Purchase Demand | Not Yet (T)RID of the Chop

Takeaway: Last week's Mortgage moonshot proved short-lived as TRID hangover replaced TRID pullforward. Expect more data choppiness in the weeks ahead.

Our Hedgeye Housing Compendium table (below) aspires to present the state of the housing market in a visually-friendly format that takes about 30 seconds to consume.


Purchase Demand | Not Yet (T)RID of the Chop - Compendium 101415


Today's Focus: MBA Mortgage Applications

After jumping +27.4% ahead of the impending TRID implementation, post-implementation Purchase activity more than retraced the gain, declining -34% in the latest week.   On a year-over-year basis, purchase demand declined -1.2%, marking the first YoY decline since the start of the year. 


As we highlighted last week (Purchase Demand is Good, But Not That Good), it’s likely we continue to see excessive chop in the high frequency data over the next few weeks as lenders go live with implementation and purchase agents attempt to risk manage any early bottle-necks.  Moreover, the demand pull-forward will likely serve to juice both the New and Pending Home Sales figures for September as the bolus of pre-TRID demand flows through the reported volume figures. However, similar to the party-hangover dynamic observed across the Purchase application data the last two weeks, the illusory gain in September is likely to decrement reported October demand by a similar magnitude (late November releases).   


Handicapping the precise impact of the regulatory changes to transaction volume in the nearer-term is a largely quixotic pursuit – we’re content to let the data breath for another few weeks before taking a directional view on the underlying  level of demand. 


Rates, meanwhile, held below 4% for a second consecutive week as our Macro call for slower-and-lower-for-longer (globally) continues to manifest.  At current levels, rates remain a modest tailwind to both HPI and affordability.




Purchase Demand | Not Yet (T)RID of the Chop - Purchase YoY 


Purchase Demand | Not Yet (T)RID of the Chop - Purchase 2013v14v15 


Purchase Demand | Not Yet (T)RID of the Chop - Purchase   Refi YoY


Purchase Demand | Not Yet (T)RID of the Chop - Purchase Index   YoY Qtrly


Purchase Demand | Not Yet (T)RID of the Chop - Purchase LT


Purchase Demand | Not Yet (T)RID of the Chop - 30Y FRM




About MBA Mortgage Applications:

The Mortgage Bankers’ Association’s mortgage applications index covers more than 75% of mortgage applications originated through retail and consumer direct channels. It does not include loans delivered through wholesale broker and correspondent channels. The MBA mortgage purchase applications index is considered a leading indicator of single-family home sales and construction. Moreover, it is the only housing index that is released on a weekly basis. 



The MBA Purchase Apps index is released every Wednesday morning at 7 am EST.



Joshua Steiner, CFA


Christian B. Drake


CHART OF THE DAY: Are Trump’s Best Days Behind Him?

Editor's Note: Below is a chart and brief excerpt from today's Early Look written by Hedgeye Director of Research Daryl Jones. Click here for more information on how you can subscribe.


CHART OF THE DAY: Are Trump’s Best Days Behind Him? - z image day daryl


"...Are Trump’s best polling days behind him? It does seem likely (although the same can probably be said for Clinton). 


Trump is still leading the Republican nomination race, but as the Chart of the Day highlights, the polling aggregates are clearly showing waning enthusiasm for his nomination in the way of lower highs of support.  In particular, Ben Carson is now within 4 points of Trump.  In fact, in the most recent poll from Fox, Carson is within 1 point."

Forrest Trump

“For no particular reason I just kept on going. I ran clear to the ocean. And when I got there, I figured, since I’d gone this far, I might as well turn around, just keep on going. When I got to another ocean, I figured, since I’d gone this far, I might as well just turn back, keep right on going.”

–Forrest Gump


Last night, the Democratic contenders for President held their first debate. The conservative-leaning website Drudge Report ran a poll that showed overwhelmingly that Senator Bernie Sanders won the debate, according to 59% of the respondents.  Meanwhile, only 7% of respondents indicated they believed the current front-runner for the nomination, former Secretary of State Hillary Clinton, won the debate.


Despite the Drudge poll, by and large, the punditry from the National Journal to the New York Times declared Clinton the winner.  Arguably though, there was another winner at least in terms of getting attention during the poll, namely Donald Trump.  With his active tweeting during the campaign, Trump seemed to have garnered as much attention as many of the candidates on the stage. 


Some of his zingers included:


“Putin is not feeling too nervous or scared. #DemDebate


“The trade deal is a disaster, she was always for it! #DemDebate”; and


“Notice that illegal immigrants will be given ObamaCare and free college tuition but nothing has been mentioned about our VETERANS #DemDebate”


According to reports, Trump picked up 60,000 new followers (about 4 times as many as Clinton) during the debate. Last night, Trump’s top tweet had nearly 11,000 retweets and 17,000 favorites. Clinton’s biggest tweet? Just 3,300 retweets and 4,800 favorites.


In terms of how he is actually doing, Trump is still leading the Republican nomination race, but as the Chart of the Day highlights, the polling aggregates are clearly showing waning enthusiasm for his nomination in the way of lower highs of support.  In particular, Ben Carson is now within 4 points of Trump.  In fact, in the most recent poll from Fox, Carson is within 1 point.


So, is the Trump candidacy a bubble? Well, if you look at the Chart of the Day, it certainly bears some comparisons to over enthusiasm we see in the stock markets at times.  In recent cycles, the candidates that are leading at this juncture typically have not gone on to win the nomination or Presidency.  In particular, in 2004 Clark was up +5, in 2008 Clinton was up +25.6, in 2012 Giuliani was up +10.7; and in 2012 Romney was up +2.4.


So are Trump’s best polling days behind him? It does seem likely (although the same can probably be said for Clinton).  But certainly he is adding some color and excitement to the race.  So what the heck, we say Run, Donald Run!


Forrest Trump - run trump


Back to the Global Macro Grind...


We uncovered an interesting data point this morning relating to shipments leaving U.S ports.  Not to be confused with the "empty suits" we sometimes see in politics, empty containers leaving U.S. ports are surging this year.  In fact, the Port of Long Beach, CA handled almost 200,000 empty containers in September, which represented 1/3 of the total shipments that went through the port.


Between Long Beach and Oakland, exports of empty containers have outnumbered those loaded with exports for 8 straight months.   While this is growth, it’s not the kind we want to be too excited about.  This is obviously indicative of global demand that is anemic at best, especially given the strength in the U.S. dollar.  In aggregate, U.S. exports are expected to decline this year for the first time since the financial crisis.


In line with the increasing plethora of global growth slowing data points, the German Economic Ministry came out and cut their 2015 GDP growth estimate from 1.8% to 1.7%.  Certainly not a meaningful shift, but also telling since it’s the Germans and it is indicative of a view that growth is slowing in Q4 more than expected.  As of now, they are leaving the 2016 GDP growth estimate intact . . .


If the Germans (and J.P. Morgan for that matter!) cutting estimates weren’t enough, European industrial production came in at disappointing 0.9% y-o-y growth for August.  This is compared to expectations of 1.8% y-o-y.  As well, CPI’s across the continent are coming well below ECB target rates this month (France +0.1%, Spain -1.1%, Italy +0.2%, and Finland -0.6%). 


Slow Europe slow!


Speaking of Europe, next week we will be re-introducing Spain as one of our top sovereign short ideas.  Hedgeye special contributor Daniel Lacalle will be leading the call.  Lacalle is a renowned European economist, who previously worked at PIMCO and was a PM at Ecofin Global Oil & Gas Fund and Citadel.  He is the author of Life In The Financial Markets and The Energy World Is Flat and a lecturer for the IE Business School and Master MEMFI at UNED University.


Spain’s equity markets have underperformed many of its European peers in the year-to-date and are currently down -1.77%.  But with many Spanish economic data points coming in worse than expected, an election that is looming in mid-December, and a 10-year bond yield that remains priced to perfection at 1.80% (the same yield as the U.K.), we think there is increasing opportunity to generate alpha on the short side of Spain.  The call will be help on Wednesday October 21st at 11am eastern.  Ping for details.


Our immediate-term Global Macro Risk Ranges are now:


UST 10yr Yield 1.98-2.12%

DAX 98

VIX 15.94-24.61
Oil (WTI) 44.34-48.01

Gold 1140-1175


Keep your head up and stick on the ice,


Daryl G. Jones

Director of Research


Forrest Trump - z image day daryl

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October 15: VAC 3Q CC ; PW: 13620306

October 15: WYNN 3Q CC , PW: 55746426 


Station Casinos - Station, which has been privately held since 2008, announced plans Tuesday for an initial public offering that will return the company to the stock market. 


Takeaway: As evidenced by our long BYD call, we like the LV locals gaming market exposure. We'll have more to say on this name.

AIRBNB - Jersey City could soon have something New York does not. On Monday, Mayor Steven M. Fulop will introduce legislation to legalize the use of all short-term sleepover web services, like Airbnb and HomeAway. The law is expected to be approved by November.  In exchange for agreeing to let some of Jersey City’s 262,000 residents rent out a couch, a bedroom or even their entire apartment or house on Airbnb, the company would charge users the same 6% hospitality tax currently levied on guests at the city’s dozen hotels.  



