Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Stock Market Potential Short-term top - 18th Feb 20
Coronavirus Fourth Turning - No One Gets Out Of Here Alive! - 18th Feb 20
The Stocks Hit Worst From the Coronavirus - 18th Feb 20
Tips on Pest Control: How to Prevent Pests and Rodents - 18th Feb 20
Buying a Custom Built Gaming PC From - 1. Delivery and Unboxing - 17th Feb 20
BAIDU (BIDU) Illustrates Why You Should NOT Invest in Chinese Stocks - 17th Feb 20
Financial Markets News Report: February 17, 2020 - February 21, 2020 - 17th Feb 20
NVIDIA (NVDA) GPU King For AI Mega-trend Tech Stocks Investing 2020 - 17th Feb 20
Stock Market Bubble - No One Gets Out Of Here Alive! - 17th Feb 20
British Pound GBP Trend Forecast 2020 - 16th Feb 20
SAMSUNG AI Mega-trend Tech Stocks Investing 2020 - 16th Feb 20
Ignore the Polls, the Markets Have Already Told You Who Wins in 2020 - 16th Feb 20
UK Coronavirus COVID-19 Pandemic WARNING! Sheffield, Manchester, Birmingham Outbreaks Probable - 16th Feb 20
iShares Nasdaq Biotechnology ETF IBB AI Mega-trend Tech Stocks Investing 2020 - 15th Feb 20
Gold Stocks Still Stalled - 15th Feb 20
Is The Technology Stocks Sector Setting Up For A Crash? - 15th Feb 20
UK Calm Before Corona Virus Storm - Infections Forecast into End March 2020 - 15th Feb 20
The Growing Weaponization of Space - 14th Feb 20
Will the 2020s Be Good or Bad for the Gold Market? - 14th Feb 20
Predictive Modeling Suggests Gold Price Will Break Above $1650 Within 15~30 Days - 14th Feb 20
UK Coronavirus COVID-19 Infections and Deaths Trend Forecast 2020 - 14th Feb 20
Coronavirus, Powell and Gold - 14th Feb 20
How the Corona Virus is Affecting Global Stock Markets - 14th Feb 20
British Pound GBP Trend and Elliott Wave Analysis - 13th Feb 20
Owning and Driving a Land Rover Discovery Sport in 2020 - 2 YEAR Review - 13th Feb 20
Shipping Rates Plunge, Commodities and Stocks May Follow - 13th Feb 20
Powell says Fed will aggressively use QE to fight next recession - 13th Feb 20
PALLADIUM - THIS Is What a Run on the Bank for Precious Metals Looks Like… - 13th Feb 20
Bitcoin: "Is it too late to get in?" Get Answers Now - 13th Feb 20
China Coronavirus Infections Soar by 1/3rd to 60,000, Deaths Jump to 1,367 - 13th Feb 20
Crude Oil Price Action – Like a Coiled Spring Already? - 13th Feb 20
China Under Reporting Coronavirus COVID-19 Infections, Africa and South America Hidden Outbreaks - 12th Feb 20
Will USD X Decline About to Trigger Precious Metals Rally - 12th Feb 20
Copper Market is a Coiled Spring - 12th Feb 20
Dow Theory Stock Market Warning from the Utilities Index - 12th Feb 20
How to Get Virgin Media Engineers to FIX Hub 3.0 Problems and NOT BS Customers - 12th Feb 20
China Under Reporting Coronavirus COVID-19 Infections by 66% Due to Capacity Constraints - 12th Feb 20
Is Coronavirus the Black Swan That Takes Gold To-Da-Moon? - 12th Feb 20
Stock Market 2020 – A Close Look At What To Expect - 12th Feb 20
IBM AI Mega-trend Tech Stocks Investing 2020 - 11th Feb 20
The US Dollar’s Subtle Message for Gold - 11th Feb 20
What All To Do Before Opening A Bank Account For Your Business - 11th Feb 20
How and When to Enter Day Trades & Swing Trade For Maximum Gains - 11th Feb 20
The Great Stock Market Dichotomy - 11th Feb 20
Stock Market Sector Rotation Should Peak Within 60+ Days – Part II - 11th Feb 20
CoronaVirus Pandemic Stocks Bear Market Risk 2020? - Video - 11th Feb 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

The Bailout of Fannie Mae and Freddie Mac

Interest-Rates / Credit Crisis 2008 Sep 08, 2008 - 03:55 PM GMT

By: Paul_J_Nolte

Interest-Rates The official take-over of Fannie Mae and Freddie Mac has begun. Whether this is the beginning of the end or merely the end of the beginning is yet to be determined, however it is certainly the hope that this move will begin to calm the housing market and allow mortgage money to once again flow. The effect of money back into housing should put a floor in the housing markets, but those effects will only likely begin to show up in the data a few months from now.

On top of the swirling around housing and the lack of punch in the most recent hurricanes, the job market has provided it's own swirl, as the jobless rate climbed to over 6% and non-farm payrolls lost over 125,000 jobs (with revisions included). We anticipate that before the job market turns around, we will be averaging over 100,000 job losses per month and based upon the current trajectory, that would likely occur mid-'09 at the earliest. With the news breaking over the weekend on Freddie and Fannie, much of the economic news coming up this week will likely be buried by the government actions. We do have an inflation report, trade and consumer related reports on retails sales and credit. Outside of the Washington focus this week, there should be additional data pointing to overall economic weakness. Monday morning should be fun!

We talked last week about “confirmation” of the recent move higher or resumption of the June/July decline. Given the huge reversal early in the week (and a very small one at the end), our guess is that the markets will be heading lower over the coming weeks. The BIG question is how low can they go? Based upon strictly fundamental valuations of the markets, our guess is the worst could take the markets down another 15-20% before finally bottoming around 1000 on the SP500.

The markets finally enter relatively inexpensive territory just 4% below current levels. So the risks remain relatively high that at least one more large decline looms in the future. There are also the beginnings of a bottom in some of our indicators that could point to this decline being the last - ultimately set up the markets for a rally as we enter 2009. This does fit with the notion that the stock markets bottom in advance of the economy bottoming – which we are figuring sometime mid-'09. Keep an eye on the financial sector, as a rally in these stocks could lend credence to the “bottom is in” theory.

The bond model continues to benefit from the decline in the CRB index. Interest rates are projected to decline over the next few weeks – even as the bailout of Fannie and Freddie are likely to add to the amount of bond issuance in the months ahead. An interesting thought on oil prices: on their way to $140+ it was thought that the prices would rob consumers of spending money. Now that prices are falling, the discussion is about how the lower prices are a reflection of a weak global economy. The roughly 10% decline in pump prices is not quite the 25%+ decline in a barrel of oil, but neither will be making much of an impact upon the still strapped consumer. We'll get a check on spending habits with the release of retail sales and consumer credit this week – may be enlightening.

By Paul J. Nolte CFA

Copyright © 2008 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules