Morning Report: First estimate of Q4 GDP disappoints. 1/26/18

Vital Statistics:

Last Change
S&P Futures 2850.8 9.5
Eurostoxx Index 400.8 2.2
Oil (WTI) 66.5 0.0
US dollar index 83.1 -0.3
10 Year Govt Bond Yield 2.63%
Current Coupon Fannie Mae TBA 103.591
Current Coupon Ginnie Mae TBA 103.688
30 Year Fixed Rate Mortgage 4.17

Stocks are higher this morning as Trump speaks in Davos. Bonds and MBS are up small.

The first estimate for 4th quarter GDP came in at 2.6%, a touch below the 2.9% Street estimate. THis was a drop from the 3.2% growth rate in the third quarter. A larger-than-expected trade deficit, along with some inventory adjustments accounted for the miss. It will be revised twice more in the next month or so. The GDP price deflator (a measure of inflation) was 2.4% and consumer spending was a robust 3.8%.

Housing increased 6.8% and accounted for about .84% percentage points of the growth. Housing construction will be the engine that will pull the economy going forward. We have tremendous demand for new housing and tight labor markets. Getting back to normalcy (1.5 million units a year) in housing starts will make a big difference. If we get to what is typically observed coming out of a recession (2 MM +) we will be looking the best economy since the 90s.

The Fed Funds futures didn’t really react much to the reading, and are currently handicapping a 71% chance of a 25 basis point hike at the March meeting. Next week’s meeting is expected to maintain the current Fed Funds rate.

Durable Goods orders increased 2.9% last month, which was better than expectations. Ex-transportation they rose 0.6%. Capital Goods orders fell 0.3%. On a YOY basis, all numbers were up smartly: Durable goods up 8.2%, DGXT up 7%, Cap goods up 8.1%. More evidence of a strong economy.

Donald Trump spoke at Davos. He stressed that America is open for business and that he is willing to negotiate multilateral trade agreements (think TPP). He mentioned tax reform and that America is open for business.

A non-profit in New Mexico has come up with a concept to help get homeowners in their first home without much of a downpayment and without MI. They issue 2 mortgages, one for 80% of the loan, which is sold on the secondary market without MI, and then a second loan for 18%, which they hold. Supposedly the performance metrics for these loans are better than the control group.

17 Responses

  1. NoVA, when is your cruise?


  2. Jemele Hill is out at SportCenter.

    A good take on it:

    How and why American Sports decided that becoming part of the Cultural Ministry and force-feeding their audience left-wing pablum was a good business decision is beyond me. The reason why “woke sports” failed is the same reason why Air America failed. The leftist viewpoint is so over-represented already that there isn’t room for more.

    But, I guess everyone in that ecosystem (media personalities, creatives at advertising agencies, media types in general) are subject to group-think and either (a) believe that this will sell or (b) believe that even if it doesn’t sell, they are doing God’s work by raising the consciousness of the typical troglodyte beer-swilling sports fan. I suspect it is the latter, although I do smell a rat with the Professional Left pushing them there with threats of imaginary boycotts. Ironic they got a real one trying to avoid a fantasy one.


    • “I don’t particularly care for Donald Trump or his politics (I lean left on a lot of social issues), but it becomes easier and easier to see why he was elected. The left wing in this country trips all over their dicks to yell and scream anytime something related to race or sex is even mentioned. When will it stop? How can we take real issues of sexism or racism seriously every time someone cries wolf like this?””

      later on in the same mailbag

      Liked by 1 person

    • How and why American Sports decided that becoming part of the Cultural Ministry and force-feeding their audience left-wing pablum was a good business decision is beyond me.

      The people in those companies live in a bubble. They grow up in a bubble, generally, or come-of-age in a bubble, and never leave that bubble, and already know everything outside the bubble is poison and will kill you, and I think they have a lot of difficulty comprehending that a significant portion of the people that consume their product not only don’t live in their bubble, but don’t want to, and perhaps have very comfortable, if different, bubbles of their own.

      And say you work at ESPN and you’re a rock-ribbed conservative or Trump supporter. Better you don’t acknowledge, even a little. Better to be like a Soviet spy and have a completely different political identity for work. But this reinforces the impression to those who are fellow travelers in progressivism that they have the only actual view on anything, and everything else is at the margins.

      So they feel kind of like the guy at the bookstore in the mega-church selling Christian products, who knows their audience will all be receptive to the Christian-themed books and posters and coasters and phone covers. But the broader world is much more diverse than the bubble they inhabit.

      I also think bubble-dwellers feel that if they pick up what they consider a big win, then everything has changed and they run everything forever now. So, Obama won and they decided the majority of the country now shares their politics and they love hearing about their politics in everything so obviously people want to hear about politics in sports programs and new hires should be all about diversity and wokeness.

      The reason why “woke sports” failed is the same reason why Air America failed. The leftist viewpoint is so over-represented already that there isn’t room for more.

      I think there is a lot of truth to that, because of the nature of the wokeness. They were trying to deconstruct sports to basically reject America, patriotism, and a lot of their audience, and that becomes a big problem. But there’s also a problem with the bait-and-switch whether left or right: if I pay for tickets to a game, and I get a Trump speech or a bunch of politics I might kind of agree with but slathered all over the sportsball which I used to consider separately from my politics . . . that gets irritating.

      When I ask for a lemonade and you give me a raspberry pomegranate green tea, I get disappointed.

      In other words, companies taken strong, overt #woke positions can be bad on two fronts.


  3. Liked by 1 person

  4. Women and minorities hit hardest.

    Liked by 1 person

  5. I’m sure Troll has already seen this, but file this one under There’s Nothing That Doesn’t Cause Climate Change:


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