Financial, Real Estate, Stock Markets Trends and Current Affairs

On or about September 12, 2012 Dr. Benjamin Bernanke, the Chairman of the US Federal Reserve, announced the 3rd round of Quantitative Easing (because the 1st two rounds worked out so well) under the auspices of attempting to reduce the unemployment rate by buying nearly a trillion dollars per year of MBS per year - ad infinitum!!! I posted the following article in response - Bernanke's Lying Through His Teeth and Not A Single Pundit/Analyst/Banker Has Called Him On It!!! The article clearly articulated how and why the man lied straight to the collective faces of MSM consuming America.

mbsvs unemployment

On September 16th, I took it upon myself to right the wrongs perpetrated by the mainstream media in not calling Dr. Bernanke and the US Fed's commented actions for the bold faced lie that it was, and streamed my own reality TV financial show, directly in front of the NY Fed, quoting data pulled directly off of the St. Louis Fed's website. For all of those who feel that there is no audience for the truth and REAL financial analysis, this short video received nearly 13,000 views and a 101:0 like/dislike ration in less than 48 hours with absolutely no promotion, production or advertising. It was simply.... the truth!!!

Now, for those who don't believe me and the machinations of this Bernanke Fed, let's simply fast forward two weeks to the present where we find interesting content...

From ZeroHedge: Fed's 'Trickle-Down' Policy Lines Pockets Of Mortgage Originators

This rally has reduced the spread between 'risky' MBS and supposedly risk-free US Treasuries to practically nothing as the Current Coupon 30Y MBS trades around 1.67%. However, where the real differential has occurred is in the spread between the risky wholesale rate that Main Street is charged on their mortgage and the government-sponsored wholesale rate they finance this debt at. The spread between wholesale and retail mortgage rates has never been higher (in absolute and ratio terms) providing a new ATM for all those banks and mortgage originators trying so hard to scrape by these days. We just assume the Fed's policy transmission-channel had modeled this trickle-down of mortgage banker bonuses (and taxes) into local Ferrari dealerships and Lafite wholesalers.

The lower pane shows the spread between the retail-facing mortgage rate that Main Street pays and the wholesale-facing cost of funds for those mortgages...

and given leverage and capital (and the now risk-free nature of MBS apparently) - perhaps a ratio of the two is more useful - and much more telling of the disconnect...

From the Confounded Interest Blog: QE3 (MBS): Mortgage Rates Decline But The Spread Is Captured by Mortgage Agencies

The results so far?

As of 9/28/2012, the Bankrate 30 year fixed rate mortgage average rose slightly after dropping on the QEternity announcement.

The spread between the Fannie Mae current coupon rate (paid on new Fannie Mae MBS) over the 10 year Treasury yield has risen to a positive spread after dipping into negative territory last week.

On the other hand, the spread between the Bankrate 30 year fixed rate mortgage average and the Fannie Mae current coupon is near an all time high indicating that the agencies are capturing rents from The Fed’s agency MBS purchases.

If the goal of The Fed is to help stabilize HUD, Fannie Mae and Freddie Mac, that is one thing. But if the goal is to lower rates to consumers, the Fannie Mae current coupon would have to fall. An alternative explanation is that lenders have captured the increased spread and not the mortgage agencies.

In the meantime, here is the subscriber content detailing the companies that we feel will be the initial victims of the Federal Reserve Bank catering to its TRUE constituency (the big money center banks) as they collaboratively sell the US worker, saver and consumer down the river.

There are four reports here - Consumer Discretionary with the remainder to be found in the Retail section. All who are interested in accessing this research can click here to subscribe. Those who have not heard of me should look into Who is Reggie Middleton?