Thursday, 2nd July 2009.

Stocks surge as investors anticipate yearend rally

Investors believing that Wall Street is on the verge of a yearend rally piled into the market Tuesday, brushing off more weak economic data while they scarfed up stocks and propelled the Dow Jones industrials up 300 points to its highest close in four weeks.

It was the biggest Election Day rally ever for the Dow, which rose 3.28 percent and topped the 1.2 percent gain seen in 1984 when Ronald Reagan defeated Walter Mondale. Prior to 1980, the market was closed on Election Day.

Broader market indexes were also up more than 3 percent Tuesday.

Some analysts said the market rose on relief that the presidential election was about to be decided. But others said investors were anticipating a year-end recovery from Wall Street’s huge sell-off and bought to be sure they didn’t miss out on its start.

“I seriously doubt it has much to do with the election, other than we’re all looking forward to it being over,” said independent investment strategist Edward Yardeni.

The fact that Wall Street is in the final stretch of a tough year is probably lifting stocks more than the elections, he said. “It’s almost been a classic textbook crash in September and October followed by a year-end rally.”

Steven Goldman, chief market strategist at Weeden & Co., said, “historically, we were at the most oversold levels since October 1974.”

“We’ve come to levels that would tend to discount a lot of bad news,” he said.

There’s still a feeling the market might fall back and retest the trading lows reached Oct. 10 before entering a true bull market. But it’s possible that the retrenchment won’t happen until 2009 — in similar oversold markets in 1974 and 2002, Goldman said, the return to the lows of the bear market did not happen until two months later.

Analysts predict stocks are headed for a recovery no matter whom is elected, as the policies of both John McCain and Barack Obama likely will be guided by the weak economy and the recent flood of government support designed to keep the global financial system from collapsing.

The market again looked past a downbeat economic report, as it did on Monday, when investors calmly received a report of a big slowdown in manufacturing before the Dow finished essentially flat.

The Commerce Department said Tuesday that factory orders fell 2.5 percent in September from August, much worse than the 0.7 percent drop analysts predicted. But investors generally expect data from September and October to be extremely weak, as credit markets began to seize up in mid-September. Analysts believe much of the bad news is already factored into stock prices; last week saw the Dow rise 11.3 percent — its best weekly gain in 34 years.

“The risk of a depression is off the table,” said Ben Halliburton, chief investment officer of Tradition Capital Management.

Still, some analysts say the market’s gains might not be sustainable. Though the uncertainty surrounding the election will be cleared, they said there are still many economic challenges, and some of the market volatility seen in October, in the weeks and months ahead.

“In the next couple of days, people are going to focus on the fact that we still have these issues,” said Bernie McGinn, chief executive of McGinn Investment Management, referring to the worsening economy. “They aren’t resolved.”

The Dow rose 305.45, or 3.28 percent, to 9,625.28. The Dow last closed above 9,500 on Oct. 6, when it finished at 9,955.50.

The broader indexes also rose. The Standard & Poor’s 500 index gained 39.45, or 4.08 percent, to 1,005.75, its first close over the 1,000 mark since Oct. 13. In the past six sessions, the S&P 500 has rallied 18.3 percent. That includes a 10.8 percent jump that occurred Oct. 28 after last month’s steep selloff.

The Nasdaq composite index rose 53.79, or 3.12 percent, to 1,780.12, its sixth straight advance and its longest winning streak of the year.

The Russell 2000 index of smaller companies rose 7.47, or 1.39 percent, to 545.97.

Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to 5.45 billion shares, compared with 4.36 billion shares traded Monday.

Energy and industrial stocks led the market higher, while health care names, often a defensive investment, showed more modest advances. Exxon Mobil Corp. rose 4.3 percent, aluminum producer Alcoa Inc. rose 5 percent and Johnson & Johnson advanced 1.2 percent.

There were other signs of the market’s growing confidence. Wall Street’s fear gauge, the Chicago Board Options Exchange Volatility Index, known as the VIX, fell to 47.73, its lowest close since Oct. 3. The VIX normally trades below 30 and tracks options activity for the companies that make up the S&P 500; it closed as high as 80.06, on Oct. 27.

Investors have overlooked a spate of bad economic data recently, including the report Monday from the Institute for Supply Management that revealed the worst monthly contraction in manufacturing activity. Additionally, automakers reported the lowest level of U.S. car sales in more than 17 years. The market closed narrowly mixed in light trading Monday, with the Dow making just a single-digit point decline — something that has become unheard of in recent months in the midst of daily several hundred point swings.

“The economic activity in October is obviously very poor,” said Halliburton, “and is going to have some very bad numbers reported, and I think that is going to continue in the fourth quarter.” As such, investors have begun dipping their toes back in to the market to take advantage of some of the buying opportunities created by the violent swings last month.

The disruptions in the credit markets were at the heart of the recent market volatility, as the evaporation in lending made it difficult for businesses and consumers to get loans, and sparked widespread panic about the economy’s ability to avoid a severe downturn. While lending has eased somewhat, analysts contend that the state of the credit markets will remain one of the biggest land mines in the weeks ahead.

The key bank-to-bank lending rate known as Libor fell to 2.71 percent from Monday’s rate of 2.86 percent for three-month dollar loans. A fall in the London Interbank Offered Rate indicates that banks are more willing to lend to one another; a month ago, when the credit markets were paralyzed by banks’ fear that they wouldn’t be repaid on loans, it stood at 4.33 percent.

Investors’ demand for short-term government debt remained high, however, a sign that they are still cautious and willing to take a very small return on their investments in exchange for security. The yield on the three-month Treasury bill, seen as one of the safest assets around, stood flat at 0.47 percent from late Monday. A low yield indicates high demand.

The yield on the benchmark 10-year Treasury note fell to 3.73 percent from 3.92 percent late Monday.

The dollar fell against most other major currencies, while gold prices rose.

Light, sweet crude jumped $6.62 to settle at $70.53 a barrel on the New York Mercantile Exchange, a reaction to the slide in the dollar.

Overseas, Japan’s Nikkei index soared 6.27 percent, Hong Kong’s Hang Seng Index edged up 0.28 percent. Britain’s FTSE 100 rose 4.42 percent, Germany’s DAX index jumped 5.00 percent, and France’s CAC-40 advanced 4.62 percent.

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Source:http://biz.yahoo.com/ap/081104/wall_street.html

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No 401(k) do-over for you


(Money Magazine) — I may write about retirement for a living, but that doesn’t mean I like seeing my 401(k) crater any more than you do. Given what’s been happening in the market, I sometimes catch myself thinking how great it would be if my financial future weren’t tied to something as volatile as Wall Street’s mood.
So it was with a twinge of envy that I reflected on the recent saga of nearly 20,000 West Virginia teachers who were unhappy with their 401(k)-style retirement plans. What transpired illustrates why so many Americans are headed for a retirement crisis.
Back in 1991, the State of West Virginia barred new teachers from participating in the state’s traditional defined-benefit pension plan, the kind that gives you a guaranteed annual income in retirement. The plan had become the worst funded of its kind in the nation, requiring large injections from the state.

To stem the bleeding, West Virginia forced new teachers into a 401(k)-style savings plan. Their ultimate retirement incomes would now depend mostly on their ability to save and invest.

Fast-forward to today. For the majority of West Virginia teachers, this new plan has been a disaster. The average account balance in 2007 was just $33,944, and only a handful of those age 60 or older had amassed more than $100,000, according to a study by West Virginia’s Consolidated Public Retirement Board.

So the teachers asked for a do-over. Under their proposal, their paltry account balances would be replaced by the more generous pensions they would have racked up had they been in the traditional plan all along.

Essentially, the past 17 years would be treated as if they’d never happened. The legislature agreed, and on July 1 four out of five teachers made the switch.

What happened in West Virginia is a scary microcosm of a 401(k) system that’s the only retirement plan for millions of Americans. For most, it’s not coming close to generating enough money to fund a decent retirement. But unlike in West Virginia, most of us won’t get a do-over.

One obvious problem is that we’re a nation of undersavers. The median 401(k) contribution rate is a low 6% of pay, according to research by Vanguard. A third of workers who have access to a plan don’t contribute at all. The trend toward automatic enrollment is helping but not enough; the median savings rate for workers signed up automatically is 2.9%.

When it comes to investing, the story is just as troublesome. More than 70% of 401(k) participants never rebalance their portfolios, says Hewitt Associates.

Only a third of those who can put money in an international stock or bond fund do so, Vanguard data show, even though pros recommend that you invest at least 20% of your portfolio overseas. But that kind of counsel is sorely lacking: Less than half of 401(k) plans offer investing advice.

It may be tempting to imagine that none of this applies to you, especially if you’ve been diligently salting away money. Don’t kid yourself. Unless the savings shortfall is fixed, you’ll pay for it one way or another.

According to the McKinsey Global Institute, two-thirds of boomers between the ages of 54 and 63 have not saved enough for retirement. To make up for the gap, they could sharply cut back on spending, slicing GDP growth by more than $5 trillion over the next three decades.

And staying on the job longer is no silver bullet: Some 40% of workers are forced to retire early due to poor health or downsizing.

Perhaps we need to implement a mandatory universal savings program like the one in Australia, where 9% of workers’ pay is set aside in a retirement account.

One thing is certain: There’s no return to traditional pensions for most of us. We’ve got to fix the system we have - and soon.

Most of us haven’t done a good job running our 401(k)s. But unlike the teachers of West Virginia, we won’t get a second chance.

Source: CNN

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McCain fights for comeback in hard-hit Ohio


CANTON, Ohio – Fading in the polls, John McCain fought Barack Obama for support in economically hard-hit Ohio on Monday, each man pledging to right the economy and turn the page on the Bush era in a state with an impressive record for picking presidents.
Eight days from the election, however, Republicans looked and sounded increasingly like a party anticipating defeat, and possibly a substantial one.
McCain betrayed no such pessimism, assailing Obama as “the most liberal person ever to run for the presidency” and warning that Democrats would tax and spend the nation deeper into recession if they win the White House and keep control of Congress.

Referring to Obama, he said, “We both disagree with President Bush on economic policy. The difference is that he thinks taxes have been too low, and I think that spending has been too high.”

Obama, running to become the nation’s first black president, countered that when it comes to the economy, “John McCain has stood with this president every step of the way.”

He added, “The question in this election is not ‘Are you better off than you were four years ago?’ We know the answer to that. The real question is, ‘Will this country be better off four years from now?’”

The polls suggest the country is leaning toward an Obama presidency. The Illinois senator runs ahead in national surveys. He also holds an advantage in several polls measuring sentiment in states that voted for Bush four years ago, as well as at least one — Virginia — that last voted for a Democrat four decades ago.

In a fresh show of GOP concern, officials inside both parties said the Republican National Committee was moving into Montana with a television advertising campaign for the first time this year. The party also is expanding its advertising in West Virginia to run statewide. Both states had presumed safe for McCain for weeks, and RNC advertising has generally run in Republican-leaning states where he is in trouble.

The candidates’ travel plans underscored the Electoral College math.

With scarcely a week remaining, McCain remained largely pinned down in traditionally Republican states, trying to eke out a majority.

By contrast, Obama’s afternoon stop in Pittsburgh marked the first time in more than a week that he had bothered to visit a state fellow Democrat John Kerry won four years ago.

In a show of confidence, he has spent the rest of his campaign time in the past week or more in “red” states — Missouri, Florida, North Carolina, Virginia, Colorado, Nevada, New Mexico and Ohio — as he reaches for a sizable triumph.

Whatever doubt remained about the presidential race, only the size of Democratic gains seemed to be in question in the campaign for control of Congress.

Republican Sen. Ted Stevens’ conviction in a corruption trial in Washington gave fresh momentum to the Democrats’ drive for a 60-seat Senate majority that would strengthen their ability to overcome Republican filibusters on key legislation.

McCain himself has endured numerous slights in recent days, including anonymous sniping between his aides and those of running mate Sarah Palin. That came on the heels of the disclosure that clothes and accessories totaling $150,000 had been purchased with donor funds for the Alaska governor and her family.

McCain announced over the weekend that $50,000 worth of merchandise had been returned, and Palin pointedly told one crowd she was back to wearing duds from her “favorite consignment” store in Alaska.

In another blow, fellow Arizona Republican Sen. Jon Kyl speculated openly over the weekend that McCain’s candidacy may end in defeat.

Ohio was Monday’s battleground, with McCain campaigning in Cleveland and Dayton, while Obama was in Canton.

Ohio has voted with the winner each time since 1964, and Bush’s victory there sealed his second White House term four years ago. But the state turned Democratic two years later when Ted Strickland was elected governor, and Sherrod Brown unseated a Republican incumbent to win his Senate seat.

Now public and private polls rate Obama the favorite, and dreary monthly jobless statistics show a statewide economy in trouble. According to the Bureau of Labor Statistics, the state has lost 92,000 jobs since February, and Ohio’s unemployment, 7.2 percent of its work force, is well above the national rate of 6.1 percent.

In an attempt to blunt Obama in Ohio, the National Republican Trust PAC, a conservative political action committee, planned to air ads there and in Pennsylvania and Florida showing clips of controversial sermons by Obama’s former pastor, the Rev. Jeremiah Wright. The group aimed to spend about $1 million in the final six days of the campaign, its executive director, Scott Wheeler said.

