Fed Holds Firm

• The Federal Reserve tried to have it both ways yesterday, leaving
  short-term rates right where they were, but talking about getting tough
  with inflation. That leaves the Fed rate at 2%, making the Prime Rate
  6%. As you know, because you are a faithful reader, Fed Rates and
  long-term mortgage rates do not have that much to do with one another.
• The long bond traders hated the news initially, but the stock
  traders hated it even more and by the end of the day we were back flat
  and repricing to the better.
• So this morning we have the first tick down in certain rates we've seen in a month.
• National Association of Realtors data this morning shows a 2%
  increase in month-to-month sales volume for houses, most of that in the
  markets like Vegas and the coasts, where house prices have dropped
  significantly. But again, it's a sign of increasing activity.
• My take? We're on the housing bottom. There will not be
  significant national drops in home prices from here. It's not going to
  get worse than it is. It is, however, going to stay bad for another
  nine months, so there's a significant buying window here. Not that I'm
  a real estate expert, mind you.
  
  

Same recommendation today, if you're going to buy, buy. Don't
try to time the market. It's a fool's game.

First Day of Summer

• Although it may have felt like it for a long time, today is
  actually the first trading day of summer. Everyone is watching crude
  oil prices, as the Saudis have indicated that they will increase
  production, possibly dramatically, by the end of 2009.
• Problem with that is, markets were hoping for a bigger increase,
  and Saudi Arabia doesn't have the kind of crude the world wants. Turns
  out the big producers of light, sweet crude are in Nigeria, Venezuela,
  and - get this - Iraq. Iraq is not entirely back on line yet,
  Venezuela is the home of one of the world's last real tin-pot
  dictators, and Nigeria is in the middle of a civil war.
• Markets are pricing in further increases in oil, and waiting for
  the Fed meeting which kicks off tomorrow. The Fed is virtually
  guaranteed not to do anything with rates, but you never know.
• Bonds, on the open, are absolutely flat. It's hard to see
  anything moving us dramatically today, given the flood of economic news
  later in the week.

For today, as we usually recommend, if you're going to buy, buy. Don't
try to time the market. It's a fool's game.



Thanks to those that came to the CJ Group BBQ this last weekend - it
was a hoot and a holler. Nice to meet so many RateWatchers, and we
look forward to seeing you again. And welcome to practically the
entire cast of Draper Arts Council's You Can't Take it With You,
a great show Jeanette and I caught on Friday. You wanna go, there's
info here.
You won't regret it if you do.

RateWatch Midday Update

This isn't a big deal, because markets aren't moving much, but it
illustrates one of the problems with market forecasting. The Philly
Fed number came in below estimates, but apparently the market estimates
weren't real, because, and I quote from CNBC, "I think we all knew the
estimates were going to be wrong."



What the heck is that about? If your estimates really aren't your estimates, then what are they?



Related to this is the upcoming trial of two Bear Stearns hedge fund
managers, arrested today, that are accused of bilking their clients out
of millions by telling them that the subprime market wasn't going to
collapse when they really thought it was. The prosecution's evidence
for this is a couple of emails back and forth where these guys say
stuff like "man, this looks bad". Well, it DID look bad. Turns out it
WAS bad. But I myself was saying as recently as February that there
were signs of recovery in credit markets. Last year I was saying that
any broker that made it to the first of 2008 was going to be fine, as
things began to turn around. Nobody knew the markets were going to be
this bad this long.



I want to underscore the difficulties here. Nobody actually knows what
the market is going to do. Nobody. Not Warren Buffet, not George
Soros, nobody. People guess wrong and lose money. It happens all the
time. Advisors screw up and cost their clients. I suppose that some
of them do it on purpose, but why, exactly, would you? Where is the
incentive to destroy your portfolio and lose your clients millions?
This seriously smacks of scapegoating, looking for someone on whom to
take out general frustrations. Maybe there's real malfeasance here,
but boy, I'm having trouble seeing it.



My father has a saying that I really like: if incompetence is the
possible explanation for some action, it's a waste of time looking for
another one.



Bonds are down.

Good News is Bad News

Good News is Bad News

• Initial jobless claims were better than expected - good news,
  right? We want people to have jobs. Don't be fooled by the increase in
  unemployment rate; that's mostly caused by a gigantic flood of
  high-school graduates into the job market, and not by people losing
  their jobs, as this morning's number proves.
• Unfortunately for bonds, when employment increases, that raises
  pressure on the Fed to raise rates, and that is bad. Bad for us here,
  that is. So that's bad, right?
• So far, not very bad. The 10-year note is losing back everything
  it got yesterday, but mortgage lenders pay more attention to the 5.5%
  and 6% FNMA bond, and those aren't off quite so far.
• The big number is the Philly Fed coming out in about 20 minutes,
  and we'll be mostly flat until then. If it moves us significantly in
  one direction or another, we'll alert you on it.
  
  

We love referrals, so feel free to forward this to anyone you like, and
have them shoot me an email so I can get them on the list their own
selves.



And this weekend, Saturday 5pm to 7pm, is the Fourth Annual Chris Jones
Group BBQ. You're invited. It's at Olivia Votaw's at 565 East 300
North in Lehi, right next to the high school (north side). Please
come, eat our food, and enjoy. Really. Our treat.



Cj

www.thechrisjonesgroup.com

Well, You Know...

• No news out today, so bonds are taking direction from stocks.
  When stocks drop, and they are, bonds usually rise, and they are. Not
  strongly. Not like Superman spinning the world backward. But we're up
  a little and punching through resistance levels.

• Part of this impetus comes from the CNBC interview
  yesterday in which the guest said, and I quote, "if the Fed raises
  interest rates with employment up and financial firms in the tank, in
  an election year, they need to be prepared for people to come for them
  with torches and pitchforks. It just ain't gonna happen."
  
  
• There had been some pricing in of a possible Fed rate hike
  later this summer, but that seems vanishingly unlikely given the
  general state of the economy, so that pricing is coming back out of the
  market, giving us a little - a very little - boost.
• New FHA regulations are on the docket for the first of next
  month, more bad news for those with iffy credit and/or not much in the
  bank. There will also be new RESPA regulations - not good ones - at
  some point this year. It's tough out there, folks. But there's good
  news as well, it's just harder to find. Be smart. Do your homework.
  Keep reading.
  
  

Recommendation: if you're looking to buy or refinance, now's the time.
Pull the trigger. Get the deal done. Do not wait for rates to move
lower, because they aren't likely to do that. Do an FHA if you possibly
can, but do something and do it immediately.



We love referrals, so feel free to forward this to anyone you like, and
have them shoot me an email so I can get them on the list their own
selves.





Cj


www.thechrisjonesgroup.com