Bear Market
Stocks fell again today, and this could be the beginning of a long slide downward, breaking the sideways movement we’ve been in for the last few months. Those experts who follow the DOW Theory are saying that the stock market is now definitely in a BEAR market. The DJ30 fell 154 points today.
Bonds continued their outstanding move with the 10 Year Treasury moving down to 3.44%, falling 0.10%. This is great news for mortgage rates, so let’s hope the treasury stays this low or lower for awhile.
Oil traders moved oil prices up again today, with oil reaching $108/barrel during the day, and closing at $107.90. This is a great showing of speculation moving the market.
In the news today….
Are you interested in what big investors are doing? Well, Wilbur Ross just purchased about $1B of municipal bonds because he thinks they were great interest rates, and he was able to find a motivated seller. The seller had to sell some of its assets because they were being called by banks to repay their loans. Nice if you can do it.
Rumors today said that Fannie Mae and Freddie Mac were in very bad shape financially, and would be asking for a government bailout in the near future. Whether this is true of not, it shows how nervous the market is.
Investment banks are “de-leveraging” the portfolios of hedge funds because they are calling their loans. When the loans can’t be repaid, the banks are taking the hedge fund’s assets, and auctioning them off. This is crushing the value of whatever securities they are selling. This helps you understand the strains on the financial system going right now. This is a truly desperation situation going on RIGHT NOW.
Part of the “de-leveraging” is in the area of gold. When gold is part of a hedge funds assets, the forced sale of the gold is causing gold to go down. If you’ve noticed the big swings up and down in gold, you now understand the big down part of those swings. Now you know who’s selling.
The CEO of MBIA (the insurer of bonds) said they aren’t going out of business – as is rumored in the market today. He said they had plenty of money to pay for any claims. (But, does he know what claims are really coming in???) Here is the really interesting part of this story. The interest rate that MBIA is charging to insure bonds is currently 16.9%. That’s outrageous. The interest rate used to be 1.5% a year ago, and went as high as 33.75% a couple of months ago. I guess the good news is that the interest rate is coming down. The excessive charge for insurance is causing great strains to the borrowers (who pay the insurance) – and they are the cities, counties, utilities, etc in your neighborhood.
Here are today’s Numbers:
Dow Jones 30 Industrial – 11,740 (Down 154 points)
10 Year Treasury Bond – 3.44% (Down $0.10)
Euro – $1.5345
Gold – $972 (Down $2)
Oil – $107.90 (Up $2.75)
Gasoline – $2.71 (Up 0.02)
