Dr Jones

How Does the WaMu Failure Compare?

Although JP Morgan-Chase may experience some exposure, depending upon how deep housing prices continue to fall, They accomplish something that would have cost them more... and taken decades to accomplish. JP Morgan-Chase has been looking seriously into taking a substantial foothold in the far west and southeastern U.S. This acquisition give them 2,200+ branches in both of those geographic areas... and without having to suffer through the 'diaper stage." Five years from now when everything settles down, (hopefully) Jamie Dimon will be considered a financial wizzard... I wonder how often he talks with the Oracle of Omaha?... Dr. Jones

Barclays Will Not Pick Up Lehman ETNs

Barclays has acted very shrewdly in their purchase of specific Lehman assets. Let us remember that Barclays will have the opportunity to take another look at the remaining ETN's, once the bankruptcy proceedings start to move forward.>> Dr. Jones

How Long Until Housing Prices Stabilize?

For those who are wondering how long the current real estate downturn will continue... here is a simple explanation. As the foreclosure rate continues to climb, (mostly due to sub-prime loans) additional inventory will be added to a swelling backlog of properties. This is likely to continue for the next 12-18 months. Remember that the greatest number of 'sub-prime' mortgages were written during June, July and August of 2006. Five (5) states; AZ, CA, FL, MI and NV, made up the highest percentages of these types of mortgages. Please keep this in mind if you are considering purchasing real estate in these states. The primary features of these hybrid mortgages included little or no-down payments and an adjustable interest rate, scheduled to increase monthly payments within 2 or 3 years.

This interest re-setting process is now in full swing; evidenced by an acceleration in foreclosures nationally (who knew). This condition tends to dump more real estate on the market, pushing property values continually lower.

The good news is that this cycle will eventually reverse. Before it does, two (2) important things must occur: 1st - foreclosures must slow to a trickle. When that happens, property values will start to level off, encouraging buyers to get back in the game. 2nd - and just as important, the Federal Reserve must make mortgage dollars (liquidity) available to banks and lending institutions, at reasonable rates, providing a critical element to finance these new purchases. Until those two (2) milestones have been reached, it's a good idea to keep your cash in the bank.

The bad news is simple... but the timing is somewhat more difficult to pinpoint. No one really knows how long this downturn will last or when credit standards will start to loosen up. Allot depends on how long this recession lasts and how much of a beating that banks and lending institutions take. One thing is for sure... the market always bounces back... and it will again.

How Much Have our Real Estate Assets Gone Down?

For those who are wondering how long the current real estate downturn will continue... here is a simple explanation. As the foreclosure rate continues to climb, (mostly due to sub-prime loans) additional inventory will be added to a swelling backlog of properties. This is likely to continue for the next 12-18 months. Remember that the greatest number of 'sub-prime' mortgages were written during June, July and August of 2006. Five (5) states; AZ, CA, FL, MI and NV, made up the highest percentages of these types of mortgages. Please keep this in mind if you are considering purchasing real estate in these states. The primary features of these hybrid mortgages included little or no-down payments and an adjustable interest rate, scheduled to increase monthly payments within 2 or 3 years.

This interest re-setting process is now in full swing; evidenced by an acceleration in foreclosures nationally (who knew). This condition tends to dump more real estate on the market, pushing property values continually lower.

The good news is that this cycle will eventually reverse. Before it does, two (2) important things must occur: 1st - foreclosures must slow to a trickle. When that happens, property values will start to level off, encouraging buyers to get back in the game. 2nd - and just as important, the Federal Reserve must make mortgage dollars (liquidity) available to banks and lending institutions, at reasonable rates, providing a critical element to finance these new purchases. Until those two (2) milestones have been reached, it's a good idea to keep your cash in the bank.

The bad news is simple... but the timing is somewhat more difficult to pinpoint. No one really knows how long this downturn will last or when credit standards will start to loosen up. Allot depends on how long this recession lasts and how much of a beating that banks and lending institutions take. One thing is for sure... the market always bounces back... and it will again.