|Dow||+274.83 to 16,994.22|
|S&P 500||+33.79 to 1,968.89|
|Nasdaq||+83.39 to 4,468.59|
|10-YR Yield||-.02 to 2.33%|
|Gold||+$10.40 to $1,222.80|
|Crude Oil||-$1.20 to $87.65|
The rockin’ rollercoaster on Wall Street continued today, with stocks initially sinking further before reversing course and surging higher after 2 p.m.
The catalyst? The release of the meeting minutes from the last Federal Reserve gathering. They showed the Fed was somewhat more concerned about economic weakness overseas. That, in turn, led investors to speculate that rate hikes could be pushed out a bit into the future. And voila — almost 300 points on the Dow in the blink of an eye!
But outside of this day-to-day volatility, one of the biggest issues for the economy is how tough it is to get a home mortgage these days. Just ask former Fed Chairman Ben Bernanke!
Say what you will about his monetary policies and economic foresight (and boy have I ever had a lot to say on that front! LOL), he’s still a fairly rich guy. His net worth is at least $1.1 million, according to public disclosures, and he is now getting paid hundreds of thousands of dollars a year for speaking engagements.
But when he went to refinance his Washington, D.C. house, he was reportedly rejected. And he has plenty of company, too!
California-based research firm CoreLogic maintains a credit availability index. It tracks things like the percentage of approved borrowers who have low credit scores, small down payments, and other higher-risk characteristics. The idea? Figure out whether lending standards are getting tighter, looser, or staying the same.
Well, it said standards are as tight now as they ever have been since at least 1998. That predates the housing bubble by several years. So it just goes to show how lenders have swung from ridiculously easy in the early-2000s to very tight now.
The problem is that most lenders sell off their loans to the likes of Fannie Mae and Freddie Mac. Those companies use automated underwriting systems that offer little in the way of leeway for lenders for extenuating circumstances.
That means someone who makes a lot of money, but in the form of variable commissions versus a high, consistent salary, faces a lot more hurdles today than in the past. Ditto for someone who has changed jobs frequently, even if they’ve earned a higher and higher wage by doing so. And what if your debt-to-income ratio is a percentage point or two over today’s strict limits? Sorry, Chuck — you’re outta’ luck!
|Lenders are getting so strict that former Fed-head Bernanke couldn’t qualify for a mortgage.|
That doesn’t mean you couldn’t necessarily find an accommodative portfolio lender, one that makes loans and holds them on the books. Indeed, several lenders say Bernanke could go that route if he needed to.
It’s just that your options are much more limited now than in the past. That’s yet another reason the housing market and housing stocks remain relatively moribund despite a generally improving economy.
Bottom line: If you’re looking to buy a house, make sure you have your ducks in a row. Be ready to substantiate every penny of income with sound documentation. Pay down debt so your debt-to-income ratios look better.
Also, try to accumulate down payment funds from regular savings or a gift from a family member. And make sure you talk to a lender before making an offer. You don’t want to fall in love with a home … and waste your time and the seller’s time … if there’s no way you’ll be able to get a mortgage to pay for it!
|“If you’re looking to buy a house, make sure you have your ducks in a row.”|
Speaking of which, have you had experience shopping for a home or mortgage recently? How did it go? Was it like pulling teeth or a relatively smooth process? What do you think relatively tight standards will mean for the housing market over the next year or two? Use the comment section here as a tool to share your insights with fellow investors!
|Our Readers Speak|
Are fad stocks dangerous? That depends on who you ask, judging from some of the comments on our website. And it’s clear that at least a couple of you think SodaStream’s (SODA, Weiss Ratings: C) product is actually pretty neat (even if the stock has been a loser).
Reader Ian said you have to keep your eyes on technical indicators if you’re going to invest in faddish companies. His comments: “Can’t take the heat, get out of kitchen and get to the sidelines. Come on, just look at SODA chart. I would have dived out at $31 so no excuses. Please, please look at charts! May be harsh but it’s your money folks.”
Reader Irene stepped up and defended the company, saying: “All I ever saw was people complaining about SodaStream. Arguments like ‘People don’t drink soda.’ So why is Monster Beverage (MNST, Weiss Ratings: A-) stock at 90 dollars? How about Coca Cola (KO, Weiss Ratings: B-) partnering with Keurig Green Mountain (GMCR, Weiss Ratings: B+)? That is the real reason Soda is down.
“Wall Street shorts WANT this company to fail so that Keurig could come out with its new soda machine. I love my soda from SodaStream. It tastes better than Coke and Pepsi (PEP, Weiss Ratings: A-). You don’t have to lug home soda cans or bottles from the grocery store. There is a lot more to this story than meets the eye.”
But another poster, Reader Andrew D.C. (nice reference to the 1980s comedian there!) said: “I remember as a child (in the early 80s) how me and my kid sister would play with this toy machine that made ‘slushies’ and water ice. I forget the name. It lasted 2 weeks.
“Then we had this mini oven where we could bake our own brownies and stuff. I forget the name also, but it was cool for a little longer than 2 weeks. Sheesh! And this was in the early 80s, loooooooong before any decent electronic gizmos started getting marketed, and we grew tired of these cool ‘toys’ in short order.”
Nice insights on the risk of passing fads there, for sure. Thanks for sharing! I remember being so excited about getting an electronic, tabletop football game for Christmas once as a kid. Turned out the thing was so frustrating to use that my brother and I basically never played with it after New Year’s.
Any other thoughts you’d like to add? Then don’t forget to leave them here.
|Other Developments of the Day|
• Wal-Mart (WMT, Weiss Ratings: B) became the latest company to eliminate health-care coverage for part-time workers. Some 30,000 employees who work less than 30 hours a week will get booted from the company’s health care insurance system as of Jan. 1.
Premiums for the firm’s most popular plan — for those still eligible — will jump 20 percent next year. Analysts say it’s yet another side effect of what I’d call the “Less Affordable Care Act,” otherwise known as Obamacare.
• Is there any central banker on the planet standing up for sound money, criticizing QE as a useless policy, and putting the onus for recovery-friendly policies on fiscal authorities, rather than monetary ones?
Yes — Jens Weidmann, the head of Germany’s Bundesbank. He continues to rail against the idiocy that pervades modern central bank thinking, most recently in the Wall Street Journal.
• Pretty sad indictment of the global economy here, from the Financial Times’ Martin Wolf. Basically, he says that the economy can’t seem to grow robustly without repeated, unsustainable boom/bust cycles in credit growth.• The battle for Kobane — a Syrian town hard against the border with Turkey — is continuing. Stepped-up U.S. airstrikes helped blunt ISIS’ momentum a bit, but many observers think it’s only a matter of time before the terrorist organization takes control.
Until next time,
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