Morning Report: Housing starts disappoint 1/18/18

Vital Statistics:

Last Change
S&P Futures 2802.5 -1.3
Eurostoxx Index 398.1 0.1
Oil (WTI) 64.0 0.1
US dollar index 84.5 -0.2
10 Year Govt Bond Yield 2.62%
Current Coupon Fannie Mae TBA 102.375
Current Coupon Ginnie Mae TBA 103.25
30 Year Fixed Rate Mortgage 4.03

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

The House looks ready to pass a one-month stopgap measure to keep the lights on. Senate Democrats are considering blocking it in order to push immigration reform, but nothing is set in stone. Bottom line, the odds of a government shutdown tomorrow are falling.

Initial Jobless Claims came in at 220,000 last week. This is a 45 year low. When you take into account population growth and the fact that we had a military draft back then that number is astounding.

The Beige Book was released yesterday, and contained no major surprises. Growth is “modest to moderate” in most districts and the labor market is tight, to the point of constraining growth. They mentioned that we are seeing wage inflation more broadly in some districts, while inflation is generally under control. Separately, the Philly Fed report showed that growth eased somewhat, however it is still very strong.

Housing starts came in at 1.19 million units (annualized), which was a big disappointment. Hurricane effects probably played a part, as many construction workers are being diverted to repair work. We did see a substantial (14%) drop in starts in the South. Building Permits came in at 1.3 million. All told, 1.2 million housing units were started in 2017, which was more or less flat with 2016. This is about 80% of the pre-bubble average of 1.5 million units a year.

Mel Watt discussed housing reform in a letter to the Senate Banking Committee. He urged lawmakers to establish a guarantor framework where shareholder-owned entities guarantee mortgages with a government backstop and a utility model. The utility model means that pricing will be set by the government in order to set an allowable rate of return for the company and nothing more, similar to how gas and electric companies are run. If one of the guarantors runs into trouble, they will be allowed to fail, however the mortgages they guarantee will be backstopped by the government, thus protecting MBS investors. The document also recommended that these guarantors offset their credit risk in the private market when economically feasible and that they hold enough capital to withstand another 2007.

60 Responses

  1. NoVA, what am I missing in the offer to give the Democrats a three year CHIP reauthorization in exchange for a 30 day CR?

    That seems way too generous to the Democrats and indicates that the Republicans are in a pretty weak position.

    Like

    • they are. The Rs have a number of issues and Trump’s not helping (he’s not hurting as much as advertised either)

      The defense hawks want a full year for DOD. so they’re causing problems.

      why the Ds don’t take that deal and remove CHIP from the table, i don’t get.

      Like

      • It’s a fight over where the CHIP recipients rank vs DREAMers/DACA in the hierarchy of victimhood.

        Liked by 1 person

        • it’s so stupid. pocket a win and then move on. they’re taking lessons from the Rs on how to own-goal themselves.

          i’m in the – they’ll pass something camp.
          but we’ll see. Trump already switch on the CHIP needs to be out of this deal.

          Like

    • A monopsonist would never do that…

      Like

    • Tim Cook is *running his company*. That’s what you do when you’re serving your shareholders, your customers, and your employees. You make decisions based on what’s best for your company, not what’s best for Democrats. Morons.

      You can choose to believe Cook or not. Personally, I don’t.

      That’s reportage right there. Fine reportage. Tim Cook is on record, repeatedly, saying that he wanted to bring that cash back to the US and spend it on expansion plans above and beyond their typical outlays. For years. But that the taxes were the sticking point. Now the taxes are changed, he’s bringing that cash home, like he said he would, years before Trump was elected.

      F***ing Slate.

      Like

  2. I did not know this.

    Like

    • In fairness to me though, it wasn’t in Venderbilt’s Hustler.

      Like

    • PL will lose their minds if tax revenue goes up after the tax cut.

      Like

      • they’ll come up with some reason on what it doesn’t count.

        Like

        • That’s exactly right. They’ll deduct tax revenues from overseas cash repatriation, ala Apple’s, because “it’s a one-time thing”, and so on. But I have a hard time seeing their being a serious net drop in revenue with the new tax bill, unless I’m missing something, or unless the economy goes in the toilet (which will not be the fault of the tax bill, PL-commentors’ opinion on the matter not withstanding).

          Like

      • It’s impressive how Trump has managed to maintain his unpopularity despite the economy. A bit more self discipline and he would be doing dramatically better.

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        • i wonder if it’s possible now or if people are so dug in.

          that said, those paycheck withholdings have kicked in yet.

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        • I think it’s too late. He had an opportunity after the election and during the first three months. It’s gone now.

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        • It’s too late. However, I wonder how his unpopularity translates in 2018 an 2020. I’m not sure he’ll lose that many voters. But there’s the motivate opposition to think about, and the number of millennials turning voting age during that time period, not to mention elderly Trump voters dying or becoming incapacitated. I don’t like Trump anymore now than I did before, but would consider voting for him in 2020 if Tennessee were a swing state (Trump wins Tennessee, no matter what) just because the opposition is offering nothing but Trump hate. Which is almost more irritating than Trump bellicosity and vulgarity.

          Like

        • I will say, I’m not sure what Trump’s popularity *means*. How accurate the measurement is, or what it’s *really* measuring.

          Right now I’m seeing 55.1% disapprove and 39.6% approve, average. At 538 What I would think are the better polls have him at 42% and 45% approval, unadjusted. NBC/Wall Street Journal has him at 39% however.

          I don’t know. The likely voter and registered voter polls have him higher, and I’m not sure how many Trump voters actually want to say they approve of Trump in public. I dunno. Not sure the polling captures everything relevant. 2018 will be a better barometer, because the voting will be treated as a referendum on Trump.

