This morning, stocks jumped higher and bonds sunk 41bps – partially a reaction to the weak jobless claims report, which showed 456,000 initial claims and 4.5M continuing claims (down 255,000 from last month).  The big question is this – how many of those non-continuing jobless claims are just people who have given up on finding work?  One other thing that you aren’t going to see mentioned in the news?  This number doesn’t include people on Emergency Unemployment; a number estimated at around 5 million additional Americans.

One other reason stocks rebounded today?  The Euro has stabilized (for now) and even the Euro Central Bank is raising its forecast of Euro growth for the year.  Spain, Italy and Ireland are all successfully raising money through bond auctions.  China continues to broadcast the expectation that their growth will beat estimates; this almost a week after they announced that wages for Chinese workers were going up.  It seems to me that China is working hard to improve its image.

The 15-year fixed rate mortgage is at a record low – an average of 4.17% according to Freddie Mac, which has tracked the data since 1991.  Other Mortgages posted near-record rates as well; the 30 year fixed mortgage came in at an average of 4.72% (that’s almost .9% lower than 1 year ago!) and a 5-year ARM is 3.92%, down .02% from last week.

This is the sweet spot for homebuyers, a perfect storm of conditions that is unfortunately wasted because most Americans in a home right now cannot afford to move up and precious few non-home-owners have the resources to buy.  If you have the opportunity to lock, it seems to be the perfect time for it; if rates do go lower, they will not drop far, and there is a HIGH LIKELIHOOD that we are going to only go up from here.

Fed Chairman Ben Bernanke spoke yesterday and warned about the unsustainability of the federal budget.  Side note: I keep waiting for him to say something that isn’t an obvious guess, or a truth that anyone could look out their window and see.  The fact remains that our economy is hurting, and experts predict that in a few short years, our national debt could grow larger than our GDP – a tipping point that could spell absolute disaster for the economy.

If or when this happens, it is likely that our credit will be downgraded; meaning that the government will have to do one of two things; print more money (a LOT more money) which will increase inflation, or continue to borrow at a higher rate.  Either way, the real loser is the American who cannot afford what little money he has to be devalued.