The Week that Was: The Markets

Many investors and traders are glad this week is safely in the rear view mirror.

After resisting poor economic news and even poorer earnings forecasts, the equity markets finally succumbed to a painful sell off. Following are what the numbers look like (for the week ending June 27): the Dow: down 4.1% to close at 11,346; the S&P 500: down 2.9% to close at 1,278; the Nasdaq: down 3.8% to close at 2,315.

On Friday, money fleeing equities found solace in the treasuries with the 10-year treasury price rising 18/32, or $5.96 per $1,000 face amount, sending its yield down 7 basis points to 3.96%. For the week, the yield was down 20 basis points, the biggest one week decline since February.

Oil and energy prices continue to confound. Oil hit a intraday high of $142.99 before settling at $140.25. Oil is up 45% year-to-date. Cash continues to seek the safety and inflation hedge that gold offers. Gold rose $16.20 to close at $931.30.

Pundits continue to exclaim that we still have not seen the bottom and more pain is coming in the form of increasing oil and energy costs and lower equity values. Particularly vulnerable has been the financial sector. Most of the big name banks and brokerages are testing 52-week lows with "experts" claiming they are still overvalued and further declines are forthcoming. It's hard to argue with them until the market shows some resilience and buyers come in looking for oversold value plays. Most investors and traders will tell you that they will sit on the sidelines until the market shows signs of stabilizing and only then will they wade back into equities. Usually, by the time that happens most have missed very good opportunities.

Fed Leaves Rates Unchanged

At the Feds regularly scheduled FOMC (Federal Open Market Committee) meeting on June 25, 2008, the Fed left it's fed funds target rate at 2%, as widely expected. The Fed's statement indicated more concern over rising inflation and less concern over economic growth. The following url will lead to the actual statement on the Board of Governors website:

http://www.federalreserve.gov/newsevents/press/monetary/20080625a.htm

The Markets reaction to the statement was subdued as most participants anticipated that the Fed would stand pat on rates. An hour after the release of the statement, equities were off their highs and the treasuries have strengthened, sending their yields lower.

Only one Fed governor, Richard W. Fisher, voted in favor of raising the target rate. I think Mr. Fishers vote in favor of raising rates is indicative of the direction the Fed will likely go in the near future. It was probably too soon to raise rates at this meeting, but as we go forward, the need to raise rates will only increase, and the Markets will likely expect it.

Greenspan's Comments are laughable

The headlines blare out into the ether "Economy on brink of recession, Greenspan says".

http://www.reuters.com/article/businessNews/idUSJAT00371420080624?feedType=RSS&feedName=businessNews&rpc=23&sp=true

You might ask yourself why I say they are laughable. Well, well my friends of gloom and doom it was only a few short years ago that Alan Greenspan was the wizard of the goldilocks economy and he could do no wrong. I find it funny that the man at least on the surface of the situation most responsible for the structural problems he laments about says that he was responsible for nothing. (Please read excerpt from article in case you do not have time to read the link for the article above.)

Greenspan said he did not believe arguments that the housing problems in the U.S. were due to interest rates being too low during his tenure. "As far as I'm concerned, the data do not support it (that argument). The housing bubble is clearly an international phenomenon."

Hmmmm! Mr. Greenspan seems to forget that the USD had become the reserve currency of the world. It would allow lesser minds, such as mine, to assume that low interest rates on borrowing of the USD would help to fuel the speculation not only in housing in USA but in markets all over the world. Not to mention the practice of Wall Street buying up all sorts of paper and debt instruments. Then slicing, dicing, and repackaging them to sell in the open markets to friends and supposed foes alike. Ever ask yourself why there were buyers? Answer, because the good ol' USA was still seen as a Nation that looked like it knew what it was doing. The world had a begrudging respect for our business and financial institutions and people who ran them. To be simple about it. They trusted our leaders in business and finance knew what they were doing! Well Kiss that trust good bye, it went up in smoke with the housing and mortgage industries. We are now in uncharted territory. And unfortunately for Al he's the poster boy. He let the guests drink from the punch bowl long after the party should have ended.

I am not even going to try and delve into detail about the housing market in the United States and what caused this train wreck. Mr. Greenspan is just one culprit of many whom should have known better all the way down to the borrower who should have known they were living way beyond their means. We will save the vitriol for the remaining players in and around that industry for later posts. Suffice to say Greenspan only wants to be remembered for the good times. Unfortunately sometimes the good times are at the expense of others at a later date.

My only advice for Greenspan and his crowd of cheer leaders, albeit much smaller since he left office, are these words which at the moment I do not know who to give credit (possibly Mark Twain).

"When you take responsibility for the sunshine, you better be prepared to take the blame for the rain!"

Well Mr. Greenspan, it's raining.

Asland

Fire in the Economy

What is going on in today's economy. Is it the WAR or is it Inflation or is it just stupidity in Washington. You will see over the next coming weeks and months discussions about the weaknesses in our leaders. Markenomics is going to discuss these topics and more. Markenomics with authors Raider Mike (Mike Hurtado also Michael Hurtado) and Road Rage will contribute to making Markenomics a insightful blog to read and follow. Economic and political commentary will be the most discussed topics. Look for Mark Zinman of NMZ Financial, a home loan residential mortgage company and mortgage broker of Lafayette, California and the Walnut Creek area, and the broader Bay Area to contribute to discussions on home loans and mortgages. Discussions on mortgages, home loans, equity lines of credit, FNMA, Freddie Mac, the two GSEs, and other big mortgage related finance companies. Raider Mike will analyze the market place and the influence these companies will have on the financial system and the economy as a whole. See Through the Forest is the name of the url and it's name is exactly what it sounds like: to see through the forest and glean what we can from what is happening in the U.S. economy and it's impact on you and your mortgage and home finance needs. This is also a mortgage and real estate blog for the Bay Area of California, Contra Costa County real estate and mortage and home loan information and beyond. Lafayette, California real estate and mortgage home loans will be discussed as well as mortgage rate quotes, not just in Lafayette, but Dublin, Pleasanton, Pleasant Hill and Orinda. Orinda real estate and home loans will be discussed. All of the communities that make up Contra Costa County real estate and mortgage home loans. Lamorinda home loans and real estate. Lamorinda is a combination of communities of Lafayette, Moraga, and Orinda.