Tag: news

Consumer Confidence Disappoints As Trump Hope Dips

After surging to 12-year highs in December, following Trump's election victory, UMich consumer sentiment faded in January and missed expectations (98.1 vs 98.5 exp). While inflation outlooks picked up modestly off record lows, economic 'expectations' – hope – dipped from 89.5 to 88.9 as the Trump Bump appears to have stalled.

While not quite as big a drop as Bloomberg confidence data, it appears Trumphoria is fading…

 

Even as inflation outlooks bounce off record lows…

 

On the bright side, survey respondents improved their view of it "being a good time to buy" Household Items, Homes, and Vehicles.

 

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How Rising Rates Are Hurting America’s Largest Mortgage Lender, In One Chart

While one can argue that both JPM and Bank of America posted results that were ok, with some aspects doing better than expected offset by weakness elsewhere, even if moments ago JPM stock just hit an all time high, there was little to redeem the report from the scandal-ridden largest mortgage lender in America, Wells Fargo. Not only did the company miss revenues significantly, reported $21.6bn in Q4 topline, nearly $1 bn below the $22.4bn consensus, but it had to reach deep into its non-GAAP adjustment bag to convert the $0.96 EPS miss into a $1.03 EPS beat (net of “accounting effect”), but the details of its core business were, well, deplorable, which perhaps was to be expected following the recent drop in new credit card and bank account growth, following last year’s fake account scandal.

Incidentally, Wells Fargo reported its latest customer metrics alongside 4Q earnings, and in December the bank said that the retail public continued to shy away, as new checking accounts plunged 40%Y/Y while new credit card applications tumbled 43%.  On the other hand, deposit balances debit card transactions continued growing which probably is not a good sign, if only for the Keynesians in the administration: it means that consumers are saving.

But back to Wells results, which revealed that in Q4, the bank’s ROE, one of Buffett’s favorite indicators, fell to 10.94%. which was the lowest quarterly level posted in years accordint to the WSJ. “While the return had been grinding lower for some time, largely due to the declining interest-rate environment, the fourth quarter also marked the first, full reporting period since the bank’s sales-tactics scandal erupted in September.”

More troubling however, was that in Q4, Wells overall profit fell to $5.27 billion, or 96 cents a share (excluding the various non-GAAP addbacks), down from $5.58 billion, or EPS of $1 in Q4 2015.

So back to Wells Fargo’s retail banking business. Here the bank reported that while credit card outstandings rose 5% compared to $33.14 billion last quarter and jumped 8% from $34.04 billion in the year-earlier period, new accounts tumbled 52% to 319,000 from 667,000 last quarter and fell 47% from 597,355 in the year-earlier period, once again this is a reflection of the bank’s ongoing legal scandals.

But it was the bank’s bread and butter, mortgage lending, that was the biggest alarm because as a result of rising rates, Wells’ residential mortgage applications and pipelines both tumbled, and after hitting multi-year highs in the third quarter when mortgage rates were likewise hugging multi-year lows, in Q4 Wells’ mortgage applications plunged by $25bn from the prior quarter to $75bn, while the mortgage origination pipeline plunged by nearly half to just $30 billion, and just shy of all time lows recorded in late 2013 and 2014. Moynihan’s explanation was redundant: “the pipeline is weaker because of fewer refi loans.” This should not come as a surprise: just one month ago, Freddie Mac warned that as mortgage rates continue to surge, “expect mortgage activity to be significantly subdued in 2017.”

Wells Fargo did not even have to wait that long, and as shown in the chart below, the biggest US mortgage lender is already suffering.

Expect even greater declines in the coming quarters should rates continue to rise.

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The Comforting Convictions of Obama’s Farewell Speech: New at Reason

President Obama sounded the same haughty notes on his way out as he did on the way in.

David Harsanyi writes:

Watching President Barack Obama’s soaring 2008 Democratic National Convention speech in Denver, I never imagined the kind of turmoil his presidency would incite. Almost everything has changed in the subsequent years, and yet his farewell speech to the nation was brimming with the same brand of haughty lecturing.

Obama loves to conflate progressivism and patriotism, pitting the forces of decency and empathy—his own—against the self-serving profiteers and meddling reactionaries who stand in the way. All of it is swathed in phony optimism.

The president’s central case for government’s existence rests on the notion of the state being society’s moral center, engine of prosperity and arbiter of fairness. Obama speaks of government as a theocrat might speak of church, and his fans return the favor by treating him like a pope. This was true in 2008. And it’s true now. Just check out liberal Twitterdom.