McCain met with economic advisers in the morning and then said he had plans to rejuvenate the economy.

“To do this, we need pro-growth and pro-jobs economic policies, not pro-government spending programs paid for with higher taxes,” he said in a slap at Obama.

“My approach will lead to rising stock market prices, a stabilized housing market, economic growth and millions of new jobs,” he said. “Sen. Obama’s plans will destroy business growth, kill jobs and lead to continued declined in the stock market and make a recession even deeper and more painful.”

Obama responded a short while later with what aides said was the summation of his long quest for the White House.

While part of it reprised his 21-month call for change, he also took time to try and link McCain with an unpopular Bush.

“We’ve tried it John McCain’s way. We’ve tried it George Bush’s way,” he said. “Deep down, Sen. McCain knows that, which is why his campaign said that `if we keep talking about the economy, we’re going to lose.’”

Source: Yahoo news

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Oil falls to $62 on gloomy global economic outlook


SINGAPORE – Oil prices fell to 17-month low around $62 a barrel Tuesday in Asia on investor concerns a global economic slowdown could worsen, further undermining demand for crude.
Light, sweet crude for December delivery fell 87 cents to $62.35 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore after trading as low as $61.75. The contract fell overnight 93 cents to close at $63.22, the lowest settlement since May 29, 2007.
“It’s quite a severe slowdown that’s been priced in already,” said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. “I thought in June and July the only way we would get below $80 was if there was a macroeconomic collapse, and it seems that that’s what we’re seeing.”

Oil investors have been taking a cue from a plunge in global stock markets that suggests major economies are headed for a significant recession over the next 12 months. Oil prices have fallen 58 percent since reaching a record $147.27 on July 11.

The Dow Jones industrial average fell 2.4 percent Monday after credit ratings agency Moody’s Investors Service downgraded General Motors Corp.’s credit rating further into “junk” status, citing a sharp contraction of the U.S. auto market. The Standard & Poor’s 500 index fell 3.2 percent.

In early trading on Tuesday, Asian stock markets were mixed, with key indices in Japan and Australia down but Hong Kong and Thailand gaining after both of those markets fell more than 10 percent Monday.

“If the credit market remains tight and the recession worsens, we could certainly go into the $50s and even below $50, but that would be an overshoot to the downside,” Kornafel said.

Prices have fallen despite a production quota cut of 1.5 million barrels a day by the Organization of Petroleum Exporting Countries last week. OPEC officials have said the group, which controls about 40 percent of global crude oil production, may cut output again at a meeting in December.

“It doesn’t matter what OPEC does or other supply news, people are just so focused on demand and getting their money out of trades that no longer make money,” Kornafel said. “There’s no real attention being paid to fundamentals in the short-term. It’s still the panic.”

In other Nymex trading, gasoline futures fell 1.68 cent to $1.46 a gallon and heating oil fell 0.28 cent to $1.91 a gallon. Natural gas for November delivery fell 1.8 cents to $6.10 per 1,000 cubic feet.

In London, December Brent crude was down $1.21 to $60.20 a barrel on the ICE Futures exchange.

Source: Yahoo News.

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Student loan fugitives

NEW YORK (CNN) — Carl, a Florida native now living overseas, is afraid to move back to the United States. That’s because he can’t afford to pay his student loans.

Carl (who doesn’t want his last name used) stopped making his $450 monthly payments after his family incurred some unexpected medical expenses, and his $55,000 private loans went into default. That’s when the phone calls from debt collectors started, and Carl decided not to come back.

“It was made clear that if I ever came home, I’m screwed,” says Carl.

Today, he estimates his private loans are more than $70,000. Though he hopes to move home one day, for now, staying abroad is the only option he can see.

“If it means I have to live in exile from friends and family…well, that’s the breaks. So be it. But I won’t put my family in a situation where they are afraid,” he says.

While most Americans are burdened with debt of some kind, student loan repayment can be a particularly scary prospect for young people struggling to start a career. Payments are often higher than expected, and the loans can’t easily be discharged. Added pressure from debt collectors causes some grads to flee their loans by fleeing the country.

“These are people new to borrowing and they didn’t understand what they were getting into,” says Mark Kantrowitz of Finaid.org, an online student loan information Web site. “It’s a very sorry situation that it comes to students feeling they have no option than to leave the country,” he says. “It’s a sign the system is broken.”

To date, there is about $60 billion in defaulted student loan debt according to Chris Lang of the New York-based debt collection agency, ConServe. But while skipping town to avoid paying student loans isn’t very common - Lang estimates that only about 2% to 4% of delinquent student loan debt is owed from students abroad - for some, it seems like the only way out.

