Marc's Mortgage Matter's

A "joke" to think about...

Five guys are stranded on an island.
One guy gets the daily firewood, one guy bakes the daily bread, one guy climbs to the top of the mountain to get fresh water, one guy fishes all day to bring home dinner, and one guy does nothing but consume the firewood, the bread, the water, and the fish.
One day the workers ask the fifth guy why he doesn't get the items himself, and he replies, "Without me, none of you would be employed."

Update on California Gov. Jerry Brown: He (1) made half the state employees turn in their government-paid for cells phones (that’s 48,000 phones), (2) froze any new purchases of state cars and ordered half the fleet sold within 120 days, and (3) declared that the days of unlimited doctors visits for Medicaid patients are over. On his cell phone and fleet vehicles cuts, he said “Fifty percent is just a starting point.” The slight smile on this photo is probably courtesy of PhotoShop. Brown does not have a sense of humor, and during the year I worked for him, I never saw him smile even once.

Brown showed how frugal he was when he was governor in the 1970’s by dumping his limo, driving an old Plymouth , and rented a one bedroom apartment across the street from the Capitol instead of living in the governor’s mansion. Last week, he had to fly to L.A. to address the Chamber of Commerce, and unlike Arnold who flew in private jets with a huge entourage, Brown flew on cut-rate Southwest. Jerry didn’t pay the extra $15 for Business Select to board early, he sat in the cramped seats like everyone else, and he spent the hour talking to the people sitting next to him. No security, no press people, no advisors, no entourage.

People often forget that when he was a novitiate studying for the priesthood, he took a vow of poverty. During a press conference in the 70’s when someone questioned his budget cutting and asked if were actually a conservative, he responded simply, “I’m just cheap.” By the way, he proposed a flat tax when he tried running for President in 1988.

Interesting talk about Google or Facebook buying Twitter for $10 billion. Is it Silly Season all over again?? Twitter had only $35 million of revenue last year, and no earnings. But it’s worth $10 billion?  Say, what?

The Egyptians I’ve met over the years are some of the most cultured people I’ve ever known, so here’s wishing the best for Egypt and its 80 million people. There’s one Bank of America employee who’s unhappy with how events turned out there. Gamal Mubarak works as an investment banker for BofA’s London office, and in this photo, he’s thinking “Dad really blew it, and I guess I’ m not going to get his job after all.”
At least he still has his job at the bank.

Fraud - in Florida? No way! Miami's highest-ranking female firefighter has been charged along with four others by a federal grand jury with taking part in an $11 million mortgage fraud scheme in which prosecutors say she acted as a straw buyer in the purchase of two luxury condominiums. She apparently used her name and credit history in 2006 to purchase a pair of million-dollar luxury condominiums. The indictment says Arthur received a payoff yet had no intention of living on the properties, which eventually went into foreclosure. MiamiVice

Higher oil prices... are they inflationary? Many would say "yes," although from the Fed's point of view, higher oil prices actually cause people to spend less on other items and instead put their money into the gas tank. Either way, the oil market is all over the press, and we are reminded of it every time we drive by a gas station - prices are easily back up to 2008 levels. And rumors of Gaddafi being shot, Saudi Arabia making up any shortfalls, or the reminder that the US has huge amounts of untapped reserves just creates more volatility. Yesterday, and today, the turmoil continued to impact the financial markets.

Everyone knows by now that that IBM’s artificial intelligence machine “Watson” won by a wide margin on Jeopardy last week. What if we turned over D.U. and L.P. to IBM? Let Watson review every single loan that’s ever been purchased, let him (or her or it) also read 100-200 million pages on the economy and housing, and then let it come up with some new underwriting criteria. When you get right down to it, the old ones didn’t work too well.

Oil prices have spiked considerably, and if $100/bbl oil hangs around for any period of time, all the money generated by the temporary decrease in payroll taxes (and then some) will disappear into the gas tank at best, or foster higher inflation at worst. If nothing else, those funds were expected to spur additional economic growth, but if they must be spent in a narrowly concentrated fashion, economic growth will suffer to some degree. 

At least for this past week (as well as the last couple) unrest elsewhere has overcome positive economic news here. To be fair, there are few indicators that the economy is gaining momentum an unmanageable clip, or that inflation concerns have begun to disrupt prices or markets to any great degree. It comes down to a question of balance: will rising prices upset inflation expectations, allowing higher prices to foment? Will the Fed continue to maintain a posture that allows for higher prices to permeate the broader economy or will they start to move from highly accommodative policy sooner rather than later? Will the nature of these price hikes (in energy, especially) ultimately act as a brake on economic growth, with higher near-term prices giving way to slower price increases later? At this point, it's hard to know.

One thing is true, though: Relative to where we are, in terms of mortgages and real estate markets, the path behind us is a mess and the path forward uncertain. As we work though this unclear transition, markets may or may not react in predictable ways or even ways they have in the past given similar circumstances. Uncertainty creates risk, and risk usually creates higher interest rates, not lower.

Next week, we get both end-of-the-month and important first-of-the-month reports. Employment (Friday) is the biggie, but we'll see the influence of the twin ISM reports, worker productivity, the latest Beige book and more. It would be best to plan for a pretty good group of numbers altogether, and a slight rise in mortgage interest rates from this week's levels.

The graveside service just barely finished, when there was massive clap of thunder, followed by a tremendous bolt of lightning, accompanied by even more thunder rumbling in the distance...
The little old man looked at the pastor and calmly said, 'Well, she's there.'