A letter sent from an observer ..."I guess the political speak of 'A Chicken in every Pot' has evolved. This is so much wrong in the real world with most of Obama's 'Plan' that I don't know where to even start with consequences. [Sarcasm!] Why doesn't he make it real simple and just outlaw all mortgage debt, wipe it clean, every home owner gets their home debt free today. And in 'fairness' let all renters just 'own' their unit they live in today collectively like a condo with the other tenants? That way in the name of 'fairness', everyone today owns a home free & clear. Of course then, how do we make it fair that some have 7,000 sq. ft. estates in the suburban hills, and some just have an apartment shared with 400 other 'owners' of their units in crime ridden areas. The 'fairness' argument never ends until there is nothing left and no one has anything. 90% of this has no chance (I hope) and is just another play in the class warfare game of his electioneering. I'm embarrassed our country has come to this. Wealth seizures are alive and well in their minds."

An interesting article in The New Yorker on The Caging of America: In 1980 we had 220 people incarcerated for every 100,000 people. Today, it has tripled to 663 per 100,000. No other country in the world approaches that. In the last twenty years, state spending on prisons has risen six times more than on education.

Expectations for a continuing period of weak economic growth continue to be confounded by stronger economic data. A flare higher in rates last week -- fostered by that warmer data -- was cut off at the knees by softer-than-expected fourth quarter GDP growth and a Federal Reserve who not only moved their expectations of increasing interest rates further down the road, but also increased expectations that more mortgage or bond-buying programs might come in 2012.

While weaker growth may yet emerge, whether from deepening troubles in the Eurozone or some yet-unseen issue, the fact is that the economy is showing signs of increasing expansion, at least for the moment. Certain of the interest rates which mortgages track moved measurably higher on Friday, with the 10-year Treasury finishing the week well above the week's low.

If the two biggest missing components of the recovery to date are housing and hiring, it's worth noting that some progress is being made on both fronts. While still low, construction and sales of homes have picked up in recent months, and after a difficult period, layoffs have abated and hiring has begun to improve.

An improving economy has yet to fully engage the consumer. At least that's the takeaway from measures of consumer moods and attitudes, and the latest reports don't leave the impression that sunnier dispositions are due anytime soon. As reported by the Conference Board, Consumer Confidence slipped a little in January, easing from a reading of 64.8 during December to 61.1 in January. Perhaps a little extra holiday-fueled exuberance caused the higher value in December, or perhaps rising gasoline prices this month have tempered enthusiasm, since virtually all the decline in the indicator came from the "present conditions" portion of the index.

So what to make of all this? We have been firmly of the mind that the economy has been improving for months, and the data continue to bear this out. In "normal" times, an improving economy would have investors concerned about loose Fed policy and the threat of forming inflation, and generally, market rates would begin to rise until the Fed felt compelled to act, raising rates by some amount to quell those fears. We are still very far from whatever might pass for normal these days, since the job market is still weak, inflation is happening at a measured (perhaps even declining) basis, and there are certainly still plenty of issues which might trip up the recovery.

While we know we are not near this point yet, we also don't know when we will be at the point where investor concerns may begin to show, and market rates will begin to rise. Will that come when unemployment moves closer to 7%? Inflation running faster than 2%? Some unknown combination of those? At present, no one knows, but at some point the markets may begin to express that a Fed committed to low rates for years to come is not in their best interests, and a change will come.

Until then, rates will remain favorable. However, potential borrowers should keep in mind that the lowest interest rates usually accompany the bleakest economic news, and to the extent that the economy is strengthening, the likelihood of perpetual new "record lows" diminishes.

We expect to see mortgage rates rise a little next week. The better economic tenor this week (especially the ISM service and employment reports on Friday) pulled money out of bonds and into stocks, as safe-haven funds seek some opportunity for better gains. Figure on a rise of 4-5 basis points, perhaps.

CONFUCIUS DIDN'T SAY:

Man who eats many prunes get good run for money.
War does not determine who is right, it determines who is left.
Man who fight with wife all day get no piece at night.
It takes many nails to build a crib, but one screw to fill it.
Man who drives like hell is bound to get there.
Man who stands on toilet is high on pot.
Man who live in glass house should change clothes in basement.
Man who fish in other man's well often catch crabs.