Morning Report: Are we headed into a recession?

Vital Statistics:

Last Change
S&P Futures 2443.0 -9.8
Eurostoxx Index 374.4 -1.5
Oil (WTI) 47.7 0.3
US dollar index 86.1 0.3
10 Year Govt Bond Yield 2.20%
Current Coupon Fannie Mae TBA 103.09
Current Coupon Ginnie Mae TBA 103.97
30 Year Fixed Rate Mortgage 3.89

Stocks are lower this morning after Donald Trump threatened to shut down the government over a wall. Bonds and MBS are up small.

Mortgage Applications dipped half a percent last week as purchases fell 2% and refis rose 0.3%. The average rate on a 30 year fixed was unchanged, while jumbos dropped 5 basis points. Mortgage rates are back at the lows of November 2016.

New Home Sales slipped to 571,000 in July, which was lower than expectations.

For all the talk about Millennials wanting to stay in cities, many are beginning to move to the suburbs. I guess it was only a matter of time. That age cohort is now the biggest group in the housing market. They are starting later than previous generations, however and the median age for a first time homebuyer is 33, which has been inching upward for decades. So, for all the handwringing articles about this generation being reluctant to buy houses, it turns out that they are pretty much like every generation before them: preferring to live in urban areas until they get married and have kids. That said, they are largely renters for the moment, as a combination of a dearth of starter homes and high student loan debt keeps them from buying. Eventually builders will realize there is an opportunity in starter homes, but as of now they are remaining lean and are stymied by regulation and a lack of skilled labor.

Several investment banks are warning that we are approaching the tail end of the expansion and are heading for another recession. They note that global correlations (in other words markets all moving together) has broken down and is back at levels we saw back in 2005. They also cite the fact that companies that beat earnings estimates are not seeing the sort of pop we are used to seeing. We also could be seeing a downturn in profits just as equity valuations reach stretched levels. FWIW, the fact that we are not seeing inflation provides some comfort. Most recessions in the past were driven by an overheating economy (low unemployment, high resource utilization) which caused inflation and tightening from the Fed. We aren’t seeing that at all today – in fact the fear is that inflation is too low. The Fed has been increasing rates not to slow the economy, but to eliminate some of the distortions caused by rates sitting at the zero bound. While you can’t rule out some sort of black swan event (some sort of shock that comes out of left field) the imbalances that usually precede Fed-driven recessions simply aren’t there at the moment, aside from a low unemployment number.

24 Responses

  1. Megan McCardle on today’s online mob

    CEO of Cloudfare on the left’s push to be the gatekeepers of internet speech

    Liked by 1 person

    • McArdle should have noted that the EU is already looking at this including creating a “right to be forgotten” that requires search engines and the like to erase old information about people.

      This isn’t entirely true though:

      “And, of course, you can’t move away. There’s only one internet, and we’re all stuck here for the rest of our lives.”

      You can opt out of participating in social media.


      • i don’t have a facebook or twitter account.


      • “You can opt out of participating in social media.”

        Or you can participate in social media in ways that are innocuous. I usually do, though I haven’t always. And be careful about your sharing rules and who you friend.

        I’m on Facebook and LinkedIn. That’s it. I’ve probably made some comments on Facebook I probably shouldn’t have, to broadcast utter neutrality. But you can either keep your social media presence general and pleasant, or you can have none at all and still access 99% of what the Internet has to offer.


    • The private companies can be the gatekeepers of Internet speech if they want, ultimately. Other users can object, and individuals can bring lawsuits and see what the courts decide. But unless they get regulated like a public utility (which has its own problems) there’s not much to prevent them from deciding they don’t like Nazi websites.

      Ultimately, this is just symbolic (pulling the plug on Nazi websites). They can still all get together in various online communities. They can be on old style usenet or IRC communities, if they want to stay under the radar.

      YouTube’s demonetization of a lot of conservative folks is interesting. It’s principle over money, because it’s not like they can’t let advertisers opt out of posting on conservative channels. They don’t have to demonetize . . . it’s just they’ve decided making money is less important than Being Noble.


  2. Interesting follow up on the Rolling Stone UVA/Jackie story:


    • “the safe version. U.Va. sets itself apart from its coarser cousins in the Deep South, the region that elites up North reject and that revels in this rejection”

      BS. Northern people do not understand the south.

      “In the Deep South, the shadowy side is actually out in the sunlight.”

      Old Dukes of Hazzard fans: the “shadow side” of the South. Sheesh.

      Still, a good analysis. Trust no one, is my motto.


  3. The media struggles to understand what has happened…


  4. The Onion is spot on:

    “New Clinton Memoir: ‘We All Made Mistakes But You Made Most Of Them’

    NEW YORK—In candid excerpts released Wednesday from her forthcoming memoir What Happened, Hillary Clinton reflects on her unsuccessful 2016 presidential bid, revealing to readers, “We all made mistakes, but you made most of them.” “I’m not suggesting it’s entirely your fault, but, let’s be frank, 99 percent of it is,” read one passage from the chapter entitled “Seriously, What Were You Thinking?” in which the former candidate conceded missteps she had made over the course of her campaign while also clarifying that none of them should have produced the final election outcome, which she characterized as “squarely on you fucking people.” “Indeed, fake news and Russian meddling played a part, and I’ve acknowledged I wasn’t the perfect candidate, but let’s not lose sight of the fact that the majority of the blame—all but the tiniest sliver—lies with you, the idiot voters. You really blew it, dumbasses. Bravo!” Sources later confirmed that Clinton devotes the final chapter of her memoir to how she has moved on from the election, begging her readers to not fuck that up for her too.”

    Liked by 1 person

  5. This reminds me of something you would say NoVA:

    “Old and busted: 1115 waivers. New hotness: 1332 waivers.”

    Liked by 1 person

  6. Why I think antifa has an expiration date in a way that Black Lives Matter does not:


  7. Anyone else find it ironic that the people most likely to condemn secession era Southerners as evil for their defense of slavery are the same people who more generally claim that morality is subjective and a function of cultural norms?


    • You just don’t understand. The things important to you are subjective and a function of “cultural norms” (by which they mean: the cultural brainwashing of ignorance and bigotry or something).

      Things important to them are universal, undeniable truths. They have a monopoly on true, undeniable, universal, unchanging virtue. What a lucky coincidence, for people who enjoy nothing more than flattering themselves.


    • The more ironic part is they are also usually advocating for Calexit too.


      • As for the folks who all want to go their separate ways, in the political sense I think this is self-defeating. Scott pointed out the political difference between the CA coast and the CA Big Empty. We could say the same for TX, PA, and many states. There is no way to assure that the next generation will have the same views as the previous one. The northeast was R in my lifetime and TX was D. The four largest cities in TX all vote D. Whole regions of TX vote D. The state overall votes heavily R. If you don’t like what you see, work for what you want. Everything changes.

        The desire to permanently cluster in like minded tribes is short sighted and simple minded. Healthy debate is lasting but lockstep agreement is fleeting. The reason a collective never works for a long time, no matter how successful it might appear for even a few years, is because folks freaking disagree.

        That’s OK!


        • The desire to permanently cluster in like minded tribes is short sighted and simple minded.

          And it doesn’t work. Any large group can’t stay like-minded for very long. Like-mindedness is, in part, a product of (or at least requires) an opposing tribe. Eliminate the current opposing tribe, another group breaks off to fill that gap.

          Also, “pure” systems tend to be corrupt and doomed, one way or another. One of the reasons I argue a seceded California becomes Venezuela. Or North Korea.

          And, frankly, if we could have prevented it, I wouldn’t think we should let Venezuela become Venezuela. If China hadn’t intervened, I don’t think we would have let North Korea be North Korea.

          Also, doesn’t California have 60 nuclear warheads? Something to think about.


        • KW:

          And it doesn’t work

          It’s the only thing that works.

          Any large group can’t stay like-minded for very long.

          This is exactly the argument for keeping groups subject to any given authority small, and expanding that authority to larger groups only to the extent that common values and interests can still be maintained. This was the genius of federalism, and why our abandonment of it is destined to lead to serious conflict.


        • It’s the only thing that works.

          I’m not convinced, but I think we may be talking about different things. In terms of management structure, small-autonomous groups are best. The participants do not have to identify tribally with every other member, or agree on every issue, or otherwise be balkanized groups of “pure” tribesmembers. They only have to agree on a single thing: respecting and adhering to the structure of the management unit, whether flat or hierarchical. All power resting in a centralized potentate, for example, is an example of the problems with tribal domination. The most powerful and ruthless tribal group tends to dominate all the others.

          I don’t think it works. Or, it doesn’t work well. See: Venezuela. A California secession would be one done on the basis of ideological purity which, like declaring independence on racial purity, would be frickin’ doomed. They aren’t going to be doing it because of onerous federal taxes and because the federal government has been quartering troops in the homes of Hollywood starlets. Perhaps they should have the right to secede on tribal grounds, constitutionally, but I don’t believe that it would work.


  8. People who think this stops with Confederate statutes are delusional:

    “New York Mayor Bill de Blasio announced a 90-day review of any statues on city property that could be “symbols of hate.” New Yorkers are now taking aim at the Christopher Columbus statue in Columbus Circle and the tomb of Ulysses S. Grant.

    Some object to the Theodore Roosevelt statue outside the Museum of Natural History, and others suggest the name “New York” itself may have to go because the Duke of York was a slave trader. New York chef Tom Colicchio dropped the name of his new restaurant because it was named after a building that was named after 19th-century publishers who had racist views.”

    It was never about patriotism vs “the traitors” during the Civil War. Hence why the same people who support taking down the statutes also take a knee during the national anthem.

    It’s about getting rid of “white supremacy” going all the way back to Columbus. Their view (and points for being consistent) is that the entire enterprise of colonizing North America was racist and illegitimate.


    • Their view (and points for being consistent) is that the entire enterprise of colonizing North America was racist and illegitimate.

      To which we say this is a done deal that you say you do not want to repeat. if you erase the history no one can learn from it, bro.


    • It’s about getting rid of “white supremacy” going all the way back to Columbus. Their view (and points for being consistent) is that the entire enterprise of colonizing North America was racist and illegitimate.

      Say goodbye, Columbus day!

      Ultimately, it won’t stop with Columbus. It never stops. That’s why we have microagressions. Once there are an insufficient amount of actual aggressions, you have to start finding them in completely normal and non-agressive behavior.

      There is never a point where we reach purity to the satisfaction of everybody who demands it. Sure, you dropped the name of the restaurant, but the building made by those racist publishers is still standing! Tear it down!

      Sure, the farms might not be worked by slaves any more. But they once were. Burn the crops! Salt the land!


      • Once there are an insufficient amount of actual aggressions, you have to start finding them in completely normal and non-agressive behavior.


        I really grew to dislike Freud the more I read about him, but his comment about the narcissism of small differences seems appropriate. Actually, he cribbed that from a Brit anthropologist, so I can go on disliking him.


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

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: