There have been an array of developments over the past several weeks which investors may consider relevant in allocating their resources or evaluating alternatives that are available to them. Some of the more significant developments include, but are not limited to, the following:
- The Federal government has taken control of mortgage giants, Fannie Mae and Freddie Mac, and placed them under conservatorship. The companies collectively own or guarantee approximately $5 trillion in home loans. Thus, this move thrusts trillions of dollars of risk directly onto the shoulders of American taxpayers.
- The U.S. government seizure of Fannie Mae and Freddie Mac has triggered one of the largest defaults in the history of the $62 billion credit derivatives market.
- Mortgage rates have dropped since the federal bailout of Fannie Mae and Freddie Mac. The average rate on a 30 year fixed rate mortgage has dropped from 6.26% to 5.88%.
- The National Association of Realtors reported that the home sales forecast is deteriorating as pending home sales decline.
- The Congressional Budget Office has estimated that the national budget deficit will rise by $246 billion to $407 billion this year. The Budget Office says that the increase is attributable due to “A substantial increase in spending and a halt in the growth of tax revenues.”
- Texas job markets are hot. Houston, Austin and Dallas-Fort Worth are reportedly the three hottest job markets in the United States. Raleigh, North Carolina is number four on the list and Seattle, Washington ranks number five.
- Lehman Brothers projects a $3.9 billion loss in the third quarter of 2008 and plans to shed assets.
- According to the International Council of Shopping Centers, some 6,500 chain stores are expected to close this year. Many other chain stores are curtailing expansion plans.
- Wachovia Corp., the fourth largest U.S. bank has announced it will attempt to cut expenses in 2009 by $1.5 billion.
- Continental Airlines will reduce the number of pilots it employs by 363 or 7.3% of its pilot work force.
- The Federal Deposit Insurance Corporation announced that 117 banks and thrifts were considered to be in trouble in the second quarter of 2008. The FDIC also reported that it may have to borrow money from the Treasury to cover insured accounts held at failed banks and thrifts.
- U.S. banking regulators have closed Silver State Bank of Henderson, Nevada, the 11th bank to collapse this year.
- Ohio, Michigan, California, and New York are among states that are projected to deplete unemployment insurance funds either this year or in 2009.
- The Big Three auto makers have begun efforts to convince Congress to fund $25 billion in loan guarantees.
- 29% of people 65 years and older were working in 2006 compared to 18% that were working in 1985.
- As the economy slows, investors have bet more than $1 trillion on a collapse in stocks prices.
- Automobile sales slumped in July to the lowest level in 15 years.
- There are approximately 3.9 million existing single family homes that remain unsold. This is the highest inventory is existing single family homes since at least 1982.
- U.S. foreclosure filings have risen to a record level in August, 2008.
- Senate Democrats are urging Fannie Mae and Freddie Mac to immediately freeze foreclosures on mortgages that they hold
- Confidence among small businesses rose for the first time since April, 2008 according to the National Federation of Independent Businesses.
- According to a U.S. Senate committee investigation, various Wall Street brokerage firms structured deals to help offshore hedge funds avoid hundreds of millions of dollars in U.S. taxes.
- The United States’ trade deficit shot up to its highest level in 16 months in July, 2008.
Page Perry’s Market Monitor is published periodically to give investors an overview of certain recent developments impacting the economy and/or the investment markets.