Happy New Year ! I wish you the best of health, happiness, safety and prosperity for you, your family and friends.
Much to talk about today. The governor of New Mexico has declined to issue a posthumous pardon to Billy the Kid, the notorious Wild West outlaw. According to legend, Henry "Billy the Kid" McCarty killed 21 people, one for each year of his life. He was shot dead in 1881 by Sheriff Patrick Garrett after killing two deputies and escaping jail. He had been sentenced to hang. Governor Bill Richardson had been asked to pardon the bandit to fulfil a promise of clemency in exchange for testifying in a murder case. He declined, he said today, because of insufficient details about the pact between Garrett and the outlaw. I wonder how much time and money was spent on this.
And then there are the two Mississippi black women, the Scott sisters, whose life sentences were suspended after serving 16 years of life sentences for their part in a robbery. Oh yeah - the robbers (who only got 8 year sentences) got all of $11, yes eleven dollars, in the robbery. That was in 1995. Yup... Mississippi justice. Obscenely true.
And then there are the two Mississippi black women, the Scott sisters, whose life sentences were suspended after serving 16 years of life sentences for their part in a robbery. Oh yeah - the robbers (who only got 8 year sentences) got all of $11, yes eleven dollars, in the robbery. That was in 1995. Yup... Mississippi justice. Obscenely true.
How are you starting 2011. Here are some tips gleaned from a couple of coaching calls last week:
- Clean out old files. If you haven't been in that file in the last 4 months, toss it !
- Clean out your desk – eliminate clutter. A cluttered desk is a disaster.
- Go through your office and dump old broken electronics. Why are you keeping this stuff? Just in case what? Donate it to a charity and get your writeoff.
- Drop what isn’t working – get rid of last years bad habits
- Organize your office, your bookshelf, even your closet. (Note: a friend of mine organizes his shirts by spectrum colors. Remember ROY G BIV !)
- Reflect on the 1, 2, or 3 things that worked in the last year… and make a declaration of what they will be in 2011.
- Take a few hours to create your one page business plan – quarterly
- What will you do to make your business succeed this year
- Come in with a new attitude; focus on the prize; the new attitude is about winning If you don’t have the winning attitude, get out now.
- Get the games off your work computer – and every computer in the office. How much time was lost in 2010 in your own office, and throughout the company?
- NO FACEBOOK during the workday. Really no one needs to be that connected during the day.
The government, in their normal mode of throwing the baby out with the bath water, has been bringing in new, tough legislation for the mortgage banking community. Here is a comment from Greg Frost, a long time participant in mortgage banking.
" I am confident that the Mortgage Banking industry, is so vital to the ethical distribution of mortgage credit to the American public, that no set of industry circumstances, natural or legislated, will depose it from its position as the nations #1 mortgage resource. We Mortgage Bankers are the entrepreneurs of the Mortgage industry. We are licensed by our states and by the National Mortgage Licensing Agency. We take mandated continuing education, which by the way, the exemption of which, most banks lobbied congress to gain. As a result our Loan Originators are eminently more educated and regulated than those working for the banks. Every day, we put our cash, credit, and net worth where our mouths are, as we fund billions of dollars of loans and then sell them to bank investors, including the Bank of America.
”Capitalism and the entrepreneurial spirit that made this country great will not be stifled by a few banks, who themselves needed a government bail out, an infusion of your tax dollars, in order to survive. I think that we should just “consider the source” and focus on continuing to provide our fellow Americans with the best choices in mortgage credit, at the fairest prices, that are available in the marketplace today."
I have passed the Federal and State Licensing exams. Fewer than 50% of those doing loans in California in 2010 have done so. And no one working for a bank has. I wonder how many people doing loans at banks would be able to pass these licensing exams. Think about it ! So, if you or your friends are considering buying a house this year, or thinking about refinancing, I would appreciate your referral. As always, you can call me directly at 818.305.4695 or by email .
Best,
Les
Berman's Factoids of the Week.
"Kryptonite" made its first appearance on the Superman radio show, not in the comic book.
"Kryptonite" made its first appearance on the Superman radio show, not in the comic book.
Shirley Temple made $300,000 in 1938... but her weekly allowance was only $4.25 a week.
And now for Lou Barnes
The present today is slipperier to evaluate than usual for an odd reason: it is so similar to the turn of last year. Hardly anything has changed. Interest rates are the same, near 5.00% for mortgages, near 3.50% for 10-year Treasurys, both expected to rise last year as now. The lack of employment is the same, and so the dearth of tax revenue (our “thing to watch” at last New Year). The economy was then expected to accelerate in a recovery assumed to be underway, making the Fed’s QE1 and home-purchase tax-credits unnecessary, both to expire in spring 2010.
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| For the week of Jan 03, 2011 --- Vol. 9, Issue 1 |
In This Issue...  |
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| Last Week in Review: Traders were singing one minute only to scream the next. Read below to see why! Forecast for the Week: How many high-impact reports can you fit in a week? Find out below. Video View: Which credit card is right for you? Discover how to decide... plus learn about new rules that impact you! |
| Last Week in Review |
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| "Wild thing! You make my heart sing!" - By The Troggs. Traders found themselves singing one minute only to be screaming the next, as Bonds saw huge swings up and down of 100 basis points on multiple days last week. Remember, home loan rates are based on Mortgage Bond prices, so huge swings in Bonds causes home loan rates to shift as well. This underscores why it’s so important to work with a knowledgeable professional who understands how interconnected the market is and can help homeowners lock in at the most opportune times. To help make sense of the volatility, here’s a montage of the top 5 hits last week that Traders and Bond investors appeared to be singing... and why. #1 "Monday, Monday... so good to me." - By The Mammas and the Papas Last week started out with Bond prices receiving a nice bump on Monday thanks to strong demand for the Treasury Department’s auction of $35 Billion in 2-Year Notes. #2 "Bonds in low places." - To paraphrase Garth Brooks On Tuesday, the Treasury Department auctioned off another $35 Billion... this time in 5-Year Notes, which carry more inflation risk. That auction wasn’t received nearly as well and sparked a sell off of Bonds. To make matters worse, the sell off was exacerbated by the ultra-thin holiday trading volume. In other words, with many Traders out of the office for the holidays, there simply weren’t enough buyers in the market to offset the selling. So when prices dropped on Tuesday, the selling pressure gained momentum with each sale and the losses grew more dramatic. The end result was a drop of 100 basis points in Bond prices! #3 "I’m Back. Bonds have lifted. And raised the gifted." - To paraphrase Kid Rock What a difference a day makes! Just one day after Bonds dropped 100 basis points, the opposite happened and Bonds saw a huge upswing. How was that even possible? Bargain hunting and a strong performance by the Treasury Department’s 7-Year Note auction were the catalysts behind the move, as buyers came out in droves and pushed Bonds up 119 basis points! #4 "Home sweet home!" - By Mötley Crüe Volatility wasn’t the only story that hit home last week. The final S&P Case-Shiller Home Price Index for the year was also released last week. According to the report, home prices in 20 metropolitan cities fell 0.8%, which was below the 0.1% improvement that was expected and the sharpest year-over-year decline in a year. This was not a good report, and when you consider more foreclosures coming to the market, it is likely that home prices could remain under pressure for part of 2011. Stubbornly high unemployment has played a role in seeing meaningful improvement in housing. #5 "You’re unbelievable!" - By EMF The volatility continued throughout the week, swinging another 54 basis points on Thursday alone. But in the end - through all the ups and downs - Bonds and home loan rates were able to finish the week strong. That means home loan rates are still unbelievably low as we start the new year. That means you still have something to sing about. Despite the overall negative trend, home loan rates are still near historic lows... at least for the time being. That may not be the case in the weeks and months ahead. Call me at 818.305.4695 oremail today to start the process - it only takes a few minutes. |
| Forecast for the Week |
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| The Les Berman Weekly View... |
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| Which Card is Right for You? These days, most people use at least one credit card and many of us use more than one. And while it's certainly important to avoid amassing large amounts of debt, it's also important tomake sure you pick the right credit card for you. The following video from Kiplinger.com contains tips that can help you do just that. -------------------------- Economic Calendar for the Week of January 3-7, 2011 Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of January 03 - January 07
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And now for Lou Barnes
Those expectations were wrong, of course (and not found here), but are no impediment to forecasters today, who see the same acceleration underway. The economy is doing a little better now than in summer, but there is no new fuel for the domestic economy. In fact, compared to one year ago, headwinds are a bit stronger: the big stimulus of 2009 has washed out, leaving state and local budgets exposed; and housing is clearly in worse shape, and it is without any prospect for helpful policy intervention.
Other than non-recovery, the only two specific economic surprises in 2010: Europe fell into currency crisis, and Left-wing Democrats suffered an epic rout.
This peculiar stability begs a different kind of forecast. Sometimes an absence of visible change properly reflects an absence of underlying tension (1950s, mid-1980s to late 1990s...), and other times unsustainable trends are accumulating tension at, near, or past their breaking points but not yet broken. This forecast must also depart from the normal US-centric approach; economic globalization is happening at a pace beyond comprehension.
There are three large-scale unsustainables in play today, and all three will rupture; however, they are so very large that each could continue to build tension for years ahead. Stephen Hawking: “Time is what keeps everything from happening all at once.” Nevertheless, we have felt foreshocks from all three, and all are linked: Europe’s currency failure, US fiscal irresolution, and China’s trade manipulation and hyperbolic growth.
Europe. You can get in a nasty fight and called a racist for saying that culture matters; for denying Jared Diamond’s insistence (“Guns, Germs, and Steel”) that we are all the same people, that only geography, resources, and power matter; and get in bad trouble for arguing that national and regional cultures are durable over centuries.
We mediate the relative economics of cultures via currencies. The dreamy, one-world pretense of gold has never worked for more than a few decades, and then only among the richest nations, and then ended badly.
The currencies of the most productive cultures inevitably rise in value. They sell more things to others, and receive payment; as they receive payment, those who buy are less able to pay. They either buy less, or pay with currency debased in one way or another, worth less, and by that means buy less. That devaluation allows the weak to sell their own exports. Millennia-old truths.
The euro was an attempt at cultural unity where none existed. In one short decade the euro has become deutsche gelt, a continental prison that will not allow economic adjustment. The hyper-productive Germans run export surpluses inside Europe and out, euro-gelt pouring in, to be recycled as loans to the buyers of those exports. Payments on those loans must be made in euro-gelt, which the weak have no way to earn; their exports are locked into euro-gelt prices. To be competitive, the cost of their labor must deflate, and with it their domestic assets (homes, stocks), and their ability to make payments on loans foreign and domestic.
Europe has two ways out: true union or breakup. Germany could switch to a consumer economy and become a net importer from the rest of the euro-zone, and all 16 nations could surrender sovereignty and form one treasury, one parliament, one tax code, and one welfare system.
Ain’t gonna happen. Culture is durable.
Meanwhile, tension is building. Club Med cannot conceivably make payments on its current debt, and must reduce the balances owed by some form of default. Their IOUs are held by the banks of the rich, who are deep into pretense that these loans will be good. Everywhere in Europe a silent calculus is measuring the cost of continuing pretense versus breakup.
The moment of breakup will be painful, but will be mightily cleansing -- just as all shifts from the fantastic to the rational. The longer that Europe waits, the more expensive and disruptive breakup will be.
US Deficit. Our last two Presidents have been the only ones in modern times to campaign to the center and attempt to govern from a wing. Both parties have focused on their extreme “bases” in a malignant Roveism. Very odd. This country has had only one durable base: the center.
In the two months since the wing-wipeout, both parties have come to their senses, competing for the center. The Left lost the seats this time, but the Right heard the warning. Our government has gotten more done in two lame-duck months than the rest of the Obama administration and a lot of the prior put together: tax-bracket extension, partial FICA suspension, sustained long-term unemployment benefits, ratified START, and repealed don’t-ask-don’t-tell.
Congress-wise Joe Biden was sent up to the Hill to cut the deals, and in brutal signal did not inform his party’s Left until after it was over. We have not enjoyed competence of that kind -- both parties -- since Bill Clinton cut the budget-balancing deal in ’93, trading pay-go spending discipline for tax increases.
Except for the Clinton moment, the US budget has been out of control since 1963. The entire country is worried about deficits to the point of economic paralysis, terrified for ourselves and our children. Everyone in the center understands that neither the Palin nor Pelosi wings will decide the terms, and knows that nobody will be happy with the specific sacrifices, and knows the end result of fiscal discipline is absolutely necessary.
When the people are moving, politicians elbow each other to follow.
China. The all-time black box. Churchill called Soviet Russia “A riddle wrapped in a mystery inside an enigma....” China is so big and growing so fast that China itself cannot know what is happening to it.
Back to principles of trade and currencies. If you run a big trade surplus, sooner or later your currency will rise in value. You may deny, distort, contort, and delay, but sooner or later, upward revaluation is going to happen. Next, your avoidance maneuvers will have domestic consequences: you must put your wealth somewhere that it will not affect your currency, which makes you bubble-prone (see Japan). Also, if you peg your currency to another, you will import the other’s monetary policy: in this case, super-easy Fed policy brings to China overheating and inflation (note the reverse in Europe, in which German-driven tight monetary policy is crushing Club Med). Your certain-to-fail peg begets speculation, everyone trying to buy yuan-denominated assets to hold for the day that the yuan soars. That anticipatory scramble reinforces the bubble and inflation pressures.
Reports from China all through 2010 describe a wage-price spiral underway. Two laws and lessons, there: we have nothing to fear from inflation here because our wages are suppressed by foreign labor competition. China has nothing to suppress its wages. Second: once a capitalist economy enters a wage-price spiral, nothing will stop it except a recession. The longer you let inflation run without the pain, the worse the ultimate discomfort; but you can run it for a long time (see US, 1968-1980). China’s growth has been compounding at annual rates in excess of 10% for 20 years, the curve steepening beyond capacity some unknowable time ago.
I have no idea which of these three unsustainables will burst in 2011, if any, or all three. Each has a great deal of momentum behind it. See Japan, again: its unsustainable condition has run for 20 years, but will run on -- in 2011 spending $1.1 trillion versus $490 billion in tax revenue, borrowing 96% of the rest from itself. The three instabilities described here are more immediate than Japan. When one does break, the whole globe will feel the consequence, which will be to slow the world economy and suppress inflation.
Beyond that suppression, resolution to these three over-stressed trends will be very good news indeed. Past them, we can look forward to the next stage of global commerce, and nothing in economic history has held so much promise for the standard of living and well-being of mankind.
by: Lou Barnes
First, it’s important to understand that home loan rates are based on Mortgage Backed Securities, which is a type of Bond. Bonds typically help provide some built in "assistance" when the nation is suffering economic headwinds. For example, negative economic news serves to help Bond prices improve and rates decline, including home loan rates. This is helpful to have when the economy is struggling, as buyers of all products - including homes - need the extra incentive of low rates to be encouraged to buy. 
