Category: Economy

This section is for economic content.

Trump finally thanks Obama – Jobs report beats expectations!

~ Fred Thomas, III ~ Leave a comment

President Obama sharing with Trump not to worry because he will be leaving a positive economy and much less drama than we he took office

It may be daylight savings time but it surely isn’t April Fools!  So, the thought that Donald Trump finally thanked Barack Obama for anything is wishful thinking.  Trump has convinced himself and his supporters that any and everything of a positive nature which has occurred since he assumed office on January 20, 2017 is the result of his personal brilliance and superb business acumen.  As painful as it may seem for him to be humbler and demonstrate basic respect or acknowledgment of what he inherited, unfortunately in doing so it might go against the basic premise of his bombastic personality of giving others credit.  Particularly if he considered that person a political opponent!

Economic factors looking good!

On Friday the Bureau of Labor Statistics released their monthly jobs report.  The data reflects activity for February 2018.  The numbers were better than expected as over 313,000 jobs were created.  No doubt those numbers are impressive and highlight the positive direction the overall U.S. economy is headed.  The core issue for Trump and to the chagrin of his supporters is that when you evaluate historic data you can’t pick what you like or dismiss what you don’t like.  Specifically, no doubt the economy has produced some impressive numbers since the Trump administration took over the reins.  What gets lost in his enthusiasm is acknowledging or admitting what he inherited?  As previously stated, some feel in doing so their anti-Obama argument get muddled because they have accepted the notion he is a Muslim, didn’t achieve anything or a person of absolute failure who did nothing to help the American people during his eight years as President.

“The recent tax cuts are a good sign but they don’t get much credit for this report because the synchronized global recovery has been strong since the middle of 2016” said Jonathan Golub, chief United States equity strategist at Credit Suisse.

The jobs report was a welcome change as it reversed the tough week the Trump administration was dealing with.

 

Nine years later some have forgotten or marginalized the condition of our economy when Obama took the oath of office?   It was in a tailspin most had never experienced.  Jobs were being lost to the tune of nearly 800,000 each month.  Yet with some fundamental economic discipline and solid leadership the economy regained it stability and charted month over month  improvement.  Remarkably, many criticized Obama for not achieving a higher level of success!  While those early years in the Obama administration required exceptional focus one thing is certain; positive numbers, even limited are much better than any negative numbers.  The result is as Obama was departing and Trump was coming into office there is little argument things were headed in the right direction.  Therefore, in fairness Trump has earned credit for keeping the economy on track and continue to move in the right direction.  Perhaps the day will come when he communicates gratitude that what he inherited was much better than what Obama inherited.

 

 

Mortgage rates keep climbing

~ Fred Thomas, III ~ Leave a comment

This has been a tough week for the stock market.  One that many say is a long-overdue correction.  On the mortgage front rates continue to climb as this week they jumped 10 more basis points and now sit at 4.32%

  Generated by IJG JPEG Library

Most consumers understand rates are cyclical and are not stagnant so it is not uncommon for them to move up and down.  What is alarming may be ever since the tax cut was announced as well as the subsequent news major employers would be granting bonuses, they have climbed nearly ½ point.  The number may appear insignificant but with all of the hoopla of the benefits of the tax break to “regular” people it is worth noting the increase in rates have translated into higher cost or more payments.  Specifically, with mortgages, the impact is approximately $44 more each month.  The soundbite that you will see more money in your paycheck starting around February may be true but the reality is if you are in the market for a mortgage, you will need it!

 

While the increase in rates was projected, it shows why you need to be laser focused on the details especially if you are in the market to obtain a new mortgage or refinance your existing one.  If that is you, positioning continues to be the name of the game as the slightest hesitation can be costly.  Perhaps that explains why mortgage applications are also rising because with normal closing times projected from 45 to 60 days, you don’t wait for rates to rise through the roof before you finally decide to start the application process.

 

While the drop in the market has some concerned, the bigger issue is whether the Feds will increase the discount rate to tamp down on inflationary concerns?

 

Here is a recap of this week rate survey

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.32% 3.77% 3.57%
Fees & Points 0.6 0.5 0.4
Margin N/A N/A 2.75

 

 

Freddie Mac produces the weekly rate survey.  Data is comprised from a pool of its lenders and the information is used to gauge movement and provide a target of interest rate movement.

Yellen gives up gavel, mortgage rates continue to climb

~ Fred Thomas, III ~ Leave a comment

Yesterday Dr. Janet Yellen chaired her last fed meeting of the Federal Open Market Committee.  The committee is part of the Federal Reserve leadership and they chose to keep rates unchanged.  Dr. Yellen passed the gavel to Trump nominee and incoming chair, Mr. Jerome Powell.  Yellen is an Obama appointee and since 2014 has served as chair.  The move was expected and even though the discount rate did not change there is speculation for increases as we move into the year.  The economy continues to move in a positive direction and it is the Fed’s mandate to manage monetary policy.

