Morning Report: Housing starts depressed by hurricanes 9/19/17

Vital Statistics:

Last Change
S&P Futures 2504.5 1.8
Eurostoxx Index 382.0 0.0
Oil (WTI) 50.3 0.4
US dollar index 85.3 -0.1
10 Year Govt Bond Yield 2.22%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.83

Stocks are flat this morning as the Fed begins its meeting. Bonds and MBS are flat as well.

Housing starts for August came in at 1.18 million, a touch above the 1.17 million estimate. Building Permits rose 1.3 million, much better than the 1.23 million the Street was forecasting. The hurricanes did depress starts a bit, as the FEMA disaster areas accounted for about 13% of US building permits. Multi-family starts have been more or less flatlining over the past couple years, while single family has steadily increased. Note that starts will probably be depressed over the near term as construction workers in these already tight markets get drawn into rebuilding projects versus new home construction.

Import prices rose 0.6% MOM and 2.1% YOY as the hurricanes boosted energy prices last month. The Fed will almost certainly consider that effect to be transitory and it won’t affect their inflation out look all that much.

Mortgage fraud risk is up 17% YOY, according to CoreLogic. In the second quarter, over 13,400 mortgage applications (or 0.82%) showed symptoms of fraud, compared to 12,700 (0.7%) a year earlier. “This past year we saw a relatively large increase in the CoreLogic National Mortgage Application Fraud Index,” said Bridget Berg, principal, Fraud Solutions for CoreLogic. “If the factors that influenced the increase continue, including a shift to purchase transactions and growing wholesale channel origination activity, it is likely that mortgage application fraud risk will continue to rise as well. Fraud on cash-out refinance transactions and home equity loans may become more of a factor in the coming years as home values and equity rise.”

30 day + Delinquencies fell to 4.5% in June from 5.3% a year ago. The foreclosure rate of 0.7% was the lowest in 10 years. The range went from 0.1% in the Denver MSA to 2.2% in the Newark MSA. Decent home price appreciation and job growth are pushing delinquencies back down to pre-crisis levels.

The Fed is expected to announce that it will begin to unwind its balance sheet at the September meeting. There seems to be a lot of handwringing in the press over the implications of the Fed ending its “easy money” policy. An important thing to remember is that easy money / tight money isn’t a binary choice. It is a continuum. In all reality, if you were to put Fed policy on a scale of 1 to 10, with 1 being easy money, we are basically moving from 1.0 to 1.1. Real short term interest rates (i.e the Fed funds rate less the inflation rate) are still negative. Long term real rates are barely positive. The Fed will still continue to purchase assets in the open markets, however they will let something like 10% – 20% of maturing assets simply go away. These are truly baby steps intended to cause as little negative impact as possible. The Fed is going very slow and cautiously, and the persistent low inflation numbers give them that cushion.

80 Responses

  1. Frist of Power!

    Nothing to see here . . .

    Nope. Just Democratic PACs inciting violence and openly admitting voter fraud. How is that news?


  2. The Case for Colonialism:

    The usual suspects are demanding that Third World Quarterly retract it.

    A lot of noise and handwringing about how the assertion Western “colonial” concepts such as rule of law and equality under the law are examples of White Supremacy.

    I found nothing objectionable in the article, really.


    • “A lot of noise and handwringing about how the assertion Western “colonial” concepts such as rule of law and equality under the law are examples of White Supremacy. ”

      Which is the exact same argument Richard Spencer and the actual white supremacists make.

      The two sides are mirror images of each other and make the exact same arguments.


  3. In 2009, it became the first state to outlaw tail-docking of dairy cows, where the tail is partly amputated to ease milking.

    California, from an article in the NYT about CA’s legislative thrust to ban puppy mills.

    I have been swatted by a tail hard, while milking, but it was more than 64 years ago, on our dairy farm. I’d bet that 10YOs all over northern CA dairy farms came to Sacramento to protest the inhumane treatment, not of the cows but of ten YO farm kids. If they didn’t it is because unlike in the late 40s and early 50s, by 2009 all the cows were on milking machines.

    Just mind boggling what some folks will sneak by as humane legislation.
    It is possible I protest too much. Maybe tail docking is still done to keep the tail from interfering with the milking machine, but having seen them operate, that doesn’t seem right. So I am actually guessing no one docks cow tails anyway.

    Some of you were raised in or near dairy herd country – what do you know about this? Brent?


    • Well, they aren’t going to outlaw the machine-milking of cows. And they want to feel like they are doing something!


      • They’re delicious.

        The waiter approached.
        ‘Would you like to see the menu?’ he said,
        ‘or would you like meet the Dish of the Day?’

        ‘Huh?’ said Ford.
        ‘Huh?’ said Arthur.
        ‘Huh?’ said Trillian.
        ‘That’s cool,’ said Zaphod, ‘we’ll meet the meat.’

        A large dairy animal approached Zaphod Beeblebrox’s table, a large fat meaty quadruped of the bovine type with large watery eyes, small horns and what might almost have been an ingratiating smile on its lips.

        ‘Good evening’, it lowed and sat back heavily on its haunches, ‘I am the main Dish of the Day. May I interest you in the parts of my body?’

        It harrumphed and gurgled a bit, wriggled its hind quarters in to a more comfortable position and gazed peacefully at them.

        Its gaze was met by looks of startled bewilderment from Arthur and Trillian, a resigned shrug from Ford Prefect and naked hunger from Zaphod Beeblebrox.

        ‘Something off the shoulder perhaps?’ suggested the animal, ‘Braised in a white wine sauce?’

        ‘Er, your shoulder?’ said Arthur in a horrified whisper.

        ‘But naturallymy shoulder, sir,’ mooed the animal contentedly, ‘nobody else’s is mine to offer.’

        Zaphod leapt to his feet and started prodding and feeling the animal’s shoulder appreciatively.

        ‘Or the rump is very good,’ murmured the animal. ‘I’ve been exercising it and eating plenty of grain, so there’s a lot of good meat there.’

        It gave a mellow grunt, gurgled again and started to chew the cud. It swallowed the cud again.

        ‘Or a casselore of me perhaps?’ it added.

        ‘You mean this animal actually wants us to eat it?’ whispered Trillian to Ford.

        ‘Me?’ said Ford, with a glazed look in his eyes, ‘I don’t mean anything.’

        ‘That’s absolutely horrible,’ exclaimed Arthur, ‘the most revolting thing I’ve ever heard.’

        ‘What’s the problem Earthman?’ said Zaphod, now transfering his attention to the animal’s enormous rump.

        ‘I just don’t want to eat an animal that’s standing there inviting me to,’ said Arthur, ‘It’s heartless.’

        ‘Better than eating an animal that doesn’t want to be eaten,’ said Zaphod.

        ‘That’s not the point,’ Arthur protested. Then he thought about it for a moment. ‘Alright,’ he said, ‘maybe it is the point. I don’t care, I’m not going to think about it now. I’ll just … er … I think I’ll just have a green salad,’ he muttered.

        ‘May I urge you to consider my liver?’ asked the animal, ‘it must be very rich and tender by now, I’ve been force-feeding myself for months.’

        ‘A green salad,’ said Arthur emphatically.

        ‘A green salad?’ said the animal, rolling his eyes disapprovingly at Arthur.

        ‘Are you going to tell me,’ said Arthur, ‘that I shouldn’t have green salad?’

        ‘Well,’ said the animal, ‘I know many vegetables that are very clear on that point. Which is why it was eventually
        decided to cut through the whoile tangled problem and breed an animal that actually wanted to be eaten and was capable of saying so clearly and distinctly. And here I am.’

        It managed a very slight bow.

        ‘Glass of water please,’ said Arthur.


    • Mark, I went to school in Dairy country, but I am really more from corn country…


    • In other CA centric news, Pelosi was shouted down by undocs who oppose the DACA extension because it does not provide amnesty for all the undocs.

      And more – the Sacramento Bee also reported that about 15% of CA residents are looking to move out of CA because of the cost of housing.

      George, they will move to Harris County, as well as to the Austin suburbs. But if they want cheap housing they should all move to Lubbock.


      • Pelosi was shouted down by undocs who oppose the DACA extension because it does not provide amnesty for all the undocs.

        The “no half measures” crowd are just another kind of purity test. The more purges there are, the less they’ll actually get accomplished.

        Their theme song:

        California folks moving out can come to Tennessee. Good cost of living, reasonably priced real estate, and no state income tax.

        The problem is often that when people start moving out of a socialist state because of the results of their sociopolitical engineering, they immediately start trying to recreate their nannystate in their new location. So maybe they should go to Texas.


      • They’ll ruin this incredibly business friendly, anything-goes zoning metropolis. This is as close as one can get to a Libertarian paradise we’re ever going to get and the Californian ex-pats will change it, never stopping to consider why they had to leave California.

        Liked by 1 person

        • Speaking of which [Houston – America’s perpetual boom town], housing starts may be depressed, but every small builder in CenTex is sending crews to the Gulf Coast, mainly to Houston. The rebuilding is [anecdotally] booming, from what I am being told, by contractors whose subs have disappeared as if into a vacuum cleaner 160 mi east-southeast of here.


        • Over 100,000 houses flooded, that’s a HUGE draw for anybody in construction.

          Also, 500,000 cars were flooded. Word to the wise, be VERY careful in buying a used car for the next couple of years. Get a CarFax, if the car was in Southeast Texas, move on.


  4. The competition to see who can be more offended continues apace:

    The dystopian future is nigh.


  5. Interesting read, but the blind spots in the history are painfully obvious.

    “America Wasn’t Built for Humans

    Tribalism was an urge our Founding Fathers assumed we could overcome. And so it has become our greatest vulnerability.
    By Andrew Sullivan
    September 19, 2017”


    • Anything about Sarah Palin’s uterus?


    • British imperialists long knew that the best way to divide and conquer was by creating “countries” riven with tribal differences.

      Not sure when historical blindspots you are referring to, but this seems not only wrong but self-contradictory. How is the imposition of colonialism in the broad sense different from the imposition of communism, at least strategically? Yet in the previous paragraph he says:

      In the Balkans, a long period of relative peace imposed by communism was shattered by brutal sectarian and ethnic warfare

      As a colonial power, you don’t want tribal warfare going on when you are trying to extract goods and labor and resources. You want peaceful submission to your rule by everybody.

      You don’t become a colonial power in an area by creating war and destruction between various tribes in a society, you do it with unquestionable military and organizational superiority. Fueling tribal infighting in a society only serves you if you have no direct designs on the country, and would rather see it destroy itself then engage in a declared war with them.

      Because we already do. Over the past couple of decades in America, the enduring, complicated divides of ideology, geography, party, class, religion, and race have mutated into something deeper, simpler to map, and therefore much more ominous.

      As opposed to the halcyon days of segregation, Jim Crow, and slavery. Remember when nativists could impugn and marginalize that Irish and the Italians with impunity? Remember when FDR interred American citizens in camps? Good times, good times. It soooo much worse now.

      He’s basically describing the difference in impression and echo-chamber-construction possible in the era of Twitter, social media, and the 24-hour news cycle. If this had existed in the 1780s and 1790s and 1800s, we’d have had a chasm between the Federalists and Democratic Republicans that broad swaths of individuals easily aligned themselves with just as assuredly.

      It rested, from the beginning, on an 18th-century hope that deep divides can be bridged by a culture of compromise

      Primarily, it rested on enforceable democracy, defined rights, representative government, majority rule, and equal treatment under the law. And checks and balances. While there was certainly compromise in government, there were also a large number of winners and losers who did not compromise, they simply lost. And there were losers then, as well, that thought America had doomed itself. Yet, thus far, the system has been remarkably robust.

      and that emotion can be defeated by reason

      That was the Jeffersonian position, never widely adopted.

      Tribalism, it’s always worth remembering, is not one aspect of human experience. It’s the default human experience. It comes more naturally to us than any other way of life.

      I agree with this 100%. I wish more people said it.

      Most tribes occupied their own familiar territory, with widespread sharing of food and no private property.

      Sounds lovely, but this may be exaggerated. Human beings have always been capable of considering items or access or position their property. People only share when it benefits them and their goals or self-image to do so. A tribe that considers themselves a family might share, or warriors at war with an enemy tribe. A loose affiliation of people might share some things but jealously hoard other things, depending on how incentives evolve and the situations presented to them by the outside world.

      but parties defined by race and religion and class and geography?

      The founders where all white men who reserved voting for white male landowners, and were nominally Christian. There were already tribes within politics defined by geography and some by denomination, if not religious. There would have been no other races allowed, and they were all of a similar class so perhaps not those things.

      they explicitly excluded a second tribe among them: African-American slaves.

      No, they explicitly did not exclude them in the founding documents, the bill of rights, etc. In not doing so, they lay the groundwork for the Civil War. They walked the line they had to to avoid enshrining slavery in the constitution, while keeping the southern states in the union. Otherwise, we would have had a confederacy from the beginning.

      and the rise of partisan gerrymandering

      I think he means the GOPs successful cooption of historically Democratic gerrymandering. They didn’t maintain control of the house for 40 years on good looks alone.

      A Monmouth poll, for good measure, recently found that 61 percent of Trump supporters say there’s nothing he could do to make them change their minds about him; 57 percent of his opponents say the same thing. Nothing he could do.

      That’s a good stat. Not sure it’s entirely true. Once he went far enough to joining the enemy tribe, his supporters might change their mind. They are thinking about sexist or quasi-racist comments, not a wholesale embrace of leftist ideas.

      One of the great attractions of tribalism is that you don’t actually have to think very much. All you need to know on any given subject is which side you’re on.

      This . . . this is the beginning, end, and middle of political “discussions” on Facebook.

      I gotta say, he nails it here:

      In America, the intellectual elites, far from being a key rational bloc resisting this, have succumbed. The intellectual right and the academic left have long since dispensed with the idea of a mutual exchange of ideas. In a new study of the voting habits of professors, Democrats outnumber Republicans 12 to 1, and the imbalance is growing. Among professors under 36, the ratio is almost 23 to 1. It’s not a surprise, then, that once-esoteric neo-Marxist ideologies — such as critical race and gender theory and postmodernism, the bastard children of Herbert Marcuse and Michel Foucault — have become the premises of higher education, the orthodoxy of a new and mandatory religion.

      New and mandatory religion. They are the New Victorians. I keep saying it. 😉

      It leads directly to a tech entrepreneur like Brendan Eich being hounded out of a company, Mozilla, he created because he once opposed marriage equality, or a brilliant coder, James Damore, being fired from Google for airing civil, empirical arguments against the left-feminist assumptions behind the company’s employment practices.

      Interesting. The more I’m reading it, the more it seems like Sullivan is pulling back from his pendulum swing to the left. I seem to recall a lot of anti-Republican tribal rhetoric from his keyboard back five or six years ago. Support James Damore is so against the present orthodoxy . . . he’s taking some risks here.

      Moore is a fascinating case in how tribalism now infects everything. After being ostracized by his own tribe, he flipped, turned into a parody of MAGA conformity, and became an employee of Milo Inc.

      This also points to the danger of having too many purity tests in your tribe. If the right was as awful and homophobic and racist as the left believes them to be, there wouldn’t be room for a Milo of a successful gay journalist on the right. But there is. Plenty of it. The left seems to be more and more becoming dominated by the ideologically puritanical victorians, where any mistake merits excommunication, whether the right is basically “You love America? Great! You’re in!”

      George Orwell famously defined this mind-set as identifying yourself with a movement, “placing it beyond good and evil and recognising no other duty than that of advancing its interests.” It’s typified, he noted, by self-contradiction and indifference to reality.

      Just like that. It’s a good quote.

      As for indifference to reality, today’s Republicans cannot accept that human-produced carbon is destroying the planet, and today’s Democrats must believe that different outcomes for men and women in society are entirely a function of sexism.

      I’m still not on board with human-produced carbon destroying the planet being an inarguable reality. The evidence is primarily circumstantial, and predictions of destruction thus far not played out. Mostly saying “I shook my rain stick, and then it rained: it’s science!”

      In 2011, a poll found that only 30 percent of white Evangelicals believed that private immorality was irrelevant for public life. This month, the same poll found that the number had skyrocketed to 72 percent.


      This rhetoric is not just untrue, it is dangerous. It wins no converts, and when actual white supremacists march in the streets, you have no language left to describe them as any different from, say, all Trump supporters, including the 13 percent of black men who voted for him.

      At which point it would be worth mentioning some lefitst pundits and academics have essentially called African Americans who do not submit the leftist doctrine are actually white supremacists.

      Many older white Americans are not so much full of hate as full of fear.

      Or they simply do not believe the narrative they are being fed, or believe certain policies are approaches to politics and life are just wrong. That’s not fear, that’s disagreement.

      The comments are frickin’ fabulous. They–without irony or self-awareness–confirm Sullivan’s thesis repeatedly.

      Agree, extinct. As I said earlier, almost every sentence in this piece is wrong or vacuous. It’s embarrassing.

      In reply to a guy citing that somehow, everything Sullivan says in that lengthy article is completely rebutted by Jonathan Chait’s “The Only Problem In American Politics is The Republicans”, a much shorter piece that barely addresses tribalism at all.

      And on and on. Lord. On the whole, I think Sullivan’s right. But the confirmation found in the comments of the article . . . just outstanding. Two tribes fighting. But also demonstrates that tribalists will read the article in the context of their tribalism, and it will do exactly nothing to make them think their tribe isn’t the One True Tribe.

      Everyone is God’s chosen people.


      • “Not sure when historical blindspots you are referring to”

        The first one that popped to mind was Sullivan citing Fox news as the start of tribalism in the media and ignoring CNN’s Crossfire.


        • Good point. Newspapers were party-controlled for years before the advent of television . . . and highly tribalistic.

          The McCarthy hearings. Media took sides there, too. The tribalism is always with us.

          That’s campaign ads for Jefferson and Adams. What they don’t mention is the content came from newspaper editorials of the time.

          Started with Fox News indeed.


        • IMO, the non-partisanship myth is just that. Certainly overseas papers like The Guardian or Le Monde make no bones about their political bias. Walter Lippman (a socialist) was the one who came up with the idea of an objective press, and I figure it was simply the beginning at the left’s 1984-esque strategy of re-defining terms to meet their agenda.

          Liked by 1 person

        • The partisan, tribal media began the myth of non-partisanship as a strategy to achieve status as purveyors of objective truth. Or so it would appear.

          A few journalists took that seriously, and still do, and get immediately drummed out of the professional for it.


  6. Good read

    “The Latest Scoops from CNN and the New York Times: A Quick and Dirty Analysis
    By Susan Hennessey, Shannon Togawa Mercer, Benjamin Wittes
    Monday, September 18, 2017, 11:03 PM”

    Liked by 1 person

    • Thats a great speech. Hits it out of the park.

      Of course, as Sullivan noted (and I quoted above):

      A Monmouth poll, for good measure, recently found that 61 percent of Trump supporters say there’s nothing he could do to make them change their minds about him; 57 percent of his opponents say the same thing. Nothing he could do.


      • I actually don’t believe that, I think people on either side generally dislike pollsters and say that as a big Fuck You to them.

        Liked by 1 person

        • I do believe it. I’ve seen too many people do it. They did man on the street interviews where they’d say, what do you think of Obama’s plan to . . . and then give them something Romney said or Trump said, and they’d love it. Then pitch a Romney supporter or Trump supporter an Obama thing, only crediting it to the guy they liked. And they’d love it! They couldn’t articulate why they supported it, or not very well. Then they found out it was the other guy, and a good chunk of them would change their mind on it, on the spot, in front of a camera.

          But I’ve seen people do it. It’s the very basis of It’s OK When Our Side Does It. I generally dislike pollsters, true, but I believe it when they say nothing Trump says can ever change their mind about him. Or, I believe that they believe it.

          Certainly, nothing in that UN speech is going to change the mind of any of his critics, and should be well received by his supporters.

          Most people seem to change their mind when a politician is not really part of the tribe, or a Member of the Tribe in Name Only. That’s why we’ve got RINOs and DINOs. And they will generally support these people through horrible personal behavior . . . but if they stray to far from the partisan fold, they are out.

          Which goes to the tribal-ness. Your personal behavior is bad, but it’s not a betrayal of the overall tribe. When you say bad things about the tribes core beliefs, then you are hurting the tribe, and out you go.

