Morning Report: Inventory falls albeit at a slower rate 8/21/18

Vital Statistics:

Last Change
S&P futures 2862 4
Eurostoxx index 384.93 1.7
Oil (WTI) 67.47 1.04
10 Year Government Bond Yield 2.83%
30 Year fixed rate mortgage 4.58%

Stocks are higher this morning as earnings season winds down. Bonds and MBS are down.

Same store sales rose 4.7% last week, which is indicative of a strong back-to-school shopping season. BTS is a good predictor of the holiday shopping season, which would support strong GDP growth for the rest of the year. Consumption is about 70% of US GDP. Current projections are looking at north of 3% growth for the year.

The Fed Funds futures are now handicapping a 96% chance of a Sep hike and a 63% chance of a Sep and Dec hike. Meanwhile, the yield curve continues to flatten.

Trump made some comments about Fed Chairman Jerome Powell at a fundraiser, saying that he expected him to be a “cheap money guy” and didn’t expect him to raise interest rates. He also tweeted that he is “getting no help” from the Fed. While publicly discussing monetary policy is not a normal thing for the President to do, wishing rates were lower is. The only politicians who want higher rates are the ones not in power. He also called the Europeans and the Chinese currency manipulators. Under any other President this would be big, but the dollar and the bond market largely ignored it. It  shows that markets are largely dismissing “Donald being Donald” communiques from the WH.

The YOY declines in inventory that have bedeviled the industry are beginning to moderate, at least according to Redfin. Inventory was down 5.8% in July, which is lower than the double-digit decreases we had been seeing. The median sales price rose 5.3%. Homes went under contract in 35 days, which is 3 days faster than a year ago. Activity is slowing in some of the hotter markets however, especially Washington DC. The inventory issue won’t be fixed until we get housing starts back to some semblance of normalcy, which means a few years of 2MM units before returning to historical averages of around 1.5MM.

Toll Brothers reported strong numbers this morning, which has sent the stock up 11%. Revenues were up 27% and deliveries were up 18%. Backlog rose 22% in dollars and 13% in units. They also bought back about $137 million worth of stock, which accounts for about 70% of earnings. Robert I. Toll, executive chairman, stated: “We believe there is room for continued growth in the new home market in the coming years. Household formations have been increasing and in many regions the aging housing stock may not satisfy the lifestyles of today’s buyers. Yet new home production has not kept pace with the growth in population and households. On the single-family side, housing starts, other than during the anemic years of this recovery, are at their lowest level since 1970. In addition, existing home values have increased, providing potential move-up and empty nester customers with more equity that they can put toward a new home purchase. We believe these two groups, along with the growing number of millennials starting to buy homes, are all sources of potential new demand in the coming years.”

I find it interesting that he talks about the low level of housing starts, while at the same time spending 70% of Toll’s net income on buybacks. Certainly the actions don’t seem to match the words.

49 Responses

  1. Just like China.

    “Facebook is rating the trustworthiness of its users on a scale from zero to one
    By Elizabeth Dwoskin
    August 21 at 10:00 AM ”


    • You know what? FB can take off, those hosers.

      I rarely get use it, but every day they make me want to use it less.


      • It’s not their fault. They are doing this under political pressure to try and avoid antitrust action.

        Liked by 1 person

        • True enough, but their capitulation (avoidable or not) makes the service less attractive. Some people really need Facebook for a variety of reasons, but I’m glad I don’t.

          Non-sequitur: What I do miss is old-style eBay, back it when it was all auctions. But the Internet keeps on a changin’.


  2. Looks like Melvin Watt is going down.

    “Federal Housing Agency Employee Secretly Taped Director’s Sexual Advances Toward Her
    August 21, 20185:01 AM ET
    Yuki Noguchi”


  3. What the pen and phone giveth, the pen and phone taketh away


    • Former Obama White House climate aide Jody Freeman expressed some concern that the court battle to follow could leave EPA with diminished authority to regulate greenhouse gases at all, unless Congress steps in with a new law.

      Isn’t this simply an admission that current law does not grant the EPA the authority to do what Freeman would have it do? Either that or current law is so vague and indeterminate that EPA is essentially legislating on its own rather than implementing legislation.

      Liked by 1 person

    • From the piece, this is the understatement of the day:

      “If we’re dealing with a two-term president, we’ve got bigger problems,” Bookbinder said.


    • EPA’s analysis of the proposed rule shows it would produce modest savings for power plants owners, while potentially adding billions of dollars in new health costs on the population at large to address problems such as heart and lung disease caused by an increase in pollution.

      Really? The rule change is going to actively increase pollution?

      Many scientists warn that time is running short to avoid the worst effects of higher temperatures,

      Which they’ve been doing for about 30 years now.

      This feels to be like another minor thing done by the Trump admin that’s being touted as the end of the world.


      • Like everything else in Washington, the change is measured relative to the current baseline, which is the Obama rules remaining in place.

        It won’t increase pollution over what it is currently, but rather what was assumed had the Obama rules been fully implemented.


    • That one I’d actually let slide. There’s a lot more shit that’s an easier target to mock out there.

      Surprised they didn’t object to Barnum’s name remaining. Presumably, he’s the Hitler of the PETA world. (Next maybe to Perdue or Tyson).


      • Surprised they didn’t object to Barnum’s name remaining.

        One step at a time, one step at a time. Got to erase Jefferson from history before they work on mere animal abusers.

        Liked by 1 person

    • There really isn’t anything new on the left:

      “Orwell also blamed, in the second part of The Road to Wigan Pier, what he branded as the “middle class left,” the “left-wing secret teetotalers with vegetarian leanings” who, according to him, alienated the working class, attracting instead all sorts of cranks among whom, reflecting his own prejudices, he indiscriminately listed together quite different types of people such as ”the ‘fruit-juice drinker, nudist, sandal-wearer, sex-maniac, Quaker, ‘Nature Cure’ quack, pacifist and feminist.””

      That’s basically the same coalition they have today.


      • It’s just a matter of who is dominating. Nationalists dominated the progressives in the early 20th century. Now it’s globalists. But one thing is true: it’s still the home of vegans and sand-wearers.


  4. Left Twitter thinks they finally bagged their elephant..


    • Left Twitter thinks they finally bagged their elephant..

      My money is on “not”.


    • Same thing with my left friends on Facebook. I have noticed something ironic:

      The same people who claim he’s one step away from fascism, likely to start a war, can’t be trusted with nuclear weapons, etc. are also the ones who watch every rally he has hoping for a “meltdown”.

      If you really believe that Trump is likely to start a war or cause a nuclear holocaust, then rooting for him to melt down should seem to be the last thing you would want.

      They refuse to see that they are the mirror image of the Alex Jones types during the Obama administration.


      • I don’t think they can see it. It’s literally invisible to them, and in no way something resembling a conscious choice.

        Emotions wrest control from the rational mind without announcement or even admitting it’s happening. Otherwise, they’d easily catch themselves rooting for the kind of behavior they also think will end the world, and stop to consider the fact their personal distaste for him is causing them to believe the literal end of the world is not too high a price to pay for Trump’s embarrassment and defeat.

        Rationalization easily dismisses the contradiction: “Well, I’m not rooting for him to meltdown, I just expect he will. And I totally don’t want it. I’m just expecting it, because he’s so bad and will probably cause a nuclear war or something. But I’m not rooting for it. It’s totally not about the clever Tweets and FaceBook posts I’ll be making to all my friends later.”


  5. These people are insane.

    I completed my studies at New York University, where I received a BA and an MA in English literature, with more than $100,000 of debt, for which my father was a guarantor.

    Their behavior is stupefying.

    Or was it my fault for not having the foresight to realise it was a mistake to spend roughly $200,000 on a school where, in order to get my degree, I kept a journal about reading Virginia Woolf? (Sample passage, which assuredly blew my mind at the time: “We are interested in facts because we are interested in myth. We are interested in myth insofar as myth constructs facts.”)

    Liked by 1 person

    • The funny thing about that article is that the left-wing Guardian doesn’t even understand that well-intentioned policy gone wrong is responsible for this state of affairs…

      Liked by 1 person

    • The best feature of traditional conservatism is the belief that personal responsibility still matters. The next best feature of traditional conservatism is belief in public fiscal responsibility. These are the features that have always made me believe I was a traditional conservative, of course, despite my active involvement in the Civil Rights movement in college in the early 60s, and in my dedication to defending Courts Martial at Fort Hood in the late 60s [WHERE I NEVER LOST A CASE].

      If I had been too stupid to know that spending money I did not have, to go to a private university, my dad wasn’t. I wonder about the author’s dad.

      An MA or even a BA in English is not per se a dead end. At UT, an English major could take a 5 course sequence of basic B courses leading to a practical certification that would make the graduate immediately worth hiring as other than an English teacher. There is also a 5 course computer science sequence leading to a certification that opens another set of doors to your liberal arts major. I believe other public universities are pushing these training wheel certs for their LibArts majors, as well. I’ll bet NYU doesn’t, or didn’t, or that the author was too fine to take advantage of them if they were offered.

      Back in the nineties there was that longitudinal study Princeton did. Princeton always boasted back then that ten of every eleven applicants were capable of doing the work, but only one in those ten were accepted each year, allowing Princeton to always be able to fill its band, its opera, its women’s lacrosse team, its regional and gender and international and ethnic goals and the number of engineering slots available from year to year. For Princeton it was a matter of cultivating alums with worldwide influence in every sphere while winning the National Title in Women’s lacrosse, of course.

      So the Daily Princetonian published the study which showed that on the personal level ten years after graduation all of the 10/11s of applicants who were “qualified” succeeded on a par with the 1/11 who attended Princeton. They concluded that “applying to Princeton was thus the key to success.”

      Apply to Princeton, go to Community College for two years, finish as a commuter at your nearest public university. That’s the ticket.


      • An MA or even a BA in English is not per se a dead end.

        I have a BA in English and make a pretty good living.

        I’m still shocked at the mocking Rick Perry got for trying to engineer a $10k bachelor’s degree in the UT system.



        I think you mean, “WHERE I NEVER LOST A CASE … BITCHES!”

        Using the word in a gender-neutral sense, of course.

        I wonder about the author’s dad.

        Ding! Even at 20, kids these days are stupid and cannot be trusted with large sums of money. He could have gotten some kind of useless degree at a state college or public university, gotten some scholarships, and gotten out $30k or less in debt, if that. Dad should have steered him. “I’ll pay $100k for a doctor or a lawyer or an engineer, son. Not an English major.”

        Apply to Princeton, go to Community College for two years, finish as a commuter at your nearest public university. That’s the ticket.

        In aggregate, the financial return on the investment is pretty much guaranteed to be much better.


  6. Question: If paying someone not to disclose dirt on a candidate for elected office qualifies as a reportable campaign contribution to the candidate, why isn’t paying someone to dig up and disclose dirt on that same candidate a reportable campaign contribution to the opposing candidate?

    Liked by 1 person

    • I think it is, if I understand your question correctly. Of course there are exceptions big enough to drive through. I think NoVa probably has a checklist!


    • It depends on if it’s reimbursed or not. The whole Michael Cohen/Stormy Daniels payment as an illegal campaign contribution argument hinges on Trump not intending to pay Cohen back and Cohen doing this out of his own pocket, thus it becoming a “donation” to the Trump campaign.

      That of course came from Trump’s previous BS that he didn’t know anything about it and that Cohen did it of his own volition.

      Fusion GPS was straight up opposition research paid for by HRC’s campaign through an outside law firm. Which is also why they don’t have the problem with unregistered foreign agents, etc.

      Liked by 1 person

      • jnc:

        It depends on if it’s reimbursed or not.

        The Washington Free Beacon originally hired Fusion GPS to dig up dirt on Trump during the primaries. I don’t believe the payments made by the Free Beacon were reimbursed by any rival campaign. I wonder if the payments it made to Fusion were, or should have been, reported as campaign contributions.

        To take it even further, I doubt that HRC’s campaign reimbursed the New York Times for the many reporters paid by the Times to dig up dirt on Trump during the election. I wonder if the NYT reported these payments as a campaign contribution.

        Liked by 1 person

        • If Cohen didn’t get reimbursed or wasn’t expecting to get reimbursed then this is going to be an easier campaign case to make than the argument that the Trump Tower meeting was a campaign violation due to damaging information on HRC being an in kind campaign contribution.

          With Cohen, you have actual money changing hands so it’s easy to put a dollar figure on it.

          If the reports of Trump asking for it to be paid with a check are accurate then he has a pretty good defense though. It implies the intention to reimburse.


        • Andy McCarthy has been pretty good and even-handed on the Mueller investigation to date. This is his take on the latest.


        • The Washington Free Beacon is Paul Singer, who wants to be the right wing George Soros. I am sure Paul didn’t ask anyone to reimburse him.


        • Brent:

          I am sure Paul didn’t ask anyone to reimburse him.

          Exactly. So does his attempts to dig up dirt constitute a campaign contribution in an attempt to “influence” the election? If not, why not?


        • Probably not if he intended to publish them. Same reason the NYT writing an endorsement of HRC isn’t an in kind contribution.

          The better point of comparison is with the money that was spent to cover up John Edwards’ affair.

