Paul asks whether people will skip the mortgage application route next month and just pay cash...
Ok, may be not.
And your homepage was worth the visit Paul and I can get past the Blogger screen to post there soon, but first a detail:
Will Katrina, Rita, Wilma, Alpha,... skew those numbers as people decide to wait or jump at the prospect of buying a new/not so new home?
anyone read gross's new commentary? he and i seem to be on the same page that short rates are near the top and that the yield curve spreads are the signal, with cuts starting in the 2nd half of 2006.
that would sit well with me and seems likely.
with oil receeding, top line cpi numbers should come down...just like core numbers have been slight.
a couple more cranks and an ARM is looking like the right place to be.
it'll be damn cool when my mortgage goes down every month instead of up!
lucky for me now that its a rolling 12 month avg of 1 month libor, and lucky for the bank, on the way down its the same thing.
new ARM originators even in their delusions of price appreciation may be rational in terms of interest rate outlooks.
One thing that Gross has been over the past year is consistently wrong- at least in his public statements (i.e. the fed will stop raising rates after Katrina, the fed will stop at 3.5 ect). My bond trader friends say that the industry buzz is that he is trying to protect his positions. Those in the pit think there is little chance of rates dropping back down (to 4ish) unless Asia goes on a spending spree or Bush figures out that deficits raise rates. There is simply too much risk for the given rewards. With the increase in M3 money supply numbers I am not sure if we can stem inflation without rate increases. We now live in a global economy and while that has helped drop rates to decade lows it is also turning into a force for inflation (and deflation). It appears that much of Asia has rebuilt there post 1997 finical crisis reserves and are now diversifying away from the dollar. The feds might drop rates late next year but by then it might be too late. I would be more worried about the bond bubble than the housing prices. If bonds pop you can bet that housing will go soon after. We all know that the housing mania stemmed from the mortgage and bond markets dont be surprised if the same markets cause housing to reverse itself. One reason that their was a tech bubble was that banks allowed for a lot of stock speculation but giving ample margins. If the UK can muster through this year than there might be hope for us
I'm with you blueblood... I don't see the FED being able to ease or even hold rates unless the budget deficit is cut a lot... The treasury will need to continue to draw offshore investment if we won't do the saving & buy our own debt...
And if by a miracle the budget deficit IS cut it will mean fewer gov't projects & subsidies & entitlement payouts... ie less money in the economy & less building & fewer jobs.
I wouldn't be surprised to see the FED keep raising all the way to 2000 levels - about 6% - but for different reasons than 2000. Not so much to cool an overheated economy but to 'protect the dollar' to keep funding the deficit and keep us from 'importing inflation' that way.
Everyone says the administration wants the dollar 'soft' to help our export competitiveness & reduce the trade deficit... but a weak dollar also means imported or globally priced resources like oil & metals & components gets more expensive too... increasing with a soft dollar... and with our high labor costs relative to Asia, high resource prices offset many of the benefits of a weak dollar... So a weak dollar doesn't help near as much as one would think.
And if the economy actually slows... I would expect the budget deficit to grow even more rapidly ... blow up... less revenue & more expenses... and even a more trouble attacting treasury bids.
So I don't see a lot of easing even with a slowing economy. Rock & hard spot hardly describes it. There is no painless way out.
Right on. Asian currencies and NZ and Australia are rallying against the dollar, and the Euro has started to reverse its decline against the dollar as well.
Even if US interest rates rise, as they must to protect the dollar and keep the flood of foreign portfolio investment going, there is still going to be a mild renewed trend out of the dollar due to increased risk of recession in the US.
Looking farther into our future... Even if we make it past the next two or three years, what does the coming baby-boomer retirement (starting in 2010) mean for rates. It looks like we might have seen lowest rates in our life time. With the world aging and the subsequent government costs going up, we are either looking at an increase in taxes or higher rates... No??? What does it mean for global cash flows? Asia and Europe have a similar problem brewing...
It looks like we might have seen lowest rates in our life time. With the world aging and the subsequent government costs going up, we are either looking at an increase in taxes or higher rates... No??? What does it mean for global cash flows? Asia and Europe have a similar problem brewing...
I think it is an even bigger problem for the equity markets (stocks)... as boomers near retirement they will shorten up their risk... move out of stocks & long bonds into shorter maturity, laddered bonds & 'insured' instruments... CDs and such.
I think the stock market will get bombed when all the 401K's, Roth's & such start liquidating to meet pay out obligations. Arbs & hedge funds will smell the forced selling & make a killing. It could be the biggest bear market in history... all that money flowing out with big funds gaming it both ways...
But it could be mildly bullish for bonds as the money flows from risk to security... depending of course on how badly the deficit gets paying SS...
I think this was part of Shrub's privatization plan - force Xers to buy boomer's equity market holdings via SS so as to 'support the market'. But it is just another transfer of risk... from boomers to Xers & beyond... Just more pay as you go like SS except brokers get commissions to boot...
