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 Government Shutdown

OK, so I’ve tried to remain neutral thus far because I realize that many of you are from “both sides of the isle.”  I will still attempt to remain in the middle so I can see both sides, and I welcome your comments.  After all, that’s what compromise is all about.  Right?

My wife Gina and I were in the kitchen the other morning and she was making Crêpes because well, that’s what our daughter wanted for breakfast (she’s 13 and a freshman in High School).  What does this have to do with the Government’s issues you ask?  Well it has to do with compromise and being willing to learn something new.  And also being willing to see the others side, or understanding their point of view.

You see, from my point of view, I am a trained Chef (bet you didn’t know that) and have run a restaurant, and made Crêpes from scratch so I know how to make them.  I asked her if she would like my advice and she promptly replied NO!   I naturally got upset.  How could someone not want to learn something new if it was possible?  Why wouldn’t you take a chance that someone else might have a better way.  After all that’s how I learned how to make Crêpes in Culinary school.

So I thought about it for a while and realized that she just wanted to make it “her” way without anyone telling her it was wrong.  This is totally her right (while I may still not understand the resistance to learn) she is entitled to it.  She made the Crêpes and they turned out great (a bit thick for Crêpes) but the bottom line was we enjoyed them and had a wonderful breakfast.  But I digress…  Now back to the story.

The basic reason our Government is currently shut down is because our politicians cannot agree on a balanced budget and we are spending way more than we’re taking in.  The republicans want some effort towards balancing the budget (deficit reduction through spending cuts) and President Obama says he will not negotiate just pass the budget anyway.

A balanced budget, (particularly that of a government), is a budget with revenues equal to expenditures, and neither a budget deficit nor a budget surplus.  This seems fairly obvious right?  To be fair, Dwight Eisenhower was the last Republican President to preside over a balanced budget.  He had a balanced budget in 1956 and 1957. Since then, there have been two presidents to preside over balanced budgets, LBJ in 1969 and Clinton in 1998 through 2001. During the last 40 years there have been five budget surpluses, all five were under Democratic Presidents: 1969, 1998, 1999, 2000, and 2001.  The National Debt in 2001 was approximately 5.7 Trillion Dollars and the budget was balanced?

In the last 12 years we have almost tripled the national debt through deficit spending.  Something that took over 250 years to build, we tripled in just 12 years.  So how long are we going to let this go on?  We are passing a debt on to our future generations that they cannot possibly repay.  What bothers me, and again please correct me if I’m wrong, is that we’ve seen this repeatedly over the past five years with no signs of change.  Our politicians can’t agree so the deficit keeps growing and they have to continually raise the debt ceiling (the maximum allowable government debt).  Every year President Obama has been in office, there have been deficits of $1 trillion — adding $7 TRILLION DOLLARS to the debt.  I just want to know what the plan is for paying it down/off (as in our credit cards).

Interestingly enough, in a February 23, 2009 blog post, after he was in office, President Obama promised that by the end of his first term, he would cut in half the massive federal deficit “we’ve inherited.”  And he said “we’ll do it in a new way: honestly and candidly.”  Obama did make that promise that day, saying, “Today I’m pledging to cut the deficit we inherited in half by the end of my first term in office. This will not be easy. It will require us to make difficult decisions and face challenges we’ve long neglected.  But I refuse to leave our children with a debt that they cannot repay, and that means taking responsibility right now, in this administration, for getting our spending under control.”

Being fair to the current Obama administration the president in 2009 inherited a $1.3 trillion deficit.  My question…  What happened?  I would question any President who made this promise and five years later not only didn’t fulfill the promise but made the situation worse.  And why are we not questioning this?  Where’s the Media on this one?

OK so back to the current shutdown; I understand the Republican point which is we need to cut spending and at least get back “on track” to balancing the budget.  But how do we do that?  It’s an interesting ploy… If you’re a Republican and you want to repeal “Obamacare” (which can’t be done under the current administration, another story) you delay its implementation for a year at which time we have a new election and possibly elect a Republican President who can the repeal the national healthcare law.  Also if you’re looking for a budget cut, you look for the biggest expense first right?

On the Democratic side we have a President who is standing by his belief that he “will not negotiate” and blames the Republicans for the whole mess.  While I understand his stance (after all they’re trying to derail his “legacy”), NOT willing to compromise not only goes against every campaign promise he made, but it simply is not politics. The Obama administration is betting that at some point, the GOP will understand that its position is futile. And while that’s a fairly big bet, the aides believe that all other options are flawed.

We also have another issue looming on the short term horizon; The National Debt has reached its limit and unless Congress votes to raise it again the Government will not be able to pay its bills namely interest payments on its Treasury Bonds effectively defaulting on debt.  The republicans are attempting to use this to get the democrats to reduce spending.  In fact, the Democrats of the 1980s repeatedly used the debt ceiling issue to force President Reagan not to increase defense spending.  And Obama himself used the issue of the debt ceiling in his battle against President George W. Bush’s tax cuts.  In 2006, then-Sen. Obama stated in a floor speech in the senate; “The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. government can’t pay its own bills. … I therefore intend to oppose the effort to increase America’s debt limit.” “Over the past five years, our federal debt has increased by $3.5 trillion to $8.6 trillion. That is  ‘trillion’ with a ‘T.’ That is money that we have borrowed from the Social Security trust fund, borrowed from China and Japan, borrowed from American taxpayers.”

If we’re going to raise the debt limit, we need to deal with the drivers of our debt and deficits.  According to the Congressional Research Service, Congress voted 53 times from 1978 to 2013 to change the debt ceiling. The debt ceiling has increased to almost $17 trillion from $752 billion. Of these 53 votes, 29 occurred in a Congress run by Democrats, 17 in a split Congress, and seven in a Republican-controlled Congress.

I’m not against Obama just to be against him.  I would feel this way if it were Republican or Democrat and they had mad promises and statements and then completely went the other way.  I have seen very little change in the last five years and the economy has grown by an anemic 2.0% during this time.  What is the current administration doing to rebuild the economy and create jobs other than throw money at it and hope?  You’ve no doubt heard the saying; “The definition of Insanity is doing the same thing over and over hoping for a different result.”  Well by this definition our politicians are insane.  When will it end?  Maybe the next election?

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Sept 13th, 2013

The National Debt is currently: $16,937,192,689,583.00

The Dow last traded at 15,365.  The S&P 500 is trading at 1,687.  Gold is trading at $1,312 an ounce, while oil futures at $107.92 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.77/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.90%.  30-year Treasury Bond yields last traded at 3.84%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% 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 98.90.  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 it was a very light week in the economic news category with lackluster trading in the markets and an economy that continues to limp along an anemic growth rates.

Consumer credit rose in July, posting an annual growth rate of 4.4.  Revolving credit, which is mostly made up of credit card loans, fell for a second month. Meanwhile, non-revolving credit, which covers loans for education and cars, among other areas, rose at an annual rate of 7.4% in July, down from 9.5% in June. Non-revolving credit has grown every month since August 2011. Credit is important to watch because it points to how real consumer spending is due to whether its borrowed or not.

A gauge of consumer sentiment, The University of Michigan/Thomson Reuters consumer-sentiment index fell to a preliminary September reading of 76.8, the lowest since April, from a final August reading of 82.1.  The sentiment gauge fell in August from the highest level in six years, on grimmer views of current and coming economic conditions. This is not a good report and indicates that Americans are still cautious and their mood has worsened recently.

On the employment frontier; Job openings at U.S. workplaces fell to 3.69 million in July, the lowest level since January, from 3.87 million in June.  Compared with same period last year, July’s job openings rose 5.4.  That’s about 3.1 potential job seekers per opening. When the recession began in December 2007, there were less than two potential job seekers per opening.  Consider this: One reason why employers are letting go of few workers is that staff levels are already so slim that there’s little fat to cut.  The number of applications for unemployment benefits fell below 300,000 for the first time since 2006, but the government attributed the surprising plunge to computer-related glitches instead of a sudden improvement in the labor market.

Retail sales increased in August by the smallest amount since late spring 0.2.  Americans remain cautious in their spending habits because of slow growth in wages and job creation.  Companies hired fewer workers toward the end of summer. And that’s a big obstacle to growth since consumers are main driver of the economy. Barring a sudden pickup in spending, there’s little chance of the economy shifting into a higher gear before the end of the year. Retail sales have risen a mild 4.7% over the past 12 months, unadjusted for inflation. In the three years prior to the 2007-2009 recession, retail sales grew at a annual pace of 6.2%, 6.5% and 5.4%.

On the inflation front; wholesale prices rose in August, mainly because of higher costs of gasoline and vegetables, but there was little sign of rising inflationary pressure in the broader economy.  The producer price index rose 0.3% in August after no change in July. Minus the volatile categories of food and energy, “core” wholesale prices were unchanged. The core index is viewed by the Federal Reserve as a more accurate gauge of inflationary pressure. Core prices have risen just 1.1% over the past 12 months, well below the central bank’s ceiling of 2.5% or less. A better measure of whether Americans are paying more for goods and services, the consumer price index, will be released next week.

The Government recorded a budget deficit of $148 billion in August, but remains on course for its first full-year shortfall below $1 trillion since 2008.  The U.S. has run deficits of more than $1 trillion for every year of President Barack Obama’s presidency, though they have fallen slightly as revenue has increased through the recent mandatory sequester cuts. The shortfall for fiscal 2012 was $1.1 trillion.  As you can see from the Debt clock above we are about to break the 17 TRILLION mark.

