Jobs, Mortgages, FDIC
Stocks finally went up today, based on news that China is considering it’s own stimulus package. If you believe a rumor like that would move the market, I have bridge to sell to you.
Bonds increased in interest rates again, and this is much more dangerous to the future economy than where the stock market ends up. If interest rates go up another half point, then mortgages will just be so expensive that people won’t buy that first time home.
The Dollar lost a little value today, and so did Gold. Gold did not turn around yet, but when it does, it will be a “buy” signal.
Oil and gasoline recovered all their lost territory, so prices are just bound to bounce up in the near term.
In the news today….
FDIC – How safe is your money in the bank? Fairly safe, but there could be a bump in the road. The head of the FDIC said it was running out of money, and could be out of money in 2009. The solution??? Charge all banks an additional fee to go to bolster the FDIC fund. The smallest banks are outraged. The fee could wipe out half to all of their 2009 profits. But, don’t worry. Congress would always pony up more of your money to cover FDIC losses if the fund ever goes negative.
Job Losses – 697,000 jobs were lost in February – more than in January. February is on Obama’s watch – so he has to take the heat for the big number. His policies were well known before February, and could have stopped the layoffs, but businesses just don’t have that much trust. January’s numbers were revised upward from 522,000 job losses to 614,000 job losses. The trend is going in the wrong way for the economy to look like it’s going to turn around soon.
Underwater Mortgages – One if five homeowners with mortgages are underwater in the US. That’s 8,310,000 homeowners who are underwater. Remember that the cause of the current economic laments come from the housing price meltdown. As more people go underwater, the number of foreclosures and short sales will continue to increase, and house prices will continue to decrease.
Home Values – The total value of all homes in the US was $21.5TRILLION last September, and now it’s $19.1TRILLION. From an absolute deflation amount, homes have lost $2.1TRILLION – now that’s a lot of loot. Here is another little tidbit. Half of that loss is in the state of California.
Here are the last numbers:
Dow Jones 30 Industrial – 6875 (up 150 points)
10 Year Treasury Bond – 3.01% (up 0.07%)
Euro – $1.2660
Gold – $907 (down $7)
Oil – $45.38 (up $3.73)
Gasoline – $1.38 (down $0.06)
Nonsense. It was never about housing. It was about leverage occurring everywhere. In hedge funds, in Asia, in the USA, Eastern Europe, homes, credit cards, anything.
DE-leveraging is the issue here, not underwater mortgages. There’s so much more to delevarage and mortgages are only a small part of it.
Do you know how much hedge funds are leveraged ? They typically like high cash flow companies, lots of people, lots of products made. If those companies go bally up that means tons of people without jobs.
Banks do not even know WHAT they have in their books, simply because the mathematical models they used to describe their assets are no longer valid. If you do not have a model to describe it.. then what it is that you have ? Sigma ? Alpha ? Any other parameter ? Then… how do you value it ?
Those are the underlying problems that go way way beyond mortgages.