{"id":14253,"date":"2011-03-03T08:05:45","date_gmt":"2011-03-03T15:05:45","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=14253"},"modified":"2011-03-03T01:10:23","modified_gmt":"2011-03-03T08:10:23","slug":"rage-and-rates-a-tin-foil-hat-production","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/14253\/rage-and-rates-a-tin-foil-hat-production\/","title":{"rendered":"Rage and Rates… a Tin Foil Hat Production"},"content":{"rendered":"

I wrote the article below a couple of days ago for a blog on political and economic freedom.\u00a0 I’m reprinting it here after enjoying some discussion on the\u00a0matter with fellow Bloodhound and\u00a0VA mortgage expert\u00a0Brian Brady<\/a>.\u00a0\u00a0Besides it being a brilliant piece (of tin foil hat wearing rantings), the article does\u00a0actually touch on an area that could be of great importance to our\u00a0real estate buying clients:\u00a0 mortgage rates.\u00a0\u00a0You see (in an over-simplified explanation), when the world gets scared, money flows to safety.\u00a0 Safety, at least for the time being, still resides in US bonds.\u00a0 Though not always correlated, the interest rates on mortgages\u00a0often travel in the same direction as those on bonds.\u00a0\u00a0So if, for some crazy, <\/em>unforseen\u00a0reason, the world becomes a little apprehensive over the next 2 weeks, we might see mortgage rates drop.\u00a0 The question is: when do you lock the rate for your client?\u00a0 Well, if we knew the actual date this crazy, <\/em>unforseen\u00a0event may occur, we could watch closely and lock right up to the day before. Why the day before?\u00a0 Because there are three possible outcomes to\u00a0this disruptive event, and two of them are bad:<\/p>\n

    \n
  1. \n
    It could\u00a0turn out to be a tempest in a teapot, in which case\u00a0money will quickly flow out of the bond market and interest rates will rise<\/strong>.\u00a0 (Because of the inverse relationship between bond prices and interest rates, when people sell bonds the price drops and the rate rises… I see people’s eyes rolling back in their heads… moving on then);<\/div>\n<\/li>\n
  2. \n
    Or, things could\u00a0go as bad or even worse than expected and oil\u00a0prices shoot up (geographical hint), causing\u00a0inflationary fears. Because inflation erodes fixed rate returns, bonds sell off\u00a0and\u00a0interest rates rise<\/strong> in response;<\/div>\n<\/li>\n
  3. \n
    Or, things could go as bad or even worse than expected\u00a0adding to the already existing fear – oil prices be damned; in which case\u00a0even more money flows to the safety of bonds and interest rates continue to drop<\/strong>.<\/div>\n<\/li>\n<\/ol>\n

    As you can see, of the three scenarios, two give rise to higher interest rates making us heroes for locking our client’s rate before the event.\u00a0 If, on the other hand, we find ourselves knee deep in the third Read more<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

    The question is: when do you lock the rate for your client? Well, if we knew the actual date this crazy, unforseen event may occur, we could watch closely and lock right up to the day before. Why the day before? Because there are three possible outcomes to this disruptive event, and two of them are bad:<\/p>\n","protected":false},"author":36,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[26,5],"tags":[190,178,66,50],"class_list":{"0":"post-14253","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-lending","7":"category-real-estate","8":"tag-mortgage-market","9":"tag-mortgage-rates","10":"tag-politics","11":"tag-real-estate-and-politics","13":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":761,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/761\/why-the-fed-matters-to-real-estate\/","url_meta":{"origin":14253,"position":0},"title":"Why The Fed Matters to Real Estate","author":"Dan Green","date":"December 12, 2006","format":false,"excerpt":"The Federal Open Market Committee meets today and will keep the Fed Funds Rate unchanged at 5.250%. It is not what the Fed does, however, that should concern Americans. It's what the Fed says. First, a clarification. The Fed Funds Rate is directly tied to Prime rate which impacts lines\u2026","rel":"","context":"In "Enduring Interest"","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":5804,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/5804\/citis-so-nice-i-bought-it-twice-a-tin-foil-hat-production\/","url_meta":{"origin":14253,"position":1},"title":"Citi’s So Nice I Bought It Twice (a Tin Foil Hat production)","author":"Sean Purcell","date":"November 24, 2008","format":false,"excerpt":"Alright, let's see if I got this straight: Less than 4 weeks ago Citi was purchasing Wachovia in a deal brokered by the FDIC. Less than 3 weeks ago the Fed injected $25 billion into Citi Less than 1 week ago Citi's shares tumbled Yesterday the Fed injected ANOTHER $20\u2026","rel":"","context":"In "Real Estate"","block_context":{"text":"Real Estate","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/real-estate\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2663,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2663\/once-more-with-feeling-mortgage-rates-are-determined-by-mortgage-bonds-mbs-not-the-ten-year-t-note\/","url_meta":{"origin":14253,"position":2},"title":"Once More With Feeling- Mortgage Rates Are Determined by Mortgage Bonds (MBS), Not The Ten Year T-Note","author":"Brian Brady","date":"February 26, 2008","format":false,"excerpt":"Mortgage rates are volatile today...very volatile.\u00a0 There are two underlying factors contributing to the volatility: suspicion of the credit quality of the MBS market and supply\/demand imbalance (more people want money than is offered). Why am I so adamant about the fact that the ten-year treasury note is not the\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2529,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2529\/amaze-your-friends-why-the-surprise-fed-funds-rate-drop-isnt-impacting-mortgage-rates\/","url_meta":{"origin":14253,"position":3},"title":"Amaze Your Friends : Why The “Surprise” Fed Funds Rate Drop Isn’t Impacting Mortgage Rates","author":"Dan Green","date":"January 22, 2008","format":false,"excerpt":"Advanced Fiscal Literacy For Real Estate Professionals The Fed Funds Rate is a fair proxy for economic health.\u00a0 When the economy is growing, the FFR\u00a0rises to fight inflation. When the economy is slowing, the FFR\u00a0falls to fight \"the absence of inflation\" (i.e recession). If inflation is the enemy of mortgage\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8270,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/8270\/stress-tests-and-wells-fargo-a-tin-foil-hat-production\/","url_meta":{"origin":14253,"position":4},"title":"Stress Tests and Wells Fargo: A Tin Foil Hat Production","author":"Sean Purcell","date":"May 7, 2009","format":false,"excerpt":"Today the Fed releases the results of the banking industry \"stress test.\"\u00a0 You remember this test right?\u00a0 The Fed created a scenario of economic failure well beyond what is already the worst economic downturn in seventy years.\u00a0 They then evaluate the banks' ability to withstand this Armageddon against the Fed's\u2026","rel":"","context":"In "Big Mother"","block_context":{"text":"Big Mother","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/big-mother\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":16296,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/16296\/can-bernanke-keep-mortgage-rates-this-low-into-2015\/","url_meta":{"origin":14253,"position":5},"title":"Can Bernanke Keep Mortgage Rates This Low Into 2015?","author":"Brian Brady","date":"April 1, 2013","format":false,"excerpt":"I've been a vocal critic of Ben Bernanke.\u00a0 I thought his Quantitative Easing schemes would eventually create a bubble in the Treasury and mortgage-bond markets.\u00a0 Bernanke has committed to keeping rates low for another 18-24 months. I was wrong.\u00a0 I violated the first rule of market prognostication (from the late\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/14253","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/36"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=14253"}],"version-history":[{"count":19,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/14253\/revisions"}],"predecessor-version":[{"id":14270,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/14253\/revisions\/14270"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=14253"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=14253"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=14253"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}