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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (7561)	2/11/2007 4:04:44 PM
From: nspolar	Respond to of 33421

John: Some comments from Gary Shilling on 2007. "TAKE A LOOK AT WHAT'S BEEN IN INSIGHT LATELY: JANUARY 2007 “The 2007 Investment Outlook: 12 Nonconsensus Themes”: As was true in 2006, six background elements will dominate the investment climate in 2007: 1. The world is still awash in financial liquidity 2. Inflation remains low 3. So many investment returns are low 4. Speculation remains rampant 5. So investors assume more risks to achieve expected returns 6. The insatiable U.S. consumer will spend until borrowing power is exhausted In this climate, we foresee 12 investment themes, eight of which are likely to unfold in 2007 while four will probably work but maybe not until later: 1. The housing bubble will burst. If so, 2. The Fed will ease; meanwhile, the yield curve will remain inverted 3. U.S. stock prices will fall, perhaps below the 2002 lows, in the midst of a major recession 4. China will suffer a hard landing due to domestic cooling measures and U.S. recession 5. Weakness in U.S. and China will spread globally, dragging down economies and stocks universally 6. Treasury bonds will rally 7. The dollar will rally, but not before the recession is global 8. Commodity prices will nosedive 9. Maybe global and chronic deflation will commence in 2007. 10. Maybe U.S. consumers will start a long-run saving spree, replacing their 25-year borrowing and spending binge 11. Maybe deflationary expectations will become widespread and robust 12. Speculative areas beyond housing may suffer in 2007"

To: John Pitera who wrote (7561)	2/13/2007 4:01:41 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Fremont Stops Providing'Piggyback' Mortgage Loans By JAMES R. HAGERTY February 13, 2007 2:09 p.m. Fremont General Corp., a sizable subprime mortgage lender, has stopped providing "piggyback" second mortgages that are frequently used by financially stretched borrowers seeking to finance 100% of a home's price, according to emails received this week by mortgage brokers. Officials of Fremont, based in Santa Monica, Calif., couldn't immediately be reached for comment. Such second mortgages typically cover the final 20% of the home's cost, supplementing a first mortgage that covers 80%. Investors have grown increasingly wary of buying such loans from lenders amid a surge in defaults by recent subprime borrowers. The holder of the second-lien mortgage can hope to collect proceeds from the sale of collateral only if the holder of the first mortgage is fully repaid. In many foreclosure cases, second mortgages must be written off. Explaining the decision to stop providing such seconds, the Fremont email received by brokers said: "This is due to investors having no interest in second mortgage loans." Reduced availability of these piggyback loans and other mortgages designed to help people stretch to afford homes is likely to eliminate some potential home buyers this year, housing industry watchers have warned. Lenders are rapidly tightening up on their credit standards in the face of pressure from regulators and wariness among investors who buy mortgage securities. Second-lien mortgages accounted for about 6% of the dollar amount of loans originated by Fremont in the third quarter of 2006 and about 8% for the first nine months, according to the company's latest earnings statement. Share prices of subprime lenders have plunged in recent days amid growing concern about losses on defaults. Investors seemed to be applauding Fremont's move, as its stock was up 9.1% to $12.94 in afternoon trading on the New York Stock Exchange. Write to James R. Hagerty at bob.hagerty@wsj.com1