Housing Bust 2.0, Energy Transition, FTC's Ban on Non-Compete Agreements & Inflation Reduction Act - A Comprehensive Look at Current Economic Landscape: (01-09 to 01-19)

Here an high level overview of what we will be discussing:
Housing Bust 2.0? ADip in Mortgage Rates Fails to Boost Home Purchases, Mortgage Lenders Struggle.
The Energy Transition is Accelerating & what the impact of the Inflation Reduction Act on Clean Energy and Transportation will be.
FTC's Ban on Non-Compete Agreement is being attacked and the negative impact on workers, consumers, and innovation non-competes have.

Let's Dive In!

Website: Wolf Street

Title: Dip in Mortgage Rates Not Slowing Housing Bust 2: Mortgage Lenders Sing the Blues
Link: https://wolfstreet.com/2023/01/11/dip-in-mortgage-rates-not-slowing-housing-bust-2-and-mortgage-lenders-sing-the-blues/

Here are the top takeaways:

• Mortgage applications to purchase a home have plunged by 44% compared to a year ago, despite the dip in mortgage rates. The current home prices though they have come down in many markets, and have come down hard in some markets are still simply way too high.

• Refinance mortgage volume has died: Applications to refinance a mortgage have collapsed by 86% from a year ago, despite the invisibly small uptick in the latest week.

• And this makes sense because hardly anyone would be refinancing a 3% or 4% mortgage with a 6% or 7% mortgage, except when under duress to extract cash.

• Mortgage lenders, whose revenues have collapsed as mortgage applications volume has collapsed, have spent the last 12 months laying off people and shutting down divisions. Some smaller operations have shut down entirely. Wells Fargo, once the largest overall mortgage lender and then the largest bank mortgage lender, is the latest to make the news with its additional efforts to step back from the mortgage market.

• CNBC reported yesterday that it had learned that the bank will now re-focus its mortgage business only on its existing bank and wealth-management customers, and borrowers in minority communities; that it is shutting down its business that buys mortgages that had been originated by third-party lenders; and that it is significantly reducing its mortgage-servicing portfolio through asset sales.

• All this will entail a new round of layoffs, on top of the layoffs in its mortgage business that started in April last year. The issue is not the credit quality of the existing mortgages. Mortgage and HELOC delinquencies, though they have ticked up from the record lows during the pandemic, remain very low.

• The HELOC 30-day-plus delinquency rate ticked down to 0% in Q3, 2022, in line with the lows during the Good Times, according to data from the NY Fed (green line).

• The mortgage 30-day-plus delinquency rate ticked up to 1% (red line), still far lower than before the pandemic. What the real estate and mortgage industries are lamenting is the plunge in volume of home purchases and the plunge in volume of mortgage originations, which have caused their revenues to collapse.

Newsletter: Grit Capital

Title: Energy Transition.
Link: https://gritcapital.substack.com/p/energy-transition

Here are the top takeaways:

• The Inflation Reduction Act provides the US with 10+ years of policy direction and creates a force-multiplier to turbocharge the $60B direct clean energy and transportation funding created by the 21 US Bipartisan Infrastructure Law.

• This provides tangible and measurable acceleration to advance new technologies and infrastructure. Electric vehicles are set to make up 33% of total light vehicles sold by 2030, and this will be fueled by a shift in consumer behavior, charging infrastructure being built out, tax incentives increasing, jurisdiction-specific mandates, and longer-range vehicles making EVs more viable.

• Energy storage is crucial to renewable energy, and lithium-ion batteries are leading the way. However, there is a risk because 95% of LFP Cathode manufacturing is produced in China, and there are patents around this process.

• When it comes to utility-scale batteries, you can see the evolution of the dominance of lithium-ion which is expected to continue. During 2022, global prices increased y/y across all forms of electric generation. New build solar and onshore wind remain cheaper than existing coal or gas plants in countries accounting for approximately 2/3 of global electricity generation, and offshore wind became cheaper than coal and gas for the first time.

• The world is in the midst of an energy transition, and solar power is playing a major role. Despite some challenges, the outlook for solar is bright, with installations expected to increase 18% per year.

• One of the key drivers of this growth is the falling cost of polysilicon, which is used to make solar panels. With enough production capacity to meet global demand, prices are expected to drop significantly in the coming year.

• This is good news for the fight against climate change, as solar power is a clean and renewable source of energy.

• Nuclear power is another critical piece of the puzzle, providing reliable, low-carbon energy. However, public opposition to nuclear power remains a hurdle to new investment. Education and awareness are key to changing this dynamic and unlocking the potential of nuclear power to help achieve net zero carbon emissions targets.