Mortgage/Economy news:

Watch for consumer confidence and consumer spending to be the more significant market movers of the week.  Of course, the biggest deal will be the Fed rate decision, which will be released on Wednesday afternoon.  Most economists expect no change in their rate this time.  We feel that is the most likely outcome, particularly because inflation has started to flare.  The complication is in the fact that the economy has not fully rebounded as the Fed had hoped they would by now.  Some people are beginning to talk about stagflation again, but that may be a little premature.  We should see a lot happen in the overall economy over the next six months, especially as we head into the Presidential elections.

Banking and investing are topping the news so far this week.  Citigroup is supposed to start cutting some of the 6500 investment banking jobs this week, according to an inside source.  Many banks have announced and begun thousands of layoffs as the housing slowdown has persisted. 

Last week, many analysts were predicting that Merrill Lynch would downgrade their own earnings forecast.  However, another analyst beat them to it.  Bank of America analyst Hecht lowered projections on Merrill Lynch and UBS from his original expectations for profits to $3.5 billion and $7 billion losses respectively.  Meanwhile, Goldman Sachs downgraded their outlook for the entire financial sector.

Mortgage question: How long must the seller be on title to satisfy the lender? It depends is the real answer. FHA has waived the 90 day guideline because of the large number of foreclosures and Fannie Mae and Freddie Mac never had a seasoning  guideline. Surprised? 

Thought of the day:

The secret of getting ahead is getting started. The secret of getting started is breaking your complex overwhelming tasks into small manageable tasks, and then starting on the first one.

Mark Twain

(Provided by Steve Hale~Georgia Platinum Mortgage)

Mortgage/Economy news:

Each piece of the three pieces of economic data today was very close to last month’s numbers, and forecasts were pretty accurate as well. 

To start with, weekly jobless claims fell just a little from 386,000 to 381,000.  Because this data comes out weekly, it is the trends and the ranges in which we’re most interested.  The little ups and downs in between don’t mean nearly as much as the news reporters make them out to be.  New claims have been in the mid to high 300K range for months now, which coincides with weak job growth.

The leading economic indicators index went from .0% to .1% in May.  The index measures 10 different aspects of the economy to approximate what the overall economy will do over the next six months.  A positive number suggests growth, but when it is hovering within in a couple tenths of a percentage point of 0, up or down, the signal is not quite as clear.  We would have to say that right now it is basically telling us that there is a 50% chance of a stronger economy by the end of the year.

No matter how poorly the Empire State Index does, the Philadelphia Fed Survey outdoes it almost every time.  The Philly Fed’s manufacturing index fell from 15.6 to 17.1 this month.  The manufacturing sector has been consistently contracting for about the last two years.  So, any manufacturing reports are only likely to have much impact on the markets if they come in much better than forecast, because the financial community already expects bad numbers.

The Federal Reserve, the Treasury Department, and the SEC are all in talks to figure out the investment bank liquidity issue.  In the midst of the Bear Stearns collapse, Bernanke and the Fed had opened up funds to investment firms, money which had previously be reserved just for banks.  The debate is over whether to allow the lending window open only temporarily or make it more permanent.  They also want to put restrictions in place that prevent future lending irresponsibility.  What they decide could be critical in dictating the pace of the economic recovery, not to mention how quickly recovery may begin.

Mortgage Hints: Which is better, Private Mortgage Insurance (PMI) or Lender Paid Mortgage Insurance (LPMI)? LPMI has the private mortgage insurance built into the interest rate. The answer is it depends on the customer’s needs and scenario. If the customer puts 15% down, the PMI solution may be a better fit since they only need 5% in appreciation, reduction of their mortgage or upgrades to the property or a combination of the three to drop PMI. Does that make sense? Call for details.

Thought of the day:

The world is a great mirror.  It reflects back to you what you are.  If you are loving, if you are friendly, if you are helpful, the world will prove loving and friendly and helpful to you.  The world is what you are.

Thomas Dreier

(Provided by Steve Hale~Georgia Platinum Mortgage)

Mortgage/Economy news:

Manufacturing got a little softer in June in the New York region.  The Empire State Index worsened from -3.2 to -8.6.  New Orders fell, while unfilled orders rose.  Manufacturers seem to slow down their production when they have less business.  Fewer workers may also be adding to difficulties getting work completed, as this has been one of the sectors hard hit by layoffs.

Soaring oil prices have not been kind to manufacturing companies who depend heavily on gas and oil for both production and shipment of their products.  Overnight oil prices came within $0.11 of $140 per barrel.  There was a fire at a drilling rig in the North Sea overnight, which will affect production.  However, many news stations and websites are reporting that the rise in the dollar is having the greater impact.  They may both be contributing a little pressure.  But, the reality is that the dollar remains well below its long-term highs, and close to a three-month low against the euro.  We feel that speculation is the driving force.  Traders are using any excuse they can to buy oil and then everyone else jumps on board for the ride.

Investors are still getting excited at investment firms only losing a few billion dollars.  Lehman just reported that their losses last quarter totaled $2.8 billion.  Doesn’t sound like good news.  Investors’ relief actually comes from the fact that it was around Lehman’s forecast, meaning that the market had already braced for such a number.  Goldman Sachs will announce their earnings later today after the markets are closed.

Mortgage hints: FHA is 100% financing if you use down payment assistance programs like Nehemiah and AmeriDream.

Thought of the day:

To love means loving the unlovable. To forgive means pardoning the unpardonable. Faith means believing the unbelievable. Hope means hoping when everything seems hopeless.

Gilbert K. Chesterton
1874-1936, British Author

(Provided by Steve Hale~Georgia Platinum Mortgage)

Mortgage/Economy news:

The Consumer Price Indexes (CPI) were even with expectations, but they are toward the higher side of where the Fed would like inflation to be on a monthly basis.  Overall CPI rose .6%, mostly attributed to gas prices.  But, core CPI, which excludes food and energy, was up .2%.  Investors were not too worried at these levels though, because the stock markets have been up right from the start of trading.  We could see technical indicators that foretold this rally, meaning that as long as inflation wasn’t too devastating, buyers were reading to buy.  The Dow is up about 120 points, but it does have some resistance on the charts.

More interestingly, the stock markets are holding onto gains following another decline in consumer confidence.  The University of Michigan sentiment survey fell from 57.6 to 56.7.  The same factors as always have been dragging it lower:  high gas prices, slow job growth, and lower consumer spending.

Oil prices have retreated to under $135 per barrel, which might be the reason why stocks and bonds have been able to gain at the same time.  Of course, another reason is probably that they have been losing at the same time, which means that there is a lot of money on the sidelines to be invested in both markets.  Oil prices fall for a day or two every time it looks like demand might start decreasing.  Many airlines are saying they will offer fewer flights, charge small fees for previously included amenities, like free baggage checking or soda on the plane.  Dipping consumer confidence would also lead speculators to believe that people might need to spend less money on gas.

It has been an interesting mix of data and news this morning.  So far, it is working to the advantage of stocks and bonds.  Usually one or the other will take control at some point though.  It is possible that both markets could sell off later in the day as we go into the weekend.  However, if either market makes gains going into closing today, that should carry over to next week.

Thought of the day:

Tenderness and kindness are not signs of weakness and despair, but manifestations of strength and resolutions.

Kahlil Gibran
1883-1931, Lebanese Poet, Novelist

(Provided by Steve Hale~Georgia Platinum Mortgage)

Mortgage/Economy news:

Retail sales numbers showed tremendous resilience in May.  They crushed expectations, with overall sales rising 1.0%.  They were even better excluding autos, up 1.2%.  A rebound in the stock market was already underway, according to the futures markets, prior to the data being released.  Investors must have been expecting strong results.

Since weekly jobless claims rose significantly, from 357K to 384K, the retail sales data is obviously more important to this morning’s traders.  If you recall, the massive sell off in stocks last Friday was a direct result of a huge spike in the unemployment rate.  However, the retail figures imply that businesses are still going to be profitable (perhaps even more profitable with lower payrolls), and therefore their stocks will maintain or grow in value.

Tomorrow’s CPI data, a measure of consumer inflation, has the potential to be just as big as last week’s employment reports.  That is because the Fed has already hinted that they may not be cutting rates anymore, which implies that it is just a matter of time before they start to raise them again.  If the economy is started to recover (as suggested by May’s retail sales), then that obstacle is taken out of their decision.  Then, they will turn their attention to inflation.  It is a catch 22 for bonds though.  If inflation is high, stocks may fall for fear that the Fed will raise their rate, but bonds naturally lose value due to inflation as well.  If inflation is low, stocks will probably rise, but that will push investors to take money out of bonds.  In other words, bond prices are more likely to fall than to rise tomorrow.

Mortgage helpful hints: FHA offers rehad money and non-occupant co-borrower programs.

Thought of the day:

Class is an aura of confidence that is being sure without being cocky. Class has nothing to do with money. Class never runs scared. It is self-discipline and self-knowledge.  It’s the sure-footedness that comes with having proved you can meet life.

Ann Landers

(Provided by Steve Hale~Georgia Platinum Mortgage)

Mortgage/Economy news:

Oil has leaked into most economic data, and the trade gap was severely affected in April.  It rose from a revised lower $56.5 billion to $60.9 billion.  It was the highest since March of 2007.  The U.S.’s oil bill hit a record high in April, and as oil has continued rising in May and June, the deficit may very well keep pushing higher.

The trade gap highlights a part of the reason that the futures markets are pricing in a rate hike by the end of this year.  Fed Chairman Ben Bernanke and Boston Fed President Rosengren have both made comments in the past two days about protecting against inflation.  The Fed’s primary weapon against inflation is to raise their overnight lending rate.

Unfortunately, the other expected effect of hiking rates is a slowdown in the economy, which we can ill afford at the moment.  This is why most people believe the Fed will take a break from rate modifications for the next few months.  That will give them a chance to step back and see what their recent policy decisions are really doing, if anything, to help the economy get back in gear.

Thought of the day:

It’s choice – not chance – that determines your destiny.

Jean Nidetch

(Provided by Steve Hale~Georgia Platinum Mortgage)

Mortgage/Economy news: 

Lehman Brothers announced this morning that they believe they show a $2.8 billion loss in the second quarter.  Therefore, they have set out to raise $6 billion, which they will do through issuance of additional common and preferred stock.  Current shareholders will have mixed feelings.  Although the extra capital will strengthen the company for the future, it also dilutes their current outstanding shares, thereby causing them to lose value in the short-term.  The company has been pretty honest about their soft position, and they have gotten rid of 20% of their mortgage-related and other leveraged loans.  It sends a message to the markets that writedowns have not been exhausted in the lending world yet, but traders will be glad to hear that the company is trying to raise reserves, which is what Fed Chairman Bernanke has recently been urging all financial institutions to do.

The Dow has bounced off its two and a half month low at 12,200.  So far it has made back about 100 of the 400 points it lost on Friday.  Some price retracement is normal after large declines as investors take profits on shorts and look for new bargains.  The Dow needs to get back above 12,400 in order to break the short-term downward trend.

Oil prices have pulled back $3 off Friday’s high, but it is hard to get excited about oil at $136 per barrel.  It could merely be based on some profit taking.  A small increase in the value of the dollar may be assisting with the lower price as well.

Thought of the day:

You are the only problem you will ever have and you are the only solution.

Bob Proctor

(Provided by Steve Hale~Georgia Platinum Mortgage)