— Economic Week In Review

Consumers Grow More Cautious in August–Vanguard’s Economic Week in Review

Posted on September 16, 2011. Filed under: -- Economic Week In Review | Tags: , |


 

It’s been a while since I posted these, so I thought I’d share Vanguard’s Economic Week in Review for this week. Enjoy!

Consumers grew more cautious in August amid wild stock market swings, zero
job growth, and heightened concerns the economy had weakened. While business
inventories and industrial production climbed, retail sales were flat as
consumer prices rose higher than expected. For the week ended September 16, the
S&P 500 Index rose 5.4% to 1,216 (for a year-to-date total return—including
price change plus dividends—of about –1.9%). The yield on the 10-year U.S.
Treasury note rose 15 basis points to 2.08% (for a year-to-date decrease of 122
basis points).

Consumer prices jump sharply

The Consumer Price Index (CPI) rose 0.4% in August, much more than expected,
led by increases in gasoline and food prices. Less food and energy, core
inflation surpassed its year-ago rate by nearly 2.0%—the upper boundary of the
Federal Reserve’s target inflation rate—as vehicle and apparel prices continued
to rise.

“There aren’t many elements to support these upper-range core CPI readings
going forward,” Vanguard senior economist Roger Aliaga-Díaz said. “There’s no
evidence of monetary roots to this inflation reading, as banks continue to build
up cash reserves and lending remains stagnant. Thus, the Fed may not feel
constrained to act based on this inflation measure.”

Meanwhile, prices for finished goods in August were unchanged. Analysts had
been predicting a significant decline. Prices for finished energy goods dropped
1.0%, the third consecutive monthly decline. Excluding food and energy, core
prices for finished goods rose 0.1%. Producer price inflation for service
industries also gained slightly.

“There’s no evidence of production cost pressures, either,” Mr. Aliaga-Díaz
continued, “as producer price inflation and import price inflation remain
moderate. With slower global economic growth ahead, we may well see core
inflation gradually receding.”

Inventories and production continue their upward climb

Business inventories grew for the 19th straight month in July, although the
gain was less than expected. Now that the Japan supply-chain disruptions have
faded, analysts had been anticipating a significant rise in auto inventories
rather than the 0.4% increase reported.

Industrial production rose 0.2% in August—its fourth consecutive monthly
gain. Combined with a solid 0.9% July increase, average industrial production
for both months was 4.6% (annualized) above the second-quarter average. Mining
output rose a sharp 1.2%, its sixth consecutive monthly increase and the
sector’s highest output since 1998. Manufacturing also continued to rise, led by
continued growth in automobile production. Overall industrial production
strength was offset by weakness in the utility sector, which fell 3% in August,
reversing its 2.8% July increase.

Retail sales fall flat in August

Consumers apparently hunkered down during August as retail sales were
unchanged. Miscellaneous and clothing retail sales dropped most, declining 2.2%
and 0.7%, respectively. Gasoline sales rose, although by much less than they had
in July. Meanwhile, sporting goods stores saw the biggest advance—a 2.4%
increase.

The economic week ahead

House building and sales reports are set for release next week: new
residential construction on Tuesday and existing-home sales on Wednesday. The
Federal Open Market Committee’s monetary policy report will also appear
Wednesday, and leading economic indicators are scheduled for Thursday.

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White House Rescue Plan Announced Today–All $75 Billion Of It

Posted on February 18, 2009. Filed under: -- Economic Week In Review, -- Real Estate Guide For Today's Market, . More Resources For YOU! |


By Molly Greaves

 

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President Barack Obama on February 18 rolled out the White House’s Rescue Housing plan of $75 billion to help struggling families avoid foreclosure and to bring some order to the housing market.  The President said taxpayer money could help save  between 7 – 9 million families who are risking foreclosure because they cannot afford their mortgages.  The President continued on adding that “this problem does not just involve them, it involves all of us. All of us are paying a price for the home mortgage crisis and all of us will pay an even steeper price if we allow this crisis to continue—a crisis which is unraveling home ownership, the middle class, and the American Dream itself. But if we act boldly and swiftly to arrest this downward spiral, every American will benefit.”  

In a roughly 20-minute announcement, the President  laid out the 4 key elements in his $75 billion Homeowner Affordability and Stability plan which he says is necessary to help the economy. If taken together, he told the folks in Mesa, AZ where he delivered his speech and also to those of us around the world listening, “the provisions of this plan will help us end this crisis and preserve for millions of families their stake in the American Dream.”

