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June 10, 1988
Producer Price Index data released this morning showed an increase of .5%, exactly the level anticipated by the market, and bonds are unchanged in early trading. Mortgage loan discounts dropped about a point in this last week. Though discounts will lurch around in response to data surprises, rates are likely to be fairly stable for a few weeks. The Fed looks steady with Fed Funds settled at 7.35%, and is not likely to tighten without a new pattern of increased inflation data. It's a little loony, but if it rains in Iowa, discounts will come down the next day, as drought fears are driving commodity prices.
Consumer Debt growth slowed in encouraging fashion to an annual rate of 7%, and the money supply rose modestly. The Commerce Department issued revised trade data for the last year, reintroducing "seasonal adjustments" which are designed to take distortions out of the raw data. This laudable effort helps not at all because we don't really know how reliable the adjustments are; the result is a garbled trade deficit indicator until the markets figure out the pattern of the adjustments.
The purpose for a Realtor in keeping track of the Fed and economic data is to help keep your clients informed. Keeping them informed does not mean predicting the future, but you really can help them with reliable current data. Ten years ago, most Boulder clients didn't know there was a Fed, and today your clients are bombarded with baked, half baked and raw opinions, data, and sales pitches. The pitches from stock brokers, lenders, and sales filler on cable TV financial news (Boulder channel 35 is a lifetime supply of hype) are particularly confusing (misleading?) to your clients.
Realtors are used to tough ethical standards against misrepresentation, and may forget that others are not similarly bound. Short of "guaranteeing" an investment result, a securities salesman can make much more aggressive representations (with far less disclosure burden in common practice) than a Realtor can. Lenders have few restraints short of lawsuit. In financial transactions, Realtors are in a unique position to provide disinterested financial advice, and it's worth the trouble to stay wellinformed.
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