Stormy Week Brings Perspective

In This Issue

Last Week in Review: Many communities are still reeling from Superstorm Sandy, while the week also began and ended with important economic news. Forecast for the Week: Between the elections and the ongoing cleanup from Superstorm Sandy, news outside the markets may take center stage this week. View: Check out four innovative ways to improve your productivity, and then share these ideas with your clients, colleagues, and friends.

Last Week in Review

"What do we live for, if it is not to make life less difficult for each other?" George Eliot. The events surrounding Superstorm Sandy certainly put this sentiment into perspective, as many communities continue to recover from last week’s storm. There was also some important economic news to note last week. The biggest news came on Friday, with the Jobs Report for October showing 171,000 new jobs created, with a healthy 184,000 private job creations being offset by modest government job losses. Adding to the good news were some upward revisions to the prior two months’ reports, adding a net 84,000 jobs to what had been previously reported.  The Unemployment Rate held steady at 7.9% as expected, and the more important Labor Force Participation Rate (LFPR) improved by a tick. The LFPR calculation is quite simple. If you are 16 years old and not in the military, then you either have a job or you don't. The ratio of people "participating" or working is then compared to the total population. All in all this was a pretty good report and, on the heel of the modest improvement in Initial Jobless Claims, shows that the labor market is still improving…slowly, but improving. And the other big economic story from last week: inflation as measured by the Core Personal Consumption Expenditure (the Fed’s favorite measure of inflation) remained tame last month. This is significant because inflation is the arch enemy of Bonds and home loan rates (which are tied to Mortgage Bonds), since it reduces the value of fixed investments like Bonds. Remember, though, that one of the goals of the Fed’s latest round of Bond buying (known as Quantitative Easing or QE3) is actually to increase inflation. This is an important story to monitor in the weeks and months ahead. The bottom line is that home loan rates remain near historic lows, making now a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients.

Forecast for the Week

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Nov 02, 2012) A slow week of economic reports comes at a time when news stories beyond the markets will be taking center stage: The week starts off Monday morning with the ISM Services report, which measures the non-manufacturing sector. Leading up to this week’s report, the ISM Services Index has seen three consecutive monthly increases and came in at its highest level since March in the last report. On Thursday, we’ll see the weekly Initial Jobless Claims report. Friday ends the week with a preliminary read on Consumer Sentiment for November. In addition to those reports, two news stories will take center stage. First, the nation will continue to focus on helping the East Coast clean up and recover from the devastation of Hurricane Sandy. Second, the presidential election will undoubtedly overshadow much of the news early in the week. One issue that will be important to watch after the election is how long it takes elected officials to shift back to the impending fiscal cliff that the country is headed towards. Remember, the United States’ mounting debt was a huge topic over the last year or so. But, as the election neared, much of the debt talk was silenced, as politicians from both major parties decided to wait and see what the leadership will look like after the election. After all, any approach to the problem will be impacted by who controls Congress and which party is in the White House. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on. When you see these Bond prices moving higher, it means home loan rates are improving — and when they are moving lower, home loan rates are getting worse. To go one step further — a red “candle” means that MBS worsened during the day, while a green “candle” means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning. As you can see in the chart below, Bonds and home loan rates rebounded after their initial reaction to the optimistic Jobs Report and they remain near their historic lows. I’ll be watching closely to see what happens this week.

The Mortgage Market Guide View...

Pushups for Your Brain Improving brain function is not just a fad for MENSA aspirants anymore, it's big news and the scientific community involved means business. Here are four innovative ways to test your own brain function, and help improve your cognitive ability and workplace productivity. Be sure to check them out and share them with clients, colleagues, and friends. Psychometrics measures cognitive performance in areas like reaction time, executive function, and verbal learning. First, you take a battery of tests to see your current cognitive performance; then you introduce and track a new behavior, called "interventions" to understand whether it helps or hurts your thinking. The intervention can include changes to work routine, diet, even what time you drink coffee or smoke a cigarette. www.quantified-mind.com/about Brain Training involves playing simple games that build your memory, problem solving abilities, and other cognitive functions that are critical to professional work environments. www.lumosity.com Neurofeedback tools require users to wear an EEG headband with small sensors that track brain waves. The devices are wireless and create real-time analytics with your PC or smartphone, measuring how deeply you focus on any given job task, helping you monitor and minimize distraction and stay in a productive state longer. www.axioinc.com/the-product.html Nudgers are mobile apps or online tools that ping you with reminder questions such as, "When was the last time you drank a glass of water?" or "Did you take a walk today?" Behavioral researchers have long realized people often don't do what they say they want to do. Nudgers can be one way to make sure you keep your New Year's resolution, or any other new habit you'd like to build. www.beeminder.com Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise. Economic Calendar for the Week of November 05 - November 09 Date ET Economic Report For Estimate Actual Prior Impact Mon. November 05 10:00 ISM Services Index Oct NA 55.1 Moderate Wed. November 07 03:00 Crude Inventories Sep NA -2.045M Low Thu. November 08 08:30 Jobless Claims (Initial) 11/03 NA 363K Low Fri. November 09 09:00 Consumer Sentiment Index (UoM) Nov NA 82.6 Low

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