Every week, I’m a participant in Bankrate.com’s weekly Mortgage Rate Trend Index. It’s a survey of many loan officers and those in the business and their opinions on what rates are going to do over the next 35 to 45 days.
Remember, those opinions might not be applicable for your individual situation. Call me at (616) 292-7559, e-mail me at tvanderwell@straighttalkaboutmortgages.com or fill out that rate quote form on the right hand side and let’s discuss it.
Thanks!
Tom Vanderwell
12-16-09
MUNCHIN’ ON THE NUMBERS
A pretty short report today, as nothing really happened of interest except the Fed’s FOMC meeting report was issued at 2:15pm and it said two things investors heard. One, rates will stay low for an “extended period.” Two, the economy is showing some life again, but it is clearly too early to call us out of the woods, as one analyst put it.
The really tough question is when should the Fed begin to tighten interest rates? Believe me, that answer will have a lot to do with whether investors continue to plow funds into the stock market. But, I expect that the wording of the FOMC’s written statement, while encouraging was not enough to either spur or deter investors. It was purposely vague, nearly a clone, though not an exact repeat of last month’s statement.
The Consumers Price Index was announced today at 8:30am, along with housing starts and building permit activity. CPI was almost exactly like last month. The other two numbers were higher than last month, but still quite subdued compared to several years ago. But, nevertheless, investors seemed glad to see the steady to better numbers all round, especially after the PPI number yesterday was a bit of a shock to everybody.
The only other action today had more to do with Congressional activities and the battle between Conservative Republicans and Socialist Democrats. The vast difference between these two is all finally hanging out and we will see which direction the voters of the country chose. In the end, it will be up to them to choose our government style by keeping Socialists or bringing in Conservatives in 2010 and 2012. That one is anybody’s guess, at this point.
As I said, not much on the plate today, so I will be signing off until tomorrow. As always, I do hope your trading day was a profitable one. Will be back here tomorrow, the Lord willin’ and the creek don’t rise.
NEED SOMETHING TO TALK ABOUT TONIGHT?
SIX MAJOR IMPACTS ON THE MARKET TODAY
1. Congress heads for finish line 2009 and hopes to get home by weekend, shoving many bills through.
2. GOP forces the reading of amendment to health bill-its design is to take over all health care.
3. Copenhagen gathering remains a real messy meeting. Nobody seems to like anybody at that meeting.
4. Oil and dollar advance after the Fed’s expected action. But, dollar gaining on other world money.
5. Bernanke named “Man of Year” by Time Mag. Looks like he will be reconfirmed for a second term.
6. Feds sue Intel for monopoly–like action, it says. Intel says Feds are trying to bust it up with this action.
Man of the year huh. Let’s se what a year brings. Need more time here. It is getting very ugly in Congress, very ugly. What have they done to my country? Will the Feds break up Intel?? Wish I know that one. Will Congress approve the $1.8 trillion (that is a T) debt increase before adjourning?? WOW!!!
DAILY CHANGES WEEKLY
Closes as of Wed. 12-16-09 CHANGE (cash) KEYLINE# ABV/BLW
DOW INDU. 10,441.12 -10.88points 9,845.65 ABV +595.47
S&P 1,109.18 +1.25 points 1,059.51 ABV +49.67
NASDAQ 2,201.91 +5.86 points 2080.23 ABV +121.68
30 YR BONDS 117 17/32 -1/32 115 27/32 ABV + 55/32
GOLD $1,135.00 +$11.50 $1,049.00 ABV $86.00
OIL $72.68 +$1.99 $83.24 BLW $10.56
DOLLAR INDEX 76.98 +.07 79.93 BLW 2.95
COPPER $3.2080 +$.0665 $2.6375 ABV +.5705
*The name Super Chart Keyline is a registered Trademark of Max Whitmore.
Okay, this is just a swell way to start off the middle of the week. The Washington Post has a story about how Citibank (you know the bank that we own a lot of) is paying back a LOT of the TARP money that the Federal government gave them. You know how there are a LOT of people saying that this is a sign that the banks are healthy. Well, here’s what could very well qualify as the rest of the story. A quick point by point listing of it:
- Citibank has lost money – according to this report from the Washington Post, over $38 Billion.
- By paying back the TARP money now, the government is giving them an exemption to a tax ruling.
- That tax ruling allows them to shelter $38 Billion in future profits from taxes.
So, what do we have here? We’ve essentially got a government that is changing the rules so that it appears that Citibank and others are totally healthy when in reality it’s not that way, it’s more a matter of these institutions attempting to save future tax dollars. Doesn’t that mean that our government is giving up future tax dollars to get back what is already ours?
