For the week of Oct 12, 2009 --- Vol. 7, Issue 41
Last Week in Review
"LISTEN TO WHAT THE MAN SAID." And those aren't just the words from Paul McCartney's hit song of the same title...they're also words of advice for anyone who's considering buying a home or refinancing. Last week, Federal Reserve Chairman Ben Bernanke said that as the economy heals, the Fed will be very vigilant to protect against inflation. While inflation is not a problem at present...it will most certainly become a problem down the road. So why does this matter if you are considering purchasing or refinancing? Because inflation is the arch-enemy of Bonds and home loan rates, and just the knowledge of it coming has been causing both Bonds and home loan rates to worsen in recent days. Along with the fear of inflation, the Fed's purchasing program of Mortgage Backed Securities is already slowing down, with the end of their buying in sight - and the reduced demand for these Bonds is also driving home loan rates higher.
Bottom line: home loan rates are already on the rise, and we won't likely see these low historic levels again.
Interest rates are still very near historic lows - George Washington couldn't have gotten a better interest rate - and the opportunity these low rates present is huge for homebuyers or people looking to refinance. If we haven't talked recently about your own home loan situation - or if you have a friend, family member, neighbor or coworker who needs advice - please call or send me an email. There's no time to waste.
On the topic of inflation - Gold has been on a tear higher of late, reaching a record high of $1048 an ounce. Remember that Gold is seen as a "safe harbor" or hedge against a falling Dollar and inflation - as Gold is not likely to lose much value in periods of rising prices. Again, fears of future inflation are pervasive, particularly in light of the massive economic stimulus that has been injected into the US economy...and inflation will drive home loan rates higher. The latest spike in Gold is more likely attributable to the Dollar's recent decline, but both factors are somewhat at play.
Also last week, the Initial Jobless Claims Report came in better than expected. According to the report, 521,000 new applications for unemployment benefits were received. That number was lower than the 540,000 that were expected, and marked the fewest number of new claims since the first week in January. However, that good news must be tempered by a look at the big picture...the reality is that despite a better-than-expected number, more than half a million people per week are still applying for new unemployment benefits. That's a sign that the labor market is still very weak. In fact, just last week former Fed Chairman Alan Greenspan also commented that he sees unemployment rising beyond 10%.
IN LIGHT OF THE ONGOING WEAK LABOR MARKET, NOW MAY BE A GOOD TIME TO MAKE SURE YOU'RE DOING EVERYTHING YOU CAN TO BE AS PROFICIENT - AND EFFICIENT - AT YOUR JOB AS POSSIBLE. TAKE A LOOK AT THIE MORTGAGE MARKET GUIDE VIEW ARTICLE BELOW FOR HELPFUL INFORMATION ABOUT A BETTER WAY TO EVALUATE YOURSELF AND MAKE IMPROVEMENTS WHERE NECESSARY.
Forecast for the Week
Despite the Bond market being closed on Monday in observance of Columbus Day, the Stock market will be open, and the week ahead has plenty of market-moving economic reports on tap.
On Wednesday, the Retail Sales Report will be released. This is the most-timely indicator of broad consumer spending patterns, so the markets will be watching to see if it comes in near expectations. Thursday brings us inflation news when the Consumer Price Index (CPI) is reported. After Bernanke's comment last week about the Fed protecting against inflation, the markets will be watching this report closely.
On Friday, the Preliminary Consumer Sentiment Index will be reported. This survey is conducted by the University of Michigan and measures consumer attitudes regarding present and future economic conditions. The index rose at the end of September, so the markets will be watching to see if that boost in confidence continued into this month's preliminary report.
In addition to the important economic reports described above, industry experts and traders will be paying close attention to the release of the Meeting Minutes from the Fed's most recent Open Market Committee meeting. Once again, any talks about future inflation could move the markets - particularly after Bernanke's comments last week.
Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see from the chart below, Mortgage Bonds were unable to close above a tough technical ceiling of resistance last week and were ultimately pushed lower, causing home loan rates to rise.
Chart: Fannie Mae 4.5% Mortgage Bond (Friday Oct 09, 2009)
The Mortgage Market View...
By Marty Nemko, Contributing Columnist, Kiplinger.com
For years, I've been pushing my clients to get a 360-degree evaluation -- that is, asking their boss, co-workers and supervisees for anonymous feedback on their work. I've also suggested using a 360-degree evaluation as a fast track to personal growth, getting feedback from friends, relatives and romantic partner(s).
But to be candid, few of my clients have responded to my exhortations and -- hypocrisy alert -- neither had I.
An easy evaluation
Because I want to practice what I preach and because -- especially as I get older -- I want to do everything I can to avoid becoming stagnant, I decided to get a 360-degree evaluation.
A new Web site, Checkster.com, makes it easy to get anonymous, work-related feedback. I did a five-minute self-evaluation at the site and then entered the e-mail addresses of eight people from whom I wanted feedback (you can choose from three to eight). They included my six most recent career-coaching clients, plus my editors at Kiplinger.com and U.S. News & World Report.
Checkster.com sent each person an e-mail inviting him or her to give me feedback anonymously, using the five-minute questionnaire. They were given a week to reply.
Five of my six clients responded; neither of my bosses did. Hmmph. (Once three or more people responded, I was notified of who did and didn't respond but was not told which questionnaire corresponded to which person.)
What I learned
My evaluations confirmed a number of positive aspects about me, which I'll refrain from recounting to prevent suspicious readers from thinking that I devised this column as an opportunity to toot my own horn. On the negative side, I got a few useful nuggets:
I'm not sure I'll act much on the last one. I know that I can't solve all my clients' psychological problems, and perhaps I should consider referring a few more to therapy. But too often I've seen therapy actually make clients worse. Yes, therapy patients may gain insight into the causes of their problems, but their life is often no better for it.
Yet frequently, in just a few minutes, I'm able to help a client identify irrational beliefs and even the childhood roots of those beliefs that have kept the client stuck. Clients are then able to move forward and implement their action plan.
How to react
The way I responded to the last client's feedback illustrates an important principle. Some people feel the need to act on all feedback, while others reflexively reject all criticism. The sweet spot is to consider feedback and then accept or reject it on its merits.
I understand that you may still be reluctant to do a 360-degree evaluation. You could get bad news or criticism in a tough-to-improve-on area -- for example, being told you're "too intense" or you often "don't get it."
But it's worth the risk. A 360-degree evaluation is arguably the most potent way to become a better professional and usually a better person. And, especially in this lousy economy, it could even save your job. (See A Career Survival Kit for more tips.)
Still unwilling? Here's a second-best solution: Do a self-SWOT. Write down your strengths, weaknesses, opportunities and threats. Now what, if anything, do you want to do differently? More of? Less of?
Marty Nemko is a career coach and author of Cool Careers for Dummies. Reprinted with permission. All Contents © 2009 The Kiplinger Washington Editors. www.kiplinger.com
The Week's Economic Indicator Calendar
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Economic Calendar for the Week of October 12 - October 16