On
to the non-April Fools' edition.....
The
total number of pages of the Federal Tax Rules, i.e., the IRS explanation of
income tax code and regulations, has increased by +34,108 pages (to 74,608)
since 1995, an increase of 5 new pages a day, 365 days a year for the last 19
years. I am sure that the promotion of "Sell Two Homes and Your Next
Vacation is On Us!" is some type of taxable event. My guess is that
Fischer Homes' attorneys took a long hard look at recent CFPB rulemaking to
make sure everything was copacetic with no hint of steering or referral
kickbacks.
Although
management reports that the problem is now corrected, the many users of Ellie
Mae's Encompass received this note yesterday, on the last day of the month,
from the company: "As you are probably aware, Ellie Mae is experiencing an
issue with Encompass that is affecting a number of our clients. This is resulting
in delays in processing loans, or in some cases, the inability for some of our
clients to close loans. Ellie Mae realizes the impact that this may have
on your business, particularly considering that today is month and quarter
end...We are also updating the Ellie
Mae Status Center regularly with real-time updates."
Fed
watchers over the last few years have had many things to study; on their list
of course has been the FOMC's asset purchase program, and while Chairwoman
Yellen unwinds the program, she is likely to apply a brand of monetary
policy-making known as optimal control, which emphasizes that the target
fed funds rate should be tailored to keep unemployment at a healthy level and
unemployment close to 2%. Bill Gross of PIMCO, never one to shy away from
voicing his opinion on the Fed, commented last week that "the
below-target inflation rate, rather than a falling unemployment rate, will
guide the Fed's decision to keep rates low for a prolonged period of
time." Gross has asserted in prior market commentaries that the
central bank is likely to hold the fed funds rate near zero
until 2016, which will help short-maturity bonds outperform the rest
of the market. It's a good conversation to have, however, an even better one is
the one Wells Fargo asks: Is the Fed Funds effective?
They write, "Is there a relationship between the federal funds target
rate, inflation rate and the unemployment rate? Recently, the Federal Open
Market Committee (FOMC) began rolling back its asset purchases program and, at
some point in the future, the FOMC will start increasing its target for the fed
funds rate. This raises the question, what would be the likely effect of an
increase in the interest rate on inflation and the unemployment rates in our
post-Great Recession world?"
Just
when you get all your icons the way you liked them, with the wallpaper of your
dog wearing a Santa Claus hat, someone has to come along and tell you that your
Windows 3.1 machine is out of date. In the same vein, what's even better than
FICO 8? FICO 9, or course! As almost everyone in the industry knows (maybe the
temp worker at the front desk?) FICO is one of the leading predictive analysis
firms in America. How leading, you ask? Well, in 2013, lenders purchased a
whopping 10 billion FICO scores to determine whether or not certain individuals
are eligible for loans. As market dynamics change over time, FICO typically
works to create new models that address these shifts and better predict a
person's creditworthiness, with FICO Score 9 being the latest in the run of
developments. According to FICO's announcement (yes,
the name of the corporation is actually FICO....with an original NYSE ticket
symbol of: FICO) FICO 9 will be the first release in a suite of updated and new
FICO Scores. It will be followed by industry-specific FICO Scores for credit
cards, auto loans and mortgages.
According
to the Federal Reserve, U.S. big banks have enough capital buffers to
withstand a drastic economic downturn, announcing March 20th
that 29 out of 30 major banks met the minimum hurdle in its annual health
check. All of the banks except Zions Bancorp stayed above the 5 percent
requirement for top-tier capital in the latest round of stress tests (note to
self: call Zions tomorrow and lift Blue Star Airlines call-options). Reuters writes,
"The tests aim to show how banks would weather a financial collapse
similar to the 2007-2009 crises. Banks had to show how they would cope with a
halving of the stock market, and the eight largest banks had to weigh the
impact of the default of their biggest trading counterparty." As you can
imagine in a post '07 world, stress tests are closely watched by the financial
markets, and are used as a sign of the industry's health. Ironically, along
with Zions, Wells Fargo and Bank of America disagreed with the Feds tests, but
for different reasons; Wells and BofA released the results of internal stress
tests that showed them performing better than they did under the regulators'
tests.
The
only news out yesterday was the 2nd tier Chicago Purchasing
Manager's Survey. It fell to its lowest level in 8 months, prompting analysts
to wonder about the strength of the US economic "rebound". Certainly
housing values are up versus a year ago, but other indicators are not running on
all cylinders... CPMI Chief Economist said: "March saw a significant
weakening in activity following a five month spell of firm growth. It's too
early to tell, though, if this is the start of a sustained slowdown or just a
blip.
The
only news out this morning is the ISM Manufacturing Index (from purchasing
managers of 300 manufacturing firms about general trends) and Construction
Spending. Overall, rates were pretty quiet yesterday, and overnight. The
benchmark 10-yr T-note closed Monday with a yield of 2.72%, and this morning it
is about where it began Monday - at 2.74% - and MBS prices are worse a shade -
but about where we were yesterday morning.
Yawn.
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