The Weekly Rap! Friday Aug 10, 2012

The Dow is currently trading at 13,115 up 33 pts over last week.  The S&P 500 is trading higher as well at 1,400.   Gold is trading at $1,623 an ounce, while oil futures at $92.97 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $3.65/Gal.

Yields on 10-year notes, which move inversely to prices, are trading at 1.65%.  30-year bond yields are trading at 2.74%.  Mortgages or FNMA 3.5% MBS (Mortgage Backed Security) is currently at 105.41, falling off higher levels. Basically each percent change in the price of the security translates to the price (or points paid or credited) of the mortgage rate.

In economic news this week; How do you know that you’ve reach a bottom in a cycle (Real Estate, Stocks, Gold, etc)???  You know when you’ve already passed it and you’re going up the other side.

Home prices rose by their largest percentage in at least seven years during the second quarter, propelled by low inventories of properties for sale and high demand for bargain-priced foreclosures.  Prices rose by 2.5% in June from a year ago, and by 6% from the previous quarter. Separately, Freddie Mac, which uses a different methodology, said home prices during the second quarter jumped by 4.8% from the previous quarter. That was the largest jump since 2004.

The main force behind the home-price gains appears to be a shortage of homes for sale.  The number of properties on the market is down sharply from a year ago.  Meanwhile, demand is up, as mortgage rates have dropped to their lowest levels in at least 60 years. Many traditional sellers are sitting on the sidelines because they are unable or unwilling to sell, mny because they owe as much if not more than they could sell their home for.

U.S. consumers increased their debt in June by a seasonally adjusted $6.5 billion, the Federal Reserve reported Tuesday. This is the tenth straight monthly gain in consumer borrowing.  For the second quarter, consumer credit increased at a 5% annual rate.  Productivity rebounded in the second quarter, posting a 1.6% gain as companies generated more goods and services even though there was little change in the number of hours their employees worked.  Productivity measures the goods and services generated by an economy. In the long run, higher productivity usually results in higher profits for businesses and bigger paychecks for workers.

The job market remains difficult as employers have pulled back from adding workers due to the European debt crisis and a stalemate in the U.S. over tax and spending policies. The unemployment rate ticked up to 8.3% in July.

And now for the Rant:  I’m sure you’ve been enjoying the summer Olympics these past two weeks as much as I have, especially seeing how well our American athletes are doing.  They are bringing home the Gold.  But did you know that when an athlete in the Olympics wins a medal that they have to pay a tax to the government based on the implied value of that medal?

Based on today’s commodity prices, the value of a gold medal is about $675, silver medal is worth about $385 while a bronze medal is worth under $5.  There are also cash prizes given out to medal winners — $25,000 for a Gold, $15,000 for a Silver and $10,000 for a Bronze.  While I agree that cash prizes should be taxed because it is, after all, income.  Taxing the value of the medal which the athlete is rarely likely to part with should be exempt.  What are your thoughts?

Whole some (few) athletes will get endorsement deals of play in a professional sport many like Kim Rhode who won Gold in women’s skeet shooting may not have the excess funds to pay the tax on the medal.  This is my reality show!  It’s my opinion and I’m sticking to it!

For information on Mortgage on what I do when I’m not bloging, check out my website.


Bill Bartok

Mortgage Advisor


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