Phil Grossfield's Blog

A LITTLE EXTRA…

Monthly Archives: January 2014

Justin Bieber Conversation

justin_bieberJustin Bieber Conversation. There are two reasons I’m writing about Justin Bieber:  (1) because my daughter was asking about him this morning on the way to school, and (2) because I couldn’t think of anything else to write about. That last one is the real reason because quite frankly I really couldn’t care any less about Justin Bieber. But since my daughter was asking I thought I’d share my conversation.

Daughter:  “Why is Justin Bieber in jail?”
Daddy:  “He’s not in jail honey, but he was in jail and now he’s home with his family.”
Daughter:  “But why Daddy, what did he do?”
Daddy:  “He made bad choices. He used drugs and drove a car while drinking. I have raised the two of you to know the difference between right and wrong, I suspect Justin knows too. But he decided to choose wrong over right and now he is paying for those mistakes.”
Daughter:  “That’s good, I hate his music anyway.”
Daddy:  “Well, we don’t want to wish bad things on anyone. Instead of focusing your energy towards him in a negative way, why don’t you choose to send positive thoughts his way so he can find the courage to choose right over wrong.”
Son:  “I already sent good thoughts Daddy!”
Daddy:  “Good job!  Both of you are fully capable of choosing your own path…I trust that you’ll choose the right one.  That doesn’t mean you won’t make mistakes along the way, but there can be serious consequences for some bad choices.  If you’re ever not sure what to do, come ask Mom or me…you can talk to us about anything, right?
Daughter:  “Is his Mom and Dad mad at him?”
Daddy:  “I’m sure they’re not pleased with his choices, but they still love him no matter what he does, just like we love you no matter what you do.  But he’s 19 years old…he’s an adult now and he is the only one that will have to pay for his mistakes, not his parents.”


My Schedule: I have a luncheon meeting today at noon and otherwise available…


My Market Watch:  Bonds Up – Prices Improved From Yesterday With Non-Conforming Jumbo Very Aggressive.  The 30-year Fannie Mae bond is up…in fact it opened higher than where it closed yesterday afternoon…+16bps higher.  As a result rates are much more aggressive this morning.

Today is a perfect example of the inverse relationship between stocks and bonds. Simply put, the bond market is doing well because traders are selling off stocks and buying bonds instead. I’ve been watching the bond closely this morning and noticed trading is fluctuating rapidly within a short range. c45That is, it’s going up and down but just barely and just above a floor of support. If you look at my graphic you can see how the bond opened higher than where it left off yesterday afternoon.  You’ll also notice that traders have been buying and selling with the bond literally touching the floor before bouncing higher.  To use my glass elevator analogy the bond elevator was heading downward, stopped at the Floor 1 and then headed back up. This pattern keeps repeating itself and I see this as a good thing…it means Floor 1 is a strong support, at least for now. The way I see it as long as the elevator doesn’t fall below Floor 1 it should be a good day for bonds.

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Phillip Loves Phillip Phillips

phillip_phillipsPhillip Loves Phillip Phillips.  When I say love him I mean I love his music, I don’t actually love him, I save that stuff for my wife and kids and family and dogs and cats and really good super-long-lasting friendships and…well, that’s enough. Phillip Phillips is presently my favorite artist…I listen to his songs all the time. My favorite is So Easy. I’m one of those people who sings a lot around the house, something my wife is still learning to deal with over the years. Now I’ve got my kids singing too…we love Phillip Phillips.  Here’s why I dig the guy:

  1. His first name is Phillip, which is the best first name one could have.
  2. His last name is Phillips, do I really need to explain this?
  3. He spells his name with two “LL”s instead of the inferior one “L”.
  4. He and I share a similar appearance, that is, we’re both incredibly handsome and sexy.
  5. His key is the same as my key and he is only slightly a better singer than me, depending on the day and surroundings acoustics.
  6. He came from nothing and followed his dream eventually winning American Idol. I love the American Idol story…that dreams do come true…it’s fun to watch and his progression was one of the best.
  7. He has been and remains modest, something I can relate to unless of course you’re taking this post too seriously.
  8. On Idol the judges kept telling him to change his style, change the way he dressed, change his song choices…but he refused and did things his way…he stayed true to himself. This is my favorite bullet.

My Schedule:  I have a meeting at 2:00 and otherwise available…


My Market Watch:  Bonds Up and Nearing A Ceiling Of Resistance – Prices Improved From Yesterday.  The 30-year Fannie Mae bond is up +27bps on the day so far. More importantly, it is rising towards a ceiling of resistance.  Why is the bond improved?  Mainly because the stock market is flailing. Why? Probably because of Obama’s speech, or negative economic news out of Turkey, or maybe because of hopeful signals in future home purchases making bonds a better bet. Take your pick…the question is whether rates will improve in the short-tun.

If you read my posts you have heard me talk about the glass elevator, an analogy I created to explain the behavior of traders’ decision-making on when to buy and sell the 30-year Fannie Mae bond. Why do you care?  Because if you have a good idea of which way the bond is going, you can make a reliable best-guess on whether rates will improve or get worse. This analysis might serve you well when talking to your borrowers, particularly when asked if this is a good time to lock in the rate.

c42Think of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide it’s a good time to sell since the elevator is as high as its going to get. That is, traders often start selling off the bond once it reaches the ceiling figuring the elevator will stop and head back down. Put yet another way, traders may decide to take the gains once the elevator reaches this high.

Once the elevator reaches the ceiling traders will only keep buying bonds if there is a catalyst to motivate them, like another weak economic report, or a statement by the Fed that traders interpret that the bond market is a safer investment than stocks, etc.  Otherwise, its a safe assumption that traders will start selling off the bond to take gains.

So, there are two things to take into consideration this morning when trying to predict the future of rates. (1) Will Capital Markets issue a reprice improvement as the bond rises towards the ceiling of resistance?  (2) If the bond reaches the ceiling of resistance, will traders start selling off the bond?

My Disclaimer

My Verse?

deadpoetssocietyThat The Powerful Play Goes On And You May Contribute A Verse…What Will My Verse Be?

In Friday’s post I shared the Apple commercial that captures the essence of one of my all-time favorite movies, Dead Poet’s Society. I’ve been thinking about what my verse is/was. At one point I thought it was to help others by practicing law. appleyourverseAnd then later in my career perhaps to help others become better salespersons since my role had been a sales/branch manager. I seriously thought at one point that I was meant to be a role model or motivational speaker for those looking for success and balance…but in hindsight I think this was more  arrogance than anything else. I suppose the verse changes over time…I wonder what my verse is yet to be?  If I’m to look through my future eyes, I want my verse to be that I was always improving as a father, a husband, a son, a brother, a friend, and a person.  I’ve got a lot of work to do….

My Post From Friday:  What Will Your Verse Be?


My Schedule:  I have a meeting at 11:00 and otherwise available…


My Market Watch: Bonds Down But Prices The Same As Friday Morning…For Now…  The 30-year Fannie Mae bond is down -22bps so far.  The reason for the decline in bond prices is a direct result of the stock market’s attempt to rebound from last week’s fall. As i said on Friday, there is an inverse relationship between the stock market and the bond market…most of the time. It’s not always true, but it’s a reliable analysis.

buyholdsellWhen the stock market is performing well investors pull money out of bonds to invest in stocks and when that happens our rates/pricing get worse. Conversely, when the stock market is doing poorly investors sell off their stocks and invest in bonds instead and when that happens our rates/pricing improve.

With bond prices already down -22bps this morning, I’d be worried about an impending mid-day reprice for the worse.

My Disclaimer

What Will Your Verse Be?

appleyourverseWhat Will Your Verse Be?  This is now the second time I am endorsing an Apple commercial…what can I say, they make great commercials. I suppose there are two compelling reasons why I love this particular commercial: (1) I’m a big fan of the movie Dead Poets Society. I’ve written about it before in my post O Captain My Captain!  (2) I read Walt Whitman when I was in college…I had a copy of his Leaves of Grass on my end table. I got the book because I thought it would be cool to read it for girls, and it was. But I also fell in love with his unique way of looking at the world…his style is seductive and captivating.  The commercial is taken from one of several call to action scenes by Robin Williams’ character in the Dead Poet’s Society. Here is the text of the commercial:

deadpoetssocietyWe don’t read and write poetry because it’s cute. We read and write poetry because we are members of the human race. And the human race is filled with passion. And medicine, law, business, engineering – these are noble pursuits and necessary to sustain life. But poetry, beauty, romance, love – these are what we stay alive for. To quote from [Walt] Whitman,

“O me, O life of the questions of these recurring. Of the endless trains of the faithless. Of cities filled with the foolish. What good amid these, O me, O life? Answer: that you are here. That life exists and identity. That the powerful play goes on, and you may contribute a verse.”

That the powerful play goes on, and you may contribute a verse.  What will your verse be?


My Market Watch:  Bonds Up Again and Prices Improved Again.  This morning the 30-year Fannie Mae bond is up +23bps so far. Conversely and not surprisingly these gains are a direct result of the triple digit losses of the stock market.

wallstreetThe big reason for the flailing stock market is poor economic data coming out of China which has a big impact on global economies. Moreover, its logical to assume that many U.S. traders have been looking at overseas investments since the Fed announced QE tapering last year. If true, then bad news coming from foreign countries will have a bigger impact on stock market trading in general.

There is usually an inverse relationship between the stock market and the bond market. It’s not always true, but most of the time this analysis is trustworthy.

When the stock market is doing well investors pull money out of bonds to invest in stocks and when that happens our rates/pricing get worse. When the stock market is doing poorly investors sell off their stocks and invest in bonds instead and when that happens our rates/pricing improve.

I’d be cautious to watch the stock market carefully. Remember, an investor’s job is to buy low and sell high and buy low again. Although stocks are being sold off for now, at some point investor’s will see low stock prices attractive and start buying again and when that happens…….. Let me know if you want to discuss.

21:16 Bitching-Free

positive21:16 Bitching-Free.  I was frustrated at 21:16 into my spin class on Sunday morning. I looked down at the elapsed time on my spin bike…only 21 minutes and 16 seconds had elapsed…nearly 40 minutes to go. And the spin instructor was driving me crazy…she wouldn’t shut up. Stop talking so much! The ideal spin instructor plays great music, yells at the right moments, and doesn’t fill every single second in the 60-minute class with her voice. This instructor was failing in all three respects. At 21:16 I was frustrated…angry even…in my head I was bitching. Then it occurred to me…maybe I was feeling this way because I had 2 glasses of wine and an aggressive homemade Manhattan the night before. Maybe I was the one failingnot the instructor. And then I think I said out loud, “what the hell is wrong with me?” What was I complaining about? How fortunate was I to belong to this club and to be in a class with 50 other motivated people?  And why was I bitching about my instructor who was up at the same time on a Sunday morning as I was…and who was expressing her passion to get the most out of her class?  At 21:16 I changed my focus, I changed my thought process, I refocused my energy into the task at hand…getting a great work out…bitching-free.  That’s the thing about exercise…it refocuses your energy, physically and mentally. After class I thanked the instructor for a great workout and then hit the steam room. Ahhhhhhhhhhhhhhh…….


My Market Watch.  Bonds Up +5bps. Prices Improved.  This morning the 30-year Fannie Mae bond is up +5bps and is trading exactly on a ceiling of resistance.  There are not a lot of pressing economic reports this week…it shouldn’t be volatile. Did I just type that?!  Now I’m nervous!

elevatorbuttonsT20140117-143642.jpghe bond is trading exactly on a ceiling of resistance. Using my Glass Elevator analogy, the bond price was going up and stopped at a ceiling…the glass elevator is stopped…the elevator doors are open…and we’re wondering whether the elevator is headed up to the next ceiling or down to the floor below. If it heads up then we could see improved pricing. If it heads down pricing could get worse. With little going on today, or this week for that matter, I think rates will do nothing today. I think the elevator is just staying put.

