Morning Report: Bad inflation data

Posted on February 10, 2022 by Brent Nyitray

Vital Statistics:

 LastChange
S&P futures4,535-43.2
Oil (WTI)90.140.43
10 year government bond yield 2.00%
30 year fixed rate mortgage 3.94%

Stocks are lower this morning after inflation came in hotter than expected. Bonds and MBS are down.

Inflation rose at a 7.5% annual pace in January, according to the Consumer Price Index. Ex-food and energy, it rose 6%. Rising energy costs were the big driver of the headline number, however used cars were another item. Shelter rose 4% YOY, however the price appreciation of the past year is only beginning to be reflected in the inflation numbers. If you take away seasonal adjustments, the headline CPI rose 8.2%.

Needless to say, the bond market took a beating on these numbers. Mortgage backed securities are down a half a point, and roll rates are increasing. This should translate into higher lock prices.

Foreclosure completions increased to 4,784 properties in January, which is up 57% MOM and 235% YOY. “The increased level of foreclosure activity in January wasn’t a surprise,” said Rick Sharga, executive vice president of RealtyTrac, an ATTOM company. “Foreclosures typically slow down during the holidays in November and December and pick back up after the first of the year. This year, the increases were probably a little more dramatic than usual since foreclosure restrictions placed on mortgage servicers by the Consumer Financial Protection Bureau expired at the end of December.”

Given that the foreclosure moratorium has expired, we should expect to see increases in foreclosure activity. Will we see a repeat of 2009 – 2010? I don’t see that as even a remote possibility. What is the difference? Home equity. Home price appreciation has been so strong that borrowers who cannot afford their current mortgage payment can sell their property and move to a cheaper place. Investors who are hoping to pick up a cheap properties as the moratoriums expire are probably going to be disappointed.

Rocket CEO Dan Gilbert is being sued for alleged insider trading. The complaint alleges that Gilbert sold $500 worth of stock two months before the company announced that gain on sale margins were falling. The plaintiff alleges that guidance out of Rocket pushed the stock to $41.60, after which Gilbert sold stock. Rocket’s spike was not due to guidance, it was due to rumors on Reddit that Rocket could be a short squeeze candidate. Redditors were envisioning another Gamestop situation. Pro tip: If the float of a stock is tiny, but the founders have a lot of stock they would like to sell, it isn’t a short squeeze candidate.

I wouldn’t be surprised to see more suits like this given how god-awful mortgage banking stock have performed in the market. Just about a year ago, Loan Depot was trading above $30 a share. It is now closer to $4. That is a 87% decline. You would think the stock would be in trouble, right? Well, not exactly. The company is expected to make $0.64 this year, which gives it a P/E of 6.5. It also has a dividend yield of 7.7%. I know mortgage banking stocks are as popular as mask mandates these days, but at some point, they have to be too cheap to ignore, right?

Filed under: Economy |

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17 Responses

  1. jnc4p, on February 10, 2022 at 9:21 am said:

    “Gilbert sold $500 worth of stock”

    Is the amount in question really only $500?

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  2. jnc4p, on February 10, 2022 at 9:32 am said:

    The level of cluelessness from Democrats here is funny:

    “Max: “I saw Speaker Pelosi is publicly, is going to back a ban on stock trading among members. I was curious what your thoughts were on this?”

    Luria: “So my thoughts on it, you know, I think this whole concept is bullshit. Because I think that, why would you assume that members of Congress are going to be inherently bad or corrupt? We already have the STOCK Act that requires people to report stock trades. Why would you assume – I mean, the people that you’re electing to represent you, it makes no sense that you’re going to automatically assume that they’re going to use their position for some nefarious means or to benefit themselves. So I’m very strongly opposed to any legislation like that.”
    …
    “Luria has a heavy position in publicly traded stocks. Luria and her husband, Robert Blondin, own between $1 million-$5 million in Facebook stock, $1 million-$5 million in ​​NVIDIA stock and $500,000-$1 million in Netflix stock. Financial disclosure reports only provide a range of asset values.

    Last year alone, Luria and her husband traded hundreds of thousands of dollars of stocks. On March 31, they sold between $250,000-$500,000 in Alibaba stock. The couple purchased $250,000- $500,000 of Uber stock the same day as they sold the Alibaba position.

    Also in March of 2021, Luria’s husband bought between $1,000-$15,000 of both QuantumScape and Tesla stock.”

    https://email.punchbowl.news/t/ViewEmail/t/08B9F6CABF6820E72540EF23F30FEDED/F0F0D2F064DCB4FC1D419C9787CC9684?alternativeLink=False

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    • Brent Nyitray, on February 10, 2022 at 9:42 am said:

      I am skeptical that Congresscritters really have access to material non-public information, but I agree the optics are terrible.

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      • Kevin S. Willis, on February 10, 2022 at 2:43 pm said:

        Some of them probably have a better idea of what might be about-to-happen regarding public contracts, possible merger approvals, a few other things. But I don’t think insider info from the government is likely the problem.

        Their positions of potential power are likely going to connect them to people in the corporate world with real insider information, and just like corporate folks bribe politicians with speaking fees, no reason not to provide a few stock recommendations.

        Even so, the incentives to potentially vote for, initiate, or obstruct legislation based on how it might impact their stock portfolios is a bad look–and probably a bad thing generally. It would be better if they had their investments in blind trusts. Or government bonds. They are serving the public, after all.

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    • Kevin S. Willis, on February 10, 2022 at 2:39 pm said:

      So my thoughts on it, you know, I think this whole concept is bullshit. Because I think that, why would you assume that members of Congress are going to be inherently bad or corrupt?

      Good lord. Why you ever assume they aren’t going to be bad or corrupt?

      Also, human beings are human. Incentives to easily make lots of money are going to be acted on by somebody. And chances are as they use advantageous information to make money, they probably don’t think they are doing anything morally (and perhaps not even legally) wrong. But part of corruption is often the corrupt folks just feel entitled–they don’t think of what they are doing as being corrupt.

      As that comment kind of illustrates.

      We already have the STOCK Act that requires people to report stock trades.

      Which apparently some congresscritters are very lazy about complying with.

      I mean, the people that you’re electing to represent you, it makes no sense that you’re going to automatically assume that they’re going to use their position for some nefarious means or to benefit themselves.

      There is an amazing level of self-regard and self-flattery that these folks assume that everyone is going to see them as basically being heroes and incorruptible beacons of good because they get elected to congress.

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      • jnc4p, on February 10, 2022 at 3:35 pm said:

        “Because I think that, why would you assume that members of Congress are going to be inherently bad or corrupt?”

        Because they are members of Congress. That’s the whole point of running for office.

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  3. novahockey, on February 10, 2022 at 2:01 pm said:

    https://babylonbee.com/news/socialists-condemn-workers-of-the-world-for-uniting

    this is just the best. i mean, knew they were so full of shit. but to immediately turn on actual labor like ths [chefs kiss]

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  4. Let the mutherfuker burn!, on February 10, 2022 at 2:55 pm said:

    Wow!

    https://www.dailymail.co.uk/news/article-10498941/Commander-charge-Kabul-evacuation-slams-White-House-distraction-chaos.html

    Not a good look for Vasely for not telling everybody but direct chain of command to fuck off. And if the chain of command wanted to deviate from the plan, since they weren’t there on the ground then Vasely should have demanded that in writing for accountability’s sake.

    I excuse politicians to a certain extent because they’re used to demanding special treatment, it’s up to the commanders, and especially the commander in the ground to focus on the mission and not get distracted by requests.

    The guys a SEAL, FFS!

    https://www.dailymail.co.uk/news/article-10498941/Commander-charge-Kabul-evacuation-slams-White-House-distraction-chaos.html

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