Jim Wigen, WHIFinancial.com - Mortgage Defaults Go DOWN last Quarter of 2009!!
•The mortgage market may have begun to turn: Fewer borrowers fell behind on their payments during the last three months of 2009.
A seasonally adjusted 9.47% of all mortgage loans were late during the fourth quarter, down from 9.64% at the end of September, according to the National Delinquency Survey, which is produced by the Mortgage Bankers Association and is considered the bible of the industry.
This figure is significant because it shows a reduction — even if just slight — in the volume of loans heading toward the foreclosure process. This has not happened since 2006.
“We are likely seeing the beginning of the end of the unprecedented wave of mortgage delinquencies and foreclosures that started with the subprime defaults in early 2007, continued with the meltdown of the California and Florida housing markets due to overbuilding and the weak loan underwriting that supported that overbuilding, and culminated with a recession that saw 8.5 million people lose their jobs,” said Jay Brinkmann, the MBA’s chief economist.
Of course, delinquency rates were still 1.59% higher than they were in the last quarter of 2008.
Brinkmann’s main reason for optimism was a drop in the percentage of borrowers who had missed one mortgage payment. That rate fell quarter-over-quarter to 3.63% from 3.79%.
“The continued and sizable drop in the 30-day delinquency rate is a concrete sign that the end may be in sight,” he said. “We normally see a large spike in short-term mortgage delinquencies at the end of the year due to heating bills, Christmas expenditures and other seasonal factors.”
Another positive sign is a drop in the percentage of borrowers whose lenders had initiated foreclosures, the first step in the process of taking homes away from borrowers. That may be only temporary, though: Lenders have been holding back and the number of seriously delinquent loans not in foreclosure has ballooned.
As a result, loans 90-days late or more now account for half of all delinquencies calculated by the MBA, a record high and twice the category’s share of delinquencies two years ago.
“The build-up in the 90-day bucket of loans that could end up in foreclosure should keep foreclosure rates elevated,” said Brinkmann.
But the high number of borrowers in that category is also somewhat of a statistical glitch. Loans are remaining there much longer than they did in past years because of government and lender attempts at mortgage modifications.
Of all the delinquency hot spots, Florida is the worst hit with 26% of all mortgages in some kind of trouble.
The worst performing category of loans was subprime adjustable rate mortgages, with more than 42% being 90 days late or in foreclosure. That is nearly four times the rate of default during early 2007, when the mortgage meltdown was heating up.
The MBA report, according to Mike Larson, a real estate analyst for Weiss Research, is a further sign that the housing market is truly stabilizing.
“We’re now seeing the next piece of the puzzle fall into place,” he said. “Specifically, early stage delinquencies are stabilizing. This is a key sign that housing market conditions are slowly, grudgingly, getting slightly better.”
One key trend is that home price declines, a key influence on delinquency rates and, especially, on foreclosures, halted their free-fall in 2009. The average home price in 20 major markets dropped only about 5% during the 12 months ended Nov. 30, according to the S&P/Case-Shiller home price index.
As prices stabilize, fewer mortgage borrowers will plunge underwater, owing more on their mortgage balances than their homes are worth. Homeowners with positive equity in their homes have an asset they can tap during temporary financial strains and are much less likely to fall behind on their mortgages.
Jim Wigen, WHIFinancial.com - Fed Raises Rate it Charges Banks for Temporary Loans
•Federal Reserve to Wall Street: The days of easy money — and, just maybe, easy profits — are numbered.
News on Thursday that the Fed would raise the interest rate that it charges banks for temporary loans was seen by lenders as a sign that their long, profitable period of ultralow rates was coming to an end.
The move suggested that policy makers believed the nation’s banks had healed enough to withdraw some of the extraordinary support that Washington put in place during the financial crisis. And, while all those bailouts stabilized the banking industry, it was low rates from the Fed that helped propel banks’ rapid recovery.
Even though the Fed had telegraphed its intention to raise the largely symbolic discount rate, the timing of the move, coming between scheduled policy meetings, caught some economists by surprise. Stocks and bonds sank in after-hours trading, suggesting Friday could be an anxious day for the markets.
“This is a victory lap by the Fed,” Zach Pandl, economist at Nomura Securities, said. “It is a signal that the Fed is very confident in the health of the banking system. Fundamentally, these actions are a sign of policy success.”
Since the crisis, the Fed has nursed banks back to health with extraordinarily low rates. Banks have been able to borrow money cheaply and put it to work in lucrative ways, whether using the money to make loans at higher rates or to trade in the markets.
The difference between short- and long-term interest rates is near a record high, presenting a profitable opportunity for banks. The difference between two- and 10-year Treasury rates, for instance, is about 2.9 percentage points. Buoyed by such policies, banks’ profits — and banking stocks — have rocketed over the last year.
Many economists said banks were no longer borrowing in large amounts from the Fed using the discount rate, and so the move on Thursday was, in a sense, purely technical.
But it was a sign that the threat of a collapse in financial markets — so real just a year and a half ago — had dissipated. Some economists said that, with unemployment high and the economy growing slowly, the Fed would not be raising the more important benchmark interest rates for some time.
“This does not say anything about interest rates, but it does say something about what has happened on the ground, that the financial industry is not under same stress as it was previously,” Frederic S. Mishkin, a professor at Columbia and a former member of the Fed’s board of governors, said.
Others countered that the move at least brought forward the moment when interest rates would begin to rise again — and put an end to the banks’ period of easy money.
Louis V. Crandall, chief economist at Wrightson ICAP, said it demonstrated “a willingness to entertain an early start to the real business of retreating from the Fed’s very accommodating stance.”
Unnerved by this prospect, at least in the short term, the bond market fell after the Fed’s announcement, driving up the yield on 10-year Treasury notes about seven basis points, or seven-hundredths of a percentage point, to 3.8 percent.
Stock futures also fell in after-hours trading. Financial shares were particularly hard hit, with shares of big banks like JPMorgan Chase and Bank of America each falling about 1 percent.
The uncertainty over what the Fed will do next, and when, is a big worry for bankers.
“It creates real havoc in managing a bank when you have to ride through these cycles when interest rates change rapidly,” said Douglas J. Leech, the chairman and chief executive of Centra Bank, in Morgantown, W.Va.
Many banks are still coping with bad mortgages and other loans. “This poses a new threat,” Mr. Leech said.
Rising interest rates will invariably squeeze banks’ profit margins and reduce the value of some lenders’ own investments. Taken together, those developments will hurt banks’ bottom lines, a particular worry for the many small and midsize banks that are struggling to cope with the weak economy.
Many banks have tried to prepare for an inevitable rise in rates by locking up customers’ deposits, which provide a stable source of funding for loans. Centra, for instance, began extending the term of its certificates of deposits to 16 months, from 12 months, last year. The bank also began offering low-rate loans that it can reset at higher rates in 18 months, in case, as Mr. Leech expects, interest rates rise.
by Graham Bowley and Eric Dash
Friday, February 19, 2010
Jim Wigen, WHIFinancial.com- Free Financial Plan for my Readers
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Jim Wigen, WHIFinancial.com - Are Banks Back to Profitability? Barclays (BCS) Is!
•Barclays (BCS) 09′ Net Profit Doubles, 2010 Starts Well
LONDON -(Dow Jones)- Barclays PLC (BCS) said Tuesday that its net profit for 2009 more than doubled, helped by a GBP6.33 billion gain from an asset sale and profits from Barclays Capital, but bad-debt charges weighed on the results, which still beat analysts expectations.
Barclays said 2010 started strongly, with profit before tax “well ahead of first half and full year 2009 run rates.” It also said its planning assumption is for a “moderate” decline in impairment in 2010.
“These numbers are further proof that Barclays has skillfully woven its way through the recessionary minefield,” Richard Hunter, head of U.K. equities at Hargreaves Lansdown Stockbrokers, said. “With or without the [asset sale], the figures are extremely impressive.
At 1103 GMT, Barclays shares were up 18 pence, or 6.4%, at 293 pence.
On the hot topic of bonuses, the bank said it awarded staff GBP2.7 billion for 2009 performance, but said Chief Executive Officer John Varley and President Robert Diamond waived awards they would have received for their contributions to the bank’s strong results.
Most banks have been lowering payouts amid the public outcry, and Barclays said the ratio of investment banking remuneration to BarCap’s revenue was cut to 38% last year from 44% in 2008.
“To be clear, our objective in the area of remuneration is to pay the minimum consistent with competitiveness,” Varley told a conference call.
Barclays reported a net profit for the year ended Dec. 31 of GBP9.39 billion, up from GBP4.38 billion a year ago.
It reported a GBP6.33 billion gain in the last quarter from the sale of Barclays Global Investors to BlackRock Inc. (BLK), which was closed in December.
Fourth-quarter net profit rose to GBP6.66 billion from GBP557 million a year earlier, according to Dow Jones calculations.
Also contributing to the bottom line was a GBP2.5 billion gain from so-called structural hedges, designed to reduce the impact of the volatility of short-term interest-rate movements on positions with the balance sheet. The bank said it expects to continue being protected by such hedges.
Meanwhile, Barclays said impairment charges for the year jumped 49% to GBP8.07 billion from GBP5.42 billion. The figure, however, was below the GBP9 billion estimate the bank gave late last year.
Varley said the worst of charges is “behind us,” although the company expects them to rise in certain books, particularly in its commercial lending portfolios.
The bank said impairment charges in Spain more than doubled to GBP455 million for the year, of which GBP270 million related to corporate and small- to midsize-enterprise portfolios.
The country, along with Greece and Portugal, has been closely watched by analysts on fears of rising sovereign debt.
On a pretax-profit level, results beat the GBP11.31 billion estimated by a poll of five analysts. It reported a pretax profit of GBP11.64 billion for the year, up from GBP6.08 billion in 2008, when it posted a GBP2.41 billion gain on acquisitions.
Breaking it down by division, profit before tax at Barclays Capital rose 89% in 2009 to GBP2.46 billion “as a result of very strong performances in the U.K., Europe and the U.S., partially offset by a charge of GBP1.82 billion relating to own credit,” the bank said.
BarCap’s performance so far this year has been strong, following a slight fall in income in the fourth quarter compared with the third, the business head, Bob Diamond, said.
Meanwhile, pretax profit for the U.K. retail banking business fell 55% to GBP612 million as economic conditions remained challenging. Pretax profit at Barclays commercial bank also fell, down 41% to GBP749 million.
The bank said performance of its global retail and commercial banking division was hurt by margin compression on deposit income as a result of low interest rates.
Nonetheless, the business reported a 7% increase in income to GBP16.1 billion.
Total income rose 34% to GBP30.99 billion.
“We have strengthened our financial position considerably over the year in the areas of capital, liquidity and leverage and are well positioned to manage further changes that may be required of us by our regulators,” Barclays said in a statement.
Its Core Tier 1 ratio stood at 10% at December, up from 5.6% a year ago.
The bank declared a final dividend of 1.5 pence a share, giving a total of 2.5 pence a share for the year.
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Jim Wigen, WHIFinancial.com - Where Does the Market Close in 2009 & 2010?
•With the DJIA above 10,500, I don’t expect more growth by the end of the year. We have heard in the past January is a good month for the markets, but that is not always true. Over the past few years, we have seen the market sell-off not increase.
I am expecting retailers to report slower sales than what they predicted for the holiday season, and with the markets rising so quickly between the Summer and Fall, expect the markets to drop in January 2010. I don’t see the market dropping in January as a sign you should sell stocks, I would however, wait to see if the market declines 4%-5% in the month of January before committing new money into stocks or equity mutual funds.
My early forecast for 2010, is the Financial Sector will lead the way to the DJIA closing around 11,600 by the end of 2010. Many of you may want look at incorporating the strategy of Selling Covered Call Options, as a means to create additional income for your portfolios in 2010. I see the markets moving sideways for the better part of 2010, with an increase third and fourth quarter 2010.
If you would like to more about the Selling Covered Call Option strategy, please email me at JimWigen@GetWealthyStayWealthy.com.
Jim Wigen, WHIFinancial.com - Retail Sales Rise 0.5% in January
•The Commerce Department said Friday that retail sales increased by 0.5 percent last month, the best showing since November and better than the 0.3 percent increase economists had expected.
Excluding autos, sales posted a 0.6 percent reading, also better than expected, with strength coming from a surge at general merchandise stores, a category that includes big national chains such as those owned by Walmart Stores Inc.
Strength in consumer spending is important because it accounts for 70 percent of economic activity. Economists are worried that the spending gains since last summer could falter given the tough times facing many U.S. households and that weakness could derail the fledgling recovery.
