The View From The Golden Dome

Views on the week's events plus some of mine.

Les Berman Weekly 8-1 Archaeopteryx Demoted, JP Morgan, and Medical Experiments


So, what about the Archaeopteryx – being demoted. And what about mommies – don’t you think the mom should do hard time for boarding a school bus because her child was slumped over in his seat, and the other kids were yelling that he wasn’t moving. And I could care less if a new stadium is built downtown or in the City of Industry. I won’t waste my time on a football game anyway. And great news on new loan programs. And I was involved in a scientific study, without really volunteering.

Good day ! Hope your last week was a good one.

I really don’t like commenting on the same thing twice. However, I congratulate the idiots in DC for their stupidity, all in the name of party politics. We have seen the worst of the political process – an inept opposition, and equally inept activity from the WH. Kick ’em all out!! After seeing this garbage, what respectable person would want to run for office. Bah humbug !!

Were you one of those that paid a fine because you got your picture taken? Now we learn that those fines were ‘voluntary’ and there are no tangible circumstances for those who refuse to pay. So we have to thank the LA Times for this information – after the fact.  And yes, that mom, a nurse,  who boarded the school bus, because the kids were yelling for help, is actually facing criminal charges for unlawfully entering a school bus. The potential penalty is one year in jail and a $2500 fine. So, Perry County, PA., I think you should send this mom up the river for a whole year to serve as a deterrent to child offenders or other nutcases who may want to grab kids. Gimme a break ! I hope the jury uses their collective heads.

Do we care about the debt issue – How do the budget crisis and a potential government shut down impact mortgage banking? One should remember that since 1976 there have been 17 shut downs, with the 1995/96 shutdown of 21 days the longest in modern history. If on August 2nd there is no budget deal, then we should see number 18. Oddly enough, the last shutdown occurred precisely when Italy and peripheral Europe were going through their last major crisis of confidence. If there is no deal in the early part of this week, the Treasury will issue a statement to the market and outline it’s directive to the Fed as to the priority of payments and it will outline an alternative auction structure for Treasury notes and bonds . Most other governments never shut down as parties bicker over spending – in fact Belgium hasn’t even had a government since 2010 and there has been no shutdown. The world will not end and the US government will eventually keep on spending, with the financial markets hoping for growth to cure the US debt problems combined with some spending cuts. But markets (stocks, bonds, whatever) don’t like uncertainty, and certainly would not like a downgrade of the United States. One can expect this uncertainty to continue to weigh on risky assets in the short-term – like the stock market. There is the potential that banks could see higher capital requirements for mortgage securities. (Currently, Ginnies are a zero risk weighting, while conventionals are 20%.) Banks may not rush to sell MBS’s, but their appetite for the product could drop. Central banks could sell, or reduce their future purchases of, mortgages in a downgrade scenario. But from a cash flow perspective, few experts expect Ginnie, Fannie, or Freddie cash flows to be affected.But they could be downgraded if US government debt is downgraded, and this would lead to higher mortgage rates.

And what about the poor Archaeopteryx? Your six year old not only knows what it is, but how to pronounce it. This is the legendary winged creature that has long been recognized as the first bird. Now, a fossil found in China suggests that this guy is a feathered birdlike dinosaur. So now, this could alter the thinking about the origin and evolution of birds. First, Pluto was demoted as a planet and now Archie. What is science doing to us? Can we take any more of this??

Yeah, and more mom stuff. A woman in Oak Park, Michigan was facing jail time for planting a vegetable garden in her front yard. Her yard had been chewed up by sewer repairs so she thought a veggie garden was better than grass. Somehow, the City was smart enough to drop the charges – but the ordinance is still in place. I wonder if this applies – A dog gave birth to puppies near the road and was cited for littering. Toronto decided that they didn’t want to look as stupid as Oak Park, so Toronto dropped a similar ordinance. Lantzville, British Columbia is prosecuting a man for the same thing as Oak Park, except the guy from BC has a 2.5 acre front yard. I wonder if these people are able to get some of the manure that is being spewed by Congress? It should be free – after all, we elected them!

