Morning Report: Big week for housing data

Vital Statistics:

Stocks are higher this morning as investors reach for risk. Bonds and MBS are down.

The week ahead won’t have much in the way of market-moving data, but we will get a lot of housing indicators with housing starts, existing home sales and homebuilder sentiment.

Business activity increased in New York State last month, according to the Empire State Manufacturing Survey. New orders and shipments surged, while employment remains weak. Inflation continues to trend down, with input prices falling while prices received were flat.

Atlanta Fed Chairman Raphael Bostic doesn’t see rate cuts this year, as inflation is still too high. “What we’ve seen is that inflation has been persistently high, consumers have been really resilient in terms of their spending, and labor markets remain extremely tight. All of those suggests that there’s still going to be upward pressure on prices,” he said. “If there’s going to be a bias to action, for me would be a bias to increase a little further as opposed to cut.”

PacWest is down again pre-market and were are getting more discussion about banning short selling in bank stocks. FWIW, I have always been skeptical about short selling bans in general – governments only step in after the easy money has been made, and in many cases the borrow in these names is already expensive.

When you short a stock, you have to find someone to lend you the stock to sell. This borrowed stock is what you deliver to the buyer on trade settlement date. Your prime broker will charge you a fee to borrow that stock, and we are seeing fees in the high teens and up. This means that your prime broker is lending you PacWest stock at a 20% fee, you will be paying about 40 basis points a week to maintain that position.

I think at this point, short sellers are not driving the price action in these names. There simply isn’t a deep borrow in these names and it costs a lot of money to borrow them. I suspect that many holders of these stocks will simple choose to not lend them out any more, which will make it difficult to short in the first place, and may force people with established short positions to exit them.

Lending standards are tightening across the board, especially for commercial real estate and residential lending. For residential, the tightening was more pronounced in jumbo and Non-QM as opposed to GSE and government loans. We are seeing weaker demand for HELOCs and other residential real estate loans.

Banks are also tightening standards on multi-fam, by increasing spreads, hiking covenants and lowering LTVs.

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49 Responses

  1. Relevant Post article:

    “A problem for the housing market: People won’t quit their cheap mortgages
    Fewer homes are available because homeowners are hanging onto coveted rates of 3 or 4 percent

    By Rachel Siegel
    May 14, 2023 at 6:00 a.m. EDT”

    This match what you are seeing Brent?


  2. The corporate pushback against DEI training has begun:


    • jnc:

      The corporate pushback against DEI training has begun:

      Don’t bet on it. When it comes to the left, never take a change in language for a change in focus/meaning. This is a time honored tactic of the left…when an idea starts garnering too much opposition, you don’t change ideas. You simply change the word you use to identify the idea, to make people think you mean something else.


      • I don’t think it’s going away, but it’s being co-opted in the corporate world.

        The managers figured out it was creating a bunch of problems due to the original cadre of activists trying to use it as leverage to change the organization. I suspect the new version is going to be as anodyne as most other corporate HR.


      • I don’t think they were replacing the I, just bolting on the B.

        But you are correct, the left changes words around and claims that they are doing something new.


        • Brent:

          I don’t think they were replacing the I, just bolting on the B.

          Yup. James Lindsay calls Belonging “Inclusion on steroids”. This whole lecture is worthwhile, but go to the 1:47:20 mark to hear him talk about this new introduction of “belonging”.


  3. Something to watch in Virginia:

    In 2020 when the Democrats had the trifecta of both houses of the legislature and the governorship, they passed a law allowing localities to authorize public sector unionization.

    Several localities did so and now the first public sector unions are coming into existence. I expect taxes to rise as a result.

    I looked into this when I saw a bunch of “Vote Teamsters” signs out while driving the other day.

    To give the devil his due, this was probably one of the single most effective actions the Democrats could have taken with a transitory trifecta to build their long term political prospects in the state with the goal of turning it “blue”. Maryland & Illinois, here we come.


    • “Newsom-backed task force calls for ‘right of return’ for Blacks ‘displaced’ by discrimination”

      Oppression buzz word bingo.

      “Among the most controversial of the housing proposals is one that would seemingly hand over control of local land use decisions to a state agency that would approve ordinances based on whether they maintain or decrease segregation. ”

      This is straight out of Kendi.


  4. Another good reason why nothing matters.

    The only rational thing to do is support the Will to Power people most aligned with protecting you and your allies as we careen toward inevitable collapse. That’s it, that’s the game, full stop.


    • McWing:

      Another good reason why nothing matters.

      That was a really good thread.


    • That’s funny. During the Bush years the progressives had the same complaint and point to Heritage, etc as constantly having a whole legion of conservative staffers ready to go.


      • jnc:

        During the Bush years the progressives had the same complaint…

        That should have been the tip off…the left always complains about their opponents doing precisely what they themselves are either doing or planning to do.


    • but replace them with who?



  5. Not sure this will change any minds here re “The Russia Hoax” or the “Deep State” investment but I am curious……………

    In a long-awaited report released Monday, special counsel John Durham slammed the FBI for actions agents took during the 2016 probe scrutinizing then-presidential candidate Donald Trump’s 2016 campaign and it alleged ties to Russia.

    Durham’s final report examining the origins of the Russia investigation brings to a close a four-year probe that failed to produce any major convictions despite the expectations pushed by Trump and his allies.

    The Justice Department and FBI “failed to uphold their important mission of strict fidelity to the law,” Durham concluded in the 306-page report.

    Looks like a big nothing burger to me!


  6. For anyone interested in actually reading the Durham report, rather than just their favored media’s characterization of it, here it is:

    Click to access durhamreport.pdf


  7. I’m fascinated that O’Keefe did this. The guys a producer repeating rumors he’s heard so it doesn’t seem all that verifiable. What’s interesting is that O’Keefe took on Fox News – a significant driver of his work at Veritas. Does this mean that Fox’s hold on rightwing pundits is lessening? Does it mean he thinks he doesn’t need Fox? It certainly strengthens his bona fides but will it cost him? To me, the attack on Fox is interesting, less so the subject of the attack.


    • I suspect the banks told Fox to fire Tucker.

      ESG is basically social credit for corporations, and now banks are enforcing it. Want to keep your line of credit? Fire Tucker.

      Why any corporation would want to go public these days is beyond me.


      • Interesting and intimidating.


        • That is the lever that ESG is using. They forced Musk to settle with the SEC over a nuisance suit that he was willing to fight.

          They told him that they would yank their credit lines, which would push the company into bankruptcy.

          I seem to recall a system of government where the government conscripts the private sector to do its dirty work.


        • I seem to recall a system of government where the government conscripts the private sector to do its dirty work.

          Interesting. Sounds like an Italian innovation.


        • Perfected by the Germans, though.


        • And lovingly embraced by the Soviet Union until 6/22/41. When, weirdly, there was an abrupt reversal.


      • You think the banks and not pharma per the link?

        Also do you think it would be doable for Musk to start his own bank?


        • My guess it is both. But banks are the pressure point for ESG.

          Climate Action 100 is a group of banks and hedge funds that committed to refuse to lend money for energy exploration and production.

          Not much different than the GoFundMe for the Canadian Truckers.


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