Morning Report: GDP revised upward

Vital Statistics:


Last Change
S&P futures 3043 5.1
Oil (WTI) 32.94 -0.69
10 year government bond yield 0.7%
30 year fixed rate mortgage 3.28%


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


Initial Jobless Claims came in at 2.1 million, about in line with expectations. At a minimum we need to see this number fall back to the six digit area to have any prayer of a recovery.


Luxury homebuilder Toll Brothers beat on the top line and the bottom line. This quarter ended on April 30, so half of the quarter was pre-COVID and half was post-COVID. Revenues fell 11% YOY, while signed contracts were down 22%. Backlog was flat YOY. CEO Doug Yearley noted that deposit activity rebounded in May and was up YOY. This is a leading indicator of housing demand.

“While net signed contracts in the first four weeks of May were down 37% year-over-year, we are very encouraged by recent deposit activity. Our deposits, which typically precede a binding sales contract by about three weeks and represent a leading indicator of current market demand, were up 13% over the past three weeks versus the same three-week period last year. Importantly, our recent deposit-to-contract conversion ratio has remained consistent with pre-Covid-19 levels. Web traffic has also steadily improved from the lows we experienced in mid-March and has returned to the same strong activity we enjoyed pre-Covid-19 in February. These early trends suggest the housing market may be more resilient than anticipated just two months ago.”

Homebuilding is an early-cycle play, so you should expect to see a turnaround in that sector first. Overall, it sounds like the builders have been pleasantly surprised at how the sector has held up during the crisis.


First quarter GDP was revised downward to -5% from -4.8% in the second estimate. Inflation continues to be tame, with the headline number up 1.3%. Ex-food and energy it rose 1.8%. In other economic news, Durable Good Orders fell 17% in April. Most of this data is pretty much irrelevant to stock prices right now. The stock market is looking over the valley.


Ex-Obama staffer Jason Furman predicts that we are about to see the best economic numbers the country has ever seen. FWIW, I agree with his sentiment. The COVID Crisis is about 3 months old. There was nothing wrong with the economy going into the crisis, and the shock to the economy should feel more like a natural disaster than a traditional bubble-driven recession. If we have passed the bottom (admittedly a big “if”) then the economy could be on fire by late summer / early fall. And speaking of “fire,” the government poured a few trillion gallons of fiscal gasoline on it.


Pending Home Sales fell 22% in April, according to NAR. “While coronavirus mitigation efforts have disrupted contract signings, the real estate industry is ‘hot’ in affordable price points with the wide prevalence of bidding wars for the limited inventory,” NAR Chief Economist Lawrence Yun said. “In the coming months, buying activity will rise as states reopen and more consumers feel comfortable about homebuying in the midst of the social distancing measures. Given the surprising resiliency of the housing market in the midst of the pandemic, the outlook for the remainder of the year has been upgraded for both home sales and prices, with home sales to decline by only 11% in 2020 with the median home price projected to increase by 4%,” Yun said. “In the prior forecast, sales were expected to fall by 15% and there was no increase in home price.”


Those hoping to snap up recession-driven bargains in the real estate market may be disappointed. That said, the bargains (if any) would be in the higher priced area, not the more affordable price points. “The mix of homes that are on the market now is a little bit different,” says Ratiu. “What’s really selling at a premium are lower-priced homes. The higher-priced homes are sitting on the market longer.”

15 Responses

  1. Tim has a good take on Minneapolis.


    • IT is good but I don’t really grok the whole “White people can compartmentalize police brutality. Black people don’t have the luxury.” Why do white people have that “luxury”?

      If police brutality disparately impacts black people, wouldn’t addressing overall police brutality disparately benefit black people? Still not sure why address the problem has to be done by race. Or primarily by race.

      Even when force isn’t used, one study of traffic stop transcripts found that police, regardless of the officer’s race, use harsher language and are less respectful of blacks than of whites

      Which should indicate that there are other issues beyond just racism that might be addressed. There may be a reasonable expectation from both black and white officers that black suspects will be more belligerent and less cooperative.

      74 percent of black parents had cautioned their children to be cautious around police, versus 32 percent of white parents

      This seems crazy to people. I’ve always told my kids to bare careful around the police!

      Perhaps the most revealing survey of all is a YouGov poll last year that found that black people were more worried about being a victim of police violence than being a victim of violent crime.

      That stats don’t bear this out at all. However bad it is, African Americans are at a higher risk of being a victim of a violent crime.

      When white people see video of unjust police abuse of a white person, it may make us angry, sad or uncomfortable, but most of us don’t see ourselves in the position of the person in the video

      This is a huge leap. I’m pretty sure I’ve had less trouble with the police in my life because I’m white (and was more hassled when I was young–because I was young). But that’s still basically mind-reading. When I see a cop kill a guy by keeping his knee on his neck, I sure as hell see myself in that guys place and I find that terrifying–trying to be cooperative and being misinterpreted and then basically being murdered because of it. That’s awful. I’m not the same color as the murder victim but I still see myself in that persons place. He starts out strong, for me, but the more it goes on the more stretchy its feeling.

      Maybe a cop had had a bad day, or had just come from a bad interaction with someone else. But black residents told me they had to be perfect. Every time. If they lost their patience and objected because this was the fifth or sixth time in a month they’d been stopped, they invited abuse.

      I’m sure there’s some racial disparity here (the number of stops would indicate that) but this is universal. When the police stop you–yes you have to be perfect. EVERYBODY has to be perfect. Possible exception being recognizable wealth and powerful white people. I got sworn at by a white female cop once and I was super apologetic and 100% polite. I had a State Trooper that could have walked out of a Stephen King novel who almost made me crash my car trying to GET ME TO SPEED in the rain, in the mountains, at night–in order to up the ticket $$$. Still, I was 100% polite. Police generally have ALL the power in those interactions and if you start arguing they don’t give a shit if you’re white. They just don’t. They have the power and you aren’t seeing it and you will almost always need to be taught a lesson.

      Don’t argue with the police.

      A 2019 study in the Lancet found that when police kill an unarmed black person, other black people in that state suffer tangible harm to their collective mental health. The study found no similar effect with white people.

      I believe this 100%. The two events are not treated the same in the media. When the police kill a white guy the news often doesn’t report it. If they do, it gets much less coverage. There are a few white identity folks who might want to exploit it–but they don’t get anywhere. They don’t get large protests organized or start viral twitter memes. When a black person is unjustly killed by cops–it becomes a nationwide story almost every time, with the implicit message that the cops are coming to kill you and your family because they exist primarily to murder unarmed black people in racist AmeriKKKa. A white guy gets killed be police and it’s dramatic enough to make the news (and given it happens twice as often, it clearly isn’t) it’s reported and treated in a manner of: that unlucky guy. That bad police officer. Police are getting too militarized. But you, white people at home: don’t worry. It’s fine. This almost never happens.

      Despite happening twice as often.

      So, yeah, I expect the reportage and how these things are treated in the media and by activists and exploitive politicians has a psychological effect.

      If you’re black, viewing the video of George Floyd’s death is a reminder that the throat under Officer Derek Chauvin’s knee could easily have been your own.

      Maybe if you’re the author that’s true. But I can see that being me, or my kid, and past that I see another human being basically being murdered by the state and it’s horrific. And I don’t feel like guys like the author are helping there.


  2. Goddamn, Van Jones is stealing my ideas!

    The only word missing is “suburban”. It’s implied though, no?


  3. Finally, you can read the transcript of the infamous Flynn/Kislyak phone call of December 29, 2016.

    I would love for someone to explain to me what it was about this phone call that would justify keeping open the otherwise closed counter-intelligence investigation of Flynn, and why the FBI would have wanted to interview him about it…apart from trying to entrap him.



    How much you wanna bet Ron Kuby represents her and steers her to a sympathetic judge and she doesn’t spend any time in prison?


  5. Someone should update the Quote of the Moment:

    “Ev’rywhere I hear the sound of marching, charging feet, boy
    Cause summer’s here and the time is right for fighting in the street, boy”

    – Rolling Stones, “Street Fighting Man”


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

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