Mortgage Credit News by Louis S Barnes - September 3, 2021

At the end of this week we know less about the economy than last week, and the same goes for policy. So, below are the anti-clarity data, some other murk, and an appeal to study a back-to-the-future tool.

In this morning’s employment data from August, payrolls grew by 235,000, one-third the consensus forecast of economists. Oblivious to their error, the same people are certain that the slowdown in job creation from the one-million range in recent months has been caused by resurgent Covid. They have no evidence for that assertion, but always a good idea to shift blame to something else which can’t be proven -- and were joined by the White House trying to deflect blame for shaky economic performance.

One datum which might support the Covid theory: zero gain in August jobs in “leisure and hospitality,” perhaps because Covid has frightened patrons away. There is no data to support that theory, except possibly Open Table’s discovery of a 10% decline in restaurant patronage. Alternate interpretation: the post-vaccine relief bulge in restaurants was likely to slow, and the two million people re-hired in hospitality in the last six months has temporarily reached saturation. We can’t all be servers, make beds and clean bathrooms.

Alternate interpretation carried further: the economy is limping forward at a fairly steady rate. It is impaired mostly by trouble in supply chains, not new. Unprecedented aspects defy analysis: good data say that millions of workers are delaying re-employment while rethinking careers. Job growth is two-sided: offer and acceptance.

The bond market this morning is not buying the Covid theory. It is selling bonds -- on this “weak” news, the 10-year T-note rose back above 1.30%. Perhaps because August wage growth by two measures rose at a 6.5% annual rate, double that in prior months.

The Fed is another source of confusion, not improved by today’s reports. Powell is clear as ever, but the hawks are wrestling for the steering wheel.

Best snapshots: The August ISM survey of manufacturing purchasing mangers was still sky-high 59.9, new orders were above the sky at 66.7 and rising, and supplier deliveries a moon-shot 72.5 -- slow deliveries are usually good news, a high score reflecting demand overrunning production, but today showing sick chains of supply. Surveyed employment did fall to 49 from 52.9 in July, but reports of unfilled jobs are everywhere, all sectors.

Sales of autos have collapsed to 2020 awfulness, only 13 million in August from should-be 17 million. Last year, no demand; this year, crippled supply of computer chips. Sheesh. I was happier anyway with hand-crank windows, analog dials, clutch and carburetor.
New claims for unemployment insurance are well-down from the 400K weekly plateau to 340,000. If Covid is softening the economy, it is doing so without causing layoffs.

China is rising quickly toward the top of the world’s imponderables. The global era of negligible inflation since 1995 has depended on China’s compulsive over-investment and over-production. China’s recurrent and deep instability should make us nervous about its continuing inflation-suppression.

Only ten years after Mao’s victory over the last of the warlords (Chiang Kai-Shek, whose forces fled to Taiwan in 1949), Mao unleashed the Great Leap Forward, an insane failure and famine probably the all-time record anywhere for civilian death. Ten years after that, Mao’s Cultural Revolution -- not so many fatalities, but a social and economic catastrophe. Ten years after that, Mao died and Deng Xiaoping led economic opening. Just one decade later Deng set the limit of opening at Tiananmen in 1989. A brief period of recovery and three orderly five-year transfers of power were followed by the rise of Xi in 2013, and in less than ten years since, the Party has risen to absolute, stultifying control, and external belligerence and contempt for the world.

That makes six losses of marbles in 70 years. Deja vu all over again.

Ode to Maps. Maps are for granddads. In the 1990s GPS gadgets began the retirement of maps, and fifteen years ago, i-phones finished them off.

Too bad. In the old days, especially out here in the West, one mark of life competence was not getting lost. Ever. As kids we learned to visualize open spaces in three dimensions by looking at flat pieces of paper. If the terrain was reasonably simple, we learned to commit maps to memory; but if complicated, carry a map. Always.

Our dads had often been map-trained in the military, or both parents in Scouting, or by trying to drive by most-direct routes. Not just maps, but compass as well. My dad took pleasure in confounding us by demanding at random moments, “Where is north?” Once, aged about 12 with dad in the stygian maze below Grand Central and Times Square, walking to the junction of the IRT and BMT, dad: “Where is north?” Later, mountaineering in the 1970s, we all bought and carried the gorgeous art of the US Geological Survey, the 7.5-minute topographical quads.

