MMG Weekly: QE2 Debate Rages On

For the week of Nov 22, 2010 --- Vol. 8, Issue 47

In This Issue

Last Week in Review: The debate over Quantitative Easing continued, as did the volatility in the markets. And Bonds and home loan rates sure felt the pinch! Forecast for the Week: It will be a busy week ahead of the Thanksgiving holiday, with more Treasury auctions and a very full calendar of economic reports. View: The holiday shopping season is gearing up, but you don't have to be afraid of the crowds, thanks to these easy and inexpensive gift ideas.

Last Week in Review

"ACTIONS SPEAK LOUDER THAN WORDS." And this week, we saw a whole lot of loud action in the volatile financial markets...and also heard a lot of words, as the debate over the Fed's latest round of Quantitative Easing continued. Here's what you need to know about what was said...and what happened to home loan rates. If you've been wondering what Quantitative Easing (QE) actually is, it's the concept of the Fed becoming a buyer of Treasuries and Bonds to try and stimulate the economy. The Fed's goal for this latest round of Quantitative Easing (dubbed QE2) is threefold: To create inflation and avoid a deflationary economy To lower the unemployment rate To boost Stock prices And while the Fed won't come out and say it outright – as they don't want to be accused of currency manipulation – one of the consequences of QE2 is that the US Dollar will weaken. And this helps make US exports more affordable abroad, as well as make imports appear relatively more expensive. In fact, as the image shows, the Dollar has weakened versus the Euro quite significantly since QE2 began. But this will help large multi-national companies, which have a large influence on the economy and the major Stock market indices. And stimulating our economy towards continued growth is the Fed’s main goal for QE2. Yet the debate rages on...even now that QE2 has begun...with respected opinions on both sides as to the wisdom of the Fed's policy. German Finance Minister Wolfgang Schauble went so far as to call current US economic policy "clueless." But supporting the Fed's position were last week's tame inflation readings at both the wholesale and consumer levels, via the Producer Price Index and Consumer Price Index Reports. However, with news last week that Ireland’s banking system is in a dire situation, like Greece's earlier this year, opponents of QE2 point to those countries when they speak to the danger of taking on debt, like the Fed is doing again via QE2. One of the most important things to understand is this: the three goals of QE2, while meant to improve our economy overall and for the long-term, are unfriendly to Bonds and home loan rates. And that was evident last week, as Bond prices and home loan rates ended the week worse than where they began. In fact, last week legendary investor Warren Buffet said, "I think short-term and long-term Bonds are a very poor investment at the present time." If Mr. Buffet thinks long-term Bonds are a poor investment right now, he is saying home loan rates can't come down much further - and the risk in waiting around for that to potentially happen does not outweigh the potential reward. Give me a call if you want to review your situation, or forward this email to a friend, family member or colleague who might benefit. I'm always happy to talk to your referrals, and provide a complimentary consultation. BLACK FRIDAY IS JUST A FEW DAYS AWAY! JUST AFTER THE FORECAST, YOU WON'T WANT TO MISS THE MORTGAGE MARKET GUIDE VIEW ARTICLE, ON FIVE INEXPENSIVE GIFT IDEAS THAT CAN MAKE YOUR HOLIDAY SHOPPING EASY.

Forecast for the Week

We may have a holiday shortened week ahead, but the markets will be filled with plenty of action. The Treasury will be buying $99 Billion in 2, 5 and 7-Year Notes on Monday, Tuesday and Wednesday. And meanwhile, economic reports for the week begin on Tuesday with the Gross Domestic Product Report, which is the broadest measure of economic activity, and also the Existing Home Sales Report. Also, the "Meeting Minutes" from the Fed’s most recent meeting on November 2-3 will be released. On Wednesday, we'll have a virtual feast of economic reports just ahead of Thanksgiving. We'll get another round of housing news with the New Home Sales Report, plus another read on the economy with the Durable Goods Report, which gives us an update on consumer and business buying behavior on big-ticket items that are designed to last for an extended period of time. Not to be left out, there will be jobs news via the Initial and Continuing Jobless Claims numbers, and inflation news via the Personal Consumption Expenditures (PCE) Index, which happens to be the Fed's favorite gauge of inflation. 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. As you can see in the chart below, it's been a volatile few weeks for Bonds and home loan rates as they've been attempting to stabilize. With so many economic reports on tap this week, the volatility will likely continue. If you have any questions about your situation, call or email me anytime! By the way, the financial markets will be closed all day on Thursday in honor of the Thanksgiving holiday, while on Friday the Stock and Bond markets will close early, at 1:00 p.m. ET and 2:00 p.m. ET respectively. I wish you and your loved ones a safe, happy, and fun Thanksgiving! Chart: Fannie Mae 3.5% Mortgage Bond (Friday, November 19, 2010)

The Mortgage Market Guide View...

