Morning Report: Small Business Optimism hits 12 year high 9/12/17

Vital Statistics:

Last Change
S&P Futures 2490.0 4.3
Eurostoxx Index 381.8 2.4
Oil (WTI) 48.3 0.2
US dollar index 85.2 0.1
10 Year Govt Bond Yield 2.15%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.73

Stocks are higher this morning on overseas strength. Bonds and MBS are down.

Small Business optimism remained strong in August, according to the NFIB Small Business Optimism Index. Increases in capital spending and higher sales expectations drove the increase. The index now matches the 12 year high set earlier this year. Interestingly, small business cited “quality of labor” as their second biggest problem, behind higher taxes. 59% reported trying to hire, and of those 88% reported few or no qualified applicants. In fact, both manufacturing and construction reported low labor quality as their biggest problem. Compensation is on the rise, as a net 28% of small businesses reported increasing comp. So, even though we aren’t getting much in the way of legislation out of DC, the drop in new regulations are helping sentiment. A net 9% of firms reported an increase in average selling prices, which is good news to the Fed.

Job openings totaled 6.17 million in July, according the JOLTs report. The quits rate, which is a leading indicator of increasing wages, was steady at 2.2%, and has been in a tight 2.1% to 2.2% range. The Fed watches this indicator closely.

Delinquencies continue to fall, driven by job growth and home price appreciation, according to CoreLogic. 30 day + DQs were 4.5% in June, down from 5.3% a year ago. The foreclosure rate was 0.7%, the lowest level in 10 years. The foreclosure rate varied between 0.1% in Denver and 2.2% in New York – Newark – Jersey City MSA.

Trump is planning on hitting the road to pitch tax reform. He was criticized for not doing more to sell the repeal of Obamacare, so he is trying not to repeat that mistake. Congress has yet to determine the particulars over what individual and corporate rates will be, but the purpose of these rallies is to make the case that we need tax reform to improve our competitiveness. Business friendly groups are also going to spend money on ads pushing for reform.

Banks with exposure to Florida are breathing easier after the damage from Irma turned out to be lower than expected. CoreLogic estimated that uninsured flood losses from Harvey could turn out to be $18-$27 billion.

30 Responses

  1. Howard Dean’s comments are worth a read.

    I think his point on Republicans having a shot from a libertarian angle and blowing it is valid. But that’s probably because it matches my own world view.


    • Well, the right has a blind spot with abortion and gay marriage, but the left has a blind spot with pretty much everything else. For libertarians, it will always be a matter of choosing the least bad candidate.

      Liked by 1 person

    • RE: “These people are not Democrats.” He’s half-right. Many of them were Bernie Sanders Democrats. The entrenched old white DNC served them up refried Clinton, and they gagged on it. It was a bad assumption on their part, as Sanders could have beat Trump, I think, in enough of the close states that he would have won.

      Unfortunately, the DNC had fixed it so the anointed candidate would inevitable win, and then GOP had not.

      and this party is an institution that looks incredibly unattractive; not because of our ideology, ’cause that is attractive

      Kind of depends on how it’s presented. Bernie Sanders had “free awesome college”, and Hillary offered “mostly free tedious trade school for future wage-slaves”. May have ultimately been the same outcome, but branding is important.

      Well, I don’t think we can focus on any group of voters including white working-class voters, if what’s driving them is race and I think it is in a lot of cases in the white working class,

      Says the guy from lily-white, bleached-wide Vermont.

      Because [the Democratic Party] is about inclusion

      About the kind of inclusion most millennials have been taught to value, anyway: race, gender, immigrants, sexual preference/fetish. So I suppose that’s fair, even though they are exclusionary when it comes to old white men, conservatives, and anybody they might disagree with about anything at all.

      not a wish to go back to the 1840s

      Love these strawmen. There’s not anybody, in any group, no matter how warped, who really wants things to go back to the 1840s. The last date anybody ever wants things to go back to is a point in time early in their own youth. We might get nostalgia for how things were back in the 1950s, for example, because we associate it with a time of family or community stability. But that’s about it. Nobody has any interest, anywhere, of rolling back the clock to frickin’ 1840, and most people would skip rolling back to the 1950s if it meant they wouldn’t have cable TV anymore.

