The markets are closed so it's time to stop thinking about economics and the markets. To help you get in the relaxing mood, here are some pictures of my dogs (the Weimeraners) and the future Mr$. Bonddad's dog -- the Beag...
Friday, February 29, 2008
The Coming Negative Equity Problem
Mish has been all over this story.From today's WSJ:Goldman Sachs economists estimate that as much as $3 trillion in mortgages could be underwater by the end of the year, leaving 30% of the country's outstanding mortgages in negative equity. Since there is roughly $1 trillion in subprime mortgages outstanding, that means a large amount of better-quality...
The Dollar's Plight and Status
There is a fascinating story in today's WSJ today about the dollar. It mentions the current nosedive is causing a ton of problems for countries around the world. But it also mentions the dollar is very entrenched in global finance which means changing dominant currencies (to the euro, for example) would be extremely difficult.Beaten down by fears of a U.S. recession, the dollar is falling with new speed -- creating severe challenges not just for the U.S., but also for sugar traders in Brazil, central bankers in the Persian Gulf and a host of...
Housing Market Weakens
The gloomy clouds shrouding the housing market continue to cast their shadow. Nationwide report that house prices fell by 0.5% in February, for the fourth month running.Hoverer, measured on an annual basis, house prices are still rising by 2.7%. This is the lowest annual growth rate since November 2005. Less than a year ago house price inflation was 11.1%.Adding to the gloom, the Land Registry report that the total number of houses sold in November 2007 fell by 20% compared to November 2006.Nationwide, whose job it is to sell mortgages, publicly...
Thursday, February 28, 2008
Translating "Fedspeak"
Bernanke spoke to Congress on Wednesday. His opening statements provide a good outline of where the economy is presently. I have interspersed his comments with some news stories and various graphs to clarify Barnanke's points. I have separated his comments by indenting and italicizing them.Here is a link to his complete testimony.The economic situation...
Today's Markets
Just when you thought it was safe to go back in into the market.....it returns. The dreaded trading range (cue dramatic B-movie horror music).The IWMs were easy to draw. The SPYs and QQQQs were a bit harder because there have been some moves outside of the range that lasted for a few days but then corrected. The lines I drew were eyeballed and there...
Taxpyers Will Definitely Foot the Housing Bill
Yesterday we learned the Fannie and Freddie were having their investment cap increased. This will allow them to purchase more mortgages on the open market. Yesterday we also learned that Fannie reported a nasty loss in the fourth quarter of last year.Now Freddie has joined the loss chorus:Freddie Mac reported a loss of $2.45 billion for the fourth quarter amid a continuing surge in home-mortgage defaults.The government-sponsored mortgage investor also warned of a further jump in losses stemming from those defaults this year and next as more borrowers...
Hank Paulson -- Comedian
From the WSJ:Mr. Paulson, a former chief executive of Goldman Sachs Group, repeated his view that the U.S. economy is fundamentally on sound footing and would dodge a recession. [Look out the window. My God, why it's a....a......a...... pig flying by with large golden wings!] Still, he warned again yesterday that the chances of worse-than-expected economic growth are greater than the chances of an upside surprise.Part of the reason for this statement/publicly stated belief is Paulson needs to show strength for the cameras. I get that.But at some...
Wednesday, February 27, 2008
The Fed, the Dollar, the Euro and Oil ... Oh My!
As the chart above clearly shows, the dollar has been dropping for the better part of the last two years. There are a lot of reasons for this. The mammoth US trade deficit (which is getting a bit better) and the large amount of US debt held by foreigners are prime reasons. However, since the Fed started cutting rates aggressively, the dollar has...
Today's Markets
The markets treaded water today. That means the rally started over the last two days could still be intact. Let's take a look at the charts.On the 10 day chart, notice the following:-- The trading range is pretty clear and the current price action is above the range.-- The index could be forming a double top or broadening formation. Both are considered...
Taxpayers Will Foot the Housing Bailout
In case you were wondering who would pay for the housing mess -- it's you and me. Not that there was any doubt about that in the end, but it sure was nice to think that maybe the people who got us into this mess -- the mortgage brokers who didn't perform any credit checks, the banks who didn't look at the collateral they were buying, the investment banks who didn't look at the collateral and the ratings agencies who gave everything a giant thumbs up -- would bear some responsibility. First, let's look at how Fannie Mae is doing:Fannie's $3.56...
Housing Is Nowhere Near the Bottom
The housing correction continues unabated. And given the current evidence, there is no doubt in my mind that the correction is far from over. Consider the latest data:The S&P/Case-Shiller national home-price index for the fourth quarter fell 8.9% from a year earlier, the largest drop in its 20 years of data. And the Office of Federal Housing...
The End is Nigh
Hector Sants, the chief executive of the Financial Services Authority (FSA), has added his voice to the Greek chorus of doom and gloom that is currently serenading the financial services industry.He has stated that the era of cheap borrowing by British banks is over. As such, in his view, the banks will revert to more "old fashioned" financial products and "relationship" banking.Sants makes his comments at an interesting time for the FSA, as it is about to publish an internal review of its handling of the Northern Rock crisis.He has already admitted...
Tuesday, February 26, 2008
FDIC's Quarterly Banking Survey ---
Here are some charts from the FDIC's Quarterly Banking Survey.I offer them without comment. If I said something, I would be accused of being bearish and talking down the economy....
Today's Markets
OMG -- did the markets break out of their trading range today?Above is a 10 day chart of the SPYs in 5-minute increments. Notice the strong rally over the last 2 days from 133.15 (approximately) to 138.34 -- an increase of about 4%. That's a big move, although the back and forth action of the last 10 days has muted its importance.On the three day...
How the Mighty Have Fallen
Google, Apple and Bidu were three market darlings for the latest rally. They have fallen on tough times, with each one trading below their respective 200 day SMA.IBD noted this in an article from today's paper:When leaders go beyond a normal correction into the ugly zone, any subsequent bounce is suspect......It's enough to know that this is a tough...
