John Pitera's Market Laboratory Message Board

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Strategies & Market Trends : John Pitera's Market Laboratory

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To: MulhollandDrive who wrote (8951)	3/14/2008 9:52:27 PM
From: Augustus Gloop	Read Replies (1) of 33421

These are rounded numbers but here are the bearish price objectives I'm getting from a specific charting method. They could take a while to become reality and we may not hit them at all - who knows. Dow 9700 SPX 1025 NYSE 7700 I'm wondering if the Fed just blows its wad next week and makes a BIG cut - we'll see. Even if they do it doesn't really matter - banks have not lowered mortgage rates in step with fed cuts. Until they do, many consumers/homeowners are screwed and getting more screwed by the month. I think we were around 6.50% for a 30 year last summer when the FF rate was 5%. Now its 3% and the 30 year is 5.95%. I really don't have the answer here. I can see why banks wouldn't want to refi homeowners at a lower rate when a lot of them are living on the edge and have declining fico scores. OTOH - these same banks abandoned all good lending practices a few years ago with no money down, no proof of income or interest only loans. In a sense the banks place your equity, my equity and anyone else who actually HAD equity in their property on margin. I say this because if things went bad (and they have) we were going to see an implosion in the real estate market. Now, even if you did everything right, if you have to sell your home you're competing with a market of foreclosed homes. There's also been a decline in average FICO scores which reduces the number of prospective buyers. So even as the FED lowers FF rates the banks aren't following. They've returned to better lending practices but the horse already left the barn because of the way they loaned money 3-4 years ago. Should the banks buckle here, lower rates in conjunction with FF drops and refi their weakening portfolio of mortgages? Would it fix some of the issue if they did? I don't really have that answer. What I do know is this - the lowering of FF rates in a commodities bull is a no-no. It's killing our currency, creating more inflation and we're about to see $4+ per gallon gas. I think the Fed's idea was that if they lowered FF's rates that banks would refi and essentially ease the credit crunch on the consumer. Since they haven't done this and inflation is now becoming an issue the consumer credit issue is getting worse by the day. This isn't the end, this isn't a bottom - this is just the beginning. The Bear Stearns news today was REALLY BAD and we're going to see more of the same thing IMO. Just wait until we start hearing about more bank failures or near misses. I'm really concerned.

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