Selling Today and Tax Returns

6 points to ponder about selling your home NOW - PLUS...3 ways to prep for April 15th



Many homeowners ready to sell are instead waiting a couple of months until the popular Spring home selling season begins.

But the fact is, in many locations, NOW may be the right time to put that property on the market.



Here are 5 things to think about:

1. Pay no attention to media reports on nationwide statistics for the housing market. They mean nothing to you as a seller because real estate markets are purely local.

2. Remember, the ratio of supply to demand is key to the health of your local real estate market. So no matter what you read about the housing market nationally, the local facts determine your chances of making a sale at any point in time.

3. So, the first question to ask your Realtor is how much competition you'd have if you put your home on the market now, before the Spring activity begins.

4. Because not many sellers put their homes on the market the first few months of the year, the inventory of homes for sale usually dwindles during the winter months. So, if your area is shy on inventory of good homes, now could be a good time to sell.

5. Interest rates are low but won't stay that way forever. There could be a fair number of savvy buyers in your market who know this and want to take advantage of the situation now.

6. Many experts believe that the big price declines are behind us. More than a few buyers are beginning to realize this and are taking a good look at today's market.



STEP UP TO THAT TAX RETURN! Preparing your tax return needn't be an annual ordeal. Getting organized can take a whole lot of stress out of the process.



Now is the time to gather the information you'll need to do your return or hand over to your tax professional. There are just three categories:

1. Paperwork: • Last year's return • All income info: W-2 forms, 1099 forms, alimony, self-employment income • Any 1098 forms: mortgage, educational institution statements, etc. • IRA info • Savings and investments info

2. Deductions: • Charitable contributions • Job hunting costs • Moving costs • State and local income taxes and sales taxes • Real estate and personal property taxes • Home mortgage interest and investment interest • Points on a home mortgage or refinance • Casualty and theft losses not covered by insurance • Non-reimbursed business entertainment and travel expenses, including car use • Business use of home • Medical expenses • Educational expenses

3. Miscellaneous expenses: • Tax preparation and tax advice fees • Safe deposit box rental • Investment fees and expenses, including service charges on dividend reinvestment plans and trustee's fees for your IRA, if separately billed and paid • Convenience fees charged for paying income tax, including estimated tax payments, by credit or debit card • Appraisal fees for a casualty loss or charitable contribution • Ask a tax professional about other expenses you can deduct if you have extensive investments, or estate, trust, IRA or Social Security issues



The above are only guidelines to help you organize some of the information you'll need to prepare your tax return. If you have any questions about these or other tax matters, always consult with a qualified tax professional. ... Have a great day! PS With today's mortgage rates at historic new lows and the most affordable home prices ever, many people are upsizing, downsizing or refinancing. Please call or email us now to discuss your situation. 214-683-1770 

The Market Slows

The Dow lost 152.71 points, or 1.3 percent, to 11,971.73 at 2:45 p.m. in New York, its first dip below 12,000 since March, and the Standard & Poor’s 500 Index fell 1.2 percent. Ten-year Treasury yields lost three basis points to 2.97 percent, while the yen rose against all 16 major peers. The cost of insuring Greek and Portuguese debt rose to all-time highs amid lingering concern over Europe’s debt crisis. Oil sank below $100 a barrel.

U.S. equity benchmarks are threatening to erase their gains for the year amid concern that the economic recovery is weakening. The S&P 500 trimmed its 2011 advance to less than 1.5 percent today and the MSCI World Index is up 0.8 percent. The Russell 2000 Index of small U.S. stocks and the Nasdaq Composite Index both erased their gains for 2011 at least briefly today.

“The big question mark for investors is -- is this simply a transitory soft patch?” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which manages $54 billion. “Or, if not, will this begin to weigh on corporate profits in a slow economic growth environment, and therefore equity valuations will have to be adjusted? Right now the market is saying the latter.”

Leading Declines
The S&P 500 has lost more than 2 percent this week and is down almost 7 percent from a three-year high at the end of April, while 10-year Treasury yields linger near their 2011 lows. The index is trading at about 12.1 times the forecast earnings of its companies, near the cheapest level since last summer, with analysts surveyed by Bloomberg forecasting profit growth of 20.1 percent this year.

