This commentary did not get emailed out yesterday, please accept our apologies. The data has been updated for this mornings reading. Michael Burry, who made a fortune shorting the subprime market in 2008, and was made popular in Michael Lewis’s book and movie The Big Short, is at it again. The quarterly SEC 13-F holdings […]
Monday’s Daily Commentary highlighted four factors that could lead to a credit crunch in the mortgage market. The graph below shows a credit crunch for mortgages may have already begun. The bellwether 10-year U.S. Treasury note yields 4.19%, almost identical to its peak in the fall of 2022. Yet, mortgages are trading .15% above the […]
Year-over-year CPI increased to 3.2% in July from 3.0% in June, ending the streak of 12 consecutive declines. While that may sound like bad news, the increase is solely a function of last July’s monthly -0.03% CPI reading falling out of the 12-month calculation. July’s monthly CPI increased by 0.2%, in line with the previous […]
The VIX volatility index calculates how much the options markets imply the S&P 500 will move over the coming month. Recently, it has been at historically low levels. Such low levels of implied volatility are a sign of complacency because it signifies that few investors are buying options to protect against adverse movements. Volatility is […]
The U.S. Treasury will auction $38 billion of a ten-year note today and $23 billion of a thirty-year bond tomorrow. Often, volatility in the longer maturities perks up as the Treasury’s primary dealers position for the auctions. Per the New York Fed, the 24 primary dealers “are also expected to make markets for the New […]
It’s no secret that mortgage rates have risen sharply. They now stand above those seen on the eve of the financial crisis. However, less appreciated, the difference between mortgage rates and U.S. Treasury yields is almost .75% more than in 2007. The predominant reason for the wider-than-normal gap is the status of the banks. Banks […]
The BLS employment report showed that job growth has finally normalized to pre-pandemic levels. Per the employment report, 187k new jobs were added, slightly below the 200k expectation. Such is the lowest monthly job growth since December 2020. The unemployment rate ticked down from 3.6% to 3.5%. Hourly wages were up slightly, but hours worked […]
Equity investors used the acronym TINA to justify buying stocks at excessive valuations. TINA followers believed that when bond yields were near zero, there was no investment alternative but to pay high valuations for stocks. Today, however, there is an alternative. In our recent article, Stocks versus Bonds, we share 150 years of equity valuation […]
On August 5, 2011, S&P downgraded the United States’ credit rating to AA+. Almost to the day, twelve years later, Fitch came to the same conclusion as S&P. The U.S. credit rating is not worthy of the AAA rating. If the U.S. were a corporation, Fitch and S&P would likely rate its debt as junk! […]