Remember when the mortgage business was fun? People enjoyed their work, and the industry stayed out of the news? When your parents didn’t quite know what you did for a living? When rates mattered more than underwriting guidelines? When we thought that the worst was over – people would liken this to a baseball game and ask what inning we were in? Now, there are rumors of yet another possible demise of a large financial company over the weekend. Who are the candidates?
Lehman employees, about whom one person commented are, “walking around like they have just been Tasered,” are preparing their resumes. Lehman is all over the press as “about to be sold”, with the buyer likely to fire most of the staff. They will join the thousands in the financial sector looking for work, like the folks from Bear Stearns. (JPMorgan kept less than half of the 13,500 employees.) And let’s hope that they diversified their investments: Lehman stock was about $86 per share early last year, was $16 last week, and is now in the low $4 range. Vultures are circling.
On the flip side, it is good to be king. Washington Mutual’s new chief executive will receive a salary and incentive package worth more than $20 million through 2009. This, as their stock hit $2 per share. Yesterday WaMu tried to reassure investors its operations are slowly improving and that it has sufficient access to capital to stay in business, and will set aside about $4.5 billion to cover bad loans in the third quarter. Last quarter they set aside almost $6 billion. WaMu also said it expects to charge off about $2.5 billion in loans for the third quarter, up from nearly $2.2 billion in the second quarter.
Last but not least, Countrywide (with everyone still wondering if BofA will stand behind their debt) was in the news saying that as many as two million Countrywide customers may have had their personal information, include Social Security numbers, stolen by a Countrywide employee – to sell to mortgage brokers! Countrywide has sent letters to customers notifying them of the breach. The company is offering two years of free credit monitoring. Thank you.
At least rates are staying low, right? Well, perhaps, but look for some choppiness. (Currently the 10-yr is about 3.63%, and mortgages are unchanged from yesterday’s close.) Yesterday they were up slightly despite a good 10-yr auction and a possible Lehman-related flight to quality. This morning it was announced that Retail Sales in August fell for a second month in a row. Sales unexpectedly dropped 0.3 percent in August after a sharply revised 0.5 percent drop in July that previously was reported as only a 0.1 percent decline. Sales at motor vehicle dealers rose for the first time since January, but August sales still were down 13.5 percent from a year earlier. (Excluding autos, retail sales in August were down 0.7 percent.) For some good news, U.S. August wholesale prices dropped by a bigger-than-expected 0.9 percent, the sharpest retreat in almost two years. The Producer Price Index, slid by the most since October 2006. Ex-food & energy, the PPI was +0.2%, since energy prices dropped 4.6% last month, the biggest drop since September 2006. For the last year, the PPI is +9.6% and the core rate is +3.6%, the biggest year-over-year gain since the early 1990’s!
Joke du jour
A plane was taking off from Kennedy Airport.
After it reached a comfortable cruising altitude, the captain made an announcement over the intercom, “Ladies and gentlemen, this is your captain speaking. Welcome to Flight Number 293, nonstop from New York to Los Angeles. The weather ahead is good and, therefore, we should have a smooth and uneventful flight. Now sit back and relax… OH, MY GOD!”
Silence followed, and after a few minutes, the captain came back on the intercom and said, “Ladies and Gentlemen, I am so sorry if I scared you earlier. While I was talking to you, the flight attendant accidentally spilled a cup of hot coffee in my lap. You should see the front of my pants!”
A passenger in Coach yelled, “That’s nothing. You should see the back of mine!”