Market Update

FNMA 30-YR 4.5%

Previous close 100.780
Opened Down 0.06bp @ 100.719

Key Economic Data:

EUR / USD 1.3522 Up 0.0033
USD / JPY 83.7950 Up 0.4703
GBP / USD 1.6157 Up 0.0119

OIL 85.30 Up 0.49
Gold 1,372.10 Up 7.00

Key Economic News:

Soft Sales, Due to Weather; Empire Index and Import Prices Both Firm
A weaker than expected retail sales report, mainly due to downward revisions to Nov and Dec. Weather clearly a factor in recent months as non-store retailers outperform relative to recent differentials. Empire index shows further gains in manufacturing in New York State while import prices surge in reaction to commodity price pressures.

KEY NUMBERS:
Retail sales +0.3% in Jan (mom, +7.1% yoy) vs. median forecast +0.5%.
Ex autos +0.3% in Jan (mom, +5.4% yoy) vs. median forecast +0.5%.
Import prices +1.5% in Jan (mom, % yoy) vs. median forecast +0.8%.
Empire index 15.43 in Feb vs. median forecast +15.

MAIN POINTS:
1. Retail sales rose less than expected in January, although the core component-sales ex autos, building materials, and gasoline-was in line with the consensus view (+0.4%) and just a touch less than we had thought (about ½%). However, data for November and December were revised down 0.2% and an additional 0.3%, respectively. We expect a small downward adjustment to the consumption component of the fourth-quarter real GDP growth rate (currently 4.4% at an annual rate for consumption) and see the tracking into the first quarter for purchases of goods at just over half the fourth quarter (nominal) 6.6% annual rate.

2. The report provides clear evidence of weather effects over the past three months in retail spending, as non-store retailers posted gains of 1.5%, 2.6%, and 1.2% for November, December and January, respectively. While this category is trending higher than the total as more Americans shop from the comfort of home, this three-month increase of 5.4% (not annualized) versus a paltry 0.9% for core sales is a much bigger difference than the difference in year-to-year trends (13.4% vs. 4.3%).

3. The Empire index rises from 11.92 in January to 15.43 in February. New orders remain broadly unchanged (down round half a point to 11.8) but shipments decline (by around 14 points to 11.31). The index for employees falls (by almost 5 points to 3.61) but the index for inventories rises (by almost 5 points to 9.64). The index for prices paid rises 10 points to 45.78.

4. Import prices rose 1.5% month-on-month in January (5.3% yoy), with increases across a variety of commodity-related categories: prices for "industrial supplies" rose 3.3% on the month, while foods and beverages were up 2.6%, and petroleum 3.4%. Categories dominated by manufactured goods, including capital goods and consumer goods, showed much lower inflation (+0.1% and +0.3% respectively).

10:00: Housing market index for Feb….still at a very low level? This index continues to hang in the mid teens, where it has been for most of the past three years. Nobody expects much of a change this month.

Median forecast (of 47): 16, ranging from 15 to 18; last 16.

10:00: Business inventories for Dec…did retail remain flat? The median forecast of a 0.7% increase implies no change in retail inventories given what has already been reported for manufacturing (+1.1%) and wholesale (+1.0%).

Median forecast (of 51): +0.7%, ranging from +0.2% to +1.0%; last +0.2%.

13:00: Treasury Secretary Timothy Geithner testifies on the administration's FY 2012 budget…before the House Ways and Means Committee.

14:00: OMB Director Jacob Lew testifies on the administration's FY 2012 budget…before the Senate Budget Committee.

17:00: ABC consumer comfort index…can't seem to hold those gains. This index fell back to -46 in the first week of February from a comparatively high -41 in the last week of January. Its nearly 3-year range is -54 to -40.

President Mubarak resigns, according to Egypt's vice president: reports

Don't give me 100%

You've probably heard it 1,000 times before.

A coach wants you to give your best effort. So what does he do? He says he wants you to give him "110 percent."

Not much has changed in my mind since I heard a coach use this line the very first time. In fact, I'm still trying to wrap my noggin around exactly what 110 percent would look like - or feel like.

After all, if everyone uses about 10 percent of his potential mind power, then why would I need 100 percent - much less 110 percent - in order to win? Seems to me if I was able to give 11% of my mind's power instead of 10%, I might move to the head of the pack.

Moreover, a one percent bump in performance is much easier to see and feel than 110. Former NBA coach Pat Riley figured this out long ago, when he coached the Los Angeles Lakers. After the team had already snagged a title, he re-motivated them by getting every single player to commit to a 1% improvement in rebounding, shooting, assists, free throws and so on.

This 1% commitment led to some staggering results. Some players, just by being able to see themselves giving 1% more, ended up doing 20% or more better than the year previous.

In Taoist internal martial arts, the focus is NEVER on giving 100% of your very best. Why? Because when you try to give 100%, you add unnecessary tension to the equation - and this tension never results in increased performance.