How to think about the Bond Glass Elevator.  Think of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling.

MLK Gloriously Oblivious

20140117-143201.jpgMLK Gloriously Oblivious. (I posted this last year)
We watched Martin Luther King’s I have a Dream speech with the kids Saturday morning. “What is he talking about?” asked the 7-year old. I tried to explain, “you see honey, there was a time when people weren’t treated equally, in fact, people still aren’t treated equally, and Martin Luther King stood up for those people and motivated all the people you see on the computer and people all around the country to stand up for people who were not being treated fairly.” Not bad, eh? “Why weren’t they being treated equally Daddy?” I stammered on this one…my wife looked at me puzzled as well. How do you tell a 7-year old girl, whose concept of bigotry and baseless hatred is as foreign as the workings of the Large Hadron Collider? How do I explain to a girl whose second grade class is made up of 20+ different cultures that there was a time when we enslaved people based on the color of their skin? More importantly, do I want to explain it? My wife tried and stuttered an explanation to no avail…my daughter didn’t get it, and that’s just fine by me. Gloriously oblivious.

“I have a dream that little children will one day live in a nation where they will not be judged by the color of their skin but by the content of their character”

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20140117-143642.jpgMy Market Watch: Bonds Up +16bps. Prices Improved. This morning the 30-year Fannie Mae bond is up +16bps and is approaching a ceiling of resistance.

The bond is trading just below a ceiling of resistance…if it breaks through and sustains we would see improved pricing. If it stops at the ceiling it will probably head back down. Think of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling.

She Loves Herself; Glass Elevator Anaolgy

20140116-121954.jpgShe Loves Herself. This morning at breakfast my almost-6-year-old son asked my almost-9-year-old daughter if she loved him. She replied, “well, I love myself the most, but I love you too.” If this isn’t the reason we love our kids I don’t know what is. First, she loves herself…as a Dad how awesome is it to hear that?! Life is good, eh? I know they’ll be fighting about some stupid toy or that one glared at the other, but I’ll bask in the love-shine for now…

My Market Watch: Bonds Up +30bps. Prices Improved. This morning the 30-year Fannie Mae bond is up +30bps. Do you feel like we’re on a roller coaster? I said yesterday I felt the bleeding was going to be over and sure enough it stopped and now we’re headed back towards happier land.

The bond is trading just above a ceiling of resistance but the momentum is not convincing enough to suggest a huge rally. We might see a price improvement today if the bond can settle in above that ceiling…if it does the ceiling of resistance transforms into a floor of support and creates a baseline for traders.

20140116-121531.jpgThink of the bond price as a glass elevator that goes up and down. As the elevator reaches the next ceiling up there is a good chance it might stop and then head back down. This is how traders think about it…they might decide its a good time to sell since the elevator is as high as its going to get. But if the elevator goes through the ceiling and continues going up, then there is a good expectation it will keep going up until it reaches the next ceiling. I hope that analogy makes sense. So the question is how do traders decide if the elevator is going to stop at a particular floor? The answer depends on what else is going on out there…economic reports, geopolitical news, general politics, extreme weather, foreign policy, etc.

In general things are up and down and up again…typical I guess. Rates for the most part have settled in to their current range. This is where we’re going to be for a while.

I Spit On My Tomlinson Jersey

mnvikingsIchargers threw my Ladainian Tomlinson jersey on the floor and stomped on it. Yes, when tested I’m a Minnesota Vikings fan…you got a problem with that?

A few years ago the Vikings and Chargers were playing in San Diego in the first game of that year. I wore my Tomlinson jersey and a Vikings hat. I figured I’d been following the Chargers long enough that I had to support them, even if they were playing my precious Minnesota Vikings. But as soon as the kick-off was completed I ripped off my jersey and threw it on the floor. I just couldn’t do it. When tested I’m a Vikings fan, and I will always be a Vikings fan, and believe me, that is not an easy thing to be. So, I’m always cheering for the Bolts, but if they’re in the Vikings way then I spit on them…it is what it is…I ams what I ams… How do you like me now?!


