Morning Report: Fears of another 2008 are overblown.

Vital Statistics:

S&P futures3,704-0.25
Oil (WTI)79.820.76
10 year government bond yield 3.76%
30 year fixed rate mortgage 6.51%

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

The upcoming week will will have some housing data with home prices (FHFA / Case-Shiller) and new home sales. We will also get durable goods orders and the final revision for second quarter GDP. Personal Incomes / Outlays will be on Friday. The jobs report will be next week.

There will be a lot of Fed-speak as well.

Economic conditions deteriorated in August, according to the Chicago Fed’s National Activity Index. Production and income data pulled down the index, while employment and consumption helped.

With the potential for a housing downturn (at least with respect to prices) the inevitable comparisons to 2008 are being trotted out. I have said this before, but 2008 was one of those twice-in-a-century moments (a residential real estate bubble) and the facts on the ground today are much different.

The biggest difference between 2008 and today? The vast majority of mortgages are guaranteed by the government. Subprime doesn’t exist. Aside from non-QM (which resembles Alt-A not subprime) every MBS is money good. So we won’t see a banking crisis, and we won’t see forced selling of securities.

Home prices might decline in some overheated markets. But many of those markets saw 30%+ home price appreciation for a couple years in a row. So a 5%- 10% haircut in Phoenix isn’t unreasonable.

The bottom line is that any decline in home prices won’t trigger another collapse because banks don’t have much credit exposure to residential real estate lending. Any exposure will be counterparty risk (i.e. those who had warehouse lines with someone like FGMC).

Bottom line, fears about another 2008 are completely overblown.

12 Responses

  1. For you George: PL calls it

    “How Ron DeSantis conquered Greg Abbott to become supreme GOP troll”


  2. Rather than focus on flying migrants from other states around, De Santis should look into this, given it’s happening in Florida.


    • It is kind of strange to think someone not old enough for a job or a drivers license somehow has the maturity to make these sorts of decisions.

      That the left has society so buffaloed as to suspend their common sense completely is shocking.


    • “Small studies suggest that breast removal surgery improves transgender teenagers’ well-being, but data is sparse”

      That’s an extremely charitable take.

      Then immediately pronoun confusion makes it entirely unclear what’s going on. Was Michael a biological male who had breasts removed because of some disorder? No, okay, a biological female which we keep referring to as a male because that’s not confusing.

      Wokeness aside, I just want to stop reading the article because that’s confusing.

      Then I want to stop reading it because it’s not news, it’s opinion, but it’s in the health news, but it’s not actually news. Even if you agree with everything about it, it’s not news.

      Now, nine months after the operation, Michael is in his senior year of high school. He said he is focused on the parts of his life that have little to do with his gender: doing theater tech at school, seeing friends, painting and applying to college.

      He also feels less pressure to prove his masculinity than before, he said. He’s growing out his hair and uses he, she and they pronouns. In June, he took his girlfriend to the prom, wearing a brown suit and a pearl necklace.

      I get that this is supposed to be a tale of how top-surgery has helped him/her become more comfortable in his/her skin but it’s also indicative of an instability that isn’t ultimately every going to be satiated with indulgence.


  3. Good luck with this:

    “Biden’s economic success story could fall flat among people still struggling

    Joe Biden is ready to hype his economic success story. But inflation and other market factors could spoil the tale.”


    • We had negative GDP growth in Q1 and Q2. Q3 will be breakeven at best. The only reason why we aren’t considered to be in a recession is politics.

      225 basis points of rate hikes have yet to impact the economy.

      The low unemployment rate is a function of a shrinking labor force, IMO.

      Things are about to get a lot worse.


    • “The White House finally believes it has an economic story worth telling. Now, it’s trying to figure out how to get voters to listen.”

      I’ll be very surprised if this gains any traction with . . . well, anybody but maybe super-wealthy leftists. Inflation hits everybody, lack of wage growth hits a lot of people, rising interest rates hits most everybody. Then everybody looking at their IRA or who had been able to console themselves with “well at least my stocks are doing well” are not having that. Add in layoffs and other corporate contractions and the tone-deafness of pitching their “economic success story” sounds about as wise as Herbert Hoover pitching his economic success story in 1932.

      They really are insular. From almost every constituent group outside of academia and blue checkmark Twitter.


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