Getting lost in the mountains is embarrassing. At dawn on Sunday morning when the volunteer rescuers find you, a hundred of them spending all Saturday night falling into briars and beaver ponds while looking for you, and the team leader asks, “Where did you lose your bearings on your map?”... you’d rather still be lost than admit that you didn’t have a map.

What-were-we-thinking Map Tour: Full-sized maps have another utility impossible on itty-bitty screens, this one also lost to history: armed with real maps, public-spirited citizens can figure out what the military and foreign policy dweebs are up to. In these last two weeks, the finale of the Afghanistan forever war, while scouring media for reliable reports and fair analysis of the beginning, middle, and end of forever I began to notice... no maps. Then began to look hard, CNN, FOX, BBerg, NYT, WSJ, then out into to the media fringe... no maps. A river of BS on Bagram, evacuation, threats and consequences without once identifying location.

Of course not. Duh. Why post anything which can’t be read on a phone? So, below are a half-dozen Afghanistan maps (and one cartoon). The military and policy professionals are vulnerable to can-do self-deception. A little map work by citizens of independent mind twenty years ago, and the forever foolishness was as predictable as sunrise.

It’s worth googling a map or two of other places, just to practice for next time. And maybe a few maps of old adventures, to retrieve lost skills. Some say Korea has been an even longer forever, and has turned out okay, but Korea is a peninsula and we are a naval power. One fatal allure of Vietnam: the place is all coastline, our sweet spot... except for the parts more than five miles inland. Iraq as a military matter turned out as well as it did for two important reasons: it is flat, except for the Kurds’ northern hideout, and no trees.

Next time? Somebody soon will want to “do” Iran. Map: its people, urban area, and nuclear facilities are invulnerable to land assault, 400 miles of mountains from the Persian Gulf. Taiwan is an island, good for us, but 6,500 miles from us and 100 from China.

The US 10-year T-note in the last year. As a “technical” matter, since mid-July we have a double-bottom at 1.19%, and a double-top at 1.39%. These doubles are usually strong signals for change in direction, but in this case a standoff, trading range intact except for the uneasy ascending bottoms in August. Economic data usually pushes 10s out of ranges, one way or the other, but the market looks more and more dependent on Powell versus the hawks. The next Fed meeting concludes in three weeks, September 22:

Most informed Americans could guess accurately that Afghanistan is located somewhere between Israel and India. The first of our “what-were-we-thinking” map tour is the simple, border-outline found on your 3rd grade classroom wall. Take a minute to stare at it. What possible threat or benefit to the US lies nearby? A thousand miles from the middle of nowhere, bad neighbors, and no access except through them.

A pretty map, like most of anyplace. Shading for altitude, but the orangey stuff does not quite convey elevations similar to Rocky Mountain National Park. It does show roads, but over-dignified. The “ring road” is the only good one, 2-lane asphalt which we built, 2,000 miles for $3 billion, and falling apart. One road exit/entrance to Iran, two to the north, and two east to Pakistan. It’s hard to find a map of any nation which does not include the hashed symbol for railroads. That’s because those places have railroads.

This satellite shot gives a better feel for terrain. Sharp eyes can pick out the border. The white stuff, top-right... the Hindu Kush and Himalaya.

Zoom in to the immediate surroundings of Kabul on this fine-scale relief map of rock outcrops. All of Afghanistan is similar terrain, except the uninhabitable desert: an infinite number of box-canyon valleys. High-mountain snowmelt provides a river or stream in the bottom of each valley, enough water for scratchy agriculture and subsistence for 39,000,000 Afghans, as well as permanent separation into ethnic groups and tribes within the groups:”

Ethnic fragmentation? Separate for so long, separate customs and language, hostile to each other... a Baluchi has a lot less in common with a Pashtun than Bernie Sanders with Mitch McConnell. The ethnic/linguistic map:

Best for last...The Pashtuns are themselves hardly a monolith. Gotta love “Other Pashtun tribes,” the sub-fragments just along the Pakistan border:

From the Washington Post, without permission: