Daily Commentary by Larry Baer: The clock is ticking and the battle lines are
being drawn.
President Obama will
address the nation at 1:05 p.m. ET this afternoon as the tense negotiations
with Congress on establishing a plan to avoid the economic devastation a second
recession could cause begins. Republican House leader John Boehner has
scheduled his own news conference prior to the President's remarks. Both
men will be engaged in efforts to prevent the economy from going over the
"fiscal cliff" of steep government spending cuts and tax increases
due to be implemented under existing law at the stroke of midnight on December
31st.
The non-partisan
Congressional Budget Office continues to reiterate its warning that if left
unresolved, the abrupt fiscal tightening will knock the economy back into a
recession, with employment rates likely to soar back to 9.0% or so. From
a mortgage interest rate perspective the good news is that another slump in the
economy will almost certainly prove supportive of the prospects for steady to
perhaps fractionally lower mortgage interest rates - the bad news is that the
plunge in job creation and the related negative impact on consumer confidence
will make ready, willing and able borrowers increasingly hard to find.
Should investors begin to sniff the possibility of a
political compromise with enough merit to avoid economic calamity -- we will
likely see a shift in the dynamics supporting mortgage interest rates at modern
day lows. Until/unless such an event occurs -- mortgage interest rates
are unlikely to make an extended move toward higher levels.
Looking ahead to the
coming holiday shortened week the release of the October Retail Sales and
October Producer Price Index on Wednesday followed by the Thursday morning
release of the October Consumer Price Index will serve as the center piece of
an otherwise quiet period for economic news. All three mid-week reports
are broadly expected to be mortgage interest rate neutral.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
