nov19 blog

Mortgage Market Commentary, 11-19-21

Nov 19, 2021 5:43:49 PM

We are excited to partner with one of our favorite mortgage minds, Lou Barnes, to bring you his biweekly commentary. Lou is a loan officer in Boulder, CO, but his insight is relevant across the country. Lou's opinions should not be construed as the opinions of CENTURY 21 Redwood Realty or our partner, Day 1 Mortgage. 

We hope that you enjoy this series! Our good friends at Day 1 Mortgage are here to answer all of your mortgage needs. You can reach them at 888.973.0624 or online at

A little new data, markets, Fed chair roulette, glimpses behind China’s veil, and then economic politics—BBB, energy supply after COP26, and one overlooked thread of human nature.

As always in the third week of November, some years easy and some not: the search for thankfulness. This year, begin with the big things. One year ago the presidential election had a winner, but the loser intended overthrow. Much better now. And we have Covid vaccine, and hope for The Pill in the new year. Big thanks. Vaccines are a life-saving improvement, but the large number of breakthrough cases say the benefits have been overstated. Like turkey.

Data. In the time of Covid, new reports are as hard to understand as ever. Retail sales in October jumped 1.7%, double the forecast, although half of the result could be attributed to higher prices. The supply-chain effect on prices is not yet improving: October import prices soared, 0.9% from 0.4% in September, and export prices 0.7% from 0.1%.

Fumbling in the Covid dark... nobody has a solid idea if better economic activity and higher prices are the result of catch-up (deferred spending, pipeline-filling, price opportunism) or future doom from overheating. Bet on the former.

Rates. Give thanks. Down. Or stable, or something, but not up. The 10-year T-note is back to 1.53% after a run above 1.60% triggered by last week’s CPI bulge. Some say held down by stock market fears, but the stock dweebs say it’s Covid again. Austria, orderly, stand-up-straight, eat-your-peas Austria is only two-thirds vaccinated, as resistant to poking as Wyoming. In the last two weeks new infections have hit 2% of the entire population. So, a new lockdown, and a test of mandatory vaccination. A benefit to the world: they try it while we get to see how it goes. Danke Sehr.

The Fed. Give thanks: We have one branch of government which is non-partisan, and functioning well through crisis after crisis. What should industry leaders, the executive branch and Congress do to help? 

Since it is doing better than all the rest of you put together, try to screw it up so that you look better, and Important.

Begin with the jackdaws, the Important People always good for an eyeball-crazy media quote, predicting disaster caused by the Fed. Perhaps a delusion on my part, but I think the eyeballs are wising up. Here they are, just this week: Mohammed El-Erian, Larry Summers, ex-Fedders Bill Dudley and Jeremy Lacker, St. Louis Fed dim-Bullard, John Mauldin, and Pershing Square hedgie Ackerman, each one with the same BS: the Fed has caused inflation, and only one (Mauldin) foolish enough to advocate rate hikes last winter.

Before nominating or re-nominating a Fed chair, it’s a good idea for the president to count noses in a breakeven senate which regards you as the conductor of the band on the Titanic. Whether Powell or Brainerd, either will be the first Fed chair in forty years to face Senate hearings during an outbreak of inflation. Leave it to Democrats to miss the heart of the matter: Brainerd is a solid choice, but her supporters have convinced themselves that she will be tougher on banks (still tightly ruled by Dodd Frank and the Fed), and better yet, devote Fed power to ending the supply of fossil fuels—two US Senators just today said so (Merkley, OR and Whitehouse, RI). 

Various smoke signals from the Senate say Powell is the clear favorite, if only for the sake of order and continuity. If so, give thanks.

China. As in the opaque days of the Soviets, sometimes little things tell big stories. A few weeks ago China flew aggressive missions into Taiwan airspace. Shortly afterward, Xi declared that rejoining China would be peaceful. Still firm, but no more flights or threats. China’s military is a political force of its own but was not on the same page as the Emperor.

This month, China tennis star Peng Shuai accused a former politburo member of assault, and promptly disappeared, followed by an obvious hostage message and official silence. Last night China’s Foreign Ministry said is “was not aware of the controversy.” It did not say that there was not a controversy, just gave it the Sergeant Schultz. There is no better sign of internal discord. 

The winter Olympics begin in Beijing in two months. Athletes do not have a strong record of principle over performance, but boycotts have happened. These Olympics will already be somewhere between unpleasant and laughable, now shifting to humiliating. Covid means no spectators, Beijing is as winter-sport attractive as Detroit with smog added, and no snow—Ms. Peng may presently be breaking ice cubes into smaller cubes for skiing.

Instability in China is not a good thing, especially while trying to reform its economy, and the world can feel that it is not going well. No thanks.

Money Politics. Slimmed down BBB made it through the house, but we can hope for a quiet squelch in the Senate.

One thread in the American mind (and to some degree everywhere) is the reflexive desire to be left alone by the bossy class. Extremists on the Left demonize their counterparts as bad people with bad ideas, which some are. However, the Left adores rules, and the rise of the Tea Party, its predecessors and new Trumpism has core strength in the desire to be left alone, especially by the Left.

This BBB thing includes $80 billion in steroids for the IRS to catch cheaters. BBB funding guesses at recovery of $240 billion in unpaid cheat-money. I would rather do without the recovery than turn loose an aggressive IRS and its presumption of guilt. Another: subsidized child care will require upgraded pay and credentials for the caregivers. Nifty for the Leftie underemployed graduates of “early childhood development.” Punishing for the large majority of non-credentialed but superb, natural caregivers.

Climate. One Sovietologist (apologies for forgetting his name) believed that Soviet collapse was the consequence of purges and bureaucracy which had selected leadership for stupidity.

We have just endured the pre-COP26 media frenzy, now mercifully evaporated because nothing to report except that global leadership will not support cuts in fossil fuel supply before we have replacements. But the climate crazies have not budged.

Australian Prime Minister Morrison last week: the coal industry will be operating in the country for “decades to come.” Too bad, but true.

Others... a German agency has canceled the opening of the Nord Stream 2 undersea gas pipeline because the Swiss owners had formed a new German subsidiary, and would thus have to start over with the approval. The Netherlands shut down one of the world’s largest gas fields because of a 2012 drilling-caused 3.6 magnitude earthquake (us Okies view fracking quakes as cause for thanksgiving.) Merkel shut down all of Germany’s nukes; France generates 75% of its power with them, China has over 50 of them under construction, and the US... two.

Do bad damage to energy cost and investment in temporary future fossil supply, and the Ghost of Christmas Past coming to visit Joe will be wearing Jimmy Carter’s cardigan. 

Give thanks for one more thing: we do misbehave and carry on, but we are still a nation of the center and good sense. When we look for it.


The 10-year T-note in the last five years, the last two days’ trading added in green. It is gratifying to see 10s stumbling along in about the same place as pre-Covid:

nov19 blog


Better. A pretty double-top established, and head-and-shoulders forming, a good forecast of decline:

nov 19 blog2

Oil... chart not so good, still stair-stepping:

nov 19 blog3


Thanks for tuning in to our collaboration! Remember that our friends at Day 1 Mortgage are here for you for all of your mortgage needs.

Lou Barnes

Written by Lou Barnes

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