Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – November 18, 2009

Rates Are Too Low NOT To Lock

Bernanke Says What Needed To Be Said

It seems as though everyone has been praising the economic recovery.  We’ve hit bottom, and everything will be turning around.  I haven’t felt quite so comfortable with that.  Monday morning, statements from Good ‘Ole Ben Bernanke echoed these concerns.  He admited a struggling labor market, a slow recovery, and unemployment concerns that will continue to drag on any economic recovery.

Confusion Regarding Jobless Claims

His comments were taken with relative ease, in the stock market, however, bonds reacted appropriately.  What I mean is that some investors felt as though Bernanke was stating these facts, just to curb the stock market downward a little.  Some feel there are concerns that the stock market is creating another bubble, based on media hype and a misunderstanding of the labor figures that I’ve been talking about.  Even though Jobless Claims are coming in lower and lower, there are still a half-a-million people filing each week!

Inflation Currently LOW

October’s Producer Price Index’s (PPI) was lower than we’ve seen since July of 2006.  This index measures inflation at the wholesale level, and it’s showing that inflation, so far, is currently not a concern….Then…the very next day…

Inflation Currently A CONCERN

October’s Consumer Price Index (CPI) was hotter than expectations.  This index rose 0.3% and was only expected to rise 0.2%.  The Core CPI which takes out energy and food prices, came in at a 0.2% increase, as opposed to the 0.1% expcted.  The Year-Over-Year Core CPI reading was 1.7%.  This is, actually, a pretty cool number, however, much higher than the 1.4% reading that we were receiving just two months ago.  The catch, here, is the Cash-For-Clunkers Program’s clever accounting priciples, enabing the industry to write off the tax rebates as a discount in car prices.  This truly artificially reduced the CPI numbers, however, the market sometimes doesn’t see things the way I’d like!

Housing Starts

529,000 permits were issued, yet 600,000 were expected.  I think, what might help with the current housing situation, is if we laid off a little, on the new construction, giving the current market time to buy up what inventory is currently available.  Keep in mind, however, that with the lower housing permits, builders may have wanted to wait and see how the tax credit extension would fare, before going out and investing in building new homes.  Food for though…

Locking Advice

I’d lock. Even though we’re sitting pretty, we have to ackknowledge that Rates are going up…and soon…mark my word!

Related Must Reads

The Media Just Doesn’t Get It
Cash For Clunkers Accounting Principles
Why Buy Now? And links to Tax Credit and Extension Answers

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Chico, CA Interest Rates Market Report – Economic Influences – September 16, 2009

Mixed CPI Report

The Consumer Price Index came in hotter than expected.  This usually hurts interest rates, but when you take out the energy costs and food costs the Core CPI was right where the government expected at 0.1%.  This reading should keep retailers from increasing their prices for merchandise, and therefore keep inflation under control.  And don’t forget that inflation is interest rates worst enemy! 

Cheeseburger On Wall Street

Oh wait…that’s Jimmy Buffett, not Warren Buffet!  Warren Buffet mentioned, today, that he thinks that the worst of the recession is over, and that we’re heading toward recovery.  Coupled with the fact that Good ‘Ole Ben Bernanke stated, yesterday, that he felt that we were headed toward recovery and that the recession is, “likely over,” the stock market has reached a new high for 2009, this morning.

Interest Rates

After bouncing off the 100-Day Moving Average, Rates moved up to the 200-Day moving average and quickly richocheted off of that.  So Rates are kind of trapped right now.  So, it’s an opportunity to float, but we’ll keep our finger on the lock button, just in case.

Chico, CA Interest Rates Market Report – Economic Influences – September 15, 2009

Cash for Clunkers”

Retail Sales jumped 2.7% last month, primarily due to the $4,000 gift to consumers to purchase a new vehicle, as opposed to continuing to drive their gas guzzling hunk ‘o junks.  More help was given to Sales numbers when retailers discounted their “back-to-school” items.  This information was, obviously, pretty hot, keep in mind…we’d have to see a few months of reports like this.  Not just one, to really impact the economy, and let’s face it…the jobs numbers are more important than this information.

Producer Price Index

August also show us an “on fire” Producer Price Index.  This was primarily sparked by the biggest surge in gas prices in TEN YEARS!  We’re hoping to see this cool down a bit, and perhaps we’ll see more information in tomorrow’s Consumer Price Index.  The Producer Price Index shows inflation at the wholesale level, like manufacturing.  Something to consider, here, is that during the recession, many manufacturers were slow, because the consumer wasn’t buying.  So, stores left items on their shelves, for longer periods of time.  Now that those items need to be replaced, it looks like manufacturing is way up…but is the consumer really buying?  Tomorrow will help point us in the right direction.

Locking?

Over the short term, it would make sense to lock.  Our earlier talk of lower interest rates, due to third quarter earnings from corporations, has been somewhat swept under the rug by the Chinese Tariff on Tires.  There’s always something in the mix, that can shake up markets.  But if you’re happy in the low 5 percentage rates…I might take advantage of what’s available today.

Chico, CA Interest Rates Market Report – Economic Influences – Nov 24th, 2008

Toying with the 200-Day Moving Average

The 200-Day moving average has been a force to recon with for two straight weeks.  We’ve actually touched it thirteen out of fourteen days.  The Consumer Price Index (CPI) fell to a monthly record low.  Particularly due to an 8.6% decline in energy prices, it left the year-over-year Core CPI at 2.2%.  Remember, the Fed wants to see inflation figures between 1.0% and 2.0%, so we’re getting to comfortable, or tolerable levels.

Bonds Poised For Being Purchased

Some interesting and exciting news on the bond front!  Giant hedge fund Paulson & Company indicated that their Advantage Plus fund has started purchasing beaten up Mortgage Bonds.  Also, PIMCO, the nation’s largest purchaser of Bonds is starting to jump in the action.  This is exciting because it shows signs of potential better pricing around the corner.  This also helps with the optimism of how the credit markets may be feeling a little healthier in the near future.  Their rumor that the Central Banks from around the world are poised to have another rate cut throughout the globe.  This could help stabilize the US Dollar a little more and continue to help with the cost of Oil (as oil is traded in dollars).

Deflation:  What Happened to Inflation?

Last week I indicated I would touch base on the Minutes from the Federal Reserve’s October Meeting.  There was some concern over how the economy is performing and they lowered their future targets for employment figures and economic growth.  The real news from the minutes was the mentioning of the big “D” word.  You may remember me talking about deflation when Alan Greenspan was still at the helm.  Deflation is when prices drop, mainly due to decreases in money supply and credit.  You’ve certainly been reading about problems with credit, recently!  With the economy coming to a halt, some are saying we’re headed toward a deflationary recession.  In a deflationary market, investors hustle to purchase safer, fixed instrument, like Bonds and Mortgage Backed Securities.  When Greenspan was mentioning the “D” word, mortgage backed securities gain 400 basis points.  IF this all pans out, we may be seeing much lower interest rates in the few months ahead.  But with all of the other major concerns, it may be short lived.  If you’re considering a potential refinance, be in close contact with your mortgage broker or banker in the next few months.

362,000 Jobless Claims Is Recessionary…

Initial jobless claims are out of control again.  542,000 filed for unemployment compensation this past week, bringing the four-week average to 506,500.  The highest since January of 1993.

Fed Reserve member Jeffrey Lacker spoke this past week and indicated that the economy should start turning around in 2009.  With low interest rates, low energy prices, less drag from the housing industry he noted, “Many analysts expect the US economy to regain positive momentum sometime in 2009.  That strikes me as a reasonable expectation.”  Finally, some good news!  Citigroup is stoked this week.  The government’s giving them a $306 Billion loan and $20 Billion cash for a $27 Billion share hold that pays 8%.  This is quite a deal, but the government should fair well, over time.

Hey, it’s a great time…get out their and buy.  Values and rates are down…Until next week…