[David] All right, Matt. Good job. Appreciate it very much. Be sure to sign up for MBS Live by going to mbslive.net. Put in LOL for the sign up code and you’ll get an extended trial period without putting in your credit card. Yes, I’m distracted reading some headlines coming out right now. Good job, Matt. Love it. All right, let’s get into a discussion. Bill. We always start out with you getting this economic stuff. You know what, we’re bouncing. We’re in a narrow trading range right now. Just looking behind myself here about my screen behind me, but we’re bumping right in a real tight 4.05, somewhere around there. This is pretty tight. We’re encouraging.
[Bill] Yeah. So I’m gonna start off with a little mini Marc rant. So one of the things in the unemployment data they were commenting on as a negative obviously, was the under 25-year-old unemployment rate was somewhere right around 10%. And one of the things that I saw is they’re basing it on AI. How about that’s the group that went depending on age high school and college during COVID, where going to school, quote unquote, didn’t matter. So do you think maybe if you wanna get a job, you need to figure out how to wake up, show up, dress up, and learn something? Again this is a group of young adults that we’re babied for four years of, oh my God, the world’s ending. You can do whatever you want and stay in your little cancun. There’s no pressure. Okay. Maybe if you want to take an exam, you can, but you don’t really have to. Fortunately I have two kids that are at the opposite end of that spectrum. And by the way, they’re doing just fine. Don’t blame it on something as esoteric as AI when you’ll look at yourself first.
[David] Great point, bill.
[Bill] But now in, in terms of the numbers and, everybody focuses on the on farm payroll and all the revisions with that and the challenges, what I’ve always looked at a lot is first, the average hourly work week, right? Number one, that’s much closer to a real time number. And if you think about it, it’s a pretty good leading indicator of where things are going because, if you’re gonna hire somebody that’s a two month process. So somebody that was hired last month, those conversations started months ago, how much somebody is working in a month of August. That’s a decision that’s made pretty much in real time and that average hourly work week has been okay, but trending lower. So I think it supports the nervousness effort. The other thing that is the average hourly earnings has been solid and decently increasing. But if you think about that, maybe employers now have realized that you’re better off keeping the good people and paying them more because, it’s, you don’t even have to be altruistic. It’s much cheaper to keep an employee than it is to train a new employee. So to me, those two numbers support the job market’s kind of dicey, but it’s not falling off a cliff. I think. all of this focus now on the non-farm payroll growth is just becoming noise and, the people that are actually doing the work and the traders that making a living off this, that’s not what they’re focused on. They’re looking at the other numbers. Dig a little bit deeper and you get the whole story. The other thing that I’m gonna be really curious, we have some more data obviously when we get to the next Fed meeting and Matt mentioned with the dot plots, are they, the fed’s gonna lower rates, but are they doing it to normalize rates? Which is probably the best scenario for everybody or are they doing cutting rates because they’re concerned about significant weakness and how they message it? How the dot plot show up. Will give us a big clue on what’s gonna happen at the following meetings. The other thing that I saw a couple of times over the weekend that I thought was interesting, that when you’re trying to look at the 10 year mortgage rates in the various easing cycles over time, so if the economy is headed into a recession, 10 year has dropped on average 150 basis points. If their easing cycle is not recession driven, the drop in the 10 year has only been six basis points. There’s two different ways to look at that, right? One is, if you’re a cheerleader for the 10 year dropping dramatically, you’re rooting for a recession. Just think about that. And I think that goes to my, are they cutting or normalizing? If they’re normalizing, yes. There’s some weakness they’re trying to get because they’ll agree right now they’re in a restrictive mode. So cutting rates, 50 basis points, whether it’s at one meeting, two meeting meet, that’s normalizing. And that’s gonna be good, but that’s not what’s gonna lead to a dramatic drop in the tenure year, especially given what we’ve already seen off of the back of the employment report. Again, I guess it’s a different way of our broken record message, which is deal with what you got today, not what you hope is gonna happen in 30 days from now.
[David] So true. Excellent. Kittle thoughts.
[Kittle] I’ll go to about what Matt Graham said too, right at the end if people heard that. The market’s building this in because we’re gonna have a rate cut the next meeting or two. So you need to be talking to your customer and let them know their rates are falling now, they’re not gonna fall again, and don’t wait as they’ve come down a little bit by whatever the number is, lock it in, go with it, and don’t look back. And if they do fall substantially, you can always refinance. So the market’s building this in and again the Fed rate is an indirect reflection of what happens in the mortgage market.
[David] Very good. Alice, let’s get your thoughts then going to Marc and Allen.
[Allen] I have a question for the group. And Bill, you’ve lived this all the time, so I have a question about if they do drop it a quarter in September, do they retain their credibility? Is the data there to do that or is this, this isn’t pressure driven, is what I want folks to understand that this is the data warrant would warrant, at least from what we see now, that a 25 basis point would be warranted.
[Bill] Yeah, so great question Alice. The way I would look at it is 25 is absolutely supported by the data we have now, and it’s probably leaning toward 50, but if the inflation data comes out stronger, that holds it at 25 and 25 is still the right move. So I think I would say that they’re straddling 25-50. I think the data has and will support either move and that to start crossing into the political landscape, you’d have to do something over 50.
[Alice] Okay. Yeah. We wanna keep all, our your European counterparts happy with whatever happens in September at this adjustment.
[Kittle] Quick thing here. I just say he is already 60 days late. That to me, the data already supports it and he’s 60 days late like he’s always been, if we’re talking about Powell here,
[David] unfortunately we’re talking, Powell is out, we’re gonna be out shortly.
[Kittle] I’m gonna be interested to see David, what happens at the meeting if Cook shows up and tries to vote.
[David] Yes. That’s a great point. Bill, you were making a point. Didn’t mean to interrupt you.
[Bill] When Alice mentioned, Europe. And I think to quote Muhammad Aria on, right now we got the cleaner shirt in the laundry. Japan’s a mess. EU is a mess. France is, they’re literally about to implode. And if you wanna, European perspective, sum it up in one sentence. Right now, the shining light of European economies is Italy,
[David] which is just so pathetic when you see, look at where Italy is at. You go, that’s, yeah. And that’s, wasn’t it Parker, that once said, were best looking glue, were the best looking horse in the glue factory.
[Bill] Yeah. But when Lason is, and he talks about this. A lot in the newsletter of one of the drivers to 380 is his target is going to be European weakness. And certainly that, there are some pretty significant cracks developing over there.
[David] Yeah. Then you look at what’s going on in London, the rioting that’s going on when they start, it is, there’s to be this thing. Europe is not feeling like a safe place right now. Marc, let’s get you in on this thing. Thoughts, you gotta rant in the middle of this lot, how all of a sudden you started this whole rant thing. Marc, Kittle down doing rants. Alice did a rant the other week.
[Marc] The big question I have for the group, we’re talking rates here and I think that Mr. Kittle’s exercise about they better take the rate and run with it, basically and if it goes lower, get a refi or whatever. I like that idea. But do you think we’ll see, a chance we’ll see a drop of a half at one time? or you think that maybe we’ll see a quarter and a quarter? What’s y’all best bet on that?
[David] Oh yeah, good question.
[Bill] I think market entirely depends on the CPI next week, if that’s on the weak side, I think that’s the air cover to, acknowledge that to Mr. Kittle’s point that they’re behind the curve that allows them to do 50, getting back closer to where they should be without it sounding political.
[Alice] And Matt said he expected the expectation was 3.1. Is that right? Just to remind.
[Marc] I personally think if they do 50 I think we’re gonna see the largest lot period of mortgage loans that ever happened in the industry in the last five years. Yeah. I think there’s such a pent up demand. I talked to so many people we’re just waiting on. The rates to get a little bit lower and I think we’re gonna have a barrage like we never haven’t seen in the last couple years in the market.
[Bill] Yeah. So a barrage like we haven’t seen in the last couple of years will be 10 loans.
[Marc] Yeah. I think that people locking loans. Yeah. Yeah, that too. Yeah.
[Bill] No, but I do, I agree with your premise that I think that even though a bunch of that would’ve already been built into the market, that’s what’s gonna get folks to react. Yep.
[David] Gotta draw people in. But what we’ve been saying all along lock, lock, wherever they’re at lock now. And so it’ll be, some people will be cussing us out for those of us saying you, I wanted to quote, but you guys had lock, so you do what you wanna do, but take the rate that’s here because you do not know what’s going on. We do not know what’s just around the corner. Allen, any thoughts you wanna reflect on here, my friend?
[Allen] Yeah everybody’s got such great commentary. There’s nothing for me to disagree with. So I just like to accentuate the minds of the great people on this podcast. But more importantly if you’re working on a technology project, you better get it in order because if people are waiting, even if it’s a small percentage drop, there’s gonna be another one coming. People may have just been waiting and realize, I just don’t know what’s gonna happen. And finally make that move and just get it done. If you’re not sure to move left or right, just make a decision and stick with it and work it out. But there’s a lot of people that are in between tech implementations, they’ve got ones that have failed. Now’s not the time to, what’s the old saying? Do something or get off the pot. So just do it.
[David] Yeah. Okay. We can we go into that one in a long time anyway, I wanna. I wanna shift over and we could talk about rates. But the last question is I’m really leaning towards a quarter only is what I think was, I think is reasonable. Although, the feds have done some pretty crazy things. So is he gonna over try to overcome Kittle his too late to the party and jump to a half? I don’t know. I’m participating a quarter. We shall see. It shall be announced soon.