The Weekly Rap! Friday Jan 24th, 2014

The National Debt is currently: $17,342,844,586,845.00  higher by about 12 BILLION.  I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,009 about 500 pts lower than where it was on Tuesday.  The S&P 500 is trading at 1,805.  Gold is trading at $1,263 an ounce, while oil futures at $96.85 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.28/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.74%.  30-year Treasury Bond yields last traded at 3.66%.  Rates on 30-year fixed-rate mortgages are about 4.625% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 101.00 about 0.50 Pt better in price than where we were last Friday at this time and a full point better than two weeks ago.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.  This is what I’ve been saying for some time that a correction in the stock market usually means a “flight-to-quality” where money flows from stocks to bonds.  This is what’s pushing the rally today in the bond market.  There was no economic news released today.

I’ve just finished revising my investment portfolio which consists of a five asset class investment allocation. If you’re interested please check the Finance tab above.

In economic news this week; the reader’s digest version is it was a very light week for economic data and some of us experienced a holiday week with Monday being Martin Luther King day of which many did the celebratory march in honor of the man who did so much for civil rights in this country.  The economy continues to crawl along but at least in a positive direction.

The LEI or leading economic index rose 0.1% in December to 99.4, marking the sixth gain in a row, the Conference Board reported. “This latest report suggests steady growth this spring, but some uncertainties remain,” said Ken Goldstein, economist at the board.  That’s like saying “the market’s going to go up, or it’s going to go down.”  I printed this quote by a “prominent” economist at the Conference Board to illustrate why I call them “economites.”   I would love to have a job where you get paid to “guess” and you don’t get fired if you’re wrong.  Kind of like being a Weather Man.

On the Real Estate front:  After falling for three months, the National Association of Realtors reported sales of existing homes rose a meager 1% in December to an annual rate of 4.87 million, pushing 2013’s total sales to the highest level in seven years. For all of 2013, existing-home sales hit 5.09 million, up 9.1% from the prior year. The median sales price of used homes hit $198,000 in December, up 9.9% from the year-earlier period, supported by low inventory. For 2013 the median sales price reached $197,100, up 11.5% from the prior year, the strongest growth since 2005.  December’s inventory was 1.86 million existing homes for sale, a 4.6-month supply at the current sales pace.

According to conventional loans funded; home prices ticked up 0.1% in November, and were up 7.6% from the year-earlier period, the Federal Housing Finance Agency reported Thursday.  In October, prices rose 0.5%. FHFA’s data are based on sales information from mortgages sold to or guaranteed by federally controlled mortgage buyers Fannie Mae FNMA and Freddie Mac

On the Employment front:  The number of Americans who applied last week for unemployment benefits rose slightly but remains near a post-recession low, suggesting little change in private-sector hiring and firing patterns.  Last week, initial jobless claims edged up by 1,000 to 326,000. The new claims figure appears to offer additional indication that the labor market has not softened as much as the government’s employment report in December suggested.  The economy added just 74,000 net jobs in the final month of 2013.  The U.S. added an average of 180,00 jobs a month over the past two years and the pace of hiring, as predicted,  should pick up a bit in 2014.

Meanwhile, the government said continuing jobless claims increased by 34,000 to 3.06 million last. Continuing claims, reported with a one-week delay, reflect the number of people already receiving benefits.

You can visit my corporate website at: http://bill.bartok.stanfordloans.com
Sincerely,

Bill Bartok

Mortgage Advisor MLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!

Asset Allocation Model

I was a licensed Broker/Financial Advisor for Merrill Lynch for 14 years but have not kept my securities license and do not charge any fees for investment advise.  Disclaimer: You are at your own risk.  I am a licensed Real Estate Broker (not practicing) and involved in the mortgage world for over 25 years.  I now work with clients helping them with their Mortgage (which I do get compensated for) and as part of this service I help them with planning in other areas of their lives.  When they are ready I will refer them to a Financial Advisor that can continue to help them on an ongoing basis.  While at Merrill Lynch I was not allowed to advise my clients to get out of a market.  In other words in 2008 I could not tell you to get out of the stock market it was called “market timing” and was forbidden.  Now advising you to get in to the stock market was OK because that’s called “investing.”  I believe there is a “safe” way to invest and still get a return that will get you to your goals.

Have you ever wondered why one stock may be affected by something that is not related to it at all?  Kind of like a bank missing its “expected” earnings report and Microsoft stock goes down in value?  These days everything is based on computerized trading.  There are programs that detect the slightest movement and execute trades for an institution.  It’s called “program trading.”  Your best investment is the index which is usually a large group of assets (S&P 500 is 500 stocks) and it’s usually diversified which is adding more safety.

What exactly is a “Safe” investment?  Well, I would say it is something that you have very little “risk” to lose value in.  The safest investment would probably be something that had a guarantee against loss of principal.  But then you have to ask who or what is giving the guarantee?  One example would be a U.S. Treasury bond or note.  If I purchase a ten year Treasury note for $10,000 that has a 4.00% coupon I know that if I hold it for ten years I will get my $10,000 back, even though the “value” may go up and down, and I will receive $400.00 per year in interest.  Buying Gold is not a safe investment because its value changes constantly.  Yes over time it tends to rise with inflation but that depends on when and at what price you purchased it.  We just learned this regarding Real Estate.  I think the best rout is to be invested in multiple asset classes.

I’ve just finished revising my investment portfolio which consists of a five asset class allocation: Stocks (both US and international), Real Estate, Commodities, Alternative investments and fixed income or Bonds.  I am a firm believer that asset classes: Stocks/Bonds, Growth/Value, US Stocks/International Stocks, Commodities, Futures, and Fixed Income or Bonds all trade in patterns and are either directly related or indirectly (opposite) related and will tent to trade in ranges.  They trade in Cycles.  The key is to be able to take advantage of the pieces of the cycle.  So I’ve come up with a strategy that will do this.  It’s very simple actually and there are ways to do it free or at little commission.

The strategy is to invest in the Index, or the closest thing to it which is a non-managed Exchange-Traded-Fund that mirrors the index.  You must re-balance the portfolio once a year.  I do it early in January because it’s easier to track.  You will be taking funds from asset classes’ that performed well and re-allocating the gains to an asset classes that underperformed.  It’s the classic buy low and sell high philosophy.  Your returns will come from reallocating, so don’t forget.

Asset Allocation Core EFT

Asset Allocation EFT Worksheet

If you’re interested in getting the spreadsheet, simply fill out the contact form and I will send it to you.

Sincerely,

Bill Bartok

Mortgage Advisor  MLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!

The Weekly Rap! Friday Jan 17th, 2014

The National Debt is currently: $17,331,747,562,682.00  higher by about 10 BILLION.  I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,480 about 100 pts higher than last week.  The S&P 500 is trading at 1,844.  Gold is trading at $1,250 an ounce, while oil futures at $94.25 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.31/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.84%.  30-year Treasury Bond yields last traded at 3.77%.  Rates on 30-year fixed-rate mortgages are about 4.625% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 100.52 about 0.50 Pt better than where we were last Friday at this time.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.

In economic news this week; the reader’s digest version is the economy continues to crawl along but at least in a positive direction.

So here’s something I rarely get to print, our government actually recorded a record budget “surplus” of $53 billion in December, helping to bring the deficit down 41% in the first quarter of fiscal 2014.  Nearly $40 billion in payments from government-controlled mortgage giants Fannie Mae and Freddie Mac contributed to the surplus, the largest on record for the month of December.  The last time there was a December surplus was in 2007, of $48 billion.

Tax receipts were also up 5% in the month.  The deficit for October, November and December was $174 billion, $120 billion below the year-ago period, reflecting continued improvement in the economy, increased tax revenue and lower spending. But before we get too excited, it was the first gap of below $1 trillion dollars spent over what we brought in, of Obama’s presidency.  We still have a long way to go.

The National Federation of Independent Business said its small-business optimism index rose 1.4 points to 93.9 in December on gains in the component of those who expect the economy to improve and those who expect real sales to be higher. Three of the ten components were negative. The NFIB said the index was nonetheless short of its recovery high of 95.4 and well below the readings over 100 that typify post-recession periods.

Retail Sales rose by a modest 0.2% in December as Americans stocked up on food and drinks for the holidays, bought more clothes and purchased more goods online.  The Commerce Department reported the increase in sales last month would have been a healthier 0.7% if the auto sector was excluded.  Auto sales hit a post-recession high in November but then tapered off last month.

The so-called Beige Book, used to help the Fed Gods prepare for their next meeting, showed steady manufacturing growth, rising consumer spending and improving real estate markets.  Firms that provide services which experienced severe contractions in business during the recession, expect economic activity will continue improving at a moderate or strong pace.  The Beige Book is a collection of anecdotes from executives at the largest employers in the 12 Federal Reserve districts and others about the economy. At its last meeting, the Fed decided to reduce the pace of its monthly bond purchases to $75 billion from $85 billion in January, and the expectation is for a similar cut after their meeting later this month.

On the inflation front: wholesale prices rose in 0.4% December the first time in three months, largely reflecting higher costs of gasoline and tobacco, but there were few signs of any inflationary pressure in the economy. The energy index jumped 1.6%, with gasoline accounting for more than half the increase.  Stripping out the volatile food and energy categories, core wholesale prices rose 0.3%. The core index is viewed as a more accurate gauge of long-term inflation trends, but it’s only risen 1.4% in the past 12 months.

Prices for consumer goods and services climbed in December at the fastest pace in five months, spurred by higher costs of energy and housing.  Yet inflation for the full year was quite tame, with consumer prices increasing just 1.5% from 1.7% in 2012.  The last time consumer prices rose less than 2% for two straight years was in 1997-1998. The core CPI, which excludes volatile food and energy costs, rose a smaller 0.1% which was just 1.7% in 2013.  The cost of housing rose 0.2% and the price of clothing shot up 0.9%. Yet airfares declined.

On the Real Estate front:  A gauge of home-builder confidence declined in January after jumping up in December, but still signaled that builders are optimistic about sales.  The National Association of Home Builders/Wells Fargo housing-market index reached 56 this month, a small drop from 57 in December.  Results above 50 signals that builders, generally, are optimistic about sales trends.  NAHB’s builder-confidence gauge has increased 19% over the past year, and is higher than levels typically associated with current construction rates.  A recent peak of 58 was hit in August, when the builder-confidence gauge was the highest since 2005.

Construction on new homes fell 9.8% in December, pulling back after a November surge, but the whole of last year had the strongest showing since 2007. Despite December’s decline, home-construction starts for all of 2013 hit 923,400, the highest annual total since 2007, pointing to the housing market’s continued recovery last year.

On the Employment front:  The number of Americans who applied last week for unemployment benefits fell slightly and is now back to a level that prevailed shortly before the Thanksgiving holiday, a signal that layoffs remain at a post-recession low.  Initial jobless claims dipped by 2,000 to 326,000 last week. That’s the smallest number in six weeks.

You can visit my corporate website at: http://bill.bartok.stanfordloans.com
Sincerely,

Bill Bartok

Mortgage Advisor MLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.  Thank you!

The Weekly Rap! Friday Jan 10th, 2014

The National Debt is currently: $17,321,617,425,675.00  higher by about 10 BILLION.  I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,386 about even from last week.  The S&P 500 is trading at 1,833.  Gold is trading at $1,243 an ounce, while oil futures at $92.46 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.35/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.88%.  30-year Treasury Bond yields last traded at 3.81%.  Rates on 30-year fixed-rate mortgages are about 4.625% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 99.96 about 0.50 Pt better than where we were last Friday at this time.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.

In economic news this week; the reader’s digest version is the economy continues to crawl forward.  I think the snail might win.  The employment numbers were disappointing with fewer jobs being created than anticipated.  Our trade gap tightened which is good news and we got to see what the Fed Gods said at their last meeting.

The Institute for Supply Management reported that its “services” index for December slowed slightly to 53% from 53.9% in November. The “new-orders” index fell 7 points to a reading of 49.4%, which was the first contraction since July 2009.  Any reading above 50% indicates expansion.  As you can see we’re barely expanding.

New orders for goods produced in U.S. factories were higher by 1.8% in November, the Commerce Department reported.  Orders for durable goods – products meant to last at least three years – advanced 3.4% in November. Orders for nondurable goods increased 0.8%.

The U.S. trade deficit sank nearly 13% to $34.3 billion in November from $39.3 billion in October.  The sharp decline in the deficit in November likely means the economy grew faster in the fourth quarter than was expected.  A smaller trade deficit means the U.S. is selling more goods overseas and buying less from foreign countries.

On the Consumer credit side credit grew at annual rate of 4.8% in November, representing a gain of $12.32 billion.  That’s the smallest percentage gain since April.  Revolving credit like credit cards grew just 0.6% after a 5.6% advance in October.  Non-revolving credit like auto and student loans meanwhile grew 6.4%, which still is the slowest rate of growth since May.

The Fed Gods agreed in December to start to wind down their asset purchase program as most believed that the benefits of the controversial policy were eroding over time.  The Minutes from the Dec. 17-18 meeting included the results of a survey of officials about the costs and benefits of the program, commonly called quantitative easing.

The survey found that “a majority of participants judged that the marginal efficacy of purchases was likely declining as purchases continue.” In other words, most of the  Fed Gods think the central bank can conclude the bond purchases in the second half of the year. At the December meeting, the Fed agreed to begin to taper its bond-purchase program by $10 billion to $75 billion per month starting in January. Fed officials expressed greater confidence in the economic outlook. They said that future reductions would be undertaken in measured steps.

On the Real Estate front: In our local area (El Dorado Hills, Cameron Park, Shingle Springs, and Placerville) the last month ending December 13th current listings have dropped almost 12% from November, but for the year were up 44%.  This is likely due to many not wanting to list in December and the hectic holiday season.  The average home price was higher by 17% for the year, but has been at a level pace since June.  Average sale price as a percent of original list price is running about 95%.

On the Employment front:  The U.S. added just 74,000 jobs in December to mark the smallest gain in three years, a disappointing number likely influenced by poor weather.  At least that’s what the economites are blaming the poor report on.  Yet the weaker pace of hiring could also be a sign of slowing momentum in the up-and-down economy as it entered 2014.

The unemployment rate fell three ticks last month to 6.7%, the first time it’s dropped below 7% in 60 months. The decline mainly occurred because more people dropped out of the labor force, however. Read: decline in labor force.   Some 347,000 Americans stopped looking for work last month and the size of the labor force actually shrank in 2013, a sour note in a year where the economy added a robust 2.19 million jobs. The U.S. has created around 2 million jobs for three straight years, though the unemployment rate still remains abnormally high by historical standards.

You can visit my corporate website at: http://bill.bartok.stanfordloans.com
Sincerely,

Bill Bartok

Mortgage Advisor MLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!

 

The Weekly Rap! Friday Jan 3rd, 2014

Happy New Year,

I hope the holidays were good for you and that you got to spend time with your family.  We do not get enough chances to spend quality time with the ones we love.  Well, it’s a new year and time to hit the ground running.  For those of you who missed last week’s comments I’ve included my “predictions for 2014” below.

The National Debt is currently: $17,311,149,951,597.00  higher by about 50 BILLION.  I post this so we will be aware of what we are leaving the next generation.

The Dow last traded at 16,461 about even from last week.  The S&P 500 is trading at 1,831.  Gold is trading at $1,236 an ounce, while oil futures at $94.41 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.35/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.99%.  30-year Treasury Bond yields last traded at 3.92%.  Rates on 30-year fixed-rate mortgages are about 4.625% this week. MBS yields are interest rates at which banks sell their loans into Fannie Mae and Freddie Mac bond programs. Rising yields mean higher consumer-mortgage rates.

The FNMA 30-year fixed 3.5% coupon, containing 3.75% – 4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 99.41 right about where we were last Friday at this time.  Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.  The higher the number (price), the better the rate.

In economic news this week; the reader’s digest version is as you may have guessed with it being the second holiday week, there was very little news to get excited about.  Markets are usually volatile this time of year with many traders taking time off.

The economy appears set to enter a new year with some fresh momentum, according to a trio of reports released on the last day of 2013.  Americans expressed the most confidence in December in three months, while other data pointed to steady expansion in the manufacturing sector and continued recovery in the housing market.  The consumer-confidence index jumped 6.1 points in December to 78.1, following two straight declines triggered in part by the government shutdown in October.

More importantly, consumers said they feel better about their current circumstances now than at any time in the last 5 1/2 years. The so-called present situation index advanced to 76.2 from 73.5. One reason is a steady increase in hiring, the survey indicated.

Two sectors that have played big roles in the expanding economy are manufacturing and housing. The manufacturing sector has been on the upswing since the end of summer, and there are few signs of any slowdown.  The business barometer for the Chicago region, a key U.S. manufacturing hub, expanded in December for the eighth straight month.

On the Real Estate front: Pending sales of homes rose slightly in November, the first gain in six months, signaling that upcoming activity could move higher reported Monday.  The National Association of Realtors’ index of pending home sales increased 0.2% last month to 101.7, slightly above a 10-month low of 101.5 in October, but down from 103.3 in November 2012.  “We may have reached a cyclical low because the positive fundamentals of job creation and household formation are likely to foster a fairly stable level of contract activity in 2014,” said Lawrence Yun, NAR’s chief economist. Although higher mortgage rates have taken a bite out of housing-market activity, Yun said sales in 2013 will be the highest in seven years. Buyers are becoming accustomed to higher mortgage rates and pricier properties.

Looking forward, the expectation is that further increases in mortgage rates won’t derail the housing market assuming that jobs growth is healthy enough, unleashing some of the demand that built up during and since the recession. And despite rising more than one full percentage point during 2013, the average rate for a 30-year fixed-rate mortgage still remains relatively low by historical standards.

In a separate report home prices remained on a solid upward trend in October, but price gains may not be as strong in 2014.  The home-price index covering 10 major cities increased 13.6% in the year ended in October, according to the S&P/Case-Shiller home-price report.  The 20-city price index also increased 13.6%, close to the 13.7% advance.  Both increases are the best since February 2006. Las Vegas continues to lead price gains, with home values up 27.1% year-over-year. San Francisco has seen prices rise 24.6%. The report noted that many forecasters expect home prices will post single-digit growth in 2014.

On the Employment front:  The number of Americans applying for unemployment benefits fell slightly in the last week of 2013, suggesting that the U.S. labor market remains on a path of gradual improvement.  In the seven days ended Dec. 28, initial jobless claims dropped by 2,000 to 339,000, the Labor Department reported. That’s the lowest level in four weeks.  One year ago, claims stood at 372,000.

Other gauges of the labor market, however, suggest that companies continue to hire at a moderate pace and many economites expect employment to further strengthen in 2014.  More evidence will emerge next week with the employment report for December.  The U.S. added an average of almost 190,000 jobs through the first 11 months of 2013, marking the best performance since the recession ended in mid-2009.

The U.S. economy can’t shift into a higher gear though without stronger employment gains and faster wage growth.

OK, here are a few predictions for 2014:  I will always tell you my honest opinion as I think you deserve to be informed of the bad thing that can happen as well as the good.  I think the economy will continue to grow at a snail’s pace, maybe 2.5% to 3.0% for the year, mostly because I do not see anything on the horizon to change it and we are trying to implement a national healthcare plan.

I think Washington will remain a gridlocked as ever and unless they can figure out a way to balance the budget (we are currently adding about 20 BILLION dollars to the national debt EACH WEEK) Economic growth will suffer.

I see a deep correction possibly below 10,000 in the stock market possible mid year 2014 mostly due to the fact that the stock market has more than doubled in value over the past 5 years (the Dow hit 6,626 on Mar 6, 2009 and 8,146 on July 10, 2009) while the economy has grown at a measly 2.5%.  And this growth is due to the government pumping billions of dollars into the markets.  There is a great piece illustrating the past 5 years and the burdens to growth at this link from the U.S. Treasury (unbiased as I can get).

I would take a look at your asset allocation (especially in your 401K and retirement plans) and re-balance or balance accordingly.  I can help with this if interested as I was a Financial Advisor for Merrill Lynch for 14 years.  I don’t charge anything and can refer you to a great advisor if needed.  Real Estate is a great investment right now.

I see interest rates possibly rising a bit but nothing to get alarmed about.  After all, we would need to see a rapidly growing economy and/or inflation, and I don’t see either.  The Fed tapering its bond purchases may cause a rift in the market but if the stock market corrects money usually flows into safe investments (bonds) and this should balance anything the Fed is doing.  I thing conventional rates will remain between 4.25% and 5.25% (no disc pts or lender Credit).

You can visit my corporate website at: http://bill.bartok.stanfordloans.com

Sincerely,

Bill Bartok

Mortgage AdvisorMLO# 445991

The nicest compliment I can receive is the referral of your family, friends and co-workers.

Thank you!