Could that be some light, just a little light at the end of the tunnel?

It seems as if, in recent weeks, there has been a steady drumbeat of bad economic news all traced back to that original subprime mostgage crisis.

The near collapse (okay, some may argue it was an actual collapse) of Bear Stearns was like a thunderclap heard around the world, alerting financial institutions that things may get a lot worse before they get a little better.

And, that is probably still going to be the case, many so-called experts think. The Bush administration plan to more closely monitor various financial institutions (commercial banks have long had tons of regulations)doesn’t seem to be going over all that well. And, even the officials whose plan it is are saying they do not expect any action till probably after Bush leaves office.

So, where’s the good news promised?

Now,let me just say upfront, no one should get too excited by the good economic news out in the early part of this week. As we should know by now, in the financial world, things can change (and in the case of Bear Stears, they did) literally overnight.

Nonetheless, consider some of the evidence.

There is a foreclosure relief bill making its way through the Senate.

The Federal Reserve, for better and maybe worse, came to the rescue of not only an investment firm, but possibly this country’s (world’s?) financial system. We can argue the merits later, but as an emergency measure, it seemed to do the trick.

Wall Street managed a big rally to kick off the second quarter–all the major indexes climbing more than 3 percent on Tuesday.

And, by many accounts, it appears as if there is a growing sense that the credit crunch may just be moderating?

But, heed the warning I gave up top. Things can change drastically. Experts can be wrong (no??). And, there are historical and political forces at play that can’t be controlled by any government or group of financial institutions.

So, enjoy it while you can. There does, indeed, appear to be at least a trickle of light at the end of the tunnel. But, if I were you, I’d make sure my flashlight batteries are still fully charged.

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Tags: bear stearns, dow jones average, Economy, investment banks, jpmorgan, president george bush, subprime, u.s. treasury, Wall-Street

The economy is sinking faster than a mafia hitman wearing cement shoes in water; and, the mortgage/housing crisis is clearly to blame.

Wall Street was apparently totally shocked today when the Labor Department reported that 63, 000 nonfarm jobs were lost last month….As Reuters points out, the problem is that Wall Street experts had expected that 25,000 positions would actually be added. So much for experts!

Stocks Down

This news helped send stocks into a tailspin, closing at their lowest level in 19 months.

Reuters points out that this bad news came at the same time that “jumbo” mortgage lender Thornburg Mortgage was unable to meet demands from creditors for upfront cash. Not good.

More and more experts are now saying the U.S. is in a recession, official or not.

And, the worst is yet to come. There will be still more foreclosures this year…many more. The credit markets are getting tighter despite Fed action. And, consumer confidence continues to go down.

It is no longer accurate to refer to this as a subprime mortgage crisis. Let’s just agree that this is a financial crisis, period! Okay.

Tags: Foreclosures, housing crisis, labor-department, recession, stocks, subprime mortgage, thornburg mortgage, Wall-Street

It is amazing how what started out as a subprime mortgage crisis has morphed into such an enormous economic mess around the world.

On Tuesday alone, the three major U.S. stock indexes went south by more than 2 percent.

Citicorp, the nation’s largest bank, had to write down $18.1 Billion for loses—loses stemming from the subprime crisis.

Tighter credit, also a byproduct of the mortgage mess, is apparently responsible for retailers now reporting their worst showing in five years.

Fears of an impending recession mount; some experts say it is already here.

On CBS radio before, I heard a really scary fact–that the total Citicorp loss is larger than anything any bank in the U.S. has experienced since the Great Depression!.

Wow. That is truly something.

Banks and brokerage houses here are increasingly looking for foreign investments to bail them out. They seem to be getting that help. For now. And, at what political as well as economic cost?

subprime mortgage crisis, economic mess, Citicorp, subprime, mortgage mess, recession, Depression, Banks

Tags: citigroup, stock indexes, subprime mortgage, Wall-Street

Here’s just a very small sample of headlines from recent days about the economic doom and gloom being caused by the ever deepening mortgage crisis that started in this country but has now reached out its tentacles to squeeze the testicles of just about every European and Asian nation and threatens to plunge the developing world into economic chaos.

Think that’s rather strong, do you?

“Retail stocks slump as Black Friday joy fades”
“10-Year Treasury yield at 2 and a half year low”
“Citigroup shares below $30; first time in more than five years!”
“Markets plunge on credit woes.”

And those headlines are just a one hour slice of the 24 hour news cycle earlier this week.

Let’s take a closer look at these tidbits of terrible news shall we?

Investors worried about rising mortgage defaults and credit market losses, says Reuters, sent stocks tumbling Monday putting Wall Street “on the verge of its worst one-month slump in five years.”

Think that’s bad? Hold on and listen to this:

“On a points basis, the Dow is less than 200 points away from its worst monthly slide EVER.”
That’s “ever” as in, well, “ever!”

Investors seem to be fleeing risk faster than New England swimmers tried to flee the Great White in “Jaws.” They are seeking the higher and safer grounds of government bonds.

Citigroup is the largest U.S. bank by assets. But, that didn’t stop its shares from tumbling Monday, sinking below the 30 dollar benchmark set back in 2002….and, as a way to bring Christmas cheer to its embattled employees, it is reportedly thinking about what are being called “massive” layoffs that could mean as many as 45 thousand people flung out the door.

Why? . . . What do you think! “Mounting concern about mortgage losses…”

MOUNTING CONCERN???? MOUNTING??? I think we are way, way, way past “mounting”–unless, that is, you are using “mounting” to mean how all of us are being f—–royally?

The problem, of course, is that no one…and I mean no one…really knows where the bottom to this debacle really is: will we reach it next month, next year, next two years??? No wonder people are freaking out.

And, it is not just here in the U.S. The runoff from our subprime sewage is polluting the international waters, too. Britain is worried. France is worried. Japan is worried. Even India is worried and can you name the last time it was worried about anything?? Actually, I think I read that India outsources its worries.

Okay. I know this is starting to sound pretty darn dark. I know we all were brought up to believe that if you walk through a storm and keep your head held high (write to the Jerry Lewis telethon if you want the exact words to that song) things will work out in the end. But, suppose if you walk through a storm with your head held high, your head just gets really wet?

And, you know how when times are tough and the tough get going we are supposed to look for that light at the end of the tunnel? What happens if there is no light? What happens if the tunnel turns out to be a vault whose steel doors will shut behind us once we enter, leaving us to suffocate in our own subprime morass?

Oh, and Happy Holidays to all!!!

Tags: citgroup, mortgage crisis, stock market, subprime, u.s. treasury, Wall-Street

The Labor Department today reported that payrolls fell by 4,000 in August for the first time in 4 years. What makes matters worse is that estimates were for this number to increase by 110,000. Job losses included those in manufacturing and construction. Clearly, we can see that the housing market is starting to affect all parts of the economy now. As a result, the stock market has once again taken a beating today.

Additionally, Comments from one former Fed official — Alan Greenspan — perhaps added to Wall Street’s unease Friday. The Wall Street Journal reported the former Fed chairman on Thursday told a group of economists in Washington that the recent market turmoil is similar to that of 1987, when the Black Monday crash occurred, and of 1998, when the big hedge fund Long-Term Capital Management came close to collapsing. Greenspan’s comments come about a month ahead of the 20th anniversary of the stock market’s crash on Oct. 19, 1987.¹

I’m a huge fan of Greenspan, and if he’s concerned, so should we . . . I’m sure you all know by now that I certainly am.

Sources:
¹ - Yahoo Finance - Payrolls Drop for First Time in 4 Years

Tags: fed, federal reserve, Greenspan, housing, labor-department, mortgage, Wall-Street