No Bottom in Sight

From Countrywide's quarterly report, we get this info:

Some 9.3 percent of the loans in Countrywide's mortgage servicing portfolio were delinquent as of March 31, up from 4.9 percent a year earlier. About 4.8 percent were 90 days or more behind in payments, the company said.

Nearly 39 percent of Countrywide's subprime mortgage loans made to borrowers with past credit problems were delinquent, up from 19.6 percent a year earlier. (Yahoo!)

I think the numbers speak for themselves. Who will buy paper that has a 39% non-performing loan status?

The Standard & Poor's/Case-Shiller home price index of 20 cities fell by 12.7 percent in February versus last year, the largest decline since its inception in 2001. Seventeen of the 20 metro areas reported record annual declines. The index dropped 10.7 percent in January and 9.1 percent
in December.

"There is no sign of a bottom in the numbers," David Blitzer, chairman of the index committee at S&P, noting that all 20 metro areas have declined for six straight months.

No sign of a bottom. Credit is contracting, and will continue to contract as the collateral behind the loans continues to shrink. This is a vicious circle that won't be broken until prices stop falling. (Yahoo!)

In other thoughts and speculations, I've been thinking about the dollar. I think this is especially important in the light of Barron's published report that 75% of global institutional "big money" managers believe that the dollar will rebound over the rest of the year. I don't. Here's why: global price inflation is putting increasing pressure on oil-producing countries and other dollar-recyclers to allow their currencies to appreciate against the dollar. Russia, for one, has bought billions of dollars recently. Their dilemma is not whethor or not to allow the Ruble to rise, but by how much. This global pressure on currencies to rise is the same as pressure on the dollar to fall. The dollar is very overvalued because the Fed has lowered rates so much. At the moment, dollar-recycling is propping up the dollar, but this is becoming a losing proposition as price inflation devours GDP growth in dollar-pegging countries.

When the dollar resumes its fall, I believe that Treasury rates will rise behind it. However, the rise in rates will not keep up with the fall.