Let’s hope that potential home buyers aren’t
keeping their down payment monies in the stock market! This morning stock
futures are down their limit. At some point it seems that money managers
enjoy pushing a certain market one way or the other, and this time it is stocks
to the downside. Asian markets were mauled overnight – with the stock
markets in most countries losing about 10% on fears of a global recession. Hong Kong, Australia,
Singapore and Taiwan
markets dropped to their lowest levels in at least three years. Japan's
Nikkei was down 9.6% to end at 7,649, the lowest its been in 5 ½ years. Their
stock market is at one fifth (as in 1/5) of its all-time high of 38,915, which
it hit in December 1989.
The stock prices of banks are being hit hard so far. Bank of
America’s are -9% to $20.90, Citi -10% to $11.85, Goldman Sachs -12% to
$95.65, JPMorgan Chase -8% to $34.90, Merrill Lynch -12% to $15.35, Morgan
Stanley -14% to $15.53, Wachovia -9% to $5.26, and Wells Fargo -8% to $28.90.
But hey, it costs you less money to fill up every week, so
all is not bleak. Oil is down another $4 to $63. The Organization of
Petroleum Exporting Countries (made up of 11 countries) cut oil production
targets by 1.5 million barrels per day for the first time in almost two years
to stem a collapse in prices, down from their current 28.8 million barrels a
day. Thankfully for Hummer owners, oil has dropped 57% since mid-July when
we were seeing $147 a barrel.
What is all this doing to interest rates? 10-yr notes from
the Treasury were up earlier 1.25 in price, with the yield down to 3.49%, and
the 2-yr was down to 1.36%. Things are not that good now, however, with the
10-yr back “up” to 3.54%. But mortgage prices are not along for the
ride. Yesterday mortgage prices held in during the morning, but then faded
during the day, and several investors changed prices for the worse as our stock
market rallied. This morning mortgage prices are actually worse by .375 to
.5 in price from yesterday afternoon. The only scheduled economic news is
September’s Existing Home Sales, expected +.8%, but really, is anyone
going to be waiting for that number?
Chase, for their broker clients, weighed in on the provisions
of the Home Valuation Protection Code, which establishes requirements governing
appraiser selection. It appears that Freddie &
Fannie have pushed out the actual details of the plan, expected to impact the
way appraisals are done, but Chase wholesale has announced a policy whereby
effective Monday, November 3, brokers have the option of ordering their
appraisals from a website that allows access to three appraisal servicing firms
selected, approved and endorsed by Chase - Equifax®, LSI and Quantrix.
Can you loan the US government some money? The
Treasury announced auctions totaling $58 billion in two- and five- year notes
next week. The Treasury said it plans to sell $34 billion of two-year notes on
Oct. 28 and $24 billion of five-year notes on Oct. 30. It will also auction $6
billion of 4 1/2 year Treasury Inflation Protected Securities on Oct. 27.
Is one better off buying Treasury securities or
mortgage-backed securities? One can do pretty well with MBS’s. Check out
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aKyjTzp9HBtw
(Thank you David M.)
What is the cost of money? For US Bank, it has gone up.
After today their Wholesale Division will increase their extension fee to 2
basis points (0.02%) per day from its current 1 basis point (0.01%) per day
cost. Their maximum extension period is 30 days (if the original lock period is
15 days, the max extension period will be 15 days), and after that the loan
must go to worse case of current lock or market. Two basis points per day equates to .60 in price per month, of course,
whereas the current security markets charge about .250 in price, or about 1
basis point.
US Bank’s Correspondent Division has discontinued the
40 year product term for their mortgage line-up.
Countrywide has come out with a plan aimed at borrowers with
subprime mortgages, or pay-option adjustable-rate home loans, which would
temporarily cut interest rates on some loans to as low as 2.5%. Some
borrowers who owe more than their homes are worth could even see their loan
balances reduced, giving them equity once again in their properties. The idea
is to modify a loan's terms just enough to create a new monthly payment,
including principal, interest, taxes and property insurance, equal to 34% of a
borrower's verified monthly income. Bank of America, who will be slowly taking
the name “Countrywide” out of circulation, says they have obtained
permission for the modifications from the vast majority of the big banks,
investment funds and institutions to which Countrywide sold most of its loans
while continuing to service them. 10 other major mortgage-servicing companies
have been given an ultimatum by the Senate to adopt programs similar to the
Countrywide plan.
What’s ahead next week for economic news? On Monday we
have New Home Sales, Tuesday Consumer Confidence, Wednesday Durable Orders and
the FOMC meeting statement, Thursday (as parents scramble for last minute
Halloween ideas) the 3rd quarter Chain Deflator number, GDP, and
Jobless Claims, and then on Halloween we have the Employment Cost Index and Personal
Income & Spending numbers, along with the Chicago PMI.
How many zeros are in a billion?
The next time you hear a politician (Republican or Democrat)
use the word 'billion' in a casual manner, think about this. A billion is a
difficult number to comprehend, but one advertising agency did a good job of
putting that figure into some perspective in one of it's releases.
A. A billion seconds ago it was 1959.
B. A billion minutes ago Jesus was alive.
C. A billion hours ago our ancestors were living in the
Stone Age.
D. A billion days ago no-one walked on the earth on two
feet.
E. A billion dollars ago was only 8 hours and 20 minutes, at
the rate our government is spending it.