          “In August 2008, Fred Baron, Edwards’ campaign finance chairman, told NBC News that he had been providing financial assistance to both Hunter and Young without Edwards’ knowledge; he further stated that no campaign funds had been used. Reportedly, Young had also successfully solicited funds from Rachel Lambert Mellon, also known as “Bunny” Mellon, a 99-year-old heiress to the Mellon fortune”

          Under the Stormy Daniels Standard (SDS), those would be illegal campaign contributions. And I don’t recall a single progressive bringing up that angle at the time.

          Edit: There was a grand jury apparently on the campaign finance angle

          “According to people familiar with the grand jury investigation, prosecutors are considering a complicated and novel legal issue: whether payments to a candidate’s mistress to ensure her silence (and thus maintain the candidate’s viability) should be considered campaign donations and thus whether they should be reported. ”

          Edit 2:

          And he was indicted, but beat the rap.

          None of this should be taken as an endorsement of the current campaign finance laws, but that’s where the line drawing is being done, much like the official corruption laws with bribery being distinguished from campaign contributions.


        • jnc:

          Probably not if he intended to publish them. Same reason the NYT writing an endorsement of HRC isn’t an in kind contribution.

          That makes even less sense to me. It is precisely by publishing them (or endorsing the candidate) that whatever value might exist has been provided.

          None of this should be taken as an endorsement of the current campaign finance laws

          Understood…nor am I advocating that a NYT’s hit piece be considered an in-kind contribution. But it does demonstrate what an unprincipled rabbit hole we are in once we begin to regulate who can donate money to who.


        • Glad you edited, Joe. I was going to respond that Edwards was indicted and tried, but proving that his sole motive was political when he was plausibly hiding it from his dying wife, which would have been personal, was a hurdle a jury would not jump. And won’t regarding DJT, either, so this will never come up in a courtroom. The Edwards case is the lesson learned, I think.

          The technical issue is that Cohen’s payment is tainted. So even if he was reimbursed by the Trump organization in a payment disguised as legal services he isn’t off the hook. But I think DJT could have directly made the payment legally, so my wife the tax specialist says that if his entity reports the payment to Cohen not as legal fees but as a distribution on behalf of the principal or as a dividend, depending on the nature of the entity, then the Organization should be off the hook, too.

          The argument against DJT from the amateur speculators is that he ordered that the tainted payment be made so he is an accomplice or co-conspirator, but it is so weak IMHO that no time should be spent on that rabbit trail by us or anyone else.

          That Cohen is another serial tax evader and bank fraudster is not surprising. And if he knows that DJT is also a serial tax evader and bank fraudster and money launderer that would be interesting – if it’s documented.

          DJT’s lauding of Manafort’s character is obnoxious. Tax evaders and money launderers should be prosecuted, but unfortunately usually are not. That the Mueller investigation uncovered the millions of tax cheating, and bank defrauding, doesn’t make Manafort a poor unfortunate. He is a crook.


        • mark:

          …but proving that his sole motive was political when he was plausibly hiding it from his dying wife, which would have been personal, was a hurdle a jury would not jump.

          Does it strike anyone else as completely absurd that if hush money is paid in order to hide something from a candidate’s wife – which necessarily means hiding it from voters – it isn’t a reportable in-kind contribution, but if it is paid only to hide it from voters, it suddenly becomes a reportable in-kind contribution? Who are the victims of the failure to report the latter, and how are they not equally victimized by the failure to report the former?


        • Scott, it’s the requirement in criminal law except for purely regulatory crimes like speeding that you have a guilty mind as well as an ostensibly guilty act. So if this were purely regulatory, maybe it would make no difference, but this is an ordinary criminal statute, like “murder” which if not accompanied by a guilty mind is manslaughter or negligent homicide or not guilty by reason of insanity.

          There are lesser included crimes possible here, too, but they just get fines, as has happened again and again to D and R campaigns since Dole v. Clinton.


        • ” And won’t regarding DJT, either, so this will never come up in a courtroom.”

          Don’t tell PL. They are convinced they have got the great white whale exactly where they want him.

          Liked by 1 person

        • @scottc1: “I doubt that HRC’s campaign reimbursed the New York Times for the many reporters paid by the Times to dig up dirt on Trump during the election. I wonder if the NYT reported these payments as a campaign contribution.”

          Now you’re just being silly. That’s just “journalism”, and is protected by the first amendment!


    • Neither should be considered a violation of campaign finance law. Or, if they are, the law has become far too draconian. IMO.


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