Morning Report: More Trump Trouble 5/17/17

Vital Statistics:

Last Change
S&P Futures 2386.3 -10.8
Eurostoxx Index 394.6 -1.4
Oil (WTI) 49.0 0.3
US dollar index 89.2 -0.3
10 Year Govt Bond Yield 2.29%
Current Coupon Fannie Mae TBA 102.875
Current Coupon Ginnie Mae TBA 103.938
30 Year Fixed Rate Mortgage 4.04

Stocks are lower as the White House gets embroiled in yet another scandal. Bonds and MBS are up.

Donald Trump has been hit with two damaging press reports over the past two days. The first one claims that he shared classified information with Russian diplomats. The second one is that he urged then FBI director James Comey to drop the investigation of Michael Flynn. The first story (if true) is probably not a crime, however the second one (again, if true) strays close to obstruction of justice. Note that both stories rely on hearsay from anonymous sources – basically some guy heard something from some other guy that Trump said this or that – and WaPo / NYT reported it. Suffice it to say, if this was about anyone else, these stories probably wouldn’t have seen the light of day with such flimsy evidence. Doesn’t mean the stories are not true, but the story’s credibility is falling predictably along partisan lines. That probably won’t change until we have some names to go with the story.

What does this mean for the markets? As I said yesterday, the Trump reflation trade is dead. Nothing is going to get done legislatively in this Congress, unless it can get pushed through on party lines, and GOP moderates are no sure thing. So far the GOP establishment has not sided with Democrats and the press against Trump (they can’t stand either), but their support is getting thinner and thinner. I suspect the next shoe to drop will be a high profile resignation, like Rex Tillerson, or Wilbur Ross, neither of whom needs this amateur hour headache. And that could be the “all-clear” signal for wavering Republicans to jump ship and turn their backs on the White House.

The dollar is beginning to take notice, and is down again today. The bond market continues to rally, and I suspect one of the most crowded trades on the Street (short bonds) is going to get painful. Remember the pre-election bond yield was 1.81%. The stock indices are being supported by a few mega-cap stocks which makes it vulnerable to a sell-off. Remember the old saw “Sell in May and go away?” Might be good advice this year.

Here is a chart of the Dow Jones Industrial Average for 1974, the year of Watergate:

DJIA 1974

Of course take that chart with a grain of salt. In 1974, the US economy was still reeling from the 1973 oil crisis, so markets were vulnerable to begin with. Second, if you sold the market during the Clinton impeachment kerfuffle you would have been killed (at least for a year or so), but then would have been correct. Note the Clinton impeachment didn’t make a bit of difference to the Fed, which kept hiking rates. That could be a difference this time around, especially if the economic data starts turning down.

Mortgage Applications fell 4.1% last week as purchases fell 3% and refis fell 6%. The refi share of mortgage apps hit a 9 year low at 41.1%. You can see below a chart of the MBA refinance index, which has been crushed since Brexit last June.

39 Responses

  1. Rumors on Twitter that the Comey anonymous source is Preet Bahara.

    Liked by 1 person

  2. Markets tanking today, but couldn’t This all be a convenient excuse (at least at the outset) for some profit taking?


  3. Rosenstein appoints Mueller special counsel to Russia investigation.


  4. Like

    • My question is this: if Comey actually believed that Trump was attempting to “obstruct” the FBI investigation in the meeting referred to in the infamous memo, why didn’t he resign on the spot and publicly accuse Trump?


      • Or follow the law and report it to the AG.

        Answer: because he didn’t view as obstruction of justice.


      • Piece in the NYT that makes your argument in detail:

        “Trump’s Statements Are Not an Obstruction of Justice

        MAY 17, 2017”

        The counter point would be that while the statements themselves may not constitute obstruction of justice, dismissing Comey when he refused to go along may well be.


      • why didn’t he resign on the spot and publicly accuse Trump?

        JNC answered you above, and I agree.

        Further, if I asked an FBI agent to cut my pal a break because he was a good guy, the standard response would be “That is an inappropriate request and don’t ask me again.” The agent would also note it in his memo to the file and perhaps a copied memo to another agent – standard CYA stuff in case later I turn out to be obstructing justice and someone in the office asks the agent about our conversation.

        I think all agents do this, btw – they did in my experience.

        If Comey thought this was part of a pattern then there may turn out to be more memos coming. But if it is just this one memo, then it was a CYA moment. If just that, it still becomes evidence in an obstruction case if the FBI ever chooses to bring one – but it is just background to assign motive to whatever follows.


  5. The WSJ has a front page report today that makes the media’s narrative-pushing so obviously transparent, and is a good example of why it is so hard to take the media seriously.

    The article is of course behind the subscription firewall, but the headline reads Russian State-Run Bank Financed Deal Involving Trump Hotel Partner and the substance of it (such as it is) is basically just a game of six degrees of separation. Vladimir Putin used to be on the board of the Russian bank VEB, which in 2010 helped finance the purchase of a stake in a Ukrainian steel mill (by an “unknown” investor) from a company called Midland Resources, which is owned by a Russian-Canadian developer named Alexander Shnaider, who 3 years earlier in 2007 had built a Toronto hotel which licensed the Trump brand name and therefore has been paying licensing fees to….Donald Trump! Thus does DJT get “connected” to Russian money. There is even a helpful graphic with Vladimir Putin at the top and a series of arrows leading eventually to DJT.

