Karl's Blog

Friday, June 27, 2008

After yesterdays massive selloff of stocks yesterday, it looks as if the bond market is trying it's best to turn positive. A good sign of just how hard this is proving to be, although the DOW dropped over 300 points, the bond struggled to gain little more than 25 Bp. The bond is once again trying to pass 25 Bp for the day, and given the volatility of the news out there, one jump in the stock market and all gains the bond made in the past 4 days are lost. With inflation now above the worrisome 2% the fed likes, and consumer sentiment once again at a 28 year low, the only factor holding bonds back now is the lack of confidence in the banking industry.  Speaking about banking, most stated income loans aren't really stated. Lenders are requiring a 4506t on all stated loans and as per the unnamed account reps they are pulling tax records on most (all) loans. If the information doesn't match, the loan is denied.  The bond is up 31 Bp for the day, and 29 Bp from when pricing came out. Look for better rates in the afternoon, but keep a wary eye out for a sudden change.

6.375% is what FHA is offering on a 30 yr Fixed. Keep your fingers crossed for improvements.

Karl Menzer

http://www.karlmenzer.com

435-849-0212

Tuesday, June 24, 2008

As what is becoming the norm with the market and rates, bonds came off their high of the day and dropped into negative territory before bouncing back to being up 25 Bp for the day. Making the market move erratically today is a mixture of housing numbers, consumer confidence, and deciphering what the Fed said. The Standard & Poor's/Case-Shiller home price index fell 15.3% in April (yes it is June), the fastest rate since it started being tracked. Not to be beaten by bad news, consumer confidence fell to a 15 year low of 50.4, smashing estimates of 57%. Had I not been in college then with a bad hairdo, I may have remembered it. Finally on to Big Ben Bernanke, who with all the wisdom of a government official, stated that we are on the brink of a recession.  With inflation on the rise, and the economy still in turmoil, the question isn't if they are going to have to raise rates but when.  Let's face it, whatever they do today won't really reflect for at least 6 months.  Although we are at risk of Stagflation, rushing into another rate change will just leave us in mass confusion. We bounced off support today, and are still holding in a lock pattern.

Karl Menzer

435-849-0212

http://www.karlmenzer.com

Friday, June 20, 2008

We started the day off well enough and even had the option of a re-price for the better. With Oil down from its high of the day, and all the major Indices also down, it would be safe to say today is a float day.... But it is not. The Bond is still having a hard time recapturing the momentum needed to push rates down.  Currently the bond is up only 3Bp for the day but down 250Bp from when pricing came out.  With companies like Citigroup and Washington mutual talking more write-down's and layoffs, and bond insurers losing their AAA ratings today, it's a wonder that bonds are not lower. Let's face it, as long as the mortgages are still tanking at historic levels, the Security that normally comes out of mortgage backed securities just isn't there. Let's keep locking them as soon as we can for now. If we do get a good day, it is more than likely going to be short lived. 

Karl Menzer

435-849-0212

http://www.menzerteam.com

Thursday, June 19, 2008

It's another mattress day today as the bond, oil, and the Dow are all struggling to be positive.  Making market news today are Mays Leading Economic Indicators, Jobless claims, and the Fed Philly Survey.  The LEI, which measures 10 different aspect of the economy and trying to predict how well (or bad) we will do over the next 6 months, came in up .1% in May. Although it is an improvement, it isn't enough to really boost confidence in the market. Initial Jobless claims beat expectations (bad) coming in at 381,000 for last week. Normally a bond rallying   number, this week's claims did show a drop of 6,000 from last week, leaving little to help out the market. With the June Philly survey showing another contraction and beating expectations by coming in down 17.1%, we may actually be seeing some help in the bond market in more of staving off losses from investors wanting to buy low on the DOW, which is struggling to stay above 12,000. I would recommend locking rates on any purchase contracts today when you can on worries that investors may pull from the bond and move them into what they may see as cheap stocks.  As always, if anything changes, I will let you know.

Karl Menzer

435-849-0212

http://www.menzerteam.com

Wednesday, June 18, 2008

We are having a modest rally on the bond today. Currently we are up 64 Bp for the day, and 40 Bp since pricing came out at 10 am, giving us 2 re-prices for the better.  The main driving force today is more on worries from the earnings reports and the effect they are having on the DOW, causing investors to move to the safety of the bond. Today both Morgan Stanley and Fifth Third Bancorp came out with much lower than expected earnings, with Morgan Stanley reporting that profits fell more than 57% from a year ago. This in turn caused a cascade effect on other financial institutions stocks helping push the bond up even more. We have finally broken above the level of resistance, which should allow for some short term rate improvement. Although I would keep a keen eye on the DOW for any major improvement, today is a good day to float in hopes for better rates tomorrow.  As always, if anythging changes, I will let you know.