Mortgage

On the mortgage side of consumer finances, the benchmark 30-year fixed rate mortgage continued to rise.  In week over week reporting from the Freddie Mac primary market rate survey rates moved up seven basis points to 4.22%.  The increase in rates was expected based on economic conditions.  While consumer confidence also continues to improve the jump in rates affects affordability, especially for those on the margins where qualifying for a mortgage could be trickier.

 

Seven basis points represents almost 1/8th of a percent and while the movement is up there is no need for alarm as movement is based on a normal cyclical flow.  As a comparison in year over year reporting, this year’s rate of 4.22% is just three basis points from last year which was 4.19%

Snapshot of popular programs

February 1, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.22% 3.68% 3.53%
Fees & Points 0.5 0.5 0.4
Margin N/A N/A 2.75

Both mortgage rates and applications jump

~ Fred Thomas, III ~ Leave a comment

This morning the benchmark 30-year mortgage jumped eleven basis points and came in at 4.15%.  Likewise, mortgage applications also increased almost five percent from week over week reporting.  As the economy continues to pick up steam consumers can expect to see rates increase accordingly as they are cyclical in nature and move based on a variety of economic factors.

Also, it is noted consumer confidence has improved.  Combined with the heralded tax cut and the recent announcement of companies providing bonuses to employees, the result is more household cash to work with.  Some analyst caution the giddiness being reported about the bonuses and cuts.  Just this morning Home Depot joined the list of companies who will provide bonuses to eligible staff to the tune of up to $1,000.  For most, the additional cash might seem like a great windfall but in the larger picture higher interest rates or higher cost of goods will reduce perceived savings.

Short term gain, long-term loss

Could the tax cuts touted by Donald Trump be another one of his “slight of hand” hustles?   Throwing a bone to average people, while he and his elite group escape with the real riches?

Let, take a look.  As an example, assuming a mortgage of $200,000, prior to the tax cuts rates where around 3.90%.  Compared with today’s mortgage survey release of 4.15%, the difference is 25 basis points here is the bottom-line.

 

3.90% principal and interest  = $943

4.15% principal and interest = $972

The difference is a motley $29 per month which seems nominal.  However annually it is $348 and factoring seven years (which is the average time consumers keep their mortgage) the result is $2,436.  So, while the bonuses are great in today’s dollars, it is more than wiped out based on higher cost.

 

Short term gain, long-term loss

There is a long-standing political debate on what effect the tax cut has for the “average” family that typically lives paycheck?  No doubt in the capital society which we live in it is great to receive extra money such as bonuses or tax cuts, however the issue for many is sustainability or how long it will last?

 

The jump is interest rates is one sign attributed to the increase in mortgage applications.  On one hand consumers may have extra money but on the other hand those who are in the market for a refinance or new mortgage realize any delay in making an application or locking in a rate may subject themselves to higher movement or additional cost to their budget.

The mortgage rates which are reflected are from the Freddie Mac weekly rate survey.  The mortgage application data is from the Mortgage Bankers Association from the “Mortgage Application Weekly Survey.”

Rate recap

January 25, 2018

30-Yr FRM 15-Yr FRM 5/1-Yr ARM
Average Rates 4.15% 3.62% 3.52%
Fees & Points 0.5 0.5 0.4
Margin N/A N/A 2.75

Trump administration comes up short on first jobs report of 2018

~ Fred Thomas, III ~ Leave a comment

The Trump administration woke up this morning knowing many eyes and ears would be focused on Michael Wolff’s scathing new book “Fire and Fury.”  In the past several days regardless of how they have attempted to dismiss it as full of crap, fake news or otherwise unreliable, their strategy has backfired as even with the bitter cold in the east coast, the public is snatching up the book in record numbers.

Customer at book store in D.C. Photo credit ANDREW CABALLERO-REYNOLDS/AFP/Getty Images)

 

Many supporters of Donald Trump and his administration cry foul that the media refuses to focus on all of the great things they are accomplishing.  The problem with that narrative is perhaps more focus would be given on accomplishments and positive news if Trump and his administration didn’t have so many self-inflicted issues which become newsworthy, thus journalist and reporters have an ethical obligation to report that, as well of other issues of the presidency!

 

The book Fire and Fury is just one example that is blocking great news such as the soaring stock market.  The other may be the January jobs report which was released this morning by the Department of Labor, Bureau of Labor Statistics (BLS).   Unfortunately, the 148,000 jobs reported in December fell 42,000 short of projections.  While the news is not alarming or worthy of concern, it does present an awkward sign for a person such as Trump who likes to boast of his success

 

The reduction in numbers have been attributed to the decline of jobs in the retail sector.

