If you blinked, you missed it and that was last week’s 11.1% rise in the purchase component in the weekly MBA data, a 3 month high, as today the MBA said it fell back down by 11.3% and is just 1% above the level right before the Fed announced their MBS purchase plan. This is even as mortgage rates remain near record lows at 4.7% for a 30 yr. Refi’s for the week fell by 10.9%.

Yes, one can argue that the housing sector would be much worse if rates weren’t this low but is flooding the Fed’s balance sheet of tough to sell longer term MBS worth the cost especially after seeing how effective lower prices are in spurring foreclosure purchases.

The 25%+ rally in equities off the low has successfully turned sentiment as the weekly II data reveals that Bulls rose to 43.2 from 36, a hair above its highest level since June while Bulls fell to 34.1 from 37.1 to the lowest since the 1st week in Jan. Y/o/Y CPI is expected to fall for the 1st time since ’55.

Category: Credit, Economy

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

29 Responses to “If You Blinked . . .”

  1. rob says:

    +11 to -11, Fucking awesome! Looks like this Rally has prosthetics!

  2. Steve Barry says:

    Today could be a market inflection point…beside the sentiment data Peter cited, II Bulls is just about as high as it’s been since the “crisis” began in mid-2007. While the 21 day MA on put/call is still near decade lows, the single day put/call has finally spiked…1.35 right now. Tax day could mark the resumption of the bear.

  3. “Yes, one can argue that the housing sector would be much worse if rates weren’t this low but is flooding the Fed’s balance sheet of tough to sell longer term MBS worth the cost especially after seeing how effective lower prices are in spurring foreclosure purchases.”

    It is just business as usual, really, socializing private losses. The money used to buy the MBS is being created out of thin air, and without any vote of our representatives in government.

    I think this program (of buying $1.25 trillion MBS by the Fed without any legislative input) is exactly the sort of thing (if in a different form today) that Thomas Jefferson feared would happen when Alexander Hamilton pushed through the creation of the first Bank of the United States, and is also why Andrew Jackson, an intellectual heir of Jefferson, abolished the second one.

    There is great danger in concentrating such power in a central bank. The monopoly power to create money is also the power to tax, and commensurately, to determine market outcomes. This is not how this republic was intended to operate.

  4. Todd says:

    Yesterday I came to the decision that the bad outweighs the good. INTC just highlights it. They barely beat extremely lowered expectations. Still a huge fall off from earning last year.

    All of the bank maneuvering, people are forgetting how bad it really is. The banks are like a patient in ICU. They have removed the aspirator and the patient can breathe on his own. He is still in ICU and not going anywhere anytime soon. Much less going home.

  5. Mannwich says:

    I think coordinated happy talk season is coming to a close. Might take a few more weeks, but reality is setting in again, circa Janaury/February ’09. It’s getting worse, not better, folks.

  6. Steve Barry says:

    I may have spoken too soon about put/call being 1.35…looks like some bad data threw it off…now back to 1.06…the usual complacency.

  7. call me ahab says:

    you can make rates as low as you want but you can’t make someone get a loan- that is the conundrum being faced by the Fed. Regardless of rates- why buy when the house you buy now may be lower in value later. Having said that some markets- such as the metro DC area- have flattened and I don’t see much more depreciation on the horizon- but-

    when you are currently saddled with a home that is underwater and the market is flooded with rentals- how do you take advantage of the low rates unless you can qualify for a new home carrying your existing mortgage? answer- you don’t.

  8. DL says:

    The Curmudgeon @ 9:59

    “I think this program (of buying $1.25 trillion MBS by the Fed without any legislative input) is exactly the sort of thing…that Thomas Jefferson feared would happen when Alexander Hamilton pushed through the creation of the first Bank of the United States…”

    And now Bernanke has created a precedent… the politicians and the bankers are going to “expect” the Fed to do such things in the future. “Moral hazard” on a very grand scale.

  9. Mannwich says:

    By the way, looks like inflation has been put on hold for a bit. Could change at any moment, of course.

  10. harold hecuba says:

    calculated risk points out that once again owners equivalent rent showed an increase. OER is also 25% of the cpi compnent. what galaxy did they get this data from. deflation is here and bernanke has failed

  11. Transor Z says:

    @ ahab:

    The ongoing need for further consumer deleveraging continues to be the topic no one wants to talk about. Borrow and spend our way out of the recession/depression my ass.

    From the perspective of the average consumer, listening to the bullshit spin that things are looking up while state governments lay off people by the thousands and cut programs, driving past strip malls with For Rent signs, with unempl0yment definitely headed north of 10% very soon… MSM should make the effort to explain “leading indicator” if they expect the public to grasp that unemployment is a lagging indicator. Ain’t gonna happen.

    It’s a clear case of “Fool me once, shame on you. Fool me… you can’t get fooled again.”

  12. Mannwich says:

    The thing that troubles me is the cognitive dissonance thing all over again. The administration and their elite cronies all think everything is just great, while Rome burns. It’s eerily remiscent of the Bush administration’s Orwellian approach to everything – just “create our own reality” and everything is just peachy. Don’t pay any attention to the man behind the curtain. Our policies are working (except they aren’t). Bizarre and surreal.

  13. call me ahab says:


    I have to disagree- I think the administration knows the trouble that lies ahead- the Fed and the USG have gone complete Keynesian- they believe that is the only way out- the part that I question the most- because I understand the idea behind QE and government stimulus- is –

    why they are propping up the bankrupt banks? That is the question for me- and my impression is that there is more into it than they are willing to let on- like maybe we are propping up the financial system of the whole western world- and a bankruptcy and fall out would cause a cascading financial disaster- worldwide.

  14. Mannwich says:

    @ahab: I agree that I THEY know the trouble that lies ahead but they continually play the confidence game with the public just like the Bush admin did on so many fronts (most prominently, Iraq). Now I don’t expect O to talk down the economy but I also don’t expect to be spoken to like we’re children who can’t handle certain hard truths that lie ahead. Why not just lay it out there for everyone and lead us to help fix the problems that face this country instead of playing games. I think this kind of happy talk merely makes people more agitated. I was hard on Bush for doing this, so I need to be the same on Obama. Even though I voted for and support O, I am not a true believer in any politician or institution. I’m a citizen first and theoretically, O and our government officials work for US (how novel).

  15. DL says:

    Mannwich @ 11:10

    Maybe they’re just trying to push down the price of FAZ.

  16. call me ahab says:


    agreed- lay it out so we are all on the same page

  17. Mannwich says:

    @DL: LOL. Good point. They can’ t push it down forever though (or can they?). How about fixing the problems and listening to the right people on policy prescriptions. I’m just tired of being led to a road to ruin by the so called “best & brightest” in this country.

  18. wally says:

    The change in sentiment is important. You can’t clip them until you get them in the barber’s chair. This is an important part of the market mechanism.

  19. HCF says:

    > How about fixing the problems and listening to the right people on policy prescriptions.

    No way the best and brightest fix these problems… Unfortunately, in recent times, the solution seems to be to kick the can down the road. It’s inter-generational fiscal child abuse! The gift that keeps on giving (along with the attached interest payments!)…


  20. ben22 says:

    What does II Bulls reveal other than the fact that most people are reactionary? Market goes up, more bulls, market goes down, more bears.

    Is there any data that supports that this survey indicates forward market direction one way or another based on when there are more bears to bulls or bulls to bears?

    I also continue to believe that put/call ratio’s are not a good data point right now due to the fact that there is a far higher than normal amount of cash allocations in major investment funds (pensions/mf’s/hedge’s) and I still think the majority of puts are bought to protect long positions.

    Before I go any further, as to not get attacked by the overwhelming number of bears here, I have flipped bearish on the markets recently buying puts against my net long accounts, adding some fixed income and raising some cash. I’m certainly not bullish on housing either.

    That said.

    My own observation about the refi applications dropping so much in a week is that it doesn’t mean anything, why are we looking at week to week changes on anything anyway?

    First, people are distracted with something else right now it’s tax season. Things get put off that can wait until another day when tax season rolls around. Rates aren’t going to jump higher in the next few weeks, so thats on the back-burner. Second, the larger banks cannot keep up with the calls for refi applications. I’ve had over 3 dozen clients looking to refi and they are being told from BAC, Chase, WFC, etc. that they need a few weeks to get back to them due to the volume of applications coming in. I have many clients that work at BAC and they are telling me that they cannot keep pace with the applications that are coming in due to employment cut backs. These people have no reason to lie about this, they have no agenda, they are not Ken Lewis, so I believe them. IMO, this refi boom is not nearly over.

    Last, I agree with the comment above that the MBS activity, that’s just biz as usual for the Fed.

  21. leftback says:

    This week is what we at Schadenfreude refer to as a “Jackass Market”™.

    This means that you would be a jackass to make any sizeable directional bet due to the imminent Weaselry that is about to be performed (bank earnings and Stress Tests). So we are hedged with some QID and SRS against our longs, but we are covering our ass very carefully in front of the JPM earnings report, which is likely to be almost as extensively massaged as Eliot Spitzer.

    If we had to take a position this week it would probably be long Dimon, short Pandit and Immelt, but we would probably be better off playing golf or at the beach in “Anteegwa”.

  22. Mannwich says:

    …..which is precisely why I’m taking the rest of the market day out having lunch and enjoying the fine weather here. Good luck everyone.

  23. call me ahab says:


    sure- people will refinance if they qualify- why wouldn’t they?- lower rates will not help the foreclosure and real estate market for the most part however because the folks who would move up can’t because they already own a home that is worth less then what is owed-

    Fannie/Freddie rules require 30% equity stake in current home before rental income can be used in qualifying – thus the borrowers need to qualify carrying their current home and the new home- a tough proposition.

  24. call me ahab says:

    anteegwa- exactly- not anteega- that just don’t sound too right.

  25. Steve Barry says:


    For time and memorium, people have tried to look at indicators to predict the market. If the Nasdaq bubble and housing bubble showed anything, it is that the time to SELL is at maximum BULLISHNESS…when every last sucker is all-in. Not every market move is so clear cut, but if you are trying to time things (which I don’t BTW) you need to look at recent seniment indicators that have changed at significant turns. When you hear decades lows, and lows since the crisis began, you need to start thinking the bull run is over…I was early stating it, but these things can scrape along for awhile. Fundamentally, operating earnings are negative, which is unprecedented.

  26. FromLori says:

    And now bernanke wants out what is going to do take the helicopter to the stashed funds in foreign banks?


  27. DeDude says:


    “Why not just lay it out there for everyone”

    What if you are among the 20% who can handle the truth, but the remaining 80% of headless chickens will panic and crush everybody else as they run away screaming “the sky is faling, the sky is faling”.

    Sometime the panic is a heck of a lot worse than the problem. So then you have to deal at least as seriously with the panic as you do with the problem.

  28. ben22 says:


    Point taken. I understand and respect your argument. I really just need to go back and do some research on this I suppose.

    Maybe I could find the put/call ratio historical numbers somewhere and build a chart that overlaps with the S&P to see what kind of prediction capability it has had in the past. Clearly the tech bubble example you give would have been one where excessive bullishness signaled the big drop in the NAS.

    Now what you say about Op. earnings, I’m much more inclined to use data like that right now.

    @ ahab

    completely agree with your take on real estate. Just seemed to me that this line in the post:

    This is even as mortgage rates remain near record lows at 4.7% for a 30 yr. Refi’s for the week fell by 10.9%.

    was worthless information. BR tells us not to pay attention to MoM changes and Peter is using a weekly data point here. I was just pointing out that I thought this refi boom was going to last for a while longer still and therefore I think a lot of people might be surprised to see the bank numbers over the coming months from JPM, WFC and BAC. That plus some manipulated data can push them higher. With the changes to m2m rules I’m not so sure that the coming foreclosures and resets on Option ARM, etc. will have the immediate impacts on the banks that they would have before. Then again, I could be completely wrong which is why I wouldn’t touch a bank long or short right now, I’d rather just watch them from the sidelines.