[David] Thank you Matt. Appreciate it very much. Good analysis. Lot of information there. Folks. I don’t know how anyone lives without MBS live up on their screens all the time. There’s so much going on, especially in bold little times such as we’re in right now. Lowest rates backup up to high rates. It’s an interesting, but his website and his screens that I have behind me are so informative of what’s happening up to the nanosecond. So I encourage you to sign up. You can sign up we’ll using the LOL for looking on letting to get an extended trial period with having to put in a credit card number. Be sure to sign up for it. Alright, let’s get some thoughts and reflections on this starting off as we do each podcast. Bill, lead off, what are your thoughts? Is this I like what Les had to say. Let’s start there. Lower rates.
[Bill] So I knew you would latch right onto those two words. Words. Of course. I was reflecting on something last week and then Les and I were chatting, and it’s funny, he brought up the exact same same event. So I remember now, I was probably three or four years into secondary at the time, and fortunately without a ton of responsibility, so I’m with my boss on a January afternoon in 1991, and James Baker walked up to the lectern, at the White House and said one word, regrettably, and bond futures dropped three points in a nanosecond. And the reason they didn’t drop more is that’s where the circuit breaker was. Yeah. And that was the announcement of the first Gulf War was about to happen. And, so that’s stuck with me and what happens in the Middle East, no matter what we do to rationalize it it matters. And to Matt’s point, there, there was some bullish economic data last week, but what’s going on in the Middle East is going to override everything that, that sentiment for a while. Yeah. Now I think it’s healthy that the market reaction has not been the bond side anyway, super dramatic. Okay. Yeah. So we’re up into the, four teams, right? That’s not an outrageous move, given all of the potential ramifications of what’s going on. I would agree with last that. As things unfold, if they unfold in a positive direction, that is ultimately good for interest rates? Yes. Number one, there are a lot of ifs in that thought process, and that’s not a thought process that’s measured in weeks or even months. This longer term, this is going to take a while to play out. And even if they announce something is happening near term, it just doesn’t end that quickly. There’s a lot of conversations now right? As oil refineries are being temporarily shut down, right? That’s, you don’t walk back in and flip a switch and it starts working, right? Yeah. There’s a ramp up time period. Yep. So I think in that, the short to medium term, right? So we’re in the same range we’ve been in. Yeah. Guess what folks? That’s where rates are gonna stay.
[David] Yep. I think it, we get locked in. Yes. I do hearing that we’re gonna see the sub sixes in the fives as we did for, like Matt said, for a brief time last week, but. I was in in Paradise out there, in Belize to join the sun. So I wasn’t paying a whole lot attention to the markets, but , that did catch my attention. But I’m really interested in the broader picture about oil and where this is heading. And the other side of it, one of our listeners who’s very experienced capital markets person, he studies all this, reads all this very sharp on all of these things he said, look at what happened to the days where, we would have a war, foreign war, a, disturbance like what we got going over there and there was the flight to quality and every rates went lower and they stayed lower. It’s just like everything that used to be seems to be disconnected. And I see you nodding your head Bill. How would you respond to that person? I agreed with him. It we seem to have a disconnect, but from the old reactions,
[Bill] Again I think we talked about it before it’s safety. And folks, even short term, aren’t gonna put their money in, so by buying us treasuries, you’re locking yourself into the dock. And I think that’s what’s different now than what has occurred in the past is the confidence in, okay, treasuries may rally, which is good for your bond investment, but if the dollar sells off, then that takes away the gain from the treasury side.
[David] Yeah. Brics the, there was an analysis that I read over while on vacation there was a, the bricks is taking a hit. They’re not gonna be as strong. A lot of this is undermining the Brics nations.
[Bill] Yeah. If you think about, so go back to my, full, faith and credit and confidence in whatever the currency is that’s backing the asset. You could make a compelling argument that folks in the world don’t have a ton of confidence in the US government and the support of the dollar, but I don’t think anybody would make the argument that any of the Brix companies, countries are any better than the us John. Yeah, exactly. It feels like it’s a race to the bottom. Yeah. And I also think , there’s some fascinating big picture geopolitical things going on right now. You’ve got so clearly right there’s stories out there and I think it’s pretty plausible that Russia is helping Iran with some of the targeting, that they just don’t have the technology to do it. But oh, by the way. You’ve now got all the other Gulf countries who, some of ’em don’t really get along with each other. A lot of what was going on in the past 10 years in Yemen was two other Gulf countries supporting the opposite sides. Now they’re all getting bought by a ran. So everybody’s becoming friends and trying to defend thing each other.
[David] The one thing, one thing, they haven’t, yeah, the one thing they have in common is a hatred for, and joining the fight on, I rant, but it’ll be shortlived. They’ll be back to inter fighting at some point.
[Bill] And so I heard another thing over the weekend and it was a real eye opener and I’d be curious to get Mark’s thoughts on this too, is that attacking Iran was a preemptive strike on the second front. If China starts a war, that if China and the US went at it over Taiwan, that Iran would immediately jump in. And either then the Persian Gulf countries are completely exposed without the US safety net, or the US is forced to fight a two front war. And this was the goal of this, is to take that second front out of the mix. Yes. Now, I don’t know, at the end of the day there’s stuff going on that is way more complicated and that we’re ever gonna understand. Yeah. We can all have our opinions, but, let’s face it, we’re That’s a good comment. Yeah. Yeah. We’re so far down in the knowledge spectrum of what’s going on, what’s really happening. Yes. They’re just opinions.
[David] Yeah, that’s exactly right. Marc, he already, and Bill, already invite your comments and get your thoughts. What’s your comments question, what’s your answer? Bill’s response or his question, and more importantly, your thoughts on rates.
[Marc] I would lend my ear to believing what bill was talking about as being a real possibility about the second front. I thought that was interesting, bill. Really interesting. I hadn’t thought of that recently. I thought about various other things around that, but that brought it home when you mentioned that and all. But I think anytime we have we can go back and there’s plenty of history in the United States. Anytime we have a disruption of any type in energy cycle in the world, it’s gonna affect rates. And it, whether it was back when Egypt and Israel were at it all the time, or whether it was Iraq, of course, as our most recent big thing we had going on, and look what’s happening right now with the South America because of oil, so it’s all gonna affect rates and gotta learn to live with it, but one of the interesting things I think about the have you guys paid attention to who the members are in the brick network? Yes. Yes, I have. Have you paid attention to the fact that Egypt and Ethiopia and Iran and Saudi Arabia and are all members? Yes, very much. Because a lot of people don’t realize that. And, it’s really amazing to me that Saudi Arabia is a member and it’s really amazed to me, UAE as a member, I could understand Iran and Ethiopia and Egypt, but those are the two that don’t make a lot of sense in that kind of group put together. And it really is always surprised me that India was a member of it. But then again, you got the largest country in the world, and they fall right in with those folks. But that’s a different country of its own, so it is.
[Bill] Mark wanna make a little side wager on whether Saudi Arabia and the UAE withdraw from the Brics after yes. Things settle down accountability. And somebody reminds ’em how much of our military force was defending them.
[Marc] I would think it probably would. Yeah. Yeah. I think I think I know UAE has had an attack from, they had a small attack from Iran. I don’t think Saudi Arabia has, I don’t remember reading that, but I know, didn’t they? Yeah, they have. They actually have they did significant attack. Okay. But I knew it. I knew UAE had one, but I can’t remember other things. So much is happening out. It’s hard to stay on top of all of it, but I’m right with you on that bill.
[David] Here’s where I want to go with this whole rate discussion. It doesn’t matter. We’re in the what Bill said. You said, we’re in the trading range. We’re still in the trading range. We’ve been in, we hit a low. That gets everyone’s hopes up, but we’re back up in the middle of the trading range we’ve been in. We’re not at the top, we’re in the middle. We’re gonna continue to have this for a period of time. I think I’m personally, this is just my personal opinion, I think I am bullish that we’re gonna see lower rates, but if I was out buying a house or if I was working with someone, I certainly would bring my opinion up because I think that moves people to putting off a purchase if they need a home, they should be buying it. Some ’em get the best rate possible, get out and focus in on the transaction that’s hand. We’re seeing the highest levels of pipelines that we’ve seen in the industry. Generally, if anyone’s out there and alive and doing anything, has any kind of marketing aspect of their business, they’re doing well. We’re seeing good reports from almost everybody across the board. Things are looking better in the industry. Alice.
[Alice] Yeah. I have a quick question though for the group. So do you think the markets are also leaning a little bit on that they think this is going to be short term what’s going on with Iran right now? Do you see that as this potentially could drag on, then the markets could have a delayed reaction to this? So your unexpected events that you keep, we’ve all talked about that could impact the market later.
[David] Yeah. Bill, I’ll let you respond to that, mark. Yeah. Then I’ll, I got opinion on it.
[Bill] So back so in the seventies right? Oil drove inflation. I remember, where Yeah. For a long time and it was really painful and I don’t think we’re gonna ever see that again, but I think that there’s also. Downplaying, the smaller impact that oil has on our economy now. ‘Cause I folks look at it when you talk about, specifically let’s say gasoline use but that discounts all the other things now that oil is used for. So yeah, if oil prices stay high for three months, four months, six months it’s gonna be hard to believe that doesn’t lead to inflation. Therefore it’s gonna put upward pressure on rates, but it’s also likely to slow down growth. Maybe then that kicks in and that, that’s the bad news scenario, right? Where rates drop because the economy is slowing down dramatically. That’s not really good for anybody but time is definitely. A factor that folks are trying to digest. Yeah. And yes Alice, I think there’s gonna be a point where people start to react because, in a given week things may not have gotten any worse, but now the time reality clicks in
[David] Yeah. If this thing comes into something protracted, guess what? We got ourselves another thing altogether. But I think that’s why they’re stepping up the bombing. I think we’re seeing a lot of this thing is ’cause they don’t want it to go into a long period of time. Is it potential? Yes. And I think we’re already seeing I think Iran’s strategy right now is let’s try to wait this out and let public opinion turn against them and they back off and we’re able to rebuild from the little bit of fragments we have left of our military. We’ll come back again. That’s what they’re hoping for the regime. I think the goal of this administration is absolutely wipe out that regime as quickly as possible and convincingly get this thing set on a new course. Certainly that’s my hopes and prayers. At this time I should say my prayers are probably more for protection of our troops than anything else, than a positive outcome. But I think that’s we remains to be seen. We don’t know. We’re talking about out for of a sudden the Kurds are kind talking amassing in the south. For the first time we talk about we’re gonna have to go in there with our own troops. I don’t like that in any way, shape or form. I’d rather have a there’s a lot to unfold, but here, come back to this focus. If you have a deal, focus on the rates as they are. Just get back to doing the business. This is all very interesting, but if someone, if you’re talking to a borrower who’s thinking, I think interesting is gonna go and they start playing the market. You know what if that takes off and we start seeing lower interest rates, so will sales and they could lose out on the opportunity they have to buy a home right now because interest rates and sales are clearly tied together. Yeah. You saw and so tell the, remind the buyer. Yep. You may get a lower rate, but someone else may jump on your house because they see it and they’re gonna act. I’m thinking about the house I bought on the lake here. The guy that came back and bought the house for me was the one that missed out of buying the house. He overpaid. I hit the buyer. The seller’s bid. I hit it and he decided to think about the house. I bought it and then he had to come back and buy it from me. ’cause his wife really loved the house on the lake. He owned an oil company. He could afford to do it. And he paid me premium dollars to make his wife happy. ‘Cause they really wanted our house. So I made a boatload of money by just me deciphering acting now. And they lost money because they tried to wait. I think there’s a moral to this story, and that is if you got a buyer, get ’em to move. If they’re looky-loos, then. How much time should be spending with them. Anyway, I think you nurture those. That’s a whole nother discussion. But anyway, I’m excited to get moving on to Alice’s segment. I think that wraps that one up.