The drivers of the slump have been an inventory correction in manufacturing because of overproduction, a slowdown in demand because of high oil prices, “spiced up with a flareup of sovereign debt pressures in the European Monetary Union periphery, plus worries about Chinese tightening,” according to JPMorgan Chase & Co. (JPM) strategists led by Jan Loeys. It also came as investors awaited the end of the Federal Reserve’s $600 billion bond-purchase program, the central bank’s third round of so-called quantitative easing that investors nicknamed “QE2.”

‘Bearish Drivers’
“How much further markets correct depends on how these bearish drivers worsen and how much investors really believe it was QE2 rather than better data that turned markets around last year,” Loeys’ team wrote in a note to clients today. “Economic data are still on net weaker though supportive of a rebound into” the third quarter.

Travelers Cos. led losses in the Dow today, sliding 2.8 percent, after the insurer said it’s scaling back share repurchases as about $1 billion in catastrophe costs will probably wipe out second-quarter operating profit.

Financial shares pared losses after CNBC reported that the maximum capital surcharge on banks being considered by international regulators may be 2 to 2.5 percentage points, not the 3 percent being widely reported. CNBC cited unidentified officials.

S&P 500 financial shares were down 0.4 percent after sliding as much as 2.1 percent earlier as the Federal Reserve announced wider scrutiny of the balance sheets of big banks. The Fed said it will expand a capital-planning program to the 35 largest U.S. lenders. Banks with at least $50 billion in assets will be required to conduct annual exams to ensure “robust, forward-looking capital planning processes that account for their unique risks and that permit continued operations during times of economic and financial stress,” the Fed said today.

email me now



Alan Felch
Residential and Commercial Lending
5401 Central Expwy #310
Dallas, TX 75205
214-561-0130
214-683-1770
1-866-796-4957 Error! Filename not specified.PrimeLending, A PlainsCapital Company"


For the week of May 9, 2011 – Vol. 9, Issue 19
>> Market Update
QUOTE OF THE WEEK..."A will finds a way."--Orison Swett Marden, American writer

INFO THAT HITS US WHERE WE LIVE...For those of us with a strong will to succeed in this housing recovery, the way appears to be by focusing on the extraordinary affordability of today's residential market. Part of this affordability lies in the fact that mortgage rates fell again for the third week in a row, according to Freddie Mac's weekly survey of national average rates for conforming mortgages. This drop took them to their lowest point of the year. The Mortgage Bankers Association (MBA) weekly survey reported demand for purchase loans was UP a seasonally adjusted 0.3% from the prior week.

The National Association of Realtors (NAR) released another annual forecast, this one predicting a 1.8% drop in the medium price of existing homes this year. Sales of existing homes, however, are expected to grow almost 8%, which shows that more buyers are realizing there are outstanding bargains out there, especially when lower home prices are coupled with the low mortgage interest rates. In solid support of this is the recent report that shows it's cheaper to buy a home than to rent in 39 of the 50 largest cities in the U.S.

BUSINESS TIP OF THE WEEK...A customer's experience with your business should be consistent. Customers should come away with the same sense of your unique professionalism and style from every interaction--emails to voicemails, phone conversations to face-to-face meetings.
>> Review of Last Week
IT WAS WILD...Wall Street gave investors a wild ride, in a week that began with the death of Osama bin Laden and ended on a mixed April jobs report. The net result was that after two weeks of gains, all three major stock indexes slid a bit. Commodities also took a hit, with crude oil prices off almost 15% for the week. This is good for consumers, who should get lower gas prices, and good for the rest of the economy, as it starts seeing some of that money which had been going into our tanks. ISM Manufacturing and Services were down for the month, though still indicating growth. Q1 Productivity was up, but lower than the prior quarter.

The April Employment Report held a few surprises. Overall payrolls, expected to increase by 183,000, came in at 244,000 new jobs. The private sector had the best gain in over five years, adding 268,000 new jobs (the loss of government jobs lowered the overall reading). Nonetheless, these numbers still describe a slow recovery, as the pace of job creation was far higher coming out of previous recessions. Also on the downside, average hourly earnings were up less than inflation, at only 0.1%, and the unemployment rate climbed back to 9%, as more people stopped looking for jobs.

For the week, the Dow ended down 1.3%, at 12,639; the S&P 500 was down 1.7%, to 1,340; and the Nasdaq was down 1.6%, ending at 2,828.

Bond prices moved higher, with safe haven buying from investors concerned over Greece's threats to leave the EU and those plummeting commodities prices. The price of the FNMA 4.0% bond we watch ended the week UP .97, the same amount as last week, closing at $100.14. Higher mortgage bond prices signal lower mortgage rates and national average rates for conforming mortgages fell again, as covered above.

DID YOU KNOW?...Crude oil dropped to $99.80 a barrel on Thursday, the first time it's been under $100 in almost two months. But analysts say crude will have to stay around $100 a barrel for 5–10 days before we see gas prices come down at the pump.
>> This Week’s Forecast
INFLATION, CONSUMER FEELINGS, CONSUMER SPENDING...This is the week for looking at inflation once again. Thursday's Producer Price Index shows us how prices are doing at the wholesale level. The overall headline number will continue just shy of 1% with the core number holding at 0.3%. How much of this price increase gets passed on to the consumer will be told by Friday's Consumer Price Index. The Fed focuses on Core CPI, which excludes food and energy and is expected to rise to 0.2%.

We'll see how much consumers are spending with Thursday's Retail Sales for April which should show continued growth, although at a slower rate when they take out car sales. Consumer feelings will be felt Friday with the University of Michigan Sentiment Index, forecast to be down slightly for May.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of May 9 – May 13
Date Time (ET) Release For Consensus Prior Impact
W
May 11 08:30 Trade Balance Mar –$46.3B –$45.8B Moderate
W
May 11 10:30 Crude Inventories 5/7 NA 3.421M Moderate
Th
May 12 08:30 Initial Unemployment Claims 5/7 445K 474K Moderate
Th
May 12 08:30 Continuing Unemployment Claims 4/30 0M 3.733M Moderate
Th
May 12 08:30 Producer Price Index (PPI) Apr 0.9% 0.7% Moderate
Th
May 12 08:30 Core PPI Apr 0.3% 0.3% Moderate
Th
May 12 08:30 Retail Sales Apr 0.7% 0.4% HIGH
Th
May 12 08:30 Retail Sales ex-autos Apr 0.6% 0.8% HIGH
Th
May 12 10:00 Business Inventories Mar 0.8% 0.5% Moderate
F
May 13 08:30 Consumer Price Index (CPI) Apr 0.4% 0.5% HIGH
F
May 13 08:30 Core CPI Apr 0.2% 0.1% HIGH
F
May 13 09:55 Univ. of Michigan Consumer Sentiment May 69.3 69.8 Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...Even though more economists are talking about the need for the Fed to raise the Funds rate to curb inflation, virtually none believe Chairman Bernanke will listen to them any time soon. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Jun 22 0%–0.25%
Aug 9 0%–0.25%
Sep 20 0%–0.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Jun 22 <1%
Aug 9 <1%
Sep 20 <1%

The Current Market Condition

In the aftermath of yesterday's historic Fed day, Mortgage Bonds are trading higher, and recouping yesterday's losses. Also helping Bonds were some weak economic readings this morning…let's break it all down.
As expected, there was no change to the Fed Funds Rate yesterday, and the Policy Statement pretty much remained the same, including the "extended period" language. Even the highly anticipated and unprecedented press conference given by Mr. Bernanke offered no big surprises.
That said, here are the important takeaways from Bernanke's press conference:
Bernanke said the downtick expected in GDP is "transitory". The Fed just loves that word - "transitory" – as they also use it to explain the persistent high prices of Oil and Commodities. By transitory, Mr. Bernanke is saying that the economy's temporary sluggishness is somewhat a result of high Oil prices, which he believes is also temporary in nature. The obvious question is, what if the high price of Oil is not "transitory" or temporary? Mr. Bernanke also clarified what "extended period" language means, suggesting that a hike in rates would be a couple meetings away. This is something we have been saying for a long time, that once that language is removed, the Fed is moving towards a tightening of monetary policy. And we aren't there yet. He was also crystal clear in saying the the Fed will complete the $600B of QE2 purchases through June, and that after that point, the Fed will continue to reinvest the proceeds running off its $2.7T portfolio back into Treasuries. He also said that early in the tightening cycle, "one step would be to stop reinvesting all or part of maturing securities." We believe the Fed will stop reinvesting these proceeds back into Treasuries at the same time as they hike rates. And we don’t feel that is likely to happen in 2011. The Fed also updated their Forecasts last given in February.
You will notice below that they have upped their expectations for inflation, but have toned down their economic growth expectations, largely due to high oil and commodity prices.
Updated Fed Forecasts:

GDP Forecast
(Most recent forecast) Apr- 2011: 3.1-3.3%; 2012: 3.5-4.2%; 2013: 3.5-4.3%; Long Run: 2.5-2.8%
(Prior forecast) Feb- 2011: 3.4-3.9%; 2012: 3.5-4.4%; 2013: 3.5-4.6%; Long Run: 2.4-3.0%

Unemployment Forecast
Apr- 2011: 8.4-8.7%; 2012: 7.6-7.9%; 2013: 6.8-7.2%; Long Run: 5.2-5.6%
Feb- 2011: 8.8-9.0%; 2012: 7.6-8.1%; 2013: 6.8-7.2%; Long Run: 5.0-6.0%

PCE Inflation Forecast
Apr- 2011: 2.1-2.8%; 2012: 1.2-2.0%; 2013: 1.4-2.0%; Long Run: 1.7-2.0%
Feb- 2011: 1.3-1.7%; 2012: 1.0-1.9%; 2013: 1.2-2.0%; Long Run: 1.6-2.0%

Core PCE Inflation Forecast
April- 2011: 1.3-1.6%; 2012: 1.3-1.8%; 2013: 1.4-2.0%; Long Run: N/A
Feb- 2011: 1.0-1.3%; 2012: 1.0-1.5%; 2013: 1.2-2.0%; Long Run: N/A
In today's economic news, the Commerce Department reported that the 1st look, or Advanced reading, of 1st Quarter Gross Domestic Product (GDP) fell to 1.8%, down from the Q4 2010 reading of 3.1% led by declining consumer spending and government spending. This was a weak reading, but it was actually higher than expectations and much better than some whisper numbers of a sub 1% reading. This is backward looking, but nonetheless, Stocks lost some ground on the number, thereby helping Bonds.
But the real rotten egg this morning was Initial Jobless Claims, which sadly climbed to 429,000 for the week, well above both expectations and that psychologically important 400K barrier. Unfortunately, the pain in the labor market has not been "transitory". And seeing Claims rise back above 400,000 is not a good thing, as Initial Jobless Claims are a leading indicator on the health of the economy. This is an area where the Fed has very limited capacity to help. And because of the pick up in inflation – which Bernanke acknowledged yesterday – we should not expect continued government support of the economy, or another round of QE, which can fan the flames of inflation.

All Thats Happening!

>> Market Update
QUOTE OF THE WEEK..."To a journalist, good news is often not news at all."--Phil Donahue

INFO THAT HITS US WHERE WE LIVE...Well, journalists had plenty of their kind of news to write about with last week's housing reports. The bad stuff began with February Housing Starts dropping 22.5% to a level close to the April 2009 low, which was the lowest on record. Most of the drop was from multi-family starts, which are volatile on a monthly basis. Single-family starts were down 11.8%. New Building Permits fell 8.2% for February. This gauges activity a few months out, indicating starts in the Spring ought to be up a bit from now.

Nonetheless, experts feel building and sales activity should normalize to much higher rates in the next few years. The population is growing and aging housing stock needs to be replaced. Analysts say builders usually need to put up at least one million homes a year to keep up with these demands. Maybe that's why an industry index of builder sentiment actually ticked up a point for March, putting it at its highest level since May 2010, when the homebuyer tax credits were making everyone feel good.

BUSINESS TIP OF THE WEEK...Don't forget to smile. You may think people buy from you because of price, quality and the fact you stand behind your work. Those factors count, but ultimately, people buy because they like you.
>> Review of Last Week
MELTDOWN ON WALL STREET...As of Friday, a nuclear disaster at Japan's Fukushima complex had been averted, but that didn't stop stocks from having their own meltdown. Investors sold off holdings, worried over Japan's nuclear crisis, Libya's civil war spreading to other oil producers, as well as the European Union's lingering sovereign debt problems. The market did manage two good days at the end, but they weren't good enough to prevent another weekly drop in all three major indexes, although many people felt things could have been a lot worse.

Economic news was mixed, the negative part being Housing Starts and Building Permits, covered above. On the very positive side was the Philadelphia Fed Index for March showing solid manufacturing growth in that region. Wholesale (PPI) and Consumer (CPI) Inflation were both up more than expected, thanks to higher energy and food prices. But the Fed focuses on Core CPI, which eliminates food and energy, and remains within an acceptable range. It seems like almost everyone but the Fed is concerned about inflation picking up. Homebuyers should note that real estate is still, even now, an excellent hedge against inflation over the long term.

For the week, the Dow ended down 1.5%, at 11,859; the S&P 500 was down 1.9%, to 1,279; and the Nasdaq was down 2.6%, ending at 2,644.

With Japan's nuclear fears prominent in the news all week, investors' "flight to safety" in bonds became a flat-out run. The FNMA 4.0% bond we watch ended up .95 for the week, closing at $99.10. In line with this, Freddie Mac's weekly survey of conforming mortgages showed national average mortgage rates easing a little more in their historically low range. Many economists forecast mortgage rates to rise this year as the economy recovers, but now feel low rates may remain a tad longer than expected.

DID YOU KNOW?...This week's GDP estimate refers to our nation's Gross Domestic Product. This is the total final value of all U.S. goods and services produced in a year: all consumer, investment and government spending, plus the value of all exports, minus the value of all imports. GDP growth is what counts, with 2.5% to 3.0% the historical average.
>> This Week’s Forecast
FEBRUARY HOME SALES AND ANOTHER LOOK AT Q4 GDP...February isn't usually a top month for home sales and the experts don't expect that situation to change. Monday's Existing Home Sales for February are expected to be down from January, coming in at a 5.05M annual rate. But Wednesday's New Home Sales for February should be up slightly from the prior month, at a 288K annual rate.

But the overall economic picture appears to be picking up. The Third Estimate of Q4 GDP is forecast up another 0.1%, to 2.9%, showing that the overall economy continues to grow. Consumers' attitudes are holding steady in the University of Michigan's Sentiment Index for March.
>> The Week’s Economic Indicator Calendar
Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of March 21 – March 25
Date Time (ET) Release For Consensus Prior Impact
M
Mar 21 10:00 Existing Home Sales Feb 5.05M 5.36M Moderate
W
Mar 23 10:00 New Home Sales Feb 288K 284K Moderate
W
Mar 23 10:30 Crude Inventories 3/19 NA 1.745M Moderate
Th
Mar 24 08:30 Initial Unemployment Claims 3/19 384K 385K Moderate
Th
Mar 24 08:30 Continuing Unemployment Claims 3/9 3.700M 3.706M Moderate
Th
Mar 24 08:30 Durable Goods Orders Feb 0.9% 3.2% Moderate
F
Mar 25 08:30 GDP-Third Estimate Q4 2.9% 2.8% Moderate
F
Mar 25 08:30 GDP Deflator-Third Estimate Q4 0.4% 0.4% Moderate
F
Mar 25 09:55 Univ. of Michigan Consumer Sentiment-Final Mar 68.0 68.2 Moderate

>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...The Fed's FOMC Policy Statement last week said that they weren't worried about inflation and that although the economy is improving, the recovery isn't strong enough to withstand a rise in interest rates. So economists are forecasting the Funds Rate to stay where it is well into the second half of the year. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.
Current Fed Funds Rate: 0%–0.25%
After FOMC meeting on: Consensus
Apr 27 0%–0.25%
Jun 22 0%–0.25%
Aug 9 0%–0.25%

Probability of change from current policy:
After FOMC meeting on: Consensus
Apr 27 <1%
Jun 22 <1%
Aug 9 2%

For the week of March 14, 2011

For the week of March 14, 2011 – Vol. 9, Issue 11

>> Market Update
QUOTE OF THE WEEK..."An economist's guess is liable to be as good as anybody else's."--Will Rogers

INFO THAT HITS US WHERE WE LIVE...Last week there was no guessing involved in the Mortgage Bankers Association (MBA) report that applications for purchase mortgages hit their highest level of the year. The MBA credited this to the improving job market and mortgage rates remaining at super low levels. This demand for purchase mortgages was up 12.5% from the week before and at its highest level since last May. Freddie Mac's weekly survey of conforming mortgages showed mortgage rates pretty much unchanged, at historically low levels for the third week in a row.

Another UCLA Anderson Forecast came out, reporting that the economy is growing and employment should soon pick up steam. But this somewhat pessimistic group of West Coast economists feel housing will continue to lag behind other sectors. Nonetheless, they see a "modest" recovery in housing starts, up 12% this year, then hitting 1 million in 2012 and approaching 1.5 million in 2013, thanks to pent-up demand.

BUSINESS TIP OF THE WEEK...Get out of your comfort zone. Don't keep doing things a certain way just because that's how you've always done them. Be open to new ideas and technology. Things can't change for the better if you're not open to change.

>> Review of Last Week
STOCKS SLIP...All three stock market indexes registered their second weekly decline in the past three weeks. The Middle East continued to concern investors as the disturbances expanded to Saudi Arabia where no one on Wall Street wanted to see them go, fearing even higher oil prices. But Friday we were all shocked by the devastation of Japan's worst earthquake in over 100 years. Oil prices seemed far less of a worry and they actually wound up down for the week.

Economic news was light but net positive. New weekly unemployment claims were up a bit, after dropping the week before, but the four-week moving average is now 392,000, quite a bit below last summer's readings. Continuing unemployment claims dropped to 3.77 million, its lowest level since October 2008! These trends are in the right direction for the country overall and for housing in particular. Friday saw Retail Sales UP 1.0% in February, increasing now eight months in a row, their longest streak of gains in over ten years! Consumers are definitely helping out.

For the week, the Dow ended down 1.0%, at 12,044; the S&P 500 was down 1.3%, to 1,304; and the Nasdaq was down 2.5%, ending at 2,716.

Amidst slipping stocks, bond prices held up, with buying driven by the turmoil in the Middle East and strong auctions. The FNMA 4.0% bond we watch ended up .01 for the week, closing at $98.15. As noted above, Freddie Mac's weekly survey of conforming mortgages showed national average mortgage rates still at historically low levels. But buyers should not expect these rates to last forever, as the economic data continues to improve.

DID YOU KNOW?...The Federal Open Market Committee, or FOMC, is the policymaking body of the Fed. Its meeting this week is one of eight held each year to discuss the economy and monetary policy options to promote stable prices and growth.

>> This Week’s Forecast
HOMEBUILDERS, INFLATION, THE FED...This week highlights three favorite topics. Wednesday we see how homebuilders are feeling, as reflected by February Housing Starts, expected to be down a little, and Building Permits, showing builders' sentiment further out, which should be up a bit.

Tuesday we'll have the FOMC Rate Decision from the Fed. Economists don't expect the Funds Rate to move off its rock-bottom level, but they'll dissect the Policy Statement coming out of the confab for signs of when the rate may go up. Rising inflation can hike the rate, but Wednesday's wholesale inflation (PPI) and Thursday's consumer inflation (CPI) readings are expected to hold steady.

>> The Week’s Economic Indicator Calendar

Weaker than expected economic data tends to send bond prices up and interest rates down, while positive data points to lower bond prices and rising loan rates.

Economic Calendar for the Week of March 14 – March 18

Date Time (ET) Release For Consensus Prior Impact
Tu
Mar 15 08:30 NY Empire State Manufacturing Index Mar 17.0 15.43 Moderate
Tu
Mar 15 14:15 FOMC Rate Decision 3/15 0%–0.25% 0%–0.25% HIGH
W
Mar 16 08:30 Housing Starts Feb 570K 596K Moderate
W
Mar 16 08:30 Building Permits Feb 573K 562K Moderate
W
Mar 16 08:30 Producer Price Index (PPI) Feb 0.6% 0.8% Moderate
W
Mar 16 08:30 Core PPI Feb 0.2% 0.5% Moderate
W
Mar 16 10:30 Crude Inventories 3/12 NA 2.52M Moderate
Th
Mar 17 08:30 Initial Unemployment Claims 3/12 387K 397K Moderate
Th
Mar 17 08:30 Continuing Unemployment Claims 3/5 3.750M 3.771M Moderate
Th
Mar 17 08:30 Consumer Price Index (CPI) Feb 0.4% 0.4% HIGH
F
Mar 11 08:30 Core CPI Feb 0.1% 0.2% HIGH
Th
Mar 17 09:15 Industrial Production Feb 0.6%
–0.1% Moderate
Th
Mar 17 09:15 Capacity Utilization Feb 76.5% 76.1% Moderate
Th
Mar 17 10:00 Leading Economic Indicators (LEI) Index Feb 0.9% 0.1% Moderate
Th
Mar 17 10:00 Philadelphia Fed Manufacturing Index Mar 28.0 35.9 HIGH


>> Federal Reserve Watch
Forecasting Federal Reserve policy changes in coming months...Fed Chairman Ben Bernanke has been adamant about his commitment to keep rates where they are until he sees greater job growth and more traction in the economic recovery. The experts are talking about a rate hike later in the year, but the chances of that now are next to nil. Literally. Note: In the lower chart, a 1% probability of change is a 99% certainty the rate will stay the same.

Current Fed Funds Rate: 0%–0.25%

After FOMC meeting on: Consensus
Mar 15 0%–0.25%
Apr 27 0%–0.25%
Jun 22 0%–0.25%

Probability of change from current policy:

After FOMC meeting on: Consensus
Mar 15 <1%
Apr 27 <1%
Jun 22 <1%

Dce

All in Oil!

"Awash in Oil?"

Friday, I filled up at Costco's discount gas station. Gas cost $3.28 per gallon. That was up from last year by at least fifty cents a gallon, but compared to the reports of $4.00-plus gasoline in California, I felt we were fortunate here in Dallas to be closer to the national average.

When I came to work this morning, I was talking to one of my associates and she mentioned that her son had filled up at the same gas station on Saturday, less than 24 hours after me, before heading back Ft Worth. The cost was $3.47 a gallon - almost a 5% increase overnight!

What's going on? Obviously, the unrest in the Middle East is creating fear that supplies of "black gold" will be reduced. That fear is sending prices higher. Those higher prices are being generated in the futures pits around the world as speculators bid oil higher. While the spot price is about $105 per barrel, the price for future delivery in the commodities markets is over $115.



It's only logical that higher oil prices should affect stocks. But how higher oil prices affect stocks can vary tremendously. Since the Egyptian crisis began, the oil and stock price indices have been moving in opposite directions. An up day in oil prices has meant a down day for stocks. And if oil prices stumble, stocks rally.

This actually is what one would expect, isn't it? If oil goes up, and if most industrial societies run on oil, increasing costs of oil can make production more expensive, causing recovering economies to slow down, earnings to decline and stock prices to sink.

Yet, for much of the last year, oil prices and the S&P 500 have behaved very differently. They were moving in lock step - rising and falling together. In fact, this has been the case since 2008. But their mutual admiration society fell apart in mid-January.


Why the change? At the end of last year, experts were telling us that the world was awash in oil - that prices should remain stable at least through the first half of 2011. Yet here we are just two months and a few days into the New Year and oil prices have increased by about 20%.

This is the supply argument and we are hearing it daily from the stock market bulls. Oil inventories are high, so oil prices are artificially high, driven there solely by the speculators. When politics calm down in the Middle East, prices will reverse just as quickly as they went up.

I must say that I lean toward this camp as well. Oil supplies have not changed appreciably since last fall when we were awash in oil. In fact, according to the most recent figures from the Department of Energy, the stockpile of oil is 1.4% above levels from last year and inventories are 4% above their 5-year average.

And just last week, Treasury Secretary Geithner declared that the US might just have to draw on its Strategic Petroleum Reserves to cool things off. While I would hope this is not just an attempt at political jawboning by the Administration, a closer look suggests that it is and that it is a hollow threat.

According to information on the Department of Energy's website, the Strategic Petroleum Reserve holds only 727 million barrels. That's significant, but still accounts for just about two and a half months of our needs.

What's more, the impact from releasing oil from the SPR would not be immediate. The DOE says the maximum drawdown per day is just 4.4 million barrels and that it would take nearly two weeks after a decision is made to tap the SPR before that oil actually hits the US market.

Of course, our friends, the Saudi's and our partners at OPEC have also tried to assure us, saying they would increase production if prices stay high. But in the past these assurances have been empty ones. And today, the head of OPEC weakened the assurances by stating that reserves would have to shrink before cartel members would actually take any action.

In the meantime, whether the bulls or the bears are correct, the stock market seems likely to be held hostage by our Middle East suppliers. With Gulf oil drilling rigs down over 75% from a year ago due to the Administration's restrictive position on Gulf of Mexico drilling (although, I note they did just award the first post-spill drilling permit today - perhaps they're feeling the heat and are going to make a policy announcement that could have a tangible effect), a further increase in US oil supplies seems unlikely to help in the intermediate term.

As the earnings season has ended and interest rates are moving up along with the price of oil, these usual bull market girders are not supportive in the short run. The most positive factor for the stock markets today is the constant drumbeat of good news about the economy. Last week we had 24 reports and 15 of them beat expectations. The employment and manufacturing numbers were especially heartening.

I continue to believe that we are in for a stock market correction, that it will be shallow, and that the stocks will bounce back to set new highs later this year.