Danny Salas

Chico, CA Interest Rates Market Report – Economic Influences – May 7, 2010

What Happened Yesterday?

Too Many Market Orders

Yesterday, the Stock Market had a wild ride.  They’re still determining the reason, however, many attribute it to Market Sell Orders.  Remember, computers are set to sell stocks, when a stock gets to a certain level.  Then, these computers are programmed to sell at the next market level, to “fill” their order requirement.  So, stocks got trapped in a technical nightmare, after losing so much value already, and basically, computers started “selling” at each market level…which kept getting lower…and lower.  The volatility was impressive, to say the least.  For example:   Accenture (NYSE: ACN) went from $40 down to 14 Cents!  If that wasn’t impressive enough, the stock ended the day at $41.09. So, you can imagine the roller-coaster ride that interest took, as well.

Fat Finger Thursday

Another analogy is that there was a Fat Finger involved in yesterday’s debacle.  Again, using computers, a trader could have accidentally touched one too many zero’s, when trying to sell a certain number of Stock, causing panic in the markets.  Regardless, it’s interesting stuff.

Unemployment Figures

Unemployment moved from 9.7%, in March, to 9.9%, in April.  However, the Labor Department reported that 290,000 new jobs were created.  The market expected 187,000 new jobs, so that’s a serious increase.  Coupled with the fact that revisions to February and March’s numbers increased jobs numbers by 121,000.

More Jobs, But Less Employment?

So, how do we move to a higher unemployment rate of 9.9%, yet add 290,000 jobs?  Well, when people are laid off, they probably prefer to collect their unemployment checks for a while.  If you don’t look for a job, for four weeks, than you’re removed from the Unemployment Figures, by the Labor Department.  It’s just the way things are…So, last month, 805,000 people started looking for jobs, again.  So how those numbers can twist and turn, like the roller coaster, above?

It's Safe To Float...

Locking Advice

I’m in favor of locking in, while the gettin’s good!  Germany has decided to help bail Greece out.  So, that could have a negative effect on the flight to quality, or safe-haven of Mortgage Backed Securities.

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Chico, CA Interest Rates Market Report – Economic Influences – April 1, 2010

Volatility Is Back With A Vengeance!

The Best Jobs Numbers In Three Years!

That’s what we may see tomorrow.  So, you’d better lock in your interest rate ahead of this news.  Forget the fact that we still will have over 5,840,000 people claiming Emergency Unemployment Compensation (EUC), that’s not even factored into the 4,660,000 plus people who are figured into the continuing Unemployment Claims.  Rates will increase, news stations will celebrate, politicians will be patting their own backs, and for what?  Simply a manner by which we report these statistics, as opposed to the real numbers.

This Is It!

One day at a time…that’s what we’ll have to be prepared for, as the $1.25 Trillion Government Purchase Program for Mortgage-Backed Securities HAS ENDED! In order to attract sideline investors, other than the U.S. Government, yields, and therefore interest rates, will have to be higher.  PERIOD!

Highest Yields Since January 2009

Locking Advice

Refer to paragraph one!

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Chico, CA Interest Rates Market Report – Economic Influences – February 5, 2010

We Managed To Break Above All Lines Of Resistance

Unemployment Drops to 9.7%

YooHoo!  That’s the Headline on the News Channels and Websites.  So, why haven’t rates skyrocketed?  Check this out…The Headline Number for Jobs Creations, for the month of January, was a -20,000 figure.  Yes, that’s a negative twenty thousand.  We were expecting 15,000 jobs gained.  This number was reported to us by the Business Survey.  Quite frankly, it’s generally a very unreliable Survey.  So unreliable that it has three names.  Business Survey, Current Employment Statistics Survey (CES), and The Establishment Survey.

So, Why Is The CES Used?

The CES can be more accurate, when there is less volatility in the market and numerous jobs numbers are either being lost, or gained.  So, it can be a helpful tool.  By interviewing approximately 140,000 business, nationwide, the survey gets its information from these businesses.  It also takes into account the birth/death ratio, when calculating their jobs numbers, and this can be very innacurrate in volatile times, as well.

