Monday, June 22, 2009
Take a Look At Market Update (MMG)
Take a look at what is happening in the market from my MMG update. Go to www.joeharris.com and click on the MMG green tab.
Friday, June 19, 2009
Obama's Mortgage Plan Good or Bad?
In my very humble opinion this new Mortgage Plan will increase costs on consumers, pile on more paper work for the industry as a whole, and force many Mortgage Brokers out of business. The very people who helped create the mortgage mess, BARNEY FRANK and CHRIS DODD are actually in charge of "Fixing" the mortgage industry. Here is a link to the explinations of the new plan:
http://ow.ly/eTO0
http://ow.ly/eTO0
Thursday, June 18, 2009
Bonds Reach their Ceiling and Bounce Down
Bonds woke up angry this morning following yesterday's sell-off. A week ago, bonds began a nice rally with the formation of a Bullish Engulfing Patern. Aided by the recent slide in Stocks, Mortgage Bond prices powered through their 200-day moving average on Tuesday. But yesterday, things changed. Bond prices initially zoomed higher to break above their 25 day moving average - but the Bears pushed prices back below this ceiling, which created a Bearish Shooting Star...a reliable indicator of prices worsening ahead. Should the Bond close below its 200 day moving average, this level will now become a ceiling of resistance, with the nearest floor being found about 250bp below current levels, at the point where the rally began. We may now have seen the last of rates in the 5% range.
Wednesday, June 17, 2009
Bonds Couninue Climbing
Inflation and consumer level was reported lower than expected today and the Consumer Price Indes (CPI) came in at 0.1% versus the 0.3% estimated. This left year-over-year headline CPI at -1.3% and the lowest level since 1950, showing that inflation has not been an issue - but many, including myself, feel that inflation will become a tough customer to deal with in the future.
Mortgage Bonds liked the very tame inflation read and continued their run higher. They have been in rally mode of late, gaining 360bp in just the past five trading days...all signaled by the Positive Stochastic Crossover and Bullish Engulfing Pattern. Mortgage Bonds are testing a tough ceiling at their 25 day moving average, and has been the case of late, Mortgage Bonds will follow in the opposite direction of stocks, which are falling through their 200 moving average and appearing to head lower yet.
There is still quite a bit of ground to be made up by bonds from their fall from highs on May 20th. Stay tuned, let us hope rates stay low to get this economy moving.
Mortgage Bonds liked the very tame inflation read and continued their run higher. They have been in rally mode of late, gaining 360bp in just the past five trading days...all signaled by the Positive Stochastic Crossover and Bullish Engulfing Pattern. Mortgage Bonds are testing a tough ceiling at their 25 day moving average, and has been the case of late, Mortgage Bonds will follow in the opposite direction of stocks, which are falling through their 200 moving average and appearing to head lower yet.
There is still quite a bit of ground to be made up by bonds from their fall from highs on May 20th. Stay tuned, let us hope rates stay low to get this economy moving.
Monday, June 15, 2009
Bonds and Mortgage Backed Securities
The bond market has taken quite a beating over the past two weeks. Go to www.gomortgage1st.com and click on the MMG report green button and take a look at the charts. A rally on Thursday and Friday last week helped some, however all of the losses over the past couple of weeks are a long shot to be regained. If you have questions, just give me a call. The numbers or on my website.
Tuesday, June 9, 2009
Getting Prepared for the Future
As we continue into the future, there are a number of things one can do to provide for future retirement and being able to survive what appears to be coming.
The first step is to Maximize contributing to your retirement account, ie..your 401-K. Add to your Roth or IRA and learn to be self reliant
The second thing is to get rid of high debt credit cards. Payoff your credit cards as quickly as possible. Keep no more than two credit cards, keep the accounts open, and make sure they have a zero balance each and every month. In order to keep your credit scores high, you need at least two Revolving credit card accounts, however keep them below 90% of your credit limit. For instance, if you have a $2,000 limit on your credit card, make sure your month ending balance is no more than $200.00 if you can't pay it down to zero. Also, don't accelerate payments on a car loan if you have a zero percent interest rate or a very low rate ... say 3% or so. Pay those monthly.
