by Erik Deckers
American Reporter Humor Writer
December 12, 2009
HOW I GET MOST OF MY COLUMN IDEAS
ANGEL FIRE, N.M., Dec. 4, 2009 -- Happy Holidays to all from Angel Fire, N.M., where it is -15°F. at this writing. With a wind chill of -25°F., we're one degree off the coldest temperature ever recorded on this date in New Mexico. But the morning job figures provide a spark, if not a fire, to warm up my seldom-used strategist's seat much faster than climate change will.
The jobs numbers are the first significant bright spot or a head fake, but I think the early indications now are positive. What is still troubling is the hard-core unemployed.
In some great lapse in sanity, as a young editor for the Research Institute of America in 1968-69, I undertook a report on the "Hard Core Unemployed" in America's 100 largest cities. What I found is when unemployment benefits run out, many people will retire, find only part-time work, become depressed and/or suicidal, and often "drop off the face of the earth" as far as statistics and tracking are concerned.
In a politically correct world we now use terms such as "discouraged workers," but the fact remains that hundreds of thousands of American working people are not counted anywhere.
Indeed, a 10 percent unemployment rate is a joke in many areas. I suspect that in as many as 20 states the "real" rate of unemployment among able-bodied people of working age is between 14 and 20 percent.
Interest rates trended up on the jobs news before the markets opened in New York. Meanwhile, there is a huge and very expensive spread in 30-year fixed mortgage rates, and especially in "jumbos" (properties valued at $417,000 and up) - and those "jumbos" now now include lots of "middle class" families - and the spread is occurring not among obscure institutions, but within major banks and credit unions.
From the mighty PNC, which recently acquired the giant National City Bank, to the largest credit union in the country, Pentagon Federal, for example, there is a 140 to 160 basis-point (price) discrepancy for applicants of the same creditworthiness and geographic area. This is a huge spread, and it means consumers who already are finding it tough to qualify for refinancing or a first-time mortgage, are:
For those holding some classes of agency prime collateralized mortgage obligation (CMO) bonds, we could see a spurt of refinancing and rapid return of principal and interest we have not seen in two years. Why?
Mr. and Mrs. Jones, who are having trouble getting approved for $430,000 on a 30-year fixed at 5 percent, will try again, shop around and find the 6.25 percent they turned down at another bank is looking better and better, and when they spot a 5.625 deal at yet another bank, even with one point for closing costs, they will grab it. They are feeling that they will either be left holding the bag with the 6.25% loan, or stuck holding their current 7.5 percent paper they should have refinanced three years ago but didn't. This could spell a stronger U.S. dollar, which would be a harsh reality for gold bugs, as Chicken Little is proven wrong and the sky remains intact. And a broad, long-awaited large cap - and especially mid-cap - US equity rally in the second or third quarter of 2010 - will materialize almost a year ahead of some pundits' predictions.
Now is the time for "year-end" notes and reports and forecasts by so-called experts, yes - and it is also a good time to start lining up long-term total return investment strategies for next year.
Longtime American Reporter financial writer Mark Scheinbaum retired as chief economist at a large Florida brokerage house in Boca Raton, Fla. He is also a former UPI newsman.