Morning Report: No surprise in FOMC minutes 8/23/18

Vital Statistics:

Last Change
S&P futures 2858 -2.75
Eurostoxx index 384.09 0.07
Oil (WTI) 67.46 -0.4
10 Year Government Bond Yield 2.81%
30 Year fixed rate mortgage 4.58%

Stocks are flattish this morning on no real news. Bonds and MBS are flat.

The FOMC minutes didn’t offer anything too surprising. Most participants said it would be appropriate to raise rates soon, which wasn’t a surprise – the Fed Funds futures have a Sep hike as pretty much a sure thing. They worried about how trade could be a downside risk to the economy, especially if it affects business sentiment, investment and employment. They mentioned that in the “not too distant future” monetary policy will no longer be viewed as accomodative. This statement seems to hint that rate hikes should wind up next year, provided inflation remains around these levels. Note that the head of the Dallas Fed suggested that the tightening cycle might be done once we get 75 – 100 basis points higher on the Fed Funds rate.  Bonds didn’t react to the minutes at all, and the Fed Funds futures didn’t budge either.

There wasn’t much talk about reducing the size of the balance sheet, which is more or less on autopilot right now. As the yield curve flattens, you would think the Fed would consider getting more aggressive on the balance sheet unwind. Maybe not on the mortgage backed securities side, but on the Treasury side. If credit is still widely available and the demand is there, why not? If the ducks are quacking, feed ’em.

Central Bankers are meeting in Jackson Hole today. There usually isn’t much in the way of market-moving statements out of these things, but just be aware.

Initial Jobless Claims fell to 210,000 last week. We are bumping around levels not seen since 1969. When you consider the fact that the US population was only 200 MM back then (compared to 325 MM today), it is even more impressive. It certainly has economists scratching their heads.

Home prices rose 0.2% in June and 1.1% for the second quarter, according to the FHFA House Price Index. The second quarter’s pace was the slowest increase in 4 years, which shows that higher interest rates are beginning to have an effect on prices. Prices did rise in all 50 states and 99 out of 100 MSAs. 5 states (NV, ID, DC, UT, and WA) had double digit increases. The Las Vegas MSA had the biggest increase – almost 19%. The laggards were CT, AK, ND, LA, and WV.

Heidi Heitkamp, a moderate Democrat from North Dakota says she will not support Kathy Kraninger to run the CFPB. She said she was inclined to vote yes, however she is concerned about Kraninger’s experience in consumer protection and also felt she “lacked empathy” for consumers and didn’t believe in the Bureau’s mission. Heitkamp has been supportive of regulatory relief, which means she was a gettable vote. Kraninger’s nomination looks largely to fall along partisan lines now.

New Home Sales fell 1.7% MOM to 627,000, which was below the Street estimate of 649,000. It is up 12.8% on a YOY basis however. The new home inventory situation is getting more balanced, with 5.9 month’s worth of supply. As always, the question is whether that inventory represents the oversupplied luxury market or the undersupplied starter market.

13 Responses

  1. And it’s all bullshit again:

    “Whoops: the cyberattack on the DNC was a test
    This is a test. This is only a test.
    By Alex Ward
    Updated Aug 23, 2018, 11:45am EDT ”


    • I think this is a very intriguing story and it smells credible. But I have some questions about the narrative and about the tech,

      Tech first.

      Kev, I have seen programs that can sort duplicate emails. I haven’t used it. I did not have the impression it relied on the metadata. Can you explain what I do not understand here – the assertion that the FBI did not or could not computer sort duplicates of what they had? Obviously opting not to is a possibility but that is not what the article suggests.

      Second: Why would the FBI be looking outside HRC’s time as SecState? They did not, but isn’t that the correct time period for the purpose of the operation? Why is that being criticized? Seems like unrelated curiosity to me.

      Third: My second question may be moot now, if this is accurate. Her entire email history may be relevant to the continuing FBI inquiry into the Foundation. For that, political favors from a Senator might be relevant. I can’t think of a rock solid reason to look at post SecState emails, but assuming she was in a position to offer favors in the future based on her coronation that might be enough.


      • Mark:

        Why would the FBI be looking outside HRC’s time as SecState?

