Morning Report: The Fed steps up the pace of tapering as expected

Vital Statistics:

  Last Change
S&P futures 4,718 17.2
Oil (WTI) 71.57 0.68
10 year government bond yield   1.45%
30 year fixed rate mortgage   3.31%

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


The Fed increased the pace of tapering yesterday, as expected. Bonds didn’t react much to the statement, although stocks rallied. The dot plot was adjusted to more or less match what the Fed Funds futures have been predicting.

The forecast for GDP growth was downgraded for this year, however it was bumped up for next. The inflation forecast was bumped up for this year and next.

Here is the new dot plot:


Initial Jobless Claims rose to 206,000 last week. We are pretty much back to pre-COVID levels.


Housing starts rose to 1.679 million in November, beating estimates. Building Permits ticked up to 1.63 million. Housing starts were up 11.8% MOM and 8.3% YOY. As we saw yesterday, builder sentiment remains elevated, however shortages of labor and materials remain a constraint.


Speaking of materials, lumber is back again on the rise. Sticks and bricks will add to the cost of new houses, so expect prices to continue to rise.

Rising prices for new homes will put upward pressure on existing home prices as well. As long as we have a housing shortage, home prices will continue to rise. In addition, we are seeing strong wage growth, which will more than offset any decline in affordability due to rising rates. Put simply, I am not buying into the forecast that home price appreciation is going to disappear next year.

11 Responses

  1. An actual good Krugman piece:


  2. I don’t agree with all of it, but this is pretty funny:

    “Where to Now, Chris? Where to Now?
    pity the American liberal, so far from God, so close to Donald Trump

    Freddie deBoer
    Dec 16, 2021

    Hayes is forever pulling this move in micro – yes, perhaps it’s bad that Cornell students have decided that serving ketchup in the dining hall is white supremacy, but have you considered that Republicans are the really crazy ones?”


    • I wonder who’ll win politically, an army of racist car dealership owners who have already taken over vast swaths of America’s state and local governments, keening for blood and soil? Or the guy in your anthropology seminar who insisted they were the voice of social justice while simultaneously making every conversation all about them?

      As if controlling the Florida State Senate is the same controlling the Presidency, Congress, the legal system, the administrative state, the media, academia, K-12 education, culture, publishing, Hollywood, and the flow of information.


    • I tend to train my fire on the broad left of center because, as much as I would sometimes like to wash my hands of the whole damn lot of them, they are the half of American politics that could actually reform, that could improve.

      Yeah, I’m not so sure. He’s clearly aware of the problems but because he has an underlying sympathy with the ostensible goals of the left, he feels they are just naturally more reformable and reachable than the right. But I don’t get any sense that that’s the case.


      • Jonah Goldberg always used to say that the left refuses to admit that it acts in an ideological manner. It thinks everyone else does, but to them they are just following the sCIEncE


        • Goldberg is now on Greg’s good side. He’s a “defector” from Fox:


        • Greg’s still delusional. Good luck turning Jan. 6th into 9/11 and Pearl Harbor combined, guys.


        • Jonah Goldberg has become Jen Rubin


        • He’s not *quite* Jen Rubin. There are categories, I think, amongst NeverTrump. There are Jen Rubin and Bill Kristol and the like who have decided the proper response to the Mean Tweets of Trumpism is to become full-on authoritarian communists and argue for the repeal of the first amendment and for making sure the Democrats can all vote early and often, to protect voting rights. And so on.

          Then there are the Jonah Goldberg NeverTrumpers who are still of the opinion that Big Government is not the answer and that the left is largely crazy and incompetent, but suffers from Trump Derangement Syndrome to the point that if for some reason Trump is referenced or Trump supporters are discussed while he’s railing on progressivism–the discussion must immediately change to be about how awful Trump was, how awful January 6th was, how awful the people support Trump were. The Commentary podcast folks can be like that, too–where the are rock-ribbed conservatives (and have even recognized the Russian collusion story was bullshit) but if it comes to January 6th or something Trump is doing the criticism becomes hyperbolic.

          It’s a spectrum. That said, I think the root of it is probably similar for Goldberg and Rubin and not (as Goldberg claims) a brave adherence to True Conservative Principals instead of being swept up in a dangerous cult of personality.

          Rather, Jen Rubin’s social life and financial well-being was wrapped up in not liking Trump, and I’m pretty sure hating on Trump improved her social credit and potentially her financial opportunities. Which doesn’t mean it’s a cynical strategy–people naturally respond to social and financial incentives in ways that can result in sincere shifting of positions.

          I think, with the Dispatch, some of that financial and social stuff is impacting Goldberg. He is friends with the now-communists at The Bulwark. No doubt he doesn’t want to stand too strongly athwart his friends and mentors. But I can listen to a remnant where he sounds like any elite conservative pundit and then another where he sounds like he’s working for the Kamala for President campaign.

          But I came to the conclusion that Goldberg had lost the thread when he started with his criticism of Kaleigh McEnany. He was just horrified that she was challenging the premises of the press’s questions and actively arguing facts with them, and pointing out their biases. That she was being disrespectful to The Media was like the worst thing he could imagine, apparently.

          When I think it was pretty obvious that she was exactly the press secretary Trump needed–and in fact the kind of press secretary any president would likely need going forward, especially a Republican one. She was shockingly well-prepared–compared to Huckabee-Sanders or Scott Spicer, or Jen Psaki–whom I have yet to hear Goldberg criticize. But Goldberg considers himself part of the media, thus of an elite class, and the worst thing he could possibly imagine was a press secretary being critical of The Media, I guess.

          Whatever. If we get another Republican president, I hope to see her back. She was great. And it would drive Jonah Goldberg crazy.


  3. Perfect:

    “Rudolph Changes Name To Rolanda, Dominates Female Reindeer Games”


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