Please visit my website at: http://bill.bartok.stanfordloans.com/agents/Blog

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 30th, 2013

Good Friday morning:

The National Debt is currently: $16,920,033,360,537.00

The Dow last traded at 14,792.  The S&P 500 is trading at 1,632.  Gold is trading at $1,400 an ounce, while oil futures at $107.54 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.49/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.76%.  30-year Treasury Bond yields last traded at 3.69%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% 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, .75 points (or percent) better than we were last week as we continue to test the top of the current trading range (100).  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; It’s the beginning of a long Labor Day holiday weekend and the markets are very quiet with most month end trading behind us and most of the big traders already  heading out to the Hamptons to enjoy the last official summer holiday weekend.  News this morning was mixed and in some ways contradictory.  For instance, consumer income was flat but spending was down. You’d think that would signal lower consumer confidence, but it did not. Confidence was up for some strange reason.  Based on current market conditions, if I had purchase loans, I would not want to enter a three day weekend unlocked.

Orders for big-ticket goods sank 7.3% in July, mostly because of fewer contracts for jetliners and large military goods.  The retreat in orders, the first in four months, was expected after a steady increase in demand since spring. Still, the weak report underscores how slowly the manufacturing sector is expanding and suggests the economy entered the third quarter with little momentum.

The economy, Gross Domestic Product (GDP) rose at a 2.5% annual rate in the April-to-June period instead of an initial reading of 1.7%.  The revision was mainly because of an improved trade picture and higher demand for American-made goods and services. This is due to a devalued Dollar which makes our goods more attractive to foreign buyers.  But the Dollar has risen since which likely will reduce 3rd quarter GDP.  At 2.5% growth employment has no chance of expanding.  We would need to see a rate of about 6.00% for many quarters to see advancement in employment.  The U.S. is forecast to grow 2.4% in the third quarter and 2.8% in the fourth quarter.  The fact that growth has not surpassed 3% since the first quarter of 2012 remains troubling.  GDP is the broadest measure of an economy’s health, reflecting the value of all the goods and services a nation produces.

Home prices in June posted another month of growth, though the data signals some moderation.  With gains in cities across the country, home prices increased 2.2% in June, a strong result but down from 2.5% in May, according to the S&P/Case-Shiller gauge. Overall, the report shows that housing prices are rising but the pace may be slowing.  Overall, home prices remain about 23% below a bubble peak. However, the story varies widely by city.

Led by drops in most of the U.S. Pending sales, or contracts on homes, fell 1.3% in July, a second month of declines, as mortgage rates continued to rise.  Despite the recent drop, the pending-home sales gauge in July was up 6.7% from the year-earlier period, according to the National Association of Realtors.

American consumers grew slightly more optimistic in the waning days of summer as the effects of tax hikes earlier in the year continued to fade, according to the consumer confidence index which rose to 81.5 in August from 80.0 in July and nearly matched a five-year high.  Rising confidence is generally a good sign for the economy, but the index remains well below its historical norm. Readings usually top the 100 mark during an expansionary phase. Another gauge of consumer sentiment the University of Michigan/Thomson Reuters consumer-sentiment index declined to 82.1 August from 85.1 in July, which was the highest level since, on grimmer views of current and coming economic conditions. I guess it depends on which index you watch and whom they poll.

Americans barely increased spending in July, another indication that the economy got off to a slow start in the third quarter.  Consumer spending edged up 0.1% last month. The increase in spending matched the meager growth in personal income, which also rose a scant 0.1% in July.  Consumers account for more than two-thirds of U.S. economic activity. When Americans buy more goods and services, businesses generate higher sales and profits and can afford to hire extra workers. That puts more money into the economy and further boosts spending and growth.

On the employment front; Signaling that the pace of layoffs remains relatively slow, a trend of jobless claims recently stuck close to the lowest level in six years.  the number of people who applied last week for unemployment benefits declined by 6,000 to 331,000.

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 23rd, 2013

The National Debt is currently: $16,911,552,058,827.00

The Dow last traded at 14,986.  The S&P 500 is trading at 1,660.  Gold is trading at $1,397 an ounce, while oil futures at $106.79 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.47/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.83%.  30-year Treasury Bond yields last traded at 3.81%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% 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 $99.25, .375 points (or percent) better than we were last week as we continue to test the bottom of the current trading range.  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 is still treading along and the Fed has to begin tapering off the bond purchases later this year (because they can’t keep doing this forever) and housing is taking a breather from the spring price increases.

The big news of the day was that sales of “new” homes dropped 13.4% to an annual rate of 394,000 in July, the lowest rate since October, as all four regions posted declines. Expectations were for sales to pull back in July to a rate of 485,000.  Looking longer-term, new-home sales in July were up 6.8% from the year-earlier period.

July’s “existing” home sales, according to the National Association of Realtors, rose 6.5% to an annual rate of 5.39 million, the highest level since late 2009, when buyers rushed to make a tax-credit deadline.  July’s spike could be due to buyers looking to purchase a home before mortgage rates rise further.  Mortgage rates have increased more than one percentage point since early May, though they still remain historically low.  The median price of a home was $213,500 in July, up 13.7% from the year-earlier level. Inventories rose 5.6% to 2.28 million homes available for sale, representing a 5.1-month supply at current sales rates. NAR added that all-cash deals remained high in July, while there were relatively few first-time buyers and distressed sales.

The Fed Gods agreed with their leader Ben Bernanke’s view that the economy will pick up later this year and allow the central bank to taper its asset purchase plan before the end of the year, according to last meeting’s minutes released Wednesday.  But they shied away from signaling when a move might come.  It’s expected that if economic conditions improve broadly, the Fed would taper the pace of its securities purchases later this year. And if economic conditions continue to develop broadly as anticipated, they would reduce the pace of purchases in measured steps and conclude the purchase program around the middle of 2014.

The U.S. continues to expand at a moderate if uneven pace with a chance that growth might speed up later in the year, according to the “Leading Economic Index” an index that measures the nation’s economic health. The LEI is a weighted gauge of 10 indicators designed to signal business-cycle peaks and valleys.  The index rose 0.6% in July to 96.0, the highest level in five years, after no change in June. Eight of the 10 components expanded in July, led by the spread on interest rates, availability of credit, stock prices and permits to build new homes.  The two categories to show declines were hours worked by manufacturing employees and business orders for long-lasting manufactured goods.

On the employment front; the number of people who applied last week for unemployment benefits rose to the highest level in a month but remained near a post-recession low.

The national activity index, a weighted average of 85 different economic indicators, produced by the Chicago Fed rose to a negative 0.15 reading in July from negative 0.23 in June, and the three-month average did virtually the same, rising to negative 0.15 from negative 0.24 in June. The index is designed so that readings of zero indicate trend growth, and readings below negative 0.70 indicate an increasing likelihood a recession has begun.

I read a great article this morning in the Wall Street Journal and I couldn’t have written a better rant so I’m just going to post the link to the article, “Fed tapering: The math investors need to know” It’s about just how overvalued the stock market is based on the Fed manipulating interest rates.  In a nutshell: Fed “tapering”, the winding down of “quantitative easing,” and the normalization of interest rates, changes absolutely everything in the markets.  Check it out.

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Please visit my website at: http://bill.bartok.stanfordloans.com/agents/Blog

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 16th, 2013

 

The National Debt is currently: $16,902,974,130,678.00

The Dow last traded at 15,071.  The S&P 500 is trading at 1,655.  Gold is trading at $1,369 an ounce, while oil futures at $106.91 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.57/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 3.87%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% 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 $98.875, 2.07 points (or percent) lower (or worse) than we were last week as we test the bottom of the current trading range.  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 readers digest version is how do we survive without the Fed’s “crack” feeding the Markets.  This will not end pretty.  The markets (stock and bond) are trading in reverse.  That is, they are moving higher on negative economic news because that means the Fed will continue buying bonds and stimulating the economy.  They should be moving higher on good news.  Strong economic growth should be good for stocks because they earn a higher return.  The current pattern suggests that when (not if) the Fed returns to normalcy, the stock market will correct.  And it won’t be pretty.

The Federal Government posted a budget deficit of $97.6 billion in July, a rise from the same month ago, though a rise in tax receipts may make the annual budget gap the smallest in five years.  In July, the government spent $297.6 billion and took in $200 billion in revenue. Including the July deficit, the budget gap for the first ten months of the 2013 fiscal year totaled $607.4 billion, down 38% from the same period a year ago.  Question; is this supposed to be good news?

Small-business “optimism” pretty much remained the same in July, helped by slight gains in the percentage of those planning to increase employment, those saying now’s a good time to expand and those expecting real sales to be higher. The National Federation of Independent Business said its small-business optimism index rose 0.6 points to 94.1, still half a point below the Dec. 2007 reading, when the U.S. entered recession. The report is based on the responses of 1,615 randomly sampled small businesses in NFIB’s membership.  I don’t know if there’s a “pessimism” index, but I show this because small business I think is a big component in the direction of growth.

Retail sales rose a sluggish 0.2% for the fourth straight month in July, and details of the report suggest some firming in consumer spending.  But most of the weakness was due to a steep drop in automobile sales after strong gains in May and June.  Excluding that category, retail sales rose 0.5%.  Consumer spending drives about two-thirds of demand in the U.S. economy.

Prices (inflation) at the wholesale level were unchanged in July, as prices declined for energy, didn’t change for food, and rose for pharmaceuticals. Meanwhile, the core producer-price index, which excludes food and energy, increased 0.1%.  The report signals that inflation was contained in July.  Weak international conditions have been pressuring prices.

Consumer prices rose 0.2% on gains for gasoline, housing, clothing and food, among other goods. Excluding energy and food, the “core” consumer-price index also rose 0.2%.  Consumer prices have increased 2% over the past 12 months, and the core has increased 1.7%.  While most traders (the Market) expect that the Fed could announce plans to taper its massive bond-buying program as early as September, there’s been some concern about inflation running too low.  Also, the government reported that inflation-adjusted average hourly earnings fell 0.2% in July. Real wages have declined 0.1% over the past 12 months.

On the employment front: Signaling a slower pace of layoffs, the number of people who applied for new jobless benefits fell 15,000 to 320,000 last week, hitting the lowest level of initial claims since October 2007. Continuing claims dropped 54,000 to a seasonally adjusted 2.97 million in the week that ended Aug. 3. Continuing claims reflect the number of people already receiving benefits.

Home-builder confidence rose in August to the highest level in nearly eight years, on gains in both current sales conditions and prospective ones. The National Association of Home Builders/Wells Fargo housing market index rose 3 points to 59, marking the fourth rise in a row.  Any reading above 50 is considered “good.” The component measuring current sales conditions rose 3 points to 62, the component measuring sales expectations in the next six months rose a point to 68, and the component measuring traffic of prospective buyers was unchanged at 45.

Consumer sentiment took a step back in August from post-recession highs after some leading retailers reported cautious spending by shoppers.  The preliminary August reading of the University of Michigan/Thomson Reuters consumer sentiment fell to a reading of 80.0 in August, down from 85.1 in July.  The outlook component fell to 72.9 in August from 76.5 in July, while current conditions dropped to 91.0 in August from 98.6 in July.  These levels are still quite weak on a historical basis even with the post-recession gains.

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Please visit my website at: http://bill.bartok.stanfordloans.com/agents/Blog

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday Aug 9th, 2013

The National Debt is currently: $16,894,431,665,658.00

The Dow last traded at 15,436.  The S&P 500 is trading at 1,694.  Gold is trading at $1,310 an ounce, while oil futures at $105.75 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.57/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.58%.  30-year Treasury Bond yields last traded at 3.64%.  Rates on 30-year fixed-rate mortgages are a hair above 4.5% 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 100.96 right where we were last week.  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 readers digest version is it was a very light week in the economic news category with lackluster trading in the markets.

U.S. service-sector companies expanded at faster than expected pace in July, according to the Institute for Supply Management. The ISM said its survey of purchasing managers – the executives who buy supplies for their companies – climbed to 56.0% last month from 52.2% in June. That’s the highest level since February.

According to the most recent survey of senior bank loan officials at American banks and foreign branches in the US, in the last three months, 13% of those questioned had established easier conditions on business loans to large and medium-sized firms and 7% on small firms.  While this is a small percentage, their business could be feeling the pinch of a slow growth economy and attempting to gain new business.

Annual home-price growth in June was close to the fastest pace in seven years, as inventories of existing and new homes remains low.  Home prices, including distressed sales, rose 1.9% in June, and were up 11.88% from a year earlier, according to CoreLogic, an Irvine, Calif.-based analysis firm. Excluding short sales and other distressed properties, prices rose 1.8% in June, and were up 10.97% from the year-earlier period, reaching the fastest annual pace since February 2006.  The 30-year fixed-rate mortgage, according to Freddie Mac data, rose as high as 4.46% in June from as low as 3.35% in May.

Consumer credit rose 5.9%, or $13.8 billion, to an annual rate of $2.85 trillion, the Fed reported.  Revolving credit like credit cards fell 3.8%, while non-revolving credit like student and auto loans climbed 10%. Revolving credit fell for the first time since March, while non-revolving credit has grown every month since August 2011.

New applications for unemployment benefits rose less than expected last week and remained near a five-year low, perhaps a sign of some improvement in the labor market. A better sign was a decline in the four-week average, a more reliable gauge than the volatile weekly number. It fell by 6,250 to 335,500, touching the lowest level since November 2007.

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home. 

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday June 28th, 2013

US national Debt is $16,888,906,375.00 and climbing!  (http://www.usdebtclock.org/)

The bond market’s month-long plunge got a bit of a bounce back in the last couple days.  The Dow last traded at 14,987.  The S&P 500 is trading at 1,613.  Gold prices continued to slide this week shedding more than 13% since the start of June and are now down almost 30% since the beginning of the year, propelled lower in part due to investors’ concerns that the Fed will soon trim its $85 billion-a-month bond-buying program.  It’s trading are at $1,226 an ounce, while oil futures at $97.06 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.65/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.52%.  30-year Treasury Bond yields last traded at 3.54%.  Rates on 30-year fixed-rate mortgages stayed a hair above 4% this week. Just a month ago, they were below 3.5%.  Since May 8th Fannie Mae MBS (Mortgage Backed Security) with 3% coupons has fallen nearly 7 points to their lowest levels in a year.  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 3.0% coupon, containing 3.75-4.125% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 100.375,.  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 readers digest version is everything hinges on what the Fed will or will not do and when.  And the Fed Gods are creating more uncertainty in the market just by opening their mouths.  Every time one of them speaks the markets react.  Most of the selling in the last few weeks is from “program” trading: that is traders will put in sell orders below the market and when they are triggered it causes a domino effect.

Mortgage rates soared over the past week, after panic set in after the Fed suggested it could start tapering bond purchases this year, with 30-year fixed-rate mortgage rate hitting the highest level in almost two years. The average rate for the 30-year fixed-rate mortgage rose to 4.46% in the week ending June 27, the highest rate since July 2011, and up from 3.93% in the prior week, Freddie Mac said in its weekly report. The latest weekly result is also the first time the rate has reached above 4% since March 2012.

The central bank’s $85-billion-a-month bond-buying program has helped prop up stock prices and keep interest rates ultralow.  Bernanke said last week that the central bank would likely scale back its bond buying later this year and end the program when the unemployment rate was near 6%, perhaps by mid-year 2014.  The problem is that the Markets didn’t pay attention to the “ifs” in his statement and took it as fact that the Fed will be pulling back on accommodative policy. There is a big rule in securities trading; “Sell the rumor, and buy the fact.”  And the markets sold off big-time on the rumor.  There are some really big “ifs” in the Fed’s statement: Bernanke said the Fed “could begin” to taper its purchase of bonds later this year, “if the economy continues to improve” as Fed officials expect and “if everything goes well.”

The Fed expects the unemployment rate, now at 7.6%, to fall to as low as 6.5% by the end of 2014 and perhaps even dip below 6% in 2015.   Unless we get employment numbers above 250,000 every month for more than six months and GDP growth above 4.5% (currently less than 2%), this simply isn’t going to happen folks.  But markets trade on perception first and facts second.

A Federal Reserve official this morning opend his mouth saying that the central bank’s bond purchase program may be scaled back in September.  In a speech to the Council on Foreign Relations, Fed God Jeremy Stein used only September as the hypothetical start date for slowing the pace of purchases. Stern’s remarks indicate he is eyeing September for making a decision about changing the pace of purchases.  In his speech, Stein suggested markets should not to focus on fresh payroll numbers that come out just before the meeting, saying any decision by the Fed to slow the pace of its currently $85 billion-per-month asset-purchase program will be based on accumulated trends since the program started last fall, not the most recent data. Stein said the Fed didn’t want to be a “prisoner” of the market.

Markets are now pricing in more rate hikes than had been assumed before last week’s policy meeting and news conference by Bernanke. Fed fund futures imply at least three quarter-point rate hikes, and possibly four, by the end of 2015.  Earlier this week, Dallas Fed President Richard Fisher likened market participants to “feral hogs” for pushing bond yields higher.

The mood of U.S. consumers climbed to a five-year high in June, according to an index released Tuesday that showed expectations for the future climbing significantly.  The Conference Board’s consumer confidence index jumped to 81.4 in June, the best reading since January 2008 and up from 74.3 in May. The final June reading of the University of Michigan and Thomson Reuters consumer-sentiment index declined to 84.1 from a final May reading of 84.5. May’s reading was the highest since July 2007.

The U.S. economy grew slower in the first quarter than previously believed, mainly because of softer spending on consumer services such as health care, takeout food and travel.  Gross domestic product rose by just 1.8% in the January-to-March period, down from a prior estimate of 2.4%, the Commerce Department said in the last of three regular updates.  The reduced pace of growth in the first three months of 2013 calls into question the Fed’s assertion last week that the economy has improved significantly since last fall.

U.S. house prices saw the strongest monthly jump on record, while new-home sales reached a five-year high. Pending home sales jumped in May to reach a six-year high.  The NAR’s pending home sales index climbed 6.7% to 112.3 in May, from 105.2 in April. The index was up 12.1% from May 2012 levels.  In the Eldorado Hills to Shingle Springs area this year, listings have grown from 149 in January to 222 in May or 48%, while sales have gone from 70 to 147 in the same period.

