Financial Market Affects July 27, 2015

Mortgage rates were relatively stable during the week as the bond market traded in somewhat of a choppy, sideways fashion until Friday.  For most of the week, traders primarily concerned themselves with an extremely volatile stock market in China with its effects on global trading, and the Federal Reserve’s latest monetary policy decision and statement.  Then, on Friday the Bureau of Labor Statistics reported the Employment Cost Index (ECI), a measure of wage and employer-paid benefits inflation, increased far less than expected during the second quarter to ignite a sharp rally in bond prices.

The Employment Cost Index rose just 0.2% in the second quarter when the consensus expectation was for a 0.6% increase.  This was the smallest increase in employment costs in 33 years.  Year-over-year, the ECI has grown only 2.0%, which conforms to the Federal Reserve’s overall inflation target suggesting real expected compensation growth is flat as a pancake.

Furthermore, growth in compensation and benefits was far weaker in the private sector than in the public sector.  Overall compensation in the private sector was flat at 0.0% after a rise of 0.7% in the first quarter, while overall compensation for state and local government employees increased 0.6% during the second quarter after a 0.5% gain in the first quarter.  The results of the ECI report encouraged investors to buy bonds, as the dreadful growth in wages and benefits in the private sector could push the Fed into postponing a rate hike until early 2016.

In housing and mortgage news, the Case-Shiller 20-City Index was released showing home prices increased 4.9% in May when analysts had been looking for a slightly stronger showing of 5.6%.  Meanwhile, the latest data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 25, 2015 revealed mortgage applications increased 0.8%.

The Refinance Index increased 2.0% from the prior week, while the seasonally adjusted Purchase Index declined 0.1% from a week earlier.  Overall, the refinance portion of mortgage activity rose to 50.6% of total applications from 50.3% the previous week.  The adjustable-rate mortgage segment of activity dropped to 6.6% of total applications from 7.3% the prior week.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance fell to 4.17% from 4.23%, with points increasing to 0.36 from 0.34.

Additionally, the National Association of Realtors released its Pending Home Sales Index for June showing an unexpected decline of 1.8% to 110.3.  However, the index was the third highest reading for 2015 and contracts to buy previously owned houses were up 8.2% from a year ago.  The consensus forecast had Pending Home Sales rising 1.0% last month.  Jennifer Lee, a senior economist at BMO Capital Markets, stated “The June decline is a hiccup.  It is important to bear in mind that there is still plenty of fundamental support for the housing market.”

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For the week, the FNMA 3.5% coupon bond gained 57.8 basis points to end at $103.84 while the 10-year Treasury yield fell 7.5 basis points to end at 2.19%.  Stocks ended the week with the NASDAQ Composite gaining 39.65 points to close at 5,128.28.  The Dow Jones Industrial Average added 121.33 points to end at 17,689.86, and the S&P 500 increased 24.19 points to close at 2,103.84.

 

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 7.65%, the Dow Jones Industrial Average has lost 0.75%, and the S&P 500 has increased 2.14%.  The national average 30-year mortgage rate moved to 4.03% from 4.02% while the 15-year mortgage rate increased to 3.23% from 3.21%.  The 5/1 ARM mortgage held steady at 3.04%.  FHA 30-year rates held steady at 3.75% while Jumbo 30-year rates rose to 3.80% from 3.79%.

 

 

Mortgage Rate Forecast with Chart

The FNMA 30-year 3.5% coupon bond ($103.84, +57.8 bp) traded within a 79 basis point range between a weekly intraday high of 103.88 and a weekly intraday low of $103.09 before closing at $103.84 on Friday.  The week’s greatest move took place on Friday when the bond powered its way 45 basis points higher to move above overhead resistance at $103.64.  Trading was choppy during the week, and after a negative stochastic crossover sell signal on Thursday, the slow stochastic oscillator abruptly reversed direction resulting in a positive stochastic crossover buy signal on Friday to create conflicting signals.

Both signals took place while the slow stochastic oscillator showed the bond was “overbought” and susceptible to a downward reversal.  A security can remain “overbought” for a longer than expected period of time. As such, when an “overbought” condition exists, it is a sign to have an extra cautious outlook and be wary of any developing signs of trading weakness.  The closest technical support level is now found at $103.64 while overhead resistance is found at the 100-day moving average at $103.94.

Technical signals will take a backseat to economic news with the next major catalyst for both the stock and bond markets arriving at the end of the week when the Labor Department releases the Employment Situation Summary for July on Friday.  In addition to the latest number of new jobs created, traders will be paying particular attention to the hourly earnings number after the dismal growth in private sector compensation and benefits shown in the Employment Cost Index report last Friday.

If the job creation and hourly earnings numbers are reported above the consensus forecast, the bond market will sell-off as it raises the prospect for an interest rate hike as soon as September by the Federal Reserve.  If the jobs data is below forecast, it lowers the likelihood for an interest rate hike in 2015, and bond market prices could continue to move higher with yields and mortgage rates moving lower.

Chart:  FNMA 30-Year 3.5% Coupon Bond

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Economic Calendar – for the Week of August 3

The economic calendar expands with a number of potential market-moving reports headlined by the July Employment Situation Summary from the Bureau of Labor Statistics, a unit of the United States Department of Labor.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – iPetCompanion lets you play with your pets via telepresence

By Michael Savoie

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iPetCompanion have developed telepresence technology that allows you to manipulate toys so you can play with your pets while you’re away.  The team has installed the system in hospitals and animal shelters to connect sick kids to homeless pets in need of interaction.  Now they are crowdfunding on Kickstarter to bring a consumer version into people’s homes.

This is not new, but it is one of a few products out there designed specifically for play.  I’ve previously written about a Microsoft engineer who used Robotics Studio to design DarwinBot, a mobile robot to play fetch with his dog.  There are also web based pet feeders, like

FeedandGo or Petzi that simply just allow you to feed and speak to your pets.  But play is more interactive than feeding.

iPetCompanion has been doing this for a few years and is installed at several pet shelters across the US.  It has actually increased adoptions at these facilities as humans fall in love with these furry creatures and take them home.  Stories are written everyday about how technology disconnects us from the real world; this is one where technology allows us to form new connections and potentially in real life.

About the author:  Michael is the founder and Chief Robot Wizard at Frostbyte Technologies, a start-up aimed at developing autonomous outdoor mobile robots.  He also writes for TelepresenceRobots.Com, because due to all his interests he is constantly trying to be in multiple places at any given time.

 

Financial Market Affects July 13, 2015

This past week the financial markets breathed a sigh of relief as it looks as if the Greek debt crisis is finally working toward a temporary resolution between Greece and its creditors.  It appears Greece will receive emergency aid and a bailout covering the next three years in exchange for a number of significant financial reforms.  The stock and bond markets both ended higher on the week as a result.

The week’s voluminous economic data, though mixed with some solid and weak reports, may have also provided stocks and bonds with a boost by generally pushing back the prospect of higher interest rates.

For example, Retail Sales for June were reported significantly below the consensus forecast.  The Census Bureau reported Retail Sales fell -0.3% in June when economists had projected a +0.3% gain.

In the area of manufacturing, the New York Fed reported their Empire State Manufacturing Survey for July recorded a six-point gain to 3.86 while the consensus forecast was 3.0.  Further, the Philadelphia Fed’s Business Outlook Survey showed a rebound in manufacturing conditions for the Philadelphia region by rising to 15.2 in June from 6.7 in May.  The consensus forecast had called for a reading of 8.0 for the index.

Inflation on the wholesale level was a little “hotter” than consensus estimates but still well below levels that would prompt the Fed to raise rates.  The Producer Price Index increased 0.4% in June after increasing 0.5% in May.  The consensus forecast had called for an increase of 0.3%.  When excluding food and energy costs, the Core PPI increased 0.3% in June after increasing 0.1% in May.  The consensus forecast was for an increase of 0.1%.

Inflation at the consumer level in June matched consensus estimates.  Consumer prices as measured by the Consumer Price Index (CPI) rose +0.3% during June while the so-called Core CPI, which excludes volatile food and energy prices, also matched expectations with a reading of +0.2%.  The year-over-year Core CPI edged higher from 1.7% to 1.8% to move a little closer to the Fed’s inflation target of 2%.

There were several reports for the housing sector this week.  CoreLogic released its May 2015 National Foreclosure Report showing foreclosure inventory fell by 27.4% while completed foreclosures dropped by 19.2% from May 2014.  The number of foreclosures nationwide declined year-over-year from 51,000 in May 2014 to 41,000 in May 2015.  This is a decrease of 64.9% from the peak of completed foreclosures in September 2010.

The latest data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for the week ending July 10, 2015 showed mortgage applications fell 1.9%.  The Refinance Index increased 4.0% from the prior week, while the seasonally adjusted Purchase Index dropped 8% from a week earlier.  Overall, the refinance portion of mortgage activity rose to 50.8% of total applications from 48% the previous week.  The adjustable-rate mortgage segment of activity increased to 7.4% of total applications.

The National Association of Home Builders (NAHB) /Wells Fargo Housing Market Index for July increased by a point to a nine and a half year high of 60 from a June reading of 59.  This indicates significantly more builders view sales conditions as good than view them as poor.  The Index came in higher than the consensus forecast of 59 and was the highest value since November of 2005.  David Crowe, NAHB’s chief economist, stated “This month’s reading is in line with recent data showing stronger sales in both the new and existing home markets as well as continued job growth.  However, builders still face a number of challenges, including shortages of lots and labor.”

The market for housing continues to expand with Housing Starts rising 9.8% to 1,174,000 annualized units in June from May’s reading of 1,036,000 units.  Starts came in slightly ahead of the consensus forecast of 1,120,000 units.  Meanwhile, Building Permits also moved higher for the month with a reading of 1,343,000 versus a consensus estimate of 1,150,000.

In addition to the week’s large number of economic reports, market participants also scrutinized what Fed Chair Janet Yellen had to say before the Committee on Financial Services of the U.S. House of Representatives and the Committee on Banking, Housing, and Urban Affairs of the Senate regarding the country’s current economic condition and when the Fed might begin normalizing interest rates.  In her biannual update on monetary policy, Yellen said “economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy.”  Yellen also said the pace of rate increases after the first rate hike will be data dependent.

For the week, the FNMA 3.5% coupon bond gained 32.8 basis points to end at $103.03 while the 10-year Treasury yield fell 5.4 basis points to end at 2.35%.  Stocks ended the week with the NASDAQ Composite gaining 212.44 points to close at 5,210.14.  The Dow Jones Industrial Average gained 326.04 points to end at 18,086.45, and the S&P 500 added 50.02 points to close at 2,126.64.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 9.10%, the Dow Jones Industrial Average has added 1.46%, and the S&P 500 has increased 3.19%.  The national average 30-year mortgage rate fell to 4.07% from 4.14% while the 15-year mortgage rate dropped to 3.25% from 3.31%.  The 5/1 ARM mortgage fell to 3.07% from 3.09%.  FHA 30-year rates held steady at 3.75% while Jumbo 30-year rates fell to 3.84% from 3.92%.

Mortgage Rate Forecast with Chart

The FNMA 30-year 3.5% coupon bond ($103.03, +32.8 bp) traded within an 89 basis point range between a weekly intraday high of 103.03 and a weekly intraday low of $102.14 before closing at $103.03 on Friday.  The bond opened Friday above closest resistance located at $102.97 with a small rising window or gap and then successfully tested support at the 25-day moving average located at $102.86 before breaking back above the $102.97 resistance level.  The next resistance level is located at the 61.8% Fibonacci retracement level at $103.16.  The bond continues to trend higher following buy signals triggered earlier in the week when there was a Morning Star candle pattern completed last Tuesday and a bullish engulfing lines candle pattern completed on Thursday.  The 25-day moving average continues to serve as support.  The slow stochastic oscillator continues to trend higher, but is not close to becoming “overbought” so we could see further price appreciation and slightly lower mortgage rates this coming week.

Chart:  FNMA 30-Year 3.5% Coupon Bond

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Economic Calendar – for the Week of July 20

 

The economic calendar slows down considerably this week with just a handful of reports scheduled primarily on Wednesday and Thursday.  The housing sector is featured with the FHFA Housing Price Index and Existing Home Sales reports on Wednesday with the New Home Sales report set for release on Friday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – How to Choose Closing Coordination Software Technology Solutions

Written by Jonathan Cutler

More transactions, more stress, thinner margins.  These qualities could describe any number of businesses, but they hit a bulls-eye for anyone involved in real estate.  The increasing volume of transactions required to maintain profitability is causing everyone to look for new technologies that break through the frustrating “glass ceiling” of efficiency.  Closing coordination software is an entirely new category of software that works alongside your current software, increasing your margins by eliminating the built in redundancy in your business processes.  It shatters the efficiency ceiling.

By adding reporting, archiving, tracking, and integrating Web features to the software you already use, closing coordination reduces the management overhead of the average agent, title company, builder, or lender by as much as 35% — while simultaneously improving customer service.  Most of the gains are achieved by eliminating redundancies in faxing, phone calls, filing and looking for files, email, and travel.  Ironically, the same real estate pros that have been slow to investigate this new technology might be surprised to find that their clients are already wondering why they can’t get their transaction information over the web.  Think about it, your clients are the same people who already use the web to check airline schedules, research their ailments, check school closings, trade stocks, and email jokes to their friends.

In an average real estate transaction, there are typically 10 different parties and 20 different steps that must take place concurrently before a transaction can be finalized.  There are also more than 50 forms faxed or reviewed, and between 150 and 400 phone calls, depending who you ask.  By using closing coordination software, each party sends their documents to their unique Web site, posts their messages on one electronic bulletin board, and makes their lists of open items where everyone can “click in” to see them.  With a 24 hour place to do business with you, your customers become MORE, not LESS connected to the people involved in the transaction.

While most companies already have Web sites, the next step is to understand that a Web site can be more than an electronic brochure or information service – it can actually do work.  When evaluating closing coordination, therefore, it’s not a matter of finding the right Web site, but of finding the right set of software tools which use the Web to implement their communication components.  Not every software package is created equal.  So like any other new purchase there’s homework to be done.

Questions you should ask yourself and software providers are:

  • Communication & Document Delivery: Can the service offer secure document delivery, document sharing, scheduling, task tracking, messaging, and group email?
  • Ordering: Will it allow you to order an appraisal, inspection, survey, or anything else you need with a few clicks?  Must you work with in-house or network services, or can you work with your usual vendors?
  • Logging: Is it capable of tracking everything that happens on your Web site?  If something doesn’t look right, or you end up with a “different impression of events” than your client or vendor, your Web site event log should tell the true story of who said what and when.
  • Archiving: If your Web site logs every message, document, form, task, and calendar item from every closing, can you keep that record for perpetuity? Get it on CD?  Logging without archiving is like a car without gas.  This will ultimately greatly reduce the mountains of paperwork you have to file and save.
  • Reporting: Can you see all of your current closings on a single screen or in one simple report?  Does that report give you the information YOU need and care about?  If you do a significant volume, you need to be able to access any one of your transactions with a click or two, and without logging in and out each time.  Also, is recent activity flagged for you?  Look for a system that can export reports to a spreadsheet, or email that report to others with whom you work for maximum efficiency.  Can you get multi-level and reporting for corporate oversight?
  • Neutrality: This is probably the least discussed, least obvious, and yet most important feature for any software that will survive more than a year or two.  Several closing coordination platforms are designed specifically for realtors, just for lenders, or primarily for relocation use.  Yet the word “coordination” means that any tool you use must be meaningful and powerful for the other professionals you work with as well.  Why?  It seems obvious, but if the title company, the appraiser, the lender, the builder, the inspector, the agent, etc. don’t all find it to be a time saving and economic application for their business, they won’t use it — and you won’t reap the benefits.  You want the software you use to also be the software they use.
  • Integration: Can your closing coordination software import data from your production software, or export it in a format useful for your vendors?  Integration means that the software you choose can import and export common file formats that are useful for all parties to the transaction.  Without integration, everyone is forced to re-enter the same data, data that may already exist in their other software.
  • Security: Is the Web-based software you are considering hosted in a true national data center, or in someone’s office.  Or worse, are you expected to host your own web server?  Hosting an application server with web access is a unique and special business, and one that should be outsourced to the pros.  This is your assurance of 24/7 availability, fire protection, power redundancy (especially in California!), and nightly data backups.  With good hosting, security on most web-based applications significantly exceeds the security of keeping the same information in your own office.
  • Cost: Any good closing coordination software will save you more than it costs, but how much does it cost?  There are basically five ways companies charge for services: 1) A per transaction fee, where you only pay for what you use, make no time commitments, and can often pass the cost on the buyer/borrower.  2) Advertising supported services that are free to the user, but not sustainable over the long term.  3) Referral fee supported, which is free only if you are willing to ask your vendors to sign up and pay a fee.  4) Per seat or license charges tied to a period of time – which usually requires set-up fees and a time commitment, and are hard to pass on to the buyer/borrower or share between offices.  5) Vendor supported, which is free only if you use that vendor for every transaction, and they build it into the price of the service.

If you are a volume player with access to the Web from your office and reasonably up to date computers (less than 4 years old), then you can immediately benefit in a big way.  If you are a smaller office sharing a single connection to the Web, the advent of closing coordination is probably sufficient reason for you to look at adding additional locations in your office for Web access and upgrading your connection.  If you’re still using a free or consumer email account which filters or limits attachments, you probably don’t realize it, but you are advertising yourself as small and dated to all of your vendors, clients, and associates.

It is no longer true that businesses are ahead of consumers in new technology.  Your clients already research communities, find builders, realtors and other services, and research loan pricing online.  They (or at least the almost 75% of the population that are online) assume that you will give them access to their closing and escrow documents and information over the web.  Don’t let your competitors beat you in this game; it’s too easy to be a winner.

Financial Market Affects June 29, 2015

This past week the bond market went on a rollercoaster ride driven by two major events, the seemingly never-ending Greek debt crisis and the June Employment Situation Summary (Jobs Report) from the Department of Labor.

The bond market began the week by spiking higher in a flight-to-safety buying spree while the U.S. stock market joined a global equity market sell-off as Greece moved closer to defaulting on its debt.  Greece was unable to agree to a cash-for-reform deal to resolve its sovereign debt with its creditors and has technically defaulted on a 1.6 billon euro ($1.73 billion) loan installment due to the International Monetary Fund.  This technical default could eventually lead Greece to a full default on its entire 323 billion euro ($360 billion) debt load, and should this happen; the consequences could shock the European banking sector to its very core.  The world will know more this week whether or not the Greek people will accept a creditor cash-for-reform proposal following the results of Sunday’s Greek referendum on the matter.

So… what would likely happen with a full-blown Greek default?  First, around $5 billion worth of credit default swaps (CDS) that investors in Greek bonds took out to protect themselves from a default would come into play.  The financial institutions that issued the CDS would be required to pay the face value of the bonds immediately, erasing some profits from their bottom lines.  Also, foreign banks holding Greek government debt would need to write down or possibly write off the entire value of that debt due to the default.  This scenario is very similar to what happened in 2008 when the banks were forced to write down billions of dollars in mortgage-backed securities as a result of the housing bust.

European banks have considerable exposure to Greek government debt with their holdings of $54.2 billion in Greek bonds.  German lenders are the largest foreign owners of Greek government debt with a total of about $22.7 billion in bonds.  French lenders have about $15 billion worth of Greek government debt exposure.  Also, in reference to the Greek private debt category, Moody’s recently issued credit warnings for three large French banks: BNP Paribas, Societe Generale and Credit Agricole.  These banks hold a combined $65 billion in public and private Greek debt, and if they have to write down an amount this large it could lead to greater chaos in the global financial system.

In economic news, the National Association of Realtors reported its seasonally adjusted Pending Home Sales Index increased 0.9% to 112.6 in May, climbing to its highest level in more than nine years.  The consensus forecast had called for the Index to rise 1.4%.  The index increased 10.4% over the past 12 months to put it just below the April 2006 level.

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Also in the housing sector, the S&P/Case Shiller Index for April showed home prices continued to rise, but at a slower rate than the prior month of March.  The 20-city Index increased 4.9% year-over-year, but the rate of annual price gains slowed in urban areas.  The consensus forecast had called for a rise of 5.6%.  The 10-City Composite Index gained 4.6% year-over-year while the National Home Price Index, covering all nine U.S. census divisions, recorded a 4.2% annual gain in April 2015 versus a 4.3% increase in March 2015.

Furthermore, the Commerce Department reported U.S. Construction Spending increased 0.8% to a seasonally adjusted annual rate of $1.036 trillion in May versus the consensus forecast for a 0.3% gain, reaching its highest level since October 2008.  Economists at RDQ Economics in a note to clients stated “Construction spending looks set to add significantly to second-quarter GDP growth, while upward revisions to the first quarter could add as much as a half-percentage point to real GDP growth.”

In the mortgage industry, the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 26, 2015 showed the Market Composite Index, a measure of mortgage application volume, fell -4.7% from a week earlier.  The Refinance Index dropped 5% from the previous week to its lowest level since December 2014.  Meanwhile, the seasonally adjusted Purchase Index declined 4% from a week earlier.  The refinance share of mortgage activity declined to 48.9% of total applications from 49.0% the prior week.  The adjustable-rate mortgage share of activity remained unchanged at 7.0% of total applications.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balance increased to 4.26%, its highest level since October 2014, from 4.19%, with points paid dropping to 0.33 from 0.38.

The week ended with bond prices moving higher following data from the June Employment Situation Summary (Jobs Report) showing a stumbling labor market that cast doubts about whether the Federal Reserve would begin to hike interest rates sometime during the fourth quarter.

The Labor Department reported employers added 223,000 workers in June which was less than the 230,000 consensus forecast.  It also downgraded its jobs numbers from April and May resulting in 60,000 fewer jobs created than previously reported.  Another poor data point was the absence of any wage growth.  The 0.0% hourly earnings number should disappoint the Fed which has counted on growing wages to help support consumer spending and move inflation toward their 2% target.

Meanwhile, bond traders who were worried about Greece’s Sunday referendum regarding austerity programs in exchange for another bailout, bought safe haven U.S. treasuries ahead of the three-day Independence Day weekend.

For the week, the FNMA 3.5% coupon bond gained 54.7 basis points to end at $102.77 while the 10-year Treasury yield fell 9.0 basis points to end at 2.39%.  Stocks ended the week with the NASDAQ Composite losing 71.30 points to close at 5,009.21.  The Dow Jones Industrial Average dropped 216.57 points to end at 17,730.11, and the S&P 500 fell 24.71 points to close at 2,076.78.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 5.45%, the Dow Jones Industrial Average has lost 0.52%, and the S&P 500 has increased 0.86%.  The national average 30-year mortgage rate fell to 4.13% from 4.20% while the 15-year mortgage rate decreased to 3.29% from 3.37%.  The 5/1 ARM mortgage fell to 3.11% from 3.15%.  FHA 30-year rates dropped to 3.75% from 3.85% and Jumbo 30-year rates decreased to 3.92% from 3.98%.

Mortgage Rate Forecast with Chart

The FNMA 30-year 3.5% coupon bond ($102.77, +54.7 bp) traded within a 94 basis point range between a weekly intraday low of $102.22 and a weekly intraday high of 103.16 before closing at $102.77 on Thursday in a volatile, holiday shortened week.  The mortgage bond market was weak on Tuesday and Wednesday, but bounced back strongly on Thursday following a disappointing June Jobs Report.

Thursday’s strong showing resulted in the formation of a two-day bullish engulfing lines candlestick pattern, a moderately strong buy signal.  Furthermore, the slow stochastic oscillator is now “in sync” with this candlestick buy signal with its buy signal from a positive stochastic crossover.  Overhead resistance is now defined by the 25-day moving average at $103.06 while technical support remains at the 50% Fibonacci retracement level located at $102.36.  If Thursday’s upward momentum can be maintained this coming week, we should see a slight improvement in mortgage rates.  The wild card for the week remains the Greek debt crisis and whether or not a deal can be struck between the Greek government and its many European Union creditors.

Chart:  FNMA 30-Year 3.5% Coupon Bond

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Economic Calendar – for the Week of July 6

The economic calendar quiets down this week and features the ISM Services Index for June on Monday; Crude Oil Inventories and the Federal Reserve’s FOMC Minutes on Wednesday; and the weekly Initial Jobless Claims report on Thursday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – Get Interrupted Less, Achieve More

By Jeff Davidson

With office and workplace interruptions on the rise, career professionals everywhere are experiencing monumental struggles to stay focused.  By some studies, today’s typical worker is interrupted every 11 minutes and then takes another 25 minutes to return to the original task because of all the other distractions along the way.

The more often you can keep interruptions at bay, stay focused on the task at hand, and allow yourself to do your best work, the more you’ll get done in a day.  If the position for which you are hired requires that you be interrupted all day long, that’s one thing.  Most of us, most of the time, have options when it comes to safeguarding our workspace and allowing us to have some uninterrupted stretches of time where we can concentrate on the project or task before us.

Why do so many of us, invite interruptions, or short of that, not vigilantly keep them at bay?  Of many possible explanations for this phenomenon, three stand out:

  1. Social media has enveloped the world, aided and abetted by mobile devices. Today, too many people are more fixated on the next communication they receive than staying focused on the task at hand. ’Nuff said.
  1. Television, radio, movies, and all other forms of news, information, and entertainment have inexorably increased the pace at which they disseminate their messages.

The average camera angle on television changes every 3.5 seconds.  Radio announcers now speak at faster paces than their counterparts of a generation ago.  The typical movie plot and pacing is noticeably faster than movies of generation ago.

While we speak at about 125 words a minute, we can listen and intake information at three times that rate.  Unless we train ourselves to slow down our focus on the message before us, and not be mentally drifting ahead, the swirl of communication that surrounds us pushes us to absorb information faster and faster.

Conversely, our professional tasks often require a slow pace.  Our concentration often cannot be rushed.  It takes a rare individual today to maintain separation between the rate at which he or she absorbs information from popular media, versus the rate at which he or she can understand, say, technical instructions, plotting a new strategy, or absorbing an internal staff report.

  1. Reading is not pretty. Much of the work that you do in the course of a given day involves reading. By some studies, career professionals typically read between two to four hours a day, including emails, email attachments, other forms of electronic messaging, and traditional print documents.  When you read, you’re just sitting there, looking at a page or a screen.  To those passing by, say in the hallway, it may appear that you’re not doing too much.

By contrast, walking to the copier, posting a note on the wall, or conducting a meeting with others, requires some form of action.  Who among us would rather sit and study, versus taking some sort of action?  As human beings, we are predisposed to take action.  Sitting and concentrating requires discipline.  Contemplating new instructions or new tasks requires mental consternation which can be accompanied by mental angst.

The ability to communicate with anybody at any time from any place around the world; the global media that bids us to pay attention to its ever-rapid dissemination of information, communication, and entertainment; and our inbred predisposition to take action rather than sit and contemplate, makes it seem as if the deck is stacked against you.

Yet, trailblazers in every industry and profession understand the importance of safeguarding their workspace from interruptions and distractions that would take them off course and render them from being less productive than they otherwise could be.

Such blessed individuals understand the need for quiet time.  They are willing to barricade themselves from the outside world, if that’s what it takes, to achieve mental clarity.  Once having done so, they can perform at their best.  They can make effective decisions.  They are better able to lead.

In which camp will you choose to be?  Will you join the masses who are buffeted daily by all manner of temptation resulting in less than stellar work performance?  Or will you have the mental and emotional resolve to join the winners?  Interruptions are the antithesis of concentration.  To be at your best, you and you alone must take the steps necessary to safeguard your work environment.  No one is coming to help you.

The choice is up to you.

Jeff Davidson is “The Work-Life Balance Expert®,” is a preeminent time management authority, has written 59 mainstream books, and has been widely quoted in the Washington Post, Los Angeles Times, Christian Science Monitor, New York Times, and USA Today.  Cited by Sharing Ideas Magazine as a “Consummate Speaker,” Jeff believes that career professionals today in all industries have a responsibility to achieve their own sense of work-life balance, and he supports that quest through his websites www.BreathingSpace.com and www.Work-LifeBalance.net and through 24 iPhone Apps at www.itunes.com/apps/BreathingSpaceInstitute.

Financial Market Affects June 8, 2015

Mortgage bonds, U.S. Treasuries, and German 10-year notes or “bunds” were quite volatile this past week.  U.S. Treasury yields increased sharply to start the week, and on Wednesday the yield on the 10-year German government note climbed to more than 1.00% for the first time since September 2014.  Yields on Treasuries and German sovereign debt then fell suddenly near the end of the week in spite of economic data that was stronger than forecast.  The U.S. Commerce Department reported core retail sales grew a solid 0.7% in May, and data on May producer prices showed a slightly higher than forecast increase of 0.5%.

Much of the week’s bond market volatility resulted from a standoff between Greece and its creditors with little or no progress being made to resolve Greece’s debt crisis.  The International Monetary Fund (IMF), which is one of Greece’s major creditors, “stunned” the financial markets they pulled out of talks with Greece due to a lack of progress on a deal to restructure Greece’s debt.  If Greece fails to make a 1.6 billion euro payment to the IMF by the end of June, it will be in technical default, which could mean the European Central Bank will no longer accept the country’s bonds as security for emergency liquidity lending.  If that would happen, it could lead to a collapse of the Greek banking system which would likely create considerable financial turmoil in Europe that could easily spread elsewhere in the global financial markets.

