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Global markets fell overnight on increasing concern that central
banks around the world will not have enough ammo in their arsenals to ward off a
deep recession. Stocks have now traded lower 15 out of the last 19 trading
days in October. Mortgage Bonds are trading lower as large investors
and hedge funds continue to unload positions ranging from Stocks to Mortgage
Backed Securities in order to meet margin calls and raise cash in the wake of
customer redemptions, and to keep creditors at bay.
The
upcoming week is full of economic reports, but the main focus will be the Fed
Meeting and Interest Rate decision on Wednesday afternoon at 2:15pm
ET. At the moment, the Fed Funds Futures are pricing in the
probability of a 50bp cut at 100%, however, there are rumors swirling that the
Fed may even cut 75bp, bringing the Fed Funds Rate under 1%.
New
Home Sales came in 2.7% higher in September than in August at 464,000 new units
versus expectations of 455,000. The inventory of unsold homes fell a
record 7.3% in September to 394,000, the lowest in four years. In the past
year, inventories have fallen 25.4%, the biggest drop since the government began
tracking the data in 1963. The median sales price fell to $218,400, down
9.1% in the past year.
Mortgage Bonds are now trading below the 100-day MA, and a Fed rate cut
on Wednesday is a sure thing. Therefore, we feel it is wise to maintain a
Locking bias in advance of the Fed.
Interesting Statistics:
- There are 14 individuals on the official presidential
ballot other than Republican John McCain and Democrat Barack Obama (source:
Official Ballot for General Election).
- The annual gift exclusion rises to $13,000 in calendar
year 2009, an increase of $1,000 from this year. All US citizens can make gifts
of cash or other property worth up to $13,000 in 2009 to an unlimited number
of people without gift tax consequences (source: IRS).
Participants
in defined benefit pension plans will be able to fund their plans to
provide an annual retirement benefit of $195,000 in calendar year 2009.
20 years earlier (1989), the maximum annual pension benefit that could be funded
was $98,064 (source:
IRS).
- When President Bush presented his fiscal year 2008
budget to Congress on 2/05/07 (i.e., for the period 10/01/07 to 9/30/08), the
plan called for spending to exceed tax receipts by $239 billion. The
actual result for the 12 months that ended on 9/30/08 was a $455 billion
deficit (source: Treasury Department).
- In the 6 months following the 9/11/01 attacks on the USA, 1.5
million workers lost their jobs. In the last 6 months, 513,000
workers have been let go by American employers (source: Department of
Labor).
- The Fed will hold its 7th scheduled meeting of the year
this week. They also held 2 emergency meetings this year. The Fed has
lowered interest rates 5 separate times in 2008 (source: Federal
Reserve).
- Only 1 out of every 106 deaths
results in the payment of federal estate taxes (source: CDC National
Center for Health Statistics, Wall Street Journal).
- President Bush signed into law a $700 billion
financial rescue plan on Friday 10/03/08. 54% of Americans approve of the
plan, aka TARP, the Troubled Asset Relief Program (source:
AP).
- The national average price of gasoline
peaked on 7/16/08 at $4.11 a gallon. By last Friday (10/24/08), the national
average price of gasoline had fallen to $2.78, a drop of $1.33 a gallon. Since
every 1 cent reduction in the price of gasoline saves Americans $3.4
million a day, a drop of $1.33 a gallon equates to a $447 million daily
savings for US consumers (source: AAA, Wall Street Journal,
Fortune).
- Harry Dent, a stock market watcher famous
for his year 2000 prediction where he forecasted a 40,000 Dow value (note
that the Dow closed at 8,379 last Friday), now believes the USA is in an
economic downturn that occurs "once every 80 years" and that the
current stretch will last a dozen years until 2020. The Dow Jones
Industrial Average is an unmanaged index of just 30 stocks and is not generally
considered representative of the broad US stock market (source: BTN Research,
WSJ).
- The Chinese Shanghai Class A stock index
(open to both Chinese and foreign investors and priced in the local Chinese
currency) has lost 65% YTD through Friday's close of business. The
Shanghai index is an unmanaged index that is generally considered representative
of the Chinese stock market. These international securities involve additional
risks including currency fluctuations, differing financial accounting standards
and possible political and economic volatility (source: BTN
Research).
- At the bottom of the 2000-02 bear market, the
S&P 500's low closing value was 776.76, down 49.1% from the index's
all-time closing high. The S&P 500 closed last Friday (10/24/08) at
876.77, down 44.0% from the index's all-time closing high (source: BTN
Research).
- Of the 8 bear markets for the S&P 500 since 1960
(i.e., a peak to trough drop of at least 20%), the average length of
time from the index's bull market closing high to its bear market
closing low has been 13 1/2 months. The index's most recent bull
market closing high (set on 10/09/07) occurred 12 1/2 months ago (source:
BTN Research).
- In the last 15 weeks (i.e., the trailing 3 1/2 months from
Friday 7/11/08 to Friday 10/24/08), the S&P 500 stock index has
fallen 29.3% while the price of a barrel of oil has fallen 55.8% (source:
BTN Research).
- Since 9/01/08 (i.e., a period less than 2 months in duration),
the S&P 500 has experienced 19 trading days that have produced at
least a 3% gain or loss (i.e., the change in the index's closing value over
consecutive trading days). The S&P 500 had 19 trading days producing
at least a 3% gain or loss in the 6 years prior to 9/01/08. The S&P
500 is an unmanaged index of 500 widely held stocks that is generally considered
representative of the US stock market (source: BTN Research).
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