Today’s Market Commentary. Slightly higher rates today.

Commentary: The mortgage market was bounced around a little this morning by the Bank of England’s stunning 150 basis-point cut in short-term rates, well in excess of the most aggressive forecasts calling for a cut of 50 basis-points. .Short-term interest rates in Britain are now at their lowest level in more than 50 years.

The sudden swoon in mortgage prices this morning suggest that mortgage investors are beginning to believe that the massive effort by the world’s central bankers will ultimately prove to be effective in jump starting the global economic engine. Rate cuts are viewed as leading to a greater demand for capital which in-turn ultimately leads to higher interest rates.

Closer to home the Labor Department said initial jobless claims for the week ended November 1st fell by 4,000 drew nothing more than a passing glance from mortgage investors. In a separate report the Department said third-quarter Productivity grew at a very anemic 1.1% pace while unit labor costs climbed 3.6%. While the unit labor costs increase is a bit disconcerting, most analysts see virtually no reason to fear a resurgence in wage driven inflation pressures.

The media channels are full of text and talk regarding the recession – and some even talking about an extended recession. As usual these “talking heads” fail to provide much perspective in terms of the time this economic condition might prevail. I think it is worth noting that since the Great Depression, there have been six major recessions; the recession of 1953, 1957, the 1973 oil crisis recession, the 1980 recession following the Iranian Revolution, the 1990’s recession and the early 2000 recession brought on by the collapse of the dot-com bubble. Three of these recessions lasted two years – and the other three lasted one year – start to finish.

If, as many suggest, the current recession began in mid-2007 -- we should reach the point at which economic activity begins to show a notable and sustained improvement somewhere between March and June of 2009. We personally find it hard to believe that $10 trillion in stimulus provided by the world’s central banks -- together with massive cuts in short-term interest rates -- will fail to have its intended effect of freeing the economic pendulum from the current recessionary mire. If our assumption is accurate, look for the economic pendulum to get a very healthy push in the direction of accelerating growth as the largest amount of cash and cash equivalents the world has ever seen that is presently sitting on the sidelines gets deployed.