International addresses make it more difficult to find people, and collection companies would usually need to hire an international counsel or a third party collector to recoup the debt, cutting into their profits and reducing their incentive to go after a debtor.

“It increases our expenses to go overseas,” says Justin Berg of American Profit Recovery, a debt collection agency in Massachusetts. “Our revenues are cut by more than half,” he says.
Very little relief

Chris left the country to help pay his debt, not to avoid it. But when that didn’t work out, he saw his foreign address as the only way to escape.

Chris (who doesn’t want his last name used) graduated with about $160,000 in student loan debt with a master’s degree in music.

“At the time I thought I could handle it. I thought the most I’d be paying was $600 a month,” he says.

But his payments were $2,400 a month. So Chris started looking for jobs overseas. He thought he’d be able to earn more and pay off his loans. But it didn’t turn out that way. His salary was even less than what he was making back home. He realized there was no way he could make his payments, so he changed his address.

“They think I’m living somewhere in Arizona,” he says. His last payment was a year and a half ago.

“I am upset at myself. I could have gone to a cheaper school,” Chris says. “But I’m most angry at the fact that for anyone who has debt that’s not student loan debt, there’s relief. You can get into $150,000 worth of credit card debt and you can declare bankruptcy and you can go on with your life. But with student loans, you’re being punished for being a better person.”

While getting student loans discharged through bankruptcy is no easy task, that doesn’t mean it can’t be done.

“There’s a mythology that private student loans can’t be discharged. But sometimes they can and should,” says Kantrowitz.

To get your student loans discharged, you must file an undue hardship petition. To qualify, you have to satisfy three conditions: First, you must not be able to repay your student loan and also maintain a minimal standard of living based on your income and your expenses. Second, your situation must likely persist for a significant portion of the repayment period of the loan. Finally, you must have made good faith efforts to repay the loans.

In about half of cases of people who do file for this hardship petition, debt will be partially or totally discharged, says Kantrowitz.
Lifting the burden

If you’re having trouble paying your student loans there are steps you can take, according to Kantrowitz.

If your income isn’t sufficient to repay a federal loan, you can apply for an economic hardship deferment or forbearance which would suspend or reduce your monthly payments. To find out if you qualify for these programs, check out the hardship calculator at http://www.finaid.org/.

If your money problems are longer term - say your career path doesn’t pay well - there are some alternate payment plans that you can explore. An extended repayment plan could lower your payments. But it also increases the life of your loan so you’ll wind up paying more in the long run.

If you have federal loans through the Direct Loan program, you may qualify for an income contingent repayment plan. In this case your payments are based on your income and your debt load .

These steps must be taken before you default on your loan. If your loan is already in default, you won’t qualify for deferments or forbearances. If you can’t resolve an issue, contact the Federal Student Aid Ombudsman at http://www.ombudsman.ed.gov/ or call 1-877-557-2575.

If you have defaulted on a federal loan, you can rehabilitate yourself. It will require you to make nine to twelve full payments of some agreed-upon amounts within a certain time period to the Department of Education. For more information on this, contact the Department at 1-800-621-3115.

And there’s another way to get help if you’re buried under student loans. Talk to a non-profit counselor.

The counseling session should be free of charge. Make sure you ask if the agency works with student loans. And in addition to helping you with your student loan payments, these agencies can work with you to manage your spending and your budget. If you are put on a managed debt program, there is typically a small fee. To find a non-profit credit counselor in your area go to the National Foundation for Credit Counseling at www.nfcc.org.

Source: CNN

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Japan’s Nikkei stock index falls to 26-year low

TOKYO – Japan’s stock market had a miserable Monday, with the key stock index plunging more than 6 percent to its lowest close in more than a quarter century as investors grew increasingly gloomy about the outlook for the world’s No. 2 economy.
Unnerved by the financial crisis fallout and the yen’s recent surge, investors unloaded banks and exporters like Toyota and Sony.
The Nikkei 225 index shed 486.18 points, or 6.36 percent, to 7,162.90 — the worst closing level since October 1982. The benchmark has lost more than 20 percent since last Monday and nearly 40 percent in the last month.
The broader Topix index posted an even steeper fall of 7.4 percent to 746.46.
Trading Monday was extremely volatile, with the Nikkei swinging from a 3 percent gain at one point in the morning to a retreat of as much as 6 percent in the afternoon.

A move earlier in the by Japanese Prime Minister Taro Aso to introduce measures to calm volatile stock markets failed to revive flagging sentiment.