Confirming the decision of the IMF delegation to withdraw from the talks, an IMF spokesperson said “There are major differences between us in most key areas. There has been no progress in narrowing these differences recently.  The ball is now in Greece’s court.”  There also were reports circulating that Eurozone officials have discussed a default scenario in a ‘theoretical’ way, perhaps planning for an inevitable default.

In housing news, CoreLogic’s National Foreclosure Report for April showed foreclosure inventory fell by 24.9% and completed foreclosures were down by 19.8% on a year-over-year basis.  There were 40,000 completed foreclosures nationwide in April compared to 50,000 from one year earlier.  April’s foreclosure level was 65.8% lower than the peak of completed foreclosures in September 2010.  CoreLogic also reported the national foreclosure inventory included approximately 521,000 homes, or 1.4% of all homes with a mortgage compared with 694,000 homes in April, down from the 1.8% level in April 2014.  The number of mortgages in serious delinquency fell on a year-over-year basis by 22.1% in April, with 1.4 million or 3.6% of mortgages in this category, which is the lowest level since May 2008 and down from 3.9% last month.

Also, the Mortgage Bankers Association reported its index of mortgage application activity rose 8.4% for the week ended June 6 while interest rates hit their highest level since November 2014.  Refinance Applications increased 7.0%, while Purchase Applications rose 9.7%.  The refinance portion of total mortgage activity was unchanged from the prior week at 49% of applications.  The adjustable-rate mortgage (ARM) share of activity increased to 6.3% from 6.1% in the prior week.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances jumped 15 basis points to 4.17% during the week, the highest level since November 2014.

For the week, the FNMA 3.5% coupon bond lost 14.1 basis points to end at $102.69 while the 10-year Treasury yield fell 1.0 basis point to end at 2.39%.  Stocks ended the week with the NASDAQ Composite losing 17.36 points to close at 5,051.10.  The Dow Jones Industrial Average added 49.38 points to end at 17,898.84, and the S&P 500 gained 1.28 points to close at 2,094.11.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 6.24%, the Dow Jones Industrial Average has added 0.42%, and the S&P 500 has increased 1.68%.  The national average 30-year mortgage rate fell to 4.12% from 4.13% while the 15-year mortgage rate dropped to 3.31% from 3.34%.  The 5/1 ARM mortgage rose to 3.05% from 3.03%.  FHA 30-year rates held steady at 3.75% and Jumbo 30-year rates also held steady at 3.94%.

Mortgage Rate Forecast with Chart

The FNMA 30-year 3.5% coupon bond ($102.69, -22 bp) traded within a range between a weekly intraday low of $102.16 and a weekly intraday high of $103.17 before closing at $102.69 on Friday.  Following a substantial gain on Thursday, bond prices traded higher on Friday to approach the 61.8% Fibonacci retracement level defining overhead resistance at $103.16 before pulling back into a loss for the day.  Friday’s trading failed to provide positive follow-through from the bullish three-day Morning Star candlestick pattern completed on Thursday.  Bond traders were indecisive and showed a lack of market conviction to end the week.  A positive stochastic crossover buy signal produced from last Thursday’s trading remains intact, so it is still possible that we could see some price improvement next week unless last Thursday’s sharp move higher proves to be nothing more than a “short-covering” rally with limited upside potential.  However, bond market volatility could certainly continue this week ahead of Wednesday’s FOMC interest rate decision and with any breaking news concerning negotiations between Greece and its creditors.

Chart:  FNMA 30-Year 3.5% Coupon Bond

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Economic Calendar – for the Week of June 15

The economic calendar features releases on manufacturing, housing, and inflation in addition to weekly initial jobless claims and a FOMC interest rate decision this week.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – Does The Listing Pass The Sniff Test?

By Amie H Chaney

All homes have a smell.  If it’s pleasing, it will be to the seller’s advantage.  I once asked a friend what prompted her to buy her current home.  “It smelled like home,” was her reply.  The reverse is also true.  If the home’s smell is offensive, potential buyers will walk away.

Since a seller is accustomed to the smell of their home, it is best to have an objective third party take the “sniff test.”  If the home fails the test, there are remedies.

The easiest and best way to make the home smell fresher is to let in fresh air.  Ventilate the home by opening windows and doors on opposite ends of the house.  Carpets and curtains should be professionally cleaned.  Professional carpet cleaners now have odor removing or reducing products used in connection with their cleaning process.

Next, determine what exactly is causing the odor and correct it.  One very offensive odor is the odor caused by pet accidents.  There is an easy, inexpensive homemade remedy for this problem.

In order to correct the problem, we first need to know exactly where the problem areas are.  For this, it is best to purchase a hand held black light which, in a darkened room, will reveal where pet urine and other stains are located.  Hand held black lights can be purchased for approximately $25.00 and are worth every penny.

Once the stains have been located, wet the area thoroughly with a solution of 50% white vinegar and 50% water.  The acidity in the vinegar will neutralize the ammonia in pet urine.  When the area is dry, apply a liberal amount of baking soda over the affected area and drizzle a quarter cup of 3% hydrogen peroxide and a teaspoon of dishwashing detergent.

Work this in to the carpet with a scrubbing brush or your fingers to dissolve the baking soda and work it down into the carpet.  Allow the area to dry, and then use a vacuum to fluff up the carpet.  This process may be repeated several times for heavily soiled areas.

The odor from cigarette smoking can be especially offensive to prospective buyers.  Of course, the best way to eliminate this smell is to have the home professionally cleaned, including carpets and drapes, and discontinue smoking in the house.

Another helpful tip is to use vinegar in small bowls hidden around the house.  Vinegar is a natural odor neutralized.  I have also found the use of Lysol Neutra Air to be helpful.  This product has less of a chemical smell and leaves the area smelling clean and fresh.

With the use of these helpful tips, the listing should pass the “sniff test.”

Financial Market Affects May 25, 2015

Mortgage bonds trended higher during a holiday shortened week while investors sifted through a multitude of “mixed” economic news, a new round of Treasury auctions, and troubling rumors concerning Greece and its debt problems.  One area of upbeat economic news during the week favored the housing sector, which plays a vital role in the economy and continues to show improvement.

On Tuesday, New Home Sales for April was reported at 517,000 units, annualized, and exceeded the consensus forecast of 510,000.  Also, April New Home Sales were higher than March’s revised number of 484,000.  Supply continues to be a problem with the supply rate down to 4.8 months.  Furthermore, housing prices have been edging higher, according to the latest monthly reports from the Federal Housing Finance Agency (FHFA) and the Case-Shiller 20-City Index.  Although the 0.3% gain reported for the March FHFA Housing Price Index was below the low-end of analyst expectations, the year-over-year number came in at a respectable +5.2% and was down only one tenth of a percent from February’s revised 5.3%.

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The Case-Shiller National Home Price Index covering all nine U.S. census divisions showed single-family home prices gained 4.1% in March while the 20-City Index rose an annual 5% in March, up from 4.8% in February.  The consensus estimate for the year-over-year 20-city index called for growth of 4.6%.  The 10-city composite index rose by 4.7%.  Since the low of March 2012, home prices are up 29.8% and 30.7% on the 10-city and 20-city indexes, respectively.

On Wednesday, the bond market responded favorably by moving higher following a successful 5-year Treasury note auction.  The Treasury auctioned $35 billion in 5-year notes that reached a high yield of 1.560%, which was the highest since December.  The auction was met with decent demand and had a bid-to-cover ratio of 2.46.  Indirect bidders, which include major central banks, took 58.4% of the supply.  Direct bidders, which include domestic money managers, bought 9.96% of the issue, this group’s largest share since last October.  The auction went smoothly and the treasury market responded by trading higher from pre-auction levels.

On Thursday, global equity markets came under selling pressure for the benefit of the bond market after Chinese brokerages stiffened margin trading rules and the head of the International Monetary Fund, Christine Lagarde, denied there is a forthcoming deal to keep Greece from a default.  Lagarde stated “We are all in the process of working toward a solution for Greece, and I would not say that we already have reached substantial results.  Things have moved, but there is still a lot of work to do.  A Greek exit is a possibility.  Such a step would “not be a walk in the park,” but would “probably not” mean the end of the euro.”

In housing news on Thursday, the National Association of Realtors reported its seasonally adjusted Pending Home Sales index rose 3.4% to 112.4 in April, the fourth consecutive monthly gain.  The consensus forecast had Pending Home Sales rising by just 1.0% last month.  Year-over-year Pending Home Sales were up 14.1%.  The index has now reached its highest level since May 2006.

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On Friday, the bond market was favored over the stock market as institutional investors sorted through several uninspiring economic reports while continuing to worry about Greece’s debt problems.  According to the second estimate, U.S. GDP contracted by -0.7% in the first quarter of 2015 instead of growing by +0.2% as first reported.  Harsh weather, a stronger U.S. dollar, the West Coast shipping ports strike, and a larger trade deficit were cited as excuses for the contraction in first quarter GDP.  The trade deficit was revised to a greater -$548.4 billion from the -$522.1 billion reported in the advance release.  This resulted in a 1.90% point reduction in first quarter GDP growth which was greater than the 1.25% reduction reported in the advance release.

For the week, the FNMA 3.5% coupon bond gained 40.6 basis points to end at $104.41 while the 10-year Treasury yield fell 9.1 basis points to end at 2.12%.  Stocks ended the week with the NASDAQ Composite losing 19.33 points to close at 5,070.03, the Dow Jones Industrial Average dropping 221.34 points to end at 18,010.68, and the S&P 500 falling 18.67 points to close at 2,107.39.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 6.59%, the Dow Jones Industrial Average has added 1.04%, and the S&P 500 has increased 2.30%.  The national average 30-year mortgage rate fell to 3.93% from 3.98% while the 15-year mortgage rate decreased to 3.19% from 3.23%.  The 5/1 ARM mortgage rose to 2.96% from 2.95%.  FHA 30-year rates fell to 3.60% from 3.75% and Jumbo 30-year rates fell to 3.75% from 3.80%.

Mortgage Rate Forecast with Chart

The FNMA 30-year 3.5% coupon bond ($104.41, +41 bp) traded within a range between a weekly intraday low of $103.98 and a weekly intraday high of $104.52 before closing at $104.41 on Friday.  The bond is currently trading on a buy signal from a positive stochastic crossover from May 22 and has broken above a pennant formation first identified in last week’s Road Signs issue.  The bond has also closed above its 25-day moving average resistance level for the first time since April 27.  This level now reverts to nearest technical support while secondary support is found at $103.97.  The next resistance level is the 50-day moving average at $104.69.  The stochastic oscillator is currently mid-range so there is further room to the upside before it signals the bond is “overbought.”  A projected long-term target line for the pennant formation breakout is shown in the chart below.  If the bond manages to continue to trend higher this week, we should see a slight improvement in mortgage rates.

Chart:  FNMA 30-Year 3.5% Coupon Bond

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Economic Calendar – for the Week of June 1

The economic calendar features Personal Income and Spending with PCE Core Prices on Monday; ADP Employment Change, Crude Oil Inventories, and the Fed’s Beige Book on Wednesday; weekly Initial Jobless Claims, Revised 1st Qtr. Productivity and Unit Labor Costs on Thursday; and the Employment Situation Summary for May (Jobs Report) on Friday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – Timing is Key When Tracking Expired Listings

By Bob Corcoran

Here’s the scenario: you’re checking the MLS hot sheet for expired listings … it’s a good day. More than 30 show up.  You grab the phone and start dialing for dollars.

It’s a scene in thousands of real estate offices every day.  It’s also one of the biggest time wasters in an agent’s life.  Yes, you read that right, it’s one of the biggest time wasters you can do.

Nothing against “expireds.”  In fact, expireds are a perfect target for agents because these are people who’ve proven they want to sell and move.  And actually, I believe if you approach expireds the right way, you can make a darn good living on them and them alone.

But the problem is timing.  Take careful note here: most agents are picking the fruit before it’s ripe.

Repeat after me: “I will pick no fruit before its time.”

What happens when you join hundreds of your fellow agents all jumping at – and reaching for – the same apple?  You get trampled.  You get frustrated.  And you get lost in the crowd.

Here’s a stat for you to nibble on: a newly expired listing gets anywhere from 15 to 25 calls from agents a day when it first becomes expired.

A bunch of agents jumping, reaching, and clawing for one apple that’s not ready to be picked or enjoyed — yet.

Consider the homeowners whose listing has just expired.  First, because their home didn’t sell, agents are likely not at the top of their “I love” list.  They have that bad sour apple taste in their mouth.  They’re upset.  And most importantly, they didn’t get what they desperately wanted.

It’s a time when emotions run high.  So here’s the secret to making a living with expireds: WAIT. Wait and let the fruit ripen before you start picking.  Let homeowners get their bearings back.  Let the wound heal.

How long?  I say give it three months.

“But oh Bob, all the expireds will be gone.  There won’t be any left in three months.”

Bologna!  There are thousands of homes out there that have been off the market for many months.  And believe me, agents get shunned and shut out by the newly expireds every day.

By waiting three months you automatically distance yourself from the pack, and – here’s the kicker – you don’t appear desperate.  Nobody wants to hire a desperate anybody.

So how exactly should you approach a three-month-old expired?

First, be dripping with empathy.  Start with emotion.  Let them know you know how they feel. Personalize the circumstances.  Ask open-ended questions to learn why they wanted to move in the first place and how not selling has impacted their life.

Then move from emotion to facts.  Share your numbers – the average days on market for your listings and your list-to-sell ratio numbers.  If your numbers are lacking, share your brokerage numbers.

Then become a teacher.  This is key.  Listings expire because agents don’t educate the sellers about the market place and where it is.  When your client’s expectations get off track at the start, nothing good happens.

Explain why listings expire – the number one reason is price.  NAR reports that if a listing doesn’t land a contract within 21 days it’s typically overpriced by four to six percent.

And if the seller doesn’t let you have a say in determining the price, be wary.  And don’t take the listing if you feel it’s overpriced.  That’s a total waste of everyone’s time.

So the lesson is this: there’s virtue in patience.

Expireds can be fruitful.  But just remember, you have to know when to pick your fruit.

Best of luck to you!

Financial Market Affects May 11, 2015

Mortgage bond prices plunged last Monday when traders looked ahead to several key Treasury auctions totaling $64 billion during the week.  In fact, the yield on the 10-year Treasury note soared past its previous high for the year last Monday.  Additionally, the Treasury released an announcement that was “embargoed” until Monday morning that they would sell $40 billion in 4-week Treasury bills on Tuesday.  Another factor for Monday’s sell-off was commentary from San Francisco Fed President and FOMC voter John Williams.  Williams, viewed as a “dove” on the FOMC, surprised the market with a more “hawkish” view when he suggested “the U.S. economy will see unemployment below 5%, underemployment at “more normal levels,” inflation heading back to 2%, and “interest rates will be moving up.”

Auction results for the week were mixed and consisted of a $24 billion 3-year note Treasury auction on Tuesday, a $24 billion 10-year note auction on Wednesday, and a $16 billion 30-year bond auction on Thursday.  Risk-adverse bond traders were worried about all of this added supply hitting the bond market during the week and this led to some choppy trading ahead of the auctions.

On Thursday and Friday the bond market benefited from weaker than anticipated economic data and mortgage bond prices rebounded with a significant move higher.  A weaker than forecast Producer Price Index report generated investor enthusiasm for the bond market on Thursday when the Index resumed its downward trend with a -0.4% drop in April.  Expectations had been for a +0.2% gain.  Friday, less than forecast numbers for April Industrial Production and Capacity Utilization, a seven-month low in the University of Michigan’s Consumer Sentiment Index, and a miss on the NY Empire State Manufacturing Survey triggered a surge in the bond market.

For the week, the FNMA 3.0% coupon bond lost 20.3 basis points to end at $101.25 while the 10-year Treasury yield gained 0.4 basis points to reach 2.15%.  Stocks ended the week with the NASDAQ Composite gaining 44.74 points to close at 5,048.29, the Dow Jones Industrial Average gaining 81.45 points to end at 18,272.56, and the S&P 500 adding 6.63 points to close at 2,122.73.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 6.19%, Dow Jones Industrial Average has risen 2.46%, and the S&P 500 has gained 3.01%.  The national average 30-year mortgage rate rose to 3.93% from 3.87% while the 15-year mortgage rate increased to 3.21% from 3.17%.  The 5/1 ARM mortgage fell to 2.99% from 3.00%.  FHA 30-year rates held steady at 3.75% and Jumbo 30-year rates fell to 3.75% from 3.77%.

Mortgage Rate Forecast with Chart

The FNMA 30-year 3.0% coupon bond ($101.25, -20.3 bp) traded within a range between a weekly intraday low of $100.02 and a weekly intraday high of $101.41 before closing at $101.25 on Friday.  The bond’s price fell below the key 200-day moving average on Monday and it wasn’t until Thursday that the bond managed to close just above this level.  On Friday, the bond made a strong showing with a gap higher opening above the 200-day moving average located at $100.73 and this level now becomes closest support.  The bond then moved higher to test overhead resistance defined by the 61.8% Fibonacci retracement level at $101.25.  The day’s trading resulted in a positive stochastic crossover buy signal as the slow stochastic oscillator emerged from “oversold” status.  A successful break and close above the $101.25 resistance level this coming week should send the bond toward a test of the next level of resistance located at $101.70.  Should this happen, mortgage interest rates should improve slightly.

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of May 18

The economic calendar features the Fed’s April 29 FOMC Meeting Minutes on Wednesday; weekly Initial Jobless Claims and the May Philadelphia Fed Manufacturing Index on Thursday; and the April Consumer Sentiment Index on Friday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – Leading From the Middle: Leveraging Your Influence in the Workplace

By Denise Federer

Prestige and influence are two very different things, and for that reason, it isn’t necessary to have a title to be a company leader/influencer.  John Maxwell, who’s authored numerous books on leadership, including Developing the Leader Within, notes that having a title is actually the lowest form of leadership.

This is great news for anyone who isn’t “titled,” yet desires to be influential within an organization.  As you acquire the behavioral/emotional intelligence skills needed for each level of leadership, you’ll gain more influence, regardless of your title.  However, there are a few things you need to know about Maxwell’s “5 Levels of Leadership” model before you can be successful “leading from the middle:”

  • Position. The basic entry level of leadership, where the only influence you have comes with the title.
  • Permission. Colleagues see that you’ve developed impressive interpersonal relationships, and you care about them and what matters to them.
  • Production. Colleagues begin to respect what you’ve contributed to the organization and admire you.  This is imperative-along with trust and credibility-to be considered a leader.
  • People Development. You demonstrate the ability to contribute to colleagues’ career success; people grow through your mentorship and become loyal to you.
  • Personhood. Your colleagues think you’re amazing

To be a key influencer without having a title, your colleagues must respect you, see you being consistent, and know they can count on you-and you must own your own power.  You need to see yourself as being in a leadership role, and understand you have a great opportunity to be impactful, even though you don’t have a seat in the boardroom, so to speak.

There are a few things you must always keep in mind as you seek to wield influence without a title:

  • Your success will always come down to whether people trust and respect you.
  • Your behavior must be aligned with organizational values.
  • You must say what you’ll do and do what you say, i.e., walk the talk.
  • You need to be good at what you do while ensuring your colleagues understand you’re a big picture person who really cares about the organization.
  • You must become an advocate of mutual respect, finding value in others as you seek to ensure they value you.
  • You must always be aware of your tone, and how others perceive you.

Many employees don’t aspire to be the president of a company or even have a defined leadership role, but most people would like to be seen as influencers.  Think about your own workplace; do you have untitled colleagues whose opinions or approval are continually sought, both by those who are “under” and “above” them?  Those people have figured out how to lead from the middle, serving in an influential role without the benefit of a formal title.  There’s no reason why you can’t do that as well.

Denise Federer, Founder & Principal at Federer Performance Management Group

Our core services include Family Business Consulting, Performance Coaching, Speaking Engagements, Financial Advisors Succession Planning, Leadership Development, Next Generation Planning and Team Building.  We offer a complimentary initial consultation and would be honored to meet with you to discuss your most important challenges and goals. Contact us today: http://federerperformance.com/contact/.

Financial Market Affects March 23, 2015

A decline in manufacturing activity in China coupled with a disappointing Durable Goods Orders release for February was instrumental in a declining stock market this past week.  The Commerce Department reported February’s Durable Goods Orders fell 1.4%, missing expectations of a modest pick-up of 0.4%.  The Durable Goods Orders excluding transportation (aircraft), a closely watched proxy for business spending plans, fell 0.4% last month and was below the consensus estimate of 0.3%.  This was the sixth straight month of declines in Durable Goods Orders and is likely due to the combined effects of a strong dollar and weaker global demand.  January’s number was also revised lower from 2.8% to 2.0%.  This report was the latest indicator that U.S. economic growth stalled earlier this year.

In the bond market, weak demand at a couple of Treasury note auctions during the week resulted in higher yields.  Intermediate and long-term U.S. Treasury debt prices fell, pushing yields higher to end a two-week rally.  The Treasury Department brought additional supply to the bond market on Wednesday with a $35 billion five-year note auction that had a high yield of 1.387%.  The bid-to-cover ratio was 2.35 indicating weaker demand, and was the lowest bid-to-cover ratio for a five-year auction in the past four years.  Indirect bidders, which include foreign central banks, took 55.7% of the supply while direct bidders took 4.7%.  The average over the prior 12 auctions had a high yield of 1.63% and a bid-to-cover ratio of 2.66.

On Thursday, the Treasury auctioned off $29 billion in seven-year debt, but the auction drew the least demand since May 2009.  The mediocre bid-to-cover ratio was 2.32 versus an average of 2.40 over the past four auctions of similar maturity securities.  Indirect bidders took 50.5% of the supply while direct bidders took 12.3%.  The prior 12 auction average saw a bid-to-cover ratio of 2.52.  CNBC’s Rick Santelli graded the auction a “D+” and selling in the bond market accelerated to the downside following the auction.

From the week’s housing news, it appears the real estate market is on the mend.  Existing Home Sales improved by 1.2% during February to 4.88 million from an unrevised 4.82 million in January.  The consensus forecast had called for Existing Home Sales to increase to 4.90 million.  The lower than expected sales number may have been negatively impacted by severe winter weather conditions, but supply problems probably have a greater impact as inventories remain at a 4.6 month supply at the current sales rate.  A more normal inventory level is maintained at a 6.0 month supply.

The lower inventory level is pushing prices higher with the median existing home price increasing 7.5% year-over-year in February to $202,600.  February marked the 36th consecutive month of year-over-year home price increases.  Higher home prices make it more difficult for first-time home buyers to enter the market and this is evident from the 29% of February purchases made by first-time buyers.  Although this was a percent higher than January’s 28%, it is well below the 40% level that is seen under normal housing market conditions.

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February New Home Sales increased to 539,000 units, annualized, surpassing analyst expectations of 465,000.  February’s sales number also exceeded January’s upwardly revised 500,000 units from the 481,000 units first reported.

Also, the Federal Housing Finance Agency reported their House Price Index increased by 0.3% in January from the previous month.  From January 2014 to January 2015, house prices were up 5.1%.  Jonathan Smoke, chief economist at realtor.com, stated “…the FHFA numbers appear to be showing a moderation in price increases which we aren’t seeing in listing prices or median existing home prices.  On the contrary, other metrics are showing acceleration in year-over-year prices that started in December and coincided when inventories started getting super tight.  The FHFA number may be weaker because it is based only on government backed purchase mortgages and therefore doesn’t reflect jumbo mortgages on higher priced homes.”

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For the week, the FNMA 3.0% coupon bond lost 18.8 basis points to end at $101.94 while the 10-year Treasury yield gained 2.8 basis points to reach 1.96%.  Stocks ended the week with the NASDAQ Composite losing 135.20 points, the Dow Jones Industrial Average dropping 414.99 points, and the S&P 500 decreasing 47.08 points.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 3.17%, Dow Jones Industrial Average has lost 0.62%, and the S&P 500 has gained 0.10%.  The national average 30-year mortgage rate rose to 3.79% from 3.74% while the 15-year mortgage rate increased to 3.08% from 3. 30%.  The 5/1 ARM mortgage rose to 3.16% from 3.10%.  FHA 30-year rates rose to 3.50% from 3.30% and Jumbo 30-year rates rose to 3.67% from 3.64%.

Mortgage Rate Forecast with Chart

The FNMA 3.0% coupon bond ($101.94, -18.8 bp) opened the week 9 basis points higher on Monday at $102.22 and ended up trading within a range between a weekly high of $102.63 and a low of $101.61 before settling at $101.94 on Friday.  The bond traded significantly lower on Wednesday and Thursday resulting in a new sell signal from a negative stochastic crossover.  The move dropped the bond below its intermediate lower trend line and back below the key 50-day moving average support level located at $101.99, which now becomes technical resistance.  Nearest support is now located at the 25-day moving average at $101.56.  Unfortunately, the bond remains close to “overbought” levels even with the losses on Wednesday and Thursday, and appears destined to test the next levels of support at $101.56, $101.40.  The bond did manage to bounce back a little on Friday to create a two-day Harami Japanese Candlestick candle pattern that can be a potential reversal signal, but this will require confirmation from a positive candlestick on Monday.

With the March employment report looming in the background on Friday, technical signals will likely take a backseat to economic news.  If the week’s economic news proves to be bond market friendly we should see an improvement in bond prices and lower yields.  Conversely, if the economic news is more favorable for stocks, we could see bond prices fall further to test support levels and see yields and mortgage rates rise slightly.

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of March 30

The economic calendar is action-packed this week and features releases on inflation, manufacturing, and employment culminating with the March Employment Situation Summary from the Department of Labor.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman.

** Probability generated from the CME Group FedWatch tool based on the 30-day Fed Funds futures prices.


 

Road Signs – Tax Filing Season and Tax Law Changes for 2015

By Anthony E Parent 

Tax laws undergo some minor changes every year, such as inflation adjustments, renewal of deductions, new taxes, and tax increases.  As the 2015 tax filing season has started, it is important to stay informed on the latest changes to the tax code and how they can affect you.  This article will explore three key areas where some of the biggest changes have been made to the Internal Revenue Code (IRC).

Affordable Care Act Changes for 2015

The Affordable Care Act is the law of the land that requires most individuals to have health insurance or risk paying a tax penalty.  Per the federal health law’s individual mandate, individuals above certain income thresholds should get health insurance coverage if they are not covered by public programs such as Medicare and Medicaid.  If health coverage is not supplied through his or her job, an individual may choose to purchase an individual private policy or get covered under the state-operated insurance marketplace.

Those who do not have the minimum level of coverage should be wary because they will be subjected to IRS penalties at the end of the tax year.  Here is a brief summary of the non-compliance penalties: the penalty for the 2014 tax year is one percent of income for both individuals and families or $95 for single adults and $285 for families, whichever is greater.  This may not seem bad at all when compared to insurance premiums; however, the fact is, the penalty structure is formulated to increase over time.  In 2015, the fine will rise significantly to $325 per adult and up to $975 for a family or 2% of income.  In 2016, the penalty will be sky high: $695 per individual and $2,085 for a family or 2.5% of income.

Small-business owners obtaining insurance through the Small Business Health Options Program (SHOP) marketplace can qualify for tax credits and tax breaks.  Businesses that employ less than 25 full-time workers and pay average annual salaries of less than $50,000 can make use of this program for group health coverage.  Per ObamaCare’s employer mandate, businesses with more than 100 full-time employees will have to provide health coverage to at least 70% of their workers starting in 2015.  This rule does not apply to companies with 50 to 99 full-time workers until Jan 1, 2016.

New Limits on IRA Rollovers in 2015

Finally, some good news from the IRS! Contribution limits to 401(k), 403(b), and other qualified retirement plans have now increased by $500, bringing them to $18,000 in 2015.  The catch-up contribution limit for individuals who are 50 or older has also increased by $500.

A new year ushered in a new rule from the IRS that put restrictions on the number of IRA-to-IRA rollovers.  Starting in 2015, taxpayers can do only one rollover in a 12-month period, irrespective of how many IRAs the individual has.  A second 60-day IRA-to-IRA rollover could result in a 10% early withdrawal penalty, and the distribution will be subject to taxation.  The old rules allowed individuals to do one such rollover per year for each IRA that they owned, which created penalty-free and interest-free loans.  Sadly, the new change limits taxpayers from taking such tax-free rollover provisions.

There is no reason to be alarmed, since this new rule change does not apply to traditional IRA to Roth IRA conversions or trustee-to-trustee transfers.  This direct rollover transfer method lets investors transfer funds any number of times between IRA accounts without taking control of the money.  This transfer is tax-free and does not trigger the 10% early withdrawal penalty.  Get expert guidance if you hold multiple IRA accounts and are planning to do transfers but are not confident about whether they fall within the rollover limit or the distribution is tax-free.

2015 Tax Rates and Other Inflation Changes

For 2015, inflation-based adjustments are made for all tax brackets: the top 39.6% tax bracket, for example, will start at $413,200 for unmarried filers (up from $406,750 in 2014) and $464,850 for married joint filers (up from $457,600).  The standard deduction for the 2015 tax year is $6,300 for single filers and $12,600 for married joint filers.  The personal exemption gets an increase of another $50 to $4,000 in 2015.  Individuals in the 25%, 33%, and 35% federal income tax brackets will pay the same 15% on capital gains, but taxpayers in the 39.6% bracket will have to pay more, as they will now be taxed at a 20% rate on long-term capital gains.

Financial Market Affects March 9, 2015

The financial markets, especially equities, experienced a greater degree of volatility this past week.  This volatility was triggered by a strengthening of the U.S. dollar against foreign currencies.  In particular, the dollar has surged against the euro trading to new 12-year highs twice during the week.  The euro is now worth $1.0496 and looks like it will continue lower to eventually reach parity with the dollar.  In fact, investment bank Goldman Sachs now predicts the euro will plunge through parity against the dollar within a year to hit a record low by the end of 2017.

A rising dollar serves as an obstacle for the U.S. economy and future corporate earnings.  The U.S. dollar index is now 3.4% higher for the month and is up about 9.0% year-to-date in 2015.  The selling in stocks arises from investor fears that earnings of multinational corporations will be negatively impacted by a stronger dollar.

Unfortunately, there was a somewhat muted response to these usually bond-friendly developments by the bond market.  Mortgage bond prices improved during the week, but were unable to recapture the losses experienced a week earlier on Friday, March 6 when the FNMA 30-year 3% coupon bond lost 80 basis points.

In housing news, CoreLogic reported home foreclosures were down 14.7% from December to January, and are down 22.5% year-over-year.  The seriously delinquent rate is at 4.0%, which is the lowest rate since 2008.  The foreclosure inventory is down 33.2% year-over-year.

For the mortgage industry, the Mortgage Bankers Association released their Mortgage Applications Survey for the week ending March 6.  The Market Composite Index fell 1.3% on a seasonally adjusted basis from the prior week.  The Refinance Index dropped 3% from the prior week to the lowest level since January 2015.  The seasonally adjusted Purchase Index increased 2% from a week earlier. The unadjusted Purchase Index increased 3% compared with the previous week and was 2% higher than the same week one year ago.  The refinance portion of mortgage activity fell to 60% of total applications from 62 percent the prior week.  The adjustable-rate mortgage (ARM) share of activity increased to 5.6% of total applications.  The average loan size for purchase applications increased to the highest level in the history of the survey at $294,900.

For the week, the FNMA 3.0% coupon bond gained 50.0 basis points to end at $101.11 while the 10-year Treasury yield fell 12.3 basis points to reach 2.12%.  Stocks ended with the NASDAQ Composite losing 55.61 points, the Dow Jones Industrial Average losing 107.47 points, and the S&P 500 dropping 17.86 points.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 2.79%, Dow Jones Industrial Average has dropped 0.42%, and the S&P 500 has lost 0.27%.  The national average 30-year mortgage rate fell to 3.88% from 3.97% while the 15-year mortgage rate decreased to 3.14% from 3.25%.  The 5/1 ARM mortgage fell to 3.17% from 3.20%.  FHA 30-year rates dropped to 3.50% from 3.75% and Jumbo 30-year rates fell to 3.77% from 3.87%.

Mortgage Rate Forecast with Chart

The FNMA 3.0% coupon bond ($101.11, +50bp) reclaimed 50 of the 80 basis points lost on Friday March 6 during this past week.  The bond made positive gains on Monday through Wednesday, but retreated on Thursday and traded flat on Friday.  The loss of momentum at the end of the week was somewhat surprising given the rising strength of the dollar against foreign currencies and technical weakness seen in the stock market.

The bond challenged resistance on Thursday and Friday at the 100-day moving average located at $101.26 but was unable to close above this tough level.  Friday’s “spinning top” Japanese candlestick indicated there was market indecision among bond traders and investors.  Support can be found at $100.30.  A pattern is forming suggesting another breakout will happen in the near future, but the direction of the breakout can’t be determined with certainty.  The prior breakout pattern is seen in red in the chart below and the pending pattern is shown in blue.  The technical picture is “neutral” at the moment, but a potential negative stochastic crossover sell signal is close to forming.  This signal hasn’t happened yet and “close” only counts in horseshoes and hand grenades.

This coming week, trading will be influenced by the Federal Reserve’s FOMC meeting on Wednesday rather than by technical signals.  There shouldn’t be much movement in the bond or stock market ahead of this meeting.  The monetary policy decision and Fed Chair Janet Yellen’s press conference that follows will be the key event for financial markets this week.  If there is any indication the Fed will go through with an interest rate hike this summer, the markets will undoubtedly sell off.  The current probability for a June rate hike is 19% and is 40% for a July rate hike.  If traders are convinced a rate hike will be postponed until later in the year we could see a relief rally.  The other factor to be aware of is how the dollar continues to trade in the currency markets.  If the dollar continues to strengthen, the stock market should continue to come under selling pressure, and this would help bond prices and keep mortgage rates stable.  If the dollar weakens the reverse would happen.

Chart:  FNMA 30-Year 3.0% Coupon Bond

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Economic Calendar – for the Week of March 16

The economic calendar features a couple of manufacturing indexes on Monday and Thursday covering activity in the Northeast U.S.  It will be interesting to see if harsh winter weather conditions had a negative impact on manufacturing in this region.  Wednesday will bring the greatest potential for market moving news with the FOMC monetary policy rate decision and press conference by Federal Reserve Chair Janet Yellen.  Wednesday will also feature the latest crude oil inventory report that could significantly impact the energy sector.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – Easily Kill Beliefs That Are Holding You Back From the Life You Deserve – Part II

By George Hutton

When you transform limiting beliefs that can charge your life with power and confidence, you will look back on the way you used to be and wonder why you hadn’t seen so clearly what it is you see now.  It will be like looking back to when you used to ride a bike with training wheels, or when you couldn’t remember if the letter “b” went that way, or the other way.  That is how powerful those new ideas will be in your mind when you use these simple yet powerful techniques.

If you’ve been keeping up with me so far, you know I’m talking about going on a search and destroy mission inside your thoughts to root out those limiting beliefs about limitation and lack, and using anti spyware of the mind to transform not only your beliefs, but your life as well.  If you’re just joining us, you might want to check out my previous articles or head over to my blog and take a look.

The belief changing technique I will be showing you here is a unique but useful one.  It works well with other techniques, but it can be just as powerful on its own.  After you’ve used some the techniques in previous articles, and identified a limiting belief, you imagine what your life will be one year from now, if you still hold that belief.  Then you imagine what your life will be in, five, ten, twenty, thirty, forty and fifty years out, if you don’t choose to release or change that belief.  Then you split your futures into two different paths, one positive, and one negative.

For example, let’s say you think losing weight is difficult.  You change the wording around to form a belief about capability, so the belief is now “I cannot maintain a healthy weight.”

Imagine picture number one.  Yourself in one year, and your one year self still believes that “I cannot maintain a healthy weight.”  Look at that person.  What does he/she look like?  What clothes does he/she wear?  How does he/she feel?  Then step inside him/her and see things from his/her eyes, feel things that he/she feels, look at your one year self in the mirror from your one year eyes.  How does that feel?

Now do the same but now the one year person has somehow shed not only the pounds but that false belief.  Look at that person, what do they look like, what are they wearing? Drift into them and see the world from their eyes.  How do they feel?  What does it feel like when you imagine your positive self saying “Keeping a healthy weight is pretty easy.”  How does that feel?

Repeat this for five years, ten years, twenty and thirty years.  You are actually giving your brain an idea what it would feel like if the belief were different than it is now.  When your brain realizes that the new belief is actually better, it will automatically forget the old one.  This may be difficult at first, as the visualizations can seem complicated.  But keep at it.  The more you practice it, the easier and more effective it will become.  And you will learn that beliefs are definitely not set in stone, rather you can learn to change them at will to create the life you want, just like that.

George Hutton is a widely read author and blogger who writes inspirational and life changing articles. You can join many others who read daily at http://www.georgehutton.net/wordpress

Financial Market Affects February 16, 2015

The bond market was churned during a holiday shortened week by rising geopolitical risks from continuing violence in Ukraine and the Middle East, but was mostly influenced by news surrounding Greece’s sovereign debt negotiations with the other European Union members.  The financial markets were closed on Monday for President’s Day, and negotiations between Greece and the European Union broke down Monday evening.  Traders reacted to this news on Tuesday by selling bonds and driving the yield on 10-year treasury notes 12 basis points higher while the Fannie Mae 30-year 3% mortgage bond fell 39 basis points.

The bond market managed to bounce back on Wednesday when the minutes from the Federal Reserve’s January FOMC policy meeting indicated the central bank may wait longer than expected to begin raising interest rates.  The 30-year 3% mortgage bond increased 47 basis points while the 10-year Treasury note yield fell by seven basis points.

The bond market then took a couple of steps backward on Thursday and Friday as news emerged on the ongoing negotiations for a loan extension for Greece.  Thursday, Greece requested a six-month debt extension of their loan package, and it only took a couple of hours for Germany, Greece’s largest creditor, to flatly reject their proposal.  Finally, on Friday an agreement between Greece and its creditors was announced.  In exchange for a four month loan extension so the debt-strapped nation could continue on as a member of the European Union, Greece agreed to develop a list of actions it will take to reform its economy and submit it to the Eurozone lenders on Monday.  With this news, equities turned around sharply with stock indexes surging to new all-time highs while the bond market sold off.

For the week, the FNMA 3.0% coupon bond lost 40.6 basis points to end at $101.17 while the 10-year Treasury yield increased 9.4 basis points to reach 2.12%.  Stocks ended with the NASDAQ Composite gaining 62.13 points, the Dow Jones Industrial Average adding 121.09 points, and the S&P 500 increasing 13.31 points.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 4.44%, Dow Jones Industrial Average has added 1.75%, and the S&P 500 has gained 2.44%.  The national average 30-year mortgage rate rose from 3.76% to 3.85% while the 15-year mortgage rate increased to 3.12% from 3.05%.  The 5/1 ARM mortgage rose to 3.16% from 3.13%.  FHA 30-year rates increased to 3.50% from 3.35% and Jumbo 30-year rates increased to 3.84% from 3.80%.

Mortgage Rate Forecast with Chart

The FNMA 3.0% coupon bond ($101.17, -40.6bp) suffered another rough week losing just over 40 basis points.  Just when it looked like we were going to get a much anticipated positive turnaround in bond prices, market volatility associated with the Greek sovereign debt crisis slammed the door on a potential upward reversal, and we got a downward move instead.  The week’s trading pivoted around the key 61.8% Fibonacci retracement level at $101.25, and the bond ended up below this level after testing support at the 100-day moving average located at $100.97.  The day’s engulfing lines candlestick pattern was bearish and suggests further weakness even though the bond is trading from a positive stochastic crossover buy signal generated last Wednesday.  Resistance is now located at $101.25.  The bond remains “oversold” and may continue that way until we see a much overdue pull-back in the stock market.  Any weakness in the stock market this week should result in a turnaround in the bond market resulting in a slight improvement in interest rates.

Chart:  FNMA 30-Year 3.0% Coupon Bond

 

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Economic Calendar – for the Week of February 23

The vast majority of this week’s economic reports will be released on Thursday and Friday.  Existing Home Sales will be reported on Monday; Tuesday the Case-Shiller 20-city Index and Consumer Confidence will be reported plus Fed Chair Janet Yellen will provide semi-annual testimony on the economy and monetary policy before the Senate Banking Committee at 10:00 a.m. ET; Wednesday New Home Sales and Crude Oil Inventories will be reported; Thursday will see Initial Jobless Claims, Continuing Jobless Claims, the Consumer Price Index, the Core Consumer Price Index, Durable Goods Orders, Durable Goods excluding transportation, and the FHFA Housing Price Index reported; and Friday the 2nd estimate of fourth quarter GDP with GDP Deflator, the Chicago PMI Survey, the final estimate of the University of Michigan’s  Consumer Sentiment, and Pending Home Sales will be reported.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

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Road Signs – Real Estate Agents Tax Saving Solution

By Alexander Thorston  

 

The start of a new year provides an excellent opportunity for small business owners to review financial goals and re-evaluate tax and savings strategies for 2015.  With tax laws in a seemingly never-ending state of flux, it is more crucial than ever for business owners to ensure that they are not only complying with complex IRS rules and regulations but also taking full advantage of every opportunity to save both time and money.

Going at it alone can create uncertainty and stress, which is why you need a trusted ally to help you navigate the byzantine tax and legal regulations that affect your small business.  Having a set of professionals come in to help you can go a long way towards accomplishing your goals.

An unfortunate reality is that, despite the myriad benefits of operating as Professional Corporation (PC) or Limited Liability Company (LLC), too many real estate agents work as sole proprietors.  This means the agent is personally liable for any debt or liability arising from the agent’s work.  There are SO MANY BENEFITS to incorporating your business.  These benefits are primarily financial in nature and allow you to save up to 15% of your money just by taking your commissions as dividends as opposed to self-employment income reported on a Schedule C of your Federal Tax Return.

Far worse than the potential liability, though, are the hefty taxes that sole proprietors pay to Uncle Sam.  Indeed, agents who operate as sole proprietors are giving away all the benefits that agents doing business as a PC or P.A. enjoy, including asset protection, flow-through taxation, no self-employment tax, 100% deductions for health insurance premiums and much, much more.  This is one of the many reasons why it is important for Real Estate Agents to obtain the legal status of Professional Corporation or P.A.  With all that is at stake, working as a sole proprietor just doesn’t make sense.

Look for a team that has helped hundreds of real estate agents nationwide by offering a comprehensive suite of services including business formation, income tax preparation and filing, and accounting services.  Whether you sell one house per year or one hundred, your business can benefit from professional services.  Think about whether some advance planning could help your business avoid unnecessary risk and maximize the retention of profits.  Save money on taxes and minimize your personal liability with just a little forethought!

Need advice on how to get the most out of your real estate business?  Learn more at http://www.realestatetaxspecialists.com.

Financial Market Affects February 2, 2015

After getting off to a disappointing start to the New Year in January, equities surged higher during the first week of February while bond prices tumbled and yields rose.  The largest market moves took place last Tuesday and Friday.

Tuesday, equity markets were supported by news that progress was being made between Greece and its lenders in restructuring Greece’s debt.  The stock market was also boosted by a decline in the U.S. dollar and surging crude oil prices that rose 6% higher to over $52 a barrel.  With oil back above the psychologically important $50 per barrel mark, energy sector stocks led the broader stock market higher triggering significant selling in the bond market.

On Friday, a strong January Employment Situation Summary (Jobs Report) sent bond prices cascading lower and yields higher.  The Labor Department reported the addition of 257,000 jobs in January, marking the 12th consecutive month that Non-farm Payrolls had exceeded the 200,000 mark, a level normally associated with a sustainable decline in the unemployment rate.  The consensus forecast had been for an increase of 235,000 new positions.

Furthermore, November and December’s jobs numbers were revised significantly higher with November Nonfarm Payrolls revised to 423,000 from an initially reported 353,000 while December Nonfarm Payrolls were revised to 329,000 from 252,000 while Nonfarm Private Payrolls were revised to 320,000 from 240,000.  The Unemployment Rate edged up from 5.6% to 5.7%, in part because the labor force participation rate increased by 0.2% to 62.9%.  This is viewed as a positive development as it suggests more people are now actively looking for work.

Also, there was a significant 0.5% jump in Average Hourly Earnings, and this exerted a negative influence on the bond market even though 0.2% of this gain in earnings can be attributed to an increase in the minimum wage in 20 states that went into effect on January 1 of this year.  The consensus forecast called for a 0.3% gain in Earnings following December’s deflationary number of -0.2% that had sparked a sharp drop in bond yields.  The prior worries about wage disinflation were unwound in the bond market on Friday, plus the robust labor report provided the Federal Reserve with a stronger case for raising interest rates “sooner rather than later” and this weighed heavily on the bond market.

For the week, the FNMA 3.0% coupon bond lost 132.8 basis points to end at $102.14 while the 10-year Treasury yield increased 27.8 basis points to reach 1.96%.  Stocks ended with the NASDAQ Composite gaining 109.16 points, the Dow Jones Industrial Average adding 659.34 points, and the S&P 500 increasing 60.48 points.

To date for 2015, and exclusive of any dividends, the NASDAQ Composite has gained 0.18%, Dow Jones Industrial Average has added 0.01%, and the S&P 500 has lost 0.17%.  The national average 30-year mortgage rate rose from 3.55% to 3.72% while the 15-year mortgage rate increased to 3.02% from 2.95%.  The 5/1 ARM mortgage fell to 3.12% from 3.13%.  FHA 30-year rates held steady at 3.25% and Jumbo 30-year rates increased to 3.75% from 3.58%.

Mortgage Rate Forecast with Chart

The FNMA 3.0% coupon bond ($102.14) lost 132.8 basis points during the past week while the stock market recorded significant gains.  The technical picture for bonds looked favorable a week ago, but the bond’s sharp decline last Tuesday generated a new sell signal from a negative stochastic crossover and it was all “downhill” from there with stronger economic news.  The bond tried to stabilize on Wednesday and Thursday, but was hit with a major negative catalyst in the form of a blockbuster employment report on Friday.  The favorable jobs news sent the bond’s price in a free-fall below support provided by the 25-day moving average.  This level now becomes nearest overhead resistance.  The next primary support level is now the 50-day moving average at $101.74.  The slow stochastic oscillator is no longer “overbought,” but there is considerable room to the downside before it becomes “oversold” so it is possible we could see further bond price erosion this coming week with slightly higher interest rates.

Chart:  FNMA 30-Year 3.0% Coupon Bond

Economic Calendar – for the Week of February 9

This week the economic calendar highlights weekly Crude Oil Inventories on Wednesday; Initial Jobless Claims and Retail Sales on Thursday; and the University of Michigan’s Consumer Sentiment Index on Friday.  Economic reports having the greatest potential impact on the financial markets this coming week are highlighted in bold.

Road Signs – Color, Color On The Wall, Which Is Fairest Of Them All This 2015?

By Desare A Kohn-Lask

Every year, there is or there are certain colors which stand out from the rest of the paint palette. Before 2014 comes to a close, professionals whose works are associated with the exterior and interior beauty of the house gave their predictions as to which paint color would be the fairest this 2015.  Here are some colors worth-mentioning in this short list.

Marsala

The Pantone Color Institute has elected the color Marsala as the color of 2015.  It is known as Pantone 18-1438 by the codes.  According to Leatrice Eiseman, the institute’s executive director, the color enriches our mind, body, and soul.  It is a subtly seductive shade, one that draws us into its embracing warmth.

The color, due to its versatility fits into many applications including that of beautifying a house.  The drama it brings because of its richness and warmth.  When used in interior spaces of the house, it can very well be paired off with other colors especially those that are neutral.  It can go pretty good with amber and umber and even golden yellows and teals.  Imagine the very rich designs in terms of wall colorizing that this color of the year can bring into your house.

Taking its cue from the wines, Marsala is also very fit for use on particular home spaces like the kitchen and dining room.  It is seen ideal in tabletops as well as great choice when it comes to the color of home appliances which shall fill the functionality of the gastro hubs of the house.

Proving its diversity, it is not only fit for splashing the walls.  The color is also an ideal choice when it comes to imparting elegance into home accessories like floor rugs, carpets, and other upholstered parts of the house.  It can even bring class to the living room and entertainment rooms.

As 2015 opens up, we can expect paint makers as well as makers of appliances and home accessories to capitalize on the elegant warmth that Marsala can bring as the color of the year.  As with the previous colors of the year, home owners can also expect that new trends in home design and renovation are to spring up from the color.

If you like to welcome 2015 with warmth, beauty, and elegance – you can opt to breathe new life into your house using the seductive color known as Marsala.  Give in to its temptation!

Click here to see the color.

Desare Kohn-Laski is a proud realtor and experienced Military Relocation Professional in Florida.  She is a real estate broker who is knowledgeable and familiar of the South Florida real estate market.  Her areas of services include Broward County, Palm Beach County & Miami-Dade County.  For more information, hop on to skyelouisrealty.