Category Archives: Interest Rates

June 2020 Podcast Video, Financial Planning and Capital Market Update – By John Kvale … From the Road

Hello and Welcome to our June 2020 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

Hope you enjoy!

June – 2020 Video (YouTube)

 

Financial Planning Tip  –

The Virtual Pivot

Oddly, this heading is the same from last month, but has a different meaning…

Here in this post we discussed how many folks are really enjoying working remotely….

In fact, the mentioned study showed that 98% of folks wanted at least some remote time moving forward…now that’s an incredible Pivot!

b8780aea-4b3c-4faa-81fb-b04cae5c29e9-49855-000003ca0134d2d5

In the future, likely some blending of remote and office…. nothing ever will replace face to face, but a nice blend may cut down on away from family and travel expenses…time will tell.

TSA Throughput Statistics

Over a weekend of surfing stumbling onto the TSA Throughput numbers an idea of sharing via graphic form was posted here in this post.

We even created this neat graph…

6-11-20 TSA Throughput 2020 v 2019

Good thing we did a review of this as the creation spreadsheet made its way to the recycle bend…not any more… it’s safely back now…

Looking forward to reviewing this again in the future to see if this continues?

Capital Market Comments

The Look Through Continues – Expect Bumps

Global markets continue to claw their way back, as investors look through the earnings drop and lowered interest rates help create a tailwind.

Recently, global markets took a few steps back when increases in cases occurred…. this makes sense.

Global markets are likely ahead of themselves….. time will tell, as mentioned in our Newsletter, there is a lot of horsepower aimed at fixing the situation in Unity!

Expect bumps, and headline shocks, both positive and negative … but that’s why we are happily conservative investors at heart!

6-30-20 World Indexes YTD 2020

Have a Great Day – Talk to you at the end of July!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
street-cents

A Little Overzealous …. Friday …

So yesterday there was a lot of red (dropping in value) on many of financial professionals and likely your electronic apparatus with regards to Capital Markets…

What’s Up?

A Little Overzealous …

As you know, we are a very “Glass Half Full” firm and individuals as a whole…

But Hang on just a second  … it makes no sense to rally all the way back to almost where we were before Covid 19 became an issue….

Do we think there will be a vaccine? Yes… Newsletter expands in great detail…

Do we think investors should look over the valley and to the greener pastures on the other side? Yes… and they are….

Do we think Capital Markets are ready to be where they where before all of this with the uncertainty of looking through the Valley? Not yet … a lot of uncertainty still…

Yesterday… Capital Market Participants agreed…

6-11-20 Indexes

A dose of reality may have sunk in as the FOMC announced they expected slower growth for the next two years and as such lower interest rates….

Or maybe, some awakened to the fact of where we were …  and where we are now… and said “Wait a Minute!”

All part of the process…. in due time this will all seem like a faded memory… not yet!

Expect ups and downs along the way!

Have a Great “Back to Reality” Friday!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Don’t Fight the Fed Brings New Meaning … Where the Stimulus Funds are Being Parked

During the Great Recession of 07-09, the FOMC (Federal Open Market Committee) led by then chairman Ben Bernanke, began an unprecedented (at the time), pushing of money into the financial system. Take a peek at the 2008-2009 move upwards in the graph below.

Fast forward to present, and the sequel (usually more dramatic) …. is well, MORE DRAMATIC…. take a look at the horsepower the FOMC is throwing at our current situation…. makes 08-09 look like a mini me version.

Bazooka is fitting!

 

img_1384

Interestingly, these funds are finding their way, conservatively into deposits in institutions, which can be seen by the next chart…. oddly, a non banking crisis as compared to the great recession which was definitely a financial crisis has more worried… hence the parking of money into low interest savings rates.

Will be watching to see if this continues or begins to trickle out into the economy … would be very stimulative if it does!

img_1383

Speaking of the FOMC, they have a meeting today, any major changes in their posture would likely be market moving.

Have a Great ” FOMC has a Bazooka” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

 

 

 

 

What Happens When You Get A Decidedly Positive Economic Reading, While Expecting Negative?

Last Friday, June 5, 2020 the Bureau of Labor Statistics (BLS) released its regularly schedule monthly report of hiring and firing report nicked name “The Employment Situation”

Closely followed as a broad measure of the health of the economy and the consumer, experts (so called) from all ports of finance (Economist, bankers, investment bankers, brokers) tally their estimates of what the monthly reading will be.

In all fairness, due to bread crumbs from other reports, usually the forecasts are very close and often garner a quick glance and a carry on to other items attention span.

Fridays expectations were for a loss of just over 7 million folks.

Oops – What Happens When You Miss Big?

With an expectation of ( -7 million) more job losses and announcement of +2.5 million gains, caught Market Participants WAY off guard…

6-5-20 Nonfarmpayroll surprise

Interest Rates took note as well… which is very logical, as rates go up as economic conditions expand…

6-5-20 Us 10 year treasury

Likely ahead of ourselves a bit, but heck it is a start….

Bumps most certainly still ahead… but still a start…

Have a Great “Why We Don’t Forecast Much” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

May 2020 Podcast Video, Financial Planning and Capital Market Update – By John Kvale

Hello and Welcome to our May 2020 Financial Planning and Capital Market Update!

If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!

Newbies –

We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!

Hope you enjoy!

May – 2020 Video (YouTube)

 

Financial Planning Tip  –

Mortgage Rates

Looking at the chart of the 10 year treasury, we can see rates have finally settled and we are hearing the volume of lenders overflow has calmed as well. While the 10 year is not an exact predictor of Mortgage Rates it is loosely correlated.

Now may be a good time to check your Mortgage Rate and consider refinancing!

Here is one of our favorite and most popular posts on the items to remember when you are getting a mortgage and especially when you refinance.

5-29-20 10 year us treasury

The Virtual Pivot

In true making Lemonade from Lemons fashion, not only have we been able to access the John Mauldin event, with over forty hours of speakers, but a National CFA(Chartered Financial Analyst) event and several others were completed virtually.

We have so much awesome information to share in the coming weeks…. oddly, that we would have not had access to if they had been held live!

Looking forward to sharing…. tons if info!!

Capital Market Comments – They Came Out!

The Look Through Continues

With current earnings being less than stellar, you may ask why the markets are clawing their way back?

It does appear investors are looking through the valley and attempting to price in what a recovery may look like.

The Tuesday after Memorial Day offered multiple openings across the country…. Wall Street wiped its brow as people came out!

Expect bumps, and headline shocks, both positive and negative … but that’s why we are happily conservative investors at heart!

5-29-20 YTD SP 500 Small Cap International

Have a Great Day – Talk to you at the end of June!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
www.jkfinancialinc.com
street-cents

Good News On Housing, Mortgage Rates, And A Happy Consumer … Early Observations

Last week we had two good personal data points concerning housing which set us in motion for additional research.

With residences being one of the larger assets for many, a downturn in prices i.e. 07-09 … caused pause for much of the consumer due to a drop in asset value, creating a negative feed back loop, thereby lowering confidence and spending.

Things may look different this time.

Initial Data Points On Housing/Residence

The jury is still out on all of this, and we would think commercial i.e. Office Properties, raw land, and other similar assets may see negative pressure initially coming from our current situation and the easy pivot to Virtual ….

However a silent winner, or at least a stabilization of value may be residential. It makes sense as there are usually winners and losers when change occurs.

With two noted sales last week, we set out for more information on what may be occurring.

The MBA Purchase index, (includes all purchase mortgage applications) has bounced back strongly and is back to about 90% of the original tracking high, set just a few months ago. Hat Tip RB, for bringing this to our attention, we were very surprised!

Here is a good chart, which is copyright protected, as such, not included in this post.

Mortgage Rates Lower – Included in the nice bounce back of the Purchasing Index above, are the following updated lower Mortgage rates … a second positive to go with the consumer and residence real estate.

While this lowered mortgage rates took time to develop (blip in chart), due to a dash for cash and a wave of refinance, along with underwriters concerns of consumer credit health, due to heightened unemployment, it does appear lower rates may be adding wind to the sails of residential market.

5-16-20 30 year mortgage rate

Consumer Confidence – One of the most widely followed confidence indexes, the University of Michigan Sentiment index last week released their latest results, and found surprisingly the index jumped higher than expected, mostly based on current situations, likely associated with the light at the end of the tunnel of openings.

Here is a chart from last month, again copyright restricts last weeks results, but this index bounced back to almost 74 last week…again surprisingly.

Certainly headed in the correct direction.

- U of M -

So a hot New Homes Mortgage Purchasing Index, along with lower Mortgage rates and a happier than expected consumer may lead to additional good news for the economy, spending, asset prices, and an eventual return to a more normal!

It’s early, and things could change quickly, but the initial bread crumbs look VERY positive!

Have a Great “Positive Consumer” Day!

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

 

 

Updated Capital Market Thoughts, Earnings, Fear Gauge, Interest Rates

We have been very careful in communicating thoughts on the Capital Markets as there are so many unknowns, it’s impossible being extremely accurate.

At the end of the prior quarter when the markets were more like a Bucking Bronco than future economic estimators, we put out our initial thoughts as follows… which so far have been pretty spot on…

Capital Market Participants will anticipate this and begin pricing in the not only conclusion of this economic slow down but the positive affects of the very large stimulus package that has been put into place.

The above being said, we think it appropriate to update you on our thoughts on where we are, and where we may be going …

So here we go …

Earnings

In normal times earnings determine the movement of the markets. Being in slightly different times, earnings are, and will be bad for the current and likely next quarter. The good news, this is not surprising to anyone.

Market participants are more interested on what it will look like on the other side, as things begin to get closer to a more normal environment.

There will be bumps, there always are, but being forward looking, participants will most likely look even farther ahead than normal and ignore the immediate results.

Major Equity Indexes Worldwide

World Equity Markets… after dropping (most likely overshooting to the downside) rather quickly, moved back up as anticipation of future growth began being priced in …

5-11-20 YTD SP R2k EFA

VIX – Volatility Index – aka Fear Gauge

A few years ago, on December 20, 2017, we commented on the record breaking lows the VIX had made …

Over the last 26 years the VIX has registered a end of the day reading of 10 or less 9 times.

At the close of market just a few days ago, as you can see, 9.42.

Care to guess how many days and counting the VIX closed below 10 in 2017 SO FAR?

49 … FORTY NINE … and counting!

Fast forward to today….  in the high 20’s and low 30’s as of late… down from above 80, which was record breaking in it’s own right….

A Continued lower VIX should be good for Capital Markets.

5-11-20 VIX

Interest Rates

The FOMC, Federal Reserve Open Market Committee, correctly dropped rates to zero as extra stimulus for the situation. Eventually rates got to a lower boundary, see chart below, take notice of the increase in rates before finally settling at a lower range. This represents a dash for cash when original fears commenced. We would be surprised to see rates stay here for a decade, as they were after the great recession of 07-09.

5-12-20 Treasury 10 Year Yield

So where are we going?

Last week we mentioned here in our Edison post, we think a cure will eventually be found, and we still do.

The day those four words are hopefully spoken …

We Found a Cure!

Our lives will change back to more normal, economic growth will pick up and a giant sigh of relief will come across all of our brows as well as a cheerful day/week in capital markets and many otherwise distressed assets.

If a relapse or fear of one occurs, there will be heightened volatility and slower Economic recovery ….

Our bet is on the former rather then the latter, but as mentioned at the beginning, no one really knows.

What Do We Do?

Stick to our allocations, trust the system, and have patience.

Will there be times and items we do not like? Sure, there always are, but we will get through them together!

Oh… and remember, Stay Informed not Consumed! (Over Drama catches the most eyes!)

Have a Great “Updated Market” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

 

 

From the Road … FOMC Takes Action Last Night in Response to Shutdowns and Economic Slowdowns

Not wanting to bring a knife to a possible gun fight, the FOMC (Federal Open Market Committee) led by Jerome Powell announced multiple actions in response to Corona and the related shutdowns last night.

FOMC Lowers Rates, Lowers Bank Reserves and Adds Money

On Friday a coalition of private and public groups agreed to begin more testing for the Corona Virus… not surprisingly if you are able to test more, there have been more findings.

Last night the FOMC led by Jerome Powell announced multiple measures to help economic activity:

  • Lowering of Short Term Rates
  • Lowering of Bank Requirements AND encouraging Banks to lend to businesses, especially small businesses with the extra freed up reserves
  • Purchasing of Treasury and Mortgage Securities for Liquidity and lowering of rates

Friday, I mentioned multiple ways to think of the current events… given the above events, here is another example…

  1. The FOMC did all of this, it must really be bad…
  2. Not wanting to get behind, the FOMC is taking advanced actions to help stay in front of disruption and possible slowness…

Choice one is easy and likely will show up somewhere in your sights, if it has not already …. again, choice two is the positive, high road choice, and will only likely be seen here today!

Yes, events are making the Spring Break Trip hard to focus on family and friends, but in a strange way, maybe it is good to be out of the office!

Careful what you intake… drama rises to the top!

Rest assured, as you can tell, we have complete remote access…and again, we are a conservative firm by nature!

Have a Great “FOMC No Knife to Gunfight” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

 

 

 

 

 

Mortgage Rates Reach ALL TIME LOW According to Freddie Mac … Get Ready, but Wait (days, not weeks) to Pull the Trigger …

As the experience notches in the belt gain in quantity, we have learned the follies of attempting to PREDICT or FORECAST events …. luckily we gave a soft “heads up” that rates MAY be in our corner due to the Corona Virus, and help with longer term Mortgage and other longer term fixed interest rate loans ….

Freddie Mac Reports Lowest Mortgage Rates EVER

According to Freddie Mac….

“The average 30-year fixed-rate mortgage hit a record 3.29 percent this week, the lowest level in its nearly 50-year history. ” 3-5-20

img_1354

Here is the deal…. rates fell AGAIN in the most recent week due to fears of Economic slowdown from the Corona Virus…. but maybe TOO FAST for Mortgage and other longer termed Fixed Rate loans to adjust … On Friday, after the above rates were calculated, the 10 year Treasury, our guidepost for rates, dropped another 22 Basis Points or almost another 1/4 point ….. 

Far right, the 10 year treasury yield fell like a rock as fear stoked investment from across the globe…. yesterday for the first time it took a breather as bonds fell and rates rose…no matter, these are Low Low Low rates!

3-10-20 Ten year treasury

Reach out to your bank, Mortgage Broker, or other refinancing officer, and get your documents in order … begin the qualification process but WAIT (days, not weeks) just a bit and check with your loan professional before locking that rate as it is likely the recent drop in rates has not yet dripped through the loan system…. hopefully better loan rates may be in our very near future…

Here is your friendly reminder on Refinancing or not:

“Think 18 months cost break even – We like to have the saving from the refinance cover the cost of the refinance within 18 months – i.e. Person with $30k mortgage at 5% probably would not need to refinance to 4%, but a $3 million mortgage may be smart to refinance from 4.25% to 4% or the like, if the numbers work out.”

Here is the complete Post which contains 11 items to remember when refinancing!

Take advantage of what cards we are dealt!

Have a Great “All Time Low Rates” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents

Interest Rates Presenting an Opportunity, Eventually … Current Freddie Mac Mortgage Rates as of Last Week

Really like to work on articles a few days, to even a few weeks (ever so often months) in advance … repeat visits to the draft make for a better post as different moods make for different views.

Well…given the speed of Capital Markets lately… a second or third look may garner a loss of possibility.

Break In: As mentioned above, things are moving quickly, yesterday early in the AM, FOMC (Federal Open Market Committee) chaired by Jerome Powell lowered interest rates by .50 or 50 basis points as an insurance policy against slowing economic conditions. This does not directly affect loan rates, but speaks to a slower economic situation, which does effect rates across the board!

More on this at a later time…. but the following is an all time inter-day low yesterday for the 10 year treasury yield…at least for the moment!

img_6213

.91% – this from the cell, such the unusual format.

Break In Again: Interestingly, after a big rally on Monday and another set for today, the treasury yield is unexpectedly staying low and not rising dramatically in yield, which is what one would expect. This actually gives loan rates time to catch up in their possible slower decline – making this exercise all the better!

Now… let’s carry on …

Fixed Rate Loans, Especially Long Dated, such as 30 Year Mortgages Need Review

Not withstanding the comments in the opener, interest rates have dropped so fast on Virus fears and possible slowing economic conditions as a result that some loans may have not completely caught up as of yet…

3-2-20 Chart of 10 year Treasury

That is an all time low- WOW!

Freddie Mac Rates

Here are the latest average mortgage rates from Freddie Mac as of last week… they are posted only weekly….

2-27-20 Freddie Mac Avg Rates

Now is a good time to review any fixed rate loans, ESPECIALLY longer dated ones… in refinancing a mortgage, here is a detailed post, the following is the most important nugget from that post…

Think 18 months cost break even – We like to have the saving from the refinance cover the cost of the refinance within 18 months – i.e. Person with $30k mortgage at 5% probably would not need to refinance to 4%, but a $3 million mortgage may be smart to refinance from 4.25% to 4% or the like, if the numbers work out.

Have a Great “Fast Moving Markets” Day!

John A. Kvale CFA, CFP

Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents