Morning Report: The Fed tightens slightly

Vital Statistics:


Last Change
S&P futures 3251 -21.25
Oil (WTI) 52.38 -0.92
10 year government bond yield 1.57%
30 year fixed rate mortgage 3.71%


Stocks are lower on mixed earnings reports. Bonds and MBS are up.


The Fed made no changes to monetary policy, however they did tweak some overnight lending rates. The interest on overnight excess reserves and reverse repo transactions were hiked by 5 basis points to 1.6% and 1.55% respectively. The vote was unanimous. The Fed Funds futures became more dovish, with the Dec futures predicting an 85% chance for a cut of some sort, and a 15% chance of no change. Interesting to see the move in the Fed Funds futures given that the Fed actually tightened slightly by increasing the reverse repo and interest on overnight reserve rates.


fed funds futures


GDP rose at 2.1% in the fourth quarter of 2019, a little bit higher than expectations. Consumption growth slipped to 1.8%, while inflation remained broadly in check. The PCE index rose 1.5%, while the core PCE, excluding food and energy rose only 1.3%. Residential construction rose 5.8%. The trade balance moved in the US’s favor, which also helped growth.




Initial Jobless Claims came in at 216,000.


Pending Home Sales decreased 4.8% in December according to NAR. “Mortgage rates are expected to hold under 4% for most of 2020, while net job creation will likely exceed two million,” said Lawrence Yun, NAR’s chief economist. “Due to the shortage of affordable homes, home sales growth will only rise by around 3%,” Yun predicted. “Still, national median home price growth is in no danger of falling due to inventory shortages and will rise by 4%. The new home construction market also looks brighter, with housing starts and new home sales set to rise 6% and 10%, respectively.”

43 Responses

  1. Latest political stunt:

    “Herring, other state AGs file lawsuit demanding addition of ERA to Constitution

    By Patricia Sullivan
    Jan. 30, 2020 at 10:36 a.m. EST”

    The long term precedent of the Supreme Court deciding if an Amendment has been properly ratified further cements the trend towards rule by judges.


    • I think procedural matters for amending the Constitution are fair game to meet the case or controversy requirement. So I do not see it as a “trend” or any movement at all. And considering the historic rarity of these events, it is hardly statistically significant. Joe, why do you see it as “cementing” a “trend”?

      I am willing to be persuaded.


      • Everything seems to be litigated these days, regardless of how black and white the actual law is.

        If this does go to the SCOTUS, it will be interesting to see if Ginsburg stands by her previous position that the ERA was dead and had to be resubmitted for ratification or if she reverses herself to get the outcome she wants.

        It will also be interesting to see how the Justices treat states that reversed their ratification votes between the original deadline and now.

        See also the Gorsuch and Thomas concurrence the other day about national injunctions.


        • jnc:

          Everything seems to be litigated these days, regardless of how black and white the actual law is.

          Exactly. And there is always some court somewhere willing to entertain the litigation, no matter how absurd, which is why it happens. And, apologies for hopping on my personal hobby horse again, but it happens because of the whole “living constitution” doctrine which has informed judges that it is outcomes, not the law, which matters.

          To remind everyone, this is the from the text of the ERA:

          Resolved by the Senate and House of Representatives of the United States of America in Congress assembled (two-thirds of each House concurring therein), That the following article is proposed as an amendment to the Constitution of the United States, which shall be valid to all intents and purposes as part of the Constitution when ratified by the legislatures of three-fourths of the several States within seven years from the date of its submission by the Congress:

          This is not a legal “procedural matter”. The text of the amendment is plain. It didn’t happen. The amendment failed. There is no legal dispute to resolve. There is only the steadfast belief among some that 1) courts exist strictly to produce desired outcomes, and therefore judges can make up whatever they want in order to achieve those outcomes, and 2) there is a substantial number of jurists in the federal judiciary who share belief number 1. Regrettably, belief number 2 seems to be accurate.


        • I think that the lawsuit will simply fail, and that the trial court will grant summary judgment.

          I guess that is why I dismissed the “trend”.

          But should the highest court to hear the case ignore the plain wording of the resolution, which if I recall correctly was extended one time [right?], then I defer to your assertion of trend.


        • Mark:

          …which if I recall correctly was extended one time [right?]

          In 1978 Congress did pass an extension to 1982, but that itself became (reasonably, I think) the subject of a legal dispute, with a challenge to the authority of congress to alter an already existing amendment which had already been ratified by a number of states. The only court to hear the challenge ruled that congress did not have the authority to change the amendment. SCOTUS issued a stay until the new expiration date, at which time it was deemed moot.

          Apparently one state, South Dakota, actually amended their own ratification, adding their own sunset provision for the original expiration date, after congress passed its extension. So there definitely are legitimate procedural issues to be resolved, but only if the court ignores the plain meaning of the amendment itself.

          Which, in contrast to you, I think has been a growing trend for decades among a certain strain of judges, 4 of which currently sit on the Supreme Court. I have in mind not just historically big cases like Wickard or Roe or Obergefell, but less celebrated cases like Martin v PGA Tour in which the rules of professional golf were deemed to be subject to SCOTUS approval, or Schuette v. Coalition to Defend Affirmative Action in which it was claimed (and accepted by both a District Court and ultimately 2 SCOTUS justices) that a state constitutional amendment to prohibit racial discrimination in public college admissions was a violation of the equal protection clause. You can’t make this stuff up.


  2. Even Vox is starting to worry about the impact of the trans agenda on Democratic election prospects:


  3. Thatcher must be turning over in her grave:

    “Privatization Failed — Even the Tories Are Admitting It

    By Dawn Foster

    Boris Johnson’s Conservative government has announced it will be renationalizing British train lines. It’s further proof that privatization is being discredited around the world.”


    • jnc:

      Thatcher must be turning over in her grave:

      Socialism is in the British DNA. Thatcher was a black swan.


    • Did privatization fail or did the train lines fail in an era of Uber and working-at-home and so on? Haven’t train lines in many cases become a less commonly useful commodity?

      So sure–the government has to step in for the trains, because they cannot be profitable by themselves, and therefore their operation must be subsidized if you want to keep having them.


      • rail in the UK has always been a basket case. it is privatized in name only.


        • That’s what I figured. However, in general it does not seem like passenger rail is a thing that can possible hope to be profitable or competitive in this day and age.


        • However, in general it does not seem like passenger rail is a thing that can possible hope to be profitable or competitive in this day and age.

          Yet people still want high speed rail in CA… You can fly from LAX-SFO for 50 bucks. No way HSR will be competitive with air. No way…

          Liked by 1 person

  4. Lol


  5. I did not hear Dershowitz say the word “foreign.” Did he say it?

    IOW, did he say that seeking an electoral favor from a foreign entity could be justified?

    Or did he omit foreign, in order to make a defensible statement?

    I do not think that Dershowitz is suddenly foolish, but I do think he has always woven arguments that take the court’s eye off the ball, while being internally consistent.

    Some courts haven’t bitten. If I remember correctly, in the mid 80s he argued a DP case out of AZ to the Supremes. At one point he suggested that the DP was, in this case, cruel and unusual. To which a Justice replied along the lines of Isn’t the phrase “No person shall be deprived…of life…without due process of law” pregnant with the implication that a person may be deprived of life with due process of law?


    • Mark:

      At one point he suggested that the DP was, in this case, cruel and unusual. To which a Justice replied along the lines of Isn’t the phrase “No person shall be deprived…of life…without due process of law” pregnant with the implication that a person may be deprived of life with due process of law?

      I’m guessing that Justice wasn’t William Brennan.


  6. The anger at not being able to control what other people say and hear:


    • From the article Joe cited:

      (Hillary Clinton’s campaign was also approached, but it declined to embed a Facebook team in her campaign’s operations.)

      Willed herself to lose.


      • I think her unwillingness to campaign in Wisconsin and Pennsylvania and probably Michigan was probably more significant. The deplorable backfire wasn’t helpful.

        I don’t know if it’s possible to tell how much of a boost Facebook gives to GoTV, but it’s a fantasy to think Facebook is deciding elections between two partisan opposites. Might be useful for disrupting primary races, pushing people who like Bernie to Warren or vice-versa–or in HRCs case, pushing potential Hillary supporters over to Bernie. But I think they are over-emphasizing the power of Facebook here, and even if they get what they want it’s not going to change election outcomes, but may negatively impact Facebook–and then people will end up heading elsewhere. At least the ones that like a lot of political stuff in their feed.

        Facebook can post deliberately misleading or false statements by candidates for public office and others, and take no responsibility for them.

        Facebook, as an entity, is not posting these things. And I don’t see a model where bringing Facebook in to police the accuracy of statements is a good idea, or where that ends.

        Mr. Trump apparently had no problem with Facebook’s decision not to fact-check political ads.

        So should TV and newspapers fact check political ads, too?

        The responsible approach is self-evident. Facebook is a publisher not just a neutral moderator or “platform.” It should be held accountable for the content that appears on its site.

        So should WaPo being responsible for everything that appears in its comment section? Should any site? We going to start holding WordPress liable for everything on its blogs? Google for everything its search engine links to?

        They follow only one guiding principle: maximize profits irrespective of the consequences.

        Ironic, consider who is saying that.

        In 1992, George Soros brought the Bank of England to its knees. In the process, he pocketed over a billion dollars. Making a billion dollars is by all accounts pretty cool. But demolishing the monetary system of Great Britain in a single day with an elegantly constructed bet against its currency? That’s the stuff of legends.


        • That was great, Kev.


        • Thanks, Mark!

          I just think the sincere belief that Facebook and Twitter are these super-powerful entities that can determine elections–and the sense you get from a lot of this stuff is that they are perhaps the most important determinant–is just a new version of the dot-com boom.

          It’s new and different and not what anybody grew up with (outside of millennials) and there’s not good historical analogs, so it’s easy to feel like “this new thing that is different from what I grew up with is the cause of all changes I don’t like”.

          I think Facebook and Twitter are obviously contributing factors. Could Trump have dominated the 2016 new cycle like he did in an era before Twitter? Probably not. Was Facebook good for GoTV for some percentage of voters who might have stayed home, or swing voters who would have abstained? Maybe. But to what degree is not an exact science, and it’s just as likely that pro-Trump material turned some people anti-Trump and vice-versa in that environment, and there are no real meme=vote metrics.

          So at best they are guessing. But a lot of folks exist in a world where Twitter and Facebook and Instragram are HUGE things that obscure the rest of the media landscape (except perhaps for Fox, CNN and the big three) so they seem much more powerful than they are.


        • I wonder how much of Twitter is your local watering hole tweeting they are running a happy hour special on tacos tonight.


        • Brian Thorton who posts on Plum Line notes that he lost a substantial portion of his savings when the pound was devalued in response to the Soros move.


        • Isn’t that Quarterback?


        • McWing:

          Isn’t that Quarterback?

          Nope. Different last name.


        • did he have his savings in F/X options or something? Strange way to lose your life savings…


        • I think it was in cash in British pounds and thus devalued.


        • but in foreign exchange losing 10% is a lot. you have to be levered a lot to wipe out your savings…


    • The left has never gotten over losing sole possession of the microphone.


  7. Seems like an appropriate day to point out that this hasn’t aged so well:

    Calm down. Trump won’t be President – and Britain won’t leave the EU

    Liked by 1 person

  8. I didn’t see this coming. She’d rather have Trump win than Sanders.

    It reminds me of an observation that Taibbi noted from a Tea Party guy vis-a-vis Boehner:

    “This is why in some states the Republican Party fought so fiercely against the Tea Party; in Ohio, the party spent nearly $1 million campaigning to stop Tea Party candidates from assuming jobs at the state level. “They hate us more than they hate the left,” says Littleton. “The left’s just an enemy. We present a legitimate threat to them.””

    Liked by 1 person

    • HRC, EW, and Bernie are all gifts that keep on giving to Trump.

      I am convinced that aside from bankruptcy law and practice and related debtor-creditor matters EW just is not very well educated. Perhaps worse than being gratuitously insulting her question was a study in political illiteracy.

      Bernie is an actual socialist who bemoaned the fact that there were 17 different manufacturers of running shoes – implying the govt as a single producer would be more efficient.

      For HRC the arrogance is over the top.

      Liked by 1 person

      • I saw her speak at the Mortgage Bankers Conference. She lectured the audience and got so much basic industry stuff completely wrong, misused terms all over the place, etc…


  9. Quote of the Day:

    ““Now the State of the Union is going to be the Stay Puft Marshmallow Man coming down the street and standing in the rubble of what’s left of the Congress,” keened one Democrat on Friday night.”


  10. If Bernie Sanders becomes the face of the Democratic Party I don’t even know if I can vote……………


    • Will not happen.


    • Seems unlikely. Eh do a write in. Surely you want to vote for state and local offices.


    • lms:

      If Bernie Sanders becomes the face of the Democratic Party I don’t even know if I can vote……………

      You can take solace from the fact that, being in California, your vote is irrelevant anyway. But it would be nice if the power structure was such that who is president wasn’t really that important, wouldn’t it?


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