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Credit News by Lou Barnes – November 4, 2016

| Friday, November 4th, 2016 | Comments Off on Credit News by Lou Barnes – November 4, 2016

Long-term rates have dropped to a two-week low, the 10-year T-note to 1.77% and mortgages again close to 3.50%.

Pushing down on those rates: Tuesday anxiety. No avoiding it. Oh, oil has crashed back to $44/bbl, removing inflation fear. Five minutes at $50/bbl and the world tried to sell all at once. Today’s job data supports a Fed hike in December, but that’s priced-in. The hikes after that are not.

Tuesday. A Democrat hosting an election-night party told the NYTimes he would have on duty a licensed mental health professional, in case of the unthinkable. Meaning no offense to Trump supporters, the narrowing in this week’s polls have global financial markets in the silent-screaming bejabbers.

Trump has made it through two weeks without a suicidal moment, leaving Clinton exposed. Cigar-store Indians are more exciting. “Wooden” is an insult to trees.

Many in the US fear Clinton, and more Obama-ism. Perhaps with reason. Trump-fear is different, little to do with policy. All other Trump negatives aside, he seems to think he’s running to be our Putin. Trump has always been ultra-litigious, misusing the legal system to his benefit; and sees our President as a giver of orders, blind to separation of powers. That’s the stuff of constitutional crisis, his greatest risk.

Back away, a long, long way away.

In 1920 Cyril Hume re-told an old China fable as a short story, “The Shout.” A new census revealed to the Emperor that his subjects counted in the hundreds of millions. Impressed by their numbers (and his own importance) he gave the order that at noon on a given day every one of his subjects would simultaneously shout his greatness. The sound would shake the world, cause hurricanes, and uproot forests and cities!

On the day at the appointed time the Emperor and his courtiers ascended a plateau to hear the roar but to be safe from the damage. As the last grains of sand fell through the Emperor’s hourglass, he looked at the fair Chinese valley below him.

Then, “high and thin and very clear came the voice of a shepherd boy on the slope below, ‘Long live His S’rene Highness Th’emprer-a China!’ Far down in the valley, a sheep bleated. A bee droned heavily past the Emperor’s ear, circled his head, and winged swiftly away into the bright air, his buzzing growing thinner, thinner. One of the courtiers laughed suddenly. Then the whole court broke into roars of uncontrolled merriment.” The enraged Emperor threatened all with death.

Few of us are as important as we think of others or ourselves.

This week’s Fed meeting concluded with no action, but two regional presidents dissented (again), insisting on immediate rate-hikes. Ms. George, Ms. Messer… you have been heard, your point made in private. Grandstanding detracts, always.

One definition of political extremism: to demand action which will never attract a majority, and if denied inflict paralysis on everyone. Both political wings are guilty; the Left defending entitlement overreach and rapid social change, the Right attempting to roll back eighty years of progress, to a world which never was.

FDR attempted to pack the Supreme Court while Democrats held a near-absolute Congressional majority, and his own party objected. Republicans have a new solution: un-pack the Court. Refuse new nominees until all are dead. Then no problem.

In the grand scheme, Trump and Clinton will pass into history faster than we imagine, and doing less harm. Either will have the same opportunity: speak sharply to both partisan wings. If we intend to have a nation we must suppress our extremes.

If Tuesday brings Trump, a bad day for markets. Perhaps very bad. Then markets will watch his transition team and appointees. Reagan was a shock to the system, but a few superb subordinates quickly quieted anxiety (and quieted the poor ones). Trump has never been seen in the company of people like the Bakers, James and Howard.

The same watch for Clinton, but without the explosion. Will it be more down-the-nose, professorial condescension, and futile Left-pressing? Or deals across the aisle?

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The 10-year T-note in the last year. Depending on Tuesday it may take months for the real trend to reveal itself, but given the condition of the outside world, neither the Fed nor 10s are likely to go very far:

The 2-year T-note if ready for a December hike:

The Atlanta Fed GDP Tracker is starting out hot for the 4th quarter, just as it for the 3rd before fainting:

The usually reliable ECRI has at last nosed over, but still describes an economy stronger than it probably is:

The link to the full text of “The Shout” follows. By the way, the author also wrote the screenplay for the 1956 sci-fi masterpiece, “Forbidden Planet.”

Click here for "The Shout"

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