No single ticker was named. Homebuilders & housing ETFs are one way for retail investors to get exposure. Not a recommendation.
Housing market requires MBS restructuring to unlock
The guest argued that the housing market is suffering from a 'shut-in effect' caused by low-coupon mortgage-backed securities (MBS) issued during COVID, which must be restructured to lower rates and spur purchase activity.
The argument
He proposed that the Fed should swap its $2 trillion MBS portfolio for Treasuries with the Treasury Department. These low-coupon assets could then be restructured into collateralized mortgage obligations (CMOs) and sold to yield-starved insurance companies.
The thesis, stress-tested
✓ What validates it
- ✓The Fed initiating a Treasury-for-MBS swap program
- ✓An increase in purchase mortgage applications and a correction in home prices in the 2027-2028 timeframe
▸ Risks discussed
- ▸The Fed may refuse to swap its MBS portfolio due to political or institutional inertia
- ▸Insurance companies may reject the restructured low-coupon duration if inflation expectations spike
Hear it yourself
"We have to restructure the treasury market and also the mortgage backed securities market to kind of undo what was done during COVID. You know, Janet Yellen, Jerome Powell, they all thought they were being helpful, but they weren't."
00:00 / 00:16