THE BASIS POINT

401-Keg, Retirement Plans, FHA Expands, IndyMac and ResCap News

I was reading the fine print in my retirement benefits plan the other day, and ran across this: If you had purchased $1,000.00 of Delta Air Lines stock one year ago you would have $49.00 left.

With Enron, you would have had $16.50 left of the original $1,000.00.

With WorldCom, you would have had less than $5.00 left.

But, if you had purchased $1,000.00 worth of beer, one year ago, drank all of the beer, and then turned in the cans for the aluminum recycling REFUND, you would have had $214.00.

Based on the above, the best current investment advice is to drink heavily and recycle.

It’s called the 401-Keg.

Are people in the US saving enough for their retirement? Or spending it on gas and food? Given the trade deficit number this morning, they are spending their money on goods from overseas (like oil). The Trade Deficit for February swelled to $62.3 billion, somewhat unexpected, although still below last August’s record $67 billion. We also had weekly Jobless Claims, which dropped 53k to 367k. So why is the 10-yr yield down to the mid-3.40’s and 30-yr A-paper mortgage prices slightly improved? Lehman has liquidated three investment funds due to “market disruptions”. Lehman’s news as well as expectations of further write-downs has renewed fears that the credit crisis is not over, and the economy is still in for more stormy weather.

The Federal Housing Administration has expanded its FHASecure program so that delinquent borrowers who have missed three payments in the previous 12 months can qualify for an FHA-insured mortgage if the servicer writes down the first mortgage to a 90% loan-to-value ratio. Many investors, such as GMAC, Wells, Chase, etc. are buying FHASecure loans, typically with a 2 (two) point hit in price.

IndymacBank has announced the securitization of $335 million of prime jumbo, alternative-A credit hybrid adjustable-rate mortgages that it traded in a private-label deal slated to settle on April 15.

Residential Capital LLC announced that it has received a $1.2 billion capital injection from its parent GMAC, but that it does not does not impact the ratings of either entity. The $1.2 billion capital injection is equal to the face amount of ResCap debt purchased in the open market by GMAC with an estimated current market value of $607 million and exchanged for $607 million newly created ResCap preferred units.