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SWBC's LenderHub blog is a one-stop resource for lenders.


Recent Posts

Pope Francis Weighs in on the Dark Art of Money Magic

Every now and then in our business, a headline comes across the newswires that makes you do a double and triple take.

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Yes, Virginia, There Is an Economic Cycle

The markets seemed to heave a sigh of relief last week over the April labor report, which showed weaker than expected average hourly earnings (AHE) growth. The Wall Street consensus was 2.7% year-over-year (YoY) growth, and the print came in at 2.6%. However, the markets shouldn’t feel relieved for too long.

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The Unbearable Flatness of Being

Every profession has its own version of a very bad time, a time where there really is no way to win, a time when the best result is not losing too badly. For bond traders, the flat yield curve is such a time. A wise man once said, “You never notice oxygen until it’s not there.” A normal, positively sloped yield curve delivers life-sustaining oxygen to a bond trader in the form of “carry.” When the yield curve is positively sloped, a five- or ten-year bond funded by one-month money, interest earned on the bond position is greater than interest paid to fund the position. That is called “positive carry.”

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This Market Can Really Take a Punch

April sure has been an interesting month, and we are only midway through it! In just the last two weeks, the U.S. has seriously sparred with its greatest economic competitor (at least by size of economies), China, and its greatest military competitor, Russia. The President of the United States had the offices of his private attorney raided by the FBI, perhaps pushing the President closer to a constitutional showdown over the fate of Special Counsel Robert Mueller.

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Germans? Forget It, He's Rolling.

Last week, another move toward a global trade war was initiated, as President Trump spoke of slapping an additional $100 billion in unspecified tariffs on China. The Chinese responded that they will have a very specific list of tariffs on U.S. goods, totaling $100 billion in retaliation.

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Welcome to the Great Game

Last week was supposed to be the coming-out party for new Federal Reserve Chairman Jay Powell as he presided over his first FOMC meeting. The Fed—as predicted by just about everyone—raised the Federal Funds Rate 25 basis points (the effective range is now 1.50%-1.75%). Perhaps more important than the policy decision was how the new Chairman answered questions about policy and the economy going forward.

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Take this Job and J.O.L.T. It!

Friday’s employment report was, on the surface, a mixed bag, with a surge in job growth coupled with lower than expected average hourly earnings (AHE) growth. Last month’s 2.9% year-over-year growth in AHE was a shocker, as it showed that the growing strength of the U.S. economy was not only adding jobs, but workers were either finding better jobs or getting wage increases from their current employers. The February report —published Friday— showed a slight revision to January’s AHE (2.8% from 2.9%) and a lower than expected, but still strong, 2.6% increase in February.

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Secretary Mnuchin Fires the First Shot

Last night, Secretary of the Treasury Steve Mnuchin had some rather interesting things to say about inflation: “There are a lot of ways to have the economy grow. You can have wage inflation and not necessarily have inflation concerns in general.” This might be true in periods where we have had tremendous leaps forward in productivity. Absent of that, however, this thinking runs counter to traditional economic thought, which is the thought that governs the Fed.

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The Tide is Going Out; Are You Wearing Your Bathing Suit?

One of the great Warren Buffett’s favorite sayings, that usually gets wheeled out in the middle of a spell of trouble in the financial markets, is, “Only when the tide goes out do we see who is not wearing a bathing suit.” The tide of central bank goodness that has wrapped the financial markets and investors like a warm, soft security blanket is beginning to recede, and we are beginning to see a whole lot of unattractive nakedness.

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It's Past 2.75%; Do You Know Where Your Risk Is?

The good news is I thought the ten-year Treasury was going to get to 2.75% sometime in 2018. The bad news is I didn’t think it would get there the first month of the year! We are at the rate levels where many wise market prognosticators, such as Jeff Gundlach at Doubleline and Ray Dalio of Bridgewater, have said the wheels will start coming off the risk-asset cart.

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