And for the most part, nothing is his fault.

View this article.

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What We Don’t Know About Marijuana’s Risks and Benefits

The last time the National Academy of Sciences issued a report on marijuana, three states allowed medical use of the drug. Eighteen years later, there are 28 states that recognize marijuana as a medicine, and eight of them also allow recreational use. But as a new NAS report published yesterday shows, there are still big gaps in our knowledge of marijuana’s risks and benefits.

The 1999 report, commissioned by a drug czar who insisted there was no evidence that marijuana is medically useful, refuted that claim but highlighted the paucity of relevant research. “The accumulated data indicate a potential therapeutic value for cannabinoid drugs, particularly for symptoms such as pain relief, control of nausea and vomiting, and appetite stimulation,” it concluded.

The new report, which takes into account studies conducted during the last two decades, is less tentative but still finds the evidence for most medical applications inconclusive. “We found conclusive or substantial evidence…for benefit from cannabis or cannabinoids for chronic pain, chemotherapy-induced nausea and vomiting, and patient-reported symptoms of spasticity associated with multiple sclerosis,” the authors say. “For these conditions the effects of cannabinoids are modest; for all other conditions evaluated there is inadequate information to assess their effects.”

The report notes that investigation of marijuana’s medical utility has been constrained by legal and bureaucratic barriers, including continued federal prohibition and the Drug Enforcement Administration’s refusal to license more than one producer of cannabis for research. “There are specific regulatory barriers, including the classification of cannabis as a Schedule I substance, that impede the advancement of cannabis and cannabinoid research,” the authors say. “It is often difficult for researchers to gain access to the quantity, quality, and type of cannabis product necessary to address specific research questions.” Last August the DEA once again refused to reclassify marijuana but agreed to start accepting applications from additional marijuana producers.

As state-legal marijuana products proliferate across the country, federal prohibition prevents scientists from investigating their properties:

Cannabis concentrate sales doubled in Colorado from 2015 to 2016, reaching $60.5 million in the first quarter of 2016, and yet current federal law prevents chemists from examining the composition of those products as it may relate to safety, neuroscientists from testing the effects of those products on the brain or physiology in animal models, and clinical scientists from conducting research on how these products may help or harm patients. And while between 498,170 and 721,599 units of medical and recreational cannabis edibles were sold per month in Colorado in 2015, federal law also prohibits scientists from testing those products for contaminants, understanding the effects of these products in animal models, or investigating the effects in patient populations.

Regarding the potential dangers of these products, the report is mostly reassuring, finding little or no evidence that marijuana impairs the immune system or increases the risk of heart attacks, lung cancer, or chronic obstructive pulmonary disease (contrary to the claims of anti-pot activists). Regular pot smoking seems to worsen bronchitis symptoms, and marijuana consumption by pregnant women is associated with lower birth weight, although there is little evidence of a link to pregnancy complications or postnatal health problems.

Marijuana use is associated with schizophrenia, suicide, poor academic performance, and abuse of other drugs, but the causal relationships remain murky. The report says “there is limited evidence of a statistical association between sustained abstinence from cannabis use and impairments in the cognitive domains of learning, memory, and attention”—i.e., effects that persist long after people have stopped using marijuana, which remains a subject of much controversy.

The report notes that marijuana legalization has been followed by increases in accidental ingestion of cannabis by children, which is usually not medically serious but can depress respiration. Another concern about legalization is its impact on road safety, since “there is substantial evidence of a statistical association between cannabis use and increased risk of motor vehicle crashes.”

Laboratory tests indicate that marijuana impairs driving ability, although not as dramatically as alcohol does. Measuring marijuana’s impact on actual car crashes is difficult, however, not least because studies generally equate a positive test for marijuana with intoxication, treating sober drivers as if they were stoned. The report notes that a 2016 review of the research suggests marijuana has a “low to moderate” effect on crash risk, increasing it by 20 or 30 percent (compared to an increase of about 400 percent for drivers with a blood alcohol concentration of 0.10 percent). But it’s not clear how many of the drivers who were deemed to be under the influence of marijuana in the studies covered by that review had consumed it recently enough that they were still feeling the effects.

For the most part, this report seems like an honest and careful attempt to grapple with what we know and don’t know about marijuana, which means neither prohibitionists nor cannabis enthusiasts will be completely happy with it (although both will mine it for ammunition). The authors are generally careful about drawing causal conclusions from statistical associations.

