THERE IS NO CONVERSATION MORE BORING… than the one where everybody agrees. (Michel de Montaigne) And the heated conversations about the Presidential candidates were anything but boring. After the dust cleared on Wednesday morning, the air of uncertainty surrounding the heated and very close race for the presidency was finally lifted when Senator Kerry conceded to President Bush. Regardless of who would be the victor, the markets had been hoping for a clear winner, and not another repeat of the memorable 2000 election. Remember the “hanging chad”, the “pregnant chad”, and other fun ballot issues? It took until mid-December for Gore to concede – and during that time Stocks declined by 6%.

In more big news, hurricane damaged oil refineries came back online, and oil prices finally drifted back below the important $50 per barrel mark. And then to cap it all off, Friday’s highly anticipated Jobs Report was a blockbuster - while 175,000 new job creations were expected, a whopping 337,000 were delivered! If that weren’t enough, the previous two months reports were revised significantly higher as well.

What a week – a clear Presidential winner emerged, oil prices dropped, and then a super-sized Jobs Report. Mortgage Bonds were eventually pressured lower by all the hot news, and mortgage rates worsened by about .125%.

AND SPEAKING OF WORSENING… DO YOU KNOW ABOUT THE THREE TAX “LOOPHOLES” THAT ARE ABOUT TO BE CLOSED? BUT BELIEVE IT OR NOT, THE IRS HAS SOME GOOD NEWS IN STORE THIS YEAR TOO… BE SURE TO CHECK OUT THIS WEEK’S MORTGAGE MARKET VIEW FOR THE WHOLE SCOOP.

Mortgage Bonds flexed some muscle last week, and showed surprising strength in the face of very positive economic news, which could have easily dragged Bonds considerably lower. So what could happen this week that may cause Bonds to weaken and home loan rates to worsen? The biggest event of the week is Wednesday’s Federal Open Market Committee meeting, starring Chairman Alan Greenspan and his inflation-fighting friends at the Fed. A .25% hike in the Fed Funds Rate is virtually a lock after Friday’s huge Jobs number, so unless Big Al has some surprises up his sleeve, Bonds and home loan rates are unlikely to make any big moves in response. Interestingly… a Fed rate hike may actually help home loan rates – as the last three Fed hikes since June have helped home loan rates decline by .75%.

The chart below shows how Mortgage Bonds continue to bounce higher off of the 50-day Moving Average. This level has served as a “floor” of support for several months. Should the bond fall beneath this important level, home loan rates may quickly rise in the near-term.

Bottom Line: All the positive economic news of last week was not enough to cause Mortgage Bonds to break significantly lower. Unless some real shockers are in store this week, Bonds and home loan rates will likely stabilize and remain fairly flat overall.

Quietly passed into law a few weeks ago was the American Jobs Creation Act of 2004. Touted as an enticement for corporations to hire more workers, the law includes several measures that could impact your taxes for 2004 and years to come. Three items in specific could cost you money… while one just might save you some coin this year. First, some good news:

Blue Light Special – Attention K-Mart Shoppers, you may now deduct your sales tax in 2004 and 2005 if you itemize your deductions. But wait; don’t buy that new plasma TV just yet. You will have the choice of deducting your sales taxes OR your state and local income taxes. You can’t claim both. If you live in a state without income tax, it’s an absolute win. If not, you get to choose. The IRS is preparing tables that will help you better determine whether to choose the sales tax or state income tax deduction. But to deduct the sales tax… you’ll need to save all your receipts.

Say Goodbye:

Big Trucks Sacked – the “Big Truck” Tax Loophole is gone. Previously, you could expense up to $102,000 for any SUV or truck weighing 6,001 to 14,000 pounds. The new law strips the amount you can expense down to a maximum of $25,000.

“Deferred-Comp” Stung – For those participating in Deferred-Compensation Plans, the law now makes it tougher to pull money out without a large tax bite. Previously, if participants wanted to withdraw money, they could do so and experience a financial penalty of as little as 6%. This penalty has now been increased to 20%, along with interest charges. Certain provisions will allow for access to the account, such as an unforeseeable emergency, a payout of the plan at a specified date, or potentially a change in ownership of the company. Also plan participants may be forced to decide how much income to defer by as much as six months in advance.

Beware Car Donations – If you want to risk an audit, give a car to charity. If the value of any vehicle donated exceeds $500, what the charity does with the vehicle will determine your deductible amount. If the charity sells the car, you are limited to the amount of proceeds from the sale. And the charity has to report the sale to the IRS before you can file your tax return. If the charity keeps the car, you can deduct fair market value. The new rules for donations go into effect January 1, 2005.

As always, seek the advice of a tax professional to determine how to best to prepare for filing your taxes, and how these new rules may impact you.

The economic calendar slows down this week with just two events having the potential to really stir up the markets… Wednesday’s Fed Meeting, at which another .25% rate hike is expected, and Friday’s Retail Sales Report.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

For the week of November 08 – November 12