Phil Grossfield's Blog

Lookback.  Have you seen your Facebook Lookback Video?  I love these little 1-minute videos. So, I’m sharing mine with you.  Click below to see my lookback video.

My Schedule: Available all day….

My Market Watch:  Bonds Up But Down From Earlier – Pricing Improved So Far – Fed Minutes Released.  The Fannie Mae 30-Year Bond is a direct indicator of rates/pricing…if bonds are being bought then rates improve and if sold off rates worsen.  Although the bond was up +20bps from yesterday’s close, the bond has been selling off and is only up +3bps right now. Because the bond has been selling Capital Markets might decide to issue a reprice worsening. If not, they are certainly watching closely. This might be a good time to lock in.

At 11:00a the Fed will release their minutes from the last Fed meeting. I’m expecting bonds to sell off after this meeting, but not too much. Why?  Because the topic of Quantitative Easing will be in there, and recent discussions about QE have been in favor of it.  Usually this results in traders putting money into stocks rather than bonds. Hey, I could be wrong…do your own research and please share it with me, okay?

Stress Is Not The Problem. Does stress make you sick?  You’ve heard this before, right?  That stress can affect you not just emotionally, but physically too. And, I believe it. But it turns out that stress is actually not bad for you. However, stressing out about stress being stressful is! Huh?  Yep, normal anxiety about life is, well, normal, and actually beneficial. But if you stress out about being stressed…that my friends is the real culprit.  Read more about it here:  A Whole New Way To Think About Stress.

Cornbread Update: On Friday I have to feed cornbread to 30 people at my BFF’s BBQ Cook-Off. So far I’ve made one cornbread recipe I found on the Internet and it was great. It’s made in an iron skillet and then baked…very good with Honey-Butter. Now I’m gonna try a jalapeno recipe.

My Market Watch:  Bonds Up – Pricing Same So Far…. The Fannie Mae 30-Year Bond is a direct indicator of rates/pricing…if bonds are being bought then rates improve and if sold off rates worsen. Although the bond is up +19bps from Friday’s close, rates/pricing are the same. That’s why I think we’ll issue a mid-day price improvement, unless something drastically reverses the current movement.

Interestingly, NAMB reported the housing index, which measures Builder sentiment, dropped more this month than in its 8-year history. According to MBS Highway, builders blamed nasty weather and a shortage of lots and labor. I thought this report might negatively influence traders when looking at bonds, but bonds are still being bought this morning so no sweat, eh?

A Plea For Cornbread.  I need a recipe, stat!  My brother-from-another-mother has assigned me to cornbread for his big BBQ competition next week. Yes, 2 of our friends got hot and heavy over who could make better BBQ and, well, one thing led to another AND VOILA, BBQ Cook-Off!

But what of cornbread?  My BFAM has given me this daunting and challenging task no doubt because he trusts only me to produce a buttery and crispy delight.  Nobody else could possibly be worthy of such a momentous challenge.  Anyone got a good cornbread recipe I can pass off as my own?

Early Valentines Day.  We had a great time…we took just one night but two days away…kid-and-animal-free.  We got to our hotel in L.A. around 4p on Monday…there was iced Champagne with chocolate strawberries waiting for us in the room.  Then we had drinks and dinner at the roof-top bar and restaurant that circles the small hotel pool.  Late the next morning we had a ridiculously good breakfast at a local joint and then went to the Getty Museum which is someplace we’ve always wanted to visit. We checked out our favorites – impressionism, sculptures and the gardens before heading home. It was a great early Valentines 2014. 

My Market Watch:  Bonds Up – Pricing Improved.  The Fannie Mae 30-Year Bond is a direct indicator of rates/pricing. If bonds are being bought then rates improve and if sold off rates worsen.  This morning the bond is up +36bps from yesterday’s close and as a result pricing is improved.  Today there was a report on initial jobless claims and there is a 30-year bond note auction.  Other than that it’s relatively quiet.  Today was a nice recovery from earlier in the week.  Let’s hope the bond continues to be attractive to traders….

Like A Dog Eats A Steak. My family goes through paper towels like a dog eats a steak. I don’t know why it bothers me so much but it just drives me nuts for some reason, particularly when they dry their hands using a paper towel…use a hand towel for the love of all things holy!  And when we’re in a public bathroom my son is like a pit bull…he will grab 20 towels until I tell him to stop. I literally have to train my family how to use paper towels…and then I saw this:  How to Use a Paper Towel. Have a nice weekend!  Oh, and don’t forget Valentine’s Day is a week away so get your flowers and a card…this is your time to show it…

My Schedule:  I have meetings all morning and may be difficult to reach before 11a….otherwise available all day…

My Market Watch:  Bonds Up – New Jobs Reported Much Lower Than Expected – Pricing Improved.  The 30-year Fannie Mae bond is up this morning +30bps after the Jobs Report came in significantly less than expected, a big surprise. As a result, pricing is up 0.250 or so. The Jobs Report tells us how many new jobs were created in January which came in at 113,000 when we were expecting 181,000. For a trader a report like this indicates the economy is weaker than previously thought:

The unemployment rate dropped from 6.7% to 6.6%…not a huge drop but it counters the weak jobs report slightly. Traders are buying bonds, but not as intensely as you might think after such a weak report…interesting….

I Just Can’t Help It.  My apologies, but I’m going to be writing about American Idol occasionally over the next several weeks.  I just can’t help it.  Although I usually don’t apologize for what I write, I know there are those of you that aren’t huge fans of American Idol…like my wife. But, like my wife, I can get you to admit that one or two artists are pretty good and worth a short listen. So, think of it like this…I will weed out the crap and only report on the non-crap…the good…the talented.  I won’t waste your time.

It’s well documented I love the dream, love the music, and love watching the progression of each.  This year there is less antagonism and no cruel or spiteful exchanges among judges.  Yes, the contestants do sabotage themselves, but at least this year the judges are mindful to inspire.  And, this year there are more extremely talented people. I like this girl:  Majesty Rose York.

My Schedule:  I have a meeting in Irvine at 1:30p today and will be driving north after noon. Then headed back down to San Diego late in the day.

My Market Watch:  Bonds Par with Yesterday’s Close.  Prices Worse.  Jobs Reports Tomorrow.  The 30-year Fannie Mae bond is down this morning but only -2bps from yesterday’s close.  The story this morning is tomorrow’s Jobs Report and Unemployment Rate.

The Jobs Report tells us how many new jobs were created in January and the unemployment rate tells what percentage is out of work.  If the Jobs Report shows more new jobs than expected, then traders will interpret this as a sign the economy is doing well. A lower unemployment rate would have a similar effect. That makes sense, right?  Traders invest their money into the stock market when they’re bully on the economy, and they’ll pull money out of bonds to do so…this results in worse rates/pricing for us. On the other hand, if the Jobs Report comes in less than expected, and/or if there is a higher unemployment rate reported, then traders will interpret the economy is a bad bet.  They would rather sell off their stocks and put that money into bonds…its a safer bet.  When they buy bonds our rates/pricing improve. It’s as simple as that.

The Jobs Report is a market mover…traders pay close attention…they try to predict what will happen and react sharply when the report is released. Obviously, the real swings occur when the report comes in significantly less or more than what was expected. It is expected that 181,000 new jobs will be reported.  From what I’m reading, this might be aiming low and more jobs than expected might be reported. If so, rates would get worse. But you need to do your own research and rely on the same before you decide to lock or float your loans. Feel free to call me to discuss….

I’ve Gone Viral!  I took a break from dinner at my favorite local restaurant and found this picture in the bathroom. So, I took a picture of it and posted it on Facebook. Since then I see it re-posted over and over and over again…I’ve gone viral!  And I want credit!  I took the picture, ME!  It’s my contribution and believe you me it was a delicate situation to take that picture considering the circumstances.  For the love of all things holy in this great land of ours I want my verse to include this picture!  🙂

My Schedule:  Available all day….

My Market Watch:  Bonds Down & Trading Below Yesterday’s Ceiling. Prices Worse.  Jobs Reports Thursday-Friday.  The 30-year Fannie Mae bond is down this morning -14bps from yesterday’s close.  The bond has fallen below a Floor of support where it has been teeter-tottering back and forth.  Basically I think traders are uncertain whether to buy or sell stocks and bonds and they’re waiting for the Jobs Reports tomorrow and Friday to help them decide where to put their money.

The main reports are Initial Jobless claims tomorrow and on Friday the Non-farm Payrolls and Unemployment Rate reports. These reports have traditionally moved the markets substantially so all eyes will be focused.

Smack Talk Retraction.  I was talking smack, or rather I was typing smack after I put out an email on Friday that I was taking Denver, and giving 4 points.  Ugh!  I had a fair amount of retaliation to that statement and even placed a lunch bet with a few lucky clients.  When someone would say something to the effect of “Seattle’s defense is just too strong” I would respond with “2 words:  Peyton Manning.”  Uh, okay, I was wrong.

WHAT A BLOWOUT. I can’t remember the last time I saw two high-caliber teams go at it with one team completely dominated in every aspect of the game…defense, offense and all facets of special teams.  The Seattle defense was unstoppable……and fast…it’s almost as if they were playing against a team in slow motion. The divergence was so entirely one-sided…they completely took Manning and the offense out of the game from the very first snap. Do you know its only been 8 times (out of 48) that a defensive player has been named MVP of as Superbowl?  What an awesome display by Seattle.

The best part of the game was halftime with Bruno Mars and the Red Hot Chili Peppers. Bruno was fantastic – my son was dancing like a rock star during the half-time show…click here to see him jam.

My Schedule:  Available all day….

My Market Watch:  Bonds Up & Price Improvement Possible – Prices Improved – Jobs Week.  The 30-year Fannie Mae bond is up again now +23bps since Friday’s close. The bond has now broken through a ceiling of resistance and looks to sustain that level. If so, it is entirely possible we will see a reprice improvement this morning.

This week is Jobs week and although today is a quiet day regarding economic reports the remainder of the week should be eventful. More on that to come….

Justin 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. That 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.

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:

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.

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?

My Disclaimer

That 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. And 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.

When 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