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Strategies & Market Trends : The New Economy and its Winners

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To: Bill Harmond who wrote (22)	5/10/2000 7:18:00 PM
From: Sonny Blue	of 57684

I think the bottom is near... Fence Sitters And Fed Fears By Tony Crescenzi May 10, 2000 12:30 PM EST Mortgage applications soared last week with the Mortgage Bankers Association's weekly mortgage applications index for home purchases up a robust 12.7% to 341.20. That is the highest since October 1998 and is 19% above the one-year average. The jump in the index appears likely due to the so-called "fence-sitter effect" whereby consumers rush to file mortgage applications out of fear that interest rates will soon rise. While this data clearly speaks to the resilience of the housing market, it is currently saying more about the extent to which consumers, and investors generally, have already discounted the likelihood of a 50-basis-point rate hike. Combined with the 80% probability of such priced into the fed-funds futures markets, the evidence overwhelmingly shows that the market's level of preparedness is sky-high. Therefore, if the markets get jolted by a 50-bps hike, it may represent a buying opportunity in both stocks and bonds, at least for the short-run.

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