The gap between the 10-year Treasury note and the 15-year / 30-year fixed-rate mortgages has narrowed, not surprisingly, since the Federal Reserve began actively buying mortgage securities in January (see Bloomberg article). The average rate on a 30-year fixed mortgage fell to 4.96 percent in January, the lowest it has been when considering data that goes back to 1971. Rates were recently at 4.98 percent. With a promise to increase mortgage-backed security purchases by an additional $750 billion, along with as much as $300 billion in Treasury purchases over the next 6 months, rates should continue to be under pressure in the near term. As the Fed continues to support low rates in hopes that consumers will either refinance or make a new home purchase, others are also encouraging consumers to purchase now, but for different reasons. Given the flood of money entering the market, consumers will eventually begin seeing inflationary pressures. Now may be the time to act while both rates and prices are low.
Time To Refinance? Mortgage Rates Lowest Since 1971
Posted by Bull Bear Trader | 3/21/2009 11:50:00 AM | Federal Reserve, Mortgage Rates, Mortgage-Backed Securities, Treasury Notes | 0 comments »The Bonus Tax: The Redistribution of Both Wealth And Talent
Posted by Bull Bear Trader | 3/20/2009 06:55:00 PM | AIG, Bank of America, Bonus Tax, Bonuses, Citigroup, General Motors, GMAC, Goldman Sachs, JPMorgan, Merrill Lynch, Morgan Stanley, PNC, Redistribution of Wealth, TARP, US Bankcorp, Wells Fargo | 0 comments »There is an interesting post over at the Business Insider Clusterstock blog regarding the bonus tax bill that recently passed in the House and is now on its way to the Senate. The bill was written mainly in response to the recent AIG bonuses that Congress wrote into the previous 1000+ page bill that no one read (or had time to read). Apparently, some members of Congress have finally gotten around to reading the bill they passed - or at least their constitutes did - causing outrage, both real and opportunistic. The bonus tax would essentially apply a 90% tax rate to bonuses paid at firms which have taken over $5 billion from the Government TARP program. While I cannot really disagree with trying to spend bailout money wisely, attacking the bonuses in this way after the same body passed them just weeks before seems not only wrong, but reactionary. In addition, you have to wonder why Congress decided on the 90 percent number. If the bonuses are unacceptable, why not 100 percent? Is 10 percent OK for poor performance, while 20 percent is an outrage? Furthermore, why are only big companies affected? Is it just the size, or is there some other guiding principal? In case you are interested, the companies that reach the $5 billion bailout threshold and are potentially affected by the bill include some of the usual suspects, along with a few others who want to get out of the lineup as quickly as possible:
- AIG
- Bank of America
- Citigroup
- General Motors
- GMAC Financial Service
- Goldman Sachs
- JPMorgan Chase
- Merrill Lynch
- Morgan Stanley
- PNC Financial Services Group
- US Bancorp
- Wells Fargo
A few weeks ago in a post I made a comparison of how both baseball and the markets had a steroid problem, although with the markets the steroids were in the form of leverage, loose lending standards, poor risk management, complex derivative products, unrealistic valuations, and unethical behavior, among others. Another comparison is unfortunately coming to bear. As with baseball, as long as the markets and the government continue to focus more on the juicers, and less on the solutions for fixing the current problems, both will continue to suffer and fail to reach their objective - reminding us of the opportunity that the markets have for making our lives better. Even though daily 450 foot home runs are a thing of the past, hitting a natural home run is still a thing of beauty, and something to be encouraged, both on the field and in the markets.