Good Monday,
The mortgage rate hysteria continued last week. Market indicators are similar to those that occurred before the 2009, 2000, and several other stock market crashes. The Elliott Wave Theory says that it's time for bonds to come back..sooner or later. What this means to you and to me .. do it now. Get off the fence. Look at these charts in this video.
The retailers are saying that this is the best retail holiday season in at least 5 years. And countering that positive news is some more absolute stupidity - "The Center for Science in the Public Interest (CSPI) files a lawsuit claiming McDonald's toys entice children to make unhealthful food choices." I'm stunned. I was going to opine that perhaps the parents have to learn to say "NO" to their precious screaming offspring. And then I remembered that so many parents today are more interested in being 'friends' with their children rather than being parents and doing what parents are supposed to do - educate, direct, show by example, say 'no', help (as opposed to completely doing the kid projects at school), discipline (I can't possibly do that!), and perhaps even taking responsibility for what the kids do.
Maybe the CSPI should file lawsuits against people who have cancer. After all, these people have a genetic issue that could have been prevented if they had willingly terminated their lives in infancy. Or shortly thereafter. I'm sure that the CSPI could find a basis for reducing the costs of all medical care by suing those who have any affliction, other than the common cold, or the flu. After all, everyone is concerned about the rising costs of medical care. Maybe the CSPI would advocate revoking the citizenship of anyone with any disease requiring medical treatment. The argument would be, of course, that the ancestor who came to the US, anytime in the last 350 years, failed to disclose their genetic disposition to such disease, and thus would be guilty of lying or failing to disclose such on their immigration application. (I don't care such disclosure was not necessary back then... it should have been in CSPI speak. )
CSPI and you other idiots - SHADDUP !
So, just for fun, here is some history about Santa Claus .
I hope that all of you have a great holiday. We're over - tomorrow, Tuesday, is the shortest day of the year, and an eclipse. Enjoy the coincidence. Drive and fly safely, and don't eat anything that you don't want to.
And as we go forward into recovery in 2011, remember that I would like your referrals to your friends and family who want to buy property or to refinance this year. And I thank you in advance.
Les
And the Factoids of the Week:
Good News: A Karaoke singing of "We are the World" burns 20.7 calories !
Left on its own, 1 ton of iron can turn into 3 tons of rust.
Do you want to write an article for my newsletter. Call me at 818.305.4695 .
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| Les Berman CMC Senior Mortgage Advisor NMLS ID # 227675 First California Mortgage Office: 310-271-1588 Cell: 818-305-4695 Fax: 877-707-8823 E-Mail: lberman@firstcal.net Website: www.firstcal.net/berman |  | ||||||||
| For the week of Dec 20, 2010 --- Vol. 8, Issue 51 |
In This Issue  |
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| Last Week in Review: The Fed met, and Congress passed the Tax Cut Bill. But what do both of these mean for home loan rates? Forecast for the Week: Housing, inflation, and jobs news - all in a holiday shortened week. View: As you unwrap gifts this holiday season, don’t throw the wrapping paper in with your Yule Log... find out why, and other tips on keeping your holiday season safe and fun. |
| Last Week in Review |
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"All good things must come to an end..." or so the popular saying goes. And right now, many people are wondering if this sentiment holds true for the historic low rates we’ve seen this year. Here’s what last week’s news suggests. 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. But now, the sharply higher expectations for future economic growth has caused rates to climb - particularly including home loan rates, since the Fed announced its second round of "Quantitative Easing" or QE2 on November 3rd. With QE2, the Fed will purchase $600 Billion in Treasury Securities through mid-2011 to keep our economic recovery on track. But is there any likelihood rates can rebound? Many experts expect that home loan rates will continue to move higher over time because:
But the good news is that home loan rates are still extremely attractive right now. If you have been thinking about purchasing or refinancing a home, call me today at 818.305.4695 or email me now to get started. Or forward this newsletter on to someone you know who may benefit from today’s historically low rates. |
| Forecast for the Week |
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| The Les Berman Weekly View... |
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| Make Your Holiday as Safe as it is Happy The holiday season is a special time of year, but the Consumer Product Safety Commission (CPSC) wants to remind everyone that it can also be dangerous. So the CPSC has issued a number of safety tips for the holidays and a holiday safety video to help keep families healthy, safe, and happy this season. Here are just three of the important tips that the CPSC posted on its website: 1. Choose Age-Appropriate Toys. Look at the age recommendation on the toys you are choosing and match that recommendation to your child. Avoid toys with small parts for children younger than three-years-old. Those small parts can cause a child to choke. For children under six-years-old, avoid play sets or building toys with small magnets. A child can swallow those magnets, which can result in a serious injury or even death. Starting at a young age, teach your children not to put toys in their mouths. 2. Gear Up. If sports-related gifts such as ride-on toys, bicycles, skates or scooters are on your gift list or around your house, make sure to include helmets that are sized to your child’s head and other appropriate safety gear. And then, make sure your child wears the gear properly EVERY time he or she uses the toy or sports equipment. 3. Plastic Wrap. Keep a trash bag at your fingertips while your kids are opening presents. That way, you can immediately throw away plastic wrappings and other toy packaging before they become dangerous playthings. As an added bonus, it makes your cleanup faster, too. Plus... Here are two bonus tips from the CPSC’s Twitter account:
You can also follow the CPSC on Twitter at http://twitter.com/OnSafety and even watch safety videos on YouTube at http://www.youtube.com/USCPSC. Have a safe and happy holiday! -------------------------- Economic Calendar for the Week of December 20-24, 2010 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 December 20 - December 24
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And now for Lou Barnes
The bond-market blowup seems to have topped: 10-year T-notes touched 3.60%, and low-fee mortgages 5.125%. Each has rocketed one full percent in one month.
In some ways this explosion makes sense, but in others it’s been downright weird. The sensible: we were way overdue for a technical correction from the straight-line drop in rates from April to August. Markets that decline in straight lines rebound in straight lines.
An economy under-performing in spring and summer led to thoughts of double-dip, and now the economy is performing better than forecasts, concentrated in retail sales, up 1.2% in November, and October revised to plus 1.7%; and in manufacturing, November production up .4%. A pop in export volume is a good hint for the “why” in manufacturing; the big-business types are happy, their global engines humming. Even the small-biz NFIB survey is an inch above two-year bottom. New claims for unemployment insurance have held lower in the last two months, 420,000 weekly.
These are legitimate improvements, consistent with an economy sputtering along just above stall-speed. Gain a little growth altitude, rates up; lose a little, back down.
The dividing line between reasonable and weird has been the reaction to two government stimuli: the tax-rate extensions and QE2. These have given bond investors a case of eye-bulging, screaming bejabbers: conviction that the US economy is now strongly self-sustaining, accelerating into 4% GDP growth and certain inflation.
When measuring economic stimulus, consider a water faucet. If water is trickling forth, so it will until you turn the handle. This “tax-cut extension” was an increase in after-tax income ten years ago that has flowed on at the same rate ever since, the economy completely adapted to it by 2004. New stimulus would require turning the handle; this extension has no force of impact at all.
QE2 frightened everyone except us central-bank junkies. All civilians saw it correctly as money-printing, but cannot be convinced that it’s necessary and non-inflationary money-printing. Perfesser Bernanke went on “60 Minutes” to try, and made it worse.
QE2 is a big thing: the Fed is buying the equivalent of all net Treasury borrowing through April. More powerful, it is buying long-dated paper at a rate at least 2.5 times new issuance. To get this interest-rate volcano going, existing holders of long Treasurys have had to sell at a rate far faster than the Fed is buying, enough to overwhelm market buyers, too. An all-out skedaddle, a true and unseemly panic.
Another marker: the Fed met on Tuesday, and its post-meeting press release confirmed standing policy. The bond market fell apart, again. What were these sellers expecting? QE2 stoppage? In the absence of pre-meeting hints, inconceivable. The market seemed frightened just to be reminded what the Fed is up to.
Financial market people do all they can to ignore housing, hoping that one day it will just go away. On current trend, it might. This notion of consumer-based economic acceleration is fatally incompatible with all four home-price gauges reporting new declines (CoreLogic, Zillow, FHFA, Case-Shiller); and new declines in unit sales, possibly no net absorption of inventory at all. A 1% increase in mortgage rates is not helpful.
On actual economic-inflation grounds, this bond rout does not make sense.
However, another reason does make sense. Or could. The great background fear has been that Treasury borrowing would at last overwhelm the world’s willingness to lend. Treasurys traded in markets today: $9.3 trillion (www.treasurydirect.gov; BTW, China holds less than 10%), and was only $5 trillion when the crisis began in July 2007. We will try to borrow another $1.2 trillion or so each year ahead (the tax-bracket extension does matter, there). An end to our borrowing ability would appear first in the world’s refusal to buy or hold our long-term paper, and that is what is happening. Maybe correlation and not cause, but a foretaste. The Ghost of Christmas Future.
Nothing on this earth matters more than a US fiscal Big Fix.
by: Lou Barnes
In some ways this explosion makes sense, but in others it’s been downright weird. The sensible: we were way overdue for a technical correction from the straight-line drop in rates from April to August. Markets that decline in straight lines rebound in straight lines.
An economy under-performing in spring and summer led to thoughts of double-dip, and now the economy is performing better than forecasts, concentrated in retail sales, up 1.2% in November, and October revised to plus 1.7%; and in manufacturing, November production up .4%. A pop in export volume is a good hint for the “why” in manufacturing; the big-business types are happy, their global engines humming. Even the small-biz NFIB survey is an inch above two-year bottom. New claims for unemployment insurance have held lower in the last two months, 420,000 weekly.
These are legitimate improvements, consistent with an economy sputtering along just above stall-speed. Gain a little growth altitude, rates up; lose a little, back down.
The dividing line between reasonable and weird has been the reaction to two government stimuli: the tax-rate extensions and QE2. These have given bond investors a case of eye-bulging, screaming bejabbers: conviction that the US economy is now strongly self-sustaining, accelerating into 4% GDP growth and certain inflation.
When measuring economic stimulus, consider a water faucet. If water is trickling forth, so it will until you turn the handle. This “tax-cut extension” was an increase in after-tax income ten years ago that has flowed on at the same rate ever since, the economy completely adapted to it by 2004. New stimulus would require turning the handle; this extension has no force of impact at all.
QE2 frightened everyone except us central-bank junkies. All civilians saw it correctly as money-printing, but cannot be convinced that it’s necessary and non-inflationary money-printing. Perfesser Bernanke went on “60 Minutes” to try, and made it worse.
QE2 is a big thing: the Fed is buying the equivalent of all net Treasury borrowing through April. More powerful, it is buying long-dated paper at a rate at least 2.5 times new issuance. To get this interest-rate volcano going, existing holders of long Treasurys have had to sell at a rate far faster than the Fed is buying, enough to overwhelm market buyers, too. An all-out skedaddle, a true and unseemly panic.
Another marker: the Fed met on Tuesday, and its post-meeting press release confirmed standing policy. The bond market fell apart, again. What were these sellers expecting? QE2 stoppage? In the absence of pre-meeting hints, inconceivable. The market seemed frightened just to be reminded what the Fed is up to.
Financial market people do all they can to ignore housing, hoping that one day it will just go away. On current trend, it might. This notion of consumer-based economic acceleration is fatally incompatible with all four home-price gauges reporting new declines (CoreLogic, Zillow, FHFA, Case-Shiller); and new declines in unit sales, possibly no net absorption of inventory at all. A 1% increase in mortgage rates is not helpful.
On actual economic-inflation grounds, this bond rout does not make sense.
However, another reason does make sense. Or could. The great background fear has been that Treasury borrowing would at last overwhelm the world’s willingness to lend. Treasurys traded in markets today: $9.3 trillion (www.treasurydirect.gov; BTW, China holds less than 10%), and was only $5 trillion when the crisis began in July 2007. We will try to borrow another $1.2 trillion or so each year ahead (the tax-bracket extension does matter, there). An end to our borrowing ability would appear first in the world’s refusal to buy or hold our long-term paper, and that is what is happening. Maybe correlation and not cause, but a foretaste. The Ghost of Christmas Future.
Nothing on this earth matters more than a US fiscal Big Fix.
by: Lou Barnes
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