Calling an emergency meeting of the Cabinet and ruling party officials, Aso urged steps including tighter controls on short-selling and expanding a government fund to recapitalize banks to as much as 10 trillion yen ($106.1 billion) from 2 trillion yen, according to Kyodo news agency.

“Stock prices are having a major impact on the real economy,” Aso told reporters after the meeting. “We need to consider and implement different strategies.”

Although Aso did not suggest intervention in foreign exchange markets, the Group of Seven finance ministers and their countries’ central bank governors expressed concern Monday about the yen’s recent movements.

Japanese exporters are likely to get battered by the recent surge in the yen, which rose to a 13-year high against the dollar Friday as investors unwound yen carry trades in which the yen is borrowed and then invested in other currencies with higher yielding bonds and assets. When investors reverse those positions, they are forced to buy back the yen, boosting its value.

The dollar was trading at 92.86 yen from 94.24 late Friday in New York. It had fallen as low as 90.89 yen on Friday, its lowest since August 1995.

Exporters are likely to get battered by the stronger yen, which makes Japanese products more expensive abroad and reduces the value of overseas profits when repatriated.

Toyota Motor Corp. shed 8.12 percent to 2,940 and Nissan Motor Co. lost 8.39 percent to 404 yen after reporting that global vehicle production declined in September due to a prolonged slump in the U.S. auto market.

Financial names tumbled sharply following media reports that Japan’s major banks were considering raising new capital by issuing new stock.

Top Japanese bank Mitsubishi UFJ Financial Group Inc. is looking to raise up to 1 trillion yen to bolster its balance sheet, weakened by its $9 billion investment in Morgan Stanley, The Nikkei financial daily said Sunday.

Mitsubishi UFJ plummeted 14.64 percent to 583 yen, Sumitomo Mitsui Financial Group Inc. closed 11.49 percent lower at 385,000, and Mizuho Financial Group Inc. lost 14.81 percent to 230,000 yen.

Source: AP

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September new home sales rise by 2.7 percent

WASHINGTON – Sales of new homes recorded an unexpected increase in September as median home prices dropped to the lowest level in four years, the Commerce Department reported Monday.
Sales of new single-family homes rose by 2.7 percent last month to a seasonally adjusted annual rate of 464,000 homes, Commerce said. Economists had expected sales would drop from the August level.
The median price of a new home sold in September declined by 9.1 percent from a year ago to $218,400, the lowest price level since September 2004, a period when home prices were rising rapidly as the country experienced a five-year housing boom.

The surprising increase in September sales still left them 33.1 percent below the level of a year ago as the country is battered by the worst slump in housing in decades.

The report on a rise in new home sales followed news last week that sales of existing homes rose in September by 5.5 percent, the largest monthly gain in more than five years.

Analysts are not convinced that the sales increases are signaling a bottom for the housing market. They note that the September gains came before the latest upheavals in financial markets which have raised new worries about the overall state of the economy.

Many analysts believe the country has already entered a recession. They are forecasting significant increases in job losses which will make it even harder to mount a sustained rebound in housing.

New home sales fell by 21.4 percent in the Northeast and were down 5.8 percent in the Midwest. However, sales rose by a sharp 22.7 percent in the West, a region of the country which has seen some of the biggest declines in prices, a development which has spurred sales. Sales were up 0.7 percent in the South.

The rise in sales left a total of 394,000 unsold new homes on the market at the end of September, down a record 25.4 percent from the number of unsold homes on the market at the end of September 2007.

Builders have been sharply cutting back on production, trying to get inventories more in line with sales.

Even with the latest drop in total unsold new homes, the inventory represents a 10.4 months supply at the September sales pace, still a historically high level.

The inventory of unsold existing homes is also remaining near historic highs as that market is being increased by a record wave of home foreclosures.

The 2.7 percent rise in sales for September new home sales followed a big 12.6 percent drop in August, which was revised sharply lower from the government’s initial estimate. Sales in July had risen by 3.6 percent.

Source: AP

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Stocks fluctuate as investors weigh economy


NEW YORK – Stocks fluctuated Monday as investors tried to determine whether the government’s efforts to prop up the banking sector and aid the economy might help stave off a protracted global recession. Wall Street also tried to position itself ahead of possible interest rate moves from central banks.
Investors around the world are nervous that the evaporation in available credit in the past month has hurt lending to the point where it will be difficult to avoid recession. But the U.S. government is implementing some of its measures this week to help the banking sector, including a plan to purchase stakes in banks.

Investors also appeared pleased after the European Central Bank could be moving toward an interest rate cut after President Jean-Claude Trichet said Monday such a move was “a possibility” as inflation pressures ease.