5 Inexpensive, Easy-to-Purchase Gifts Black Friday's almost here. And, after that there's the busy holiday season. But just because it's the holidays, doesn't mean shopping has to be hectic or expensive. The following list offers 5 easy-to-get, inexpensive gift ideas. 1. Gift Cards – Anyone who says a gift card is impersonal has never received one. It doesn't get any more personal than allowing someone the opportunity to pick out the gift they really want. The fact is, gift cards are often well received…and nowadays they’re easy to purchase just about anywhere so you probably won’t even need to stand in a long line. 2. Godiva Chocolate – For any diehard chocolate lover, Godiva offers several gift selections for under $25. It's not only a delicious product, but receiving chocolate in a little gold box is about as iconic as receiving jewelry in a little blue box. Visit www.Godiva.com to see the various selections. 3. Lottery Tickets – Buying $20 worth of scratchers as a holiday gift is easy to do and can make an exciting holiday gift, especially if some of them hit. Besides, the idea of scratching off 20 lottery tickets does sound like fun. Tuck them inside a thoughtfully-written card and you're all set. 4. Movie Tickets for Two – If you know a couple of movie fanatics, this is an ideal gift. After all, free tickets are like gold to them. You could even combine this gift with idea #1 above by purchasing a gift card to a restaurant so the movie lover can make a “dinner and a movie” night out of it. 5. Homemade Gift Basket – Putting together a gift basket for someone allows you to tailor the gift precisely to the interests of the person who's receiving it. Gift basket themes are limitless and can fit into any budget. Good luck and happy holiday shopping! -------------------------- Economic Calendar for the Week of November 22-26, 2010 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 22 - November 26 Date ET Economic Report For Estimate Actual Prior Impact Tue. November 23 08:30 Gross Domestic Product (GDP) Q3 2.4%   2.0% Moderate Tue. November 23 02:00 FOMC Minutes 11/3       HIGH Tue. November 23 10:00 Existing Home Sales Oct 4.42M   4.53M Moderate Tue. November 23 08:30 GDP Chain Deflator Q3 2.3%   2.3% Moderate Wed. November 24 08:30 Personal Income Oct 0.4%   -0.1% Moderate Wed. November 24 08:30 Personal Spending Oct 0.4%   0.2%

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MBSQuoteline Weekly Newsletter

	Mortgage Time Mortgage Market News for the week ending November 19, 2010
Compliments of Philip Jensen AmeriFirst Financial PHONE: (602) 492-6595 pjemnsen@amerifirst.us      Events This Week: Inflation Lower Retail Sales Rose Housing Starts Fell Manufacturing Mixed Events Next Week: Tues 11/23 Existing Sales GDP Wed 11/24 Durable Orders New Home Sales Income		What's Going On With Mortgage Rates? After reaching the lowest levels in decades, mortgage rates have shot higher over the past two weeks. There is not a simple explanation for why this happened, but looking at the many factors which are influencing mortgage rates right now will help to understand what's going on. In short, when investors look ahead, they see few reasons for mortgage rates to move lower and many possible causes for them to move higher. The major negatives for mortgage rates include stronger than expected economic growth, domestic and foreign opposition to quantitative easing, and concerns about lower foreign demand for US securities. Beginning in late August, the Fed hinted that they would initiate a new stimulus program to purchase Treasury securities, which is known as quantitative easing. In the short-term, Treasury buying by the Fed increases demand for bonds, including mortgage-backed securities (MBS). In anticipation of this added demand, investors purchased MBS, which pushed mortgage rates lower. After the Fed's official announcement on November 3, mortgage rates began to move higher for a variety of reasons. Stronger than expected economic data caused investors to raise their outlook for economic growth, which generally leads to higher inflation. In addition, there was substantial opposition to the quantitative easing program from other countries and from many US politicians and economists, meaning that the Fed will face strong resistance to an expansion of the program. Investors had viewed the $600 billion initial level as a first step which would likely be increased in the future. Stronger economic growth and opposition to quantitative easing has reduced the likelihood that the program will be increased. The recent news has not been uniformly negative for mortgage rates. Current inflation levels remain extremely low. In fact, the Consumer Price Index data released this week showed that annual core inflation dropped to a record low in October. Bottom line, though, when mortgage rates reached such extremely low levels, it left them in a position to reverse direction very quickly. Also Notable: The Jobless Claims four-week average declined to the lowest level since Sept. 2008 Bernanke testified that the $600B quantitative easing could create 700K jobs over two years The Treasury will auction $99 billion in 2-yr, 5-yr, and 7-yr securities next week Oil prices dropped 6% from the high for the year reached last week Average 30 yr fixed rate: Last week: +0.15% This week: +0.10% Stocks (weekly): Dow: 11,150 -50 NASDAQ: 2,500 -25    Week Ahead Due to the Thanksgiving holiday, all of next week's economic reports will come out before Thursday. Revisions to third quarter GDP and Existing Home Sales will be released on Tuesday. Durable Orders, New Home Sales, Personal Income, Consumer Sentiment, and the Fed Minutes from the November 3 meeting will come out on Wednesday. There will be Treasury auctions on Monday, Tuesday, and Wednesday. Mortgage markets will be closed on Thursday and will close early on Friday.

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Inflation Information Breaks Through the Clutter

Phil Jensen Mortgage Director AmeriFirst Financial Phone: 602-692-7445 Phil@JensenTeam.com www.JensenTeam.com

