Initial Jobless Claims were reported at 365,000, slightly below expectations of 375,000.  The more closely watched four-week average of Claims edged higher to 367,500.  This not-so-good read on the labor market helped Bonds improve from their worst levels of the day. 

As expected, The Bank of England and the European Central Bank (ECB) have left their benchmark interest rates unchanged today as they also cope with inflation pressures and a slowing European economy.  

In the absence of market moving news this week, we have been seeing Mortgage Bonds respond to the action in the Stock market as well as technical factors.  Yesterday, the Dow closed below the psychological 13,000 level, and Mortgage Bonds responded by moving higher.  Should Stocks look to regain their footing after yesterday's losses, Mortgage Bonds may give back some of yesterday's gains.  From a technical standpoint, the Bond continues to ride sideways above a layer of support at the 50 and 100-day Moving Averages and at the moment, prices have popped above the 25-day MA.  For now, we will continue to float.

At the end of the month, Fannie Mae will adopt higher minimum down payments and credit scores for borrowers with a past foreclosure. The government-sponsored enterprise already has boosted the time period for these borrowers to re-establish their credit to five years from four years. While exceptions could be made for borrowers in hardship situations, Marianne Sullivan, senior vice president of single-family credit policy and risk management at Fannie Mae, says those who had the ability to pay but walked away from their homes should be treated differently than those who met their payment obligations. Additionally, Sullivan says Fannie Mae will make it more difficult for borrowers to transform their current residences into rentals and purchase new homes to discourage them from walking away from the existing home after the transaction closes. Fannie Mae is making these changes as Congress considers passing legislation that would allow struggling borrowers to refinance into FHA loans after their lenders write down a portion of their mortgages, and the mortgage industry is pushing for speculators to be barred from the program. Former Mortgage Bankers Association chair Regina Lowrie asks, "Why should a servicer take a haircut or have a cram-down for any borrower that truly has the ability to pay?" Source: American Banker

Two weeks ago we wrote...." But in this case the Fed may decide that lowering rates one more time could actually hurt. Yes, the Fed faces a tough decision---and no move or a smaller rate cut could be the result." Well, we could not have been more on-target with this theory. Obviously the Federal Reserve Board opted for a smaller rate cut and the notes released after the meeting this past week indicated that this may indeed be the last cut for some time. Why is the Fed about to end its rate-cutting campaign?

There are several possible explanations. For one, short term rates are so low there is not much room for more on the downside. If something bad happens, the Fed needs more ammunition in reserve. Secondly, higher oil and food prices make higher inflation as much a concern as a slower economy. Finally, the Fed may feel that the worst news is behind us. Though the economic news released in the past week was weak at best, the bottom line is that economic growth was positive. This is better than a recession. On the other hand, preliminary readings are subject to significant revisions.

It’s getting harder for renters to find an affordable place to live with rents rising and availability falling. The median asking rate for rentals has jumped 14 percent, from $591 a month during the fourth quarter of 2003 to $673 a month in 2007, according to the U.S. Census Bureau. Vacancy rates are down from last year, and average rent is projected to rise 5.3 percent in 2008, up from a 3.1 percent increase in 2007, according to the National Association of Realtors. "We've seen demand for rental housing go up," says Mark Obrinsky, chief economist at the National Multi Housing Council. "The ownership side is retrenching, and we're seeing the demand going to the rental side. There's a lot of hesitancy to buy. Others can't get (financing), so they're remaining renters longer." Source: Rentometer and USA Today

Bonds are moving higher this morning after bad news was released for Fannie Mae, the largest provider of US home financing.  The company said it lost $2.19 Billion in the first quarter due to the current housing and credit crisis, which equates to a loss of $2.57 a share compared with a profit of 85 cents a year ago.  And like Freddie Mac, the company plans to raise capital and cut its dividend.  Stocks traded lower on the news, pushing money into Bonds and helping Bond pricing improve.  

In other headlines, oil hit a new record high of $120.93 this morning.  Oil prices have doubled over the past twelve months, pushing the average price at the pump to $3.60 a gallon.  Goldman Sachs is forecasting that black gold could rise to $150-$200 a barrel in the next twelve months.  If this plays out as they suggest, the inflationary effects of high oil prices could pressure Mortgage Bonds lower, causing home loan rates to move higher...so this will be a story to watch. 

For now, Bonds continue to ride a dual floor of support at the 50 and 100-day Moving Averages.  We will continue to Float for now, and watch how the Bond behaves near this strong floor.

The latest advance gross domestic product data indicated the US economy grew at a 0.6 percent rate in the first quarter.  Fed officials remain concerned that inflation is rising and the economy is heading towards recession.  Many analysts believe the economy is already in one.  This data was mixed with the GDP price index rising 2.6% in the first quarter compared to a 2.4% increase in the fourth quarter. 

Productivity is the rate at which goods or services are produced.  It is most commonly defined in terms of labor, which is the contribution of people to the process.  Labor costs represent about two thirds of the value of the output produced.  The Bureau of Labor Statistics of the US Department of Labor releases the most widely cited productivity statistics quarterly and annually.  Increased productivity is often credited for economic growth with little signs of inflation.

Productivity is significant because as it increases, businesses can produce more with the same or less input.  This wealth building effect is vital to the US economy.  As productivity increases, the US economy generally performs better.  As productivity decreases, the economy generally suffers.

While the bond market generally favors signs of weakness in the economy, bonds tolerate growth as long as the economic environment shows little or no inflationary pressures.  Unfortunately, inflation has escalated as of late.

Keep in mind that rates remain historically very favorable.  Now is a great time to avoid the uncertainty surrounding continued market volatility by locking your loan.  Capitalizing on current levels is prudent to protect against future volatility.

The Labor Department reported 20,000 jobs lost in April, which was better than market expectations of 75,000 jobs lost, with the unemployment rate falling to 5%.  On the news, Mortgage Bonds quickly fell a whopping 134bp in a matter of minutes.  Yes, 134bp...that's exactly the type of knee-jerk reaction we had anticipated.  But once the details of the report were unpacked, including downward revisions to the last two Jobs Reports, as well as some realization that the economy still lost 20,000 jobs, Mortgage Bonds have staged an enormous recovery.  So...while prices are still negative, they are much improved from the lows after the initial knee-jerk reaction to the Jobs Report headlines.    

The birth-death ratio is used to help figure the Jobs Report, and in a declining Job Market like the one we have now, the number is likely to be overly optimistic about the actual condition of today's job market.  Therefore we feel strongly that downward revisions are in the cards for the next two months. 

It appears that on short-term transactions, yesterday's advice  may have protected you, as prices have suffered a bit over the past 24 hours.  If you have more time and have the stomach for a turbulent period, float carefully as prices should come back".  This morning's sharp rebound higher from the lows leaves the Bond trading above support at the 50 and 100-day Moving Averages.  For now we will Float - but carefully in this volatile environment.

It's been a big week when it comes to economic news, especially yesterday's news that the Federal Reserve made another .25% cut to the Fed Funds Rate. Typically bonds and home loan rates react poorly to this news due to inflation concerns; however, the Fed's cut was not unanimous and the Fed also indicated their rate-cutting cycle may be over. As a result, Bonds reacted favorably to the Fed's action.

In other news, the Core Personal Consumption Expenditure Index, the Fed's favorite inflation gauge, was slightly higher in March and the important year-over-year Core PCE is now at 2.1%, just above the Fed's desired range of 1 to 2%. Also, Initial Jobless Claims were reported at 380,000, much worse than expectations of 360,000. This left the four week moving average of continuing claims at the worst level since early 2004.