CCL - As cruise lines continue to jump into the growing Chinese cruise market, Carnival Cruise Line and AIDA -- both owned by Carnival Corporation -- announced that they will have ships in the country by 2017.  The move by Carnival Corp. means that four of the company's 10 brands will have a foothold in China. Costa Cruises has been offering voyages in China since 2006, while Princess Cruises has been in China since 2014. In 2015, Carnival expects over 500,000 passengers in China, up from about 350,000 in 2014 -- a 43% increase YoY.


Takeaway: 2017 is shaping up to be a true test for the Chinese cruise market. 


Star Cruises - Star Cruises could be upping its deployment to Vietnam nearly four times in 2016, according to a report in The Saigon Times Online.  With 50 scheduled port calls in 2015, Star may be targeting upwards of 200 in 2016 with the SuperStar Libra and SuperStar Virgo, according to the report, sailing from Hong Kong and mainland China.



UBER - Uber is coming back to Broward County.  Broward County (Fort Lauderdale, FL) commissioners finalized a new ordinance Tuesday for ride-sharing services such as Uber and Lyft. The ordinance passed in a 6-2 vote. The amended ordinance comes after Uber suspended its service in Broward County on July 31 after the county passed new requirements for ride-sharing drivers, including county background checks and a mandatory chauffeur's license.



Macau Airport Traffic - Macau International Airport handled over 120,000 passengers during the National Day golden week of holidays in the mainland this month, 6% more than in the corresponding period last year, the operator says. 


Takeaway: A positive and consistent with the visitation data. GGR growth is much more difficult to come by. 


Macau Tourist Price Index -  The Statistics and Census Service (DSEC) indicated that for the third quarter of 2015 the Tourist Price Index dropped by 2.72% YoY to 131.46, the first decline since the third quarter of 2002.  Notable decrease were observed in the price index of Accommodation (-10.88%) and Clothing & Footwear (-6.96%); meanwhile, price index of Food, Alcoholic Beverages & Tobacco; Transport & Communications; and Entertainment & Cultural Activities increased by 5.87%, 3.94% and 3.14% respectively.



Macau Consumer Confidence - The Macau University of Science and Technology’s index of consumer confidence in the city fell by 5.09% to 81.57 in the third quarter of this year.  



China Macro - China's imports slumped by nearly 18% YoY to 924 billion yuan in September, while exports slipped by 1.1% YoY to 1.30 trillion yuan, Customs said. But that was an improvement on August's decline and better than the 6% drop forecast in a survey of economists by Bloomberg News.




  • Iowa SS GGR:  +2.1% YoY
    • BYD: +9.1% YoY
  • Missouri SS GGR: +3.6% YoY
    • PENN: +9.2% YoY

Takeaway: As predicted, September looking much better in regional gaming than August. Earnings visibility for BYD and PENN looks good.


In short, the economy is slowing; the ag commodity complex prices are crashing; the herd is fat and growing and consumers are consuming less red meat.  Therefore, the current set up for a crash in red meat is nearly perfect:

  1. Because beef is among the most expensive proteins.
  2. The strong dollar is hurting the export market for beef.
  3. U.S. per-capita beef consumption in 2015 will decline to 53.9 pounds per person, the lowest in government data that goes back to 1970. 
  4. Cattle futures are in a free fall and could crash further and stay low for an extended period of time.  As a result, the bubble in red meat prices is going to burst, and could be in a bear market for years.




On Thursday, October 15th at 1:00pm ET we are holding a Thought Leader call discussing the current crash in cattle prices and the long-term implications for the industry.  On the call will be James G. Robb, Senior Agricultural Economist and Director, Livestock Marketing Information Center. 


The call will focus on the following:

  1. Historical context to the current cattle market supply and demand dynamics
  2. The free fall in cattle prices
  3. The cattle life cycle and why the largest cattle herd expansion in history is now underway
  4. Why the “fat” inventory of cattle will continue to drive prices lower
  5. The ramifications of falling beef prices across the supply chain
  6. A time table for key industry events that could drive price down further



Jim Robb is the Senior Agricultural Economist at the Livestock Marketing Information Center (LMIC) and for 18 years has served as the Director. He has written several hundred articles and newsletters on a variety of agricultural marketing and cattle industry topics. Jim is a regular speaker at conferences throughout North America and has given expert testimony to the US Senate Agriculture Committee.


Prior to joining the LMIC, Jim was an Agricultural Economist at the University of Nebraska. He also has worked in the agricultural banking sector. Jim received degrees in Agricultural Economics from the University of California-Davis and from Michigan State University.


The LMIC began in 1955 and is a unique cooperative effort that supports market education, research, and outlook. Currently, the Center includes 28 US Land Grant Universities, Utah State University was a founding partner. The Center also includes six USDA agencies, and several associate organizations.



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Howard Penney

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Shayne Laidlaw