patrick.net

Can one of you super savvy financial guys riddle me this, why when the FED rate was 1% or so mortgages were 5% or so, a 4% spread. Now that the FED rate is 5.25%, why are mortgages only 6.6%, a 1.35% spread. Who is taking the hit?

Surfer X,

You have struck a nerve sir! I was wondering the same thing at about 5:00am this morning! I have NO logical explanation and there aren't any straight shooter type mort. brokers that I know of so let me make a few calls. I'd been wondering the same thing myself. I mean wtf?

The spread on ARMs has stayed the same (i.e. ARM prices have increased with the FED rate):

http://library.hsh.com/?row_id=93

But 30-yr fixed have not moved up:

http://library.hsh.com/?row_id=92

Basically, this is the bond market saying they expect a recession and a future drop in rates. That or else it's just foreign banks buying MBS without realizing / factoring in principle risk.

milk delivery man and Jake Gyllenhaal

MMMMM cowboy love, Astrid do you have chaps?

surfer-x,

The funny thing is that I've yet to watch Brokeback Mountain. I've read both of Annie Proux's short story collections, and I do want to watch BM. But just haven't had the opportunity.

You can count me in as a Donnie Darko geek. :D

Flat Yield Curve?

X,

The "float" on the 30 yr. (since it's re-introduction) is only about 50 bil. With pension assets buying up all they can get their hands on it's definitely narrowed the spreads. I'm on hold.

Astrid, we are filming "brokeback beach" down here in $anta Barbara. A rousing tale of the love that dare not speak it's name. Two trustafarians meet and fall in love, kind of a gay Romeo/Juliet, but with better cars.

Peter, I’m with you on gold, but this current move is getting out of hand, especially in the base metals like copper. I bought a bit more at $670 but think we’re due for a sharp 5-10% correction and will wait for that before picking more up.

Conor, no insult intended, but if 25-year olds are day trading gold, that's a sign of the peak.

House/stocks/gold - whatever you're going to invest in, buy and hold. Churn and transaction costs will kill you.

X,

Yield curve plus micro-economic stuff that affects mortgage rates: supply & demand. If less people are demanding them then the "price" (premium, spread, whatever) will have to come down.

X,

From the "bond desk":

The 30 yr. FRM is not really affected by the Fed. Funds Rate.

Fed. Funds Rate has a more immediate impact on short term money. Namely ARM's.

30 yr. FRM is more closely tied to the 10 yr. and right now the Bank of China as well as the bank of Japan have continued to bid that up. (So far)

However; (and this will make your day) the spread banks are taking it right in the "brokebutt beach" if you get my meaning. Same said bond desk is moving out of financials. Duh!

x,

That's fine. As long as Stephen Merritt scores the movie.

FRIFY,

I think that Conor has well displayed that he is not just another 20 something. You go Conor!

Peter P,

As a sample last night I tuned into 5 Bay Area AM radio stations between 9:30pm and 12:30am while doing some other work. 4 were talk format, 1 news format. All had at least one "buy gold now before it's too late" ad. One station in particular had an ad about every other break, and from different companies, and saying things like "Gold going to $5,000/oz! Better buy now".

Common support were stylized "Gold-to-DOW" correlations. Interestingly, no direct attacks on the dollar. Probably a weird marketing/advertising thing there about not offending anyone's national pride. After all, these ads were clearly aimed at "lay people", not financially astute investors.

I then flipped through late night television before hitting bed (I rarely watch TV). I found two gold-profit infomercials running, although one was gold + copper, no risk, make $ without using your own $. Do it like the hedge-funds do! kind of stuff.

I'm not saying it's a bubble yet, but it's starting to look "frothy".

X,

I think the FED is at 5% even, no? Doesn't matter, just as long as we have an ample supply of bubble bucks!

Btw, who will be playing the lead roles in Broke Butt Beach?

Surfer-X should direct it.

x,

I'd pay good money to see Broke Butt Beach, starring Takeshi Kaneshiro and Sean Maher. (of course, I'd pay good money to see any movie with those two)

DinOR, yeah 5%. But come on, if the fed keeps raising rates it makes more sense to put your money elsewhere, if you are getting what 4.7% holding very risky housing notes, and you can get 4.75% in a freaking CD, come on man, do the math. Makes no sense to me. But then again I pay everything off. So far the tally is student loan only, 41K at 3.75% fixed. I abhor debt but see no reason to pay this one off as it is technically now free money.

Brokeback Beach is currently filming. Seems that "Chad" is upset that "Blain" keeps diddiling the cabana boys.

Just got back from the coin store with 1/200th of my post-bubble house in my pocket. I'm sure I've left some money on the table for the next guy. Enjoy the butterflies and the told-you-sos for the next 0-6 months and we'll talk in a year.

X,

Agreed! And yes, it's basically free money. Claim as ded. int. as usual. I think my daughter's loans will run quite a bit more than 3.75%!

Just the idea of low budget version of BBM filmed in SoCal reminds of those cheesy Bikini Car Wash, or Bikini Drive-Thru movies they used to run at 3:00am on USA. You know, where you see uncredited extras playing 2 or 3 roles and they don't even bother to take the pains to conceal it?

You know the deal! We've got to raise $25,000 before the bank will foreclose on my drifty, but likeable uncle! He runs the last drive-in movie/hot tub hotel/taco stand in SoCal! Let's get to work girls! Alright already. Cue the "clueless" guy with coke bottle thick glasses.

