Morning Report: The rocket launches

Vital Statistics:


Last Change
S&P futures 3331 -13.6
Oil (WTI) 41.63 -0.52
10 year government bond yield 0.53%
30 year fixed rate mortgage 2.85%


Stocks are lower this morning after the jobs report. Bonds and MBS are flat.


Jobs report data dump:

  • Nonfarm payrolls up 1.7 million
  • Unemployment rate 10.2%
  • Average hourly earnings up 0.2% MOM / 4.8% YOY

Overall, it shows the job market is on the mend, although it is probably taking longer than people would like. At this point, smaller businesses (especially restaurants and retail) are folding.


Rocket Mortgage priced its IPO yesterday after it was downsized by 43%. The stock performed reasonably well, popping 20% on the day. With the stock trading here, Quicken is valued at $43 billion, with a P/E of 47 and a price to book of almost 12. I guess the question here is how much you are willing to pay for the steak and how much for the sizzle. Last year Quicken originated $145 billion in loans, while PennyMac Financial originated. $118 billion. Quicken earned 62 basis points on that origination to PennyMac’s 33 bps. Yet Quicken’s market cap is almost 11 times PennyMac’s. There are some companies that trade at huge premiums to their competitors: Tesla versus Ford, versus Barnes and Noble back in the day. A huge multiple doesn’t necessarily imply a lousy investment. But you are paying up for the sizzle here. When the Fed starts hiking rates, Quicken will suffer a drop in volume just like everyone else will.


Intercontinental Exchange (the parent company of the New York Stock Exchange) just bought Ellie Mae from private equity firm Thomas Brave for $11 billion. ICE also owns MERS and Simplifile, so this continues the company’s expansion into the mortgage space.

Twenty years after we founded Intercontinental Exchange to provide a transparent trading platform for the energy industry, and following two decades of providing continued innovation to help customers navigate global markets, we are pleased to announce the acquisition of Ellie Mae, which will help us similarly transform the mortgage marketplace,” said Jeffrey C. Sprecher, Founder, Chairman and CEO of Intercontinental Exchange. “Our planned acquisition represents a one-of-a-kind opportunity to add an extraordinary enterprise with great leadership to our family. It will also enhance ICE’s growth strategy in mortgage technology, with complementary products and a wide array of customers and stakeholders who will benefit from our core and proven expertise in operating networks and marketplaces.


PennyMac Financial reported second quarter earnings yesterday, with production increasing to $37.6 billion. Earnings per share increased from $0.92 in the second quarter of 2019 to $4.39 a share. The company also hiked its dividend by 25%.


While forbearances in general are falling, Ginnie Mae forbearances are still rising.

10 Responses

  1. What is Ellie Mae?


  2. Good read:


  3. My quick and dirty on today’s EOs:

    1] The extension of a $400/wk benefit, apparently contingent on states paying 1/4.

    Every single state will howl that it cannot pay, and the R Senate will be forced to at least agree very soon to a statutory $400 benefit, federal only. Or else no one gets anything, if it is true match contingency.

    2] Payroll tax cut.

    The employees’ shares, although deferred, are still statutory trust funds in the employer’s hands. Accountants and lawyers will advise employers to escrow the funds until it is known whether the deferred amounts are forgiven, or risk the worst boomerang effect IRS has to offer – the crack down on employers who don’t shepherd the trust funds.

    The only plausible litigation here would be by employers for declaratory relief as to what to do with the trust funds, it seems to me.

    I doubt there will be litigation arising from the Ds in the HoR.


    • I’m worried these sorts of EOs open up the possibility of presidents doing the reverse in some form. I get that the Hill is dysfunctional but it seems like the president shouldn’t be able to do this sort of stuff by fiat. Of course the president pays the electoral price when congress doesn’t take action, so … this seems to be the direction we are headed.


      • EOs have been way over the top for BHO and DJT. Timing favors Trump on these, and no political opponent will sue even though they are mainly outside the Presidential power. Can’t blame him for trying.

        The paper that picked up on the problem with the payroll tax moratorium that I pointed out was of course the WSJ.


  4. Interesting read:

    One of the peculiarities of civil war is that it is hard to say, except in retrospect, when a nation has passed the point of no return. There is rarely anything so distinct as Caesar’s fateful crossing of the Rubicon. It is, rather, like falling into a black hole: there is an “event horizon,” at some distance from the singularity, beyond which nothing can escape. To a space-traveler falling through it, there is no visible difference, no noticeable boundary—but once you have crossed that fateful border, there’s no possibility of turning back. All future timelines must pass through the singularity.

    Is that where we are today? For the answer to be “no” means either that one side in this great political conflict will simply admit defeat, or that there will be some softening of grievances, some sort of coming together in a newly formed political center. Does that seem likely?


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