Hello!
Just a few things on the market today. Obviously, today is all about the Fed. I find this funny in some ways because as Rick Santelli reported today on CNBC, two days from now the Fed speak will be all be forgotten and we will go back to trading the market.
I had to laugh when Rick asked one of the veteran traders on the bond floor where he will be today at 2:15 today when the Fed announcement is released. His answer "on the 9th hole". The bond market realizes that the Fed is pretty irrelevant right now. Its obvious they are boxed into a corner right now between a weakening economy on one side and inflation on the other.
The Fed can do nothing but sit and wait for confirmation as to where the economy is heading. The durable goods orders for May was released today and showed zero growth which was in line with expectations. As a result, this didn't help the Fed much in terms of confirming we are heading.
Although it may not be confirmed, we all realize the economy is heading straight into the toilet. Its just a matter of time before the manipulated data shows that it is.
The reality of the situation is the financial tsunami that is about to hit us is so massive that the Fed realizes it has little power to stop it. These little rate cuts providing liquidity to the markets to fight deflation are comparable to using a BB gun to kill an elephant. They are worthless and do nothing but exacerbate the problem because it weakens the dollar which puts further pressure on inflation.
Mortgage Aplications Hit a 6-1/2 year Low for the week
CNBC reported this today. They also confirmed that refinancings are also plunging. I find this interesting because rates actually pulled back last week.
Here are the highlights:
U.S. mortgage applications fell for a second consecutive week, hitting their lowest level in nearly 6-1/2 years despite a sharp drop in interest rates, an industry group said Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications for the week ended June 20, which includes both purchase and refinance loans, dropped 9.3 percent to 461.3 -- the lowest level since the week ended Dec. 28, 2001.
The report offers additional evidence of a U.S. housing market that is suffering one of the worst downturns in its history.
Significantly tighter lending standards and an unwieldy supply of homes for sale are some of the factors preventing the U.S. housing market from rebounding out of its two-year-long slump.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 6.39 percent, down 0.18 percentage point from the previous week.
Refinancing Plunges
The group's seasonally adjusted index of refinancing applications plunged 12.1 percent to 1,212.2, down 30.0 percent from its year-ago level of 1,731.6."
Final Take:
We haven't seen drops in weekly mortgage applications like this since the last recession. Kinda pathetic when you see that that rates were down last week, and we are in the middle of the so called "peak buying season" for houses.
Consider this a prelude of things to come. Housing simply continues to do nothing but spiral downward. I see no change in this trend.
Bottom Line:
The Fed will be the market mover today. If we see a suprise raise in rates then the market corrects. If they hold rates and their statement is bland then we could see a little bounce today. We seem a little oversold for the short term.
Its a pretty quite morning from a news perspective. Countrywide got sued by Illinois today(what a shocker..Not!). For the life of me, I can't understand why Bank of America wants to close this deal. I still think they will end up walking away from this transaction unless something is going on behind close doors.
I have a busy day so I will have my thoughts on the Fed tomorrow. Feel free to discuss it amongst yourselves in the forum. Anyone is welcome to start threads. The link is http://www.frustratedhomebuyer.com/ to anyone who hasn't had a chance to stop by.
Until next time!
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