In This Issue           Last Week in Review: Recent economic events are giving a strong indication of where rates are headed. Read on to find out where and why. Forecast for the Week: Here's a quick rundown of reports we need to watch this week... and there are some big ones on the docket! View: Read below to find out how decluttering your home can help you financially!           Last Week in Review           "INFLATION IS WHEN YOU PAY $15 FOR THE $10 HAIRCUT YOU USED TO GET FOR $5 WHEN YOU HAD HAIR." - Sam Ewing. And regardless of how much hair you have these days... one thing we can watch to help a get sense of where rates are going is inflation. Right now, the headline numbers in the US show little inflation overall... but we are already seeing significant inflation in particular items like commodities, food, and oil - which are being driven by a weak US Dollar, and increasing demand from emerging countries like China and India. In addition, the global market reacted late last week to higher-than-expected inflation in China. This is important to us because Bonds and home loan rates hate inflation, no matter where the whiff of it comes from. Here's why. Think of inflation as a hot air balloon and rates as the basket under that balloon. As the balloon (or inflation) rises, the basket (or rates) must rise as well. So, if inflation moves higher in China, their government has to raise rates to fight inflation. And if rates move higher in China, global investors seeking the highest yield will move away from the relatively meager returns seen in US Bonds - and move their Bond buying money into juicier yields found abroad. There are so many opinions by so many smart people on both sides of the inflation argument, but right now it is all about what the Bond market thinks. And the recent market action shows just how quickly sentiment in the market can change. Remember, it was just a few weeks ago that fears and whispers of deflation helped the Bond market - and home loan rates - improve. But now with the Fed intent on avoiding deflation and in fact creating inflation through another round of Quantitative Easing (or QE2), the entire Bond market - including Mortgage Bonds - have began to react negatively. Remember, Quantitative Easing is the concept of the Fed becoming a buyer of Treasuries and Bonds, in a bid to stimulate the economy by: Creating inflation Lowering the unemployment rate Raising Stock prices While those goals may be good for the overall economy, we need to remember that all three are very unfriendly to Mortgage Bonds and home loan rates. The good news is, despite ending the week worse than where they started, home loan rates are still near historic lows for the time being. If you or someone you know is looking to take advantage of low rates, now is the time. Please call or email me today to get started.           Forecast for the Week           After a relatively slow schedule of economic reports last week, we'll see some big reports over the next few days with the potential to really move the markets. We'll start off right away Monday morning with the Retail Sales report for October as well as a dose of manufacturing news in the Empire State Index, which looks at New York State's manufacturing sector, and is a good gauge of manufacturing overall. On Thursday, we'll also see the Philadelphia Fed Index, which is another important manufacturing report. Those two indices have the potential to impact the market, since they indicate the health of the manufacturing sector in the US. Even more big news is headed our way on Tuesday with the Producer Price Index (PPI), which measures inflation at the wholesale level. Then, the very next day on Wednesday morning, we'll see the Consumer Price Index (CPI) with a look at inflation at the consumer level. In light of last week's news and the information described above, it will be important to see what these reports reveal - since inflation is the archenemy of Bonds and home loan rates. Wednesday will also bring more housing industry news with reports on the number of Housing Starts and Building Permits in October. The week of reports caps off on Thursday with the Initial Jobless Claims report. Last week's report indicated that Initial Jobless Claims fell in the latest week to the lowest reading since July. Continuing Jobless Claims also moved lower. While those numbers showed modest improvements and are steps in the right direction, there is still a lot of wood to chop where jobs are concerned. 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. Some of the charts that monitor Bond activity can look complex - but they tell quite a story! In the chart below, pay attention to the downward trend for Bond prices (which means an upward trend for home loan rates) since November 3rd, which was when the Fed announced their QE2 plans. This chart shows us that Mortgage Bonds have traded sharply lower since the Fed Meeting and official QE2 announcement. Again, home loan rates are still at historically low levels for the time being, which means there's still time to purchase or refinance a home and take advantage of the great rates. And it only takes a few minutes to get the process started - please feel free to get in touch with me, and pass on this newsletter to friends, family members, neighbors or coworkers that might benefit as well! Chart: Fannie Mae 3.5% Mortgage Bond (Friday, November 12, 2010)           The Mortgage Market Guide View...           Financial Benefits of Decluttering It pays off to unload items you no longer need (or never really needed at all) By Cameron Huddleston, Kiplinger.com I have been in a decluttering mode lately. It was sparked by moving my mom from her three-bedroom home to a one-bedroom apartment in my house -- and having to pare down her belongings. Spending weeks going through all her stuff to figure out what she did and didn't need (then selling and donating the unnecessary items) made me want to remove all the clutter from my life, too. A few articles I recently read fueled this desire even more. My husband and I usually go through our closet once a year to clear out clothes we no longer wear. But an article in the New York Times about people who decided to wear only six items for a month made me aware that there still is a lot in my closet that I don't need. We occasionally go through other closets, cabinets and drawers to rid them of items that don't get used and just take up space. After reading G.E. Miller's 3 Guerilla Tactics to Get Rid of Clutter on 20somethingfinance, I realized my haphazard keep-or-toss tactics weren't cutting it.

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Elections, the Fed, and Jobs... Oh My!

