This is one of many Indians at the The Smoking Lamp, next door to the Francis Marion Hotel, King Street, Charleston, SC.
Kevin M. Breeland
General Manager
Residential Mortgage of South Carolina, LLC
427 Johnnie Dodds Rd.
Mount Pleasant, SC 29464
www.residentialscdailyrates.com
Competitive by nature...the Best by choice!
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Rear View
June 16, 2009....While attending the National Settlement Service Summit in Cleveland, Oh, June 16th and 17th, 2009, attending a reception at the Great Lakes Science Center which is next door to the Rock and Roll Hall of Fame.
What is happening to rates? That is a very good question and one I will attempt to answer without boring you to death.
As everyone knows by now we have entered into historic times. The Federal Government created a TARP plan for Banks, involved in the Auto Industry, have taken unprecedented steps into the housing industry, and yes finally taken a lead role in the MBS (Mortgage Back Securities) market. Why? Well, not so long ago MBS was virtually worthless....not because they were no good. It was because the buyers, foreign investors, in fact almost all buyers of MBS left the market. Then Treasury Secretary Paulson and Fed Chairman Bernanke saw this problem and took action. What action did they take, the NY Treasury started buying MBS...who was head of the NY Treasury, our own Timothy Geithner now Treasury Secretary in the Obama administration.
What did Treasury Secretary Geithner and Fed Chairman Bernanke do? Well, as Fox News reported in December they were going to drive interest rates to 4%.....hummmm never made it. Rates however did eventually get into the 4.5% to 4.75% range but not until the Treasury first committed to purchasing $750Billion (yes billion) in MBS and then later added another $500Billion to make the total commitment $1.25Trillion (yes Trillion) in MBS. The markets loved this yet the rest of us was thinking where is all of this money coming from? Same place all the other money is coming from, the Government is printing it. So what happened?
Lack of focus and follow through....and oh yea the Free Enterprise System. You see, when you make too much of something then usually what happens is the demand falls followed by the price. You and I understand this because "in our world" this is how we conduct our day to day business and life. If you really want a big SUV the best time to buy one is when gas is over $3 a gallon....not because they have such great gas mileage but because if you REALLY want one the demand is lower then and dealers are making better deals to move them off the lots. Simple...right. Well the Federal Government doesn't operate that way....and never will. So when the Government gets involved in the Free Enterprise System so we can have a "soft" landing, well this is soft.
Since May 21, 2009, the 4.5% MBS has fallen 553bps.....as of this writing that is 15 trading days ago...15. Why, well here are some reasons. The Federal Reserve has not issued a statement after having taken 6 months to bring home loans rate below 5%. Since May 21st, rate have increased at least 1% on every program. Another reason, the printing of money..or the excessive printing of money. Added supply creates inflation fears, inflation is the Kryptonite of MBS. These inflation fears have caused Securities and Treasury Traders to DUMP Bonds into the market that is already oversupplied. Speaking of Supply, Treasury is doing a 30 yr note auction today. Another reason, Oil. What Oil? Why Oil? Simple, oil as a product or commodity is everywhere. Did you know that in a bag of shredded cheese the inside of the bag is lined with a petroleum product to keep the cheese from clumping together? We don't use Oil just to refine gasoline. Oil is used everywhere. Yesterday, Oil closed at $71.33/barrel....in March Oil was $35/barrel. There is your inflation fear. If you recall gas prices were around $1.65 gallon before Christmas, now they are $2.50 a gallon and going higher. Remember how much it cost to fill you car in the summer of 2008. Get ready....but that is inflation. Last but not least, there is a growing belief that we are coming out of the recession....that does have the markets concerned that INFLATION is just around the corner as consumers heat up their spending. Today, Retail Sales rose .05%, the first advance in three months. Additionally, initial jobless claims fell by 24,000 to 601,000....601,000 people filed for initial unemployment and this is good news. 601,000 new people are now unemployed....hardly good news.
HAVE A GREAT DAY!
Kevin M. Breeland
General Manager
Residential Mortgage of South Carolina, LLC
427 Johnnie Dodds Rd.
Mount Pleasant, SC 29464
www.residentialscdailyrates.com
Competitive by nature...the Best by choice!
Today is my Daughter's 30th Birthday....Happy Birthday Tara....Dad loves you!!!!
Oh yea, School's out for Summer.....reminds me of Alice Cooper and that great song he did that never gets old.
Today when I was going to lunch I had to stop for a school bus. The bus was unloading a bunch of kids and as the kids unloaded I was surprised that over half of them stopped and gave the bus driver a hug. Everyone was full of smiles and I couldn't help but remember the time when I was a kid. My wife would say I still act like one at times and maybe she is right but it has been many years since I was a kid.
This morning I took my son to school as it is his last day as well. Needless to say he is ready for school to be out. I asked him if he had his friends phone numbers so they could talk during the summer and he pulled his phone out his pocket and said yes. Wow, alot different from when I was 12. I can honestly say if this technology was available when I was 12, I would not have had one. How do I know, well my dad is 75 and he does not have a cell phone. Anyway, he was excited and frankly so was I when I was his age and I was today for him. School was never something I disliked and he does not dislike it either but like me we have to have our breaks.
So what will he be doing this summer, oh I don't know. He is signed up for three baseball summer camps, two here in Charleston and a week at Cal Ripken Baseball. His older sister with her family will be coming to visit this summer and for a week he gets to be Uncle to his 2 yr old niece. His older brother will be coming during the same time as well so he will have lots to do and lots of attention while doing it. Between baseball, swimming, video games, taking my mom's trash out three days a week, and family visits I am sure the summer will just fly by for him, but probably not fast enough for us, his parents.
HAVE A GREAT DAY AND SUMMER!!!!
Kevin M. Breeland
General Manager
Residential Mortgage of South Carolina, LLC
427 Johnnie Dodds Rd.
Mount Pleasant, SC 29464
www.residentialscdailyrates.com
Competitive by nature...the Best by choice!
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