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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: russwinter who wrote (54569)	2/23/2006 1:19:38 PM
From: Ramsey Su	Read Replies (3) \| Respond to of 110194

Russ, I was debating this issue with a homebuilders analyst yesterday in the context of whether bubble areas such as SD and non bubble areas such as Detroit would be hit in the same manner. He believes the bubble areas would be hit first while I opine that there may be enough equity left due to the higher appreciation to possibly squeeze one more round of refinances out of the bubble areas, unless other conditions change. I based my opinion on defaults and foreclosures. It appears that we still have negligible defaults while the non bubble areas appear to be experiencing a higher rate. Unfortunately, we do not have good data source for defaults to strongly validate either opinion. In either case, the First American report clearly pointed out that there is little room left unless conditions improve from here, either in the form of lower rates or higher property value. Ramsey

To: russwinter who wrote (54569)	2/23/2006 3:38:53 PM
From: Perspective	Read Replies (1) \| Respond to of 110194

MCO: Russ, I was clicking on the header links and noticed you had Moody's in there. I never really considered them as a prime beneficiary of the housing bubble, but this earnings release a few weeks ago cites housing weakness as a significant threat to their earnings. Also, a peek at their valuation says that there is nothing behind that stock price. Well over 30PE, even looking forward, and zilch for book value. Man, if their business dies off even one touch, that stock is going to get hammered. finance.yahoo.com marketwatch.com NEW YORK (MarketWatch) -- Moody's Corp. on Friday reported a 22% increase in fourth-quarter net income as the bond rating and analysis firm's global customized finance business heated up. Moody's Corp. (MCO : moodys corp com News , chart, profile, more Last: 67.54+0.41+0.61% MCO67.54, +0.41, +0.6%) said it earned net income of $150.1 million, or 50 cents a share, up from $122.6 million, or 40 cents a share in the year-ago period. Year-ago earnings figures were adjusted for a 2-for-1 stock split, effective in the second quarter of last year. Revenue rose 21% to $473.2 million. A survey of analysts by Thomson First Call forecast earnings of 46 cents a share. Shares of Moody's fell 6 cents to close at $63.89 on Friday. The stock hit its 52-week high of $65.70 a share on Jan. 11. Prudential Equity Group analysts said Moody's turned in "another good quarter and that it expects the company to grow earnings in the low double-digit percentage range. "Moody's guidance calls for a moderation of revenue growth as it is not sure about the housing market and how interest rates might effect the structured finance business," Prudential said in a note to clients. "Last year the company gave similar advice which turned out to be wrong." Global structured finance revenue totaled $210.1 million for the fourth quarter of 2005, an increase of 36% from a year earlier. The business tracks syndicated loans and other services offered by large financial institutions for companies with unique financing needs. The deals generally involve complex financial transactions. Casting its forecasting lens into the rest of 2006, Moody's CEO Raymond McDaniel said trends from last year will continue, with divergent opinions on how important segments of the debt markets will perform. "Nonetheless, we believe Moody's market position and revenue diversity can support reasonable growth even if conditions in some market segments become less favorable," McDaniel said. Moody's said it expects stock option expenses of 12 cents to 14 cents a share in 2006. Revenue growth for 2006 is seen at the high single-digit to double-digit percent range, including a "small negative impact" from foreign currency translation. The company said its operating margin will decline by up to 1% to reflect investments in international expansion, analytical processes, ratings transparency, compliance initiatives, new products and technology.

To: russwinter who wrote (54569)	2/23/2006 11:53:09 PM
From: redfrecknj	Read Replies (1) \| Respond to of 110194

Long bond may bring 50-year mortgages 30-year Treasuries are guide for rates Associated Press Published February 18, 2006 NEW YORK -- The Treasury Department's resumption of 30-year bond sales could have an interesting impact on the home mortgage market, with lenders offering more 40-year loans and maybe even 50-year mortgages for the first time to help some consumers qualify for loans. Although the connection between the two--the U.S. government borrowing money through the sale of debt and a home buyer looking for a loan to buy a house--might not be apparent, the two are inseparable. That's because the interest rate the government pays for its debt usually determines the rate consumers and corporations will pay for the loans they take out. The reintroduction of the 30-year bond means lenders, who had relied on the government's 10-year note for mortgage rate guidance, have a better idea of what to charge home buyers for a 40-year mortgage. There is also talk among lenders, who are always looking for new mortgage products, about creating a 50-year home loan. The longer-term mortgages would lower monthly payments. "To the extent more consumers have more products available, it will be a help for affordability," said Douglas Duncan, chief economist at the Mortgage Bankers Association. Keith Gumbinger of HSH Associates, which tracks the mortgage industry, believes lenders will likely generate some borrower interest with the 40-year loans. "Expanding your menu [as a lender] to include as many loan choices means you get a better opportunity to scour borrowers out of niche markets," he said. After a five-year hiatus, the Treasury Department borrowed $14 billion through the sale of 30-year bonds on Feb. 9, and said it plans to continue regular sales of the bonds. The long bond's revival was a big event on Wall Street and for mortgage bankers because the longest-dated government debt had been the Treasury 10-year note. "A 30-year security might give lenders a benchmark to track the pricing of longer-term mortgages," said Steve LaDue, president of Affiliated Mortgage in Wauwatosa, Wis. Forty-year mortgages have been offered by lenders over the last two decades, according to Gumbinger, who recalled that their use last jumped in the 1980s when home prices were high and interest rates were in double digits. Rising home prices are bringing them back, he said, but noted that these loans likely will not account for more than a fraction of a percent of all loans processed by bankers. Last year lenders underwrote $3.2 trillion worth of mortgages. By stretching out their mortgage payments over 40 years, first-time buyers can lower monthly borrowing costs and qualify more readily for a loan. LaDue said bankers also could create a 50-year mortgage because of the Treasury's 30-year bond sale.