The Weekly Rap! Government Rhetoric, the Economy and other stuff. 5/13/16

The National Debt is currently: $19,268,001,132,587.00  is Higher by another 8 BILLION in the last week.  The interest pay-out alone on the debt is 233 Billion per year!  I post this so we will be aware of what we are leaving to our children.

Brace yourselves folks, it’s Friday the Thirteenth!  Stocks slid this morning Friday, putting major indexes on track for their longest weekly losing streak since January.  Energy and financial shares in the S&P 500 led the declines. Indexes had wobbled earlier in the session after an upbeat reading on retail sales, which contrasted with gloomy earnings reports from department stores earlier this week.

The Dow is lower by 185 points at 17,535.  The S&P 500 is at 2,045.  Gold is trading at $1,274 an ounce, while oil futures at $46.14 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $2.33/Gal.

The FNMA 30-year fixed 3.0% coupon (interest rates at which banks sell their loans into Fannie Mae), containing 3.25% – 3.625% mortgage rates, the benchmark or how rate sheets are priced these days is currently trading at 102.78.  Our current trading range is about 102.00 to about 103.00.  Each .50 change in the price of the security translates to about 0.125 in rate.  Basically the 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 lower the rate.  

Does anyone wonder, or care, why we as a nation are promoting a candidate, Donald Trump, that has no political experience whatsoever and another that is promoting Socialism?  Well just look at the last ten years.  We’ve had a financial meltdown where we almost saw the banking system become nationalized.  Wall Street firms fell (and yes Merrill Lynch fell).  We elected a President who won the Nobel Prize is his first few months of office and for what I’m not sure.  Our government can’t balance the budget and has had to raise the debt ceiling many times (BTW isn’t that why we call it a ceiling?).  And we haven’t grown our economy at more than 2.00% in the last eight years.

Donald Trump said in an interview that economic conditions are so perilous that the country is headed for a “very massive recession” and that “it’s a terrible time right now” to invest in the stock market, embracing a distinctly gloomy view of the economy that counters mainstream economic forecasts.  I for one have been saying this for some time now.  The writing is on the wall.  We can’t continue to have next to zero interest rates and no growth in the economy forever.  The issue is that no one wants to hear anything negative.  So we’re constantly fed positive news.  Hey, you can twist just about anything positive.

The Federal Reserve’s decision about interest rates in June will be heavily impacted by the drift of its forecasts for the economy.  The Fed Gods ought to be reluctant to raise short-term interest rates at the meeting if they are also reducing their forecasts for growth and inflation or raising their forecasts for unemployment. Why raise rates if you’re becoming more pessimistic about the economic outlook?

The Wall Street Journal’s latest survey of private economists suggests that when officials reconvene in a month the position the Fed might find itself in is one of a “conundrum”  Does anyone remember that term as used by Alan Greenspan?   Forecasters surveyed in the past week have reduced their projections for 2016 growth in GDP since March and they have trimmed other projections for growth, inflation and hiring.  Their 2016 GDP growth forecast has gone from 2.4% in March to 1.9% in the latest May survey.  The forecast for 2017 growth was snipped from 2.3% to 2.2% since March.

The WSJ survey shows expectations for inflation have come down as well since March. The projection for the year-over-year change in the Consumer Price Index in December is down to 1.7% in May from 1.8% in March and 2.1% in December. The 2017 forecast was trimmed to 2.2% from 2.3%. Forecasts for the unemployment rate in December 2016 and December 2017 were nudged up to 4.7% from 4.6% in March.  These aren’t big shifts, but they’re all going in the wrong direction. Barring a big shift in economic data between now and mid-June, the hurdle looks increasingly high for a June rate increase.

A measure of small-business sentiment, The National Federation of Independent Business’s optimism index, rose 1 point to 93.6 in April, snapping a three-month losing streak that took it to a two-year low, the group said Tuesday.  Most of the index’s sub-gauges rose or stayed neutral. Only one, the index that tracks views about the future path of the economy, slipped.  The current political climate is to blame for small business owners’ pessimism, NFIB said in a release.  “There is no leadership in Washington, no articulations of a path to a better future, and no evidence that policy-making is focused on promoting economic growth or job creation,” wrote the group’s chief economist, William Dunkelberg.  And respondents don’t think that will change after the election. The index touched a cycle high of 100 in December 2014. Its current reading is well below the 42-year average of 98.

Good news for once, our government ran a budget surplus of $106.4 billion in April, the Treasury Department said Wednesday.  After narrowing for four straight years, the deficit for the current fiscal year looks set to see an increase of red ink.  April is an important month for the deficit as it contains highly unpredictable annual tax payments and refunds.  The bigger picture though is our “politicians” are still spending more money than we are making.  See our National Debt above.  It has doubled is just the last ten years! Donald Trump has insisted that he would be able to get rid of the nation’s more than $19 trillion national debt “over a period of eight years.”  Whether or not he can accomplish this, at least he’s addressing the problem.  I’ve heard no other politician even mention taking down the debt.

