Archive for September, 2005

The Chris Jones Group Testifies Before State Legislature

Attached is the press release from my testimony this morning before the State Tax Reform Task Force. I grew up in Washington D.C. and politics is in the water, so to speak. It was gratifying to be asked to speak along with Mike Ostermiller, the Association Executives Committee Chair of the Utah Association of Realtors, John Butler, legal representative for the Church of Jesus Christ of Latter-Day Saints (the Mormons), and Laura Polochuk (sp?) of the AARP.

Since this state is absolutely technically avant garde, you can listen to my testimony here (you need RealPlayer). I am second in line, after David Spackman, and I start at about 5 minutes in. Following me (at 21 minutes) is Mr. Ostermiller, and I invite you to please listen to his remarks as well, especially the grilling he gets afterward from the committee, which in my opinion he thoroughly deserved. I’ll have much, much more to say about this tomorrow. His testimony goes for roughly 35 minutes, and then at 55 minutes Mr. Butler speaks for the Church. His comments last about 12 minutes. He is followed at 1:08 by Laura. Other testimony follows. I can specifically recommend Mike Jerman’s testimony at 2:41 (these are NOT short meetings, folks). Mike is the Vice President of the Utah Taxpayers Association and one of the best financial minds in the state.

Na. I promised that I’d talk about the markets, Robin Hood, and a doctor on the Gulf Coast. Life has, of course, developed other things to talk about, so let’s get to it.


The markets are confused. Unemployment, which is one of the top two or three things that impacts bond rates, was up gigantically, but that was already priced into the market because of Katrina. The producer price index was also up .5%, which is a big move and indicative of inflation, but if you take out energy prices, there was no inflation at all. Quoting from CNBC:
Morning price gains made on grim jobless data were erased by a sharp increase in prices in the New York Fed’s Empire State index, to 53.41 in September from 29.0 in August.
But the Philadelphia Fed survey set off a wave of selling in longer-dated debt, with the 30-year down more than a point in the afternoon, after it also showed a sharp rise in prices paid to 52.7 from 25.9.
The combined effect of the reports reaffirmed fears that spiking energy prices have filtered through to factories, offsetting the fact that actual factory activity in both regions stalled in early September.
Yeah. This is how these fellas write. Personally, I find the prose almost impenetrable. What it means is that fuel costs more so everything costs more. Why this is bad for bonds is a mystery, except that the Fed will no doubt interpret this as inflationary and raise its rate again. More evidence of the Fed driving markets instead of reacting to them. Not their job, I didn’t think, but as you already know, I have no love for the Fed.

Bottom line: prices are up on rates, and we’ve lost 1/8 on the 30-year since last week this time. We’re sitting at about 5.875%, give or take.

Robin Hood (1937)

Make no mistake: this is NOT the Kevin Costner bomb of 1991 or the sometimes-hilarious Robin Hood: Men in Tights of 1993. Both of those have underrated performances (the immortal Alan Rickman in 1991 and the immortal Man in Black himself, Cary Elwes, in Men in Tights), but little else to recommend them.

Not so the 1937 4-star classic. Starring the immortal Errol Flynn, featuring Olivia DeHavilland, Basil Rathbone, and Claude Rains (aka Captain Renault, Senator Joseph Harrison Payne, and the Phantom of the Opera), this is a tale with sharp writing, classic dialogue (“One of us? He looks like 3 of us!”) and great stunts. Ignore the swordplay (though some of it is pretty decent), and the rest of it is terrific. Absolutely terrific. It’s going to be available at any good video store, and you definitely ought to rent it and watch it with the kids or the significant other.

Note: I am partial to older films. They get much more slack than the new stuff. Just my personal bias.

Doctor Goodheart

Stan Tillinghast is a retired cardiologist who, when Hurricane Katrina hit, cashed in some miles for a plane ticket to Jackson, Mississippi, rented a car, and started driving until he came to people who needed his help. He started a blog, Dr. Goodheart (he means your heart, not his) to record his experiences. PowerLine has a great post on him, and his blog is at the link above. Many, many of my clients have expressed their wish that they could do something like this, and we’ve tried to design plans to help them get to the point where they can. It could happen to you. Let us help.

Mortgage Consultants Need Prayers Too

Ray is sick. If you pray, and I recommend it, pray for him. He prays for you, you know.

Wells’s paternal grandfather died late last week, so he’s out of the office, too. Heck, we could all use your prayers, since it looks like Jeanette is pregnant with #7. Due end of May, we think. Thanks for asking.

Bonds were up strongly today on tame inflation numbers. Quoting from CNBC:

The Producer Price Index report, a closely watched inflation indicator that measures prices at the wholesale level, rose 0.6 percent in August, compared with a 1 percent increase in July. Economists surveyed by Briefing had forecast a 0.7 percent boost in August.
The so-called core PI, which excludes food and energy costs, also came in weaker than expected, indicating that inflationary pressures are in check for now.
Bond investors fear inflation, since it erodes the value of their fixed-income investments.
But many analysts fear that inflation will jump in the aftermath of Katrina, which has driven up energy prices and may push prices on several construction materials higher to meet a jump in housing demand and infrastructure rebuilding needs.

Apparently I am one of many analysts. This would indicate, however, that there are some analysts that do not think that Katrina will increase prices and lead to inflation, and that’s really weighing on my faith in the financial profession. But of course, I lie. I never have had any faith in it. I say this in all charity, being one of the profession myself.

Bonds going up means rates coming down. In this case, coming right back down to where they were yesterday before the market opened. Since the move in the market is slight, I ought to explain again how “rates” move.

On the Docket Tomorrow

We’re going to discuss The Adventures of Robin Hood (1938), look at the market, and quote from a doctor that’s doing incredible things in the Gulf Coast region.

See you then.


Chris Jones Watch: today I am part of the media group that worked on the Sci-Fi Channel reincarnation of Battlestar Galactica. I can hardly express to you how proud I am to have done this.

Curious about the Chris Jones Watch?

See What I Mean?

I read Ms. Ochman’s very excellent site every day (I have it on RSS), and lo, my first chance to trackback. This is her post from this morning. I thought it very applicable to mine of last night.

LA Power Outage Brought Down Many Sites Including This One

The LA power failure this afternoon brought down my web host and the thousands of sites they host, including my site, this blog and my email for many hours.

It sure doesn’t take much to cause chaos. Not particularly re-assuring, is it.

No, I responded, it isn’t very reassuring, even if you did spend two hours in the garden this morning harvesting peppers and tomatoes. I’m not kidding myself that I have left the grid, or anything. I am still terribly dependent on all sorts of things I neither construct nor understand.


What is Real?

Okay, so it’s my father, but he writes great stuff. Here’s his article on Labor Day.
Apropos of that – and note, please, that I am using the term correctly – when I was in the tech industry and my father was doing an affinity-marketing thing on the web on the east coast, we had a conversation about whether anything we were doing was real. By real we meant that it would continue, even for a day, if EMP destroyed the world’s computer infrastructure. We concluded that we weren’t, and that bothered me a lot.
I then read an article talking about The Discarded Image, and the conflict that led to the Bonfire of the Vanities and other reactions to the encroachment of escapist literature and art into the real world. I happen to be a fellow that thinks that great art and literature help us to see the real world more clearly, but that’s not the point of this post. The point is that increasingly we live in a world that is lit by fluorescents, heard in .mp3 files, and seen through the 19″ of a Sony, and that none of those things is real.
That was when I stopped being a man, and became a Hobbit. And like all Hobbits, I share a love of things that grow. I lost most of my use for power and money and glory and the trappings and neon of the world in America (and other places), and discovered – remembered, perhaps – that there is nothing so beautiful as a row of jambalaya peppers ripening in the sun and my family in the earth, weeding and caring for them.

Gordon’s article about the real labor of Labor Day hits on a similar theme.

Of course, I blog about this. Irony, above all.
Chris Jones
Resident Magician

How Mortgage Rates Track Bond Markets – Unfortunately

September 12-

Holy….there’s a lot of information out there. I keep getting sucked into the blog vortex, thanks largely to and its ilk. And now I know all about RSS and Feedster and you name it, and frankly, I haven’t had this much fun on the internet since I learned HTML.

But that’s not why you come here. I should let you know that these articles now appear on three sites at the same time, at The Chris Jones Group main website, at The Chris Jones Group main blogsite, and at Mortgage Blog, the best mortgage blog on the ‘net, not that that is saying much. Each site has its own content as well as these posts, but they are common to all sites.

No economic news today means a flat market, except that bonds were off pretty substantially this morning on inflation fears. Well, folks, I think inflation is on its way, and there’s nothing the Fed can do about it. When you have food and water and gas and jet fuel and other shortages caused by the closing of one of the largest ports in the US, the prices of things will rise. This is Econ 101. Whether that inflation can or should have a larger impact that needs to be dealt with by raising short-term interest rates is debatable, but not very.

As we’ve stated here before, what the Gulf Coast needs to rebuild is not federal money, which will be mismanaged and wasted after being forcibly confiscated from other places, but short-term low-interest loans from the financial institutions directly connected to the community, possibly (with any luck) augmented by grants from private foundations using donated money. If Greenspan has a brain, he’ll stop raising the Fed Funds Rate until Spring at the soonest (of course, by then, he’ll be retired, and maybe the next fellow will not raise them at all. A guy can dream).

To explain again – when the Fed raises short-term rates, that makes ARMs less attractive, as the ARM rates are based on short-term bond rates. There is no one-to-one correlation, but the trends track. The fixed-rate mortgages (30 and 15 year, and increasingly often 40-year) track the 10-year bond, which is not as affected by Fed decisions. In fact, currently, as short term rates have risen long-term rates have not, and that squeezes the prices together. For instance, the 30-year rates are currently better than the 7- and 10-year ARMs, and very close to the 5-year and 3-year ARMs. This reduces financing choices in the mortgage market.

This combination of circumstances is not necessarily bad; if you like the 5-year ARM rate you can still have it, only for 30 years. But the spread between the rates is so small that one thing is certainly true – either the 30-year rate is too low or the 5-year rate is too high. Since the 30-year rate is based on the wisdom of the massed bond market, and the 5-year rate is based on Alan Greenspan’s hunch about inflation, I’d be betting on the 30 being right. This is not just because I recently finished reading the Wisdom Of Crowds, but that helped.