I wonder if mortgage applications being down augurs poorly for the next few existing home sales reports?
Paul asks whether people will skip the mortgage application route next month and just pay cash...
Ok, may be not.
And your homepage was worth the visit Paul and I can get past the Blogger screen to post there soon, but first a detail:
Will Katrina, Rita, Wilma, Alpha,... skew those numbers as people decide to wait or jump at the prospect of buying a new/not so new home?
anyone read gross's new commentary? he and i seem to be on the same page that short rates are near the top and that the yield curve spreads are the signal, with cuts starting in the 2nd half of 2006.
that would sit well with me and seems likely.
with oil receeding, top line cpi numbers should come down...just like core numbers have been slight.
a couple more cranks and an ARM is looking like the right place to be.
it'll be damn cool when my mortgage goes down every month instead of up!
lucky for me now that its a rolling 12 month avg of 1 month libor, and lucky for the bank, on the way down its the same thing.
new ARM originators even in their delusions of price appreciation may be rational in terms of interest rate outlooks.
One thing that Gross has been over the past year is consistently wrong- at least in his public statements (i.e. the fed will stop raising rates after Katrina, the fed will stop at 3.5 ect). My bond trader friends say that the industry buzz is that he is trying to protect his positions. Those in the pit think there is little chance of rates dropping back down (to 4ish) unless Asia goes on a spending spree or Bush figures out that deficits raise rates. There is simply too much risk for the given rewards. With the increase in M3 money supply numbers I am not sure if we can stem inflation without rate increases. We now live in a global economy and while that has helped drop rates to decade lows it is also turning into a force for inflation (and deflation). It appears that much of Asia has rebuilt there post 1997 finical crisis reserves and are now diversifying away from the dollar. The feds might drop rates late next year but by then it might be too late. I would be more worried about the bond bubble than the housing prices. If bonds pop you can bet that housing will go soon after. We all know that the housing mania stemmed from the mortgage and bond markets dont be surprised if the same markets cause housing to reverse itself. One reason that their was a tech bubble was that banks allowed for a lot of stock speculation but giving ample margins. If the UK can muster through this year than there might be hope for us
I'm with you blueblood... I don't see the FED being able to ease or even hold rates unless the budget deficit is cut a lot... The treasury will need to continue to draw offshore investment if we won't do the saving & buy our own debt...
And if by a miracle the budget deficit IS cut it will mean fewer gov't projects & subsidies & entitlement payouts... ie less money in the economy & less building & fewer jobs.
I wouldn't be surprised to see the FED keep raising all the way to 2000 levels - about 6% - but for different reasons than 2000. Not so much to cool an overheated economy but to 'protect the dollar' to keep funding the deficit and keep us from 'importing inflation' that way.
Everyone says the administration wants the dollar 'soft' to help our export competitiveness & reduce the trade deficit... but a weak dollar also means imported or globally priced resources like oil & metals & components gets more expensive too... increasing with a soft dollar... and with our high labor costs relative to Asia, high resource prices offset many of the benefits of a weak dollar... So a weak dollar doesn't help near as much as one would think.
And if the economy actually slows... I would expect the budget deficit to grow even more rapidly ... blow up... less revenue & more expenses... and even a more trouble attacting treasury bids.
So I don't see a lot of easing even with a slowing economy. Rock & hard spot hardly describes it. There is no painless way out.
Right on. Asian currencies and NZ and Australia are rallying against the dollar, and the Euro has started to reverse its decline against the dollar as well.
Even if US interest rates rise, as they must to protect the dollar and keep the flood of foreign portfolio investment going, there is still going to be a mild renewed trend out of the dollar due to increased risk of recession in the US.
Looking farther into our future... Even if we make it past the next two or three years, what does the coming baby-boomer retirement (starting in 2010) mean for rates. It looks like we might have seen lowest rates in our life time. With the world aging and the subsequent government costs going up, we are either looking at an increase in taxes or higher rates... No??? What does it mean for global cash flows? Asia and Europe have a similar problem brewing...
It looks like we might have seen lowest rates in our life time. With the world aging and the subsequent government costs going up, we are either looking at an increase in taxes or higher rates... No??? What does it mean for global cash flows? Asia and Europe have a similar problem brewing...
I think it is an even bigger problem for the equity markets (stocks)... as boomers near retirement they will shorten up their risk... move out of stocks & long bonds into shorter maturity, laddered bonds & 'insured' instruments... CDs and such.
I think the stock market will get bombed when all the 401K's, Roth's & such start liquidating to meet pay out obligations. Arbs & hedge funds will smell the forced selling & make a killing. It could be the biggest bear market in history... all that money flowing out with big funds gaming it both ways...
But it could be mildly bullish for bonds as the money flows from risk to security... depending of course on how badly the deficit gets paying SS...
I think this was part of Shrub's privatization plan - force Xers to buy boomer's equity market holdings via SS so as to 'support the market'. But it is just another transfer of risk... from boomers to Xers & beyond... Just more pay as you go like SS except brokers get commissions to boot...