As expected, the Fed voted to leave the Fed Funds Rate holding steady at 5.25%. However, it was the tone of the Policy Statement that was not so nice for Bonds or home loan rates, which worsened a bit following the release. Why? Because the market was looking for some loving lyrics from the Fed, particularly in regards to inflation. Recent inflation and wage data has all been friendly, and the economy is slowing a bit as well. So the markets were expecting a nice ballad from the Fed about inflation being under control…but instead, the Fed said their predominant concern is that inflation will “fail to moderate as expected”. While the Fed’s primary mission is to be on guard against inflation, the market was hoping for a little more love on this front, and was a bit displeased with the tone of the Statement.

Retail Sales slipped lower in April, bringing the worst reading in seven months. The declines were seen in clothing, restaurants, sporting goods, cars and home products. Possible reasons? The price of gasoline is back up, and this means consumers may be forced to cut back on their buying of other retail products. Additionally, food costs are significantly higher in recent months, due to a variety of factors including crop freezes early in the year, and many corn products being diverted for use as fuel. Because they are so volatile, neither food nor energy costs show up in the important Core inflation numbers - but when it comes to a consumers actual day-to-day spending habits which will always include gas and groceries, these factors will absolutely have an impact on spending. The weak Retail Sales report was good news for Bonds, but not good enough, and home loan rates still ended slightly higher on the week overall.

BUT IF YOU’RE THINKING ABOUT SAVING A FEW BUCKS BY WASHING YOUR CAR AT HOME RATHER THAN THE LOCAL CAR WASH…THINK AGAIN, AS IT COULD COST YOU BIG IN THE LONG RUN. READ THIS WEEK’S MORTGAGE MARKET VIEW FOR THE WHOLE SCOOP.

The chart below shows how Bond prices have been “bouncing” up and down in a tight range, causing home loan rates to move higher and lower by about .125% with each “bounce”. As Bond prices move higher, home loan rates move lower, and vice versa. So the chart indicates that Bonds appear poised for a bounce higher, with home loan rates moving lower. But first, Tuesday’s inflation measuring Consumer Price Index will need to prove inflation is tame before another favorable bounce higher and help home loan rates improve.

Chances favor a mild inflation number in light if the recent economic reports, and also when compared to last years elevated reading. But if the Report reeks badly of continued consumer inflation, Bonds won’t like it, and may proceed to bash right through the floor and cause home loan rates to worsen. The good news on this front is that the 200-day Moving Average is a very strong floor of support, and it would take some very Bond-unfriendly news to force prices below this floor and cause home loan rates to worsen.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday May 11, 2007)

With summer fast approaching, most people want to have their car looking good. Driving a nice clean car just feels good - and it can also help to preserve its appearance and resale value.

So what’s the best way to clean your car? Is it better to take the car to the car wash or wash it by hand at home?

Believe it or not, an automatic car wash is not only more convenient, but it can also be much safer for your car than washing the car at home. Why? If your car is washed by hand in direct sunlight, the drops of water turn into mini magnifying glasses, which can cause the sun’s rays to burn spots into the paint - and this could cost you big when going to resell the vehicle. Additionally, many use harsh household soap products which remove protective wax and leave a chalky residue on the surface. Taking this into consideration makes the $10 to $15 automatic car wash fee look pretty reasonable.

But at the car wash, there’s all the “extras”, which can add up fast and quickly double the cost of a quick car wash! Before you agree to the “works” package, find out what is included and decide if it is really worth the extra money to have a fresh scent sprayed in the interior, or a spray-on wax applied to the exterior.

Here are some tips: Undercarriage rust proofing and spray-on wax may be a couple of extras to pass on. Most new cars are rust proofed at the factory, and spray-on wax simply adds shine. A few to consider getting would be an undercarriage bath, a hand-applied wax, and tire dressings. An undercarriage bath could wash away crud from the winter months and prevents buildup, a hand-applied wax restores oils and provides a UV-protective film, and tire dressings remove dirt and brake dust.

And remember to always opt for a brushless car wash. Older car wash facilities may still be using brushes which tend to leave light scratches in the paint and can remove the clear coat that was applied by the factory to protect the paint. And don’t ever agree to have the engine cleaned. High pressure water is used to perform the engine cleaning and can cause serious engine problems in new vehicles.

Economic Calendar for the Week of May 14 – May 18

First, the Fed’s favorite gauge of consumer inflation, Core Personal Consumption Expenditure Index (PCE), showed a year over year reading of 2.1%, which is very close to the Fed’s target zone of 1 - 2%. With inflation moderating, the Fed might start thinking about making a cut to the Fed Funds Rate in the 2nd half of 2007. This tame read on inflation was very good news for Bonds, as the value on their fixed returns get eroded by the impact of inflation.

Then, the Jobs Report arrived, with new jobs created in April being reported at 88,000, below what most analysts expected. Additionally, revisions took 26,000 jobs away from previous months reports, the Unemployment Rate rose slightly to 4.5%, and Average Hourly Earnings were reported slightly lower than expected at 0.2%. Overall, the Job Report suggests the strong labor market is softening a touch and wage based inflation pressure is moderating - more good news for Bonds and home loan rates. Wage-based inflation comes into play when the job market is tight and therefore employers are forced to pay their employees more. This naturally results in more dollars being injected into the economy for spending - as well as the cost of doing business moving higher for employers - all of which can cause prices on goods and services to rise.

DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW, WITH TIPS ON SAVING MONEY ON HOMEOWNERS INSURANCE…QUICK, SIMPLE HITS THAT ARE “SO EASY, A CAVEMAN CAN DO IT.”

Speaking of inflation, Fed Chairman Ben Bernanke has to be smiling, as the latest data suggests the Fed is doing a great job in handling the economy. Recent reports have shown moderate, stable economic growth and inflation pressures easing.

The chart below shows that Bonds and home loan rates may be making a move soon. The ceiling and the floor of the current technical range are putting pressure on Bonds, squeezing prices from both above and below…so they’ll have to make a breakout soon. And the tone of the Fed’s Policy Statement on Wednesday might just be the catalyst for a move. If it suggests that inflation is controlled, Bonds and home loan rates will like this news, and see some improvement - but if the Fed still sounds overly concerned about inflation, Bond prices and home loan rates will worsen.

Chart: Fannie Mae 5.5% Mortgage Bond (Friday May 04, 2007)

That’s right, insurance. And premiums are costing us more and more every year. But there may be some savvy steps you can take to trim the bill and still have your valuables in good hands.

Items that push premiums higher include a pool with a slide or diving board, having a trampoline, or even a dog that has a record of biting others. These factors could be part of higher premium costs, so contact your insurance agent and see if changes can reduce your premium payments.

There are also interior items that can impact the cost of insurance. The coziness of the wood-burning stove may be appealing to the homeowner, but to the insurance agent it could look like a fire hazard, and result in a higher premium.

If you have not done so already, investing in a good alarm system may enable you to shave some of the cost of insurance, while giving you some added protection. And be sure to ask your insurance agent about combining auto and home policies, this could help trim the overall cost of your insurance bill too.

Often times, once the insurance policy is purchased it sits in a drawer until the need arises to file a claim. But taking the time to review your personal insurance policy, just once a year, provides the opportunity to lower the overall annual premium and make sure your valuables are adequately protected. It is also the perfect time to make any additions for personal possessions that may have been purchased or acquired during the year, like art, home furnishings, and jewelry. Additionally, if the home has been remodeled discuss the upgrades that have been made with your insurance agent to insure that all upgrades are covered in the policy. And most importantly, if you need a recommendation to a great insurance agent - just give me a call!

Economic Calendar for the Week of May 07 – May 11

This week also brought an interesting report called the Employment Cost Index - one of former Fed Chair Alan Greenspan’s favorites - which measures the change in employment costs like wages and benefits. This report showed that costs are increasing, with wages increasing by 3.6% and benefit costs increasing by 3.1% over the past year. So not only are employers having to pay more in salaries due to a tight labor market, but the benefits they are providing to their employees are costing more too. What’s a business owner to do? You got it - consider raising the price of their goods and services to cover the rising costs of their employees…and higher prices means inflation. Not good news for inflation-hating Bond prices and home loan rates, which lost the improvements made earlier in the week and ended unchanged to slightly worse for the week overall.

THE JOB MARKET IS TIGHTENING, AND A COLLEGE EDUCATION IS MORE IMPORTANT THAN EVER - YET 97% OF AMERICAN FAMILIES HAVE NOT PLANNED PROPERLY FOR THEIR CHILD’S COLLEGE FUND. THINK YOU’VE GOT ALL KINDS OF TIME BECAUSE YOUR KIDS ARE YOUNG? WAITING COULD COST YOU…READ THIS WEEK’S MORTGAGE MARKET VIEW FOR A CAUTIONARY TALE OF TWO PARENTS, AND LEARN WHY YOU SHOULD GET STARTED SAVING RIGHT AWAY.

If either of these reports are out of line - showing more inflation than expected or markedly more jobs than expected - this could cause Bond prices and home loan rates to suffer. And on the flip side - if the reports show low inflation or fewer job creations than anticipated, this could help Bond prices and home loan rates improve.

Mortgage Bonds are now trading within a few whiskers of a very important technical floor of support at the 200-day Moving Average. Why is this floor so important? The chart below shows that Bonds have traded above this floor for eight months - and the last time Bonds traded beneath this level, the 200-day MA became a tough overhead ceiling of resistance, putting a lid on Bond prices or home loan rates improving for one and half years. So…if the news of this week forces the Bond beneath this 200-day MA floor of support, it may mean higher home loan rates for a while.

In today’s world, a college education is more important than ever. Many of the jobs that do not require a college degree have been outsourced to workers in other countries, or replaced by a computer or machine. And according to Fed Chairman Ben Bernanke, the income disparity between college grads and non-grads is growing every year. In 1979, college grads earned 38% more than those with only a high school diploma - but today, college grads earn 75% more than those without degrees.

But let’s face it, college is expensive, and becoming more so every day, inflating at around 5% per year historically. If anything, the cost will continue to rise as the upcoming high school graduating classes are expected to be the largest in history. The demand for four-year colleges will likely increase and with the number of seats in the classrooms still the same, expansion of space will probably not be an option for colleges and universities, but bumping the price tag certainly will be. And the type of college your child attends can have a big effect on the cost too - for just one year of tuition, room and board, an average private college runs just over $30,000, a public out of state college around $19,000, and even a public in state college is close to $13,000.

So as a parent who wants your child to have the chance to attend college - what can you do? Plan early. Let’s look at a tale of two parents to illustrate how important it is to get started right away.

The preschool open house was in full swing, and two parents were chatting over the punchbowl, remarking on how they knew time would fly, and before you know it - their kids would be off to college. Taylor’s parents are prepared, having recently sat down with a mortgage professional and learning that to completely fund Taylor’s four year education at the local college would cost either $300 per month in savings - or by being able to tap into the equity in their home, only $133 per month after tax. “What a relief to know it’s all taken care of!” they commented to Max’s parents. But Max’s parents replied, “Hey, what’s the rush? Look, the kids are only knee-high right now…we’ll worry about this later.”

Seven years later, the kids are in 5th grade, and the parents meet up again at a birthday party. College comes up in the conversation, as Max’s parents just learned that for him to attend the very same college as Taylor, it will now require them to save $835 per month to be ready on time, which is not something they are prepared to do. Taylor’s parents recommend that they meet their trusted mortgage professional, who advises them that by using the mortgage wisely, it will only cost them $260 per month after tax. Much easier to swallow - but it’s twice as much per month as Taylor’s parents, who planned ahead and started earlier.

The moral to this story? If you want to save for a college education for your child, start the investment early. And encourage your children to invest and save too, with a portion of funds from their allowance or a side job like mowing the neighbors’ lawn or babysitting. They will see how the value of their savings grows over time, and most importantly, will help instill the importance and value of a college education to your child. And as the college years approach, explore scholarships, financial aid, or federal direct aid, which is money that does not have to be repaid. When your child is young - you just don’t know if they will be a star athlete or straight A student - so always better to plan ahead, and if scholarship money does become available, what a wonderful problem to have more than enough money in savings, due to your good planning.

Let me know how I can help - if you want to discuss options and strategies on saving for your child’s college education, contact me and we’ll get started right away!

Economic Calendar for the Week of April 30 – May 04

But this wasn’t to be - what happened? Bond prices were feeling the love, home loan rates were improving - but right in the middle of the party, Bonds ran dead into a tough ceiling of technical resistance, stopping them cold and turning them back, causing them to lose some of the nice ground they’d made in the first part of the week. The path of least resistance ahead appears to be that Bond prices and home loan rates may worsen before they get better…but it all depends on the flavor of the news ahead.

FOR MOST AMERICANS, TAX SEASON IS OVER…BUT MORE PEOPLE THAN EVER ARE HEARING THEIR CPA SAY, “I DON’T KNOW HOW TO TELL YOU THIS…BUT YOU’RE GOING TO HAVE TO PAY ALTERNATIVE MINIMUM TAX THIS YEAR”. NOT GOOD NEWS. WHAT’S THE STORY? THIS WEEK’S MORTGAGE MARKET VIEW EXPLAINS.

Unless any of the news and releases this week prove to be surprises, Bond prices and home loan rates are likely to respond to technical factors. The chart below shows how Bond prices made a strong move higher this week, helping home loan rates improve - but now appear to be trapped beneath a tough layer of overhead resistance. What does this mean? That it will take some very “Bond-friendly” news to help Bonds muster up the strength to mount a successful attack against that ceiling of resistance, and help home loan rates improve.

Bottom line: If the news this week tends to be economically weak or negative, or otherwise helps reduce the fears of inflation - Bonds would make another run at the ceiling. But if the news is economically positive - or even moderate - Bonds will likely follow the path of least resistance they are on presently, moving lower and causing home loan rates to rise.

The nasty AMT isn’t just for the wealthy anymore, as it is trapping an alarming amount of the middle class, especially those who own homes and live in states with high income tax rates. And it’s getting worse. Pretty soon, over half those with incomes between $75k - $100k will be victimized by the AMT.

So what’s the scoop with AMT, and what do we need to watch out for?

The AMT was first enacted nearly 40 years ago to ensure that wealthy taxpayers pay at least some federal income tax versus sheltering their entire income with big write-offs. This strategy worked at the time, but AMT has never been indexed for inflation, resulting in more middle-income taxpayers owing the additional tax.

All of us go through the AMT test each year. Our income is matched up with the tax brackets it falls into and the tax owed is calculated. But we also go through a second calculation - The AMT calculation. Many deductions are eliminated and the tax brackets are reduced. The tax owed under AMT is then compared to the tax owed under the bracket calculation. And guess which one you owe? The higher tax, of course.

More individuals will pay the higher AMT tax since it does not allow deductions such as certain interest on some home loans, property taxes, state and local income taxes, standard deductions, or personal exemptions for children and dependents that are normally deductible under the regular tax brackets. As stated earlier, certain interest on some home loans will be wiped out under the AMT. There are two types of home loans that can be eligible for tax deductibility.

First, there is Acquisition Debt, which allows interest to be deductible on a loan used to acquire or improve your primary or second home, with a loan limit of $1 million dollars. The good news about Acquisition Debt is that it remains deductible, even if you are subject to AMT. This makes Acquisition Debt very valuable. But once you pay off or reduce the balance of your Acquisition Debt, it is gone and only the interest on the remaining portion is deductible. So taking out a new loan at a higher amount will not give you that precious Acquisition Debt back.

The next best thing to Acquisition Debt is Home Equity Debt. Home Equity Debt has a limit of $100,000, which can be used over and above the Acquisition Debt Balance. And Home Equity Debt is flexible in that you can pay it down and pull it back out, which is not allowable for Acquisition Debt. But Home Equity Debt is eliminated under AMT…ouch. And with so many people being trapped by the AMT and also having loan amounts higher than what was used to acquire the property, the lost deduction is significant.

It’s always good to check with a tax professional about your own personal scenario, and learn how this impacts you. If you need a referral to a tax pro, I’d be more than happy to make a suggestion, just give me a call!

Economic Calendar for the Week of April 23 – April 27

And the Fed was watching too…remember that the pop in new job formations and stronger wages creates that risk of further inflation ahead, and this news comes on the heels of a higher read on inflation from the Fed’s most closely watched indicator - The Personal Consumption Expenditure Index. So, despite the media and many “so called” experts saying the Fed has to cut rates soon - don’t expect a cut in the near future, as the Fed’s main priority is controlling inflation.

WANT TO REDUCE THE INTEREST YOU PAY ON CREDIT CARDS? YOU’RE NOT ALONE…SO DON’T MISS READING THIS WEEK’S MORTGAGE MARKET VIEW, TO GET SMART ON THE TRICKS THAT CREDIT CARD COMPANIES USE TO CHANGE THE RULES AND COST YOU MORE, IN WAYS THAT YOU MIGHT NOT EXPECT.

The chart below shows that Bond pricing has been skidding lower of late, meaning home loan rates have worsened right along with them. And the next “floor of support” to catch them is lower still - indicating that Bond pricing and home loan rates will likely get a bit worse before they get better.

The market may see some added volatility early in the week, as last Friday’s trading session was condensed into just a few hours of trading before a market close in observance of Good Friday. Stocks should improve off the strong Jobs Report, which could hurt bonds and home loan rates.

Credit card companies do a great job at disclosing all of their terms and conditions…but do so in an exceptionally hard to read font and verbiage, designed to dissuade you from really reading the infamous “fine print”. But failing to understand the terms can be costly.

Most people know that when your bill arrives, it needs to be paid on time or you’ll be hit with a hefty late fee - but many don’t know that paying late usually entitles the credit card company to raise your rate immediately and significantly. And worse yet - did you know that paying late on one of your credit cards also entitles all your other credit card companies to raise the rates you are paying them as well? You bet - it’s called the “Universal Default Clause”, and it basically means that if you are late on one credit card account, all other credit card companies that you have accounts with can increase the interest rate too, even if their accounts have been paid completely on time.

But the plot thickens further - this goes beyond late payments on credit cards alone.

If one of your credit card companies has the Universal Default Clause noted in their disclosure - and most of them do - this clause states that they have the right to penalize a consumer with an increased interest rate if a late payment is reported to ANY other creditor, including utilities, car loans, and home loans. Better believe that credit card companies with this clause sit back and wait for the opportunity to increase the interest rate…and continually monitor their customer’s credit reports, just waiting for the opportunity to do so.

And just when you thought it couldn’t get any worse…

…it’s not just late payments that trigger the Universal Default Clause; interest rates can be increased if a consumer exceeds a credit limit, bounces a check, or applies for additional credit. All of these signs may be read by the credit card company that a consumer is “high risk”. The penalty? You guessed it - a higher interest rate.

Further, if an offer seems too good to be true, it probably is. This popular phrase rings true for many consumers that sign up for zero percent interest offers. Although these offers sound great and every consumer goes in with the best intentions of paying the balance in full before the zero percent interest term expires, the vast majority of people do not pay off the bill before the offer ends. And what consumers do not realize is if the account is not paid in full, the creditor does not start charging interest from the date the deal expires, the creditor goes back to the day the purchase was made and charges interest on the balance for the entire period.

Or - back to the Universal Default Clause, if you are late on another credit card payment during the introductory time period with the zero percent rate offer - the card issuer of that sweet deal could prematurely break it off and force a steamed up interest rate, retroactively charged back to the original date of purchase. That smoldering rate could mean paying double or even triple for the purchased merchandise.

Try your best to only charge what you can afford to pay off in full, on a monthly basis. Beyond being just good advice, here’s another little known credit card fact that could cost you.

If you charge and then pay the account in full, there is no interest due. But if you charge and choose to only pay half of the bill when it arrives, guess what - you get charged interest not just on the remaining balance, but for the entire charged balance, regardless of your paying half the bill in full. If the bill is not paid in full the following month, this game continues until the account is paid in full.

So although the fine print can be a real snoozer to read, taking the time to become familiar with credit card terms and conditions can save you some serious dollars. Review your current credit card terms and conditions and take the time to find a credit card company that truly matches your spending habits and needs. You will save yourself a few sleepless nights - and more importantly, save yourself a lot of money too!

Economic Calendar for the Week of April 09 – April 13

The Fed closely watches the rate of inflation and uses the Core Personal Consumption Expenditure (PCE) Index as its favorite gauge. And last week the Fed was thrown a curve, as the PCE increased more than expected during February for the largest monthly spike since August. As previously mentioned, the Fed wants inflation no higher than 2%, and the annual rate of PCE just rose to 2.4% from the previous reading of 2.3%.

Also of note, the Personal Savings Rate remains negative at -1.2%. It appears that achieving a meaningful amount of savings for many Americans is as tough as hitting a pitch from Mariano Rivera. Mortgage Bonds worsened during the week, causing Home Loan Rates to increase modestly.

SLOWER BASE RUNNERS ARE NOT THE ONLY ONES CAUGHT STEALING - THE BIGGEST CREDIT CARD SCAM IN HISTORY WAS UNCOVERED - AND YOU COULD HOLD ONE OF THE 45 MILLION CREDIT CARD NUMBERS STOLEN. LEARN HOW TO PROTECT YOURSELF IN THIS WEEK’S MORTGAGE MARKET VIEW.

Mortgage Bonds have been in a slump since the middle of March, causing home loan rates to trend slightly higher. But Bond prices are now resting near a floor of support at the 50-day Moving Average, as evidenced in the chart below. If this floor of support fails to hold, we could see Bond prices continue to drift lower still, which would further worsen home loan rates. A weak Employment Report should help Bonds rally and help home loan rates improve, but a strong jobs number may cause home loan rates to worsen…and could also signal that another Fed rate hike may be on deck.

