Why You Shouldn’t Panic About June Mortgage Rates

What a week, huh?  The mortgage rates meltdown scared a lot of people this week, me included.  I was mostly worried that foreign investors believed American homeowners were a all sub-prime borrowers.  I knew if that false sterotype were allowed to proliferate, mortgage rates would skyrocket. I was worried but…

…I didn’t panic.

I didn’t panic because I remembered two rules of investing, learned early in my career:

1- Buy the rumor and sell the news. I expect the Fed to massively intervene next week;  perhaps expand its commitment even higher.  If Ben’s talking on the TV, I’m locking a day or two later.

2- Don’t fight the Fed. People do it all of the time and often end up on the wrong side of the trade.  Why would you fight an institution that just creates money when it needs it?

I said we’ll see rates under 5% by the end of next week.  It looks like I was wrong.  Check out how I screwed this one up