Morning Report: New home sales disappoint

Vital Statistics:

  Last Change
S&P futures 4,395 -6.2
Oil (WTI) 71.84 -0.25
10 year government bond yield   1.24%
30 year fixed rate mortgage   3.03%


Stocks are lower this morning on resurging COVID fears. Bonds and MBS are up.


New home sales fell to 676,000 in June, according to Census. This is 6.6% below the May reading and 19% below last year’s reading. The Street was looking for 800k, so this is a sizeable miss. That said, the margin for error in new home sales estimates is pretty large, so this one might be revised upward in the future.


The big event this week will be the FOMC meeting on Tuesday and Wednesday. No changes in rates are expected, although the market will be looking for language regarding tapering bond and MBS purchases. Aside from the FOMC meeting, we will have some important data with durable goods, personal incomes / spending and GDP.


While the headline inflation numbers seem high compared to recent history, much of this is simply due to COVID-19 – related factors, and should therefore prove to be temporary. The market seems to agree, as longer-term inflationary expectations are falling, at least if you look at the difference between normal Treasuries and inflation-indexed Treasuries. This should give the Fed at least some comfort that inflation isn’t getting out of hand.

Of course the inflation that we have had since the 1970s has been asset inflation, not goods and services inflation. In other words, we have had too much money chasing too few assets, not too much money chasing too few goods. Increased productivity and globalization have also helped keep goods and services inflation low.

IMO the big question re inflation will be wages. Wage-push inflation has largely been non-existent since the 1970s. Union contracts were a big factor in baking in inflationary expectations, and a resurgence of private sector unions probably isn’t in the cards anymore. Job descriptions (and compensation) are way too customized today.


The US population appears to have crested. It looks like the US population grew 0.35% for the year ending July 1 2020. “The economy of the developed world for the last two centuries now has been built on demographic expansion,” said Richard Jackson, president of the Global Aging Institute, a nonprofit research and education group. “We no longer have this long-term economic and geopolitical advantage.”

Economically, an aging population (which is the flip side of low fertility rates) is not inflationary in the least. Old people have bought their stuff already, and their consumption falls. The model is Japan, which has had little to no economic growth (and a debt to gdp ratio of 2.3x) for a generation.

The post-COVID economy will be a test of the Reinhardt-Rogoff model which says that a high level of debt relative to GDP acts as an anvil on economic growth. If the model is correct, we may see flat GDP growth for another decade or two, which is deflationary, not inflationary.

15 Responses

  1. Just imagine what would be going on if this was a video of Trump.


  2. Oh great.

    “Biden says long-term effects of covid-19 can be considered a disability under federal civil rights laws”


    • I read some of the comments. Nobody ever asks why the Biden admin/Democratic congress think(s) it’s a good idea to turn the Capitol Police into a nationwide “domestic terrorist” police force, likely to be up to worse than what they are whinging about.


    • This is why i always laugh at the defund the police commies. These morons have no idea what kind of police state you will need to enforce their utopia.


      • But saying “defund *your* police so we can capaciously fund *our* police” is too explicit.

        Although that seems to be the underlying message. Police for me but not for thee.


  3. Nice quip:

    “The COVID Debate Is Running On Political Fumes
    As long as vaccines continue to work, the politicized debate on COVID will be mostly hot air.

    Shant Mesrobian

    Thanks in large part to the emergence of the Delta variant of COVID, America is finding itself in a new wave. And I don’t really mean a new wave of the pandemic (though cases have been significantly rising due to the increased infectiousness of the new variant) so much as a new wave of America’s favorite national pastime: Arguing about which half of the country is bad.”


  4. David French has turned into a complete caricature…

    I wouldn’t be completely surprised to see him write a column making “The Christian case for Atheism!”.


    • As typically happens with elite progressive Christians–or ostensible Christians, as the faith they seem to argue from seems to be one of a belief in government, experts, and elite opinion rather than something Biblical.

      But as I’ve argued before, regarding humans drive to tribality, it’s all bout the identity group they primarily identify with. I expect French has numerous identity groups that are primary to him, while his religious affiliation is a distant second or third. So any time his religious conviction conflicts with his progressive convictions, the progressive convictions always win. Elite neocon progressivism, sure, but still.


    • I should also point out I think French like Jonah Goldberg and NRO to some extent–and almost any capturable ideological or partisan outlet/pundit–can be captured by their donors, and sufficient cash and money and cultural exposure (Hollywood is often used for this purpose), people can be shifted to a more “enlightened” viewpoint.

      Which has, BTW, always been the point of Rush Limbaugh’s complaint about invitations to cocktail parties. One of the many comments Jonah Goldberg has made about critiques of elite neocon opinion is how absurd it is to say people conform their opinions based on “cocktail parties”, which they don’t even get invited to anyway so it’s silly, because real progressives still think they are the Great Satan.

      Yet the specific example of “cocktail parties” was never the point. The point is the cultural milieu that they both exist in–or that seeks them out as a way of soft influence. Which is literally they only coherent explanation of French transitioning from characterizing critical race theory as a great evil to demanding it be institutionalized in our churches and schools in such a brief time.

      The Dispatch–like Bill Kristol and the Bulwark–has been subject to donor-class capture. I also expect access to various resources where progressive elites act as the gatekeepers also has an influence.

      But at the end of the day, I always tend to believe cash is king. I’d be willing to look at pushing CRT as a job if the paycheck was sufficient. Sometimes you don’t even like your job–but damn, that paycheck!


    • I’m more than happy to trade him for Greenwald, Taibbi, etc.


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

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: