Morning Report: Building Permits in the Northeast struggle 7/17/18

Vital Statistics:

Last Change
S&P futures 2794 -2.5
Eurostoxx index 383.01 -1.04
Oil (WTI) 68.12 0.06
10 Year Government Bond Yield 2.85%
30 Year fixed rate mortgage 4.51%

Stocks are lower after Netflix (one of the FAANG leaders of the market) missed earnings. Bonds and MBS are flat.

Industrial Production rebounded in June by 0.6% and manufacturing production increased 0.8%. Capacity utilization is 78%.

Jerome Powell heads to Capitol Hill today to begin his semiannual testimony in front of Congress. Expect a lot of questions regarding wage growth, trade wars, and regulation. Overall, he is expected to say that the economy is in good shape overall with above-trend growth and a strong labor market. He will face some questions from Democrats on regulation, especially since the Fed approved Goldman and Morgan Stanley’s capital plans despite the fact they were technically failed their stress tests. The Fed Funds futures continue to move in a hawkish direction, with the Sep futures pricing in a 88% chance of a hike and the Dec futures pricing in a 63% chance of 2 hikes.

Despite trade tensions, the IMF still expects the global economy to grow 3.9% this year and next. Trade remains a threat, however the impact is relatively small: a decrease of 0.5% in global growth by 2020. They forecast the US economy will grow 2.9% this year. Note many strategists took up their Q2 numbers on the strong retail sales print yesterday.

The Fifth Court of Appeals ruled yesterday that the structure of the FHFA is unconstitutional. Not sure how that is going to play out. Separately it also ruled that the FHFA was within its authority to sweep the profit from the GSEs, which is bad news for shareholders. FNMA stock was hit to the tune of 6% after the ruling.

The difference in sentiment between Northeastern real estate markets and the West is night and day. Growth in single family permits was actually negative for the first 5 months of this year. Compare that to the West, where they are up almost 18%.

The Northeast still has yet to really recover from the Great Recession, although some of that has more to do with secular trends in banking and the securities industry than it does with the real estate bubble. The securities industry has been hit by secular trends (falling commissions, ETFs) that have been great for investors but not great for employment in the industry. 5 cent commissions and 2%/20% hedge fund fees supported a lot of jobs which supported a lot of $1MM + homes. Towns like New Canaan have banned For Sale signs and the only part of the real estate market that is moving is in the sub-$750k segment. Million dollar plus listings languish. It is amazing – we have a housing shortage in the US overall, but you would never know that if you looked at the NYC suburbs.

28 Responses

  1. An interesting third method of constitutional interpretation stemming from Madison’s definition of “liquidation” in Federalist 37.

    Made me want to read the Law Review article, but I have not done so yet.


  2. Republicans cave on their plans to make the Democrats vote against their own bill.

    Liked by 1 person

    • I tried to warn you that this would never happen because these stunts always backfire. They are always too clever by half like pairing a “We love motherhood” resolution with a definition of life as beginning at ejaculation. It plays to the base but just blows past the average voter.

      Liked by 1 person

      • They just lost their nerve.They didn’t need to pair it with anything, just make the Democrats vote against their own bill.

        But even that’s beyond the House Republicans these days.


        • jnc:

          They just lost their nerve.

          I don't even see why it took would take any nerve in the first place. I genuinely don't see the downside to having them all vote "no" on their own bill.


        • Presumably they were afraid of letting them take the floor for the debate and bring up ICE detentions etc.

          I don’t really know why they caved. I thought the same as you, namely that voting against their own bill works for Republicans.

          Liked by 1 person

        • they’re concerned about losing the house and having to vote “no” about their own nonsense/messaging bills this time next year.


      • Well, they could have brought it up for a vote, just to have Democrats vote against their own bill. But that it would all just blow past the average voter is almost certainly true. Then come the commercials where Republicans proposed we end border enforcement, and we brave Democrats voted “NO!” . . .

        I could see that being a concern, potentially.


        • KW:

          Then come the commercials where Republicans proposed we end border enforcement, and we brave Democrats voted “NO!” . . .

          Except that the bill was actually proposed and sponsored by D’s, not R’s. And R’s will have voted “No” in greater numbers than the R’s.


        • Except that the bill was actually proposed and sponsored by D’s, not R’s.

          Yeah, I’m just suspecting they wouldn’t be constrained by actual facts or data, given their career choices.

          I had to read down in the article, I noticed, before they start referring to the fact (obliquely) that it was originally a Democratic bill.

          “We know Speaker Ryan is not serious about passing our ‘Establishing a Humane Immigration Enforcement System Act,’ so members of Congress, advocacy groups, and impacted communities will not engage in this political stunt,” the bill’s sponsors said in a statement last week.

          So why author the bill in the first place? This part confuses me.


    • I hope they learn to only cast natural red heads in future red-headed roles. And natural blondes. And so on. Also, every actor must be the age of the character they are cast as. Because of justice.


  3. Progressive despair on climate change and it’s logical end point:

    “Raising My Child in a Doomed World
    Some would say the mistake was having our daughter in the first place.
    By Roy Scranton
    July 16, 2018

    Mr. Scranton is the author of “We’re Doomed. Now What? Essays on War and Climate Change.

    Indeed, taking Wynes and Nicholas’s argument seriously would mean acknowledging that the only truly moral response to global climate change is to commit suicide. There is simply no more effective way to shrink your carbon footprint. Once you’re dead, you won’t use any more electricity, you won’t eat any more meat, you won’t burn any more gasoline, and you certainly won’t have any more children. If you really want to save the planet, you should die.”


    • Christ on a cracker. I seriously think some of these people just want attention. They may rationalize it as being about something, but it’s just them craving attention.


    • There is such a thin line between “I should die to save the planet” and “you should die to save the planet.”

      Can’t wait to have these people in charge of my life.

      Liked by 1 person

  4. Hunh.

    ”Now Trump is trying to cover it up. There is no sugar coating this. It is hard to see President Trump siding with Vladimir Putin over our own intelligence community and our criminal investigators as anything other than treason.”

    Ok, sounds definitive.

    In an interview with The Seattle Times, Smith expanded on his “treason” comment, saying Trump legally did not commit treason but has committed other impeachable offenses.

    Oh, so just Treason, not Treason Treason. Got it.


    • “Miracle Max: He probably owes you money huh? I’ll ask him.

      Inigo Montoya: He’s dead. He can’t talk.

      Miracle Max: Whoo-hoo-hoo, look who knows so much. It just so happens that your friend here is only MOSTLY dead. There’s a big difference between mostly dead and all dead. Mostly dead is slightly alive. With all dead, well, with all dead there’s usually only one thing you can do.

      Inigo Montoya: What’s that?

      Miracle Max: Go through his clothes and look for loose change.”

      Liked by 1 person

  5. Not normally a fan of Ted Rall, but this is pretty accurate

    Liked by 1 person

  6. I agree with this.

    Ditto Turkey.


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