Rate improvement likely in the morning…bonds UP. 5% range on the 30 year fixed notes.
Have you metChad?
FNMA 4.0% : Up 31 bps. Friday's sellers back in the market, Fed buying power back on and Asian buyers are cited as a factor in today's rally. Remember: all investors have got to put their money SOMEWHERE. In looking at a "lower risk" bet: many have turned to mortgage backed securities. Remember: Quality is UP for the mortgages done today and the feds have placed a $200 BILLION "guarantee" that FNMA and FHLMC WILL pay as agreed when the time comes. Rates will stay low as the mortgage backed securities continue to look "good" and relatively "low risk".
DOW: down 64 points…not too bad. Nasdaq (mostly technology) is UP…
DJIA 7,936.75 -64.11 NASDAQ 1,494.43 +18.01 SP500 825.44 -0.44
DEFLATION: I read an interesting side effect of a "deflationary environment" such as housing seems to be in… The author contends that would-be buyers sit on the sidelines and "wait for better deals" to come along. Sound familiar?? When anything is getting 'cheaper': consumers do not want to get in "before the bottom"…but then generally end up getting in AFTER things are trending back up. There really is no right answer…but you know the cliché: "…a bird in the hand…"
A fellow loan officer used to always say: rates go up like a rocket ship. This can really "eat into" a "good deal" if the interest rates are at a high when the pricing is at a low…effectively it may be better to buy with the lower interest rate even at a higher price depending on the situation. The math would be easy…but the variable would be the "rate and price" of the future. Inflation fears seem to have subsided as "numbness" to the 819 BILLION dollar package is setting into the markets. This is not to say that fears would not still be valid...but remember that most of the market is "emotion" and "psychology."
Consumer Spending: Supported the above impression: spending is down by 1.4%. Residential spending actually fell 3.2% in December with a 2008 slump of 22.3%...yikes. Flip side: we are saving more with consumer saving coming in at 3.6%
What is it? ISM index: The "ISM index" or "Institute of Supply Management" index came in at 35.6 vs the 32.5 expected. This was actually good news even though readings under 50 indicatate market "contraction". The ISM index is a composite number that is reached by interviewing 300+ manufacturers to gain a real "street level" perspective on how things are going in the manufacturing world. Number of new orders, production levels for the month, efficiency, etc are considered. Remember: the "state of the economy" in large part depends on our "Production"…and this number is thought to be the MOST IMPORTANT indicator of trends there.
BUY AMERICAN: I have come across quite a few posts and articles criticizing the "buy American" clause in the stimulus package that is in question. The Gist according to one article: all of the materials for the infrastructure piece of the plan ($117 of the $819 billion) will be required to be American produced. China's top officials were noted to have been "very upset" by this in an article I read on my "Wii" last week. J
"PROTECTIONISM" or policies that give unfair advantage to US producers can be dangerous in this day and age where we are SO dependant on foreign participation in our economy. (We need an estimated $66 billion/day in foreign investment…) Anyone remember the "Smoot-Hawley Act" that was proposed shortly after FDR was elected? The "Smoot-Hawley Act" was originally intended to give American farmers the advantage by adding tariffs to imported grain…but by the time it made it through the house there were nearly ONE THOUSAND products that were a part of the bill. When it looked like it was going to pass…foreign investors pulled right out of our economy and crashed the market. It is deeper than offending them at this point: it could be disastrous to their economies. Naturally "fear based" proactive response in anticipation of any disaster could be interesting at best... Perspective: Most likely, things will ultimately be okay. Pres. Obama seems to be reacting well to the criticism of the plan and hopefully some more sense will be put into the plan as it bounces around in the senate.
Haveagreatday!
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Chad Schauers
Have you metChad?
MetLife Home Loans
406.522.0922
406.522.0924 (fax)
1924 W. Stevens, Ste. 202
Bozeman, MT 59718
Cell: 406 799 8613
ccschauers@metlifehomeloans.com
