May your stuffing be tasty May your turkey plump, May your potatoes and gravy Have never a lump. May your yams be delicious And your pies take the prize, And may your Thanksgiving dinner Stay off your thighs!
Happy Thanksgiving Everyone!
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
Stocks are trading higher on news that Citigroup is set to receive a $306 Billion lifeline from the US Government, and an additional $20B in cash from the Treasury Department. In exchange, the Government will receive $27B of preferred shares, paying an 8% dividend. This is an enormous financial commitment by the US Government, but over time this deal could be a profitable one for taxpayers.
Also helping Stocks move higher are talks of a larger than expected stimulus plan by the Obama administration, which could top $1 Trillion.
Mortgage Bonds are trading near unchanged levels, and will likely take their direction from Stocks today. At 1pm ET, the Treasury Department will auction $36B of 2 Year Notes, and the additional Bond supply could weigh on Mortgage Bond prices later today.
Existing Home Sales will be released at 10:00am ET and the market is not expecting a strong number. Unless the report wildly misses expectations, there shouldn't be much of a reaction.
Mortgage Bond prices remain above support at the 200-day Moving Average, while attempting to overtake resistance at the Falling Resistance Trendline. We will continue to carefully Float, but be ready for any sudden changes.
Here is a link to the economic reports for this week. http://www.bloomberg.com/markets/ecalendar/index.html BY THE NUMBER$ We hope you enjoy this edition of "BY THE NUMBERS" below - use these as talking points with your clients and referral partners this week!
1. THE RANGE - In the 1-year following the low point from each of the 9 bear markets that have occurred since 1957 (not counting the current 10th bear market) the S&P 500 has experienced a double-digit return. The best of the 9 produced a +58.3% return. The worst of the 9 was up +23.2%. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).
2.2008 ELECTION YEAR - 17 of the last 20 presidential election years (not including the current election year) have produced a positive total return for the S&P 500, including 15 of the last 16. With 5 ½ weeks remaining in calendar year 2008, the S&P 500 is down 44.4% (total return) YTD (source: BTN Research).
3.WOW - The YTD closing low for the S&P 500 (a value of 752) occurred on 11/20/08 (i.e., last Thursday). At the close of business on 11/20/08, 187 of the 500 stocks that are part of the index (i.e., 3 out of every 8 stocks) were down 60% or more YTD (source: NASD100.com).
4.U.S. DEBT - There are $4.4 trillion of Treasury bills, notes and bonds outstanding. The Chinese, with ownership of $585 billion of our Treasury debt, own more than any other foreign country (source: Treasury Department, FT).
5.U.S. STOCKS - The market capitalization of the S&P 500 has fallen by $4.4 trillion through the first 10 months of calendar year 2008. The total value of the stock index was $8.5 trillion as of 10/31/08 (source: S&P).
6.BACKSTOP - The Pension Benefit Guaranty Corporation (PBGC) insures the pension benefits of 44 million workers and retirees in the private sector. The PBGC was forced to take on 67 failed pension plans in its latest fiscal year. Over the last 5 years, the PBGC took over an average of 134 failed plans per year (source: PBGC).
7.STAY THE SAME - Only 4% of US employers anticipate that they will reduce their 401(k) matching contribution within the next year (source: Watson Wyatt).
8.BIG NUMBER - Through the first 9 months of 2008, the US imported $277 billion of crude oil, equal to more than $1 billion a day of oil imports (source: Commerce Department).
9.SUPPLY AND DEMAND - One week ago the president of OPEC said that the cartel will cut its daily oil production in order to raise the price of oil to $70-$90 a barrel. The price of oil closed last Friday at $49.93 a barrel. The last time the price of oil was $90 a barrel (10/07/08), the price of gasoline was $3.48 a gallon (source: Financial Times, BTN Research).
10.OIL INFLICTED PAIN - Inflation (using the CPI as the measurement) on a trailing 1-year basis (i.e., 11/01/07 to 10/31/08) is up +3.7%. 34 years ago as the nation was recovering from an oil crisis that began in 1973, inflation on a trailing 1-year basis (i.e., 11/01/73 to 10/31/74) was up +12.1%. The consumer price index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies (source: Department of Labor).
11.THEY TOOK THEIR TIME - 7 years ago this Wednesday (11/26/01), the organization responsible for determining the beginning and end dates of US recessions declared that a recession had started on 3/31/01. A later announcement that this particular recession had lasted only 8 months and that it had ended on 11/30/01 was made public on 7/17/03 or more than 1 ½ years later (source: National Bureau of Economic Research).
12.ELECTIONS AND RECESSIONS - The last time the US was in a recession during a presidential election year was 1980. The country endured a 6-month recession that ended in July 1980. Republican Ronald Reagan defeated Democratic incumbent Jimmy Carter in the November 1980 election (source: NBER).
13.HEALTH CARE - Medicaid provides health care to poor Americans. The program's cost is split between federal and state governments. Just 4% of Medicaid enrollees account for 50% of its expenses (source: USA Today).
14.GIVING - Legislation added to the $700 billion rescue plan signed by President Bush on 10/03/08 extended a tax benefit that had originally expired on 12/31/07. Americans at least age 70 ½ now have until the end of next year (i.e., 12/31/09) to make direct gifts from an IRA to a tax-qualified charity. Without this extension, an individual would have to take a withdrawal from his/her IRA, pay taxes on the distribution, and then make a contribution to a charity. This limited-time exception allows for a tax-free IRA distribution of up to $100,000 to be transferred directly to a charity (source: Kiplinger's Retirement Report).
15.COMPUTER KNOW-HOW - When Barack Obama becomes the 44th President of the United States on Tuesday 1/20/09 (8 weeks from tomorrow), he will be the 1st president in our nation's history to keep a laptop computer on his desk in the Oval Office (source: New York Times).
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
Over the years, MMG has continued to help the mortgage community discover and understand the disconnect between the 10-year Note and Mortgage Bonds. In recent times that disconnect has been very clear to anyone in our world - but in the past 24 hours, the disconnect has been dramatic. Since yesterday the 10-year Note has risen by 285bp, while Mortgage Bonds have risen 12bp!!! Do you think the media knows this? NO. Use this to inform your relationship partners and clients of what really drives fixed rate mortgages.
So what happened? Yesterday the Fed Minutes from the October Fed Meeting were released. The Minutes expressed concern over the health of the economy and their future targets for employment and growth were lowered. But the big news was the "D" word. The Fed, after years of being concerned with inflation, now say they are concerned about deflation. This news shocked the financial markets, pushing Stocks sharply lower while directing enormous money flow into ultra-safe Treasury Notes.
Deflation is when prices drop, mainly due to decreases in money supply and credit. And we are sure seeing problems with available credit right now. And with the economy slowing down, we are hearing some people say we are in for a deflationary recession. In a deflationary environment, investors flee into fixed instruments like Bonds because the fixed payment received would actually buy them more goods and services over time.
For those of you in the business a few years, you may recall back in the Spring of 2003, when Alan Greenspan uttered the "D" word. Mortgage Bonds rallied 400bp in a couple weeks, setting off an unprecedented refi-boom. Things are quite different right now, but stay tuned, should more investors wake up to the value of Mortgage Bonds, we could again see a significant improvement in prices. Get your clients informed and ready - all refi-runs have a limited timeframe. And this time will certainly be more challenging as there are fewer programs with stricter guidelines, but the biggest hurdle will be appraised values. Now would be an excellent time to run some filters on your database and see who would best be able to benefit from the window of opportunity when it hits.
Initial Jobless Claims continue to worsen as 542,000 filed this past week, far more than the 503,000 that was expected and the highest in 16 years. The four-week average of initial claims climbed by 15,750 to 506,500, the highest since January 1983. While the numbers are ugly, comparing them to previous markers is a bit unfair because there are more people today.
At 10am ET, the Philly Fed Index will be reported and while this may influence pricing in a typical market, we don't expect it to reverse the course of Mortgage Bonds.
Prices have barely peaked above the 200-day Moving Average. We will continue to float, but be mindful that things can change quickly. And a reminder about 2003, when Alan Greenspan came back and later said there is no threat of deflation - the refi-boom quickly ended and rates shot up dramatically higher. Stay tuned - we are living history.
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
Mortgage backed securities were off about 40 bps this morning, but are only off 9 bps currently. I would continue to float and see if they continue to improve throughout the day.
Risks favor: Floating into Jobs Report Current Price of FNMA 6% Bond: $101.31, -34bp Mortgage Bonds are down sharply this morning after they have enjoyed a nice three-day 160bp rally higher. Prices are now resting just near important support at the 200-day Moving Average with the highly anticipated Jobs Report set for release tomorrow - read on for our Jobs Report Strategy.
Initial Jobless Claims were 481,000, slightly worse than the 476,000 expected. The continuing claims jumped to 3.84 million, the worst in 25 years.
A preliminary reading on 3rd Quarter Productivity, a measure of employee output per hour, rose at a 1.1% annual rate, slightly above expectations. Labor costs climbed at a 3.6% annual rate, also more than the anticipated 2.8%. The higher labor costs are inflationary and not bond friendly, causing some of the selling pressure we are seeing today.
Some huge global news - The Bank of England surprisingly cut their benchmark interest rate by 1.5% to a rate of 3%, bringing it to the lowest level since 1955. And if that weren't enough, the European Central Bank (ECB) also lowered interest rates by .50% to a 3.25% rate. In recent updates we have been discussing how it was likely that Europe would need to continue cutting rates and how that would have a positive effect on the US Dollar and thus Oil prices - at the moment Oil is down over $3.00, leaving Oil under $62 per barrel. It looks like more cuts in Europe are likely.
Jobs Report Strategy
We always have to consider both fundamental and technical factors. Fundamentally, tomorrow's Jobs Report is set up to be a stinker. However, the markets are already prepared for a lousy report, with estimates of 200,000 jobs lost during October. The recent ADP Report as well as the latest Initial Jobless Claims numbers indicate that the Job market is doing poorly. So while we will certainly see a bad number, it might actually be better than expectations which wouldn't help Bond prices. But we see more downward revisions and a potentially significant uptick in the unemployment rate, which will both work towards improved pricing.
On the technical side, both the 200-day and 50-day Moving Averages are near the same level, creating a strong dual layer of support. This floor has already been tested this morning and prices currently sit right at this important threshold. Although the Bond is down this morning we would like to be patient, float and look for an improvement tomorrow morning. We feel both fundamental and technical factors point towards floating into tomorrow's Jobs report and a continuation of the recent uptrend
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
Risks favor: Floating, with a finger on lock trigger Current Price of FNMA 6% Bond: $100.12, +19bp Mortgage Bonds are trading a bit higher, but already far off the best levels of the day. In a speech this morning, Richmond Fed President Jeffrey "The Dissenter" Lacker, said the US economy was definitely in a recession, but he believed it would be fairly moderate in size. "We are in a contraction. Up until the summer it was a fairly mild recession,". Mr. Lacker, is not a voting Fed member, but he will be back in the voting rotation in 2009.
The ISM Index for October was reported at 38.9, which was much worse than expectations of 42. And even after the poor economic news, Mortgage Bonds failed to improve.
Technically, Bond prices indicate indecision among Traders. The last five trading days show a sideways trading pattern, hovering near support. We will float for now, but be ready to lock in this jittery environment.
Here is a link to the economic calendar for this week. http://www.bloomberg.com/markets/ecalendar/index.html BY THE NUMBER$ We hope you enjoy this edition of "BY THE NUMBERS" below - use these as talking points with your clients and referral partners this week
1. A TIE? - There are 538 electoral votes at stake in tomorrow's election. It will take 270 electoral votes to win the Presidency. There has been a tie in the Electoral College voting only one time in the nation's history. In 1800, both Thomas Jefferson and Aaron Burr each received 73 electoral votes (source: PresidentElect.org).
2.SENATE TO THE WHITE HOUSE - Only 2 Presidents in the history of our country have ever gone directly from the Senate to the White House. They were Warren Harding (President # 29) and John Kennedy (President # 35). Both John McCain and Barack Obama are US Senators and one of them will become US President # 44 (source: WhiteHouse.gov).
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
3.MAJORITY VOTE - The 2004 presidential election broke a streak of 3 consecutive elections where no candidate won 50% of the popular vote. President George Bush won the last election with 50.7% of the national vote. Bill Clinton won the 1992 election with 43.0% of the vote and then won reelection in 1996 with 49.2% of the vote. President Bush won the 2000 election with 47.9% of the popular vote. Before 1992, the last President to win the White House with less than 50% of the vote was Richard Nixon in 1968 (source: PresidentElect.org).
4.SOUTHERN DEMOCRATS - The last Democrat to win the White House that wasn't from the South was John Kennedy (1960). Since 1964, the 3 Democrats that have won the White House have been from the South. The 3 are Lyndon Johnson (Texas), Jimmy Carter (Georgia) and Bill Clinton (Arkansas) (source: WhiteHouse.gov).
5.WE'RE OPTIMISTIC - A majority of Americans have a positive opinion of both presidential candidates, as indicated by the favorability rating of both Barack Obama (61%) and John McCain (57%) from a survey released on Friday 10/24/08 (source: Gallup, USA Today).
6.THE BUCKEYE INDICATOR - The candidate that has carried the state of Ohio has won the White House for the last 11 presidential elections. The last time that the winner of Ohio did not win the White House was Richard Nixon in 1960. Nixon beat John Kennedy in Ohio but Kennedy won the White House (source: PresidentElect.org).
7.60-VOTE SENATE - If either political party was to achieve 60 votes in the 100-member Senate that party would be able to stop a filibuster by the minority party, or end floor debate and bring any proposed legislation to a vote. The last time when either party had a filibuster-proof majority in the Senate resulted from the 1976 elections when the Democrats achieved a 61-vote majority (source: Senate).
8.SONS IN THE MILITARY - John McCain, Sarah Palin and Joe Biden each have a son that is currently serving in the military. Jimmy McCain is in the Marines, Track Palin is in the Army and Beau Biden is a military attorney with the Delaware National Guard. The last US president to have a child serve in the military during his term in office was Dwight Eisenhower, our 34th president (source: Wall Street Journal).
9.SHORT LIST - 1,000 days before tomorrow's presidential election (i.e., 2/08/06), the most widely read newspaper in the USA had a story documenting the 20 most likely Republican and Democratic candidates for the White House in 2008. John McCain and Joe Biden were on that list but Barack Obama wasn't (source: USA Today).
10.REPUBLICAN VP - In a 7/26/08 Wall Street Journal article, the potential selection of Sarah Palin to be John McCain's VP was described as a possibility if he wanted to "go outside the box." The selection of Governor Palin was announced on 8/29/08 in Dayton, OH (source: Wall Street Journal).
11.WHERE IT BEGAN - Barack Obama announced his run for the White House in Springfield, IL on 2/10/07, almost exactly 146 years after Abe Lincoln did the same thing in the same city. John McCain announced his candidacy on 2/28/07 on the David Letterman Show (source: BTN Research).
12.ON THE JOB EARLY - Secret Service protection for presidential candidates is not required by law until 120 days before the November election date, or as of 7/08/08 for the 2008 election. The Homeland Security Department can authorize earlier coverage and did so on 5/03/07 for Barack Obama. John McCain accepted the government's protection on 4/27/08 (source: Houston Chronicle).
13.YALIES - Every president since 1988 has earned a degree from Yale (source: PresidentElect.org).
14.WIDE OPEN RACE - The 2008 presidential race is the first time since 1952 that no current president or vice president is running for the White House (source: PresidentElect.org).
15.PERSONAL STATS - Democrat Barack Obama stands 6 feet, 1 ½ inches, more than a ½ foot taller than Republican John McCain's 5 feet, 7 inch height. Both gentlemen are left-handed (source: Wall Street Journal).
-- Fannie Mae (NYSE: FNM - News) today announced that it will reinstate a requirement for homeownership counseling and education for first-time homebuyers obtaining a MyCommunityMortgage® loan or a loan that relies on nontraditional credit to qualify. Effective January 1, 2009, the requirement is geared toward helping borrowers better assess their options and responsibilities both before and after they purchase a home.
In otherwards, agents, customers, originators all have to pay for the sins of others. Sorry!
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
I know it's scary out there, but just a note to wish all a Happy and safe Halloween!
The markets are very volatile out there but with this uncertanty there is opportunity. I have found that in times like this that it only makes us stronger for the next challange that may arrive.
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
The first phase of the Troubled Asset Relief Program is being put in place. The first $250 billion will be used to provide a voluntary capital purchase program to rebuild bank capital. Citibank, JP Morgan, Bank of America and Wells Fargo will all receive $25 billion. Second the treasury announced plans to guaranty commercial paper and inter-bank funding. Banks that participate will be charged 0.75% to protect their debt issuances. (this means that the banks should start lending to one another again but the rates will be more expensive, which ultimately means loan rates will go up, but at least the markets will start lending again.) Third, deposit institutions can now offer full deposit insurance coverage on non-interest bearing deposit transaction accounts. Regardless of the deposit amount. The FDIC had recently increased coverage to $250,000 but institutions that participate will be charged an additional 0.10% on top of their current FDIC insurance. (what this means is that 100% of the deposits in checking are covered. This is very good for businesses since they do not get paid interest on their checking accounts. Not so good for consumers because they would have to move their funds to a non-interest bearing account to get the 100% insurance coverage.)
Housing starts fell to 817,000 annualized units. September starts were well below expectations. They are well below their lowest level since 1991. Housing permits are also falling off more than 8% nationally.
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
Fall is hands down my favorite time of the year. It is sunny here in St Croix Falls, Wisconsin this afternoon. Crimson, rust, gold, bright yellow, evergreen all blend to create an incredible palate of color! The changing colors of the leaves is set off by the shadowy, dark grey stone and rock that line the St Croix River. The cold, clear water matches the sky's bright blue. I hope that you can take the time to thank God and appreciate the simple things that life has to offer. Big time problems and worries surround us all these days. But so do the promise of a better future and these beautiful colors of fall! For now, I am not going to worry about my MS. Or the stock market, or budgets, or meds. Today, at this moment, it is wonderful to be alive!
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
The fourth in our series highlighting American Dream homes for under $500,000 takes us to sweet homesteads in the nation's heartland
Writing about the Midwest of his boyhood in Life on the Mississippi, Mark Twain famously observed: "This region is new, so new that it may be said to be still in its babyhood... (O)ne may forecast what marvels it will do in the strength of its maturity."
This week we offer some of the marvels the Midwest offers in its 21st century maturity -- affordable luxurious houses. In our Affordable Homes series so far, we've visited the Northeast, the Northwest, and the Southeast. The fourth leg in our search for affordable American Dreams under $500,000 takes us to the Great Middle, bounded by the Appalachians to the East and the Great Plains to the West. As you'll see, the grand cities of the nation's industrial and agricultural heartland offer some of the most distinctive and beautiful homes on the market. Affordable? You betcha.
As with other regions of the country, some of the best buys can be found in smaller cities and towns. But like the Southeast, the Midwest offers plenty of value in its metropolitan areas, too. Whatever style you're looking for, when it comes to the heartland, there's truly no place like home.
Thanks, Greg Adelman
Midwest Home Center LLC. 715-483-0012 612-735-4414 cell 612-395-5444 fax
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
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