Phillip 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:
- His first name is Phillip, which is the best first name one could have.
- His last name is Phillips, do I really need to explain this?
- He spells his name with two “LL”s instead of the inferior one “L”.
- He and I share a similar appearance, that is, we’re both incredibly handsome and sexy.
- 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.
- 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.
- He has been and remains modest, something I can relate to unless of course you’re taking this post too seriously.
- 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.
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 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?