Morning Report: Comey fired 5/10/17

Vital Statistics:

Last Change
S&P Futures 2391.5 -1.8
Eurostoxx Index 395.9 0.1
Oil (WTI) 46.4 0.6
US dollar index 90.4  
10 Year Govt Bond Yield 2.36%
Current Coupon Fannie Mae TBA 102.6
Current Coupon Ginnie Mae TBA 103.81
30 Year Fixed Rate Mortgage 4.05

Stocks are lower this morning on no real news. Bonds and MBS are up.

Last night, Donald Trump fired FBI Director James Comey. This will excite the chattering classes and provide endless fodder for the media, but it shouldn’t matter much to the markets. At the margin, it will probably push bond yields lower.

Mortgage applications rose 2.4% last week as purchases rose 2% and refis rose 3%. Conforming and jumbo rates were flat, while FHA ticked up a few basis points.

Import prices rose .5% MOM and are up 4.1% YOY. Bonds are shrugging off the data, however it could be a sign of inflation creeping up. We did see a small sell-off in the dollar during April, but nothing of that magnitude. Something to watch.

We will have some Fed-speak this afternoon with Eric Rosengren and Neel Kashkari speaking at 12:30 and 1:30 EST respectively.

With all the data over the past week, Fed Funds futures are moving mainly for the September meeting, which now has a 40% chance of a 25 basis point hike, up from 20% about a week ago. June is currently pegged at 80%. The weak Q1 print so far has not had an effect on trader sentiment.

Good advice for the first time homebuyer who is also saddled with student loan debt. Waiting until the deferral period has passed helps. Also look at FHA loans, however there are caveats.

Boston Fed President Eric Rosengren warns that GSE reform could hit the multi-family market. F&F bear the credit risk of 44% of the multi-fam market, more than all the banks combined.

Job openings in the construction sector are higher now than they were at the peak of the bubble. Yet the hiring rate is just off the lows of the bust. This certainly corroborates the claim that a labor shortage is a big reason why housing starts are still depressed. Lots of skilled labor left the sector after the bubble burst and got jobs in the energy patch. There is only one way to square that circle and that is to raise wages to attract talent. Which means compressing margins if builders are unable to pass on that cost increase. Regardless, it doesn’t bode well for new home affordability unless we begin to see wholesale increases in wages across the US, which hasn’t been happening.

Secrecy 1/23/17

http://www.nytimes.com/books/98/10/04/reviews/981004.04tanenht.html

I read Moynihan’s book, back then. I don’t remember what I read, in detail. So I dug up the above linked review from the NYT as an easy reference. I do recall that it was entertaining, but infuriating, to the point where all I could do was laugh when I learned that Gen. Bradley did not tell Truman what Army Intelligence knew about Alger Hiss, even though the two Missourians liked each other and even went fishing together. This, because it was an Army “secret”.

I heard a report this morning that Flynn is under CIA investigation for his Russia ties. Also, that the Trump campaign is under investigation, for the same.

How awkward. If CIA develops classified information that implicates Flynn they must report it to the President, right? Or do they make a “need to know” assessment of some sort? And what if they determine, correctly or not, that Trump has questionable ties to the Kremlin, that color his national security decisions in a way that compromises American interests? Do they go to their Congressional oversight committees first? I suppose that would be my choice if I were the Agency.

To be clear, I think the con artist we elected is just that – merely a clever con man, not a traitor.

Morning Report: Jeb Hensarling for Treasury? 11/18/16

Vital Statistics:

Last Change
S&P Futures 2184.0 -0.5
Eurostoxx Index 339.4 -1.2
Oil (WTI) 45.5 0.1
US dollar index 91.3 0.1
10 Year Govt Bond Yield 2.28%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4

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

Bonds are ending their worst two week run in 25 years as the 10 year bond yield increased almost 50 basis points. Strategists are suggesting that the 10 year will be in the 2.5% – 2.75% range a year from now if Donald Trump manages to get his infrastructure spending plan and tax cut. The US dollar continues to strengthen as well.

So far, it looks like Jeb Hensarling is in the mix to take over as Secretary of the Treasury for Donald Trump. Note he is a politician, not a Wall Streeter. In fact, the banks believe he is a bit of an obstacle for getting real reform. Hensarling is generally viewed as not a friend of the big banks, and he really isn’t that interested in their input. Hensarling does have a plan to reform Dodd-Frank, which would include scrapping the Volcker Rule (which prohibits proprietary trading), reining in the CFPB, eliminating caps that banks can charge merchants for debit card transactions, and reforming the SIFI (systemically important financial institutions) rules. The big banks will need to raise a lot of capital in order to have more latitude however, as his bill requires a 10% capital cushion. Citi, for example, is at 7.4%, which means the banks would need to raise hundreds of billions in new equity capital.

The glory days of the CFPB are numbered. A court ruling that prevents the director from being fired and the potential for a business-friendly Trump Director has made it possible for a bipartisan consensus that the director be replaced with a 5 person committee, and that it be subject to Congressional appropriations. At least one expert believes that will slow down the agency and probably cut its enforcement actions in half. As of right now, if you are a graduate of a top law school and have an interest in financial regulation, the CFPB is the hot place to be.

Bottom line: we could get some regulatory relief, however it will be at the margin and probably not a wholesale change from what we have now. Will it be enough to get the private label securitization market back? So far I have not seen anything with respect to required equity tranches etc, so it is hard to tell. The only name for HUD I have heard is Westchester County Executive Rob Astorino, who is fighting HUD on zoning issues and affordable housing mandates.

After rising for several years, average home sizes are falling, as construction moves away from focusing in the high end to starter homes.

Scott Adam’s is a Fascist 6-8-16

Today, Amanda Marcotte published an article in Salon maintaining that Dilbert has Gone Fascist.

As an interesting aside, I discovered this when I was typing in the words “scott adams” into my search bar to get to Scott Adams blog. Google and/or Apple is apparently heavily invested in making sure that everybody who wants to go to Scott Adam’s blog gets a chance to read Amanda Marcotte’s wisdom on Dilbert’s/Scott Adams’ embrace of racism.

scottadamssearchbar

Anyway, onto Marcotte:

In the real world, Trump has off-the-charts unfavorability ratings, but in the world of Scott Adams, Trump is  a svengali of politics, headed for a landslide in November, due to the enormous persuasive power of racist cracks and non sequitur ramblings. If you read enough of Adams’s blog, it becomes quickly apparent that the only reason Adams thinks this is because he himself is persuaded to vote for Trump. And, like his fellow narcissistic Donald Trump, Adams mistakes his views for the majority.

I think this is a legitimate objection to Scott Adams’ insistence that Trump will win by a landslide in November. Specifically, what I have not seen Adams address is the difficulty of persuading entrenched opposition. Persuasion and branding are powerful things, but their effects are also often semi-permanent to permanent. Once successfully persuaded to buy fully into something from a car brand to a computer ecosystem to an ideology, it’s very difficult to brand and persuade someone out of it.

If you’ve been buying Apple Macintosh computers for years, your next one is likely to be an Apple Macintosh, and no amount of compelling persuasion techniques by Lenovo or Intel or Microsoft is going to change that. No matter how good. This is why Trump’s powerful persuasion techniques identified by Adams’ are unlikely to result in a landslide for Trump in November. This is not a competition between two brand new products in an entirely new category. There is already a lot of baked-in brand loyalty, and a good advertising campaign may move the needle, but the shift will not be seismic.

However, things like this are awesome:

Despite claiming not to support anyone, Adams has largely handed his blog over to defending Trump from his critics.

He doesn’t really do a lot of defending Trump from his critics. He’s asserting that Trump’s dispensing of facts and logic in favor of persuasion techniques, intentional or accidental, is superior to what anybody else is doing in the campaign, and that certainly proved to be true as far as the Republican primary went.

Trump makes a blatantly racist remark about Judge Gonzalo Curiel being “Mexican” and therefore, in Trump’s opinion, unable to render an impartial verdict in the Trump U case? Adams says that Trump critics must therefore be saying Curiel is a “robot” because “100% of humans are biased about just about everything.”

She includes a link to the original blog post which makes it pretty clear Adams is writing a satirical piece on the absurdity of identity politics and the concept of impartiality (in his opinion), and analyzing Trump’s strategy from his perspective on the art of persuasion:

Curiel looks human on the outside, and he has passed as human for decades. But Cooper made it clear in his interviews yesterday that while science understands that 100% of humans are biased about just about everything, this robot judge is not susceptible to being influenced by his life experiences. It sounds deeply implausible, but no one on CNN challenged Cooper’s implication that Judge Curiel is the only bias-free entity in the universe. Ergo, he must be a robot.

Anyway, lots of folks on Twitter are asking me why Trump would accuse the robot judge of being “Mexican” when that is obviously a racist thing to say. Did Trump make a huge mistake, or is it some sort of clever persuasion thing?

Clearly, Adams is defending both racism and fascism. It is not possible to reach any other conclusion.

The nut of Adams argument (as with pretty much all his Trump posts) and basically untouched on by Marcotte, who tries to use her own lame skills at persuasion to convince us that Adams only wants to slavishly defend Trump and was only using the above blog post to assert that Trump critics were saying the judge, Curiel, is actually a robot (literal, much?) … and, where was I? Oh, yes, the nut of Adams argument regarding Trump and Curiel:

1. Trump wins in court, in which case, Trump wins.

2. Trump loses in court, in which case, Trump says Democrats rigged the system to give him an unfair trial. We’re already primed to believe it.

From a legal perspective, race is not a reason to remove a judge. I haven’t heard anyone argue otherwise. But from a persuasion perspective, Trump is setting the stage for whatever is to come. So yes, it is smart, albeit offensive.

Not quoted by Marcotte, of course, presumably to avoid her readers being offended by reading what Adams actually said, instead of her skewed interpretation of it.

Adams writes a whole blog post sneering at the very idea that one is capable of predicting a person’s future behavior on their past record.

Except, of course, Adams is demonstrably correct in his actual assertion. Also, there are no quotes, of course, because things like this would erode her primary assertion:

So, how did President Obama do on the job? Was he a good president?

If you have an answer in your head – either yes or no – it proves you don’t know how to make decisions. No judgement can be made about Obama’s performance because there is nothing to which it can be compared. No one else in a parallel universe was president at the same time, doing different things and getting different results.

I’m not a fan of everything our president has done, but I feel as if historians will rank him as one of our best presidents. Definitely in the top 20%.

Wait, what? Am I crazy?

Many of you think Obama nearly destroyed civilization. You and I can’t both be right. But both of us can be irrational in trusting our opinions. We are literally comparing Obama’s actual performance to imagined alternatives that exist only in our minds. Maybe you think the imaginary president in your mind is way better than the real one, whereas I think the real one did well compared to my imaginary alternative.

That isn’t thinking. Science is pretty clear on that.

Marcotte never mentions that this Trump-infatuated sycophant thinks Obama will be ranked in the top 20% of US Presidents. Hmmm.

I will not dive into the plenitude of evidence that people are horrible at prediction, and wildly overestimate their own ability to predict the future, their own future behavior, and the future behavior of others beyond the simplest degrees of complexity.

Back to Marcotte:

Now Adams has a real doozy of post, where he pretends to endorse Clinton, but of course it’s a cover story for his real endorsement: Trump. In the post, Adams literally accuses Clinton of trying to get Trump killed because, “once you define Trump as Hitler, you also give citizens moral permission to kill him.”

I understand that when people lampoon our sacred cows, we don’t find the humor funny. However, I am prone to believe that Marcotte doesn’t understand that part of what Scott Adams is doing is parody. I find it also ironic (and interesting un-self-aware) that Marcotte does not seem to associate that post as using an inversion of the same logic Trump’s critics do when they blame him for violence at his rallies.

Obviously, this is not a Clinton endorsement. The purpose of this is to try to convince people that Clinton is some kind of dangerous fascist demagogue who will send her brownshirts into the street to force people into compliance with violence. This opinion, of course, has nothing to do with the real life Clinton and everything to do with Adams’s fantasy version of her.

I’m not sure she understands satire. Or irony. There has been a constant and ongoing comparison of Trump to Hitler and his supporters to brownshirts for the more hyperbolic elements of the left and the Democrats. Did Marcotte miss that?

It’s a fantasy version of Clinton that is quite obviously a direct result of Adams’s own bizarre hang-ups about women. Adams has a long history of being obsessed with the idea that women have grown too powerful and they are pushing hapless men around in our new feminist dystopia.

Oh, well. Of course she missed it. When you are a hammer, I suppose everything looks like a nail.

For instance, there is the classic post where he argued that ours is a “female-dominated” society, because, in what he clearly believes is a grave injustice, “access to sex is strictly controlled by the woman.” They are allowed to turn you down even if you pay for dinner first. And you ladies think you have it bad just because you get paid less, are far likelier to be raped, and have to endure politicians trying to force childbirth on you against your will.

Some of that she’s just making up. An important part of that post that Adams’ perhaps should have emphasized is this:

Now compare our matriarchy (that we pretend is a patriarchy) with the situation in DAESH-held territory. That’s what a male-dominated society looks like. It isn’t pretty. The top-ranked men have multiple wives and the low-ranked men either have no access to women, or they have sex with captured slaves.

He’s arguing that a real patriarchy looks like ISIS or the Taliban or Saudi Arabia. Yet she asserts that Adams is suggesting the fact that America isn’t run by the Taliban is a “grave injustice”.

About another post, in which Adams suggest there’s really no middle ground in the war between the sexes, either men or women will win (and he seems, to me, to think it’s sad that men can’t win, but it’s better for humanity that women do) , Marcotte writes:

 He concludes that the only solution to this problem is to “come up with a drug that keeps men chemically castrated” and eliminate all copulation, because clearly, in his mind, the only way men can express themselves sexually is by abusing women.

Always comes to the same thing with feminists. Men and women having sex = abusing women.

I gotta say, she needs to work on her persuasion skills.