Sunday, December 28, 2008

Wow - 56 degrees in NNY in December

A little warmth tends to keep one off the computer for a little while. However, the winds have returned, the Cowboys were humiliated and the temperature has plummeted again, so let's get back to the markets.

One of the first indicators of the retail environment this holiday shopping season is the Mastercard spendingpulse which tracks spending by US consumers using their Mastercards.
The headline data was sufficiently dismal - down 4% in December from the previous year - but I think this has to be viewed as a minor win for the retailers. If total retail sales end up within a percent of this number (down 3-5%), I think people would be happy with those results. I think you could argue that people paid for a greater percentage of their purchases with cash this year and that could account for some of the Mastercard spendingpulse decline.

"A final burst of spending retailers hoped for last weekend never came. Shopper traffic fell 27% compared with the same time last year, while sales declined 5.3%". Really? Did anyone go to a mall last week? You couldn't find a parking space in NY/NJ or PA. Maybe things were really bad in Montana and Arizona.

When you wonder what went wrong in the housing market don't look too far beyond good old fashioned greed. The NY Times has a revealing look at WAMU and their lax lending standards. Did WAMU push the envelope to expand the Community Reinvestment Act? Of course not, they did it because it meant big bonuses for bankers and real estate agents.

"Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.
Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved."

"WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients."

Hmmm, do you think a real estate agent and banker might put their own interest in front of those of a financially naive borrower? For about $10,000 they might.

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