[Alice] Thank you Matt. That was terrific. I really have a lot to chew on now is what we all have to dissect what’s been going on in the market. David, you were sharing before we got on the show that you saw Kevin Warsh this weekend. And so let’s fill in our listeners on what you heard on the show earlier this weekend and combine that with what Matt’s telling us and tell us what you think is happening in the market.
[Kittle] Yeah, it’s really counter of course. Kevin was on with Maria Bar Romo on Fox yesterday, and I wrote down seven or eight bullet points of statements that he made. These are actually exact quotes, I think. But it’s rare. As we were talking before the podcast started, Marc Helm said that fed Governors usually don’t eat their own and is usually a pretty good club to where they respectful for each other, but he took a different tack Yesterday he said that fiscal and monetary house needs to get in order in the Fed directly at chairman Powell. Growth is larger than predicted. Right now we’re on the cusp of radical improvement in production capacity, the tariffs, which was just mentioned. Coming out the report, I guess tomorrow for June, we had $27 billion in June. That gave us a budget surplus. He said the Fed should be cutting rates money’s loose on Wall Street, tied on Main Street and that the balance sheet the Fed has right now is comparable to the ‘08 crisis that we have and that the Fed needs to shrink the balance sheet and cut rates. Then it was brought up. The last thing that I’ll mention is Maria brought up to him, he goes, that the Fed just spent $4 billion, not a lot to the Fed, but they spent it on new office space in Washington, DC And he was very critical of that. He questions the Fed’s credibility with spending $4 billion in a market like this because the optics are so bad. He says it matters because of the credibility. And the very last thing he said was, he goes, this fed is the inference was very political as it cut 50 basis points before the election, and then cut 50 basis points right after the election was over, and that has never been done in 50 years. Now I don’t know if that’s accurate or not, but that’s what he said. So this is he is, I think, to be quite transparent here, Kevin has been mentioned for a fed seat. Again, that’s opening up before Powell retires, which would put him in position to move into Powell’s seat. Should Trump want that to occur? But here we have former Federal Reserve Governors now pressing the Fed to lower rates based on all the economic data that’s out there right now.
[Marc] Your comment, he, that he made about the Wall Street and Main Street kids dead owned. He didn’t waste any bullet on that. He said it just like it is. That’s something we need to think about.
[Kittle] And he was right. He was right enough for me to rerun it and record the whole thing on my iPhone, which I’ll send out to everybody after we get off here. But it was quite interesting that he would come out and be that open against chairman Powell.
[Alice] Bill, you were nodding. Did you listen to in on this too?
[Bill] I listened to the exact same thing and listened to it again. Mr. Kittle and I are in the same camp, but my opening comment, so first I thought last and Marc and Matt had really the exact same message and which we’ve talked about a lot because we’re in the middle of a range and depending on the data rates could move to the high end of the range. They could move to the lower end of the range. If I knew what tomorrow’s CPI report was gonna be and what was gonna happen, I like you guys a lot, but I probably wouldn’t be here. But I also think and I was again going back to Kevin Warsh. So there’s another piece of this where I think it’s the OMB director is calling for an investigation into Powell that his sworn testimony to Congress around the renovations of the Fed headquarters was not honest. And I’m like, okay, if you think the Fed’s being politicized and folks are nervous about what the market reaction may be. I don’t know that anybody had on their bingo card for rate forecasting going after the Fed chair with criminal charges. I think there’s, there’s a lot that Kevin Warsh said that I agree with. I think I agree with most of it. The one thing where I thought, by the way, Maria was playing loose with numbers, where when she talked about, oh, in last month there was a budget surplus come on, anybody can look at their bank account and depending on when deposits go in and checks clear, you look like you have more money than you do. So I think that comment was a cheap shot. The other thing that he was focused a lot on, and it was related to the headquarters, but also just the whole of the Fed. And I think you’ve gotta separate monetary policy decisions from a lot of the other things that the Fed does that don’t get a lot of transparency and there’s no audit. And that’s a lot of what Warsh was going after. They’ve gotta be accountable again, separate from the 12 members voting up or down on monetary policy, but everything else the Fed does is not even behind the curtains behind a wall. And then I also heard something interesting this morning that, Powell has been very adamant that he is not stepping down as chairman, but his term at the Fed runs until 2028. He can still be very around and obviously be very involved long after anything happens with the chairmanship. But at the end of the day, folks, this is, there, there needs to be a lot of change. But having, playing these kind of games with the Fed gets really dangerous for the world’s view of the US and our financial system. And yes, there needs to be a lot of change, but, let’s think about how to do it and avoid the unintended consequences because that could be pretty severe. But in terms of what’s going on day to day, I go back to, yeah, so we have CPI tomorrow that can move. Matt and Les said that can and really will move the market significantly, but it’ll take a while to figure out is that a move within the range or is that a move that breaks to a new range higher and lower? I tend to think we’re gonna stay in the same range that we’ve been in for quite a while.
[Alice] Yeah. He was mentioning 10 to 15 basis points, so that would still be in the range, but he still felt that was still gonna be a shock if it was that much.
[Bill] Yeah. But again, if you think about it, we always do go back to the day-to-day origination world, right? and to 15 basis points on treasuries comes out to a little bit less than an eighth and rate. That’s, if you’re in the middle of making housing decisions, that’s not going to change the equation completely. One way or the other.
[Alice] David Kittle, anything you wanna add? I don’t disagree with anything Bill said.
[Kittle] I didn’t give any commentary on the fact that we had a budget surplus, but he’s right. You can check your own account and come up with something. That was an comment. By the way, payday Friday, my checking account looks good. No, to be clear, Maria Omo made that comment, not Kevin Warsh, and she was baiting him on on what to say. I just think there’s pressure to do it and there’s no, there is no inflation out there unless it appears tomorrow there hasn’t been. And he’s been way, as I’ve said many times on this program. He’s too slow in both directions and he has a history of it. And he’s right where he is. Same pattern. He’s always been in indecisive.
[Alice] Yeah. So we’ll see tomorrow if we get any change as a result of that up or down. And then Marc, did you wanna add anything else to this?
[Marc] Yeah. I wanna make two comments if we could. First is, I agree with what Bill and David has said so far and I think it’s very interesting about that the budget surplus right now. I for one, have been leery of the tariffs because tariffs can cause an inflationary lift in company about the consumer goods to the customer. But I’m hoping what’s gonna happen from tariffs is tariffs are to be able to ship their products here and be marketable. They’re gonna have to ship them in at a pay their tariff. And it’s gotta be a, maintain the cheap cost of it or the, that’ll help the consumer because if they don’t do that, the manufacturing in other countries will kick in. And also more manufacturing here in the United States. I’d like to see more of our things made at home. I’m just sick and tired of everything we pick up being made overseas. We’ve got too many people are outta work and too much money. It could be what I for one, would pay 15 to 20% more for things made here in the United States to support our country. Now, maybe I’m an exception, but I would say that, and I think most people like to know that they can pick up the phone and call someone in the states that the product goes wrong and get it taken care of and if you buy something from a multitude of other companies, there’s no anybody to call on that, a retailer, they didn’t manufacture it. So it’s really tough. So I think some bright things are coming with the tariffs, so I just hope it stays on and doesn’t go crazy. But if it continues to give us a $27 billion surplus every month, I’d be all for that.
[Alice]Absolutely. And I think the other thing Matt mentioned that I wanna make sure everybody made note of is the real big report is gonna be the jobs report, which isn’t until next month. Do I have my dates right on that? So I think I thank You’re correct. Yeah. Yeah. So there’s, yeah, you’re correct. There’s definitely the report tomorrow, but there’s even more news that we’ll follow. So we’ll see based on tomorrow, whether they feel they need to hold off and wait for the jobs report, which doesn’t have a great history lately anyway, but then you can keep on waiting for the next month and the next report next month and the next report, and it goes on forever. You have to make a decision and be a leader. Leader.
[Bill] So it’s also perplexing when you’re focusing on one report and making a move, and yet at the same time, the. Keeps talking about monetary policy changes have a long lag time. It’s your turning of a battleship and those two things completely contradict each other. And this goes back to, Dave, what you said about being too late. If you’re truly data dependent and you see the data and you hit the button to make a change by their own words, they’re way too late. ’cause those changes aren’t gonna really impact the economy for, 6, 8, 12, 15 months.
[Alice] Right. Allen, did you wanna add anything,
[Allen] I think every, everyone’s got a very solid opinion. I. It’s like a young couple. When’s the best time to have their first child? There’s never a best time. They’re always gonna consider everything in life that hasn’t happened yet, is gonna be in the way. Sometimes it’s just time to make the decision. There’s another way to say it, but I’m gonna be very nice on this call. It’s time to make the decision. You gotta make an executive decision and move forward. The economic environment’s gonna constantly change it’s something that we’ve seen in the mortgage industry forever, and you have to work lean and mean, and you know what your flexibility is. There’s always a plus and minus of every decision. So I just add to the group with that. And if you ask the everyday consumer out on the street, they’re gonna say it needs to cut. We need the advantage because it’s definitely would help consumers. All right, thanks everybody.