Morning Report: Household wealth increases again 9/22/17

Vital Statistics:

Last Change
S&P Futures 2499.5 -5.8
Eurostoxx Index 382.9 0.1
Oil (WTI) 50.4 -0.1
US dollar index 85.7 0.1
10 Year Govt Bond Yield 2.25%
Current Coupon Fannie Mae TBA 103.24
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.85

Stocks are lower this morning on no real news. Bonds and MBS are flat.

We will have some Fed-speak today, however nothing should be market-moving given how recent the FOMC decision was.

The Markit PMI flash index came in at 54, showing manufacturing remains strong. Separately, businesses expect to see about 1.9% inflation in the coming year, according to the Atlanta Fed.

San Francisco Fed President John Williams sees the Fed gradually raising rates and considers 2.5% on the Fed Funds rate the “new normal.” “Although I do expect us to need to raise rates gradually over the next couple of years, it’s not like we need to raise rates a lot over the next couple of years,” Williams said, adding that the pace “will depend on how the economy progresses.”

US household wealth hit a record in the second quarter as asset price appreciation continued. Household wealth increased to 96.2 trillion. Total debt grew at 3.8% as households and businesses borrowed more than governments. State and local government borrowing actually fell.

Freddie Mac is out with its 2018 forecast, which basically predicts more of the same. Economic growth is expected to hang out in the 2% range, while mortgage rates are expected to rise. The increase in purchase activity will not offset the drop in refis, however and they are forecasting a 6% drop in originations versus 2017. They see home price appreciation of 5%. They expect the limited inventory problem to remain as the aging of the population and limited mobility keep a lid on home sales. They see the 30 year fixed rate mortgage increasing by 40 basis points to 4.4% and only a modest increase in housing starts to 1.33 million.

Ray Dalio of Bridgewater on why the US economy resembles 1937. His point was that the Fed began to remove accomodation from the markets in 1937, which caused (in his opinion) the “recession within the Depression in 1937. While it is possible that monetary policy caused that recession, it is also possible policy had an effect too, especially FDR’s undistributed profits tax, which basically told companies to “use it or lose it” with respect to their retained earnings. It was a political disaster from the start and only lasted two years, but it certainly was an ominous sign for business, which didn’t help release the animal spirits. The Fed is going so cautiously at the moment, I don’t see how they will send us into a recession by overshooting.

Jamie Dimon doubled down on his criticism of Bitcoin, saying cryptocurrencies are a “novelty” and “worth nothing.”

26 Responses

  1. Today in leftist idiocy

    It is so strange to hate Republicans so much that you prefer a communist dictator or to hate Christianity so much that you embrace Islam.

    The left is just one throbbing id at this point..

    Liked by 1 person

    • Who is this person and why would you link his tweets?

      Random idiots are a waste of time. The left is very problematic – it is following self proclaimed socialist old guy Sanders over a cliff. But whomever this guy is or claims to be, he is not an example of an ideology, unless you think Trump Derangement Syndrome is an ideology.

      On real substance, I cannot buy Dalio’s analogy. 1937 and 2017 are so completely different that I would not be able to exhaust the ways in which there is no parallel. But let us begin with the relative health of all the interdependent western economies today compared with the isolated depressed nation states of 1937, and then mention just-in-time inventory, and social security did not exist as a floor on purchasing, and the fiscal policy of the time did not actually produce huge deficits even in a depression, so that until war spending ramped up there was miniscule propping from Congress, and…and…and

      Liked by 1 person

      • Chelsea Handler is a thought leader on the left… They take her very seriously

        Liked by 1 person

      • Mark:

        Who is this person and why would you link his tweets?

        Chelsea Handler is a woman comedian with her own TV show.

        But whomever this guy is or claims to be, he is not an example of an ideology…

        I think you are wrong about that. She is a very stereotypical example of celebrity left-wing politics, which has significant influence over the culture.

        Liked by 1 person

        • It’s possible that I am totally out of touch with the far left.

          Like

        • Mark:

          It’s possible that I am totally out of touch with the far left.

          Chelsea Handler is a pretty pedestrian example of mainstream celebrity leftism. If she is “far left”, most of the trendsetters in American culture are “far left”.

          Liked by 1 person

  2. The stock market is going up and I don’t understand why:

    http://www.businessinsider.com/stock-market-news-michael-bloomberg-2017-9

    “Our economy has some real challenges,” he continued. “The infrastructure’s falling apart. We’re destroying jobs with technology. We are keeping the best and the brightest from around the world from coming to America to create new jobs and create new businesses.

    “All of those things would give you pause to worry about the future.”

    The stock market right now is the FAANG stocks: Facebook, Amazon, Apple, Netflix, and Google. They don’t give a shit about these things the left wrings their hands over.

    Exhibit (a) why you should never invest based on your political ideology…

    Liked by 1 person

  3. This is getting interesting.

    A chief prosecutor has asked Spain’s National Court to consider investigating for sedition demonstrators who led thousands earlier this week to protest a police crackdown on preparations for an independence referendum.

    https://www.yahoo.com/news/latest-spain-deploy-extra-police-catalonia-vote-093219713.html

    Like

  4. http://www.argusmedia.com/news/article/?id=1535022

    The US has sold 14 million barrels of sour crude from the Strategic Petroleum Reserve to Valero, Phillips 66, BP, ExxonMobil, Shell and Macquarie Commodity Trading, with deliveries set to take place between Oct. 2 and Nov. 30. The sale generated $664 million in proceeds.

    This is SOUR crude, more expensive to refine. Sold at $47.42 per barrel, if I figure right. I think this is above market for SOUR crude.

    West Texas Intermediate is going for $49.85, and it is sweeter.

    2.33 million barrels were sold to each of 6 companies — Exxon, Valero, Shell,
    BP, Phillips and Macquarie Trading Company.

    Not sure why they are adding to the world oil glut.

    The oil glut is caused by production at the well head, not by the refining process. I don’t understand why the 4 refineries bought SOUR crude at such a high price. I do think Perry negotiated a great price for the Govt. selling, if he had anything to do with it.

    So it’s a sale of a commodity in production glut at a high price. And the Govt. didn’t need to sell anything from the Strategic Reserve, at all.

    I know no one but George and I care about peculiarly Texan issues, but if this deal were done by Texas while Rick was Gov., we’d all smell dead fish and rich Rick.

    Liked by 1 person

    • Could it be Harvey-related?

      Like

      • Could it be Harvey-related?

        I do not see how. As soon as the refineries reopened there was plenty of crude in the totally unaffected pipelines.

        I am guessing this is simply a case where these companies are being promised something in return for overpaying.

        Like

  5. The left politicizes the NFL and then gets all butthurt when Trump says something about it. Agree the president shouldn’t be weighing in on this crap, but if you are going to be making political statements, you can’t play the victim when someone calls you a jackass…

    Liked by 1 person

    • If recent history has demonstrated nothing else, it has demonstrated that you can always play the victim. 🙂

      Like

      • That is probably the most annoying thing about the left. They are the aggressors in the culture war, and then they get to play the victim card when pushed back.

        The left and the media are just a clique of middle school girls.

        Liked by 1 person

        • Yeah. Never seen it quite so . . . extensive. So blatant. The single mode of all self help from this point forward needs to be “You Are Not A Victim”. Yes, the cry bullies are aggressive, but most of them are also miserable, most of the time, and live in a constant state of negative delusion.

          The victimology is just hugely destructive to the individual. I’d much rather be aggressed against and have a reasonable defense or evasion, and not see myself as a victim. The victim class is taking what should be a basic legal standard for protection under the law, and turning it into a core philosophy and lifestyle.

          Like

  6. Brent…tough way for your Lions to lose.

    Like

  7. I’m thinking about auditing a class or two now that Trump’s legalized campus rape.

    Frat hazing’ gonna be wild.

    http://time.com/4954158/betsy-devos-title-ix-sexual-assault-guidelines/

    Like

    • Interesting stuff going down now that it’s permissible to talk about male predators. Everyone suddenly came out about Cosby, and in the film geek community some prominent SJWs have gotten in trouble for harassment and unwanted advances with physical contact. Ain’t It Cool’s Harry Knowles (who has worked in some idiotic Trump attack into half his “articles” since the election–just turned off the main revenue source for his site–that comment section. Because he’s been accused of inappropriate sexual touching (he denies, but if you’ve read a ton of his stuff, as I have, it’s utterly believable) and it dominated the comments section. So he shut them all down. The era of being a Good Liberal giving you permission to be a male predator is apparently over. I don’t mind that so much.

      Like

  8. Liked by 1 person

  9. Like

    • “For Your safety and ours … ”

      Is that a threat? I think it is.

      You engage in violence, you risk getting doxxed. I love how they want to overthrow everything and beat on whomever, but don’t think it’s fair that they have to risk discomfort or awkwardness to do it. Not exactly pledging their sacred honor to the cause.

      Like

  10. I feel for the dude, can’t tell you how many times I’ve attempted to have this exact conversation with the exact same people.

    The suspect told Secret Service officers and agents that he was going to the White House to speak with National Security Agency Director Admiral Mike Rogers and Defense Secretary James Mattis “for advice on missing paychecks and how to get the chip out of my head,” according to the incident report obtained by CNN.

    http://www.cnn.com/2017/09/24/politics/arrest-near-white-house-weapons-cache/index.html

    Fucking government chips in heads.

    Liked by 1 person

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