Morning Report: Fed Day

Vital Statistics:


Last Change
S&P futures 2925 -0.25
Oil (WTI) 53.85 -0.35
10 year government bond yield 2.09%
30 year fixed rate mortgage 4.15%


Stocks are flat as we head into the FOMC decision, which is set for 2:00 pm. Bonds and MBS are down.


The disconnect between the current market forecast and the last Fed dot plot are so stark that we are probably set up for some volatility in bonds after the announcement. Be careful locking around then.


Donald Trump looked at ways to possibly remove Fed Head Jerome Powell. While the law protects the independence of the Central Bank, Fed Chairmen have been removed before. Jimmy Carter removed G. William Miller in the late 70s after something like 11 months on the job, and kicked him upstairs to Treasury. Note the President was unhappy with the ECB and their signals of new stimulus – it strengthened the dollar against the euro and that is a negative for US exporters.


Mortgage Applications fell 4% last week as purchases and refis fell by 4%. Rates rose by 2 basis points to 4.14%. “After seeing a six-week streak, mortgage rates for 30-year loans increased slightly, which led to a pullback in overall refinance activity,” said MBA Associate Vice President of Economic and Industry Forecasting Joel Kan. “Borrowers were sensitive to rising rates, but the refinance share of applications was still at its highest level since January 2018, and refinance activity was at its second-highest level this year. Government refinances actually increased last week, led by a 17 percent in VA refinance applications, while conventional refinance applications decreased 7 percent.” The refi index has rebounded to the highest level in almost 3 years:


MBA refinance index


New Jersey has tightened the requirements for nonbank servicers.

20 Responses

  1. So I noticed that the order must have come down from the Ministry of Culture to rename all border detention facilities as concentration camps.


    • Yep. Congrats on normalizing concentration camps. No one’s mind is being changed on this, especially since everyone knows that detaining the illegal immigrants and asylum seekers in camps predates Trump.


      • so who thinks he gets re-elected?
        i’m 60-40 he does. maybe Biden can beat him, but the progressives will stay home in that case.


        • I think he will be too. I actually expected worse results from his presidency.

          This is an interesting read about something that I don’t think is fully appreciated:

          “The Wave That Could Carry Trump to Re-election

          National and state polls don’t tell the whole story. A global anti-elite surge improves the president’s chance of victory.

          By Matthew Continetti
          June 18, 2019

          Mr. Continetti is editor in chief of The Washington Free Beacon.”


        • IMO they nominate Warren, and it will all depend on whether she can overcome the schoolmarm vibe..


        • nova:

          so who thinks he gets re-elected?

          I’m with you, although I think 60% chance is probably low.


    • No one asks the obvious question, what should be done with illegal border crossers and visa overstayers?


    • So I noticed that the order must have come down from the Ministry of Culture to rename all border detention facilities as concentration camps.

      When I was a young, teenage liberal, this is the stuff I would have loved and thought EXTREMELY IMPORTANT to CONVEY THE TRUTH.

      I was not quite able to understand how that would play with society as a whole. I now think the segment of the population for whom such newspeak rewording works is vanishingly small. And for some it can be alienating.

      And it gets in my craw because it’s inaccurate. It obfuscates rather than illuminates.


  2. So the FOMC raises their GDP projection, cuts inflation and unemployment projections, and greases the skids for a cut.

    Calvinball monetary policy


  3. The Supreme Court is showing signs of becoming healthily non-aligned and bound and determined to do law over politics. I am pleasantly surprised. We keep seeing opinions written by, say, Thomas, backed by one “conservative” and four “liberals”. or by Sotomayor backed by four conservatives.

    Take this one form the other day: VA Uranium v. Warren. Affirmed, 6-3. Gorsuch announces judgment and an opinion with Thomas and Kavanaugh, Ginsburg concurs in judgment with Sotomayor and Kagan. Roberts dissents with Breyer and Alito. AEA does not preempt VA’s uranium mining ban on private lands.

    Thomas is the most predictable on text and state sovereignty issues, Ginsburg the most predictable on the civil liberties of defendants, Roberts and Kagan are the best writers, and without the sloppiness of Kennedy opinions I think they are all arguing LAW in the conference and coming down like lawyers more often than the did in the Kennedy years.

