February 14, 2011 Weekly Market Commentary

AN END IN SIGHT FOR FANNIE & FREDDIE
Friday, the Obama administration presented a plan to wind down Fannie Mae and Freddie Mac by 2018, with Treasury Secretary Timothy Geithner citing “very broad consensus” that the government should play “a much smaller role” in the housing market. So what will replace them? The plan puts three options before Congress. In one option, the government would leave the mortgage market save for the VHA, FHA and other existing agencies. Two other options would set up “re-insurance” programs. A limited version would guarantee private mortgages only in economic or real estate downturns; another would provide a backstop for mortgage investments already guaranteed by private insurers. All three options would pave the way for higher mortgage costs. The Treasury and HUD have also suggested phasing in a short-term requirement for borrowers as Fannie and Freddie are unwound: homebuyers would have to put 10% down for any mortgage backed by the GSEs.1,2

CONSUMERS FEEL MORE UPBEAT
The latest Reuters/University of Michigan consumer sentiment survey is in, and the initial February reading is 75.1, an improvement from the final January mark of 74.2. This is the best reading since June 2009. The survey’s current conditions index rose 5.0% to 86.8 – the highest it has been in 37 months.3

GOLD ADVANCES, OIL PULLS BACK
Gold prices climbed 0.86% last week to settle at $1,359.90 an ounce Friday – it was the best week for the precious metal YTD. Oil and natural gas prices fell to their lowest levels since November on Friday after Egyptian president Hosni Mubarak announced his resignation; natural gas futures fell 9.28% on the week, and oil slipped 3.88% for the week to settle at $85.58 per barrel on the NYMEX.4

DJIA CLOSES AT HIGHEST MARK SINCE 6/16/08
The Dow logged an eight-day winning streak from January 31 to February 9, and it has advanced in 10 of the past 11 weeks. The weekly performance? DJIA, +1.50% to 12,273.26; NASDAQ, +1.45% to 2,809.44; S&P 500, +1.39% to 1,329.15.5

THIS WEEK: Very little is scheduled for either Monday or Friday. Tuesday brings January retail sales numbers and a report on December business inventories, plus 4Q earnings from Dell, Barclays and Tesla. Wednesday offers the January Producer Price Index, the most recent FOMC minutes, reports on January housing starts and industrial output and 4Q results from Comcast and CBS. Thursday, we get the January Consumer Price Index, the Conference Board’s latest LEI, new initial claims numbers and earnings from Nordstrom.

WEEKLY QUOTE
“The spirit, the will to win, and the will to excel are the things that endure. These qualities are so much more important than the events that occur.”
– Vince Lombardi

WEEKLY TIP
Students who want to enter college this fall should complete the FAFSA early in 2011 to increase eligibility for student aid. After completing it, they should apply for scholarships as soon as possible.

Best Regards,

Kevin Kroskey



Citations.

1 - blogs.abcnews.com/george/2011/02/the-end-of-fannie-mae-and-freddie-mac.html [2/11/11]
2 - cnbc.com/id/41529671 [2/11/11]
3 - marketwatch.com/story/us-consumer-sentiment-rises-in-february-2011-02-11 [2/11/11]
4 - blogs.wsj.com/marketbeat/2011/02/11/data-points-energy-metals-459/ [2/11/11]
5 - cnbc.com/id/41537483 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=2%2F11%2F10&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=2%2F11%2F10&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=2%2F11%2F10&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=2%2F10%2F06&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=2%2F10%2F06&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=2%2F10%2F06&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=DJIA&close_date=2%2F12%2F01&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=COMP&close_date=2%2F12%2F01&x=0&y=0 [2/11/11]
6 - bigcharts.marketwatch.com/historical/default.asp?detect=1&symbol=SPX&close_date=2%2F12%2F01&x=0&y=0 [2/11/11]
7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyield [2/11/11]
7 - treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=realyieldAll [2/11/11]
8 - treasurydirect.gov/instit/annceresult/press/preanre/2001/ofm11001.pdf [1/10/01]
9 - http://montoyaregistry.com/Financial-Market.aspx?financial-market=wills-and-living-trusts&category=30 [2/13/11]


This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information should not be construed as investment, tax or legal advice. The Dow Jones Industrial Average is a price-weighted index of 30 actively traded blue-chip stocks. The NASDAQ Composite Index is an unmanaged, market-weighted index of all over-the-counter common stocks traded on the National Association of Securities Dealers Automated Quotation System. The Standard & Poor's 500 (S&P 500) is an unmanaged group of securities considered to be representative of the stock market in general. It is not possible to invest directly in an index. NYSE Group, Inc. (NYSE:NYX) operates two securities exchanges: the New York Stock Exchange (the “NYSE”) and NYSE Arca (formerly known as the Archipelago Exchange, or ArcaEx®, and the Pacific Exchange). NYSE Group is a leading provider of securities listing, trading and market data products and services. The New York Mercantile Exchange, Inc. (NYMEX) is the world's largest physical commodity futures exchange and the preeminent trading forum for energy and precious metals, with trading conducted through two divisions – the NYMEX Division, home to the energy, platinum, and palladium markets, and the COMEX Division, on which all other metals trade. Additional risks are associated with international investing, such as currency fluctuations, political and economic instability and differences in accounting standards. All information is believed to be from reliable sources; however we make no representation as to its completeness or accuracy. All economic and performance data is historical and not indicative of future results. Market indices discussed are unmanaged. Investors cannot invest in unmanaged indices. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional.