Ron Brown FHA & VA Home Loan Specialist

US Stocks are enduring a See Saw day on light volume trading, and more mixed message economic reports. Mortgage Bonds are positive for the day, but have mimicked the up & down day of Stocks.

Stocks got some welcome news early when the University of Michigan Consumer Sentiment Index showed a reading of 56.9 better than expectations of only 53.0. This 5 point jump since June is being credited to the steady decline in energy prices. New Home Sales were reported up 2.4% in July, but still less than forecast, and subsequently the reading for June was revised lower from the original 515,000 to 503,000 making it the worst month since 1991. On the positive side, the median price of a home rose to $230,000 (still down over 6% from one year ago), and inventory levels are now down to a 10.1 month supply which is the lowest level in the last 5 months. The Fed released the minutes from their meeting in August (not the retreat to Jackson Hole) which indicates the primary concern is over growth rather than inflation, and showed they lowered expectations for economic recovery, and are now expecting the slowdown to continue into the 3rd quarter of next year. The majority still feels inflation will subside as the continued effect of the slower growth dampens demand. Speaking of demand, Oil pricing has also been up, and down today, seeing prices climb back over $117 on concerns over the Russia, Georgia conflict, as well as hurricane worries , only to fall back under $115 on declining demand reported by the US Energy Information Administration.

Mortgage Bonds continued their gains in after hours trading yesterday, starting the day above yesterday's highs. The initial good news from the Consumer Confidence Index, along with surging Oil prices sent Bonds down nearly a quarter point in the morning's trading, but they soon recovered those losses as Oil dropped, and the Dollar turned positive. The Drop in Oil came not only from lower demand, but also from a surge in the US Dollar. Germany, the largest single economy in the European Union, saw their version of Consumer Confidence drop more than expected, and recessionary fears there pushed the Euro lower in relation to the Dollar. When the FOMC Minutes showed an inclination to keep rates steady, and that inflation remains a secondary concern, the Dollar rallied further, and as a result Bonds are now at their best levels in over a month.

The outlook for Mortgage Bonds remains positive as Stocks continue to face pressure from Financials, and overall slow growth. I recommend to continue floating for now on transactions that have a few weeks until closing, but with rates as good as we've seen in recent memory, it is not a bad time to lock for short term closings. Make it a great day!

Ron Brown

VA & FHA Loan Specialist

Firt Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks are dropping significantly today as the Dow is down over 200 points with all 30 of it components having gone negative. Mortgage Bonds are enjoying the benefit of some of this capital "fleeing to safety", and landing in Bonds.

Stocks are retreating from last Friday's gains, weighed down by the continuing concerns of the Financial Sector, and fears about Oil prices. Oil futures started the day on the rise, then fell back, only to push higher again at this time, but are trading within a fairly tame range. The seemingly omnipresent concern about Financials is really what's driving Stocks at this point. Lehman Brothers were the beneficiary of rumors that they may be propped up (if not bought outright) by Korean Development Bank, but a more cautious tone has emerged, leading to increased speculation Lehman will have to sell off its profitable asset lines instead. Fannie and Freddie are also heating up the rumor mills with economists choosing sides as to whether they will be nationalized, or not. While both companies have seen their value erode by 90% in the last year, their stock is currently up as sentiment that a bail out is still not a given gathers steam.

Mortgage Bonds opened slightly above Friday's close, and have been positive since all day. The gains are mostly a reaction to Stocks falling with investor's choosing to park their capital in Bonds as a safe haven. Today's only economic report is the National Association of Realtor's Existing Home Sales which rose more than expectations. However, Bonds have not reacted much at all because the report also shows that inventory levels increased to another record high, and the median price dropped again as well. Technical factors are positive for Bonds as we spent the entire last week above the 25 day moving average for price, making that now a strong level of support. Having finally broken through both the 25, & 50 day averages convincingly, our next level of resistance becomes the 100 day average, which is a considerable distance away, leaving much room for improvement.

The Markets seem to have "priced in" a factor that inflation data is to be discounted given the recent decline of Commodities pricing, and the bet is that tomorrow's release of the Fed's minutes from their last meeting will reinforce this. This leads me to recommend cautiously floating as we see just how much the Bond market can gain over the next few days.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks are on a strong rally today as Oil prices fall back, and Fed Chairman Ben Bernanke eases inflations fears. Mortgage Bonds are struggling to hold their recent gains against the flow of capital toward Stocks.

Stocks are posting strong numbers with the Dow currently up by close to 200 points. The driving force for this increase is a positive turn of investor sentiment on the heals of comments from Ben Bernanke, and Warren Buffet. Chairman Bernanke gave his speech from the Fed's annual convention which provided a sense of calm over inflation expectations, and continued growth. Warren Buffet appeared on CNBC, and while he indicated his belief the economy is actually in recession, he also expressed confidence that the US was on a path of improvement. He also added his voice to those predicting that the Federal Government would inevitably have to bail out Fannie Mae, and Freddie Mac, and that that would likely destroy shareholder equity. Other news for Financials was more positive, as rumors are out that Lehman Brothers may yet be saved by a state run Korean Development Bank, after being turned down in a similar instance earlier in the week.

Mortgage Bonds are only slightly positive for the week at this time, despite strong gains on Wednesday. Thursday's increases in Commodities prices pushed pricing back, and today's rally in Stocks is applying more selling pressure regardless of easing inflation. Their are no economic reports of significance for Bonds to feed on until Tuesday's release of the minutes from the most recent Fed meeting, so performance is being dictated by technical factors, and Stocks. The news of Lehman's possible rescue is inspiring confidence in the Financial Sector even though it is now almost a foregone conclusion that Freddie, and Fannie will require government intervention. If, or when, that action takes place, Bonds will be in position to benefit as this is sure to create a "flight to quality" of capital leaving Stocks and flowing towards Bonds.

The old adage of "never lock on a Friday" is looking pretty accurate today. The rally in Stocks is as much a reaction to several days of decline, and a feeling of renewed hope that the bottom has been reached versus any reliable fundamental indicators. My recommendation is to float through this rally, and wait for the Market to react to the reality of Bernanke's "weakening outlook".

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks are trading mostly in the negative on more concern over the fate of Fannie, and Freddie, as well as the Financial Sector, plus a sharp rise in Oil. Mortgage Bonds began the day up from yesterday's strong gains, but are currently lower after this morning's chaotic trading.

Stocks are on the defensive today as worries mount over an impending doom sentiment concerning the fate of Fannie Mae, and Freddie Mac. Rumors, and reports of the inevitability of government intervention for the two mortgage giants have pushed their stock value's to near record lows. Citibank joined Goldman Sachs in lowering 3rd quarter earnings estimates for most of the major investment banks in the wake of future write down expectations. Oil is up to a two week high, over $120 per barrel again, as supply/demand data was effected by a big drop in gasoline inventories, and concerns over Russia's actions in Georgia, and threats toward Poland, have spooked investors. As a result of all of the above, the US Dollar is losing some of its recent gains as well, with investors moving to "safe haven" currencies like the Yen, and Swiss Franc.

Mortgage Bonds are not benefitting in a similar flight to quality so far. Bonds looked to continue yesterday's rally early on, but moved lower when Initial Jobless Claims were reported slightly stronger than expected. This marked the first time the government showed the level of extended benefits since Congress established the new system last month, although they are not able to distinguish its effect on the overall number. The 4 week average of new claims is now at its highest since the 2001 recession. Leading Economic Indicators were down more than expected, but that result is likely due more to one time factors like the Jobless claims above, and is not being interpreted as negatively as they would otherwise. Interestingly, Consumer Expectations were one of the factors that rose in the index. The Philadelphia Fed Manufacturing index fell for a 9th consecutive month, but was much improved from last month, and beat expectations.

Once again, the long term outlook for Mortgage Bonds remains positive, but for short term closings the recommendation is to lock after 5 days of gains. The technical indicators show we are in a somewhat "overbought" state, and with Oil, and commodities in general pushing higher, risk versus reward says it's time to cash in.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000

US Stocks have reversed course, and turned positive for the day as higher inventory levels of Crude Oil push back futures pricing, and HP posted strong gains for the Tech sector. Mortgage Bonds have broken above their 50 day moving average, and are trading near their best levels in over a month.

Stocks received good news from Hewlett Packard as they posted growth in earnings, and matched optimistic expectations with revenue gains of 10% year over year. Two thirds of their growth came from the overseas markets of Brazil, Russia, India, & China. Oil futures have reversed sharply from this morning, giving back all of yesterday's gains as inventory levels climbed by roughly 10 million barrels, the largest rise since 2001. At the same time gasoline inventories have fallen as demand has steadied after prices decreased from record highs. Worries about the Financial, and Housing sectors continue with Goldman Sachs lowering earnings estimates for most of the major investment banks on expectations of further growing amounts of write downs on mortgage related assets. Freddie, and Fannie have seen their values crash by as much as 40% in trading this week alone on what has become a consensus opinion that the government will have to step in and bail them out. Rumor has it that the Fed has already held secret meetings with representatives of Freddie.

Mortgage Bonds are improving steadily despite the see saw day for Stocks. After finishing right at their 50 day average yesterday, they were able to break through early today, and have built up momentum to challenge the next level of overhead technical resistance. Worries about economic growth outside of the US, along with the decrease in Oil, has helped to strengthen the US Dollar against most of its major counterparts, adding to the attractiveness of Bonds. Recent comments by Fed Presidents Lacker, & Fisher have also helped here by discounting inflation expectations, and insuring that the Fed will be raising rates possibly sooner than expected. Mortgage Bonds are also benefitting from speculation that the Bank of England, along with other European banks, are leaning towards a rate cut to deal with their economic slowdown.

At this time, Bonds have just broken above their second line of resistance as stocks seem to be running out of steam. If this holds over the next hour or two, we should see some investors re-price for the better today, so I am recommending to float for now. However, any transaction that will be closing soon should be ready to lock, since Bonds have been on a 5 day positive streak, and odds start to favor a reversal.

Make it a great day!

Ron Brown

VA & FHA Loan Specialist

First Mortgage Company of Washington

615 E Pioneer Ave.
Puyallup, WA 98372
(253) 520-0000