Morning Report – Humphrey Hawkins 7/15/14

Vital Statistics:

Last Change Percent
S&P Futures 1972.8 1.8 0.09%
Eurostoxx Index 3180.1 -5.8 -0.18%
Oil (WTI) 99.69 -1.2 -1.21%
LIBOR 0.233 0.001 0.21%
US Dollar Index (DXY) 80.21 0.018 0.02%
10 Year Govt Bond Yield 2.55% 0.01%
Current Coupon Ginnie Mae TBA 106.3 -0.1
Current Coupon Fannie Mae TBA 105.4 0.0
BankRate 30 Year Fixed Rate Mortgage 4.24

Markets are higher this morning on decent earnings reports out of JP Morgan, Goldman, and Johnny John. Bonds and MBS are up small.

Retail Sales increased .2% month-over-month in June. Ex autos and gas, they increased .4% versus a .5% estimate. The numbers were generally below the Street’s lofty expectations. May’s numbers were revised upward across the board. There is tremendous pent-up demand and we are finally seeing it get released.

JP Morgan announced that mortgage originations were $16.8 billion, down 66% from the prior year and 1% from the prior quarter. They expect Q3 to be flat to below Q2. Jamie Dimon, who has been diagnosed with throat cancer, said that he will be involved in the business during his treatment and that JPM is in “great shape” regarding succession. He also lobbed in a warning against “moralizing” against tax inversion trades, a comment sure to infuriate the left. For a glimpse of how the left hates these things, check out this column.

Janet Yellen is scheduled to testify in front of the Senate Banking Committee at 10:00 am. Bonds rallied small on the dovish language in the prepared remarks. As I said yesterday, Humphrey-Hawkins is more for the benefit of politicians to posture about their pet concerns, not for the benefit of investors to gain insight into the Fed’s thinking. Punch line: QE ends in October, there is still a lot of slack in the labor market, inflation remains low, and just because the Fed is talking about “normalization” doesn’t mean a rate hike is imminent.

The latest Black Knight Financial Services (formerly Lender Processing Services) Mortgage Monitor is out. Total DQs were flat at 5.62% in May, while foreclosure starts ticked up a hair to 86k. This is the fifth consecutive month with foreclosure starts below 100k. Purchase originations through April are on par with 2013, so the increase in rates isn’t affecting the purchase market. Refis, however are way down. Credit scores are falling as originators are reaching out of the credit curve.

purch and refi

11 Responses

  1. Thought you guys might get a chuckle out of this. . . paging Scott!


  2. @McWing: “Yeah bagger, it’s never been so fucking tranquil!”

    I can’t help but think what would have happened in the media and on places like PL if one of Bush’s press secretaries said that. Good lord, we’re still hearing about a frickin’ “Mission Accomplished” banner when, in fact, the mission as defined had actually been frickin’ accomplished.


  3. “It’s a stumper.”

    Jenny McCarthy would say the vaccines are giving them whooping cough. Personally, I blame Obamacare.


  4. RE: Global cooling.

    Granting the high degree of likelihood that the climate is changing (because whatever we may be contributing to the process, the climate has always frickin’ changed), if the mean temperature is in fact rising the climate scientist community and the advocates made a terrible, terrible mistake with the “global warming” designation.

    I got up this morning and it was chilly. Not cool. Chilly. In July. In Memphis. Temperatures were in the 60s, according to the weather, and I’d say at my house it was closer to high-50s. This on top of an already cool and wet spring and an unseasonably cool June and early July. We’ve gotten more rain than we normally get, but not flood levels. The temperature has been temperate and lovely, and rainfall a little high but overall ideal (which it never is–all my life it’s either been just wet enough or too wet in the spring, followed by a dry summer). Not only does it not anecdotally feel like “global warming”, granting that it’s climate change at the root, man made or not, it’s a distinct improvement. Although if it keeps getting colder and wetter, it won’t be.

    This is not what was being promised by the climate models 15 years ago, no matter how it’s redacted, and as I’ve noted before, attributing every weather anomaly to man made climate change is like saying a dry season is punishment from the gods. When anything and everything is proof of something, it’s no proof at all.

    But . . . back to my point: global warming was a horrible designation. Those not already well-convinced coming out of their house to a pleasant 60 degree morning in the deep south in the middle of July are going to say: “Global warming, my ass. If anything, it’s a new frickin’ ice age on the way!” Because that the planet was going to get hotter, universally, was the sales job for well over a decade.


  5. RE: Global cooling.

    The preferred euphemism is now “climate change” which makes it a lot easier to pin phenomenon other than heat waves on the results of anthropic dispersion of carbon dioxide (and other chemicals) into the atmosphere. Weather is different from climate and a nice cool spell in July is very welcome but we have also had plenty of very hot weather as well. Confirmation bias both directions is a strong motivator of anecdotal evidence.

    Joel Achenbach has a good piece today on the alarmism over water level rises in South Florida and wonders if this sort of Henny Penny-ism isn’t counter-productive.


  6. For those weeping for our sweet Gaia, let’s stop subsidizing flood insurance.


  7. yellojkt: “Weather is different from climate”

    I may be mistaken, but, intuitively, there does seem to be some relation between the two. And much of the early discussion of global warming focused on weather, and even now when there’s a huge hurricane or a monsoon or an usual flurry of tornados (all weather), climate change comes up. It’s difficult, in terms of creating any further acceptance of climate change as an impending disaster that requires costly action, to discuss climate in the abstract without considering the weather. And the “global warming” term naturally created an expectation of consistently warmer weather. And confirmation bias is indeed a powerful force, but it goes back to my point: global warming was a very bad designation, and the argument would be much easier to make if it had been “climate change” from the outset, as this is not just a nice cool spell, it’s extremely abnormal weather for the area. Which would, in fact, reinforce the argument of climate change, although would not help anyone benefitting from it see it as a pressing problem. 😉

    Of course, the problem with anecdotal evidence when it comes to large systems is that it’s not evidence at all. No number of hot days in the fall provide evidence of global warming, nor cool days in the summer provide evidence against, but laypeople on both sides of the issue will focus quite a lot on anecdotes.

    Henny-Pennyism is counter-productive, but reading the article, I think he misses the problem, more common early on the AGW debate, of predicting imminent disaster. Hyperbole about what is actually currently happening is one thing, but predicting major disasters tends to be very counter-productive when what materializes is an incremental change. Images of New York underwater should not be evoked. 😉

    But there’s also a lower-level to the argument that seems harder to disagree with: wouldn’t it just be a generally good idea to find a way to pump less carbon dioxide into the atmosphere? Isn’t polluting less generally a general good? Isn’t climate change a likely issue whether or not it’s man-made, and shouldn’t it be figured in long term planning? It’s not like the climate of the planet hasn’t changed significantly, several times, over the lifespan of the earth. That seems like a good place to focus, to me.


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