          Like

        • The left will not be able to maintain the current level of outrage for another 3 years. They will burn out.

          Like

        • The left will not be able to maintain the current level of outrage for another 3 years. They will burn out.

          I think the bigger risk is that they *can* maintain or even amp-up their level of outrage, and the voters will burn out on them. Either check out completely, or become alienated by the Democrats.

          Like

    • I have always said that equalizing US tax rates with that of our competitors will raise revenue because it will end all of the transfer pricing games companies play to maximize foreign income and minimize US income. All it does is subsidize foreign governments..

      Like

    • Tim Cook told the government–*directly* told Obama–that they would bring their cash home if the tax hit wasn’t so huge (Cook said it would be 40%, and they weren’t going to burn 40% of their foreign assets just to bring the money back to the US). Did they do anything? No, and no. Despite Apple being a very progressive company and a friend of liberals, because . . . can’t let companies keep any money. That would be immoral. Morons.

      Is the repatriation change in the tax code permanent or temporary? It should be permanent. Then a smaller–but still large–amount of cash will keep coming in, year over year, as companies repatriate foreign cash because the tax isn’t overly punitive.

      Like

  3. The Washington Post has a cute red shutdown counter on the home page now.

    Like

  4. Traffic is going to be a permanent hell NoVA:

    “Amazon Is Totally Putting Its Second Headquarters in D.C., Right?

    By Jonathan L. Fischer
    Jan 18, 2018”

    https://slate.com/business/2018/01/amazon-is-totally-putting-hq2-in-d-c-right.html

    Like

  5. The opposite of the Obama approach:

    “Trump officials weigh keeping national parks open even if government shuts down
    By Lisa Rein and Juliet Eilperin
    January 18 at 3:39 PM”

    https://www.washingtonpost.com/politics/trump-officials-weigh-keeping-national-parks-open-even-if-government-shuts-down/2018/01/17/7837649e-fbd1-11e7-ad8c-ecbb62019393_story.html

    This could be interesting to watch. Next up, prioritizing treasury payments when the debt ceiling is hit.

    Like

  6. This is the kind of Federalism I’m on fucking board with!

    Liked by 1 person

  7. Well, the house passed a CR with D support.
    so it’s over to the Senate. we’ll see if Dreamers > CHIP beneficiaries.

    Like

    • “Democrats shut down the government to protect illegal aliens” is the perfect Republican talking point.

      The two parties deserve each other. It’s a race to the bottom in terms of self destructive behavior.

      Like

      • the guys in my office seem to think the Ds will fold, as they don’t have the stomach for actually shutting it down. and the Dreamer contingent is a sure thing. what are those single-issue voters going to do. vote republican? stay home? fat chance.

        Liked by 1 person

      • “The two parties deserve each other. It’s a race to the bottom in terms of self destructive behavior.”

        We get self-destructive battles, or cooperative-self-aggrandizement. That’s the two modes they operate in.

        Like

  8. here’s a kick in the nuts:

    https://www.cnbc.com/2018/01/18/the-dows-31-percent-gain-during-trumps-first-year-is-the-best-since-fdr.html

    The Dow’s 31% gain during Trump’s first year is the best since FDR

    Liked by 1 person

    • And yet, he’s managed to botch that in terms of his popularity.

      Democrats & progressives should be thanking the Arc of History ™ every day that they got Trump and not a competent authoritarian.

      Like

      • it’s really incredible. take a winning hand and mess it up. repeatedly.

        Like

        • He should have done more to court the Republicans in the house and senate. The “deep state” and the media and the Democrats were never going to much be on his side, except some few where he could deliver for them something they want in their state. He might have been able to poach some congressional democrats. But the big thing is throwing tantrums about Republicans. I don’t think that was ever the answer. He needed to save all his venom for the left. And Democrats. The Republicans he should always seem to be the better, bigger man with. It would improve the impact of his anti-Democrat stuff while getting more the GOP senators and congresscritters on his side.

          Like

        • He should have lead with an infrastructure bill. His (or Bannon’s) instincts were right to start off the term with beating up Carrier for outsourcing jobs and inviting the unions to the White House.

          But instead they were stupid and started with the EO for travel restrictions, etc.

          Divide and conquer works in that order. Instead, he took the most provocative actions possible to unify Democrats immediately.

          Obama did the same thing by leading with the stimulus giveaway to the Democratic interest groups. A lot harder to get cooperation later when you start off by picking a fight.

          Liked by 1 person

        • “But instead they were stupid and started with the EO for travel restrictions, etc.”

          Good point. That was not the thing to start on. Infrastructure bill would have been smart.

          “A lot harder to get cooperation later when you start off by picking a fight.”

          Also a good point. But that’s apparently what modern era presidents do now.

          Like

      • “And yet, he’s managed to botch that in terms of his popularity.”

        Yeah. Although I’m not sure how well FDR would have gone over, had he done the exact same stuff, but been a Republican and reported on by today’s media. “FDR slaughters farmers animals and burns their crops, leaving them to starve!” “FDR rounds up American citizens and puts them in concentration camps! – ‘ Can’t trust those Japs,’ He is Reported To Have Said”

        Trump is in a situation where his greatest strength is also his greatest weakness. If he eliminated his negative Tweets and comments and stuck to positive spin and personal hagiography, I think he’d be doing much better.

        Also, if he had better press secretaries. And dumped Sessions.

        Like

  9. if trump were smart, he’d be camped at a hospital right now, pen in hand, waiting to sign a 6-year reauthorization of CHIP.

    Liked by 1 person

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