Market Commentary for 1/6/11

Rates are a bit worse this morning after mortgage bonds took a beating yesterday given preliminary job data appears to be setting us up for a strong employment report tomorrow.  Yesterday private sector job data came in very strong, followed up today with lower jobless claim numbers.  Some of this appears to be seasonal but the overall strength of the data remains.  Currently bonds are attempting to regain some losses in light trade and stock market indices are negatively largely on energy stocks.  So far the trading session has been choppy as market sets up for tomorrow’s big jobs report and next week’s round of auctions.  The 10-year Treasury yield is hovering around 3.421% significantly higher than when Ben B. and the Federal Reserve announced their dollar busting QE2 scheme…accomplishing the opposite of his stated policy objective of lowering and stabilizing rates….makes one wonder what the real objective is.

In the news today…        For more detail, click on the Market-Headlines attachment

- Fewer Americans Filed Jobless Claims Over Past Month (beware seasonal adjustments and general government B.S.)

- In 2011, Fed Will Be in Watch Mode (watch them purchase a trillion in US Treasury debt)

- Foreclosures May Be Undone by State Ruling on Mortgage Transfer

- Soros Mistrusts EU Aid as Irish Default Risk Soars (Soros mistrusts?  I think we should mistrust his as he is a currency manipulator extraordinaire.)

Reading Suggestion of Today…    The 5000 Year Leap by W. Cleon Skousen   

Market Commentary for 1-3-11

Rates are improved today as mortgage bonds, despite being in negative territory, are better overall from Thursday’s levels when pricing was set.  No apparent reason for this really as we see positive economic indications and the Feds money creation scheme which should push rates up …. keep an eye out.  The market is trading thinly again this morning as Asia is still on holiday.  Bonds are under pressure as strong manufacturing and construction data was released today, continuing to paint a picture of a recovering economy which continues the narrative of a rising rate environment.  The stock markets are continuing to rally with the Dow up over 125-points at the moment. 

In the news today… Click on the Market-Headlines Attachment for More Detail      

- ISM Index of Manufacturing in U.S. Rose to 57 in December

- Construction Spending in U.S. Rose in November for Third Month

- Mishkin Says Economic Strength Makes QE3 ‘Much Less Likely’

- Bank of America Resolves Fannie, Freddie Loan Putback Dispute and Ponies up with $2bill to cover

Reading Suggestion for Today …The Moon Is a Harsh Mistress, Robert A. Heinlein

Market Commentary for 12/30/10

Rates worsened a bit today as mortgage bonds fail to sustain yesterday’s gains and Treasuries lose ground after more positive economic data was released today.  The bond market views positive economic data leading to inflationary pressure which destroys the value of bonds.  Jobless claims decreased, business activity increased and pending home sales rose.  Origination is light and trading conditions remain thin and choppy as 2010 come to a close.  Stock markets are negative this morning but that can hardly take away the massive gains made this year.  Looks like the little guys are piling back into equities hoping not to miss the rally … that they missed … and insiders are beginning to pare back their exposure to equities … so look out for a correction. 

Let’s hope a bid reemerges (increased demand) for US Treasury bonds in 2011 to help get the housing market back on its feet.  I guess hope springs eternal for a housing market rebound but the only way to turn it around is for unemployment to dramatically fall.  Given our governments undeclared war on capital formation through high taxes on multiple levels and its war on business through confiscatory taxes and massive regulation, business will be less likely to take the risks required to grow and hire people. 

