In the spirit of Robin Williams classis film (1987), Gooooooood morning Austin mortgage borrowers! Nice to be back.
Speaking of the movie, do you remember this volley:
Censor #1: You know the rules, airman. If this is a legitimate news story, it must go through proper channels.
Adrian: Look tweedledee, it’s an actual event. (referring to blood on his short). What do you think this came from, shaving? It’s the truth. I just want to report the truth. It’ll be a nice change of pace.
Major Dickenson: What is going on here?
Adrian: Sir, will you listen to me?
Major Dickenson: (reads the story). This is not official news, airman. As far as I’m concerned, it didn’t happen.
Adrian: It did happen.
Major Dickenson: You shut your mouth!
Adrian: What are you afraid of Dickenson? People might find out there’s a war going on?
The truth is we have a battle going on between stocks and bonds, recovery or no recovery, inflation or no inflation. JPMorgan Chase blew the doors off, beating the street’s estimate by .30 cents a share. Intel reported yesterday (after the close), posting a great quarter as well. Equity traders are falling all over themselves, taking the Dow within a few points of 10,000, a level not seen since October 3rd, 2008. Retail Sales also hit the tape, down 1.5% while the ex-auto’s component was plus .5%. The better than expected numbers portray a consumer that seems to be increasing spending, albeit at a slow, value based level.
August Business Inventories were also released, down 1.5% while sales were up 1.0%. Business inventories are now more in line with sales, almost back to normal levels. We will want to watch for inventory rebuilding in the near future for further signs of employment growth and GDP improvement. Bonds, notes, and MBS took it on the chin this morning as the early trade (7:30 am cst) had the 10 year note down 1 point. Mortgage backs are off their worst levels of the day but still down 10/32’s on the FNMA 4.50% coupon.
The failure of the market to hold yesterday’s gains suggest we are building on a bearish continuation pattern. English translation is one of caution, telling us it’s time to be defensive. We expect the new range on the 10 year to be 3.34% to 3.48%. Expectations for worsening Austin mortgage pricing is quite high so take cover. With the expectation of strong earning out of Goldman, B of A, and Wells Fargo, stocks should continue their momentum rally, adding pressure to our fixed income market. Sorry to put you back on defense but just like Adrian, “it’s the truth”.