funds so the FBI could expand its investigation of Russia-and-the-2016 election. Those would be the dots that are being connected by critics of DJT.

          A desperate man would do exactly this. It is less plausible that DJT might not be desperate and might be pure as the driven American snow and that he might think Comey is worth firing on the merits, for doing what DJT previously praised him for doing.

          Another choice that could make sense and be innocent is that the FBI is so torn up factionally that it needs a new leader. No one has offered that one, however.

          You remember that I cut Comey a lot of slack for his bumblefucking around exactly because I did not think it was partisan, rather just not politically astute. I personally do not care about the political astuteness of the FBI Director, just his willingness to follow the law and run the Department.

          I doubt Comey has a lot of dirt on Russia=DJT, now. Thus it might be better in DJT’s eyes to try to stifle the investigation now. But that is mere speculation.

          Have you read that DJT had a law firm write a letter to Lindsey Graham? I thought I heard that somewhere today but cannot find it.

          Like

        • Mark:

          I doubt Comey has a lot of dirt on Russia=DJT, now.

          What dirt do you suppose actually exists on Russia=DJT? Do you think that the Trump campaign was in cahoots with Russia re the DNC hacking?

          Like

        • From the timing of remarks made during the campaign I think the DJT campaign knew what the wikileaks would reveal before they were revealed and that the timing of the revelation was done to blunt the effect of his pussy grabbing BS.

          That implies some level of cooperation.

          So, yes.

          Like

        • Mark:

          From the timing of remarks made during the campaign I think the DJT campaign knew what the wikileaks would reveal before they were revealed

          I’ve never heard this suggestion before. Do you have more details?

          Like

        • Well, I come from the perspective that the Russian/Trump collusion is completely made up, so, shitcanning Comey for being incompetent is a perfectly reasonable action, since there is literally nothing to the Russian/Trump collusion story.

          Like

        • McWing:

          Well, I come from the perspective that the Russian/Trump collusion is completely made up…

          That is my sense, too.

          Like

        • “Do you have more details?”

          It’s from Roger Stone. He was saying that for a while before the leaks and he’s the nexus between WikiLeaks & Trump.

          Like

        • jnc:

          He was saying that for a while before the leaks

          What was he saying? I’ll look for a link, but if you have anything on this you can pass along, I’d be interested in seeing it.

          Like

        • Mark:

          Stone. Exactly.

          OK. So I found this timeline:

          http://www.cnn.com/2017/03/20/politics/kfile-roger-stone-wikileaks-claims/

          From what I can see, it appears that Stone, an “associate” of Trump’s (not sure what exactly that means) openly declared back in August that he had a “mutual friend” of Wikileaks’ Julian Assange, who was passing him information about Clinton that Wikileaks possessed and was going to leak. His predictions about what would be released by Wikileaks ranged from possibly but vaguely accurate (“Podesta’s time in the barrel”) to definitely inaccurate (“virtually every one of the emails that the Clinton henchwomen, Huma Abedin and Cheryl Mills, thought that they had deleted” and “the smoking gun that will make this handcuff time”). These predictions were made openly on both twitter and in live interviews, and again were attributed at the time to his contact with a mutual friend of Assange.

          When you referred to “remarks made during the campaign” that lead you to think DJT knew what was going to be released by Wikileaks, I assumed you meant remarks made by Trump or his campaign team which, in retrospect, indicated that he knew what was going to be released. But, in any event, it seems to me that it takes a fairly big leap to move from being “associated” with a person who was openly boasting of being fed info about what Wikileaks had received and was going to release, to secretly colluding with the Russians in obtaining and/or disseminating that information.

          Like

        • “You think that the Trump admin has seen media as anything other than adversarial? I don’t. ”

          During the Republican primaries, he used them to good effect and they liked his ratings and possibly thought he was the best opponent for HRC to have. It was a symbiotic relationship that changed once he had an actual chance to win.

          Like

        • Agreed, though I think Trump was less strategic then you do. I think he knew that if he said seemingly outragous things, he’d get media attention.

          It still works the same way and he still uses it the same way.

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        • See also:

          “Stone previously disclosed that he had contact on Twitter with Guccifer 2.0, an individual believed to be part of the Russian intelligence network. Stone, who’s called that communication “completely innocuous,” has insisted allegations about any connections to Russia are unfounded.”

          http://thehill.com/blogs/in-the-know/in-the-know/326273-roger-stone-documentary-to-premiere-in-may-on-netflix

          Like

  11. This is why no reporting around Trump should be trusted.

    Further clarification:

    Like

  12. Heh.

    Liked by 1 person

  13. I think the Right should be celebrating the left’s newfound love of Federalism, not criticize it.

    http://hotair.com/archives/2017/05/11/los-angeles-schools-offer-blatantly-break-law-opposing-ice/

    Liked by 1 person

  14. It is just unfortunately expensive for us and fortunately saves cash, for them.

    I’m so old I remember when not “freeloading” meant having a nefarious Praetorian guard

    http://prospect.org/article/trump’s-private-security-force-operational-and-legal-swamp

    Liked by 1 person

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