Posted on 08/04/2013 4:37:44 PM PDT by whitedog57
After a dismal jobs report on Friday, there are doubts about a US economic recovery. If The Fed has growing concerns about the economy (as in last week’s change from “moderate” to “modest”), any tapering of Fed stimulus will likely be postponed.
And on Friday, Federal Reserve of St. Louis President James Bullard confirmed this fear.
Aug. 2 (Bloomberg) — Federal Reserve Bank of St. Louis President James Bullard, who backed this week’s Fed decision to continue bond buying, said the Fed will probably hold mortgage-backed securities among its assets longer than it had expected.
“We are more inclined to hold these longer than we were previously,” Bullard said today in response to an audience question after a speech in Boston. “We will probably hold mortgage-backed longer” and “a couple years in the future make a decision on what to do.”
Mortgage rates, Bankrate 30 FRM (yellow), Mortgage Bankers 30yr Effective rate (green), and Freddie Mac US Mortgage Market Survey (white), all show the general rise since May 1st.
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And mortgage rates follow the 10 year Treasury yield.
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The yield curve has risen over the past year with the fixed short-end and the rising long-end.
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Treasury coupon implied forward rates are indicating a rise in the 10 year rate.
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Investors are betting on the 10 year Treasury yield rising. But a further stalling of the American economy can delay Fed easing. Let’s hope this is not the case.
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Anyone who ever goes to the grocery store knows in their heart that inflation is may times higher than the government tells us.
Even though today’s mortgage rates are higher than 6 months ago, they are still a great bargain from a historical perspective.
An inflation hedge which has worked well for me, is real property.
When the country is printing money like there is no tomorrow, great inflation is coming. Borrowing money to buy cheap real estate (think rental property) is one of the few ways the common man can strike back at inflation.
Meat is 1/3 higher than it was 2 years ago. But there is no inflation they say.
Obama has covertly instituted his “chained” Consumer price index in which a market basket of goods is no longer based on average products in the basket but on the cheapest available alternative. If you like Kellogg’s corn flakes, then tough if the price goes up. Chained CPI says that they believe you will substitute oatmeal or some cheaper grain. Therefore, Kellogg’s could have gone from 3.50 to 4.50, but that isn’t what’s looked at. What’s looked at is that oatmeal can still be bought for 3 bucks.
Therefore, not only was there no inflation, but you actually are getting a lower price bonanza!
Aren’t you one happy serf!
http://finance.yahoo.com/news/why-chained-cpi-rattles-elderly-100432667.html
Bingo ! That’s why I’m back in the rental business.
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