Jupiter, Fla (PRWeb) 20 Ιαν., 2008
Mike Larson takes a closer look at the markets collapse and the big picture trends for 2008. Mr. Larson examines the declining sectors of the U.S. market.
Earnings reports are hitting the Newswires fast and furious in the financial sector. Banks and brokers have poured so much red ink that is difficult to keep up with everything. The markets are collapsing and there is no time to lose. Here is the big-picture trends for 2008.
Much of the carnage from home mortgages and structured financing opportunities. A major culprit is Guaranteed debt obligations (CDOs), a form of fixed income security that invests in other packaged sliced loans.
These caustic investments are now displayed in a press release after press release:
???? The Bank of New York Mellon (BK) wrote down CDOs at 118 million dollars.
;;;; M & T Bank (MTB) announced $ 127 million charge CDO.
;;;; Merrill Lynch (MER) reported a stunning $ 11.5 billion fourth-quarter charges related to CDOs. Total quarterly losses Merrill was $ 9.83 billion versus 2.35 billion profit a year earlier.
;? And Citigroup (C) won the blue ribbon, taking a huge $ 18 billion charge. This helped drive the company deep into the red, losing $ 9,830,000,000 for the quarter versus $ 5.1 billion profit a year earlier.
Another significant development is many of these companies have insured the value of CDOs and other holdings to conclude political “credit insurance” with certain counterparties. Think of these like any insurance policy. As a homeowner, you buy homeowners insurance ‘to protect against the risk of your house will burn. Financial firms can also buy credit insurance;. Insurance that protects apparently their portfolios against losses if the bonds or other instruments keep going to default
There is only one problem: Some of the parties who sold those policies credit insurance face tremendous financial difficulties. Martin Weiss has talked about Ambac, MBIA, and others before.
Since then, the prices of their stocks and bonds continued to sink. The reason: So many CDOs and other securities are going into default, or threatening to do down the road, that investors are worried about the losses will swamp the insurers. And this could cause a new round of write downs and charges. Indeed, Merrill Lynch took $ 2.6 billion because one hit from insurers and ACA Capital Holdings is under severe financial pressure. The deleted ACA-provided coverage as worthless.
Big financial firms take big market risks all the time, and sometimes get burned. Investors can ignore these events. But now these companies are also seeing their bread and butter underlying loans go bad quickly.
Loans made in 2007 are performing even worse, a sign that auto lenders went too far off the curve of the risks just like brothers mortgage lender.
Make no mistake, housing remains weak and commercial real estate is slowing down. December was a particularly bad month for the construction industry. Housing starts were off by more than 14% monthly, 38% yoy and 56% from the peak of the market. Permits fell 8.1% on a monthly basis, 34.4% for the year and a whopping 52.8% from the highest level.
“The decline was geographically widespread, too. Construction fell in all four regions, while activity declined to leave three of the four. Separately, an index measuring optimism builder, current trends in sales and marketing buyer remains in the dumps. At 19, the index is just off the reading of December 18, which was the lowest level since the National Association of Home Builders survey began in 1985, “Mr. Larson states.
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About Mike Larson and Money and Markets
Mike Larson joined the company in 2001 and has over 10 years experience researching and writing about personal finance, investing, and the housing industry and mortgage loans. In 2003, Mr. Larson was named associate editor of the monthly Safe Money Report of the company. In this role, he is responsible for preparing and processing and analyzing trading opportunities for customers. Mr. Larson is also a regular contributor to the daily email, Money and the company.
Before joining Weiss Research, Mr. Larson was a personal finance reporter for Bankrate.com, where he wrote extensively on mortgage loans, banks, real estate, and Federal Reserve policy. His responsibilities included analyzing economic data and interest rate trends for a weekly column and developing rate forecasts for a regular feature index. Previously, Mr. Larson held positions at Bloomberg News and the Boston Herald.
recognized as interest rate mortgage loans and market experts have views of Mr. Larson is already listed in the Washington Post, Chicago Tribune, Dow Jones Newswires, Reuters, the Sun-Sentinel and the publication of Palm Beach. She also appeared as an expert investment to discuss the housing market to CNBC, CNN and Bloomberg Television. Scripture has been recognized by both the National Association of Real Estate Editors and the Massachusetts Press Association.
Among the first analysts to call the housing slide, a new policy paper by Larson, “How federal regulators, lenders and Wall Street created the U.S. housing crisis: Nine Proposals for a long-term recovery” has received wide coverage media following its July 2007 submission of the Federal Reserve and the FDIC.
Mr. Larson holds B.A. and B.S. degrees from Boston University.
Money and Markets (http://www.moneyandmarkets.com) is a free daily investment newsletter from Dr. Martin Weiss and Weiss Research analysts offering the latest finance and investment ideas for the stock market, including tips and advice on investing in gold, energy and oil. Weiss Research, Inc located in Jupiter, Florida. For more information about our editors, or create an interview, please contact Jennifer Moran at 561-627-3300 or visit http://www.moneyandmarkets.com.
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