    I don’t know if Roberts side was the better one in the VA uranium case, but his dissent started off

    Although one party will be happy with the result of today’s decision, both will be puzzled by its reasoning. That’s because the lead opinion sets out to defeat an argument that no one made, reaching a conclusion with which no one disagrees.

    I love it. On the same day, the Court ruled 7-2 that double jeopardy does not attach to a state conviction followed by a federal prosecution on the same facts, which has always been the law, although not expressed in the Constitution, but derived from the expressed notion of state semi-sovereignty. Predictably Ginsburg thinks it should not apply in that way and she was joined in her dissent by Gorsuch.

    This is way more lawyerly than “5-4” opinions with predictable lineups.

    Liked by 1 person

    • I agree. They are doing what they should be doing. Seems odd to think Kennedy might have been that much of an influence. Or could Gorsuch and/or Kavanaugh be questioning/making in arguments in such a way that tend to bring the focus around to the law rather than partisan politics?


    • Mark:

      The Supreme Court is showing signs of becoming healthily non-aligned and bound and determined to do law over politics.

      Color me skeptical. The Court has always had a high degree of cross-ideological agreement across its (mostly politically non-contentious) gamut of cases. I remember years ago stumbling on a website that detailed the percentage of cases in which there was agreement (in part or full) between any given pairing of justices. The lowest percentage of agreement – the lowest – was 50%. Most pairings were at least in the 65% range.

      I have little doubt that when the next politically contentious case reaches the court, the 4 living constitutionalists on the court will, as they always do in such cases, vote in lock-step to impose their own political preferences. That is, after all, the whole point of being a living constitutionalist.

      …state semi-sovereignty…

      Finally coming around to my view? 😉


      • HA! I take your view to be “sovereignty”, not “semi-“.

        Anyway, they announced three more completely “mixed” opinions. They are on a roll.

        Addendum: Volokh has noticed:

        Supreme Court
        Is There an RBA (Roberts-Breyer-Alito) Axis on SCOTUS?
        These three justices all share a pragmatic streak and they stuck together in three of four decisions decided today.

        Jonathan H. Adler | 6.17.2019 1:35 PM

        Today, the Supreme Court issued four decisions in argued cases. All four case split the justices, as is common for this point in the Supreme Court term. Most of the unanimous cases are released earlier as there is (generally) less back-and-forth among the justices over the opinions.

        Today’s decisions were particularly interesting in that they split the Court in some unusual ways. These opinions suggest the potential emergence of a pragmatist bloc on the Court, and perhaps provided hints at the Court’s direction going forward.

        Perhaps the most interesting split occurred in Virginia Uranium, Inc. v. Warren, in which a 6-3 Court rejected the argument that the Atomic Energy Act preempts Virginia’s prohibition of uranium mining within the state. Although a clear majority of the Court found no preemption, no opinion commanded a majority—or even plurality—of the justices. Indeed, the Court split 3-3-3, rejected a position favored by the business community, and suggested broad preemption claims may face greater Court skepticism going forward.

        Justice Gorsuch announced the opinion of the Court, and authored an opinion joined by Justices Thomas and Kavanaugh, finding no preemption. Justice Ginsburg wrote an opinion concurring in the judgment, joined by Justices Kagan and Sotomayor. Although these two opinions reached the same result, they differed starkly in methodology. Justice Gorsuch focused on the statutory text and explicitly rejected relying upon efforts to divine legislative purpose (beyond what’s in the text) to answer the preemption question. This approach could make it difficult for business groups to advance claims of field preemption going forward.

        While agreeing with the result, it’s no surprise that Justices Ginsburg, Kagan, and Sotomayor did not wish to sign on to Justice Gorsuch’s opinion, as all three are quite amenable to efforts to divine legislative purpose. Chief Justice Roberts dissented, joined by Justices Alito and Breyer—a trio that stuck together in three of the four cases decided today, perhaps suggesting the emergence of a pragmatic bloc on the Court that eschews formalist analyses. Time will tell.

        Virginia House of Delegates v. Bethune-Hill produced another surprising line-up. Justice Ginsburg wrote the majority opinion, concluding the Virginia House of Delegates lacked standing to challenge a lower court opinion concluding Virginia House districts were unconstituitonally gerrymandered along racial lines. Justice Ginsburg was joined by Justices Sotomayor, Kagan, Thomas and Gorsuch. Justice Alito authored a dissent, joined by the Chief Justice and Justices Breyer and Kavanaugh.

        The 5-4 Bethune-Hill split is particularly interesting both because it cuts across traditional right-left lines and because several justices adopted a position at odds with their usual approach to standing cases. Justice Ginsburg, like the other liberal justices, is generally quite generous when it comes to standing, and yet she authored the majority. Chief Justice Roberts, on the other hand, is among the most stingy about finding standing, and he dissented. Justices Gorsuch, Thomas, and Breyer, on the other hand, are about where you’d expect them in a standing case.

        A third interesting (if somewhat predictable) split occurred in Gamble v. United States, in which the Court, 7-2, refused the invitation to reconsider the dual-sovereignty doctrine, under which state and federal prosecutions for the same offense do not violate the constitutional prohibition on double jeopardy. This was a win for stare decisis, if a loss for criminal defendants. Justice Alito wrote the Court’s opinion for the seven-justice majority. Justice Thomas concurred. Justices Ginsburg and Gorsuch each authored dissents.

        The least surprising line-up of the day came in Manhattan Community Access Corp. v. Halleck, in which the Court split 5-4 along traditional right-left lines. Justice Kavanaugh wrote for the conservative majority, concluding that the Manhattan Neighborhood Network is not a state actor subject to First Amendment constraints. Justice Sotomayor dissented, joined by the Court’s three other liberals.

        Although this right-left division is not particularly surprising, it is interesting to see Justice Kavanaugh writing an opinion rejecting a First Amendment claim, as Justice Kennedy was the Court’s most speech-protective justice on the Court. This is not to say Justice Kennedy would have disagreed with Justice Kavanaugh’s conclusion, however, as this case concerned what entities are constrained by the First Amendment, not the scope of such protections, and Justice Kennedy might also have been sensitive to the broadcaster’s own First Amendment interests.)

        The Court is expected to release more opinions on Thursday.


        • Mark:

          HA! I take your view to be “sovereignty”, not “semi-“.

          I’ve always been on board with semi-sovereign or, as even you once characterized my view, “sort of sovereign”! The only time I objected to
          “semi-sovereign” was when you used it to mean “not sovereign”.


        • BTW, Mark, I stumbled on this paper from several years ago, and thought you might find it interesting. The Perpetual Anxiety of Living Constitutionalism:

          Click to access 990134cf77649c771a2205bd5e23f516a385.pdf


        • Thanks, I will read it later – probably tomorrow, at this point.

          As to Iran: I am glad he called off the strike, especially citing disproportionality, and lefty critics must be between a rock and a hard place on that [do they want war?].

          However, I suspect Bolton of constantly pushing escalation and Pompeio of fellow traveling with Bolton. I suspect constant pressure from Israel. And without a SecDef, especially without Mattis, the cooler heads are likely at the Joint Chiefs, and they probably need to be heard by the President even without a designated spokesperson, lacking an experienced SecDef. I would not be surprised if it was direct contact from the JCS explaining the issue and risks that caught his attention this time.

          If I am correct, there is cause to worry, but it is about the current crop of civilian advisors, wrt Iran.


        • Is shooting down a drone an act of war?


        • Is your position that it’s not possible for a person who campaigned on lesser engagement in the ME, and who critiques the previous admins, particularly 43’s for engaging in unnecessary war, to arrive at a conclusion that overtly attacking Iran, a country of 70 million, is a bad idea?


        • No. I think his instinct is reasonable.

          I was critical of Bolton’s instincts and proclivities and worried about his influence and Pompeio’s, unchecked by having no experienced SecDef who presumably would have or should have the same suspicion of ME ventures as the President.

          The choice of a blatant war lover like Bolton as one of a group of advisors could actually make sense for an inexperienced president who really had no taste for it. But only if Bolton was not the sole advisor in the room and only if there are Mattises and Kellys around for balanced presentation of options.

          What I do not think is reasonable about Trump’s instincts on FP is his ignorance of alliance building and maintenance. If Bolton got his way, the US would be going alone into every conceivable military adventure. And Trump is most critical of traditional allies as a general tendency.


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

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: