Update and by the numbers

Mortgage Bonds are enjoying a nice little "gap" or open higher to start the week. This Candle, which shows the opening price higher than last Friday's highest prices, tells us there were more buyers than sellers to open the day. That is a positive technical signal and when coupled with the usual suspects - the Fiscal Cliff debate, Greek Drama escalating, and the overall weak US economy - we may just see Mortgage Bonds move higher from here towards the top of the trading range.

Over in debt riddled Greece, finance ministers from the Eurozone are meeting today to try and solve the problems that have plagued the country for what seems like years. Some are asking for deeper cuts and major countries like Germany are refusing to forgive some of Greece's debt.

There are no economic reports due for release today but the rest of the week's calendar is chockfull of reports that could impact trading. The Treasury will sell a whopping total of $99B in 2,5 and 7-year Notes this week, which according to the outcome, could also sway investor sentiment this week.

In Washington, lawmakers are set to meet this week to tackle the fiscal cliff issues. With just just December remaining to work out some type of deal and with Congress having to take their holiday vacations before the year ends, there are not many business days left to iron out a deal.

Floating seems prudent with prices bouncing off support near the bottom of its trading range. However - be mindful that the 25 and 50-day Moving Averages will try and thwart the bounce higher - so stay tuned should the present bullish Bond sentiment change.

Note: There have been a few changes to the MMG Bond page. The Fannie Mae 2.5% 30-year coupon has been added while the 4.5% has been deleted. The Ginnie Mae 2.5% 30-year coupon has been added, the 3.5% has been deleted. The Fannie Mae 15-year 2.5% has been added, the 3% has been deleted.

Enjoy today's issue of By The Number$, and use a few of these talking points with your clients and referral partners throughout the week.

1. STOCK QUARTERS - Since 1990, the 4th quarter (October-November-December) has produced the highest average total return (a gain of +5.2%) for the S&P 500, more than the average total return of the other 3 quarters combined (a gain of +2.9%). The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).

2. THE LAST MONTH - 19 of the last 22 Decembers have produced a positive total return for the S&P 500. The average December performance since 1990 is a gain of +2.1%, the best of any month (source: BTN Research).

3. BANK FAILURES - During the 5 years from 1987-91, a total of 1,901 US banks and savings & loan institutions either failed or required financial assistance from the government or more than 1 per day. YTD through 11/16/12, 50 banks had failed in the United States or 1 every 6 ½ days (source: FDIC).

4. TWICE AS MUCH - Only 5 of the last 52 fiscal years in US history have ended with a surplus, i.e., tax receipts in excess of outlays. Fiscal year 2012 spending (i.e., the $3.54 trillion spent during the 12 months ending 9/30/12) is double the $1.79 trillion the government spent in fiscal year 2000 (source: Treasury Department).

5. TOP THREE PERCENT - For tax year 2010, 142.9 million tax returns were filed in the USA. 3% of those returns reported adjusted gross income (AGI) of at least $200,000. Those high income Americans received 28% of all AGI in the country and paid 52% of all federal income tax for the year at an effective tax rate of 22% (source: Internal Revenue Service).

6. NOTHING - For tax year 2010, 142.9 million tax returns were filed in the USA. 41% of those filed returns (58.4 million returns) legally paid zero federal income tax through exemptions, deductions and credits (source: IRS).

7. NOT BIG EARNERS - 84% of the 58.4 million tax returns filed in 2010 that did not pay any federal income tax reported less than $30,000 of adjusted gross income (source: Internal Revenue Service).

8. BIGGER NUMBERS, SAME RATIO - The cost of tuition, fees, room & board at an average private college for the current school year (2012-13) is $39,518, 2.2 times the $17,860 cost that a college student would pay this year at an average in-state public college. 30 years ago (i.e., the 1982-83 school year), the cost at an average private college ($7,126) was 2.2 times the cost at an average in-state public college ($3,196) (source: College Board).

9. PENSION BACKSTOP - The Pension Benefit Guaranty Corporation (PBGC) was forced to take over 155 failed pension plans in its latest fiscal year that ended 9/30/12. Over the last 5 fiscal years (2008-2012), the PBGC took over an average of 133 failed plans per year (source: PBGC).

10. IS IT WORTH IT? - It would take $24,000 invested in a taxable money market earning +4.18% (the national average yield 5 years ago at Thanksgiving 2007) to generate $1,000 of taxable income over the course of a year. It would take $5 million invested in a taxable money market earning +0.02% (the national average today) to generate $1,000 of taxable income over the course of a year (source: BTN Research).

11. A REAL NUMBER - The nation’s unemployment rate was 7.9% as of 10/31/12. Every ½ of 1% decrease in our nation’s unemployment rate is equal to 778,000 Americans going back to work (source: Department of Labor).

12. SEQUESTRATION – The lame-duck Congress will debate the timing of the automatic spending cuts of $1.2 trillion that are scheduled to occur over the 9 years from 2013-21. The $1.2 trillion represents just 3% of the projected government spending ($40.3 trillion) over the 9-year period (source: CBO).

13. NOT ENOUGH - The Federal Housing Administration (FHA) reported on 11/16/12 that the reserves it maintains for potential mortgage defaults had fallen below zero, i.e., the expected losses on the $1.1 trillion of mortgage loans that the FHA guarantees exceeds the reserves currently set aside. By law, the FHA has a 2% capital reserve requirement, equal to $22 billion based upon the size of its mortgage portfolio (source: FHA).

14. IMPROVEMENT – As of 9/30/12, 1 out of every 8.5 home mortgages (11.7%) in the USA are either delinquent or are in the foreclosure process. As of 12/31/09, 1 out of every 6.7 home mortgages (15.0%) in the USA was either delinquent or was in the foreclosure process (source: MBA).

15. ONE STROKE DIFFERENCE – Golfer Rory McIlroy averaged 69.63 strokes per round during the 2012 season (lowest for the PGA tour), earning $8.05 million in prize money. Nick O’Hern averaged 71.66 strokes per round during the 2012 PGA season (i.e., 1 stroke per 9 holes greater than McIlroy), earning $489,375 in prize money or just 6% of the money made by McIlroy. O’Hern played in 26 events, 9 more than McIlroy (source: PGA).