Morning Report: Donald Trump was a mortgage broker 8/22/16

Vital Statistics:

Last Change
S&P Futures 2179.0 -3.0
Eurostoxx Index 340.7 -0.1
Oil (WTI) 47.8 -1.0
US dollar index 85.7 0.2
10 Year Govt Bond Yield 1.56%
Current Coupon Fannie Mae TBA 103.3
Current Coupon Ginnie Mae TBA 104.2
30 Year Fixed Rate Mortgage 3.5


Stocks are slightly lower this morning after Stanley Fischer said the US economy was close to hitting all of the Fed’s targets. Bonds and MBS are down small.
Not a lot of market-moving data this week, aside form the second revision to GDP on Friday. Note central bankers will be out in Jackson Hole this week, so there is the possibility of comments moving the markets. Otherwise, it looks to be a dull week in late August.
The Chicago Fed National Activity Index came in better than expected at .27, but the 3 month moving average is negative, indicating the economy is growing slightly below trend.

Fannie Mae is forecasting the Fed will maintain rates throughout 2016, and they believe the economy will strengthen. “Second quarter growth was a disappointment, but consumer spending appears solid heading into Q3, and we expect inventory investment to balance out after a surprising drawdown in Q2,” said Fannie Mae Chief Economist Doug Duncan. “Credit expansion, combined with improving labor market conditions and strengthening household balance sheets, should continue to support consumers, who will likely be the primary driver of growth again in the second half of the year. The positive July jobs report may encourage some Federal Open Market Committee members to argue for a Fed rate hike at the September meeting. However, we remain convinced that the Fed will hold the target rate steady this year given global uncertainties and anemic output growth. Although much of the financial volatility from Brexit has subsided, long-term Treasury yields continue to face downward pressure and we expect them to remain low for some time.”

More from Fannie on the housing market: “Housing market fundamentals remain a mixed bag. During the second quarter of 2016, both new and existing home sales rose to expansion highs, while single-family starts pulled back, remaining historically low for an expansion,” said Duncan. “Tight housing inventory from a lack of new construction continues to create affordability challenges, particularly at the lower end of the market. Robust rental demand during the second quarter of the year has created the lowest rental vacancy rate in decades. In addition, the homeownership rate dropped to below 63 percent in the second quarter, but we are seeing some tentative signs of older Millennials moving toward homeownership. We expect homebuyers will benefit from improving job and wage growth, more favorable lending standards, and continued low mortgage rates through the rest of the year, with the 30-year fixed-rate mortgage rate projected to average 3.4 percent during the fourth quarter.”

Talk about bad timing: Donald Trump got into the mortgage business in 2006. He did make an interesting point about bubbles and the madness of crowds. “Are you the type of person who takes advantage of positive situations when they present themselves, riding them out as long as they last? Or do you heed every message of doom and gloom, avoiding risks that could be some remarkable opportunities?” If you sold stocks in 1996 when Alan Greenspan discussed “irrational exuberance” in the stock market, you missed out on the lion’s share of the growth. Also, the most money is made right at the end of the move when it goes parabolic.
Following on Donald Trump, many recognize we have a bubble in sovereign debt. Black Rock believes that supply-demand imbalances will keep the bubble inflated for the near term. Meanwhile, Paul Singer suggests that bonds come with a warning label: “Hold such instruments at your own risk; danger of serious injury or death to your capital!”
Note that the European Central Bank and the Bank of Japan are now buying private placements from corporate issuers.  I guess the big question is “what happens when these bond issues go bad?” The European Central Bank is supporting 3.3 trillion euros of assets on 100 billion euros of capital, or about a 32:1 leverage ratio. The Fed is even worse, supporting $4.5 trillion in assets on just $40 billion worth of capital for a 112:1 leverage ratio. It won’t take much of a move in asset prices to wipe out the equity of either entity.

34 Responses

  1. Donald Trump was a mortgage broker

    Just not a very good one. But that is par for the course on his endeavors.


  2. I like Comey, but I think he’s wrong here:

    “In announcing the FBI’s findings in July, Comey said investigators found no evidence that the emails it found “were intentionally deleted in an effort to conceal them.””

    The technical people knew exactly what was up:

    ““Starting to think this whole thing really is covering up some shaddy shit,” the employee continued. “I just think if we have it in writing that they told us to cut the backups, and we can go public saying we have had backups since day one, then we were told to trim to 30 days, it would make us look a WHOLE LOT better.”


    • i think the federal judge needs to start jailing people for contempt. this is getting ridiculous.

      ” “carefully appraised at State” to separate official records from personal ones.”

      easy enough — if it was on State’s system, it wasn’t personal. that’s work email 101.


  3. NoVA, I hope that when HRC wins that the Republicans take a hands off approach to the ethics issues.

    Let them run riot and do whatever they want. Full scale bribery for pardons, etc. Bring down the whole system and end any pretense of good government. Let the press report helplessly and the Republicans simply say that it’s up to Democrats to hold the Clintons accountable if they chose to do so.


    • It really chaps my ass that people can run around with their hair on fire about CU and then turn around and say the Clinton’s are beyond reproach and the victims of a witchhunt


    • agree.. the best result is that people lose faith in good government. progressives require people to drink the koolaid in order to get the control they want…


  4. I admit I’m enjoying the whole “Hillary has terrible health issues” theory being generated on the Right. It’s pissing off the right people and it’s nice payback for the whole “John McCain was tortured into insanity by the Vietnamese, even though They didn’t torture and even if they did it was understandable because war criminals.”


  5. NoVA, you watch “Stranger Things” on Netflix yet?


    • McWing:

      It was never rational to think or ever expect they were.

      The only people to blame for the NYT’s loss of “final arbiter” status is the NYT itself.


      • And the media generally. For something to be a final arbiter of facts, it would have to be structured very differently than the media is. And there would be no place for an editorial page in a publication that was considered to be an arbiter of conclusive facts.


  6. i can’t even waste my vote on the Libertarian candidate in good conscience.

    There are no True Pure Libertarians. Just ask any libertarian.


    • yello:

      There are no True Pure Libertarians.

      It has nothing to do with purity. He’s not just compromising on Libertarian principles. Far worse he seems to have no clue what they even are.

      And a tax doesn’t magically transform itself into a “free market” solution just because one thinks the tax is needed. This kind of rhetorical flimflammery is more understandable (if no less irritating) coming from mainstream party candidates than from third party candidates with literally no chance of winning anything, the primary attraction of which is being able to actually be honest with people without fear of losing votes.


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