The other night I was warming my son, Frank, up in the bullpen prior to a Little League scrimmage. Unlike other days, he was way off in this throws. The balls were flying a couple feet over my head. Or wide right - or wide left.

I walked up to him and increased the depth of his inhale and exhale. Why? Because he was hardly breathing at all. And if someone isn't breathing with each pitch, guess what's he holding onto?

TENSION.

Just by getting him to relax via a good inhale and exhale, his aim improved 100 percent.

But then I added some other internal martial arts knowledge to his pitching. I gave him a specific percentage of his maximum I wanted him to be using when he throws. I based this number upon what I know will give him maximum velocity and control.

I can assure you the percentage I gave him was NOT 100 percent - much less the highly-touted "110 percent."

Guess what happened?

He started throwing perfect strikes to me. And they were stinging my hand. Let me tell you, when a 10-year old throws hard enough to sting your hand, he's got some ooomph.

When Frank took the mound a few minutes later, he looked great. One bullet after another. Three up three down.

Every pitcher has good days and bad days. It's rare that one who is doing poorly can be turned around on the same day. Yet, that's what happened with my son the other night.

It's a natural and typical occurrence with the kids I work with.

Last night I worked with a few of the other pitchers - all of whom are beginners. None of these kids could throw a perfect strike.

But after a few minutes of changing the mental pictures of what they're doing - they were tossing strikes.

Each kid went home believing in himself a little more than when he started out. And this belief will result in improved performance, not just in practice - but in the games as well.

Ridding your body of tension is key to superior performance. It's key to getting the most out of life.

It's key to turning wild pitches into perfect strikes.

Believe me, success isn't about giving 100 percent or 110 percent. It's about learning to get more out of yourself while feeling like you're doing less.

It's being in a relaxed-ready state that allows for maximum output.

Tension interferes with output. It creates physical, mental and spiritual resistance.

You're much better off with ZERO RESISTANCE .

Zero Interference from your mind-body.

By Matt Furey

Reports that Hosni Mubarak could imminently announce his resignation as president of Egypt moderately rattled world financial markets on Thursday, but investors have already discounted the political situation's broader impact, analysts say.

Rate Hits High Not Seen Since April 2010

The average weekly rate for a 30-year fixed-rate mortgage Thursday hit a high of 5.05% not seen in Freddie Mac's survey since April 2010 in a move attributed to positive economic data and a run-up in bond yields.

Thirty-year fixed mortgage rate hits highest level since April: Freddie Mac

Market Update

FNMA 30-YR 4.5%

Previous close 100.310
Opened Down 0.22bp @ 100.094

Key Economic Data:

EUR / USD 1.3617 Down 0.0116
USD / JPY 83.0450 Up 0.6880
GBP / USD 1.6043 Down 0.0059

OIL 86.25 Down 0.46
Gold 1,354.10 Down 11.40

Key Economic News:

Sharp drop probably affected by weather
Initial claims fall sharply, but may be due al least in part to poor weather. Continuing claims continue to drift lower.

Key Numbers:
Initial claims -36k to 383k in week ended Feb 5 vs. median forecast 410k.
Continuing claims -47k to 3.888 million in week ended Jan 29 vs. median forecast 3.9 million.

Main Points:
1. Initial claims fell sharply in the first week of February, to the lowest level since early July 2008. Although we think the trend is improving, this figure must be discounted on account of poor weather, at least until confirmed by the next week's report. Recall that major snow and ice storm blanketed most of the country during the week.

2. Continuing claims are generally less affected by the weather, and the week to which the latest data refer also did not have as serious a disturbance in this regard. Hence, we're more inclined to see the roughly in-line reading as consistent with gradual improvement in the labor market. The number of people receiving benefits from extended and emergency programs rose by about 84k in the week ended Jan 22, undoing a similar decline from the preceding week.

10:00: Wholesale inventories for Dec...a moderate increase? These inventories are goods that are essentially in transit from factories or from the docks to final destinations such as retail outlets and are therefore difficult to forecast, and they have been quite volatile of late. The median increase is about one-half of what the Commerce Department assumed in its preliminary GDP estimate for the fourth quarter.
Median forecast (of 35): +0.7%, ranging from -0.4% to +1.8%; last -0.2%.

14:00: The US budget balance for Jan...better than a year ago, once corrected for calendar quirks. The CBO estimates that the US Treasury ran a $53bn deficit in January. This is $10bn larger than in January 2010, but $16bn smaller once special calendar effects are taken into account. This would bring the four-month fiscal year total to $242bn. , versus $431bn at the same point in FY 2010.
CBO -$53bn; median forecast (of 29): -$55bn, ranging from -$70bn to +$60.5bn; last (Jan 2010): -$42.6bn.

16:30: Federal reserve balance sheet...Last week the balance sheet expanded by nearly $26bn. It is closing in on $2.5trn, on its way to what we expect will be about a $2.9trn level by the time the asset purchase program is done in June.

Advice:

With unemployment slowly improving, even with the effects of bad weather. I expect the market to slip back below 100.00 again.

I would lock short term and long term today.