January 13th, 2014 9:18 AM by Nick Rapplean
Okay, were up to our toes in 2014 by now, and none of us has developed any weird pains or mental problems so far at least, so far as I know. It’s been pretty smooth sailing. In fact, I’m developing a short list of reasons to be glad its 2014 now.
At the top of the list? We have a whole new approach to Quantitative Easing. In fact, were easing the easing from $85 billion a month in Fed funny money purchases of mortgage-backed bonds to $75 billion. That may not sound like a big reduction, but remember Everett Dirksen? He pointed out that if you include a billion here and a billion there, pretty soon you're talking real money.
And indeed, we are talking real money. But don’t hold your breath, waiting for that $10 billion a month to eliminate the national debt. Work on that remains to be done.
The important thing here, from my own point of view, is that the suggestions in the past that the Fed was going to reduce the QE purchases made world investors run into their offices, lock the doors, and hide under their desks. No so this time.
There had been a lot of muttering about higher interest rates slowing our markets and bruising the economic recovery. Happily, though, interest rates haven’t moved much with the possible exception of 10-year treasuries but even that shouldn't be causing us to feel a little faint. The Freddie Mac weekly average mortgage rate, which should track the 10-year T-note, reported in last week with a lower number very easy to live with at 4.51%.
At the same time, the latest jobs report, which most analysts were very squirrely about, came in with a minor gain in the number of new payrolls. Nothing to get worked up about though a little more strength would have been nice.
It’s beginning to look like the Feds decision to taper is being taken in by the markets without a whimper. Even the price of gold, often a measure of how anxious the world of international investors is, has fallen down and is doing its best job of playing dead. Barclays and the Bank of America announced today that they expect precious metals to continue losing value this year.
And what might all of this mean? It could mean continuing low inflation rates, lower-than-anticipated interest rates, including mortgage rates though I have an inclination not to count chickens until the eggs start hatching.
All in all, especially when you add a few positive indicators like new home sales from the real estate sector, it looks pretty good. Good time to take out a loan, good time to buy a home, good time to be ready to do a fair amount of business.
Well keep looking, of course, but let’s stop and smell the roses here. There is much to cheer us.