In Barack Obama’s exact words, here is how his plan works:

First, we will make it possible for an estimated four to five million currently ineligible homeowners who receive their mortgages through Fannie Mae or Freddie Mac to refinance their mortgages at lower rates.

Second, we will create new incentives so that lenders work with borrowers to modify the terms of sub-prime loans at risk of default and foreclosure.

Third, we will take major steps to keep mortgage rates low for millions of middle class families looking to secure new mortgages.

Fourth, we will pursue a wide range of reforms designed to help families stay in their homes and avoid foreclosure.”

To read more on each key point, or to read his speech in its entirety, please click here.

One last important thing for you…

I went to the White House website to learn more about this for my readers, and came across a Q & A section for Borrowers about the Homeowner Affordability and Stability Plan.  I thought it would be useful and have copied it below for you. If you are risking foreclosure or even if you are current on your mortgage, you will find most likely find this useful. For those of you facing foreclosure, please scroll down to find your questions and answers. Just so you know, all of this information below is based on the official White House blog.

Borrowers Who Are Current on Their Mortgage Are Asking:

  • What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?

Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan.   Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.

  • I owe more than my property is worth, do I still qualify to refinance under theHomeowner Affordability and Stability Plan?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property.   For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify.  The current value of your property will be determined after you apply to refinance.

  • How do I know if I am eligible?

Complete eligibility details will be announced on March 4th when the program starts.  The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history.  The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

  • I have both a first and a second mortgage.  Do I still qualify to refinance under theHomeowner Affordability and Stability Plan?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan.  Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage. 

  • Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan.  Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.  Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate.  These borrowers, however, could save a great deal over the life of the loan.  When you submit a loan application, your lender will give you a “Good Faith Estimate” that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan.  Compare this to your current loan terms.  If it is not an improvement, a refinancing may not be right for you.

  • What are the interest rate and other terms of this refinance offer?

The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment.  All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate.  The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender.  Interest rates may vary across lenders and over time as market rates adjust.  The refinanced loans will have no prepayment penalties or balloon notes.  

  • Will refinancing reduce the amount that I owe on my loan?

No.  The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans.  Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe.  However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

  • How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?

To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.

  • When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.   

  • What should I do in the meantime?

You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available.  This includes:

  •  
    • information about the gross monthly income of all borrowers,  including your most recent pay stubs if you receive them or documentation of income you receive from other sources
    • your most recent income tax return
    • information about any second mortgage on the house
    • payments on each of your credit cards if you are carrying balances from month to month, and
    • payments on other loans such as student loans and car loans.

Borrowers Who Are at Risk of Foreclosure Are Asking:

  • What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?

The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current.  By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

  • Do I need to be behind on my mortgage payments to be eligible for a modification? 

No.  Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default.  This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.   

  • How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits.  Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

  •  I do not live in the house that secures the mortgage I’d like to modify.  Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No.  For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible.  If you used to live in the home but you moved out, the mortgage is not eligible.  Only the mortgage on your primary residence is eligible.  The mortgage lender will check to see if the dwelling is your primary residence.

  • I have a mortgage on a duplex.  I live in one unit and rent the other.  Will I still be eligible?

Yes.  Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.

  • I have two mortgages.   Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification.

  • I owe more than my house is worth.  Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford.  Lenders are likely to lower payments mainly by reducing loan interest rates.  However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.

  • I heard the government was providing a financial incentive to borrowers.  Is that true?

Yes.  To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan.   The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt.  Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

  • How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan.  If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee.  Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance. 

  • Is my lender required to modify my loan?

No.  Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis.  But the government is offering substantial incentives and it is expected that most major lenders will participate.

  • I’m already working with my lender / housing counselor on a loan workout.  Can I still be considered for the Homeowner Affordability and Stability Plan?

Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

  • How do I apply for a modification under the Homeowner Affordability and Stability Plan?

You may not need to do anything at this time.  Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria.  After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks.   If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor.  Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

  • What should I do in the meantime?

You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available.  This includes:

    • information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources
    • your most recent income tax return
    • information about any second mortgage on the house
    • payments on each of your credit cards if you are carrying balances from month to month, and
    • payments on other loans such as student loans and car loans.
  • My loan is scheduled for foreclosure soon.  What should I do?

Contact your mortgage servicer or credit counselor.  Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility.  We support this effort.

 

 

 

 

 

 

 

 


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The Dow Closes Down 382 Points, Down The Most In 3 Months…

Posted on February 10, 2009. Filed under: -- Economic Week In Review, . More Resources For YOU! |


By Molly Greaves

timothy_geithner_1

At 11:00 am today, the Treasury Secretary Timothy Geithner, was scheduled to announce the Obama Administration’s new bank bailout plan.  Earlier, U.S. stock futures were trading lower as investors prepared for details on the new financial rescue plan. When Mr. Geithner began his speech, the Dow was down about 80 points.  As he unveiled his plan, taxpayers and investors listened closely, and many followed the Dow’s movement to see Wall Street’s reaction in real-time.  Not liking what Geithner had to say, stocks fell sharply after the plan was outlined, and the market was down over 280 points by the time he was finished, even though the market had yet to reach the bottom.

 That’s because also today, Federal Reserve chairman Ben Bernanke took the helm and appeared in front of the House Financial Services Committee. He was scheduled to talk about the moves the Fed has taken to deal with both the credit crunch and with the recession while also addressing whether the Fed should continue to have as much powers over the economy. By the time Mr. Bernanke was done speaking and answering questions from lawmakers, the Dow dropped another 100 points!!

 Meanwhile, Wall Street was also having a hard time swallowing the $838 billion stimulus package that was passed by the Senate today. “The markets weren’t impressed,” said Fox Business News Stocks Editor, Elizabeth McDonald. And understandably so. $838 billion is some serious money, wouldn’t you agree?

288

Did you know that if you had spent $1 million PER DAY from the time Jesus was born, up until now, you still would be less than ¾ of the way to a trillion dollars?!  I’m not kidding! Let’s do the math…

 $1million x 365 days per year = $365 million per year

 $365 million x 2,000 = $730 billion

 (The number 2,000 is used assuming Jesus was born 2,000 years ago. I used this number to make math easy, and to help you really grasp your mind around what a trillion really is)

 $730 billion is 73% of $1 trillion, which is less than ¾ of a trillion. Yikes!

 Guess what else? With the stimulus amount that was passed through the Senate today — all $838 billion of it — being equal to almost 84% of $1 trillion, that is the same thing as spending a $1 million per day for 2295 years. That’s 295 days in addition to our example above!!

It’s no wonder with all this spending and low confidence that the market plummeted. With all of that said, the market closed today at 7888.88, down 4.62 percent or 381.88 points.  This is its lowest point since Nov. 20, the date considered by many experts to have been the low of the bear market. Hopefully tomorrow the market we’ll be back over 8000 again.

 

 

 

 

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Economic Week in Review: Prices fall as global slump advances for week ending Friday January

Posted on January 16, 2009. Filed under: -- Economic Week In Review | Tags: |


By Molly Greaves via Vanguard

angrybear——————————————————————–
Economic Week in Review: Prices fall as global slump advances
———————————————————————

A bevy of bleak economic reports marked the continued worldwide economic
slump, from lower industrial production and retail sales in the United
States to reduced international demand for U.S. exports. The economic
slowdown, coupled with the downtrend in energy prices, continued to push
consumer and wholesale prices lower for the fifth straight month. For the
week, the S&P 500 Index fell 4.5% to 850.1 (for a year-to-date total return
of -5.78%). The yield of the 10-year U.S. Treasury note declined 7 basis
points to 2.36% (for a year-to-date increase of 11 basis points).

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek011609

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Economic Week in Review: Wild swings and ill winds. Week ending October 17, 2008

Posted on October 17, 2008. Filed under: -- Economic Week In Review | Tags: |


By Molly Greaves via Vanguard http://www.vanguard.com

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Economic Week in Review: Wild swings and ill winds
——————————————————————-

It was another white-knuckle week for investors, with the leading
stock indexes soaring, plummeting, and soaring again in rapid
succession. There were few real surprises in the week’s major
economic reports, however, with most indicators simply confirming
what Americans already know: The economy is weak and seems to be
getting weaker. For the week, the S&P 500 Index rose 4.6% to 940.6
(for a year-to-date total return of –35.2%). The yield of the 10-year
U.S. Treasury note rose 8 basis points to 3.94% (for a year-to-date
decrease of 14 basis points).

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek101708

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Wall Street’s worst week ever

Posted on October 10, 2008. Filed under: -- Building Wealth, -- Economic Week In Review | Tags: , , , |


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Economic Week in Review: Wall Street’s worst week ever
——————————————————————-

It was a week most investors would rather forget.
Despite continuing efforts to restore a semblance of serenity in the
financial markets, the global economic crisis only deepened this week,
and investors’ confidence seemed to diminish by the hour. When the
closing bell finally rang Friday–a day of spectacular swings–the
Standard & Poor’s 500 Index was down an historic 18.2% for the week
to 899.22 (for a year-to-date total return of –38.0%). The yield of
the 10-year U.S. Treasury note rose 22 basis points to 3.86%
(for a year-to-date decrease of 22 basis points).

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek101008

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Economic Week in Review: Economy gets back to work Week ending Friday August 29

Posted on August 29, 2008. Filed under: -- Economic Week In Review | Tags: |


By Molly Greaves

 

Economic Week in Review: Economy gets back to work
——————————————————————-

Economic indicators worked overtime this week to deliver good news
before the Labor Day holiday. Second-quarter growth in the gross
domestic product (GDP) was revised upward more than anticipated,
orders for big-ticket items increased, and consumer confidence
grew. Even the depressed housing market perked up, signaling
that its prolonged weakness may be stabilizing, although it
remains too soon to declare that the corner has been turned.
In the financial markets, the S&P 500 Index slipped –0.7% to
1283 (for a year-to-date total return of –11.4%). The yield
of the 10-year U.S. Treasury note dropped 4 basis points to
3.83% (for a year-to-date decrease of 21 basis points).

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek082908

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Economic Week in Review: Inflation heats up as summer cools…Week ending Friday August 22, 2008

Posted on August 22, 2008. Filed under: -- Economic Week In Review | Tags: |


By Molly Greaves

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Economic Week in Review: Inflation heats up as summer cools
——————————————————————-

Good news was hard to find in this week’s economic reports.
Inflation at the wholesale level rose at a worrisome pace in July,
even excluding higher prices for energy and food. One bright spot
was the decrease in initial claims for unemployment insurance.

In the financial markets, for the week the S&P 500 Index slipped
–0.5% to 1292 (for a year-to-date total return of –10.8%).
The yield of the 10-year U.S. Treasury note rose 3 basis points
to 3.87% (for a year-to-date decrease of 17 basis points).

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek082208

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Economic Week in Review: Inflation hurts consumers and retailers alike Friday August 15, 2008

Posted on August 15, 2008. Filed under: -- Economic Week In Review | Tags: |


By Molly Greaves

 

Economic Week in Review: Inflation hurts consumers and retailers alike
———————————————————————-

Despite a drop in energy prices, inflation rose during the month of
July at a much higher rate than analysts had expected. Retail sales
fell as consumers tightened their belts. On a positive note, June’s
trade deficit narrowed for the second month in a row. For the week,
the S&P 500 Index also rose 0.2% to 1,298 (for a year-to-date total
return of –10.4%). The yield of the 10-year U.S. Treasury note
dropped 10 basis points to 3.84% (for a year-to-date decrease of 20
basis points).

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek081508

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Economic Week in Review: Fed pause sparks market rally week ending Friday August 8, 2008

Posted on August 9, 2008. Filed under: -- Economic Week In Review, -- Uncategorized | Tags: |


By  Molly Greaves with the datat brought to you via Vanguard, where I do my paper asset investing.

Economic Week in Review: Fed pause sparks market rally

——————————————————-

As expected, the Federal Reserve kept its target federal funds rate
at 2.0% on Tuesday. The news spurred a major stock market rally as the
S&P rose 2.9% on the day of the announcement. Other economic headlines
for the week were more mixed. Positive news included June factory
orders, which increased at their fastest pace in six months and
productivity, which rose at an impressive rate given current economic
conditions. On the negative side, consumer debt saw its largest
monthly increase in more than six months while modest improvements in
the performance of the service sector did little to reassure
investors. For the week, the S&P 500 Index also rose 2.9% to 1,296
(for a year-to-date total return of -10.6%). The yield of the 10-year
U.S. Treasury note dropped 3 basis points to 3.94% (for a year to date
decrease of 10 basis points).

To read Vanguard(R) Economic Week in Review in its entirety, go to:
http://www.vanguard.com/visit/econweek080808

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