Morning Report: Retail Sales Increase.

Vital Statistics:

S&P futures4,35612.2
Oil (WTI)71.840.25
10 year government bond yield 1.34%
30 year fixed rate mortgage 3.12%

Stocks are up this morning after good retail sales numbers. Bonds and MBS are flat.

Retail Sales rose 0.6% last month, which was better than expectations. If you strip out vehicles and gas, they rose 1.1%.

Ginnie Mae is considering increasing the capital requirements for GNMA servicers. In addition to the $2.5 million and 0.35% of the GNMA servicing book UPB, they are looking at require 0.25% of the UPB of a servicers agency book. When the foreclosure moratorium ends, servicers will have a lot of wood to chop.

DoubleLine bond investors Jeffrey Gundlach sees similarities between the current economic environment and the 1970s. “When you look at real interest rates on long-date Treasurys, it looks like Jimmy Carter area,” said Gundlach. “We’re talking about the CPI at 5.4%, and if we want to use the 10-year Treasury it’s not even at 1.4%, that’s a negative 4% interest rate. That’s Jimmy Carteresque.”

IMO the similarities to the 1970s are not that great. While LBJ’s Guns and Butter policies do resemble today, the big driver of 1970s inflation was probably the Arab Oil embargoes in the early 1970s, which drove oil prices up 6 times over the decade. That would be like oil increasing to $425 a barrel today.

In addition, US factories, which were built in the early 20th century were beginning to show their age and incremental production was more expensive given that capacity utilization was already high. Today, we have much more of an IP-driven economy and low capacity utilization. In addition, globalization was not yet a thing in the 1970s. That started more in the late 80s and 1990s.

To me, the big question is what happens when this big COVID-related rebound is done and the supply chain shortages are fixed. Then what? Does growth return to 3% – 4%? Or does it return to 1% – 2%? If the latter, then the model isn’t the US in the 1970s, it is Japan in the 2000s.

13 Responses

  1. “Rep. Joyce Beatty arrested during voting rights protest at Senate office building

    By Vanessa Williams
    July 15, 2021

    The chairwoman of the Congressional Black Caucus was arrested Thursday along with several activists as she protested in a Senate office building for voting rights.

    Rep. Joyce Beatty (D-Ohio) and leaders of several groups demonstrated and chanted in the atrium of the Hart Senate Office Building before they were arrested by the U.S. Capitol Police.”

    So charge them with fomenting an insurrection? They were in the Capitol.


  2. Perfect juxtaposition:

    “U.S. seeks prison term for first felony defendant to be sentenced in Capitol breach, citing domestic terror threat

    By Spencer S. Hsu
    July 15, 2021

    U.S. prosecutors on Wednesday urged a federal judge to impose an 18-month prison term on the first defendant to face sentencing for a felony in the Jan. 6 Capitol breach, citing the need to deter domestic terrorism.

    “The need to deter others is especially strong in cases involving domestic terrorism, which the breach of the Capitol certainly was,” Special Assistant U.S. Attorney Mona Sedky said in a government sentencing request for Tampa crane operator Paul Allard Hodgkins, 38, who carried a Trump flag into the well of the Senate.”


    “Prosecutors move to drop charges against protester identified by facial recognition software

    By Justin Jouvenal
    July 15, 2021

    Federal prosecutors in the District filed a motion to dismiss charges against a protester who was identified using facial recognition technology and was accused of assaulting police officers as they swept demonstrators from Lafayette Square last summer.

    The case against Michael Peterson Jr. was one of a number in which authorities have used the controversial technology to identify protesters accused of violence during demonstrations over the murder of George Floyd.

    Peterson was accused of punching one U.S. Park Police officer in the face and wrestling another as law enforcement agencies forcefully cleared protesters from Lafayette Square on June 1, 2020, ahead of a widely criticized photo op by President Donald Trump at a nearby church. Authorities alleged that Peterson then fled the scene.”


    • I think we can all agree that there have been at least two sets of laws for a long time now. What I’m appalled by is the obsequiousness of the defendants, they should be shouting “Hell yes we ordered the code red, Republicans need to FEAR us.” A real lost opportunity, frankly.


    • I wonder if the mob has the judges intimidated.


    • Oh yeah, Greenwald, et al. have been all over that since yesterday. As always, it’s a joke.

      I miss the days when there were consequences for reporters pushing fabricated documents.


  3. This was good:


  4. Our problems are solved.


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