 |
 |
|||||||||||||
|
||||||||||||||
![[% CUSTOMER_NAME %]](http://www.mmgweekly.com/templates/spare_images/bighouse.gif)
| For the week of Dec 01, 2003 --- Vol. 1, Issue 13 |
Last Week In Review  |
 |
|
The strong. The bold. The brave. Who are we talking about? It’s the after Thanksgiving Day shoppers! It’s official, the holiday shopping season is underway. If you were one of those brave enough to dive into the frenzy that ensued last Friday, you probably found that parking was tough to find, the stores were crowded and check out lines were long. Great news! How so? The solid rush to the malls means consumers are ready to spend and the economy is looking up. A strengthening economy is good news for all of us. However, when the economy strengthens, mortgage interest rates tend to rise. Last week brought some spectacular economic releases, including a revised Gross Domestic Product report at a blockbuster 20 year high! The strong economic indicators last week caused mortgage bonds to finally falter and lose significant ground, which in turn caused mortgage interest rates to increase about 25%. News Flash – an increase of a more positive note was the announcement of the new conforming loan limit – now up to $333,700 from $322,700, beginning January 1st. Next time you hit the malls and experience the madness, you may be asking yourself if crowded stores and parking lots really give significant insights about the economy. As you drive around the lot yet once again, take a moment to consider Peter Lynch. One of the best stock pickers and money managers of all-time, Lynch amassed a 2700% return from 1977 to 1990 as he ran the Fidelity Magellan Fund. A 2700% return, even considering the crash of 1987! His investment philosophy was very common sense oriented, and believe it or not, he spent a great deal of time visiting malls and observing store traffic. Much of his ability to pick winning stocks was based upon this very practice. And did you know Peter Lynch had great L’Eggs? Don’t miss the Mortgage Market View below, where you can read a favorite Peter Lynch success story that just might help you with your own investment decisions. |
| Forecast For The Week |
|
|
Recent economic news has shown improving signs for the economy, but questions remain about job growth. This Thursday and Friday, some of those questions may be answered. Strong job creations along with continued slowing of job losses might just be a one-two punch, and it wouldn’t be a surprise to see mortgage interest rates a bit higher by the end of the week. The chart below shows how mortgage bonds have finally stopped defying gravity, and have broken through both the 25 and 50-day moving averages. The decline in mortgage bonds means an increase in mortgage interest rates, and it remains to be seen if the 100-day moving average can hold up as support. MORE GOOD NEWS: Even if mortgage rates do move a little higher, the bright economic picture is healthy for the housing market, which focuses less on interest rates and more on jobs. Chart: Fannie Mae 5.5% Mortgage Bond (Friday Nov. 28, 2003)
|
| The Mortgage Market View… |
|
|
So…what’s this about Peter Lynch and his great L’Eggs?? It all started when Peter’s wife Carolyn purchased a pair of Hanes pantyhose at the grocery store called “L’Eggs”. She happened to be delighted with her new nylons, and over dinner, she told Peter about her great find. Lynch knew his wife was a very good shopper, so being a smart husband and wise investor; he listened to his wife and did a little bit of research. Here’s what he discovered. He found out the average woman goes to the supermarket or drugstore once a week, but they go a woman's specialty store or department store only once every six weeks. He also found that all the good hosiery was being sold in department stores, and the supermarkets and drugstores sold junk. So Hanes had seen an opportunity, and had come up with a great product to sell in groceries and drugstores – “L’Eggs”. They had all the sizes and all the colors, but they never advertised price. Instead, they simply advertised, "This fits. You'll enjoy it." L’Eggs became a huge success. Lynch could see that his portfolio would sure enjoy the fit, and Hanes became his biggest position. The plot thickens. Lynch always worried somebody would come out with a competitive product, and sure enough, about a year-and-a-half later another large company called Kaiser-Roth came out with a product called “No Nonsense Pantyhose”. They moved in on Hanes territory, and No-Nonsense found a home right next to the L’Eggs rack at the supermarket and the drugstore. Being a no-nonsense man himself, Mr. Lynch knew he needed to investigate. What did Lynch do to protect his largest investment? Marched into the grocery and bought 48 different pairs of No-Nonsense in all colors, shapes, and sizes. Imagine the look on the cashiers face! Peter may have blushed a bit himself, but he brought the nylons back home to Carolyn, brought some to the office, and began his research project. He had the simple request, “try these out, and tell me if they are better than L’Eggs”. People came back to him in a couple weeks and said, "Peter – they are just not as good." Lynch held onto Hanes and made over a 1,000% return on his investment! The moral to the story? Lynch says that the best fundamental research you can do is to examine the companies and products that surround you; the businesses that you can see, feel, hear, and taste are high quality. What better way to invest, than to experience exactly what you are investing in? This holiday season, if you experience a great store or product, think beyond the great gift you might have just found. Consider your shopping trip to be an exercise in investment research, and investigate adding a new stock to your portfolio. A personal investment can also be a wise portfolio investment, just like Peter Lynch found with his great L’Eggs. |
| The Week's Economic Indicator Calendar
|
|
|
What’s in the hopper this week? One of the most exciting reports this week will be the Jobs Report on Friday. If the numbers are particularly strong, it could have a high impact on the mortgage bond market, and therefore mortgage interest rates. At first blush, knowing that the economy is on the rise, you might think that the Jobs Report will naturally indicate further decreases in the unemployment rate. But not so fast – check out this interesting twist. The improved conditions in the labor market will bring the long-term unemployed back to seeking jobs, and could actually delay a continued decline in the unemployment rate! So the market may focus more closely on job creations. Listen in on Friday to hear the real deal, and count on the Mortgage Market Guide Weekly to bring you all the details next week! Remember that in general, weaker than expected numbers would indicate the economy is not improving as quickly as expected, and could cause mortgage rates to improve. Positive numbers would indicate a strengthening economic climate, and could cause mortgage rates to gradually climb higher. For the week of December 1st - December 5th, 2003
|
 |