Rates now worse by .75%

Market Color: Break out the champagne, the great recession is over, unemployment rate went down contrary to the SI prediction to 10%.  Now why is SI so skeptical this is a real number.  Not after we have constant comments made about the job market is getting less bad, but a full recovery is a distant hope.  While it is encouraging to see jobless claims lessen in yesterday’s report the number of people drawing unemployment is holding steady at 10 million and reportedly 9.3 million people are working part time.  This has been constant from the charts since November 2007, however when these people can find employment, the common refrain seems to be the new term called the “New Normal”.   SI thinks that is just another way of wanting to lessen our current and future expectations on the way things should be.  If this is the start of better days, our mortgage rates will begin to back up and based upon what I see on the screens at the moment, they certainly have.  Low rate punch bowl has been removed for the moment rather abruptly.    Orders to U.S. factories unexpectedly rose in October, the sixth gain in the past seven months. It was further evidence that the manufacturing sector is beginning to recover, which will help support the overall economy. Economists are hoping that the fortunes of the manufacturing sector are beginning to rebound after the recession briefly forced two major U.S. automakers — General Motors and Chrysler LLC — into bankruptcy protection earlier this year.  Chart of factory orders is attached above. Right now, the futures market is pricing in an 82% chance that the Fed keeps rates somewhere between 0% and .25% through March 16th, 2010.  Currently, the Ten Year yield is at 3.47% (3.37% yesterday).  30 year fixed rate mortgages are ugly worse by .75%.   Market News:  The Fed Chairman is on the hot seat before the Senate finance committee for his reappointment to obtain a second four year term.  Under mounting criticism, Federal Reserve Chairman Ben Bernanke took to Capitol Hill on Dec. 3 to defend his record even as he acknowledged that the Fed’s mistakes did contribute to the economic meltdown. Bernanke conceded that the central bank was too slow in safeguarding consumers from high-risk home loans during the housing bubble, adding that banks should have been forced to hold more capital for all the risks they carried. The special hearing reflected doubt among congressional legislators over the Fed’s role as the country’s primary overseer of the financial system. Sen. Richard Shelby, R-Ala., lamented, “In the face of rising home prices and risky mortgage underwriting, the Fed failed to act. Many of the Fed?s responses, in my view, greatly amplified the problem of moral hazard stemming from ‘too big to fail’ treatment of large financial institutions and activities.” More than likely the Bernanke will be appointed but some pounds of flesh will be taken from the Fed and the Chairman in the process as Congress seems bent on taking some powers from the Federal Reserve on how the mortgage meltdown was handled.   For those branches operating in California, the Sacramento Bee came out and said the State’s debt may be a half a trillion dollars.  And we thought the Federal Government had its problems. Here is the article.  http://www.sacbee.com/politics/story/2355706.html   Last year was a very dramatic time as many firms were forced to go out of business.  Several books have now been written, such as “House of Cards” and “Chain of Blame” and so on.  It was and will continue to be an unprecedented period of time and you lived through it.  The attached link is a 26 minute brief expose by the lead executive of Morgan Stanley who describes the one week period which led up to the sale of Morgan Stanley to Chase Bank.  The CEO was speaking to the Wharton School of Business about leadership in times of business crisis.  If you have the time, you will find it quite amazing how this CEO fought to keep his company in business.  The cast of characters include the Morgan Stanley CEO,  Secretary of Treasury Hank Paulsen, Fed Chairman Ben Bernanke, and New York Federal Reserve Governor, Tim Geither.  It is entitled ‘John Mack on Saving Morgan Stanley – Inside the Bunker.”  http://www.youtube.com/watch?v=R9sQtmPAYO0   Not much product news to share as we close out this week.  Meanwhile, everyone is telling us as we age we need to make sure we are exercising, and eating a healthy diet.   Joe Ewens our EVP of Production SI is told works out a great deal and he shared one of his exercise plans.

“Begin by standing on a comfortable surface, where you have plenty of room at each side. With a 5-LB potato sack in each hand, extend your arms straight out from your sides and hold them there as long as you can. Try to reach a full minute, and then relax. Each day you’ll find that you can hold this position for just a bit longer.
After a couple of weeks, move up to 10-LB potato sacks. Then try 50-LB potato sacks and then eventually try to get to where you can lift a 100-LB potato sack in each hand and hold your arms straight for more than a full minute.  After you feel confident at that level, put a potato in each sack and repeat the cycle.  Our thanks to Joe for his secret exercise plan to get in shape for these holidays.  Enjoy the weekend.  20 days to Christmas eve.  (SI)