Friday, December 7, 2007

Quiet day, but subprime worries continue

After all the excitement in recent days, the stock markets quieted down. The markets in Asia & Europe were up following the lead of our market yesterday, they like the subprime fix announced. Today our traders were mildly disappointed by the jobs report from the Labor Department. No big news, maybe the markets need some time to digest recent gains. Dow & NAZ are about even, advancers are slightly ahead of decliners on the big board. Oil fell back to 88 while the Treasury bond remains near 4%. If the Dow holds it will be up 2% this week, not a bad start for Dec.

The subprime "fix" news is getting a lot of attention. There are about 3MM adjustable rate subprime loans, about 19% are past due. Without help more will become past due with higher resets in the coming months. The help is not a quick fix & only applies to marginal loans needing help. At the toll free phone number, callers are told there would be "lots of hoops to jump through" to obtain the five-year freeze. This program is voluntary & will vary depending on the lender. Can you spell, "uh-oh?" Reality is setting in & sounding a lot worse than many had originally thought.

The subprime mess is not only big but global in nature. Mortgages are sold in pools to financial institutions around the world. Asian & European banks have already taken big write-offs on their investments. Northern Rock, the largest lender in UK, has been struggling for weeks trying to remain alive dealing with a huge mortgage portfolio. Countrywide (CFC), our largest mortgage holder, has rebounded to 10, they're still struggling. They know & are trying to prevent more foreclosures which will add houses to an already soggy housing market.

Enjoy the up market this week. Tues, it should be up big after the FED interest rate cut announcement. Then we'll worry about the future.

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