Mortgage Credit News by Louis S Barnes - January 8, 2021

It may take history a little while, but the 20 hours from the Georgia election results Wednesday morning to the Electoral College confirmation at 3;30 AM Thursday will be regarded as among the greatest hours in American democracy -- democracy anywhere.
Of course, I’m a doughnut guy, not a fan of holes, but bear with me.
Evidence? From Wednesday to Thursday, the Dow jumped 773 points, rising right through the red-hat breach of Congress. Some of that rise was parochial, a Democratic Senate likely friendlier to stimulus, but also to tax increases.
Interest rates jumped, too, the 10-year T-note suddenly above 1.10% from 0.90% one week ago, and from the August low at 0.51%. The mortgage-to-10s spread has closed, 10s rising and mortgages holding, but this jump in 10s will begin the inevitable, disorderly, up and down but up stairstep in mortgages.
Markets behave this way on good news, so suppress your gloom.
The economy is in a holding pattern, NOT a recovery. We got strong numbers from the purchasing managers’ surveys, the ISM manufacturing clear above 60 (50 is breakeven), and the much larger services sector from 55.9 to 57.2 in December. But these indices indicate change, not level, the overall economy still several points below pre-Covid, the apparent strength more pipeline refilling than acceleration.
Employment is stagnant, as it must be and will continue to be until we can work, shop, sell, travel, and recreate indoors and at close quarters. Today’s news of job loss in December is just one of many distortions in data, Covid producing weird patterns not in historical seasonal adjustment.
The virus is worsening economic activity outside the US. Tokyo is in a state of emergency, China has new lockdowns, and most of Europe is shutting down again -- even previously self-congratulating refuges like Norway.
Hunch: the alarming headlines about the new variant of virus are way overdone. One UK explanation for “50% more contagious”... if we spend 15 minutes unmasked within six feet of a contagious person, the original Covid gave us an estimated 10% chance of infection. The variant, perhaps 15%, hence a “50% increase” in risk. The new variant does not move through walls, under doors, or from auto to auto.
Hunch #2: hopes for a slingshot recovery when vaccines take hold, helped by spring and moving outdoors... nobody knows. Youth (under 40) has never been at risk, and may quickly resume normal activity, even supernormal. But many youths know they can infect the vulnerable, which will extend caution and economic suppression (thank you, my son Gus for your sacrifice to protect us and your sister).
Fed and rates. The Fed does not want to fuel an asset bubble, but no way does it want to see long-term rates rising much more than they have. Not until recovery is truly entrenched. Until punished by markets, I assume the 10-year bulge above 1.00% is the already overdone reaction to the Georgia and Senate surprise -- and relief that two months’ of attempted coup has failed and been resolved in magnificent fashion. Inflation is not an issue. Excessive borrowing and Treasurys forced into markets, that’s an issue but a comfortable old adversary.
The Biden administration? First things first: hit the slow gopher ball coming to the plate. Nothing matters more than vaccine distribution. Display competence, revive the economy, revive faith in government, all with one swing.
Competence. Janet Yellen, the Yoda of central banking, a Truly Wise Person as Treasury Secretary will limit excessive stimulus and coordinate with the Fed. Judge Merrick Garland, blocked from the Supreme Court by McConnell will be Attorney General and instantly restore faith at Justice, inside and out. He will under no circumstances be hustled into the support of administration misbehavior, nor would Biden ask, not even for his son. These people are so straight and honorable that they don’t have to say so.
From Defense to Intelligence work will resume. In these last four years, the government gradually got nothing done, trying only to stay on the right side of the White House, doing and saying as little as possible while fending off our worst-ever political appointees.
Divided government has become the preference of many of us. Relax. It still is. In the last two years Republicans have had a three-vote edge in the Senate, a hair larger than the few moderates (Collins, Romney...) could overcome. But the Democrats now have a one-vote majority, placing control in the hands of their moderates (Manchin, Tester...). House Democrats lost seats to a thin majority, and lost because of too much hard-left noise. Biden faces odds to finish one term, which puts heat on Harris to show seriousness, and fast.
All good. Most Democrats know that even minor misbehavior can get them run out of Congress in two years, the fate of Obama’s presidency in 2010.
“Magnificent?” Find an older person to ask. On Wednesday morning we learned that Georgia had elected to the United States Senate the Black, Senior Pastor of the Ebenezer Baptist Church, Rafael Warnock. Dr. King’s church. Wherever Martin is, I do hope that Gabriel and Saint Pete have wheeled a TV over to his cloud so he can watch. “I have been to the mountaintop! I have seen the promised land...” Glory halleluiah, indeed. Woke twerps are fond of saying the US has not made racial progress. BS to that.
Magnificent. On Wednesday evening, not at all sure of safety despite hard-eyed security carrying MAC-10 SMGs, Pence, McConnell, Pelosi, and others gathered Congress to finish certifying the Electoral College. It took until 3:30 AM to work through the dead-enders’ unconstitutional objections, and making certain who will be in office at noon on the 20th.
No mob of wanna-be Johnny Rebs would halt our democratic process. Media have been filled with “EEK!!” about the awful American spectacle, especially overseas. People overseas always struggle with us -- we enjoy more personal freedom than anywhere else, hence occasional disorder and goofiness, but we alone think freedom is worth the price. The price is responsibility, and how could we be more proud of Republican election officials who placed nation ahead of party, and the astounding patriotism of so many Republicans in Congress on Wednesday.
The sky is black with chickens. All of our founders feared a new king, but they feared the mob more. They structured our government only 100 years after the English Civil War, and feared in particular a strong minority, angry and mobilized, discovered and led by a man on a horse. James Madison, on his cloud near Martin, might be laughing out loud. It worked!! It felt closer than it was, but was our closest since 1860.
Cultish minority movements usually fizzle, and soon. Goldwater and John Birch, the Religious Right. My generation in the 1960s-1970s was cultish and scary, but gradually fizzled, dampened by the need to make a living and foolishness like marriage and children. Sometimes these movements do not snuff, Weimar 1933, Russia 1917.
This one... the mob ended this one on Wednesday. As suddenly as Joseph Welch blew up Joe McCarthy. I could snark at souls-sold Republicans suddenly discovering who Trump is. He has not changed; he tried for mob rule from “American carnage” to Charlottesville, and finally got his wish. But I won’t. Many of these people are honestly like Colonel Nicholson at the end of River Kwai. “My God. What Have I Done?”
American exceptionalism. Those who enjoy looking down their noses at the efforts of others are having fun. They don’t get it. We are exceptional because we try to be, try to live up to the impossible standards set by the founders, set in the complete knowledge of our persistent failings. The biggest benefit of the week: more of us are watching, talking, and thinking. For a while, fewer of us will be proud to say, “I don’t watch the news. All of these politicians are the same.”

Multi-label charts take a little explaining. The color intensity below reflects the percentage of ICU beds holding Covid patients, the bright-red high at 53%. The states outlined in black have an all-patient ICU census above 75% of beds. These figures of course are distorted by unknown “crowding out” by Covid. However, one standout impression of the surge reflected by the chart: at the New Year it gets cold in the south and more people stay indoors. Oddly enough, the phenomenon reverses in spring.

The humble, historic Ebenezer Baptist Church in Atlanta:

Dr. King’s three-mile funeral procession from Ebenezer Baptist to King’s alma mater, Morehouse College, April 1969, King’s pine box and a wagon pulled by a pair of mules:

Georgia Governor (1967-71) Lester Maddox, autographing one of his many and popular ax-handles. Elected Governor after refusing to admit Blacks to his store, he refused permission for King to lie in state at the Georgia statehouse.

US Senator, the Rev. Rafael Warnock