Danny Salas

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

Retail Sales

October Retail Sales came in at 1.4%, compared to 0.9% that was anticipated.  When you take out auto sales, the number, actually, came in at 0.2%, lower than the 0.4% expected.  Not only that, but September’s numbers were revised from a negative 1.5% reading to a dismal -2.3% reading.  These numbers are alarming because Retail Sales Taxes help give states, and the country, money to operate their government.  With lower Sales, there are lower Sales Tax Income Opportunities for governments.  Further hurting the deficits. 

Ben Bernanke Speaks Today

He’ll be talking with the Economic Club in Manhattan.  Any time Bernanke speaks it can move interest rates.  Wonder if he’ll comment regarding when and what the Fed plans on doing to hold off inflation, while trying to deal with interest rates remaing low to help with the economy.  He’s got to have the funnest job in the world, these days. 

Alarming Statement

Kansas City Fed President Thomas Hoenig said this, this weekend, “We still have significant weakness to work through in the economy, in the U.S., and coupled with a rapidly rising level or debt and enormous moral hazard issues, we have a great deal of work ahead of us.”  Statements like this, are kind of what I have been talking about.  The media continues to paint a rosy picture of our economy, and I just don’t see it.  I guess statements like this are what people need to hear, to start thinking twice about pulling out of this financial situation that we’re in, as a country. 

No Auctions This Week

However, there will be an annoucement of what next week’s Treausry Auction amounts will be. 

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Rates Move on Speculation
The Real Jobs Numbers
Treasury Auction Funds Are Drying Up

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Chico, CA Interest Rates Market Report – Economic Influences – October 14, 2009

JP Morgan Chase Earnings Up

Today’s movement, in the markets, is the opposite of yesterday’s.  Stocks are enjoying the fact that Chase reported higher earnings than expected, as well as Intel.  So the Dow Jones Industrial Average is pushing 10,000.  A significant level, both psychologically and financially.  But even a push over 10,000 might cause the markets to reverse when investors cash in on their recent earnings. 

Hot Retail Sales…OR Not So Hot

Now that the “Cash for Clunkers” Program is over, Retail Sales for September fell by 1.5%.  However, the government expected a -2.1% adjustment.  Taking out auto sales, the report showed a 0.5% increase.  Better than the 0.2% increase expected.  So, why “Not So Hot?”  Even though these numbers are, “better than expected,” they’re still ugly figures.  Pre-holiday sales are showing that retailers are unable to promote any price increases, or have comfortable and sustainable growth.  These figures will show, later in the year, in the year-over-year Retail Sales numbers.  It’s one of those particulars that changes interest rates, somewhat unfairly.  Because the market interprets these numbers positively, and therefore interest rates suffer.  However, once the information has time to really seep into the market, an opportunity for rates to recover, could be lost. 

Cash For Clunkers Accounting

Looks like the government is going to use the “Cash for Clunkers” Program to take advantage how inflation is reported.  What I mean is that they are accounting for the $4,500 tax break as a discount in vehicle sales prices.  Who cares, you might ask…Seniors might!  Here’s why.  Accounting for a lower price, in vehicles, will translate into lower inflation.  If vehicles’ values are going down, that doesn’t translate to economic growth.  So, it’s kind of a brilliant way to look at things.  Lower inflation translates to lower interest rates!  However, lower inflation also saves our government money when paying social security benefits; as social security benefits are adjusted with inflation. 

Locking…

We do have some support, below us, with the 200-Day Moving Average, so, it’s risky.  But, if you have a strong stomach, you can float.  If you don’t…I’d lock.

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How Did We Get Here? A 2008 Review
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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 – January 20th, 2009

No Closing Cost Loans A Thing Of The Past

This week, I will discuss the market, but I also want to delve into why we’re not seeing the “no closing cost” loans of the past refinance booms of 1993, 1998, and 2002-2003.

Retail Sales Are UGLY!

First, Retail Sales figures totally sucked!  They plummeted by 2.7 percent, and when you take out auto sales figures, they were even worse.  So, adjusting the previous two months’ figures, we’ve seen six months of decline.  This is the longest decline on record.  Another concern was Deutsche Bank warned of another $6.3 Billion loss.  Citigroup announced an $8.29 Billion loss, and Bank of America announced their first loss in seventeen years.

Lowest Inflation Readings Since 1954

Now, the Initial Jobless Claims rose 54,000 last week to 524,000.  The four-week average of new claims actually lowered a bit to 518,500.  Remember when we were concerned with 362,500 claims?  And that with those numbers we might be in a recession!  Inflation is basically gone, as the Producer Price Index dropped by 1.9%, and with energy costs spiraling downward, you’d think interest rates would just be rejoicing.  But, I remind you that we’re in unprecedented and historical times.  Things aren’t working normally, markets aren’t reacting normally, and there’s just nothing normal about where interest rates will go speculating on where economic reports are measured.  Also, the Consumer Price Index showed its slowest pace of annual inflation since 1954.  Virtually NO inflation on the horizon would generally mean virtually the lowest interest rates we’ve ever seen, however, rates remained unchanged.

Fed Buying Bonds…Effect Is Unknown

Of interest this past week, the ECB cut its overnight rate to 2.0%.  This is a record low that should have lowered our interest rates, as the value of the dollar becomes stronger with each lowering of the Euro.  However, this isn’t a normal market…so, we did not see a significant lowering of our long term rates.  The Fed has purchased $33 Billion, so far, from their promise to purchase $500 Billion of Mortgage-Backed Securities.  The more the Fed Buys, the lower interest rates should move, however, there’s nothing normal about the Fed Buying Bonds, so we aren’t sure how interest rates and the markets will continue to react.

Longer Turn Times

Another word to the wise:  If you’re considering refinancing, there are a few things to take into consideration.  There is about 1/3 of the work capacity that banks have had in recent years.  So, when rates drop below 5.0%, they’re getting inundated with volume.  Therefore, since there are fewer banks with fewer people, they cannot handle this influx of loans.  So, they are artificially increasing their interest rates to stop the flood and make these loans manageable.  So be aware that refinances could take longer than a thirty day turn time.  Be prepared for two months, and if it closes sooner than that, you’re lucky.

Oh Yeah, No Closing Cost Loans

On the note regarding the “no closing costs” loans.  Let’s put it simply.  In the refi-booms of ‘93, ‘98, and ‘02-’03 banks learned that by refinancing at no cost, when they get paid off six months later because rates have dropped again, they didn’t have a chance to make any money on that loan.  So, as our ex-president once said, “fool me once…shame on,…fool me twice…um….”  Basically, our banks learned their lesson and they can ill-afford to make those mistakes again.  It’s an Amazing time to buy…I hope you’re considering it…as rates and values are at the lowest we’ve seen in decades!  Until next week…