Morning Report: Schneiderman gone 5/8/18

Vital Statistic:

Last Change
S&P futures 2667 -3
Eurostoxx index 388.93 -0.56
Oil (WTI) 70.09 -0.62
10 Year Government Bond Yield 2.96%
30 Year fixed rate mortgage 4.55%

Stocks are lower as we await the Trump Administration’s decision on the Iran deal. Bonds and MBS are down small.

The Administration is set to announce later today whether they intend to stay in the Iranian deal or abandon it. Oil has been rallying on expectations Trump will leave.

Jerome Powell said that market expectations (i.e. the Fed Funds futures) are more or less in alignment with the Fed’s expectations for the future path of interest rates. The December Fed funds futures are predicting about a 10% chance of one more hike this year, a 44% chance of 2 more and a 39% chance of 3 more. Over the past month, the central tendency has become more hawkish.

Small Business Optimism remains strong, according to the NFIB. More businesses are planning on increasing capital expenditures, while hiring remains strong and we are seeing evidence of increased compensation. Profitability increased as well, which indicates that productivity is increasing, and that some of this CAPEX is going towards labor-saving technology. Finding qualified workers continues to be the biggest issue surrounding small business. “There is no question that small business is booming,” said NFIB Chief Economist Bill Dunkelberg. “Consumer spending, the new tax law, and lower regulatory barriers are all supporting the surge in optimism across all small business industry sectors.”

Despite the hurricane-related spike in delinquences, overall DQ rates have been falling, according to CoreLogic. Home price appreciation, in addition to more stringent underwriting standards are the driving force behind it. The foreclosure rate is down from 0.8% to 0.5%, and the 30 day DQ rate is down to 4.8% from 5.0%. As you would expect, TX and FL are experiencing rising DQ rates, but the rest of the nation is down.

Tesla stock has more or less recovered from its conference call induces swoon from last week. The bonds are at the lows however, trading at 88. Note there is a divergence also in NFLX, which has bonds in the low 90s, while the stock is a highflyer.

NYS AG Eric Schneiderman resigned from office after reports came out that he abused 4 women. Schneiderman was an AG cut in the same cloth as Eliot Spitzer, and hated the financial industry about as much as he did (FWIW the feeling was mutual). When Spitzer announced his resignation, cheers went up on the floor of the NYSE.

Freddie Mac is getting into the business of providing lines of credit against MSR portfolios. Nonbank servicers face liquidity issues when loans they are servicing go delinquent. They are required to make the mortgage payment to the ultimate investor of the mortgage until the loan is brought current or foreclosed. Banks generally have no problems with this, but nonbank issuers generally don’t have the balance sheet to withstand heavy advances activity. Fannie Mae only requires 6 months of advances, but Ginnie Mae has no similar relief. Policymakers are concerned about the ability of nonbank servicers to withstand a period of prolonged stress if delinquencies spike.

Homebuyer sentiment hit an all-time high according to the Fannie Mae Home Purchase Sentiment Index. “The latest HPSI reading edged up to a new survey high, showing that consumer attitudes remain resilient going into the spring/summer home buying season,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “High home prices and good economic conditions helped push the share of Americans who think it’s a good time to sell to a fresh record high. However, the upward trend in the good-time-to-sell share seen since last spring has done little to release more for-sale inventory. The tightest supply in decades, combined with rising mortgage rates from historically low levels, will likely remain a hurdle for mobility and a persistent headwind for home sales.”

16 Responses

  1. The Schneiderman piece is quite a read:

    Edit: This is a good take

    “Hero worship among sportswriters is annoying, but largely harmless and, besides, there’s always someone who doesn’t buy into it. Hero worship in our politics, however, is a dangerous business. The search for the person on a white horse is an open invitation to counterfeit engagement and artificial activism. The impact of celebrity on our politics has been devastating enough; see the current tenant at 1600 Pennsylvania Avenue for details. It’s a by-product of the constant calls for “leadership” among our political class, many of which are simple appeals for someone—anyone!—to remove the burdens of citizenship and self-government from our shoulders. And that has worked far too well.”

    Liked by 1 person

    • If Trump was tweeting about Schneiderman’s peccadilloes 5 years ago, it means everybody knew about it, and the MSM looked the other way…

      Liked by 1 person

  2. To me, this shows how confident they are of at least taking the House.

    Liked by 1 person

    • Or they believe it’s an election about turning out the base and not bothering to appeal to the middle.

      Progressives believe in raising taxes on the rich as a matter of principle

      Related, they don’t believe that the “middle class” or the poor should have to pay anything more for increased government.

      “Republicans are paying for teacher raises with taxes and fees that hit working- and middle-class taxpayers
      Tax hikes in Arizona, Oklahoma, and other states will burden middle- and low-income workers.
      By Alexia Fernández Campbell and Alvin Chang
      May 8, 2018, 9:20am EDT”

      The horror.

      Liked by 1 person

  3. If Google and Facebook end up being regulated or targeted by an antitrust action, it’s probably going to come from conservatives for abusing their market power for political rather than economic ends. They aren’t being subtle about it:

    Liked by 1 person

  4. Oh the irony of citing this as an example of why Fox isn’t a real news organization like the rest of them:

    “How Fox News has been ignoring the Stormy Daniels story, in 3 charts
    The data shows Stormy Daniels has been a big story this year — except on Fox News.
    By Alvin
    May 8, 2018, 12:40pm EDT”

    Liked by 1 person

    • The question is, Post Clinton/Lewinsky and sex is a private issue, how much coverage does it deserve?

      The rules have changed.

      Liked by 1 person

      • “how much coverage does it deserve?”

        Today for the MSM, that’s a business question driven by ratings and advertising sales revenue, just like Trump coverage in general.

        Liked by 1 person

    • They have zero awareness. Stormy Daniels, even if literally true at every level in every way, is still a tabloid story, and does not remotely deserve the attention the MSM is giving it. If the MSM wasn’t primarily driven by politics, prurience, and weren’t ratings whores, which they are, mostly.


  5. Lulz

    Yes, let’s get back to Hillary Clinton’s book tour and Ruskie Collusion.

    Liked by 1 person

  6. I’m thinking this won’t be quite the genius move they think it is:

    “Democrats just previewed their secret weapon against Republicans in the 2018 midterms
    Obamacare rate hikes are set to surge ahead of the 2018 elections. Democrats say Trump is to blame.
    By Ella
    May 8, 2018, 3:20pm EDT”


  7. Homie fucking nails it.


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