Sales at retailers posted the biggest increase in April in a year, offering the hope that our economy is rebounding after a weak first quarter.  Retail sales rose 1.3% last month, spearheaded by big gains among auto dealers, gas stations and Internet retailers, the Commerce Department reported Friday.  Every segment of the retail industry saw improved results except for home centers whose sales were hindered by unusually damp and rainy weather.  Then again we’ve seen this year over year and nothing has changed to make me feel that we’re going to have a banner year.

Producer prices rose 0.2% in April after two straight declines, but inflation at the wholesale level remained largely absent in the broader economy.  The cost of services edged up 0.1% in April, the Bureau of Labor Statistics said this morning.  Goods rose 0.2%, led by surge in scrap metal prices and higher energy costs.  Food prices fell 0.3%, though.  The wholesale cost of eggs sank by one-third as farmers rebuild flocks depleted last year by the threat of disease.  Wholesale prices are unchanged in the past 12 months.  Stripping out food, energy and trade margins, so-called “core” producer prices rose 0.3% in April.  Over the past year core prices have risen just 0.9%. That’s the same as in March and February.

Consumer sentiment surged in early May as Americans’ views of the future brightened.  The University of Michigan’s index surged 7.6% to 95.8.  Most of the gain was due to the expectations index, which soared 12.8% to 87.5, it’s highest in nearly a year. The current conditions component also rose, by 1.8%, to 108.6.  The largest gains were centered in lower-income and younger households, who may be more sensitive to income gains and the jobs outlook, the Michigan researchers noted in a release.

On the Employment front:  The number of available jobs rose to an eight-month high in March, in what could be a sign that companies are struggling to find talent to fill the positions they need — but that financial-market turbulence hasn’t deterred firms from expanding.  The Labor Department said there were 5.76 million job openings in March, up from 5.61 million in February.

The sector with the largest number of open jobs is the professional and business service sector, with 1.23 million open slots, a 124,000 gain from March. The number of job openings in the construction sector edged up to 210,000, the highest level in nearly nine years, before the Great Recession that wrecked the housing sector.  The low-paying retail sector had 35,000 fewer open jobs in March, though another low-paying field, leisure and hospitality, had 29,000 more jobs to fill.

The number of Americans who applied for unemployment benefits in early May rose for the third straight week and hit a 14-month high, reflecting an unusual surge in New York state and perhaps adding to evidence that the U.S. labor market may have softened.  Initial claims climbed by 20,000 to 294,000 from May 1 to May 7, the Labor Department reported Thursday. The last time initial claims were that high: Feb. 28, 2015.

Wall Street is sure to pay close attention to jobless claims over the next few weeks to see if the softening trend continues. Even after 46,000 increase in the last three weeks, however, initial claims are still very low. They’ve held below the key 300,000 level for 62 weeks, the longest streak since 1973.

If you like this commentary please visit and “Like” my Facebook pageI put all of my prospective buyers through underwriting so that when they place their offer, it is as close to “cash” as you can get.  So to get “underwriter approved”, please contact me and get your offer accepted!

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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! Government Rhetoric, the Economy and other stuff. 5/6/16

The National Debt is currently: $19,268,001,132,587.00  is Higher by another 8 BILLION in the last week.  The interest pay-out alone on the debt is 233 Billion per year!  I post this so we will be aware of what we are leaving to our children.

The Dow industrials and S&P 500 fell for the second week in a row, the first back-to-back declines since the market hit a low in February.  Stocks have struggled to gain traction after a multi-month rally, dragged down by downbeat economic readings, swings in oil prices and declining corporate earnings not to mention a weaker-than-expected reading on the U.S. labor market.  The Dow actually closed higher by 79 points at 17,773.  The stock market’s gains marked a reversal from earlier in the day, when the Dow fell as much as 80 points and the S&P briefly turned negative for the year. The S&P 500 closed at 2,057.  Gold is trading at $1,289 an ounce, while oil futures at $44.599 a barrel.  Gas prices, (Regular in El Dorado Hills, Costco, AM/PM), are at $2.33/Gal.

The FNMA 30-year fixed 3.0% coupon (interest rates at which banks sell their loans into Fannie Mae), containing 3.25% – 3.625% mortgage rates, the benchmark or how rate sheets are priced these days is currently trading at 102.78.  Our current trading range is about 102.00 to about 103.00.  Each .50 change in the price of the security translates to about 0.125 in rate.  Basically the 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 lower the rate.  

Is anyone else frustrated up to here with American companies outsourcing their tech/customer support to India/Pakistan or some other country that barely speaks English and can only help if it’s “in their book”? I use Act by Swiftpage as my client/personal database and pay extra each year (Gold Support) to speak to someone here in the USA, (Scottsdale AZ) when I have an issue. Apparently their systems aren’t recognizing the Gold status and I’ve been transferred to India 3 times. I’m sorry but I can barely understand them, and they do not understand my issue. They just keep repeating “I can help you with that”. Is it really that much cheaper to outsource these calls? Why could Americans not do this? Imagine how many Americans we could employ if customer service were provided here in our own country. I am more likely to support companies that keep jobs here in the USA. We should have a list of companies that do. I welcome your thoughts.

