In other news, Barclays Bank is disputing rumors that they will post a write-off of over $10 billion. That is a huge loss, but again Barclays says it is not true. If it is true, they would experience a roughly 15% drop in share value. That's amazing.
Have a great day.
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Mr. Pavlik also feels that the cost of oil is now being fully felt in the economy, reducing the consumer's availibility of descretionary dollars. I'm sure everyone has seen a large increase in prices at the pump. As of this morning, regular unleaded in Ocean City has increased $.32 /gallon, an increase of over 10%.
On a positive note, Pavlik feels that the softer dollar is good for American companies that have multi-national business models. Maybe that means while gas prices increase, we'll see a drop in some consumer goods, like toilet paper?
Have a great day.
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Citigroup's Charles Prince retired under pressure, saying that retirement was "the only honorable course..." amid write-downs of between $14.5 billion -$17.5 billion on securities tied to subprime mortgages.
Coluntrywide's Board of Directors received a request from a pension plan requesting that Angelo Mozilo, Chairman and CEO, be fired after Countrywide's 3rd Quarter profits dropped 47% after subprime loan losses.
After Merrill Lynch took a $7.9 billion write-off due to losses in the subprime market, Chairman and CEO Stanley O'Neal resigned after underestimating the size of the loss.
At Bank of America, 3rd Quarter profit fell 32%, while non-performing loans doubled to $3.3 billion. Ken Lewis, Chairman, CEO and President, is feeling the heat as delinquency rates rise.
After many months of many Americans struggling to pay their mortgage payments and keep their homes, the decision makers on Wall Street are now feeling some of the pain. The problems that have occurred in the subprime mortgage are far reaching and there is plenty of blame to go around.
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This comment should make everyone who is expecting The Fed to continue cutting rates to take notice. Fed Chairman Bernanke is widely viewed as an inflation hawk and Mishkin is saying that The Fed is still on inflation watch and have not changed their position.
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He felt that although personl spending has been propping up the economy, he feels that personal spending will moderate. He believes that many people are spending using their home as an asset, but that will change. With property values in some areas declining and as credit requirements for mortgages and home equity loans become more restrictive, it will become increasingly more difficult for homeowners to borrow their equity and then spend it.
Due to the impact this change in personal spending will have on the economy, he felt that the Federal Reserve will have to continue to reduce interest rates. His opinion was that 30 year fixed rates might drop into the 5.0% - 5.5% range. I hope he's right. Rates at that level would be good for everyone. Have a great Monday!
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