It was quite an eventful day as democrats and republicans tried to get a handle on what's going on with our financial system. Not sure there is a perfect solution, but what's clear is that no one wants to hand over a blank check without firm oversight. Dow was up almost 197 points on hopes that an agreement could be reached, but alas that was not to be.
Let's recap:
- Washington Mutual's branch system and deposits bought by JP Morgan after regulators seized the savings and loan. This now represents the largest bank failure in U.S. history. (This happened after the close of business)
- Weekly initial jobless claims jumped 32,000 to a seven-year high of 493,000.
- Durable goods orders fell 4.5% in August, well below the estimate of a 1.9% decline. Ex-transportation, orders fell 3.0%, south of the forecast of a 0.5% drop. Growth in Japan has been weak, and Europe appears to have entered a recession, which are most likely contributing to orders being down.
- New home sales fell 11.5% in August to an annual rate of 460,000, short of the estimate of a 1.0% decline to 510,000. The supply of homes rose from 10.3 months to 10.9 months. Existing home sales, which make up over 80% of residential sales have stabilized over the past year, but new home sales remain in a downward spiral. In order for prices can stabilize, it is critical for the market to absorb the excess inventory on the market.
- Existing Home Sales were down in August following a gain in July as tight mortgage credit was blamed on the slow down. Nationally, existing-home sales declined 2.2%.
It looks like further negotiations are needed to come to an agreement on how to handle this mess as the meeting/photo op at the White House today was unsuccessful in building a consensus. Secretary Paulson provided a 2 1/2 page outline of what he and Chairman Bernanke would like to do, which included little to no oversight, no accountability and a $700 billion price tag.
Congress is asking for:
- Legislation to help homeowners avoid foreclosure;
- limiting compensation to executives of troubled firms receiving assistance, ie, no golden parachutes;
- greater oversight than the limited bi-annual reporting requested in the current proposal;
- giving taxpayers an equity stake in companies;
- decreasing the timeframe for the Treasury workout from two years to one; and
- limiting the initial outlay followed by a reassessment early next year prior to providing additional funds.
We'll see what happens over the next few days!
Disclaimer: All information in this post is subject to change without notice and is an opinion, is not guaranteed, may be time sensitive, as well as based on information collected from many sources which are not guaranteed to be reliable.
A good friend of mine sold all her stock today figuring that the government would make a muddle of this. I didn't. Darn! I do think the Paulson plan had serious flaws. Yes, the government needs to open the spigots on new credit immediately, but I think the government should funnel the money through FHA or some other government entity rather than just give a huge handout to private enterprise. We have no guarantee that the companies we bail out will issue new credit immediately to the public. This government entity could create an auction process to buy out the distressed loans from these firms, but I think the process of stopping foreclosures has to be looked at in terms of the impact on specific communities. We can't bail out every foreclosure as taxpayers, but we can stop whole communities from becoming slums.
Great stats and helpful post. I wish you could predict what you will be writing about a month from now. Good selling!
Guess it's time for introspection and levity. Someone sent me this, and I just had to share.
it would now be worth $49.00.
With Enron, you would have $16.50 left of the original
$1000.
With WorldCom, you would have less than $5.00 left.
If you had purchased $1000.00 of Delta Air Lines stock you
would have $49.00 left.
If you had purchased United Airlines, you would have
nothing left.
But, if you had purchased $1000.00 worth of beer one year
ago, drank all the beer, then turned in the cans for
recycling, you would have $214.00.
Based on the above, the best current investment advise is to drink heavily and recycle.
This is called the 401-Keg Plan.
Hi Anna . . . From Burbank !!
It looks to be a wild ride and a turbulant track ahead. Change in EVERYTHING as we knoew it.
Hang On Tight and keep your powder dry !!
Aloha
Jim
Hi Anna, Great report. Did you see the CAR market report? It was so misleading that to an average consumer it looks like that the home sales actually went up significantly in August!!!!