Taking Stock
Stocks jumped way up today on the cool news of the healthcare bill being signed into law. This means less unknowns, and markets like that.
All other markets moved sideways.
In the news today……
Existing Home Sales – fell in February 0.6%, the third straight month of declining sales. The median price of the homes sold fell 2% from one year ago – and that’s the only decent news being reported. The price drop could have been far worse. The National Assoc. of Realtors is now worried that the housing “recovery” may be faltering. I find it amazing that these cool-aid drinkers are just now coming around to start thinking for themselves. I have been warning for months – actually for over a year – that the housing market is in bad shape, and the worst is yet to come. There is a big inventory of foreclosures/REOs and future foreclosures to come. People are starting to walk away from their homes and mortgages in bigger and bigger quantities.
Tonight’s Dinner Conversation…..
Let’s take stock on where the markets are today. My summary would be – pretty darn good. In March 2009, banks crashed, stocks crashed, liquidity dried up, junk bonds crashed, loans were hard or impossible to get, and housing dove. Today, we see all of those markets with the BIG exception of housing having recovered. While banks still aren’t lending like they did before the crash, lending is available for creditworthy borrowers. Stocks have pretty much recovered, and people are feeling complacent about stocks. The junk bond market has recovered as people are looking for higher fixed interest instruments. Housing is the exception – as home prices continue to fall, and mortgage securities (CDOs, etc) are still toxic assets. However, CDO values have recovered from the March lows as people feel better about all the other markets.
A small example of this is AIG. The government has lend AIG $183B. Now that’s not chump change; it’s a huge amount of money. However, with all those assets that the government took as collateral from AIG as part of the bailout, they have reflated to reasonable values. So, a reasonable estimate is that we, the taxpayers, will be out as little as $12B to $20B when it’s all said and done.
However, that prognostication assumes the US economy will continue to recover and grow as it has done the past 11 months. Will it continue? I leave that to you to discuss among yourselves. Just let me say that I see some storm clouds on the horizon.
Here are the last numbers for today:
Dow Jones 30 Industrial – 10,889 (up 103)
10 Year Treasury Bond – 3.68% (up 0.02%)
Euro – $1.3499
Gold – $1104 (up $4)
Oil – $81.91 (up $0.31)
Gasoline – $2.26 (no change)
