KP Talks Dollars and Sense

KP interviews his mentor, Barry Habib at the Momentum Builder at Caesars Palace Las Vegas. Barry shares his insights about the 517,000 jobs added in January. According to Barry, it wasn't 517,000 jobs. It was a loss of 2.5 million jobs, 2,505,000 jobs lost in the month of January. The government made a seasonal adjustment. Typically in January, you lose 3,000 jobs. So they attach that 3,000 j...

If the Fed were a doctor, they'd be writing a prescription to lower the patient's fever right now. Consumer demand is about 68% to 70% of the economy, and the gross domestic product (GDP).  If things have a higher cost and there are higher interest rates because of the Fed's action, then the demand for those goods and services that are interest rate sensitive will come down. And whe...

The 40% debt-to-income ratio is impossible to manage. The Federal Housing Finance Agency (FHFA) announced further changes to Fannie Mae's and Freddie Mac's single-family pricing framework by introducing redesigned and recalibrated upfront fee matrices for purchase, rate-term refinance and cash-out refinance loans. The good thing is that the Mortgage Bankers Association is going to push b...

There's a massive lack of supply. There are old neighborhoods that need to be gentrified. There's people that are moving from much larger markets to sell their higher-priced stuff. So we're trying to build supply. So we've seen home prices come down. Revolving debt increased to $1.2 trillion. A pretty high amount in the month of November to December, like a 68% increase. So we&...

We had a Goldilocks jobs report. So a little bit more jobs were created than expected, but not a lot more. We seem to have eased off a bit because it wasn't a super hot, tight job market. A lot of those jobs created were temporary jobs and wage inflation actually got reduced a little bit. So is inflation softening? We're going to find out with some more data on Thursday this week with th...

The amount of our budgets are estimates. You get either less money coming in or overspend. On this last round, we were like 5.5% equivalent GDP, either underfunded or over budget. And 2.5% of that came from the Department of Education because we've been forgiving or canceling or pushing back the payment of student loans to our government. The equivalent of 2.5% of our GDP is unfunded by the g...

We have a shrinking negative money supply because of the actions of the Fed to fight inflation. And that hurts interest rate-sensitive industries like our industry. And so people in their relationship with money have a lot to do with how well they do in life or with their businesses. Some people are more aggressive with their money. Some people don't like to lose money. We've seen compan...

CPI was good! Two CPI prints in a row were showing inflation to roll over.  39% to 40% of the CPI print is housing. Rent, owner equivalent rent, lodging away from home. It's a big portion and it's lagging data over the last 12 months. Housing isn't a big component of the PCE. If there's a beat on this PCE, then that's yet another piece of data that shows inflation is rolli...

December is generally a very good month for the stock market. If the market has been bearish and we know our CME tool that we look at all the time. You can go to CMEGroup.com and you can see what the Fed's future rate outlook is. Everyone thinks it's going to be like a 73.5% chance as I'm recording this that there'll be a 50 basis point rate hike announced and only a 26.5% chan...

The Fed is trying to mold and shape inflation. Which then molds and shapes our interest rates. They have blunt tools. They have quantitative tightening. They can sell off their balance sheet that they have or let it run off and buy less mortgage-backed securities and treasuries. They can raise the Fed funds rate. The Fed has said they are going to be data-dependent. And that data is showing that t...

Barry Habib and his team at MBS Highway really break down the PCE number. He said that the PCE has less waiting on housing, which we all know there is still inflation there. There's certainly inflation year-over-year. It's a lag effect. But the PCE is more of a consumption expenditure. So people are spending less on rent. There's less owner-equivalent rent. There were over 280,000 j...

We're up 50% higher listings on the market right now than a year ago but 36% under pre-pandemic levels in 2019. There are more listings that have been coming on the market because there's less demand with higher interest rates. People pull their listings off the market because it's Thanksgiving all the way through the holidays and then into the New Year. And then you start to see th...

Instead of a 75 basis point rate hike, it's only seen as a 50 basis point rate hike for the December 14th meeting. So it's like an 80% chance now and then the February 1st meeting, then after that is only another quarter. So that gets our top line number at 4.5%.  The market rallied. Some people think it was a technical bounce or a bear market rally. If a market is oversold and the bears...

Do we have a central bank pivot? Not just with the Fed but the banks around the world. We saw Australia and England and Canada, all their central banks making moves that seemed to be a little bit soft. They've been softening, not as hawkish. The Fed had a hawkish tone during the Federal Open Market Committee meeting. There was about 450,000 birth/death added. And then the 60,000 survey compon...

The credit scoring is changing. We usually do a tri-merge credit report for loans that are funded. That's three bureaus Equifax, TransUnion, and Experian. Now you only need two. It's a FICO 10T report with trended data and a VantageScore report and their 4.0 algorithm. That will change the game, two years to implement. The Fed pivot used to mean we're raising, now we're cutting...

This is a very volatile market. I may be wrong for three months and things may come back down. But if it's 3 to 4 months of very volatile 10-year Treasury costs that will cause a little bit of upward pressure on interest rates. So inflation is still the number one target for the Fed right now, and that will continue to cause upward pressure on bonds, treasuries, suck money out of the stock ma...

The earnings season has kicked off! Will companies start to talk about hiring freezes? Will we see our unemployment rate go up? The Fed doesn't want to see a really tight labor market with tons of jobs available, which require higher wages, exacerbates the inflationary problem, and eat away at all of our abilities to buy goods and services. You can now officially apply for student loan forgiv...

There are 263,000 jobs created in the October jobs report. The participation rate actually went up overall by about 63.5%. We have a strong, tight labor market, which is not giving up. The unemployment rate went down, which gives the Fed the green light to hammer another 75 basis points at their meeting in November. The administration has been pushing a fair housing agenda. To try and serve the un...

Housing has a problem with weather incidents. This is not a political statement. It's a fact The Harvard Joint Center for Housing Studies put out articles all the time talking about the potential losses for our industry with any kind of weather instance. Whether just normal storms, rains, or even major hurricanes like we just had with Hurricane Ian. Over $50 billion and counting in damage, it...

Latino homeownership is the fastest-growing segment of first-time homebuyers in America. We buy and sell money in the mortgage business. That is what mortgage-backed securities are. The Fed is going to squash inflation. They are going to crush inflation. That is what they are going to do. Inflation was not transitory, but the dollar is strong. People don't know what price to pay for an asset...

There is a racial equity gap in homeownership. There's a 30% gap, 72% versus 42% homeownership between whites and blacks. We can do better. We can make things better. Owning a home has been very expensive. The stock market sold off hard and broke below 3,900 S&P resistance level. It's a purchase season, but listings are down and they're down even earlier than they typically dip...

Gas prices have fallen. Demand by consumers over the summer, and the peak travel season was down as well. So we could get an August read of a negative CPI number. Remember, these indexes, indices, are 12 monthly readings in a row. And you take the 1 from 12 months ago and you replace it with this one. Government spending is about 20% of GDP. Infrastructure Bill, aka the Inflation Reduction Act and...

The Fed raised interest rates to 75 basis points! They're going to look and see if inflation peaked. The PCE is a really big indicator. PCE and CPI are core readings of inflation figures of what consumers pay. The Fed got rid of $20 billion of mortgage-backed securities off their balance sheet. They own something like $2.7 trillion just in mortgage-backed securities. $20 billion in a week and...

Everyone is talking about the Fed pivot. And it comes in three stages. The first Fed pivot is lower increments. They've been doing 75. Fed Chairman Jerome Powell said that they got to fight inflation. Now it's a 68% chance or more of a 75 basis point rate hike. So stage one of the Fed pivot looks like lower increments. Time is money. So to me, talking about time is just like talking abou...

The CME has what is called a futures indicator of the Fed funds rate. So you can buy futures, basically place bets on whether the Fed will make a 75 basis point rate hike or a 50. 100% of the bets have one of those two choices. Everyone thinks the Fed is going to hike at least 50. I think they'll do the 75. That's my opinion, not because it's slightly favored, but because inflation...