Goldman Sachs, in a July 22 newsletter talks about housing supply – specifically vacant housing supply. They estimate that there are between 1.5 million and 3.5 million vacant housing units. If it is the lower figure, then they estimate the housing markets could return to equilibrium in just over two years. Under their high estimate, it would be about five years. They based the higher figure on the Census Bureau’s quarterly Housing Vacancy Survey. Now, I know a little about government: actually very little. But I do know that government figures are way behind the actual market. The Goldman Sachs report does say that the wide range of numbers (100%+) is due to the discrepancy in available data. This is a four page report with some graphs. I would like to be paid the same collective amount as the seven staff people to say what they said : We don’t have any idea what the vacant housing inventory is, and neither do those who supply the data to us ! Nice income if you can get it !

You know – I really hate it when I’m really rolling and this program crashes – and I lose great content ! Damn.

You know I’m THE mortgage advisor. There are new programs being rolled out almost every day. For example, if you invest in single property houses for rental, and you buy them with cash, I can now get most of your cash back immediately after closing. No more long waits. Yes, there are rules and you do have to follow the bouncing ball. But, you can go out and buy more properties now instead of waiting for several months. First thing you have to do is call me at 818.305.4695 or send email . And tell your friends too.

I saw a news item about a company that uses a robotic mini helicopter to take aerial video of homes for sale. Technology at work. I think that’s really cool, and it would be done before the neighbors start screaming.

A friend of mine was at the shoe manufacturers show in Las Vegas last week. She told me that traffic was way down. So that tells me that the retailers are projecting a slow recovery and that shoe sales in the spring of 2012 will be slow. It also means that more people are repairing shoes and that shoe repair shops are doing well right now. I wonder what has been happening at the garment manufacturers trade shows.

I was at a roundtable meeting yesterday and the topic was Al Qaeda after OBL. One of the speakers said that the Dept of Homeland Security (DHS) is spending money on the obvious (airports etc) and not spending much on ports, nuclear power plants etc.  We have San Onofre in SoCal, and there is a nuclear plant about 30 miles from Manhattan, you know, the one that sits on a couple of earthquake fault lines. That concerns me. The speakers are very well credentialed and have written books so I’ll take them at face value. I hope that the FBI, CIA et al are talking to each other, and continue to be smart – and lucky.

And it is being widely reported today that the U.S. Treasury is down to about $74 Billion in reserves. Apple has $76 Billion. hmmm… There is precedent apparently. In the 1890’s, with the U.S. economy climbing back from the financial panic of 1893, the U.S. Treasury was in danger of going bankrupt because concerned investors were trying to collect what they were owed from U.S. gold reserves. Having exhausted all options, President Cleveland met with New York financier J.P. Morgan, who pledged a $60 million in gold. Adjusted for inflation, that would be about $1.5 billion today. So investors were placated, confidence was restored to the markets, and the US recovered financially. Of course, Morgan continued to do whatever he wanted financially. And then he was called upon again in 1907 to deal with that banking crisis.

So the country is saved and those that didn’t understand banking, vilified him and the others who stemmed the crisis. The outcome of these two crises was the creation of the Federal Reserve System. Why is it that the people who object to things the most have no understanding of what has happened or why. (It’s the same today). I think the small thinking people of yesterday would have been happy to have small local banks that stayed available to Jesse James, the Dalton Gang et al. Oh wait a sec – don’t we have the same people around today – on both sides – but with different names??

Here is the basis for the scientific study. It had been repeated for years that there is a direct correlation between crops grown for  manufacturing garments and those grown for human consumption. Over time, it was discovered that when the human consumption crops are abundant, the fibers of the other crops actually shrink. Let’s try to be specific. (And I’m telling you this in advance of publication in the New England Journal of Scientific Medicine). The focus was on cotton crops, and why fibers shrink when exposed to certain elements. And those elements were specifically focused on crops grown for human consumption.

It was found that when the crops were grown in close proximity to each other, there was no change in the fibers of the cotton. The experiment was broadened, and the study narrowed it down to the correlation between crops grown in the mid-west, America’s so called breadbasket, and cotton grown in the southern states. After about 20 years of study, they found a direct correlation between wheat, specifically, and shrinking Cotton fibers. In the last three years, I have been involved in this study, and this is the conclusion. Wheat does cause cotton fibers to shrink ! And the proof is that the cotton fibers in manufactured garments, such as dresses, jeans etc. will shrink when the human consumes wheat in the form of doughnuts. And I think you all know that I’m 100% accurate in reaching that conclusion. OK ok – I just found out that the New England Journal of Scientific Medicine Editorial Board declined to publish the study, but they did order a dozen from Krispy Kreme anyway 🙂

Being in a somewhat punny mood, I offer the following: A vulture boards an airplane, carrying two dead raccoons. The stewardess looks at him and says, ‘I’m sorry, sir, only one carrion allowed per passenger.’ and .. A sign on the lawn at a drug rehab center said: ‘Keep off the Grass.’

And on that note…

Have a great week! And remember, you need to call me 818.305.4695 today to discuss your planned purchase, or to refinance. Rates were down again last week.

Les

Berman’s Factoids of the Week:

Some hummingbirds hold their nests together with spiderwebs.

Animal instincts: Only about 3% of mammals practice monogamy. (I only print this stuff).

 

First California Mortgage
Provided to you Exclusively
By
Les Berman CMC
Les Berman CMC
Senior Mortgage Advisor
NMLS ID # 227675
First California Mortgage
Office: 310-271-1588
Cell: 818-305-4695
Fax: 877-707-8823
E-Mail: lberman@firstcal.net 
Website: www.firstcal.net/berman
Les Berman CMC

 

“I GET IRRITATED, NERVOUS, VERY TENSE OR STRESSED, BUT NEVER BORED” – French actress Catherine Deneuve. Those words sum up the state of mind not only in the markets last week, but also across the country. The Dow finished its worst week in a year and Mortgage Bonds traded in a volatile fashion last week, mirroring the tense – and often irritating – news out of Washington.

1. If a deal DOES pass, which many experts still think will happen, any deficit reduction program should strengthen the value of US debt, because there will be less spending. At the same time less government spending will also weigh on Gross Domestic Product (GDP). And just last week we saw how weak the GDP already is when the 2nd Quarter GDP came in well below expectations and at the slowest growth rate in 2 years. Additionally, the 1st Quarter GDP was revised sharply lower than it was previously reported. Remember, a weak GDP would make Stocks LESS attractive and Bonds MORE attractive – as Bonds generally perform better during sluggish economic times.

2. If a deal does NOT pass, the Treasury will be unable to auction off new securities since we will be unable to take on new debt as a country because we have reached our debt ceiling limit. The lack of new Bond supply coming to the Bond market will make existing Bonds/Treasuries/Notes more valuable – which is the opposite of what happens when new Bonds continue to flood the market.

The bottom line is that Bonds are still holding their own and home loan rates are still attractive for now. So if you or someone you know has been considering refinancing or purchasing a home, it’s a great time to look at your options. After all, this is a very volatile world and the current bullish sentiment in Bonds could change in a hurry. So call me now at 818.305.4695 or send me an email.

As the Debt Ceiling debate impacts Stocks and Bonds, the markets get set for a week of heavy-hitting reports:

  • We start off right away Monday morning with the ISM Index. This is the king of all manufacturing indices and is considered the single best snapshot of the factory sector.
  • On Tuesday, the markets will see reports on Personal Spending and Personal Income, as well as the Personal Consumption Expenditures (PCE) Index, which is the Fed’s favorite gauge of inflation.
  • The big topic of the economic reports this week will be the labor market. First up is the ADP National Employment Report on Wednesday, which measures non-farm private employment.
  • The ADP report will be followed by another round of Initial Jobless Claims on Thursday. In last week’s report, Initial Jobless Claims broke below the 400,000 mark for the first time in 16 weeks! I’ll be looking forward to this week’s report to see if that trend continues.
  • Finally, the busy week culminates in the all-important Jobs Report on Friday. This report features new data regarding Non-Farm Payrolls, the Average Work Week, Hourly Earnings and the Unemployment Rate. Needless to say, this report can be a big market mover!

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result.

As you can see in the chart below, Mortgage Bonds and home loan rates finished strong at the end of last weekend, as uncertainty had investors opted for the safe haven provided by Bonds. I’ll be watching closely to see how the ongoing Debt Ceiling debate and the after shock impacts Bonds and home loan rates.

Chart: Fannie Mae 4.0% Mortgage Bond (Friday Jul 29, 2011)
Japanese Candlestick Chart
The Les Berman Weekly View… sym_arrow.gif
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How to Cut Cooling Costs in a Heat Wave

These eight tips will help keep your electric bill under control.

By Cameron Huddleston, Kiplinger.com

It is hot outside. Too hot to even go to the pool because the water’s so warm that it doesn’t cool you down. So what do you do if you live in a part of the nation taking a beating from this heat wave? You retreat indoors and crank up the AC. Then you gasp when you see the electric bill and start looking for possessions to pawn to pay it.

Keeping cool doesn’t have to bankrupt you, though. Edison Electric Institute (EEI), the association of shareholder-owned electric companies, offers these eight simple, no-cost tips to help you keep your electric bill under control this summer:

Set the thermostat at 78 degrees or higher when you’re home. That’s where I keep my thermostat set, and I feel comfortable at home all day — even when the heat index outside is in the triple digits. When no one is home, turn up the thermostat to 85 degrees. You’ll save 1% to 2% on cooling costs for each degree you raise your thermostat, according to EEI. And be sure to clean your air filter every 30 days to keep your air-conditioning system working efficiently.

Close the curtains or shades on any south- or west-facing windows to save 2% to 4% on cooling costs.

Turn on ceiling and table fans then raise the thermostat setting about four degrees — you’ll still feel cool. Make sure ceiling fans are turning counterclockwise and use them only when you’re in the room.

Shut doors to unused rooms and close any air supply vents inside them to reduce cooling costs up to 3%.

Cook with the microwave instead of a regular oven to reduce cooking costs up to 90%. If you can stand the heat outside, cook on a grill to lower cooking costs even more.

Install compact fluorescent lights. You’ll reduce lighting costs per fixture by about 66%, according to EEI. Be sure to turn off lights that aren’t being used and, if possible, dim ones that are being used.

Wash and dry full loads of clothes and dishes to save 2% to 4% on energy costs because you’ll be washing fewer times than if you ran your appliances to wash several smaller loads. You’ll also save by using cold water rather than warm or hot.

Check out your power company’s Web site because all electric companies offer money-saving tips, and many have energy-saving programs and incentives, including free online energy audits, rebates for purchasing high-efficiency appliances and low-interest loans to help purchase high-efficiency appliances.

Reprinted with permission. All Contents c2011 The Kiplinger Washington Editors. www.kiplinger.com.

Economic Calendar for the Week of August 1-5, 2011

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of August 01 – August 05

Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Mon. August 01
10:00
ISM Index
Jul
54.0
55.3
HIGH
Tue. August 02
08:30
Personal Income
Jun
0.1%
0.3%
Moderate
Tue. August 02
08:30
Personal Spending
Jun
0.1%
0.0%
Moderate
Tue. August 02
08:30
Personal Consumption Expenditures and Core PCE
Jun
0.3%
0.3%
HIGH
Tue. August 02
08:30
Personal Consumption Expenditures and Core PCE
YOY
NA
1.2%
HIGH
Wed. August 03
08:15
ADP National Employment Report
Jul
85K
157K
HIGH
Wed. August 03
10:00
ISM Services Index
Jul
53.1
53.3
Moderate
Thu. August 04
08:30
Jobless Claims (Initial)
7/30
405K
398K
Moderate
Fri. August 05
08:30
Non-farm Payrolls
Jul
78K
18K
HIGH
Fri. August 05
08:30
Unemployment Rate
Jul
9.1%
9.2%
HIGH
Fri. August 05
08:30
Hourly Earnings
Jul
0.2%
0.0%
HIGH
Fri. August 05
08:30
Average Work Week
Jul
34.3
34.3
HIGH
The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.
As your trusted advisor, I am sending you the LES BERMAN WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.

 

 

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August 1, 2011 - Posted by | Uncategorized

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