Morning Report: Retail Sales strong

Posted on December 27, 2018 by Brent Nyitray

Vital Statistics:

 

Last Change
S&P futures 2432.5 -38.5
Eurostoxx index 331.96 -3.2
Oil (WTI) 45.4 -0.32
10 year government bond yield 2.77%
30 year fixed rate mortgage 4.60%

 

Stocks are lower this morning after yesterday’s furious rally. Bonds and MBS are up.

 

Was there any particular catalyst for yesterday’s move in stocks? Not really. Markets don’t go up in a straight line, and they don’t go down in a straight line either. Bonds sold off heavily, but you didn’t see as much action in TBAs. They were down, but not like the 10 year. TBAs have been lagging the move in the bond markets anyway.

 

Home prices rose 5.5% in October, matching the move we saw in September. The usual suspects saw the biggest increases: Las Vegas, and San Francisco. Phoenix is now showing strength as well. Affordability remains the most pressing issue: “Home prices in most parts of the U.S. rose in October from September and from a year earlier,” says
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The combination of higher mortgage rates and higher home prices rising faster than incomes and wages means fewer people can afford to buy a house. Fixed rate 30-year mortgages are currently 4.75%, up from 4% one year earlier. Home prices are up 54%, or 40% excluding inflation, since they bottomed in 2012. Reduced affordability is slowing sales of both new and existing single family homes. Sales peaked in November 2017 and have drifted down since then.”

 

Retail sales were the strongest in 13 years for last week, with same store sales up 7.8%. Since consumption is 70% of the economy, I wouldn’t be surprised to see some strategists bumping up their Q4 GDP estimates.

 

Note that due to the government shutdown, the Commerce Department won’t be releasing economic numbers. We won’t be able to get tax transcripts out of the IRS, but FHFA should be running normally, so you should be able to get case numbers for FHA loans, and Ginnie Mae securitization markets should function normally.

 

The Trump Administration expressed confidence in Jerome Powell, and said that he is safe. There is a precedent for the President showing Fed Chairmen the door – Jimmy Carter dumped G. William Miller after a year on the job, though he kicked him upstairs to Treasury and nominated Paul Volcker.

Filed under: Economy, Morning Report |

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28 Responses

    • markinaustin, on December 27, 2018 at 9:42 am said:

      Brendan Kelly, USMC:

      Before the shooting last month, Thousand Oaks was perhaps best known for its reputation as one of the safest cities in America. So I was hardly surprised when Brendan Kelly described his childhood as idyllic.

      But now, at 22, Mr. Kelly has experienced more mass violence than anyone should face in a lifetime. First, he was in Las Vegas last year, when 58 people were killed at a country music festival. As he recovered, he spent countless nights at Borderline. Just as things were really feeling back to normal for him, a gunman entered Borderline and killed 12 people there.

      He seems to approach danger — and even death — in the most matter-of-fact way. To memorialize two of his closest friends who were killed last month, he tattooed their names on his back, along with something a friend told him as they left Las Vegas: “In this game of life, no one makes it out alive.”

      In just a few days, Mr. Kelly will head to Afghanistan for his first tour of duty as a Marine.

      Like

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  2. jnc4p, on December 27, 2018 at 12:53 pm said:

    This should be good. Now we have Americans attempting to be fake Russians pretending to be fake Americans on Facebook .

    “Disinformation campaign targeting Roy Moore’s Senate bid may have violated law, Alabama attorney general says

    By Craig Timberg and Tony Romm
    December 27 at 1:17 PM
    …
    Internet billionaire Reid Hoffman apologized Wednesday for giving $750,000 to a group, American Engagement Technologies, that allegedly had ties to an effort to undermine support for Moore and bolster Jones. The new senator has called for a federal investigation into Project Birmingham.

    Hoffman said in his statement Wednesday that he did not know that the money had been used for disinformation tactics, including a reported effort to create fake evidence that automated Russian accounts, called bots, were supporting Moore in the race.”

    https://www.washingtonpost.com/technology/2018/12/27/disinformation-campaign-targeting-roy-moores-senate-bid-may-have-violated-law-alabama-attorney-general-says/

    Liked by 1 person

    Reply
  3. jnc4p, on December 27, 2018 at 1:10 pm said:

    And the media continues to play right into his hands:

    “NBC News is standing by misleading story on Trump’s visit to troops”

    https://www.washingtonpost.com/opinions/2018/12/27/nbc-news-is-standing-by-misleading-story-trumps-visit-troops/

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    • Brent Nyitray, on December 27, 2018 at 2:02 pm said:

      #OrangeManBad

      Like

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      • markinaustin, on December 28, 2018 at 10:15 am said:

        We must remember that although MSNBC thinks he is bad, he really is. He did have a long history of shady dealing well known and well covered throughout his adult life before becoming Individual 1.

        It’s analogous to a stopped clock being correct twice a day, or to a paranoiac who is actually being spied upon furtively looking over his shoulder.

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        • Brent Nyitray, on December 28, 2018 at 10:27 am said:

          they’re all bad. as long as they vote to cut my taxes and keep the government off my back, i don’t really care.

          Liked by 1 person

        • jnc4p, on December 28, 2018 at 10:30 am said:

          True, but writing that Trump is the first president not to visit the troops and then refusing to change the headline when he does so shows that it’s not about reporting facts.

          It’s about #OrangeManBad.

          Also, it was regular NBC, not MSNBC.

          A couple of other great examples:

          “Trump used her slain daughter to rail against illegal immigration. She chose a different path.”

          https://www.washingtonpost.com/local/social-issues/trump-used-her-slain-daughter-to-rail-against-illegal-immigration-she-chose-a-different-path/2018/12/27/084f93a4-e9ce-11e8-a939-9469f1166f9d_story.html

          “Trump’s visit to Iraq prompts concerns about politicization of military”

          https://www.washingtonpost.com/world/national-security/trumps-visit-to-iraq-prompts-concerns-about-politicization-of-military/2018/12/27/42aa20fe-0a13-11e9-892d-3373d7422f60_story.html

          Again, these are news stories not op-eds.

          Trump has done what he set out to do which is to turn the media into the opposition party and they’ve happily decided to play that part. They refuse to heed warnings by Jon Stewart about the consequences of that with regards to their own credibility.

          This was spot on:

          “STEWART: They are personally wounded and offended by this man. He baits them. And they dive in. And what he’s done well, I thought, is appeal to their own narcissism, to their own ego. Because what he says is these are the — and the journalists stand up and say, “We are noble. We are honorable. How dare you, sir?” And they take it personally and now he has changed the conversation to not that his policies are silly or not working or any of those other things, it’s all about the fight. He is able to tune out everything else and get people just focused on the fight. And he’s going to win that fight.”

          http://transcripts.cnn.com/TRANSCRIPTS/1810/30/ampr.01.html

          Plum Line these days is nothing but an exercise in competitive outrage.

          Liked by 1 person

        • Kevin S. Willis, on December 28, 2018 at 5:46 pm said:

          Trump is not a good guy in many ways, as no politician is a really good guy. And in some ways he’s unique in his badness. But the Orange Man Bad stuff is just detached from reality, and not just MSNBC. It’s not news, it’s an SNL sketch. It’s less Op-Ed now than just making stuff up, and each news outlet becomes its own channel for creating outrage and ignoring actual data.

          Like

        • ScottC, on December 29, 2018 at 9:08 pm said:

          Mark:

          We must remember that although MSNBC thinks he is bad, he really is.

          Perhaps, but not in the ways or for the reasons incessantly propagated by the media (and not just MSNBC). And that matters. Or should.

          It’s analogous to a stopped clock being correct twice a day

          I dont think so, because the critique of the media isn’t that it has inadvertantly stumbled upon some truth, but rather that it so often presents falsehoods as te truth. The media’s behavior is far more analagous to the corrupt police force that thinks it is perfectly acceptable to frame a known troublemaker for all kinds of crimes simply because he’s a “bad guy”.

          Like

  4. jnc4p, on December 28, 2018 at 11:02 am said:

    Got to love Jacobin:

    “You Don’t Want Hygge. You Want Social Democracy.
    By Meagan Day

    Hygge has exploded as a cozy, comforting interior design trend. But the security and intimacy it evokes can’t be achieved by scented candles alone — that requires social democracy.”

    https://www.jacobinmag.com/2018/12/hygge-holidays-design-denmark-social-democracy-solidarity

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  5. jnc4p, on December 28, 2018 at 12:00 pm said:

    This:

    “I realized what I was really writing was an insider’s guide to how reporters lie to the public. It was part tirade, part confessional. The text poured out in big chunks, probably reflecting, I realized, years of secret frustrations.

    Manufacturing Consent was a dissection of propaganda at the structural level. It’s a macro-analysis.

    Hate Inc. – what I started off calling The Fairway – increasingly focused on deceptions that were more at the sentence level. It returned frequently to one theme: What most people think of as “the news” is really a particularly twisted wing of the entertainment business.”

    https://taibbi.substack.com/

    Liked by 1 person

    Reply
  6. jnc4p, on December 28, 2018 at 3:07 pm said:

    Syria is going to be just fine without the US.

    “Syria’s Kurds, Feeling Betrayed by the U.S., Ask Assad Government for Protection

    By Ben Hubbard
    Dec. 28, 2018

    BEIRUT, Lebanon — Syria’s most powerful Kurdish militia has called on President Bashar al-Assad’s government to send forces to protect it against an attack by Turkey, the first sign of shifting political alliances in eastern Syria since President Trump announced that he would withdraw American troops.”

    https://www.nytimes.com/2018/12/28/world/middleeast/syria-kurds-turkey-manbij.html

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    • Brent Nyitray, on December 28, 2018 at 7:07 pm said:

      I know this sounds crass as hell, but why not leave the ME to the Chinese or Russians? Why should we care? There is no energy reason and Israel can take care of itself.

      Can’t we just say it is time for someone else to relieve the watch? Yes, whoever takes over will be the target for terrorism, but again, so what? Haven’t we already done our part?

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  7. jnc4p, on December 29, 2018 at 10:33 am said:

    Good piece. His book was great too:

    “The President’s Field Trip to the Forever War
    “Thank you for your service,” but spare the details, please.

    By Matt Gallagher
    Dec. 28, 2018”

    Like

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  8. lmsinca, on December 30, 2018 at 8:05 am said:

    Hope you’ve all had a great Christmas/Hanukah Holiday and are looking forward to the New Year. I always look forward to the next one. At my age they’re a luxury! We’re doing fine here and enjoyed some fun days with my grandsons and most of the kids between Thanksgiving and Christmas. Looks like I’m going back to CO in February and a girl’s trip to Hawaii at the end of April. Walter doesn’t really like to travel much anymore (his heart health seems to be declining) so I’m pretty much solo on most of this stuff. I doubt retiring to CO is in the cards for us……………..makes me a little sad because I was really looking forward to being closer to the kids.

    Anywhoo, that’s my life at the end of this year. I came across this piece (written in 1984) I thought you guys might find interesting as we consider the state of the world, technology, the environment and society as we head into 2019. I think Isaac Asimov was a bit optimistic although he totally predicted the changes we needed (but didn’t make happen) in both the future of education and concern for environmental decline as they should have been. I think we’ve missed the mark on both and Space Settlements are a pipe dream for now.

    Happy New Years my secret buddies……………LOL

    https://www.thestar.com/news/world/2018/12/27/35-years-ago-isaac-asimov-was-asked-by-the-star-to-predict-the-world-of-2019-here-is-what-he-wrote.html

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  9. Michigoose, on December 30, 2018 at 6:42 pm said:

    Sorry, NoVA! 😉🙌

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Be kind, show respect, and all will be right with the world.