Tuesday, June 17, 2008

Here is something that you don't hear every day. Kuwaiti Finance Minister Mustafa Al-Shimali stated today that oil prices are too high and that they should be around $100 per barrel.  With this coming from the 4^th largest oil producing member OPEC, oil has retreated below $134 again.  Housing starts fell 3.3% in May, the lowest in 17 years. This is bad news for the construction industry, but good for the market as a whole as we all painfully know, we could use a reduction in inventory. The Producer Price Index came out today at 1.4%, or .2% core with energy and food removed.  Normally most investors would only look at the .2% (which was expected) as the general consensus is that food and energy rise and fall.  With most starting to figure that the price of oil isn't looking to retreat any time soon, including former St. Louis Fed President Poole, more and more are looking at the overall 1.4% as a better gauge of inflation. The biggest positive news out today was Goldman-Sachs better than expected earnings report. Normally a boost to the DOW, today's news coupled with the PPI and housing starts has given us a small rally in the bond. We are up 54 Bp for the day, but still sitting with the finger on the lock trigger as any change in stocks will defiantly come at the expense if the Bond Market. Look at rates in the 6.75% range on FHA and keep an eye on the market as it looks like it will only take a small nudge pass 7%.

Karl Menzer

435-849-0212

http://www.tooelehomeloans.com

Friday, June 13, 2008

I true Friday the 13^th form, what can go wrong will.  Although numbers came in as expected today, and the bond started off on a positive, it turned negative within the last hour. Bonds had been up as much as 40 Bp they have turned downward and as the normal lately, we are seeing re-pricing for the worse.  In housing news, foreclosures once again made record territory with a 48% increase over the same time last year, and a 7% increase from last month. It looks as like most investors are taking today's profits and running while they can.  Maybe they need the money to buy gas for the way home.

Thursday, June 12, 2008

This morning the bond found its level of support..... and then shot lower.  With May retail sales beating everyone's expectations by .5%, it seemed that the much worse than expected unemployment numbers, which came in at 384,000, took a back seat. Bonds are still tracking down and we have already seen a re-price for the worse today.  Oil is also down, which make stocks the winner of the day.  With so much worry in the banking industry, we are going to be hard pressed to find a level of support. Tomorrow's CPI may show an increase in inflation, but with the Fed already hinting around at a rate hike, locking the loan as soon as soon as you can is still the best option.  The FNMA 5.5% 30 yr is down 73 Bp for the day and 28Bp since pricing came out this morning.  We are looking at some of the worse rates since early march, and don't see any major improvement in the near future.  As always, if anything changes, I will let you know.

Karl Menzer

435-849-0212

http://www.menzerteam.com

Wednesday, June 11, 2008

What a fun day yesterday. Since I was unable to e-mail and post this yesterday, here is a brief synopsis. 3 (count them) reprises for the worse, and a 118 Bp drop on the bond.  We are still in a lock mode for the time being.  That means that if you get a signed contract, please have your client ask their lender to lock the loan as soon as they can. With inflation on the Fed's mind and fear about the financial industry in investors' minds, oil has made a $6+ gain today as the safer investment. Today's Beige book came out showing 2 cracks in the economy; weak economic activity, and soaring costs due to the price of fuel (anyone have an old Moped). The report stopped just short of pushing for a hike in the fed rate, but it is becoming clear that if they want to slow down inflation, it may be the next step. Bonds are up 40Bp for the day, but down 20Bp from 10 am when pricing came out, which put us in line for a re-price for the worse. We are facing a time of irrational fears, where it is hard to really predict what will set off the market in one way or another. One person gets spooked, and then another spooked by him, and so on. We all remember the shampoo commercial in the 80's.  The sky isn't falling, but telling Chicken Little that is having little effect. FHA 30 Yr fixed is currently 6.5%.

Monday, June 09, 2008

Lehman Brothers announced today that they are expecting a $2.8 Billion loss for this quarter and are in the process of trying to raise $6 Billion in Capital. This has provided the hammer to push down the bond today and raised rates. Oil, which flirted with $140 on Friday, has pushed back down to the $136 range. Pending home sales unexpectedly jumped in April to 88.2, higher than October, but still 13% lower than a year ago.  With Bargain hunters moving their money from bonds today to buy stocks,  it would be wise to lock any loan that you have a contract on and hope that your lender has the option to re-lock if (big word there) rates do a turn for the better. The FNMA 30 yr 5.5% is currently down 60 Bp for the day. With investors skittish, even the smallest drop may trigger a re-price for the worse.  We are now way below the 25, 50, and 100 day moving average, and looking for the new floor