European Effect - Markets Higher on ECB Rate Cut

Vital Statistics:

	Last	Change	Percent
S&P Futures	1771.3	5.7	0.32%
Eurostoxx Index	3097.5	41.1	1.34%
Oil (WTI)	94.12	-0.7	-0.72%
LIBOR	0.239	0.000	0.10%
US Dollar Index (DXY)	81.39	0.903	1.12%
10 Year Govt Bond Yield	2.64%	-0.01%
Current Coupon Ginnie Mae TBA	106.1	-0.1
Current Coupon Fannie Mae TBA	105.1	0.0
RPX Composite Real Estate Index	200.7	-0.2
BankRate 30 Year Fixed Rate Mortgage	4.28

Markets are higher after the European Central Bank cut rates and we got a surprisingly strong 3Q GDP report. Initial Jobless Claims fell and came in slightly below expectations. Bonds and MBS are down small.

#Twittergoespublicat26.  Symbol is TWTR for those who want to watch at home. This is a punchy valuation at 12.4 time sales. The offering price was increased from $17 to $26, lets see if they got too greedy on the IPO the way Facebook did.

The advance estimate of 3Q GDP came in at 2.8%, well above the Street expectations of 2.0%. Remember, this is the advance estimate and it will be revised twice. Lately, we have seen the advance estimates come in too high, only to be revised downward - for example the first estimate for Q113 GDP was 2.5% and by the third revision it ended up being 1.1%. Given the differential between the Street and the government, I suspect the number will be revised downward.

There had been chatter in the marketplace that Nationstar (NSM)'s pricing had gotten worse and they were backing out of the market. Well, today, we saw that there was indeed something wrong; as the company missed its earnings estimate in a big way. Pro-forma EPS were $1.08 vs the Street at $1.27. They took down guidance for full year 2013 and 2014. They also announced they are selling their wholesale channel to Stonegate (SGM). Some retail The stock is down 8 bucks (about 16%) pre-open. 

The mortgage REITs have been announcing earnings and for the most part, they were flat on the quarter with regard to book value per share. They have de-leveraged a lot over the past quarter, and I would almost go as far as to say that their MBS (and TBA) selling is probably close to finished. Many are lowering duration by switching to hybrid ARMs and increasing credit risk while lowering interest rate risk. REIT selling has been one of the reasons why secondary margins have been getting hit across the board. 

Fannie Mae reported good earnings per share and will pay Treasury $8.6 billion in the third quarter. The stock is up 6% or so pre-market

Merger mania in the home-builder space. Earlier this week, Tri Pointe Homes (TPH) announced it is buying Weyerhaeuser's home building unit for $2.7 billion.  Now Toll Brothers (TOL) is in a deal to buy Shapell for $1.6 billion to increase its California exposure. As we have seen, financing availability has been a case of the haves and the have-nots. If you are big enough, you can get amazing financing terms.

Brent Nyitray, CFA

Director of Capital Markets

iDirect Home Loans

National Asset Direct

Dellacamera Capital Management

1010 Washington Blvd, 6th Floor

Stamford, CT 06901

203-817-3614 (w)

917-841-4938 (c)