Well,
here we are on Friday again and I’m trying to figure out how to
summarize all that’s been happening in the mortgage and financial
worlds. I could write a book about it, but I won’t (at least not
today….)
here we are on Friday again and I’m trying to figure out how to
summarize all that’s been happening in the mortgage and financial
worlds. I could write a book about it, but I won’t (at least not
today….)
So, here goes:
The week started out with Wachovia
(the 4th largest bank in the country) announcing that they were getting
out of wholesale lending. That started a lot of people wondering how
bad things were at Wachovia because Indymac announced that on a Monday
and by Friday they were shut down. On Tuesday, Wachovia announced
that they lost a LOT of money ($8.9 billion to be exact) in the 2nd
quarter. But guess what, their CEO stood up and said, “I’m confident
that we’re going to be fine,” and their stock went up.
(the 4th largest bank in the country) announcing that they were getting
out of wholesale lending. That started a lot of people wondering how
bad things were at Wachovia because Indymac announced that on a Monday
and by Friday they were shut down. On Tuesday, Wachovia announced
that they lost a LOT of money ($8.9 billion to be exact) in the 2nd
quarter. But guess what, their CEO stood up and said, “I’m confident
that we’re going to be fine,” and their stock went up.
Then we move on to our dear friends at Washington Mutual
and they only announced a loss of $5.9 billion and announced that they
were going to initiate cost cutting measures that will save them $1
billion. Oh and their CEO stood up and said, “We aren’t going to need
to raise any more money.” And their stock went up.
In the interest of full disclosure, Fifth Third
announced our earnings (losses) for the quarter. Compared to these
two, we did quite well, but we didn’t do as good as we’d like. We
came in down $202 million for the quarter. But our CEO stood up and
said, “We’ve made adjustments, we’ve raised additional money and we’ll
be fine.” Guess what our stock did? Yep, it went up.
Existing Home Sales
came in lower than expectations. If you’ve been reading this for a
while, you know my feelings on the year over year comparisons. We’ve
moved into a new market and comparing last year to this year is like
comparing me to Tiger Woods. There is no comparison because we aren’t
even on the same playing field.
Weekly unemployment claims came in higher than expected.
National City
came out and announced a huge loss for the 2nd quarter – $1.78
billion. Their CEO stood up and said (Well, you get the picture……)
came out and announced a huge loss for the 2nd quarter – $1.78
billion. Their CEO stood up and said (Well, you get the picture……)
Washington Mutual
had to make a second statement this week that said, “We really are
okay! Honest! We’re healthy! Everything’s fine!” The market
didn’t quite believe them and at the writing of this, their stock is
down over 30% this week alone.
Durable good orders came out better than expected, but if you read the story behind the story at www.straighttalkaboutmortgages.com you’ll see that it’s not as good as it sounds.
New Home Sales came out down but not as bad as the market expected.
The House of Representatives passed the Fannie Freddie Bailout
bill. Now it’s off to the Senate. Rumor has it that they’ll pass it
but some of the people in the House are pushing
Bush for a veto.
Oil prices have drifted down quite nicely this week.
Consumer Confidence came in surprisingly higher – do you think it was because the price of gas started with a $3 rather than a $4?
Where does that leave us? I’m
going to quote John Augustine, a senior investment advisor at Fifth
Third Investment Advisors because he summed it up quite nicely:
We now need better news in at least two of the below three areas to help support the recent Financial-led rebound in stocks –
-
lower crude oil (…happening)
-
better US housing market news (…not happening)
-
calmer credit market (…not happening – credit spreads widening again with and continued concern about US loan losses).
I’ll leave you with a couple of thoughts:
1.
If it sounds too good to be true, it probably is. If it sounds too
good to be true that bank stocks are going up in light of all of the
losses, it probably is.
2.
If someone says we’re at the bottom, good luck in believing that.
We’ve got a lot of inventory to work through and a lot of loan losses
to sort out.
3.
Something really interesting has happened – the spread between
conforming and jumbo mortgages has all but disappeared. Why? Because
of the problems that Fannie and Freddie are in and the pending bailout.
I’ll continue to keep in touch, let me know how I can be of help.
Thanks!
Tom Vanderwell
Quote of the week: When asked
how to solve the housing crisis, Bill Gross, from PIMCO, replied: “One
of the wisest men I know has this serious but admittedly impractical
solution: have the government buy one million new/unoccupied homes,
blow them up, and then start all over again. Absent that, he’s not
quite sure what to do, nor am I.”
Related posts: