So far in October the U.S. Stock market indexes has risen about 14%, a good month. Remember my statements about 1,000 points lower on the Dow Jones Industrial Average, that now was a great to time to buy a mutual fund that invests in U.S. Stock. At the time, many people thought that I was a little crazy. The people who continued to contribute to their retirement account have been rewarded for their persistence. This is an example of value investing. First is the weekly recap from Vanguard. Lastly, are some quotes for your enjoyment.
Vanguard
Signs of progress on Europe's sovereign debt crisis and solid, but unspectacular, GDP growth in the United States sounded hopeful notes in a week of otherwise mixed signals. The S&P 500 Index rose 3.8% to 1,285 (for a year-to-date total return—including price change plus dividends—of about 3.9%). The yield on the 10-year U.S. Treasury note increased 11 basis points to 2.34% (for a year-to-date decrease of 96 basis points).
Value Investing
Value investing is when an investor views a decline in an asset as a potential buying opportunity rather than a time to panic. Some research is needed to know if it is a buying opportunity or a change in climate. It is important to look at the situation from a few perspectives.
Perhaps the most difficult thing about being a value investor is to buy when your emotion says to sell and to sell when your emotion says to buy. The best time to buy an asset is when it is a good value and when experts in the news media are saying how bad things are and that things are going to get worse. Conversely, the best time to sell an asset is when experts in the news media are saying how good things are and that things are going to get even better.
Interesting Quotes
An American went to Scotland and played golf with a newly acquainted Scottish golfer.
After a bad tee shot, he played a "Mulligan" which was an extremely good one.
He then asked the Scottish fellow, "What do you call a Mulligan in Scotland?"
"We call it 3."
A 2:00 am Police Stop: An elderly man was s stopped by the Knoxville, TN police around 2 a.m. and the officer asked him where he was going at that time of night. The man replied, "I am on my way to a lecture about alcohol abuse and the effects it has on the human body, as well as smoking and staying out late." The officer then asked, "Really? Who is giving that lecture at this time of night?" The man replied, "That would be my wife!"
"It’s not important who starts the game but who finishes it."-- John Wooden
“It is not sufficiently considered in the hour of exultation, that all human excellence is comparative – that no person performs much but in proportion to what others accom-plish, or to the time and opportunities which have been allowed them.” Samuel Johnson
“Life’s like a play – it’s not the length, but the excellence of the acting that matters.” Seneca
“The way to achieve success is first to have a definite, clear, practical ideal – a goal, an objective. Second have the ne-cessary means to achieve your ends – wisdom, money, mate-rials and methods. Third, enlist all your means to that end.” Aristotle
“Do not spoil what you now have by desiring what you have not – but remember that what you now have was once among the things you only hoped for.” Epicurus
“A great part of courage is the courage of having done the thing before.” Emerson
“If you’re strong enough, there are no precedents.” George Bernard Shaw
Sunday, October 30, 2011
Sunday, October 23, 2011
Birth Rate & Immigration
This past week was full of news about things like pulling troops out of Iraq and the killing of a tyrant in Libya. I think that these are good things for our country. The most important news for your retirement benefits that was not reported related to Birth Rate.
A weekly recap from Vanguard is the opening paragraph. The last section are quotes from one of my favorite historical figures Robert E. Lee known as the General for the Confederate Army in the Civil War, past President of Washington & Lee University, and owner of the land that is now the Arlington National Cemetery.
Vanguard,
The economy is stirring more than it was a few weeks ago, but there's still worry the long slumber will continue. Economic reports were mixed this week. Both the Beige Book and a set of leading economic indicators showed slow growth. Industrial production crawled forward. A sizeable gain in new residential construction was muted by a decline in existing-home sales. Consumer and wholesale prices rose, but inflation still appears tame. For the week ended October 21, the S&P 500 Index rose 1.1% to 1,238 (for a year-to-date total return—including price change plus dividends—of about 0.1%). The yield of the 10-year U.S. Treasury note fell 3 basis points to 2.23% (for a year-to-date decrease of 107 basis points).
Birth Rate and Immigration
The future solvency of Social Security and Medicare is dependent upon having people contribute to it on an ongoing basis. The statistic this week on the United States Birth Rate shows that since 2007 the number of babies being born has been declining. Even as the economy has been recovering, this birth rate continues to decline.
We need an expanding economy creating more jobs and American citizens filling them. We need to have people paying FICA and Medicare taxes. The issue of immigration is of paramount importance as well. If we do not have enough babies then we need to have legal immigration to have an ample supply of workers. What really makes me mad is a business person that hires illegal aliens to get around paying FICA and Social Security taxes and then complains about the future solvency of Social Security and Medicare.
Robert E. Lee Quotes
"Duty is the most sublime word in our language. Do your duty in all things. You cannot do more. You should never wish to do less.”
“Never do a wrong thing to make a friend or to keep one.”
“It is well that war is so terrible, or we should get too fond of it.”
“The education of a man is never completed until he dies.”
“I cannot trust a man to control others who cannot control himself.”
“Get correct views of life, and learn to see the world in its true light. It will enable you to live pleasantly, to do good, and, when summoned away, to leave without regret.”
“We have fought this fight as long, and as well as we know how. We have been defeated. For us as a Christian people, there is now but one course to pursue. We must accept the situation.”
“I have fought against the people of the North because I believed they were seeking to wrest from the South its dearest rights. But I have never cherished toward them bitter or vindictive feelings, and have never seen the day when I did not pray for them.”
“Obedience to lawful authority is the foundation of manly character.”
“I think it better to do right, even if we suffer in so doing, than to incur the reproach of our consciences and posterity.”
A weekly recap from Vanguard is the opening paragraph. The last section are quotes from one of my favorite historical figures Robert E. Lee known as the General for the Confederate Army in the Civil War, past President of Washington & Lee University, and owner of the land that is now the Arlington National Cemetery.
Vanguard,
The economy is stirring more than it was a few weeks ago, but there's still worry the long slumber will continue. Economic reports were mixed this week. Both the Beige Book and a set of leading economic indicators showed slow growth. Industrial production crawled forward. A sizeable gain in new residential construction was muted by a decline in existing-home sales. Consumer and wholesale prices rose, but inflation still appears tame. For the week ended October 21, the S&P 500 Index rose 1.1% to 1,238 (for a year-to-date total return—including price change plus dividends—of about 0.1%). The yield of the 10-year U.S. Treasury note fell 3 basis points to 2.23% (for a year-to-date decrease of 107 basis points).
Birth Rate and Immigration
The future solvency of Social Security and Medicare is dependent upon having people contribute to it on an ongoing basis. The statistic this week on the United States Birth Rate shows that since 2007 the number of babies being born has been declining. Even as the economy has been recovering, this birth rate continues to decline.
We need an expanding economy creating more jobs and American citizens filling them. We need to have people paying FICA and Medicare taxes. The issue of immigration is of paramount importance as well. If we do not have enough babies then we need to have legal immigration to have an ample supply of workers. What really makes me mad is a business person that hires illegal aliens to get around paying FICA and Social Security taxes and then complains about the future solvency of Social Security and Medicare.
Robert E. Lee Quotes
"Duty is the most sublime word in our language. Do your duty in all things. You cannot do more. You should never wish to do less.”
“Never do a wrong thing to make a friend or to keep one.”
“It is well that war is so terrible, or we should get too fond of it.”
“The education of a man is never completed until he dies.”
“I cannot trust a man to control others who cannot control himself.”
“Get correct views of life, and learn to see the world in its true light. It will enable you to live pleasantly, to do good, and, when summoned away, to leave without regret.”
“We have fought this fight as long, and as well as we know how. We have been defeated. For us as a Christian people, there is now but one course to pursue. We must accept the situation.”
“I have fought against the people of the North because I believed they were seeking to wrest from the South its dearest rights. But I have never cherished toward them bitter or vindictive feelings, and have never seen the day when I did not pray for them.”
“Obedience to lawful authority is the foundation of manly character.”
“I think it better to do right, even if we suffer in so doing, than to incur the reproach of our consciences and posterity.”
Sunday, October 16, 2011
Annual Meeting
The first week of corporate earnings is here and the investing environment has turned around. It appears that all of the noise of Europe is in the background and the focus is on corporate earnings which appear to be coming in about as expected. The first annual meeting occured past Thursday night and the bullet points from the meeting are shown.
Vanguard
Retail sales grew faster than expected in September as the Federal Open Market Committee (FOMC) minutes showed considerable debate about what the Fed should do next to help the economy out of its funk. For the week ending October 14, the S&P 500 Index rose 6% to 1,225 (for a year-to-date total return—including price change plus dividends—of about –2.74%). The yield on the 10-year U.S. Treasury note increased 16 basis points to 2.26% (for a year-to-date decrease of 104 basis points).
Annual Meeting Bullet Points
1) Business Cycle: The US economy remains in a recovery mode, not in a growth mode.
2) Investment Cycle: The cycle has shifted to being favorable to stocks and when stocks reach the July high the accounts that purchased stocks will be asked to be sell stocks and get back to the previous position.
3) Retirement Environment: People need to continually invest in retirement accounts due to future reductions in Social Security, Medicare, and government pension funds.
4) Cheapest Investment Today: US Stocks, bonds and gold are expensive.
5) Greece/Europe: This is a minor story as Europe has to solve it to keep the European Union together.
6) Current Concerns: Legislation involving the Volker Rule and the impact on banks and the Yuan Bill impacting the relationship with China.
7) Housing and Banks: Banks are not the cause of the housing mess rather government policy.
8) Timing to buy Real Estate: Now is a great time to refinance a mortgage and for many people now is a great time to buy real estate due to improving economic conditions and having mortgage rates at historically low levels.
9) Obama Care: Medicare reimbursements to health providers are starting to be reduced because of it. This means that individuals will be paying more in the future so it would be prudent to keep contributing to a retirement account.
10) Investing in the Short Term: Take advantage of the Investment Cycle.
11) Investing Strategy: Long term time horizon with decisions based upon value of possible asset choices.
Vanguard
Retail sales grew faster than expected in September as the Federal Open Market Committee (FOMC) minutes showed considerable debate about what the Fed should do next to help the economy out of its funk. For the week ending October 14, the S&P 500 Index rose 6% to 1,225 (for a year-to-date total return—including price change plus dividends—of about –2.74%). The yield on the 10-year U.S. Treasury note increased 16 basis points to 2.26% (for a year-to-date decrease of 104 basis points).
Annual Meeting Bullet Points
1) Business Cycle: The US economy remains in a recovery mode, not in a growth mode.
2) Investment Cycle: The cycle has shifted to being favorable to stocks and when stocks reach the July high the accounts that purchased stocks will be asked to be sell stocks and get back to the previous position.
3) Retirement Environment: People need to continually invest in retirement accounts due to future reductions in Social Security, Medicare, and government pension funds.
4) Cheapest Investment Today: US Stocks, bonds and gold are expensive.
5) Greece/Europe: This is a minor story as Europe has to solve it to keep the European Union together.
6) Current Concerns: Legislation involving the Volker Rule and the impact on banks and the Yuan Bill impacting the relationship with China.
7) Housing and Banks: Banks are not the cause of the housing mess rather government policy.
8) Timing to buy Real Estate: Now is a great time to refinance a mortgage and for many people now is a great time to buy real estate due to improving economic conditions and having mortgage rates at historically low levels.
9) Obama Care: Medicare reimbursements to health providers are starting to be reduced because of it. This means that individuals will be paying more in the future so it would be prudent to keep contributing to a retirement account.
10) Investing in the Short Term: Take advantage of the Investment Cycle.
11) Investing Strategy: Long term time horizon with decisions based upon value of possible asset choices.
Friday, October 7, 2011
Corporate Earnings Season
Next week is the start of corporate earnings season, alleluia. Remember that this next Thursday is the first annual meeting which will be held in Lenoir. If you are planning to attend, and have not told me as of yet, please let me know. The first section is from Vanguard. The last section is titled Cliff Young, you will enjoy reading how 1 person changed a sport.
Vanguard
The latest economic reports suggest that the U.S. economy is on a knife's edge—growing enough at the moment to stave off recession, but not enough to make a dent in the unemployment rolls, while casting a shadow on the longer-term outlook. The week's closely watched jobs figures illustrated the dilemma: The unemployment rate was unchanged in September at 9.1%, payroll job growth was substantially higher than expected, and previous months' payroll figures were restated upward. Good, but not good enough, say economists. Meanwhile, Ben Bernanke, chairman of the Federal Reserve Board, warned that the U.S. economic recovery was "close to faltering" and urged fiscal action from Congress and the White House. For the week ended October 7, the S&P 500 Index rose 2.1% to 1,155 (for a year-to-date total return—including price change plus dividends—of about -6.7%). The yield of the 10-year U.S. Treasury note increased 18 basis points to 2.10% (for a year-to-date decrease of 120 basis points).
Corporate Earnings Season
The 2nd week of the first month in a quarter starts corporate earnings season. This season goes strong for about 7 weeks until the end of the second month in a quarter. Typically, corporations announce any earning surprises before earnings season begins. So far, it appears that corporate earnings should be good which should provide support for stock prices. I am really looking forward to the next 7 weeks.
Cliff Young
Many runners already know the legendary story of Cliff Young. Every year Australia hosts the Westfield run. A 543.7-mile – (875 kilometers) – endurance run from Sydney to Melbourne. It is considered among the world’s most grueling ultra-marathons. The race takes five days to complete and is normally only attempted by world-class athletes who train specifically for the event. These athletes are typically less than 30 years old and are sponsored by large companies such as Nike.
In 1983, a man named Cliff Young from Beech Forest, Victoria showed up at the start of this race. Cliff was 61 years old and wore overalls and work boots. To everyone’s shock, Cliff wasn’t a spectator. He picked up his race number and joined the other runners. The press and other athletes became curious and questioned Cliff. They told him, “You’re crazy, there’s no way you can finish this race.” To which he relied, “Yes, I can. You see, I grew up on a ranch. We couldn’t afford horses or tractors, and whenever the storms would roll in, I’d have to go out and round up the sheep. We had 2,000 sheep on 2,000 acres. Sometimes I would have to run those sheep for three or four days. It took a long time, but I would always catch them. This race is kind of like herding sheep!”
When the race started, the pro runners quickly left Cliff behind. The crowd and television audience were enter-tained because Cliff didn’t even run properly, he appeared to shuffle. Many even feared for the old rancher’s safety. The professional athletes knew that it took 5 days to finish the race. In order to compete, one had to run about 18 hours a day and sleep the remaining 6 hours. They also had an entourage traveling with them – trainers, nutritionists, massage therapists, medical personnel, sleeping tents, etc. The thing is, Cliff Young didn’t know this. He had his girl friend and an old pickup truck. (Cliff married his girl friend shortly after the Westfield race.)
The morning of the second day, everyone was in for another surprise. Not only was Cliff still in the race, he had continued shuffling all night – he didn’t stop to sleep. He was only a little ways behind the leaders of the race. Cliff was asked about his tactics for the rest of the race. To everyone’s disbelief, he claimed he would continue to run straight through to the finish without sleeping.
Cliff kept shuffling. Each night he came a little closer to the leading runners. By the final night, he had passed all of the younger, world-class athletes. He was the first competitor to cross the finish line beating his nearest competitor by nine hours. In addition, he set a new course record. When Cliff was awarded the winning prize of $10,000, he said he didn’t know there was a prize and insisted that the money be given to the other runners.
The following year, Cliff entered the same race and took 7th place. During the race, he had fallen and displaced his left hip. His wife kicked it back in place and Cliff continued to shuffle to the finish line.
Cliff came to prominence again in 1997 at age 76, when he set out to raise money for homeless children by shuf-fling around Australia’s border. He completed 6,520 kilometers – (4,051 miles) - before he had to drop out. His only support staff member, his wife, had become ill. Cliff Young passed away in 2003 at the age of 81.
