Are We Recovering and Will it Hold?

This was the name of the presentation I was lucky enough to attend today that was presented by Doug Duncan Vice President and Chief Economist for Fannie Mae.

I gleaned a couple of things from the presentation.  As always these are my understanding of his presentation and as he had in his presentation I would also like to add a 10 page disclosure essentially saying that I cannot be held accountable for any of these predictions…If they come true…I accept credit…If they don’t…I was never here and never made these predictions!

1. The economic models we use to predict what we expect to happen are pretty much useless since we have no historical data that is similar to what has occurred over the past two years!  This really supports my theory that no one has a clue about what to expect…Even the folks we think should!
2. The Fed is going to have to start talking about an exit strategy from the credit and MBS markets.  Oh boy…I can only see this adding to the volatility of the MBS Markets regardless of what they do.  Investors don’t like uncertainty. At some point they will have to say how they intend to get out…Investors will have to figure out how that will impact the markets.  I have serious concerns that the unknown will have many investors sitting on the sidelines trying to figure out the new rules of the game before they start playing the game!
3. Rates will be going up.  The conventional rate markets are being artificially held low…when that stops margins and risk factors will likely rise.  I think a better gauge of were rates will be is to look at the real Jumbo Market rates.  Those rates are being set by the market and may paint a more accurate picture of what rates will be adjusting too.
4. The recovery will be SLOWWWWWW.  The majority of Americans’ are way over leveraged and it will take time for this to get back to sustainable levels.

What this all means…I am really not sure…But at least I know folks that are much smarter than I aren’t really sure either!