Hmmm, I think there is more to this story…
Tom Vanderwell
DEAL MADE TO RECOVER BAILOUT
Firms exempted from rule when U.S. sells its stake
Citigroup says it has built up $38 billion in losses. With the tax exemption, it will be able to shelter up to $38 billion in future profits. (Richard Drew/associated Press)
By Binyamin Appelbaum
Washington Post Staff Writer
Wednesday, December 16, 2009
The federal government quietly agreed to forgo billions of dollars in potential tax payments fromCitigroup as part of the deal announced this week to wean the company from the massive taxpayer bailout that helped it survive the financial crisis.
The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.
While the Obama administration has said taxpayers are likely to profit from the sale of the Citigroup shares, accounting experts said the lost tax revenue could easily outstrip those profits.
12-15-09
MUNCHIN’ ON THE NUMBERS
If you wanted to issue bad numbers, today was a good example of how to do it. I don’t think any of the report results were expected and all were worse that last month. First, the PPI came in way above expected levels, with a number that spooked investors and may have even given Fed Chairman Bernanke a shiver or two.
The expected numbers for PPI was about +.6% and it came in at +1.8%! The core level was expected at +.3% and came in at +.8%!! And if that wasn’t bad enough the NY manufacturing numbers (called the Empire numbers), expected at 21, came in at 2.55!! The only not surprise was the Capacity utilization coming it at 71.3% on an expected 71.4% and the Industrial {Production coming in at +.8% on an expected +.7% — the lone number to be above its expectation.
Investors seemed a bit stunned at first, but recovered rather quickly, as the big guys were not here today to collectively run for the exits and send indices prices tumbling. In the end, the Dow was down by only -49 points and the S&P -6.18 points, but it still closing above the 1,100 level at 1107.93 (cash index).
One other measure I watch to help gauge the tenor of the day’s trading is the total daily range of the S&P, high to low. If it is under 10 points, I consider it a rather non-descript day. Today it was only a total of 8.9 points from daily high to daily low. So, count today a yawner, pretty much. I expect that – barring some totally unexpected major good or bad news, the rest of the days until Christmas will look a lot like today,
Now, I better amend that statement a bit, for tomorrow is the day the FOMC (Federal Open Market Committee) meets for their final drafting of a statement for the past month’s general summary, as the members of the committee see it. I don’t expect a rise in rates here – no one does (would they surprise us maybe?) -but the wording of their written consensus on the economy’s health could cause some fireworks. But, again, I don’t expect much tomorrow (2:15PM EST)
Not really much to add today, so I will sign off for now. I do hope your trading day was a profitable one. Was a so-so one for me, considering it is Christmas season, usually quite quiet. As always, I will be back here tomorrow, the Lord willin’ and the creek don’t rise.
NEED SOMETHING TO TALK ABOUT TONIGHT?
SIX MAJOR IMPACTS ON THE MARKET TODAY
1. Another big bank says it will repay it TARP loans – Wells Fargo. I think that is the final one to say so.
2. U.S. Dollar gained some strength on bad economic outlook predictions for Europe.
3. Boeings 787 flew for the first time today, but 2 years late and about $2 billon over budget. Ugh.
4. Fed Chairman Bernanke expects unused production capacity to keep inflation low for some time.
5. Oral Roberts, famed pastor, died today at age 91. May God bless one who blessed so many.
6. Tiger Woods known total now 14. Oh, me. Tiger my grandson idolized you. Hope he forgets you, now.
Watched the Boeing 787 maiden flight on internet today and it was beautiful. Worth the time to watch. Bernanke may be wishing for a bit much on the inflation front, but maybe he might be right. Hummmmm. Oral Roberts was a good fried to my cousin, also a pastor, so to see him leave us is a sort of sad day for the family. And I really wish the Woods thing would go away – maybe into some deep rough or something. All in all a quite day to stimulate conversation.
DAILY CHANGES WKLY
Closes as of Tue. 12-15-09 CHANGE (cash) KEYLINE# ABV/BLW
DOW INDU. 10,452.00 -49.05 points 9,845.74 ABV +606.26
S&P 1,107.93 -6.18points 1,059.49 ABV +48.44
NASDAQ 2,201.05 -11.05 points 2078.13 ABV +122.92
30 YR BONDS 117 18/32 -0- 115 27/32 ABV + 55/32
GOLD $1,123.00 -$4.50 $1,044.50 ABV $78.50
OIL $70.69 +$1.19 $83.22 BLW $9.24
DOLLAR INDEX 76.91 +.59 79.93 BLW 3.02
COPPER $3.1410 -$.0115 $2.6369 ABV +.5041
*The name Super Chart Keyline is a registered Trademark of Max Whitmore.
