Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – January 15th, 2008

What’s A Revision-ary?

Daniel C. Salas … your Mortgage Market “Revision-ary!”

Have you not heard that it’s an excellent time to buy?  O.K., IT’S AN EXCELLENT TIME TO BUY! 

The Federal Reserve board is really in a precarious position as the economy slows down, but inflationary fears still seriously meander all around us.  Philadelphia Fed Prsident Charles Plosser indicated, “we must remain vigilant on the inflation front and be prepared to act as necessary to avoid the risk of undermining public confidence in the central bank’s commitment to price stability.”  So while we keep hearing of overnight rate cuts by the Fed, if inflation keeps rearing its ugly head, than forget about more cuts. 

Another Revision?

Pending home sales were reported down 2.6%, however there was a huge revision for October’s numbers from 0.6% to 3.7%.  Revisions in the market…don’t ya just love that!  It’s like…oh yea…sorry about that…your interest rate could have been .125% lower, saving you $8,853.98 on that $300,000 loan but the government reported those dang numbers incorrectly last month and so…too bad…!  THANK YOU…You’re such a “revision-ary!” 

Visionaries

Goldman Sachs predicted a recession in 2008 and for the unemployment rate to reach 6.5% by 2009.  They also are indicating that the Federal Reserve will lower their overnight rate to 2.5% by the third quarter of this year to help the economy cruise to a “soft landing.”  So, while the inflation concerns are warranted, Goldman people are, generally what you might call visionaries, as opposed to “revisionaries!”

 S&P 500 Companies are expected to lose 9.8% over the third quarter of 2008.  Remember, if Stocks are losing value, bonds generally benefit and therefore interest rates.  But with inflation lingering (interest rates worst enemy) it will be interesting to follow. Capital One Financial Corporation said it will be taking a $1.9 Billion fourth quarter loan loss.  Merrill Lynch, the United States’ largest brokerage firm, will report losses of approximately $15 Billion next week, primarily due to bad mortgage investments. 

B of A Buying Countrywide

The big news of the week is that Bank of America announced that they are buying Countrywide Financial for $4 Billion.  This should keep Countrywide out of bankruptcy, however, $4 Billion?  That seems like one heck of a buy to me!  I mean…check out CitiGroup…they’re writing off potentially ANOTHER $24 Billion in sub-prime mortgage related losses alone…so BofA spending $4 Billion to save Countrywide…I’m just a few dollars short, but to me it sounds like one heck of a buy. 

Thank goodness Bush asked for OPEC to lower their prices.  Whew!  The balance of trade widened by 9.3% in November to a whopping negative $63.1 Billion.  Primarily due to high oil prices, but our fearless leader, I’m certain, can convince these oil nations to lower there price per barrel.  I’m certain of it!  Remember…I’m a “revisionary!”

Term Auction Facilities

The Fed Auctioned off $30 Billion of 28-day Term Auction Facility Funds (TAF).  We’ve talked about this in the past too.  Since doing these special auctions, LIBOR has moved down over 100 basis points.  LIBOR is an index tied to many adjustable rate mortgages.  And it the index is 1% lower (100 basis points), then when a loan adjusts, it will be 1% lower than before these TAF started. 

The economic figures keep looking bleaker.  Next week we will report of the Consumer Price Index and its inflationary potential.  There are also rumors about an emergency meeting of the Fed, to lower rates before their January 30^th meeting…we’ll see next week…

Emergency FED Meeting?

What’s A Revision-ary?

Daniel C. Salas … your Mortgage Market “Revision-ary!”

Have you not heard that it’s an excellent time to buy?  O.K., IT’S AN EXCELLENT TIME TO BUY! 

The Federal Reserve board is really in a precarious position as the economy slows down, but inflationary fears still seriously meander all around us.  Philadelphia Fed Prsident Charles Plosser indicated, “we must remain vigilant on the inflation front and be prepared to act as necessary to avoid the risk of undermining public confidence in the central bank’s commitment to price stability.”  So while we keep hearing of overnight rate cuts by the Fed, if inflation keeps rearing its ugly head, than forget about more cuts. 

Another Revision?

Pending home sales were reported down 2.6%, however there was a huge revision for October’s numbers from 0.6% to 3.7%.  Revisions in the market…don’t ya just love that!  It’s like…oh yea…sorry about that…your interest rate could have been .125% lower, saving you $8,853.98 on that $300,000 loan but the government reported those dang numbers incorrectly last month and so…too bad…!  THANK YOU…You’re such a “revision-ary!” 

Visionaries

Goldman Sachs predicted a recession in 2008 and for the unemployment rate to reach 6.5% by 2009.  They also are indicating that the Federal Reserve will lower their overnight rate to 2.5% by the third quarter of this year to help the economy cruise to a “soft landing.”  So, while the inflation concerns are warranted, Goldman people are, generally what you might call visionaries, as opposed to “revisionaries!”

 S&P 500 Companies are expected to lose 9.8% over the third quarter of 2008.  Remember, if Stocks are losing value, bonds generally benefit and therefore interest rates.  But with inflation lingering (interest rates worst enemy) it will be interesting to follow. Capital One Financial Corporation said it will be taking a $1.9 Billion fourth quarter loan loss.  Merrill Lynch, the United States’ largest brokerage firm, will report losses of approximately $15 Billion next week, primarily due to bad mortgage investments. 

B of A Buying Countrywide

The big news of the week is that Bank of America announced that they are buying Countrywide Financial for $4 Billion.  This should keep Countrywide out of bankruptcy, however, $4 Billion?  That seems like one heck of a buy to me!  I mean…check out CitiGroup…they’re writing off potentially ANOTHER $24 Billion in sub-prime mortgage related losses alone…so BofA spending $4 Billion to save Countrywide…I’m just a few dollars short, but to me it sounds like one heck of a buy. 

Thank goodness Bush asked for OPEC to lower their prices.  Whew!  The balance of trade widened by 9.3% in November to a whopping negative $63.1 Billion.  Primarily due to high oil prices, but our fearless leader, I’m certain, can convince these oil nations to lower there price per barrel.  I’m certain of it!  Remember…I’m a “revisionary!”

Term Auction Facilities

The Fed Auctioned off $30 Billion of 28-day Term Auction Facility Funds (TAF).  We’ve talked about this in the past too.  Since doing these special auctions, LIBOR has moved down over 100 basis points.  LIBOR is an index tied to many adjustable rate mortgages.  And it the index is 1% lower (100 basis points), then when a loan adjusts, it will be 1% lower than before these TAF started. 

The economic figures keep looking bleaker.  Next week we will report of the Consumer Price Index and its inflationary potential.  There are also rumors about an emergency meeting of the Fed, to lower rates before their January 30^th meeting…we’ll see next week…

This entry was posted on Tuesday, January 15th, 2008 at 6:14 pm and is filed under Weekly Market Report. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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