The Treasury Department got some much needed good news over the weekend, with Axios reporting that President Donald Trump will appoint Fannie Mae General Counsel Brian Brooks as deputy secretary. Brooks worked with Treasury Secretary Steven Mnuchin at OneWest before joining Fannie Mae in 2014 as executive vice president, general counsel and corporate secretary. His history with OneWest is sure to come up in his confirmation hearings, as it did for Mnuchin. From Axios: “Deputy Secretary is a pivotal role in the Treasury Department, and Wall Street has been keeping a close eye on the vacancy. Brooks will be expected to play a driving role in tax reform and the other major agenda items. Two sources say that Mnuchin wanted a loyalist in this key position.” Mnuchin has had a hard time staffing Treasury, with his first pick for deputy secretary, Jim Donovan of Goldman Sachs, pulling himself out of consideration in May. An article in Bloomberg explained that Treasury is already late delivering a study on how to undo some regulations put in place after the financial crisis. From the article: “Department officials have spent months on the review, holding dozens of meetings with financial companies and investors, yet it’s already behind schedule. Rather than issuing one omnibus document, Treasury says its findings will be put out piecemeal in a series of reports.” The reports are part of the Treasury’s effort to deliver on President Donald Trump’s executive order to reduce regulation. If Brooks survives the nomination hearing, he could provide much-needed support.
Investor confidence pushes up oil prices
Oil rose on Monday to break a three-day losing streak, after futures traders increased their bets on a renewed price upswing even though physical markets remain bloated, especially from a relentless rise in US drilling. Brent crude futures had risen 23 cents to $48.38 per barrel by 0900 GMT, while US West Texas Intermediate (WTI) crude futures gained 17 cents to $46.00 per barrel. Traders said the price rises came as data showed speculative traders had increased their investment in crude futures by taking on large volumes of long positions. Brent and WTI futures have lost around 10% in value since May 25, when the Organization of the Petroleum Exporting Countries and 11 of its partners extended a restriction on supply into the first quarter of 2018. “Oil bulls have reset for a technical bounce,” said Stephen Schork, author of the Schork Report. While financial traders have confidence in rising prices, the physical market remains under pressure, especially due to a rise in US drilling for new oil production.
RealtyTrac – the home flipping pyramid
While some may think home flipping is the domain of high-powered, highly capitalized institutional investors, the data suggests otherwise. More than two-thirds (69%) of all single family homes and condos flipped in the first quarter of 2017 were by investors of the mom-and-pop variety who just completed one flip during the quarter, according to an analysis of data from the ATTOM Data Solutions Q1 2017 US Home Flipping Report. Stacked on that broad base of the pyramid are mid-tier investors who completed two to nine flips during the quarter and accounted for 20% of all home flips during the quarter. At the top of the pyramid are those mythical top-tier investors who completed more than 10 flips during the quarter (and only 3% of all flips were by investors who completed more than 100 flips during the quarter). But the pyramid turns upside down when looking at the average purchase price of homes flipped and average time to complete a flip, indicating the mom-and-pop flippers are getting the worst “deals” and taking longer to flip. This probably makes sense intuitively given that professional volume flippers are more experienced at both negotiating discounts upfront and at having a defined process in place to complete rehab and market the home for sale.
Tech selloff spreads to Europe and Asia, politics lifts euro
Technology stocks fell across Europe and Asia on Monday after the worst day for Apple shares in more than a year, while the euro and its bonds rallied after a bumper weekend for pro-EU and pro-business politics in France and Italy. It was a groggy start to the week for shares as the hangover of Apple’s near 4-percent dunking on Friday hit Asian rivals including Samsung and Europe’s big chipmakers STMicro and Dialog. Europe’s tech index fell 2.8% to put it on track for its biggest one-day loss since October. The index had reached a 15-year high earlier this month and has soared around 40% over the last year. The pan-European STOXX 600 was down a more manageable 0.6%, mildly supported by modest gains in oil prices which lifted shares in energy stocks and by the first round of parliamentary election results in France which look set to give President Emmanuel Macron a huge majority to push through his pro-business reforms. Italy also offered some comfort after the eurosceptic 5-Star Movement suffered a severe setback in local elections after failing to make the run-off vote in almost all the main cities up for grabs. It spurred on debt markets. Italian government bond yields, which move inverse to price, fell to their lowest since January, Portugal’s tumbled to nine-month lows while France’s bonds closed the gap on benchmark German Bunds. “Macron doing well in the first round of the French parliamentary elections bodes well for him getting a majority,” said Lyn Graham-Taylor, fixed income strategist at Rabobank. “The fact that 5-Star did poorly in local elections in Italy also suggests a setback for populism in Europe.” The euro rose back to $1.1220 in the currency markets where anticipation is also building ahead of Wednesday’s conclusion of a two-day meeting of the US Federal Reserve.
Former employees accuse Colorado mortgage company of widespread mortgage fraud
Four former employees of a Colorado mortgage originator claim in a lawsuit that their former employer fired them for trying to blow the whistle on widespread mortgage fraud taking place at the company. The Denver Post has the details on American Financing Corp., an originator based in Aurora. Here’s from the Denver Post: “The mortgage originator allegedly misled at least a half-dozen banks and finance companies with faked documents and consumer loan applications, according to the whistle-blower lawsuit. The action in Arapahoe County district court claims managers at the company knew of the alleged mortgage fraud the employees discovered and, in some cases, worked hard to try to cover it up.”The four employees claim that they were concerned by the company’s alleged actions and brought those concerns to their superiors, only to be suspended and ultimately fired. Again from the Denver Post: “Some of the alleged fraud was brazen, including assertions that potential borrowers’ income tax returns were intentionally withheld to hide potentially adverse information, relying instead on their W-2 forms. The banks allegedly defrauded include JP Morgan Chase, Wells Fargo, US Bank, Flagstar Bank and PennyMac, according to the lawsuit, and other institutions include the Colorado Housing and Finance Authority.” According to the report, the company claims that the allegations are false and plans to “vigorously” defend itself.
Asian shares mostly lower after technology shares fall in US
Asian shares were mostly lower Monday, following the drop of technology shares last week on Wall Street. Japan’s benchmark Nikkei 225 slipped 0.4% in morning trading to 19,941.80. South Korea’s Kospi slipped 0.9% to 2,359.98. Hong Kong’s Hang Seng lost 1.1% to 25,756.52, while the Shanghai Composite index dipped 0.5% to 3,144.30. Trading was closed in Australia for a national holiday. Market players are watching central banks’ meetings in Great Britain and the US later this week. Analysts say the Fed is likely to raise interest rates, while the Bank of England is expected to keep them unchanged. The Bank of Japan is also meeting on monetary policy later this week, but little is expected to impact markets, they say.