Morning Report: Fannie Mae revises housing forecast downward…

Vital Statistics:

Last Change
S&P futures 2855.5 3.8
Eurostoxx index 383.49 2.43
Oil (WTI) 65.92 0.02
10 Year Government Bond Yield 2.84%
30 Year fixed rate mortgage 4.58%

Stocks are higher this morning on optimism of a deal with China. Bonds and MBS are up small.

Late August is a generally dull time to begin with, and this week promises more of the same. We will get some housing data (Existing home sales, new home sales, FHFA price index) and one possible market-moving report (durable goods) but that is about it. We will get the FOMC minutes on Wednesday as well.

Liquidity is drying up in the bond market as it usually does this time of year. Note that the short bond position is one of the biggest on the Street, so we could see some quick rallies in the 10 year.

Flagstar has been released from special oversight that limited its corporate options to pay dividends, make acquisitions, etc.

Luxury apartments in NYC are falling in price, after years of torrid growth. Some are blaming the new tax laws, however some could be from falling foreign demand. We are seeing the same thing in London. Note that luxury properties in the suburbs of NYC are doing the same thing. You can’t give away properties priced at $1MM +

Fannie Mae cut their housing forecast for 2018 for the 4th time this year. They are looking for $1.67T in originations this year and $1.7T next year. The 30 year fixed rate mortgage is expected to average 4.5% this year and 4.7% next year. They are also forecasting a major slowdown in GDP growth, from 3% this year to 2.3% next year.

34 Responses

  1. Worth noting vis-a-vis Anthony Bordain’s suicide.

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    • Yes, because one benefits only the poor and is a government mandate that in many ways punishes evil property owners, while the other benefits lots of different people and who gets benefited and how much isn’t micromanaged by the state.

      Is the alternative being proposed just doing away with Prop 58? While presumably doing nothing to adjust tax rates?

      Like

  2. Apparently free tuition is to be applauded, unless it helps the wrong people:

    https://slate.com/business/2018/08/nyu-medical-school-plans-free-tuition-for-all-what-a-waste-of-money.html

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    • I wasn’t aware that the “free tuition” thing wasn’t supposed to apply to everybody. I don’t recall advocates mentioning who would be excluded due to expectations of future wealth

      But if those are truly NYU’s goals, then giving every student a free ride, no matter who they are, or what career they pursue, is an incredibly wasteful, haphazard way of tackling them.

      So, presumably, arguments for free tuition, generally, would exclude things like literary degrees and feminist studies and other things nobody really wants that offer no value to the larger community.

      Instead, NYU is going to offer free tuition to every upper-middle-class Caucasian student destined to make a killing as a urologist in Florida, and hope that a few more exceptional black students show up at its door as part of the bargain.

      A: that’s racist and B: lots of extra urologist might be better service and/or lower prices for regular folks needing a urologist. I think that’s a win!

      Like

    • That’s a great analogy.

      Like

    • Well, I liked Palin and like her still, though not as much. I like Ocasio-Cortez, too.

      Though if Orasio-Cortez faced the same kind of media hitjob that Sarah Palin did, she’d be dead in the water already.

      Like

      • KW:

        Though if Orasio-Cortez faced the same kind of media hitjob that Sarah Palin did, she’d be dead in the water already.

        Yup. Imagine the SNL parodies that would be available if SNL was an equal-opportunity mocker.

        Liked by 1 person

    • This part I thought was funny (quoting Nate Silver):

      I don’t know, I watch these clips where Ocasio-Cortez is supposedly making huge gaffes and it seems like her policy knowledge is…probably about on par with or maybe a bit ahead of the average member of Congress.

      That’s not a plus for Ocasio-Cortez. It’s an extremely low bar to reach for, it seems, and if nothing else it is at least more of a condemnation of congress than a recommendation for Ocasio-Cortez.

      Like

  3. Interesting read:

    “Not enough people are paying attention to this economic trend
    By Bill Gates
    August 14, 2018 ”

    https://www.gatesnotes.com/Books/Capitalism-Without-Capital

    Liked by 1 person

  4. I think Vox is fake news.

    https://www.vox.com/policy-and-politics/2018/8/20/17759468/2018-republican-nominees-trump-brookings-study-midterms

    In Tennessee, all the campaign ads have been “I’m with Trump, I’ll support president Trump”, all the time.

    Yet one of the examples Vox cites is Bill Lee beating Diane Black, saying “Diane Black” had been touting herself as Trump’s choice. But they both were doing that, and someone had to lose, so of course when every candidate is saying “Trump is awesome”, one of the “Trump is awesome” candidates is going to lose.

    The real story:

    https://www.memphisdailynews.com/news/2018/jul/26/tennessee-gop-governors-race-turns-to-spat-over-trump-immigration/

    In TV ads and debates, the four leading GOP candidates are lauding Trump and his wall-building immigration crackdown while blasting each other as insufficiently supportive of the president.

