Durable-goods orders were a nice surprise on the upside, advancing 1.3% -- 0.7% when you take out the volatile transportation orders. Over the last three months, durable-goods orders have increased at a 11.3% annual rate, and the backlog of unfilled orders is at a record. This would belie the notion that the manufacturing sector is weak.
Mortgage applications last week were up an anemic 0.5%, but at least they weren't down. Credit availability is needed before housing can recover, and the wide credit spreads we have written about need to return to more normal levels.
A report that Sanford Bernstein issued today addresses the issue of bailing out the government-sponsored entities Fannie Mae (FNM - commentary - Cramer's Take) and Freddie Mac (FRE - commentary - Cramer's Take).
One of the problems in a bailout is the status of the preferred stock and the impact its default would have on banks that hold the paper as part of their capital base. Bernstein figures that if the preferred is wiped out but the agency and mortgage-backed paper issued by FNM and FRE were to be guaranteed, the write-up of those asset classes against where they are trading now would benefit the large bank balance sheets more than the writedown of the preferreds would hurt the balance sheets. It would be, in effect, a capital raise, and Tier 1 capital ratios would improve. A fascinating and unique way of analyzing the issue.
P.S. Will you be there when Cramer makes his next move?
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Market Commentary Good News in Housing, the Dollar 8/26/2008 12:15 PM EDT Home prices are leveling off, and the greenback is strengthening against world commodities.
Market Commentary A Closer Look at Wages 8/27/2008 7:45 AM EDT Falling 'real' wages are a concern, but an inflation spiral doesn't seem likely.
Vincent Farrell Jr. is chief investment officer for Soleil Securities Group and a regular guest on CNBC and other national print and broadcast media.
Prior to joining Soleil in August 2008, Farrell was a principal of Scotsman Capital Management. Before that, he was chairman of Victory Capital Management of Cleveland and chairman of Victory SBSF Capital Management in New York. He was a founding partner of Spears Benzak Salomon & Farrell, which was acquired by KeyCorp in 1995. Vince held a variety of positions in his 23 years at SBSF, including chief investment officer, and he served as the portfolio manager on a number of the firm's largest client relationships.
Prior to joining SBSF, Vince spent nine years at Smith Barney as a vice president, sales.
Vince graduated from Princeton University in 1969 and received his MBA from the Iona College Graduate School of Business in 1972.
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