Morning Report: Spending falls in May

Vital Statistics:

S&P futures3,775-45.75
Oil (WTI)109.21-0.94
10 year government bond yield 3.03%
30 year fixed rate mortgage 5.90%

Stocks are lower as we end a hideous quarter for the markets. Bonds and MBS are up.

FGMC has filed for bankruptcy. It won’t affect closed loans and the company obtained DIP financing. “While we have made considerable efforts to address our ongoing financial challenges related to the state of the mortgage market, we ultimately must do what is best for our borrowers and consumers,” said Aaron Samples, chief executive officer of FGMC. “After careful review and consideration, the Company determined that pursuing the protections of chapter 11 is the right and responsible path at this time. As part of this process, the Company retained a portion of its workforce to manage the day-to-day business. We are requesting that the court approve a variety of motions that will promote a smooth transition for all pertinent parties while also preserving value for the benefit of the Company’s stakeholders.”

Personal incomes rose 0.5% MOM, according to the Bureau of Economic Analysis. This number was in line with expectations. Personal consumption expenditures came in light, rising only 0.2%, when the Street was looking for a 0.5% increase. If you adjust for inflation, spending fell 0.4%.

The inflation indices were at least somewhat encouraging. PCE Inflation rose 0.6% MOM, which was an increase however the YOY change was flat at 6.3%. Ex-food and energy PCE inflation rose 0.3% MOM and fell to 4.7% YOY.

Overall, the spending number is discouraging, and indicates that second quarter GDP might be weaker than people are thinking.

Jerome Powell said yesterday that he was more concerned about the risk of inflation than the risk of recession. Is there a risk we would go too far? Certainly there’s a risk,” Mr. Powell said Wednesday. “The bigger mistake to make—let’s put it that way—would be to fail to restore price stability.” He was speaking at the European Central Bank’s annual economic conference.

The risk is that the economy transitions into a higher-inflationary regime where higher inflationary expectations get baked into the economy. This happened in the 1970s, and the Fed found itself with a economy where growth stagnated and inflation kept ratcheting higher. The state of affairs was eventually described via the misery index, which was the sum of inflation, unemployment and interest rates.

Inflationary expectations tend to have reinforcing effects. People tend to accelerate purchases in order to buy before prices rise. This exacerbates shortages. Workers expect annual cost-of-living increases which further increases the prices of finished goods. This psychological phenomenon is what the Fed is trying to ward off.

62 Responses

    • This was an interesting one from yesterday. I think Gorsuch has it right and the other Justices just don’t like the implications of the previous ruling on Oklahoma.


    • I absolutely love the trolling of progressive history that Gorsuch does in the first footnote of his concurrence.. After noting that the Framers thought that a Republic would be more likely to produce just laws than would “a regime administered by a ruling class of largely unaccountable ‘ministers,'” he footnotes his observation that “some have questioned that assessment”, with:

      For example, Woodrow Wilson famously argued that “popular sovereignty” “embarrasse[d]” the Nation because it made it harder to achieve “executive expertness.” The Study of Administration, 2 Pol. Sci. Q. 197, 207 (1887) (Administration). In Wilson’s eyes, the mass of the people were “selfish, ignorant, timid, stubborn, or foolish.” Id., at 208. He expressed even greater disdain for particular groups, defending “[t]he white men of the South” for “rid[ding] themselves, by fair means or foul, of the intolerable burden of governments sustained by the votes of ignorant [African-Americans].” 9 W. Wilson, History of the American People 58 (1918). He likewise denounced immigrants “from the south of Italy and men of the meaner sort out of Hungary and Poland,” who possessed “neither skill nor energy nor any initiative of quick intelligence.” 5 id., at 212. To Wilson, our Republic “tr[ied] to do too much by vote.”


      Edit: Later he even explicitly associates the dissenters with Wilson, and by implication his bigotry, saying:

      In places, the dissent seems to suggest that we should not be unduly “‘concerned’” with the Constitution’s assignment of the legislative power to Congress. Post, at 29 (opinion of KAGAN, J.). Echoing Woodrow Wilson, the dissent seems to think “a modern Nation” cannot afford such sentiments.



      • Gorsuch takes a shot at Obama, too:

        When Congress seems slow to solve problems, it may be only natural that those in the Executive Branch might seek to take matters into their own hands. But the Constitution does not authorize agencies to use pen-and-phone regulations as substitutes for laws passed by the people’s representatives.


        • When someone feels the need to lie about what their opponents are saying/doing, it should tell us something about the merits of their own argument. Kagan closes her dissent with this:

          The Court appoints itself—instead of Congress or the expert agency—the decision maker on climate policy.

          That is quite literally the exactly opposite of what the Court did. It asserted that the policy in question could only be decided upon by Congress. If Kagan’s arguments were better on the merits, why would she lie about what the Court was doing?


        • “That is quite literally the exactly opposite of what the Court did.”

          Not exactly. The court has substituted it’s judgement that Congress has to make the policy instead of the “expert agency”. Which may be contrary to what both Congress and the agency want.

          I.e. the court is refusing to let Congress shirk it’s duty here under the Constitution even though it may well want to.


        • jnc:

          However you want to characterize what the Court actually did, the Court definitively is doing the opposite of what Kagan claimed. It was definitely not appointing itself a decision maker on climate policy (no climate policy has even been proposed much less imposed by the court’s decision) And far from preventing Congress from being the decision maker on climate policy, the Court was saying the exact opposite…it is congress’s job to make the policy!


        • They aren’t making themselves the decision maker on climate policy at all, they are insisting the legislative branch make the decisions. Not to be pedantic but it’s an important distinction, IMO.


        • “(no climate policy has even been proposed much less imposed by the court’s decision)”

          No, but one was invalidated.

          I think the decision was correct, but invalidating a climate policy on Constitutional grounds is still making a decision.

          Like I said, they are trying to force Congress to make policy here (and declining to legislate is a policy) even if they don’t want to.


        • Did it invalidate a Climate Policy that was a law or did it invalidate Executive agency created climate policy?


        • Technically neither. I think both climate policies being litigated were already rescinded (Obama’s & Trump’s) and Biden hadn’t finished his yet. Trump reversed Obama’s and then Biden reversed Trump’s.

          Both were executive agency rules. The court didn’t rule that the Environmental Protection Act itself was unconstitutional.


    • This seems to be the actual argument they want to make:

      “Richard Lazarus, a Harvard environmental law professor, said in a statement that by insisting that an agency “can promulgate an important and significant climate rule only by showing ‘clear congressional authorization’ at a time when the Court knows that Congress is effectively dysfunctional, the Court threatens to upend the national government’s ability to safeguard the public health and welfare at the very moment when the United States, and all nations, are facing our greatest environmental challenge of all: climate change.””

      I.e. some sort of “Congressional Dysfunction” doctrine where if Congress doesn’t legislate on an issue within a certain period of time, then the agencies automatically assume the power to make regulations instead. Sort of a “negative notice” premise.


      • Erza Klein was on that hobby horse in the run-up to the ACA.
        if congress doesn’t act, it cedes authority to the executive.


        • I think based on commentary I’ve seen recently, the progressive left is ready to get behind Biden if he were to pull an Andrew Jackson and declare that he will ignore the courts rulings.

          They would probably support him arresting all the Republicans in Congress too & the conservatives Justices to boot.

          But they won’t characterize this as “abandoning democracy’. This is not an ideal state of affairs.

          I also don’t dismiss the issue with Congress ceding it’s prerogatives. Charles Pierce noted a while back that in Congress there’s always a combination of the performative aspects and the substantive aspects, and as the ability of Congress to legislate has declined, it’s tended to attract more people who are just interested in the performative aspects. I’d say that House Republicans fit into that description pretty well.


        • I think you can count on one hand the Congress critters interested in the substantive aspects of the job in either party.


      • The heart wants what it wants.

        The ruling is really going to fire up the Deep State, this is their power being eroded. We’re about to see some weird shit being revealed about R appointed SCOTUS. Expect browser tabs open level of detail.


