Be More Attractive…Scientifically. Want to be more attractive? According to scientists, all you have to do is a few simple things. Believe it or not, men are attracted to women who wear less make-up…we like the more natural look. I concur. And we also like a woman who smiles. I concur. Women are attracted to men that have a straight face and wear red. Yep, smile less and put on some bright clothes and the women will be all over you. Don’t believe me? Check it out. And for the record, yes, I love Scarlett Johansson.
My Market Update – 01/08/2015
The 30-year Fannie Mae bond is trading down -8bps this morning since yesterday’s close. Generally a lender’s pricing worsens when the bond is being sold off. Yesterday we lost some ground after back-to-back increases in bond activity.
Tomorrow is all about the Jobs & Unemployment Report. Yesterday I posted my analysis. Today, I’ll address expectations.
Once the Jobs and Unemployment numbers are reported, we can predict how the markets will react. But what about now in anticipation of the reports? It is expected that 245,000 new jobs will be reported and the unemployment rate will decrease just a tick to 5.7%. Now that we have our expectation, the only thing that matters is whether the actual numbers will be more or less.
If the actual jobs number comes in as expected, then it is logical to assume there will be little activity since most traders have already made adjustments in anticipation of the report. However, if the actual number comes in significantly higher or lower than expectations, then traders will react per my analysis yesterday. For example, if tomorrow it is reported that only 200,000 new jobs were created in December, 45,000 fewer than expected, then traders would conclude the economy is weaker than expected. That should make sense…fewer new jobs must mean the economy isn’t doing as well as we thought, right? But if many more new jobs are created than expected, say 300,000, then traders would logically conclude the economy is stronger. Remember, traders typically sell bonds when they think the economy is strong and buy bonds when they think the economy is weak. When they buy bonds our rates improve and when they sell off bonds our rates get worse.
Also, a quick explanation of the unemployment rate is warranted. A higher unemployment rate means there are more people out of work than expected which will be interpreted as a weaker economy. A lower rate means fewer people are out of work which is interpreted as the economy is stronger. In my experience, this report is less likely to vary significantly from expectations…but if it does then the analysis is the same.
MBS Highway thinks we might see a lower than expected report on new jobs. Per a Bloomberg article you could conclude the numbers are likely to come in as expected. Economist Brian Jones thinks the number will come in high at 305,000 new jobs. The simple truth is nobody knows what’s going to happen. You can survey 20 economists and get 20 different opinions. Hell, they’ll even differ on what color outfit President Obama is likely to be wearing during his speech in Phoenix today. For what it’s worth, my gut tells me the actual number will come in slightly lower than expected and as a result we could see a tick improvement in rates/pricing. As always, I feel it’s important you understand the analysis to give you talking points with your borrowers. The more knowledgeable they perceive you, the more likely they will trust you…and it’s all about trust. Just be careful not to firmly predict the outcome, and for the love of all things holy in this land, don’t tell them to lock or float. Instead, explain the analysis and then let them make the decision. Your feedback is welcome…
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Deflategate III.
iPhone Still Kills. 
I have to say, I live in an Apple universe. I’ve been an iPhone owner since they came out and I’m loyal. I’ve seen friends and family try other brands and they never hold up. My wife recently switched to a droid phone made by HTC and she hates it. Let’s face it, Apple knows what they’re doing…they make beautiful phones that work the way you expect. Yeah, there is less customization and more common denominator functionality…I say it’s just fine with me. If you don’t have one, I bet you will soon enough. As Yoda would say, an iPhone soon will you own. I’m virtually entirely Apple at this point…iPhone, iPad, iPods for the kids…all I need now is a Macbook Air. To that end, I need some loans people!
Deflategate.
I’m really curious to see how trading is affected by the blizzard storm closing in on New York City which is expected to be one of the worst storms in their history. Suffice it to say, this week could be interesting. If I were a betting man, which I’m not unless I’m playing poker or Fantasy Football, I’d wager the stock market is going to suffer this week which means the bond market would have a good shot at improving. If I’m right, and you’ll please read my disclaimer below, our rates/pricing would improve.
Ego – Too Much Or Too Little?
Jerks.
jerks in the world but most are just like you and I (assuming you don’t think I’m a jerk).
Like you wrote, terrorism is here to stay. Whether it is homegrown or foreign. This is actually a good thing that the markets and investors are not reacting or overreacting. The reason being is that terrorists are not getting the power pull by causing the market to take a big swing. It is just like all the mass media attention these terrorists are getting right now. This just empowers more People who crave this kind of attention to go out and copycat. We need to stop glorifying the terrorists. We need to spend more time glorifying good deeds. When was the last time you saw this much media attention on something good???? I cannot remember a time and I am 47 years old. When we continue to glorify and give more attention to the bad we create more bad. We need to stop and start glorifying the good. If you want to put a few blips on the screen “hey have you seen these 4 men driving a stolen car, please call police.” that is it. All this iPhone coverage of the actual killings and the shooting of an innocent bystander is wrong. We need to stop. The markets have it right, don’t react and we keep the power and not give it away to terrorism.
Today’s Jobs Report came in pretty much as expected. We expected 245,000 new jobs but 252,000 new jobs were reported. This isn’t significantly higher, so why are trader’s investing in bonds? Wages…that’s why. Wages remain weak and actually fell in December. Lower wages indicate that there isn’t much inflationary pressure. Since bonds hate inflation, a report indicating less inflation makes bonds attractive. Moreover, less inflationary pressure encourages the Fed to keep rates low. For all these reasons, and with a Jobs report that is par with expectations, traders are investing in bonds and when that happens our rates improve.
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