That’s right, if you shopped at TJ Maxx over the past few years, your credit card may be one of the 45 million - yes 45 million - that was accessed and copied in the biggest data leak ever. The card info was used to make duplicate dummy cards…and those cards were used to buy gift cards at WalMart and Sam’s Club for $400 each, which is under the $500 threshold for showing identification. This is not the first time this has happened. You may recall the DSW Shoe security breach about a year earlier; and like Déjà vu, it’s Déjà DSW all over again. And unfortunately, it’s a good bet that something like this will happen yet again.

You might be saying it’s a good thing you have that security code on the actual card to show that you have it in your possession…but the latest scam is designed especially to gain that information.

Scammers lure you into giving them the security code by impersonating themselves as employees of the credit card company, calling the cardholder, and acting as though fraud has already taken place in hopes that you will give up that precious three digit code. Here is how the call plays out.

The caller identifies himself by name, badge number, and states that the call is from the Security and Fraud Department of Visa or MasterCard. They use the news about TJ Maxx and asked if you have shopped there in the past 4 years…a decent chance you have and have also heard about the data leak.

The caller explains that your card has been flagged for an unusual purchase pattern, he is calling to verify a charge that was made to your account (reads the account number to you), and asks if you made a purchase in the amount of $497.99 to a Marketing company in Arizona for an Anti-Telemarketing Device? When you respond “no” the caller states that a credit will be issued but to issue the credit the caller needs the security code (the three digit code from the back of the card) to process the credit. You innocently pull out the card; give the caller the security code, and minutes later are hit with a charge not a credit in the amount of $497.99. Even though the scammers have your account number, name, and some personal information, this information is not always enough to make purchases and the scammers need the security code.

Should you receive a call that is similar to the description above, take the following steps to protect your identity and your credit:

• Do not give the caller the security code.
• Ask for the caller’s name and terminate the call.
• Call the credit card company immediately, but do not call the number the caller provides.

Additionally, here are a few extra steps you can take to protect your sixteen digit credit card number and personal information:

• Be aware of your surroundings when purchasing merchandise. If the individual behind you in line is crowding your space, cover your credit card information.
• Watch your card when individuals around you in public places have cell phones. Thieves can easily use a cell phone to take a snapshot of your credit card.
• Shred all credit card receipts. Many merchants issue a charge receipt with the full account number and your name.
• Don’t leave credit card statements lying around the house or office, file or shred statements once paid as they contain all of the information for a thief to perform this scam.

Economic Calendar for the Week of April 02 – April 06

Mixed news from the housing front, in the form of new construction Housing Starts bouncing higher, yet new Building Permits moving lower. Existing Home Sales rose somewhat unexpectedly in February, marking the largest monthly gain since March 2004 and the highest pace of sales was the highest since April of 2006. Overall, not bad reports, considering how the media still wearily beats away on their housing bubble drum. But it wasn’t all great news - overall sales are off 3% from last year, the inventory of existing homes on the market rose slightly to a 6.7 month supply, and the median price of a home declined slightly to $212,800. Many experts feel it is likely the housing market saw its worst days during August of last year, but although stabilizing, the housing market still has a ways to go.

Worried about what rates did this week? Despite some frantic moves throughout the week, home loan rates ended up unchanged to only slightly worse than where the week began.

AND IF YOU’RE OVER 40…YOU MIGHT BE WORRIED ABOUT THE FACT THAT YOU’RE HAVING TO SQUINT TO READ THIS NEWSLETTER, OR EVEN REACH FOR A PAIR OF READING GLASSES. THINK IT’S JUST A PART OF AGING THAT YOU HAVE TO ACCEPT? MAYBE NOT. READ THIS WEEK’S MORTGAGE MARKET VIEW.

Remember, weak or negative economic news tends to be bad for the Stock market, but good for Bonds and home loan rates as money flows out of Stocks and into Bonds. And conversely, strong or positive economic news causes investors and traders to want to move money into Stocks, but pull it out of the Bond market, causing Bond prices to go lower and home loan rates to rise. Bonds are currently sitting right on the “floor of support”…so unless the news is quite strong for the economy, Bond prices may move higher within the range, and home loan rates may see some improvement during the week.