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Please visit my website at: http://bill.bartok.stanfordloans.com/agents/Blog

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday June 7th, 2013

The bond market’s month-long plunge has pushed long-term interest rates on mortgages and Treasurys to their highest levels in more than a year.  The Dow last traded at 15,213.  The S&P 500 is trading at 1,6392.  Gold is trading higher at $1,383 an ounce, while oil futures at $96.23 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.73/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.15%.  30-year Treasury Bond yields last traded at 3.31%.  Rates on 30-year fixed-rate mortgages stayed a hair above 4% this week. Just a month ago, they were below 3.5%.  Since May 8th Fannie Mae MBS (Mortgage Backed Security) with 3% coupons has fallen nearly 4 points to their lowest levels in a year.  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 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 100.28, right where they were a week 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.

In economic news this week; The big news of the week is the employment report this morning.  The Fed’s stimulus has been a boon to financial markets, so traders have been on edge since Mr. Bernanke’s comments. Today’s report appears to have eased concern among stock investors that the central bank would soon pull back on stimulus as the Dow jumped 1.2% to reclaim the 15000 level.

U.S. employers added 175,000 jobs in May, maintaining the slow but steady gains of recent months and easing worries about a summer slowdown in the U.S. economy. The May payroll increase was in line with the average job gain of 172,000 over the past 12 months.  The unemployment rate rose slightly to 7.6% in May from 7.5% in April, as more people entered the workforce, the Labor Department reported this morning.  A broader measure of unemployment that includes discouraged workers and those forced to work part time was 13.8%.

The report likely keeps the Fed Gods on their current monetary-policy path as they contemplate pulling back on its on their $85-billion-a-month bond-buying program later this year.  Fed Chairman Ben Bernanke said last month that the central bank could start slowing its bond purchases at one of its “next few meetings” if the economy continues to improve.  Has anyone bothered to ask where the Fed is getting the $$$ to be purchasing 85 BILLION of bonds each month???

Construction spending rose a scant 0.4% in April.  Nonresidential construction spending, which includes projects such as health-care facilities, rose 0.7%, while residential construction spending fell 0.2%.  Supported by growing demand and low inventory, home prices continued to run ahead in April, with year-over-year growth hit the fastest pace in more than seven years. Including short sales and other distressed properties, home prices in April grew 3.2% during the month and were up 12.1% from the same period last year.

Businesses in the U.S. weren’t as productive in first quarter as originally believed and worker pay posted the biggest drop since 1947, as companies sought to avoid the full effect of a big tax increase that took effect in January. The growth in productivity from January to March was taken down a few pegs to 0.5% from 0.7%, according to newly revised figures from the Labor Department.  Adjusted for inflation, hourly wages sank 5.2% in the first quarter.

Apparently there is little evidence that cutbacks in federal government spending were slowing down the economy. The Beige Book data (because the report is printed on beige paper, seriously), with the report of steady growth may be one reason that Bernanke has suggested the central bank could reduce the pace of its bond-buying program in a “few” meetings, subject to the economic data.

The report said that manufacturing continued to expand in most districts. One area of some concern could be consumer spending.  Instead, the so-called Beige Book released by the Fed, covering the period from early April to late May, said the economy maintained the “modest to moderate” pace that has been in place so far this year.  The report showed that seven of the 12 districts reported only ”slight’ sales growth. Three reported modest or moderate gains. New York reported sales were tepid and Richmond said sales were flat. Residential housing and construction activity was either moderate or strong across the country. Reports about the labor market seemed more upbeat, with hiring “at a measured pace” in several districts and some contacts reporting difficulty in finding qualified workers.

Now here’s what really worries me: Since January 2009 the average growth rate in the economy has been at or below 2.0%.  The Dow has gone from 9,000 to 15,000 a 66% gain in the same time period.  Historically, from 1947 until 2013, the United States GDP Growth Rate averaged 3.2 Percent.  First Q GDP is estimated to be 2.4%.  Does this really warrant a stock market breaking all-time highs?  I begged the question earlier; has anyone bothered to ask where the Fed is getting the $$$ to be purchasing 85 BILLION of bonds each month?  If the Fed is attempting to slow their purchases of Billions each month in bonds, my guess is that it’s not because the economy is growing, it’s because they can’t continue to do it forever.  As we continue to print more $$$ the value of our currency will drop causing further problems.

The US can’t continue to run this way forever.  The more debt we incur (trillions each year) the more of each revenue dollar gets eaten up.  Just try running up your credit cards and see what happens.  This is a house of cards that could so easily fall.  As soon as the stock market realizes this it will correct, and when it does retirement and saving assets drop, consumers spend less, companies’ tighten, layoffs ensue and you have another recession or worse.  I’m not trying to be a gloom-sayer here, but am I the only one who sees this.  The US national Debt is almost 17 TRILLION and climbing with no signs of stopping.  The Fed has been trying to control something we call “free markets” in our capitalistic system, and this can only be “controlled” for some time and eventually it will return to its natural state.  Maybe this is a good thing.  We’ve had our rose colored glasses on for some time now and eventually they will either fall off or be ripped off.  But it probably will be the latter.

