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Commentary

The U.S. situation – Bullishness Where There's Only Bull

U.S. home foreclosures are up 90% in Jan 2008.

Defaults among subprime borrowers and those unable to meet rising payments on adjustable-rate loans drove foreclosure filings to the highest since August and the second-highest since RealtyTrac started keeping records. About $460 billion of adjustable mortgages are scheduled to reset this year, raising minimum payments for borrowers, according to New York-based analysts at Citigroup Inc.

The ABX indices are at their lowest.

MBIA has been let off by S&P, who let them keep AAA – but how? They are in no position to make good on any obligations. Anyways, MBIA is not planning to write mortgage insurance for the next 6 months (who will buy from them anyhow?). They’re also planning to split their mortgage and munibond insurance businesses over the next few years.

Ambac is still on negative watch and unless they raise significant capital they’re going down, it seems.

Yet, both stocks were hugely up yesterday! The market discounts the immediate future, which seems positive (not yet downgraded) versus the real future which is “bust” for these guys, at least the way they are today.

And in India we couldn’t care less. A budget is on the way this week, and the stock markets are low volume and buoyant. Not a good sign this, but it’s interesting that the very same factors that were involved a month ago are still existing today, more so than in Jan, and yet, we’re looking positive.

If FIIs start another round of selling, we’re going to see another big round of damage. Until then we may have a good session going up – but since I won’t bet on it, I won’t trade it. Waiting for some really good news now – it’s been a while!

  • Guruprasad says:

    >Bond insurers would “REST IN PEACE”. Before death everyone would try to do something, thatz what Ambac(ABK)and MBIA(MBI)has done. Seeking alpha has come out with an interesting article regarding Fridays’15 minutes rally at Dow jones Industrial http://seekingalpha.com/article/65780-friday-s-turnaround-raid-on-the-shorts
    US might give few exit rallys. But people should keep patience to enter markets. Keep patience. US Recession at cards. While writing this comment, US home prices have declined upto 8.9% which low since 2003.

  • Anonymous says:

    >Pfizer downgraded while MBIA keeps AAA. What crock!!

  • Anonymous says:

    >There seems to be 2 different views on the US/Global economic situation;
    1. Economic pessimism: That US credit crunch, housing price declines will lead to slowing of credit velocity and thus deeper recession. This present inflation is temporary which will be followed by deep deflation as crisis mounts. In such a case emerging markets coupled to US will also take a hit. If one belives in this then one should take profit at rallies in the stock market.

    2. Economic Optimism: The recent fed moves to lower interest rate along with monetary stimulus package, rerating of Insureres etc. will overcome the temporary set back and bring back confidence and by second half of this year Economy will recover. If this is true then holding stocks despite temporary downturn will be rewarding in the long run.

    Who will win?