Yet another stockbroker

It didn’t take long until FED acted and that will in the short term take away some of the stress the market feel regarding the mortgage situation. FED cut the level of interest with 50 points for banks and other players in the financial market. At this stage the market fear that the companies will have there investments costs rapidly increasing cause the revaluation of risks and the last couple of years historically very low spreads on lending. The fact is that the last couple of years the mortgage situation been the same for all companies regardless what the books look like, the last couple of month that been changing and that will only hit companies with weak balance sheet.

The market will probably have some insecurity and volatility will probably be a theme the next couple of month before the market and the global economy completely get into the fact of an environment with higher interests, that move might take some time longer cause the problems in the credit market.

Something of great importance is that FED, Bank of England and others the last couple of years been very independent in there work of protecting the growth and keeping the inflation within stated goals which has been helping the market to sustain in this long period of strong economic growth. This independence will further on be important to increase the possibility for FED and others to act quick and powerful.

What the market hoping for at this stage is that the FED will cut interest at there next meeting to help the mortgage situation not going out of control. At the moment there is difficult to see the consequences of the sub prime mortgage situation world wide, but so far a couple of hedgefunds been closing down and some financial institutions going out of business or are under pressure. Among hedgefunds closing down two Bearn Stearns with a 15 times gearing going under, that fact says more about the great risks investors taking than what problems the sub prime mortgage situation have been causing.

The probability that FED will decrease interest on there next meeting have the last couple of weeks been rapidly increasing but is far from being sure. FED is still focusing on job growth and inflation and there seems to be possible regarding both the weakness of job growth and the low inflation that an increase of interest will come sooner rather than later.

Companies taking a hit the last couple of weeks and still are under pressure are banks and financial institution cause there overall exposure in the mortgage sector. A qualified guess is that there is in that sector there will be a strong move on the upside as soon as the insecurity in the mortgage situation is gone. What to look at is companies within the banking sector is companies with low exposure and risks in the mortgage portfolio and strong balance sheets.

The next couple of weeks will probably be good timing for going long or just taking short positions and taking gain in the volatility the market will provide in the next couple of month.

Technorati Tags: mortgages, loans, FED, sub prime

The mortgage situation is creating insecurity in the stockmarket all around the world. As I predicted and discussed before I think the market underestimate the help it will get from the softness in interest policy all around the world. FED seems to be first out with cutting interest helping the house and mortgage sector to have a soft landing which will holding up growth and ease off the insecurity we see in the stockmarket on a daily basis.

Most of the insecurity we see in the market today comes from the stress if the interest policy will change in a phase that will catch up the weakening growth that might be a fact if today’s mortgage situation will proceed from a credit squeeze towards a credit crunch which in my opinion is not an alternative cause the strong underlying global growth world wide and the big change the FED and other banks gone through the last couple of years with great independence in the focus they got of withholding the growth with inflation and job growth high on the agenda.

The insecurity in the stockmarket will move more money in to government bonds in the short perspective but as soon the market realize that the interests will be coming off and the low valuation of the overall stockmarket is consistent.

Consumption have in the financial history played an important role and what we see coming through the last couple of years is that countries with population that stands for an huge part of the world population is starting to get to a point where the overall consumers for the first time in the history of mankind, reached a level where they have the possibility to consume will change the map of prosperity.

Another aspect is that regions where the growth is strong the interest levels have historically speaking been high but in the last couple of years the interest levels on mortgage loans been coming down on more reasonable levels and the trend are intact. That will also be the case further on as long the policy of interests will be focusing on controlling the inflation and have a strong but healthy growth. An aspect of that is that consumers can start improving there wealth by taking loans, buying houses, apartments and making investments where they can in the long run improve there wealth.

Turkey is an example of a country where the interest of mortgage loans been coming off for some time and the impact of the economy is strong when it comes to the overall growth and the willingness to invest from both Turkish investors and foreign investors all over the world.

The possibilities of taking on loans is driving the economy forward and of course there is times where the willingness on taking on risks will get out of hand but that’s what the interest policy of the specific country should handle to take the market back to a reasonable level when it comes to the willingness of taking on risks for new projects.

Technorati Tags: mortgage loans, government bonds, global growth, stockmarket

The subprime mortgage situation is hitting the credit market in the US and the house mortgage loans are once again in focus where the credit squeeze might go towards a credit crunch. If we going towards a credit crunch there will be signs that mortgages rated as Alt A loans is starting to get hit.

At this stage there are no signs that the credit squeeze is going towards a credit crunch and hit the private consumption and global growth. Interesting though is that problems in the subprime mortgage loan market in the US expect to be hitting the loaning market world wide and for now stockmarkets in “old Europe” is taking a hit and been coming off more than 10% in the last month though Asia, where the real growth is today not been taking much on the downside. Though the depending on the US market is declining the fear is spreading all over the world but the impact of US insecurity is day by day decreasing when country by country is less depending on the US consumers. Japan as an example have the last 5-6 years decreased there total depending on the US market by 25 %.

To understand the impact on what is going on at this stage there might be a good idea to try to find out the worse case scenario on the US mortgage situation. When it comes to high risk loans in the US market there is four types of high risk loans, subprime, Alt – A, Jumbo IO and option ARM which together stands for around ¼ of the total house mortgage stock in the US. What shakes the market at this point is the insecurity how far this can go, what is going on now is revaluation of risk and this might in the end hit the spreads between company bonds and government bonds. At this stage the spreads in the private sector is getting wider and if that also hit company loans that will hit the cost for company investments world wide. Besides the fear of increasing spreads on loans the stockmarket speculating that the growth coming from US consumers will be taking a hit when the house mortgage sector having problems.

The FED is though very aware of the risks and will be watching very close what will occur regarding the mortgage situation. FED has to provide the market with liquidity and act powerful to avoid the US going into a recession. At this stage FED is waiting for the growth of employments to ease off to take the step to cut interests. This might though be a view that FED will change if the mortgage situation is getting really bad.

In the longer run the level of interest in a number of countries seems to peak on historically low levels will be something that might help the global growth in near future. The US and Great Britain is as an example where the probability of pushing the interest any further is out of the question regarding the risks of growth and inflation.

The impact on the overall expectations on low interest levels in the global economy might at this stage as well be underestimated by the market and help both easing off the mortgage problems we have at this stage and keep the growth on a descent level as it did in the mid ninety when the stockmarket holding up nicely though the interest was peaking.

Technorati Tags: government bonds, trading, stockmarket, mortgage, subprime