All Things in Moderation

Morning Report: The US economy is off to a good start this year

Vital Statistics:

Stocks are higher this morning on good earnings numbers out of market darling Netflix. Bonds and MBS are up.

Mortgage applications rose 3.7% last week as purchases increased 8% and refinances fell 7%. There was an adjustment for the Martin Luther King holiday. “Mortgage rates increased slightly last week, but there continues to be an upward trend in purchase activity. Conventional and FHA purchase applications drove most of the increase last week as some buyers moved to act early this season,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Refinance applications declined over the week and remained at low levels. There is still little incentive for homeowners to refinance with rates at these levels.”

Homebuilder D.R Horton released Q1 earnings last night that missed Street expectations. Earnings per share rose 2% YOY, while revenues rose 7%, indicating that margins are contracting. Part of the issue was a decline in gross margins, which was due to hedging costs related to the company’s use of buy-downs to incentivize homebuyers. By using buy-downs, homebuilders can “cut” the price of the home to the buyer without disturbing the comps. Headline price stays the same, but the borrower gets the price cut via a subsidized mortgage.

Orders rose 35%, but average prices are decreasing as consumers prefer lower price points. The stock was down 9.2% on the day. The homebuilders have been on a tear for the past year, so any disappointment was likely to have an outsized reaction.

The S&P Homebuilder ETF XHB was on a tear last year, rising almost 60%.

The builders are still being somewhat cautious, which is surprising given the demand out there. D.R. Horton’s single family homes under construction fell to 900 units or so at the end of the year.

Meanwhile, apartments are flooding the market, especially in the hot MSAs like Nashville, where developers are having to get quite promotional to get occupancy – i.e. 4 months of free rent. Supposedly Nashville will see 37,000 new units hit the market this year. Suffice it to say, over the past several years the US has overbuilt multi-fam and under-built SFR.

The US economy started 2024 on a strong note, according to the flash PMI. “An encouraging start to the year is indicated for the US economy by the flash PMI data, with companies reporting a marked acceleration of growth alongside a sharp cooling of inflation pressures. Output measured across both goods and services rose in January at the fastest rate since last June, growth momentum having stepped up a gear on the back of improved demand conditions. New orders inflows have now picked up for three months, buoyed in particular by improving sales to domestic customers, helping lift business confidence about the year ahead to the most optimistic since May 2022.”

Importantly, inflation was the lowest since October 2020, indicating the Fed’s tightening policy has worked. We get the all-important PCE data on Friday before the Fed meets next week.

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22 Responses

1. 

   Let the mutherfuker burn!, on January 24, 2024 at 3:59 pm said:

   I am enjoying the living shit out of Dewit’s indignation here.

   <b>The decision to step down on Wednesday was part of an “ultimatum,” DeWit said, adding that the Lake campaign threatened the release of a “more damaging” recording, audio which he says he is unsure what it contains.</b>

   So, he’s pissed he’s giving in to the “ultimatum” to avoid the release of “more damaging” recordings? Stand up for yourself, man. If you didn’t do anything wrong, let’s hear your side of it and let them throw you out.

   https://www.azfamily.com/2024/01/24/arizona-gop-chairman-jeff-dewit-resigns-after-controversy-involving-kari-lake/

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   • 

     Let the mutherfuker burn!, on January 24, 2024 at 4:06 pm said:

     This part of Dewit’s statement is hilarious.

     <b>The recording, from over ten months ago, is not only taken out of context but also undermines the integrity of private discussions critical for party leadership.</b>

     I love his pretending that integrity is in anyway associated with politics.

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2. 

   jnc4p, on January 24, 2024 at 5:13 pm said:

   This is good:

   Let me be very clear. In those two Tweets, and in my essays throughout 2020 to 2022, and in my current essays, I have indeed compared the rise of this new form of totalitarianism to the rise of the best-known 20th-Century form of totalitarianism, i.e., Nazi Germany. I have made this comparison, and analyzed the similarities and differences between these two forms of totalitarianism, over and over again. And I will continue to do so. I will continue to analyze and attempt to explain this new, emerging form of totalitarianism, and to oppose it, and warn my readers about it.

   The two Tweets at issue here feature a swastika covered by one of the medical masks that everyone was forced to wear in public during 2020 to 2022. That is the cover art of my book. The message conveyed by this artwork is clear. In Nazi Germany, the swastika was the symbol of conformity to the official ideology. During 2020 to 2022, the masks functioned as the symbol of conformity to a new official ideology. That was their purpose. Their purpose was to enforce people’s compliance with government decrees and conformity to the official Covid-pandemic narrative, most of which has now been proven to have been propaganda and lies.

   Mask mandates do not work against airborne viruses. This had been understood and acknowledged by medical experts for decades prior to the Spring of 2020. It has now been proven to everyone and acknowledged by medical experts again. The science of mask mandates did not suddenly change in March of 2020. The official narrative changed. The official ideology changed. The official “reality” changed. Karl Lauterbach was absolutely correct when he said, “The masks always send out a signal.” They signal they sent out from 2020 to 2022 was, “I conform. I do not ask questions. I obey orders.”

   That is not how democratic societies function. That is how totalitarian systems function.”

   https://cjhopkins.substack.com/p/the-verdict

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3. 

   Let the mutherfuker burn!, on January 24, 2024 at 7:35 pm said:

   I am absolutely fascinated with the Republican Senators who are in support of this. They have to know it’s a non starter with a huge portion of the base and would irrecoverably fracture it.

   https://redstate.com/mike_miller/2024/01/24/mcconnell-pressures-gop-senators-to-back-disastrous-border-bill-before-its-publicly-released-for-debate-n2169161

   Is that the goal, or is the goal to be seen supporting it knowing it’s not going anywhere. I honestly cannot fathom it.

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4. 

   jnc4p, on January 24, 2024 at 7:47 pm said:

   Romney actually gets it for once:

   “If virtually all the GOP governors and senators were to say they would not support Trump, even in the general, I don’t think his poll numbers would be harmed, at all,” he told Martin. “They might even get better. I think the MAGA base dislikes our elected elites as much as or more than they dislike Democrats.”

   https://nymag.com/intelligencer/article/can-joe-biden-win-2024-presidential-election-anti-trump-coalition.html

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   • 

     Brent Nyitray, on January 24, 2024 at 7:50 pm said:

     I think the elected Republican elites dislike the MAGA base as much or more than they dislike Democrats too. Same with the NRO pundits.

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     • 

       jnc4p, on January 24, 2024 at 7:56 pm said:

       Taibbi identified this all the way back with the Tea Party in 2011:

       Boehner’s irrepressible hackosity is a serious problem for the Republican establishment, which desperately needs a more convincing con man to stave off voter anger on the right. In this regard, the contrast between Boehner and Littleton, the Tea Party leader in Boehner’s home state, is interesting. The two men live in the same place, the small township of West Chester near Cincinnati, so Littleton is very familiar with Boehner. But Littleton’s opinion of the Republican establishment couldn’t be lower: It was precisely programs like the Medicare drug benefit bill and No Child Left Behind, programs he considers unacceptably wasteful and intrusive, that moved him to get into politics. “These were all Republican programs,” Littleton says. “If you look at Republican congressmen from Ohio, they all voted for this stuff.”

       What’s interesting is that the survival of the hack political class that Boehner represents now depends almost entirely on their ability to neutralize grass-roots leaders like Littleton — and the word “leader” here is used in the real sense of the word. While Boehner often negotiates for a Republican delegation that winds up rejecting the compromises he reaches, Littleton, when I speak with him, strikes me in exactly the opposite way — I feel very aware that I am talking to someone with a lot of political power, who represents quite a lot of actual human beings.

       For obvious reasons, this is a real problem for the Republican Party establishment, which would forfeit any ability to squeeze the Goldmans and Citigroups of the world for golf vacations the instant they stop being able to deliver the votes for cushy spending bills and deregulatory goodies — votes that are now, at least in part, controlled by people like Littleton. This is why in some states the Republican Party fought so fiercely against the Tea Party; in Ohio, the party spent nearly $1 million campaigning to stop Tea Party candidates from assuming jobs at the state level. “They hate us more than they hate the left,” says Littleton. “The left’s just an enemy. We present a legitimate threat to them.”

       https://www.rollingstone.com/politics/politics-news/the-crying-shame-of-john-boehner-182888/

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   • 

     Let the mutherfuker burn!, on January 24, 2024 at 7:56 pm said:

     This has been true for some time, maybe since Bush’s second term when he attempted to nominate Harriet Miers to SCOTUS. Or when Rubio et al floated immigration reform, even had Limbaugh considering it. Or, as the Middle East wars dragged on, in addition to the ‘08 economic crash and the bank bailout.

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   • 

     Brent Nyitray, on January 24, 2024 at 9:16 pm said:

     Chait is such a dingleberry. The complaining about authoritarianism is 100% projection.

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     • 

       jnc4p, on January 24, 2024 at 10:37 pm said:

       The CJ Hopkins piece is really good in that regard.

       Not every form of totalitarianism is the same, but they share common hallmarks. Forcing people to display symbols of conformity to official ideology is a hallmark of totalitarian systems. Declaring a “state of emergency” and revoking constitutional rights for no justifiable reason is a hallmark of totalitarian systems. Banning protests against government decrees is a hallmark of totalitarian systems. Inundating the public with lies and propaganda designed to terrify people into mindless obedience is a hallmark of totalitarian systems. Segregating societies is a hallmark of totalitarian systems. Censoring dissent is a hallmark of totalitarianism. Stripping people of their jobs because they refuse to conform to official ideology is a hallmark of totalitarian systems. Fomenting mass hatred of a “scapegoat” class of people is a hallmark of totalitarianism. Demonizing critics of the official ideology is a hallmark of totalitarian systems. Instrumentalizing the law to punish dissidents and make examples of critics of the authorities is a hallmark of totalitarianism.

       https://cjhopkins.substack.com/p/the-verdict

       He’s one of the few who claims to be an antifascist who I believe legitimately deserves the title.

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5. 

