Daily Commentary by Larry Baer: The
economy faired slightly better than initially thought during the second-quarter
of the year. Government data wonks said
their second "quesstimate" of the value of all the goods and services
produced in the country from April to June expanded at a 1.7% annual pace - up
from their first guess at 1.5%. While
the composition of economic activity during the period was fairly stable,
growth remains well below the 2.0 to 2.50% rate required every quarter to hold
the unemployment rate steady - a condition which certainly leaves the door wide
open for more fiscal stimulus from the Fed at anytime if they so choose.
The market spotlight is now focused
exclusively on Fed Chairman Bernanke who is scheduled to make a key-note
address Friday morning at 10:00 a.m. ET at the Kansas City Fed's Economic
Symposium in Jackson Hole,
Wyoming. There is a growing sense that too many market
participants may be expecting too much from Mr. Bernanke's speech. Allen Sinai, chief executive office of
Decision Economics Inc. says Bernanke will make it "crystal clear"
that the Fed is poised to take action if necessary - but from there his talk
will likely be about possible options and otherwise very short on timing
indications. When I think about it --
there is really no reason for Mr. Bernanke to do anything other than describe
all the tools in the Fed's fiscal and monetary policy arsenal prior to the next
big national employment report due on Friday, September 7th.
If Mr. Bernanke provides any hint in his
address the Fed is "on-go" to launch "QE3" before the end
of September --mortgage interest rates will likely slide notably lower even as
the stock markets soar. On the other
hand, if no such hint is forthcoming and/or if Mr. Bernanke indicates such a
move would be premature in front of pending Congressional action, or lack
thereof, to avert the looming "fiscal cliff" -- stock prices will
almost certainly plummet while mortgage interest rates move sideways to
fractionally higher.
In other news of the day the National
Association of Realtors said contracts to buy previously owned homes in July
rose to their highest level since April 2010, suggesting the housing market may
be gaining some traction.
The Realtors' report fits with data from the
Mortgage Bankers of America's weekly Mortgage Application Survey. According to the MBA, total loan originations
(both refinance and purchase money) declined by 4.3% in the week ended August
24th - its fourth consecutive decline. Refinance loan demand fell by 5.7% on a
week-over-week basis while purchase-money loan application traffic edged up by
1.4%. The contract rate for 30-year
fixed-rate mortgages fell by 6 basis points during the period to 3.8%. The interest rate is up 5 basis points from
this time one-month-ago but its down 57 basis points from the year-ago mark.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
