Morning Report – positive jobs report 7/5/13

Vital Statistics:

  Last Change Percent
S&P Futures  1620.0 10.9 0.68%
Eurostoxx Index 2625.8 -20.7 -0.78%
Oil (WTI) 101.8 0.5 0.53%
LIBOR 0.27 -0.001 -0.37%
US Dollar Index (DXY) 84.38 1.152 1.38%
10 Year Govt Bond Yield 2.68% 0.18%  
Current Coupon Ginnie Mae TBA 103.9 -0.5  
Current Coupon Fannie Mae TBA 102.6 -1.2  
RPX Composite Real Estate Index 203.5 -0.7  
BankRate 30 Year Fixed Rate Mortgage 4.4    

 

Green on the screen after a strong jobs report. Stocks are up, while bonds and MBS are getting hammered
 
Note: many desks are going to be understaffed today as senior traders take a 4 day weekend. Thin markets tend to be volatile
 
The jobs report was pretty good, which is why bonds are selling off. Payrolls increased 195k vs the 165k expectations and the prior two months were revised upward by a total of 70k. The unemployment rate stayed the same at 7.6%. The labor force participation rate ticked up .1%. Hourly  earnings increased, while hours were unchanged. 
 
The employment report probably does not change anything with respect to the Fed’s intentions. They plan on tapering back purchases this year, and plan to end QE entirely when the unemployment rate reaches 7%, which they expect to happen in mid 2014. 
 
With this report, the 10 year bond yield spiked to 2.68%. We should be best-exing into 4s at this point.
 
The MR will be spotty next week as I will be in SF for the Western Secondary Conference.

Bites & Pieces: A Postcard from Costa Rica

I arrived in Costa Rica on Monday night after far too long an absence from my favorite home away from home. We started taking our sons their for a month in the summertime a few years ago. I was going to be away at a conference and my better half (Keen) was offered work out of town that overlapped my conference. Rather than give up on work at a slow time and lacking a kennel in which to put the boys, we worked out something else. I flew down to Costa Rica with them, dropped them off with their grandmother, and flew back to DC before going on to my conference. Keen flew down after finishing her assignment and spent the rest of August. It worked out so well, that they’ve spent 4 – 6 weeks in Costa Rica every summer since then. In honor of our annual trip, I thought I’d post a few of my favorites that I associate with Costa Rica, one way or another.

Breakfast – Gallo Pinto

Every country in Central America claims to have invented Gallo Pinto, but the Ticos do it best. I say this with absolute confidence, never having visited Guatemala, Honduras, El Salvador, Nicaragua, or Panama (and let’s not forget Belize). My confidence in Costa Rican Gallo Pinto is that I can’t imagine having it without Salsa Lizano. It’s the same general class of condiment as steak sauce in the US and relish in the UK (Worcestershire sauce is one of many). It’s rice and beans with a twist.

Ingredients

1/4 cup of vegetable oil
2 cups of white rice, cooked
2 cups, black beans, cooked (or 1 can, drained)
1 medium onion, minced
2 cloves garlic, minced
1 carrot, (you guessed it) minced
1 bell pepper, (and wait for it) minced
Salsa Lizano or other seasoning, to taste

optional: cilantro leaves or diced tomato for garnish

Method

Heat oil in a heavy frying pan and add the minced veggies. Cook until soft and then add the rice. Stir for a bit until warmed and mixed with the veggies, then add the black beans. Season well with Salsa Lizano. I like to let it cooked unstirred for a bit to build up a crust on the bottom or just cook and stir until hot. This is a staple of Costa Rican kitchens, usually served at breakfast with tortillas, queso duro (hard cheese) and scrambled eggs. Garnish with cilantro leaves or some diced tomato if you like. It’s great with some mango or papaya on the side.

Lunch – Ceviche

Peruvians hold claim to this sushi from the south and you can usually get the best ceviche at a restaurant run by Peruvians. I had my first taste of ceviche at a little joint near Manuel Antonio, a national park on the Pacific coast. The basic concept is simplicity itself. Cut up fresh fish into rough dice–dorado (mahi-mahi) and corvina (sea bass) and cover with lime juice. The juice “cooks” the fish, firming it up as if it had been cooked with heat. The acid should also kill off various beasties, but this is not the same as cooking, so you need to use high quality fish. Make sure it’s sushi grade for salmon unless you want to risk a tapeworm. After a period varying from a few minutes to hours (depending upon the fish and how you like it), drain and toss with minced onion, tomato, possibly some chiles, and cilantro. Serve with tortilla chips and, if you’re Costa Rican, salsa rosada. This “rose sauce” is a mixture of ketchup and mayo, but we like to use plain yogurt instead. Tangy and tasty.

I’ll add a pair of recipes from a book on ceviche that was given to me by a friend. Guillermo Pernot, the author, was the chef-owner of ¡Pasion! in Philadelphia (since closed) and now is the concept chef of the Cuba Libre restaurants. The first of these combines whole bay scallops with a blackened tomatillo salsa and truffel oil. Indulgent and a favorite of mine for parties. The second recipe combines sea scallops with grapefruit for a colorful presentation. Make sure to use high quality scallops; wet pack won’t do.

Bay Scallop Ceviche with Truffle Tomatillo Salsa

1 pound fresh, untreated bay scallops or sea scallops, trimmed and quartered
1 cup fresh lime juice
1/4 cup fresh orange juice
3 tablespoons finely diced red
2 tablespoons finely diced serrano chilies (specialty Latin
1 tablespoon kosher salt

3 tablespoons extra virgin olive oil
1/2 pound fresh tomatillos, husks removed, rinsed
1/2 pound ripe plum tomatoes
1 red onion, quartered and unpeeled
1 jalapeno chili
4 cachucha chilies
1 bunch fresh cilantro leaves
1/2 cup fresh lime juice
3 tablespoons truffle oil
Kosher salt and freshly ground black pepper, to taste

2 tablespoons crushed platano chips (recipe follows)
12 whole platano chips

1. Combine the lime juice, orange juice, onion, serrano chilies and salt. Add the bay scallops and toss to combine. Cover and refrigerate for 24 hours.

2. In a large saute pan, heat 1 tablespoon of the olive oil over moderately high heat. Add the tomatillos, tomatoes, onion, and chiles. Cachucha chiles look like habañeros, but without so much heat. You can use a couple more jalapeños instead. I often toss all the ingredients with oil and broil them in the toaster oven. Works about the same. Let the blackened veggies cool and stir in the cilantro. Pulse in a food processor until chopped, but chunky. Pernot likes to use a meat grinder for a different texture. Combine the vegetable mixture with the lime juice, truffle oil, remaining 2 tablespoons olive oil, salt and pepper. Taste for seasoning, cover and refrigerate for up to 1 day.

3. Put it all together. Drain and discard the liquid marinade. In a medium bowl, combine the marinated scallops with most of the blackened tomatillo-truffle sauce. Cover and refrigerate 20 minutes to marinate. When ready to serve, drain the scallops of excess liquid, and toss with the remaining blackened tomatillo-truffle sauce. Adjust the seasoning, adding salt and pepper if necessary. Divide the ceviche among soup spoons laid on a platter. Sprinkle with crushed plantain chips just before serving, accompanied by bowls of plantain chips.

You can make plantain chips on your own by frying planks of green plantains in oil and draining on paper towels. Or just buy a bag of them.

Sea Scallop Ceviche with Grapefruit and Radishes

1/2 pound of sea scallops, cut into two rounds each
3/4 cup of ceviche marinade
2 ruby grapefruit
6 red radishes
1 lime, juiced (about 2 tablespoons(
pinch hot pepper flakes
1/2 tsp. kosher salt
1 tablespoon chiffonade of basil (regular or Thai)
1 tablespoon chiffonade of mint

Combine the scallops with the marinade and refrigerate for 30 minutes. Slice away the skin and membranes from the grapefruit and set aside. Combine the lime juice, pepper flakes (if using), salt, and herbs. Thinly slice the radishes and add half the juice/herb mixture. Drain the scallops of the marinade and add the remaining juice & herbs. Divide the scallop rounds into four plates. Place the grapefruit segments around the outside and a pile of radish juliennes in the center.

Marinade for Ceviche

1/2 cup fresh lime juice
1/4 cup fresh orange juice
2 tsp. kosher salt

Afternoon – Bebidas

I’m sure you’re a bit thirsty from that walk along the beach and could use something refreshing. I would suggest jugo en leche (mango or papaya, blended with milk) or pipa for non-alcoholic drinks. For the latter, grab a green coconut, whack off the top with a machete, and stick a straw in it. Lacking a green coconut or a machete, you can always pick up some coconut water at the market. It also makes a great piña colada. Use the coconut water instead of that stuff in a can, blend with fresh pineapple and rum and enjoy. As long as we’re discussing alcoholic beverages, I might suggest a nice, cold Imperial (which you can sometimes find in the US) or a Cuba Libre (rum and coke with lime juice).

Dinner – Black Bean Risotto

Let’s head over to the other side of Costa Rica, also known as the Mosquito Coast. Many Caribbean workers came to Costa Rica to build the railway between San José and Limón, on the Caribbean coast. Many stayed, giving that coast a distinct cultural and culinary flavor. We spent our honeymoon in Punta Cocles, about two hours south of Limón and just north of the Panamanian border. It was the worst road I’d ever driven. At times, it seemed there were more potholes than highway. Once you get there, it’s worth the drive. We hung out and had a lot of good food. One dish that stood out for me was the Caribbean style rice and beans. It’s made with coconut milk and served with chilero, a spicy vegetable mix of bell pepper, carrot rounds, and hot peppers (habañeros), all steeped in vinegar. Some time later, I had the idea of making a risotto with black beans and used this dish as my inspiration.

Ingredients

Brodo
4 cups chicken stock
1 cup coconut milk (2/3 of a can)
½ cup dry white wine (or more broth)

Soffritto
2 tablespoons butter
1 tablespoon vegetable oil
1/3 cup finely minced onion

Riso
1 ½ cups short grain rice (Arborio or Carnoli, though sushi rice works well)
1 ½ cups cooked black beans or 1 can, drained and rinsed

Condimenti
½ cup coconut milk (1/3 can)
½ bunch cilantro, washed, thick stems removed, chopped to make about ¼ cup
Queso duro or fresco, crumbled for garnish

Method

1. Bring broth to a steady simmer in a saucepan on the stove. Add coconut milk and return to simmer.
2. Heat the butter and oil in a heavy casserole or dutch oven over med. heat. Add the onion and sauté for 1 to 2 minutes until it softens.
3. Add the rice to the soffrito, stir using a wooden spoon until the grains are thoroughly coated. Add the wine and stir until it is completely absorbed. Add the simmering broth, ½ cup at a time. Stir frequently until almost completely absorbed and add the next ½ cup.
4. Add coconut milk and cilantro and remove from heat. Stir completely to combine with the rice. Add the black beans near the end of cooking.
5. Put the risotto on serving dishes. Sprinkle with crumbled queso. Top with chilero or serve on the side. This dish is also good when topped with grilled shrimp or fresh mango.

Serves 4.

Chilero

8 chiles, preferably Scotch bonnet or Habañero
1 large onion, yellow or sweet (Vidalia)
1 large or several small carrots
1 red bell pepper
Cider or white vinegar

Cut the onion and bell pepper into 1/2″ chunks. Peel the carrot(s) and slice into rounds. Wearing gloves, cut the chiles in half and remove the seeds. Toss all vegetables and put in a large mason jar. Fill to the top with vinegar. I like cider vinegar for this recipe, but white vinegar should do as well. White wine vinegar might work, but isn’t really needed. Let sit for at least a week.

Dessert – Alfajores

These cookies are a favorite indulgence of mine. It’s two small sugar cookies with dulce de leche in the center and topped with powdered sugar. The cookies are made with cornstarch instead of flour and so are quite soft. They’re great with coffee, preferably Costa Rican of course.

Ingredients

1 1/2 sticks butter (3/4 cup)
1 cup sugar
1 egg
2 egg yolks
2 1/2 cups cornstarch
1 cups all-purpose flour
1 tsp. vanilla extract
1/2 tsp. baking powder
Zest of 1/2 lemon
Dulce de Leche

Method

Cream the butter and sugar together. Add the remaining ingredients except the dulce de leche and coconut and mix well. Turn onto a floured work surface and knead until the dough is smooth. Let the dough rest for 15 minutes.

Roll the dough out to a thickness of about 1/4 inch and cut into 2-inch rounds. Place on a greased cookie sheet and bake in a preheated 300°F oven for 20 minutes. When cool, spread some dulce de leche on the bottom of half the cookies and make a sandwich with the remaining cookies. Squeeze the sandwiches so that some of the dulce de leche is squeezed out the sides, and roll the sides in the grated coconut. Makes about 12 cookie sandwiches. Dust with powdered sugar.

Gallo Pinto2

alfajores

Independence Day

4thfireworks1

Variously known as the Fourth of July and Independence Day, July 4th has been a federal holiday in the United States since 1941, but the tradition of Independence Day celebrations goes back to the 18th century and the American Revolution (1775-83). In June 1776, representatives of the 13 colonies then fighting in the revolutionary struggle weighed a resolution that would declare their independence from Great Britain. On July 2nd, the Continental Congress voted in favor of independence, and two days later its delegates adopted the Declaration of Independence, a historic document drafted by Thomas Jefferson. From 1776 until the present day, July 4th has been celebrated as the birth of American independence, with typical festivities ranging from fireworks, parades and concerts to more casual family gatherings and barbecues.

I’m always curious what others are doing to celebrate the 4th. of July.  I worked my butt off yesterday to clean, shop and cook for a big party so we’re in the “casual family gathering and barbeque” category.  If I have time this morning and I’m as organized as I think I am we may wander down to the 6th. Street Parade but we’ll see.  The city will shoot off fireworks this year again, we’ve been dark lately because of budget cuts, and we’ll watch them from our balcony.  We have about 35 or 40 people coming and we’ll swim, play horse shoes, listen to music (which inevitably leads to dancing) and drink at least one keg of our son’s latest brew.

I enjoy this holiday, my grandfather (7 times removed) was a Captain in the Revolutionary Army who also had numerous slaves and apparently two wives on opposite sides of the river with 15 to 17 kids between them (reports vary).  I’m a sucker for a flag and a patriotic holiday.

Hope you all enjoy your day and the long weekend.

Morning Report – watch the PIIGS 7/3/13

Vital Statistics:

  Last Change Percent
S&P Futures  1603.2 -4.0 -0.25%
Eurostoxx Index 2558.8 -44.4 -1.71%
Oil (WTI) 101.4 1.8 1.78%
LIBOR 0.274 0.001 0.37%
US Dollar Index (DXY) 83.39 -0.151 -0.18%
10 Year Govt Bond Yield 2.46% -0.01%  
Current Coupon Ginnie Mae TBA 102.5 0.1  
Current Coupon Fannie Mae TBA 101.4 0.0  
RPX Composite Real Estate Index 204.2 -0.3  
BankRate 30 Year Fixed Rate Mortgage 4.35    
Early close today for stocks (1:00 pm) and bonds (2:00 pm). 
 
Markets are down small after political issues in Europe are pushing PIIGS spreads out. The Portuguese 10 year yield is 117 basis points higher to 7.89% and Greece is out 58 bps. Want to know what can stop the bond market selloff in its tracks?  Risk off trade due to European sovereign bond problems
 
We have a slew of economic data this morning, and Friday’s jobs report looms large. Mortgage applications fell 12%. Purchases were down 3%, while refis dropped 16%. The ADP Employment Change report which foreshadows the private part of Friday’s jobs report came in better than expected at +188k. Initial Jobless Claims were 343k, better than expected. 
 
The Fed approved Basel III capital requirements yesterday. The Fed apparently relaxed some of the capital requirements for mortgages, but it appears this would only apply to community banks. I haven’t seen anything with regards to MSRs.

REPRINTED WITHOUT PERMISSION 7-2-13

Why They Fought
By DAVID BROOKS

Tuesday is the 150th anniversary of the second day of the Battle of Gettysburg. In his eloquent new account, “Gettysburg: the Last Invasion,” the historian Allen Guelzo describes the psychology of the fighters on that day.

A battlefield is “the lonesomest place which men share together,” a soldier once observed. At Gettysburg, the men were sometimes isolated within the rolling clouds of gun smoke and unnerved by what Guelzo calls “the weird harmonic ring of bullets striking fixed bayonets.” They were often terrified, of course, sometimes losing bladder and bowel control. (Aristophanes once called battle “the terrible one, the tough one, the one upon the legs.”)

But, as Guelzo notes, the Civil War was fought with “an amateurism of spirit and an innocence of intent, which would be touching if that same amateurism had not also contrived to make it so bloody.”

Discipline was loose. Civil War soldiers were not used to subordinating themselves within large organizations. One veteran observed that in battle “men standing in line got in paroxysms of laughter.” But many were motivated by the sense that they were living up to some high moral ideal. Words like “gallant,” “valor” and “chivalric” dot their descriptions of each other’s behavior. Upon being taken prisoner, one Union soldier shook his captors’ hands and congratulated them on the “most splendid charge of the war.”

Another officer remembered battle as a “supreme minute to you; you are in ecstasies.” A Union artillery officer confessed that throughout Gettysburg “somehow or other I felt a joyous exaltation, a perfect indifference to circumstances, through the whole of that three days’ fight, and I have seldom enjoyed three days more in my life.”

In our current era, as the saying goes, we take that which is lower to be more real. We generally believe that soldiers under the gritty harshness of war are not thinking about high ideals like gallantry. They are just trying to get through the day or protect their buddies. Since World War I, as Hemingway famously put it, abstract words like “honor” and “glory” and “courage” often seem obscene and pretentious. Studies of letters sent home by soldiers in World War II suggest that grand ideas were remote from their daily concerns.

But Civil War soldiers were different. In his 1997 book “For Cause and Comrades,” James M. McPherson looked at the private letters Civil War soldiers sent to their loved ones. As McPherson noted, they ring with “patriotism, ideology, concepts of duty, honor, manhood and community.”

The soldiers were intensely political. Newspapers were desperately sought after in camp. Between battles, several regiments held formal debates on subjects like the constitutional issues raised by the war. “Ideological motifs almost leap from many pages of these documents,” McPherson reports. “It is government against anarchy, law against disorder,” a Philadelphia printer wrote, explaining his desire to fight.

The letters were also explicitly moralistic. “The consciousness of duty was pervasive in Victorian America,” McPherson writes. The letters were studded with the language of personal honor, and, above all, a desire to sacrifice, as one soldier put it, “personal feelings and inclinations to … my duty in the hour of danger.”

One of the most famous letters was written not at Gettysburg but on July 14, 1861, on the eve of the First Battle of Bull Run. It was written by Sullivan Ballou, an officer from Rhode Island. Ballou had lost his own parents when he was young and, having known “the bitter fruit of orphanage myself,” he declared himself loath to die in battle and leave his small children fatherless.

“My love for you is deathless,” he wrote to his wife. “It seems to bind me to you with mighty cables that nothing but Omnipotence could break; yet my love of country comes over me like a strong wind and bears me irresistibly on with all these chains to the battlefield.”

It’s not just love of country that impels him, but a feeling of indebtedness to the past: “I know how strongly American Civilization now leans upon the triumph of the Government, and how great a debt we owe to those who went before us through the blood and suffering of the Revolution. And I am willing — perfectly willing — to lay down all my joys in this life, to help maintain this Government, and to pay that debt.”

These letter writers, and many of the men at Gettysburg, were not just different than most of us today because their language was more high flown and earnest. There was probably also a greater covenantal consciousness, a belief that they were born in a state of indebtedness to an ongoing project, and they would inevitably be called upon to pay these debts, to come square with the country, even at the cost of their lives.

Makes today’s special interest politics look kind of pathetic.

Morning Report – Highest home price appreciation since Feb 2006 7/2/13

Vital Statistics:

  Last Change Percent
S&P Futures  1606.5 -0.2 -0.01%
Eurostoxx Index 2597.2 -25.4 -0.97%
Oil (WTI) 98.8 0.8 0.83%
LIBOR 0.273 0.000 -0.07%
US Dollar Index (DXY) 83.42 0.368 0.44%
10 Year Govt Bond Yield 2.48% 0.00%  
Current Coupon Ginnie Mae TBA 102.8 0.1  
Current Coupon Fannie Mae TBA 101.5 -0.1  
RPX Composite Real Estate Index 204.5 -0.8  
BankRate 30 Year Fixed Rate Mortgage 4.34    

 

Markets are flattish on no real news. Later on today, we will get the ISM New York, Factory Orders, IBD / TIPP Economic Optimism and Vehicle Sales. None of these releases should be market moving. Bonds and MBS are flat.
 
The Fed votes on the Finalized Basel III rules today. For originators, the most important part of this will be the treatment of mortgage servicing rights. Basel III requires banks to over-reserve for MSRs once they reach a threshold point as a percent of capital. MSRs had been under pressure for quite some time in anticipation of the rule, but now that rates are rising, you are starting to see cheeky bids for newly-originated MSRs. For LO’s, the value of MSRs affects the value of SRPs which influences your ratesheet.
 
The CoreLogic Home Price index rose 12.2% in May, which was the highest price increase since Feb 2006. Excluding distressed sales, prices rose 11.6%. Home prices nationwide remain 20.4% below their peak which was set in April 2006. The Pending Home Price Index indicates that prices are expected to rise even more (13.2%) in June. These sales would have had contract signings before interest rates started backing up, so you can’t read too much into how higher rates are affecting home prices, but the pending home price index is encouraging. 
 
12 month home price appreciation:
  • Arizona – 16.9%
  • California – 20.2%
  • Connecticut – 3.8%
  • Florida – 11.1%
  • Nevada – 26%
  • New York – 9.8%
  • North Carolina – 5.6%
  • Tennessee – 5.3%
  • Texas – 8.5%
In anticipation of Friday’s jobs report, here is a cool little widget courtesy of the Federal Reserve Bank of Atlanta. The jobs calculator shows you how many jobs need to be created to get the unemployment rate down to a target rate. You can play with the labor force participation rate, population growth rate, etc. If you  take Ben Bernanke at his word that the Fed will end QE when unemployment hits 7%, you can use the calculator to figure out whether we are on pace or not.
 
Finally, I did an interview on Capital Markets Today where I discussed the recent rise in rates and its implications for housing and the economy. Check it out.

 

Latest interview on Blog Talk Radio. 7/1/13

I talk about the Fed, interest rates, and real estate.

http://www.blogtalkradio.com/capitalmarketstoday/2013/07/01/special-edition-market-turmoil-bond-market-interest-rates

Morning Report – Record outflows in bond funds 7/1/13

Vital Statistics:

Last Change Percent
S&P Futures 1607.5 8.2 0.51%
Eurostoxx Index 2618.1 15.5 0.60%
Oil (WTI) 97.87 1.3 1.36%
LIBOR 0.273 0.000 0.00%
US Dollar Index (DXY) 83.16 0.022 0.03%
10 Year Govt Bond Yield 2.53% 0.04%
Current Coupon Ginnie Mae TBA 102.3 -0.2
Current Coupon Fannie Mae TBA 101.3 -0.2
RPX Composite Real Estate Index 205.3 -0.2
BankRate 30 Year Fixed Rate Mortgage 4.39

 

Markets are higher on no real news. The Markit US Purchasing Managers Index came in a little lower than expected. Later this morning we will get construction spending and the ISM manufacturing. ISM could be market moving. Bonds and MBS are down.

 

This week is relatively data-light, with the 4th of July holiday in the middle. The highlight of the week will be the jobs report on Friday.

 

A record $80 billion was pulled out of bond funds and bond ETF funds in the month of June, according to Trim Tabs. This record outflow is also based on people who follow the news closely. Q2 statements are coming out soon and a lot of people who don’t follow their investments closely may be in for a shock. Which means we could face another deluge of selling.

 

Delinquencies are falling again, with serious delinquencies dropping to 2.83% in the month of May, according to Fannie Mae’s monthly summary. Serious DQs were 3.57% a year ago. Separately, Citi paid just under $1 billion to settle buyback claims on mortgages originated from 2000 to 2012.

 

I will be on Capital Markets Today later this afternoon discussing the latest from the bond markets

A Blazing Hot Sunday in CA

Saturday it was 104 and today it’s supposed to be 106.  Friday we had to quit working out in the warehouse at about 1:00 pm and then went back out at about 6:00pm and worked until midnight while it was slightly cooler.   Yesterday we worked until about noon and then called it a day.  We were going to make a margarita and sit outside last evening but it was too damn hot for that even.  Today we’re taking the day off and swimming this morning and then either staying in and watching baseball or going to the movies.

*****************************************************************************

I love the picture with this story.

(Reuters) – More than 170 people were treated for heat-related ailments and some towns and cities took emergency steps to protect the homeless and elderly as the West sweltered on Saturday in dangerous near-record, triple-digit temperatures.

Extreme heat enveloped most of California and Nevada and parts of southern Arizona as a large high pressure system trapped hot air across the area, said National Weather Service meteorologist Todd Lericos.

More than 170 people were “treated for heat-related injuries” and 34 more were sent to local hospitals while attending an outdoor concert on Friday afternoon in Las Vegas, Nevada, where temperatures soared to 115 degrees Fahrenheit (46 C), said Erik Pappa, a spokesman for Clark County. On Saturday, highs are expected to reach 117 (47 C).

“It involves pretty much the entire West Coast at this point,” Lericos said, adding that the steamy conditions, which began in some pockets on Thursday afternoon, will likely continue throughout the weekend and linger into next week.

Temperatures were well into the triple-digits in most of the area, except in higher elevations.

In Death Valley, one of the hottest places on earth, temperatures could soar on Saturday to 128 F (53 C), close to the daily record set in 1994. 

******************************************************************************

There is a lot of pent up romance blooming in California.

In a surprise action, a federal appeals court cleared the way, bypassing a normal waiting period and lifting a hold on a trial judge’s order that declared Proposition 8 unconstitutional.

The news came in a single, legalistic sentence Friday afternoon from the U.S. 9th Circuit Court of Appeals.

“The stay in the above matter is dissolved immediately,” a three-judge panel wrote.

Gov. Jerry Brown told county clerks they could begin marrying same-sex couples immediately, launching plans for ceremonies up and down the state. The two same-sex couples who filed the federal lawsuit against Proposition 8 headed to the city halls in Los Angeles and San Francisco to tie the knot, ending their long fight to become legal spouses.

Of course in a state where the tension between the SSM sides is still alive and well, not everyone was pleased with the Court’s decision.

Supporters of Proposition 8 were furious that the 9th Circuit acted before the normal waiting period. ProtectMarriage, the sponsors of the ballot measure, has 25 days from the ruling to ask for reconsideration.

“It is part and parcel of the utter lawlessness in which this whole case has been prosecuted, said Chapman Law professor John Eastman, a supporter of Proposition 8. “Normally, courts let the parties kind of pursue their legal remedies before they issue a mandate.”

******************************************************************************

And many of us in CA, and elsewhere, realized Thursday that the SC decision could signal trouble to our system of ballot initiatives.  Be careful what you wish for I guess.