In a second report, the Commerce Department said that businesses reduced their inventories by 0.2 percent in December, a weaker performance than the 0.2 percent rise that economists had expected.
Total business sales rose by 0.9 percent in December following an even stronger 2.4 percent gain in November but the dip in inventories showed that businesses remain cautious about the strength and durability of the recovery.
The overall economy grew at an annual rate of 5.7 percent in the October-December period, the best showing in six years, but the concern is that this growth could slow considerably in coming months as the impact of the government’s stimulus programs begins to fade and unemployment remains stubbornly high.
In its annual economic report to Congress, the Obama administration on Thursday forecast that the economy would average 95,900 new jobs per month this year, not enough to make a significant dent in an unemployment rate that now stands at 9.7 percent. The administration’s economists also forecast that Americans’ personal savings would remain high as credit remains tight, another development likely to weigh on spending.
The 0.5 percent increase in retail sales in January followed a 0.1 percent decline in December, a figure that was revised up from an initial report that sales had fallen 0.3 percent during the month. The latest reading was the best showing since sales had surged by 2 percent in November.
Sales at auto dealerships were flat in January following a 0.1 percent rise in December. Activity last month was hurt by a series of safety recalls at Toyota.
The 0.6 percent increase in retail sales excluding autos followed a 0.2 percent drop in this category in December. The strength in January was led by a 1.5 percent jump in sales at general merchandise stores, the biggest one-month jump in this category since February 2009. General merchandise includes major department stores and big national chains such as Walmart and Target.
Sales at specialty clothing stores rose by 0.3 percent while sales at gasoline stations were up 0.4 percent. Other stores experiencing increases in January were sporting goods stores, restaurants and bars and nonstore retailers, the category that covers internet shopping.
Retailers seeing declines during the month included furniture stores, where sales fell by 1.4 percent, and hardware stores, with a drop of 1.2 percent.
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Jim Wigen, WHIFinancial.com - AT&T (T) and Verizon (VZ) my Top Dividend Paying Stock Ideas
•If you are looking to buy stocks which pay over a 3% dividend yield, look at these stocks:
HRPT Properties Trust (HRP) stock price, $6.47 with 7.29% dividend yield
AT & T (T) stock price, $25.18 with 6.65% dividend yield
Verizon (VZ) stock price, $28.97 with 6.61% dividend yield
J.C. Penney (JCP) stock price $24.63 with 3.23% dividend yield
Intel Corporation (INTC) stock price $19.82 with 3.21% dividend yield
Honeywell (HON) stock price $37.84 with 3.20% dividend yield
Caterpillar Inc. (CAT) stock price $53.45 with 3.14% dividend yield
Please note, I am not recommending you go buy these stocks for your portfolio without talking with me or your current financial advisor. Regardless of profit potential for any recommendation made, the possibility exists that losses may be incurred as well.
If you would like me to review your portfolio, have me give you a second opinion on your investments or hire me to be your Financial Advisor/Portfolio Manager, please email me at JimWigen@GetWealthyStayWealthy.com. Continue to check my website, GetWealthyStayWealthy.com, for updates on the stocks listed above as well as new stocks I am buying and selling for my clients.
Jim Wigen, WHIFinancial.com - Bank of America (BAC), Caterpillar (CAT), Siemens (SI), my Top Picks
•Many of you have emailed me asking what stocks I like, so I have decided to provide you my weekly top 10 stocks. Please note, I am not recommending you go buy these stocks for your portfolio without talking with me or your current financial advisor. Since I am not aware of your personal financial situation, I am providing my top 10 stock picks for you to get ideas on what you may want to buy for your portfolio or to bring my stock ideas to your current financial advisor.
Here are my top 10 stocks (in order) for the week, and at their current stock price, if they do pull back I would still buy more shares:
1. Bank of America, BAC
2. Caterpillar, CAT
3. Siemens, SI
4. J.C. Penney, JCP
5. Fluor Corp., FLR
6. Alcoa, AA
7. General Electric, GE
8. Citigroup, C
9. Morgan Stanley, MS
10. Honeywell, HON
If you would like me to review your portfolio, have me give you a second opinion on your investments or hire me to be your Financial Advisor/Portfolio Manager, please email me at JimWigen@GetWealthyStayWealthy.com. Continue to check my website for updates on stocks I am buying and selling for my clients.