Morning Report: Fed day

Vital Statistics:

 LastChange
S&P futures4,1834.8
Oil (WTI)63.440.57
10 year government bond yield 1.64%
30 year fixed rate mortgage 3.18%

Stocks are flat this morning as earnings come in. Bonds and MBS are down as we await the FOMC decision at 2:00 pm

Morgan Stanley is out with a call saying that optimism for the economy out of the Fed could be bearish for stocks. The fear is that the Fed will begin removing accomodation before the economy has fully recovered. FWIW, the December Fed Funds futures are handicapping a 12% chance of a rate hike this year.

Mortgage applications fell 2% last week as purchases fell 5% and refis fell 1%. The 30 year fixed rate mortgage fell for the third week in a row. “Mortgage applications decreased last week, even as mortgage rates dropped for the third week in a row,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Even with a few weeks of lower rates, most borrowers have likely already refinanced, which is why activity has decreased in seven of the last eight weeks. The purchase market’s recent slide comes despite a strengthening economy and labor market. Activity is still above year-ago levels, but accelerating home-price growth and low inventory has led to a decline in purchase applications in four of the last five weeks.”

The CFPB has officially delayed the new QM rule until October of next year. This was the rule that changed the relevant metric from a 43% debt to income ratio to something based on a mortgage’s proximity to the average mortgage rate. It also keeps the GSE patch in place, although FHFA has told Fannie and Freddie to limit their 43 DTI + loans, so I guess this really isn’t going to make a substantial difference unless the FHFA letter to Fan and Fred from last January is rescinded.

The homeownership rate ticked down in the first quarter, according to the Census Bureau. FWIW, it is still artificially high due to the foreclosure moratorium. I am not sure what drove the Q220 and Q320 spike, but it looks strange and I suspect it is some sort of data issue.

Consumer confidence rose in April, according to the Conference Board. We are back to pre-lockdown levels as consumers’ current assessment of conditions increased.

27 Responses

  1. Speaking of potential civil liberties violations:

    Like

    • While it may not be, stuff like this, the timing–feels 100% political and retributive.

      Sending a message. That sort of thing.

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      • Yeah I think this is actually about Rudy double dealing and soliciting the Ukrainians as clients of his while over there supposedly doing investigation work for Trump. But it’s a bigger dragnet now and they are going after others.

        https://www.usatoday.com/story/news/politics/2021/04/28/feds-raid-rudy-giulianis-ny-apartment-amid-continuing-ukraine-inquiry/4873905001/

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        • Are we really ready to accept the explanation considering past media/DoJ/IC behavior?

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        • Another chance for the R’s to get to the left by doubling this number and publicly attempting to trade it for barring audits on incomes below, say, $200,000. This is a gimme for them ffs!

          https://www.dailywire.com/news/biden-wants-80-billion-to-fund-irs-audits-tax-enforcement-against-high-income-earners

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        • I’d move back to CA for this shit.

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        • FOAD douches.

          Republicans should support doubling proposed Democratic rates. What’s the argument against?

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        • The GOP doesn’t have the balls and also lacks the persuasion and PR abilities to make the working class case for doing so.

          But muh donors!

          They won’t do it.

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        • What would you rate the chances they will that? I say zero.

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        • Republicans should support doubling proposed Democratic rates. What’s the argument against?

          The same reason that Porsche doesn’t make a budget car to compete with Kia and Toyota. That isn’t the brand.

          Republicans oppose tax hikes. It is a fundamental part of their message.

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        • From a branding standpoint I’d wager that Republicans are perceived by the voting electorate as opposing tax hikes on the rich. Republicans are also the party of Civil Rights and have the receipts to prove it, is that perceived as their brand? If upping the Democrats on raising taxes on the rich is a tough pill to swallow frame it as the rich doing their part to service the debt and hold out for a percentage of the tax increase dedicated to that. Or at least commit to not filibustering tax increases on the rich, or trade it for tax cuts on the non-rich. Or eliminate or lower taxes on gas. There a million ways to do it and further service the working class Republican constituency but to continue to reward constituencies that seek to remove you from power makes no sense. Why fight hammer and tong to protect the rich that do not vote for you? Trump didn’t bring about a re-alignment but he certainly recognized it. The working class is the new Republican constituency now and they need to be rewarded and they need to perceive that Republicans will fight for them. Otherwise they’ll keep losing. As it stands now, I think 2022 will be a bloodbath for Republicans, there seems to be no reason to vote for them.

