Morning Report: Biden says a recession isn’t inevitable

Vital Statistics:

S&P futures3,68618.85
Oil (WTI)114.88-2.84
10 year government bond yield 3.23%
30 year fixed rate mortgage 5.99%

Stocks are rebounding this morning after yesterday’s blood bath. Bonds and MBS are down.

Biden said that a recession isn’t inevitable in an interview with AP. On the subject of what voters should take away from the fact that economists suggesting a recession is possible next year, he said:

“They shouldn’t believe a warning. They should just say: “Let’s see. Let’s see, which is correct.” And from my perspective, you talked about a recession. First of all, it’s not inevitable. Secondly, we’re in a stronger position than any nation in the world to overcome this inflation. It’s bad. Isn’t it kind of interesting? If it’s my fault, why is it the case in every other major industrial country in the world that inflation is higher? You ask yourself that? I’m not being a wise guy. Someone should ask themself that question. Why? Why is it? If it’s a consequence of our spending, we’ve reduced the deficit. We’ve increased employment, increased pay. There was a survey done uh, uh, by the, uh, I forget which one it was, which one it was now, about three months ago. You had more people had lower debt (inaudible) credit cards, more savings in their savings account, higher pay in the job they had, more satisfaction in the job they had and they were in good shape financially.”

The Conference Board’s Index of Leading Economic Indicators fell 0.4% in May. “The US LEI fell again in May, fueled by tumbling stock prices, a slowdown in housing construction, and gloomier consumer expectations,” said Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “The index is still near a historic high, but the US LEI suggests weaker economic activity is likely in the near term—and tighter monetary policy is poised to dampen economic growth even further.”

Given the abrupt rise in interest rates, I suspect the LEI hasn’t caught up to the new reality yet. Even the MBA forecast from earlier this month has a Q2 and end of year forecast for the 30 year fixed rate mortgage around 5%. It is currently 6%. Last week’s CPI report was a game changer.

Industrial production rose 0.2% in May, which was a touch below consensus. Manufacturing production fell 0.1%. Capacity Utilization inched up to 79%. Capacity Utilization is much lower than it was in the 1970s, and is at least one positive statistic on the inflation front. Of course the economy is much different today – we are no longer a manufacturing-focused economy but this is at least one positive development.

39 Responses

  1. Not a parody:The Vox version of what holidays are for:

    “Juneteenth isn’t just a celebration of freedom. It’s a monument to America’s failures.

    The holiday observes the emancipation of enslaved people. Let it also be a time to consider the hypocrisies of the American experiment.

    By Sean Collins ”


  2. From the AP interview with Biden:

    “Yet Biden’s remedy is not that different from the diagnosis made by former President Jimmy Carter in 1979, when the U.S. economy was crippled by stagflation. Carter said then the U.S. was suffering from a “crisis of confidence” and “the erosion of our confidence in the future is threatening to destroy the social and the political fabric of America.””

    Not the analogy I think he would want.


  3. How to make supply chain problems worse:

    “U.S. importers brace for chaos as Uyghur Act looms

    06/16/2022 08:30 AM EDT”


  4. Interesting point:

    “The S&P 500 is down about 22 percent roughly from its January peak, inflation is really, really high. A recession is very possible, mortgage rates are rising pretty sharply. A lot of analysts think the housing market has already peaked. Crypto, whoa, crypto has just been hammered. Crypto markets lost $200 billion just over the last weekend, woof. So we’re seeing valuations collapsing across asset categories, stocks, houses, crypto, it’s not obvious that these should all be correlated. For instance, wasn’t Bitcoin supposed to be a hedge against inflation, the thing you bought so you didn’t lose money when inflation began rising? But nope, turned out to be highly, highly correlated with stocks, just one more speculative asset.


    • I thought the same exact thing about gold in the 2008 crisis. It fell in value just like every other asset. Ultimately I think these assets don’t correlate necessarily with inflation – they correlate with confidence in the system. Maybe the era of central banking has made that obsolete. Of these will only rally if people lose confidence in the worlds central banks.


  5. So, Capital police aren’t heroes anymore?

    If only they’d shot and killed one of these insurrectionists, that would do it.


  6. So crazy it just might work!

    But by then he’ll be a convicted felon.


  7. If there’s another school shooting parents are going to shoot their way past cops to get into the school and no one will convict them of it.


  8. And it would’ve worked too, if it weren’t for those meddling kids!


  9. Coming up: battery shortages


  10. How come Trump’s administration managed to
    Keep the Russians out of the 2018 midterms and the 2020 Presidential elections? Apparently Democrats cannot keep Russians from interfering with elections.


  11. Good read:


    • The basic allegations against Mr. Trump are well known. In disregard of advice by many of his closest aides, including Attorney General William Barr, he falsely claimed that the 2020 presidential election was fraudulent and stolen; he pressured Vice President Mike Pence to refuse to count certified electoral votes for Joe Biden during the electoral count in Congress on Jan. 6; and he riled up a mob, directed it to the Capitol and refused for a time to take steps to stop the ensuing violence.

      I think the characterization is horseshit but even if I granted it what is/are the crimes?


      • Does any reasonable person doubt a DC jury would convict Trump of literally anything?

        He would have to believe that the department could probably convince a unanimous jury that Mr. Trump committed crimes beyond a reasonable doubt.


        • Ok, here are the “crimes”

          The two most frequently mentioned crimes Mr. Trump may have committed are the corrupt obstruction of an official proceeding (the Jan. 6 vote count) and conspiracy to defraud the United States (in working to overturn election results). Many have noted that Mr. Trump can plausibly defend these charges by arguing that he lacked criminal intent because he truly believed that massive voter fraud had taken place.


        • How is this written with a straight face?

          The prosecution thus might jeopardize Mr. Garland’s cherished aim to restore norms of Justice Department “independence and integrity” even if he prosecutes Mr. Trump in the service of those norms.


        • McWing:

          How is this written with a straight face?

          The NYT has a great deal of practice in writing patently absurd things with a straight face.


        • If diseased scum like Wilson and LBJ can occupy the Oval Office and it’s not considered beyond the pale what has Trump done to justify the lefts and Never Trumps behavior towards him?


        • He made them feel bad. And for the left, everything is justified by emotion.


        • I can’t think of. Republican victory that didn’t make the left feel bad but their reaction to Trump’s only other parallel is Lincoln’s election.


        • Trump treated them with disdain. Sure, other R’s had policies that made them feel bad, but they at least treated the left with respect while at the same time seeking the left’s respect. Trump had the audacity to simply give them the middle finger and not care when they called him names. That, I think, pushed them into uncharted territory of unhinged hatred.

          Plus, of course, he completely embarrassed them by doing what they repeatedly said he could not do…he beat them.


        • “The NYT has a great deal of practice in writing patently absurd things with a straight face.”

          It’s an op-ed by Jack Goldsmith. Former George W. Bush DoJ assistant attorney general, not the NYT editorial staff.


  12. Lol!

    Now hear me out – Trump could have used a butterfly flapping it’s wings in Outer Mongolia to declare himself God Emperor of Dune.


  13. That settles it, I’m giving up my guns and leaving my security to the tender mercies of the police.

    Thanks Senate Republicans for getting on board with gun control!!


  14. Biden admits the pain is the point.

    No mean tweets though so we dodged a bullet there.


  15. Because they fucking love science is why!


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