   Brent Nyitray, on January 25, 2024 at 9:22 am said:

   Newsflash: People aren’t going to pay for propaganda

   I'm starting to think that brainwashing the American public with obvious bullshit, day after day, is not a good business model.

   You know who doesn't understand that point?

   Answer: The investigative reporters who are getting fired.

   Somehow they missed the story about how they… https://t.co/Fv1a3PVZ2o

   — Scott Adams (@ScottAdamsSays) January 25, 2024

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6. 

   Let the mutherfuker burn!, on January 25, 2024 at 11:22 am said:

   appreciate the phrasing here.

   https://x.com/doc_0/status/1750508605743264212?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

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   • 

     jnc4p, on January 25, 2024 at 1:08 pm said:

     Vox wrote this unironically:

     The immediate issue before the Supreme Court is not whether Texas is allowed to construct such a barrier against the wishes of the federal government, which is itself a doubtful proposition. The Supreme Court has long held that “the supremacy of the national power in the general field of foreign affairs, including power over immigration, naturalization and deportation, is made clear by the Constitution.”

     Rather, the question in the Texas case is whether the state of Texas may obtain a court order forbidding federal agents from cutting the razor wire barriers when they need to do so in order to perform their official duties. In at least one instance, according to the Justice Department, an agent “saw an ‘unconscious subject floating on top of the water,’ but was ‘unable to retrieve or render aid to the subject due to the concertina wire barrier placed along the riverbank.’”

     Nevertheless, the Fifth Circuit reached the flabbergasting conclusion that it should issue an order allowing Texas to block federal officials with razor wire.

     Despite the Fifth Circuit’s decision, Texas’s arguments in favor of such an order are so weak that they border on frivolity. Again, the Constitution says explicitly that states must yield to federal law, and that they must permit federal officials to perform their duties when those officials’ actions are authorized by federal law.

     And there’s simply no question that federal law permits border patrol agents to approach migrants entering the United States, even if they do so on non-public land. Among other things, federal law explicitly gives border patrol agents the power, without first obtaining a search warrant, to “have access to private lands, but not dwellings, for the purpose of patrolling the border to prevent the illegal entry of aliens into the United States.”

     https://www.vox.com/scotus/2024/1/22/24047314/supreme-court-texas-homeland-security-razor-wire-eagle-pass-biden

     Of course, the border patrol agents in question here aren’t acting “for the purpose of patrolling the border to prevent the illegal entry of aliens into the United States” but rather to facilitate the illegal entry of aliens into the United States. That’s the whole issue.

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     • 

       Let the mutherfuker burn!, on January 25, 2024 at 1:29 pm said:

       The hysteria over Abbot’s action is weird. All the court said was that the Feds could remove razor wire if they want. It didn’t address whether or not Texas could put razor wire right back up. That being said, Texas is now arguing that an invasion is occurring and they are taking measures to stop it. I say to Abbott, prove it by actively detaining and repatriating said invaders. Until then it’s typical Republican kabuki bullshit.

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       • 

         jnc4p, on January 25, 2024 at 3:14 pm said:

         He’s planning on doing that. It’s being litigated as well.

         https://www.texastribune.org/2023/12/18/texas-governor-abbott-bills-border-wall-illegal-entry-crime-sb3-sb4/

         https://apnews.com/article/texas-immigration-law-questions-3cb931b43de67e4fe730c1bca42144ee

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       • 

         Let the mutherfuker burn!, on January 25, 2024 at 3:36 pm said:

         I don’t think SCOTUS will let this fly, he needs to go with the invasion logic and start increasing razor wire on the border and turning people back, deporting illegal crossers before INS gets to them. That will be something.

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     • 

       Let the mutherfuker burn!, on January 25, 2024 at 3:48 pm said:

       This is an interesting look at what might happen.

       https://x.com/auronmacintyre/status/1750551722458599648?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

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7. 

   jnc4p, on January 25, 2024 at 3:16 pm said:

   Worth noting:

   https://reason.com/2022/10/10/judge-holds-federal-bureau-of-prisons-in-contempt-for-allowing-man-to-waste-away-from-untreated-cancer/

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   • 

     jnc4p, on January 25, 2024 at 3:31 pm said:

     and another one:

     https://reason.com/2024/01/24/feds-will-try-backpage-co-founder-michael-lacey-for-a-third-time/

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8. 

   Let the mutherfuker burn!, on January 25, 2024 at 5:15 pm said:

   I agree with this and am requesting we submit names of other Republicans that will speak at the Democratic convention.

   https://x.com/realjeremycarl/status/1750574007873683667?s=46&t=vSGsUlnc4rLxcUf7zfUiHg

   Obviously Kizinger and Liz Cheney, but that’s too easy so I will submit General Kelly.

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   • 

     jnc4p, on January 26, 2024 at 10:49 am said:

     I don’t see Romney speaking at the Democratic convention. This is resistance fantasy thinking again.

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9. 

   jnc4p, on January 26, 2024 at 10:50 am said:

   Presumably he’ll require permission from the Greek and Italian governments for the antiquities displays as well.

   https://www.nytimes.com/2024/01/26/arts/design/american-museum-of-natural-history-nagpra.html

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