Morning Report: Markets prepare for Janet 8/25/17

Vital Statistics:

Last Change
S&P Futures 2447.5 6.8
Eurostoxx Index 375.7 1.2
Oil (WTI) 47.7 0.3
US dollar index 86.1 -0.1
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 up this morning as we await Janet Yellen and Mario Draghi speeches in Jackson Hole. Bonds and MBS are flat.

Janet Yellen will be speaking at 10:00 am EST at Jackson Hole. The markets aren’t expecting much in the way of new policy guidance, however given the general illiquidity of the markets, and the fact that it is a Friday during summer, anything that spooks the herd could have outsized effects.

Durable goods orders slipped 6.8% in July largely due to a drop in aircraft orders. Ex-transportation they were up 0.5% MOM and 5.6% YOY. Capital Goods orders rose 0.4% and are up 3.5% YOY. Capital Goods orders are a good proxy for business capital expenditures, and indicates manufacturing confidence in the future.

Credit scoring is something we take for granted, however there is competition to the standard Fair Issac model (FICO). VantageScore (created by Fair Issac competitors Transunion, Equifax and Experian) is attempting to become an alternate scoring methodology for Fannie / Fred and FHFA loans. FHFA is worried that allowing new credit scoring methods would create a race to the bottom, where the agencies end up using the one that shines the most favorable light on borrowers. Some feel the FICO methodology, which doesn’t distinguish between types of debt, is outdated. Vantagescore uses things like utility and rent payment history, which is useful for people who don’t borrow much in the first place and don’t have a FICO score.

The post-election sell-off in bonds is unwinding, and mortgage rates have hit the lows of 2017, matching levels seen just after the election, according to Freddie Mac. The 30 year fixed rate mortgage averaged 3.86% for the week ending August 24, which is the lowest level since November 10, 2016.

The homeownership rate may have bottomed, and perhaps we are seeing a turnaround for the younger buyers. Below is a chart of the homeownership rate by age cohort, going back to 1994. The youngest age brackets definitely have the most volatility, and they are the most affected by the dearth of starter homes for sale.

46 Responses

  1. It will be interesting to see if anything comes out of this. The local police, state police, mayor of Charlottesville, and the governor are all starting to point fingers at each other over the (lack of) police response.

    http://www.richmond.com/news/virginia/government-politics/charlottesville-mayor-got-advice-from-governor-on-white-nationalist-rally/article_66ddff07-55e6-5bd0-9c87-3a2d13055663.html

    Liked by 2 people

    • my theory —

      the locals pols are thinking — oh shit, we can’t have our cops roughing up BLM types.

      the cops are thinking — oh shit, whatever i do, i’m going to be on youtube and my career is over.

      “Charlottesville Mayor Mike Signer on Thursday said that he did not have access to security details before the deadly white nationalist rally earlier this month, claiming that his city’s police chief at one point told the mayor to “stay out of my way.”

      and this just doesn’t pass the laugh test. please. the mayor’s office is involved in where i put an ambulance for street festival. but here’s a huge event and the mayor isn’t briefed on security? BS

      Liked by 1 person

  2. This is a great line:

    “We have to get outside of our too-closed bubble. We need to be able to go to places where the Wi-Fi sucks, where you don’t want to take a picture of your dinner, where you’ll be sitting with people who are giving thanks to God for that dinner, and they’re not worried about whether spaghetti and meatballs is cultural appropriation.”

    http://www.slate.com/articles/news_and_politics/interrogation/2017/08/mark_lilla_thinks_identity_politics_are_destroying_the_democratic_party.html

    Liked by 1 person

    • The interviewer completely proves his point about the democrats being completely hung up on race and identity politics.

      Like

      • Yes, it’s truly impressive to see it play out like that.

        However, Lilla totally glosses over how the New Deal consensus collapsed in the late 1960’s and 1970’s. As with most progressives, he makes the break at 1980. It was earlier than that. Reagan’s election merely ratified it.

        This is also spot on:

        “The word we is the most important word in the Democratic lexicon. If you cannot appeal to that, you cannot rally people.”

        But again he needs to broaden his investigation of how things ceased being about “we”. It wasn’t all identity politics. Making income redistribution the primary focus of progressive politics played a big role too.

        Like

        • Also, the left went too far in trying to social engineer the suburbs after white flight in the 60s.

          Like

    • On a purely tactical level, this is obviously true. Even they don’t change a single core belief, if they want votes they’ve got to stop narrowing the bubble they exist in.

      Like

    • It seems to me that the biggest issue of the last 40 years is that we have this left and the right, and the right’s lunacy on its side is shown in electoral politics.

      The interviewer does indeed prove the point. That he can see lunacy on the right, but can’t see the lunacy on the left, is a big part of the problem. In no small part because Trump demonstrated that right-wing lunacy remains way more popular with the electorate. Or is less of a turn-off to swing-voters, at the very least.

      They hold two-thirds of the governorships. They hold 24 states outright, and if they win two more they can call a constitutional convention.

      The interviewee is serious about the facts on the ground. He’s got to be a very lonely progressive.

      There’s a constitutional right to abortion in this country, and there are parts of the country where you cannot get one, and why is that? Because we are not competitive in these places because people have walked away from us, because of the way we talk, because of the things that with our seeming contempt for them.

      Who knew that calling voters deplorable was not a way to win votes?

      [Ed. note: The majority of women voted for Clinton. The majority of white women voted for Trump.]

      I wonder what that majority number is when you subtract California. I know what it was for the electorate overall.

      When you say that Democrats—or “we”—have turned away from this, I don’t know what that means after eight years of a presidency that by and large did exactly what you’re asking for.

      There are a lot of PLers that considered Obama center-right. For whom Obama was too conservative.

      Those people are who the interviewee is talking about. Those are the folks that make progressives, collectively, seem crazy and radical and contemptuous of average Americans.

      You’re acting a little bit as if local Democratic candidates are telling voters that eating meatballs is cultural appropriation. Or Chuck Schumer or Nancy Pelosi is telling people that they shouldn’t eat Italian food because that’s offensive.

      Interviewer just wants to miss the point.

      I think interviewee misses an important point that Democrats routinely miss: they don’t offer appealing tangibles to their voters, or their efforts to do so (eh, some kind of free college, maybe, from Hillary) is a weakness when attractive voters.

      You keep coming back to Trump. Trump is not the issue.

      I think he’s probably right about that. Making Trump the issue is a real weakness for progressives and Democrats. They’ll be bitching about Trump as the number of Republican governors and legislatures increase.

      Like

  3. Some things can’t be parodied:

    ““Game on,” said Mayor Joe McComb at a news conference. “We’re looking forward to having a very good positive result from this storm. We’ll get through this, we’ll be better for it because the community has been pulling together.””

    https://www.washingtonpost.com/national/hurricane-harvey-grows-stronger-as-texas-braces-for-historic-storm-to-make-landfall-friday-evening/2017/08/25/b63c8f3c-8992-11e7-a94f-3139abce39f5_story.html

    Like

    • and the vetting process that these groups have for bringing in new people is very strenuous.

      I wonder how true that is.

      Like

    • Bray says:

      One of the arguments I make in the book is that while analytically that’s (what is a fascist?) a conversation worth having, I don’t know of any empirical examples of anti-fascists successfully stopping a neo-Nazi group and then moving on to other groups that are not racist but merely to the right.

      That’s because, the population of neo-nazi groups being so miniscule, they usually simply start with people “merely to the right”. Ask Charles Murray.

      EDIT: I should have read further before commenting. Bray essentially contradicts himself and reinforces my point later on.

      I can’t speak for the individuals who committed these political actions, but the general defense is that the rationale for shutting down someone like Milo has to do with the fact that his kind of commentary emboldens actual fascists.

      There you go. He admits that they are on the slippery slope already.

      Liked by 1 person

    • Resisting white supremacy my ass… These are the same people who rioted in DC when the World Bank was in town. They are just the far left.

      Liked by 1 person

  4. They said Trump ought to be impeached if he pardoned Arpaio. So he pardons Arpaio.

    Heh. They should say he should be impeached if he taxes the rich and institutes a universal basic income, and see what he does. 😜

    Like

  5. I guarantee that UC Berkeley is a seething cauldren of racial tension. It’s my understanding that half of all enrollee’s have to either be nazis or klan affiliated.

    Cohen, worried that the “Alt-right invasion” will aggravate racial tensions at the school,

    Berkeley is notorious for its White Pride.

    In another tweet, she states that “A valuable education would involve administrators modeling to us how to combat bigotry on campus” even going as far as to call the speakers “hateful no body’s [sic]” and “proponents of ethnic cleansing.”

    I know Coulter and Milo have both talked about their love of nazi Germany.

    https://www.campusreform.org/?ID=9640

    Liked by 1 person

  6. I’m still trying to figure out what the problem was for these people. The two examples provided consist of having to answer questions about their ethnicity (horrors of horror) and feeling uncomfortable because of all the whiteys.

    http://www.portlandmercury.com/feature/2017/08/23/19263182/how-portland-is-driving-away-new-residents-of-color

    I suppose if I were in Nigeria, it would feel weird that I was a minority, I get that, but would I expect Nigerians to import white people so I’d feel less conspicuous?

    Plus, when I think of Portland, obviously I think of Klan HQ, or of Berlin in the late ’30’s. AmIRight?

    Bottom line, it’s a stupid article about people who are exercising their minority butt hurt privilege.

    Like

  7. Mark Zuckerberg is the most powerful editor in the world

    http://www.thedailybeast.com/trump-damaged-democracy-silicon-valley-will-finish-it-off

    Surprised to see the left worried about this..

    Like

  8. The left these days…

    Liked by 1 person

  9. My boss’s son is a Marine Reservist (E-3) in Dallas, he was activated at 5:30 AM this morning and is headed to Houston.

    Kind of shocked.

    Like

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