Tomorrow morning, the monthly Non-Farm Payroll Report is due to be released. Expectations are for a loss of 75,000 jobs, which is pretty bad. This Report is determined by data provided by the Bureau of Labor Statistics, and it uses historical averages for the past several years. In other words, they don't actually count each person that was hired. They use a lot of averaging, historical data and a lot of assumptions. Which is why we typically see many revisions for prior months. So here's the deal - the Job market is bad. But the report will likely paint a better picture than actually exists...until the downward revisions come later. And we should see downward revisions tomorrow from the past two month's reports.

So here's my advice - If you are closing within the next week, I recommend locking. If you have more time, and can stomach the volatilty a bit more, I suggest to float.

The Road to a Jumbo Mortgage Was Supposed to Get Easier

By Jagadeesh Gokhale and Thomas Firey
From the Cato Insititute
Thursday, April 24, 2008; 12:00 AM

When the Federal Reserve's Federal Open Markets Committee meets next month, the foremost topic of conversation is likely to be whether to continue lowering interest rates. Since last September, the Fed has reduced the federal funds rate by 3 percentage points -- a large change by historical standards.

The decisions to make these rate cuts have not been unanimous, which raises the question: Why? To answer that question, we must understand the Fed's role and its past policy decisions.

Congress has given the Federal Reserve two sometimes conflicting mandates: It should maximize economic growth and restrain inflation. The former apparently requires low interest rates; the latter, high ones. Walking that tightrope gives currency to the old saying that the Fed should "take away the punchbowl before the party really gets going."

As we learned in the 1970s, high inflation -- and expectations of high inflation -- can devastate the economy. Low inflation -- and expecations of low inflation -- mean stable wages, interest rates and prices, all of which tend to encourage work, innovation and production.

The Fed's strategy 1980s and '90s earned it considerable credibility as an inflation fighter. But the Fed has been less successful in responding to negative supply shocks, such as spikes in oil prices, that raise firms' production costs and increase the risk of overall inflation. In response, firms must make structural adjustments -- eliminate unprofitable products and change technologies to minimize cost increases. Those changes are often painful, especially for displaced workers.

In the past, the Fed responded to oil shocks by tightening the money supply, but that often led to recessions. Yet if the Fed had reduced interest rates to prevent oil-shock-induced output losses, it would have risked higher inflation.

The Fed's past decisions to opt for money tightening probably reflected an extreme anti-inflationary bias at a time when memory of the 1970s' "great inflation" was still fresh. That memory seems fainter and less influential today, given the Fed's dramatic interest rate cuts in the wake of climbing oil prices.

In the Fed's defense, the current economic situation involves more than just an oil supply shock; the housing sector has weakened and the financial markets are suffering liquidity shortages. Declining home prices reflect over-investment in houses, which compounds the negative oil price shock with a negative shock to Americans' wealth and spending. Depreciating home values also cause lopsided bank balance sheets with too many non-performing loans eroding bank capital. Those capital losses are triggering cutbacks in lending to viable borrowers who, in turn, reduce spending on consumption and investment.

This leaves the Fed with lousy choices. If it tightens the money supply in order to combat inflation, the supply shock-induced decline in the nation's output may accelerate. But if it increases liquidity for financial institutions, it may trigger higher inflation in the future. Indeed, inflation rates have been ticking up since November.

So far, the Fed has appeared willing to run the risk of inflation in order keep the economy buoyed. But should it pursue that policy much further? Two arguments suggest that the FOMC should refrain from additional rate cuts, at least for now:

First, the credit market problems cannot be solved by traditional interest rate cuts. They ultimately require an infusion of capital in affected institutions, and that is a fiscal and not a monetary issue.

Second, output losses from structural adjustments are unavoidable. Sooner or later, we must shift our investment from housing to energy, and that shift will not be painless. Loose monetary policy might induce households and business to postpone making those changes -- but that will prolong and perhaps increase the total amount of economic pain.

The FOMC's policy disagreements over interest rates reflect its members' different perceptions and preferences about how quickly such adjustments should be promoted via monetary policy. We worry that further delays induced by excessively accommodative policy will result in a vicious cycle of higher inflation, increased inflation expectations, reduced Fed anti-inflationary credibility, slower capital reallocations and, eventually, a weaker economy.

Jagadeesh Gokhale is senior fellow at the Cato Institute and formerly was senior economic adviser to the Federal Reserve Bank of Cleveland. Thomas Firey is managing editor of the Cato Institute's Regulation magazine.

A lot of homeowners have the mind set that making payments on time automatically equates to good credit and credit scores.

Unfortunately, this couldn't be further from the truth.

While paying your bills on time accounts for a large portion of your credit score, there's still a lot more to it. In fact, paying your bills on time only drives 1/3rd of the points in your credit score, which means that 2/3rds of your score has nothing to do with making on time payments.

Five main categories go into making up your overall credit score calculation. Let's briefly review each category and how much they count:

1. Payment History - The Most Important Category
This category is pretty self-explanatory. It doesn't take a rocket scientist to figure out that if you pay your bills on time, you'll do well in this category. Likewise, if you have a history of late payments, collections, chargeoffs, public records, etc. - you're not going to do so well in this category.

In addition, the number of negative items on your credit reports is important. The more incidents of credit transgressions, the more your score will suffer. And if you have recent negative information that will punish your scores more than if they are several years old.

2. Debt - A Very Close Second
The most important non-payment category in your credit score is, by far, the amount of debt that you carry. And while your installment debt (auto loans and mortgages) are factored into your scores, it's really your credit card debt that's most important.

This includes anything from Visa, MasterCard, Discover, American Express, gas cards and/or retail credit cards like Macy's or Target. The balances that you carry on your credit cards can affect your scores almost as much as whether or not you make your payments on time.

This category calculates the proportion of balances to credit limits on your revolving credit card accounts - also referred to as ‘revolving utilization'. Simply put, the higher your revolving utilization percentage, the fewer points you will earn in this category.

So what is revolving utilization and how is it calculated?

To determine your revolving utilization, you'll need to add
up all of your current balances and all of your current credit
limits on your open revolving credit accounts (except for Home Equity Lines of Credit). This will give you a total balance and a total credit limit. Divide the total balances by the total credit limit and then multiply that number by 100. This will give you your total revolving utilization percentage.

See the example provided below:
Remember, the lower your utilization percentage, the more points you'll earn and the higher your credit score will be. To earn the most possible points in this category, you should try to keep your revolving utilization at 10% or less. If you can't reach 10%, just remember that the lower the better. While 50% is better than 60%, 40% is better than 50% and so on.

How you pay your bills and your revolving utilization are by far the most important factors used to determine your credit scores. They account for 2/3rd of the points in your score. That's a hefty chunk! Needless to say, if you don't do well in both of these categories, your scores aren't going to be very good regardless of how you do in the remaining categories.

While the remaining categories are worth fewer points, they are still very important for consumers who want to earn the highest scores possible, certainly a requirement in today's difficult credit environment:

3. The Age of Your Credit History -
Secondary Category
Don't confuse this with your age. It's the age of your credit reports. Basically, the score is looking to see if you have a lengthy history of managing your credit obligations. The age of your credit history is determined by the "date opened" on the oldest account listed on your credit report. The older your credit report, the more points you will earn in this category.

There's really not much you can do in this category except wait it out. As your reports get older, you will gradually earn
more points. This means that you should never try and get old, good accounts removed from your credit reports.

You want the history!

4. New Credit/Inquiries - Secondary Category
When you apply for credit you are giving the lender permission to pull your credit reports and credit scores. Each time this happens, your credit report will reflect what's called an "inquiry." To perform well in this category, you should really only apply for credit when you need it.

5. Credit Mix - Secondary Category
What types of accounts do you have? You will do well in this category if you have a nice diverse list of different types of accounts in your credit report. This includes mortgages, auto loans, installment loans, credit cards, etc.

If your credit report is dominated by one type of account (or lack of others), this could negatively affect the number of points that you earn from this category.

That pretty much covers the factors that are used in determining your credit scores. Let's do a quick recap:

1. How you pay your bills - on time is good, late     is bad
2. How much you owe your creditors - keep     your credit card debt low (10% utilization is     optimal)
3. How long you've had credit - the longer the     better
4. How often you apply for credit - apply only     when you really need it
5. Account mix - diversity is good

If you can stick by these five key principles, you should be
well on your way to healthy credit and credit scores.

Economic Commentary - Fed Faces A Tough Decision

We are rapidly approaching some very important economic news. Next week we have the release of the first quarter economic numbers (GDP) and employment report for April. This happens while the Federal Reserve Board will be meeting and deciding whether to lower rates one more time. This time the Fed faces a very tough decision. Why? The price of oil hit $115 per barrel on April 16th. The incredible run-up in the price of oil causes a slow down in consumer spending that hurts the economy, but it also fuels inflation. Prices were up significantly on the wholesale level last month and these higher prices are likely to be felt beyond the gas pump.

If the Fed lowers rates, the dollar loses even more value and this causes oil prices to go up even more since most oil is imported. So the Fed lowering rates can not only increase the threat of inflation, it could wind up slowing the economy even more. Conventional wisdom says that lowering rates stimulates the economy. But in this case, the Fed may decide that lowering rates one more time could actually hurt. Yes, the Fed faces a tough decision---and no move or a smaller rate cut could be the result.

 Proposed home appraisal rules will drive up costs for homeowners and limit their choices

Ann Arbor, MI, April 24, 2008 – The CMPS Institute has just sent regulators a detailed commentary on how their new home appraisal rules will adversely affect consumers. “While most of the proposed rules are good and necessary, a few of them will have adverse consequences for homeowners,” said Gibran Nicholas, Chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

This proposal to change the home appraisal rules originated as part of a settlement agreement between the Attorney General of New York, Fannie Mae and Fannie Mae’s regulator, the Office of Federal Housing Enterprise Oversight (OFHEO).  “Although the rules are not considered a federal law or regulation, they will have virtually the same affect,” said Nicholas.  Over 60% of US home mortgages are securitized, meaning that they are owned by investors like Fannie Mae and Freddie Mac who issue bonds on the bond market using these mortgages as collateral.  For this reason, when Fannie Mae and Freddie Mac change their policies and procedures, it has a wide-spread effect on how the rest of the industry operates.

The rules were initially proposed on March 3, and the period for public comments ends on April 30. Unless the rules are amended based on the public comments, they will go into effect on January 1, 2009.  However, many lenders have already started adopting some of these changes.

Under the new rules, lenders, mortgage brokers and real estate agents are prohibited from pressuring appraisers to overvalue the homes that they appraise.  “It’s about time the industry got serious about tackling this very real problem,” Nicholas said.  “However, a few of the policy changes go overboard, and these should be modified to better protect homeowners.”  For example, lenders and brokers won’t be able to give appraisers any old appraisals, helpful data, or any other estimate of what a home is anticipated to be worth at the time the appraisal is ordered or at any other time prior to the completion of the appraisal.  “This would drive up consumer costs as appraisers would be forced to redundantly analyze data that may have already been paid for by the consumer or analyzed by another appraiser in the past,” said Nicholas.

Additionally, mortgage brokers and real estate agents would be completely prohibited from communicating with appraisers during the appraisal process. This would frustrate consumers, drive up costs and unnecessarily drag out the appraisal process, especially under the following circumstances:

• Properties with limited or no recent comparable sales data
• Properties with limited or no publicly available comparable sales data
• New construction or home improvement projects
• Unique properties where brokers or lenders may have valuable information based on prior dealings with the homeowner or subject property

Finally, consumers would be prohibited from requesting a new appraisal from their lender if they disagree with the appraiser’s opinion.  “Homeowners would effectively be stuck with the results even though another appraiser may have an equally qualified, but different opinion of value,” said Nicholas.

The decline in new-home sales to a seasonally adjusted annual rate of 526,000 was much weaker than the 577,000 pace expected by economists surveyed by MarketWatch.

New-home sales are down 36.6% compared with a year ago and are down 62% from the peak in July 2005. February's sales pace was revised lower to 575,000 from 590,000.

"There is little to support any claims that the housing market is stabilizing, let alone forming a bottom," wrote Richard Moody, chief economist for Mission Residential.

"The growing imbalance between housing demand and supply suggests continued construction cuts and price declines, and in turn, an extended period of sluggish economic growth," wrote Michelle Meyer, an economist for Lehman Bros.

The figures likely overstate the number of sales because they don't account for canceled sales, which have ballooned. The report is based on contracts signed, not sales closed.

Perhaps the only ray of hope was data showing that inventories of unsold homes fell for the 12th consecutive month in March, an indication that builders are making some progress to get their inventories under control. However, with sales plunging even faster, the supply of homes on the market rose to 11 months, the most in 27 years.

Inventories are likely understated as well because of canceled sales contracts.

The number of completed homes for sale fell for the third straight month to 189,000 after peaking in January at 198,000. Completed homes represent more than 40% of the total inventory, just off the record percentage set in February and an indication of how much speculation had taken over in the home building industry.

Most analysts believe it could take several more years to bring inventories back in line with fundamentals. Builders are competing against an influx of supply from foreclosed homes and homes being sold by distressed owners.

Median sales prices for new homes have fallen 13.3% in the past year to $227,600, the biggest decline in 38 years.

Average sales prices are down 11.3% to $292,200, the biggest drop since the record book begins in 1963.

"The fact that prices are falling so rapidly is scaring off potential buyers despite the improvement in affordability," wrote Sal Guatieri, an economist for BMO Capital Markets.

Sales fell in all four regions, dropping 19.4% in the Northeast to a 27-year low, falling 12.9% in the West to a 17-year low, falling 12.5% in the Midwest to a 27-year low, and slipping 4.6% in the South to a 12-year low.

Government statisticians have low confidence in the monthly report, which is subject to large revisions and large sampling and other statistical errors. In most months, the government isn't sure whether sales rose or fell. The standard error in March, for instance, was plus or minus 16.1%.

The government says it can take up to five months to establish a new trend in sales. Over the past five months, sales have been on a 590,000 annual pace, 35% slower than a year earlier.

In all of 2007, 776,000 new homes were sold, down from 1.05 million in 2006.

In separate reports, the Commerce Department said orders for U.S.-built durable goods fell for the third straight month in March, the first time that's happened since the 2001 recession.

Meanwhile, the Labor Department reported first-time claims for unemployment benefits fell by 33,000 to a two-month low of 342,000.

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.97 percent in March from 5.92 percent in February; the rate was 6.16 percent in March 2007. Source: National Association of Realtors^® press release, April 22, 2008.

Lawrence Yun, NAR chief economist, said yesterday that the mortgage market is performing unevenly.  “Though mortgage rates are at historically low levels, some borrowers are facing restrictive lending practices in declining markets,” he said.  “At the same time, many buyers continue to bide their time with a large number of homes to choose from, while other potential buyers remain on the sidelines.” In other words, the real estate market is slow even though mortgage rates are great.

NAR President Richard F. Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif., said there are problems with the implementation of mortgage guidelines.  “It appears there is some over-reaction on the part of some lenders now in requiring higher down payment percentages than may be necessary,” he said.  “On the other hand, buyers in many parts of the country are able to take advantage of more lenient policies for FHA loans.  However, because lenders don’t have enough underwriting experience with FHA loans in high-cost areas, there are localized bottlenecks in loan processing.” Consumers should make sure their mortgage lender is experienced and on top of the latest developments in the market.

