Conference nyoss1::market_investing

    
    I think that history is on the side of rising long term rates, but the
    FED is believed to have intervened 2 Fridays ago to keep the rate below
    7%.  *If* there was a lot of inflation afoot, then I'd say that the FED
    could not keep the long bond below 7% indefinately...  but the signs of
    inflation are still pretty weak, so my bet is that 7% is a short term top
    for the long bond.  On the other hand, I'd be surprized to see it break
    6% again this year. 
    
    /jim
      

    Economic THEORY would hold that the long rates (i.e., 30 yr notes like
    conventional mortgages) will decline/stay low if inflation is held in
    check. Rationale that the REAL rate is approx 3%, but that he nominal
    rate (which includes the underlying rate of inflation) will by higher
    by that rate of inflation. If boosting short term rates (reducing money
    supply) slows growth, keeping inflation in check at/about 3-4%, then
    mortgages should hold steady.
    
    This is the theory. It remains to be seen in this case whether the fed
    will be successful, and whether mortgage rates will hold/drop. I am
    certainly concerned about this, as I'm having a new house built,
    project closing on a mortgage on/about July 1, 1994. I was quoted a 30
    year fixed rate in January at 6 5/8 (3 points). Most recent quotes in
    the newspaper should at/about 7 1/2 %!
    
    Steve

    
    re: -.1
    
        the nominal short term rate is approx 3+%, but with inflation
    	at about 3-% (depending on which measure you look at), real interest
    	rates are actually around 0%-1%.
    
    /jim

    
    Ok, so what do all the numbers mean (for the economically impaired)
    
    Should I lock in a 30 year rate NOW (*) or wait for another drop in the
    rates?
    
    
    (* I have an ARM that started at 5.25%, is at 6.5% now, and could top
    out at 10%)
    
    
    Thanks! 
    Jamd

    
    re: .4
    
    The real answer is "nobody knows".  Anybody who could accurately
    predict the future of interest rates could make a fortune.
    
    

re                <<< Note 705.4 by DV780::DORO "Donna Quixote" >>>
                          -< Please use small words >-

    
>    Ok, so what do all the numbers mean (for the economically impaired)
>    
>    Should I lock in a 30 year rate NOW (*) or wait for another drop in the
>    rates?
 

well, major banks raised the prime rate by 1/4 of a point.  lots and lots of
loans to businesses, people, cred card, etc. is tied to the prime lending
rate.  this includes mortgages.  

i suggest locking in a rate now.  how much could it drop if it dropped at 
all?  if you're gonna stay there for a while and have some extra money,
pay 2 points and you can probably lock in a 7 5/8 - 7 3/4 rate, which, isn't
bad at all, imo.

personally, i don't see why the Fed is raising the rates 'cuz inflation has
not been a problem, yet.  any takers on this one?

    
    re: .-1
    
    	because if it waits until inflation is a problem, it may be too
    	late to stop it.  The FED is attempting a "preemptive strike".
    
    	btw, the hike in the prime was expected, if not overdue.  I think
    	the intervention by the FED on the long side of the yield curve
    	is a significant event; historically the FED has not attempted to
    	influence the long end by direct market operations...  this is new.
    
    re: last night
    
    	did I hear Clinton say last night that the U.S. is prepared to
    	prop up the Mexican currency if panic ensues after the murder of
    	the leading Mexican candidate?  yikes, what a _bad_ idea.
    	Doesn't Bill know that markets are more powerful than governments?
    
    	my prediction of a 7% short term top on the TBond is contingent on
    	the absence of a currency crisis in Mexico.
    
    
    /jim

    I believe that a fixed rate note is PROBABLY a wise decision at this
    point. As someone stated, even if rates do decline, I'd be astounded to
    see them drop much below the recent lows (in the 6.5% range for 30 yr
    fixed). Kind of like kuying or selliung stocks...It's next to
    impossible to buy at the _very_ bottom, or to sell at the _very_ top.
    If you buy near the bottom, and sell near the top, you "win". So, if
    current rates (yeah, about 7.5% with 2 or 3 pts) are 1 point above the
    low, and are also among the lowest rates seen over the last 20 years,
    it seems a simple decision (assuming no issues with qualifying, i.e.
    those first year "teaser" rates can let someone qualify for a larger
    note).
    
    I'm in an ARM now from 1985; it has worked VERY well given the decline
    of interest rates over the last 8 years. I will be looking at either 20
    yr or 30 yr fixed when I close on a new house in June/July. I sincerely
    HOPE that the markets react positively to the ST rate hikes driven by
    the fed by reducing the "inflation premium" in the LT rates.
    
    Steve

    >	did I hear Clinton say last night that the U.S. is prepared to
    >	prop up the Mexican currency if panic ensues after the murder of
    >	the leading Mexican candidate?  yikes, what a _bad_ idea.
    >	Doesn't Bill know that markets are more powerful than governments?
    
    	From an article in today's Boston Globe Business section:
   
    	"To calm jittery investors and help defend the Mexican pesos
    against possible attack by speculators, the United States said
    yesterday it was extending a $6 billion line of credit to Mexico,
    effectively boosting the country's foreign reserves by that amount.
    
    	Treasury Secretary Lloyd Bentson said the Federal Reserve chairman
    Alan Greenspan said the action 'confirmed continued strong US support
    for Mexico's economic policies.'"
    

    
    Here's hoping that long term interest rates are tracking the DJIA and
    going down.  +82 at 16:00.
    
    
    
    

	In case anyone has heard yet, the unemployment report that came
	out before the market opened showed the best rebound since 1983.
	For Feb. unemployment as 5.5% (compared to 5.8% for Jan.) with
	705,000 new non-farm jobs added to the payroll last month.

	This is driving all the markets down on the fear that the above
	report has dashed all hopes for another easing of interest rates
	by the Fed.

	Delayed openings for lots of DJIA stocks and other controls
	activated as sell orders piled up before the open, and the
	DJIA was still down 120 points within the 1st 1/2 hour.

	The 30 year bond down over 2pts in price driving up the yield.
	Anyone getting a new morgage or refinancing better hope they have
	a rate lock or better hope some other economic report shows the
	economy is not headed for the recovery todays unemployment
	report seems to indicate.

	Todays unemployment report could just be a fluck with all those
	new jobs being temp. ones in the media business to follow campain
	1996 :-)))