Top Line: The stock market did seem to indicate that it wants to start the spike down that we discussed here on Thursday evening. The next few weeks should be the process to get us down quite a ways down in the Dow, initial target would be the January lows near 11,500. These lows are, in Wall Street's mind, a large area of support so if these are taken out, there will be another wave down. We'll deal with that when the time is right. For now, we concentrate on the immediate decline that seems to have started on Friday.
Looking back to the last few days, we again see many articles directed toward the mortgage world, starting with this one from San Francisco, published in the UK. We had never heard the term "ninja" loans before but thought it clever if nothing else. Ninja is an acronym that stands for No Income, No Job, no Assets.
And then there's our favorite NY Times journalist, Gretchen Morgenson, reporting about a new index called the Consumer Spendables Indicator developed by TrimTabs Investment Research, a proprietary research firm in Santa Rosa, Calif. This indicator represents the amount of money consumers have for spending including non-wage sources, like home equity extraction. We recommend reading this great article. It estimates the jobs' data for later in the week at a loss of 77K versus an estimate of between 30K and 40K increase from surveys of economists.
Here's a short article, again from the NY Times, about the rate of foreclosures versus home sales in various states. There is a nice graphic embeded in the article that shows the states with the highest foreclosure rates but also has a chart in it that shows the rate of foreclosure in the four large regions of the US. This chart shows the foreclosure rate in the West is over 80% of home sales.
One last article of interest is the one about Peloton, showing the ups and downs of a mortgage investing hedge fund. Beware of the rough spots in the housing market. Unfortunately, we have no time to discuss this tonight but it is an important part of what is going on in the markets at this time--troubled hedge funds selling assets to meet margin calls.
The last item we have this evening should be required reading for investors everywhere. Actually we have two things and both of them are Buffet related. First is his annual letter to shareholders and the second is a nice article that summarizes his comments.
We think the market is ready for a hard slide and that it has started. Surprises to the Downside at this time. Bull market tactics will not work here, such as buying the dips. The Asian markets are down 3% to 4% this evening as we write--no doubt responding to last Friday's drubbing in the US market. The US futures are down a little right now but not much. Let's see what our market can do on Monday the first trading day of the new month.
FSI: 74.24 (not a new low for the move)
Trish, thanks for the note--don't really know how to respond to that except, the people in charge need to do whatever they can to indicate their confidence in the system and that includes the rate cuts from the Fed and the economic stimulus from the government and bullish economic rhetoric. But, since you are here for pictures here is another one sitting on Grampa's lap: