Friday, December 01, 2006

Hot and Cold News About Mortgage Delinquencies

Hassler at Bloomberg writes about a disturbing evolution in mortgage delinquencies. "About 3.3 percent of the $160 billion in sub-prime loans made this year through July have payments that are more than two months late, the highest ever for mortgages in their first year, according to New York-based Fitch Ratings."


"The median price of a new home fell by 9.7 percent in September, the biggest drop since 1970, government reports showed."

Keep in mind that (1) 3.3% is not huge; and (2) the drop in median price follows an extraordinary rise in median price, so the drop is not in a vacuum.

Still, the future is uncertain, and the markets are showing it. The dollar is touchy, the stock markets are up and down, the numbers are all over the charts. And in a day and age when the numbers are everything, it's an uncomfortable time. It's as if the stats were the equivalent of Greek oracles every time one comes out. The whole world trembles as though Zeus were sneezing.

[Thanks to for the image of Zeus on the steps of the Federal Reserve Bank.]

All the markets and international financial players know that the central banks look at the figures as they come out and collectively decide about the future of the availability of credit. The market players are not concerned about whether or not the men and women making these decisions can do it well; this is a question that has never had a positive answer throughout history. All they want to do is plan for tomorrow. So they watch what the central banks watch and try to outguess the central bankers.

I wonder if they teach Fed-watching at business school.


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