Morning Report: The Fed cuts rates and then goes into a holding pattern.

Vital Statistics:


Last Change
S&P futures 3042 -5.25
Oil (WTI) 54.42 -0.64
10 year government bond yield 1.73%
30 year fixed rate mortgage 4.02%


Stocks are lower this morning after the Fed cut rates. Bonds and MBS are up.


As expected, the Fed cut rates by 25 basis points yesterday, and Jerome Powell said that “the current stance of policy is expected to remain appropriate” as long as the labor market remains strong and the economy continues to expand moderately. They also removed the language that said the Fed would “act as appropriate” to maintain the current expansion. This was the “pause” language that the markets were looking for. The vote was 8-2, with two members voting to maintain the current Fed Funds target. For some reason, the pause language put some starch in the bond market, which has sent rates lower by about 12 basis points. The December Fed Funds futures are currently handicapping a 20% chance of another 25 basis point cut. FWIW, Morgan Stanley is out with a call saying the Fed is on hold through 2020. As a general rule, the Fed tries to stay out of the picture as much as it can during an election year, so that call may end up being correct.


Personal Incomes and spending increased 0.3% and 0.2% respectively, which was lower than August’s torrid pace. On an annual basis, incomes rose 3.8% and consumption increased 4.4%, both strong numbers and well ahead of the weaker-than-expected inflation readings. The PCE price index (which is the Fed’s preferred inflation measure) was flat in September, and up 1.3% YOY. Ex-food and energy the PCE index was flat and up 1.7% annually. Separately, the employment cost index rose 0.7% in the third quarter and was up 2.8% YOY. Note that wages increased 0.9%, which is a quite strong number.


The Urban Institute has panned the Administration’s plan to reduce the GSE footprint in the mortgage market. Their point is that the government guarantee for Fannie MBS is so important that it will be hard for other entities to compete, unless the guarantee fee is set higher than the credit risk dictates. They also claim that it will reduce credit and slow down the economy.


The overall share of GDP attributable to housing increased to 14.6% in yesterday’s GDP report. Residential fixed investment (homebuilding, remodeling, etc) increased to 3.11%, while housing services, which is mainly rent, was about 11.5% of the economy. Historically, residential fixed investment has been closer to 5% and rent has been closer to 12% – 13%. In other words, housing is still punching below its weight economically, although it may be turning around. This represents a huge potential boost to GDP once things return to normalcy.


housing GDP



22 Responses

  1. Does the ABA’s opinion of judges carry any weight on the right? or are they just another one of a gazillion liberal interest groups?


    • It’s probably considered a nice thing to have, all things being equal. But the right isn’t willing to let them be self appointed gatekeepers anymore.


  2. The Trump Biden thing has really triggered all of the liberal establishment.


    • the left completely controls culture and it isn’t enough…


      • Every knee shall bend.


      • Just as a general observation, people who really define themselves and their tribal membership by their political ideology and partisanship almost never feel like they are winning. They are always losing, always being betrayed, always of the precipice of apocalypse. They are surrounded by traitors and morons “who just don’t understand” and while there are many praiseworthy fellow travelers, there are also many (especially in Washington) who just don’t put up a fight or roll over for the opposition–or may, in fact, really be a closet-OtherPartyMember.


    • It was hard not to feel the irony while I was reading excerpts from your recent speech at Georgetown University, in which you defended — on free speech grounds — Facebook’s practice of posting demonstrably false ads from political candidates. I admire your deep belief in free speech. I get a lot of use out of the First Amendment. Most important, it’s a bedrock of our democracy and it needs to be kept strong.

      When did Zuckerberg argue that pressure should be brought on theaters and TV and cable and Blu-ray renters and streaming services to blacklist The Social Network or that the movie should be completely banned. He thought the movie was bullshit. You are welcome to think any Facebook ads are bullshit and say so publicly,

      I kind of feel like this open advocacy of censorship is not a good look for the left. And especially not Hollywood.

      And right now, on your website, is an ad claiming that Joe Biden gave the Ukrainian attorney general a billion dollars not to investigate his son. Every square inch of that is a lie and it’s under your logo. That’s not defending free speech, Mark, that’s assaulting truth.

      The implication being smart people who know better than common folks, like Sorkin, can know that but all you other idiots can't so it's the job of us elites to screen all information for you.

      You and I want speech protections to make sure no one gets imprisoned or killed for saying or writing something unpopular, not to ensure that lies have unfettered access to the American electorate.

      I love the intellectual contortions here. “The 1st amendment doesn’t give everybody the right to just say anything”. Really trying to broaden that “fire in a crowded theater” argument.

      I hope your C.O.O. walks into your office, leans in (as she suggested we do in her best selling book), and says, “How can we do this to tens of millions of kids? Are we really going to run an ad that claims Kamala Harris ran dog fights out of the basement of a pizza place while Elizabeth Warren destroyed evidence that climate change is a hoax and the deep state sold meth to Rashida Tlaib and Colin Kaepernick?”

      First, I would actually use Facebook if I might get to see those ads. 100% Facebook should run those ads. Second, no kids are going to be using Facebook for anything except games, and probably not even that, and if they were they wouldn’t be paying attention to frackin’ political ads. The argument is incoherent. But then, it’s Sorkin.

      The law hasn’t been written yet — yet — that holds carriers of user-generated internet content responsible for the user-generated content they carry, just like movie studios, television networks and book, magazine and newspaper publishers.

      Interesting. A nice threat in there of a kind, but also a sudden conflation of user-generate content and paid ads. Because it’s also important to censor user content, too. Maybe even more important. You plebes should be other there absorbing the wisdom of Sorkin, not airing your own uninformed opinions!

      Most people don’t have the resources to employ a battalion of fact checkers.

      And do you, Sorkin? Or do you just know better than other people because you’re so much smarter and better than them?

      Nonetheless, while testifying before a congressional committee two weeks ago, Representative Alexandria Ocasio-Cortez asked you the following: “Do you see a potential problem here with a complete lack of fact-checking on political advertisements?”

      And called him a racist and associate with white supermacist and basically suggest he either loved Alex Jones or was a John Bircher. I might be exagerating, but Sorkin’s little misrepresentation of ommision is no better. Should the NYT not have banned Sorkin from including that obviously distorted representation of AOC’s grilling of Zuckerberg that was clearly done to call no attention to just how unhinged and incompetent AOC came off as?

      Now you tell me. If I’d known you felt that way, I’d have had the Winklevoss twins invent Facebook.

      I would go see that movie. Might have been a better movie. Clearly, Sorkin hates awesome things.

      Sorry, sorry. We should just obey our betters voluntarily until they can finally get the laws passed that make our complete obedience mandatory.


    • I felt like this was obvious from the outset. Maybe it’s just my biases, but it immediately felt tactical and strategic not borne out of any kind of honest concern. It was either an orchestrated political tactic or an orchestrated effort at revenge–or perhaps currying favor with other parties. What is was obviously not was a “whistleblower” shocked and apalled by a quid pro quo who felt the nation was at risk because of it, and they had to get the word out.

      Also, Taibbi’s point about how actual whistleblowers generally get treated was pretty spot-on, IMO.


  3. Everyone is in on it:

    It’s all a racket to shake down these countries and companies for consulting fees to avoid American “anti-corruption” efforts and keep foreign aid flowing.


    • Of course they are. This is what mystifies me about the current strategy–DC is full of quid pro quos, including with foreign leaders and diplomats, all the way down. It has to be. Human nature and the structure of our system and the general wealth of our country . . . makes it inevitable.

      The Russian collusion story wasn’t great, but at least it kind of focused on Russia being a bad actor and the potential of catching Trump being a bad guy. This is about DC politicians doing the quid pro quo thing and (as with the Hunter Biden thing) using government influence to line their own pockets. Which is a universal thing in DC. Bi-partisan. The vast majority of politicians come out of DC richer than they went in, frequently much richer, and their are board memberships, books deals, and consulting contracts to explain all the filthy lucre.

      Everything the complaint is about (including what Trump’s complaint was about) is (I suspect) pretty much universal–or common enough that anyone who gets under the microscope is not getting off without trouble.

      I wonder if Trump is going to start a Trump Foundation once he leaves office and start getting in on that foundation cash.


  4. “Media Scrambles To Fact-Check Image Of Trump Riding Hero Dog Into Massive Space Battle”


    • I gotta feel the idiocy of fact-checking memes doesn’t not reflect well on these people with the majority of the public. The thing about fact-checking the photo of Trump giving a dog a medal makes them just seem really stupid. Then complaining about the source of the Photoshop job as being disrespectful to the actual recipient (from people who either did, or would have had they been alive, spit on the guy and called him a babykiller when he returned from Vietnam) is just . . . absurd.


      • “”The presence of a Cylon Basestar in the image casts doubt on its authenticity right away,” said Bart Tucker, head fact-checker at The Washington Post. “We were also able to trace the image of the sandworm to the cover of Avalon Hill’s 1979 board game Dune, so we can discredit that element of the space battle in any case.””

        Liked by 1 person

      • It’s obvious if you read the Washington Post and NY Times stories that they really wanted the actual Medal of Honor recipient to be offended so they could play that angle up and were disappointed when he approved of it.

        They are paving the way for his reelection with this level of obvious thumb on the scale.

        Liked by 1 person

        • Jeremy Boreing, the chief operating officer at the Daily Wire, dismissed emailed questions about whether the altered photo originated from his publication.

          Interesting that they didn’t quote Boreing, who in fact replied to the WaPo’s inquiry by saying “You’ve got to be fucking joking. Please quote me.”

          The WaPo has truly become a joke.


          Liked by 1 person

        • They are paving the way for his reelection with this level of obvious thumb on the scale.

          I think so. In no small part because they have an unrealistic belief in how influential they are–and even where they can confess that people are ignoring their wisdom, they attribute that to Russian bots or misinformation spread by Fox news and if only we could get rid of those things, then suddenly everybody would just take what they say as gospel.

          They have no skill an persuading anyone who isn’t already a true believer because they are incapable of understanding that anyone might disagree with them, about anything. There are many “this is how you got Trump” memes that address this sort of stuff, yet they still don’t get it–and still keep doing it.

          The WaPo’s obit for the austere cleric has to take the cake, however. That was amazing.


    • “Media Scrambles To Fact-Check Image Of Trump Riding Hero Dog Into Massive Space Battle”

      Hahahahaha. The “real” media has been an absolute boon to the Babylon Bee.

      Liked by 1 person

  5. I thought this was funny:

    More effective at making Trump look like a buffoon than anything the DC politicians or the NYT or WaPo is doing.


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