Daily Commentary by Larry Baer 12.31.2012

Daily Commentary by Larry Baer:  Tick - tock - tick - tock. 

The probabilities are high the hours between now and the stroke of midnight will be filled with intense negotiations to resolve the current fiscal crisis - but at this juncture each party seems primarily focused on blaming the other for failing to make the concessions necessary to avert pushing the American people and their economy over the edge of the "fiscal cliff." 

As I write (10:00 a.m. CT, Monday) there are rumors circulating in various media sources suggesting Congress may actually come up with a "buzzer beater" resolution - at least in regard to the issue of tax increases for the majority of Americans.  If these rumors happen to morph into fact - a dramatic last second fiscal cliff "save" by Congress will likely spawn a rally in the stock market at the expense of fractionally higher mortgage interest rates. 

The mortgage market will close early at 2:00 p.m. ET today for the New Year's Day Holiday.  Wednesday's Institute of Supply Management's December Manufacturing Index and Friday's December Nonfarm Payroll Report will bookend an otherwise quiet week of economic news.  Both reports are expected to show the economy is churning along at a very modest growth rate - well below levels that might otherwise exert substantial upward pressure on mortgage interest rates.

THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME

Daily Commentary by Larry Baer 12.27.2012

Daily Commentary by Larry Baer:  As has been the case for the past several weeks - economic news may cause a temporary little flutter in the mortgage market - but any substantial shift in the current trend trajectory of mortgage interest rates will almost certainly be tied to events surrounding political action - or lack thereof - with regard to the looming "fiscal cliff". 

Mortgage investors gave this morning's economic news little more than a passing glance. 

Consumer Confidence fell more than expected in December, hitting a four-month low as the bickering and political brinkmanship in Washington sapped what had been a growing sense of optimism about the economy. 

Other data released earlier in the day by the Labor Department showed the number of Americans filing first-time claims for government jobless benefits fell last week by 12,000 - to nearly an 4 ½ year low, while new home sales in November churned 4.4% higher to touch levels last seen in April 2010. 

No specific bill dealing with the twin "fiscal cliff" issues of across-the-board tax hikes and massive government spending cuts is on the agenda in either the Senate or the House of Representatives today -- so investors are becoming increasingly resigned to the idea that the best that can be hoped for now is a "kick the can down the road" kind of deal before year end.   

This new scenario is pretty bleak since it means we are all in for extended exposure to the continuing acidic dysfunction of our government.   As long as this condition persist - the stock markets will likely experience a ramping up of selling pressure - a process sure to add support to the prospects for steady to perhaps fractionally lower mortgage interest rates.

THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME

Daily Commentary by Larry Baer 12.26.2012

Daily Commentary by Larry Baer:  No specific bill dealing with the twin "fiscal cliff" issues of across-the-board tax hikes and massive government spending cuts is on the agenda in either the Senate or the House of Representatives when Congress returns tomorrow after the holiday break.

It is becoming increasingly likely Congress will allow income taxes to go up for everybody as now scheduled on December 31^st.   Once the clock strikes midnight on the last calendar day of 2012 no member of Congress would have voted for a tax increase on anyone - since current "fiscal cliff legislation approved in 2011 mandates the coming increase - and the only votes any member of Congress will cast in early 2013 will be to decrease tax rates for most Americans back to their 2012 levels.  No fuss - no muss - and every politico comes out looking like a hero to the majority of their voting constituents.  The currently mandated government spending cuts may take a little longer to modify - but most of those curtailments will probably not last through the first-quarter of 2013.

The income tax part of this scenario is already "baked-in-the-cake" and will likely have no impact on the current trend trajectory of mortgage interest rates.  The spending cuts are more problematic - for stocks.  If the scenario I've laid out above actually plays out -- selling pressure in the stock market will almost certainly increase - to the direct benefit of steady to perhaps fractionally lower mortgage rates.  The weakness in this assumption is that a near-term sell-off in the stock market is inconsistent with my current technical analysis of the Dow.  For the time beginning I think it far wiser to assume my technical analysis is correct as opposed to my supposition regarding potential Congressional strategy and tactics.

There is still chance the President and Congress can reach an accord before midnight next Monday - but that chance is becoming smaller with each passing day.   

As has been the case for the past several weeks - economic news may cause a temporary little flutter in the mortgage market - but any substantial shift in the current trend trajectory of mortgage interest rates will almost certainly be tied to events surrounding political action - or lack thereof - with regard to the looming "fiscal cliff". 

THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME

Daily Commentary by Larry Baer 12.24.2012

Daily Commentary by Larry Baer:  It is exceptionally quiet in the mortgage market this morning - the few traders still at their desk are simply there because they drew the "short straw" - not because they want to be.

The fiscal cliff is the only thing that is important to investors right now - and that story is on hold until the President and Congress return from their holiday recess on Thursday, December 26^th.

The prospect of a fiscal agreement between the White House and Republications before year-end is still possible - but increasingly improbable.  House members and senators now have less than a week to reach agreement on an issue they have been trying to resolve for more than a year.   As a result, investors continue to move capital to the sidelines as the curtain opens on yet another act of ongoing political theater - a condition supportive of generally steady mortgage interest rates. 

As has been the case for the past several weeks - economic news may cause a temporary little flutter in the mortgage market - but any substantial shift in the current trend trajectory of mortgage interest rates will almost certainly be tied to events surrounding political action - or lack thereof - with regard to the looming "fiscal cliff". 

THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME

Daily Commentary by Larry Baer 12.21.2012

Daily Commentary by Larry Baer:  Not only is it pathetic - it is starting to get down-right embarrassing.

Investors continue to shake their collective heads in disappointment as the prospects of a fiscal agreement between the White House and Republications before year-end becomes increasingly unlikely.  House members and senators now have no chance of voting on any plan to step back from the edge of the so called "fiscal cliff" until after Christmas, giving them less than a week to reach agreement on an issue they been trying to resolve for more than a year.   As a result, investors continue to move capital to the sidelines as the curtain opens on yet another act of ongoing political theater. 

Today's battery of economic data was completely overshadowed by the lack of action from Washington.  The Commerce Department announced earlier this morning consumer spending surged a surprisingly strong 0.4% higher in November - posting its best single-month performance in three-years.  Consumer spending was supported by an equally solid 0.6% month-over-month gain for personal incomes.  The Fed's favorite measure of inflation pressure at the consumer level, the personal consumption expenditure index, gained a very modest 0.1% last month. 

Normally solid numbers like these would have caused mortgage investors to nudge rates a touch higher - but the increasing likelihood we all should brace for an imminent tumble over the edge of the "fiscal cliff" fueled a "flight-to-quality" buying spree more than powerful enough to muscle through today's otherwise mortgage interest rate unfriendly economic news.

As has been the case for the past several weeks - economic news may cause a temporary little flutter in the mortgage market - but any substantial shift in the current trend trajectory of mortgage interest rates will almost certainly be tied to events surrounding political action - or lack thereof - with regard to the looming "fiscal cliff". 

THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME