Phil Grossfield's Blog

Terrorism.  In response to my Terrorism post, I received this comment from a reader and I appreciated it so much I thought I’d share it with you:

Like you wrote, terrorism is here to stay. Whether it is homegrown or foreign. This is actually a good thing that the markets and investors are not reacting or overreacting. The reason being is that terrorists are not getting the power pull by causing the market to take a big swing. It is just like all the mass media attention these terrorists are getting right now. This just empowers more People who crave this kind of attention to go out and copycat. We need to stop glorifying the terrorists. We need to spend more time glorifying good deeds. When was the last time you saw this much media attention on something good???? I cannot remember a time and I am 47 years old. When we continue to glorify and give more attention to the bad we create more bad. We need to stop and start glorifying the good. If you want to put a few blips on the screen “hey have you seen these 4 men driving a stolen car, please call police.” that is it. All this iPhone coverage of the actual killings and the shooting of an innocent bystander is wrong. We need to stop. The markets have it right, don’t react and we keep the power and not give it away to terrorism.

My Market Update – 01/09/2015

The 30-year Fannie Mae bond is trading up +42bps this morning since yesterday’s close.  Generally a lender’s pricing improves when the bond is being bought.  We’re seeing some volatility in trading…the bond was down to +30 just a few minutes ago and then bounced back up to +42bps again.  I suspect traders are taking quick profits.  Today pricing is about 0.250 better than yesterday.  I’m advising locking now…I’ll explain below.

Today’s Jobs Report came in pretty much as expected.  We expected 245,000 new jobs but 252,000 new jobs were reported.  This isn’t significantly higher, so why are trader’s investing in bonds?  Wages…that’s why.  Wages remain weak and actually fell in December.  Lower wages indicate that there isn’t much inflationary pressure.  Since bonds hate inflation, a report indicating less inflation makes bonds attractive.  Moreover, less inflationary pressure encourages the Fed to keep rates low.  For all these reasons, and with a Jobs report that is par with expectations, traders are investing in bonds and when that happens our rates improve.

All that said, I think you should take advantage of the increased prices and lock now.  Even though the Jobs Report was not much higher than expected, adjustments to previous months were higher making 2014 the biggest jobs growth month since 1999.  I suspect these facts will slowly work its way against bonds and by the end of the day I wouldn’t be surprised to see a mid-day change for the worse.  Therefore, if my Mom asked for advice and needed to lock soon, and since I love my Mom, I’d tell her to lock.

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