Week 1, November 2009
This week I want to make note of the addition of a price watch for both Treasuries and Mortgage-Backed Securities to the daily finance blog that I think are of benefit to those of you who watch the markets and wonder what on earth drives mortgage rates up or down. Perhaps the old adage of “follow the money” is the most appropriate first concept to consider when attempting to analyze the trends in the mortgage market. Investors are the key players in the free market, and that includes the market for capital as well. In the simplest terms, banks lend out money for a higher price than it costs them to raise the capital themselves. And when we’re talking about mortgages, it’s a staggering sum of actual promissory notes that banks sell in a concept called “securitization” where investors don’t just buy an individual promissory note from a bank, but instead buy a portion of a bundle of potentially hundreds of notes called a Mortgage-Backed Security, or MBS. Fannie Mae and Freddie Mac buy the notes from your favorite bank and then sell these MBS to investors— and we can follow the ebb and flow of demand for these securities just like we can follow other fixed-rate-of-return investments such as Treasury Bills. Remember: the question we’re hoping to answer by watching this is where is the money going? When investor confidence is booming the money moves away from the safer, fixed-income investment and towards the more rapid profits of the stock market. When the market warning signs look grim, investor money moves back towards safer, fixed-return harbors such as Treasuries (which affect the borrowing costs for banks themselves) and MBS (which affect the profit margins for banks selling notes.). When investor money is funneling towards both MBS and Treasuries, we’re definitely looking for rate drops. But when the demand is strong for MBS alone, it’s still a good thing for the mortgage market. Just follow the money…
See here to learn more about Mortgage-Backed Securities and rate watching.
To contact me about financing your dream-home click here.
Weekend Wanderer’s Events
…finding the treasures in your town and beyond.
Two for This Weekend:
“Think California” Exhibition in San Francisco: Straight from their website: “The California Historical Society presents Think California, an exhibition highlighting the colorful history of California through the institution’s remarkable collection of artwork, artifacts, and ephemera. This ambitious exhibition asks the question “What do you think about when you think of California?” Here you see both common and little known facts of the Golden State’s fascinating history, as well as the myths and realities that are the lore of California.” $3 admission and a fun visit to downtown SF.
Milton Nascimento in San Francisco: As part of the 27th Annual Jazz Festival one of the most beloved performers of the nation of Brazil comes to the Nob Hill Masonic Auditorium on Saturday night. He’ll be playing the bossa nova standards that he, himself attributes as some of his greatest influences. Good times are had here at the top of Nob Hill. Have a great pre-show libation with a breath-taking view at the Top of the Mark just a block away from the auditorium. Enjoy Nob Hill and the show!
Help Your Fellow Living Beings:
RotaCare Bay Area Health Clinics: “RotaCare is a nonprofit corporation formed for the purpose of providing free medical care to people who have the most need and the least access to medical services. It is a coalition of physicians, nurses, pharmacists, social workers, interpreters/translators and other volunteers who provide free medical care to the medically underserved in a collaborative effort with Rotary Clubs, hospitals, clinics, community and social service organizations and service groups.” Yes We Can.
Two Weekends from Now:
Ray Davies at the Warfield in San Francisco: Not sure how Ray would take this, but this event is a chance to see a classic song-writer/performer. In fact, when I think of this video here, I sort of laugh out loud how this guy would view somebody promoting this co-founder of The Kinks as a “classic.” But I love to live so pleasantly… live this life of luxury… lazing on a sunny afternoon… in the summertime… in the summertime. Sound familiar? Check out Ray Davies in SF Thursday night.
Pic of the Week… from my phone camera:
On Greenwood in Oakland on guess which night? :)