Morning Report: JP Morgan kicks off earnings season 10/12/17

Vital Statistics:

Last Change
S&P Futures 2549.3 -3.8
Eurostoxx Index 389.9 -0.3
Oil (WTI) 50.6 -0.7
US dollar index 86.5 0.1
10 Year Govt Bond Yield 2.35%
Current Coupon Fannie Mae TBA 102.875
Current Coupon Ginnie Mae TBA 103.938
30 Year Fixed Rate Mortgage 3.9

Stocks are lower as third quarter earnings season begins with results from the banks. Bonds and MBS are flat.

JP Morgan reported better than expected earnings this morning, posting a 7% increase in net income. Higher lending revenues offset lower trading revenues. Mortgage origination was flat YOY, but revenue dropped 17%, which means margins are falling. The stock is flat pre-open.

Initial Jobless Claims came in at 243k last week, historically a very low number. For those wondering about places like Puerto Rico, their number is estimated.

Wholesale inflation remains close to the Fed’s target rate of 2%, according to the Producer Price Index. The PPI rose 0.4% MOM and 2.6% YOY, however if you strip out food, energy, and trade services, it rose 0.2% MOM and 2.1% YOY.

The FOMC minutes really didn’t provide much in the way of additional information. There was some discussion that low inflation might not just be a temporary phenomenon, which was interpreted as dovish by some observers. The 10 year didn’t react to the minutes, but the dollar sold off a tad. The December Fed Funds futures decreased the implied probability of a rate hike by a couple points.

Kevin Warsh is now the favorite of economists to run the Fed after Janet Yellen’s term. He is a Wall Street type who worked for Morgan Stanley during the crisis and has been critical of monetary policy since then. He is generally regarded as more hawkish than Yellen, and will definitely be less of a regulatory hawk than she is. Paul Krugman (Dr. Cowbell) threw a little shade Warsh’s way.

Donald Trump is re-thinking the state and local tax deduction after it turns out that about 30% of people making between 50k and 150k a year could be hit with a tax increase under the new plan. The state and local tax deduction (along with the mortgage interest deduction) are two immensely popular deductions which have managed to survive numerous assaults over the years. House Republicans in blue states, like Peter King of NY, will not support tax reform if it means giving many of their constituents a tax hike. If the state and local tax deduction remains, something else has to give, which will probably mean the estate tax (something loathed by the right) remains.

Congress is preparing legislation to subject the credit bureaus to Federal cybersecurity inspections, and to end the use of social security numbers in credit reporting by 2020. The bill will also require the credit agencies to provide free credit freezes.

How tight is the housing market? So tight that people will put up with living in haunted houses.

19 Responses

  1. Ron Paul on the media

    NBC reports that Trump asked for 10x the nukes we currently have. Trump denies.

    Who do you believe?


  2. Russian hacking is the left’s version of black helicopters and FEMA camps.

    Liked by 1 person

    • your post about responding to a authoritarian who thrives on the circus by being boring and going about the business of governing is lost on them

      Liked by 1 person

      • As is the consequences of amending the Constitution. If they want to see a constitutional amendment about Russian Hacking, I’m sure that the constitutional convention that the Republicans are close to being able to call can add that to the agenda.

        Liked by 1 person

        • It’s a fantasy. They just fantasize, constantly. They aren’t going to get a constitutional convention and wouldn’t get anything they want to happen ratified if they did. They’re just poor people fantasizing about how awesome it will be when they win the lottery.


  3. Trump doesn’t need to divide his opposition. They are doing a great job of that all on their own:

    Liked by 1 person

    • Republicans haven’t been working to discredit journalism. Journalists have been doing that.

      And everyone who gets bad press wants to discredit the story. Or the people who wrote it. In what universe would they not?


  4. Lulz


  5. Ha!

    Opponents of the new laws in both Colorado and Washington had proudly advertised their noncompliance with the new regulations. In Washington, Wintemute and his co-authors noted, more than 1,000 gun rights supporters held an “I will not comply” demonstration at the state capitol where they reportedly flouted the newly passed law in public by transferring firearms to each other in full view of law enforcement. In Colorado, some sheriffs in more conservative rural areas reportedly said they would not enforce the new gun control law, and others that enforcement would simply be “a very low priority”.

    Curious on the overlap between those that advocate this and those that support Black Lives Matter.

    “If I’m an advocate pushing for one of these laws, [I would ask]: ‘What can I do to maximize the opportunities for enforcement? Does that mean funding for law enforcement, for augmenting the activities of an enforcement unit?”

    Weird thing to study, wouldn’t you want to know if it reduced crime?

    it asked a simpler question: did a law requiring more background checks actually result in more background checks being conducted?


  6. I’ll be in my bunk.


  7. Jacobin goes there:

    “The Clinton Double Standard
    Oct 13
    Branko Marcetic

    There’s little in the Weinstein story that doesn’t apply to Bill Clinton.”


      • From the article, which was truly an eye-opener after Heffington’s letter:

        The military is supposed to be apolitical. It’s a tool, not part of a specific political party. We need to do what the British did with Sandhurst: turn undergraduate education over to the ROTC programs and colleges, and use our beautiful buildings (and West Point’s incomparable location on the Hudson) for military graduate courses.

        I did not know that the Brits had made Sandhurst a grad training ground. Sounds like a good plan. When I was defending Courts Martial in the early 70s I thought the ROTC/OCS contingent were far more in touch with their enlisted men than the black stone ring guys. But I had no way to judge their leadership qualities, of course.

        As I have written before, if the entering 2003 Regular NROTC class at UCLA was in any way typical, they were a great smart bunch. Seem to be the same for Regular AFROTC at UT. These are the units with which I am familiar.

        I do not know if the partial scholarship non-regular ROTCs are at the same level – in 2003, 1300 SATs and A averages and participation especially captain participation in a sport were pretty much required for Regular NROTC full scholarships.

        ROTC for undergrads, OCS options, and Academies as grad and specialized skill schools – a good idea whose time is probably nowhere near yet, unfortunately.


        • I spent last weekend at my alma mater for the 30 year reunion of my NROTC class. I talked with many UW NROTC seniors and came away very impressed.

          We’ll be fine with these officers coming in.

          Liked by 1 person

        • This is a GOOD Thing and reinforces my own view of ROTC. I assume those Wiscy NROTCs were not all Regulars?


        • They changed the rules when I was in NROTC, and most everyone who graduated from NROTC was USN, not USNR


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