Speculation

Speculation. That's a scary word. I've been doing a lot of reading today on why rates have gone up the last few days.

Now remember, I usually believe that rates go up and down. You'll rarely see in a day to day chart that rates just go up and up and up, conversely you won't see them go down, down, down. News will be anticipated causing rates to do one thing, reality will set it and then rates will do the opposite and land a little bit more in the direction they're supposed to go into.

Since it doesn't really matter what I think and I'm just as accurate as the "professional" writers of the economy, here's my thoughts on rates. I think they'll stay LOW, that's right, low. Why? Well, we have to look at why people think rates will go up. It's a belief that the government will stop buying MBS (mortgage backed securities) in March / April as currently planned. Also, in the same time is when the temporary credits for home buyers will end as well. But that was all supposed to happen at the end of this year. The economy looked so bad that the government said, we have to extend these programs so to stimulate the housing market.

My question is, has anything changed? Look in your pocket, has them money grown? Let's see the sales data from the holiday season. I think we'll see a weak economy. This will lead to the extension of MBS buying by the Fed. The market is reactionary. That's why rates are rising months before the Fed actually stops buying these securities. What happens if all of the sudden the Fed comes out in January and says, we're going to extend these purchases and incentives that seem to be the only real stimulus that is working for the average worker further into next year if not the end of the 2010? You'll see rates drop back down and people to continue buying houses. I don't think it seems so far fetched that these programs could continue if the Fed shows / sees that this is what is stimulating the economy and if it where to stop things would only get worse.

I find it funny how people look at dates and schedules that have changed a million times before but this is the final time, "this is the time where the Fed will stop." (paraphrasing) "Rates hit a all time low and there is now where to go but up" - recent CNBC article. I've heard the same thing about rates for the past 6 or 7 years. Every time rates get low, someone will come out and say "That's it, rate have now where to go but up and here's the reason..."

How about this one? Rates go up and down. Yes we've recently hit a little low, and have now bounced back up but they can just as easily go right back down and possibly drop even the slightest bit further down. The people that say the rates are off from their historical trends of following the yields of the treasuries and we should have higher rate are telling the truth; but my issue is that right now we're experiencing very odd times. you can't judge what's going to happen. the yield was higher in the beginning of December was higher than it was in the summer but the rates in early December where lower than at any time during the past 3 - 4 months. Explain that. It doesn't follow conventional logic. You can't expect one part of this economy to be certain and stick to past rules while other parts are doing things you've never seen or expected.

I think everything right now needs to be less reactionary to what is supposed to happen in 3 - 6 months and more to what's going on now. If that means rates go up today, fine then the Fed will have to extend their buying policies and THEN the rates will come right back down. It's still reaction but it's current and actual reactions to what's happening. With so much in limbo how can people speculate on what's going to happen in the future? I remember at the end of 2008 we where supposed to be done with the depression and back to normal at the beginning of 2010. We might not technically be in a recession but it sure feels like we are and I don't see anything that says in six months we'll be anywhere different.

Only time will tell. Let's visit this in six months and see if everything that was "planned" actually happened.

News and expectations

Today's been an odd day for news. So odd that something is not feeling right and I hope it's not true. I'm seeing articles saying that we're slowly but surely coming out of the recession that we're in. Of course that's easy to say when you fall flat on your face, of course things will get better eventually. Slowly, I too agree with. But that's the kind of article that makes you think "things" are going to be ok sometime soon.

Then I read the dollar is inching up. Then I read home manufacturing is down. And in my gut and from what I saw from the results of Black Friday, we're not going to have great / good numbers from December, which is what will make or break many business's year.

The odd feeling that I'm getting is stagnation. Which is not good for anyone. I know it's hard to hear and unfair to say but if the housing market is going up or down, with low rates like they are, we can do something with it. But if you have everyone just holding and saving their money we're going to go into stagnation which is the worst thing that could happen on an unstable economy.

Rates are low and you're still seeing people buying and selling (be it short sale or foreclosure too) we've got a punchers chance to take on 2010. But if my gut is wrong, and I hope it is, let's hope stagnation of this economy doesn't set in. Only time will tell. Let's see what the rest of this week says because once we get into the second half of December, you're not going to be able to do much... except await the next Bear installment :)