Morning Report: Slow news week

Vital Statistics:

	Last	Change
S&P Futures	2422.0	-0.5
Eurostoxx Index	381.1	0.0
Oil (WTI)	43.9	-0.4
US dollar index	88.4	0.1
10 Year Govt Bond Yield	2.37%
Current Coupon Fannie Mae TBA	102.88
Current Coupon Ginnie Mae TBA	103.75
30 Year Fixed Rate Mortgage	4.05

Stocks and bonds are flattish this morning on no real news. 

The week after the jobs report is usually pretty data-light, and this week is no exception. We will have a lot of Fed Speak however. 

The Labor Market Conditions Index slipped in May, but is still reasonably strong. 

Fannie Mae's Home Purchase Sentiment index matched a record set last February. The number of people who say it is a good time to sell hit a record, which confirms what we already know, that it is a seller's market. Lenders think credit is going to ease somewhat over the next few months. The survey also showed that people are more confident in their personal financial situations and are less worried about losing their jobs. 

Washington has noticed the shortage of appraisers and is looking to find ways to address the issue. While appraisals are not at the top of the list for Dodd-Frank reform, they are beginning to be discussed, along with the role the Federal government has in the business. One of the ideas being considered involves reducing some of the duplicative educational requirements.

Deutsche Bank is warning investors over frothy equity market valuations as the world's central banks reverse course. They note that the ratio of stock market capitalization to GDP is approaching the peaks set in 2000 and 2008. I would counter that central banks worldwide are going from a posture of "ludicrous easing" to "ridiculous easing." Short term real interest rates are still negative in most of the world. In the US, the core inflation rate is anywhere from 1.5% - 2%, depending on what index you use. All US rates are below that range out to 3 years. So, even if the Fed hikes the Fed Funds rate another 50 basis points, we are still in negative territory. So, while you can characterize what the Fed is doing as "tightening," that really only indicates a direction. On a scale of 1 to 10 we are going from 9.9 to 9.8. 

We know that a shortage of skilled construction workers and lots are hampering homebuilding. Now, it looks like sticks and bricks are an issue as well. 21% of the builders surveyed in the NAHB homebuilder survey cite a shortage of framing lumber. The spot price of framing lumber is up about 10% YOY.