On the Real Estate front:  Does ‘staging’ a home lure buyers into paying more?  Plastic surgery might improve one’s looks. But so might a little makeup. When it comes to making your house more attractive to prospective buyers, home staging is definitely in the makeup category.  What is home staging?  Just like makeup, it’s an on-the-surface solution. Staging can help your place look its best during the sales period without the cost or expense of a renovation. Then again, if you’ve repaired a motorcycle on the living-room carpet, all the staging in the world isn’t going to help.  For a small sum, the home you’re about to put on the market can be filled with great-looking furniture, well-considered accessories and tasteful art.  Here is a good guide to staging a home.  There are some very interesting stats in this guide. 

In economic news this week; Companies scaled back hiring in April, adding just 160,000 new jobs, in a sign the U.S. economy is still suffering from an early-year chill.  The good but not great April employment report coming on the heels of the soft gross domestic product report likely rules out a quarter-point rate increase in June. U.S. GDP slowed to a 0.5% annual rate in the first three months of 2016.

Economic woes from weak commodity prices are spreading in the oil sector from energy firms to other businesses and consumers, according to a Federal Reserve survey of senior bank loan officers released on Monday.  Bank officers reported that credit quality deteriorated in the first quarter on loans to businesses and consumers in energy dependent areas of the country, the Fed said.  In particular, credit quality on auto loans had suffered, with 23% of banks reporting a deterioration, according to the survey of 70 domestic and 22 branches of foreign banks operating in the U.S.

The U.S. trade deficit shrank in March by almost 14% to $40.4 billion, the lowest level in more than a year, but the plunge reflected a tough climate for American exporters and more caution on the part of consumers.  U.S. exports fell 0.9% to $176.6 billion in March and remained near the lowest level in several years, the government reported Wednesday.  Exports of food and industrial supplies dropped to the lowest level since 2010.  Imports fell an even steeper 3.6% to $217.1 billion and touched a five-year low. Although cheaper oil contributed to the drop, the U.S. also imported fewer autos, clothes, computers, consumer goods, wine and beer.  The decline in imports offers more evidence that consumers grew cautious after a rocky start to 2016, when stock markets tanked briefly on worries about a worsening global economy.  The U.S. trade gap declined from a slightly revised $47 billion in February, the Bureau of Economic Analysis said.

Borrowing by consumers ballooned in March at the fastest pace in more than a decade.  Outstanding consumer credit, a measure of non-real estate debt, rose by a seasonally adjusted $29.67 billion in March from the prior month, the Fed reported this morning. The 10.0% seasonally adjusted annual growth rate was the fastest growth pace since November 2001. The sharp increase in consumer borrowing follows months of modest economic growth. While the economy has been producing jobs at a healthy pace, overall economic activity has slowed.

Measures of consumer confidence have reflected uncertainty in recent weeks. The University of Michigan final consumer-sentiment index declined in April to its lowest level in seven months. The closely watched gauge of consumer sentiment, released last week, was 89.0, down from March’s final reading of 91.0 and the lowest level since September.

A separate gauge of U.S. household attitudes, the Conference Board’s consumer-confidence index, dipped in April to 94.2 from 96.1 in March, the group said last week. That report showed slightly fewer people saying that they planned to take a vacation or buy a car, home or major household appliance within the next six months.

On the Employment front:  The number of Americans collecting unemployment benefits fell in late April to a nearly 16-year bottom, largely reflecting the low rate of layoffs taking place across the economy.  Some 2.12 million people collected weekly unemployment benefits, known as continuing claims, in the seven days stretching from April 17 to April 23, the Labor Department said Thursday.

Companies scaled back hiring in April, adding just 160,000 new jobs, in a sign the U.S. economy is still suffering from an early-year chill.  The disappointing employment report, (Wall Street had expected a 203,000 gain) is likely to keep the Fed from raising interest rates anytime soon.  Hiring has tapered off in 2016 in tandem with a broader economic slowdown, while falling corporate profits has sparked worries about whether companies will take down their “help wanted” signs.

The increase in hiring was the smallest since September. Job creation has slowed to an average of 200,000 in the last three months from a five-year high of 282,000 a month in the fourth quarter.  The unemployment rate remained flat at 5%, but more people dropped out of the labor force and the so-called participation rate fell for the first time in seven months. That could mean people find it a bit harder to get a job.

In a bit of good news, average wages rose again to $25.53 an hour.  Hourly pay has increased 2.5% in the past 12 months, up from 2.3%, reflecting a tighter labor market in which more firms say they have trouble finding suitably skilled workers.  Still, the Fed will likely wait for more evidence that the economy is on the mend after a weak first quarter. 

Prior to the release of the governments’ jobs data, it was reported Wednesday that private-sector employment gains slowed markedly in April as well.  Employers added 156,000 jobs in April, according to Automatic Data Processing Inc.  This is the weakest estimate since February 2014. ADP lowered March’s gains to 194,000 from the prior estimate of 200,000.

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!