So what does this chart represent? The Fed’s purchase of mortgage backed securities. They committed last spring to spending $1.25 Trillion worth of our money buying mortgage backed securities and originally planned on doing it by November. They then decided to “ease” out of things and take until March to do it.
Rates at that point dropped by .375% overnight and have since dropped further. I’ve read a variety of analysts predictions that rates will go up by anywhere from .25 to 1.25% when the Fed steps out of the market. My personal opinion is that we aren’t going to see a dramatic reversal, but rather a slow increase once it becomes evidence that they aren’t going to extend it out further than they already have.
Tomorrow’s Federal Reserve Open Market Committee meeting (which is held behind closed doors) will potentially give some insight into the question of whether, how long, how far they might extend or shorten their market stimulus. My prediction is that we won’t see them make any dramatic moves but reaffirm that they’ll be done in March. I also don’t anticipate we’ll see the effects of the market dealing with a huge buyer leaving the marketplace until well after the New Year when we get closer to them really being finished.
Stay tuned and if I can help, let me know.
Tom Vanderwell
12-14-09
MUNCHIN’ ON THE NUMBERS
How can you tell Christmas is just around the corner if you work on Wall Street? Just look in all the empty offices. Most of Wall Street is where it is warm, sunny, beautiful, miles from a meeting room, and where the evenings are filled with island music, filled bars, and fancy foods. But, those that went paid for it with smaller bank accounts than several years ago and are glad to get away from the heat of “What’s next?” being the morning’s mantra.
Hey, we are all here, just as always. But, I do need to fess up. Truth be told, I was by the ocean several months ago to do my “getting away.” Has a great time and beat the crowds of Christmas visitors. I felt that keeping the doors open when almost everyone else is gone might be a better approach this year.
But, enough of that. Today’s action on the exchanges everywhere was light, at best. I would expect that this will likely be the case until after New Year’s Day football games. There was some overnight buying that was supported by those that did trade today, buying caused by the move made by Abu Dhabi to extend a $10 billion loan to help out strapped neighbor Dubai. Many had been hoping that some sort of help might come and it did. How much more is the big question, but many believe that there will be several more such moves before it is all over and Dubai is reduced to a shadow of its former self.
To illustrate how much of a non-news day it was, the fact that the S&P will be adding five new stocks to its 500 index and dropping five stocks made headlines some places. The stocks coming on are quit solid performers, while the ones being dropped are rather weather-beaten. You likely know by now that this is how the S&P Index continues to grow. Out with the old single digit losers and in with the double digit coming on strong companies. Don’t mean to demean S&P, of course, but they do the same thing with the Dow 30, if you ever noticed. Usually this kind of thing gets little if any attention. This time, “big news.” Oh, me.
Happy to report that bonds did steady out today and actually gained 6/32nds. As I said in the Weekly Report, this is good news. The dollar was off a bit, influenced more by news that Citibank is planning to try and exit its government involvement by paying back its TARP advance. Traders that were around felt maybe some move to the currency sidelines might be a good tactic. We will see.
Gold dropped just $5.00, but mostly in response to the selling of the dollar. No real hard news to account for any strength or weakness in the gold sector today. Copper advanced a tad, but in a quiet market, no way to know if it was inflation related or not. After the first of the year we will get a better reading on that.
Oil seems to have found some support in the $69-70 area today. Some reports hitting the wires are bearish long term the oil contracts. But, all it would take to change all that would be a flare up in the Middle East. I suspect until a better handle is gotten on how the current excess oil inventories are to be worked off, we will continue to see weakness here. May take 3-5 weeks to begin to get a handle on that, I believe.
Other than those notes, not much news to report that moved the market at all. Just a normal as usual business day during the Christmas season trading day.
So, until tomorrow, I do hope your day was a profitable one. Will be back here tomorrow, the Lord willin’ and the creek don’t rise.
NEED SOMETHING TO TALK ABOUT TONIGHT?
SIX MAJOR IMPACTS ON THE MARKET TODAY
1. Abu Dhabi gives a partial bail out to Dubai. The market lets out a sigh of relief – for now.
2. The move to the yen as the “carry trade” choice picks up some more momentum today.
3. S&P shifts their holdings again. Out with the bad, in with the good. New guys stocks all higher.
4. British Airways employees announce 12-day strike. Funny, it coincides exactly with Christmas travel.
5. House passes a $1.1 Trillion spending bill for current needs. Do they call that pocket change now?
6. NASA launches satellite to seek out asteroids that threaten Earth. Do we really want to know?
I was more interested in the NASA announcement than anything else. But then, I am a science buff. Even if they find one, how do we stop it? And hope that neither you nor family members affected by the British Airways well timed strike. The English have a way about them, don’t they. And finally, why didn’t anyone tell us what the $1.1 trillion was for? Did you see anything that laid out the use? Hummmmmm.
DAILY CHANGES
Closes as of Mon. 12-14-09 CHANGE (cash) KEYLINE# ABV/BLW
DOW INDU. 10,501.05 +29.55 points 9,846.19 ABV +655
S&P 1,108.10 +4.90 points 1,059.55 ABV +48
NASDAQ 2,190.31 +21.79 points 2076.12 ABV +114
30 YR BONDS 118 1/32 +6/32 115 24/32 ABV + 2 9/32
GOLD $1,127.50 -$5.00 $1,044.50 ABV $83.00
OIL $69.50 -$.01 $83.21 BLW $13.71
DOLLAR INDEX 76.32 -.25 79.92 BLW 3.60
COPPER $3.1525 +$.0195 $2.8873 ABV +.2552
*The name Super Chart Keyline is a registered Trademark of Max Whitmore.
THE KEYLINE WEEKLY REPORT 12-14-09
SIDEWAYS ISN’T SO BAD, YOU KNOW
CURRENT BUY – 100% of portfolio stock allocation $$$
KEYLINE 7-25-09 BUY 50% allocation only (S&P @ 970)
SIGNAL 10-9-09 BUY balance of 50% (S&P @ 1071)
Sometimes you just wonder how long the market can meander sideways. But then, you remember that the rule in charting is that the sideways movement, called a “correction in time,” (especially after a long rally) can be the best world of all. What such a market says is that, yes, the heavy preponderance of buyers has declined, but, the auction market is now at almost a balance between buyers and sellers and the index prices should hold their own until more buyers come to the game.
My wife used to ask me why the market was up or down on a particular day. My answer became so “the same” that she often answered for me. My answer on days where the market was up was “More buyers than sellers,” and on down days “More sellers than buyers.” She used to laugh, but I am sure she got tired of hearing that. I recall she would often say, “No, I mean really!” Sorry honey, but who REALLY knows exactly for sure. Sometimes it is clear, but most of the time it is foggy at best to pick the one best reason. That is why in the daily “Munchin” report I try to give you the 5-7 main reasons the market moved up or down for the day, at least as I see them. Take your pick, as any one of them usually has had at least some noticeable impact during the day.
But, on to the markets. I told you last week that if the bonds held steady, the dollar steady, gold was soft and the S&P above 1,100 on the Friday close this would be the best scenario for the week. We only got the S&P to cooperate. The bonds were decidedly down on much stronger than expected retail sales and consumer confidence. Bonds took the hit, as they say, because the good consumer numbers portend a recovering economy.
That potential recovery means that the Fed may soon be able to raise rates and try to get back to the historical mean of about 5% interest rates. But, the rub is that rising rates means lower profits 80-90% of the time and lower profits means lower stock prices. This last effect is one the Fed would like to avoid, at least for the next 12 months or so. All of this is the main reason I developed and use the Keyline so diligently. It keeps me out in bad selloffs and in on good rallies – like this one.
THE CHARTS
Ok, let’s get to the charts for this week. By the way, I am including two charts this week that I have made a part of the closing data at the end of this weekly Keyline Report, the dollar and copper. The dollar I have shown you several months ago, but I will be now including it on a more regular basis. Copper I am including because of all the commodities, it is the one that is most used by professional traders to gauge the effects of inflation. Yes, there is a commodity index that included almost all the commodities, but copper is the single most sensitive commodity over the years and traders even call this metal “Dr. Copper,” as it is most often the first to signal changes in the inflations winds.
But first, let’s get to the S&P chart.
You can see that we are just “crawling up the chart’s Headline. So far, we have held above it, but just barely, as the market has worked over the last month or so to digest the huge rally that began last March. My target remains the S&P 1220-40 area, at this point, but I am keeping a close watch for any weakness that might signal a shift from the current sideways movement. For now, we are above the Keyline (at 1059) and holding above the 1,100 mark all this week would be a good sign. About 1,080 is still a critical support. Note in the MOMENTUM SECTION of the chart, at the bottom of the chart, that the green line (fast stochastic) has moved back into the 80 area (see red circle), a rather high reading for a good up move to develop. But, I have seen it happen before. Just need to be alert to this high reading for now. Let’s let the chart show us the way here, however.
Now on to the dollar chart.
I am showing the last 10 years here, so you can get a good grasp of the decline this period of time has produced. It is substantial, but the lower dollar has also helped to reduce our import-export balances. But, we need to really cut oil imports to make any more of a dent, it would appear.
The current price remains well below the Keyline (at 79.92) and, you can see by the chart, that the bit of a dollar rally they have talked about the last 10 days is really a very anemic move – so far. The big news here is that the Japanese yen is replacing the dollar as the choice of the “carriage trade” traders. That means that the dollar will be bought for the next month or so, as these traders buy dollars to repay their “carriage trade” loans and move to the yen.
I expect, assuming the shift is relatively smooth, the dollar will continue to gain some in price, but should remain below the Keyline for now. This gain in the dollar will weigh on the stock market, as it means, primarily, that the U.S. will be less competitive in world markets with its goods and services – less profits to the minds of investors. A steady to mildly higher dollar this week would be the best scenario.
And finally, on to the copper chart.
I had this chart in the daily “Munchin’” report this week, but I am including it here again, as I have more extensive comments to make about it. This time I am showing the chart back 10 years. You can see it did the same nosedive that stock market did, as would be expected. But, note that it began to rally as early as January of this year, nearly 60 days ahead of the March low. I suspect that this was one of the major clues to the big investors that that March low was not a harbinger of more lows and may have help set off the rally we are still experiencing.
Note in the MOMENTUM SECTION at the bottom of the chart that the green line (fast stochastic) is quite low and the black line (slow stochastic) is still in the 70 area. This kind of setup is usually a harbinger of higher copper prices. This might also be telling us that the current stock market rally might be ready for more up move. I will be watching this closely.
We remain well above the Keyline (at 2.8808) for now, but like we did in late July to October period, prices are moving sideways pretty much. I am keeping a watch on this one for any weakness that might break the $3.00 level. If that were to occur, we might well see the stock market begin to drop again, also. If that were to occur, the drop would hopefully not be like it was last year. But, for now, the $3.00 level is a critical support. Watch the price updates I give you daily to keep up on this one. Best scenario is to hold steady in price this week.
THE BOTTOM LINE THIS WEEK
Well, that pretty much wraps up this week. I will have the daily update to keep you current on any major developments during the week. But, I will not be giving you a summary this week, as I have in the past, of the major news events influencing the market all week. That I am now doing within each daily update report.
But, here is the way I see the bottom line that would make this week’s scenario a good one. The S&P needs to remain above the 1,100 level, bonds really need to find support in this 117 area, Gold needs to hold steady – but above $1,100 level, oil should hold the $68-72 area and the dollar not break above the 77.50 mark, as the “carriage trade” exits the dollar usage and shifts to the use of the yen.
So, as always, do have a good investing week. And you keep in touch. I do! See you next week.
WEEKLY CHANGES
Closes as of Fri. 12-11-09 WK. CHANGE (cash) KEYLINE# ABV/BLW
DOW INDU. 10,471.50 +83 points 9,848 ABV +623
S&P 1,106.41 +43 points 1,059 ABV +47
NASDAQ 2,190.31 -4.05 points 1,969 ABV +221
30 YR BONDS 117 21/32 -23/32nds 115 24/32 ABV +1 30/32
GOLD $1,132.50 -$37.00 $1,044.40 ABV $88.10
OIL $69.56 -$5.91 $83.21 BLW $13.58
DOLLAR INDEX 76.57 +.63 79.03 BLW 2.46
COPPER $3.1330 +$.0285 $2.8808 ABV +.2522
TOP 10 STOCK SECTORS LAST 6 MONTHS @12-11-09
1. BROADCAST (+70.3%) SAME AS LAST WEEK SAME
2. TOOLS (+65.0%) #7 LAST WEEK UP
3. AUTO (+49.0%) SAME AS LAST WEEK SAME
4. ELECTRICAL (+48.0%) #6 LAST WEEK UP
5. ENGINES (43.4%) #4 LAST WEEK DOWN
6. PRINTING (+42.5%) #2 LAST WEEK DOWN
7. TEXTILE (+41.1%) #10 LAST WEEK UP
8. MINING (+38.6%) #9 LAST WEEK UP
9. PUBLISHING (+36.7%) #5 LAST WEEK DOWN
10. CHEMICAL (+34.4%) NEW TO LIST UP
*The name Super Chart Keyline is a registered Trademark of Max Whitmore.
