Market: So, yesterday we were watching the Fed, and as it turned out there was nothing to see. Bonds ended exactly flat at 0. Today we’re up 12bps and sitting on a multiple resistance line (Note: if this doesn’t make any sense to you, don’t worry. It’s not important in the cosmic sense. I just want you to know that I’m paying attention to it, and that I know what it means. Call it outsourcing your worry about rates.)
Analysis: Oil spiked a couple weeks ago because it looked like the recession was bottoming out. Whoops. Demand continues to be bad. Oil is now falling. GDP numbers today showed the economy shrinking by 5.5%, and unemployment numbers were bad again, and now earnings are bad as well, so what we learn from this is that we still have a long way to go. This argues for a flat rate environment.
In fact, we’d be trending strongly downward except that every time the government holds a press conference it talks about changing the face of the financial landscape to such a degree that lenders and banks are forced to hedge their bets. Think of it this way: you’re in Vegas. You want to play a little blackjack. You go to the table and the dealer deals you some cards. Then when you look at them, he takes one back. Apparently you can’t look at both of them. This hand, the dealer says, 23 will be the winning score. Next hand it’s back to 21, except you can’t win if you have clubs. How much would you bet on a game like that?
But that’s precisely what’s happening with the US government. Between President Obama, Ben Bernanke, Secretary Geithner, FHA, FHFA, OFHEO, HUD, and a partridge in a pear tree, every single day (and sometimes twice) the rules for lending, how much you can lend, to whom, under what conditions, are changing. If you were a bank, how much would you bet on a game like that?
If it weren’t so catastrophic to so many people, it would be actually kind of fun, like trying to do a puzzle using a funhouse mirror. At least I can say my job isn’t dull.
City 1st Mortgage Services, Utah’s Mortgage Lender of Choice (and nearly everywhere else)