Morning Report: Beware of Hurricane Deductibles 9/8/17

Vital Statistics:

Last Change
S&P Futures 2458.8 -6.0
Eurostoxx Index 374.7 -0.3
Oil (WTI) 49.0 -0.1
US dollar index 84.3 -0.4
10 Year Govt Bond Yield 2.05%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.74

Stocks are lower as markets fret over the possible damage due to Hurricane Irma. Bonds and MBS are flat.

Donald Trump cut a deal with Democrats to fund the government until December and increase aid for Harvey and Irma. Republicans were caught off guard here, however the optics of making a stand on a completely symbolic hill like the debt ceiling during a couple of major hurricanes would have been awful. Trump and Schumer are reportedly planning a bill to repeal the debt ceiling altogether.

Credit reporting agency Equifax suffered a cyberattack which potentially gave social security numbers, addresses and drivers license numbers for 143 million people. The company has set up a website  where people can see if their data was stolen. Banks generally eat the charges for fraud, so something of this size could potentially hit bank earnings if the fraud is big enough. The stock is down 16% on the open this morning.

Initial Jobless Claims jumped to 298k last week due to the effects of Hurricane Harvey. This number is probably understated as many areas in Texas were unable to report.

Productivity rose by 1.5%, which beat the 1.3% estimate. The employment cost index came in at 0.2%, below the 0.3% estimate. As long as inflation stays low, wage growth will be low as well.

Trump has some vacancies to fill at the Fed. Janet Yellen’s term expires in February, while the Deputy Fed Chairman Stanley Fischer recently resigned as well for personal reasons. Frontrunner Gary Cohn is supposedly losing favor, partially because the sense is a Goldman banker would have difficulty attracting Democrat votes. Chances are looking better that Trump renominates Yellen for another term. Former Fed Governor Kevin Warsh is also a good possibility. Warsh is slightly more hawkish than Yellen, which means he would pursue higher rates at a faster pace than Yellen, at least at the margin.

The latest Fed funds futures prediction has a 63% of no move in December now. They are predicting no move in September as well.

Homeowners in Florida and Texas should read the fine print on their policies. These storms could trigger “hurricane deductibles” that allow insurers to push more of the damage costs to homeowners. These became widespread after Hurricane Katrina in 2005, but haven’t been used. These allow insurers to increase the size of the deductible in certain coastal states if a hurricane occurs. These deductibles are usually a percentage of the policy, as opposed to a flat dollar amount. They generally run in the 1% to 2% range. Sandy did not trigger these due to the fact it was a tropical storm when it hit the East Coast. Bottom line, someone who was expecting a deductible of $1,000 might find themselves with a $5,000 or $10,000 deductible.

Fannie Mae is offering forbearance up to 12 months in some situations. Borrowers affected by Harvey or Irma are encouraged to contact their servicer to see if they are eligible for some relief. Details are here:

36 Responses

  1. Lots of sturm and drang out of the left over the prospect of public comment on Title IX cases of sexual assault.

    Hysterical claims of “silencing” people.


    • Brent:

      Hysterical claims of “silencing” people.

      Allowing public comment is silencing people. Love is hate. War is Peace. Welcome to room 101, Winston.


      • It really is. When I was in highschool, I loved 1984, and I pretty much saw Big Brother in anything I didn’t agree with or obligated me to have any personal responsibility. My interpretation was very self-centered, and very broad.

        As I grew older, I began to see references to 1984 in a similar vein to references to Hitler, etc: as trite cliches, absurd hyperbole, complete misinterpretations of text, etc. Essentially: nonsense and non-descriptive.

        So I think I’ve got some standing here. I’ve gone all the way from seeing 1984 (re: Nazis!) everywhere, to finding the entire concept of making parallels to 1984 absurd and cliche in the most hoary manner.

        So it is with regret that I have to concur. After become almost trite, it’s now just becoming . . . accurate.

        Identity politics is really driving us into a world of “love is hate, war is peace” redefinition. Orwell was right.


    • Is there straight-foward orientation at these schools that tell male students that if they have sex with, and potentially just interact with, the women at the college that they can be accused of rape with little recourse and no opportunity to defend themselves, and that women are invited to interpret any vaguely sexual experience, apparently consensual or not, as rape? Any interaction as harassment?

      And that even if they have no interaction with women on campus, they still might be accused and have little recourse (a lesser chance, but still there), so they need to consider the possibility of experience their own little Salem witch trial when deciding to attend that school?

      I mean, if that’s going to be the school policy . . . then they have an obligation to spell it out to male students at the outset.


      • I mean, if that’s going to be the school policy . . . then they have an obligation to spell it out to male students at the outset.

        Sounds like a plan to me.


        • Wouldn’t that kind of be the case, generally? Couldn’t a solid legal case be made by one of these students is that he had no reasonable expectation (perhaps he, like many highschool students, never followed the news) that this was the policy? Wouldn’t they have an obligation to spell it out (and, really, before tuition is paid) just the sort of risk the average male student is taking by going to that particular college?

          I feel like not doing so leaves them open to lawsuits once their internal kangaroo courts are complete.


      • The only safe thing to do is segregate the schools by gender.


  2. Totally off any subject including hurricane deductibles:

    I think FP is the President’s main power and duty. Therefore I thought that Ike and GHWB were the best prepared to be President in my lifetime.

    It would also follow that HRC had good prep as a former SecState. Yet I never had the comfortable feeling with her that I had with Bush 41 or with Ike, when I was in HS.

    BHO got personally attended to as a protege of Lugar’s, which was for me a bennie.

    RWR and WJC learned FP on the job and had good second terms in FP, IMO.

    GWB and LBJ messed up, getting us into costly wars of choice.

    Right now I am hard pressed to think of who would be a reassuring R or D in 2020 on this criterion. Gates and Panetta are too old. Unfortunately, some of our best general officers of recent years have got themselves into unnecessary messes.

    Don’t know if he registers R or D, but McRaven is doing a good job at the University of Texas and gives a compelling speech, while having some real FP credentials.

    Forget the usual criteria of electability and humor me with a list of public figures below Medicare age who have FP chops. Please.


  3. Carrying this over from previous thread:

    Look where healthcare spending was in 1960 vs 2010, and compare healthcare spending in 2016 vs 2010.


    • 2% growth, right? Since 2010, that’s not bad (although the real-dollar growth is more than 2% might suggest). Without mucking about in the year over year percentages, once can still reasonably conclude that the share of healthcare spending as a percentage of the federal budget will continue to go up. It has already outpaced military spending (which has, as a dollar amount, not gone down, I don’t believe). It’s not long until healthcare spending outstrips social security and unemployment.

      Healthcare as a right will bankrupt the country. And, unfortunately, repealing the ACA won’t do anything to stop what the Great Society launched in 1960.

      Can’t find exact data, but I’m thinking the benefits of governmental healthcare spending topped out years ago, in terms of statistical outcomes. And that more than half, if not almost all, of the improvements in life expectancy and health outcomes have come not as a direct result of government spending at all, but innovation. Some of which might have come from government research . . . but that’s not in the $1 trillion we spend on healthcare. That’s in grants in a variety of categories.


    • KW:

      Look where healthcare spending was in 1960 vs 2010, and compare healthcare spending in 2016 vs 2010.


      I have been banging this drum for a long time now, but in constant dollars and on a per capita basis, the government collects record amounts of revenues in taxes nearly every year now. Our problem is not a revenue problem. It is a spending problem. If you are not focused on controlling and reducing government spending, then you are not focused on solving the problem.


      • So what you are saying is that there is not a single person in Washington focused on solving the problem, and that we can’t seem to elect anybody that is. Perhaps its beyond the power of elected officials now, for some reason (cough–deepstate–cough).


      • And a lot of the spending is a waste problem. We’re not getting our money’s worth, even if you’re a full bore European socialist, from our healthcare dollars. Unfortunately, their solution would be to outlaw private medicine, ultimately, but still. As a Great Society, we are not getting anything close to what we’re paying for. We are not getting a trillion dollars of benefit and quality-of-life enhancement out of our government healthcare dollars.


  4. Even Vox finds the latest round of Clinton deflection absurd:

    Onion is perfect too:

    “Clinton Already Working On Follow-Up Book Casting Blame For Failures Of First ”–56870

    Liked by 1 person

  5. Worth noting:

    ” FBI, Homeland Security warn of more ‘antifa’ attacks

    Confidential documents call the anarchists that seek to counter white supremacists ‘domestic terrorists.’

    09/01/2017 04:55 AM EDT”

    Liked by 1 person

  6. TX court grants an injunction against Ezekeil Elliott suspension…He’s playing Sunday… This can’t be common, right? Did the judge draft him?


  7. I think people aren’t appreciating the New Yorker to New Yorker relationship with Schumer… It si 100% transactional…


  8. Ben Domenech riffs off of Ti-Nehisi Coates’ absurd article from the other day:

    Liked by 1 person

    • I saw that. He had the same reaction I did to his purple, Tolkeinesque prose.


    • The funny thing this morning is watching Greg Sargent get slammed on Twitter for commenting on it.

      It’s insufficient to just be on the same side when you are on the left. You must agree on everything in the exact same manner, lest you be branded a misogynist and racist too.

      Liked by 1 person

      • Cooler heads are going to have to get control of the identity politics stuff on the left, or the GOP is going to continue to steamroll them politically. They think Demographics is destiny, and maybe it is, but identity politics means you have to keep picking which group is more important than all the others. So you keep alienating everybody but this increasingly narrow strip of the single virtuous demographic. Maybe you have two, but even that gets hard–whose more important? Muslims or transsexuals? African-Americans or lesbian women? Which group do you want to piss off this week?


    • I can’t see Ben Domenech’s tweets because he blocked me when I pointed out that he was fired from the Washington Post for plagiarism.


    • But their ostensible end-goals are far less objectionable, even noble. So totally different.

      It depends on how important the abstract excuses and rationalizations the mentally ill person gives you their obsessive and destructive behaviors are to you. To me, they don’t matter.

      As I’ve pointed out elsewhere, German Nazis did not rise to power on a pro-holocaust platform, and in the 1930s could have been seen as good progressives (though not globalists in the modern sense). Eugenics was the fad amongst progressives . . . Nazism was not remotely seen as Nazism is now, and might never have been, had Hitler not had such aggressive military objectives towards the outside world.

      Antifa, fortunately, is not going to rise to power. They are disorganized and immature and largely incapable of self-control. Too many have the modern millennial tendency to demand global acceptance of their defects and self-identifications, rather than the good sense to conceal them and paper over everything negative with savvy PR. Many reasons why they ultimately fail to gain political power.

      Which is good, because they exist on the same moral plane as any set of Nazis you can think of where it counts–they can justify any bad or violent destructive behavior in the name of their larger goals.


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

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