7/8 Saxo Bank Report - US Residential Mortgage Report

If you would like to receive the full version of the Saxo Bank US Residential Mortgage Report, please contact Slavka Bila slb@saxobank.com

Outright, consumers have thought of their houses as being something equivalent to credit cards. As the value of houses and properties increased during the early 2000’s money was withdrawn through home equity loans, meaning that there was no equity margin left whatsoever when prices started to decline in 2006.

The withdrawn money was in most cases used to excessive consumption. The downward spiral in the U.S housing market has picked up lately, yet there is more to come. After having seen the first wave of delinquencies and foreclosures mostly related to subprime mortgages, option ARM’s and Alt-A mortgages are next on turn and we expect a steep rise in delinquencies and foreclosures during the second half of 2009 as unemployment continues to climb.

In the report you can see a “snapshot” summary table calculating the estimated total losses for different types of mortgages. Based on the arguments throughout this report, the estimated total loss for the five types of loans will climb to over $1.2Tn when reset periods for option ARM’s and Alt-A mortgages kick in later this year. Important to note is that this amount is volatile with regards to changing delinquency rates and recovery rates.

7/8 US Non-farm payrolls to be released today

Prepared by John Hardy, Consulting Forex Strategist, Saxo Bank

A quick overview at some of the issues with today’s nonfarm payrolls. There is more than enough fishy statistical manipulation going on over at the BLS – that should be the main point of this little article. Many of the big banks – like Goldman Sachs - are predicting a better than expected number today, and I’m sure they have more of a chance of being right than any guess that I can come up with, but the main point here is to show how the job market may be much worse than what the BLS is telling us over the last many months, regardless of the specific July number. This means that even a positive release today could be met with a wall of cynicism and actually serve as a catalyst for risk averse action in the market (powerful bond rally, steep equity sell-off and the greenback and yen taking the rest of the G-10 currencies behind the shed for a lashing.) This market is an accident waiting to happen…..