Daily Commentary by Larry Baer: New day -- same old story.
Euro-zone finance officials are continuing to voice optimism this morning that a deal to avert a Greek debt default is imminent. The rumor mill is buzzing with chatter that an agreement between the Greek government and its private creditors will be complete within days.
The "so what" factor here is pretty straightforward.
Massive amounts of capital have fled the multi-year crisis in the euro-zone and have poured into safe-haven assets like U.S. dollar-denominated Treasury debt obligations and mortgage-backed securities. The good news part of the story is all this capital has helped push mortgage interest rates here at home to historical lows. The bad news part of the story is once the financial threat begins to diminish in Europe -- capital parked in safe haven investments will likely begin to look for higher yielding opportunities elsewhere. Once the process starts one of the significant supports behind the move to record low mortgage interest rates here in the U.S. will slowly begin to fade. I will continue to keep you posted on this developing story.
The Commerce Department released the December personal income and spending figures earlier this morning and the news was good for the prospects of steady to perhaps fractionally lower mortgage interest rates -- and not so good for the prospects of further economic growth. Consumer spending was flat in December as households took advantage of the largest rise in income in nine months to boost their savings at the expense of retailers. It was the weakest reading on spending since June. For the time being at least, consumers appear to have rediscovered the notion that a penny saved is a penny earned. Consumer spending drives more than 70% of all domestic activity, so this new penny-pinching attitude on the part of consumers could certainly set the tone for slower economic growth in the coming months. Salaries and wages posted a 5% gain last month marking the largest improvement in this measure since March. The report showed that inflation pressures were generally contained with the core rate of the personal expenditure and consumption index inching up a very modest 0.2% in December.
THE MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
