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The Financials Pit Review

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For the week of April 7th, 2008

Tue, Apr 8 2008, 08:58 GMT
by Kalvin O’Brian

Pit Guru

U.S. Economy

The US housing crisis is so devastating that some banks have started to just look the other way when homeowners have stopped making mortgage payments. The number of borrowers at least 90 days delinquent on their mortgage payments increased to 3.6 percent at the end of December, marking the highest percentage in 5 years according to the Mortgage Bankers Association in Washington. That number is almost double the 2% who have already been foreclosed on. On Friday the U.S. Labor Department reported the unemployment rate jumped from 4.8% to 5.1% in March. This was the highest in over 2 years with a loss of 80,000 in non-farm payrolls. This number was far bleaker than expected. Looking further into the numbers the Labor Department also revised January’s non-farm payrolls from down 22,000 to 76,000 jobs. February was also revised from down 63,000 to down 76,000. The market is going to feel further effects from the unemployment numbers. I would look for the market to be down by week’s end, despite early enthusiasm to start the week.

Currencies

Just above us, our neighbor to the north Statistics Canada reported a decrease in the unemployment rate from 5.8% to 6.0% in March with a net gain of 14,600 jobs. This number was weaker than expected. However over the past year Canada has added 325,000 new jobs. Additionally it was reported by the Conference Board in Canada that its index of consumer confidence fell from 96.5 to 94.5 in March. The Canadian dollar should not pass the 1.00 mark for a while. Australia's Bureau of Statistics said that retail sales were down .1% in February, weaker than expected. Both of these export based

Dollar denominated deposits held almost no appeal due to the Fed’s lowering of its target rate for overnight loans between banks to 2.25%. It is the second lowest after Japan’s .5% among the G-7. Surveys are saying the European Central Bank will keep its rate at 4% at its April 10th meeting, I would like to disagree since the European union has seen a number of ill-effects from its inflated currency which have contributed to general slowdowns in export and manufacturing. Any action to revive these sectors might weaken the euro and bring buyers back to the US dollar.

Published on  Tue, Apr 8 2008, 09:00 GMT