        • No doubt but I expect the lack of competence we’ve been seeing will manifest there as well, and the tales of ACB as a drug-runner or former porn star will turn out to lack credibility.


      • We should just happily cede authority to unelected and often anonymous bureaucrats because congress is too incompetent to do its job. Sounds smart.


  1. I know you guys are joyful re the SC decisions but I still want to inject some reality here (mine and Liz Cheney’s reality, which I never thought I would say). Below is a rough transcript of her speech yesterday in CA!

    I’m a conservative Republican, and I believe deeply in the policies of limited government, of low taxes, of a strong national defense. I believe that the family is the center of our community and of our lives. And I believe those are the right policies for our nation.

    But I also know that at this moment, we are confronting a domestic threat that we have never faced before. And that is a former president who is attempting to unravel the foundations of our constitutional Republic.

    And he is aided by Republican leaders and elected officials, who’ve made themselves willing hostages to this dangerous and irrational man.

    Now, some in my party are embracing the former president, and even after all we’ve seen, they’re enabling his lies.

    Many others are urging that we not confront Donald Trump, that we look away.

    And that is certainly the easier path.

    One need only look at the threats that are facing the witnesses who’ve come before the January 6th committee to understand the nature and the magnitude of that threat.

    But to argue that the threat posed by Donald Trump can be ignored is to cast aside the responsibility that every citizen, every one of us, bears to perpetuate the Republic.

    We must not do that. And we cannot do that.

    Ronald Reagan said it is up to us in our time to choose — and to choose wisely — between the hard but necessary task of preserving peace and freedom, and the temptation to ignore our duty and blindly hope for the best, while the enemies of freedom grow stronger day by day.

    No party, and no people, and no nation can defend and perpetuate a constitutional Republic if they accept a leader who’s gone to war with the rule of law, with the democratic process, or with the peaceful transition of power, with the Constitution itself.

    As the full picture is coming into view with the January 6th Committee, it has become clear that the efforts Donald Trump oversaw and engaged in were even more chilling and more threatening than we could have imagined.

    As we have shown, Donald Trump attempted to overturn the presidential election. He attempted to stay in office and to prevent the peaceful transfer of presidential power.

    He summoned a mob to Washington.

    He knew they were armed on January 6th.

    He knew they were angry, and he directed the violent mob to march on the capital in order to delay or prevent completely the counting of electoral votes.

    He attempted to go there with them. And when the violence was underway, he refused to take action to tell the rioters to leave.

    Instead, he incited further violence by tweeting that the vice president, Mike Pence, was a coward. He said, quote, Mike deserves it. And he didn’t want to do anything in response to the “Hang Mike Pence” chants.

    It’s undeniable. It’s also painful for Republicans to accept.

    And I think we all have to recognize and understand what it means to say those words, and what it means that those things happen.

    But the reality that we face today, as Republicans, as we think about the choice in front of us:

    We have to choose. Because Republicans cannot both be loyal to Donald Trump and loyal to the Constitution…. [LOUD APPLAUSE]

    And as we think about this choice, and as I think about how I come to this choice, the first thing that I think about is that I come to this choice as a mother, committed to ensuring that my children and their children can continue to live in an America where the peaceful transfer of power is guaranteed.

    We must ensure that we live in a nation that is governed by laws, and not by men….

    America is exceptional. We’re the exceptional nation. We’re a good and a great nation. And our history teaches us that ordinary Americans in every generation have done extraordinary things. They have done heroic things. Our men and women in uniform have made the ultimate sacrifice to defend our freedom.

    And that task is now ours.

    In his inaugural address, President Kennedy said this: “In the long history of the world, there have only been a few generations that have been granted the role of defending freedom in its hour of maximum danger.”

    And today that responsibility is ours — and what a magnificent responsibility that is, and what a blessing it is that that is our duty and our obligation.

    But my fellow Americans, we stand at the edge of an abyss, and we must pull back.

    One of my Democratic colleagues said to me recently that he looked forward to the day when he and I could disagree again, and, believe me, I share that sentiment, because when we can disagree again, about substance and policy, that will mean that our politics have righted themselves.

    That will mean that we have made the decision that we are going to reject anti-democratic forces, that we are going to reject toxicity, that we are going to reject some of the worst kinds of racism, and bigotry, and antisemitism that characterize far too much of our politics today.

    History has taught us that what begins in words, ends as far worse. And we must reject those things.


    • I didn’t vote for Trump in either election, but I don’t find Liz Cheney credible on this.

      Matt Taibbi put it well the other day when he noted that just like Russiagate, the media class and the Democrats aren’t content with just going after Trump on what can be proven but instead have to overhype it because they believe it gives them an issue that they can run on and to break through the background noise.

      It’s not enough that Trump wanted to march to the capitol with the participants at his rally, he has to be seen as literally fighting the Secret Service for the wheel in the presidential limo.

      I’d like to have an accounting of January 6th that I could trust was unbaised and accurate, but this committee isn’t it.


      • It may be because I know it’s never going to happen, but I don’t even care that much for an accurate accounting. But that’s sour grapes I’m thinking. But right now I just feel like: eh, let them do what they want. They will continue to torch their own credibility with everyone except the true believers and I don’t have to worry about it because it’s mostly political fan fiction “ripped from the headlines to the day!”


    • she uses the same talking points as a democrat. surprised she didn’t manage to jam in transphobia in he last paragraph.


      • It’s all part of the plan:

        “The Reason Liz Cheney Is Narrating the January 6 Story

        The committee is laying out the facts in a way optimally designed to cultivate trust.
        By Anne Applebaum”

        But what they don’t get is that for the people they are trying to reach it’s going to backfire because the manipulation is so obvious.


        • yep. the left has no concept of how red-pilled people are outside of their bubble these days.


        • Brent, you may find this amusing:

          “The Season Finale of Catch Trump if You Can”


        • She is good. I had never heard of her until a few months ago.

          But yes, the left and the media’s problem is that they just have zero credibility at this point.

          I also think the whole point of the Trump Accountability Project (basically blacklisting anyone who worked in his admin) was to force shit like this. You want to work again? Say Trump developed 10 foot arms and grabbed the wheel from the backseat of a limo..


        • Bigger than that, unless the candidate is approved by the Deep State (and is a Democrat) you’re fucked if you work for the Admin or campaign.


        • He was really in an SUV that day so Trump going Jason Bourne on some jacked secret service dude half his age or less—that just makes sense once you hear that.


        • Fascinated as to why Bennie Thompson isn’t seen as trustworthy?


        • So very obvious. Also if I had low interest in politics, even if I was center-left or imagined myself to be a Democrat, I might either find the whole thing boring and repetitive or a huge waste of tax payer money and the entirely wrong focus when shelves are often empty, gas is $5 a gallon, and food keeps getting more expensive.


      • Ace made a point about Tom Nichols about how he’s gone to the left or hard left on all sorts of positions since Trump happened, without any sort of explanation for the 180. There’s no explanation of how they got blue-pilled or what opened their eyes to the moral rightness of totalitarian progressivism and pro-war leftism. No tales of road to Damascus moments. They just suddenly start spouting left wing talking points the way they used to spout right wing talking points, with no transition.

        While people on the side the new convert has come over to don’t find this odd, I think anyone in the middle or on the other side have a hard time believing their conversion is anything but them selling out to the highest bidder, having no core beliefs, or having been a wolf in sheep’s clothing all along.

        They don’t persuade anyone in their abrupt conversions—you can’t if you can’t walk people through why something you didn’t like from one politician or incident or even a few suddenly means everything you espoused in the past was wrong and now you’re totally on the other side.


    • I can’t do anything here to argue against the SC decisions but the least I can do is remind you guys how dangerous Trump is. Otherwise all I can do is fight for candidates who reflect my views, or even if they don’t, if they’re honest and have integrity I can swing my vote their way too. I’ve actually been sending money to a few like Liz Cheney, who at least put up a fight for the integrity of our elections. Although…………..not sure how well that’s going to survive this SC. At this point I’m just hoping that the SC may have cut the foot off the supposed midterm elections and we (Liberals and Independents) may have a better outcome than we thought. Unpopular decisions have consequences!


      • Look, I’m not voting for Trump in the primaries. That’s my only commitment. If it’s Trump against Biden or Harris or Clinton then I will not like my choices but will 100% vote for Trump.


      • lms:

        At this point I’m just hoping that the SC may have cut the foot off the supposed midterm elections…

        Why “ supposed”? Are you suggesting that the midterms won’t be actual elections?


      • lms, have you seen this?

        That’s not what Democrats should be doing if they truly believe that Trump is a threat to democracy.


    • “ But I also know that at this moment, we are confronting a domestic threat that we have never faced before. And that is a former president who is attempting to unravel the foundations of our constitutional Republic”

      I may be wrong but I think this is fantastical. I’m not seeing it, I think there is clearly a one-sided narrative being crafted, and given everything else going on this sounds like self-serving bullshit, to me. Or the product of having been born and raised an elite—and so believe all the peasants should be just as concerned as she is that a brash, low-class orange man had the temerity to waltz into their exclusive club, and then apparently inspired the peasants to think they had some sort of right to protest and riot within the people’s house. I don’t recall her ever getting so exorcised about rioters burning down minority businesses and low-income housing and preventing ambulances getting to hospitals during the 2020 Summer of Love.

      Meh. Perhaps she’s sincere but even that sincerity is borne out of an elitism and not a little narcissism. Which is not unusual for the political class, from right to left.


  2. I’m sure that somehow this is Trump’s fault too:


  3. FOAD, shitbird.

    When asked about the high gas prices and how long we should expect to pay for it, Biden said at his NATO presser that Americans should be prepared for pain at the pump for as long as it takes to defeat Russia in Ukraine. Excuse me (via NY Post):

    It’s hard to describe how viscerally angry this makes me. Two of the most corrupt entities on earth are fighting a war we’re financing either directly through giving corrupt Ukrainian oligarchs money and weapons or shoveling money into Russia to buy their oil.

    For what? So that Ukrainians can keep their current corrupt government? Jesus.Fucking.Christ.

    Can we divorce now for fucks sake?!?

    But no mean tweets though, so I guess it’s all worth it.


  4. It’s gotta less than net zero as China and India will not comply with any requirement that could effect their GDP growth.


    • Our ruling elite have a secret desire to be chased with pitchforks and later marched to the guillotine. You can’t make such drastic changes so fast and not find yourself an a personal existential crisis.

      The protection of wealth only serves you so long.


    • The left likes high energy prices in theory, not reality. They do gas tax holidays when the going gets rough.


  5. This cannot be true, can it?

    $1000/month car payment?!?!


    • 50k, 5 years, 6.25%, just about that.


      • mine was $800 a month before i paid it off a few years ago.
        it was one of those .. either sink a lot of capital into the car. or pay $800 a month at, uh, maybe 1%. good credit.

        ended up selling it about a month or so ago. don’t need 2 cars when we’re both 100% WFH.


  6. Krugman with a well reasoned take


    • The left can’t use the administrative state as its toady to implement things that could never be passed legislatively?

      Oh well, since the regulatory state works solely for the left, i don’t really care all that much.


      • I don’t particularly want the left or the right to be able to use the administrative state to accomplish their preferred policy goals. Laws should be passed be legislators. If there is going to be a body that can write laws and enforceable regulations that apply to general companies and people—they should be run by a board of governors that are elected by a vote of congress of state legislatures or literally the governors of the 50 states. But they should be elected and elected by people the general public vote for so when some Soros-sponsored agency head wants to close down the most productive oil fields in America during a gas crisis, voters know who THEY can vote against to express their displeasure. In addition to the party in power in Washington.


    • Well of course he sounds crazy, like a crazy 80s right-winger talking about porn.

      But the blue-on-blue violence in the responses is amusing. Apparent he was belittling the plight of women.


    • That anyone in spitting distance of the administration would ever think that is a good answer is kind of terrifying.

      We can’t keep saying they are saying the quiet part out loud when they are saying it all out loud.


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