Mid-week already? My morning train reads: • What issue in the world of finance isn’t getting enough attention? (Peter Lazaroff) • Ignorance of The Future (Irrelevant Investor) see also My Investing Pet Peeves (A Wealth of Common Sense) • We went to China’s Silicon Valley to see the front lines of the robot wars (The Verge) • Trump’s America: Switching political…
Mortgage applications increased 0.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 13, 2017. The previous week’s results included an adjustment for the New Year’s holiday.Click on graph for larger image.
... The Refinance Index increased 7 percent from the previous week. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index increased 25 percent compared with the previous week and was 1 percent lower than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,000 or less) decreased to its lowest level since December 2016, 4.27 percent, from 4.32 percent, with points decreasing to 0.39 from 0.41 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
The first graph shows the refinance index since 1990.
It would take a substantial decrease in mortgage rates to see a significant increase in refinance activity - although we might see more cash-out refis.
The second graph shows the MBA mortgage purchase index.
Even with the increase in mortgage rates, purchase activity is still holding up. However refinance activity has declined significantly.
How Experts Enable Corruption: The Role of Conflicted Lawyers at CalPERS and Other Public Pension Funds
John Fernald, senior research advisor at the Federal Reserve Bank of San Francisco, stated his views on the current economy and the outlook as of January 12, 2017.
Recent data confirm that the economy has picked up from its modest pace of the first half of 2016. Indeed, in the third quarter of 2016 GDP growth was revised up from an annualized rate of 3.2% to 3.5%. This rapid pace in part reflected transitory factors such as inventory accumulation and agricultural exports. Going forward, GDP growth is likely to remain for some time a bit above its long-run trend of 1½% to 1¾%. The fundamentals of consumer spending remain healthy, including solid income growth and strong household balance sheets. And business capital spending is poised to rebound from its weak pace of the past several years.
Employment gains remain solid. Nonfarm payroll employment rose by 156,000 jobs in December. Unusually cold weather in many parts of the country appear to have held down those job gains somewhat. However, even without controlling for weather, the pace of gains remains well above the “breakeven” level needed to absorb new entrants to the labor force, which we estimate at roughly 80,000 new jobs on average per month.
The labor market remains near its sustainable, full employment level. The unemployment rate in December ticked up to 4.7%, a touch below our estimate of the natural rate of unemployment of 5%. The December unemployment rate was the lowest end-of-year rate since 2006.
Inflation remains below the Federal Reserve’s 2% objective, but has been gradually increasing towards the target rate since early 2016. Overall consumer prices, as measured by the price index for personal consumer expenditures, were 1.4% higher in November than a year earlier. Core consumer prices, which strip out volatile movements in energy and food prices, were 1.6% higher. With a tight labor market and the waning effects of past energy price declines, we expect overall and core consumer price inflation to run just a shade below 2% this year.
Interest rates have risen sharply since the election in early November. In addition, the Federal Open Market Committee as widely expected raised its target for the federal funds rate at its December meeting. At the post-meeting press conference, Federal Reserve Chair Yellen noted that the decision to raise the fed funds target was “a reflection of the confidence we have in the progress the economy has made and our judgment that progress will continue.”
There is considerable uncertainty about the scope of policy changes that might be implemented under the incoming administration and about their effects on the Federal Reserve’s dual-mandate objectives of maximum employment and price stability. Of particular focus are possible changes in Federal tax and spending policy.
Federal revenues fell short of federal outlays in 2015, leaving a deficit of about 2½% of GDP. There are conflicting political pressures that could influence the path of future government spending. On the one hand, there is some desire to restrain spending in order to keep the budget deficit down. On the other hand, there is some desire to increase military and infrastructure spending, while an aging population will put upward pressure on Social Security and Medicare spending.
Federal spending as a share of GDP typically goes up in recessions and stabilizes or falls in expansions. That was particularly true in the past decade. The Great Recession of 2007-09 lowered GDP deeply, and, to help cushion the downturn, the government increased spending under the 2009 American Recovery and Reinvestment Act. Since 2010, the spending share has fallen as the economy has grown and the temporary stimulus package ended. In addition, budget caps implemented in 2011 have constrained spending. Given the competing political pressures, our forecast assumes that the path of overall federal spending remains unchanged although there may be shifts in composition.
Federal revenue as a share of GDP typically goes down in recessions and rises in expansions. For example, with a progressive tax system, the average tax rate falls when income falls. As with spending, this pattern was especially pronounced in the Great Recession. Revenues as a share of GDP are currently close to their average levels over the past few decades. Our forecast assumes that there will be reductions in individual and corporate taxes amounting to about 1 percent of GDP.
All else equal, tax cuts boost household and business income. Although the details of the tax cut matter, a plausible estimate is that desired spending may rise by perhaps 0.6 percent of GDP. (Households and businesses will try to save the rest.) However, because the economy already is near full employment, this increase in desired spending likely will be dampened somewhat by higher interest rates and a stronger dollar. On balance, we expect that tax cuts will raise the level of GDP by a total of about 0.4%. Since it is likely to take time for the legislation to be passed and for the increase in spending to occur, we expect that tax changes will boost our growth forecast by 0.1% to 0.2% for the next few years.
The views expressed are those of the author, with input from the forecasting staff of the Federal Reserve Bank of San Francisco. They are not intended to represent the views of others within the Bank or within the Federal Reserve System.
Instead of simply recounting what you did right and wrong and what you'd like to do going forward, grade yourself on your consistency.
Your consistency grade requires a list of your best practices. These are the things you do when you're at your best. They can be lifestyle choices, such as how you eat or exercise; they can be best trading practices; they can be best practices in terms of your romantic and family relationships. In other words, the list consists of the things that define you at your best.
Your consistency grade represents a frequency count of the number of days in the past week in which you have enacted that best practice.
When our two youngest children were very young, we created "sticker charts" for them. Each day they cleaned their room, played well together, and ate well, they received a sticker. If they received stickers every day of the week, they could cash those in for a toy or fun thing to shop for over the weekend. The key to the exercise was the requirement that stickers had to be earned every day. That rewarded not just good behavior, but consistency in good behavior. It's that consistency that builds positive habit patterns.
Imagine an adult equivalent of the sticker chart: If you can check the boxes on your best practices list every day, you arrange a reward experience on the weekend. Perhaps it's a reward experience with someone you love, giving an extra incentive to achieve consistency. Most traders are achievement oriented. If they set up this kind of system and make it public (we hung the sticker charts on the refrigerator), they will want to check the boxes. They will not want to fall short of a goal they commit to.
The hard part in making changes is getting to that place in which desired behaviors become routine behaviors. It's easy to fall back into old patterns before the new ones take root. Structuring your work on yourself--and on your trading--as work on consistency helps you make that transition, building those new, positive habits one day at a time.
Further Reading: Turning Success Into a Habit
Trump, Policy, Markets David R. Kotok Cumberland, January 17, 2017 As Don Rissmiller of Strategas Research Partners succinctly points out: “There are four types of government policy that can be used to steer the economy: 1) monetary policy, 2) fiscal policy, 3) regulatory policy, and 4) trade policy.” We will use Don’s…