If I had to guess I would choose the less than 4% oitpon. However, I am not nearly as confident in making a prediction on mortgage rates as I am further price declines and tightening credit.Regardless of what happens to interest rates, I expect there will be tighter qualifications on non-performing (and possibly even performing ones) this time next year. Even the GSEs will be forced to tighten standards if defaults keep increasing.Further, I strongly believe that house prices will have continued to spiral downwards in a year's time. We may see some kind of bump in the spring or summer, but come the fall and winter I think things will start to look ugly again.As far as interest rates go, I can easily imagine a scenario where a deepening global economic contraction leads to an even greater rush for US treasuries, in hopes of safety. However, I can also envision a case where further de-leveraging forces holders of US treasuries to sell in order to raise actual cash. This would be bullish for the dollar itself, but negative for T-bills (i.e. leading to higher interest rates). Regardless, I think T-bills will outperform most other asset classes in the next year (e.g. precious metals, stocks, real-estate, etc).Keep in mind that I expect a MAJOR rally (e.g. the Dow could rise to the 10,000 level) in all asset classes to last through the summer, which will make it look like inflation has re-appeared and that the depression is over. Unfortunately, all these gains will be retraced late in the year and early 2010. Rate this comment: 0 0

by Simar 10:39:56 PM 2012.11.01