WHOA! Gold is at $1384/oz and Oil is Climbing...Why?

Latest news from the fed released yesterday that they will be purchasing 600 billion dollars worth of "longer-term" treasury notes from the US government.  Essentially, this is like the right hand saying to the left hand: I will give you $600 billion...if you sell me a promise to pay me back with interest written on a piece of paper.  It is a way to move money around. 

They also STILL feel that keeping the fed funds rate low for "an extended period" is wise.

Mortgage Backed securities have been really beat up and then making recoveries over the last several weeks.  Today the FNMA 3.5% security is UP to $101.38 which is 47 basis points higher than it started this morning.  We seem to be on a Rally...  Yesterday however, we saw indications that the market really doesn't know how to react at all as the bond traded in a VERY wide range with pricing improving then deteriorating rapidly.  There seems to be conflicting philosophy on how the latest change in the House will affect the financial and healthcare changes we are all bracing for as well as the announcement for further "easing" through more government spending.

GOLD is trading at $1384/oz and Oil us up almost 2 bucks trading at $86.73.  Both of these may be due to the heightened perception that we are in for some serious inflation.

The thought is:

Inflation = DEVALUED U.S. Dollar.   

Devalued U.S. Dollar = other countries can buy more of our stuff.

Inflation can be an indicator that an economy is turning around for the better (since it would mean that more money is chasing the same goods and services).  The interesting thing here though is that the "more money" appearance is created by essentially "printing" more money instead of actual economic strength.  Inflation is in-part controlled by making money harder to get...so fed funds rates would have to be raised.  

In the Bozeman Montana Mortgage department: We are seeing some great things starting to slowly come around.  For instance: processes with us have actually gotten more streamlined thanks to the addition of a local operations manager and more local processing staff.  The mortgage insurance companies are starting to make conventional lending more attractive with products like split MI and the return of second home mortgage insurance.  The appraisal process with us is getting more streamlined.  I am excited!

Cheers,

Chad

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Chad Schauers
Montana Mortgage Lender, Bozeman, Montana
Personal Cell: 406 799 8613
Personal Email: metchad@gmail.com