Two Mintues with Todd 10.6.08 Uncertainty Rules the Markets

Hi Team,

First I want to welcome all of my new subscribers and to thank everyone who has referred new viewers and new clients this week. I truly appreciate it.

Last week was another crazy week for the financial markets. I didn’t want to blow my “two minute limit” with a summary today, so I hope you enjoyed my special “Weekend Update” highlighting some of the big points of the bailout. If you missed it you can view it in the archive over to the right. As my update predicted - it wasn’t the economic reports that moved the market, it was the headlines. The big daddy of reports – the jobs report – was horrible. The economy lost 159,000 jobs; which was far more than was expected. This would usually give rates a huge boost but did not. Rates stayed in a sideways pattern and finished unchanged for the week.

Now into the usual summary for the week: The Freddie Mac Primary Mortgage Market Survey for last week was 6.10% with .6% Fees/Points for a 30 year fixed rate loan (up from 6.09%). The 15 year fixed rate was 5.78% with .6% Fees/Points (up from 5.77%).

What will move bonds this week? The new bailout bill- as its effects begin to unfold we will see how the market reacts. If the market thinks it will help, we will see stocks rise, most likely at the expense of bonds (pushing mortgage rates higher). If it looks like the trouble will continue on (my current opinion), then stocks will perform poorly most likely benefiting bonds and interest rates. People are both skeptical and anxious to see what it will do.

The "high impact" report this week that will move bonds will be Tuesday’s release of the minutes from the last Federal Open Markets Committee (FOMC) aka “the Fed.” The market will be watching for talk of a rate reduction in the Fed overnight lending rate. Although on the surface this seems like a good thing for mortgage rates, it is not. Lowering rates is inflationary which puts long-term upward pressure on bonds and rates. However, this time around may be different. There are rumors swirling around that the US, the Bank of England and the European Central Bank may simultaneously cut rates. If that happens it would offset the decline against foreign currencies thus offsetting this inflationary threat. This could actually support both the stock market and mortgage bonds. The rest of the reports will be lower impact this week.

If you, your clients, friends and family owe more than your home is worth, have an ARM that is adjusting in the future, or are facing foreclosure; please call for the latest information on Hope for Homeowners. This Government program was just introduced on October 1st, 2008 and will help many people.

As always I'm here for questions, comments, and concerns. Have a great week. Todd