Morning Report: New Home Sales disappoint 5/23/17

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S&P Futures 2396.3 3.5
Eurostoxx Index 392.3 1.1
Oil (WTI) 51.1 -0.1
US dollar index 88.6  
10 Year Govt Bond Yield 2.25%
Current Coupon Fannie Mae TBA 102.6
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 4

Stocks are higher this morning despite a terrorist attack in the UK. Bonds and MBS are up.

New Home sales came in at 569,000, lower than the 620,000 estimate. The median new home sale price was 309k. The average was 369k. New Home Sales are still lagging population growth.

The Richmond Fed Manufacturing Index declined in April as well.

The DC Appeals Court will hear arguments Wednesday to reconsider its decision that the current structure of the CFPB is unconstitutional. If the CFPB loses its case, it will probably have to be re-worked, with a committee instead of a single director who will be accountable to the President. Trump has said he isn’t in favor of killing the agency, but would like to make some modifications.

Merrill Lynch is taking down its inflation forecasts for the year. They are taking their estimate for end of 2017 CPI to 1.9% from 2.3% and its estimate for core PCE to 1.7% from 1.9%. The core PCE is the inflationary index the Fed targets. Merrill is identifying some transitory drivers, so they expect inflation to return to target levels in 2018. Don’t forget, we will get the FOMC minutes tomorrow, which will give some further color on what the Fed was thinking last month, especially given the political environment in DC. Their Fed Funds forecast was based on an assumption that fiscal stimulus will get passed, and that looks impossible at this point.

Minneapolis Fed Head Neel Kashkari wants to see more data before making a decision on a June hike. The June Fed Funds futures are factoring at 78% chance of a 25 basis point hike. Note as well that the yield curve continues to flatten from its post-election steepening. The twos-tens spread (basically the difference between the 10 year yield and the 2 year yield) is the lowest since October.

Trump outlined his proposed budget, which cuts domestic spending by $3.6 trillion over 10 years. His budget doesn’t touch Social Security, Medicare, or defense. This is largely an ideological document that will never pass – in fact one of Obama’s proposed budgets couldn’t muster up even one Democratic vote. There is talk that the budget will cut HUD’s Community Development Block Grant Program, which runs Meals on Wheels and also doles out money for things like bike lanes, public spaces, etc. Based on trial balloons floated earlier in the administration the rest of HUD’s budget looks like it will be untouched.

51 Responses

    • They obviously need more domestic, white Anglo Saxon terrorists in the UK. Then they can explain how it was probably them and its really all their fault.

      Personally, I think it’s wrong to blame Islam, or radical Islamic terrorism. It’s also wrong but a better try to blame girls and women.

      Clearly, the blame here lies with Ariana Grande.


    • The victims of Monday’s bombing will almost certainly be mostly girls and women.

      I love the modern era. Where fact-free speculation is the currency of the media. And what, exactly, is supposed to allow me to distinguish between Slate and any other source of fake news?

      No clue as to the goal of terrorism, or the effort to deconstruct Western pop-culture, or the desire to cause a stampede and get fellow concern-goers to kill more people than the explosion. That whole article is just so wrong on almost every level.

      And bizarre that the article makes a case that the act was a specific attack on women and girls and homosexuals (while not noting it’s their status in Western society more so than the fact of them that makes them objectionable to certain folks) and not mentioning that Islam is not a big fan of homosexuals or sexually liberated, independent women.

      The goal being, presumably, to continue to cultivate a society that makes more such attacks happen, while feeling morally superior. The ultimate issue is not senseless death or the tearing down of Western values, but the opportunity to preen.


    • lots of pearl-clutching over Trump calling terrorists evil losers…


    • At least one opinion writer admits that metal heads are just as worthy of being terrorists’ victims as girls are:

      Attacks like these aren’t intended merely to kill people who like al fresco dining and the Eagles of Death Metal, or gay men who find their community on the dance floor, or girls young enough to don cat ears. They are an attempt to murder the idea that it’s safe to eat outside on a November evening, or go to any concert, anywhere, or let your child be, for one evening at least, deliriously happy and free in the presence of a pop idol.


  1. I experience this a lot when I’ve discussed politics in certain venues:


  2. I’ll be in my bunk.

    “Her loss immediately set off protests from hundreds of her backers, many of whom charged that there were irregularities that included allowing voters to cast proxy ballots without proper ID.


  3. CNN is warning viewers not to jump to conclusions, that the Manchester bombing could be a right wing false flag operation…


  4. Interesting piece on Thomas and the North Carolina gerrymandering case.

    “He also explained that he joined the liberal faction with respect to District 12 in part because of his belief in deferring to the findings of the trial court unless it clearly errs. Here, Thomas was tweaking the Court for not finding the gerrymander unconstitutional in a 2001 case after a district court did. Interestingly, Thomas is the only holdover from the 2001 case who didn’t switch sides, which is both a credit to Thomas and a demonstration of how partisan views of racial gerrymanders have changed. (At issue is whether majority-minority districts facilitate the election of minority officials in those districts, or packs minorities in such a way that the overall power of their vote is lessened.)”


    • jnc (from TNR):

      But not only has he been a more than able justice (whether one substantively agrees with him or not), he has brought a unique perspective to the Court that could not have been provided by a more generic Republican nominee.

      I don’t agree with that. I don’t think Thomas has brought a “unique” perspective to bear because of his race. I think he is uniquely positioned because of his race to articulate certain perspectives without fear of being labelled a racist, but that is not quite the same thing.