As for renewed demand pushing Treasuries prices up and yields down…don’t hold your breath.  The handwriting is on the wall and it appears, despite the destructive actions of the Federal Reserve and its massive QE1,2,3 etc. etc. money creating schemes, that interest rates will continue to rise as bonds get pinched by inflationary pressures created the Fed and the increasing threats of bond defaults.  Keep your eye out in 2011 for increased chatter about Municipal Bond defaults and outright Muni Bond defaults and cities being forced into bankruptcy.  The cities and the states are strapped with bond debt used to finance everything from Taj Mahal style schools (remember the $500 million dollar high school in California?) all for the children of course (not a union payoff?) to lavish retirement benefits for city and state workers.  What is conspicuously missing from the massive increase in city and state bond issuances is economically stimulating and efficiency increasing infrastructure development projects.  Unfortunately most of the proceed from massive city and state bond issuances of the last two decades was used to pad budget shortfalls and for immediate consumption and not economy facilitation infrastructure projects like bridges, ports, dams, nuclear power plants, super modern power grids and super highways … all of which lower the costs and increase efficiencies for business which in turn facilitates economic development and job creation in the private sector.    

In the news today…        For more detail, click on the Market-Headlines attachment

- Jobless Claims in U.S. Decreased to (only) 388,000 Last Week (we need to produce 150,000 just to break even)

- Business Index in U.S. Increases to Two-Decade High (especially with the cash flush “too big to fail”… go figure)

- Pending Sales of U.S. Previously Owned Homes Rise (just wait for those higher rates to work in)

- Mortgage Rates for U.S. Loans Climb to 7-Month High (how’s that QE2 working out for ya?)

Suggested Reading for Today… Who Moved My Cheese?:  An Amazing Way to Deal with Change in Your Work and in Your Life - Spencer Johnson and Kenneth Blanchard

Market Commentary for 12/28/10

Rates are slightly improved today.  Mortgage bond prices are lower than yesterday afternoons close, but higher than when lenders were setting rates and publishing rates early this morning.  Consumer Confidence seems to be fading along with the Christmas spirit; the economic reading came in 3.5% lower than expected, but also lower than November's level.  Couple that with rising inflation expectations, a less than stellar 2yr Treasury auction yesterday with little if any indirect bidder participation, the home price index showing home prices have fallen once again, and the rosy economic recovery picture that's being painted by the teleprompter readers on Bloomberg and on CNBC may need a touch up. 

So what does all this really mean in regular people language?  All the happy talk about economic recovery isn’t being born out in the real economy as many of us have been saying for quite some time now.  Your government and Wallstreet are just feeding you a line of bull to get you to go out and SPEND, SPEND, SPEND.  If you were being told the truth about what the real economic reality was … you would be SAVING YOUR MONEY.  Remember people … it isn’t consumer spending that creates wealth and economic growth … spending is simply a function of savings and investment and without savings and investment THERE IS NO WEALTH CREATION ….  The BS emanating out of government agencies generating the economic prognostications is highly suspect at best and a deliberate manipulation of our “animal spirits” at worst.  Additionally, the “less than stellar” 2 yr auction simply means that no one was beating down the door to buy our Treasury debt but for the Federal Reserve that simply prints the money to buy it.  Maybe nobody wants our Treasury debt because they (China, Brazil, Germany, Saudi Arabia et all) have finally realized that WE HAVE NO INTENTION OF EVER PAYING IT BACK. 

Just think about it people … in just 35 years the US has gone from the world’s greatest creditor nation (meaning we were the lender to the world), to the world’s biggest DEBTOR nation (meaning we are the biggest borrower in the HISTORY OF THE WORLD).  To put it another way … the USA has taken out the biggest Interest Only, Adjustable Rate, Subprime Mortgage IN THE HISTORY OF THE WORLD and its getting bigger by almost 3.5 billion dollars PER DAY.  It’s almost impossible to believe that we have chosen not to pick up pitch forks to stop our country from getting deeper into debt and to stop QE2 and all the other manipulations and rip off’s of the Federal Reserve and the resulting destructive monetary effects.  It appears that we have lost our national survival instinct.  Know that what we are witnessing threatens the very existence of our nation and … here we sit collectively as a people quietly in our lazy boy recliners staring at the flicker of our flat screen TV’s  … COMATOSE … DISCONECTED. 

