Morning Report: FOMC minutes confirm no move in December

Vital Statistics:


Last Change
S&P futures 3110 1.25
Oil (WTI) 57.39 0.74
10 year government bond yield 1.76%
30 year fixed rate mortgage 3.93%


Stocks are flat this morning after China invited the US for trade talks in Beijing despite the resolution backing Hong Kong. Bonds and MBS are down small.


In economic data, initial jobless claims were flat at 227,000 last week and the Philadelphia Fed manufacturing survey improved.


The CFPB is conducting an assessment of the TRID rule. There doesn’t appear to be any specific issues the CFPB is looking to address, but it is part of the Trump Administration’s push to eliminate unnecessary burdens on business.


Independent mortgage banks had their best quarter in 7 years as pretax production profit rose to 74 basis points from 64 in the prior quarter. “A surge in refinance activity and a healthy purchase market led to robust mortgage volume in the third quarter, pushing up production profits to a high not seen since the fourth quarter of 2012 ($2,256 per loan),” said Marina Walsh, MBA Vice President of Industry Analysis. “The increase in profits was primarily driven by declining production expenses and higher loan balances, which mitigated the effects of lower basis-point revenue.” Interestingly, production revenue and secondary marketing income fell. The purchase share of the market fell from 74% to 60%.


Bold prediction: Within the next two years, we will see the majority of loans go through the entire process without any human involvement. It will be a much more mechanized process.


The minutes from the Fed confirmed the market’s view that the central bank will be out of the picture for a while. They removed the “act as appropriate” language in order to signal that stance. From the minutes:


In describing the monetary policy outlook, they also agreed to remove the “act as appropriate” language and emphasize that the Committee would continue to monitor the implications of incoming information for the economic outlook as it assessed the appropriate path of the target range for the federal funds rate. This change was seen as consistent with the view that the current stance of monetary policy was likely to remain appropriate as long as the economy performed broadly in line with the Committee’s expectations and that policy was not on a preset course and could change if developments emerged that led to a material reassessment of the economic outlook.


Translation: We aren’t moving in December. Note the Fed Funds futures agree with that assessment, although they are predicting more cuts in 2020. FWIW, the Fed generally tires to avoid modifying policy in the months leading up to an election for fear of appearing political. That said, the March futures are pricing in about a 25% chance of a cut.


fed funds futures


Is the REO-to-Rental trade finally done? Blackstone has finally exited its entire position in Invitation Homes, which it created in the aftermath of the financial crisis. Invitation was one of the first to buy up distressed properties and rehab them to rent. Turns out Blackstone tripled its money on the trade.

10 Responses

  1. After a week of watching, I am with Peggy Noonan on this.

    In short, this is bad stuff worthy of bipartisan Censure but not worth a futile Impeachment trial. Read Noonan’s column for details.

    Pretty much where I was for Clinton.


    • Also, when this Committee sends its “report” to Judiciary, that won’t stop Judiciary from pounding on the tax stuff and Mueller and stretching this out for more sound bites. I think everyone who thinks there will be Articles of Impeachment from Judiciary in December is in for a big surprise and a long wait. Judiciary might not even meet for this stuff over the holidays. And they are pursuing a bunch of other stuff, themselves.

      Fiona Hill was a super witness. And she helped Rs on one significant piece. She flatly says the info in the Steele Dossier is Russian BS.


    • In short, this is bad stuff worthy of bipartisan Censure but not worth a futile Impeachment trial.

      I think this is true–although I think the Impeachment clause is open-ended enough that most president’s–and Trump definitely–do enough things to be impeached. While the fantasizing about invoking the 25th I’ve felt would be clearly unconstitutional, impeaching Trump would not be, as impeaching Clinton wasn’t.

      That being said, I don’t think it’s a good idea from any direction or at any level. I think they are making the re-election of Trump–likely with coattails that reduce the number of Dems in the house or even flips it back–much more likely. If for no other reason than they clearly aren’t focused on the 2020 elections.

      A censure would have made a lot more sense, and is probably what they would have done had Trump not driven them crazy. 😉


  2. If you read the comments to this post, the media and the people have let the KosKidz down. Adam Schiff handled the hearings perfectly.

    It has to be the people and the media’s fault it hasn’t moved the opinion needle.

    Liked by 1 person

    • Always blame the voters. Such a good idea.

      I thought this was a really good episode of Joe Rogan:

      He talks to Taibbi about how the media is a dumpster fire. Touches on Epstein’s likely murder and how there is clearly something majorly wrong there. He makes a lot great points, especially about the state of the press.


      • And the stuff about how many people Taibbi heard talking about how the Clinton/Trump election was really close in 2016, but they didn’t want to talk about it because it might help Trump, is also very interesting.


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