Recently Morgan Stanley, Merrill Lynch and Goldman Sachs were in the news for stating that they had reserved $20 Billion to pay themselves their bonuses. This came after the government announced its bailout. http://www.bloomberg.com/apps/news?pid=20601087&sid=aRDImphnW84Y&refer=home

So we know part of the bailout is being used to protect Wall Street bonuses. Does that help the economy? Is that fair? Should that make us furious? Why is it that the same institutions and same people who profitted handsomely from creating this mess are getting bonuses?

Well how should the money be used?

As Einstein would say the best solutions are the simplest. We have also been down this road before. Let's review the fundamental reason why we are in this mess.

Housing.

This past week ending October 18th, saw a slight increase in Mortgage Interest rates. Why the increase and what is our forecast for the weeks ahead.

1) There has been an increase in 30 year conforming rate to 6.125% with zero points.
2) The underlying 30 year and 10 year notes both rose this past week.
3) At the end of the week the concerted government action led to freeing of capital across borders

We believe that the Federal Reserve will reduce the Fed Funds rate at their next meeting and that the further introduction of new money into the system (through TARP and other programs globally) will lead to a decrease in rates. When the fiscal stimulus effect of these actions take hold banks will be increasingly under pressure to loan the money at lower rates.