Morning Report: Trump talks trade at noon today

Vital Statistics:


Last Change
S&P futures 3087 -0.25
Oil (WTI) 57.09 -0.04
10 year government bond yield 1.94%
30 year fixed rate mortgage 4.02%


Stocks are flat this morning on no real news. Bonds and MBS are up small.


Donald Trump will speak at the Economics Club today around noon and markets will be listening for any sort of information on trade with China. This will probably be something that affects stocks more than bonds, but just be aware.


Small business optimism remained strong in October, according to the NFIB Small Business Optimism Index. Job creation, inventory investment and capital spending drove the increase. While we are seeing increases in labor compensation, prices paid are still flattish so we aren’t seeing inflation. “Labor shortages are impacting investment adversely – a new truck, or tractor, or crane is of no value if operators cannot be hired to operate them,” said NFIB Chief Economist William Dunkelberg. “The economy will likely remain steady at its current level of activity for the next 12 months as Congress will be focused on other matters, and an election cycle will limit action. Any significant change in trade issues will impact financial markets more than the real economy during this period. Adjustments to a new set of ‘prices,’ such as tariffs, will take time.”


Homebuilder D.R. Horton reported better than expected earnings this morning, sending the shares up 3% pre-open. Forward guidance for 2020 was also above expectations. The homebuilders have been on a tear this year, as interest rates have fallen. The homebuilder ETF (XHB) is up something like 50% YTD.


Mortgage credit availability increased in October, according to the MBA. “Mortgage credit availability increased in October, driven mainly by an increase in conventional loan programs, including more for borrowers with lower credit scores, as well as for investors and second home loans,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Credit supply for government mortgages continued to lag, declining for the sixth straight month. Meanwhile, the jumbo credit index increased 3 percent to another survey-high, as that segment of the market stays resilient despite signs of a slowing economy.”


CBS is out with a piece claiming that climate change will eliminate the 30 year fixed rate mortgage. The fear is that flood insurance could get too expensive and wildfires will make certain areas uninsurable / uninhabitable. How that translates into the end of the 30 year fixed rate mortgage is anyone’s guess, since the piece fails to show its work. FWIW, this article is just clickbait. The 30 year mortgage is going nowhere, and climate change isn’t going to destroy the financial system. The Union of Concerned Scientists frets about the “short sighted” market, but a typical mortgage lasts about 7-10 years, so something that might happen in 30-50 years is going to be off the radar, by definition.

17 Responses

  1. I keep reading that the transcript of Trump’s Ukrainian call is incomplete, of those that were on the call who is saying that the transcript is not accurate? Even the Ukranofile Vindman has said it’s an accurate transcript.


    • I keep flashing on the woman yelling at cat meme, with the woman yelling “international extortion” and the cat saying “investigating corruption”

      Pretty much summarizes the state of affairs


      • It’s manufactured but you’d think they could at least get Vindman to say it’s not accurate but nope, he says it’s very accurate.



        • No, they couldn’t. Because to say so implicates Vindman as covering something up or leaving something out of his testimony–either even worse for Trump, or exculpatory. So he’s not going to agree that he’s left out something important.

          The problem with trying to have your cake an eat it too. One one hand, the Democrats want to suggest Vindman is a Real American Hero and completely unimpeachable, but on the other hand they want to say there’s also all sorts of damning stuff left out of the transcript that then, by implication, Vindman knows about but has failed to disclose. And they can’t have both.


  2. CBS is out with a piece claiming that climate change will eliminate the 30 year fixed rate mortgage.

    This has to be clickbait or something? Or just the low-quality of journalists coming out of j-school these days?

    That’s what the future could look like without policy to address climate change, according to the latest research from the Federal Reserve Bank of San Francisco.

    And what sort of folks are in charge of the FRB of SanFran? And what other motivations might they have, one wonders? Is the idea that California will be hardest hit by climate change–and so might a greater allocation of resources to save the mortgage market? Or . . . what? This does not feel like research undertaken without some sort of underlying, cash-grabbing motivation.

    “It is a function of where there will be a market at all,” wrote Jesse Keenan, a scholar who studies climate adaptation, in the Fed’s introduction.

    Well, obviously, not if everybody is dead from all the changing climate. But I’m sure this is a sincerely felt opinion, and totally not cynical alarmism and fear-mongering with some for of financial end-goal.

    The housing market doesn’t yet factor in the risk of climate change

    The housing market also doesn’t price in the risk of alien invasion. Coincidence? I think not!

    In California, for instance, 50,000 homeowners can’t get property or casualty insurance because of the increased risk to their homes.

    The implication being that’s because of climate change, and not California’s fire management policies.

    Once lenders and housing investors do start pricing in such risks, “There may be a threat to the availability of the 30-year mortgage in various vulnerable and highly exposed areas,”

    This is the question of should we insure the man who builds his house upon the sand? If you live below sea level, should your flood insurance being more expensive or unavailable? If you repeatedly build where hurricanes hit, why should that be insured? Hurricanes and wild fires didn’t “just show up”, and one of the big problems is that for most of the past century or two, we just didn’t build nearly as much in places of high risk of wildfire or flood.

    “Nobody denies that [climate change] is happening, that it’s real, that it is going to have a material effect.

    I’m not sure this is entirely true, particularly in regards to “material effect”. I’m certainly not sure that climate change has a greater impact on wildfires than fire management policies, and I’m also not sure that climate change has a bigger effect on hurricane destruction that building codes.

    Very dubious of the accuracy, completeness, and motivations behind that story. 😉


  3. The insurance industry is going to determine building and housing patterns, and areas that now have 500 year floods every 10 years are going to gradually empty or empty in a big freaking rush.

    Cal coast. Louisiana coast. FL coast. parts of the TX coast. soon Savannah. A little later, Manhattan.

    They will write some coverage at increased pricing, but that coastal coverage is not going to be available at any price.

    Big concerns in my lifetime will be the viability of the LA ports complex and the Houston Ship Channel, which are by far the largest tonnage and dollar volume ports in America. These concerns, will by the Constitution, be FEDERAL. And expensive.


    • I’ve no doubt that insurance companies will attempt to cash-in on the Gaia hysteria. I also think, due to the competitive nature of property insurance, there will be some saying they won’t raise their rates due to Gaia hysteria. In the end, who do you think captures more customers?


    • and areas that now have 500 year floods every 10 years are going to gradually empty or empty in a big freaking rush

      How do they calculate the flood interval for 500 year floods in the first place? Even 100 year flood plains with a maximum sample of, what, 300 years maybe–400?–would be tough to say using average occurrences as an indicator.

      Similarly, “500 year floods” happening “every 10 years” would have to be calculated over more than a decade or two, I think, to be meaningful–it’s always been the case that you can have two “hundred year floods” two years in a row.

      So I Googled it and WaPo says: A 500-year flood isn’t necessarily something that happens once every five hundred years. Rather, a 500-year flood is an event that has a 1 in 500 chance of occurring in any given year. “For a 500-year flood, there is a 0.2 percent chance of having a flood of that magnitude occurring” in any given year, according to the National Weather Service.

      So it’s kind of an odds thing, not necessarily how often you can think of such floods actually occurring. They could occur multiple times in a decade and the odds are still calculated as being 1-in-500.

      Assuming one accepts that the climate is warming (and this seems reasonable, as the climate has been both warmer and colder historically, regardless of cause) it would make sense that the risk is increasing due to the potential for more airborne water vapor in warmer overall temperatures. Though I still think the terms “500 year floods” and “100 year floods” are misleading. The nomenclature perhaps should be changed.

      There’s one final issue: Not all estimates of 100-year or 500-year events are equal.

      Terms like 100-year and 500-year began to be applied to floods with the creation of the National Flood Insurance Program in 1968. The program needed to identify which areas of the United States were at risk of flooding and which weren’t. Floodplains came to be defined as land likely to flood during a 100-year rain event.

      Climatologists base their estimates of 100-year and 1,000-year rainfall estimates based on a statistical analysis of prior years’ rainfall data. The more data you have, the better your estimate is. Some places have more data available than others. As new data rolls in every year, estimates everywhere can be updated.

      All of that is alarming news for residents of Houston, New Orleans and the millions of other people who live in areas vulnerable to extreme flooding. It cumulatively suggests that what we once projected would be extreme weather is more common than we thought and, as the climate cooks, is only getting more so.

      I still feel like this is going to have a moderate impact on the existence of 30 year mortgages.

      Big concerns in my lifetime will be the viability of the LA ports complex and the Houston Ship Channel, which are by far the largest tonnage and dollar volume ports in America.

      The concern being hurricanes? It seems unlikely that sea level rise would be a threat. One estimate says the sea might rise 19 inches by 2050, but others suggest the sea level is rising about 3.1 mm per years (still others suggest it hasn’t gone up that much). In any case, it seems fairly clear the pace is slow enough to allow for thoughtful adaptation as necessary that could be a component of normal maintenance and upgrading, given the timescale. In any case, that much shouldn’t be a concern in any of our lifetimes.

      Since at least the start of the 20th century, the average global sea level has been rising. Between 1900 and 2016, the sea level rose by 16–21 cm. More precise data gathered from satellite radar measurements reveal an accelerating rise of 7.5 cm from 1993 to 2017, which is a trend of roughly 30 cm per century.

      This suggest about a foot per century rise in sea level, but I think multiple factors would probably slow that rise over time.

      In any case, I’ve never seen a compelling, data-driven case made for any kind of Waterworld scenario.


      • It all depends on population assumptions and energy consumption assumptions. Heck, I can make the eastern seaboard disappear by 2040 if I assume we get to a 30 billion population and increase coal generating capacity by 10x.


  4. I feel like Taibbi’s days at Rolling Stone are numbered, any time I read anything else from Rolling Stone:

    Underpinning that inaccurate incoherence, however, is the base-level white nationalism that underscores so much of Trump’s efforts — particularly related to immigration. This is a president who said he’d like more immigrants from somewhere like [very white] Norway and not from what he described as “shithole countries” populated largely by nonwhite residents.

    Gotta say, I love the non-quoting quote which takes literally two words Trump says and pads the rest to make it clear that the mind-reading journalists knows that Trump wants only white immigrants.

    Which again makes me wonder how deluded or fact-blind these folks are. There are so many actual things that Trump does–perhaps more than any other Republican president–that they could throw at him. There are plenty of places where they could attack where he might actually be vulnerable (even immigration) but attributing everything he does to white nationalism is not something that comes off as credible to people who don’t have Daily Kos set as their homepage.

    That’s useful context for assessing Trump’s motives when he moves to deport a group made up largely of nonwhite people who, despite not being born in the United States, have spent nearly their entire lives in the country.

    I’m not sure there is evidence that this is what he’s doing. Or that that is the administration’s intention, or that any kind of actual deportation has any chance of happening.

    On Tuesday, as the Supreme Court heard arguments on DACA, the Southern Poverty Law Center’s Hatewatch

    The Southern Poverty Law Center is a far-left agitprop group that is afforded a kind of respect they have not earned and do not deserve from the mainstream media, solely because they say the kinds of things progressive journalists want to hear.

    And most of the SPLC article the Rolling Stone article is based on is about conflating Trump with Miller and VDARE and a variety of super-anti-immigration (and quasi-white nationalist, is the same since CAIR could be considered Muslim nationalist and La Raza could be considered Mexican Nationalist, but I’m not seeing the SPLC complain about them). Yet indications that Trump is sympathetic with any of that seems tenuous (indeed, the article is all over the place–conflating DACA with the confederate flag issue, Miller’s objection to the vandalization of confederate statues, etc.

    Miller praised President Calvin Coolidge, whose policies were touted by Hitler: Miller repeatedly praised President Calvin Coolidge and complained that history has not given him his due. As Hatewatch notes, Coolidge is a white nationalist icon who condemned race mixing. His Immigration Act of 1924, which all but eliminated immigration from certain parts of the world, was described by Hitler in Mein Kampf as a model for Nazi Germany.


    The Supreme Court, now, will decide if that policy becomes the law of the land.

    My primary complaint about the article is that it is horribly written. There’s nothing that connects the wandering around of everything racist Miller has said or been associated with to the concluding sentence. If this is what j-school is turning out, no wonder the press can’t attract readers or be taken seriously.

    Nowhere does the article address the constitutional questions of a president’s ability to retract another president’s executive order–which seems obvious to me, and should literally be the only thing the case in front of SCOTUS should be about. Well, that and the presumption of district courts that they can issue national injunctions that apply to the entire country.

    It doesn’t address a country’s right the control immigration and manage it’s own border. Or that there are lots of legal avenues to immigrations, and potential changes to legal immigration to smooth that process. Or that most of the emails being cited from Miller don’t have anything DACA. All things I would consider relevant. And, in fact, are relevant.

    Or the Democrat-controlled congress’s ability to pass a law that accomplishes the same thing Obama’s executive order did. I would think that would be worth mentioning as well.


  5. Miller praised President Calvin Coolidge

    How many politicians have praised and quoted Calvin Coolidge? I’m sure plenty of Democrats have, over the years. Were they all white nationalists?

    And there’s a lot to like about Silent Cal.

    Nothing in this world can take the place of persistence. Talent will not: nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not: the world is full of educated derelicts. Persistence and determination alone are omnipotent.

    Also, very early on even FDR had nice things to say about Hitler and Mussolini. Certainly many people in FDR’s administration saw Hitler and Mussolini as models for good progressive governance, and often looked at their authoritarian powers with envy. Progressives and leftists in the US had lots of nice things to say about Hitler and Mussolini in the years before WWII.

    I hate journalists. They are all, to greater and lesser extents, propagandists that lie about their status as shills, propagandists, and generalists pretending special knowledge they do not have and aren’t that interested in actually obtaining. Bah, humbug!


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