For the week of April 23, 2012 – Vol. 10, Issue 17

>> Market Update 

QUOTE OF THE WEEK..."A great pleasure in life is doing what people say you cannot do." --Walter Bagehot, English businessman, essayist and journalist

INFO THAT HITS US WHERE WE LIVE... People say home building can't recover any time soon. Yet the signs continue to mount that a recovery is underway. Off 5.8% for March, Housing Starts are up 10.3% from a year ago, to a 654,000 unit annual rate. The monthly drop came from volatile multi-family starts, while single-family units were down only 0.2%. And the number of homes under construction was up for the seventh month in a row! Even Building Permits are up 30.1% versus a year ago. It's early in the home building recovery, but some are saying we could get to 1.5 million units by 2016.

More signs the housing market is recovering slowly but surely came with March Existing Home Sales. Although off 2.6% for the month, at 4.48 million units, they're up 5.2% over a year ago. In addition, the median price rose in March to $163,800 and is up 2.5% over a year ago, while the months' supply of inventory stayed at 6.3. Frankly, no one expects a big bump in home sales soon, but the market is definitely beginning to heal, as it's obviously a great time to buy. 

BUSINESS TIP OF THE WEEK... Take time to think. Get away from the day's chaos and ponder a while. Don't worry if a great idea doesn't come right away. Back on the job, your subconscious will continue to work.

>> Review of Last Week

UP AND DOWN... Markets went in both directions last week as the S&P 500, a broad market measure, clung to a fractional 0.6% gain, its first move upward in three weeks. Traders' moods were also up and down, as the economic data rolled in. The up mood was fueled by the strong earnings reports of a wide range of players, from McDonald's to GE to Microsoft. Also up were March Retail Sales, gaining a better than expected 0.8% and up 6.5% over a year ago!

But other things economic were downers. Both the Empire State and Philadelphia Fed manufacturing indexes dropped for the month, reflecting a slowdown in growth. Industrial production was flat and manufacturing capacity edged down, both worse than expected. Worse than that, weekly unemployment claims headed up to 386,000, while continuing claims hit 3.30 million.

For the week, the Dow ended UP 1.4%, at 13029; the S&P 500 closed UP 0.6%, to 1379; and the Nasdaq edged down 0.4%, to 3000. 

There was enough political and economic turbulence coming out of Europe to keep investors in the safe haven of bonds. This held prices up, with the FNMA 3.5% bond finishing the week UP .04, at $103.19. Inflation fears were kept in check as doubts about the economic recovery continue. So national average mortgage rates held steady, still at historically low levels, as reported in Freddie Mac's weekly Primary Mortgage Market Survey. 

DID YOU KNOW?...  CPI inflation is more widely reported, but the GDP Price Deflator is often the inflation measure of choice for economists. It takes a more comprehensive look at price levels for a more precise read on inflation.

>> This Week’s Forecast

NEW HOME SALES, PENDING HOME SALES AND THE FED... We'll have more reads on the housing market, with Tuesday's New Home Sales forecast to be up slightly for March. Thursday's Pending Home Sales, measuring signed contracts in March for existing homes, are expected up a bit, indicating sales a few months out.

The Fed meets Wednesday and although no one expects the FOMC Rate Decision to change anything, we'll have a policy statement giving their opinion on the economy. For hard numbers, we'll have to wait until Friday for Q1 GDP-Advanced, projected to show economic growth slowing.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Apr 23 – Apr 27

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... We'll see if this week's Fed meeting gives any indication of when they'll change their super low Funds Rate policy. No one sees a hike any time soon. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of April 16, 2012 – Vol. 10, Issue 16

>> Market Update 

QUOTE OF THE WEEK..."Faced with the choice between changing one's mind and proving that there is no need to do so, almost everyone gets busy on the proof." --John Kenneth Galbraith, Canadian-American economist

INFO THAT HITS US WHERE WE LIVE... When people tell you the housing market isn't showing many positive signs, here are some facts that may change their minds. As of January, the National Association of Realtors (NAR) reported the housing inventory of for-sale homes has fallen to its lowest level since March 2005 -- 2.3 million homes, about a six-month supply. Meanwhile, total home sales rose 13% in the last six months, according to another industry survey.

The NAR also reports that sales of second homes in 2011 shot up to their highest market share since the height of the housing boom. This includes both vacation and investment homes. A survey of real estate economists and analysts reported home prices should stabilize this year, rebound in 2013 and accelerate in 2014. Finally, Freddie Mac's weekly survey revealed that national average mortgage rates hit new all-time lows for 15-year fixed-rate loans and were just above the record low for 30-year mortgages.

BUSINESS TIP OF THE WEEK... When you have more problems than you can handle, start with the ones that are most important. Ask yourself, "what's the most valuable thing I could be doing right now?"

>> Review of Last Week

SECOND DOWN... The S&P 500 and the Nasdaq lodged their first back-to-back weekly losses, while the Dow had its worst week of the year. Some observers felt stock prices were simply due for a correction after zooming UP 30% since October. But others pointed to genuine economic concerns after China reported its economic growth slowing more than anticipated, dropping from 8.9% in Q4 to 8.1% for Q1. Of course, that's still over 2.5 times our growth rate! Spain's rising borrowing costs also worried Wall Street.

Over here, corporate earnings season got off to a great start with Alcoa, Google, JPMorgan Chase and Wells Fargo all coming in better than expected. The February Trade Deficit was lower than expected, as U.S. exports gained, a good thing. BUT weekly unemployment claims shot up to 380,000, Michigan Consumer Sentiment dropped for April and the CPI inflation reading showed consumer prices shot UP 0.3% in March after being UP 0.4% in February.

For the week, the Dow ended down 1.6%, at 12850; the S&P 500 closed down 2.0%, to 1370; and the Nasdaq sank 2.2%, to 3011. 

Good corporate earnings and increasing inflation would have hurt bond prices, but worries over European sovereign debt and China's economic growth kept investors committed to the safe haven of bonds. The FNMA 3.5% bond we watch finished the week off just .01, at $103.15. National average mortgage rates slipped again last week, as economic concerns kept investors in mortgage bonds, holding prices up and rates down.

DID YOU KNOW?... Crude Inventories is the DOE's estimate of the weekly change in barrels of crude oil held by commercial facilities. Growing inventories may lower oil prices, diminishing inventories can raise them.

>> This Week’s Forecast

BUILDERS AND EXISTING HOME SALES HANGING IN THERE... A lot of this week's economic indicators are expected to slip but stay in positive territory, as the economy continues to grow so slowly it's barely perceptible. But our key points of interest -- Tuesday's Housing Starts and Thursday's Existing Home Sales -- are actually forecast UP, though just by a tick.

Keep an eye on today's Retail Sales numbers, as they indicate consumers' willingness to spend at the store on everything up through autos, which are included in the overall number. Cars, of course, are the second biggest consumer purchase after homes.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Apr 16 – Apr 20

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Last week, Fed Vice Chairman Janet Yellen suggested the central bank could keep the Funds Rate super low through 2015 if necessary.

For the week of April 9, 2012 – Vol. 10, Issue 15

>> Market Update 

QUOTE OF THE WEEK..."You miss 100% of the shots you don't take." --Wayne Gretzky, hockey's all-time leading goal scorer

INFO THAT HITS US WHERE WE LIVE... Hopefully, more people will be taking a shot at buying a home, with home ownership regaining its appeal as rents head higher. A real estate research firm reported average apartment rents UP 2.7% last year, while the national vacancy rate went below 5% for the first time since 2001. Increasing rents, plus very affordable home prices and near record low mortgage rates, have made home buying cheaper than renting in most areas, spurring on first-time buyers. 

A major bank housing analyst said apartment rental costs have historically been about 10% lower than after-tax home ownership costs. That difference began shrinking in 2010 and now apartment rents are about 15% higher than home ownership costs. A new survey found that twice as many real estate professionals, compared to three months ago, expect home values to rise. The housing market appears to be stabilizing as home sales trend upward and homebuilders are more optimistic than they've been in years.

BUSINESS TIP OF THE WEEK... Focus your networking on the people who have referred business to you or made advantageous introductions. Stay in contact every three months to stay top-of-mind with these important contacts.

>> Review of Last Week

SLIPPING INTO Q2... In a not-so-wonderful start to the second quarter, the Dow suffered its worst weekly loss since last December, while the S&P500 and the Nasdaq also went lower. FOMC Minutes from the last Fed meeting left investors uncertain about monetary policy, while there were renewed concerns about Spain's sovereign debt. The ISM Services index, measuring the largest sector of our economy, dipped more than expected, but stayed in positive growth territory, as did the better-than-expected ISM Manufacturing index.

Friday, equity markets were closed, but the government's disappointing jobs report ended the week on a downer for us all. Just 120,000 new jobs were created in March, hugely below expectations. The unemployment rate crept down from 8.3% to 8.2%, but economists explained that was because more people are becoming discouraged and dropping out of the work force.

For the week, the Dow ended down 1.2%, at 13060; the S&P 500 closed down 0.7%, to 1398; and the Nasdaq edged down 0.4%, to 3081. 

Following the weak jobs report, investors sought the safe haven of bonds in Friday's holiday-shortened session. Bond prices surged, with the FNMA 3.5% bond we watch finishing the week UP .92, to $103.16. National average mortgage rates eased again last week, according to Freddie Mac's weekly survey. Purchase loan demand rose to its highest level in months. 

DID YOU KNOW?... The typical home purchased in 2011 was built in 1993, with three bedrooms and two bathrooms in 1900 square feet of space, as reported in the latest NAR survey. 

>> This Week’s Forecast

BUDGET, FED VIEWS, INFLATION... Wednesday's March Federal Budget should show the government running a big deficit, no surprise there. This will be followed by the Federal Reserve's Beige Book of economic observations from Fed districts around the country. Could be some good stuff.

But the big reports will be PPI wholesale inflation on Thursday and CPI consumer inflation come Friday. The monthly numbers are expected to reflect annual inflation rates slightly above the Fed's 2% target. This is not good, as inflation cuts consumer buying power, sends mortgage bond prices lower -- and mortgage rates up!

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Apr 9 – Apr 13

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... The Fed said it intends to keep the Funds Rate low for quite some time, which is what economists expect. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of April 2, 2012 – Vol. 10, Issue 14

>> Market Update 

QUOTE OF THE WEEK..."To succeed, jump as quickly at opportunities as you do at conclusions." --Benjamin Franklin

INFO THAT HITS US WHERE WE LIVE... Last week's housing reports supported the fact there are great opportunities in today's real estate market, as long as you don't look at just part of the data and jump to conclusions. For example, February Pending Home Sales, measuring contracts on existing homes, were off 0.5% for the month. But wait a second, Pending Home Sales are now UP 13.9% over a year ago!

In the same vein, the S&P/Case-Shiller Home Price Indices slipped a non-seasonally adjusted 0.8% for January and 3.8% from a year ago. But the seasonally-adjusted index of home prices in the 20 largest metro areas was unchanged for the month. And nine of the twenty metros showed price increases! The National Association of Realtors (NAR) expects home prices to rebound in 2012 with existing home sales up 7%-10%, to their highest level in five years.

BUSINESS TIP OF THE WEEK... It's important to listen to your customers to see things from their point of view. But then firmly set their expectations to what you can deliver, so they'll be satisfied at the end.

>> Review of Last Week

HIGH-SCORING FIRST QUARTER... We're not talking basketball, just S&P 500 stocks, which ended the week posting their biggest first quarter gain in over a decade, up a very strong 12%. The Dow registered the best first quarter advance in its history, an 8.1% hike. Not to be outdone, the Nasdaq went up almost 19% the first quarter. Experts said that big institutional investors are feeling a little better about the economy and looking to make money in riskier stocks, pushing prices up.

The economic data continues mixed. Personal income and personal spending were up in February, both good things, but inflation was worrisome. Overall prices are up 2.3% the last 12 months, above the Fed's 2% target. University of Michigan Consumer Sentiment was up more than expected, but the Consumer Confidence Index was down. Fed Chairman Bernanke voiced his concerns that job market conditions remain far from normal.

For the week, the Dow ended UP 1.0%, at 13212; the S&P 500 closed UP 0.8%, to 1408; and the Nasdaq went UP 0.8%, to 3092. 

Bond prices held steady, as there are still enough economic concerns to keep safe haven buyers participating in the market. The first quarter ended with the FNMA 3.5% bond we watch finishing the week UP .12, at $102.24. After edging up the last two weeks, national average mortgage rates switched direction in Freddie Mac's weekly survey. Mortgage rates remain firmly at historically low levels. 

DID YOU KNOW?... According to the NAR, the top 3 approaches first-time home buyers use are: 1) online search for homes; 2) online search for info on the home buying process; and 3) contacting a mortgage lender. 