@SP, the all time best has to be "Moo Goo Guy Poon"

SP,

Do Elitists come with personal intellectual property lawyers? That's a lot of trademarking you're doing. :)

Gold will get busted.

I am praying that Ag rises above 15.

Three men and a maybe?

Oh, this has just gone too far!

Anyway, the reason I thought that the "endless beach party/my folks are gone for the weekend" format would create the perfect vehicle for Surfer X's "up date" of BBM is b/c this is an art? form that obviously doesn't take itself too seriously. No attempt is made to make these "works" a period piece. They are shot in the here and now and if there's a "vapor trail" or they just can't get that rush hour traffic to materialize they just leave it in. Everything is done on a budget and the first take is the ONLY take. They just kind of turn out how they turn out, take it or leave it. Cut! That's a wrap. Now let's really party!

Conor, the market is a giant casino. The real macho guys play with gold futures. Of course, most speculators get eaten alive by the COT in the futures market. The no-so-macho guys like me dabble with mining stocks.

You can also play Au and Ag ETF. But you need a lot of money to daytrade them (in order to get a sizable profit).

But if you stay put for the long run, you'll do well. The only downside is that with physicals, you have no leverage. But you'll do much better than 99% of your peers. And since you are still very young, that small advantage will turn into major advantage at an exponential pace, especially since you seem to have a brain -- the same cannot be said for some other people in this world, let alone on this board.

Anybody here has insight on platinum or palladium or other (I believe palladium is a rare earth metal?!?) rare earth metals? They certainly have industrial uses.

Anybody here has insight on platinum or palladium or other (I believe palladium is a rare earth metal?!?) rare earth metals?

Buy, buy, buy.

NOT INVESTMENT ADVICE

Conor,

Well said. I don't know if those LTCM guys had a brain. My buddies and I, all togther an ex-nuclear physicist, an ex CS theoretician, and an ex aspiring theoretical physicist-experimental jack of all trades-occasional hacker-lover of women, checked the Nobel Prize-winning theory that those guys came up with. It was a very simple shit, physics applied to economics.

Mucking with math equations does not need a brain.

On my way to work, I talked to a carpenter who's fixing stuff at our condo complex. I was surprised that this guy, in his late 50's-60's, had gone to college to study sociology in the 60s. He knew what he was talking about. He said he was once rich and made 6 figures shortly after college, back when 6 figures was something to boast to your college buddy (perhaps even your parents). I did ask him about RE market in the Seattle area. He coyed. (Did I spell correctly?)

I love talking to these old folks.

Here’s some advice — if you don’t know what palladium is, don’t invest in it.

IMO, one does not need to know what X is before investing in X. One only need to know what other people think of X. It is 100% human psychology. Fundamental analysis will only derail your feel.

Conor,

LOL! I was hoping someone would tell me. I know it turns up for use as a catalyst and in alloys. I'm not planning to invest any of the above (except maybe platinum), but it's nice to get some feedback about them.

Conor,

I commend you on your fiscal austerity. Living below your means is the key to long term prosperity. I just hate to hear a young guy investing in something with such a historically low return as gold at a historically high water mark. Gold's return is low for a reason; it bubbles when people fear inflation and retraces when they calm back down.

I'm not going to try to talk you out of gold, but if you own no stocks, you're overexposed to metals. Diversify, diversify. Cash @ 5% return isn't a bad safe bet, but as young as you are, you should be in the stock market at 70% or above. The only serious inflation we've experienced has been housing inflation. If you believe the majority of the people on this board, that's been an abnormal result of the foolish borrowing habits of FBs and the foolish lending habits of dark forces.

Gold sits. Gold produces nothing. Make your money work for you. Invest it. Buying gold is speculating.

Good luck!

FRIFY says:
Good luck!

Indeed. Conor needs it if he follows your advice.

Peter P,

It's not 100% human psychology. There are always supply and demand constraints. If diamond is as common as graphite, no one would pay so much for them, no matter how much it sparkles.

So you still need to analyze for production capacity, current availability, usage, etc. Going all meta on mass psychology is insufficient. You need to go meta-meta to figure out what figures into mass psychology, and reality is a surprising important component.

Seriously, studies have shown that timing is very important even for long-term stock investing. So this putting your 70% in the stock market is pure garbage, propagated by people who were lucky enough to live their useful period of life during 1980-2000.

Living below your means is the key to long term prosperity.

With all due respect, the key to long term prosperity is being born at the right place at the right time. The next best thing is doing the right thing at the right time.

One cannot gain much wealth just by saving. It is making the right call at the right moment that counts.

Gold sits. Gold produces nothing. Make your money work for you. Invest it. Buying gold is speculating.

One can surely invest in his own speculation.

NOT INVESTMENT ADVICE

Indeed. Conor needs it if he follows your advice.

Haven't unloaded all of your Gold portfolio yet, GC? ;-) You can't get my goat, but you might give Linda my vote...

Conor,

Absolutely. Common sense and street smarts are not taught at schools. As a matter of fact, colleges make a point not to teach these things. Well, for one thing, the profs don't know how to for they lack common sense ans street smarts. For another, if they do, meaning teaching something one naturally picks up in the streets or inherit from parents, how can colleges justify their existence and high tuitions?

One more body bag added to the altar of majority rule (woops, democracy).