Daily Commentary by Larry Baer: U.S.
consumer prices were flat in July for a second straight month and the
year-over-year increase was the smallest in more than 18 months. Stripping out the volatile food and energy
prices, inflation pressures at the consumer level were also tame. The so called "core rate" of the
July Consumer Price Index rose just 0.1%, the smallest increase since February,
and breaking four consecutive months of 0.2% gains.
The docile July inflation reading leaves the
door open for another round of economic stimulus from the Fed -- even though
recent data on job growth and retail sales have hinted at a pick-up in economic
activity as the third-quarter gets underway.
Judging by the heavy selling in the mortgage market since the end of
July - most mortgage investors are indicating they don't expect the Fed to make
any move to launch "QE3" unless/until economic conditions show signs
of deteriorating substantially from current levels. As long as this mindset prevails among
mortgage investors -- it will be exceptionally difficult for rates to make a
sustained move to lower levels.
The Mortgage Bankers of America have released
their Mortgage Application Survey figures for the week ending August 10th. The composite index fell 4.5% as refinance requests
dropped by 5.1% and purchase-money loan demand slipped 2.0% lower. Refinance applications accounted for 80.9% of
all applications and 77.9% of the prospective loan volume. The contract rate for 30-year fixed-rate
mortgages was unchanged at 3.76%, up 2 basis-points from four-weeks ago and
down 59 basis-points from the year-ago mark.
Be patient - be disciplined - and play it by
the numbers outlined above.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
