Vital Statistics:
Last | Change | |
S&P Futures | 2267.0 | 5.0 |
Eurostoxx Index | 362.7 | -0.7 |
Oil (WTI) | 52.2 | 0.8 |
US dollar index | 91.9 | 0.1 |
10 Year Govt Bond Yield | 2.48% | |
Current Coupon Fannie Mae TBA | 101.2 | |
Current Coupon Ginnie Mae TBA | 103.1 | |
30 Year Fixed Rate Mortgage | 4.19 |
Stocks are up as we prepare for the inauguration. Bonds and MBS are down.
Should be a quiet day for bonds as there are no economic data.
Janet Yellen spoke yesterday at Stamford and stressed the Fed was not behind the curve, and we still have some slack in the labor market. However, she said it was prudent to undo some of the accomodation so that we don’t have to move too quickly later. She also said the economic outlook was clouded due to uncertainty out of Washington. While Trump can sand down the edges of the regulatory state, he has a problem legislatively with Democrats in complete opposition, and a tenuous relationship with Republicans.
A partial explanation for the weakness in the high end of the real estate market can be explained by new Chinese capital controls. The Chinese government has instituted capital control to prevent an outflow of yuan. Foreign real estate was a big beneficiary of that capital, so expect to see more weakness in the high-priced markets like San Francisco, NYC, Seattle, and Denver.
Trump Treasury Secretary nominee Steve Mnuchin testified in front of Congress yesterday, and largely escaped unscathed. He called for a reform of Fannie Mae and Freddie Mac, however he said he did not support “recap and release.” He also said that any sort of “border tax” would be targeted at companies that offshore manufacturing and then sell back into the US. The hearing got testy at times, with Sen Pat Roberts (R-KS) suggesting that Sen Ron Wyden (D-OR) take a valium. Democrats zeroed in on his role with IndyMac and purported foreclosure abuses.
Fannie Mae and Freddie Mac tumbled during the testimony, however they also lost a lawsuit that could have have explained the fall as well. Both were down 5% after being up for the day. Both stocks have more than doubled since the election on optimism that Donald Trump would support some sort of change in how the government treats these stocks. Currently, the government owns 79.9% and all profits from the company go directly to Treasury.
In terms of other takeaways from Mnuchin’s testimony, he supports bringing the CFPB into the appropriations process, would like to tweak the Volcker rule (which prohibits proprietary trading) to eliminate the negative effects it is having on market liquidity, to ease the regulatory burden on small banks, and to bring back a “21st century” Glass-Steagall law, whatever that means.
Glass Steagall was implemented during the Great Depression because investment banks were putting busted underwritings (i.e. underwritten bonds they couldn’t sell to the public) on the balance sheets of their captive commercial banks and insurance companies at par in order to hide the losses. Glass Steagall ended this practice by requiring all of these transactions to be arm’s length. Fast forward to 2007, the crisis wasn’t caused by JP Morgan the investment bank stuffing bad paper on Chase the commercial bank’s balance sheet. For what its worth, the US is the only country on the planet that separates investment banking and commercial banking, or even draws a distinction between the two. Everywhere else, it is just called “banking.” Indeed, the reason Glass-Steagall was repealed in the first place was that reason: Wall Street investment banks like Morgan Stanley and Goldman couldn’t compete with foreign banks because they had to fund their balance sheets at LIBOR while the foreign banks could borrow at much lower deposit rates. As the derivatives business expanded in the 1990s, “Wall Street” was becoming Credit Suisse, Deutsche Bank, Nomura, and Barclay’s.
The Mortgage Bankers Association was out with a statement yesterday, speculating that the change in FHA MIP could be reversed by Ben Carson’s HUD. “”Based on recent testimony and political pushback, we believe there is a strong chance the most recent MIP reduction… may be one of the rollback actions taken soon after President Trump takes office.” Carson has said he would study how the change would affect the insurance fund, but hasn’t indicated whether he supports the change or not.
Note that we did see a rally in the Ginnie II higher coupon MBS yesterday despite a rough day for bonds otherwise. You can see in the chart below how Ginnie 4.5s (black line) outperformed Fannie 4.5s (blue line). Expect to see higher volatility in the higher note rates for FHA and VA loans as this plays out.
Negative equity is becoming less of a problem as home prices continue to rise. During 2016, 1 million homes regained positive equity, leaving only 2.2 million homes with negative equity. While we are still well above the bubble years in terms of negative equity, we have fallen markedly from the peak of 15.1 million homes in 2010. As houses regain positive equity, it will create refinance opportunities which will help offset the effect of higher rates. It will also increase mobility, which is one of the reasons why we have a low unemployment rate, but have so many workers still on the sidelines. They can’t move to where the jobs are because they are trapped in a home with negative equity they can’t sell.
Filed under: Economy, Morning Report |
Election Day documentary that’s worth a watch:
http://www.epix.com/movie/election-day-lens-across-america
When it was in real time, it wasn’t about Russian hacking, the DNC leaks, Comey, or anything else. It was about the mood of the country and how badly it was misread.
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Ace made that point in a series of posts last night relieving election night
John Ekdahl had a point I think I’m allowed to repeat. He and I were watching these videos a couple of weeks ago, and he observed to me tonight that on election night itself, liberals were so shocked by the result that they could mostly only respond with the easiest sort of reaction: Honesty.
http://ace.mu.nu/archives/367984.php
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Yep.
The interviews with the African American voters on their views about Clinton are illuminating.
Edit: It also reminded me of how the narrative from the 2000 recount evolved from how it was portrayed at the time.
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This is great:
““There’s a good portion of us who think Trump is a liberal who basically pulled an Alinsky on the GOP and beat them with their own rules,” Hedtke said. “It’s kind of funny, from an anarchist standpoint.””
https://www.theatlantic.com/politics/archive/2017/01/welcome-to-the-trump-presidency/513893/
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This is amusing:
They really do make it too easy for him.
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Those morons on the PL actually want a civil war, don’t they.
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Yes. Yes they do.
They really do believe what they say.
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really? not surprised..
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Don’t know that sick burns and sex toys are going to be all that effective against rednecks with heavy weapons.
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nova/jnc:
Those morons on the PL actually want a civil war, don’t they.
Another indication of the fundamental totalitarian mindset of the left. When we don’t like what the rest of the nation has voted for, we advocate for a divorce, allowing them to continue to do whatever they want to themselves. When they don’t like what the rest of the nation has voted for, they advocate for killing the opposition.
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Clearly I am not missing anything today
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I’ve been staying away, but they (some of them) want either want a civil war or the line of succession assassinated. I saw both suggested or hoped for, and that was weeks ago.
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No surprise from the posters at PL.
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He knows what he’s doing:
“‘This is the greatest guy’: Trump meets FedEx courier, offers him $10,000
By Justin Jouvenal January 19 at 11:04 PM”
https://www.washingtonpost.com/local/dc-politics/this-is-the-greatest-guy-trump-meets-fedex-courier-offers-him-10000/2017/01/19/e227a8fc-de98-11e6-acdf-14da832ae861_story.html
Original story that prompted it:
“In donated shoes and suit, a Trump supporter comes to Washington
By Justin Jouvenal
January 18”
https://www.washingtonpost.com/local/dc-politics/in-donated-shoes-and-suit-a-trump-supporter-comes-to-washington/2017/01/18/ccb691dc-d839-11e6-b8b2-cb5164beba6b_story.html
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“One by one the factories shuttered and left our shores, without even a thought for the millions of workers who were left behind. The wealth of the middle class has been ripped from their homes and redistributed across the world. But that is the past, and now we are looking only to the future.””
attribute this to Sanders and watch the left eat it up.
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https://www.washingtonpost.com/local/ten-year-old-anti-abortion-protester-was-shoved-then-an-anti-trump-demonstrator-reached-out-to-help/2017/01/20/ab4cec54-df31-11e6-acdf-14da832ae861_story.html?postshare=5231484936744435&tid=ss_tw&utm_term=.4fb6d0337031
wth is wrong with people
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these people are like a religious cult, and blasphemy is a sin.
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nova:
wth is wrong with people
Political ideology consumes their lives, probably. It’s why they disown relatives who have the wrong political views, its why they go out of their way to destroy small businesses that don’t toe the politically correct line, and it’s why they taunt children who are protesting for the wrong cause.
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They couldn’t Google how to spell “illegitimate”?
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Good take:
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“… the birth of a populist and nationalist new right”.
For the next few years, anyway, if Trump eventually gets coopted as DC seems to have a way of doing. Or 8 years, max, if not. I don’t see the GOP being any more self-reflective than the left on why Trump won, why Sanders did so well and the DNC had to practically sabotage him for him to lose against Clinton.
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http://www.mirror.co.uk/news/world-news/man-says-189-inch-penis-9661421
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Read “18.9” as “189” and was sure it had been said by DJT. Big disappointment, there, George.
My first take on Inaugural Address: 21st C. billionaire huckster channels Andrew Jackson [rage against the insiders, push nationalism, git the bad guys, and build Fortress America].
Cherokee Nation better watch out.
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Don’t think she’s #Woke
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PL has become nothing more than one big Facebook rant:
https://www.washingtonpost.com/blogs/plum-line/wp/2017/01/20/a-liberals-letter-to-conservatives-on-the-occasion-of-trumps-inauguration/
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Think of it as Paul’s purge. 🙂
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It’s amazing how much politics is catharsis. Political posts on Facebook, I’ve noticed, are generally almost pure catharsis, no matter who is doing them. We’re creatures that love to express ourselves.
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waldman reminds me of the loudmouth petulant campus marxist in college who called you a stupid baby killer and bummed your smokes…
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The sad thing is he is capable of producing a decent piece.
This is from almost one year ago.
http://prospect.org/article/perpetually-outraged-perpetually-outrageous-0
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This is awesome:
http://www.thedailybeast.com/articles/2017/01/20/trump-s-whitehouse-gov-disappears-civil-rights-climate-change-lgbt-rights.html
Troll level: Master Class
Someone must have wished on a shooting star for a president that would literally drive all liberals insane. Because we have him.
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I don’t think I’m insane. But if you think of the commentary that was strewn around here about Obama, the standard for “insane” is pretty darn low.
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I don’t think you’re insane, either! In regards to the commentary about Obama . . . not sure to what specifically you refer or the points you’re connecting, but there are chunks of left and right that go certifiably insane just based on the party in power. As if they had some god-given right to rule indefinitely.
I’ve just never seen a president so willing to so constantly flip the middle finger at the American left. And pretty much everyone else, when it comes down to it. He just seems designed to drive half-the-country completely crazy.
I mean, he’s not really Dwayne Elizondo Mountain Dew Herbert Camacho. But he is.
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Mich:
But if you think of the commentary that was strewn around here about Obama, the standard for “insane” is pretty darn low.
Here is a list of 4,864 ATiM comments that mention Obama. Perhaps you could pick out a few that demonstrate what you suggest above?
https://conservaliberals.wordpress.com/wp-admin/edit-comments.php?s=Obama&comment_status=all&pagegen_timestamp=2017-01-21+12%3A51%3A55&_total=4864&_per_page=20&_page=6&paged=1&_ajax_fetch_list_nonce=46afc6764a&action=-1&comment_type&action2=-1
This link will take you to the day after the 2012 election. Maybe if you start there and work your way towards the present you can compare and contrast the reaction of ATiM to the election of Obama to the current reaction of the left to the election of Trump, and point out the similarities. (I think McWing, QB and I were missing from ATiM until late December of 2012, so if it was us that have set the low bar on insane, you might want to jump ahead a month.)
https://conservaliberals.wordpress.com/wp-admin/edit-comments.php?s=Obama&comment_status=all&pagegen_timestamp=2017-01-21+12%3A57%3A47&_total=4864&_per_page=20&_page=140&paged=135&_ajax_fetch_list_nonce=46afc6764a&action=-1&comment_type&action2=-1
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Did GWB have a LGBT page? Did Clinton?
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Probably not, but memories are short.
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It’s like they’re literally committing genocide!!1!1!1!1!
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We have an illegal virtuesignal on the offense, 15 yard penalty, replay the down…
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To far?
I’m worried I went to far.
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Trump getting busy on the regulatory front:
https://www.bloomberg.com/politics/articles/2017-01-20/trump-aides-said-to-prepare-list-of-first-days-changes-on-energy?cmpid=socialflow-facebook-business&utm_content=business&utm_campaign=socialflow-organic&utm_source=facebook&utm_medium=social
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Yeah Dan, it was obvious that the NYT hated Clinton and Obama.
Nailed it.
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Sit on or hold back for maximum effect? They ran it right at the end of October.
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It was a strategic backfire in the press’s ongoing effort to manipulate election results via propaganda tactics, and perhaps Pfeiffer’s critique is that they screwed it up by waiting so long, without explicitly saying so.
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https://twitter.com/lachlan/status/822910976622264320
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We have access to free razors?
I find it fascinating what human beings are willing to inflict on themselves. Cher and Madonna are famous, rich, can pretty much do anything they want with their time, have social networks to draw on and business networks that we can only dream of . . . but they are victims and making themselves miserable because of mostly imaginary stuff for no discernible reason.
We’re just designed to find reasons to be unhappy.
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Heyooooooo!
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The kind of comparison that can be done to anybody. You know who also wore pants? Hitler.
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That’s why there’s an asterisk after Obama’s name when it comes to the 2012 election. Selected, not Elected.
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McWing:
That’s why there’s an asterisk after Obama’s name when it comes to the 2012 election. Selected, not Elected.
The IRS hacked the 2012 election!
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Oh, I think these protests are going to influence the midterms and the 2020 presidential election. Just not the way they are thinking.
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In the same way “Make America Great Again” ≠ “I’m With Her”, “I’m Scared of an Imaginary Bogeyman and I Hate You” ≠ “Jobs, Terrorism, The Economy”.
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What’s the difference between us TeaBagger’s “obstructing” Obama and Dumb Lefties “Resisting” Trump?
Asking for a friend.
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McWing:
What’s the difference between us TeaBagger’s “obstructing” Obama and Dumb Lefties “Resisting” Trump?
Teabaggers were motivated by “rage and resentment”, while our current rioters are driven by love and tolerance.
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This is a complete non sequitur, but….
I’m currently reading (listening to, actually) the Erik Larsen book In The Garden Of Beasts, which is about the tenure of William Dodd as ambassador to Germany from 1933 thru 1937. It compelled me to do a little internet reasearch into Dodd, and I found this line from a speech he gave in Berlin in 1933 to be particularly interesting. Speaking of what was going on in Roosevelt’s America, he said:
It was not revolution as men are prone to say. It was a popular expansion of governmental powers beyond all constitutional grants, and nearly all men everywhere hope the President may succeed.
In our current age in which virtually every expansion of federal power is routinely claimed to be justified by the ever-changing nature of an allegedly “living constitution”, and we have become accustomed to the disingenuous sophistry of those who seek to articulate such justifications, it is somewhat refreshing to see such honesty about the obviously unconstitutional nature of what the original architects of unlimited federal power wanted, nevertheless, to do.
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https://www.yahoo.com/tech/foxconn-ceo-says-investment-display-plant-u-exceed-120029682–finance.html
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This is the common response to this meme, but my response is: uh, inanimate objects don’t have rights. If you accept the absurd premise, why guns? Hammers have more “rights” than guns and more freedom of movement. So do handbags. Polo shirts. Lunch boxes. Fishing rods. iPhones. Comic books. But guns are not conscious, not thinking entities, do not have lives and do not have rights. Gun owners and gun manufacturers have rights and limitations on those rights.
It speaks to the quality of thought for some of those folks.
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Football. Bah, humbug.
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I assume your favored sports ball team did not throw the pigskin into or through the correct goal line basket. 🙂
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Her flipping the bird at the end makes me wish I had voted for a Trump.
http://www.theamericanmirror.com/video-passengers-cheer-woman-berating-trump-supporter-kicked-off-plane/
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Matthew Yglesias has a decent piece today:
http://www.vox.com/policy-and-politics/2017/1/23/14348298/womens-march-trump-opposition
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