"AN ECONOMIST IS AN EXPERT WHO WILL KNOW TOMORROW WHY THE THINGS HE PREDICTED YESTERDAY DIDN'T HAPPEN TODAY." Laurence J Peter

And sure enough, the economist's predictions were off the mark again last week, as several key economic reports came in weaker than anticipated. Weak economic reports tend to benefit Bond pricing and therefore home loan rates, so rates were slightly improved to unchanged overall over the course of the week.

Durable Goods Orders - which are simply items that are expected to last longer than three years, such as appliances, electronics and furniture - were reported much lower than the economists had forecast. Then several key manufacturing reports came in weak - in fact, the weakest numbers in three years. News on housing was mixed, but showed home sales continue to cool from the overheated levels of recent years. Initial Unemployment Claims were higher than they've been in a year. And on the heels of all that - one of the most important measures of inflation showed that it still remains higher than desired by the Fed.

So the debate on what the Fed should do next continues...some experts say that the Fed should consider a rate cut to support a rapidly cooling economy, while others say more hikes are needed in order to slay the inflation "dragon". The Feds primary concern is inflation - and protecting not only us, but our future generations, from runaway prices of goods and services - so until inflation moves closer to their desired target, a rate cut is not likely to be in the cards in the very near future.

BUT IF MAKING SOME YEAR END INVESTMENTS IS IN YOUR CARDS FOR THE END OF THE YEAR...HO-HO-HOOOOLD ON THERE BEFORE YOU INVEST IN A MUTUAL FUND IN DECEMBER. WHY? TO AVOID A POTENTIAL TAX TRAP THAT MOST PEOPLE WANDER INTO COMPLETELY UNAWARE. READ THIS WEEK'S IMPORTANT MORTGAGE MARKET VIEW TO LEARN WHAT YOU SHOULD BE WATCHING OUT FOR, BEFORE YOU BEEF UP YOUR

SAVINGS. Forecast for the Week

This week brings a mix of economic reports along with the Big Momma - the monthly Jobs Report. This is the last Jobs Report before the Fed meets to decide on interest rate policy, so the numbers will be looked at especially carefully by Traders, as they attempt to handicap the Fed's next move. Economists are looking for the formation of 115,000 new jobs, and hourly earnings to increase by 0.3% for the month.

On a technical level, Bonds have been in a nice strong trend higher since the end of June, meaning home loan rates have moved lower.

Remember that as Bond prices go higher or improve, home loan rates (which are hand in hand with Bonds) go lower and improve.

So looking at the chart below, you can easily see the improvement Bonds and therefore home loan rates have gained in recent months. But historical levels play a big part in predicting future action. You can see the strong levels that were reached by Bonds in late January, early February before they started to worsen. There is still some room to go before the Bond touches these same lofty levels, but once they hit a level that in the past proved to be a high...they may begin to back down as Traders typically bet on history repeating itself. The Jobs Report on Friday will likely be the determining factor.

If the Report is a real stinker and shows very weak employment, this would be good for Bonds and home loan rates, and we could see more improvement, moving closer to and perhaps breaking those past historic levels. On the contrary, if the Report is strong, Bonds may well begin a retreat and home loan rates could worsen slightly.Chart: Fannie Mae 6.0%% Mortgage Bond (Friday Dec 01, 2006)