If you know anyone who can benefit from my services, please call me.  My greatest goal is to see clients and friends happy.  I guess that’s why I love providing mortgage financing.  It’s an immediate gratification when you can help someone purchase a home, or lower their payment on their existing home.

Bill Bartok

Mortgage Advisor

NMLS# 445991

The Weekly Rap! Friday May 31st, 2013

The bond market’s month-long plunge has pushed long-term interest rates on mortgages and Treasurys to their highest levels in more than a year, sparking a debate: Is this a bursting bubble, the aftereffect of clumsy Federal Reserve communication or a welcome sign the economy is, at last, on the mend.  The Dow last traded at 15,232.  The S&P 500 is trading at 1,652.  Gold is trading higher at $1,393 an ounce, while oil futures at $92.87 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.80/Gal.

Yields on 10-year Treasury notes, which move inversely to prices, last traded at 2.18%.  30-year Treasury Bond yields last traded at 3.33%.  Rates on 30-year fixed-rate mortgages rose a hair above 4% this week. Six months ago, they were below 3.5%.  Since May 8th Fannie Mae MBS (Mortgage Backed Security) with 3% coupons has fallen nearly 4 points to their lowest levels in a year.  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 3.0% coupon, containing 3.25-3.625% mortgages, pretty much the benchmark or how rate sheets are priced these days  is currently trading at 100.34, which is 1.25 pts worse than where we were just last week 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.

In economic news this week; The reader’s digest version is the housing market continues to improve and overshadow the slight improvements in the rest of the economy as well as consumer confidence at least for the moment is on the rise.  All eyes are on the Fed these days as many traders see the recent fall in bond prices, which move inversely to yields, as confirmation of a bond-market bubble fueled by the Fed and bound to end badly, retarding an economy whose growth is already painfully slow.

Home prices rose in March, marking the fastest annual growth rate in nearly seven years.  The S&P/Case-Shiller 20-city composite rose 1.4% in March, the largest monthly growth since July. The growth from the same period of last year was 10.9%, which marks the highest year-on-year growth rate since April 2006. All 20 cities tracked by the gauge saw year-over-year improvements for a third consecutive month.  Low inventory and interest rates, as well as pent-up demand, are supporting home prices. There are also fewer distressed sales.

Pending sales of homes ticked up 0.3% in April, with gains in the Northeast and Midwest, but decreases in the South and the West.  Despite April’s slight gain, the pending-sales gauge increased 10.3% from April 2012, hitting the highest level in three years.  While the housing market has seen large gains over the past year, low inventories, and high unemployment and credit standards are constraining growth.

Rising home prices encourage market activity as more owners are willing and able to place their homes on the market.  As home prices have increased, the number of owners who owed more on a home than the property was worth fell to about 13 million in the first quarter from 15.7 million during the same period last year. On a percentage basis, 25.4% of all homeowners with a mortgage had negative equity in the first quarter, down from 31.4% during the same period last year.  Owners with negative equity, (those with less than 20% equity) may be unable to afford a down payment for a new home, thereby preventing them from moving.  Rapidly rising prices and bidding wars are preventing first-time buyers from participating.  With fewer first-time buyers, it’s tougher for other owners to sell and move up from starter homes.  It’s a vicious circle.

The Economy grew a touch slower in the first three months of 2013 than previously believed, mainly because of a slower buildup in inventories and a somewhat steeper drop in government spending.  Gross Domestic Product (GDP) expanded at an annual rate of 2.4% in the first quarter, down from an initial estimate of 2.5%.  GDP is the broadest measure of an economy’s health, reflecting the value of all the goods and services a nation produces.  The gain in first-quarter growth follows a tepid increase of 0.4% in the fourth quarter last year.  A big driver of GDP is consumer spending.  The more products that are purchased the more products are produced thus increasing GDP.  Consumer confidence allows us to predict future GDP growth.

Earlier in the week we saw the Conference Board’s Consumer-Confidence Index climbed to a five-year high of 76.2 in May from 69.0 in April.  Apparently we have the most confidence in five years about the nation’s economic prospects.  Higher stock prices, rising home values and falling gasoline costs have made apparently made us more upbeat. A lack of drama in Washington has also allowed consumers to regain confidence after several political disputes had threatened to harm the economy. Still, consumer confidence remains well below the level expected in a normal economic recovery. Before the Great Recession, consumer confidence hovered in the 100-point range.

Please visit my website at: http://bill.bartok.stanfordloans.com/

Sincerely,

Bill Bartok

Mortgage Advisor

NMLS# 445991