Morning Report: Jamie Dimon hates Bitcoin 9/13/17

Vital Statistics:

Last Change
S&P Futures 2490.8 -3.5
Eurostoxx Index 381.0 -0.5
Oil (WTI) 48.7 0.5
US dollar index 85.0 0.0
10 Year Govt Bond Yield 2.17%
Current Coupon Fannie Mae TBA 103.33
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 3.82

Stocks are lower this morning on no real news. Bonds and MBS are flat.

Mortgage applications increased 10% last week as purchases rose 11% and refis rose 9%. This includes an adjustment for the Labor Day holiday. Rates hit a low of 2.03% last week on fears that Hurricane Irma would cause major damage. Rates have fallen almost 20 basis points since July, although much of that was given back early this week after Irma turned out to be much less destructive than originally feared.

Inflation at the wholesale level increased 0.2% in August and is up 2.4% YOY. Ex-food and energy, it rose 2% YOY, more or less right at the Fed’s target. Surging gasoline prices at the end of the month pushed up the PPI. Note that Hurricane Irma will cause higher food prices, so we may see a temporary spike in inflation over the next few months.

Vikram Pandit (who ran Citigroup back in the day) says that AI and automation will replace up to 30% of all banking jobs, primarily in the back office. For the mortgage business, I suspect we will see AI and automation help increase the capacity of personnel, but not necessarily replace them. Underwriting a mortgage is much more complicated than clearing a foreign exchange trade. Still, there is no doubt that technology is impacting the business.

Cryptocurrencies are all the rage these days, but J.P. Morgan CEO Jamie Dimon thinks they are a fraud on par with tulip bulbs. In fact, he said he would fire any employee trading bitcoin for “stupidity.” His view is that governments will not tolerate an extra-governmental medium of exchange that they cannot control. In fact, China recently shut down its Bitcoin exchanges. Bitcoin prices are up fourfold this year.

Donald Trump is beginning to work on selling tax reform by hosting 3 Democrats to dinner at the White House last night. He is targeting Democrats in states he won. All Democratic Senators except these 3 (Manchin, Heitkamp, and Donnelly) have signed a pledge that they will only support tax reform if (a) it doesn’t add to the deficit, (b) doesn’t increase the burden on the middle class, and (c) goes through the regular order process.

The gap between the homeowner’s and the appraiser’s perception of a house’s value decreased in August, according to Quicken’s Home Price Perception Index. In August, the difference was 1.35%, while in July it was 1.55%. Interestingly, out West, the appraised value is coming in higher than the homeowner’s perception, while in the Midwest and Northeast it is lower. I have to say I am surprised to see that appraisals ever come in higher than the homeowner’s perception, but it does happen. Note that their home value appraisal index (which only tracks appraisal prices) rose 0.2% in August and is up 2.6% YOY, well below the more popular home price indices like Case-Shiller or FHFA.

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