Archive for June, 2006

Bonds and Footie

Bond markets reacted very negatively to the inflation data this morning, despite the fact that only one of the four numbers was above expectations, it is generally conceded that now the Fed will have to raise rates for the 18th consecutive time at its next meeting in late June.  That’s bad for bonds, which sold off, though this time stocks actually saw this as a good thing (market uncertainty is very bad for stocks) and rallied.  That put the Dow back in positive territory for the year.

What does this mean for mortgage rates?  Well, it’s interesting.  Week before last when the employment data came in negative, bonds rallied strongly, and that ordinarily means hat mortgage rates dive.  But they didn’t.  There was no move whatever in the bond runup.  So today, when bonds crashed back to where they were before, what happened?  Nothing.  My rate sheets today look exactly the same as they did yesterday.  I got no reprice notices at all during the day.  Now, tomorrow, things might change, and the bond move might be priced in, pushing the 30-year back up to 6.625%.  But I wonder.  I’ll post when we see what’s occurred.

On to football/soccer.

I read an article at TheSportsEconomist discussing the recent performance of the US national team at the World Cup.  Most of you know I am a great enthusiast of the sport, and was very disappointed by the US performance against Czech Republic.  The article contends that this is a systemic problem – the US team has no players that can create in packed space – and that those teams that play the way the Czechs do (and the Italians do, for that matter, looking ahead to Saturday) will beat the US pretty much at will.  This could explain why the US has NEVER won a match on European soil.  The Chris Jones Group is saddened, but not surprised.

So why do we not have such players?  Well, I have a theory.

For a number of years, I’ve had a nagging suspicion that the way the US develops its players has a great deal to do with what we get from said development – namely, that at a very young age we put tiny little players on very large fields with adult-sized goals.  What we get from this is very fast players who are good on counterattack and in the air, and the world’s largest supply of top-flight goalkeepers.  What we do not get is quality distribution of the ball in midfield or creativity in tight spaces, and we do not get quality finishing with either foot from our strikers.  That, it seems to me, pretty much exactly describes this incarnation of the US national side.

In South America particularly, but in Europe and increasingly in Africa, the fields and goals are very much smaller for very much longer.  This is especially true of the playgrounds where most of the youth spend their pickup time.  The average European playground is no larger than half a basketball floor and the goal size resembles the back of a park bench (and frequently IS the back of a park bench).  What you get from this is Brazil and Argentina, France and Germany.  You get Beckenbauer and Zidane and Ronaldinho.

It’s a theory.  I’m far from expert in such matters.  But it appears to me to be an explanation for the continuing state of US football vis-a-vis the rest of the planet.

The next serious football threat to South America, incidentally, seems to me to  be coming from Africa, not Europe.  Their wide-open, high-work-rate, offensive-minded game is very fun to watch and increasingly competitive on the world stage.

That said, the Saudi Arabia/Tunisia match was the best so far for drama and passion, and there might never have been a better footballing atmosphere anywhere on earth than what we saw in the Germany/Poland match.  Absolutely crackling.

I Don’t Drink

I don’t drink. But I do know a great blog post when I see one. Opinion Journal has one today:


A Cure for What Ales You
“A main ingredient in beer may help prevent prostate cancer and enlargement, according to a new study,” the Associated Press reports from Corvallis, Ore.:

But researchers say don’t rush out to stock the refrigerator because the ingredient is present in such small amounts that a person would have to drink more than 17 beers to benefit.

Boy is the AP ever confused. Quite obviously if you have to drink 17 beers, that would mean you do need to rush out to stock the fridge. Some journalists just don’t understand science.


Back in the world as we know it, bond markets are flat even though inflation data are benign. Brazil beat a very, very game Croatia 1-0. France turned in the worst offensive performance in the history of the World Cup in their draw with Switzerland, even worse than the US yesterday, which is saying something.

And Cars, apparently, is absolutely marvelous.

Oh The Humanity!

I love soccer.  I loved it when I was a kid and played it, I loved it in Hungary when I lived there, and I loved coaching it as an adult.

Today’s 3-0 defeat to the Czech Republic is the worst thing I have seen on the pitch from the USA.  Ever.

Yes, 1990 was bad.  I laughed at us over that (I was just back from Hungary and knew what good football looked like – and we didn’t play any).  1998 was really bad in France, but we had a bad coach and an old, divided team, so that was about what I was expecting.  Today, though, we have an experienced, solid team that played quite simply the worst match in the entire World Cup.

I’m also watching the Ghana/Italy match, and it is absolutely possible that we will lose to everyone we play this year.

Markets are flat, waiting for some sort of direction from the Fed.  Why not?  Nothing else seems to make any difference.  The economy appears to be good, most of the numbers look good, but there’s this sense of malaise that just doesn’t seem to go away.  I’m afraid it’s going to get worse before it gets better.

