Quote of the Day: Jeff Saut

Monday, April 02, 2007 | 12:15 PM

Before I head over to the Yankees home opener, here is a short but sweet QOTD via Jeff Saut (I'll include his chart relative to our earlier post this morning):

"Now for those pundits that insist that real estate is not spilling over into the real economy, we ask the question, “Why has the Association of Home Appliance Manufacturers’ Index posted a roughly 10% decline in shipments?” Or, “Why is Circuit City laying off 3,400 of its best sales personnel and attempting to hire maladroit sales people at a much reduced compensation package?”

Similarly, “Why is Citigroup cutting 15,000 financial-related jobs?” And, “Why is GMAC stating that its Residential Capital subsidiary is going to hurt profits?” Inquiring minds want to know such things.

Moreover, if the problems in sub-prime mortgages are NOT spreading, why are sub-prime mortgage companies dropping like flies, why are companies like ACC Capital closing their “call centers,” and why are delinquencies rising not only in the Alt-A complex, but in prime portfolios as well?”

We think the answer resides in the fact that housing prices are falling while Mortgage Equity Withdrawals (MEW) are contracting. Indeed, MEW has declined from $844 billion to $386 billion over the past nine quarters as housing prices have softened and trillions of dollars of adjustable mortgages have reset at higher interest rates. And with the continuing decline in housing prices, combined with mushrooming adjustable rate mortgage resets, it is difficult to envision that this situation will not continue."

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Source:
“As long as the roots are not severed . . .”
Jeffrey Saut
Raymond James Investment Strategy, April 2, 2007
http://www.raymondjames.com/inv_strat.htm

Monday, April 02, 2007 | 12:15 PM | Permalink | Comments (14) | TrackBack (1)
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» Early Reactions To The End of the Century from DealBreaker.com
As we reported this morning, one time mortgage king New Century has tumbled all the way down into bankruptcy. It will now be up to the courts, the creditors and the management to see if they can put this shattered... [Read More]

Tracked on Apr 2, 2007 2:56:48 PM

Comments

The hypsters attitude is "It ain't over till it's over!"

Until we see more New Century style bankruptcies, layoffs, stock market plunge i.e. real plunge of 10%+ in one day, I don't think the Lereahs of the world will give up easily...

Posted by: Lauriston | Apr 2, 2007 1:41:21 PM

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