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“The ABCP market, which had helped finance the housing boom, fell $4.6 billion to $883.7 billion following last week's $11.0 billion decline, according to Federal Reserve data released on Thursday. On the other hand, the overall U.S. commercial paper sector grew for a fourth straight week to $1.872 trillion in the week ended Oct. 23, up $6.2 billion from a week earlier, the Fed data showed. Commercial paper is a vital source of short-term funding for daily operations at many companies, but its issuance largely ground to a halt as the crisis that began in risky mortgages led to a broader credit crunch.” Although banks appear to be “out of the woods” as the commercial paper market recovers, asset backed commercial paper, which is the source of funding for mortgages, is still shrinking. Score: banks-1, homeowners-0. The fallout from the mortgage crisis is spreading. The price tag to investors and financial institutions on this debacle is estimated at $400 billion, far larger than the last real estate crisis in the early 90’s. Homeowners, will suffer the greatest, however, with a $2 to $4 trillion dollar price tag put on the loss of home values. So far, this is less than the $7 trillion loss to stock investors earlier this decade, but don’t treat this problem as if it were over and done. An equal or greater number of adjustable rate mortgage resets are due in 2008. This morning Countrywide Financial reported a loss of $1.2 billion. The majority of this loss ($718.6 million) came from the sale of loans and securities. Its stock soared 26% on the announcement that better times are ahead. Is this really happening? Japan’s Nikkei decline is underway…
Shanghai market stumbles.
The Shanghai market stumbled 4.8% yesterday, making the total decline 9% from its peak earlier this month. The drop was attributed to a new Initial Public Offering of stock by Petro China, the next new thing. Many advisors and analysts admit that there are no more bargains in this market, but believe that the market run has further to go even though share prices are still up 90% from the beginning of the year. The market has weakened.
Treasury bonds tread water:
For sale: Two Million Empty Homes.
The Census Bureau report puts the number of vacant homes for sale at 2.07 million in the period, up about 2 percent from the second quarter, and 7 percent above year ago levels. In the meantime, existing home sales tumbled another 8% in September. How far will the dollar decline go?
Next stop for gold $800?
Gasoline prices catching up with crude oil.
The Energy Information’s “This Week In Petroleum” has some interesting observations. Natural gas users can exhale now.
Californians coming home. I have several family members living in Southern California. I just learned that one brother-in-law returned home yesterday in Poway and found his home untouched by the fire. I am praying that the rest of my family living there have the same experience. 350,000 families were driven out of their homes while the fires raged. Now they are coming back. Let us do what we can to lend support to those in need of rebuilding or relocation. Losses are estimated in the hundreds of millions for businesses and homeowners.
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INFORMATION The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
…even
though the market rose last night. The 
Long-term
Treasury prices reversed course several times Friday, moving lower as
the stock market powered ahead, then rising at points when the equities
rally seemed to falter. Low-risk Treasuries often are in demand when
stocks seem too risky to investors. But on Friday stocks were more in
favor, although trade was choppy in both markets.
The
number of 
There
are 
Everyone
who is knowledgeable about gold agrees that it is overdue for a
correction. But no one is ready to say when. “Just not yet.” Seems
to be the answer. Few are brave enough even to mention a pullback. Yet
these trends don’t go forever. Those familiar with market patterns
suggest the time is ripe for a pullback. But in a “melt-up,” markets
can extend. This extension may be pushing the limits.
One
thing technicians look for is whether similar commodities are acting the
same. For example, oil is hitting new all-time highs, while gasoline
languishes. This suggests that one or the other may break down. In this
case, we don’t want to see the price of gasoline going much higher,
since it means that the trend for both commodities may continue.
