Morning Report: Tax reform week 9/25/17

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

We have a decent amount of economic data this week, along with a lot of Fed-speak. The big economic news will be the final revision to second quarter GDP and the personal income and personal spending releases. Janet Yellen speaks on Tuesday.

Economic activity slowed in August, according the Chicago Fed National Activity Index. The index fell from 0.4 to -.31, for the lowest reading in a year. Production-related indicators drove the decrease. Employment-related indicators were a mild positive.

The Trump Administration is going to push for tax reform this week. The highlight is a cut in the top rate to 35% and a cut in the corporate income tax to 20%. The cut in the top rate will be paid for in part by limiting deductions for state and local taxes. Chuck Schumer has insisted that “not one penny” of tax cuts go to the top 1%, so that could make the plan doomed. The estate tax will also get the axe. Republicans are working on the procedures to pass this without Democratic votes.

Meanwhile, Obamacare repeal and replace looks like it is going to go down as well.

We are starting to see some of the fallout from the recent hurricanes: Homebuilder D.R. Horton cut its cash flow forecast by 50%. Lennar has also said that the hurricanes will delay deliveries. At the end of the day, there is such high demand for homes that this should be a 1 quarter effect which will be made up in following quarters.

Lenders are easing standards given the increase in interest rates and the corresponding drop in volume. “Lenders further eased home mortgage credit standards during the third quarter, continuing a trend that started in late 2016. In particular, both the net share of lenders reporting easing on GSE-eligible loans for the prior three months and the share expecting to ease standards on those loans over the next three months increased to survey highs,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Lenders’ comments suggest that competitive pressure and more favorable guidelines for GSE loans have helped to bring about more easing of underwriting standards for those loans. We believe that the GSEs’ attempts to relieve repurchase concerns and expand credit for creditworthy borrowers have contributed to the easing trend. Meanwhile, market competitiveness also led to the fourth consecutive quarter in which lenders’ net profit margin outlook deteriorated. The share of lenders citing competition from other lenders as the key reason for a negative profit market outlook rose to a new survey high.”

40 Responses

  1. My wife reports listening to an HRC interview in which she complained mightily about the “glass ceiling”. Rosanne is sympathetic to the notion of the existence of same but thinks the discrimination women face is a low priority issue as it can be overcome on an individual basis relatively easily.

    She thinks the public sees the evidence of women high achievers all around them and [like Rosanne] the general public could not understand discrimination against women as the organizing principle of HRC’s campaign. That HRC is still banging that drum reflects taht HRC does not understand how she blew the election, Rosanne says.

    Full disclosure: my wife voted for HRC without hesitation but she always wondered why the Ds pushed her as if she were entitled, and she could not understand why HRC herself did not take campaigning seriously enough to get out of the women’s rights + DJT is a chauvinist pig rut.

    Meanwhile, DJT apparently does not make employment decisions for the NFL or the NBA. I am one who takes his placement of that critique so centrally and harshly in a speech in AL as racially motivated, in at least a cynical way. A white audience in AL hearing POTUS trash rich black entitled athletes for not salutin’ is especially receptive to that sort of rhetoric. The really strange part of that speech was that considering all the brain trauma ex-football players have been reporting, DJT dumped on making the game safer. I don’t think that was calculated for the audience.

    FRIST.

    Liked by 1 person

    • Mark:

      I am one who takes his placement of that critique so centrally and harshly in a speech in AL as racially motivated, in at least a cynical way.

      I take it as Trump simply doing what Trump does…feeding off of the MSM outrage machine to draw attention to himself and in turn feeding the MSM outrage machines by giving it something new to talk about. It is a symbiotic relationship.

      A white audience in AL hearing POTUS trash rich black entitled athletes for not salutin’ is especially receptive to that sort of rhetoric.

      What indication is there that it is the race of the rich, entitled protesters that bothers whites in AL, and not the content of the protest itself?

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      • I think the people being rich, spoiled, and entitled and then quasi taking a dump on the things their poor, hardscrabble fans happen to find important is the bigger issue than race to the fans.

        As far as how Trump was thinking, I suppose the safety of such comments to an Alabama audience, vis-a-vis race, is that something that entered the equation. The kind almost every politician makes (including HRC) at some point in time.

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        • KW:

          As far as how Trump was thinking, I suppose the safety of such comments to an Alabama audience, vis-a-vis race, is that something that entered the equation.

          It seems to me that the only reason for one to think that such comments would be “safer” in Alabama than in any other place, would be if one assumes that 1) the comments had a racial element and 2) Alabamans (or at least Trump supporting Alabamans) tend to be racists.

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        • 1) the comments had a racial element and 2) Alabamans (or at least Trump supporting Alabamans) tend to be racists.

          Can’t prove it. However,

          I think 1] is true and 2] is true, if “tend to” means “many”. My own experience in AL is that many white people are racist against blacks and a goodly number of blacks are racist against whites. My reluctance to assert it more strongly is that my younger relatives in AL say the hard core racism is less among folks born after 1975. The sense of delicacy is such that if one does not consider himself a racist one does not correct everyone else in the workplace from freely using the word “nigger” unless one is the boss and also bigger than the next biggest guy in the room, if you get my drift.

          I also think this about MS, and some parts of LA and east TX. I still have relatives in small town MS as well, btw. Unfortunately they are both over 90 and have Alzheimers. Their many grandchildren/great-grandchildren are my younger relatives spread from Memphis to Biloxi, and including Birmingham.

          KW, how far off would I be as far as you can see?

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        • MarK;

          I think 1] is true and 2] is true, if…

          My sense it that you think 1 is true simply because you think 2 is true. There was nothing overtly or explicitly racial at all about what he said, and so your interpretation of what he said seems to be informed primarily by your sense of the crowd to which he was speaking, and the assumption that Trump shares that sense.

          Had he made the comments to a New York crowd instead of an Alabama crowd, would you have interpreted them as being particularly racial?

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        • @markinaustin: Well, I don’t live in Alabama. I live in Tennessee, but more importantly, I live in the Memphis-metro area. Caucasians are a minority here. The 50/50 threshold in population can, to some extent, diminish racism (to an extent) because of the diversity of the population. I could expound on that, but it would get lengthy.

          Still, there are typical racists, and then just old southern white people who grew up with African-Americans conforming, as far as they could tell, to certain stereotypes and generally playing a subservient role, and were never completely integrated into the more PC view of race that took place in the post-60s eras. So they may have gotten to the point where they don’t ever use the ‘n’ word, but that’s about as far as their political-correctness goes.

          My dad would be considered racist by the modern standard, but positively enlightened by a 1950s standard, for example. My dad is in a nursing home, and its an interesting dynamic to observe. Most of the people who regular interact with people in the almost entirely white and elderly population are African-American, and half of them understand that a more casual reference to skin color from a white, elderly person with dementia means nothing. Half of them are offended by everything and obviously hate their job. An elderly white man might refer to a young black man in this context as “boy”, but the context is entirely different to both of them. Political correctness does not seem to survive most versions of dementia.

          I think most contemporary racists (at least in the south), or what the PC crowd would refer to as racists, are really “culturalists”. They look down on what they see as contemporary black culture, and see most African Americans as representing or tolerating that culture. They also feel resented for just being white, and so see a “reverse racist” in every African-American they meet, or practically. In many cases, the cultural tension between groups is interpreted is racism when I don’t think that’s completely accurate. When there is a Morgan Freeman or a Diamond and Silk or African American who is a proud American and denounces victimology . . . those same “racists” love that guy or woman (which is why the contemporary left is angling to create a category of black “white supremacists”).

          And identity politics plays a part. It’s appealing, when your group gets to be the victim group and your own shortcomings can be explained by discrimination (in this case, black racism and Affirmative Action, etc).

          “Racism” morphs to embrace prominent social tensions, at least in America. Thus, why “islamaphobia” gets categorized as racism, why opposing illegal immigration gets cast as racism, etc. White millennials are being cast as racist now because of how they interact with African Americans. Either showing inadequate deference, doing things that “appropriate” their culture, trying to hard to be understanding, listen to black people, or make African American friends. When that becomes “racist”, then what isn’t racist? But it represents a shift in the cultural tensions, which is really the root of critiques of racism.

          And there are always going to people who identify with their primary tribe by racial characteristics. There will always be white people who don’t like black people “because”, and vice-versa. Identity politics amplifies this and encourages it, but didn’t create it.

          Sufficed to say: I think there are few real, serious, almost-Klan-type racists. Many more cultural “racists”. Also plenty of identity politics racists, where disagreement on any issue represents discrimination or racial prejudice. I think there are situational racists, especially in the south, where it’s okay to say or think racists things about an African American (or any minority) if you have other good reasons not to like them.

          Which is why people who adore Clarence Thomas and Thomas Sowell would say sometimes clearly racist things about Obama, for example. Any racist or quasi-racist thing said about Obama from someone important enough that it became news or a blog post somewhere were all examples of situational racism. These aren’t people that don’t like African Americans, these are people who find casually racist comments about people they have other reasons not to like perfectly acceptable. As they are from a generation, or children of a generation, where stereotypically racist insults, directed towards people they didn’t like based on their race or culture (blacks, Irish, Italian, Hispanic, women, whatever) were commonplace. The same generation that invented polish jokes and published books of race-based humor. Which you could easily buy at B. Dalton or other fine booksellers in the mid-1980s.

          I think southern racism may have a resurgence with the preponderance of identity politics. It’s a case where embracing what seems like a successful political and ideological strategy turns out to have very negative secondary consequences, and the answer is not to turn up the volume on your personal identity politics . . . but it’s what each group will end up doing.

          On the other hand, is the south full of people who want to return to slavery or Jim Crow? That desperate won’t separate drinking fountains? No.

          Sadly, there are a lot, though, that do want to be viewed as victims in their own identity group.

          Like

        • @scottc1: It seems to me that the only reason for one to think that such comments would be “safer” in Alabama than in any other place, would be if one assumes that 1) the comments had a racial element and 2) Alabamans (or at least Trump supporting Alabamans) tend to be racists.

          I don’t think there’s any doubt that such talk would be better received in Birmingham than Berkley.

          You can say “racist”, but you can also say he was speaking in the language of the dominant identity group. Like most politicians, and pretty much every single politician on the left. Bernie Sanders can’t go wrong talking about free college and free healthcare in a speech at Berkley, for example.

          Like

        • Free college and UBI are the “Loose Shoes, Tight Pussy and a Warm Place to Shit” of the 21st Century.

          Liked by 1 person

        • Replying to both KW and Scott, I very much appreciate the sorting Kev does, which is pretty much how I see it, too. That is, that racism is secondary to other likes/dislikes for most. It is also why polls find that only about 6% of white Americans would never vote for a black person, but closer to 20% would object to a daughter dating a black man.
          Different levels to be sorted.

          So I don’t think DJT would have been as quick to take on a single NFL player since black-balled in order to vent in the same way in NY as he did in AL. Reading audience is what he is good at.

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        • Mark:

          Reading audience is what he is good at.

          I agree, but I think the audience he is playing to is the media. Which is why I don’t think it matters where he was when he gave his speech, nor do I think there were any intended racial undertones to his comments. He saw a chance to get on the popular side of a cultural issue – patriotism vs critics of America – and he seized it. Note that the media didn’t spend the weekend talking about North Korea or the impending failure to repeal Obamacare. They spent the entire time talking about how Trump was trashing people who disrespect the national anthem. That’s a winner for Trump. And if you don’t think it is, check out who has the biggest selling NFL jersey as of today. It isn’t Colin Kaepernick.

          https://www.bloomberg.com/news/articles/2017-09-25/steeler-who-stood-for-anthem-now-has-best-selling-nfl-jersey

          BTW, I also think it is wrong to characterize this as DJT taking on a single ball player who has since been blackballed. Player behavior during the national anthem has been a growing subject of media discussion since the first week of the season, well before Trump’s comments.

          https://www.washingtonpost.com/news/sports/wp/2016/09/11/nfl-week-1-scores-latest-news-fantasy-football-and-betting-tips/?utm_term=.411a1cbc1850

          I think it is perfectly reasonable to say that as President Trump should not have weighed in, or even just not in the way he did. But to imply that Trump was bringing up an otherwise dead subject out of the blue rather than commenting on a topical subject that was already a part of the on-going cultural discussion is just plain wrong.

          Like

        • This was far from being a dead subject, Kaperflack, or whatever his name is, has been in the national news since he can’t find a job and the issue, knew taking, has been covered rather breathlessly non-stop since last year. This is an attempt to blame Trump for an issue that was getting bigger regardless of the attention he brought to it.

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        • McWing:

          This is an attempt to blame Trump for an issue that was getting bigger regardless of the attention he brought to it.

          Exactly right. He didn’t choose to draw attention to it. He was just wily enough to take advantage of the attention it was already getting.

          Like

  2. Taking the measure of the manApparently the pissing contest between DJT and Kim continues to escalate.

    Liked by 1 person

    • This seems really weird. My instinct is to say it’s all BS and nothing of serious destruction will come from it, but it’s . . . I see a lot of similarity between the two leaders. Which is weird. And then the nature of the battle is weird. And then NK talking about how the are totally going to launch a missile or two over or around America in some context . . . that’s insane. He’d get so much more transaction globally claiming victimhood and bullying. He launches a legit missile, I think that will be the end of his country.

      Very odd situation.

      Like

  3. Like

  4. Having a hard time wrapping my head around Tomlin’s comments here.

    http://www.foxnews.com/sports/2017/09/25/steelers-coach-mike-tomlin-raps-alejandro-villanueva-for-standing-for-national-anthem.html

    Dude did 3 tours and was awarded a Bronze Star.

    A. Bronze. Star.

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    • As a Steelers fan, i can tell you that Tomlin often doesn’t make much sense.

      As a PGH columnist put it this morning, Tomlin cares about 2 things.
      1: football
      2: things that distract from football.

      Like

    • Are you referring to: ” I asked those guys to discuss it and whatever they discussed that we have 100 percent participation or we do nothing,”

      Doing nothing is doing a thing . . . which he was demanding 100% participation in . . . that just makes no sense. If you can’t agree, saying you do something default response . . . I dunno.

      An examples of the left making Villanueva a white supremacist Nazi aggressor and bad for not going along with his team? Haven’t seen any yet, but it would not surprise me.

      ….

      I’m having a hard time wrapping my head around NFL, ESPN, and sports and general. I’d guess that more than 50% of their consumer revenues come, historically, from people who don’t like the whole “hate America” vibe they’ve got going all of a sudden. I’m sure many sports fans are just choosing to ignore it, and keep buying tickets and watching shows and so on, but they’re moving towards ideological purity tests for sports fans . . . I really don’t get it.

      That being said, Villanueva is a f*ing hero, as far as I’m concerned, and the only thing to come from any sportsball related anything that I’m remotely interested in. I hope Trump invites him to the Whitehouse and gives him the presidential Medal of Freedom.

      Like

  5. Think it is strange that Goodell is against pretty much against any sort of self-expression in the game, with the exception of kneeling for the National Anthem.

    Like

    • Brent:

      Think it is strange that Goodell is against pretty much against any sort of self-expression in the game, with the exception of kneeling for the National Anthem.

      If I had to guess I would say he is against this, too, but he risks being called a racist if he comes out against it, and he is not willing to risk that. I’d also bet that Trump’s tweets reflect the feelings of at least half the owners in the league, too, but for the same reasons they can’t actually follow through with it.

      Like

    • Based on my Facebook feed, a lot of progressives who felt compelled to boycott watching the NFL this season due to the concussions now feel compelled to watch to show support for all the players taking a knee.

      Politics has infected everything.

      Liked by 1 person

      • Infected is the word. I’d almost feel like I’d have to stop watching the sportsball pageants, if I actually watched them in the first place.

        But that’s infection: when you don’t want to care about politics in a given context, but are given no choice. They make you pick a side in a realm largely unrelated to the realm you’re actually operating in. Comic books are doing the same thing. Fortunately, I haven’t collected comic books in a quarter of a century. If I did, I’d have to stop buying them. 😉

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      • a lot of progressives who felt compelled to boycott watching the NFL this season due to the concussions now feel compelled to watch to show support for all the players taking a knee.

        That tickles me. I luaghed when I read it. I’m sure it’s true.

        I don’t watch NFL football. But if i did I would worry about concussions. And as I wrote, I thought the strangest part of DJT’s AL speech was his criticism of head injury prevention measures as ruining football.

        Who could be against minimizing debilitating brain injuries?

        Liked by 1 person

        • “Who could be against minimizing debilitating brain injuries?”

          It appeals to the idea that we’re becoming softer, where the kind of things that we had to endure while growing up that “made us who we are” are being taken away by the PC-police. It’s not specifically about preventing brain injury, but the seeming neutering of the culture, and classic American past times, in the name of safety.

          Like

    • it would be such a perfect world if only liberals had freedom of speech.

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      • They don’t seem to realize who would be doing the censoring if they got their wish.

        Edit: And Glenn Greenwald pointed out how interesting it will be if Zuckerberg decides to run for President.

        Liked by 1 person

        • Any group in a democracy advocating for powers that they would not want the other side to have (either over them, or to pass legislation) is a confederacy of dunces.

          The other side can always, eventually, figure out how to game the system and gain control. If you’re not in the elite, the system–even if “your guys” control it–can always end up being used against you, because you as an individual are expendable.

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  6. Kind of a fucked up standard, Dan.

    Coats said some of the concerns are unsubstantiated,

    http://www.mcclatchydc.com/news/nation-world/national/national-security/article175334586.html

    Like

  7. No good deed goes unpunished…

    Like

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