MADISON, Wis. — An increase in short-term selling could be driven by government measures to get national and worldwide financial systems back on track coupled with the stock market flip flops.
"Until we get implementation of the new tools for 'unclogging' the financial system, which should bolster confidence and spur economic activity, the path of least resistance for short term traders is to sell," said Bruce Ebel, managing director, portfolio manager for MEMBERS Capital Advisors in the company's Oct. 15 MarketLine report.
"This trend could reverse quickly since it is not grounded in facts. Rather it is grounded only in worst-case fears, an improbable outcome given the attention already given the problem."
Ebel said recent macroeconomic data is "clearly weak, indicating we are in the recession, raising questions about the length and depth of the slowdown." Retail sales dropped sharply in September and real consumption fell for the first time in 17 years, he added. Major trading partners such as Europe and Japan will feel the effects of slowing U.S. consumption, Ebel said. He also pointed to regulatory changes and third-quarter corporate reports as other signs of uncertainty.
"[Presently], we are at a difficult juncture for the market and economy, resulting in a higher likelihood of short-term selling pressure," Ebel said.
–msamaad@cutimes.com
Dems Want FDIC In on Foreclosures
WASHINGTON — House Democrats have asked President Bush to appoint the FDIC to handle government-wide measures to reduce foreclosures.
House Financial Services Committee Chairman Barney Frank (D-Mass.) and Housing and Community Opportunity Subcommittee Chairwoman Maxine Waters (D-Calif.) sent a letter to President Bush explaining that giving one official clear responsibility on the subject would improve the effectiveness of the federal government's efforts.
The politicians said recent actions by the government–the takeover of Fannie Mae and Freddie Mac, the Oct. 1 implementation of the Hope for Homeowners program and language in the Emergency Economic Stability Act–allows the feds to have a major impact in stabilizing the housing market and preventing foreclosures.
Frank and Waters said they were impressed with Bair's work on foreclosure mitigation.
When the FDIC took over IndyMac, the agency suspended most foreclosure actions so it could evaluate the portfolio of 742,000 loans that it inherited. The agency modified 40,000 of the 60,000 delinquent loans serviced by IndyMac through interest rate reductions, extended amortizations and forbearances. Borrower payments were cut by more than $430 each.
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