Stocks are lower this morning as we begin the July FOMC meeting. Bonds and MBS are up small.
The FOMC meeting begins today and the Fed Funds futures have a 36% chance of a rate hike:
The uncertainty is wider than is typical before a Fed meeting, and that may be by design: Warsh is much more of a throwback to the days pre-2008 when the Fed said much less. The dot plot, the inflation target were all reactions to the persistent deflation we saw in the aftermath of the real estate bubble.
Prior to that, the Fed’s main experience was fighting inflation from the 1960s through the 1980s. Economic theory says that monetary policy will be more effective if the market doesn’t have a chance to pre-load its reaction to rate hikes or cuts. Elmer Fudd’s inscrutable answers that said absolutely nothing were legendary.
Warsh is taking a step back towards normalcy and away from the emergency measures put in place during the Bernanke / Yellen era and that is probably the right call. Deflation is not a risk any more.
Durable goods orders increased 0.3% MOM in June according to the Census Bureau. Computers and electronics (presumably associated with data centers) drove the increase. If you strip out transportation orders rose 0.6%. If you strip out transportation and defense they rose 0.3%.
Redwood Trust reported earnings of ($0.03) per share and earnings available for distribution of $0.15. Mortgage banking production topped $8 billion in volume which was more than double last year.
Aspire gain on sale (big part of the growth) came in at 101 basis points. Sequoia gain on sale was 92 bps.
Speaking of mortgage bankers, has anyone been paying attention to the swan dive in United Wholesale? The stock has been crushed over the past year, falling from $9.49 a share to $1.84. I guess the bidding war for Two Harbors took its toll.
Assuming the company doesn’t cut its $0.10 quarterly dividend, it has a yield of over 20%. Mat Ishbia holds most of the stock, so the dividend is really him paying himself. But that chart is ugly.
