Phil Grossfield's Blog


Salmon Spawning; STRONG RATES as Bonds Climb!

salmonSalmon Spawning Skagway   Here in the river were thousands and thousands of spawning salmon. They made it! They got past the fisherman, past the bears, and all the way to their original birthing grounds 7 years or so prior. Here they are at the end of their life…idling in the stream and ready to spawn…ready to complete their life’s journey.

There are so many of them, and they are swimming just enough to remain idle…you could literally reach down and grab one with your bare hands. skagwayThese fish are protected since they are spawning…if you touch one you go to jail…they take this very seriously in Alaska.  But you wouldn’t want to eat one of these anyway since they are at the end of their lives…not good eats. I thought this was super cool. Click here to see a short 20-second video of the spawning salmon I took.  By the way, just up the mountain we stopped to take a look at the view…and what a view it was…check it out in this 20 second panoramic video I took.

Processor Needed In Irvine for In-House Position.  One of my brokers has asked me to help him find a processor for an in-house position. Please advise…have the candidate send me his or her resume via email.

My Schedule:  I have a meeting at noon today and otherwise available….

My Market Watch:   Bonds Up – Pricing Improved.  The Fannie Mae bond is trading up again today +21 as of early this morning. The reason for the upswing is uncertainty across seas, specifically Syria. Unrest in the world results in traders preferring the bond market over the stock market which is much more greatly affected by such things.  When traders pull money out of stocks and instead invest in bonds our rates/pricing improve.

The bond has been performing well since Friday. In fact, it’s been doing so well that it is now approaching a ceiling of resistance. This is a nice change of pace because for the last 3 months I feel like I’ve been writing only about declines in prices. c28Let me explain how this works…when traders are trying to decide when to buy and sell bonds, they look to geopolitical news and economic reports for guidance. Then they look to technical signals as shown in the graphic…the bond is now approaching Ceiling 2. Think of it as a glass elevator going up to the next floor…will it stop and go down or will it keep going up? Traders try to guess…they want to buy low and sell high. If the bond breaks through the ceiling it means traders are still buying bonds…the price will keep going up. When traders feel like it’s gone as high as its going to go, then they sell to make a profit. These ceilings and floors (called moving averages) help traders make those decisions. We want to see the bond trade above the ceiling because traders will then look to the next ceiling up, Ceiling 3, for guidance. I hope that makes sense.

For more information on QE and tapering, read my QE analysis from earlier this week.

My Disclaimer

Perspective.  30-Year Fixed Average Rates:  Past 40 years:  8.15%    Past 30 years:  7.45%    Past 20 years:  6.52%    Past 10 years:  5.72%

A word on locks.  Even though turn-times are fast, I advise longer term locks or at least a pricing cushion to account for possible lock extensions. Flexibility in getting additional days is not as elastic. I advise 45 day Locks. If you must lock 30 days then be sure to build in additional rebate in case you need to pay for an extension.  This is good smart business.


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