With that in mind, the economic calendar will deliver fresh news every single day next week, with New Home Sales on Monday, Consumer Confidence on Tuesday, Durable Goods Orders on Wednesday, Final 4th Quarter GDP on Thursday, and last but certainly not least, the highly anticipated Personal Consumption Expenditure Index on Friday. This does happen to be the Fed’s most favored measure of inflation, so investors, traders, and armchair analysts alike will be watching carefully…and attempting to guess how the Fed will read the report, and what their next move might be.

Yes, almost everyone reaches an age where the frustrating fact of failing vision means reading glasses are likely inevitable. For some, glasses can be a real fashion statement…while for others, they are a nuisance, or simply an item that only grandparents should wear. But modern medicine has come a long way in the last few years. LASIK surgery has become a billion dollar industry, and millions of people have had great success with the surgery, correcting poor vision issues like nearsightedness, farsightedness, and even astigmatism. Yet the one thing that LASIK physicians will tell any individual considering the procedure is that it cannot correct “presbyopia”, the condition that makes it difficult for aging eyes to read fine print.

But now - for those who are too vain to pull out a pair of reading glasses to read a menu, or just don’t want to deal with the hassle, there just might be something that can help. What’s the answer?

A new procedure called Conductive Keratoplasty, or “CK”. And like any medical procedure, there is good news…and bad news. The good news is the procedure only takes about fifteen minutes and is non-invasive, requiring just an eyedropper of local anesthetic. More good news, the surgeon may only need to perform the surgery on one eye. Why? Because the correction is being made to accommodate focus at near, middle, and distance ranges at the same time, so the surgeon may only need to correct the one non-dominant eye for near vision, and can leave the other eye untreated to achieve the desired result. The bad news? Well, aging eyes keep right on aging…and the results from the CK procedure will only last five to ten years. And it’s not especially cheap, costing around $1500 per eye.

About 100,000 people have already had the surgery done…so if you’ve found yourself to be squinting or reaching for your reading glasses as you’ve read this issue…you might decide to check with your eye doctor, and perhaps be next in line for this interesting new procedure!

Economic Calendar for the Week of March 26 – March 30

Although 97,000 new jobs created in February is not a scary number, it was less than expectations from the Department of Labor. The Unemployment Rate did fall to 4.5%, and Average Hourly Earnings rose more than anticipated to $17.16, but fears of inflation from these numbers spooked bonds into a Friday sell-off.

Mortgage Bonds and home loan rates had been improving earlier in the week, but the overall strong economic tone of Friday’s Jobs Report erased the gains that had been made, leaving rates at essentially the same place they started on Monday.

Bonds started the week off to the plus side due to investor fears about the economy, which caused money to be parked over in the “safe haven” of low-risk Bonds…thereby benefiting home loan rates. The fears were broader than the sub-prime headlines and Greenspan warning. They included evidence of economic slowdown in the US as well as China. Additionally, an early candidate for quote of the year came from the CEO of homebuilding giant DR Horton, Donald Tomnitz, who said that “2007 is going to suck”. Hmm…talk about telling it like it is.

BUT ONE PLACE NOT TO TELL IT AT ALL IS WHEN YOU GET A PARTICULAR KIND OF CALL FROM THE FRONT DESK OF THE HOTEL YOU’RE STAYING IN. DON’T FALL FOR THIS SNEAKY PLOY BY READING THIS WEEK’S MORTGAGE MARKET VIEW.

The chart below shows that unless the news of the week is very Bond-friendly, home loan rates may get worse before they get better. The light blue line shows the improving trend that Bond prices have enjoyed of late, which has meant an improvement in home loan rates. But Friday’s action drove Bond prices below this trendline…so Bond prices and home loan rates could now continue to worsen, unless the news goes their way this week.

Most would answer “very safe” because the card is right there with you, either tucked securely in a wallet or locked in the safe. But beware…it might not be as protected as you think. There is a new scam lurking about hotels, and it’s not coming from hotel employees - it’s from people outside the hotel altogether. Here’s how it works:

The phone in your room rings and the individual on the other end identifies themselves as someone from the front desk. They say there is a problem with your credit card and the number needs to be verified. You cooperatively pass along the information, and don’t think about it again until the monthly statement arrives with a slew of charges that are not yours.

Suddenly you realize while on vacation or caught up in an important business trip, you were scammed!

So how do these individuals get to your room if they do not know your name? They simply call the hotel and randomly ask for room numbers until they can get through to a person in the room, or they ask for a hotel guest with a common last name like “Smith” until the connection is made. One way or another, they get through and scam hotel guests.

If a call is ever made to your hotel room requesting credit card information, taking just one precautionary step will confirm whether or not the call is a legitimate one. Simply ask for the hotel employee’s name and tell them you will come down to the front desk and provide the credit card information. Asking for the name may cause the scammer to panic and hang up - but even if a name is given, take the time to go to the front desk and confirm the call. According to the American Hotel and Lodging Association, hotels never ask for credit card information over the phone. So, chances are good that receiving a call like this is a scam, and taking the time to walk down to the front desk will confirm whether there really is a problem with your card.

Be on guard for anyone asking for your credit card number over the phone, and ensure that you can enjoy your vacation or focus on that business trip with the peace of mind that you are not getting scammed.

Economic Calendar for the Week of March 12 – March 16

What happened? First, remember that the Stock and Bond markets compete for the same investment dollar. This means that when Stocks are worsening and investors are selling off their holdings, some of that money gets moved over into the Bond market, which helps home loan rates improve. And vice versa, when Stocks move higher and investors are buying into the Stock market, some of that money comes back out of Bonds, which causes home loan rates to worsen.

Last week’s volatility began with the Chinese Stock market plunging, setting off a string of worldwide stock selling. Our own Stock market was ripe for a reversal lower, and money flowed out of Stocks and into Bonds, helping home loan rates improve. The next day, Stocks began to rebound, moving money back out of Bonds and causing home loan rates to worsen. But the “see-saw” action continued for the balance of the week - and may not be done yet, causing high amounts of volatility in Stocks and Bonds - and therefore, home loan rates.

AND ALTHOUGH WEARY INVESTORS MAY NOT BE LOOKING FOR STOCKS…MAYBE THEY ARE LOOKING FOR A NICE NEW CAR THIS SPRING. IF YOU’RE IN THE MARKET FOR A NEW VEHICLE, DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW.

This week holds only one potentially major market-moving economic release, the February Jobs Report. Initial estimates are calling for the creation of 100,000 new non-farm jobs, down from January’s report of 111,000 new jobs. The chart below shows some mixed signals for Bonds, with a nice “rising pennant” formation - typically good news for Bond prices and home loan rates; but also shows that Bonds are “overbought” and ripe for a reversal lower. For now, the technicals will take a backseat at least until Friday, as Stocks seem to be driving all the action for Bonds and home loan rates.

The majority of car leases state that you will be responsible for any damage to the vehicle that is beyond “normal wear and tear.” So before turning in that leased vehicle, be sure and inspect it for damage. If damage is found, take the time to visit a few body shops and get some estimates. Why not just let the dealer figure it out and handle the damage repair? Well, the dealer may invoice you for a higher price than necessary for the repairs, and pocket the difference as profit - so doing your homework first will allow you the option of having a local body shop repair your vehicle at a lower price, before you turn the vehicle back in.

If you choose to have the vehicle repaired with a body shop not affiliated with the dealer, be sure to use a competent repair shop and check out their track record with the Better Business Bureau. If the repair shop does a lousy job with the repairs, you may end up paying for the repairs twice to get it properly fixed. For example, if the body shop repairs a fender, but does not match the paint with the rest of the vehicle - the dealer will likely hand you another invoice for the charges to match up the paint. Confirming that the body shop is reputable will ensure that you only have to foot the bill once.

Try to avoid filing a claim with your insurance company for cosmetic damages to a vehicle, and instead opt to pay for the expense out of pocket. Although it may seem less expensive to file a claim with the insurance company, they may tag your account as being high risk - even for cosmetic work done to a leased vehicle - and it may result in a jump in your insurance premiums.

And although your new car makes it tempting to always be the designated driver for road trips and outings - be careful not to exceed the mileage allowance. Each lease specifically states the amount of mileage that can be accumulated each year, and if that mileage limit has been exceeded, the bill could be costly. And no, you can’t force the mileage to turn back by putting the car up on blocks and slamming the car into reverse…this trick didn’t even work for the charmed Ferris Bueller!

But leasing can be a great choice, particularly if you tend to purchase new vehicles every few years. In fact, about 25% of Americans choose to lease rather than buy. About half of those leases are on European vehicles, about 25% are Asian, and about 20% are American. Mercedes leads the way with 60% of their sales being leases, followed by Lexus at 59%, Toyota at 34% and GM at 24%.

Economic Calendar for the Week of March 05 – March 09