Let's Make a Big Deal Out of This - Or Not

The Dow Dropped almost 500 points on Friday and it was a big deal. At least that's how financial chatter-boxes like CNBC saw it. Hey, biggest drop since January! Imagine.

Gold joined the drop like a rock party. at one point it was up almost $50 - then finished the day down almost $30 - a pretty big swing for so-called "real money." Except that CNBC didn't think it would get as many hits as the Dow news. So sort of a big deal?

Actually neither one was really a big deal if you back up a week. Stocks wound up down less than 1% for the week. Gold wound up a bit less than 1% for the week.

Seriously not a big deal.

On the other hand, there's been something up in the Bond market. Mid-week, after the CPI came out "hot," bond yields leapt up. And they had been creeping up before that. If anything might be a big deal, this could be it. Or is it?

Frankly the trend is relatively short. So who really knows?

But the financial media - at least the main stream - needs stuff to attract folks. With that in mind, we could pretty much dismiss all of this if we're trying to gain any special insight into what's happening in financial markets. They gin up stories - clickbait to be sure - and bite, or, er, click.

Oh, and let's not forget a mid-week story about mortgage rates. Not that mortgage applications were up or anything like that. But re-financing was. The purported stats (if we indeed have good reason to believe them) show...well, what exactly does it show?

After all, the rates didn't really fall. Some thought they might. But there was that hot CPI things. And that held rates over 7%.

Would you refinance your 3% mortgage in exchange for a 7% mortgage? Apparently some folks did.

Of course, we don't know if those folks were mostly fixed rate types (at somewhere around 3%) or might be adjustable rate types who are trembling at the thought of their mortgage rate jumping up to...um, I dunno? 7%.

Does any of this add up?

The story I read said that folks who wanted to re-fi just jumped on the rate they thought was going to decline but didn't. The article gave this reason: They were going to re-fi, and figured maybe instead of rates falling like they hoped, they might keep going up. So re-fi while the re-fi-ing was good - or something like that.

But the thing you'd think they'd offer was a reason for why these folks wanted to re-fi. Are they all going to spruce up their houses? Maybe some. Although if that's why they exchanged a low-rate mortgage for a higher rate to replace kitchens and bathrooms, it only makes sense if they think they need to to get the place ready for sale - soon. 

If on the other hand they just wanted to make the place look nicer and stay there, they need to take some finance courses.

But wait! Haven't we all read that credit card balances have been flying upward. And aren't we all aware that interest on balances not paid off have zoomed into the mid-upper 20% range (!)?

Could it be that the re-fi folks had big outstanding credit card balances at 20+% and figured 7% was a better deal?

Maybe. Then again, wouldn't they need to have balances in the six-figure range to justify this. If you pay 25% on a $10,000 credit card balance, that's $2,500/yr in interest owed. If you bump your $300,000 mortgage from 3% to 7%, you're paying an extra $12,000 or so per year in interest. Doesn't add up.

We could suppose some math makes sense here. You'd need a high credit card balance, and a low outstanding mortgage. Are those the folks who decided to re-fi?

Can't say. Can say, though, that it sure seems crazy.