Morning Report: Incomes and spending rise smartly 8/31/17

Vital Statistics:

Last Change
S&P Futures 2462.3 6.5
Eurostoxx Index 374.1 3.1
Oil (WTI) 46.3 0.3
US dollar index 86.1 0.2
10 Year Govt Bond Yield 2.14%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.86

Stocks are up this morning on end-of-month window dressing. Bonds and MBS are flat.

Personal incomes rose 0.4% in July, while personal spending rose 0.3%. The PCE index (the Fed’s preferred measure for inflation) rose 0.1% MOM and 1.4% YOY. Good report for stock bulls in that incomes and spending are rising smartly while low inflation keeps the Fed at bay. The December Fed Funds futures are currently predicting a 36% chance of a rate hike at the December meeting and virtually no chance of a hike at the September meeting.

Pending Home sales fell again in July, for the fourth time in five months as tight inventory reduced contract activity. Since bottoming 5 years ago, home prices are up 38% while incomes are only up about a third of that. While that would imply home affordability is getting worse, we are still quite affordable (as far as mortgage payment to income ratios) than we have been historically. It turns out that interest rates matter more than prices when it comes to affordability.

Job cuts rose to 33,825 in August according to the Challenger and Gray Job Cuts report. This is an uptick from July, and a slight uptick on a YOY basis. Retail and construction (surprisingly) were the areas hit. A number in the low 30ks is generally a pretty strong number historically. Don’t forget, these are job cut announcements based on press releases. They may never actually happen.

Initial Jobless Claims were flat at 236,000 last week, which is still an exceptionally strong number.

The Chicago PMI was unchanged at a strong 58.9 last month. New orders and production rose, while employment contracted. Another possible sign of a slowdown in the labor market?

Congress may tie Harvey funding to a debt ceiling increase to make it palatable for all parties to vote for it. If there is going to be a fight over spending increases, the wall, and the debt ceiling, it will happen at the end of the year, not now. Note that Harvey’s costs will also complicate tax reform.

Fannie, Fred, and FHA have announced they will offer forbearance for at least 90 days for homeowners in Houston who were affected by Harvey.

The CFPB has released its planned changes to TRID. These changes go into the Federal Register on October 10, however they are not mandatory until 10/1/18.

The hits keep coming for Wells. An expanded review of fake accounts increased the estimate to 3.5 million. They are also being sued for charging improper lock extension fees. This will certainly be an obstacle for Republicans who want to argue for loosened financial regulation. For the most part, it seems that any regulatory relief will be directed towards the smaller community banks who have been hit the hardest with increased compliance costs. There is still very little sympathy in Washington for the big money center banks.

25 Responses

  1. Guess someone isn’t all that worried about climate change….

    http://www.realtor.com/news/celebrity-real-estate/obamas-may-buy-in-marthas-vineyard/

    Liked by 1 person

  2. “near a Confederate statue.”

    Liked by 1 person

    • when the only tool in your toolbox is a hammer, everything looks like a nail.

      Liked by 1 person

    • WaPo has gone full Fox News, in the other direction.

      Market wise, I think it’s smart. There’s no market for the dispassionate reporting of facts.

      Although in this case I see the relevance of the “near a confederate statue”, given recent events. The relevance of the story . . . I’m less sure of that. The thread to connect Trump’s donation to the National Park Service to the restoration of a historic home, near a confederate statue, seems a stretch. When was the last time WaPo reported on restoration expenditures of the National Park Service?

      Like

  3. Great link from Ace. This was the same writer in the same publication, 9 days apart.

    Liked by 1 person

    • The cognitive dissonance is strong with this one.

      But all you have to do is read the quality of writing to understand the person writing should not have a job as a writer. There was really no explanation of opinions. It could have been better written by an AI algorithm.

      “the kind of foreignness” — what does that mean? A white pants suit tells America loud and clear that Clinton accepted the opportunity to run for president of the US joyfully? What does that even mean?

      Like

  4. Hmm. I seem to recall this happening recently to another individual and it being applauded by the left.

    “I criticized Google. It got me fired. That’s how corporate power works.
    By Barry Lynn
    August 31 at 2:08 PM”

    https://www.washingtonpost.com/news/posteverything/wp/2017/08/31/i-criticized-google-it-got-me-fired-thats-how-corporate-power-works/

    Like

    • Totally different cause reasons.

      Liked by 1 person

    • I was stunned. I told my boss that I didn’t want to leave — I had been with New America for 15 years, and my colleagues and I helped build the think tank to what it is. I asked her to reconsider her decision. But she wouldn’t. She gave me until Sept. 1 to find a new home and a new place for my colleagues and me to work.

      I was shocked, shocked I tell you, to find that organizations that need money to operate don’t continue to employe (i.e., pay that money to) people who do things to radically reduce the organization’s income.

      I am a money guy and know stuff about monopolies. Hire me so I can piss of the people funding your organization and cost you millions of dollars. Because of economic justice!

      I and the entire Open Markets team were let go because it’s not in Google’s interest to finance criticism of its business model. It’s as simple as that.

      Shocking. Just . . . shocking. Even a smart guy like him could never have expected such.

      We should all be worried about big business interfering with our speech, our thinking and our expression.

      I am very worried about corporations not funding my non-stop criticism of them. Very worried.

      Wherever you work, whatever you do, as businesses grow and concentrate their power, your livelihood will be at risk if corporations continue to extend their reach into the world of ideas.

      Or you could, you know, just do what preserves your paycheck. Don’t expect anybody to underwrite your efforts to tear them down.

      The United States was born out of rebellion against concentrated corporate power.

      Yes, that’s why the Declaration of Independence was a non-stop diatribe against the East India Company. And we all know how the constitution is all about preventing “concentrated corporate power”. Must say it a dozen times.

      Also doesn’t note that the East Indian company was essentially owned by the British government.

      Like

  5. Maybe share this with the idiots over at the PL.

    Then ask them what the carbon footprint was of the monter trucks.

    Liked by 1 person

  6. Dinosaurs. That’ll show ’em!

    Liked by 1 person

    • We are proving inadequate not only to our most difficult problems but also to routine duties. Our national political campaigns never stop. We seem convinced that majorities exist to impose their will with few concessions and that minorities exist to prevent the party in power from doing anything important.

      I see nothing to dispute there. He’s right. I don’t see it changing, but he’s definitely right.

      Although I expect he’s mostly concerned with raising the debt ceiling, so he can funnel more cash to the military contractors who own his very soul. 😉

      Like

      • And he proves my contention:

        We all know spending levels for defense and other urgent priorities have been woefully inadequate for years.

        My paymasters have instructed me to demand more money from the lowly serfs!

        Like

    • Good article on the profound anti-Constitutional results of recent SCOTUS rulings on immigration law, and Scalia’s prediction of it.

      https://www.conservativereview.com/articles/scalia-these-court-rulings-wouldve-erased-america-from-history

      Thus, both the Constitution and the inherent right to sovereignty rooted in social compact theory dictates that federal control over immigration should primarily be in one direction: more restrictive than states would want, not less restrictive. Now, obviously, once the feds were given final say over immigration, the letter of the law dictates that states cannot prevent immigrants from settling within their borders where statute otherwise authorizes it. However, as Scalia noted, a state “has the sovereign power to protect its borders more rigorously if it wishes, absent any valid federal prohibition,” and in this case, “Arizona is entitled to have ‘its own immigration policy’—including a more rigorous enforcement policy—so long as that does not conflict with federal law.”

      Yet, over the past decade, Judge Susan Bolton and several other leftist judges have stolen the sovereignty of the state and voted down, like a super-legislature or an executive veto, every commonsense measure that passed either via state law or ballot initiative. She overturned an anti-smuggling law in 2014 as well.

      In 2006, 77 percent of voters approved Arizona Proposition 100, which denied bail to illegal aliens charged with “serious felony offenses.” After this measure was “struck down” by the Ninth Circuit, the Supreme Court refused to hear the case. In dissenting from the denial of certiorari, Thomas and Scalia were furious. “Our indifference to cases such as this one will only embolden the lower courts to reject state laws on questionable constitutional grounds,” wrote Thomas.

      Returning to the Ninth Circuit case involving Hawaii, ponder for a moment the astonishing hypocrisy of courts upholding federal powers over immigration to such an extreme that states cannot even complement federal laws, while at the same time, states that want liberal immigration policies can directly veto federal laws. Further juxtapose this with the growing list of lower courts that are not only upholding sanctuary laws but mandating sanctuary cities by preventing states and localities from cooperating with ICE detainer requests.

      The rulings of these lower, Congress-created courts, which overturn immigration law, popular sovereignty, the social compact, and settled case law stating courts have no jurisdiction over immigration, are now considered the law of the land.

      Liked by 1 person

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