There's nothing better than to hear that the lending continues and the debt keeps mounting up. And what better thing to invest in than folks who've already been thru bankruptcy. But then again, there's the positive - real estate values are saved! (Talk about marking to price/value slight of hand). Well, for once, I agree with Bush in vetoing this nonsense. Despite what Barney Rubble says, things would be better if prices adjusted and those folks sitting on the sidelines with the down payment and a steady job were able to buy - rather than continuing ownership by those that obviously don't know what they're doing. Banks would be no worse off either.

And what about that moral hazzard thing? Do we just trash that? And what do we - or the Fed - do if "keeping folks in their homes" results in a second round of mortgage failures? Should we lower the mortgage balances even more? (Has anybody recently checked the U.S. Capitol for air quality?)

I don't know what this has to do with T/A; but T/A doesn't live in a vaccuum, so it must mean something. It seems we have a policy these days of dealing with financial 'mishaps' by throwing money at them - i.e., taking on more government debt (since the U.S. government really has no wealth whatsoever - unless they want to sell the Grand Canyon!). Problems are then moved out of sight/under the rug. And the 'players' agree to keep doing what they're doing. This may work in the short term (like the consumer's financial plan with home equity loans and credit cards); but it creates a false sense of well being. We are more and more broker and broker.

Good Morning everyone... 

  Apparently most of the exchanges on the planet had a bad hair day last night.  Both Asian and European stock markets where down in overnight trading with only a few exceptions.  S&P and Nasdaq futures trading indicates that the U S markets will have a nasty open.   Norbert has already commented on the 2 year treasurey rate chart.  I can add that the 5 yr and 10 yr rate charts also have double tops.  In addition to all that, the USD is dropping against the Yen and the Euro, while oil and precious metals are rising.

A quick look at a couple of major index charts indicates that if we test the march lows, we will have had about a 10% correction.

uh 

and I haven't even had my coffee yet this morning... now you make me want to put something in it.  Maybe something Irish... how is Ireland doing?

I don't mind the oil and gold... I am over-weight there... but it can't carry my whole portfolio... does ease the pain a lot, though.  Financials just continue to disappoint, don't they? 

Seriously. I don't blame the messanger... keep up the good work and keep us informed.  I can hope for better news, can't I?  My micro caps have just been decimated...  One of them had horrible earnings in the last quarter, because they didn't hedge the dollar. 

I was wondering if we might see some bad quarterly reports from all those companies that have been benefiting from the weak dollar in foreign business.  That would hit a lot of the market favs of recent months.  Any thoughts on that?

I wish foreign markets were doing better...

erryl

erryl:

 Financials just continue to disappoint, don't they? 

I was wondering if we might see some bad quarterly reports from all those companies that have been benefiting from the weak dollar in foreign business.  That would hit a lot of the market favs of recent months.  Any thoughts on that?

erryl

I still believe that at least as to the major Financials their future earnings model is broken and therefore I avoid them. In many cases 75% of their "profits" came from dealing in these exotic instruments which have crashed so ignominiously. That has two effects it means past earnings are somewhat illusory and it is not clear what their future earnings stream will be or even where it will come from. In short what replaces the profits from the now defunct high margin, high volume businesses? A broken business model is not a good place to invest in my opinion

 I don't think that the dollar will have an adverse effect on exporters earnings in Q3 or Q4 at least on a YOY basis. First of all the $US may or may not have bottomed.That is unclear.  But to have an adverse impact on earnings comparisons of a year ago the $US would have to roughly gain 10% from here for Q3 and about 5% or more for Q4. That is unlikely IMHO and if that conclusion is right the $US will provide a favorable wind on a comparative basis not adverse. Of course what the "analysts" may have modeled into their assumptions is anybody's guess including theirs.:-)

On the Barney Frank bill, Bernanke indicated support for this kind of action.  I prefer targeted initiatives to big rate cuts and helicopter money (think "tax rebates") because they get to the heart of the problem without decimating the US dollar.

If I understand the bill correctly, the idea is that banks accept a mortgage write-down and the homeowner gets an affordable fixed-rate mortgage. It's a compromise.  Up to 500,000 homeowners - residents only - might get to keep their homes.  That's a lot.  If we're going to see 500,000 foreclosures, I'd rather have this plan.  If there is home value appreciation later on, the profits do not go to the homeowner. 

This does not seem so different from the Bear Stearns intervention to me. 

While some homeowners certainly got in over their heads, there's a thin line here between individual fault and a regulatory failure related to lending abuse.  Coupled with tighter lending rules - such as those proposed by Hank Paulson - the Frank bill would go a certain distance to correcting the damage of the past few years.

I want financial discipline, but don't think that this is a bad bill.  However, I have not studied it enough to be sure.

We should know more when the weekly charts are available, but I rolled out of most of my long positions today and into GLD, SLV, SLW, and cash.  I am curently sitting on about 40% cash with the thought of shorting oil with DUG.  I doubt that the PPT will come to the rescue of oil and it looks a little overbought right now.  I will probably wait until monday before I try it.

uh 

norbertc:

If I understand the bill correctly, the idea is that banks accept a mortgage write-down and the homeowner gets an affordable fixed-rate mortgage.

How would that work? My understanding is that most of these mortgages have been packaged and re-sold many times to the point the homeowner doesn't know who owns his mortgage. As a result the right to agree to a mortgage reset is diffused or unclear and in the normal case is a multi-party discussion and a debate as to who has authority to do what. I have been led to believe there is no simple reset mechanism.

 Personally I favor a cheaper solution: let's mandate that these homeowners grow corn instead of grass as a cash crop and give then a subsidy for doing so. 500,000 homes probably adds 200,000 or more acres of corn production. Solves two problems at once.:-)

DeerIslander:

How would that work? My understanding is that most of these mortgages have been packaged and re-sold many times to the point the homeowner doesn't know who owns his mortgage.

How dare you ask me a tough question like that? 

All I know is this is that the FHA would refinance about $400B in mortgages if the current holder of the loan agrees to reduce the principal.  Don't go asking me "how this" and "how that".  Was Columbus asked on what date he was going discover America?  No. 

You just need to have faith.  Anyway, I digress. 

The Republicans (excepting for their Florida and California representatives) are digging in their heels now that the economic data has improved so much.  Clearly these people don't know what we know.

Your proposal to solve America's energy crisis via a revolution in home gardening is very original.  Me, I just walk everywhere. 

DeerIslander:

let's mandate that these homeowners grow corn instead of grass as a cash crop 

 But...an ounce of grass is worth so much more than an ounce of corn that it'd be hard to persuade the homeowners :-)