Dollars and Jens
Thursday, September 27, 2007
Morningstar on the State of the Market
Morningstar thinks the market is undervalued.

I'm nervous about credit and (mostly in the alternative) inflation. But I'm usually nervous.

Wednesday, September 19, 2007
Interest Rates
In case you haven't been paying attention, the Fed did, in fact, cut rates by 50 basis points yesterday. The stock market then went up.

This morning, the Wall Street Journal had a kind of weird editorial (subscribers only) which seemed to go out of its way to avoid saying that the Fed loosened too much while leaving the impression that they thought the Fed loosened too much. Maybe they aren't convinced that it's wrong, but just want to express wariness, as such:
The point we'd like to stress today concerns the Fed and its credibility -- or to put it more tartly, its character. It is easy for a central bank to cut rates and ease money. At least in the short term everybody loves a good time, as yesterday's equity euphoria showed. The harder task is being willing to tighten money amid the business and political criticism that inevitably follows. That's the true test of a central banker's mettle.
And they have a point. Preserving the value of the currency should generally be their top priority. The risk of inflation is not currently at an all-time low, but it's not terribly high, either.

If we do see signs of inflation, that will be a good time for Bernanke to prove that he's willing to pull on the reins of the money supply. But that's not where we are right now.

Thursday, September 13, 2007
Countrywide Lawsuit
A lawsuit filed against Countrywide Financial Corp. on behalf of its employees claims the mortgage lender failed to warn its employees about the depth of its financial troubles, resulting in heavy stock losses in their 401k retirement accounts.
The poor dears wanted to engage in insider trading and management didn't help them out. Or is there some other way to interpret that?

I assume there will be at least an attempt at a shareholder class-action suit, just as a matter of tradition. But forming a class out of only employee shareholders is new to me.

Wednesday, September 12, 2007
FOMC meeting next Tuesday
While I've opposed an inter-meeting cut, probably in part for message-sending reasons (though I'm not sure those fully justify my feelings on that), I'm not all that sold on the gradualist policy the fed has adopted, and at this point I support a 50bp cut on Tuesday. It may be entirely appropriate that the statement be somewhat hawkish — spelling out that any future further cuts would be contingent on data, and implicitly insisting that a 50bp cut now shouldn't be read to imply that more cuts are already planned. I can't say why 4.5% seems to me like it might be too low, but 4.75% doesn't; I shouldn't have the amount of precision in my feeling as I do.

Anyway, I'd like to note that the whole short end of the yield curve — out to two years and beyond — is down more than 50bp since the last meeting, and the spreads between TIPS and nominal securities are indicating lower inflation expectations than they have in a long time. Especially after the employment report, it's hard for me to imagine a funds target of 4.75% leading to unwelcome inflationary pressure in the next 18 months — whether the cut is needed to prevent a recession or not.

Tuesday, September 11, 2007
Morningstar Does Options
To their mutual funds ratings and their stock ratings, Morningstar has added stock options.

In case you're interested and hadn't noticed.

Thursday, September 06, 2007
fed repos
For Overnight Repos:
Type of Collateral Submitted Accepted Stop Rate
U.S. Treasuries $16.1 billion $5.981 billion 5.18 percent
Agency $10.6 billion $2.269 billion 5.22 percent
Mortgage-backed $6.85 billion None N/A

TOTAL $33.55 billion $8.25 billion

For 7-Day Repos:
Type of Collateral Submitted Accepted Stop Rate
U.S. Treasuries $18.85 billion $7.718 billion 5.10 percent
Agency $20.35 billion $4.169 billion 5.22 percent
Mortgage-backed $19 billion $4.113 billion 5.28 percent

TOTAL $58.2 billion $16 billion

For 14-day Repos:
Type of Collateral Submitted Accepted Stop Rate
U.S. Treasuries $16.4 billion $7 billion 5.05 percent
Agency $19.95 billion None N/A
Mortgage-backed $24.55 billion None N/A

TOTAL $60.9 billion $7 billion

I'm just kind of showing off, aren't I.

WaMu Raids Countrywide
SEATTLE--(BUSINESS WIRE)--Washington Mutual, Inc. (NYSE:WM - News) today announced that John P. McMurray is joining WaMu to serve as the company's Chief Credit Officer, effective Sept. 24, 2007. He will report to Ron Cathcart, EVP and Chief Enterprise Risk Officer.

McMurray, a mortgage industry veteran, most recently was Senior Managing Director and Chief Risk Officer at Countrywide Financial Corporation, Calabasas, CA.
I suppose they know better than I whom to blame for what, but I found it amusing that someone would seek out Countrywide's "Chief Risk Officer" to fill an executive position.

Sunday, September 02, 2007
Bogle Interview
Presented without endorsement, an interview of Vanguard's Jack Bogle. There's a five-paragraph summary, which may be worth reading, of a half-hour of audio. If you're inclined to listen to the audio, the first 85 seconds are radio-fluff; I have nothing against the rest, but it's nothing new.

Saturday, September 01, 2007
Overpriced Real Estate
Forbes has a ranking of the world's most overpriced real-estate, relative to the income the real estate generates on the rental market.

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