>> This Week’s Forecast

FED MUSINGS, MARCH JOBS... As the Spring home selling season begins, it could certainly use the support of a healthier jobs market. Tomorrow, the FOMC Minutes from the Fed's March 13 meeting could put some overall economic perspective on the situation. We'll see.

Then Friday, we get the March Employment Report. Unfortunately, no major improvement is foreseen. The modest rate of job creation we've had the last few months should drop a bit, with unemployment still at 8.3%.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Apr 2 – Apr 6

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... Economists expect the Fed to keep the Funds Rate low for quite some time. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy:

For the week of February 13, 2012 – Vol. 10, Issue 7

>> Market Update 

QUOTE OF THE WEEK..."People can alter their lives by altering their attitudes." -- William James

INFO THAT HITS US WHERE WE LIVE... People's attitudes should surely be altered by new data from the National Association of Home Builders (NAHB). Their survey released on Thursday revealed four record highs hit by home building in 2011. The average size of new homes bumped up to a record 2,522 square feet, a record-high 42% of new homes had at least four bedrooms, 28% had at least three bathrooms and 30% included finished basements, all numbers up substantially over 2010. Countering this, there were a record low 429,000 single-family housing starts for the year.

But there's hope. The NAHB's chief economist forecast a 16% increase for new-home sales and single-family starts for 2012. He cited NAHB estimates of a pent-up demand for 2 million homes coming from households that are doubled-up or waiting to buy a home. Another NAHB sponsored survey revealed 78% of Americans likely to vote in the presidential election said owning a home was one of the most important things in their lives. They feel homeownership is about family and remains part of the American dream. Freddie Mac's chief economist chimed in, "The desire for homeownership long-term is still there." 

BUSINESS TIP OF THE WEEK... What about your business makes you happy... and unhappy? The answers can help you discover how to motivate yourself and persuade others, since happiness is the universal motivator.

>> Review of Last Week

IT'S ALL GREEK TO WALL STREET... As of last Friday, Greek politicians couldn't come to agreement with creditors on the latest bailout proposals. That was all investors needed to hear to start selling in earnest, sending stocks down for the week, ending five straight weeks of gains. Eurozone officials are threatening to withhold needed funds unless Greece agrees to austerity measures and signs them into law. The big prob? Political gridlock could take Greece closer to default, which might threaten U.S. financial institutions.

Over here, a light dose of economic data came in mixed, as usual. The Federal deficit for January unexpectedly dropped to $27.4 billion from $50 billion in December. But the Trade deficit ballooned to $48.8 billion. Initial weekly jobless claims dipped to 358,000, but continuing claims grew to 3.52 million. Finally, preliminary University of Michigan consumer sentiment for February fell to 72.5 from 75.0 the prior month.

For the week, the Dow ended down 0.5%, at 12801; the S&P 500 closed down 0.2%, at 1343; and the Nasdaq slipped 0.1%, to 2904.

Bonds saw heavy selling pressure early in the week, but those Greek default fears helped prices recover a bit on Friday. The FNMA 3.5% bond we watch ended the week down just .08, at $103.16. Following the prior week's better than expected jobs report, national average rates inched up for some types of mortgages in Freddie Mac's weekly survey. But mortgage rates overall remain historically low.

DID YOU KNOW?...This week's Producer Price Index (PPI) is an inflation indicator for the wholesale prices of a basket of raw materials and semi-finished goods (but not services). It's a leading indicator of consumer inflation.

>> This Week’s Forecast

HOUSING STARTS, PLUS RETAIL, MANUFACTURING, THE FED, INFLATION... We're back to a ton of economic data. Thursday's January Housing Starts will grab our attention, forecast up a smidge, and Building Permits, expected a bit down. January Retail Sales are expected up, both with and without autos. The several manufacturing reads -- Empire State, Industrial Production, Capacity Utilization and Philadelphia Fed -- should also inch up.

Wednesday's FOMC Minutes from the Fed's January 25 meeting might reveal more on why they want to extend exceptionally low interest rates til late 2014. The festivities end with PPI and CPI inflation reads, expected to remain within Fed targets.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of Feb 13 – Feb 17

>> Federal Reserve Watch   

Forecasting Federal Reserve policy changes in coming months... On January 25, the Fed pledged to keep the Funds Rate extra low through late 2014. Economists expect no change near term. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

Probability of change from current policy: