Adam can you answer a question for me.....could this recent sell off just be everyone getting out and waiting to see what the 4th brings? Pulling out your money, evaluating your position, and seeing if there is a more profitable position to be in in a few days. it would make sense that the investors would fear the glut of pre-pays if rates do drop drastically...just trying to wrap my head on what is happeniing..any input is appreciated...

Adam- I have been on this forum for about 4-5 months but finally signed on. I just wanted to let you know you guys are doing a fantastic job. Very interesting.

The sell off of MBS is no different then any other sell off. The rates will go back down again to what they were a week ago and then go back up. I don't think the 4th is going to bring us anything. Why do I say that? Because if it sounds too good to be true it probably is and that is not how the market works. Obama has not given any details and probably won't. One thing I know for sure is that his plan is not going to work. Obama never heard "those who don't learn from history are doomed to repeat it." FDR's New Deal was a disaster for 7 years and World War II got us out of the Depression. But I digress, I would suspect that there will be little or no change on 03-04-2009. It will be business as usual.

Would we see rates drop drastically if they gave the explicit guarantee on all loans? Do you think there is a chance of this happening?

Hopefully, what we are seeing is the market already adjusting for a poor plan being released on the 4th. Meaning if the plan is really as poor as we expect - then the damage is already priced into the market. If by chance the package is recieved well by the market - we could see some positive market reaction. Most likely, the 4th shall provide a small bump or dip in the market and have little effect by the following week's news/market releases.

I don't think rates will ever drop lower than they have in the last 3 months. Do you really think that as an industry we really could handle 4 or 4.5 w/ true 0 pt rates? If we dropped that low I think that capacity would sling the rates right back up within hours or risk a meltdown with all the refi business that would come through in terms of locks and processing. It would be mayhem.

I posted this on another conversation, and I'll post it again - jobless claims much worse than expected, durable goods much worse than expected, housing purchase worse, major corporations continue to take a pounding in terms of profits - all pointing to deflation, yet the market is up and so are rates. The only explanation is hope that government will simply not allow the worst to happen. I don't want the market to collapse, but I want rates to edge down too - it's all killing me!