What coffee drinker doesn’t want to open up some
market commentary and get a coupon for free coffee? (Gosh, I hope that I
don’t get sued on this one!) ImportMedia/_GE1QRI3EnUg/SH0ClYTIFPI/AAAAAAAAKlU/9oK0igolicg/s1600-h/Starbucks+COUPON.jpg
You have to right click and save it as a picture to your desktop. Then open it
from there and print.
In an example of being late to the party, according to a
story in Reuters & Bloomberg, “Morgan Stanley told thousands of
clients this week that they will not be allowed to withdraw money on their
home-equity credit lines. Most of the clients had properties that have lost
value, the agency reported, citing a person who declined to be identified. The
second largest U.S.
investment bank will review home-equity lines of credit, or HELOCs, monthly
from now on, the agency said, citing the person familiar with the
matter.”
As expected, the Federal Open Market Committee decided to
keep its target for the federal funds rate at 2%. “Economic activity
expanded in the second quarter, partly reflecting growth in consumer spending
and exports. However, labor markets have softened further and financial markets
remain under considerable stress. Tight credit conditions, the ongoing housing
contraction, and elevated energy prices are likely to weigh on economic growth
over the next few quarters. Over time, the substantial easing of monetary
policy, combined with ongoing measures to foster market liquidity, should help
to promote moderate economic growth. Inflation has been high, spurred by the
earlier increases in the prices of energy and some other commodities, and some
indicators of inflation expectations have been elevated. The Committee expects
inflation to moderate later this year and next year, but the inflation outlook
remains highly uncertain. Although downside
risks to growth remain, the upside risks to inflation are also of significant
concern to the Committee. The Committee will continue to monitor
economic and financial developments and will act as needed to promote
sustainable economic growth and price stability.”
Freddie Mac lost $821 million in the 2nd quarter after taking
$2.5 billion in provisions for credit losses. Revenue fell to $1.69 billion
from $2.34 billion, and the loss was slightly greater than expected. They will
cut their common stock dividend, but pay the full preferred dividend. In
addition, “the company continues to review and consider other
alternatives for managing its capital including issuing equity in amounts that
could be substantial, reducing or rebalancing risk, slowing purchases into its
credit guarantee portfolio, and limiting the growth or reducing the size of its
retained portfolio.”
Indiana
“dis-approves” 360 mortgage shops? Since
July 2007 Indiana
laws require mortgage brokerages to employ a principal manager who has passed a
competency exam, but they have been slow to comply. So sorry. http://www.indystar.com/apps/pbcs.dll/article?AID=/20080806/BUSINESS04/808060336/1279/BUSINESS04
Back to the economy and rates. Lately the ISM Non-Manufacturing
Index increased to 49.5, higher than forecast, from 48.2 in
June. (Non-manufacturing businesses make up almost 90 percent of the
economy.) Last week mortgage applications increased from a seven year
low last week by 2.8%, with refinancing +4.4% and purchases
+1.8%. Demand for ARM’s fell 2.9% to make up 6.9% of the total
number of applications. Note that today the Treasury will sell $17 billion
of 10-year notes, up from May’s sales, and they will be auctioning off 30-yr
bonds tomorrow. Let’s hope for a good 10-year auction, as we’ll
need it: currently the yield is up to 4.03% and mortgage prices are worse by up
to .5 versus yesterday!
An article in the Wall Street Journal highlights FirstFed
Financial Corp., saying that it “is struggling with rising losses”. The bank
posted a loss of nearly $70 million in the first quarter, 40% of its borrowers
became at least 30 days delinquent after the payments on their adjustable-rate
mortgages were recast, and the number of foreclosed homes held by the bank
doubled in the second quarter from the first quarter! The article goes on to
elaborate the problems with payment option ARM’s. First Fed had been
doing well with this product, but in 2003 guidelines and terms relaxed and
competition increased, and First Fed followed the crowd to maintain market
share. (Sound familiar?) “As of the end of June, nonperforming assets
climbed to 8.2% of total assets, compared with 0.85% a year earlier.” It
is definitely worth a read.
Two bats are hanging upside down from a tree branch.
One bat says, “There’s only thing that I fear
when I grow old.”
The second bat says, “What? Loss of hearing? Sore
wings?”
The first bat says, “Incontinence.”
Rob
