Stocks are trading higher on news that Citigroup is set to receive a $306 Billion lifeline from the US Government, and an additional $20B in cash from the Treasury Department. In exchange, the Government will receive $27B of preferred shares, paying an 8% dividend. This is an enormous financial commitment by the US Government, but over time this deal could be a profitable one for taxpayers.
Also helping Stocks move higher are talks of a larger than expected stimulus plan by the Obama administration, which could top $1 Trillion.
Mortgage Bonds are trading near unchanged levels, and will likely take their direction from Stocks today. At 1pm ET, the Treasury Department will auction $36B of 2 Year Notes, and the additional Bond supply could weigh on Mortgage Bond prices later today.
Existing Home Sales will be released at 10:00am ET and the market is not expecting a strong number. Unless the report wildly misses expectations, there shouldn't be much of a reaction.
Mortgage Bond prices remain above support at the 200-day Moving Average, while attempting to overtake resistance at the Falling Resistance Trendline. We will continue to carefully Float, but be ready for any sudden changes.
Here is a link to the economic reports for this week. http://www.bloomberg.com/markets/ecalendar/index.html
BY THE NUMBER$
We hope you enjoy this edition of "BY THE NUMBERS" below - use these as talking points with your clients and referral partners this week!
1. THE RANGE - In the 1-year following the low point from each of the 9 bear markets that have occurred since 1957 (not counting the current 10th bear market) the S&P 500 has experienced a double-digit return. The best of the 9 produced a +58.3% return. The worst of the 9 was up +23.2%. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the US stock market (source: BTN Research).
2. 2008 ELECTION YEAR - 17 of the last 20 presidential election years (not including the current election year) have produced a positive total return for the S&P 500, including 15 of the last 16. With 5 ½ weeks remaining in calendar year 2008, the S&P 500 is down 44.4% (total return) YTD (source: BTN Research).
3. WOW - The YTD closing low for the S&P 500 (a value of 752) occurred on 11/20/08 (i.e., last Thursday). At the close of business on 11/20/08, 187 of the 500 stocks that are part of the index (i.e., 3 out of every 8 stocks) were down 60% or more YTD (source: NASD100.com).
4. U.S. DEBT - There are $4.4 trillion of Treasury bills, notes and bonds outstanding. The Chinese, with ownership of $585 billion of our Treasury debt, own more than any other foreign country (source: Treasury Department, FT).
5. U.S. STOCKS - The market capitalization of the S&P 500 has fallen by $4.4 trillion through the first 10 months of calendar year 2008. The total value of the stock index was $8.5 trillion as of 10/31/08 (source: S&P).
6. BACKSTOP - The Pension Benefit Guaranty Corporation (PBGC) insures the pension benefits of 44 million workers and retirees in the private sector. The PBGC was forced to take on 67 failed pension plans in its latest fiscal year. Over the last 5 years, the PBGC took over an average of 134 failed plans per year (source: PBGC).
7. STAY THE SAME - Only 4% of US employers anticipate that they will reduce their 401(k) matching contribution within the next year (source: Watson Wyatt).
8. BIG NUMBER - Through the first 9 months of 2008, the US imported $277 billion of crude oil, equal to more than $1 billion a day of oil imports (source: Commerce Department).
9. SUPPLY AND DEMAND - One week ago the president of OPEC said that the cartel will cut its daily oil production in order to raise the price of oil to $70-$90 a barrel. The price of oil closed last Friday at $49.93 a barrel. The last time the price of oil was $90 a barrel (10/07/08), the price of gasoline was $3.48 a gallon (source: Financial Times, BTN Research).
10. OIL INFLICTED PAIN - Inflation (using the CPI as the measurement) on a trailing 1-year basis (i.e., 11/01/07 to 10/31/08) is up +3.7%. 34 years ago as the nation was recovering from an oil crisis that began in 1973, inflation on a trailing 1-year basis (i.e., 11/01/73 to 10/31/74) was up +12.1%. The consumer price index (CPI) is a measure of inflation compiled by the US Bureau of Labor Studies (source: Department of Labor).
11. THEY TOOK THEIR TIME - 7 years ago this Wednesday (11/26/01), the organization responsible for determining the beginning and end dates of US recessions declared that a recession had started on 3/31/01. A later announcement that this particular recession had lasted only 8 months and that it had ended on 11/30/01 was made public on 7/17/03 or more than 1 ½ years later (source: National Bureau of Economic Research).
12. ELECTIONS AND RECESSIONS - The last time the US was in a recession during a presidential election year was 1980. The country endured a 6-month recession that ended in July 1980. Republican Ronald Reagan defeated Democratic incumbent Jimmy Carter in the November 1980 election (source: NBER).
13. HEALTH CARE - Medicaid provides health care to poor Americans. The program's cost is split between federal and state governments. Just 4% of Medicaid enrollees account for 50% of its expenses (source: USA Today).
14. GIVING - Legislation added to the $700 billion rescue plan signed by President Bush on 10/03/08 extended a tax benefit that had originally expired on 12/31/07. Americans at least age 70 ½ now have until the end of next year (i.e., 12/31/09) to make direct gifts from an IRA to a tax-qualified charity. Without this extension, an individual would have to take a withdrawal from his/her IRA, pay taxes on the distribution, and then make a contribution to a charity. This limited-time exception allows for a tax-free IRA distribution of up to $100,000 to be transferred directly to a charity (source: Kiplinger's Retirement Report).
15. COMPUTER KNOW-HOW - When Barack Obama becomes the 44th President of the United States on Tuesday 1/20/09 (8 weeks from tomorrow), he will be the 1st president in our nation's history to keep a laptop computer on his desk in the Oval Office (source: New York Times).
Thanks,
Greg Adelman
Midwest Home Center LLC.
715-483-0012
612-735-4414 cell
612-395-5444 fax
www.midwesthomecenter.com
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