      • I think his background mattered but race was only one component of that. I always appreciate his skepticism of the value of the Ivy League, for example.

        I do like that the author acknowledges this:

        “In part because he rarely speaks at oral argument, there was a common perception that Thomas is just a clone of the late Antonin Scalia. This assumption—which, in some cases, carried the odor of racist condescension—is profoundly wrong.”

        Also, this isn’t actually true:
        “without fear of being labelled a racist”

        He just gets called a race traitor instead.


        • jnc:

          I do like that the author acknowledges this:

          Yeah, I agree with the author on that one.

          He just gets called a race traitor instead.

          True, that is a fair point, but my sense is that such a charge carries a lot less weight in the public consciousness than does the racist charge that would surely be lobbed at whites who made the same arguments.


        • In terms of trying to discredit Thomas to the public, I think it’s a wash.

          He’s a racist if he’s white and makes the argument and a race traitor if he’s black and makes the same argument. It’s ad hominem either way. If anything, I think Thomas is more ostracized by the Ivy League set than a white justice with the same views would have been.


        • jnc:

          If anything, I think Thomas is more ostracized by the Ivy League set than a white justice with the same views would have been.

          Very probably.


    • “Thomas is the only holdover from the 2001 case who didn’t switch sides, which is both a credit to Thomas and a demonstration of how partisan views of racial gerrymanders have changed.”

      but he’s just Scalia’s stooge.



  5. Yep, women and minorities hardest hit:

    “Every terrorist attack is an atrocity. But there’s something uniquely cowardly and especially cruel in targeting a venue filled with girls and young women.”

    Because the lives of the metal fans killed in Paris don’t matter as much as Ariana Grande fans.

    “But the Manchester bombing delivers another message, too. It reminds girls and young women that there will always be people who hate them simply because they were born female.”

    No, it’s because they are in the West which is in a war with the Islamists. But that can’t be admitted because they have victim status so best to blame the “patriarchy” instead.


  6. Good piece on the broader picture:

    “The Manchester Attack Shows How Terrorists Learn

    Can governments be as innovative about saving lives?

    Daveed Gartenstein-Ross”


  7. Still amazes me that the ordinarily religion-phobic left has decided to become BFFs with Islam


  8. Someone gets it:

    “What Progressives Miss About Arms Sales

    Celebrating their success in retaining blue-collar jobs is one way Republicans are winning the votes of working-class Americans.

    Andrew Exum”


  9. Interesting take on Comey.

    “The guy who predicted Comey’s memos thinks Comey may be trying to take down Trump
    By Aaron Blake
    May 17”


  10. National Review is absolutely right:

    “The World Is Too Comfortable with Terror
    by David French
    May 23, 2017 2:51 PM

    Western countries would rather accept a certain level of threat than do what it takes to mitigate it. Make no mistake, there is an emerging bipartisan consensus that a certain amount of terrorism is just the price we have to pay to live the way we want to live. Now, to be clear, very few people will come out and say this explicitly, and national-security establishments do their best — within certain, limited parameters — to stop every single terror attack, but more than 15 years after 9/11 it’s clear that there are prices our societies aren’t willing to pay. And neither our nation nor any of our European allies is willing to pay the price to reduce the terror threat to its pre-9/11 scale. Consequently, an undetermined number of civilians will die, horribly, at concerts, restaurants, nightclubs, or simply while walking on the sidewalk. It almost certainly won’t be you, of course, but it will be somebody. And they’ll often be kids.”


    • But that is too facile – like fighting The War on Drugs.

      Islamic extremism, the greatest feeder of terrorism, must be addressed by how the west treats Saudi support of Wahhabism, as well as how Iran supports Hizbollah and Pakistan supports the Taliban. Even that is too simple.

      The invasion of Afghanistan made sense early on, in hindsight (for me, anyway) the invasion of Iraq was a bad idea. It can be said that the west spent more than a trillion bucks – mainly the US, but also the UK and some others, because of 9-11 “to stop terrorism”.

      It is a workable strategy that is lacking, not the will. Again, like The War on Drugs.


      • I think both are lacking at this point.


      • Mark:

        It is a workable strategy that is lacking, not the will.

        The key word there is “workable”. A part of what makes a strategy “workable”, perhaps the key part, is a willingness to implement it. I don’t think our culture has the will to implement what it takes to protect ourselves from Islamic extremism. We can’t even manage the very basic step of preventing immigration from places and populations from which these terrorists originate, much less taking the war to their own homes and destroying them in place. We don’t have the stomach for what it takes.


    • It is because the left views Islamophobia as a bigger sin than terrorism…


      • Cue the NYT Editorial from this morning.


        • Meh, nothing a bunch of Coexist bumper stickers can’t fix…


        • From the NYT:

          it is important to recognize this attack for what it is: an attempt to shake Britain — and, by extension, the rest of Europe and the West — to its core, and to provoke a thirst for vengeance and a desire for absolute safety so intense, it will sweep away the most cherished democratic values and the inclusiveness of diverse societies. The Islamic State wants nothing more than to watch Western democracies embrace its mad version of a holy war pitting Muslims against Christians, the newly arrived against others.

          Who believes this idiocy? Do the people at the NYT even believe it themselves?


        • Virtue signaling.

          Wanna send a message? Nuke Raqqa.


        • Virtue signaling.
          Wanna send a message? Nuke Raqqa.

          I would love to see Katy Perry do a show there…


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