      The left’s primary blindspot is due to its echo chamber. They mistake how universal their opinions, especially their more extreme ones, are. They mistake the popularity of generally centrist figures like Obama as a kind of endorsement for open borders and gun control and everybody (except the elites) living a subsistence lifestyle to fight climate change. They overvalue their own importance and star power, thus Clinton’s narcissistic campaign slogan: I’m With Her.

      It’s interesting to observe how awful the Democrats, as a party, are becoming. In terms of personality, they offer very little to differentiate themselves from the Republicans. Despite the Obama template. I expect pickups in 2018 for the Dems, but I’m thinking it will be kind of underwhelming. They learned nothing from Trump’s election, except perhaps the exactly wrong lessons about what to do.


  2. Full fledged TDS on display.

    “Trump could be removed for political incompetence — using the 25th Amendment

    By Eric Posner
    September 12 at 11:07 AM”–using-the-25th-amendment/2017/09/12/b6c62380-9718-11e7-82e4-f1076f6d6152_story.html

    Liked by 1 person

    • While the incompetence argument is poor, it’s the very idea that this would ever happen in a million years that offends me the most. These are our serious journalists and pundits, telling us that it just might be possible that Trump will be run out of Washington by unicorns shooting rainbows at him.

      No. It’s not remotely going to happen. For a million reasons obvious to non-idiots. And there’s precedent. Woodrow Wilson had multiple strokes while in office and basically became incapacitated. His wife essentially became acting president. There were those who advocated a 25th amendment solution, but nothing happened in pretty much the exact situation with 25th amendment was created for. So what makes these people think anything might possibly happen now just because they really, really don’t like Trump?

      And what precedent would that set? Every opposition party argues the other president is incompetent. GWB? Reagan? Clinton was incompetent due to excessive horndoggedness. And so on. If you successfully removed a president based on the argument of incompetence, every future president would face such potential removal.

      And the Democrats think they get punished at the polls now . . . And they want to removed Pence at the same time? How the heck could that possible work?

      It’s erotic fanfiction for leftwing pundits, and that’s all it is.


    • I think there is some truth to this, but it’s not quite what the Democrats think it is. That is, the media is pretty much always in the tank for the Democratic candidate, but they way over-estimate their importance and influence, so despite (and sometimes because) their attempts to influence public opinion towards the Democrats, only they choir has a positive reaction to the sermon.

      They do have a media problem, and the problem is that they’ve lost their media advantage in terms of the power of the media to set the narrative. They simply don’t have the influence they once did, and few people see them as objective and dispassionate reporters of facts. They don’t have the authority to tell anybody that the Democrat is the superior candidate or the Republican is awful and have any significant influence. But over the years, the Democrats have come to depend on their media domination. They still have it, but the effect is nothing like it was.


  3. This, right here:

    “It’s a perfect word, “shivved.” The Hillary Clinton of this bitter memoir resembles the shrunken, beaten Richard Nixon who told David Frost that he gave his enemies a sword and “they twisted it with relish.””

    Liked by 1 person

    • and her defeat has been genuinely traumatizing for millions of women.

      That’s part of the problem right there. Being the trauma candidate is not compelling.

      I wish so badly we were a country where a candidate who said, ‘My story is the story of a life shaped by and devoted to the movement for women’s liberation’ would be cheered, not jeered,” she writes. “But that’s not who we are.”

      Trying to poison the well for any women who come after her?

      Her book finally takes on directly what has been muttered for years: That Clinton was often treated poorly simply because she was a woman.

      That’s never been addressed directly? What’s wrong with these people? Yes, yes it has. Early and often.

      “I’ve seen women CEOs serve coffee at meetings,” she writes, “women heads of state walk tissues over to a sneezing staffer.”

      If they waited for a dude to do it, it’d never get done. They’re just taking the initiative.

      Again and again she blames herself for losing, apologizing for her “dumb” email management, for giving paid speeches to banks, for saying she’d put coal miners “out of business.” She veers between regret and righteous anger, sometimes in the same paragraph.

      That she acknowledges any of that is kind of surprising.

      and how she had to restrain herself at snapping at a young woman who tells her after the election that she didn’t vote: “Now you want me to make you feel better?”

      This will continue to be a problem for Democrats. They may have the youth, but the youth are hard to turn out to vote.

      exiled to her home in Chappaqua, N.Y


      She’ll be all right.


    • Says something about the British diet.


      • ever had a british fry-up for breakfast? enough fat to add a hundo to your triglyceride level..

        Liked by 1 person

        • Nope. Last time I was in Britain was 1989, I think. But I remember pretty much everything dripping with oil. We went to Kentucky Fried Chicken (because: KFC! In London!) and it was like regular KFC, only like they pour a cup of oil over the chicken before serving it.

          Also hit a Pizza Hut. Where they apparently soaked the pizza dough in oil before serving.

          The fish and chips place we ate at in Solsbury, the food was super oily, but it must have been peanut oil or coconut oil . . . it was super-delicious. We ate all of it and both found ourselves ill that night.


        • Food has gotten much better in the UK, or at least in the London metropolitan area where I was from 1999-2006. The only thing I would say that they still have not figured out how to make properly is a good hamburger. Over 7 years, I never found any restaurant or pub that could make a decent cheeseburger and fries. You also can’t find any good NY style pizza, but the european style pizza (super thin crust) they make there is not bad


        • I was there for two weeks in 1989, but was 20, so did most of my eating from a nearby convenience store (mostly UK junk food, and one place made this incredible peanut butter fudge, so I ate that). And American fast food (KFC, Pizza Hut, McDonalds) because I wanted to hit the UK version of the American fast food icons. I got a blueberry pie at McDonald’s, naturally, because McDonald’s in America didn’t have blueberry pies!

          We also ate at a Greek restaurant, which I found underwhelming at the time, but I can’t really remember the meal. Just some appetizer wrapped in grape leaves that tasted both bland and bitter at the same time.

          I would expect the fat content of a lot of the stuff has come down since 1989, given the health consciousness of the Western world in general. And I’m sure Brussels has had some regulations on fat content and fried foods since then. Because why wouldn’t they?


        • KW:

          And I’m sure Brussels has had some regulations on fat content and fried foods since then. Because why wouldn’t they?

          Brexit was all about bringing back the fat.

          Liked by 1 person

    • A couple (or dozen) comments:

      Uber and Tesla, each with a market capitalization exceeding General Motors, have never earned even a single penny of profit, defying traditional models of valuation.

      The market capitalization of Tesla is a bet on the future. It may or may not pay off, but those betting on it are taking a strategic risk. Tesla may well be the leader of the pack in a future filled with autonomous electric cars. Elon is something of an amalgam of Henry Ford and Nikola Tesla (or maybe Steve Jobs). It’s not unreasonable to bet on him making a permanent, money-filled mark on the landscape.

      There is no reason for Uber to have a market capitalization greater than any car company (including Tesla). Literally anyone can write a ride sharing app, and any experienced business people could build the company (and legal team) necessary to go around it. Lyft is already taking a bite out of Uber, and I can easily envision a better ride-sharing service coming up. Uber may build a fleet of autonomous cars, and so become uniquely dominant with a large base of tangible assets, but there’s no reason Lyft can’t compete in that space, or Google, for that matter. Apple could, if they wanted to.

      Amid great controversy, Google summarily fired an engineer, James Damore, for thoughtfully questioning the assumptions of the company’s diversity policies.

      Which they should be entitled to do. So should any company, so long as the firing doesn’t violate federal (or state law). If Damore can make a case that the law was violated, then good for him. Lawsuits will be the only thing that might reign the Google cult in. Not holding my breath, however.

      More recently, Google appeared to direct the dismissal of a scholar from the New America Foundation, a progressive Washington think tank backed by Google, for praising fines levied against the company by European regulators for antitrust violations.

      Ultimately, Google could have just pulled back funding. They have no obligation to fund the New America Foundation, and if they were going to stop bankrolling the foundation, the guy would have lost his job, anyway. I guarantee it. Again, I have no problem with this. Biting the hand that feeds you comes with risks.

      Companies servicing the Internet—and especially search engines—are de facto public utilities

      No. Extreme popularity does not turn you into a de facto public utility. Anyone with money can start their own search engine or social media site. Google and Facebook know this, and are always in the business of putting their money towards making their products stickier (i.e., building a better mousetrap before someone else can and compete with them). I could design a better search engine than Google. So could thousands of other people. Unfortunately, they don’t work with Bing, but there is competition. And the possibility. All I need to beat Google in the search engine business is a few billion dollars.

      Also, this sort of assumes public utilities operate fairly and responsibly, which I’m not sure is always true.

      online payment facilitator PayPal and domain administrator GoDaddy have banished or withdrawn funding services for websites whose content they disapprove of

      In the case of both, there are numerous reasons such things can happen. One of them is to avoid potential liability. Another is they simply don’t want to do business with them (as a baker might not want to bake a cake). And in this environment there is a ton of competition. PayPal isn’t Google (there are a number of money transfer alternatives; none as ubiquitous, but still available. PopMoney and P2P come to mind). There are dozens of domain administrators. Lots of internet companies offer their own domain administration, and the barrier to entry in the market is a lot lower than becoming a popular search engine or money transfer service. GoDaddy should get to do whatever they want. Chances are, whoever hosts your website has their own DNS system you can purchase your domain through.

      In other words, Google is conspiring with Left-wing activists to suppress their political opponents.

      Of course they are. Some noble men need to make their own search engine and get the word out. There is nothing stopping them. It just takes time and money.

      This astonishing concentration of power should concern all citizens, regardless of political persuasion.

      Caveat emptor, and live by the sword, die by the sword. You want to sell at the family flea market, you can’t sell sex toys. Find another channel.

      Should conservatives, blinded by their allegiance to the free market, condone this partisan perfidy?

      No, but they shouldn’t necessarily advocate antitrust remedies, either.


      • KW:

        Pet peeve of mine, primarily because it happens all the time in political discussions of policy.

        Which they should be entitled to do. So should any company, so long as the firing doesn’t violate federal (or state law).

        You cannot argue that that someone “should” be allowed to do something, as long as it doesn’t violate the law. Arguing what they “should” be allowed to do is just another way of arguing what the law itself should be. Which means that the argument reduces to the nonsensical “The law should allow them to do X, unless the law prohibits them from doing X.”

        If Google “should” be entitled to fire someone if they want, then any Federal or State law that disallows it “should” be repealed.


      • KW:

        live by the sword, die by the sword.

        This aphorism is actually an argument in favor of using anti-trust law against these progressive companies. Since they advocate for the application of government power to punish people who disagree with them, then they too should be subject to the application of government as punishment by by those who disagree with them. Live by the sword, die by the sword. It is only the principles of the right…principles which progressives both lack and reject…that suggests that anti-trust laws ought not be used against these companies.


        • This aphorism is actually an argument in favor of using anti-trust law against these progressive companies.

          Indeed it is, but that didn’t seem to me to be the argument the article was making. Although perhaps the author was playing 3-dimensional chess.

          In general, I do not think these companies should be regarded as public utilities. I also don’t see any situation where Google should be obligated (irrespective of their politics) to fund an organization they are funding voluntarily, if that organization turns hostile towards Google.

          As to if I will shed a tear for them should they be pursued for anti-trust, I will not. But I believe it will be a hard case to make. Although the case against Microsoft should also have been so hard to make as to caution against even trying, and it was, but they did it anyway, primarily because Microsoft, at the time, spent almost no money on lobbying congress. They now spend a lot of money on lobbying congress (or this is my understanding) and, interestingly, there have been no more anti-trust cases regarding Microsoft.

          Google presently spends many millions lobbying in DC. Almost $17 million in 2014 and 2015, $15 million in 2016. They’re up there with AT%T and Comcast and the National Association of Manufacturers.

          They spend more than Microsoft. As such, I don’t expect Google to be targeted with any serious anti-trust probe.

          Google also contributes generally to political PACs (though moderately, mostly on issues of net neutrality). 44% to Democrats, 56% to Republicans in 2016. They can adjust this if necessary. They may be wildly progressive philosophically (especially on issues of identity politics), but they are bipartisan when they go shopping in Washington.

          Paypal and Uber tend to spend more about the $1m mark in lobbying. They don’t contribute much in terms of political donations. However, that can always change.


        • KW:

          In general, I do not think these companies should be regarded as public utilities.

          I agree with you.


  4. While I’m convinced actual voter fraud is not a real problem (outside of California, IMO), this is a no duh:

    Of course voting machines can be hacked without evidence. They’re frickin’ Windows machines. There might be some evidence, with deep forensic investigation, of a rootkit hack, but it wouldn’t tell you what votes were changed, if any, or if anything happened at all.

    It doesn’t even get to the fact that such machines are potentially susceptible to incorrect results just due to error.

    The problem is not that voting machines are computers, however. The problem is they are off-the-shelf, running off-the-shelf software at all but the very highest levels (the voting interface).


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