Morning Report: Productivity increases 12/6/17

Vital Statistics:

Last Change
S&P Futures 2625.0 -3.3
Eurostoxx Index 384.5 -2.3
Oil (WTI) 56.9 -0.8
US dollar index 86.8 0.0
10 Year Govt Bond Yield 2.32%
Current Coupon Fannie Mae TBA 102.625
Current Coupon Ginnie Mae TBA 103.625
30 Year Fixed Rate Mortgage 3.88

There is a slight risk-off feel to the market today as stocks are lower and bonds rally.

Mortgage Applications rose 5% last week as purchases rose 2% and refis rose 9%. The average 30 year fixed rate mortgage dropped a basis point to 4.19%.

The economy added 190,000 jobs last month according to the ADP Employment Survey. The Street is looking for 204,000 jobs in this Friday’s payroll report. This ADP number is more or less close to the average for the past year. Moody’s Chief Economist Mark Zandi is warning that the job market could overheat next year, as he sees the unemployment rate going below 4%. Will that cause the Fed to start hiking rates more aggressively? Perhaps, but until we start seeing broad-based wage inflation and begin to see it flow through to prices the Fed will probably be content to gradually normalize policy and not push the economy into a recession.

Productivity rose 3% in the third quarter, according to BLS, as output increased 4.1% and hours worked increased 1.1%. Generally speaking productivity increases drive wage increases, although that relationship has broken down somewhat over the past 15 years or so. Unit labor costs declined 0.2% as the increase in productivity offset the 2.7% increase in wages. At a recent CEO roundtable, labor costs have taken over regulation as the top concern of Corporate America. Tax reform will probably encourage more capital investment to make workers more productive, and that should translate into wage inflation, although not necessarily into a larger number of workers.

As tax reform gets resolved, the next issue will be funding the government. It won’t take many conservatives to balk at funding the government to make Democrats necessary to keep the lights on. Democrats want some sort of immigration deal to go along with voting for a continuing resolution, which will be a non-starter for many Republicans. Don’t forget the last time we had a government shutdown, you couldn’t get 4506-Ts from the IRS, loan officers, plan accordingly.

Ray Dalio of Bridgewater warns that tax reform will cause an exodus from high tax states like California, New York, New Jersey, and Connecticut. Many big names in the hedge fund business have already relocated to Florida, where there are no state income taxes. Connecticut will be especially vulnerable, as it gets most of its revenue from one county. Meanwhile, NAR and Trulia warn that tax reform will hit property values in these high tax states, and will exacerbate the inventory shortage as it will discourage sellers. As I have said before, it may affect the higher end of the market in these areas, but the sub $750,000 sector should be fine. If anything, it might encourage those that are thinking of buying a million dollar home to lower their price point, which would increase demand in that sector. As a general rule, the multi-million sector in the Northeast has been moribund to begin with, and the multi-million sector in the West has been driven by foreign money and stock market appreciation.

Affordable Housing Advocates are also staunchly opposed to the new tax bill. Many for simple ideological reasons, however tax reform will affect the value of the tax write-offs that act as the incentive to build affordable housing. It will make affordable housing construction less attractive (and may turn it into a money-losing enterprise). Some groups claim that the home price appreciation has been so fast (especially in California) that it is creating a homelessness problem. A lack of affordable housing has been an issue for a long time, and tax reform certainly won’t make it less of one.

The hurricanes accounted for 10% of the country’s mortgage delinquencies. This is going to be a huge headache for lenders with servicing portfolios in Texas and Florida.

The emergence of fraud and swindles usually signals the top of bubbles. Liar loans and CDO squareds were the bell ringing at the top of the US residential real estate market. It looks like we are getting to see some of this in China as well, which has a residential real estate market of epic proportions. When China’s residential real estate bubble finally bursts, it will be a massive battle of wills between Mr. Market and Mr. Big Government. When Japan’s bubble burst, the government used all sorts of ham-handed methods to prevent a crash, and I wouldn’t be surprised to see China try some of the same things. Once China’s bubble bursts, they will export deflation to the world, which will keep inflation in check in the US, however it will also sap global growth. Luckily Japan seems to be picking up at long last (almost 30 years).

68 Responses

  1. Here’s what I don’t understand, why can’t her family join her in Mexico? What’s stopping them from reuniting with her there?–I-don-t-know-when-we-ll-be-together-again-Broken-families-try-to-cope-following-deportation


    • I read the oral arguments in the Colorado bakery case, Masterpiece Cakeshop vs Colorado Civil Rights Commission.

      Click to access 16-111_f314.pdf

      My first reaction is the Alice in Wonderland nature of the whole exercise. The court spends an inordinate amount of time discussing and searching for a limiting principle to a law which by its nature dispenses with all principles of freedom embodied in the Constitution and specifically the first amendment.

      But that aside, one thing that baffles me, and perhaps Mark can explain, is the fact that the decision under review by SCOTUS was originally issued by a 7 member, politically appointed review board, the above mentioned Colorado Civil Rights Commission, not by a jury after an actual trial. What ever happened to the right of a jury trial in civil cases?

      Liked by 1 person

    • Is this story something? it increasingly seems like it should be.

      Can the Justice Department appoint a special prosecutor to investigate a special prosecutor?

      Liked by 1 person

    • “Here’s what I don’t understand, why can’t her family join her in Mexico? What’s stopping them from reuniting with her there?”

      Duh. Who wants to live in Mexico?

      Being reunited means being in the UNITED States. It’s right there in the name!

      Why do you hate equality?


  2. big news tomorrow. you heard it here first. (sorry!)


    • Franken resigning?


      • yes.


      • It’s hard for me to describe how awesome this all is.


        • McWing:

          It’s hard for me to describe how awesome this all is.

          How much more awesome will it be when, after all these D’s resign, Moore gets elected anyway and, given that he was elected in full view of the accusations against him, we can’t possibly overrule the will of the people.

          Liked by 1 person

        • I agree with the WSJ on Moore… If he wins, it will be a Pyrrhic Victory…


        • I’m terrified the media and progressives might start viewing Alabama Republicans in a negative light if Moore wins.

          Liked by 1 person

        • “I’m terrified the media and progressives might start viewing Alabama Republicans in a negative light if Moore wins.”

          Heh. That’s great.

          No matter how much evidence is presented to the media that they are not kingmakers and are increasing irrelevant, they will not learn the lesson.

          If Roy Moore wins, it will be another loss for the media.


      • It’s weird that he has to resign because he’s a creep. Or was a creep, as most of these stories seem pre-senate run. While I realize his particularly creepiness is probably not universal amongst the halls of power, some kind of creepiness, invading-of-personal-space, senate-gym-sanctioned-nudity, whatever . . . there’s some sort of foible or painpoint for so many of those folks.

        While what’s good for the goose is good for the gander, I’m not sure it’s a great precedent. Conyers makes more sense. Now, should he have had to resign because someone found a magical box of uncounted 100% Franken ballots in the trunk of their car? That I can see.

        Eh. Live by the sword, die by the sword. I guess. On principle, I don’t like it. But I don’t think the senate will be worse off without Franken.


  3. fascinating discussion at lunch. we’re waiting for the member to show and the women are talking about harassment/etc. and the guys are hiding behind their phones. and one of them says “i was a conference. about 50 guys and 2 women. and I say ‘who wants to share an uber. and nobody wanted to get in a car with me.” so that Pence rule might be laughed at, but nobody wants to have even the appearance of impropriety.


    • Like picking up pennies in front of a steamroller. No upside, hellacious downside…


    • nova:

      so that Pence rule might be laughed at, but nobody wants to have even the appearance of impropriety.

      The witch hunt atmosphere is ultimately going to be bad for women, I suspect.


