Monday, March 26, 2007

Tuesday Curtain Raiser

There will be more grilling on Capitol Hill over this subprime mess. This time the House Financial Service Committee gets a crack at questioning various regulators.

Let's hope those regulators don't try to again say subprime isn't contained to subprime, because the evidence is mounting that the problems in subprime mortgages are spreading:
Subprime mortgage crisis may hurt auto loans -S&P.
Oh, but wait - they're still are saying it's contained: Subprime Woes Not Impacting Credit Market, says NY Fed Chief. Silly me.

As the Barron's interview of Sy Jacobs noted over the weekend, we're in the midst of a 'slow motion train wreck' (in subprime) that's picking up speed. Where not along ago the signals were ducky from the credit ratings agencies, the guidance in recent days has been swinging gradually towards worsening assessments: S&P raises 2006 subprime mortgage loss expectation, Fitch: Subprime Woes May Cause Problems for US RMBS Servicers.

GM was up 26 cents Monday, but what's going on at its Rescap division? The Gale Warning Red Flags are Up IMHO.

So with my inside source on the real estate market right here at home (my wife), the slide in new home sales was not a surprise. This Northern Trust pdf gives quick analysis and provides some excellent visuals to give you a look at just how deep in the crapper the housing market is.
And ultimately, Mrs. K tells me, the existing home sales figures are also going to get flushed down the toilet (my words not hers) as well.

As I blogged somewhere here, or maybe I was talking to someone (this is bad when blogging and the rest of life get confused and mixed together) about this, economic activity this month (March) is going to have to be spectacular give the weak housing, retail sales and manufacturing numbers we've seen for January and February to keep 1st quarter GDP from falling below 2%.

Consumer Confidence data from the Conference Board is due at 10 ET. In February it reached 112.5 its highest level since August of 2001. Its predicted to slip to 107 for March. If it doesn't take a surprise plunge tomorrow, look for a slide next month. Unless the methodology has changed, the bulk of the Conference Board survey is done closer to the beginning of the month; while that may capture some negative feelings about the stock market swoon, it may not have picked up the snowballing impact of subprime. Eventually, I feel subprime will crater Consumer Confidence.

Tonight, Google News lists 139 stories similar to this one: Subprime bust forces families from homes, and that's got to have a fearful impact and will eventually show up in confidence numbers.

I'm still holding my gold futures position and happy. Gold rallied following the New Home Sales data as bonds took off and the dollar fell. The dollar just doesn't get any respect these days. Just the other day I posted about the IMF's desire to see dollar depreciation. Today word that China holdings of U.S. debt not a problem should a "shift" in allocations occur. I would take that to mean, Ben Bernanke would just order up the printing of more bucks.

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