Mortgage Credit News by Louis S Barnes - December 18, 2020

In this 2020 Christmas week there is a lot of important stuff pending. It should be a quiet and contemplative time, but we’ll get to that.
The economy is running low on reserves: the unknowable but large fraction spending its reserves to stave off eviction or default, and the many who have depended on assistance. New claims for unemployment insurance are rising each week, now above 800,000 weekly, more than four times the February normal, and add another double, the 455,000 new weekly applicants for Pandemic Unemployment Assistance. Retail sales fell .3% in November.
The Fed met and spoke this week, changing nothing immediately but setting the stage for 2021. Many in markets had hoped for and even expected that the Fed would extend the maturity of its bond buys, pushing down long-term rates. The best of the Fed-watchers (Timiraos at the WSJ) correctly saw through the smoke. Long rates are already so low, why bother? New construction starts of housing are running 12% above fall 2019.
The stage-setting... chair Powell said the obvious, but we’d not like to be reminded. The Fed will pull back from bond-buying before it raises the overnight cost of money, and promised advance notice. Powell’s key phrase was “over the coming months.” That’s 2021. The last time the Fed gave early warning of an end to QE, long-term rates soared one full percentage point in the 2013 “Taper Tantrum.” We’ll have another fit in the market, but times have changed. The principal change: the Fed and markets now understand, WAY late, that the US and global economy at least twenty years ago lost its tilt to inflation, and deflation became the risk.
Of course there is more room on the upside for rates than down. And the best traders (Dave Shirmeyer today) have noticed the 10-year T-note 40-day moving average rising since August and failing every test to go lower. But the best long-term guide for long-term rates is inflation, and the Fed’s 2% target looks more and more like a dream than a target.
Stimulus. Good grief. It is difficult to get anything through Congress without the wholehearted and wholeheaded support of the White House. Overnight, the occasionally sensible Pat Toomey R-PA has tacked on an effort to trim the Fed’s ability to respond to crisis, in particular aid to states. The Tea Party loves that idea because we all know that the blue states are lazy overspenders and have the wrong kind of voters. The hard right can’t process reality: states have balanced-budget constitutions, have massive loss of tax revenue, and the big and urban states have equally large masses of jobs at risk.
Brexit. One of the remaining disputes involves EU rights to fish in UK waters. Last week the Royal Navy sent all three of its ships into the Channel, prepared to fire on French trawlers on New Year’s Day if a deal fails. It’s been two hundred and five years since shooting at the French, and good to know that old skills are at the ready.
The silence among all parties in the last few days adds to my hunch that the parties will find a way. Murky, ambiguous, issues deferred, but announce a deal and then stumble forward a always.
Christmas. No offense intended. My insuppressible “Merry Christmas” is the non-religious wish of Charles Dickens for redemption of souls.
One thing certain about the year 2020... no shortage of souls requiring redemption. Mine included of course, if only for my annual “Children! Oh, children! The Reginald Owen Christmas Carol is on again!!” (as they flee...).
Another certainty: the election is over, mostly, but not our anxiety about partisan division, not resolved in the slightest by the election. And, incredibly, made worse by the virus. There’s little to say about the virus, but I can speak to division.
In major media every day from any political angle comes Very Serious Word of our sectarian division. Get over it! And with all the joy of Mr. Fezziwig. It is both sad and ridiculous to be so distressed by who we are.
We were born for sects (no offense to religion). And to reassemble in new groups at the drop of any charismatic speaker. Isolate a group of us for weeks and we’ll become hostile to the others, and in a few years unable to communicate with them. We are excellent at group-on-group conflict, which explains the present-day absence of any of the dozens of hominids which attempted evolution near us. Conflict may be our best skill, if not the most attractive.
Something like three-fifths of the nation today enjoys partial relief at the passing from office of an American strongman, yet worried about the one-quarter or one-third of us still in his thrall. If still looking for presents to give, and very careful about what to whom, “Strongmen” by Ben-Ghiat is a good one. Instead of adding to alarm, especially about the interval passing, find some peace in understanding who we are.
The US has been spared the frequent experience of many nations, but excessively het-up causes have come here, too, and we have survived. McCarthy... anti-war both before WW II and during Vietnam... the Confederacy, still with us. Britain and its Commonwealth have been more free of overheat than any place, the last strongman Cromwell 380 years ago. France has had its fill since Robespierre and the Corsican. Germany, Spain, Italy, Japan, Russia, China, all over Africa and the southern New World, strongmen more common than not.
In the haze between genes and culture, that’s us. Be vigilant and resist, of course, but don’t dignify our proclivity by thinking a new episode is new. Could not be older. The best antidote and keeper of the peace: our sense of humor. We can choose anger at each other, or Charlie Chaplin as the Great Dictator.
The Best of 2020, and many other years... MacKenzie Scott is the ex of Jeff Bezos. In the last four months she has in silence given away $4.2 billion. The money cost nothing to her, except the pain of divorce, and no hardship (she still holds $30 billion in Amazon stock). But the way, and to whom she gave the money... Scrooge on Christmas morning.
She did not give to big and recognized charities, or Yale, or grandiose save-the-world projects. Instead she gave to those in need, who know how to use the money, and who never ever expected her help or anyone’s. $50 million to Prairie View A&M, a university for Blacks founded in 1876, the gifts manager unable to speak for her tears. $40 million to Laredo’s Texas A&M International -- not the one with shiny-boots sojer boys, but a school for Hispanics. The largest gifts in each school’s history. And the story the same: one phone call from a representative, a few question about mission and use, no questionnaire for competitive review, and then where to send the money.
$40 million to Baltimore’s Morgan State, known for the best marching band on this side of the galaxy and determined assistance to its Black students. The astounded, tearful administrator there said that the gift doubled the school’s endowment.
A Merry Christmas to all!

At www.calculatedriskblog.com this running total of tests and positivity. Shortly after January 20 we’ll find out what we can do if we try. The vaccines of course are great news. But a dose of humility has not hurt: every non-island nation has been exposed as unable to contain the virus this winter. Early spasms of superiority have given way to high counts. The only exceptions are in Asia, possibly historical immunities to ancient Covids, or for sure a loss of civil liberties not worth the trouble.

Dame Edith Evans as Christmas Past, 1970 “Scrooge:”