Revisions To The CES

Here’s how accurate the CES has been (sarcasm).    December’s numbers were revised to 150,000 jobs lost.  Almost double what was originally reported.  November showed 60,000 additional gains, and October showed an additional 100,000 jobs lost.  Then, the big Benchmark Revision I discussed on Wednesday.  As I stated, the revised numbers were an additional 900,000 jobs lost from March of 2008, to March of 2009.

The Household Survey

This month, the media chose The Household Survey, in which to report the labor statistics.  This Survey, formally known as Current Population Survey (CPS), calls about 60,000 actual households.  The household survey showed that the U.S. gained 540,000 new jobs, in January.  The Unemployment Rate is reported by The Household Survey and jobs numbers are reported by both the Business Survey and The Household Survey.  So, the media can take information from either of these Surveys.

The Fed Is Watching

“I always feel that, (The Fed) is WATCHING ME.”  Falco (I think), but more recently made popular by Geico commercials.  If the Fed feels as though the media is portraying a move toward more healthy labor statistics, they may remove their “extended period,” comments from their next FOMC meeting.  That wouldn’t be good for interest rates.

Quick Sidenote

$1.173 Trillion, of the Fed’s designated $1.25 Trillion, has been spent on the Mortgage-Backed Security Government Purchase Program.  We’re gettin’ close folks!  Rates will increase when this occurs!

Locking Advice

Rates are similar to yesterday, but I feel that the market it just digesting the labor statistics.  I’d lock, today.  But, we have managed to stay well above the 50 and 100-Day Moving Average, so floating would be risky, but could be beneficial.  With rates at, or below, the 5.0% area, how can you go wrong?  I also feel as though investors will take this new lower unemployment figure and take their funds from bonds and put them into stocks, as stocks generally do well with better than expected unemployment statistics…

Related Must Reads

The Benchmark Revision Numbers
Fed’s “Extended Period” Comments…What It Means
Why Rates Will Increase Once The $1.25 Trillion Is Spent

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Chico, CA Interest Rates Market Report – Economic Influences – February 3, 2010

Jobs Numbers Will Move Markets

Jobs, Jobs, Jobs

American Data Processing (ADP) has reported their version of the employment sector.  They reported only 22,000 jobs lost, for the month of December, 2009.  The market was expecting a 30,000 lost job number.  So, better than expected news can weigh on interest rates, and they have, slightly.  We’re currently down 12 basis points, which is about a cost of .125% from yesterday’s pricing.  The official jobs numbers are scheduled for release on Friday.  Together, with the public sector and private sector, we’re expected to gain approximately 13,000 jobs for the month of December, with the Unemployment Rate holding steady at 10%.

The “Benchmark Revision”

Friday will give us a very important figure.  The Benchmark Revision to the Jobs Report will give us a revision to the revised numbers that we’ve already seen, from March to March.  So, when we see jobs numbers, they, generally get revised, from one month, to the next month, for two months in a row.  So, the reason for the revisions, is to get more accurate figures so we can see a more true economic picture.  What’s the problem?  Well, even though we expect these revisions to be a more accurate taste of what’s occurring, it’s old news.  And, old news is not really news.  So, even though the revised numbers could paint an ugly picture of what truly happened from March of 2008 through March of 2009, the current numbers (with a gain of 13,000 new jobs) could be absorbed as good news for our economy, and therefore, bad news for interest rates.

Looking Into The Crystal Ball

So, the Administration expects a 6.0% Unemployment Rate in five years.  Well, read this past article about these numbers and see for yourself where you think interest rates may be in five years.  If we cannot realistically reach these numbers, then we could have further deficit problems, which would lead to higher interest rates.

Locking Advice

We’re still under the 50-Day and 100-Day Moving Averages.  It would be very difficult to maneuver above these two lines of resistance, so locking it, might be prudent, before the Jobs Numbers turn rates ugly, before you have a chance to lock in, Friday Morning.

Related Must Reads

The Real Jobs Numbers
ADP is O-F-F  A Look At Their Sometimes Interesting Numbers
What Is A Moving Average?

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