SACRAMENTO — Activists on both sides of the bitter fight over same-sex marriage managed to agree on one thing in the wake of Wednesday’s U.S. Supreme Court decision.

The justices, they said, set a worrisome precedent by giving elected officials undue power over ballot initiatives.

The court essentially voided Proposition 8, a measure placed on the state ballot by foes of gay marriage and passed by voters in 2008. The justices said supporters of the initiative had no standing to defend the measure after state leaders — who opposed the law — had refused to do so.

Their reasoning drew a testy dissent from Justice Anthony M. Kennedy, a Sacramento native, who wrote that the decision “disrespects and disparages” California’s political process — a staple of which is the ballot initiative.

The court, Kennedy wrote, did “not take into account the fundamental principles or the practical dynamics of the initiative system in California.”

Many in the state, regardless of their views on same-sex unions, shared Kennedy’s sentiment, fearing that elected officials now have permission to scuttle initiatives they dislike by simply deciding not to defend them in federal court.

“The initiative process, by its nature, is designed to bypass elected officials,” said Jon Coupal, president of the Howard Jarvis Taxpayers Assn., a group named for the man who transformed California government in 1978 with Proposition 13, a ballot initiative that reined in property taxes.

“Anything that vests power in those elected officials over the initiative process is a dangerous move,” Coupal said.

Even Lt. Gov. Gavin Newsom, an early supporter of same-sex marriage when he was San Francisco’s mayor and an opponent of Proposition 8, expressed such reservations.

*******************************************************************************

And just to confirm some of the hopefully irrational fears expressed out in America somewhere, here’s one from the SF Chronicle.

SC marriage

And don’t worry I won’t turn every Sunday into a CA day….I don’t want to make y’all too jealous because you don’t get to live here.

Morning Report – First Time Homebuyer Sighting. 6/28/13

Vital Statistics:

  Last Change Percent
S&P Futures  1603.2 -3.4 -0.21%
Eurostoxx Index 2596.7 -23.2 -0.88%
Oil (WTI) 97.22 0.2 0.18%
LIBOR 0.273 -0.001 -0.33%
US Dollar Index (DXY) 82.83 -0.075 -0.09%
10 Year Govt Bond Yield 2.52% 0.05%  
Current Coupon Ginnie Mae TBA 102.1 -0.5  
Current Coupon Fannie Mae TBA 101.1 -0.4  
RPX Composite Real Estate Index 205.5 -0.2  
BankRate 30 Year Fixed Rate Mortgage 4.38    

 

Markets are down slightly on no real news. The NAPM-Milwaukee report came in better than expected. Bonds and MBS are down.
 
Big drop in mortgage rates yesterday. Bonds were up a bit, but this was a big move. Sounds like the pandemonium in the TBA market since last week is taking a breather. You had a period where mortgage REITs and originators were getting in each other’s way trying to sell TBAs. Perhaps the Great Mortgage REIT Convexity Hedge / Deleveraging Trade is finished, at least for the moment. Ginnie I / II spreads and Fannie / Gold spreads will tell the tale.
 
KB Home reported earnings yesterday, and gave some background on where they see the housing sector. There were two big takeaways from the conference call.  First, the increase in interest rates is not negatively affecting demand; in fact it is creating a “sense of urgency” among buyers. This comports exactly with what Lennar said on their call earlier this week. Second (and this is big), the first time homebuyer is back. KB Home is one of the lower price points for the homebuilders and focuses on the first time and move up buyer. 60% of their business is the first time homebuyer. If this is in fact the case (and Lennar also observed the same thing) this is the last step needed for a full, robust housing recovery. 
 
Pending Home Sales increased 6.7% to a 6 year high, according to NAR. These are contract signings, not sales, so they reflect the increase in rates over the month of May. We are finally seeing robust growth in the West. The Northeast was flat, but grew 14% year-over-year. The West grew 16%, but was flat year-over-year. Next month’s number will be very interesting because it will include the “Bernanke Scare”, which is becoming the euphemism for last week’s FOMC statement that scared the beejeezus out of the bond market.