But not always. The report says “cannabis use is likely to increase the risk for developing substance dependence” involving other drugs, a quote we surely will be seeing in anti-pot propaganda hyping marijuana’s “gateway effect.” Later in the same chapter, however, the authors concede that all we really know is that “there is moderate evidence of a statistical association” between cannabis consumption and abuse of other drugs. That’s why “additional studies are needed to determine whether cannabis use is an independent risk factor for, or causally contributes to, the initiation or use of and dependence on other drugs of abuse later in life.”

While I welcome the self-correction, I doubt research will ever resolve this issue. Scientists can (if regulators let them) conduct a randomized, double-blind study to see whether cannabis extract is effective at controlling seizures or treating irritable bowel syndrome. They cannot legally or ethically conduct such a study to see whether smoking pot makes teenagers more likely to become heroin addicts.

As researchers like to say, more research is needed, especially in an area where the government has systematically discouraged it. But research cannot solve every puzzle.

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EU Fiscal (In)Discipline Summed Up In 1 Shocking Table

Submitted by Constantin Gurdgiev via True Economics blog,

EU's Fiscal Discipline in one table: here is a summary of the EU member states' performance when it comes to 3% deficit ceiling set out as a core fiscal criteria:

Yes, even after a large scale fiscal 'retrenching' of 2016, on average, EU member states have been outside satisfying fiscal deficit ceiling criteria 41 percent of the time, with EA12 average being worse – at 43 percent.

Six EU states are more than just serial violators of the rule, with their respective frequencies of falling outside the rule constraints being in excess of 2/3rds. It is worth noting that in this group, all states are violating rules predominantly during the years of economic expansion.

Another 11 states are frequent violators, breaking the rule more than 1/3rd of the time but less than 2/3rds. Here too, with exception of Cyprus and Slovenia, more violations took place during the times of expanding economies than during the periods of recessions. All in, 17 states of the EU are breaking the EU fiscal rule on deficit ceilings more than 1/3rd of the time.

Only 7 states break the rule less than 25 percent of the time and only 5 break the rule less than 10 percent of the time.

Surely, nothing to worry about.

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Scientists Rebuke California Coastal Commission Over Desalination: New at Reason

Bureaucrats in California are getting called out for misrepresenting the science while trying to thwart a desalinization plant.

Steven Greenhut writes:

The Coastal Commission’s stated concern that a proposed Huntington Beach desalination plant’s intake pipes pose a threat to small and microscopic plankton has been rebutted in a letter from three prominent California marine biologists.

Anthony Koslow, Eric Miller and John McGowan—marine biologists at Scripps Institution of Oceanography in La Jolla—were responding to comments made at a Dec. 1 panel about ocean desalination in Ventura County by Tom Luster, the agency’s lead staffer on the desalination issue.

Luster actually had cited Koslow, Miller and McGowan’s research in arguing against open intakes given a 75 percent reduction in plankton off Southern California since the early 1970s. Citing the Scripps research Luster said it would be “hard to maintain and enhance marine life like the Coastal Act requires in a situation like this and so open intakes have a hurdle to overcome.”

In a sternly worded Dec. 29 rebuttal letter, Koslow, Miller and McGowan said Luster’s comment reflected “an inaccurate understanding of our research,” adding that their paper showed “many of the taxa are predominantly distributed offshore but share the same trend as more coastal taxa.”

View this article.

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That ’50s TV Show Where a Con Man Named Trump Promised to Build a Wall

Remember that TV western from the ’50s where a con man named Trump promised to build a wall that would protect a Texas town from obliteration? No? Well, someone posted some scenes from it on YouTube, and Snopes says it’s legit.

The actor who plays this Trump—Walter Trump—doesn’t bear much physical or vocal resemblance to the fellow now preparing to be inaugurated, but he does sound a little Donaldesque when he declares, “I am the only one. Trust me. I can build a wall…”

The show was Trackdown, and this installment—called “The End of the World”—apparently aired originally on May 9, 1958. Sadly, the full episode doesn’t appear to be online. Someone, somewhere, please rectify that.

(For past editions of the Friday A/V Club, go here.)

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Guccifer 2.0 Emerges To Slam Intelligence Community’s “Fake Evidence”

After laying silent since a November tweet in which he promised to “be an independent observer at the U.S. 2016 election,” Guccifer 2.0 has returned with a new blog post slamming the “fake evidence” presented by the “FBI/DHS/NSA reports.”

 

While DHS/DNI issued a joint statement in October 2016 linking Guccifer 2.0 to the Russian Government, in today’s blog post the hacker declares that he has “totally no relation to the Russian government” and that he was only acting “in accordance with my personal political views and beliefs.”

