Wednesday, September 14, 2011

I guess I should spell in rumours...

Stocks rebounded yesterday and are up sharply again overseas this morning hopium that maybe Brazil, Russia, India and China will bailout Europe.  While the finance ministers of these countries have been much more cautious in their statements it hasn't stopped the rumour mills from churning out enough stories to save the market so far.

However, it's worth noting that yields on Greek 1 year debt crossed 145% today so maybe all is not well.

One of the greatest myths of investing that has been put to the test repeatedly during the dotcom collapse and the 2008 recession is that diversification across asset classes will help protect investors during periods of volatility.  Unfortunately, it appears as though the exact opposite effect occurs.  The more volatile the markets, the more most asset classes seem to move together.  I think that the increased level of programmed trading has only heightened these correlations.


Look at those correlations to the move in the S&P500.  Utilities and Consumer Staples were long thought to be safe havens in rough seas.  However, when times are tough they are basically marching in lockstep with the S&P.  As someone said yesterday after seeing this info "If you still want to be in the market, fire your advisor and buy the S&P"

Bank of America ramping up foreclosure efforts?
There has been significant slack in the foreclosure system as many banks chose to wait out the recovery hoping things would pick up and borrowers would suddenly be able to make those mortgage payments they've been skipping since 2009.

Yesterday came word that BofA was making a move to substantially increase it's rate of foreclosures. 

"Bank of America is ramping up its foreclosure processing, sending out far more notices of default to borrowers in August than in previous months ... Mortgage and housing analyst and strategist Mark Hanson alerted me to unusually high legal default filing activity ... [BofA responded to Olick]

"It appears the numbers you noted to me this afternoon generally track with our own numbers for key categories. It should be noted it’s driven more in key states like California and Nevada than overall, and certainly the progress we’re seeing is limited to non-judicial states. Judicial states continue to move very slowly, with key states like New Jersey only beginning to start processing foreclosures again this month."

Ultimately, this will be a painful process for the individuals involved but I think it will lead to a healthier market in the long-term. 

Ah, I love NY...

"A man charged with murder got an unexpected note in the mail -- a jury duty summons for his own trial in Schenectady County Court."


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