Morning Report: Blue Wave doesn’t show up

Vital Statistics:


Last Change
S&P futures 2782 25
Eurostoxx index 366.66 0.41
Oil (WTI) 62.93 0.71
10 year government bond yield 3.20%
30 year fixed rate mortgage 4.96%


Stocks are higher this morning after Midterm elections. Bonds and MBS are flat.


Democrats took a narrow 7 seat majority in the House last night, while Republicans increased their majority in the Senate. There were largely no surprises last night – urban voters stayed reliably Democrat, rural voters stayed reliably Republican, however some suburban voters flipped from Republican to Democrat. That change could have been due to either (a) the tendency of educated voters to skew more Democrat, or (b) tax reform. I wonder if tax reform played a part, since higher income suburban voters probably got hit the hardest from the deduction limits on property taxes and state / local taxes.


One takeaway from the election: Progressive darlings flopped. Beto O’Rourke, Richard Cordray, and Andrew Gillum all lost. So while the energy in the D party is with the resistance, that doesn’t necessarily mean the voters are there too. The Blue Wave never materialized. The other takeaway: The Never Trump Republicans (the John McCains and the Bob Corkers) are gone as well. So DC is going to be more polarized than ever.


What will the election mean for markets? Nothing. Gridlock is generally positive for the stock market, and the bond market is being driven by the Fed. Oh, by the way there is a Fed FOMC meeting starting today.


There were about 7 million job openings at the end of September, according to the JOLTs report. This is a decrease of about 285k jobs from August’s record 7.3 million number. The quits rate was flat at 2.4%. While anecdotal evidence abounds regarding the inability of companies to fill positions and retain workers, that has yet to really show up in the government’s numbers.


Home prices rose 5.6% MOM in September, according to CoreLogic. They estimate that 38% of all MSAs are now overvalued, when looking at home prices versus incomes. Just under 20% were undervalued. Of course overvaluation / undervaluation is a moving target, so that can all change if incomes rise, especially if mortgage rates stay the same. Betting on a flattening yield curve late in an economic cycle is usually a decent bet, especially after the Fed finishes a round of monetary tightening.


Mortgage credit availability increased in October according to the MBA Mortgage Credit Availability Index. “Credit availability increased in October, driven largely by an expansion in the supply of conventional credit, while government credit fell slightly over the month,” said Joel Kan, MBA’s associate vice president of economic and industry forecasting. “Reversing a trend from last month, lenders made more conventional and low down payment programs available to prospective borrowers. This increase in supply was likely in response to a growing number of first-time home buyers in the market, as home price appreciation has slowed and wage growth has picked up. Jumbo credit availability also expanded last month, with the jumbo index increasing again to its highest level since the survey began.”




Last week’s drop in interest rates didn’t have much of an effect on mortgage applications, as the MBA’s index fell 4%, driven by a 3% drop in refis and a 5% drop in purchases. Activity hit a 4 year low.


Zillow is getting into the home buying business in Houston, by making cash offers for homes from qualified sellers and then listing the home for sale. It looks like Zillow is selling this as a service to make it easier to sell a home rather than just real estate speculation, but who knows? We do know that Z-estimates are often wildly inaccurate, so Zillow might not have such a big edge.

30 Responses

  1. There are few things as annoying as woke white progressives making derogatory generalizations about white people on social media whenever Democrats under-perform in an election.

    It’s the most insular form of virtue signaling I’ve come across.

    Liked by 1 person

    • wait. there was an election? I thought Trump canceled it because of fascism.


    • How about woke political science professors talking about the Senate popular vote?


      • There are lots of folks (on both sides) who like the system working like its supposed to when it favors them, and then start screaming bloody murder when the same system they had no problem with when they were getting what they wanted doesn’t keep giving them what they want.

        The senate vote works exactly like its supposed to, for the most part. If anything, it’s too nationalized, where Senators should be representing the issues of their state more. But the fact that there are only two senators per state, which means the lowest population state has the same representation as the highest population state, is exactly how the senate was designed to be apportioned. It’s not “unfair”, just as the electoral college is not “unfair”–its how it works.

        These same people don’t spend much effort complaining about the almost entirely unrepresentative, unaccountable, undemocratic federal bureaucracy.


    • It’s, like, super gross. But that’s the easiest, laziest form of virtue signally in contemporary liberal America: “I’m a white straight male and I’m the problem. Please, take away my rights!” or some variation thereof.

      But then, what would you expect from straight, white males? Intelligence and hard work? That’s a laugh.


      • I’m convinced they say it because they think it will get them laid.


        • Maybe? I mean, it’s the primary motivation of most males of a certain age. But I get the sense that it’s about their overall popularity in their peer group: I think that they think it will make them seen as the most virtuous among them, the most noble in their sacrifice, an honest lone hero amongst the natural Nazis.

          I think they are generally sincere (with a subconscious subtext that it makes them better and smarter and more insightful and more honest than others, setting them apart and, ironically, establishing them as the true elite).


        • I see your point, I’m just not sure out-birthing your peers is a prime mover for dudes. Seems like more of a white woman thing, and as we all know, they’re the worst.


  2. “One takeaway from the election: Progressive darlings flopped. Beto O’Rourke, Richard Cordray, and Andrew Gillum all lost.”

    Good thing Cordray resigned early from the CFPB so he could focus on the election.

    And guess who is still in charge there?

    Liked by 1 person

    • That takeaway may make sense for Cordray, but Beto way overperformed. No poll had him inside a 2.5% margin loss and no D has done within 7% as well in 20 years in TX. In fact, I cannot think of a D who could have come close to his numbers this time. The characterization of him as “left” within the D Party would be wrong, as well.

      His major legislative achievements were all in bipartisan veterans affairs or defense bills that he led the D part of the coalition on or even wrote.

      He not only carried the D cities, but he carried Tarrant County, heretofore the most populous sure R County in the USA. It’s also pretty clear that if the Ds had run someone moribund at the top like they did for Governor they would not have flipped two House seats and two appellate courts and narrowed safe R districts in the triangle from R+ double digits to R+4 or less.

      I don’t ever presume to understand FL, our perpetual swing close call state for 138 years and counting. It doesn’t seem to matter what the demographics are, FL will florida.


  3. Prediction: If Trump gets an infrastructure bill passed with the House Democrats,he gets reelected.


    • National performance (i.e., the senate) suggests Trump can perform well nationally, that Republicans remain strong in national elections, and if the Democrats stick to the playbook they aren’t going to make much headway against him ahead of 2020.


  4. Well VA GOP. awesome job. You might learn something from West VA. Manchin might be a lot of things, but winner is one of them. You managed to nominate a senate candidate that was doomed the second the primaries ended. Either try to compete in NoVA or become irrelevant.

    Liked by 1 person

  5. So I guess the next order of business is to DNA test every cathouse mattress in Moscow?


    • Depends on which Democrats win the argument. Some want to overplay their hand and give Trump the full Ken Starr treatment. Others don’t want a replay of the Republicans in ’98 for themselves.


  6. Heh

    Liked by 1 person

  7. I am only half a psychopath:

    You score for primary psychopathy was higher than 57.99% of people who have taken this test.

    You score for secondary psychopathy was higher than 29.26% of people who have taken this test.


    • You score for primary psychopathy was higher than 52.93% of people who have taken this test.

      You score for secondary psychopathy was higher than 54% of people who have taken this test.


      • I feel like a lot of people who take the test must answer based on what they think reflected their best selves, or just what they think makes them the most awesome, generous, non-psycho ever. Otherwise regular people living their lives wouldn’t routinely score above 50, it seems to me.

        I feel like my strong opinion that love is way over-rated really hurt my score.


    • You score for primary psychopathy was higher than 50.45% of people who have taken this test.

      You score for secondary psychopathy was higher than 39.13% of people who have taken this test.

      What does this mean? Do I have to turn myself in? If the answer is “yes” I am going to McBrides for buckshot first.

      I had a 48 year career of working for gains for my clients and thus me at the expense of others. I suppose these people think all lawyers who answer that one honestly are half crazy, right?

      Liked by 1 person

  8. I’m dumber for having read this.


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