        Recall that Comey’s stated reason for not prosecuting HRC was the alleged absence of any evidence of intent. It’s possible that e-mails prior to her time in office could provide evidence of her intent in setting up and using the home server. Also, recall that during the investigation, after her lawyers vetted the emails to be turned over to the FBI, she wiped the server clean, making it impossible to know whether there were any emails that should have been turned over but weren’t. It is possible again that emails from that time period could have provided indications of a deliberate attempt to hide something in wiping the server.


        • I’m still kind of unclear why Comey made any public pronouncements about this stuff. Did they have to mention they had Weiner’s laptop and what they found on it? Couldn’t a lot of that been kept under wraps, if the intent was to hear no evil, see no evil?


        • He didn’t make any kind of public pronouncement about Weiner.

          He sent a letter to Congress, and Republican members subsequently released it to the press.

          He felt he had to inform Congress as he had testified under oath hat the investigation was over and that was no longer true. He suspected, correctly in my opinion, that if he hadn’t notified Congress FBI agents would have leaked it viewing it as a cover up.


        • See also this for the reasoning on the original announcement of no charges:


      • Whatever they are using would have to be somewhat specialized (which might explain why it didn’t work), as you’d be looking for duplicate emails between two email DBs. “Metadata” in this case would be header data, which describes the email (who it’s too, the subject, HTML or text, priority, a lot of other extra stuff, which can vary between two emails if one is a “sent” email in one mail DB and another is a received mail in the comparison DB.

        But I’m unaware of what kind of specialized tools they have to manage that, but there are about a million ways such a tool could fail, be confused, be inaccurate, miss things, etc. But any time you hear something like Comey’s assertion of having magically determined which emails were duplicate an didn’t need review, it’s almost always being oversold or inaccurately represented.

        In the normal course of things, I would expect eliminating duplicates would have been an involved job going over an extensive period of time that would involve a lot of manually reviewing the information. I can see stripping out meta data and making a hash of the text and special characters and then limiting the comparison to a few “blocks” of the hash and then saying, sometimes accurately sometimes not, that you’ve got a positive duplicate. Or something in the metadata, potentially, although I honestly don’t know how reliable that would be.

        But they may have specialized tools they are satisfied with. I’m inclined to be dubious–based on both my experience with data comparisons and government bureaucracy (small scale)–but without having an audit on the process, there’s no way to know for sure.


      • That said, there’s something wrong with this: “The absence of this metadata — basically electronic fingerprints that reveal identifying characteristics such as To, CC, Date, From, Subject, attachments and other fields”

        Unless the record of email was text files the emails had been cut and pasted into, I’d be curious why there was no “metadata” (that is, headers on the emails). That’s very unusual. Headers are stored in email DBs, always. You don’t have the header, generally you wouldn’t have the email.

        But also, de-duplicating based on metadata alone would also be tough, as it might eliminate a lot stuff that’s not duplicated if too broad or not eliminate things that are duplicates if too narrow.

        You’d have to eliminate attachment information from a comparison because lots of things change attachment info.

        It would be tricky to do. Again, specialized tools might be able to do it but I don’t understand the idea that there was not header information (unless somebody was using a special email client that stripped header data out of the emails). But even then, you could “de-duplicate” by taking the body of the email and turning it into a “filtered fuzzy match”. But unless they had tools on hand for doing that, they wouldn’t be able to without some kind of database/software developer working on it. And that would involve intaking both DBs into their own systems (at which point they would have all the data, off the sources, and would retain it indefinitely).

        My guess is they kept the original reviewed emails in some special form internally (otherwise, how could they compare), not in an email DB, and didn’t not preserve it with an eye towards doing future comparisons to de-duplicate, so found de-duplicating almost impossible.


        • My guess is they kept the original reviewed emails in some special form internally (otherwise, how could they compare), not in an email DB, and didn’t not preserve it with an eye towards doing future comparisons to de-duplicate, so found de-duplicating almost impossible.

          That HAD occurred to me. It just seemed so unlikely that they would go to the trouble to say, print all the original database to .pdfs, which would be inconvenient as hell to re-assemble in their original order, and not worth a damn as evidence.


  2. Just remember: it’s never a good thing when your Pecker starts leaking. . .


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