Morning Report: FOMC week

Vital Statistics:


  Last Change
S&P futures 3937 -1.4
Oil (WTI) 64.88 -0.76
10 year government bond yield   1.62%
30 year fixed rate mortgage   3.27%

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


The big event this week will be the FOMC meeting on Tuesday and Wednesday. While no one expects to see any change in policy, a lot of attention will be drawn to the dot plot and whether we see an increase in the number of members seeing rate increases in 2023. We will also get a fresh set of economic forecasts, and economists are taking up their numbers for this year. While I won’t be surprised to see the Fed take up GDP estimates, I am more interested to see whether they take up inflation estimates.

Jerome Powell will hold another press conference, and I am curious as to whether he will discuss the effect that the supplemental liquidity ratio is having on longer-term rates, or whether the business press asks about it.


Tappable equity, or the amount of home equity that could be converted into a cash-out refinance, reached a record of $7.3 trillion at the end of 2020. This works out to be about $158,000 per homeowner. “This past year has been one of significant home price growth, to say the least,” Walden said. “But it has also occurred in a market in which the word ‘unprecedented’ has likely been used more over that same period than perhaps ever in history. Nevertheless, that growth has brought the levels of equity available to American homeowners with mortgages to…well, unprecedented levels.”

This stat is important, because it illustrates how cash-out refinances, particularly debt consolidation refis, will increase in importance as rates rise. Even if the new rate is more or less the same, if the borrower can repay credit card debt that costs in the teens with a 30 year fixed rate mortgage at 3.5%, it still makes sense to do. Don’t forget that 30 year to 15 year refis will also be popular with rates down here. There will still be plenty of business to be done.

Given the supply / demand imbalance for available homes, expect to see home prices continue to rise. I do wonder however if the new Fannie restrictions on investment and second homes affects pricing in certain areas.


Higher input prices will be driving up the price of new homes. Lumber prices are trading around $1,000, and skilled labor wages are on the rise as well. This will affect affordability issues.


16 Responses

  1. Why anyone in their right mind would read the WaPo these days is beyond me. It literally just makes shit up and lies to its readers.


    • If this was really the reason “based on information provided by a source”, then they need to make public the name of the source.

      That’s what Greenwald and Taibbi call for all the time.

      If they don’t then it should be considered “collusion” between the reporter and the source to spread “misinformation”.


      • Also does anyone believe we’d be getting this correction now if Trump had pulled it off and was presently president, or would we be getting this as an article of impeachment?


      • jnc:

        If they don’t then it should be considered “collusion” between the reporter and the source to spread “misinformation”.

        We both know that they won’t. And the collusion is not just between the reporter and the source, but includes the editors and publishers as well, because ultimately they control whether or not the source gets named in print.


        • jnc:

          We both know that they won’t.

          Looks like I was wrong. I can’t see the WaPo re-write of the article (I don’t subscribe) but I am hearing that they did, in fact, reveal the source…Jordan Fuchs.


        • You are correct. Credit where it is due to the Post:

          “The Washington Post reported on the substance of Trump’s Dec. 23 call in January, describing him saying that Watson should “find the fraud” and that she would be a “national hero,” based on an account from Jordan Fuchs, the deputy secretary of state, whom Watson briefed on his comments.


          When The Post first reported on the call, state officials said they did not believe that a recording existed. Officials located the recording on a trash folder on Watson’s device while responding to a public records request, according to a person familiar with the situation, who spoke on the condition of anonymity to describe the internal process.

          Watson has not responded to requests for comment. The Post originally withheld her name because of the risk of threats and harassment directed at election officials. In an interview with WSB-TV, she said she was “shocked” by Trump’s call but did not feel pressured by his outreach.”


    • The only hope is the majority of people come to understand the media just lies, and that journalists don’t do reporting any more, and basically nothing they say is true. They are less truthful that advetorials and political ads.


    • It wasn’t a mistake. It was an attempt to swing an election.

      The left deserves absolutely zero assumption of good faith in any negotiation or interaction.


      • Brent:

        The left deserves absolutely zero assumption of good faith in any negotiation or interaction.

        I couldn’t agree more.


  2. Worth noting:

    “More than a dozen gravestones and memorials were toppled and spray painted in Hollywood Cemetery on Saturday, causing more than $200,000 in damages, according to the Richmond police, who are investigating the vandalism.

    “The desecration of graves is just a cowardly act that we cannot tolerate,” Police Chief Gerald Smith said at a press conference Monday asking the community for tips or any information about the incident.

    Vandals entered the cemetery shortly after 1 a.m. Saturday, he said. It appears they used a sledgehammer to knock over headstones and black spray paint on some. The graffiti was not legible, Smith said.

    The damage occurred in the Presidents Circle section of the cemetery, the final resting place of two presidents, James Monroe and John Tyler. Smith said neither of their graves was disturbed.”

    Who is the “American Taliban” now?


  3. Oh the hubris of youth:

    “I think that Gen Z was so fed up with being put in these positions to reeducate the generations that have preceded us.”


    • Hubris combined with being fabulously ignorant and over-emotional while entirely full of shit and easily manipulated by near-fossilized ideologues.


    • Gell-Mann Amnesia Effect? You are forgetting what you already know….The WaPo makes shit up to advance its preferred narratives. I have no reason to think that it isn’t just making this up, too.


  4. The Wall Street Journal reported that China’s government demanded that Alibaba divest its media assets. The tech giant has been in the crosshairs since Jack Ma, its founder, made unflattering remarks about state-owned banks last year. Alibaba owns stakes in several social- and traditional-media outlets, including Weibo and the South China Morning Post. The government reportedly resents its influence over public opinion.

    China might just screw itself. The growth had depended for so long on pre-capitalist protected mercantilism as opposed to communism that a return to Maoist one size fits all is sure to be stifling.


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