Askcallie’s Weblog

The 30 year fixed rate is at 6.125% today before adjustments, if any.

Mortgage/Economy news:

The employment payrolls change did technically beat analysts’ estimates, although for all intents and purposes it was perfectly in line.  The economy lost another 49,000 jobs in May, compared with average forecasts of -50,000.  The average workweek was unchanged as usual, and average hourly earnings were even a tad higher than expected.

But none of that data is what has crushed the stock market and given at least a mild boost to bond prices.  The unemployment rate soared from 5.0% to 5.5%; in a month!  Normally, even in bad economic periods it takes a good four to six months for unemployment to rise by a half percent.  In fact, the last time it rose this quickly was 1986.  That’s 22 years ago by my calculation.

Oil prices and a weak dollar might be a big part of the reason why bond prices are doing even better this morning.  The Dow has already lost over 200 points with ease, after the horrendous employment data.  However, by proportion, bond prices are really struggling to make gains.  The threat of inflation is never good for bonds though.  Higher oil prices and a weaker dollar are creating the fear of inflation.  Oil prices are close to their $135 per barrel high, an increase of $6 since yesterday.  The dollar, which has weakened considerably over the past two days, is being blamed for the oil price changes.  It may be a partial cause, but speculation is what is really driving the oil market.

Thought of the day: Nothing can stop the man with the right mental attitude from achieving his goal; nothing on earth can help the man with the wrong mental attitude
Thomas Jefferson

Mortgage helpful hints: Investment properties are selling at very low prices. Are you buying? How about 10% down and a fixed rate around 7%. Do you already have a renter?

The 30 year fixed rate is at 6.25 today before adjustments, if any.

Mortgage/Economy news:

A better than expected job growth number is possible for tomorrow.  While weekly jobless claims did happen to fall from 372,000 to 357,000 last week, this has nothing to the assertion that payrolls could beat the -50,000 average forecast by economists.  Actually, it has to do more with people’s general tendencies.  Forecasts had been widely incorrect to the high side for three or four months in a row.  As economists have become accustomed to the low readings, they are now more willing to be pessimistic.  This was evident in their forecast last month, which were for -80,000 compared to the actual -20,000.  However, one could argue (as we did), that the revisions downward from previous month brought the net losses to 100,000.  It would be surprising if job growth did turn positive, but not at all shocking it is better than estimates by 20 – 30K.

The stock markets have rallied strongly this morning.  We explained yesterday that it was our concern that this would exacerbate an already heavy sell off in the bond markets.  The Dow is up over 100 points, but it has hit a short-term downward trend line.  It is also trading around the 12,500 level, which is a significant price level in itself.  If the Dow breaks this level, we will probably see a stampede out of bonds.

Thought of the day:

If only the people who worry about their liabilities would think about the riches they do possess, they would stop worrying.  Would you sell both your eyes for a million dollars. or your legs. or your hands. or your hearing?  Add up what you do have, and you’ll find that you won’t sell them for all the gold in the world.  The best things in life are yours, if you can appreciate yourself.

Dale Carnegie

The 30 year fixed rate is at 6% today before adjustments, if any.

Mortgage/Economy news:

The only relevant data released today was the ISM services index.  It didn’t give us a whole lot of useful information either though.  The index was virtually unchanged, going from 52.0 to 51.7.  Unless this index moves at least 2 or 3 points from one month to the next, the changes are rather meaningless.  Case in point, you can go to some news sites or stations and they will tell you that the U.S.service sector grew faster than expected.  Then, another group of reporters will tell you that the service sector shrunk from the pervious month.  You get two completely opposite views of the exact same number.  What we can take away from this number is that the service sector remains sluggish, but it still above the 50.0 level, marking very minor growth.

Earlier, first quarter productivity was revised higher from 2.2% to 2.6%.  This is somewhat of an afterthought piece of data, because it comes out a week after the revision to GDP.  Productivity naturally has to move in the same direction as GDP, simply based on the way it is calculated.  Therefore, the improvement was of little consequence to the markets.  And, on the subject of data that doesn’t matter, the ADP employment report was released early this morning.  They are betting on an increase of 40,000 jobs in May.  They have bet on job growth all five months this year, despite the fact that there have been more jobs lost than created in each of the first four months of 2008.  We use the word “bet” as opposed to predicted, because ADP is like the gambler who keeps putting his money on black.  Eventually, it’s going to hit and he will be right, but the longer that takes to happen, the more irrelevant his system becomes.

Thought of the day:

There are two primary choices in life;

to accept conditions as they exist,

or accept the responsibility for changing them.

Denis Waitley

Mortgage helpful hints: Are you a veteran? Do you have VA eligibility? Yes, it is still 100% financing! 

The 30 year fixed rate is at 6.125% before adjustments, if any. Typical adjustments are credit score, loan-to-value, cash-out and interest only.

Mortgage/Economy news:

Fed Chairman Bernanke is talking this morning, so it is time to perk up our ears.  One of the main topics of his speech is the value of the dollar.  As virtually everyone across the country is aware, the dollar is historically weak versus the euro, and it is not faring much better against other European and Asian countries.  It is the first time that Bernanke has openly admitted the possible adverse affects of the weaker dollar.  He does attribute part of the recent inflation to the continually softening dollar.  His focusing on this issue is leading many analysts to believe that the Fed could be done with their rate cuts.  In fact, they may start raising their rate even sooner than expected, because there would be a two-fold benefit.  First, it would presumably keep inflation lower.  Next, it would improve the return on investments in the U.S. against foreign countries.  That would increase the demand for dollars to buy U.S. investments, which would in turn cause a rise in the value of the dollar.  Aside from these more direct benefits, it should also bring oil prices down, since oil is traded only in U.S. dollars.  Oil prices are already beginning to fall under $127 while Bernanke is speaking.

Factory orders were unexpectedly strong in April.  They rose by 1.1%, compared to economists’ forecasts of only .1%.  Durable goods orders make up the majority of factory orders, and those numbers were already released last week.  Durables are considered a much better gauge of future economic growth potential, because the rest of the factory orders are for consumable goods, including food and clothing.  Necessities don’t indicate that businesses are preparing for expansion.  It just means that there are either higher prices or greater demand for certain items.  For instance, summer clothing orders may have contributed to the rise.

Thought of the day:

For all sad words of tongue and pen, The saddest are these, “It might have been”.

John Greenleaf Whittier

The 30 year fixed rate is at 6.125% today before adjustments, if any.

Mortgage/Economy news:  

Stock traders woke up this morning from their four-day slumber.  They could care less about the economic data, which we will discuss.  The Dow fell most of its 140 point decline within the first half hour, prior to the economic data being released.  There is not doubt that the banking sector had the biggest hand in the frenzied selling.  Whacovia showed their CEO the door.  Ken Thompson had been a part of Wachovia for 32 years.  But, when a person get’s blamed for a multi-billion dollar company losing half its value, that person usually doesn’t get to keep their job.  Washington Mutual board members were a little kinder to CEO Kerry Killinger, who was only stripped of his Chairman position but will remain in the CEO capacity.

The technical factors of the market only exaggerated the move.  The Dow hit resistance at around 12,750.  It was also forced lower by the 10-day moving average a little below that key price level.  The dominating trend still has to be considered sideways, but stocks could fall quite a bit more and still stay in a sideways trading pattern.

As we mentioned, the markets have not been real interested in today’s economic data.  Construction spending in April fell .4%, a real yawner, now that we’ve become accustomed to construction slowing on a monthly basis anyway.  If anything, it could be considered a strong report for housing, because it was about three times better than March, and it also beat analysts’ forecasts by .2%.

Thought of the day:

Let us raise a standard to which the wise and honest can repair; the rest is in the hands of God.
George Washington

The 30 year fixed rate is at 6.125% today before adjustments, if any.

Mortgage/Economy news:

Consumer spending was cut in half from March to April, but the drop was forecast by economists.  April is the first month of the second quarter, and a .2% gain is not going to provide much of a boost to GDP.  Even though last quarter’s GDP was revised higher, it stayed extremely low at .9%.  Personal income was only up .2% as well.  Many consumers have been buying on credit the last several years, but as credit dries up and food and gas prices rises, consumers have not felt a strong desire to buy much.

Inflation is easing though according the core PCE price index.  It showed that consumer prices rose just .1% last month.  Believe it or not, oil prices may help bring inflation down as well.  They are back under $127 per barrel this morning, after reaching a record high around $135 a week ago.  Oil prices fell dramatically following Memorial Day weekend last year as well, and they continued to ease going into the summer.  That was when prices were much lower, so if they drop by a similar percentage, we could easily see oil back around $100.

Thought of the day:

Whether or not you reach your goals in life depends entirely on how well you prepare for them and how badly you want them. You’re eagles! Stretch your wings and fly to the sky.
Ronald McNair

The 30 year fixed rate is up today at 6.25% before adjustments, if any.

Mortgage/Economy news:

Interestingly, the higher GDP, up .9% in the first quarter, did not have the affect on stocks that we had expected.  Unfortunately, bonds were hit exactly as we thought they would be.  The stock indexes have begun the day slightly lower, but that could be a product of a lack of excited over GDP coming in just as it had been forecast.  Data that is already expected rarely moves the markets.

The improvement to GDP was attributed to a lower trade deficit.  People weren’t buying from other countries, which is not surprising given that the value of the dollar is extremely weak relative to most other currencies.  It would be much more expensive for them to import goods.  That could be another reason why stock traders have not been electrified by the news.  Consumer spending, which makes up two-thirds of the calculation and is the best indication of economic growth was unchanged.  Cost cutting by domestic companies does not inspire one to believe that the economy is recovering.

Plus, it is even less likely that people will think the economy is getting stronger when the latest weekly jobless claims came in at 372,000.  And, an even more telling sign of the stagnant economy is continued claims, which are up at a four-year high.  Next Friday will be the next report on monthly payrolls.  They have shown job losses in each of the first four months of the year, and economists are estimating another substantial decline in the jobs market for May.

Thought of the day:

Mary Lou Retton

The 30 year fixed rate is at 6% today before adjustments, if any.

Mortgage/Economy news:

While durable goods orders may have fallen .5% overall last month, they hopped up 2.5% excluding transportation (i.e. autos and aircraft).  Everything from machinery to communications equipment to appliances was in high demand, along with all the raw materials used to make them.  This indicates a couple things.  First, it implies that businesses are investing in the future expansion of their business.  It also means that companies may be getting ready to add to inventories in anticipation of stronger demand.  Finally, it appears that factories may be gearing up for even more orders.  It will be interesting to compare this number with consumer spending on Friday to see if there really is increasing demand from shoppers.

Oil prices have dipped drastically since last Friday’s peak.  They were under $127 at one point this morning.  Although they have risen a bit off their lows, they are holding under $129 per barrel.  We saw a similar reaction last year.  Prices reached extreme highs (for back then anyway) right before Memorial Day when greater travel is anticipated, and then it promptly retreated heading into the summer.  There is certainly a good chance that this could happen again, since the timing coincides with reports that demand is decreasing.

Tomorrow’s GDP revision could be a turning point.  If it is revised lower than the .6% reported last week, which is not expected, then the economy could be on the brink of recession.  On the other hand, an improvement, as is forecast, might lead investors to believe that a recession has been narrowly avoided and perhaps the worst is behind us.  That’s why we see this as the most significant data of the week.

Thought of the day:

Ability may get you to the top, but it takes character to keep you there.

John Wooden

The 30 year fixed rate is at 5.875% today before adjustments, if any.

Consumer confidence sank again in May. The Conference Board’s consumer confidence index fell to 57.2, the lowest in 16 years. Soaring gas prices are no doubt a big reason for slumping confidence, but ironically, oil prices have slipped back to around $130 per barrel this morning. Estimates from the Federal Highway Administration and AAA show that road trips over Memorial Day weekend were lower than normal. It could mean that families are going to scale back on unnecessary trips this summer as well. The lower demand would help counter the perceived shortages in supplies. Based on consumer confidence readings these past couple months and the spike in oil prices, summer could be sluggish for economic growth. However, lower demand could gradually bring oil prices down, and we might see an economic pick up by the time school gets back in session.

New home sales may have been better than economists’ forecast, but they are way too low for anyone to care. Neither of this morning’s reports seems to have swayed the markets, especially since they were mixed between strength and weakness. Thursday’s GDP report is the only data this week that we feel can have a massive impact on the financial markets. We think the consensus estimate for a slight improvement is probably accurate. Any extra growth might send stocks racing higher though, leaving bond prices in the dust.

Thought of the day:

Only those who dare to fail greatly can ever achieve greatly.

Robert F. Kennedy