Yun offered a caution:  “With elevated inflation, the Federal Reserve should be extra careful about further rate cuts,” he said.  “Mortgage interest rates, which do not move directly with Fed funds rates, may rise measurably and hurt the housing recovery if inflation gets out of hand.”

This morning, Mortgage Bonds bounced from up... to down... to near unchanged levels, as the volatility continues.

Retail Sales for March were reported slightly better than expected; however, if gas station receipts are taken out of the retail sales mix, retail store sales were flat.

YIELD/RATE (%)		52-WEEK		CHANGE IN PCT. PTS
Interest Rate	Ap. 14	Wk Ago	High	Low	52-Wk	3-Yr

30-year mortgage, fixed	5.73	5.76	6.57	5.36	-0.20	0.16
15-year mortgage, fixed	5.3	5.34	6.22	4.91	-0.37	0.12
Jumbo mortgages, $417,000-plus	7.19	7.25	7.38	6.19	0.95	1.40

Source: Bankrate.com

The good news is that home loan rates for 30-year fixed rate mortgages remain below 6%, making this a great time to buy.

The level of interest rates reflects the balance between the supply of money from investors and the demand for money by borrowers.  Rising inflationary expectations cause investors to require higher rates of return on investments to compensate for the erosion of the principal that eventually is returned to them.  Regardless of inflation levels, though, rising economic activity can increase the demand for investors’ funds, and thereby lead to higher interest rates.

The demand for money diminishes as the economy struggles.  The Fed lowers interest rates as an incentive to businesses and consumers to increase their borrowings.  The Fed hopes manufacturers will increase their investments in plants, equipment and inventories and that consumers will push housing construction higher along with consumer spending and with that, consumer debt.  The inverse is also true. 

Analysts will monitor this week's consumer credit levels for any indications that consumers may be tapped out.  The economy has been wobbly for some time now and even Fed Chairman Bernanke has voiced recession concerns.

There is much debate in the financial community about the future.  Economists, market analysts, and traders all seem to have a different opinion about the future state of the economy and especially the effects of rising energy prices.  One thing most market participants agree on is both the bond and stock markets are going to see some volatility until a direction is clear.    

Remember, the Fed cuts rates to spur the economy, which generally helps stocks at the expense of longer-term bonds.  Longer-term bonds are what most closely correlate with interest rates. Now is a great time to take advantage of rates to avoid the uncertainty in the credit markets and the potential for mortgage interest rate increases due to continued inflation fears. 

Economic Influences and Rate Expectations

Last Week In Review… "I KNEW THE RECORD WOULD STAND UNTIL IT WAS BROKEN." ~ Yogi Berra A record was broken on the job front last Friday as the Labor Department reported a much worse than expected loss of 80,000 jobs in March - the greatest jobs loss reported in five years. In addition, revisions to both January and February's Jobs Report delivered an additional loss of 67,000 jobs - that's on top of the previously reported loss of 85,000 jobs for that two-month period.

And...the story might be even a bit gloomier than it already appears. The Labor Department uses a lot of averaging to help it come up with its numbers more quickly, but this practice can skew the current picture significantly. Think of it this way - and because it's now baseball season, here's a Baseball analogy - let's say that mid-way through the season, a red-hot hitter with a batting average of 340 declines into a bad slump for several weeks. While he now can't even hit a basketball thrown underhand to him, his average - while lower to 300 - is still very strong due to his previous hot performance. So someone looking at just the statistics may think that this batter is still absolutely terrific, but he is really someone the fans are booing as he approaches the plate. This is not very different from current numbers being reported by the Labor Department - previous averaging is likely causing an understating of the ACTUAL number of job losses...which somewhat masks