Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – April 16, 2010

SEC Files Fraud Charges Against Goldman Sachs

SEC Files Against Subprime Giant

We have finally broken through the 25-Day Moving Average and Bonds are benefiting as Stocks suffer, lead by the Security and Exchange Commission’s charge of Fraud, against Goldman Sachs and their involvement with the Subprime Mortgage Industry.

Housing Starts

Housing starts climbed to 626,000, in March, and have moved twenty percent higher since last year.  New Housing Permits also climbed higher than expected, to 685,000.  This is good news for housing, as it’s a pretty strong report!  I’m glad to see some optimism in the building industry, however, as I have stated over and over again, we need jobs to move that inventory.  So, I just hope that the building is responsible.

“Judas” Hoenig Speaking Today

Kansas City Fed President, Thomas Hoenig, will be speaking today.  Hoenig has been the long time dissenter of the Fed, requesting that the “extended period,” language be removed from the Fed’s Policy Statements regarding low interest rates.  He’s expected to discuss his reasons for his departure from the rest of his clan.  These statements, alone, could move markets, so we’d better be paying attention.

Thomas "Judas" Heonig Speaks Today

Locking Advice

I’d float, into the day, to see is any of Hoenig’s statements move markets.  Floating is prudent, here, because money’s pouring out of Stocks, while the market digests the results of the Fraud Charges filed against Goldman Sachs.

Related Must Reads

Read This Carefully: A Look Into “Judas” Hoenig’s Concerns
Trend Lines: Why They’re Significant To Rates
The REAL Jobs Numbers: What’s Your Point?

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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…

Chico, CA Interest Rates Market Report – Economic Influences – November 27th, 2007

50 Basis Point on the Waist

Wow!  Even with the short week there is a lot to report on.  First, I probably gained about 50 basis points on my waist-line this weekend.  Not good for “interest”…period! 

Anyway, housing starts were higher than expected, but interestingly, building permits (which shows future housing activity) were at there lowest levels in fourteen years.  This may indicate that new construction might level off. 

Freddie Needing More Money?

FreddieMac (the nations 2^nd largest purchaser of real estate loans) reported a loss of $2.0 Billion in the 3^rd quarter.  They are also indicating that they’re a little short on a comfortable margin above the required reserve funds and hired Goldman Sachs to help them raise capital.  This will be an interesting story to watch and see how it may affect the markets in the future. 

Last week we saw the Ten-Year Treasury and Mortgage-backed securities moving in opposite directions AGAIN.  It’s the second time in less than a month that this has occurred.  Remember, interest rates follow yields on mortgage backed securities…period.  So make sure you’re working with a mortgage professional that follows this…and understands it…or it could be quite costly, to YOU. 

Overnight Rate Cut?

The minutes were released from the Federal Open Market Committee’s last meeting.  It was interesting to note that the Fed thought that lower inflation may be in the forecast.  So, while in the recent past, it looked as though the Fed was definitely NOT going to lower the overnight rate in December, with this lower inflationary tone, coupled with slower economic growth and job growth…who knows…maybe there WILL be a cut. 

Did You Lock On Monday?

Earlier this week mortgage backed securities were at their best levels in over two years.  Monday was the day to lock!  What happened was very interesting.  Interest rates benefited because stocks took quite a hit.  Remember that when stocks aren’t doing well, money flows out of them and into bonds…benefiting interest rates.  Well, the Dow Jones Industrial Average, the NASDAQ and the S & P 500 were all trading below their 200-day moving averages.  Just like bonds, stocks have trends and averages that they like to hover around.  Once they break through a trend (above or below) markets can move quickly. 

With the lowering of stocks, money flowed into bonds.  Bond prices went up, causing rates to move down.  But once bond values touched on the two year high…it was time to lock…cause it’s VERY hard to break though a tough level of resistance that hasn’t been broken in over two years.  So, locking was prudent. 

Abu Dhabi Invests in Citi

Sure enough, first thing on Tuesday morning, Abu Dhabi Investment Authority and Citigroup announced that Abu Dhabi was putting $7.5 Billion of capital into Citigroup to help them offset their recent losses particularly from the Sub-prime mortgage fiasco.  This sent a message to investors that stocks might be hitting rock bottom.  And, if investment companies are willing to come in a buy, buy, buy, obviously stocks will benefit.  But, at whose expense?  Bonds of course!  So, interest rates moved in the opposite direction as on Monday. 

To make things a little worse, Goldman Sachs reported that the Fed WILL decrease the overnight rate by 150 basis points to help with the credit crisis and have the overnight rate at 3.0% by the middle of 2008.  This is thought of as inflationary, because it lowers the value of the American Dollar, making foreign imports more expensive. Last, the New York Federal Reserve Bank announced that they are putting $8 Billion worth of liquidity into the market.  This should calm investor’s fears of a continued liquidity crisis.  Rates continue to be below 6% for conforming loans.  If you’re a fence sitter…start taking out the splinters and make a move…it is time.  Until next week…