Below are commentaries on the rates, and also an inspirational article - I figured we could all use some good news for a change! 

Have a safe and Happy New Year; see you Next Year!

From Think Big Work Small

The final day of the year started with the bond and mortgage markets a little better and stock indexes lower. Trading volume will be very low with most traders and investors out until next year. There are no economic reports today, no Fed actions and nothing markets can look forward to other than squaring positions at year end. Although better this morning it is likely that by 2:00 this afternoon when the bond markets close the bond and mortgage markets won't be much changed from yesterday's closes. We suggest ignoring the trading today regardless of how it ends.

Take a look at the 4.0 FNMA Jan 30 yr coupon chart; the present price is braking above its 20 day moving average for the first time since Nov 8th; as we noted over the past couple of days technicals remain bearish but are improving. The bellwether 10 yr treasury at 9:00 sat at 3.33% (see below for 10:00 level) and is closing in on its 20 day average on the yield chart. While looking a little better the interest rate markets still have a bearish tone, we need the 10 yr to move under 3.25% to change the near term trend.

Although recent improvement in the bond and mortgage markets is very welcome, that volume is very thin keeps me from becoming too friendly to the rate markets now. We need to see improvement on more trading, that should begin on Monday with everyone back to doing real business. The overwhelming consensus now for 2011 is for the economy to continue to expand, we remain skeptical however. There are two key components to consider when adopting the bullish outlook; the housing sector and consumer spending, both raise serious questions. 2011 is not going to be good for housing, likely about the same as this year; consumer spending was better for the holidays but will consumers continue to increase spending in 2011-----a huge question and the defining issue for the economy in 2011. We won't have a good handle on that until we get a look at Jan economic data in Feb.

On Dec 31st 2009 the 10 yr note yield was 3.84%, today 3.35%. Mortgage rates in 2010 also fell 45 basis points. Looking for rate market improvement in Jan and possibly the first quarter, if we see that the mortgage markets will not fall back to the lows seen this fall prior to the beginning of Nov. 4.5% mortgage rates are likely the best we can expect unless the economic outlook changes dramatically. We are not as bullish about 2011 economic growth as most, if we are right the bond and mortgage markets should do better in the first half of the year. Look for continued volatility in the markets early next year.

Rates Mostly Up in Freddie Mac Weekly Survey

 

Fixed-Rate Mortgages Still Historically Low

McLean, VA - Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which saw all but the 1-year ARM rise. This brings 30-year mortgage rates back to levels seen in May of this year, while the 15-year ties levels not seen since June. Even so, mortgage rates remain incredibly low.

News Facts

•·         30-year fixed-rate mortgage (FRM) averaged 4.86 percent for the week ending December 30, 2010, up from last week when it averaged 4.81 percent. Last year at this time, the 30-year FRM averaged 5.14 percent.

•·         15-year FRM this week averaged 4.20 percent, up from last week when it averaged 4.15 percent. A year ago at this time, the 15-year FRM averaged 4.54 percent.

•·         5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.77 percent this week, up from last week when it averaged 3.75 percent. A year ago, the 5-year ARM averaged 4.44 percent.

•·         1-year Treasury-indexed ARM averaged 3.26 percent this week, down from last week when it averaged 3.40 percent. At this time last year, the 1-year ARM averaged 4.33 percent.

Quotes

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

• "Interest rates on fixed mortgages and the 5-year Hybrid ARM rose slightly over the holiday week, but were still below the year's highs set in the first half of 2010. For the year as a whole, 30-year fixed mortgage rates averaged just below 4.7 percent, which represented the lowest annual average since 1955 when secondary market yields on FHA mortgages were above 4.6 percent and the average price of a home was $22,000.

• "Recent news on housing markets has been mixed. The S&P/Case-Shiller® house price index fell 0.99 percent in October, in line with other reports showing a softening in house prices since mid-year. Home sales continue to recover in the months following the expiration of the Homebuyer Tax Credit, however, with sales of new and existing homes up 5.5 percent and 5.6 percent, respectively, in November."

Celebrate the child in you

 

By Harvey Mackay

http://www.harveymackay.com/columns/column_this_week.cfm

Throughout the holidays, a lot of emphasis frequently falls on children.  Why?  Because children bring such a marvelous perspective to events that many of us take for granted.

Kids get excited about life in general.  They see everything with fresh eyes, knowing they will find something new and different every time they look.  Adults, on the other hand, look for things they know and expect.  Imagine what we grownups are missing!

My friend, the late Jim Rohn, was a master speaker and motivator.  He encouraged folks to "practice being like a child."  This time of year, when the wonderment of the holidays shines through, reminds me of his fine advice.  Jim said there are four ways to be more like a child, no matter how old you are.

First, he suggests that we become curious.  "Learn to be curious like a child ...  Kids can ask a million questions.  You think they're through.  They've got another million ...  Kids use their curiosity to learn.  Have you ever noticed that while adults are stepping on ants, children are studying them?  A child's curiosity is what helps them to reach, learn and grow," he said.

Truer words were never spoken.  Have you ever heard a little kid look at a challenge and say "but we've always done it this way?"  Of course not.  They let their imaginations run wild and aren't afraid to try unconventional ideas.  Children don't have to be taught to "think outside the box."  Most kids I know hate being confined.  They are experts at pushing the envelope!

Jim next recommended that we "learn to get excited like a child ... so excited you hate to go to bed at night.  Can't wait to get up in the morning.  So excited that you're about to explode."  Then he takes it a step further:  "If you're too old to get excited, you're too old."

That reminds me of a story about a friend's mother, a sweet Irish grandmother who loved the holidays because she looked so forward to shopping for toys.  She would get so excited playing with the grandkids and their new toys that even she didn't like to stop long enough for the holiday dinners.  "Put me at the 'kids' table," she would say, so that she could eat fast and get back to the fun and games.  "Kids are so much more interesting than adults," she would say.

Faith is Jim's third childlike quality.  Faith is childish, he said.  "Adults too often have a tendency to be overly skeptical.  Some adults even have a tendency to be cynical."  He said that adults need proof that something is good before they will believe it.  Kids aren't that way, according to Jim.  "Kids think you can get anything.  They are really funny.  You notice the difference?"

I'm afraid I fall into the adult category all too often.  Sure, I take plenty of risks, generally guided by past experience and gut instincts.  I'm sort of a "show-me" guy.

Finally, Jim cited trust as a childish virtue that many adults have forgotten.  "Have you heard the term 'sleep like a baby?'  That's it.  Childish trust.  After you have gotten an A+ for the day, leave it in somebody else's hands," he said.

Trust is in short supply in the business world.  Can you trust that your customers will pay for their orders?  Can you trust your vendors to come through on time?  Can you trust your employees to show up ready to work every day?  Those are big questions that any responsible manager must be able to answer, yet we know deep down that most people want to do what's right.  They will do what they have to do in order to stay in business.

I'm not suggesting for a moment that we all become gullible and naïve.  But I am encouraging adults to take a closer look at their world and take in the details that they have been missing.

How does this relate to business?  Every successful operation can find ways to be better.  Want to take a really big risk?  Ask your staff to join you for a brainstorming session, but only if they agree to embrace their inner child.  Escape from the familiar and see what else is out there.

"Curiosity, excitement, faith and trust," Jim Rohn said.  "What a powerful combination to bring back into our lives." 

Mackay's Moral: Grow up and think like a kid again.