Morning Report: Bank earnings looking strong

Vital Statistics:


Last Change
S&P futures 2991 -6.25
Oil (WTI) 52.97 0.14
10 year government bond yield 1.74%
30 year fixed rate mortgage 3.97%


Stocks are lower this morning as bank earnings come in. Bonds and MBS are down.


Retail Sales disappointed, falling 0.3%, which was lower than expected. Ex autos and gas, they were flat, although August numbers were revised upward across the board. The control group was flat, and sales rose 4.1% YOY.


Mortgage Applications rose 0.5% last week as purchases fell 4% and refis rose 4%. “The ongoing interest rate volatility is impacting a borrowers’ ability to lock in the lowest rate possible. Despite a slight rise in mortgage rates last week, refinance applications increased 4 percent and were 199 percent higher than a year ago,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Purchase applications slowed for the second week in a row. While near term economic uncertainty is still a factor, other fundamental issues, such as a lack of housing inventory in many markets, is preventing purchase activity from meaningfully rising. However, purchase applications were still much higher than a year ago. This is a reminder that the purchase environment in 2019 continues to be stronger than in 2018.”


Bank earnings are generally looking good, and mortgage backed securities trading desks are doing well as rates have fallen and volumes have picked up. The other side of the coin is that the drop in rates have negatively affected the values of mortgage servicing rights. Wells is a good example: despite a $127 million increase in origination revenue, total mortgage banking revenue fell by $292 million as their servicing book took a $419 million mark-to-market loss.

10 Responses

  1. PIthy headline:

    “Mob of Democratic Candidates Denounces Concept of Using Taxes to Pay for Social Services

    By Ben Mathis-Lilley ”


  2. Checked out the Mulvaney press conference on CSpan.. The media is so fricking dishonest about what was said…. The WaPo eliminated about 500 words where he explains the whole thought process by using … between two sentences….

    Reminds me of the book review that reads: “Amazing how such a piece of trash could ever get published. I laughed at how wooden the characters were and I cried after wasting 10 hours of my life on it. It was a tour de force of pedestrian garbage” to “Amazing. I laughed, I cried. A tour de force”

    Liked by 1 person

    • Sure. I’ll – let’s deal with the second one first, which is – look, it should come as no surprise to anybody – the last time I was up here – I haven’t done this since I was Chief of Staff, right? The last time I was up here, some of you folks remember, it was for the budget briefings, right?And one of the questions y’all always asked me about the budget is, “What are you all doing to the foreign aid budget?” Because we absolutely gutted it, right? President Trump is not a big fan of foreign aid. Never has been; still isn’t. Doesn’t like spending money overseas, especially when it’s poorly spent. And that is exactly what drove this decision.I’ve been in the office a couple times with him, talking about this. And he said, “Look, Mick, this is a corrupt place.” Everybody knows it’s a corrupt place. By the way, put this in context: This is on the heels of what happened in Puerto Rico, when we took a lot of heat for not wanting to give a bunch of aid to Puerto Rico because we thought that place was corrupt. And, by the way, it turns out we were right. All right? So put that as your context.He’s like, “Look, this is a corrupt place. I don’t want to send them a bunch of money and have them waste it, have them spend it, have them use it to line their own pockets. Plus, I’m not sure that the other European countries are helping them out either.”So we actually looked at that, during that time, before – when we cut the money off, before the money actually flowed, because the money flowed by the end of the fiscal year – we actually did an analysis of what other countries were doing in terms of supporting Ukraine. And what we found out was that – and I can’t remember if it’s zero or near zero dollars from any European countries for lethal aid. And you’ve heard the President say this: that we give them tanks and other countries give them pillows. That’s absolutely right, that the – as vocal as the Europeans are about supporting Ukraine, they are really, really stingy when it comes to lethal aid. And they weren’t helping Ukraine, and then still to this day are not. And the President did not like that. I know it’s a long answer to your question, but I’m still going.So that was – those were the driving factors. Did he also mention to me in pass the corruption related to the DNC server? Absolutely. No question about that. But that’s it. And that’s why we held up the money.Now, there was a report –

      So the demand for an investigation into the Democrats was part of the reason that he ordered to withhold funding to Ukraine?

      Mick Mulvaney
      Mick Mulvaney
      The look back to what happened in 2016 –

      The investigation into Democrats.

      Mick Mulvaney
      Mick Mulvaney
      – certainly was part of the thing that he was worried about in corruption with that nation. And that is absolutely appropriate.

      And withholding the funding?

      Mick Mulvaney
      Mick Mulvaney
      Yeah. Which ultimately, then, flowed. By the way, there was a report that we were worried that the money wouldn’t – that if we didn’t pay out the money, it would be illegal, okay? It would be unlawful. That is one of those things that has the little shred of truth in it, that makes it look a lot worse than it really is.We were concerned, over at OMB, about an impoundment. And I know I just put half of you folks to bed, but there’s – the Budget Control Act – Budget Control Impoundment Act of 1974 says that if Congress appropriates money, you have to spend it. Okay? At least that’s how it’s interpreted by some folks. And we knew that that money either had to go out the door by the end of September or we had to have a really, really good reason not to do it. And that was the legality of the issue.


  3. Mark:

    I don’t have a subscription to The Economist, but I think you do. Perhaps you can let us know if this article has a real argument to substantiate a headline that appears to me to be a highly dubious assertion.


    • From my reading of that February article it reaches conclusions from short term studies, and I frankly assume it will take 20 years from the beginning of electrification to achieve community or nationwide results. Further, it reports on only household electrification, as a practical matter.

      Here is the meat of it:

      …just under 1bn people worldwide still lack access to electricity, according to the International Energy Agency, a research group. Almost two-thirds live in Africa, mostly in the countryside. The UN believes all should have power, and has set a target date to achieve universal access of 2030. That sounds plausible—since 2000 the number of people without power has fallen by 700m. Sadly, it is unlikely to happen. And recent economic research shows that rushing to illuminate the world is a bad idea.

      Rwandans who were given solar lamps responded by lighting their households more brightly, for more hours each day. They burned less kerosene, and their children studied a little more, especially at night. But the adults’ working lives changed hardly at all. Solar lamps appear not to rescue people from poverty.

      Nor even does a grid connection. A detailed study of rural Tanzania, where America’s Millennium Challenge Corporation built power lines and subsidised connections, found little effect on adults’ welfare. Offering cheap connections cut the proportion of people living on less than $2 a day from 93% to 90%—hardly a transformation. Children’s lives changed, but perhaps not in a good way. Those who were connected went from watching almost no television to one and a half hours a day, and did even less housework than before.

      …World Bank estimate that connections boost the spending of people in the top fifth of the earnings scale by 11%. People in the bottom fifth see a benefit of 4%.

      Too short term to measure benefit to kids studying without breathing kerosene and too narrow to deal with what grid electrification can do for business, industry, and productive AG. Or so I think.


      • Thanks Mark.

        On a different note, I just finished reading (listening to actually) Douglas Murray’s new book The Madness of Crowds: Gender, Race, and Identity. I highly recommend it. You can get a bit of a flavor for the book from a recent Murray interview with Brett Weinstein (of Evergreen College fame), which is also worthwhile listening to on its own merits.


Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: