Durable Goods Orders - which are simply items that are expected to last longer than three years, such as appliances, electronics and furniture - were reported much lower than the economists had forecast. Then several key manufacturing reports came in weak - in fact, the weakest numbers in three years. News on housing was mixed, but showed home sales continue to cool from the overheated levels of recent years. Initial Unemployment Claims were higher than they’ve been in a year. And on the heels of all that - one of the most important measures of inflation showed that it still remains higher than desired by the Fed.

So the debate on what the Fed should do next continues…some experts say that the Fed should consider a rate cut to support a rapidly cooling economy, while others say more hikes are needed in order to slay the inflation “dragon”. The Feds primary concern is inflation - and protecting not only us, but our future generations, from runaway prices of goods and services - so until inflation moves closer to their desired target, a rate cut is not likely to be in the cards in the very near future.

BUT IF MAKING SOME YEAR END INVESTMENTS IS IN YOUR CARDS FOR THE END OF THE YEAR…HO-HO-HOOOOLD ON THERE BEFORE YOU INVEST IN A MUTUAL FUND IN DECEMBER. WHY? TO AVOID A POTENTIAL TAX TRAP THAT MOST PEOPLE WANDER INTO COMPLETELY UNAWARE. READ THIS WEEK’S IMPORTANT MORTGAGE MARKET VIEW TO LEARN WHAT YOU SHOULD BE WATCHING OUT FOR, BEFORE YOU BEEF UP YOUR SAVINGS.

On a technical level, Bonds have been in a nice strong trend higher since the end of June, meaning home loan rates have moved lower. Remember that as Bond prices go higher or improve, home loan rates (which are hand in hand with Bonds) go lower and improve.

So looking at the chart below, you can easily see the improvement Bonds and therefore home loan rates have gained in recent months. But historical levels play a big part in predicting future action. You can see the strong levels that were reached by Bonds in late January, early February before they started to worsen. There is still some room to go before the Bond touches these same lofty levels, but once they hit a level that in the past proved to be a high…they may begin to back down as Traders typically bet on history repeating itself. The Jobs Report on Friday will likely be the determining factor.

If the Report is a real stinker and shows very weak employment, this would be good for Bonds and home loan rates, and we could see more improvement, moving closer to and perhaps breaking those past historic levels. On the contrary, if the Report is strong, Bonds may well begin a retreat and home loan rates could worsen slightly.

But if you invest in a Mutual Fund that is about to pay a distribution before the end of the year, you could get caught in a tax trap…a trap that many innocent investors fall victim to.

Be sure to research the fund you are about to invest in and find out if it’s planning to have a year end distribution. Here is how a distribution from a Mutual Fund typically works. If the price of the fund is $10 per share and the fund does a $1 taxable distribution just before the year is over, the share holder gets the $1 either in cash or the equivalent amount in additional shares. But the value of the fund drops by that same $1, which would bring it down from $10 to $9 in this example. The net value is the same to the shareholder, but the $1 distribution is now taxable.

So let’s say someone invests $10,000 in a fund that is about to pay a year-end distribution. They get a statement showing a $1,500 distribution, and typically the money is re-invested right back into additional shares. The value per share declines to account for the distribution, but the additional shares received still keep the value of the account at $10,000…but now the shareholder has a $1,500 taxable gain, which could mean a $500 tax bill for some. Talk about a Bad Santa.

To avoid this unpleasant surprise, visit the websites of the Mutual Funds that you may be considering and determine if the fund will be paying distributions in December. If you do determine that the distribution will occur in December, and you need to avoid a big taxable gain, wait until the fund’s “ex-dividend” date (after the money has been deducted from its share price), and then make the investment into the mutual fund. Or, consider investing the money in the same Mutual Fund, but buy the Mutual Fund as an IRA, or see if you can invest additional funds into your 401K - and then the distributions will be tax deferred.

It’s so important to add to your savings…but take just a few minutes to understand and determine the dividend date on Mutual Funds, so you can ring in the New Year without having to give Uncle Sam an unnecessary present.

Economic Calendar for the Week of December 04 – December 08