Morning Report: The economy slips in February

Vital Statistics:

S&P futures39088.4
Oil (WTI)61.22-0.72
10 year government bond yield 1.69%
30 year fixed rate mortgage 3.35%

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

The upcoming week will have a lot of Fed-speak, but should be relatively non-eventful for economic data. We will get personal incomes and spending on Friday, along with the third revision of Q4 GDP.

Congress has allocated money to help struggling landlords who aren’t receiving rent from the their tenants. That said, many landlords are turning down this aid because of the strings attached. “If you have someone who wasn’t upholding their end of the contract…you’re asking the housing provider to sign up for essentially another year of this person being in this unit unable to pay,” said Amanda Gill, government affairs director for the Florida Apartment Association, a landlord trade group.

The Chicago Fed National Activity Index slipped in February, as production and consumption fell. Bad weather was a factor in the production numbers, but shouldn’t have played a part in the consumption area. The idea that we are going to start a rip-roaring recovery in the back half of the year is predicated on spending, particularly stimulus funds. If people use that money to pay bills or reduce debt, the effect will be much smaller.

Existing Home Sales fell 6.6% in February, according to NAR. That said, they still were up 9% on a YOY basis. The median home price came in at $313,000, which was up 16% from a year ago. Inventory stood at just over 1 million homes, which is a 2 month supply.

“Despite the drop in home sales for February – which I would attribute to historically-low inventory – the market is still outperforming pre-pandemic levels,” said Lawrence Yun, NAR’s chief economist.

“I still expect this year’s sales to be ahead of last year’s, and with more COVID-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy,” Yun said. “Many Americans have been saving money and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.”

18 Responses

  1. Thanks to many comments of yours, I have been thinking about the Fed’s role in encouraging asset bubbles with suppressed interest rates. It seems inescapably the case, to me. They have thrown a monkey wrench into Smith/Marshall price theory on a semi-permanent basis. I may not live to see the correction, and if a correction at any given moment looks too “painful” to the Fed there may not be a correction for a long time, as in my lifetime.

    Liked by 1 person

  2. Dr. Sullivan comments on the Atlanta shootings:

    Not to be outdone, the WaPo ran sixteen separate stories on the incident as an anti-Asian white supremacist hate crime. Sixteen! One story for the facts; sixteen stories on how critical race theory would interpret the event regardless of the facts. For good measure, one of their columnists denounced reporting of law enforcement’s version of events in the newspaper, because it distracted attention from the “real” motives. Today, the NYT ran yet another full-on critical theory piece disguised as news on how these murders are proof of structural racism and sexism — because some activists say they are.

    When an admittedly smart guy who has fact- and consequence-proof Trump Derangement System and was obsessively convinced Sarah Palin had faked a pregnancy can see what the media is doing, what are the chances that 80% or more of the audience don’t also see what the media is doing?


    • I have been reading the Fourth Turning, and supposedly after this crisis period there will be a golden age of trust in institutions.

      I cannot imagine how that happens.


      • Things can always get worse.


        • Some things will always get better, other things will always get worse. Much happier generally with computer technology and phone technology and car technology (I love bluetooth) and the abundance of audiobooks and podcasts and so on these days. Choice has exploded. Amongst many other things. The hysterical response to the pandemic might have ushered in a great depression in the 1980s or 1970s (had such a response been possible) but we seem to robust enough now to endure incredible corruption and incompetence (which is, admittedly, both good and bad).

          On the other hand, there will be some things getting worse. I don’t think there’s ever a time where everything is getting better, or where things only stay the same and get better. There will always be things getting worse or devolving or going backwards. As such, while I have many fantastic resources I might not have 30 years ago and access to medicine I would not have had 60 years ago–not to mention access to air conditioning I would have had a century ago and so on and so forth–free speech is under assault, the “free press” has become propaganda organs for a chosen political side and their largest advertisers, the culture at large is becoming humorless and unforgiving, social media has made people more combative and narcissistic . . . and so on.

          I expect 20 years from now some things will be better and others will be worse. Ideally, you’d like more things to be better or at least the same amount of things to better as have gotten worse, but there’s no way of guaranteeing that. Fingers crossed, though!


