On today’s episode, Editor in Chief Sarah Wheeler talks with Lead Analyst Logan Mohtashami about Trump’s plan for a possible shadow Fed president to bring down interest rates.
Related to this episode:
FHFA Director Pulte calls on Powell to lower interest rates | HousingWire
https://www.housingwire.com/wp-admin/FHFA%20Director%20Pulte%20calls%20on%20Powell%20to%20lower%20interest%20rates
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Con
Related to this episode:
FHFA Director Pulte calls on Powell to lower interest rates | HousingWire
https://www.housingwire.com/wp-admin/FHFA%20Director%20Pulte%20calls%20on%20Powell%20to%20lower%20interest%20rates
The HousingWire Daily podcast brings the full picture of the most compelling stories in the housing market reported across HousingWire. Each morning, listen to editor in chief Sarah Wheeler talk to leading industry voices and get a deeper look behind the scenes of the top mortgage and real estate stories. Hosted and produced by the HousingWire Con
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NewsTranscript
00:00Welcome, everyone. My guest today is lead analyst Logan Motoshami to talk about Trump
00:10preparing for a possible shadow fed presidency to bring down mortgage rates. Logan, welcome
00:16back to the podcast. It is wonderful to be here, Sarah. I got to tell you, having the
00:23president of the United States share your article in this environment has been absolutely a joyful
00:30experience. The messages range from very hateful to very happy to congratulations to what the hell's
00:42going on. But it just reminds me, if people don't know me, I like detest politics. I don't care about
00:50it. Don't watch it. Don't watch TV. I don't. I even have friends that I've gone to their weddings
00:55that I've never I will never talk to them ever again, because all they want to do is talk about
00:59politics. I've like deleted their there. I've deleted their ability to message me, call me or
01:04anything. Unless I see them on the street, I will never talk to them because they want to talk
01:08politics. So in this case, today's conversation is actually going to be like, why Trump sharing my
01:16article really got me thinking that he is prepping himself and his administration to start the shadow
01:25fed president premise. Because you and I, while we were talking yesterday, we always say that, man,
01:31anything could happen. President Trump was meeting with Powell the exact time that, you know,
01:37we were talking and then people started mentioning about it. And I said, I retweeted a lot of people
01:44say, Hey, guys, it's not shocking that the president of the United States shared my article
01:50on truth social left it up there for 18 hours before, you know, tweeting anything else. What
01:55do they call it actually on truth social? It's not tweeting. It's like truth posting or something
02:00like that. Retruthing or something? I don't know. Yeah. So tactical, right? I don't care so much about
02:06an answer. I always want to figure out why. That's why we always say we want to be the detective,
02:10not the troll. And I believe that he is prepping his team to get ready to start the shadow fed
02:17president movement going out in the future. It makes sense timing wise, because, you know,
02:23Powell's term is up in 2026. And so we're close enough to that. Plus, he wants to move markets. I
02:30mean, Trump wants to the bond market to be like, you can believe in this. And I can't do anything to
02:36Powell. He's tried and tried. He tried, just like you said, just the other day. Powell's
02:41resolute. So his options are limited. So for those that might not know what we're talking about,
02:48in October of 2024, Besant talked about, we believe that we can imply a shadow fed president,
02:57meaning that he's going to be the next fed chair, and he's going to talk the markets down by implying
03:05that they will cut rates aggressively or moderately or whatever, when he's there. So bond traders,
03:13and this is a good lesson for everybody. Why? Why haven't there been any bond vigilantes?
03:19Okay, in the history of America? Okay, so we're having this discussion, the 10 year yields at 4.39%.
03:26What the hell happened to the deficit? And the tax cuts? And the, you know, the bond market is going
03:32to go against us. Bond traders are here to make money. They've always been here to make money.
03:38They're not ideological people, right? Ideological people trying to make money get their hand to to
03:44them, right? And they get out of a job. So bond traders will go with where they think they can make
03:50money. This is why we always talk about channels with the 10 year yield, right? This is why in the
03:54last decade, I said, Hey, listen, we're just going to range between 1.6 to 3%. Bond traders went with
03:59that. All we heard about is deficits, deficits, we're broke, we're broke. We barely, you know,
04:04stayed above 3% for any kind of duration. But here, bond markets are in a range that is perfectly
04:12acceptable. Like as the labor, today, the GDP came out 3.8% GDP growth, right? By the way, for any
04:19economic nerdy people, we imported growth. This means that the trade data was really tilting the data
04:26back in Q1. It's really tilted this report. So average it out, not much is happening. But
04:31be careful on reading about wild GDP data, both negative and positive. But here, the bond market
04:39isn't doing what the Fed or what Trump wants. For the longest time, Pulte was talking about, you know,
04:47President Trump is, you know, cutting spending and 10 year yield is down, you know, mortgage rates are
04:52lower. Now, it changed on Sunday when he, when Pulte talked about, we need the Fed to cut rates. And then
05:00Trump puts my article up for 18 hours, then he meets. This is tactical. This is all a tactical setup,
05:09because I don't think the trade war is going as, as, as good as he wants. And he wants rates to go
05:16lower. And I think this is the groundwork of setting up for the next stage of getting the shadow Fed
05:23president into there. Okay, so a couple of things. People may not know what article you're talking
05:29about. So talk about that and then define bond vigilantes. Okay, so on last Sunday, when this
05:38comes out, it's going to be Monday morning. But the previous Sunday, Pulte came out and said, you know,
05:43the Fed needs to cut rates, enough's enough. So we wrote about that on Sunday. And then the day that
05:49Trump meets with Powell, that morning, very early, he tweets it or truth posts it, whatever they call
05:56it, leaves it there for 18 hours or so. It was a very long time, meets with Powell, tells him you got
06:02to cut rates, you're wrong. So a bond vigilante is a boogeyman that was supposed to like bond market
06:12is going to sell the 10 year yield and force the government to spend. Right now, people could say
06:18that in Europe, the UK had a bond vigilante moment. Remember, we're the US, we're not the UK. And for
06:26about 60, 70, 80 years, people have said that the bond market is going to regulate government spending,
06:32they're going to shoot the 10 year yield higher and there hasn't happened. So when I say that to
06:38for people, why haven't we seen bond vigilantes when supposedly we've been broke since the 1930s
06:44or 40s, especially after all the World War II spending with them? Because bond people here to
06:51make money, right? You as a bond trader are going to make money. You're not going to, if you're an
06:55institution and you, the Fed is cutting rates and you're trying to say, I believe in the principle,
07:01you're going to get fired. Homie, you're gone. Go back to your wife and go, honey, out of principle,
07:06I was going to sell the 10 year yield and short it. Oh yeah. Out. That's why you haven't seen bond
07:13vigilantes. It's a nice boogeyman, but it's never been here. So in this case, the 10 year yield,
07:19how it's trading looks perfectly fine. So he wants it lower, right? And he knows that if he can get
07:25the Fed to just cut 1%, that trading bandwidth where you can get yields can come lower. I'm telling
07:32you, Trump would be perfectly happy if the 10 year yield was probably at 380 to 480.
07:36425, its spreads were normal. That's probably all he needed. That obviously hasn't worked. So
07:42in this context, I thought about it. You wouldn't share my article and then go meet the Fed unless
07:50you have something in the background. And I think today, by the way, no one talk about tacos to the
07:57president, please. Any reporter out there, do not ask or talk about tacos. What is occurring is that
08:06China, for example, is being stubborn. We haven't had a lot of trade deals. So every month that goes
08:12by, we get closer and closer to the midterm election. So, and plus the courts and what's
08:19going on here, you know, what can he do? What law permits him to do what? It's getting a little
08:24bit hectic. So I think he feels much better because he saw this during COVID. He saw the U.S. economy
08:29outperform with lower rates. He's not quite sure if that can happen here. So I think this was just
08:36the groundwork. So if things don't go for him, then, you know, the shadow Fed president theory,
08:43whoever he wants to pick is going to come out there and go, hey guys, listen, bond traders,
08:46I know you're here to make money, guys. None of you are principal people. There is no bond
08:52vigilante. We are going to cut rates and get ready, you know, and I think that's the mindset of what we
08:58saw in the previous week. So from your perspective, once he starts this, which we haven't really seen
09:06yet, I mean, because you think it's going to be worse, right? Unless somebody else, he's only
09:12really brought him up, which is funny because Kevin Walsh is one of these guys who just constantly
09:17bashes the Fed and then now wants to be ahead of it. So there's a lot of people who just really
09:22don't like him for that. In any case, he's the person that Trump has talked about, which means
09:28he's probably made a deal with Trump. Yeah, I'll do what you want.
09:35So if you're out there, you're sitting there, you're in real estate, you're in mortgage, you're like,
09:40just tell me when are rates going to go lower?
09:44Sarah, you keep on asking this question for that. I tell you, until the labor market runs,
09:50here's a really good example. This is a really good example. Today, inflation data,
09:56PC inflation headline, 2.1%, core two and a half. We're pretty much at like the bottom end range
10:02of inflation. By the way, we should ban all men from doing dual access charts because by the way,
10:09everyone said, Arthur Burns in 1970s, we're going to have the second wave of inflation is going to
10:14start in 2024. Guys, it's literally June 2025. And if we don't have a trade war, we're not even
10:21talking about inflation anymore. It's just the trade war is the reason that the Fed has raised
10:26their inflation expectations. So the growth rate of inflation looks really tame. If you saw that,
10:33you're thinking, wait a second, is the Fed really behind? And the Federal Reserve might say,
10:38yeah, maybe if we didn't have to worry about this trade war, we may be talking more dovish.
10:44But in any case, bond market didn't really care. It was not too much action on Friday morning after
10:52the report. So the growth rate of inflation has fallen. But what have we've always said?
10:55Paper, rock, scissors. Sarah Wheeler, the bossy boss. You know, you keep on asking me the same
11:04question I keep on telling you. Labor over inflation. Jobless claims is ticking up the
11:10four-week moving average. So we're building a little bit of a higher base, but we haven't broken
11:15yet. And that's why I've always said since 2022, a lot of people were going to think that if the
11:20growth rate of inflation fell, rates would go lower. But this was always about the labor market because
11:25the Fed made policy about the labor market. And 65% to 75% of where the Fed funds rate and 10-year
11:31yield of mortgages is still Fed policy. Where I think one of the confusing things is like,
11:36this has not been a normal year for many reasons, but the tariffs, right? The trade war, the Godzilla
11:42tariffs, as you call them, on, off, on, off. And now like this further thing with China, because I
11:47think people thought, okay, maybe we are going to see the imports from China become normal, which would
11:54stave off some of that unemployment. And now it seems like that's back on. It's very hard to know
11:59what the unemployment situation is going to be like. What's the next report? When's it going to
12:03finally come through?
12:05It's one of the reasons why the Federal Reserve has said, we're going to sit and wait.
12:10Now, if jobless claims data is at 289,000, we're having a different conversation.
12:17But the four-week moving average is around 230, around there. So to them, they've always said,
12:22remember, the Federal Reserve finally came out in public and admitted it. Jerome Powell said on TV,
12:27he said, oh, by the way, we track jobless claims and it's still low. So there are labor triggers. I
12:34would say that the last jobs report, so this week will be jobs week, residential construction
12:40workers had a slight decline. So we're keeping an eye on this, but the US economy is one bad bleep,
12:48bleep, bleep, man. Oh, goodness gracious. You think about a 14-year period where we've had some
12:53of the most biggest bearish people who sold their soul to the devil to prostitute doom porn 24-7 for
13:0014 years and to absolutely get their heads handed to them in the United States of America. And by the
13:05way, if you're a guy over the age of 50, you're done, you're cooked. So I tell you, younger men,
13:09younger men, please do not follow your elderly brothers or fathers or bosses who are telling
13:16you, the fat is destroying everything. You have one life to live. They are too old. They're done.