    • Given what’s going on, what sort of oblivious moron would find anything remotely funny about the Pence rule? It’s shaping up that the rule needs to be no: no contact, period. No eye contact, no direct communication.

      There’s going to be a whole new job market for bonded mediators who are insured against sexual harassment suits, probably a good gig for attorneys, who can vet all conversation and communication with women for anything inappropriate.

      In the current climate, I would not share an Uber with any woman who was not my wife. Maybe not even then. Pence is a frickin’ visionary genius.


      • Pence, as a religious conservative Republican, knew that he had a target on his back a lot earlier than everyone else did.


  4. Dayum.

    Why aren’t we at least allowed to know how Bloomberg will treat the source’s information going forward. Also, shouldn’t they not if the same person is a source for another story?


    • McWing:

      Why aren’t we at least allowed to know how Bloomberg will treat the source’s information going forward.

      My question is why Bloomberg would continue to honor the anonymity of the source. It seems to me that when a media outlet publishes false information based on an anonymous source, it has an obligation to its readers not just to correct the information, but to identify the person culpable for it being published, so readers can make judgements about that person going forward. Either identify the lying source, or explain how it was that the reporter attributed to the source information that the source did not actually provide.

      Liked by 1 person

      • I agree. At the very least they need to provide for us every story they’ve ever written using that source so that the reader may reevaluate the information.


      • Because it is probably a D party operative who fed it to them and they know damn well the story is false. Or they think maintaining that contact is more important than any reputational hit they might take for getting it wrong.

        The fact that these “mistakes” only seem to go in a single partisan direction tells me it is the former, and they don’t care because they are preventing “Literally Hitler” from resurrecting the Third Reich…


        • Hitler was all about recognizing Jerusalem as the Israeli capital. If I’m not mistaken he was going to move the German embassy there but was distracted by the war.

          Plus, the dude’s that marched with tiki torches in Charlotte are huge lovers of the Jewish people. Part of the message of that night was an urging of Trump to move the US embassy to Jerusalem.

          Straight up.


        • you are using logic. the left (and the MSM) are running on 100% emotion at this point..

          Liked by 1 person

        • “you are using logic. the left (and the MSM) are running on 100% emotion at this point..”

          There you go trying to constrain them with numbers and logic. They are running at 1000% emotion. And they are 10,000% right about everything. And those are facts because of science, and because facts have a liberal bias!

          As Al Franken might say, all the right is is lying liars who lie.


        • When they learn to distinguish nationalism from ethnonationalism, I might listen to what they have to say.

          That being said, I know an ethnonationalist in the internet world. Talking to him is like talking to a hardcore liberal, or almost anyone at PL (but I repeat myself, ba-dum-dum!). Replace the “ethnicity” of choice (usually white European) with “liberal” or “democrat” and a good liberal and a good ethnonationalist are indistinguishable. Replace Republicans with “blacks” or “the Jews” (especially “the Jews” . . . a rant about how right-wing fat-cats control everything and are destroying our country could be a script, stolen verbatim, from American Nazi’s talking about the Joos. Just replace “Republican” with “Jew”.

          Yet they crib constantly from the ethnonationalist playbook, and do so with zero sense of irony.


      • It’s going to have to happen. Planted sources will be used, more and more, as tools to spread disinformation. Publications will have to start burning them, or they are going to be nothing but pure disinformation. Which would not be terribly different than it has been, but they might start being seen generally as being nothing but disinformation, regurgitating false data from paid propagandists.

        Although I’m not sure that’s so different from the current state of affairs.


  5. If I was a progressive, I’d be pretty butthurt it was only 58 Democrats. I’d start to wonder if I was being punked like in ‘06 with Bush.

    Liked by 1 person

    • Not all the DC Democrats see Trump as a threat to their personal fiefdoms, I’m guessing.

      Any of them with any brains don’t see impeaching Trump as any kind of real answer. And the effect of an impeachment doesn’t tend to be great for midterms (check the Democrats post-impeachment midterm results) and a successful removal of a president is an unknown, in terms of how it effects the election results of the party that did the removal.

      They talk about it. Aside from Maxine Waters and Al Green, I’m not sure that many of them actually want it.


      • I’m waiting for Eric Schneiderman to bust onto camera waving a NYS securities fraud suit…

        Cause you know that is coming… Even if it is bullshit…


  6. If the voters of AL elect Moore despite all the allegations against him, does the Senate try and expel him? Even if these remain allegations and not convictions?

    How is that supporting democracy?


  7. So we does bitcoin get added to the vital statistics in the list?


  8. Like

  9. Told ya the new rules would suck.

    Because all women deserve to be heard and their experiences taken seriously. I think that was the right thing to do.

    Nope, not a right to be heard and taken, they’re supposed to be believed. You lose, Al!

    You’re guilty dude, those are the rules you and your party signed on for.

    I also think it gave some people the false impression that I was admitting to doing things that in fact I haven’t done.

    Why does Al think all women are liars and whores?

    Some of the allegations against me are simply not true. Others I remember very differently.

    It was always going to be the same outcome, your leaving the Senate. Women are always supposed to be believed.

    I was confident in the outcome.

    Liked by 1 person

    • Not sure I want more of this. This seems like a relatively normal, if not entirely well-considered, thing to do. Certainly, there has never been anything in the sexual harassment training I’ve seen saying “don’t discuss surrogacy with your co-workers”. What’s next? “He said his wife was pregnant, and that made me very uncomfortable, and I felt shamed. He should resign.”

      There’s a reason we kinda stopped being Victorians and puritans, and some of this is getting more puritanical than the frickin’ puritans.


  10. Lol

    “In this #MeToo environment, you must always just believe the women and I think that there’s a lot of reasons why we need to look at the women seriously and believe them,” said Brzezinski “I’m just wondering if all women need to be believed and I’m concerned that we are being the judge, the jury and the cops here and so did Senate Democrats getting ahead of their skis.”

    They don’t like the new rules.


    • Well, no, of course not. At the same time, I think concern is merited, as the pendulum looks like it’s kind of swinging in the other direction. And I’m concerned about due process, sure, but also what is getting redefined as sexual harassment and assault, and resigning offenses. Talking about surrogacy? Really? That should obligate you to resign? What was he trying to do, pressure them to have a baby for him? That’s about the only thing I could think might rise to the level of “you need to resign”.

      Also, all accusations about all things are given weight. But grabbing a woman and forcibly kissing her is not the same class as putting your arm around someone at a photo-op:

      I’d read the article. Does that sound like groping to you?

      He immediately put his hand on my waist, grabbing a handful of flesh. I froze. Then he squeezed. At least twice.

      I’d been married for two years at the time; I don’t let my husband touch me like that in public because I believe it diminishes me as a professional woman. Al Franken’s familiarity was inappropriate and unwanted. It was also quick; he knew exactly what he was doing.

      This woman sounds insane to me. Yet is added in to the “list of accusers” with Franken stories.

      I’m not sure which wave of feminism dictates reflexively doubting women because the man seems pretty cool, but it washed away Dunham’s credibility on this issue. She later apologized.

      … Dunham has credibility? On what?

      That being said, this points to what seems to be happening: being a good liberal, ala Clinton, is not protection for being a douchebag with women. Not any more. I think that’s what the piece ultimately comes down to: men are the enemy. When it comes to harassment, being Al Franken or John Conyers or Bill Clinton is no different from being Donald Trump or Roy Moore.

      Finally, a little egalitarianism from the left!


    • Nothing is more delicious than watching the left get bent out of shape when their own rules are applied against them….

      Liked by 1 person

    • “I feel sick about what’s happened to Al because I think that he legitimately would dispute many of the accusations that have come up but was trying to show that he respects women and believes they should be believed,” said one top-ranking Democratic strategist

      Quite a bind. How to get people to believe that you think women should be believed while at the same time getting them not to believe the women saying things about you? Tough one.


Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: