Morning Report: The CFPB is going to define the term “abusive.”

Vital Statistics:


Last Change
S&P futures 2810 2.75
Eurostoxx index 364.61 -0.6
Oil (WTI) 71.52 -0.5
10 year government bond yield 3.18%
30 year fixed rate mortgage 4.95%


Stocks are flattish this morning after yesterday’s huge rally. Bonds and MBS are down.


We will get the minutes of the September FOMC meeting today at 2:00 pm. Be careful locking around that period. They usually aren’t market-moving, but you never know.


Lots of people are returning from the MBA conference in Washington, DC, so let’s catch up on the economic data from the past couple of days.


Job openings hit a record (going back to 2000) last month as 7.1 million positions went unfilled. The quits rate was unchanged at 2.4%. The quits rate has been steadily inching upward and we are back to early 2001 levels. The quits rate is generally considered to be a predictor of wage inflation.


quits rate


Retail sales for September disappointed at the headline level, rising only 0.1%. The control group, which strips out autos, gas stations, and building materials rose 0.5%, which was towards the higher end of expectations. Department Stores were especially weak, which isn’t surprising given that Sears just filed for bankruptcy. Overall, consumption for the third quarter looks to have been strong, which will support a good GDP number.


Industrial production rose 0.3% last month, and manufacturing production rose 0.2%. Capacity Utilization was steady at 78.1%. Manufacturing was up about 3.5% YOY, which is an inflation-adjusted number. If you add back 2.5% inflation, we are looking at 6% nominal growth, which is a very respectable number. Suffice it to say that whatever trade wars seem to be occurring have yet to show up in the numbers. Also, with capacity utilization stuck below 80%, we don’t have inflationary pressure from more marginal (and costly) production being used.


Mortgage applications fell 7% last week as purchases fell 6% and refis fell 9%. Seasonal adjustments are primarily responsible; unadjusted applications were more or less flat, which is kind of impressive given that rates rose about 16 basis points in the previous two weeks.


CFPB Chairman Mick Mulvaney told the MBA conference that regulation by enforcement is dead. Regulation by enforcement was a prime tactic of the Cordray regime, which was characterized by intentionally vague rules. Dodd-Frank inserted the term “abusive” into the vernacular, and while words like “fair” and “unfair” have been litigated over the past century such that we all have a pretty good legal idea of what they mean, “abusive” is still pretty much a blank canvas. The CFPB is working on a definition of what the term actually means.


“We know what ‘unfair’ is,” Mulvaney said. “We know what ‘deceptive is; I’m not sure we know how to define ‘abusive.’ This is an example of how we are looking at issues….”We are still Elizabeth Warren’s child, for better or worse. We’re not the FDIC; we’re not the SEC…I want the Bureau to get there, to where we are associated with other regulators and not controversial because of its partisan circumstances, which colors what half of Americans think of it.”


“Partisan” is a good description of how the agency was initially staffed. Here is one lawyer’s description of how things went. The agency ensured that only Democrats who were inherently hostile to the financial industry were hired to staff out the agency. Mulvaney may have different goals than Richard Cordray, but the rank-and-file of the agency do not.


Trulia noted that price reductions at the high end of the market accelerated in July and August. Over 17% of US listings had a price cut during August. Between tax reform, higher rates, and higher prices it was only a matter of time before we started seeing an impact at the higher price points. Don’t forget that in the aftermath of the crisis, luxury real estate was about the only sector that was working for homebuilders. While the West Coast has been able to absorb that inventory, the East Coast definitely has not. Indeed, tony NYC suburbs are swollen with $1 million + properties for sale, and some have gone as far as to ban “for sale” signs.


Trump continued to jawbone the Fed, calling it his “biggest threat.” FWIW, there isn’t a politician on the planet that actually likes tightening cycles, but most have the common sense not to say anything about.

16 Responses

    • I can’t read the article, does it say we should let the Saudi’s buy billions of dollars of weapons from the US?


      • No.

        It says the Saudi military infrastructure is built on US arms and cannot switch to any other without massive revision. It says the deals Trump is talking about that are in the pipeline are wildly fewer $$ than the number he quotes. He says the Saudis are dependent on US arms on a continuous basis to fuel their war in Yemen. It says we have all the leverage and can use it as we have done in the past to modify Saudi behavior.


        • So, just so I understand, we’ve successfully modified Saudi behavior in past? Do you really believe that?

          Also, why is it in our interest to “punish” Saudi Arabia?


        • Do you really believe that?

          Sure. Tweaks on Israel, petroterrorism, OPEC pricing, not going nuclear, etc. We have always pushed them on Americans held by them – this guy was a legal alien and I think a Green Card – but I don’t see that as a compelling reason to ignore [what happened to] him.


        • Fair point re influence. Not sure there is a compelling national interest in what the Saudi’s due to a Saudi citizen on Saudi soil.

          What would you say is the US national interest in this?

          Also, not sure the Turks are the most reliable source regarding journalists.


          The only decent actor in the region is Israel. Ultimately if the Saudi’s kill a Muslim Brotherhood apologist, meh. What seems important is constricting the worst actors in the region and that’s Iran. Then, when they’re defeated, the Pakistani’s followed by the Syrians.


        • Sometimes apologist journalists may be embedded spooks. And the disappearance may have something to do more direct spook activities. That we have no knowledge of.


        • I don’t have any moral objections to punishing Saudi Arabia, or twisting their arm. I assume a
          successful arm twisting would have some potential positive benefit for us but I don’t know. I’m all for “renegotiating the terms”, but I don’t know enough to know how that should happen or what we should ultimately seek to get from them, except less terrorist funding.


        • what we should ultimately seek to get from them,

          Americans can’t be snuffed without consequences. I know-he wasn’t a citizen. But he was a resident and legal alien. He worked for an American newspaper. Let them kick out American journalists they don’t like. See Al Jazeera, for example. But luring them into an embassy to snuff them should be off the grid.

          Gotta go. See y’all when I get back from the trip.

          Liked by 1 person

  1. Wife’s hip replacement was today. Surgery went well. Doctor was so excited about how messed up her hip was, he came out to show me a picture. Now lots of rehab.

    Replacement was necessary because of deformation due to Legg-Calve-Perthes. So more complicated than osteoarthritis hip replacements, but it’s done. 👍🏻


  2. Still stunned that Paul Allen died this week and it was a half day story, if that. Dude contributed to a massive change in this country.

    Liked by 1 person

  3. It’s hard not to look at lefty media love for Beto O’Rourke as racism, straight up.

    He’s undistinguised legislatively but he’s white and relatively young. That’s it.

    Liked by 1 person

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