Danny Salas

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

Rates Making a Turn

As mentioned in yesterday’s article, I stated in might be a good day to lock.  It was.  Even though some favorable inflation numbers came in, we still have fears of the treasury bond sale annoucement that the Fed will be reporting on Thursday.  Another interesting statistic was that housing numbers weaker than expected.  This should have helped rates, but did not.

2009 & 1947 – What They Have In Common

The Producer Price Index (PPI), which measures inflation on the wholesale level, came in much lower than expected.  The Labor Department started collecting data on the PPI in 1947, and over the course of this year, we haven’t reported as great a loss since 1947.  A record -6.8%!  Now that’s recessionary numbers.

Chico, CA Interest Rates Market Report – Economic Influences – December 18th, 2007

Twas the week before X-mas

when all through the banks

The Value of Bonds were falling, another closing bank joined the ranks

The Stock market plunged with the news of a quarter-point hit

Of the overnight rate cut down by lowering a bit

The Fed dreamed up a new plan that would bring $40 Billion to the table

An Auction Facility, to help the credit crisis, but would it really be able

It would be a 28 day window to ease preasure and increase liquidity

December 17 would be the first day, but would it put the crises at ease?

The Fed changed it statement that growth and inflation risks were in balance

To “act as needed,” said Bernanke…for the economy and inflation challenge

$57.8 Billion, our trade deficit did widen

The Senate passed an FHA reform bill, with only one decent, and it wasn’t Joseph Biden

The week showed the PPI move like 1973, higher than expectations

This really hurt Bonds, and not like the ball-players, perhaps awaiting incarcerations

When weekly initial Jobless Claims declined by 7,000

That news was kinda expected, so bonds lowered, but up was the Dow’s end

The CPI readings every month are more hot

2.1%, 2.2%, then, this month 2.3%, are bonds overbought?

Thank goodness for the 50-day moving Average, I will not lie

It acted as support, as it did back in early July

Now Bernanke, Donald Kohn, Kevin M. Warsh, and Frederick M. Mishkin

Lower interest rates for Christmas, is what we’re all wishin’

To the drop of the Dow, and the drop of bond yields

Now dash away, dash away high interest rates in our field

On Monday, Banks borrowed from the Fed’s auction Facility

Hoping that LIBOR loans adjustments and the ability

would lower ARM Rates when it come time for adjusting

So this credit crisis we’re in, doesn’t continue a-bustin’

And then from out of nowhere, Alan Greenspan, shouts, “recession”

High consumer prices, a receding economy, with whom does he think he’s messin’

Capacity Utilization was reported at 81.5 percent

a reading above 85 is inflationary, thank goodness this report didn’t relent

The ECB put $500 Billion in the banking system this weak

This calmed the credit pressures moved interest rates our way

Monday came and the Fed’s auction of $28 Billion went well

It appears as though our mortgage funding system may NOT be going to hell

 Bonds started to move higher as Housing Starts and Permits looked merry

But coming in at expectations, housing remains soft, like the fruit of a cherry!

New construction and single family permits hit 16 year lows

Lending people to wonder if I was their friend or foe

The Fed’s meeting real soon about a change in the lending practice

Stricter guidelines, no pre-pay’s, higher reserves, will become status

Friday will give us the Personal Consumption Expenditure Report

The Fed’s favorite gauge on inflation, it can move markets of the sort

The GDP will come out giving us a read on the third quarter

If that news is too bad, I’ll be drinkin’ a Sierra Nevada Porter

So, keep up your chins, markets change and us with ‘em

Go buy toys for your children that require some lithium

Just know that I told you when to lock and when to float

This market will change, so please, please, please don’t gloat

You heard me exclaim, rates again are below six

So, “thank you,” this Christmas, I’ll mention to Jolly ole’ St. Nick

Chico, CA Interest Rates Market Report – Economic Influences – November 19th, 2007

Stock or Bonds?

So, last week we were waiting for Retail Sales numbers to come in and we expected numbers to be a little higher than we’ve seen lately because WalMart reported some strong earnings.  They came in at expectations, but the Producer Price Index (PPI) rose 0.1% for October.  But the Core PPI came in below expectations, which was good for interest rates.  The Consumer Price Index rose to 2.2% from 2.1%, which is inflationary and generally bad for interest rates, however, what kept rates down was the understanding that this inflationary information would mean that the Fed would NOT raise the overnight rate at their December meeting.  So, money poured out of Stocks and into Bonds on that news. 

CitiGroup Downgraded

This week, Goldman Sachs downgraded Citigroup to a “Sell” from a “Hold”.  Citi may have to write off $4Billion dollars, additionally to what they have forecasted in the past, due to sub-prime related losses. 

Federal Reserve Chairman Ben Bernanke indicated last week that the Fed is changing the manner in which reports, minutes, and other general information will be reported to the general public and markets.  This is really cool because it will enable us to follow, more closely, why the Fed makes certain monetary policies on the information that they’re being provided with.  This “transparency,” “will provide a more-timely insight into the Fed’s outlook, will help households and businesses better understand and anticipate how our policy decisions respond to incoming information, and will enhance our accountability.”  What they plan to do is provide information on economic growth, unemployment, and inflation twice as often as they do now, and estimate figures for three years out, as opposed to the two year estimates currently being produced.  This will be helpful to guys like me because it’s just more information that could have a result on the markets.  But, it also means that I could be writing myself right out of an columnist position with the News & Review (editor…don’t read this).

Mortgage Insurance Changes

I thought I’d take some time and go over some major changes regarding mortgage insurance (MI) that will go into effect in January, 2008.  Generally speaking, mortgage insurance is required whenever you put less than 20% down on the purchase of real property, one to four units.  There are ways around this…but for the sake of simplicity…The calculations have been pretty standard for years, but first, HUD came out and said that they were changing the Up front MI factors based on loan to value, credit risk score, and/or source of down payment funds.  Let’s give an example:  Richard N. Diedert buys a home.  Funds are a gift from pops.  His credit score is bummin’ at about 595.  In the past, regardless, his up front MI factor would be 1.5% of the loan amount.  Now, we would have to go to a matrix and look up what that factor would be.  With this scenario the factor would move to 2.0% of the loan amount. 

Fannie Mae & Freddie Mac Pricing Changes

Not to be outdone, Freddie Mac came out with their new model for pricing loans.  For example, let’s say the Richard is now buying an investment property.  He wants to put 20% down.  In the past, he could either pay 1.375% in points (this varies from lender to lender) OR absorb that cost in his interest rate (about 0.5% in rate).  Now, that add on will also be determined by credit risk score.  So, many changes keep popping up in this new environment and we’ll keep you posted.  Gobble, Gobble…Danny