Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : News Links and Chart Links -- Ignore unavailable to you. Want to Upgrade?

To: Les H who wrote (8398)	8/16/2003 4:49:06 PM
From: Les H	Read Replies (2) \| Respond to of 29594

I have added a new interest rate chart which shows you what happened to mortgage rates this week. It is clear that when the ECB warned its constituent members to shed Fannie Mae paper, that panic phone calls were placed from Washington threatening retaliation if they unloaded. For the time being, the federal meddling worked, but the die is cast and it will not be long before the market tests the GSE paper once again. The pause in the bond market collapse has the mark of federal intervention written all over it. Whoever was forced to sell the 10 year note in a panic was bailed out forcefully but quietly. As you will see on the chart below, the government must bull the fixed mortgage rate down below 5.5% to keep the refi boom and the economy alive. The rally in the 10 year note has been modest in comparison, meaning that the only way they can bull the rate below the magic 5.5% level is to undertake a dramatic expansion of Fannie Mae liabilities. The bond vigilantes will take the paper into their portfolios only at higher rates, which forces Fannie Mae to keep all the new mortgages on its books. FNM stock will vaporize before this is over, as will the credit card issuers and the credit insurers in their turn. This B wave up in the 10 year note (and the mortgage) could last as long as a month before trouble starts. Indeed, the Nasdaq decline lasted exactly 30 months and the A-B-C rally has lasted exactly 10 months or 33% as long as the decline. Another 5 weeks of topping action would give the B wave in the bond time to complete and would then give us a stock rally that endured for a fibonnaci 38% as long as the decline. However, as you will see from the rest of the charts, the NDX looks like it is ready to head south right now. home.ddc.net