Mortgage rates are about the same, just under 6.5 percent, but the ultra-indicator, the 10-year T-note yield, has gradually fallen from 4.7 percent last week to 4.6 percent.

Mortgage rates are about the same, just under 6.5 percent, but the ultra-indicator, the 10-year T-note yield, has gradually fallen from 4.7 percent last week to 4.6 percent.

That fall is the tell-tale in a vertical tug of war. Pulling up are those convinced that the Fed’s easing is either inflationary or unnecessary or both; pulling down are those concerned that the housing/credit crunch combination will result in recession. I am with camp number two, my judgment clouded by desire for a half-percent drop in long-term rates and a little refinance party. Wouldn’t hurt home sales, either.

New economic reports don’t help much because we have so little real-time data on the still-developing effects of the crunch. August closings of existing homes dumped 4.3 percent, but those were pre-crunch contracts; new August contracts for new-home sales tanked 8.3 percent, subject to future cancellations. Think big. The drop in new-home sales is good news, diminishing the undercutting supply from give-away builders.

The tug of war will be decided by the job market. If it holds up, no recession, and few if any additional cuts from the Fed. The definitive job report is monthly, due Friday, Oct. 5, with September data, and don’t expect much rate movement until then. Meantime, the job-market proxy is the weekly report of new filings for unemployment insurance — amazing to me in the last two weeks: flat to falling, meaning fewer layoffs.

At this point, home buyers and sellers have been propagandized into paralysis. The marker for the moment of hysterical maximum was Jim Cramer’s (new) rant on the “Today” show, a finger-wagging “Don’t you dare buy a house — you’ll lose money!!”

Mr. Cramer’s credentials as the Mahmoud Ahmadinejad of CNBC are well-established. If he were one-tenth as smart a trader as he says, he would have long-since made enough money to buy the network, and renamed it All Jim.

That said, Pollyanna crap won’t reassure fearful civilians. Cramer has a point, but a defect in reasoning fatal to any trader. Pulling chips off the table is a breeze; figuring out when to play again … that’s hard. In financial markets, the Cramers are everywhere (like the stuff that’s hard to get off your shoes) and old-timers dismiss them this way: “Sonny, they don’t ring a bell when it’s time to buy.”

There is nothing new in this housing episode, not even bad mortgages (the FHA 245 in 1980), and proper tactics still apply. Location prevails. Prices fall early in sour markets and then flatten. Sellers tend to be patient, and should be, ignoring bottom-fishers and cripple-shooters. Good stuff bottoms first, and rises first. Two common phrases in civilian homes, the first less so than the second: “I knew we shouldn’t have paid that much!” and “I told you we should have bought then, but nooooooo!”

Another hysterical argument driving civilians crazy: a threatening “dollar crash.” Yes, the buck has some long-term trouble (it started about a week after the end of World War II), and could suffer short-term lurching, but the yammering from Wall Street commentators is unprofessional and wishful, and invariably incomplete.

When oil or gold or stocks or homes fall in price, the decline is absolute, from one price to another. When a currency changes in value, it is always relative to another currency and subject to very powerful self-correcting cyclical forces. A weaker buck will help us out of this slowdown, and euro strength will slow Europe; then down goes the euro.

Currency trading is limited to this planet: to exit the dollar you have to buy somebody else’s currency. Which one? The euro is saturated, as are the Canadian loonie, and Aussie and Kiwi bucks, and Swiss francs. Asia? Oops! — all pegged to the dollar. Can’t buy China’s RMB anyway — not a traded currency. Then, you could pick pesos, reals, sols, rubles, colons, rupees or Bolivars — you want ’em, you got ’em. You could buy hard assets instead, but drive up the prices far enough and nobody can afford to make anything out of your copper or burn your oil.

Enough with Opus’ anxiety closet. Calm down out there.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@boulderwest.com.

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