13:23They're finished, right? Wait, aren't you going to turn 50 this year? I'm going to turn 50,
13:29but I'm not an anti-Central Bank person, right? Guys, it's not, listen, not all doomers are anti-Central
13:36Bank people. There's a lot of crybaby progressives out there, but all anti-Central Bank people are
13:43doomers. This is nothing. These people are crazy, right? So for the younger generation,
13:49this is a dying old man cult. And they got some crazy old ladies with them too. But in any case,
13:55you don't want to follow this crew. You have the privilege of living in the United States in the
13:5921st century. You won the golden ticket, man. Go back to like the 1700s. I mean, things used to be
14:05really tough, right? And now you got it. You got air conditioning. You got AI apps. Oh my God,
14:13Sarah, I got an AI video creator. Lord have mercy. We are all, no one is saying. You can't give me an
14:19AI like things, but oh, now I got AI. Oh man. Oh, you should like handcuff me strap. Don't let me use
14:28use the phone anymore. In any case, you know, when we think about the US economy and how resilient it
14:36is, and we were joking about this on Friday morning, like, like, you know, what are people
14:42not getting? It's what we talked about. It's the honey badger labor market. And if people go back to
14:47all of our work going from the COVID-19 recovery model, when we retired that model on December 9th,
14:542020, we outlaid the case for a labor recovery that nobody's ever going to see that we should
15:01get all the jobs back lost to COVID by September of 2022. Roughly got that right. We're going to
15:06get 10 million job openings. We got up to 12 millions. The labor market is tougher than what
15:11people, because the US economy is tougher. And why is the US economy tougher? Qualified mortgage in 2010,
15:17the 2005 bankruptcy reform laws. If we are a consumption-based economy that has deficit spending,
15:22because we're elderly, like people like, like the income data came in really strong. You could look
15:27at it in social security. We have money into the system. So you've got to break this. Something's
15:33got to break this. And this is why everyone's, this is why I could understand why a lot of people went
15:37full 100% recession, because they thought the trade war in itself, if it, if it stayed, if Godzilla
15:43tariff stayed 100%, that that would be a shock that the economy, but we are one badass economy,
15:50man. We are one badass. Don't waste your life looking in the mirror and go, Oh my God,
15:56everyone's broke or something like that. So we have labor triggers. We have early labor triggers
16:01that have worked for, for decades. Jobless claims have to start perking up to a certain percentage
16:08tied to the civilian labor force. If you nerdy people know what I'm talking about, that's worked
16:13post-World War II. We look at residential construction workers. We did saw a decline. We're keeping an eye on
16:19that. And if you follow that, that is a functioning model. So whenever you ask me, when are rates?
16:25I say rates can stay in a range, right? Oh, the forecast for 2025, 10-year yield, 470, 380. We got
16:32what? 479 to 387. Mortgage rates, seven and a quarter to 5.75. We took everything down. If the
16:40economy's breaking, it could get us there. Why? The only two times mortgage rates got near 6%
16:45were both economic growth scares. Silicon Valley banking crisis. And then last year when the labor
16:52data was getting revised lower and everybody was saying the recession started in October of 2023 and
16:57oh my God, and that didn't happen. So have faith in people that have models, Sarah Wheeler. You and I
17:05talked about that the first time we were on stage together. Believe in people who have economic models
17:10because they're not ideological people, right? They just simply look at it and certain things
17:15have to crack before we get there. So rates just stay in a range, right? And if you guys look back
17:20at it, just look at a 10-year yield chart for the last five years, waves, channels, okay? Fed policy,
17:27economic expectations, inflation, growth, all these things. It's stayed in that range for a reason.
17:33I mean, it's amazing. And the economy being so strong, the honey badger labor market, which I
17:40think is still one of my favorite descriptions that you've come up with. Oh, we brought the gif
17:45out today when a honey badger was taking on a lion. And it's just, it's 2025, guys. It's 2025. So many
17:53people put everything into the inverted yield curve, which is a market related, which is even part of
17:59the sixth recession, red flag model, but the labor triggers don't break. And if you don't have labor
18:04triggers breaking early, this is why we always show those residential construction charts. When
18:10you visually see it, it's so funny. Not a lot of people ever seen that chart. When they see it, they
18:13go, wait a second. Well, so, I mean, this is good. This is very good. It's good for the, you know,
18:20our country, all that stuff. It's just not good for mortgage rates. And this is the hardest thing
18:25about being in an industry where it's so tied to rates is like, it's not like we want, oh, I hope
18:29a lot of people lose their jobs. But unless some people lose their jobs, unless something happens,
18:34we're going to be at this level. And the second article I ever wrote for HousingWire is that a
18:39stronger economy might not be good for housing because rates will go up. And that's why I like
18:45to do that existing home sales chart going back to 1968, where you see sales fall, its rates rise,
18:50and then all of a sudden a recession happens. And what happens during a recession? Why do home sales
18:57tend to start growing on a risk? Because rates fall, right? So you build a period of time where
19:01wages grow, household formations grow, you have a lower sales base, rates fall. And I mean,
19:07think about it in this way, the home builders, the new home sales data hit a multi-year high in the
19:14sales print. And they're still in 2019. They are still elevated versus the existing home buy at sub 6%
19:21mortgage market. You know, that's just the way they did. So I could totally understand the
19:26frustration. It's like you sit here and you see this is happening, but, and you see the new home
19:31sales sector all the way up here. And, you know, the existing home sales quite doesn't have that.
19:37And that's one of the reasons why I think Trump, I think in the background, since this has been the
19:41baseline case for them since the start, as an administration, they went in and said, hey,
19:46if we could bring mortgage rates down and people start buying homes, we could really push that as a
19:49success. Cause that hasn't been happening under Biden and stuff. So, but trade wars aren't easy.
19:56Economic cycles aren't easy. You can stick to your models and dive yourself into the data and
20:02people have lives and nobody wants to do that, but somebody like me loves this stuff.
20:06So you do it 24 seven. Well, thank you so much for guiding us through that.
20:11Who knows between now and when this actually publishes.
20:15Yeah. It's going to air on Monday and who knows 27 crazy things could happen over the weekend.
20:20And this is that, but, but you know, the, the main point of this podcast is that
20:25if things don't go right, let's, let's kind of get prepared for a shadow fed president run here,
20:31because this is something they talked about before Trump won. When Trump was winning
20:37Mnuchin, the old treasury, God, I missed Mnuchin would have been great. What would have happened?
20:44He's talking about, you know, yield curve control. We don't want the 10 year yield above 450. So
20:50you can see this is part of the game plan. And it looks like, Hey, if Powell isn't working with us,
20:56we will start the process. And Trump said that a few weeks ago, why would I fire him when I could
21:01replace him? Uh, uh, uh, very soon. So just, just think about that. If the 10 year yield doesn't
21:07go down and mortgage rates don't go down, don't be shocked about this whole shadow fed president.
21:12I know a lot of people didn't take it seriously, but you know, you can't fire him. And with us,
21:17with the, with the court saying you can't, this is the only option he has. And Trump has the
21:21personality to do something like this, you know? So he does. Yes, he does. Well, thank you. Once again,
21:27everyone go look at the tracker too, cause I know it's going to be amazing. Most up-to-date data you
21:32can get on the housing market. Yes. And one last thing we're laughing cause, um, you know, Mike Simon
21:39and Mike Simon said and myself work together, but, uh, it's funny. There are a lot of people out there
21:44that don't know Mike and I actually work and we work off the same data lines the way he it's funny
21:52the way, the way Mike does it. Mike is purely just working off of his inventory data. And the way
21:57I do it is that I incorporate my economic models into the tracker, but we're both basically working
22:03off the same data line set. Yeah. I think the only difference Mike and I really had this year is that
22:08my price forecast was, was lower than his to start off the year. But outside of that, we have the same
22:13data. We're working off the same things. We're the only ones that really look at the tracker before
22:17the weekend. So it is funny to me that people, um, Mike's a much nicer man than I am, you know? So me,
22:24I just want to go after everyone. I want to get every man in America, put them in front of a camera
22:28in front of his wife and kids and get them to forecast and model. And Mike's a gentleman, me,
22:32I just want war. So, uh, our personalities make a scene that we're like in two differences,
22:37but we really are working off the same data. You absolutely are. It is a strength for us.
22:42Okay. Logan, have a great weekend. We will talk again soon.
22:46Pleasure.