FEDSTOCK… FOUR DAYS OF PEACE, LOVE AND ECONOMIC TESTIMONY. In seriousness, minus the peace, love and other various substances, last week was like the Fed’s version of Woodstock, as they sure seemed to have much to say each day over the course of the week. Traders were paying attention, and reacted to the show by continuing a sell-off in Bonds, causing mortgage interest rates to increase by about .25%.

Chairman Greenspan came out unusually optimistic on Tuesday, beating the drum of economic recovery, and although he tempered his second set of statements on Wednesday – the markets heard him loud and clear. He strongly stated that the economy is "clearly coming back"…and the straw that broke the camel's back was Mr. Greenspan virtually promising a rate hike this summer by laying the groundwork with the words "the US financial system is strong and well-positioned for the challenges of higher interest rates”.

Fed Governor Bernanke continued the upbeat set by stating his expectations of very strong GDP growth in the second half of the year, and combined with the strong numbers pouring in of Durable Goods Orders, Retail Sales and corporate earnings (78% of companies reporting earning so far have exceeded market expectations), the message is clear: we are in for higher interest rates this year. So let’s talk timing. The Fed has meetings planned for June, August and late September, but waiting until September is unlikely – especially because it is so close to the election. A more likely guess would be June or August. Since by June there will only be two more employment reports released, August would be a good bet, as it the Fed will likely exercise patience, waiting to have four more employment reports under their belts before making any rate increases.

ALWAYS THOUGHT A POWER OF ATTORNEY WAS JUST FOR SPECIAL CIRCUMSTANCES OR THE ELDERLY? THINK AGAIN…BE SURE TO READ THIS WEEK’S SPECIAL MORTGAGE MARKET VIEW, WHERE NATIONALLY KNOWN SPEAKER, AUTHOR AND TELEVISION HOST SUZE ORMAN OFFERS HER VALUABLE INSIGHT ON HOW TO USE A POWER OF ATTORNEY TO PROTECT YOURSELF AND YOUR FAMILY, EXCLUSIVELY FOR MORTGAGE MARKET GUIDE WEEKLY READERS.

We can see that Mortgage Bond prices continue to stair-step lower…and rates continue to nudge slightly higher, as economic news has persistently shown signs of a strengthening economic recovery. Take a look at the chart below, showing the “staircase” that is leading to increased interest rates!

This week, keep your ears open for economic news…if reports continue to be positive for job growth in particular and the economy in general; mortgage bond prices will continue to stair-step on down, sending mortgage rates slowly higher. While the Fed will be backstage taking a breather this week…the economic reports calendar will step out strongly, warming up with New and Existing Home Sales on Monday and Tuesday, bringing on the increasingly intriguing Initial Jobless Claims numbers, backed up by the Employment Cost Index on Thursday, and rounding out the show with the University of Michigan Consumer Sentiment numbers on Friday.

Barring any unforeseen geopolitical events…if economic news continues to be positive overall, mortgage interest rates will move slightly higher this week.

THIS WEEKS SPECIAL MORTGAGE MARKET VIEW FEATURES SUZE ORMAN, WRITING TO MMG WEEKLY READERS ABOUT THE IMPORTANCE OF HAVING A POWER OF ATTORNEY…WHAT IT MEANS, AND WHY YOU SHOULD CONSIDER IT RIGHT NOW!

Dear MMG Weekly Reader:

Keeping up with our bills, investment accounts, mortgages and other financial obligations is a time consuming task…yet it is not something any of us can just let slide. That’s why I want to talk to you about a Power of Attorney document that deals with financial matters. This is a legal document where one person can designate another person to be their “agent” or “attorney-in-fact.” It is up to the person creating the Power of Attorney (POA) to specify exactly what they want the agent to do. It can be one task, such as writing the monthly mortgage check, or it can include oversight of all bill paying, investment accounts, and permission to sign a variety of financial documents. All powers of attorney become invalid as soon as the principal dies.

Those of you with elderly parents or loved ones who are having trouble keeping up with their finances can no doubt see the value of a Power of Attorney for financial matters. But it is just as important for all of us to draw up our own Power of Attorney. Though my wish for you is a safe and long life, we always need to plan for any of life’s unknowns. With a POA you can have the peace of mind that your finances will be in good hands if you are suddenly unable to take care of things for yourself.

But you need to be very careful in setting up a POA. First, you need to make sure your POA document meets the requirements for any institution you are dealing with. And, I also want you to carefully consider who would be your most trustworthy agent.

Get the Right Document: When it comes to honoring a POA, banks, brokerages and even the IRS can be quite difficult; they may not recognize your “agent” if your POA is not drawn up using the correctly specified document. A generic Power of Attorney form is readily available online, but you should check with your state Bar Association to see if they have their own standard document that must be accepted by all financial institutions in your state, or ask your attorney for advice on this matter. If there is no standard form, you are best off checking with each institution that you deal with. Yes, this means you may have to create slightly different versions of the same document for different institutions, but that’s a very small price to pay to ensure your finances will be in good hands.

Use only Special “Agents”: Speaking of good hands, please be very careful in who you designate as your “agent.” You need to have complete trust in this person, and integrity is crucial since you are essentially giving this person access to your bank and brokerage accounts. I don’t want you to fall victim to what I call the “absconding fiduciary”…an agent who runs off with your money. If this happens and you are incapacitated, there could be many problems. You would need a court-appointed conservator, which could cost a friend or family member $10,000 to arrange. And then there’s the cost of the lawsuit against your absconding agent, which could cost you much more.

The best advice is to make sure you make good choices in the first place. POA’s are best when the designated agent is a spouse, partner or a very trusted friend. And to be extra careful, my advice is that you hold onto the document until it is actually needed.

Best wishes to you –

Suze Orman

MMGW EDITORS NOTE: You can hit this link to view a generic POA document for your state: State Specific Power of Attorney Forms. As with all legal issues – you should consult a trusted attorney to ensure that all documents are current and complete when you proceed with this terrific plan to protect your finances.

This week is set with a full slate of economic reports that could influence the direction of Bond prices and interest rates. Which reports have special interest this week? Monday and Tuesday brings the always important New and Existing Home Sales…but the most interesting news of the week will arrive on Thursday, with the heavy-hitting Employment Cost Index (a Greenspan favorite) along with Initial Jobless Claims. With all the focus on jobs, these employment-related reports will rate special attention, and could be market movers late in the week.

Remember, as a general rule, weaker than expected economic data would indicate the economy is not improving as quickly as expected, and could cause mortgage rates to improve. Positive data would indicate a strengthening economic climate, and could cause mortgage rates to gradually climb higher.

For the week of April 26 – April 30, 2004