Morning Report: Investor optimism hits a 9 year high 12/29/16

Vital Statistics:

Last Change
S&P Futures 2246.5 1.5
Eurostoxx Index 360.7 -0.8
Oil (WTI) 53.9 -0.2
US dollar index 93.2 -0.3
10 Year Govt Bond Yield 2.49%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4.29

Stocks are flat as we head into the end of the year and volume dries up. Bonds and MBS are up again.

Initial Jobless Claims ticked up slightly to 365k last week.

Wholesale inventories increased 0.9% last month as autos and retailers had unsold items. This follows a decline in October. Chances are this inventory will be moved in December, however if it is not, it will have the effect of “borrowing” economic growth from Q1.

PHH has announced they are selling their entire MSR portfolio. New Residential was the buyer. This sale excludes the Ginnie Mae MSR, which were sold separately. The sale price is about 84 basis points of unpaid principal balance. MSR valuations were hurt during 2016 due to higher-than-expected prepayment speeds and lower interest rates. MSR valuations should firm going forward due to higher interest rates as well as new rules regarding the securitization of VA IRRLs. Higher MSR values should generally translate into better rates for the borrower.

Higher mortgage rates will probably force buyers to purchase lower-priced homes, according to a survey of realtors by Redfin. Almost half think that homebuyers will be forced to lower their price range, while another 15% think it will cause buyers to walk away. The rest either see no effect or think that sellers will decide to sit tight. Homebuilders will probably shift their production to lower price points, and builders like D.R. Horton and Pulte could be situated best. We are also seeing a migration of younger families from the coasts to the heartland, where real estate and the cost of living is much lower.

One other tidbit from the survey: more and more realtors are offering discounts.

Investor optimism hit a 9 year high, according to Gallup. There was a definite partisan birfurcation, as Republicans became more optimistic while Democrats became more pessimistic.


21% of home buyers regret their choice of mortgage lender, according to a study by J.D. Power. 27% of first time home buyers regretted their choice. The complaints basically fell into two categories: The first type included a customer experience that was harmed by lack of communication, unforseen problems, and broken promises. The second type felt pressured to choose a specific type of mortgage product. They ended up being happy with their rate, but felt like they weren’t exposed to other options. Of course for the first time homebuyer, some of this is to be expected. If your only experience with getting credit is a “sign and drive” event at a car dealership, then the mortgage process will be a new experience. TRID and everything that goes with it could explain some of disappointment as well. For the second type, the borrower typically already had a relationship with the lender, but felt like the menu was limited. Note that technology is becoming more important, with 28% completing their application online last year versus 18% 2 years ago.

54 Responses

  1. Procedure porn for progressives:

    “With Biden in the chair on Jan. 3, the Senate can confirm a renominated Merrick Garland. Here’s how.
    By David Waldman
    Tuesday Dec 06, 2016 · 1:10 PM EST”

    And why it’s not likely to work, even if they tried it.


  2. Liked by 1 person

  3. Worth a read

    “Why Obama — and every president since Carter — failed to transform the Middle East
    “We are not a people to whom and nation to which limits don’t apply.” —Andrew Bacevich
    Updated by Sean Illing
    Dec 29, 2016, 9:30am EST ”

    Liked by 1 person

  4. “Don’t call my bluff, Eric.”

    Liked by 1 person

  5. It’s interesting the role reversal on Putin and the Russians for Democrats & progressives vs the USSR. I do like Glenn Greenwald’s coverage of how the MSM engages in fake news:

    “The people who should be most upset by this deceit are exactly the ones who played the leading role in spreading it: namely, those who most vocally claim that Fake News is a serious menace. Nothing will discredit that cause faster or more effectively than the perception that this crusade is really about a selective desire to suppress news that undermines one’s political agenda, masquerading as concern for journalistic accuracy and integrity.

    Yep. Couldn’t have said it better myself.

    Liked by 1 person

  6. Got to love Slate’s take on things:

    “Self-Driving Cars Will Make Organ Shortages Even Worse
    We need to prepare for that now.
    By Ian Adams and Anne Hobson ”

    Liked by 1 person

    • I have a feeling that driverless cars will always be like 3D technology, forever about to take off.


      • It’s coming, just maybe not as fast as they are predicting it. And, yeah, it will probably make organ shortages worse, but how do you prepare for that? Anyway, 10 years after driverless cars are standard, you’ll be able to 3D print organs made from your own cells (meaning no more rejection and immunosuppression), so it’s a lot of worry over what’s likely to be a decade-long problem. They’ve already printed kidneys and stuck ’em in a pig. More complex organs, for people, are coming in the not-too-distant future.

        3D television and movies is a different problem. Holographic projection is a non-trivial problem that would ultimately require some kind of super complicated substrate or nano-technology system to work without glasses . . . it’s just a novelty until, like 4K, it can just be in your TV and slowly stuff starts being broadcast in 3D. And that’s actually a bigger problem that printing human organs using your own t-cells as a base.


  7. Here’s a thought exercise for you on how President Obama is in fact responsible for Donald Trump’s election.

    First: let’s ascribe to Trump the same lack of agency that’s often posited for Muslims, namely that they can’t be expected to not react to provocations like the Charlie Hebdo cartoons. Presumably his Twitter account, instead of being a strategic way of going around the media to get his message out, is instead evidence of a complete lack of self control.

    Second: Knowing, or at least suspecting that, President Obama proceeded to mock and ridicule Trump during the 2011 White House correspondents’ dinner, thus “punching down” and making Trump a victim. He triggered Trump.

    Third: In response, Trump decided to run for office and ended up winning. Presumably a nuclear war and/or recession (women and minorities hardest hit) will follow.

    Therefore, much like the premise that the Charlie Hebo cartoonists should have expected a violent reaction for publishing mocking cartoons, Obama should have expected that Trump would react and thus is actually to blame for the result.


    • Not sure whose to blame for the fetishization of the presidency. Even if the office has broader powers than defined in the constitution, Trump is not going to be the Emperor Palpatine of this story.


  8. Not quite sure what to say about this:!

    Beginning on Jan. 1, prostitution by minors will be legal in California. Yes, you read that right.

    SB 1322 bars law enforcement from arresting sex workers who are under the age of 18 for soliciting or engaging in prostitution, or loitering with the intent to do so. So teenage girls (and boys) in California will soon be free to have sex in exchange for money without fear of arrest or prosecution.


  9. If interest.

    “The PHP malware sample they have provided appears to be P.A.S. version 3.1.0 which is commonly available and the website that claims to have authored it says they re Ukrainian. It is also several versions behind the most current version of P.A.S which is 4.1.1b. One might reasonably expect Russian intelligence operatives to develop their own tools or at least use current malicious tools from outside sources.

    Analysis of the IP addresses provided by DHS and DNI

    DHS provided us with 876 IP addresses as part of the package of indicators of compromise. Lets look at where they are located. The chart below shows the distribution of IP addresses by country.

    As you can see they are globally distributed with most of them in the USA.”


    • True that the Russian government would not likely to be using this . . . or be using PHP at all. Not if they were involved in any kind of serious hack.

      As far as the IP addresses—it just doesn’t matter. This stuff becomes available universally. The idea the IP addresses mean anything, one way or another, is just silly.


  10. I blame Trump for all this left-wing rake-stepping.

    Baby, you know I love you! Why you make me hit you?

    Liked by 1 person

    • More like Trump has their wrist clamped and is using their own hands to slap their faces, while asking: “Why are you hitting yourself? Why are you hitting yourself? Stop hitting yourself!”


  11. Baby, why you make me hit you?

    if this usual bargaining and persuasion process breaks down due to increased polarization, presidents will stretch the limits of their authorities ever further, leading to an eventual constitutional crisis.

    Liked by 1 person

    • What I didn’t fully appreciate, and nobody can appreciate until they’re in the position, is how decentralized power is in this system.

      Actually anyone who bothers to read the Constitution can appreciate it. So much for the myth of Obama as a Constitutional law scholar.

      Liked by 1 person

  12. Brent, Wiscy ran a TD play where the blocking was so perfect it was almost unbelievable. A forward Vee of blockers appeared, like a flock of geese in formation, and man-for-man wiped each defender, leaving a gap like the parting of the Red Sea to the end zone.

    If you did not see it, dial it up on Youtube in a couple of days. It’ll probably make Sports Center, too.


    • Thanks, Mark…I was only able to catch the second quarter. Will have to look for it.


      • Wisconsin one of the few Big 10 teams to actually win their bowl game. I think Big 10 is 3-8 in Bowl games. The top 3 all went down in flames.


        • at least UM put up a fight… I couldn’t believe how OSU was dominated so thoroughly on both sides of the ball…


        • It was the best defensive game that Clemson has played all year. They looked really good. I hope they can do the same vs ‘Bama.


        • hope everyone took the over on the rose bowl..


        • What a game…and what a way to lose for PSU. Poor play calling in the last minute, I think. All they needed was a FG, and they ran one running play and a bomb that got picked. Not sure what they were thinking.


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