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Current PULSE of the Market -
WOLF, Am I crying or are you afraid? The world is voting on the US, as the dollar continues to reach new lows since the records began in 1967. The dollar is being treated like one of Britanny’s children and the parents are still out shopping. OK, think Jack Nicholson’s famous statement, “ You can’t handle the truth”. If this resonates for you, then its best to stop reading. As a caveat to my mother’s advice, who tries to tell me, “ If you don’t have anything nice to say, then don’t say anything at all”. So, cautiously, the good news, mom, is unless we understand what’s happening we are destined to be ruled by circumstances, brewing that will undermine our well being and way of life. Rather than mimic silence, understanding the forces in economic motion, will require action to navigate in most uncertain financial markets soon to ensue. Can you think economic – geopolitical, war ? Can you face the wolf? Comments heard on CNBC, exclaiming talk of a return to international debt being settled in gold rather than the dollar is cause for serious review. “Paper currencies irreverent”, being the underlying message haunts auspiciously towards a surge on real assets; ie: gold, copper as a more stable basis of exchange. Gold eclipsing the 1980 previous highs, trading above @$ 830 an ounce sounding a breakout bell on the shiny substance we hold so dear. Within the grand strategy design, we confront a global contracting credit environment. Next week’s, Financial Accounting Standards Board ( FASB) rules on # 157, which deals with an obscure little area of the market concerning what is called level 3 assets. Within this category are some estimated $ 750 Trillion in derivatives. ( Keep in mind that this number was @ $ 5 Trillion five years ago.) Complicating the analysts is the general misunderstanding with these off balance sheet items, which are conveniently only footnoted, BUT, which by way of NEW mandated disclosure may impact directly on balance sheet results. In an effort to comply with the Basel II accord ( the rules for the BANK system) which further requires additional disclosure and unified valuing ( almost impossible), and becomes imposed law, January 1, 2008. Banks are scrambling to tackle this issue, which few really understand. The unlayering and paper-trail to these arcane instruments, if sold for value could conceivably deplete liquidity to the money system. Warren Buffet states, “If you want to know the value of something, sell a little bit of it”. Yes, it gets fairly complicated, so let's digress to another issue of concern. Bond pools from A+ rated home mortgages originated in 2006 are trading at @ 76% on the dollar. Consider banking 101. When you take a dollar and deposit it in the bank, the bank in turn can then loan @ 95% of that dollar for such things as new home loans. SO, the bank must keep @ 5% on reserve. If the 95% difference is loaned out and then gets ‘ marked to market at 76% then the effective reserves on deposit must go UP. Now when the original dollar that you deposited resulted in that bank loaning out $95, that means that another $ 95 gets deposited into another institution and can loan out 95% of that amount, so that it is generally assumed that each $ 1 on deposit results in creating @$ 20 in loans, within the banking system ( not counting the influence of the $ 750 T in derivatives) . IF reserves must reflect the value of the outstanding ( loans / assets) THEN, credit must shrink dramatically, UNLESS a serious cash infusion/ or bail out is put on the table. The SIV’s- Sovereign Investment Funds being discussed point to our new partners in ways that become geopolitical. An example, may be that the bank system needs to replenish @ $2.5 Trillion in the soon to be marked down mortgage bond arena. The money may come from monies pooled into these SIV’s. The origination of country and source of funds can only point to oil selling entities or currency benefactors( Saudi Arabia, Soviet Union, China, Canada and other nameless large dollar providers), who have the capabilities for such infusions. DO you know or will you care who bails us out when confronted with a bank holiday? So this writer, is concerned that the $ 850 billion in subprime loans are coming due this month, with an additional @ $ 350 billion per quarter still coming to get rolled over, into a marketplace that is less than forgiving. So the math of going from @ 2 - 5.5% in payments goes to 6 % - 12.5%, may suggest further foreclosures and downward pressure on valuing the underlying bonds associated with these loans. Congresswoman, Sanchez, from Orange County, today reports that 33% of all homes for sale in Anaheim and Santa Ana, CA, are results of foreclosures, certainly points towards downward pressure in home prices in these areas. Expect FNMA to get a boost from the prevailing limits of $ 417,000 to at least $ 500,000 to offer some relief, as loans over $ 417,000 are the ones slated to get real expensive, unless you have pristine credit, ample loan to value and can prove your income. The Canadian dollar has appreciated 68% in five years versus the US, after being stable for about 30 years. It costs over $ 9 a gallon for gas in London. The US dollar is off almost 50% in value versus the Euro in @ 7 years. Oil has appreciated almost 1000% over the last 13 years, yet we are told inflation is under 3 %. Is the plan is to make the US a 3rd world country, or is just turning out that way ? Please don’t shoot the messenger, the numbers and spending policies, need to be dealt with by a rational non partisan group. Check the accuracy of these mortgage comments as we have accurately forecasted and explained the economical realities, months in advance, just call for archived comments. We still have the best rates in town and are able to shop your loan parameters to hundreds of national lenders. We normally can save you thousands, so let us compete for your trust and business. Lock up your 30 year fix now. Now in our fourteenth year. We are small but mobile able to quickly adapt to market changes. Amazing, but this author sees extraordinary issues, never touched and mostly misunderstood. ~ Government ownership is never mentioned nor rarely credited towards ongoing business expenses. Simply tap the well in democratic republic acknowledgement. Challenges wholeheartedly welcomed on this subject perhaps, public debate. References furnished on request. Interest only loans or fixed pay type loans for five years still are popular. The difference between the 5 year terms and 30 year terms is only about an eighth higher to rates, while historically, this spread is higher. This true if full doc - not true when add on fees for stated income are applied, often adding 2.5 points to fee in many cases. Did you know your share of the National Debt is $ 29,948 ? (everyone) based on a $ 9 T debt? Check our best 30 year Interest Only fixed rate at 6.875% - Jumbo! Check Out our Unbeatable stated income loans to $ 9 Million. 5 yr Fix to $ 1 million ! 30 year fixed rate at 6.25 % and better ! with no loan origination points and stated income documentation when under 80% LTV - + OK for Non Occ too add @ .375 to rate! ... Interest rates shown are for example only assume zero origination points based upon fully documented loan applications with credit scores better than 680. Rates subject to change without notice. Thousands of loan programs available! Conforming SFR (Single Family Residence) limit is $417,000. We have some lenders that will let you 'relock' at a lower rate If the rates drop before you fund! Call for details.... All indexes are effective as of November 08, 02:00 p.m. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
