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Monthly Archives: March 2009

The Good, The Bad, and The Missing: When will the Market Turnaround

Contrary to what the title piece may suggest, we are not here to discuss the sequel to a famous 1966 spaghetti western movie. Instead, we intend to focus on recent developments in the financial markets and review how the market is constantly weighing three inputs to determine its direction and risk profile: what it views as positive, what it views as negative, and what it does not yet understand. In this veritable screenplay the characters are faced with the Good, the Bad, and the Missing. While no one can argue that the Bad has been the most influential of the three inputs as of late, it is important to understand thte dynamics of these three factors and how the market values and weighs them.

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/thegood_thebad_theMissing_3_4_09.pdf

Sticking With Our Base Case on the Economy

It was another difficult week for the U.S. economy and financial markets last week, with another dose of bad news on the economy helping to push the broad U.S. equity market indices to their lowest levels in more than 12 years. In addition to the dour news on the economy, markets were buffeted by:

  • The release of President Obama’s first budget
  • Key testimony from Federal Reserve Chariman Ben Bernanke
  • More detail on the Adminstration’s bank rescue program
  • Yet another attempt by the U.S. government at shoring up Citibank
  • The Federal Deposit Insurance Corporation’s (FDIC) list of problem banks as of December 31, 2008
  • A rash of dividend cuts from high profile major U.S. corporations – including General Electric

 On balance, the flood of news on the economy, policy and on corporate America was disconcerting at best.

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/Weekly_Economic_Commentary_3_2_09.pdf

Mortgage Modification May Move Markets

Market participants are unhappy to have to wait for specifics on the Obama administration’s recovery policy initiatives. We expect the administration to release the details of this plan to limit foreclosures and reduce the number of bad loans are less eagerly awaited than those of other initiatives such as the Public-Private Investment Fund, the specifics of this mortgage modification plan may be market moving.

The core of the crisis comes down to housing. A home is most families’ the biggest asset. Falling home prices undermine consumers’ confidence to spend and drag down the economy. The financial crisis was the result of financial institutions’ high degree of leverage to mortgages of questionable quality. As delinquency and foreclosures rise, losses mount for lenders and jeopardize their stability to make new loans.

To see the rest of this article, please click on the link below:

http://www.mwboone.com/library/Weekly_Market_Commentary_3_09.pdf