The third thing is to prepare a Rainy Day Fund. Work to have 12 months of your fixed expenses in the bank as liquid cash. CD's Money Market accounts, etc. Work towards this and make a plan to make this happen.
The fourth thing in the process is to Invest for Future Needs in good quality Real Estate, Gold, Hedge Funds etc. Invest for the long term and diversify your investments.
By accomplishing these four things, your life will be set and you won't be counting on the government to take care of you, which will probably not be to your best interest. Good luck and make this happen!
The first step is to Maximize contributing to your retirement account, ie..your 401-K. Add to your Roth or IRA and learn to be self reliant
The second thing is to get rid of high debt credit cards. Payoff your credit cards as quickly as possible. Keep no more than two credit cards, keep the accounts open, and make sure they have a zero balance each and every month. In order to keep your credit scores high, you need at least two Revolving credit card accounts, however keep them below 90% of your credit limit. For instance, if you have a $2,000 limit on your credit card, make sure your month ending balance is no more than $200.00 if you can't pay it down to zero. Also, don't accelerate payments on a car loan if you have a zero percent interest rate or a very low rate ... say 3% or so. Pay those monthly.
The third thing is to prepare a Rainy Day Fund. Work to have 12 months of your fixed expenses in the bank as liquid cash. CD's Money Market accounts, etc. Work towards this and make a plan to make this happen.
The fourth thing in the process is to Invest for Future Needs in good quality Real Estate, Gold, Hedge Funds etc. Invest for the long term and diversify your investments.
By accomplishing these four things, your life will be set and you won't be counting on the government to take care of you, which will probably not be to your best interest. Good luck and make this happen!
Monday, June 8, 2009
Four Step Process to survive
Is it a good thing to have your home paid for? I know that paying off your home is a goal that is first and foremost in the minds of most individuals, however is having no mortgage on your home a good thing? Let us take a look.
Suppose your home is paid for and you lose your job or become disabled. Let's say your home has a value of $200,000 and so now you have "equity" in your home which amounts to $200,000! A good thing yes? Let us examine a few things:
Your home will still have to have homeowners insurance which could amount to $150.00 per month, plus your property taxes would have to be paid, which could be another $200.00. Utilities could be another $300.00, so is your home really paid for? Just those expenses amount to $650.00 monthly.
Now, let us look at how using your home to create "velocity of money" would work. Your home is worth $200,000 and 80% of that value is $160,000. If you were to refinance your home up to 80% LTV and put that $160,000 into an account, or investment, say tax free municipal bonds, or something similar, you may be able to earn 6% or 7% return on your money. Of course you would have had to be employed to refinance, however if you did you would now have $160,000 cash. Your monthly payment would be $959.28 at 6% interest, plus taxes and insurance, or in our example $1,309.28, of which the interest on the mortgage is deductible from your federal taxes, which could effectively lower your monthly payment by $248.00 per month if you're in the 31% tax bracket, so the "effective" payment would be close to $1,061.28. Remember you would have $160,000 still in the bank or in an investment earning you money. If you didn't have a job, you could go for 12 years just making your house payment!
Now if you were to invest that money at 6% rate of return in just 11 years that $160,000 would become $320,000! You would owe approximately $136,600 on your mortgage by then, so guess what? You could pay off your mortgage if you wanted and still have $183,390.94 in your account! This is a fact, not speculation.
So is Dave Ramsey right? I have questions about some things he says, and using your homes' equity to gain wealth is an excellent strategy in my very humble opinion!
Suppose your home is paid for and you lose your job or become disabled. Let's say your home has a value of $200,000 and so now you have "equity" in your home which amounts to $200,000! A good thing yes? Let us examine a few things:
Your home will still have to have homeowners insurance which could amount to $150.00 per month, plus your property taxes would have to be paid, which could be another $200.00. Utilities could be another $300.00, so is your home really paid for? Just those expenses amount to $650.00 monthly.
