(New York)

If you have been paying attention to the mortgage market, you will see that some of the most worrying lending activities from the pre-Crisis era are returning. For instance, there has been a sharp recent rise in loans to non-traditional borrowers, or those who have trouble proving their income. The amount of such loans looks to have almost quadrupled in 2018 versus the year before. So far these loans look to be healthy, but there are concerns that in a downturn such mortgages could deteriorate quickly.

FINSUM: These loans are subject to more stringent regulatory standards than back before the Crisis, but this is certainly something to keep an eye on.

(New York)

While markets have calmed down somewhat from December’s chaos, there are still worries over the domestic and global economy. Part of those worries is the real estate market, which continues to sink into a notable slump that could either prove a blip or an important leading indicator. December homes sales fell 6.4% from the previous month and a whopping 10%+ from last December. The market is suffering from significantly elevated mortgage rates and a lack of starter homes. The big fall in sales is counterintuitive because of the currently strong labor market.

FINSUM: The housing market reflects interest rate rises in a very pure way. The big question is whether this is a leading indicator or a slowdown that is idiosyncratic to the sector. To be honest, we think it is some of both.

(New York)

The junk bond market may be coming back from the dead. The “December doughnut”, as it is being called, is now in the past, and the frozen market finally thawed this week with the first new junk bond sale since November. The market had gone 41 days without a sale until Tuesday, when $4 bn of new issuance went through.

FINSUM: A 41-day freeze and then 4 sales in one day totaling over $4bn. Demand was so high the companies were able to raise more than expected. Maybe the worst is behind the high yield market?

(Seattle)

Are you looking to find a good investment thesis for Amazon? Look no further than their growing private label business, which could prove a catalyst for expanding margins and share price growth. According to an analyst at Suntrust Robinson Humphrey, “The rise of private labels and exclusives is one of the least understood/most under-appreciated trends within Amazon”. He continued, “This strategy should strengthen the flywheel effect of proprietary offerings/better user experience/higher retention/spend/share gain, and should prove accretive to margins over time”. The profit margins on own-branded products are 7-15% higher than on other branded products.

FINSUM: Because of their huge user base, Amazon is in a good position to benefit from selling their own brand, as they have a ready audience. This will likely improve overall margins as the business expands.

(Houston)

With all the volatility in stocks and bonds over the last few months, oil hasn’t gotten much attention. Drivers will have noticed gas is cheap right now, as oil prices have fallen considerably over the last several months. But will it stay that way? Right now the IEA is forecasting solid global demand growth in 2019, which should keep prices strong, but that forecast is vulnerable to some big swings. The IEA warns that since the signals from the global economy are not strong, the forecast could have some considerable downside.

FINSUM: Oil will probably dance to the music of the economy this year. It does not seem to be a significant leading indicator at the moment.