Vital Statistics:
Last | Change | |||
S&P futures | 2722 | 3.75 | ||
Eurostoxx index | 392.17 | 0.2 | ||
Oil (WTI) | 71.3 | -0.06 | ||
10 Year Government Bond Yield | 2.96% | |||
30 Year fixed rate mortgage | 4.56% |
Stocks are higher this morning on no real news. Bonds and MBS are flat.
Import prices rose 0.3% MOM and 3.3% YOY, driven by oil. Ex-energy import prices were flat.
St. Louis Federal Reserve Head James Bullard said that interest rates may already be at the level where they are no longer stimulating the economy. There are “reasons for caution in raising the policy rate further given current macroeconomic conditions” he said in his prepared remarks. Bullard has generally been considered a dove, so this is not much of a surprise. He is also a non-voter. He believes that there is little in the inflationary pressures being signaled in the market.
With respect to inflation signaling, he has a point. The spread between the 30 year bond and the 5 year bond is now the narrowest since 2007. Note that the yield curve generally flattens during tightening phases and is probably not signifying the type of deflationary period that 2007 did. Given all of the QE over the past decade, the signals from the bond markets are heavily distorted and should be taken with a grain of salt. Note short Treasuries is one of the biggest hedge fund trades on the Street.
Are the homebuilders set to outperform going forward? They have suffered more than the market during the recent declines, but the environment should be favorable for the sector going forward. With a shortage of housing, high demand and rising prices, the sector should be in good shape. The problem for investors? The sector is highly cyclical, and the stock behavior reflects that. In other words, earnings will rise and fall, and the multiple will expand and contract, dampening the effect. So, if the average multiple is typically mid-teens, don’t be surprised if P/E ratios fall to the high single digits during boom times.
Q2 GDP is currently tracking at 3.7%.
Sen Pat Toomey says that the Trump Administration doesn’t have the authority to pull out of NAFTA, since it was passed by Congress. On the other hand, the Admin does have the authority to pull out of the Iran Deal, as well as the Paris Accords because they were only deals with the Obama Administration and not the US – never ratified by Congress.
Filed under: Economy, Morning Report |
Sen Pat Toomey says that the Trump Administration doesn’t have the authority to pull out of NAFTA, since it was passed by Congress.
Sounds right to me…
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Bush pulled out of the ABM treaty in aught-two. I think a POTUS can.
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ABM Treaty had a six month notification get-out clause for either party that, IIRC, left the notification from the US entirely with POTUS. I could be wrong. Is it worth pulling up the Treaty and Protocols to link?
FWIW, I don’t know the NAFTA get-out provisions.
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Another SCOTUS holding that says, fuck ya a POTUS can shit-can a treaty.
https://en.m.wikipedia.org/wiki/Goldwater_v._Carter
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Good catch. It specifically stands for the proposition that if Congress wants to rein in the POTUS on a “political question” Congress must do it because the Court won’t.
So DJT can leave NAFTA and the only thing that could stop him would be a statute making NAFTA the law of the land passed by a veto proof majority.
Thanks for the tutelage, George. Time for you to write to the Senator.
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The comments are the best part
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Predictable and disheartening how many people cannot see past their own distorted view of the world, and justify their primitive tribalism as some kind of noble ideology. Cerebral cortexes are wasted on these people.
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Shitcanning the deal keeps giving!
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