      • If their theories are true, I’m not convinced we’re at the crisis period. Bannon thought it was the financial crisis and I’m sure some think it’s the so called pandemic. Neither seem like the crisis like the declaration of independence, secession or the Depression cited in the book. I suppose the economic devastation brought about by the pandemic, infinitely worse than the financial crisis but not close to the Depression, would be the closest. Further, I don’t see war with China or any seriously renewed conflict with anything in the Middle East as being on the horizon that could “bring the country together”. If anything, the sovereign debt bubble that Brent so eloquently talks about could be the eventual crisis but there would need to be another “safe harbor” for money to flow into that’s better than ours and I don’t see any entity that is capable of it.


        • Scott, did you hear about this? If so, whatcha think?


        • McWing:

          Scott, did you hear about this?

          I was not. I paid zero attention to the news over the weekend. But I will say it is nice to see that not everyone in the UK is on board with what is going on.


        • The response to which will be to determine what platforms were used to coordinate the protests, then pressure them to provide tools to prevent such protests from being organized, deplatform the organizers, etc.


        • I would argue the crisis could have started with 9/11, included the financial crisis, and the current cold civil war we are having.


      • I can’t imagine a golden age of trust in institutions when all the institutions seems more obviously untrustworthy and corrupt (and/or incompetent) than ever in my lifetime, at least. Where experts and institutions and corporations and political activists have gone into full psy-ops mode in transforming language so nothing means anything anymore–or at least meaning cannot be relied on–so it becomes impossible to trust that, were the institutions acting in good faith, you actually understand what they say as they mean it.

        And it seems impossible to me to imagine a future where anyone paying attention trusts that any of our major institutions are acting in good faith.

        I just don’t see a circumstance in which institutions get any trust, at all, except via laziness or exhaustion (a kind of: “sure, whatever you say, just leave me alone” reaction).

        For the most part, I see our institutions being corrupted and contaminated and I don’t see how that is going to be stopped, much less reversed, at least in my lifetime.


        • It was funny listening to this book which was written in the 1990s talking about all the potential catalysts for this crisis.

          Terrorist Attack? Check
          Financial Collapse? Check
          Pandemic? Check

          I guess the answer is (D) All of the Above

          But, supposedly the Millennials will be the same as the GI Generation: The doers who will be the conformists. Maybe, but I don’t see it.

          And I don’t see trust in institutions at a gut level, but at a Cultural Revolution level. And the book kind of goes there. IMO we are seeing that in action now.

          Some on Blue Check Mark Twitter (who are really our overlords) accused Glen Greenwald of not “reading the room.” I guess Big Culture has its marching orders.


        • I can see a Cultural Revolution level of “trust in institutions” but I’m not sure that can be characterized as a golden age of institutional trust, especially given the implication is people will pretend to trust the institutions for their health and solvency–not actually trust the institutions. But I suppose if they act as if they do, that’s good enough!


  3. Masterpiece Cake Shop is being targeted for more prosecution, this time by a trans-activist.

    This is the perfect demonstration of what is wrong with anti-discrimination law. They do not exist to provide protection to people who otherwise would be locked out of access to goods and services. Instead they exist as simply a weapon with which to beat people who hold the “wrong” thoughts.


    • And apparently it doesn’t apply to Amazon when it comes to Parler, or Twitter when it comes to the many, many people they’ve kicked off the platform. Or Facebook. It only applies to Masterpiece Cake Shop and I guess Hobby Lobby or some other places where people refuse to conform in all ways to far-leftist orthodoxy.

      The solution for Masterpiece, IMO, would be to come up with a menu of specific cakes and some rule regarding profanity or something and just sell cookie-cutter. Since apparently you can provide an open-ended service without getting nailed if you don’t take the job, basically.

      I don’t see this sort of stuff stopping any time soon, though.


      • There is no solution except capitulation.

        The left isn’t looking for a logical solution.

        The key to understanding the left is to assume bad faith. Then everything the left does makes sense.

        The left is running a Cultural Protection Racket. That is all this is.


        • Brent:

          The key to understanding the left is to assume bad faith. Then everything the left does makes sense.



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