Meantime, the 30-year is hanging out at 6.625% and the 15-year is at 6.375%, with the ARMs back in play, especially the 7-year ARM, which is at 6.5%.

Just by way of getting started, I want to post an article from the Deseret News from Sunday’s edition, which I found profoundly moving. Most of you know that I did not go to college for a degree in finance – in fact, I never took a college-level math class and spent only one semester anywhere near the business/economics building. I studied Classical Civilization, and emphasized Roman History.

Why did I do this? Because if you can think, if you can write, if you can speak, you can do anything. Not perhaps literally anything, for instance, I would be loath to attempt neurosurgery, but it is also true that the world’s greatest neurosurgeon is going to need someone like me if he is going to pass on any of his knowledge. To think clearly is to touch the face of God. To create literature is to become God, for however brief a moment in however tiny a way.

This article expresses a truth I want very much to share on this Monday morning – there are lots of ways to be poor. And the worst ones have nothing to do with money.

More later.

Careful What You Wish For

As we’ve discussed in this forum many times, economic data and your mortgage interest rate are closely linked.  If you are purchasing a house, which is roughly half the planet right now, then the link is almost a direct one.  If you have an adjustable rate mortgage, and there are some of you out there that do, then there is a similar connection.  At any given moment, we here at The Chris Jones Group are working half a dozen new loans and watching a dozen or so older ones for indications about refinances or rate locks.  I have on my computer the latest bond market data, updated every 5 minutes.  Ray keeps a similarly close eye on things at his desk.  If the bond begins an aggressive move, which lenders define as about .03 on the 10-year bond, then we immediately have to make a call about whether we want to lock the rate for the new loans we’re working.

A word about rate locks as an aside, then back to the original thrust of this post.  Like many mortgage terms, “lock” means different things to different people.  It means different things to us than it does to you.  But in general, rate sheets are posted with a standard lock term, that is, a number of days that the rate is guaranteed.  Most lenders use 30 days, but some use 25, and our current favorite lender, First National, uses 15.  If we send in a “lock sheet” on a loan, that loan’s rate is guaranteed for the term of the lock.  Locks can be extended, but that costs money.  The longer the term of the lock, the more it costs to get it.  For a more comprehensive explanation of this, see this post from a while back.

Na.  When I tell a client that his loan is locked, that means that the Good Faith Estimate he got from me has the rate he’s going to see at the closing table.  Locking with us means that we guarantee the rate.  It does not, incidentally, mean that we have submitted a lock sheet to the lender.  Not sure why I’m telling you this.  We will, after consultation, occasionally decide to roll the dice and not lock a loan.  If the rates rise, then we’re going to eat the loss, but if they decline, we get to make more money.  We take the risk, though, not the client.  “I assume all the risk, is it not fair that I should assume some dough?”, one might say if one were Nathan Detroit.

What this means on a daily basis is that we find ourselves wishing for bad economic news.  Bad news makes bond traders happy (and, because the Fed is bonkers, it means good things for stocks, too) and that increases bond prices and that drops mortgage interest rates.  On at least two loans that we’re working right now, that’s an unmitigated good thing.  One of them we locked with the client, but rolled the dice on with the lender.  One of them is my own home loan.  So the very weak economic news from the past two days means that we’re going to be a couple thousand dollars richer than we might otherwise have been.

But there’s a dark side, and this morning it really bothered me.  I found myself, as I booted up my computer on the market open, wanting to pray that the employment data (as we’ve discussed, employment data and core CPI numbers more than anything else drive the bond) would come in weak.  Normal enough.  But those employment data represent something.  They represent people trying to get jobs.  And here I am, seriously considering asking God to make sure they hadn’t found them, just so I can make another few bucks and possibly get 1/8% better interest rate on my home loan.

So, in the end, I didn’t ask Him.  I’m trying to become a better person, and that didn’t seem to fit with the program.  As it is, the data is weak, meaning that 100,000 fewer people found jobs in April than the markets were expecting.  This is not a good thing.  But bonds are soaring, which is driving pricing for mortgage rates up, meaning that “rates” will drop later this morning.  That’s good news for me.  But I can’t help wondering if one of those 100,000 that are still looking for work might be just down the street, a friend of mine, one of my relatives.  Or one of yours.  I promise you, whatever it means for interest rates, I’m going to be much more careful about getting in their way in the future.

You have to be very careful what you wish for.

P.S. I do absolutely without reservation wish my sister Elizabeth a happy birthday.

P.P.S. I do also without reservation invite all of you to the American Cancer Society Relay for Life tonight at 5:30 (until Saturday roughly noon) at Lehi High School, just off the Lehi Main Street Exit off I-15.  There will be games, prizes, fun galore, and oh, by the way, we’re raising money to stop people from dying of cancer, just as an aside.  Come to the school, look for the checkered flags (that’s our campsite), and party with us.  Walk a lap.  5 minutes.  That’s all we’re asking.

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