Tuesday Market Conditions

10/02/2007


More choppy trade today as the employment report looms on Friday.
Yesterday the interest rate markets managed a rally, early this morning the yield curve and mortgages started lower in price as the tight range in the bellwether 10 yr not is likely to hold steady until we see what the employment looks like. Last month the Labor Dept reported August non-farm jobs declined 4K, we believe there will be an upward revision when the Sept report hits; expectations are for Sept job growth to be in the neighborhood of 100K new jobs.

At 10:00 the NAR reported August pending home sales fell more than expected; -6.5% from July which was revised slightly better. Yr/yr sales are down 21.5%; the index at 85.5 is the lowest since the indexes inception in 2001. The bond market saw a slight bounce on the report.

At 1:00 Dallas Fed pres fisher will talk on technology. Not likely to generate any interest from the markets though.

Finally, a voice of understanding has taken on the sub prime mortgage issue and put it in proper perspective. After months of chastising the mortgage lending industry for creating the housing depression (yes depression), with Congress and presidential candidates all over the mortgage industry with talk of reform and more control, as well as making lenders and originators look like con artists; the reality of it has finally surfaced for all to see, and we can thank Alan Greenspan stepping up and calling a spade a spade. It isn't new news, but coming from Greenspan it is worth publicizing. It wasn't mortgage originators that caused this mess, it was investors looking for high returns in a very low interest rate environment. And of course Wall Street firms were only too willing to step up and add huge profits by creating the path to "riches" for investors (mainly hedge funds with greedy investors already well off financially---but they had to have more). "People always say it's the subprime market that created this crisis,'' Greenspan told investors at an event hosted by Bloomberg in London. "It's the subprime asset-backed market'' which did, he said. "As a consequence of that there's going to be some rethinking about collateralized debt obligations.'' "The Wall Street firms were under real pressure to supply asset-backed securities and the Wall Street firms were pressing the lenders to give them more raw material,'' Greenspan said today. "Credit standards just went straight down, and applications for subprime mortgages soared. The consequences of that are evident.'' Let's get off mortgage lenders' backs; investors, hedge funds and Wall Street firms and banks are getting what they deserve; at the expense of homeowners and consumers as the economy heads for possible recession as a result of it all.

Gold and crude oil are seeing selling in early activity this morning as the dollar is doing well against the euro. Gold off over $14.00 and crude was down under $80.00, but has bounced back a little