My Mortgage Blog

It's that point in our flight when the captain's voice crackles on to the intercom: We will start our descent very soon, ladies and gentlemen, and though there's nothing to worry about, we ask that you all fasten your seat belts, just in case we run into a bit of turbulence.

Yeah, and finish that soda, because it could land in your lap if you aren't careful. After Captain Bernanke made his mild-mannered announcement that the third version of Quantitative Easing (QE3), the one that costs roughly $85 billion per month in mortgage-backed bond purchases by the Fed, will be ending in the foreseeable future, the Dow Jones Industrial Average went into panic mode, dropping a quick 300 points, and then another 200.

Why the fear and gnashing of teeth? If we've been paying any attention at all to the recent announcements from Fed officials, we should know that there has been a less-than-subtle campaign of getting us used to the idea that the Fed will be pulling back the reins on its lengthy campaign of manipulating interest rates. They've been lathering us with butter, like pieces of toast. And we can believe them when they say they will retain the ability to fine-tune the way they run things, even if that means resuming QE3 (or do I hear a QE4, anyone?).

Nothing has changed much. Bernanke tied the end of QE3 to a sustainable jobless rate of 7% or less (formerly, unless I lost track, something like 6.5%). He assures us that, while the Fed forecasts such an unemployment rate for next year, it will not stay with a pull-back of QE3 if this doesn't happen.

But the news that struck the markets in the face was that we now have a number of 7% unemployment. Beyond that, however, the Fed chairman (Oh Captain, My Captain) was no more willing to be specific in the timing of future events than he usually is, other than to say the program would probably be gone in 2014. And QE3 will begin its phasing-out process in, oh, two or three months, or maybe four or more. It all depends on how strong the recovery remains and whether it meets Fed targets.

So, this sound and fury, signifying nothing specific, leads me to suspect that the Fed may have wanted to send a small punch to the markets solar plexus. The stock markets in particular, after all, were reminded how vulnerable they are to the Fed's actions and perhaps, in the Fed's view, the losses in the DJIA drained some of the excesses from market values, at least temporarily.

I mean, who knows? There were, as always, other problems bothering world investors as well. Richard Silk wrote in The Wall Street Journal, "Beijing's determination to ride out increasing economic headwinds without resorting to its usual interventions is heightening anxiety in markets around the world." It sounds like we have a theme here.

So the market flight which is now in an apparent process of descent could land us in China? No, it’s far too early to worry greatly about this piece of day-to-day economic noise.

Indeed, the initial reaction in our stock markets to the Bernanke announcement has, as these words are written, already begun to fade into the ethers. So, if you are looking for something you can continue to worry about, note that Lawrence Yun, chief economist for NAR, "cautioned Thursday that the recent rise in home prices isn't sustainable given that housing prices are rising at a double-digit pace while Americans incomes are rising only tepidly." [Sarah Portlock and John Mitchell, The Wall Street Journal]

Yun has a point, of course, though it's probably too early to fasten our seat belts again over this one. And look: Isn't Yun warning that, OMG, the real estate market is too good? Maybe we should withdraw from the sound and fury in the financial news and just engage in the business this great market is bringing us.