Mortgage Bankers Association Confirms Our Fear
Wednesday's news from the Mortgage Bankers Association offered plenty for "The Greek" to mull through my dear compatriots, so I couldn't let it go without mention. We expect you'll still find the info useful, despite its hour of delivery. So, please find our commentary below the video that follows here. Email readers must visit our independent equity research website to see the video. Stocks discussed in today's video include Merck (NYSE: MRK), J.M. Smuckers (NYSE: SJM) and Proctor and Gamble (NYSE: PNG).
Opinions expressed within the video may not agree with those of "The Greek."
Mortgage Bankers Association - Mortgage Activity Report
We found Wednesday's weekly mortgage activity report from the Mortgage Bankers' Association quite interesting. It confirmed something we've touched upon more than just once recently. The economic fishtail looks to already have begun.
Mortgage activity declined sharply in the week ended May 30, 2008, dropping 15.3% from the week before. A marked decline in refinancing activity clearly drove the move, as refinancings decreased 25.7%. Further illustrating the dramatic change, refinancing activity went from 46.1% of total weekly mortgage originations, to 40.6% in just a week's time. Seasonally adjusted purchase originations decreased 5.4%.
Why?
The average contract interest rate on 30-year fixed rate mortgages increased to 6.17% from 5.96%, while the rate for 15-year fixed rate loans rose to 5.7% from 5.49%.
My friends, (I guess we're going to hear that a million times before November) the inflation lion roars! Rates are rising on inflation concerns, and they threaten to undo much of the intended benefit of Fed rate cuts. First of all, the focus of most of the nation's attention, housing recovery faces a roadblock. Mortgages become unaffordable for more of you (remember, I'm already priced out). This means the hefty stock of home inventory gets sticky, and thus home prices do not find stability any time soon.
Secondly, but not too far off, if the cost of debt rises, and the cost of equity as well, corporations face a higher hurdle to create economic value, and its close relative, market value. What does this all mean... It means the upside for your stocks, and the economic recovery you were hoping to boost them, becomes limited. Bernanke better start thinking about correcting the skid before overcompensation sends us into full fishtail.
Pay Attention to the ECB Tomorrow
One last note, pay attention to the ECB tomorrow when the Europeans make their decision on their regional rate. We think it's going to become increasingly harder for Jean-Claude Trichet to NOT raise rates. Europe is already seeing truck driver protests blocking traffic in Paris and London, and soon unions will shut down the entire continent as they protest for higher wages to match the higher cost of living they see plainly before them.
Please see our disclosure at the Wall Street Greek website. Article interests AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: QLD, Nasdaq: QQQQ.
Opinions expressed within the video may not agree with those of "The Greek."
Mortgage Bankers Association - Mortgage Activity Report
We found Wednesday's weekly mortgage activity report from the Mortgage Bankers' Association quite interesting. It confirmed something we've touched upon more than just once recently. The economic fishtail looks to already have begun.
Mortgage activity declined sharply in the week ended May 30, 2008, dropping 15.3% from the week before. A marked decline in refinancing activity clearly drove the move, as refinancings decreased 25.7%. Further illustrating the dramatic change, refinancing activity went from 46.1% of total weekly mortgage originations, to 40.6% in just a week's time. Seasonally adjusted purchase originations decreased 5.4%.
Why?
The average contract interest rate on 30-year fixed rate mortgages increased to 6.17% from 5.96%, while the rate for 15-year fixed rate loans rose to 5.7% from 5.49%.
My friends, (I guess we're going to hear that a million times before November) the inflation lion roars! Rates are rising on inflation concerns, and they threaten to undo much of the intended benefit of Fed rate cuts. First of all, the focus of most of the nation's attention, housing recovery faces a roadblock. Mortgages become unaffordable for more of you (remember, I'm already priced out). This means the hefty stock of home inventory gets sticky, and thus home prices do not find stability any time soon.
Secondly, but not too far off, if the cost of debt rises, and the cost of equity as well, corporations face a higher hurdle to create economic value, and its close relative, market value. What does this all mean... It means the upside for your stocks, and the economic recovery you were hoping to boost them, becomes limited. Bernanke better start thinking about correcting the skid before overcompensation sends us into full fishtail.
Pay Attention to the ECB Tomorrow
One last note, pay attention to the ECB tomorrow when the Europeans make their decision on their regional rate. We think it's going to become increasingly harder for Jean-Claude Trichet to NOT raise rates. Europe is already seeing truck driver protests blocking traffic in Paris and London, and soon unions will shut down the entire continent as they protest for higher wages to match the higher cost of living they see plainly before them.
Please see our disclosure at the Wall Street Greek website. Article interests AMEX: DIA, AMEX: SPY, AMEX: DOG, AMEX: SDS, AMEX: QLD, Nasdaq: QQQQ.
posted by The Greek | 11:59 PM
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