Morning Report: What will be the shape of the recovery?

Vital Statistics:


Last Change
S&P futures 2900 -23.1
Oil (WTI) 24.79 0.29
10 year government bond yield 0.67%
30 year fixed rate mortgage 3.36%


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


About 80% of renters made a full or partial May payment as of May 6, according to the National Multifamily Housing Council’s Rent Tracker.  “Despite the fact that over twenty million people lost their jobs in April, for the second month in a row, we are seeing evidence that apartment renters who can pay rent are stepping up and doing so,” said Doug Bibby, NMHC President. “We expect May to largely mirror April, when the payment rate increased throughout the month as financial assistance worked its way to people’s bank accounts.” Meanwhile, New York extended its eviction moratorium until August. Note that rent strikes are a thing now.


Matt Taibbi discusses the mortgage servicers. The balloon payment issue is a hot button one for the left, and they are sounding the alarm. Basically Taibbi interviewed all the usual consumer advocate types on the left – guys like Richard Cordray, analysts at liberal think tanks and advocacy groups, and take the servicers to task for not having 4 months of advances laying around.

Should the Fed open its war chest and create a “liquidity facility” to help mortgage servicers? It seemed like the obvious move — this really was a problem caused by a bailout that encouraged even people who didn’t need forbearance to accept it — but how could this be done in a way that didn’t put homeowners at more risk?

“This is the script of a heist flick, where homeowners get screwed in the end while servicers get the money,” says Carter Dougherty of Americans for Financial Reform. “If you combine money for servicers with strong consumer protections and a vigorous regulator, then the film could have a happy ending. But I’m not holding my breath.”

That said, this unfortunately IS what the industry is up against, and a good indicator of how the regulators (at least on the left) view the industry. It is why getting some sort of liquidity facility for the servicers might be harder than it looks. Which is pretty sad when the Fed is considering buying corporate junk bonds to stabilize the economy.


More economic forecasters are predicting a “swoosh” style recovery. “This is not going to be a quick recovery,” said Mark Schneider, chief executive officer of Nestlé SA, the world’s biggest packaged foods maker, recently. “This is going to be a several-quarter, if not several-year kind of process.”


For what its worth, I am somewhat skeptical of the long, drawn out recovery argument. Most recessions in the past started for a reason – a long expansion encouraged a buildup of inventory, or asset bubbles. Once the economy slows down the problems that have been building become apparent. That isn’t what happened this time around. We didn’t have a slowdown driven by organic issues in the economy. We had a government-engineered crash. Sure, there were pockets of the economy like retail which were weak to begin with, but for the most part the economy was super healthy going into the COVID Crisis. I think comparing this to the Great Depression or the Great Recession has to be done carefully. Both were driven by rotten timbers in the economy that finally collapsed. That wasn’t the case this time around, and I think that argues for a V-shaped recovery.

16 Responses

  1. “That said, this unfortunately IS what the industry is up again”

    Did you mean to say “up against”?


  2. I laughed.


  3. True.


    • Sometimes I feel all these things exist to provide red meat to the masses, but at the end Flynn is cleared and nobody ends up getting in any real trouble–possibly because this sort of stuff happens a lot.


  4. The Dispatch on China’s “discourse power” strategy, which is interesting:

    It is a version of power politics that is opposed to Western values. “Discourse power” doesn’t rely on who has the better of the facts. It’s all about the power to shape narratives to one’s own liking.

    In late April, Australian Prime Minister Scott Morrison endorsed calls for an independent inquiry into COVID-19’s origins. Morrison said it is “entirely reasonable and sensible that the world would want to have an independent assessment of how this all occurred, so we can learn the lessons and prevent it from happening again.” He didn’t go out of his way to blame China. Morrison even refused to repeat President Trump’s claim that the virus could have originated in a lab, saying it was more likely to have come from a wet market. But the CCP’s propaganda organs quickly went to work anyway.


  5. The replies to this Twitter thread are really interesting.

    In short, good leadership will get Americans to do anything.

    I’m not convinced.


    • Cultures with strong leadership and cultural and racial homogeneity, sure. Wouldn’t ever work here.

      This doctor:

      All of your points are well taken, however, I am an ER doc. When do we ask those individuals who choose not to participate in such public health actions to stay home when they get sick? As they flock to the ER, they will take someone else’s ventilator. They will expose a nurse.

      Really? Does he say that about people who damage joints or get concussions playing sports? People who eat themselves into poor health or never exercise? What sort of politically-conforming Aryans does he believe should be allowed into the ER? What about someone who does something risky, like skydive, or pick a risky career, and then gets hurt? They should stay home because they knew the risks, or should have?

      Ugh. These people.

      I think there’s another aspect to American culture that you forgot to mention: “anti-intellectualism.”

      I love how the left particularly likes to characterize every disagreement with them, about anything, or even pointing out that certain opinions are opinions and not facts, is “anti-intellectualism” or “anti-science”.


    • Mark:

      Are boycotts equivalent to freedom of speech?

      I don’t know, but I definitely agree with Volokh that they are equivalent to behaviors that are targeted by so-called public accommodation laws. So if one is, so is the other.

      This, in particular, is true:

      By contrast, the motivation for public accommodations law is to increase access to public accommodations for disfavored minority groups and individuals, regardless of the underlying motivation for the exclusion….

      I don’t buy that reasoning, as I do think that in the modern U.S., a major underlying rationale for public accommodations laws is indeed the hostility to the ideology of those who might exclude, such as the baker who doesn’t want to bake cakes for same-sex weddings.


    • The list of things that you can force government contractors to comply with as a condition of getting government business has always been long and capricious. I’ve never seen any of the restrictions challenged under the First Amendment before.

      Liked by 1 person

      • Doesn’t seem likely to be successful. Also, not a fan of legal remediation for this or all sorts of other things, anyway–let companies boycott Israel and then let supporters of Israel boycott those companies. Including the government, IMO.


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