Now, let us look at how using your home to create "velocity of money" would work. Your home is worth $200,000 and 80% of that value is $160,000. If you were to refinance your home up to 80% LTV and put that $160,000 into an account, or investment, say tax free municipal bonds, or something similar, you may be able to earn 6% or 7% return on your money. Of course you would have had to be employed to refinance, however if you did you would now have $160,000 cash. Your monthly payment would be $959.28 at 6% interest, plus taxes and insurance, or in our example $1,309.28, of which the interest on the mortgage is deductible from your federal taxes, which could effectively lower your monthly payment by $248.00 per month if you're in the 31% tax bracket, so the "effective" payment would be close to $1,061.28. Remember you would have $160,000 still in the bank or in an investment earning you money. If you didn't have a job, you could go for 12 years just making your house payment!
Now if you were to invest that money at 6% rate of return in just 11 years that $160,000 would become $320,000! You would owe approximately $136,600 on your mortgage by then, so guess what? You could pay off your mortgage if you wanted and still have $183,390.94 in your account! This is a fact, not speculation.
So is Dave Ramsey right? I have questions about some things he says, and using your homes' equity to gain wealth is an excellent strategy in my very humble opinion!
Thursday, June 4, 2009
Jobs Report Strategy
In handicapping the Jobs Report - bottom line, tomorrow's (Friday) number won't be pretty, and the Stock market probably won't like it. As we mentioned earlier, an already negative techinical picture fo Stocks could be exacerbated by a nasty jobs number. That means negative action in Stocks could mean improvement for Bonds, meaning rates could improve a little.
Current expectations are for a loss of 520,000 jobs, but whisper numbers range from a low of 500,000 to as high as 550,000 jobs lost! I also expect higher revisions to the proor month's reading and what my hurt Stocks is the uptick in the Unemployment Rate...to 9.2% up from last months 8.9%. I would not be surprised to see it tick uup even higher. You can hear the media now talking abut nearly 10% unemployment and we don't see Stocks liking this, the the benefit of Bonds! Remember the Jimmy Carter days? Oh for Ronald Reagan again!!
Current expectations are for a loss of 520,000 jobs, but whisper numbers range from a low of 500,000 to as high as 550,000 jobs lost! I also expect higher revisions to the proor month's reading and what my hurt Stocks is the uptick in the Unemployment Rate...to 9.2% up from last months 8.9%. I would not be surprised to see it tick uup even higher. You can hear the media now talking abut nearly 10% unemployment and we don't see Stocks liking this, the the benefit of Bonds! Remember the Jimmy Carter days? Oh for Ronald Reagan again!!
More on today's market
Mortgage bonds opened lower, in anticipation of the massive amount of Treasury auctions. This morning the Treasury decided to pare back the amount of auctions for next week, likely sensing that the reception will be less than desirable. The additional supply to fund the various government spending programs has been weighing heavily on both the Bond market and the US Dollar. The severe erosion of the Dollar against other currencies has pushed the price of oil up significantly. This is also providing a headwind for Bonds. But there may be some hope ahead...read on.
Today's initial Jobless Claims number, a leading indicator of the health of the jobs market, met expectations at 621,000. We will need to see a siginificant inprovement in unemployment claims in order to see the labor market improve. Some of the early signs of improvement in the econlmy may be more related to a rebuilding of inventories, rather than robust sales.
Today's initial Jobless Claims number, a leading indicator of the health of the jobs market, met expectations at 621,000. We will need to see a siginificant inprovement in unemployment claims in order to see the labor market improve. Some of the early signs of improvement in the econlmy may be more related to a rebuilding of inventories, rather than robust sales.
Wednesday, June 3, 2009
Market Update
The bond market has been hit hard over the past week due to an oversupply of bonds in the market place. The cause is basic economics 101...there is too much supply of bonds, due to the hord of refinances and first time home buyers entering the market. This over supply has caused the bond market to sell off as supply far outweighs demand.
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