Where are the markets going? NO ONE CAN PREDICT THE MARKETS:

Warren Buffet sure can pick stocks. You would expect that if anyone can predict market movements, he would be one of those guys.  On September 20, 2005, he predicted that over the next 7 years the S&P 500 is likely to return something less than 10% per year.2 years into his 7-year prediction, the S&P 500 has gained +29.0% (total return), an average annual return of +13.6%. He still has five years to go on his prediction, and I have been one person in the camp who believed his prediction. He may yet be correct.  I guess we’ll have to check back in five years.

THE ECONOMIC NEWS: The Producer Price Index (PPI) jumped +1.1% at the top-line level, but was up only +0.1% after food and energy prices were removed. Retail sales increased +0.6% in September which indicates that consumers are holding up pretty well. The U. S. trade deficit shrank for the third month in a row.  Exports climbed to record levels and imports actually fell.  Relatively low inflation, strong retail sales, and a shrinking trade deficit.  When you throw in double-digit market gains so far this year one could argue that we are having a good year.

EARNINGS:  The next couple of weeks will see a flood of corporate third-quarter earnings reports. These reports will have a major impact on the stock market’s performance for the rest of this year.  Expectations are relatively modest as most companies have been guiding lower for the past couple of months.  Earnings highlights this week are from the likes of IBM, Yahoo, Google, and eBay.

STORM CLOUDS?:  There remain plenty of warning clouds on the horizon. I am concerned about the impact on the global economy if China stumbles. Many believe that the Chinese government is holding back its repressive tendencies until the conclusion of the Olympics in 2008. In 2008, the number of U.S. adjustable rate mortgages resetting could cause a major disruption in the economy. In addition, despite all of the warning signs in this country about the negative impact of government deficits and the impact of the growing costs caused by Medicare, Medicaid, Social Security, our government does not seem to will to solve these problems.

BABY BOOMERS: I am a baby boomer (a very young one!).  Next year, Baby Boomers (defined as those born between 1946 and 1962) begin to qualify for reduced Social Security Benefits at age 62; their “full retirement age” is 66. In 2011, Baby Boomers start to become eligible for Medicare coverage.  Medicare is already (2007) paying out more than it is taking in.

BIG DEFICIT, BUT MUCH LESS THAN EXPECTED: This past week the federal government reported the results for their fiscal year 2007, which ended October 31. Receipts were $2.568 trillion; total outlays were $2.731 trillion; for a deficit of $163 billion.  This was about half of the deficit that had been predicted earlier in the year and one of the smallest deficits in recent years.

If you would like to apply for a Mortgage Loan, you can APPLY ONLINE HERE, you can call John Thomas at 302-703-0727.

John R. Thomas – NMLS 38783

Certified Mortgage Planner – Primary Residential Mortgage, Inc.

302-703-0727 DE Office / 610-906-3109 PA Office / 410-412-3319 MD Office

248 E Chestnut Hill Rd, Newark, DE 19713