June 19 2006

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For the week of Jun 19, 2006 --- Vol. 4, Issue 25

Last Week in Review

"SURELY YOU CAN'T BE SERIOUS!" "I AM SERIOUS, AND DON'T CALL ME SHIRLEY." FROM THE 1980 MOVIE, AIRPLANE! And the last week was a serious one indeed, with Mortgage Bond prices plummeting lower, causing home loan rates to rise between .125 and .25%. What was all the commotion over? First was the hot Consumer Price Index, showing that the prices we as consumers are paying for all of our goods and services is up 2.4% year over year…much higher inflation than the Fed wants to see. And with inflation in the crosshairs, the Fed Governors and Presidents then took turns speaking their mind all week long. Just like the infamous scene in "Airplane!" where passengers line up to slap a hysterical woman, the Fed Board members lined up to take a whack against inflation in their speeches and media soundbites, saying inflation is "unwelcome". No kidding. So although the Fed has hiked the Fed Funds Rate sixteen consecutive times in the effort to slow inflation, it appears that a seventeenth hike is on auto pilot for June 29th, and very likely another hike on August 8th. Because Fed Funds Rate hikes impact the Prime Rate - and therefore most of the interest rates we all finance our personal and business purchases on - it may be time to consider a restructure to your outstanding debt before rates rise even further. This is serious business, so I surely hope you'll call on me for assistance and ideas on strategies that may make sense during this time. AND WHAT COULD MAKE MORE SENSE THAN SAVING SOME SERIOUS DOLLARS ON YOUR CAR RENTALS THIS SUMMER? FOR SOME INSIDER SCOOPS AND SECRET CODES THAT COULD SAVE YOU BIG…DON'T MISS THIS WEEK'S MORTGAGE MARKET VIEW.

Forecast for the Week

The week ahead is lean in terms of news items…but a big hitter called Durable Goods Orders is stepping up on Friday. So what on earth are Durable Goods, and why do you care? Durable Goods are large ticket, long lasting purchases - such as refrigerators and televisions for consumers; office equipment, copy machines…even "Airplanes" for businesses. Now last month, the reading was lower than expectations, which generally indicates the economy slowing. In fact, Durable Goods Orders may be one of the first reports to show that the Fed hikes are taking a toll on the economy and the Fed may have already gone too far. Why? Because as we said above, Fed hikes affect the Prime Rate, which is the basis for the cost of borrowing money to buy these big ticket items. So whether it is on a consumer loan or a business loan, the cost is generally tied to Prime. And with Prime doubling over the past two years, it cost a lot more to make these types of purchases. So while the Fed has had to act to control inflation…they may have gone too far, as it appears that personal and business purchases are beginning to slow. In advance of the next Fed rate decision on June 29th, reports such as Durable Goods have extra significance. The chart below clearly shows how the scent of ongoing inflation in the economy has caused Bond pricing and home loan rates to worsen…so if the report comes back weak this Friday, Bonds actually might gain some altitude on the news and find a small measure of welcome improvement. But if the news continues to stink of inflation, Bonds and home loan rates will act like they had bad fish for dinner. Chart: Fannie Mae 6.0% Mortgage Bond (Friday Jun 16, 2006)

The Mortgage Market View...

YOUR ENGINES ARE RACING…you need to rent a car, but need a great deal. So you've spent hours online, and you finally feel confident that you've found that great deal. You've had five website windows open at a time, compared and contrasted, made your selection, finally finished filling out all the online screens, you're ready to check out and sure you're rounding the last bend…but then you come to a screeching halt. After all that work, you're staring at a field asking for a promotional code, coupon code, or rate code. And all you can think is…after all that work! If I had that secret code it could potentially save me even more money on this rental rate, but I don't know the code! So before you even cross the start line…is there a way to save money and save time on car rentals…and best yet, get those secret codes? Quite simply, two links to check out. First hit www.rentalcodes.com, and search for the current discount codes for all of the major rental car companies. The site clearly spells out the type of code being offered, when the code expires, and what type of car the discount applies to. Jot down a few codes for different rental car companies and then take a few minutes to do a little comparison shopping, by visiting www.bnm.com. This site gives an easy rental car comparison tool, as well as publishes last minute discount offers and even more codes. Here's another hot tip: some of the agencies will give you an even deeper discount if you pay for the entire rental upfront. And reserving the car isn't the only place that you can save a few bucks. Consider these money saving tips when you arrive at the rental counter. Don't accept the prepaid gas option unless you are certain the tank will be empty when you return the car. Although this can be convenient, it can also be costly. If you choose this option, it may cost you an entire tank of gas plus a service fee when you return the car, even if you only use a few gallons! Before you agree to the insurance option at the counter, know the details of your own auto insurance policy. If your auto policy has collision coverage, skip the insurance option. It can save you $20 or more per day. Take the time to walk around the vehicle and note all the dings and scratches. This will save you the headache of being charged for damage that may not have been done while you had the car in your possession. With gas prices at their current high levels, taking advantage of the above tips will help save you a few needed bucks…and may even provide a deep enough discount for you to upgrade to that sassy convertible!

The Week's Economic Indicator Calendar

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of June 19 – June 23 Date ET Economic Report For Estimate Actual Prior Impact

The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is not without errors.

As your trusted advisor, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.