Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – April 21, 2010

Trouble In Greece Is Helping Our MBS

You Down With S.E.C?

What is going on with the Security Exchange Commission (SEC) and Goldman Sachs?  It’s unwinding into, an already, ugly mess.  The timing of the release of the lawsuit was already under suspicion, because generally an announcement like this would occur after trading hours.  This is to not effect the market , and have an obvious effect on Stocks.  Well, the SEC orchestrated a beautiful release party, so to speak.  You see, just as they were announcing the Goldman Sachs suit, they were also announcing their huge mistakes and sub-par handlings of the Bernie Madoff fiasco and the R. Allen Stanford Fraud Cases.  It looks like the SEC missed several red flags on Stanford, much as they did with Bernie Madoff.  According to the New York Times, the SEC found several securities violations over the years, “but each time the regulators ultimately let the company off with relatively small fines, records show.”  So, there is speculation that the announcement of the Goldman Lawsuit was timed perfectly enough to squelch any media coverage regarding mistakes that the SEC made on these two huge fraud cases.

Motivation From Financial Reform

And now, it’s being reported that the government has testimony that completely contradicts the findings, of the SEC, against Goldman Sachs.  This information is helping Goldman’s Stock, but there are many questions into what the true motivating factors are, behind the SEC’s actions, lately.  Could Financial Reform have anything to do with it?  We’ll have to wait and see.

Earnings Up, NO Down, No Up…

Corporate Earnings Reports were all over the board yesterday.  Starting with McDonald’s and Morgan Stanley beating expectations.  Unfortunately, Wells Fargo and Boeing’s revenue fell short of expectations.  The big news was reported after trading hours, when Apple reported significantly better than expected earnings.  This has shot their Stock to almost record high’s of about $260 per share.  Did you, also, hear about the next phase iPhone being left on a counter-top on a bar?  Well…you think that might not have been actually planned?  That could help their Stock, too, don’t you think?

Greece VII

Is this Greece VII, or VIII?  It looks like Greece and Portugal’s credit rating is falling and that their financial assistance packages may not have been enough to get them out of financial trouble.  This is helping funds to pour into the safe-haven of United States’ Treasuries.  If this continues into next week and the Treasury Auctions, it could be extremely beneficial for interest rates.

With Greece's Continued Problems...

Locking Advice

With no real economic information to report today, and the European troubles mentioned above, I’d continue to float.

9 Days Left To Get Into Contract For Tax Credit

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Chico, CA Interest Rates Market Report – Economic Influences – April 14, 2010

Technical Factors Will Determine Interest Rates

Stocks Poised For Rate Adjustments

Technical factors will provide the path for interest rates, this morning.  Earnings’ season is upon us, and as reports roll out, through the next few weeks, Stocks and Bonds will be all over the board.  The market has already priced itself for healthy reports, so anything different, like Alcoa’s shortfalls, will likely cause nervousness in the market.  I’m not sure, but I have a hunch that Stocks might suffer a bit, which will benefit interest rates, as investors move to the safe-haven of Bonds and Mortgage-Backed Securities.  It will be fun to watch.

Inflation In Check

Couple of things happening this morning.  The Consumer Price Index (CPI), and Core CPI came in at very low levels.  As a matter of fact, the year-over-year Core CPI is measuring at 1.1%.  It’s the Fed’s desire for inflationary measuring devices, is to stay within 1.0%-2.0%.  So this cool reading has led Fed Chairman Ben Bernanke to continue to state that interest rates will remain low, for “an extended period of time.”

Retail Sales Up

Consumer spending has increased, compared to last month’s dismal numbers.  Spending is up 1.6%, but it’s not certain as to whether this swing is due to a healthier economy, or better weather, as spring rolls in.

FOMC Meeting Scheduled

This month, April 27-28, The Federal Open Market Committee will gather together to discuss the economic status of the country.

With Good Interest Rates Available...

Locking Advice

Today’s a tough call.  I think we still take advantage of where rates are, however, if you’re still looking for a home and cannot lock into an interest rate, don’t be too alarmed.  Even though there is a lot of resistance to lower rates, the Stock Market has already priced in exceptional earnings predictions, and I’m just not so sure that, with Alcoa’s lead, other companies might show similar difficult times, as well.  It’s going to be a bumpy ride, but hang in there.

Related Must Reads

What “Extended Period” means for Interest Rates

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Chico, CA Interest Rates Market Report – Economic Influences – February 26, 2010

4th Quarter GDP Excites

Dissecting The GDP

A ton of economic information to report on, this morning.  First of all, the 4th Quarter Gross Domestic Product grew at a whopping 5.9%. The Best GDP reading in over six years!  You’d think that Stocks would surge and interest rates would move up on the great economic news. However, let’s dissect this figure.  The gains are primarily due to businesses re-stocking their shelves, after the government “Cash for Clunkers” Program and NOT buying during the late 2008 and 2009 seasons, due to the recession.  Also, when you measure consumer spending (the most important component of GDP), we had a measly 1.7% growth.  Not so whopping!

Existing Home Sales

January’s Existing Home Sales were expected to be at 5.5 Million Units.  Unfortunately, the number attained was 5.05 Million.  Inventory of unsold homes moved to 7.8 months.  Weather, back east, probably had a lot to due with this number.  These numbers are not as promising as we’d hoped, and shows that we’re still trying to maneuver out of this slump.

The Chicago Purchasing Managers Index (PMI) and Consumer Sentiment, both came in at expectations.

Where’d All The $ Go?

This last week, the government purchased purchased $11 Billion in Mortgage-Backed Securities.  So, there’s only $44 Billion left, in the Government’s $1.25 Trillion Mortgage-Backed Security Purchase Program.  Wow!  That’s alarming!

Locking Advice

We're Still Floatin'

Poor economic activity reduces demand for capital causing Stocks to lower, which causes Bonds to rise, which, in turn, causes a reduction in interest rates.  If this structure continues, the goods news is that mortgage interest rates would probably move lower.  Unfortunately, the bad news is that this could have a very negative effect on the job market.  Which in turn has a negative effect on the housing market.

Related Must Reads

Advanced GDP Hot! An October Take On GDP
More Jobs – Better Housing
The Effect of $1.25 Trillion…Gone

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Chico, CA Interest Rates Market Report – Economic Influences – December 11, 2009

Related Must Reads

Wake Up Buyers! A look into why rates will increase in the near future
To Lure Investors, Why Longer Term Treasury Yields Need To “Sweeten The Pot”
Bond Values, Trend Lines, Moving Averages…What Makes Rates Move

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