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        • McWing:

          As it stands now, I think 2022 will be a bloodbath for Republicans, there seems to be no reason to vote for them.

          I think you are an outlier with that judgment.

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        • Scott,

          I agree with you. I’ve never been one to shy away from not voting or protest voting (often voting 3rd party rather than for the Republican, and sometimes independent or even Democrat for state and local elections). I’ve also skipped midterms more than once (include the 1994 landslide midterms, where I had just assumed the Democrats would hold the house as they had my entire life).

          I’m showing up for these midterms. I will hold my nose and vote a straight Republican ticket. If given an opportunity to eject a GOP, Inc. candidate in a primary in favor of literally anyone else, I will do that, too.

          I may be an outlier there as well, but unless the Democrat in question is Tulsi Gabbard, I’ll be voting against them, using the one option that might make my single vote have some microscopic impact: the Republicans. As worthless as I think the GOP is, by and large.

          And I’m doing this with the understanding that the Republican in my district would probably win anyway, just as the Democrat in the district I used to be in would win (Steve Cohen, who is basically a Communist, and has been in politics since I was nine years old, at least).

          Like

        • My electoral prognostications are not keen, that’s for sure.

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        • Neither are mine so … who knows!

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        • From a branding standpoint I’d wager that Republicans are perceived by the voting electorate as opposing tax hikes on the rich.

          And most of the ones that aren’t being accused of having been involved in the Jan. 6th riots probably do oppose tax hikes on the rich. The “crazy Qanon” types might be the only ones who might actually be in favor of tax hikes on leftist billionaires, as they are likely the only ones in congress that don’t in some form receive a lot of cash from said leftist billionaires.

          Republicans are also the party of Civil Rights and have the receipts to prove it, is that perceived as their brand?

          Nope. And they 100% let that happen, and so many of them are so old–especially in the power structure–they seemed to have been completely unaware that for about 30 years that ceased to be a problem in most of the south. Their lack of outreach to conservative black leaders and lack of building a stable of minority “evangelists” to advance a message of individual responsibility, Christian values, the importance of the two-parent family . . . etc., etc. It’s fucking criminal. The folks in charge of the GOP have been entirely negligent in not just stewardship of their responsibilities in government, but in their responsibilities re: winning elections and expanding the party.

          So much more the Republicans could do there. Trump touched on it several times–the only Republican with the balls to do so, apparently, maybe because he was only casually a Republican. But even his folks didn’t recruit and practice a little affirmative action, and that just . . . ugh. I don’t get it. I really don’t. If you don’t pull in Candace Owens to go campaign for you, what about Brandon Tatum? There are black conservative running for congressional seats and local political offices. That the GOP isn’t cultivating that bench . . .

          That’s because they are worthless as anything but as a blunt instrument with which to vote against Democrats.

          or trade it for tax cuts on the non-rich.

          I’ve been saying this forever. But because neither party is serious about improving the economy or funding government, it never happens.

          I’ve suggested they should (a) advocate for a more progressive tax, that adds small incremental percentages to income every couple of $100k. Worry less about loopholes and just make the tax itself more progressive, up to $10m or $20m. In trade, keep taxes at Trump levels for those making under $250k, and lower taxes on those making $100k (with adjustments for single-filing versus joint-filing).

          But nah. Nobody is going to do that.

          There a million ways to do it and further service the working class Republican constituency but to continue to reward constituencies that seek to remove you from power makes no sense

          Unless you consider yourself part of the same class, aspire to be in that same class, or see future employment and money coming from that class. Then it makes some sense. The only way most of what you’re discussing is going to happen is via the primary process–the old guard has to be removed.

          As it stands now, I think 2022 will be a bloodbath for Republicans, there seems to be no reason to vote for them.

          As I said, I don’t know that this is true but I do believe the Republicans could win in a landslide, even long-time blue districts, if they were making a serious working class appeal. The problem there is the old guard has no idea what a working class person thinks or believes or wants, or what motivates them to vote. The working class is an abstract notion to too many of them.

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        • They need to reposition as people who fight tax hikes on the middle and working classes, and support tax cuts for same. IMO.

          I know it’s crazy to think there ought to be a political party that represents the vast majority of the population, but it’s so crazy it just might work!

          Like

  2. Per Carville, if Democrats are going to try and endlessly bash the Republicans over the Capitol Hill Riot, then the Republicans should repay in kind with this:

    https://mtracey.substack.com/p/one-year-after-george-floyd-minneapolis

    NoVA, FIDO in action:

    “Kevin C. is 22 years old and lives with his younger sister in their great-grandmother’s house off Lake Street in South Minneapolis — the epicenter of last summer’s riots and protests. He was a protester himself, and even had to jump out of the way during an infamous incident when a tanker truck nearly barreled into the crowd he was in on the interstate.

    Now almost a year later, he told me his current preference is for police to be more aggressive in curbing indiscriminate violence in his neighborhood. A few weeks ago, he said, there was a shooting in the alley behind his house — bullets were flying just yards from him and his sister. “The police came, but they didn’t really like, investigate,” he recalled. “They just shined their lights and then drove off.”

    He said he’d noticed a steep decline in police presence lately, especially after last week’s trial of Derek Chauvin ended with a guilty verdict. “Even before the trial,” he said, “they would drive through here, but there wouldn’t be any, like, policing going on.””

    Liked by 1 person

    • Well, I won’t hold my breath for Republicans to do so.

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    • The Republicans’ best weapon against the left is the Cult of Woke. And the left provides endless fodder for YouTubers to make fun of it, or talk about how authoritarian the left is.

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      • Brent, EW and BS have written the worst tax bill I have ever seen at any level. If I had time I would detail everything that is complete bonkers in it. The increased rates are the LEAST of the problems – their rip-up of the remaining logic within the IRC is the worst part.

        I will have to count on John Tester killing the destruction of the family farm/ranch provision, and Joe Manchion killing the imposition of an inheritance tax on top of the estate tax while removing the step-up in basis at death. Without basis step-up middle class estates will be so difficult to administer that no one in his right mind would serve as an executor because the liability would be astonishing for an inadvertent error caught after the fact, when long lost documents were found in a cubby in an attic. I don’t think a bonding company would even cover an executor or administrator under those unfortunate but very real circumstances.

        When I told Joe that neither of BS nor EW could become the nominee I was right – but my belief that they would have little say afterward was totally fucking wrong.

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        • “but my belief that they would have little say afterward was totally fucking wrong.”

          Ditto. I felt the same way.

          Biden in the primaries vs as president feels like a big bait and switch, but as certain commenters here have pointed out, I really should know better by now.

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        • Mark,

          I get a sense that the Sanders and Warrens, et al, are taking what they feel is the temperature of the time (although too much of that temperature taking is done via Twitter, IMO, directly or indirectly) and so think *this is the time* for transformational legislation, as they view it.

          That’s my sense, anyway.

          Like

        • Republicans need to get to the left of EW and drive up taxes on earners and assets of, say, $5 million and up. Let those voters get the government they voted for good and hard. Does the R base that Trump forged give a shit about confiscatory taxes of the wealthy? I don’t think so.

          Like

        • mark:

          When I told Joe that neither of BS nor EW could become the nominee I was right – but my belief that they would have little say afterward was totally fucking wrong.

          You got conned. But would it have changed anything even if you had been more clear-eyed about what the Democratic party has become? As I recall, you explicitly justified your support for Biden over Trump on character grounds, regardless of policy. Just keep reminding yourself that the alternative to all of this insanity (from his tax proposals to his border-security policy to his neo-marxist race policies to his science- and logic-defying trans policies) was Orange Man Bad.

          The thing that put the “Never” in Never Trumper was the idea that literally nothing could be worse than Trump. We’re only 3 months in and already Biden is pushing the boundaries on that theory.

          Like

      • But they will need political candidates with the savvy to go there and critique the left effectively with facts, as well as paint a narrative picture of how things are headed in the wrong direction, and what heading in the right direction will look like. That’s a big ask for the average GOP politician.

        Like

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