The comments come a day before the start of a regularly scheduled two-day meeting of the Federal Reserve. There is speculation the world’s major central banks could announce coordinated rate cuts; the Fed is expected to lower its fed funds rate by a half-point to 1 percent on Wednesday.

Traders are juggling other expectations about the government’s next moves. The Treasury said it signed agreements with nine banks and will buy stock in the companies this week. The proceeds from the stock sales are intended to bolster the banks’ balance sheets so they will begin more normal lending and help ease the continuing credit crisis. But investors remain worried that the credit crisis has hurt the world’s economy.

“Clearly, what’s most important is that the funding crisis needs to be contained at this point,” said Chris Orndorff, director of equity strategy at Payden & Rygel in Los Angeles.

“The banks need to start taking on some more risks,” he said. “I think it’s going to take months.”

In midday trading, the Dow Jones industrial average rose 65.39, or 0.78 percent, to 8,444.34.

Broader stock indicators were mixed. The Standard & Poor’s 500 index rose 0.15, or 0.02 percent, to 876.92, and the Nasdaq composite index fell 3.98, or 0.26 percent, to 1,548.05.

The Russell 2000 index of smaller companies fell 4.87, or 1.03 percent, to 466.25.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 476.1 million shares.

Light, sweet crude fell $1.41 to $62.74 on the New York Mercantile Exchange, while gold prices rose slightly.

Investors were cheered by news that sales of new homes showed an unexpected increase in September. While median home prices have dropped to the lowest level in four years, investors appeared pleased that the market was beginning to chip away at an inventory glut. The Commerce Department reported that sales of new single-family homes rose by 2.7 percent in September to a seasonally adjusted annual rate of 464,000 homes. Economists had expected sales would drop from August.

The median price of a new home declined by 9.1 percent from a year ago to $218,400, its lowest level since September 2004.

Even with several pieces of welcome news, investors around the world remain worried about the prospects for economic expansion. A surge in the yen illustrated investors’ nervousness about how much economic activity could slow. Japan’s Nikkei 225 index dropped to its lowest close in 26 years as investors worried that the high yen will hurt Japanese exports and further disrupt economic activity. The currency moved to the 93 yen level and near 13-year highs. The yen is seen as a safe haven holding for investors who contend the Japanese economy will fare better in a global recession.

The ongoing selling is due in part to the belief that a worldwide recession is likely inevitable, but it’s also being triggered by hedge funds and other investors unloading stock because they’re being hit by margin calls. In a margin call, a broker who lent money to an investor calls in the loan, forcing the investor to sell stock to repay the loan.

The gyrations in U.S. stocks have been sizable since the market’s peak a year ago, but particularly since last month’s bankruptcy of Lehman Brothers Holdings Inc. and the government rescue of insurer American International Group. With investors uncertain about the economy, the market appears to be bouncing along a rocky bottom after falling sharply earlier this month.

Investors’ nervousness fed demand for the safety of some types of government debt Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.69 percent from 3.72 percent late Friday. The dollar was higher against most other major currencies, except the yen, while gold prices rose.

The yield on the three-month bill, regarded as the safest asset around, fell to 0.74 percent from 0.82 percent late Thursday.

A key bank-to-bank lending rate slipped Monday. The London Interbank Offered Rate, or Libor, on three-month loans in dollars dipped to 3.51 percent from 3.52 percent on Friday.

While Libor has fallen steadily for over 10 days as confidence slowly returns to the banking system, investors remain skittish. South Korea’s central bank cut its key interest rate Monday by three-quarters of a percentage point, its largest-ever reduction. The country’s stock market benchmark Kospi ended with a 0.8 percent gain.

Elsewhere, central banks in Australia and Hong Kong added funds to their markets to boost liquidity.

The Nikkei fell 6.4 percent to its lowest level since October 1982, while Hong Kong’s Hang Seng Index tumbled 12.7 percent, its lowest finish in more than four years and its biggest single-session drop since 1991.

The sell-off came even as the seven leading industrial nations on Sunday issued a statement warning about the “recent excessive volatility” in the value of the yen. The G7 said it would “cooperate as appropriate,” stirring speculation of an orchestrated intervention to help stabilize currency markets.

Selling spread to Europe. Britain’s FTSE 100 fell 0.73 percent, Germany’s DAX index lost 0.50 percent, and France’s CAC-40 declined 3.45 percent.

Source: AP

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The $1.75 eBay house: Foreclosure bargains aplenty

For months, I’ve been hearing rumors and tales about incredibly cheap housing in high-foreclosure markets. In Detroit, for example, a house that cost $65,000 in 2006 recently sold for $1, and it’s apparently fairly common to find houses in the $300 range.

As in the case of the $1.75 house that Joanne Smith bought in Saginaw, Michigan, many of these super-cheap foreclosures come with a tax bill that is in arrears, but even with the $850 in back taxes and cleanup costs that she will end up having to pay, she’s gotten an incredible deal.

Searching through various foreclosure listings online, I decided to check out some of the places where I’ve lived. In Roanoke, Virginia, where my wife and I briefly contemplated buying a home, the cheapest place I found was running about $1,000. Meanwhile, in Blacksburg, where my wife and I worked, even HUD homes used to run in the $140,000 range. Right now, “motivated sellers” and banks are dropping properties at fire-sale prices.

Of course, to find the really cheap houses, I had to wander around eBay. While I didn’t see any foreclosed homes going for $1.75, there were quite a few in the $1,000-$4,000 range. For example, I saw a 3 bedroom, 1 bath with full basement and 1-car garage going for $2,125 in South Bend, Indiana; in Cleveland, Ohio, there’s a 3-bedroom, 1 bath currently at $4,062; and a semi-gutted “handyman special” in Welch, West Virginia is holding steady at $1,610.

Of course, all of these houses need a lot of work, and there’s no accounting for neighborhood quality. Still, if you’re enthralled by the idea of grabbing your part of the American dream but don’t have enough money for a down payment on a house in your town, you could probably do a lot worse. Welch, West Virginia, here I come!

Bruce Watson is a freelance writer, blogger, and all-around cheapskate. He’s looking for foreclosed houses in the Bronx, but is a little worried about what he might find.

Source: Walletpop

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Ten percent off on homes…your time to buy?

When we heard late last week that Coldwell Banker was announcing a 10-day “sale” to start last Friday, you can imagine our skepticism. Here we were looking at the worst week in stock market history, and buyers are supposed to rush out their local open house listings?

If you go to ColdwellBanker.com and you can see which listings in your area are participating in the 10-day sale. I just looked and there is one house in my ZIP code that reduced it’s price by $50,000 (slightly less than 10%.)

I had a chance to talk with Jim Gillespie, President and CEO, Coldwell Banker Real Estate LLC, last week about the promotion.

* More than 30,000 sellers have agreed to reduce the list price on their homes for the 10-day nationwide event. The price reduction can be as much as 10% off, but obviously not all sellers will reduce it this much. At the same time, you can make an offer for more than 10% off the list price.

* Also, Coldwell Banker Mortgage will waive its appraisal fee if you do make an offer on a house and it is accepted. This generally ranges from $250-$500 depending on the price of the home.

* Don’t forget, there’s a federal first time-buyer tax credit of $7,500 that expires next July 1.

* Lastly, this promotion is something that CB has already successfully tested in Florida and the New York City area. What they found was that 85% of sellers kept their homes at the reduced sales price even past the 10-day period, and 10% of the reduced price homes did sell.

I asked Mr. Gillespie where he thought the bargains were, and he said the data he’s seeing out of California is unreal. Values have dropped 40% in the past three months and buyers have come flooding back in to the market, picking up foreclosures and short sales. If you are interested in short sales or foreclosures, Mr. Gillespie says that most of the bank-owned properties are listed in your local MLS.

Buyers: While the stock market fell, rates have risen steadily in the past week, so between the reduced prices on these and other homes, and the relatively cheap cost of borrowing, you do have a chance to get a deal between now and Thanksgiving that may be a once in a lifetime chance. But forget those flipping shows we all love, you need to plan on staying in the house for at least three to five years.

Sellers: If your home has been sitting on the market for 60-120 days, you have to be willing to try something to get some buyers interested in your home. Would you rather drop the price 10% now or in March after it’s been sitting on the market for six more months? If you don’t sell by Thanksgiving, you may be better off taking your home off the market for a few months.

Speaking from experience, it is not easy to close a real estate deal as you get closer to the holidays. To me, this promotion makes complete sense for buyers and sellers to make a last gasp attempt to get something done before Halloween.

If you had the moxie to make a bid on a home last week, we bet you got it for a steal, but this weekend might not be a bad time to play let’s make a deal.

For more information on short sales, foreclosures and first time buyers, go to AOL Real Estate.

Brett Widness is an editor with AOL’s real estate channel and a licensed agent in Virginia. Find homes for sale, foreclosures, home values, real estate finance and apartments at AOL real estate.

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