My Schedule:  I have an appointment at 11:30a and will be done around 1:30p or so. Then I have another appointment at 4:15p.


Market Watch: Bonds Down and Falling. Pricing Improved From Yesterday But Not For Long…  This morning the 30-year Fannie Mae bond is down -33bps and falling. We could see a mid-day reprice worsening.

The Fannie Mae 30-year bond has been falling all morning and has now dropped below 2 floors of support.  Even though Interbank’s pricing has already taken into account the lower bond price, I believe they will take a prudent/conservative approach and issue a reprice worsening. So, if you were planning on locking today I hope you saw my earlier warning and locked before Capital Markets took action.

There were a few economic reports that supported a stronger economy but my opinion is the sell off this morning is simply due to traders taking gains from yesterday’s rally. Yesterday I advised you lock and I hope you did because the nice price rally I was hoping for was short-lived. Now the bond price is back to where it was Friday afternoon…all those gains are gone. But more concerning is where the next floor of support is. The next floor down, the Lobby in my graphic below, is a ways down there. It’s not inconceivable that traders will continue to sell since they don’t expect the bleeding to stop until it hits that Lobby. Remember, a trader’s job is to sell high and buy low…if they think the price will drop to the Lobby, then they will sell and wait for the price to hit that Lobby.  I hope that makes sense. Let me know if you have questions…
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Chargers

chargersChargersvikingsAdmittedly I’m a Minnesota Vikings fan but I’m also a San Diego Chargers fan, unless of course they’re playing the Vikings.  I’ve lived in San Diego since 2000 so I’ve paid my dues, and yesterday was a heartfelt loss, even if it wasn’t a surprise. To beat Denver in Denver would’ve been nothing short of a miracle, and by golly I thought the miracle was comin!  But at least they ended strong. If they couldv’e gotten things going just a little earlier we might have had a chance. But too many dropped balls and missed plays. You just can’t do that and expect to beat the best quarterback in the NFL. With a healthy Matthews next year and a couple of adjustments, we might have a team, unless of course we lose all our coordinators in the off-season.                                                           


I ADVISE 45-DAY LOCKS ON EVERYTHING. Turn-times are fast…like lightening fast. But free lock extensions are going away or will be extremely difficult to obtain in the future. I’ve been working diligently on getting relief to this rule, and I’m close. But for now, I strongly advise you lock 45 days or take enough rebate to cover extension costs.  Let me know if you want specifics


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My Market Watch:  Bonds Up and Rising!  Pricing Improved.  This morning the 30-year Fannie Mae bond is up +28bps and rising. We could see a mid-day reprice improvement.

The bond is currently trading above 2 ceilings of resistance which is fantastic. If it holds then these ceilings convert into floors and become a foundation for the rest of the week. Let me know if you’d like a more thorough explanation….  Assuming we do not get any geopolitical news or negative economic reports, we would be is the midst of a nice pricing rally.

My Disclaimer

Wake Up!

20140111-005903.jpgWake Up! I slept! Thank goodness! My eyes are awake. Are you awake? Today is the first day of the new QM rules. Are you excited?! I’m excited about the market right now! Read below…

My Market Watch Bonds Up Big! Surprising Jobs Report Comes In Weak…Very Weak. This morning the 30-year Fannie Mae bond is up +81bps. As a result, rates are improved from yesterday. This morning the Jobs Report came in at only 74,000 new jobs when it was expected to come in at around 200,000. That is significantly lower and took everyone by surprise. As a result, traders are buying bonds and rates have improved.

Remember, traders are concluding the economy is weaker because 125,000 less new jobs than expected certainly indicates a weaker economy. That makes sense…less new jobs than expected = weaker economy than thought. Traders would rather invest in bonds when the stock market is a bad bet…and when the economy looks weak the stock market looks like a bad investment. Bonds are up big, and prices are improved accordingly.
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We might see some very competitive pricing this month. First, Fannie Mae delayed a Gfee and LLPA increase and now we have a weak economic report. It very well could be a good month…that would be nice, eh?! Here is a look at the Jobs Report over 2013, courtesy of MBS Highway:
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