Monday Morning Cup of Coffee takes a look at news coming across HousingWire’s weekend desk, with more coverage to come on bigger issues.
Federal Reserve Chair Janet Yellen last week came out of her hole and didn’t see her shadow, so it’s another six weeks or months before the Fed raises interest rates.
Analysts with Bank of America/Merrill Lynch say this was the only good option, given continued trend of positive economic numbers
“Given the continued good news on employment and the transitory implications of lower oil prices on inflation, what we’ll call the accepted economic view, we see the Fed’s options on policy direction this week as a Hobson’s choice: the only real alternative, its path of least resistance, was to signal it will carry on with raising rates as previously signaled, even if it risked sounding hawkish,” analysts write in a client note.
“This tells us that, all else equal, short term rates remain biased upward from a looming Fed tightening, which in turn provides the front end of the yield curve’s contribution to the flattener that is underway.”
On agency (that is, Fannie Mae and Freddie Mac) mortgage backed securities, they say that demand has partially supported MBS performance in the most recent leg down in yields.
“Recent basis performance for agency MBS is indicative of what we anticipate going forward. The structural problems associated with declining homeownership will continue to translate into relatively low mortgage production, given the rate level. This somewhat favorable supply dynamic should continue to create good short term demand for MBS after the basis widens into risk free bond rallies,” they write. “But given our view that the path of least resistance for risk-free rates is lower, we caution against chasing these short term basis tighteners and would sell into them.
“With this perspective, we maintain our underweight view of agency MBS and remain particularly cautious on the belly of the coupon stack. We maintain our down-in-coupon/up-in-duration bias within agency MBS and in CMOs. We think the market remains complacent about the risk of an escalation in prepayments,” BAML says.
If you want a look at the mindset we on the free market side are working against – or that is working hard to undermine the free market – look no further than (naturally) Slate.com, which has morphed into Salon.com after Salon.com morphed into an Onion.com parody site.
Here Salon promulgates the idea that knowledge won’t help the poor sheep known as the American public, only more rules and regulations will.
I’ve never seen an argument against education, until this moment.
And I expected it come to come from a barefoot hillbilly young-Earth creationist, not one of the faux intellectuals of the modern left.
Citing one dodgy academic paper and a failure by some high schoolers, Salon’s writer makes the argument that financial literacy just isn’t going to happen, so don’t even bother trying to have a more educated public. (How journalists count – one, two, trend!)
No, don’t teach people to be responsible and independent. Just pen them in like sheep and protect them from the big bad wolves known as businesses. (Or, as the writer calls them, “corporate financial predators.”)
Here we see the true agenda of the progressive left laid bare in a rare moment of candor.
It’s all very confusing and, frankly, insulting for someone with a grounding in logic and a belief in the basic potential of people to excel.
No, no. Don’t bother teaching people to live within their means, or how to budget. No, that’s not going to work.
The actual headline is “Stop trying to make financial literacy work” because, from their perspective, it won’t work.
But you know what will work? More Consumer Financial Protection Bureau.
For the progressive left, is there any problem for which the solution isn’t more government?
Monday morning we will get news on how construction spending fared in December.
Construction spending slipped 0.3% in November after a sharp 1.2% rebound in October. Market expectations were for a 0.5% gain. November's decrease was led by public outlays which fell 1.7% after a 2.8% jump in October. Private residential spending rose 0.9%, matching the pace the month before. Private nonresidential construction spending dipped 0.3% in November after edging up 0.1% in October.
After some early surveys and estimates that come out Wednesday and Thursday, the big report for the week that moves markets will be the Employment Situation report on Friday for January.
It’s expected to be down month over month.
Nonfarm payroll employment in December advanced 252,000 after jumping a revised 353,000 in November. October and November were revised up notably by a net 50,000. The unemployment rate decreased to 5.6% from 5.8% in November.
Going back to the payroll report, private payrolls increased 240,000 after rising 345,000 in November. Average hourly earnings slipped 0.2% in December after gaining 0.2% the prior month.
Average weekly hours were unchanged at 34.6 hours and matched expectations. Looking at the broader underemployment measure from the household survey, the U-6 measure eased to 11.2% from 11.4% in November. Also from the household survey, the participation rate slipped to 62.7% from 62.9% in November.
No banks were reported failed by the FDIC for the week ending Jan. 30.