UGGG … back to the markets.  Trade is still relatively thin this morning, with many big wig traders still using their 'out of office' replies and many little wigs traders that can't seem to drudge through the snow and make it to the trading floor.  Smaller trades can move the market when trading is this thin so WATCH YOUR LOCKS.  The 5yr Treasury note auction is on tap for later today which should be interesting.  Keep those pipelines tight, and make sure all of your active locks get extended if needed. 

In the news today…Click on the Market Headlines attachment for more detail on these stories

- Survey Shows Consumer Confidence Slips in December

- U.S. Home Prices Drop 1.3% From September to October

- U.S. Crude Oil Supplies Probably Fell Last Week, Survey Shows

Reading Suggestion for Today … “The Day After the Dollar Crashes”, Damon Vickers

Market Commentary for 12/28/10

Rates are slightly improved today.  Mortgage bond prices are lower than yesterday afternoons close, but higher than when lenders were setting rates and publishing rates early this morning.  Consumer Confidence seems to be fading along with the Christmas spirit; the economic reading came in 3.5% lower than expected, but also lower than November's level.  Couple that with rising inflation expectations, a less than stellar 2yr Treasury auction yesterday with little if any indirect bidder participation, the home price index showing home prices have fallen once again, and the rosy economic recovery picture that's being painted by the teleprompter readers on Bloomberg and on CNBC may need a touch up. 

So what does all this really mean in regular people language?  All the happy talk about economic recovery isn’t being born out in the real economy as many of us have been saying for quite some time now.  Your government and wallstreet are just feeding you a line of bull to get you to go out and SPEND, SPEND, SPEND.  If you were being told the truth about what the real economic reality was … you would be SAVING YOUR MONEY.  Remember people … it isn’t consumer spending that creates wealth and economic growth … spending is simply a function of savings and investment and without savings and investment THERE IS NO WEALTH CREATION ….  The BS emanating out of government agencies generating the economic prognostications is highly suspect at best and a deliberate manipulation of our “animal spirits” at worst.  Additionally, the “less than stellar” 2 yr auction simply means that no one was beating down the door to buy our Treasury debt but for the Federal Reserve that simply prints the money to buy it.  Maybe nobody wants our Treasury debt because they (China, Brazil, Germany, Saudi Arabia et all) have finally realized that WE HAVE NO INTENTION OF EVER PAYING IT BACK. 

Just think about it people … in just 35 years the US has gone from the world’s greatest creditor nation (meaning we were the lender to the world), to the world’s biggest DEBTOR nation (meaning we are the biggest borrower in the HISTORY OF THE WORLD).  To put it another way … the USA has taken out the biggest Interest Only, Adjustable Rate, Subprime Mortgage IN THE HISTORY OF THE WORLD and its getting bigger by almost 3.5 billion dollars PER DAY.  It’s almost impossible to believe that we have chosen not to pick up pitch forks to stop our country from getting deeper into debt and to stop QE2 and all the other manipulations and rip off’s of the Federal Reserve and the resulting destructive monetary effects.  It appears that we have lost our national survival instinct.  Know that what we are witnessing threatens the very existence of our nation and … here we sit collectively as a people quietly in our lazy boy recliners staring at the flicker of our flat screen TV’s  … COMATOSE … DISCONECTED. 

UGGG … back to the markets.  Trade is still relatively thin this morning, with many big wig traders still using their 'out of office' replies and many little wigs traders that can't seem to drudge through the snow and make it to the trading floor.  Smaller trades can move the market when trading is this thin so WATCH YOUR LOCKS.  The 5yr Treasury note auction is on tap for later today which should be interesting.  Keep those pipelines tight, and make sure all of your active locks get extended if needed. 

In the news today…Click on the Market Headlines attachment for more detail on these stories

- Survey Shows Consumer Confidence Slips in December

- U.S. Home Prices Drop 1.3% From September to October

- U.S. Crude Oil Supplies Probably Fell Last Week, Survey Shows

Reading Suggestion for Today … “The Day After the Dollar Crashes”, Damon Vickers

Market Commentary for 12/21/10

Interest rates are level to a touch worse this morning from yesterday’s re-price for the worse as mortgage bonds fail to hold onto Monday’s closing levels, taking their cue from Treasuries which are trending negative with the 10-year yield moving back up to 3.375% but still off the highs approaching 3.50% of last week.  Stock market indices are all positive, continuing the year-end Santa Claus rally, but all markets have very thin volumes as is the case this time of year with fewer participants--the stock markets appear over bought and the bond markets appear over sold—so it’s difficult to draw too much significance from current price action as traders appear more interested in eggnog and sugar plums at the moment.  ABC consumer confidence is the only scheduled data point to be dumped today and will be released later this afternoon.  Tomorrow and Thursday squeeze all the weeks’ news into two days so it could be a bumpy ride to close out this shortened holiday week.  Stay tuned … and monitor your locks!

In the news today … For more detail, click on the Market-Headlines attachment

- Fed Extends Swap Lines With ECB, Other Central Banks (bailing out foreign banks again…what about me Mr. Fed?)

- EU to Sell as Many as Eight Bonds Issuances for the Destitute Ireland in 2011 (money that will never be repaid)

- Portugal May Be Cut by Moody’s on ‘Sluggish’ Growth (the same Moody’s that rated subprime MBS AAA?)

- Foreclosures in Most States Bypass Judges, Making Evictions Easier (as those same banks get mega bail outs and free Fed loans)

- Bond Market Rejects Fed’s QE2 as Long Term Yield RISE!!!! (that’s not gonna stop Mr. Ben B. and the Fed however)

Suggested Reading for Toda y … Ayn Rand, The Capitalist Manifesto

Market Commentary 12/20/10

Rates improved again today as mortgage bonds continue to rally from Thursday and Friday as the same thin trading conditions that took us negative are now paring some losses.  Interest rate markets continued to rally for a second day Friday (the first two day rally of December), backing well off of six month high reached in the middle of last week. This two day rally culminated in a 9.5 basis point improvement in the ten year Treasury to 3.33% as of week’s end and a 3 basis point strengthening in the two year to 0.61%. One of the biggest trends in play, though both the early-December selloff and more recent rally, has been a massive flattening in the yield curve between the ten and thirty year maturities.  From its November high of 160 basis points, the 10s/30s spread has retreated nearly 50 basis points to 111 basis points as of early Monday activity, driven by ten year yields rising much more rapidly than thirty year yields.  Converging inflation expectations are the culprit, as the markets’ forecasts of thirty year inflation has declined while the markets’ forecasts of ten year inflation have risen.  The 5-year Treasury repos (another Fed purchase program with fake money) are helping as no auctions are scheduled this week and very light origination is giving mortgages a bid despite underperforming versus Treasuries. 

No major economic data is for scheduled today or tomorrow but we get a double-barrel full on Wednesday and Thursday with GDP, existing home sales, durable goods, inflation numbers, jobless claims, consumer confidence and new home sales.  Let’s hope we can sustain this rally in spite of a likely $99 Billion in Treasury Bond auctions next week to be financed and purchased by the Federal Reserve with newly minted money printed out of thin air. 

In the news today…     (Click on the Market Headlines attachment for more details)

- Chicago Fed National Activity Index for November Decreased -.46% from -.25 in October (don’t worry be happy)

- Yields Flatten QE2 Critics With Curve Showing Fed End (we’ll see who gets flattened)

- Fed Places 70% Per-Security Limit on Treasury Debt Holdings (it was 30%)

- ECB Bond Purchases Drop to Lowest in Almost Two Months (but still MASSIVE)

- France’s AAA Grade at Risk as Euro Debt Catastrophe Spreads (this will not end well)

- Band of Eengland Forecast to Raise Interest Rate Within Six Months (gulp!)

Reading Suggestion for Today…    Free to Choose, Milton Friedman.

Your Takeaway… Come to work every day with the knowledge that the incredibly low interest rates we all have enjoyed for years now will not last indefinitely and one tiny market or geopolitical event can change everything overnight.  Re-double your efforts to build purchase loan referral sources and don’t forget about reverse mortgages.