Is Gold a Safe Bet?

mortgage application decline again

Yesterday the market saw it’s 3rd best day in 2010 and was up 273 points. It is my opinion which is also shared with alot of other Wall Streeter’s that you should be buying on the dips and selling into the rallies. This is how I would be trading in a market like this. The days of long term investing is gone for right now and the key is to preserve as much of your capital as possible.

Many things still trouble the markets and a resolution to these things don’t seem likely anytime soon. BP’s Oil Disaster is a huge burden, as well as the potential credit crisis spreading in Europe. However, today’s auction of the Spain and Italy Bonds (which went well) seem to indicate the debt issue may not be as bad as people had expected. The Euro stabilizing is another positive sign. I feel gold hitting an all time high on Tuesday $1,245 an ounce is an extremely negative factor hanging over the market and an indication that the market / people feel the debt crisis may not be over. I still believe that if you want our economy to grow we have to stop the massive government spending and cut taxes across the board to promote growth. Since this isn’t the way the current administration is heading (actually directly the opposite) we may be in for some turbulent times ahead.

Not Hiring

Today’s Jobs Report was a disappointing figure. The market opened lower this morning with this terrible number and the sell off continued to accelerate throughout the day dropping below 10,000 down 310 points to 9,946. The Department of Labor said that Jobs grew by 431,000 in May but, went on to say that nearly all those jobs were temporary census workers. There were 411,000 census workers added and only 41,000 private sector jobs created. The unemployment rate dipped slightly to 9.7% however there are still 4.66 million continuing to receive jobless benefits. I find this figure to be a huge smoke screen! Why should temporary work be classified as employment? Isn’t the goal of employment to be employed for a long period of time? What happens when this work ends? Will these people then be able to file for unemployment? Sounds like a horrible scenario to me!

Pending Home Sales were up 6% in April and the Index is up 22.4% year over year. Pending Home Sales in the Northeast were up 29.5% in the month of April. These are contracts signed not closed. Many Realtor’s surveyed are unsure if these homes will closes by the June 30th Home Buyer Tax Credit deadline due to the overwhelming amount of short sales and appraisals that are taking longer than expected. May will be the 1st month in 16 months that the Government isn’t paying people to buy homes. I have been saying for quite a long time that these numbers are lagging indicators (old data) and the real news will be what happens after the June 30th date.

Mortgage applications to purchase homes dropped 4.1% this past week. It was down the 4th straight week and down a staggering 40% from last month which is the lowest level since April of 1997! Mortgage rates remain low which is good for the housing market. The 30 year fixed rate national average is at 4.625% and the 15 year fixed rate average is 4.125%.

BP Oil Spill Disaster

Looking ahead we have some big challenges to be dealt with. For me, a major question is how long this economy can run effectively not running on all 8 cylinders? I think there are some major issues abroad in Europe with the credit issues looming to other countries and in China that need to be addressed! What happens if China Real Estate Market (bubble) experiences a similar situation we did in the U.S.?

The employment issue is defiantly a problem as well. The Government needs to give back to small business to encourage employment. That is the only way to grow our economy. Entitlement programs need to be cut, extending unemployment benefits is not the way to get people back to work.

The long term affects of this oil disaster will also have a huge impact moving forward. The amount of work that could be lost along the Gulf Coast could be catastrophic! Some analysts say the loss of jobs alone in the tourism industry could be greater than the fishing industry as a whole. That is a scary thought! I pray that the efforts are successful and things can get back to some sort of normality for these folks.

Consumer Price Index fell in April to .1% and the core rate excluding food / energy it was unchanged. The Consumer Price Index measures and estimates the average price of consumer goods and services purchased by households. This was the smallest gain since 1996 and the word on the street is, could this be a sign of Deflation? Deflation is when prices of goods and services fall faster than the inflation rate which then allows consumers to get more for there dollar.

Housing Starts were better than expected for the month of April up 5.8%. Housing Starts is when the construction actually begins. New Building Permits also came out this week was down 11.5% for the month of April. Many analysts are now starting to say that the housing numbers are going to be greatly impacted by the end of the Home Buyer Tax Credit Program. I have been call this for quite sometime now and the numbers speak for themselves as weekly mortgage applications for purchases fell a whopping 27.1% this was the biggest drop in 13 years!

30 Year Fixed Rates fell this week to 4.83% and the 15 Year Fixed Rate fell to 4.19%. The Fed revised their Gross Domestic Product figures for 2010 to 3.45% vs. previous estimates of 3.15% and real GDP to grow to 4% in 2011 & 2012. The Fed also estimated that unemployment would drop to 9.3% in the 4th quarter of 2010 and fall to 7.05% by the end of 2012. These are aggressive numbers considering that the market seems to be pricing in a double dip recession.

I think we are still not out of the woods. Since many of these economic figures are lagging indicators we’ll only know what happens as we start to move forward from this point. I feel some major problems we are going to have to deal with is Europe and how this Greece situation may effect other countries. China! If their housing market crashes what will the implications be and how that will ripple through the markets? We can’t forget Washington and their crusade to over regulate! This is no doubt a huge negative for the Markets and the more they tinker with policies the least likely things will be better than they are. Criminals always find a loophole, the only thing over regulating does is that it creates larger institutions and discourages the small guy to compete.

This was another very volatile week for the stock market. After last weeks Dow plunging 998.50 points in the mater of 5 minutes it was a very important week to see if that trend continued. The market open up huge on Monday with a more than 350 point surge but after almost breaking 11,000 the market leveled off to being up 234 for the week.

Retail Sales for April was up .4%. Retail Sales measures consumer spending. The core rate which excludes auto, gas, and building materials fell .2% which was the biggest decline in a year. Consumer Sentiment rose in May to 73.3% from April’s 72.2% Luxury spending is back on the rise as the economy tries to rebound. Gold hit a record high on Wednesday to reach $1,249.70 an Oz. as much of Europe looks to Gold as a safe haven as worries about the next Bail Out rumors spread. Oil surprisingly has been down as it closed down $2.42 on Friday to $71.98 a barrel.

30 Year Fixed Rate Average fell to 4.96% as the 15 Year Fixed Rate Average fell to 4.32%. This is the lowest level rates have been in the year. Foreclosure filings were down 9% in April, as Bank Repossessions were up a whopping 45% from last year! The expiration of the Home Buyer Tax Credit program has already effected the housing market. Purchase apps for the week were down 9.5% and sellers are being more aggressive with their prices. In some areas, we’ve seen a 10% drop in price to off set the popular tax buyer incentive program.

The question going forward is going to be what happens with home sales going forward without this program in place and how it will affect the rest of the market. Other things to keep an eye out for is other European Countries falling subject to a Bail Out. Obviously, another Terrorist Attack will also affect the market. We were extremely lucky last week to avoid a major problem and fortunately it seems the Government is doing a good job being one step ahead of these criminals!

Have we come out of a recession and recovered? I would say it’s too early to tell but, hopefully it wont be a double dip recession that some analysts have started to talk about.

About the Me: The above Real Estate information was provided by Greg Afarian, l can be reached via email or send me a message on Twiter.  Have a home to sell on the NorthShore in Mass? I’ll help you with my social media skills for a quick transaction to help save you time and money. I service the following towns in Boston and the Greater Boston Area: Andover, North Andover, Lawrence, Methuen, Haverhill, Boxford, Bradford, Dracut, Reading, North Reading, and beyond.

The 1st property is a 2310 Sq. Ft. Colonial 8 Room, 4 Bedroom, 2 1/2 Bath located close to downtown Andover.

The 2nd is a 3568 Sq Ft. Colonial 10 Rooms, 5 Bedrooms, 3 1/2 Baths located in West Andover.

US Mortgage and News Update presented by Greg Afarian of Virtual Media Realty in North Andover MA.