In This Issue           Last Week in Review: Election results, the Fed's announcement, and the Jobs Report - what a full week it was! So what was the impact on home loan rates? Forecast for the Week: It's a quiet week on the economic report front, but don't expect the volatility to die down as the markets continue to digest last week's news. View: Leasing a car may be easy, but getting out of a car lease is another story. Luckily, this week's View article has some ideas that can help.           Last Week in Review           "TOMORROW IS OFTEN THE BUSIEST DAY OF THE WEEK." Spanish Proverb. And it sure seemed that way every day of last week, with one of the busiest economic calendars seen in years. Friday's Jobs Report capped off a week filled with election results and a big announcement from the Fed regarding the next round of Quantitative Easing (QE2). So what impact did all of this news have on Bonds and home loan rates? Let's break it down. On Friday, the Labor Department reported that 151,000 jobs were created in October, all in the private sector. This was much higher than the 60,000 job creations that were expected - and while the economy needs a lot more job creations to put a dent in the unemployment rate, this is a great start to a recovery in the labor market. Adding to the positive tone of the report, there were upward revisions to both August and September's numbers, and the Unemployment Rate held steady at 9.6%. The Average Hourly Wage increased as well - and across the board, the numbers were stronger than anticipated. Should this trend continue in the coming months, it would support the notion that labor has not only stabilized - but is perhaps even expanding, which would be welcome news indeed. And while this is great news for the economy, remember that when good economic news arrives, investors move money into Stocks... and this pulls money out of all types of Bonds, including Mortgage Backed Securities, which home loan rates are based on. When money moves out of Bonds, it causes Bond pricing and home loan rates to worsen - and that's exactly what happened, following the better than expected Jobs Report. Although we all like to hear good news for the economy - any strong, positive economic news is bad news for Bond pricing and home loan rates. Home loan rates were exceptionally volatile all last week - and likely to remain so ahead. While rates are still at very low, affordable levels - they won't last forever, so please get in touch if you have questions about how the current rate climate might benefit your situation. In other big news last week, the Federal Reserve Board made their much anticipated announcement regarding another round of "Quantitative Easing" or QE2, where the Fed will participate in purchasing Treasury Securities in a bid to keep the economic recovery on track. On Wednesday, the Fed announced that they intend to purchase $600 Billion in Treasuries, starting now and continuing through mid-2011, which equates to about $75 Billion in purchases per month. So how will this impact home loan rates ahead? We need to be mindful that the Fed initiated QE2 for three reasons. One, to help lower interest rates in order to spur consumer and business spending... which in turn will create inflation. Two, to help lower the unemployment rate via an economic boost. And three, to help push Stock prices higher. And all three of these factors will cause headwinds for Bonds and home loan rates down the road. As the Fed gets to work on putting their latest plan into effect - we can be sure that inflation readings in various economic reports will likely be more highly scrutinized by the markets. Upcoming reports will reveal whether the Fed will be successful in their quest to fight deflation, and create a level of Goldilocks inflation that is not too hot, not too cool... but juuuust right. Ultimately, if inflation expectations creep higher, interest rates for long-term Bonds - like Mortgage Bonds - will rise as well. One thing is certain, the volatility we saw in the markets last week is sure to continue. If you have any questions about how you can take advantage of today's historic low rates, please contact me, and let's evaluate your current situation. And feel free to forward this email to any friends, family members, or colleagues who may have questions as well - I'm always pleased to talk with anyone you'd refer my way. THINK YOU'RE STUCK IN YOUR VEHICLE LEASE? THINK AGAIN. CHECK OUT THE MORTGAGE MARKET GUIDE VIEW FOR SOME TIPS THAT COULD MAKE GETTING OUT OF IT EASIER THAN YOU THINK.           Forecast for the Week           After all last week's big news, Traders will continue to digest all the happenings... and will have a somewhat quiet economic news week ahead, including the Bond Market being closed on Thursday in honor of Veteran's Day There are no major economic reports until Wednesday, which will bring another look at employment with the Initial and Continuing Jobless Claims Report. Last week's Initial Jobless Claims were 457,000, above the 445,000 that was expected, while Continuing Jobless Claims fell 42,000 to 4.34 Million. Initial Jobless Claims have been stuck to that mid-400's level like a magnet for a very long time - and a real, sustained movement below 400,000 is needed in order for the market to feel confident that labor is recovering. Also this week we'll get a read on Consumer Sentiment on Friday - always an important number, but particularly of note for retailers, especially as we head into the holiday shopping season. 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. As you can see in the chart below, Bonds and home loan rates had some ups and downs last week in response to the QE2 announcement and the Jobs Report. I'll be keeping a close eye on the volatility as this week progresses. ----------------------- Chart: Fannie Mae 3.5% Mortgage Bond (Friday, November 5, 2010)           The Mortgage Market Guide View...           Getting Out of a Car Lease Car leases can pose many advantages for consumers. Typically speaking, lease payments are less than payments on a car loan, thus allowing a consumer to lease a vehicle that he or she couldn't afford to actually buy. Many people also like the idea of avoiding major repairs by handing back their car after a predetermined amount of years. However, being tied into a lease can be a negative burden at times - especially in today's uncertain economic climate. Let's say that after signing on the dotted line to lease a car, your financial situation changes for the worse and you can no longer afford it. Just turning the car into the dealership and walking away from the lease could impact your credit dramatically, even to the point of a "repossession" showing up on your credit report. But what option do you have? It may surprise you to find out that you actually have a few options. One option is something known as an "early termination" of the lease. The problem with early termination, however, is that it can be costly, very costly. Aside from paying off the amount owed on the lease, there can also be penalty fees and other miscellaneous charges padded into the contract. Another option is to sell your leased car privately. The problems with this option are that it requires a lot of hard work on your part and it only benefits consumers with cars that have an equal or greater value than their current "buy out" price. But there is another option for getting out of your car lease, and it can prove to be the best one for many people. It is something known as a "lease transfer" and the process is just as it sounds. A leaseholder finds someone who is not only credit-worthy, but also willing to assume his or her car lease. Once the terms are negotiated and ratified the remainder of the lease is transferred into the new leaseholder's name. If a lease transfer sounds like a complicated process, it's because it can be. The good news, however, is that thanks to websites like www.leasetrader.com and www.swapalease.com the lease transfer process has been fully explained and streamlined. These companies basically act as middlemen between the buyer and the seller, providing a forum for listings, as well as hands-on help with expediting the process. It is important to know that the aforementioned websites - as well as most car leasing companies - will charge a fee for a car lease transfer. But... those fees can be negotiated between the buyer and the seller, and they are also much less costly than the fees associated with terminating your lease early. -------------------------- Economic Calendar for the Week of November 8-12, 2010 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 08 - November 12 td

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MMG Weekly: Can you believe what they said?

In This Issue           Last Week in Review: Strong words - and colorful quotes - fill the headlines. Forecast for the Week: A serious "trifecta" of heavy-hitting events in store! View: 10 ways you can save for a rainy day, not to mention retirement.           Last Week in Review           "TEN PEOPLE WHO SPEAK MAKE MORE NOISE THAN TEN THOUSAND WHO ARE SILENT." - Napoleon Bonaparte. And there have certainly been more than ten who are speaking out - and using some pretty strong words - as experts and analysts are looking forward to some major events this week, including the midterm elections this Tuesday, the Fed Statement on Wednesday, and the Jobs Report on Friday. To say the least, that's a very influential trifecta of events - so let's take a look at some of the strong and colorful lingo being used - and why. One of the biggest news items up for debate is the Fed's expected announcement of another round of Quantitative Easing (QE2) when it releases its statement this week. Remember, QE is the concept of the Fed becoming a heavy buyer of Treasuries and Bonds. This is done to artificially cause those security prices to move higher under the increased demand, which in turn will cause interest rates to move lower in the hopes of stimulating the economy - but it also continues to load the US with debt and may have numerous other negative unintended consequences. Although this move by the Fed is likely, it's been under some criticism - and after hearing some colorful commentary about QE2 last week from Fed Chair Ben Bernanke, the skepticism heightened. Fed Chair Bernanke compared the Fed's handling of the next round of QE2 to being like a golfer with a new putter, stating that the golfer has to tap lightly at first and try to figure out how to use it properly. Wow - not exactly words that inspire confidence in the Fed's ability to get QE2 right... particularly when you consider that the weekend golfer has a less than 50% chance of sinking a putt 3 feet in length. And one of the Fed members themselves, Kansas City Fed President Thomas Hoenig, actually said that attempting to stoke change for the economy via monetary policy like QE2 is making a "bargain with the devil". Strong words. Bill Gross, manager of the world's largest Bond fund, PIMCO, took the criticism of QE2 a step further. He recently stated that "Checkwriting in the Trillions is not a Bondholder's friend... it is in fact inflationary, and, if truth be told, somewhat of a Ponzi Scheme. It raises Bond prices to create the illusion of high annual returns, but ultimately it reaches a dead end where those prices can no longer go up." Definitely colorful language, likening what is happening to a "Ponzi Scheme!" While Bill Gross doesn't always get it right... he sure has it right here. Printing more money will ultimately be a negative to Bond investors, and could pose serious negative consequences to the economy down the road. ----------------------- World's Largest Bond Fund Manager, Bill Gross, Compares QE2 to a "Ponzi Scheme" Let's take a look at one of the consequences that may impact consumers looking to purchase or refinance a home in the future. For months there has been an ever-growing fear that our economy is headed towards deflation, which is when prices on goods and services are falling lower. Deflation is the exact opposite of inflation, which of course occurs when prices climb higher. Remember, inflation is the arch-enemy of Bonds, so fears of inflation negatively impact Bond prices and home loan rates. But fears of deflation are good for Bonds and home loan rates. That's because the fixed payment that a Bond provides to an investor goes further in a deflationary environment. So, the recent fears of deflation have helped Bond prices move higher and home loan rates move lower. But last week, future deflation/inflation expectations changed... and investors in the Bond market started betting that the Fed will be successful in "creating inflation" via their Quantitative Easing plans, and will thus avoid continuing down a deflationary road. This was evidenced by the results of last week's 5-Year Treasury Inflation Protected Securities (TIPS) auction, which saw investors buying TIPS at a premium since they were confident they'd be able to benefit from the increased inflation that should result from the QE2. Of course, investors aren't the only ones impacted by this. The media has already been chattering that the Fed has to be careful not to let inflation get out of control in the coming months and years. In fact, just last week, there was a headline explaining how another round of Quantitative Easing brings the risk of "unleashing the 1970s inflation genie." Consumers who are looking to purchase or refinance a house should also take note of that possibility - since even talk of inflation can impact home loan rates negatively. After all, a rise in inflation would be bad for Mortgage Bonds and, as a result, for home loan rates. The good news is that home loan rates are still near historic lows for the time being. If you or someone you know would like to see how you can benefit from the current situation, call or email me today. ALL THE TALK OF POTENTIAL INFLATION AND RISING PRICES SHOULD SERVE AS A REMINDER THAT EVEN DURING TIGHTER ECONOMIC TIMES, IT'S IMPORTANT TO SAVE FOR A RAINY DAY - MAYBE MORE IMPORTANT THAN EVER. AND IT DOESN'T HAVE TO BE PAINFUL... CHECK OUT THE MORTGAGE MARKET GUIDE VIEW BELOW FOR TIPS ON 10 EASY WAYS YOU CAN SOCK AWAY MONEY AND SEE YOUR SAVINGS GROW.           Forecast for the Week           Put on your seatbelt - it will be an exciting week ahead! As stated above, we'll see the midterm elections this Tuesday, the FOMC Meeting and following Monetary Policy Statement coming on Wednesday, and the all-important Jobs Report on Friday. On their own - each one would have the ability to create volatility in the financial markets... but having all three in a row certainly spells an exciting and interesting week ahead. I'll be staying closely tuned - and we'll break down all the events in next week's issue. In addition to those three big events, we'll see economic reports on Personal Spending, Personal Income, and Personal Consumption Expenditures (PCE) - which measures price changes in consumer goods and services - on Monday. We'll also see some important employment news leading up to the official Jobs Report on Friday. First up is the ADP National Employment Report on Wednesday, which measures nonfarm private employment. That will be followed the next day with another round of Initial Jobless Claims. In last week's report, Initial Jobless Claims were reported at 434,000, which marked the third straight decrease in Claims and the lowest level since early July. That was definitely an improved number... but we can't get too euphoric until we see the Initial Jobless Claims reaching the 400,000 mark and steadily moving lower from there. And as if that weren't enough excitement for the week, we'll see more housing news with Pending Home Sales on Friday. Regardless of what these economic reports say, it's bound to be a roller coaster ride with all the big news items on tap - call me this week if you have any questions about how home loan rates are moving. 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. As you can see from the chart below, Mortgage Bonds managed to rally towards the end of last week after being pushed down early in the week. ----------------------- Chart: Fannie Mae 3.5% Mortgage Bond (Friday, October 29, 2010)           The Mortgage Market Guide View...           The Top 10 Ways to Save Janet Bodnar shares her most practical and effective strategies for spending less and keeping more cash in your pocket. By Janet Bodnar, Kiplinger.com I recently reached a milestone in my life on Twitter: The number of people following my tweets passed the 1,000 mark. I'm still a piker compared with champion Twitterers like Ashton Kutcher, but four figures sounds impressive to me. To thank everyone, I promised that I would tweet my top ten savings tips. I've always believed that the trick to saving money is just that -- a trick. You don't have to win the lottery, strike it rich on Wall Street or even earn a six-figure salary to build a comfortable savings cushion. You just have to play psychological tricks on yourself to stay focused on spending less and keeping more cash in your pocket. Over the years, we've written about a lot of these strategies in Kiplinger's Personal Finance, and the promise I made on Twitter encouraged me to mentally cull through those tactics to choose the ones that I think are mo

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