“I’M NOT GOING TO BUY MY KIDS AN ENCYCLOPEDIA. LET THEM WALK TO SCHOOL LIKE I DID!” -- Yogi Berra And as the school year began across the country, Bond Traders had some studying to do of their own last week. 2nd Quarter productivity data was released with the report reeking of wage based inflation. Because unemployment has reached lower levels than seen in years, employers now need to pay higher wages in order to gain and retain employees. Inflation of any sort is the arch-enemy of fixed return Bonds, and home loan rates were slightly higher on the news, increasing about .125% over the course of the week.

Meanwhile, the debate rages on…after getting hit with some inflationary news, will the Fed to continue to raise short-term interest rates, or in light of the devastating effects of Hurricane Katrina, will they temporarily suspend rate hikes? Although opinions vary widely, there is a good chance that the Fed will pause before taking another hike at the next meeting later this month. After all, Greenspan is winding out his last months in office, and it would appear somewhat cold-hearted to continue rate hikes without very clearly assessing the economic impact of Katrina.

AND IF YOU ARE ONE OF THE MANY WHO DESIRE TO DONATE TO THE CAUSE…BUT WANT TO MAKE SURE YOUR MONEY GOES WHERE YOU INTEND IT TO…TAKE JUST A MOMENT TO READ THIS WEEK’S IMPORTANT MORTGAGE MARKET VIEW.

Since Bonds had finally escaped the brutal “Down Escalator” which had caused home loan rates to increase during July, they had in turn stepped onto a nice “Up Escalator” helping home loan rates improve during August, clearly seen in the chart below. But the trend may be reversing. Although Bonds have not made a decisive move just yet, it appears they may be losing their toehold…and a more negative trend could be coming.

This coming week will be economic news-heavy, including the Consumer Price Index, the Producer Price Index, Retail Sales and the Philadelphia Fed Manufacturing Index. These reports are generally high impact, and will give a broad look at inflation, consumer spending and manufacturing. Remember that in general, positive economic news tends to cause Bonds and home loan rates to worsen, whereas weak or negative economic reports tend to cause Bonds and home loan rates to improve.

Bottom Line: the flavor of the economic reports this week will likely dictate if Bonds can muscle higher and stay on the “Up Escalator”, helping home loan rates to improve…or if we could be seeing a trend reversal with higher home loan rates in store.

No one has ever become poor by giving. -- Anne Frank

Many lives have been affected by the horrible destruction caused by Hurricane Katrina. During these hard times, many Americans want to show their support and are considering making donations to charitable organizations. As you consider making a donation, it is extremely important that you familiarize yourself with the organization, and be aware of solicitations requesting funds via phone, email, or door-to-door solicitors. Unfortunately, not all of these operations may be legitimate. Sadly, many people make donations with the very best of intentions, and later realize that the money was not used as promised. It is unfortunate that any individual would try to capitalize on a tragic event and the misfortunes of others, however, you can avoid this problem simply by doing a little research.

Start by researching the charitable organization by visiting www.give.org or www.charitynavigator.org. Both websites provide helpful tips on making donations, post news and alerts, and focus on recommending charitable organizations that meet the standards for charitable accountability. In the article and news archives you will find specific articles relating to protecting yourself from Hurricane Katrina charity scams and general tips to watch for to help to recognize a potential scam.

Next, visit the website of the actual charitable organization that you are considering, and learn a little about the organization. A vast majority of charitable organizations have websites that provide detailed descriptions about what the money will be used for and how the funds will be distributed.

There are many different ways to donate and help the victims of Hurricane Katrina. Most charitable organizations prefer cash donations; however, others are requesting specific products or services. Below are a few suggestions:

Cash donations: www.redcross.org - www.bushclintonkatrinafund.org - www.secondharvest.org

Product donations: www.giftsinkind.org/katrina_help.asp -- this link provides a specific list of items needed for relief efforts

Housing donations: www.hurricanehousing.org

And remember, every little bit helps.......if one quarter of the United States Population donated just five dollars each, over $369MM Dollars would be raised for the victims of Hurricane Katrina.

This week's economic calendar is peppered with several potentially high impact reports including the inflation-measuring Consumer and Producer Price Indexes. Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

Economic Calendar for the Week of September 12 – September 16