With that brief intro, the hacker then attacked the U.S. intelligence community’s “technical evidence” on “Russian hacking,” calling their reports a “crude fake.”  He goes on to point out, as have others, that the malware noted in the technical report is “commonly available” on the web and was likely only referenced in an effort to make the report seem more credible. 

Here is the full statement posted to Guccifer 2.0’s blog:

I really hope you’ve missed me a lot. Though I see they didn’t let you forget my name. The U.S. intelligence agencies have published several reports of late claiming I have ties with Russia.

 

I’d like to make it clear enough that these accusations are unfounded. I have totally no relation to the Russian government. I’d like to tell you once again I was acting in accordance with my personal political views and beliefs.

 

The technical evidence contained in the reports doesn’t stand up to scrutiny. This is a crude fake.

 

Any IT professional can see that a malware sample mentioned in the Joint Analysis Report was taken from the web and was commonly available. A lot of hackers use it. I think it was inserted in the report to make it look a bit more plausible.

 

I already explained at The Future of Cyber Security Europe conference that took place in London in last September, I had used a different way to breach into the DNC network. I found a vulnerability in the NGP VAN software installed in the DNC system.

 

It’s obvious that the intelligence agencies are deliberately falsifying evidence. In my opinion, they’re playing into the hands of the Democrats who are trying to blame foreign actors for their failure.

 

The Obama administration has a week left in office and I believe we’ll see some more fakes during this period.

 

I guess you have a lot of questions for me. So, feel free to send them via DM.

While we can’t confirm many of the claims above, we have little doubt in his assertion that the Obama administration has much left to accomplish in their last week in the White House.

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Core PPI Comes Hotter Than Expected, Driven By Rising “Brokerage, Investment Advice” Prices

While headline PPI came in at 0.3% on a sequential basis, as expected, and rose 1.6% on the year, also in line with expectations, it was the core PPI that came in modestly hotter than expected, printing at 0.2%, above the expected 0.1%, and rose 1.6% Y/Y, above the 1.5% expected, and far above the -1.1% drop reported one year ago.The headline jump was driven by a spike in energy prices, as final demand energy rose 2.6% in December. Accounting for almost half of the December jump in final demand goods prices, the index for gasoline climbed 7.8% , while heating oil was up 9.6%.

Away from the non-core energy and gasoline prices, the headline PPI rise was driven, surprisingly, mostly by “prices for securities brokerage, dealing, investment advice, and related services” which advanced 4.4%. In other words, brokers are capitalizing on the rush by retail investors to jump in the market and are hiking prices.

Nonetheless, on an annual basis, the 1.6% increase in PPI was the highest since August 2014.

 

Broken down between goods and service:

The breakdown:

The breakdown between goods and services:

Final demand goods: Prices for final demand goods jumped 0.7 percent in December, the largest increase since a 0.7-percent rise in June. Sixty percent of the December broad-based advance can be traced to the index for final demand energy, which climbed 2.6 percent. Prices for final demand goods less foods and energy rose 0.3 percent, and the final demand foods index increased 0.7 percent.

Accounting for almost half of the December jump in final demand goods prices, the index for gasoline climbed 7.8 percent. Prices for light motor trucks, jet fuel, iron and steel scrap, chicken eggs, and liquefied petroleum gas also increased. In contrast, the index for fresh fruits and melons fell 13.6 percent. Prices for residential electric power and for plastic resins and materials also decreased.

* * *

Final demand services: The index for final demand services inched up 0.1 percent in December after increasing 0.5 percent in November. About 70 percent of the December advance can be attributed to prices for final demand services less trade, transportation, and warehousing, which rose 0.2 percent. The index for final demand trade services also advanced 0.2 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Conversely, prices for final demand transportation and warehousing services declined 0.4 percent.

Most of the December increase in the index for final demand services can be traced to prices for securities brokerage, dealing, investment advice, and related services, which advanced 4.4 percent. The indexes for machinery, equipment, parts, and supplies wholesaling; apparel, footwear, and accessories retailing; food retailing; and health, beauty, and optical goods retailing also moved higher. In contrast, prices for airline passenger services fell 2.4 percent. The indexes for fuels and lubricants retailing, loan services (partial), and apparel wholesaling also decreased.

* * *

In short, in December, the price of gasoline and heating surged, brokerage fees jumped, and everything else was largely in line as airplane tickets dropped while the price of fruits and melons tumbled.

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