          Some people may be moved by logic and rhetoric, I confess, but I think it’s probably a minority. I think most of the people with TDS would greet Trump presenting a legislative agenda that was, say, an exact duplicate of Obama’s 2015 agenda, with wails of horror and approbation.


      • I think it reflects the echo chamber reality of news any more. We get our news from different sources and talk about different things. Often I am completely oblivious to something that is blowing up left-wing Twitter, and they are oblivious to the stuff that is getting talked about on RW Twitter.

        Liked by 1 person

        • And both sides want to be. As Sullivan points out, it’s emotionally satisfying to the participants. When you try to point out what the other side really meant, or that this meme is factually wrong, or that in context it doesn’t mean what they are acting like it means, or just list some actual facts that don’t comport with the current blowup, the response is generally hostility. Often with a restatement of what you just said that is entirely wrong and not what you actually said at all.

          Because what you’re really saying is: stop eating that delicious cheeseburger, I have some raw, unsalted and unseasoned kale that’s much better for you.


  7. I LOVE this site!

    Meathead’s on board!


    • I wonder if they are trying to be subtly remincesent of McCarthy and the HUAC. Red scare!

      History does indeed repeat itself.


    • I am picturing Dr. Evil with the air quotes around non-partisan…


      • And I’m sure most of them believe they are non-partisan. Recently read a post (I think it was Ace) talking about (as Bernie Goldberg did in Bias, and in fact it was also discussed in the Andrew Sullivan article about tribalism) about how left-liberals see themselves as normal, impartial, objective.

        You can see this in their mantras, oft glimpsed on Plum Line and the like: “facts have a liberal bias”, “it’s science!”, etc. Many of the average liberals will cop to their leftwards slant, but at the end of the day they are liberals because of facts and reality and science, so they are just real people based in reality. I.e., they have no problem making a claim of non-partisanship, and believing it, because they are non-partisan . . . it just so happens that deluded-ultra-religious right-wing pro-fascist anti-science Republicans are to blame for everything bad. But that’s not partisanship, it’s science!

        As McWing noted, Meathead is on board. How many people on the left would accept a non-partisan website dedicated to the investigation of the Clinton Foundation period, much less one founded by Ann Coulter? Just the fact they were looking into the Clinton Foundation would make them de facto hyper-partisans, even without Coulter’s involvement. But they can seriously produce this modern, red-baiting site with the announcement of known hyper-partisan, hyper-liberal Rob Reiner pitching it, and claim non-partisanship and believe that is a remotely credible assertion.

        But also I think it’s just an open invite to #NeverTrumpers, saying, essentially, Republicans that hate Trump are invited to participate and enjoy.

        Which I guess is a nice show of bipartisanship. They are willing to set aside their differences with any Republicans willing to work to destroy the current Republican president. Magnanimous, even.


        • As Jonah Goldberg notes, the right is happy to acknowledge its ideology, but it is maddening sometimes how the left refuses to admit it acts ideologically as well.


  8. Curious what allies Ben is referrring to?


    • Iran and North Korea. You know, our allies. Guess we might alienate France but we’re always doing that.


    • the people who got billions in cash on a pallet. Those guys..

      Liked by 1 person

    • The reaction on the left to Trump’s perfectly respectable (but, alas, unapologetically pro-American) speech is just mind-boggling.

      Add that to everything else (I’m thinking about the Tweets about the kid mowing the Whitehouse law being an affront to child labor laws, and antifa, of course, and blaming the DREAMers disruption of Nancy Pelosi being explained as Russian interference, but there’s so much more), and I think Ace is right: the American left is letting its freak flag fly, and at the very least, it’s premature to do that: all the old white straight guys have not died off quite yet.


  9. This may be the single best day of the Trump presidency.

    You’ll have to ask them. Who knows what stirred up this kind of animosity. What we know we know about the Russians and their interference in the 2016 elections is that they tried to increase divisions within this country,” Shaheen said.

    By all means you dumb broad (BIRMINGHAM), lets give amnesty to those Russian stooges!

    Liked by 1 person

  10. You know I would.


  11. Why did Obama want to start a nuclear war with North Korea? Why was he such a war-monger? Tsk, tsk, tsk.


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