 

“A little bit of a disappointment when you only get 2,000 jobs out of the government and get retail at the absolute busiest time of the year losing 20,000 jobs. It just goes to show the true struggle that traditional brick and mortar is having now,” said JJ Kinahan, chief market strategist at TD Ameritrade.

 

Just today while discussing President Trump, nationally acclaimed journalist David Gregory reported on CNN, “He is his own worst enemy.”

One more critical point and indicative of Donald Trump’s communication style is this afternoon on his way to Camp David but taking time to have an impromptu chat with the media belted out, “the jobs report released this morning is good.”  A perflexing comment when you compare January 2016 data while President Obama was in office as the numbers were 151,000 but better than the 148,000!

“Never apologize, never back down, never admit you were wrong, use every means possible toward achieving your ends,” Donald Trump as private citizen

Read the full BLS report HERE

What in the hell is Net Neutrality: Donald Trump’s continued revenge?

~ Fred Thomas, III ~ Leave a comment

Some who were in attendance at the 2011 Correspondent’s Ball have suggested it was that event which convinced Donald Trump revenge was the only remedy to the humiliation Present Obama dumped on him.  On that chilly night in April Obama’s team of writers had him buzzing better than the late Richard Pryor or even the late Redd Foxx as he had the entire room in laughter while chastising Trump over his ill-advised birther crusade.

 

As Trump was forced to sit in his chair all the while seething, you could see his mind was plotting the next move.  During the 2016 presidential campaign he swore to his supporters that if elected he would take on an aggressive strategy of attempting to rescind any order approved by Barack Obama.  Interestingly, even as his supporters wildly cheered his proclamations, they were not aware or didn’t pay attention that some of those orders actually benefitted them!

 

Nevertheless, Trump was determined and hell-bent on getting even.  Fast forward to the holiday season of 2017 and we see first hand how Trump is obsessed with getting even with Obama, as he can’t find enough orders to rescind while suggesting they ALL were terrible.

 

The latest charade is the Net Neutrality issue.  It doesn’t matter that in 2015 the Federal Communications Committee approved a guideline committing to equal access to the internet.  With a majority in hand the Committee led by Ajit Pai felt obliged to help Trump in his quest to remove yet another Obama order.  In the guise of increasing competition or the notion that any regulation is bad for consumers, on Thursday, December 14th the Committee  voted along party lines to remove net neutrality guidelines.

Commission’s Statement

 

The beneficiaries are the large communications companies such as A.T.& T, Verizon, Sprint and others known as internet service providers (ISP’s).  The result of the vote means they now can manipulate internet speed which will affect traffic and in many cases, send a signal to consumers to be prepared for a price hike.

 

As simple as Net Neutrality is, it just sounds complicated.  No doubt there is always room for improvement and yes, those consumers who use more than others should be expected to pay more.  Surely, you can’t blame the ISP’s for having the desire to charge you for services which you use.  The rub is consumers already have the option of improving internet speed by the tiered pricing structures  ISP’s have.

At the same time the entire focus of net neutrality was to make the internet accessible for all, not to use it as a commodity to penalize those who simply lack the resources to obtain.  Internet pricing has moved just like cable television.  What seemed like a bargain at $29 per month has morphed to over $100, $200 and more.  Companies offer a variety of rebuttals to justify the price increases, so as long as your budget allows you to pay, you simply keep moving.   The ire for those protesting the commission’s vote is the core question; what happens to those who are priced out?

 

While the commission did indeed vote to rescind Obama’s 2015 guideline, it appears the last word on this issue has not been spoken.  Just after the vote, public outcry reached a fever pitch as people from across the nation, even those who claim support for Trump have started their plea for Congress to overturn the commission’s ruling.

Protestors claim the fight has just begun

For those such as Trump, the issue does not appear to be what is in the best interest of the public as evidenced by public opinion.  The issue for them is to use elements of our government as tools for revenge.

Fed raises rate a quarter of a percent

~ Fred Thomas, III ~ Leave a comment

[Washington, D.C.]  In its last meeting for 2017 the Federal Reserve’s Federal Open Market Committee (FOMC`) agreed to raise the discount rate from 1.250% to 1.500%.  The move was expected and based on the health of the economy and the unemployment rate falling, if not holding steady, the Fed’s felt the move will benefit the economy in the long run.  It was also mentioned the move is designed to thwart inflation and keep it no higher than two percent.

 

“The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”  FOMC

 

Two dissenting votes

 

On the nine FOMC voting members, surprisingly there were two who voted against the increase due to concerns of maintaining the existing target.

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Voting for: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Patrick Harker; Robert S. Kaplan; Jerome H. Powell; and Randal K. Quarles.

Voting against the action were Charles L. Evans and Neel Kashkari.