    Like

    • Mostly these days Vox is acting as the paid promotional agent for “Crazy Rich Asians”, judging by the number of posts on the subject and the tenor of the coverage.

      Liked by 1 person

  5. Democrats propose the next logical step to fight Russia:

    “Democrats want Facebook to tell them who has seen disinformation
    by Donie O’Sullivan
    August 8, 2018: 3:20 PM ET”

    https://money.cnn.com/2018/08/08/technology/dnc-facebook-disinformation/index.html

    China is one step ahead of them though:

    “In the northwestern Chinese region of Xinjiang, Chinese authorities are holding roughly a million Muslims in what government propaganda creepily calls “free hospital treatment for the masses with sick thinking”—in other words, concentration camps.”

    https://slate.com/news-and-politics/2018/08/xinjiang-the-nba-is-running-a-training-camp-in-the-middle-of-one-of-the-worlds-worst-humanitarian-atrocities.html

    Liked by 1 person

  6. Good read:

    “The Dangers in the Trump-Brennan Confrontation
    By Jack Goldsmith
    Monday, August 20, 2018, 9:01 AM”

    https://www.lawfareblog.com/dangers-trump-brennan-confrontation

    Like

    • Can someone explain to me why revocation of security clearances once one is no longer employed by the government is not simply standard operating procedure? I genuinely don’t understand why spending a few years in government should entitle one to access to intelligence secrets for the rest of one’s life.

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      • Because there’s no good reason to revoke it as it doesn’t actually entitle one to view classified material on it’s own. It’s merely a prerequisite for access being granted.

        And since they are needed for contracting, it would just clog up the system (which is already backlogged) to have to reapply for them again for every new job or position.

        There’s no defending Trump here on policy grounds. He’s just being an asshole because he can be.

        Sort of like LBJ.

        Like

        • Thanks.

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        • Brennan isn’t a particularly defensible representative of this cohort though. Love to know what Wyden or Feinstein think.

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        • Yes, Brennan is the one who actually makes Trump’s reaction look understandable.

          Which is precisely Goldsmith’s point in the piece about how they are playing into his hands.

          Charles Pierce had the opposite take:

          “Clearance-Gate Is Nothing But Amusing

          President Trump revoked John Brennan’s security clearance. So what?
          image
          By Charles P. Pierce
          Aug 15, 2018

          Nobody’s book deal is going to be threatened by this. Nobody’s seat in the cable news green rooms is in jeopardy. I guess if you’re part of the national-security priesthood this could be like having the general break your sword over his knee, but you will not find anyone less respectful of the prerogatives of that priesthood than I am.”

          https://www.esquire.com/news-politics/politics/a22739717/john-brennan-security-clearance-president-trump/

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      • This is my question. Not such much why was Brennan’s clearance revoked, but why isn’t everybody’s who has no demonstrable need to know and has left government.

        And that you lose your security clearance if you start working for a media outlet would seem like it should be automatic. But also if you start working for lobbyists or anyone who sells to the government … keeping clearance out of the position should be on a case-by-case basis.

        Like

    • The French and Italian banks owned all of the Greek sovereign debt. What is he talking about when he says it was about punishing the French and Italians?

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      • More like warning them against any restructuring schemes that didn’t involve full repayment of government debt.

        The point about Brexit voters paying attention to Greece has merit though, and is usually overlooked as it implies that they are something other than immigrant hating yokels.

        This is what’s being referenced in terms of Greece being punished to set an example:

        “Greece, as Varoufakis sees it, was the canary in the coal mine. Its bailout from the so-called troika of lenders—the European Commission, European Central Bank, and the International Monetary Fund—came with politically impossible terms that not only gave the country Europe’s largest increase in poverty rates between 2008 and 2016 but also helped bring down three Greek governments between 2009 and 2015, when the leftist Syriza came to power. Those terms, Varoufakis and others argue, weren’t necessarily designed to restore Greece’s economic heath—today its finances are still far from solid.They were designed to send a message to larger European countries with problematic finances (Italy, France) to keep their houses in order.”

        https://www.theatlantic.com/international/archive/2017/11/yanis-varoufakis-is-back/545570/

        Like

  7. Another good piece:

    “Taibbi: Corey Stewart, Donald Trump’s Favorite Nut Job

    The Virginia Senate candidate is running a campaign built on race-baiting and falsehoods: He’s the president’s mini-me

    If anyone were to try to articulate a political theory of Donald Trump, this might be it: lying-ism. It’s not so much about policy — Stewart runs to both the left and right of traditional Republicans, depending on the issue — as it is about using aggression as an electoral strategy.

    You turn everything into a fight, renouncing decorum as a trick of the establishment (Stewart actually promised to run a “vicious, ruthless” race). Then, court voters’ secret resentments by relentlessly ripping your opponent as the Fucker Responsible for Everything, using accusations that are true, not true, doesn’t matter, just make sure you never stop.”

    https://www.rollingstone.com/politics/politics-news/taibbi-corey-stewart-donald-trump-711227/

    Liked by 1 person

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