Wednesday, December 3, 2008

Wild Numbers

A Mixed Picture

Amazing Volatility

The Dow Jones Industrial Average has moved up and down by an amazing average of 517 points each day over the last two months and for much of October by a record 600 points.

Mortgage Refi Rebound

Mortgage applications for purchase or refinance rose by a record last week as lending rates plunged after the Federal Reserve agreed to buy mortgage-backed debt. The Mortgage Bankers' index jumped 112 percent to the highest level since March. The refinance index rose 203 percent while the purchase index rose 38 percent.

The Fed announcement on Nov. 25 that it would buy $500 billion of Fannie Mae and Freddie Mac debt sent mortgage rates to a three-year low. 30-year fixed-rate loans dropped to 5.47 percent from 5.99 the prior week. 15-year fixed mortgages dropped to 5.13 percent from 5.78. One-year adjustables fell to 6.61 percent from 6.87.  The Refi share of applications rose to 69 percent from 49 percent  the prior week.

Meanwhile, the housing slump continued. Combined sales of new and existing homes in October were at a 5.4 million annual pace, down 36 percent from their July 2005 peak. Housing starts in October fell to their lowest since records began in 1959.

Harvard Endowment

Harvard officials say the largest college endowment fund lost at least 22 percent or about $8 billion in the four months since the fiscal year began. The endowment was worth $36.9 billion on June 30. The fund is considered an innovator and one of the best managed college funds.

Stock Market Still Not Cheap?

Bill Gross, manager of the world’s biggest bond fund, said stocks aren’t as cheap as they appear given that the era of high leverage, low borrowing costs, deregulation and low corporate tax rates is over. He argued that corporate bonds are better investments.

The S&P 500 has fallen 46 percent since its record 14 months ago as losses at financial firms approach $1 trillion and economists forecast that the recession will be one of the worst since World War II.  The U.S. government has pledged more than $8.5 trillion in all around help during the past 15 months.