“I compare you to a kiss from a rose on the gray, the more I get of you, the stranger it feels, and now that your rose is in bloom, a light hits the gloom on the gray” – Seal
Mustard seeds, blooms on the rose, chutes of green, the end of the Depression, the bottom of the market, St. Patty’s Day bear rally, return of a bull market, historically low mortgage rates, record high foreclosure rates, foreclosure relief, $1.4 trillion dollar federal deficits, 8.5% unemployment rate, at least 650,000 jobs lost each of the last three months, a strong dollar, mark to market relaxed, bank bailouts, federal debt at 80% of GDP, $ 1 trillion of IMF support for under developed countries, Madonna denied adoption rights (just slipped that one in to see if you’re paying attention).
Omigosh – talk about information overload! I watch the financial news far too much. It reminds me of a herd of cows following a feed truck with a leak in the truck bed. The cows want the feed. The truck driver is wandering through the field looking for a dry spot to park. The cows and the truck wander aimlessly through field, and it’s pouring down rain.
The financial markets are behaving much the same way. They seem to wander. Everyone is tired of the “gloom on the gray” and wants to acclaim the bloom on the rose. We have two or three weeks when bad news produces good results, and two or three weeks when bad news produces bad results. We are all looking for some sign of recovery, or some positive results from all of the money that our government is throwing at this problem. And the bad news just keeps pouring down.
Are there any blooms, or any buds on the vine? There are a few.
Mortgage rates are at incredibly low levels – in the mid 4’s. Given the outrageous financing needs that our government faces, I just do not see how they sustain these low levels. If you have not yet refinanced, hurry. If you need and can afford to buy a house, now is the time.
There are some indications that houses are beginning to sell. Realtors and mortgage companies are reporting increased activity. Prices are still below replacement cost in most areas of the country. The housing affordability index is at an all time high. New construction has been at a slow pace for almost a year. Foreclosures are still pervasive, but are showing some sign of stabilizing. As supply and demand stabilizes, home prices will go up. I believe there is little doubt that mortgage rates will go up – within the next year. If you need or want to buy or refinance your house, the bloom is on the rose.
Say what you will about the plan. It’s not perfect. But we finally have a plan. Banks are actually starting to see some operating profits. The government’s toxic asset plan and relaxation of mark to market rules will diminish the huge loan losses. Banks will soon begin to report decent quarterly operating profits – perhaps even this quarter. Once the banks sustain that profitability for a few quarters, we will see private capital start to come back into the banks. That will further the process of improving credit availability. It’s not a bloom, but there’s a bud on the vine for the banks and the availability of credit.
The notion of a world economy is disconcerting. It’s also a reality. Our country’s deficit is too large for us to be arrogant and protectionist. Let’s face it. We’re in better shape than most of them. But we badly need the rest of the world’s money to finance our bad habits and expensive mistakes. We also need to sell them our goods and services. I read where Rosetta Stone Co. will soon complete a $100 mm IPO. It’s time to brush up on your Arabic and Chinese. The recent G20 meeting signaled a new era of international cooperation for the economic good of all countries. That is a change of recent world status for our country, and a bloom on the rose.
There remains a “gloom on the gray” that bothers us all – job loss and unemployment. I think everyone would like to believe that the monthly job loss numbers have stabilized at the lowest levels we will see. But no one seems ready to say they will return to normal numbers. That’s the most positive way that one can think of such gloomy numbers. Unemployment stands at 8.5%. It is hard to imagine that it will not reach 10%.
The last issue is “the gray” itself. That is inflation and federal deficits. We are entering a gray zone in which we have never before been. Everyone likes to compare this to the great depression of the 1930’s. I don’t see it. Government and its institutions, the demographics and education of world population, the nature of industry and the point from which we are coming are all too different. Only time will tell. Our vigilance against run away inflation is the easy part. What to do is the problem. The speed and immensity of the fiscal stimulus could produce equally fast and immense inflation. If the Fed raises short term rates to fight inflation (and the yield curve flattens), they will harm the already weakened bank and financial sector. If we have to increase intermediate and long term rates to attract money to finance our federal debt, this could slow economic growth. This is the gray zone. A lot of smart and well educated guys are trying to figure this out. My guess is that we will just have to watch and be fast and graceful on our feet – something at which our government has never been good. Is it just me, or is the new group in Washington better dancers?
Mustard seeds, blooms on the rose, chutes of green, the end of the Depression, the bottom of the market, St. Patty’s Day bear rally, return of a bull market, historically low mortgage rates, record high foreclosure rates, foreclosure relief, $1.4 trillion dollar federal deficits, 8.5% unemployment rate, at least 650,000 jobs lost each of the last three months, a strong dollar, mark to market relaxed, bank bailouts, federal debt at 80% of GDP, $ 1 trillion of IMF support for under developed countries, Madonna denied adoption rights (just slipped that one in to see if you’re paying attention).
Omigosh – talk about information overload! I watch the financial news far too much. It reminds me of a herd of cows following a feed truck with a leak in the truck bed. The cows want the feed. The truck driver is wandering through the field looking for a dry spot to park. The cows and the truck wander aimlessly through field, and it’s pouring down rain.
The financial markets are behaving much the same way. They seem to wander. Everyone is tired of the “gloom on the gray” and wants to acclaim the bloom on the rose. We have two or three weeks when bad news produces good results, and two or three weeks when bad news produces bad results. We are all looking for some sign of recovery, or some positive results from all of the money that our government is throwing at this problem. And the bad news just keeps pouring down.
Are there any blooms, or any buds on the vine? There are a few.
Mortgage rates are at incredibly low levels – in the mid 4’s. Given the outrageous financing needs that our government faces, I just do not see how they sustain these low levels. If you have not yet refinanced, hurry. If you need and can afford to buy a house, now is the time.
There are some indications that houses are beginning to sell. Realtors and mortgage companies are reporting increased activity. Prices are still below replacement cost in most areas of the country. The housing affordability index is at an all time high. New construction has been at a slow pace for almost a year. Foreclosures are still pervasive, but are showing some sign of stabilizing. As supply and demand stabilizes, home prices will go up. I believe there is little doubt that mortgage rates will go up – within the next year. If you need or want to buy or refinance your house, the bloom is on the rose.
Say what you will about the plan. It’s not perfect. But we finally have a plan. Banks are actually starting to see some operating profits. The government’s toxic asset plan and relaxation of mark to market rules will diminish the huge loan losses. Banks will soon begin to report decent quarterly operating profits – perhaps even this quarter. Once the banks sustain that profitability for a few quarters, we will see private capital start to come back into the banks. That will further the process of improving credit availability. It’s not a bloom, but there’s a bud on the vine for the banks and the availability of credit.
The notion of a world economy is disconcerting. It’s also a reality. Our country’s deficit is too large for us to be arrogant and protectionist. Let’s face it. We’re in better shape than most of them. But we badly need the rest of the world’s money to finance our bad habits and expensive mistakes. We also need to sell them our goods and services. I read where Rosetta Stone Co. will soon complete a $100 mm IPO. It’s time to brush up on your Arabic and Chinese. The recent G20 meeting signaled a new era of international cooperation for the economic good of all countries. That is a change of recent world status for our country, and a bloom on the rose.
There remains a “gloom on the gray” that bothers us all – job loss and unemployment. I think everyone would like to believe that the monthly job loss numbers have stabilized at the lowest levels we will see. But no one seems ready to say they will return to normal numbers. That’s the most positive way that one can think of such gloomy numbers. Unemployment stands at 8.5%. It is hard to imagine that it will not reach 10%.
The last issue is “the gray” itself. That is inflation and federal deficits. We are entering a gray zone in which we have never before been. Everyone likes to compare this to the great depression of the 1930’s. I don’t see it. Government and its institutions, the demographics and education of world population, the nature of industry and the point from which we are coming are all too different. Only time will tell. Our vigilance against run away inflation is the easy part. What to do is the problem. The speed and immensity of the fiscal stimulus could produce equally fast and immense inflation. If the Fed raises short term rates to fight inflation (and the yield curve flattens), they will harm the already weakened bank and financial sector. If we have to increase intermediate and long term rates to attract money to finance our federal debt, this could slow economic growth. This is the gray zone. A lot of smart and well educated guys are trying to figure this out. My guess is that we will just have to watch and be fast and graceful on our feet – something at which our government has never been good. Is it just me, or is the new group in Washington better dancers?
0 comments:
Post a Comment