Today the “Young shuffle” has been adopted by ultra-marathon runners because is it considered more energy-efficient. Further more, during the Sydney to Melbourne race, modern competitors do not sleep. Winning the race now requires runners to go all night as well as all day, just like Cliff Young.
• Moral of the story – it only takes one person to change long held perceptions in this world.
Vanguard
The latest economic reports suggest that the U.S. economy is on a knife's edge—growing enough at the moment to stave off recession, but not enough to make a dent in the unemployment rolls, while casting a shadow on the longer-term outlook. The week's closely watched jobs figures illustrated the dilemma: The unemployment rate was unchanged in September at 9.1%, payroll job growth was substantially higher than expected, and previous months' payroll figures were restated upward. Good, but not good enough, say economists. Meanwhile, Ben Bernanke, chairman of the Federal Reserve Board, warned that the U.S. economic recovery was "close to faltering" and urged fiscal action from Congress and the White House. For the week ended October 7, the S&P 500 Index rose 2.1% to 1,155 (for a year-to-date total return—including price change plus dividends—of about -6.7%). The yield of the 10-year U.S. Treasury note increased 18 basis points to 2.10% (for a year-to-date decrease of 120 basis points).
Corporate Earnings Season
The 2nd week of the first month in a quarter starts corporate earnings season. This season goes strong for about 7 weeks until the end of the second month in a quarter. Typically, corporations announce any earning surprises before earnings season begins. So far, it appears that corporate earnings should be good which should provide support for stock prices. I am really looking forward to the next 7 weeks.
Cliff Young
Many runners already know the legendary story of Cliff Young. Every year Australia hosts the Westfield run. A 543.7-mile – (875 kilometers) – endurance run from Sydney to Melbourne. It is considered among the world’s most grueling ultra-marathons. The race takes five days to complete and is normally only attempted by world-class athletes who train specifically for the event. These athletes are typically less than 30 years old and are sponsored by large companies such as Nike.
In 1983, a man named Cliff Young from Beech Forest, Victoria showed up at the start of this race. Cliff was 61 years old and wore overalls and work boots. To everyone’s shock, Cliff wasn’t a spectator. He picked up his race number and joined the other runners. The press and other athletes became curious and questioned Cliff. They told him, “You’re crazy, there’s no way you can finish this race.” To which he relied, “Yes, I can. You see, I grew up on a ranch. We couldn’t afford horses or tractors, and whenever the storms would roll in, I’d have to go out and round up the sheep. We had 2,000 sheep on 2,000 acres. Sometimes I would have to run those sheep for three or four days. It took a long time, but I would always catch them. This race is kind of like herding sheep!”
When the race started, the pro runners quickly left Cliff behind. The crowd and television audience were enter-tained because Cliff didn’t even run properly, he appeared to shuffle. Many even feared for the old rancher’s safety. The professional athletes knew that it took 5 days to finish the race. In order to compete, one had to run about 18 hours a day and sleep the remaining 6 hours. They also had an entourage traveling with them – trainers, nutritionists, massage therapists, medical personnel, sleeping tents, etc. The thing is, Cliff Young didn’t know this. He had his girl friend and an old pickup truck. (Cliff married his girl friend shortly after the Westfield race.)
The morning of the second day, everyone was in for another surprise. Not only was Cliff still in the race, he had continued shuffling all night – he didn’t stop to sleep. He was only a little ways behind the leaders of the race. Cliff was asked about his tactics for the rest of the race. To everyone’s disbelief, he claimed he would continue to run straight through to the finish without sleeping.
Cliff kept shuffling. Each night he came a little closer to the leading runners. By the final night, he had passed all of the younger, world-class athletes. He was the first competitor to cross the finish line beating his nearest competitor by nine hours. In addition, he set a new course record. When Cliff was awarded the winning prize of $10,000, he said he didn’t know there was a prize and insisted that the money be given to the other runners.
The following year, Cliff entered the same race and took 7th place. During the race, he had fallen and displaced his left hip. His wife kicked it back in place and Cliff continued to shuffle to the finish line.
Cliff came to prominence again in 1997 at age 76, when he set out to raise money for homeless children by shuf-fling around Australia’s border. He completed 6,520 kilometers – (4,051 miles) - before he had to drop out. His only support staff member, his wife, had become ill. Cliff Young passed away in 2003 at the age of 81.
Today the “Young shuffle” has been adopted by ultra-marathon runners because is it considered more energy-efficient. Further more, during the Sydney to Melbourne race, modern competitors do not sleep. Winning the race now requires runners to go all night as well as all day, just like Cliff Young.
• Moral of the story – it only takes one person to change long held perceptions in this world.
Sunday, October 2, 2011
Mortgage Rates, Buying Stock
Congratulations on getting through September and a very volatile third quarter of investing. I look forward to a more rational time period. This will have 3 sections, none written by me, that cover the topics of Vanguard Weekly Recap, Record Low Mortgage Rates, and Warren Buffet's view of Stocks. The bottom line is this, now is a great time to re-finance a mortgage and now is a great time to buy stock if you have a longer term time horizon. I hope you enjoy it.
Vanguard Weekly Recap
The U.S. economy grew slightly more than expected in the second quarter, tempering some fears of another recession. But the economy remains weak. The housing market continues to struggle, and although initial jobless claims fell significantly last week, the number of unemployed remains high. For the week ended September 30, the S&P 500 Index fell 0.4% to 1,131 (for a year-to-date total return—including price change plus dividends—of about -8.7%). The yield on the 10-year U.S. Treasury note rose 8 basis points to 1.92% (for a year-to-date decrease of 138 basis points).
Record Low Mortgages
Mortgage rates have skated near record lows for weeks. But now it can finally be said: Long-term rates in the United States have never been lower. This week, the average rate on a 30-year fixed mortgage fell to 4.01 percent, mortgage buyer Freddie Mac said in its weekly report. That's the lowest since it began keeping records in 1971.
For months, Freddie had pointed to data from the National Bureau of Economic Research showing that rates were lower in the early 1950s, when long-term mortgages typically lasted just 20 or 25 years. But Freddie says that's no longer true: Today's average 30-year rate is even lower than the average 20- or 25-year rate was in the 1950s.
The NBER's data show that between July 1950 and February 1951, long-term rates averaged 4.08 percent. Today's average 30-year rate is 4.01 percent. Both are higher once you include the extra fees most buyers pay. Those fees are called points; one point equals 1 percent of a loan amount. If you include fees and points comparable to today's low rates, the 1950-51 average would be 4.33 percent, Freddie Mac said Friday. Today's average on the 30-year, with extra fees factored in, is 4.17 percent.
The average on a 15-year fixed mortgage, a popular refinancing option, also ticked down to 3.28 percent this week. Economists say that's the lowest rate ever for that loan. Mortgage rates tend to track the yield on the 10-year Treasury note, which has risen this week to around 2 percent. A week ago, it touched 1.74 percent -- the lowest level since the Federal Reserve Bank of St. Louis started keeping daily records in 1962. As recently as July, the 10-year exceeded 3 percent. Rates on mortgages could fall further after the Federal Reserve announced last week that it would take further action to try to lower long-term rates.
Warren Buffet's View of Investing
Warren Buffett says Berkshire Hathaway has been buying stocks at bargain prices, including shares of his own company. In a live interview on CNBC from the floor of the New York Stock Exchange, Buffett revealed Berkshire has bought a net total of $4 billion worth of common stocks during the quarter that ends today. That's about as much as the company bought in the first half of the year.
He tells Squawk Box co-host Andrew Ross Sorkin, "The cheaper stocks get, the better I like to buy them, whether its our stock or somebody else's." Buffett says he thinks Berkshire's market price is very attractive, and the company has just begun to repurchase some shares under the surprise buyback program announced on Monday. Buffett wouldn't reveal how much has been bought, noting the "paperwork was just completed yesterday." It all depends on the price. "The cheaper it is, the more aggressive, generally, we will be buying. It's just like any other stock."
Buffett says the buyback program should not be seen as a sign he's pessimistic about finding potential acquisitions, and he's still looking for "elephants" to buy. The Omaha billionaire isn't worried his new purchases will be caught up in a 'double-dip' for the U.S. economy. He thinks "it's very, very unlikely we'll go back into a recession... We're coming out of a recession."
Buffett tells us profits for Berkshire's businesses are improving and the company will invest $7 billion in its plants and equipment this year. Ninety percent of that money will be spent in the United States.
Vanguard Weekly Recap
The U.S. economy grew slightly more than expected in the second quarter, tempering some fears of another recession. But the economy remains weak. The housing market continues to struggle, and although initial jobless claims fell significantly last week, the number of unemployed remains high. For the week ended September 30, the S&P 500 Index fell 0.4% to 1,131 (for a year-to-date total return—including price change plus dividends—of about -8.7%). The yield on the 10-year U.S. Treasury note rose 8 basis points to 1.92% (for a year-to-date decrease of 138 basis points).
Record Low Mortgages
Mortgage rates have skated near record lows for weeks. But now it can finally be said: Long-term rates in the United States have never been lower. This week, the average rate on a 30-year fixed mortgage fell to 4.01 percent, mortgage buyer Freddie Mac said in its weekly report. That's the lowest since it began keeping records in 1971.
For months, Freddie had pointed to data from the National Bureau of Economic Research showing that rates were lower in the early 1950s, when long-term mortgages typically lasted just 20 or 25 years. But Freddie says that's no longer true: Today's average 30-year rate is even lower than the average 20- or 25-year rate was in the 1950s.
The NBER's data show that between July 1950 and February 1951, long-term rates averaged 4.08 percent. Today's average 30-year rate is 4.01 percent. Both are higher once you include the extra fees most buyers pay. Those fees are called points; one point equals 1 percent of a loan amount. If you include fees and points comparable to today's low rates, the 1950-51 average would be 4.33 percent, Freddie Mac said Friday. Today's average on the 30-year, with extra fees factored in, is 4.17 percent.
The average on a 15-year fixed mortgage, a popular refinancing option, also ticked down to 3.28 percent this week. Economists say that's the lowest rate ever for that loan. Mortgage rates tend to track the yield on the 10-year Treasury note, which has risen this week to around 2 percent. A week ago, it touched 1.74 percent -- the lowest level since the Federal Reserve Bank of St. Louis started keeping daily records in 1962. As recently as July, the 10-year exceeded 3 percent. Rates on mortgages could fall further after the Federal Reserve announced last week that it would take further action to try to lower long-term rates.
Warren Buffet's View of Investing
Warren Buffett says Berkshire Hathaway has been buying stocks at bargain prices, including shares of his own company. In a live interview on CNBC from the floor of the New York Stock Exchange, Buffett revealed Berkshire has bought a net total of $4 billion worth of common stocks during the quarter that ends today. That's about as much as the company bought in the first half of the year.
He tells Squawk Box co-host Andrew Ross Sorkin, "The cheaper stocks get, the better I like to buy them, whether its our stock or somebody else's." Buffett says he thinks Berkshire's market price is very attractive, and the company has just begun to repurchase some shares under the surprise buyback program announced on Monday. Buffett wouldn't reveal how much has been bought, noting the "paperwork was just completed yesterday." It all depends on the price. "The cheaper it is, the more aggressive, generally, we will be buying. It's just like any other stock."
Buffett says the buyback program should not be seen as a sign he's pessimistic about finding potential acquisitions, and he's still looking for "elephants" to buy. The Omaha billionaire isn't worried his new purchases will be caught up in a 'double-dip' for the U.S. economy. He thinks "it's very, very unlikely we'll go back into a recession... We're coming out of a recession."
Buffett tells us profits for Berkshire's businesses are improving and the company will invest $7 billion in its plants and equipment this year. Ninety percent of that money will be spent in the United States.
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