For the week of Nov 15, 2010 – Vol. 8, Issue 46“INFLATION IS WHEN YOU PAY $15 FOR THE $10 HAIRCUT YOU USED TO GET FOR $5
Last Week in Review
“INFLATION IS WHEN YOU PAY $15 FOR THE $10 HAIRCUT YOU USE TO GET FOR $5
Right now, the headline numbers in the US show little inflation overall… but we are already seeing significant inflation in particular items like commodities, food, other shopping products that you find in some shopping reviews sites, and oil – which are being driven by a weak US Dollar, and increasing demand from emerging countries like China and India. In addition, the global market reacted late last week to higher-than-expected inflation in China. This is important to us because Bonds and home loan rates hate inflation, no matter where the whiff of it comes from.
Here’s why. Think of inflation as a hot air balloon and rates as the basket under that balloon. As the balloon (or inflation) rises, the basket (or rates) must rise as well.
So, if inflation moves higher in China, their government has to raise rates to fight inflation. And if rates move higher in China, global investors seeking the highest yield will move away from the relatively meager returns seen in US Bonds – and move their Bond buying money into juicier yields found abroad.
There are so many opinions by so many smart people on both sides of the inflation argument, but right now it is all about what the Bond market thinks. And the recent market action shows just how quickly sentiment in the market can change. Remember, it was just a few weeks ago that fears and whispers of deflation helped the Bond market – and home loan rates – improve.
While those goals may be good for the overall economy, we need to remember that all three are very unfriendly to Mortgage Bonds and home loan rates.
The good news is, despite ending the week worse than where they started, home loan rates are still near historic lows for the time being. If you or someone you know is looking to take advantage of low rates, now is the time. Please call or email me today to get started.
Chart: Fannie Mae 3.5% Mortgage Bond (Friday November 12, 2010)
The Mortgage Market View…
Financial Benefits of Decluttering
My husband and I usually go through our closet once a year to clear out clothes we no longer wear. But an article in the New York Times about people who decided to wear only six items for a month made me aware that there still is a lot in my closet that I don’t need.
We occasionally go through other closets, cabinets and drawers to rid them of items that don’t get used and just take up space. After reading G.E. Miller’s 3 Guerilla Tactics to Get Rid of Clutter on 20somethingfinance, I realized my haphazard keep-or-toss tactics weren’t cutting it.
What resonated with me most, though, was a reader comment on the Opinionator blog post How to Lose a Legacy. The reader wrote about cleaning out his (or her) parents’ home after his mother died and father moved out: “I wonder why we (me) hang on to stuff that really just takes up physical and emotional “room” in our lives; I s’pose it’s because the “stuff” (as George Carlin so aptly and comically put it) signifies a longing to hang on to, or dare I say, cling, to memories using physical things… even if we actually wish we could just throw a lot of it in the trash.”
It feels good to get rid of the clutter. This is a personal finance column, so I won’t advocate just throwing your stuff in the trash because you’d miss out on the financial benefits of decluttering. Here’s what getting rid of things you don’t need can do for your finances.
1. Lower your tax bill. If you itemize on your tax return, take all that stuff to Goodwill or any other charitable organization and claim a deduction for your contribution. Goodwill has a list of price ranges for items sold in its stores that can help you figure out the market value of items you donate. If your noncash contributions total more than $500, you must complete Form 8283 and attach it to your tax return. Single items valued at $5,000 or more, regardless of condition, require a written appraisal.
2. Put money in your pocket. You’ve heard it before: One man’s trash is another man’s treasure. Have a yard sale ( see these tips) or sell your wares on eBay, Craigslist and other sites ( watch this video).
3. Eliminate financial mess. While you’re decluttering, take the time to get rid of documents you no longer need and go digital with the rest. See Paper Records: What to Toss, What to Keep and Create a Digital Archive of Tax Records for help. This exercise can help you get your remaining documents organized, save you time as you prepare your next tax return and perhaps prompt you to find ways to streamline more of your financial responsibilities (by setting up automatic bill pay, for example, and eliminating all those monthly paper bills).
Reprinted with permission. All Contents ©2010 The Kiplinger Washington Editors. www.kiplinger.com.
This Week’s Economic Calendar
Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.
Economic Calendar for the Week of November 15 – November 19