It was Morgan Stanley’s turn in the barrel reporting an additional $6.7 billion dollars in sub-prime mortgage exposure on Tuesday of this week. Bringing there total exposure to an estimated $12.7 billion. These losses now seem to be priced into the markets and are not having the effect on stocks that they did initially. Stocks finished slightly higher for the week. On a brighter note, Warren Buffett and his Berkshire Hathaway company are considering entering the bond insurance business. So risk within sub-prime mortgages may not be as bad as initially thought.
Last week core pricing was below expectations, jobless claims were 20,000 higher than expected and consumer pricing, retail sales, and producer pricing all met expectations. Inflationary fears have retreated a bit and we will look to future initial jobless claims reports to see if this s a trend or not. This week housing starts and building permits report on Tuesday and jobless claims and the University of Michigan index of consumer sentiment report on Wednesday.
Currently, it is a buyer’s market in real estate over most of the nation and this should continue through next spring. The economy still seems very fragile. Some economists believe we are in a mild recession. We will continue to monitor all of the pertinent financial data for signs of further decline or an improvement in the housing market, the dollar, or crude oil prices that could jump start the economy again. In spite of any economic condition the American consumer’s propensity to spend continues.
Happy Thanksgiving and as always thank you for the opportunity to serve you and your clients.
