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Get ready for the weekend, the Pineapple Express is on the way - first weekend for storm watching at the coast-----

Below are various commentaries on what is going on with rates,  Have a great weekend - Monday is Columbus Day so be sure to check schedules to see who is open


From Think Big, Work Small


The Sept employment report had something for everyone this morning; total non-farm jobs were expected down 8K, they fell 95K, private sector jobs were expected to increase by 75K to 80K, they gained only 64K The unemployment rate was widely expected to increase to 9.7% frm 9.6%, as reported it was unchanged at 9.6%. Government jobs lost 159K jobs about evenly divided between federal jobs and state and local jobs. Census workers continue to wind down at the federal level and state and local governments continue to trim jobs. There are 14.8 million people still out of work, that doesn't take into account millions that have simply given up looking for work.


The bond and equity markets initially sat there for a few minutes before moving; by 9:30 the equity markets opened soft while the bond and mortgage markets continued to rally. The DJIA opened up 2 points, the 10 yr note +9/32 at 2.35% -4 bp with mortgage prices up 7/32 (.22 bp) frm yesterday's closes. The employment report obviously was weaker than expected but in this perverse case was seen as a positive. A positive because it adds more certainty to the Fed's QE moves that were expected but now cemented solidly in the markets.


Economic weakness continues to be ratified with almost every employment report we see, yet the optimism remains in equity markets. Hard to square but there is almost uniform belief that more easing (lower rates) from the Fed will fuel increased economic recovery. As most readers know, we unfortunately can't get on that wagon; previous QE (QE 1) lowered rates but so far not help for the economy. Housing foreclosures mount, consumers still deleveraging, housing markets remain in depression, and although employment is a lagging event businesses are unwilling to hire with all the uncertainty out there. Taxes, health care, consumers not increasing spending; we continue to be left with the question, how will another Fed easing help cure the core problems?


How will we know when the economy is turning around in a fundamental way? The unemployment rate will increase. There are millions of unemployed that have dropped out, the reason why the unemployment rate remains under 10%, if those that are declaring they are not looking for jobs would all of a sudden say they are back looking, the unemployment rate would spike to over 17%. Obviously, that won't happen overnight but over time when the economy actually picks up momentum look for unemployment rate to begin to increase.


Yesterday Treasury announced next week's auctions. $32B of 3 yr notes on Tuesday, $21B of 10 yr notes on Wednesday and $13B of 30 yr bonds on Thursday; the total of $66B, $1B less than last month's series.


At 10:00 August wholesale inventories, expected up 0.4%, increased 0.8%; July inventories were revised higher, to +1.5% from +1.3%.


Recent lawsuits are raining down on banks over foreclosures and the lack of proper documentation. There are state attorneys general that are lining up to stop foreclosures as evidence mounts that loan docs are lost or have been destroyed; in the meantime evidence is mounting that some banks and lenders are engaging in what some legal experts are calling fraud, using notaries to sign off on docs that are not original. Slowing sown or stopping foreclosures will continue to plague big banks as the evolution of this mess morphs into another avenue. Interesting video






Mortgage Rates Continue to Fall According to Freddie Mac's Weekly Survey


McLean, VA - Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which found that the 30-year fixed-rate mortgage rate dropped yet again to break the survey's all-time low; the 15-year fixed-rate did the same. The 5-year ARM also set an all-time survey low.

News Facts

•·         30-year fixed-rate mortgage (FRM) averaged 4.27 percent for the week ending October 7, 2010, down from last week when it averaged 4.32 percent. Last year at this time, the 30-year FRM averaged 4.87 percent.

•·         15-year FRM this week averaged a record low of 3.72 percent, down from last week when it averaged 3.75 percent. A year ago at this time, the 15-year FRM averaged 4.33 percent.

•·         5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.47 percent this week, down from last week when it averaged 3.52 percent. A year ago, the 5-year ARM averaged 4.35 percent.

•·         1-year Treasury-indexed ARM averaged 3.40 percent this week, down from last week when it averaged 3.48 percent. At this time last year, the 1-year ARM averaged 4.53 percent.


Attributed to Frank Nothaft, vice president and chief economist, Freddie Mac.

•·         "The 12-month growth rate in the core price index for personal consumption, which the Federal Reserve closely tracks, has been drifting lower over the past six months ending in August and suggests inflation is running at a tepid pace at best. This allowed mortgage rates to ease to new or near record lows this week.

•·         "Housing affordability increased for the second month in a row in August to tie April's level, according to the National Association of Realtors® (NAR). As a result, pending existing home sales also rose for the second consecutive month in August to the strongest pace in four months, the NAR also reported. Furthermore, since the end of August, mortgage applications for home purchases were up over 14 percent for the week ended October 1st."

Dick Lepre, San Francisco

Friday October 8, 2010

Treasury yields keep falling.

Nonfarm jobs were -95,000 in September.  Also interesting is the media spin which breaks out private and public jobs. NYT opens with "Cuts in Government Led U.S. Economy to Lose 95,000 Jobs." Never before the last several months have journalists deemed it necessary or desirable to break out private and public jobs when reporting the BLS Employment Situation Report. The report has always had them broken out but reporting has always used the total. Even the report itself opens with "Nonfarm payroll employment edged down." The fact is this: discretionary Consumer Spending - the best leading indicator for GDP - started declining this January.  Anyone who describes the present situation as "unexpected" is simply looking in the wrong place for data.  Hourly Earnings and Average Workweek were flat.  Talk that the Fed will come to the rescue by increasing money supply misses the point that $1 trillion of excess bank assets is parked in Federal Reserve Banks.  The problem is that the consumer is expressing FUD - fear, uncertainty and doubt.  Maybe the media are correct - what we need is more spin to get the consumer spending.

The path toward a world economy took another step forward yesterday when on opening day the NHL Carolina Hurricanes and Minnesota Wild played in Helsinki, Finland.


Thursday October 7, 2010

The dollar is suffering because the market players believe that QE II - another attempt by the Fed to get the economy going will not help.  Initial Jobless Claims were 445,000 last week.  The downsizing had already been done and jobless claims reflect not that companies are hiring but they are not letting people go as aggressively as they were.

The notion that increasing money supply has failed once and may fail again is a bit frightening.  With no lasting pop to the economy from the Keynesian stimulus and no result from a gigantic spike in base money in 2009 there is little that the government can do.  Consumers are deleveraging and lacking confidence.  Discretionary spending continues to fall.

 Here is a cool blog from a very smart guy that used to work for FHA - you can subscribe and be kept up to date on lots of statistics, information, opinions etc in regards to housing in Oregon and elsewhere.  Go Tom!



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