    Seriously? This is what you’ve got on Trump?


    • “and is a good example of why it is so hard to take the media seriously.”

      I’ll see you the WSJ report and raise you a leaked transcript of part of a House Republican conversation on the Post, with the appropriate headline in case anyone actually reads the transcript and doesn’t draw the appropriate conclusion:

      House Majority Leader McCarthy told colleagues in 2016: ‘I think Putin pays’ Trump”


      • there’s enough to criticize without making stuff up.
        can’t help themselves.


        • Bill Clinton’s biggest advantage was Republican overreach.

          The speculation on PL about how Pence and Ryan are going to be impeached too and somehow Pelosi will end up as President is the online equivalent of watching the guy in the subway masturbate in public.


        • The speculation on PL

          The next person in line would be Hatch. Right?

          What kind of smoke is there around Ryan? Did someone offer even a speculative rationale? A “source”?


        • of watching the guy in the subway masturbate in public.

          Don’t sell this short if the enthusiasm and energy is there, it can be enrapturing.


        • This is glorious.


        • It’s based on the link above. Ryan “knew” that Trump was being paid by Putin and are engaged in a cover up.


        • Ryan “knew” that Trump was being paid by Putin and are engaged in a cover up.


          How did they get to Pelosi in the line of succession?


        • Some House of Cards mumbo jumbo where Republicans were so intimidated after Trump, Pence and Ryan are impeached, removed from office and sent to jail that they come to her to save them or some such BS.

          Or they may be assuming that she becomes speaker after the 2018 elections again and they impeach whomever is President and Vice President at that point.


        • How did they get to Pelosi?

          I believe that they’re counting on the Democrats taking back the House in 2018, followed immediately by impeachment of both Trump and Pence.

          The one that I like even better is President Pelosi appoints Michelle Obama as VP, then resigns in her favor. The governor of California then appoints Pelosi back to her congressional seat, President Obama picks Sen Warren as her VP, and women rule the roost.

          Some good imagination getting exercised over there.


        • “Some good imagination getting exercised over there.”

          Like I said, “the online equivalent of watching the guy in the subway masturbate in public.”

          I’m sure there’s a spreadsheet somewhere that shows how it’s all possible.

          Liked by 1 person

        • “the online equivalent of watching the guy in the subway masturbate in public.”

          I lived in NYC for 10 years. I have seen worse…


      • My wife asked me about the relative import of the WaPo story on McCarthy. I told her the story itself says it was a joke, comparing DJT to some R Congressman whose name escapes me, who was always saying complimentary stuff about Russia.

        She said the repeated story made it sound important, but she could not figure out why. I told her that the inference from the joke is that most R Congressmen are uncomfortable with buddy-buddy talk about Russia, and they probably wished at the time that DJT would shut up about it. It is like a human interest story and has no import, really, I told her.

        We both thought his sweet talk about Russia and Putin was weird and probably McCarthy did, too. Weird enough to be a joke.

        At long last, DJT should listen to a defense attorney and shut up. Last night I thought the government might get back to work today, but the tweeter-in-chief is apparently doing his best to keep actual work from being done again.


        • The fact that the Post only put up a partial transcript shows how the story is being intentionally framed for shock value beyond it’s actual merits.

          But you can tell from what’s there that it wasn’t meant seriously.

          Trump’s opponents are starting to sound like the right wing fever swamps vis-a-vis Clinton.


      • FYI — this story is the on the front page of the (edit — print edition of the) Post today and it reads like a scandal — if they clarify it’s a joke, they don’t on the front page.


        • Wow – they changed the story from last night where their source told them everyone in the room took it as a joke comparison with Rohrbach [?]


        • i reads like ryan swore people to secrecy because treason.


        • “EXCLUSIVE”

          This is the blurb:

          “House Majority Leader McCarthy told colleagues in 2016: ‘I think Putin pays’ Trump

          Kevin McCarthy made the politically explosive assertion in a private conversation on Capitol Hill in June 2016 with his fellow GOP leaders. House Speaker Paul D. Ryan interjected and stopped the conversation from exploring McCarthy’s assertion, saying: “No leaks. … This is how we know we’re a real family here.””

          It also makes them sound like they are part of the mob.


        • Drudge is pimping this.


        • It also makes them sound like they are part of the mob.



        • This was in the beginning of the original story:

          House Majority Leader Kevin McCarthy (R-Calif.) said in June 2016 that he thought Vladimir Putin had paid then-GOP presidential candidate Donald Trump. And it seems entirely possible — if not likely — that he was joking.


      • jnc:

        I’ll see you the WSJ report and raise you a leaked transcript of part of a House Republican conversation on the Post

        I fold. That one is even worse.


  6. Scott Adams gets under climate alarmist Michael Mann’s apparently very thin skin:


Be kind, show respect, and all will be right with the world.

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