Jumbo mortgages — home loans exceeding $417,000 — now have the fastest rising default rates of any mortgage class. According to recent data from First American CoreLogic, 7.4% of these larger-than-life mortgages are currently in some form of default, nearly three times the rate at the start of 2008.

As you can see, when stocks tanked in late 2008, the market for super-sized mortgage loans followed suit:

(Heh, we love the “exclude option ARMs” note… no need to worry about them!)

Is there any reason for this trend to improve? The Obama administration has done plenty to help out their beloved middle-class homeowner… like the $8,000 first-time homebuyer credit, artificially low FHA mortgage rates and several mortgage modification programs. But those programs don’t apply to jumbo loans. Even Fannie and Freddie, masters of mortgage speculation, will no longer stand behind jumbo mortgages.

And the market is blowing jumbo loans a stiff head wind, too. Mortgage rates are roughly 100 points higher for jumbos and inventory — geesh — this is pretty remarkable:

So… an accelerating rate of default; a government cold shoulder; higher-than-typical lending rates; and a huge, growing glut of supply? Could get interesting.

Source: The New Credit Crunch Victims

Good day… Hopefully this will reach everyone today. We have been having some computer problems causing some major delays in the delivery of your Pfennig. As Chuck always says, if you need your Pfennig, just go to www.dailypfennig.com where it is posted each morning as soon as I hit the send button. For those of you who feel the need, the website also has an archive, so you can all read what I had to say yesterday. But enough about our email problems, you all want to know what is happening in the markets.

The dollar began the day trading in a fairly tight range, but a fairly large jump in US consumer confidence sent the US$ tumbling. Yes, the old ‘opposite’ trading pattern has begun again. When we have good news regarding the US and global economies, the US$ gets sold. But when the data is bad, the dollar is purchased as a safe haven. Yesterday both pieces of data released in the US were more positive than most economists expected, so the dollar gave back some of its recent ’safe haven’ gains.

The currencies ended up with their best day in a week vs. the US$, as the commodity currencies of New Zealand, Australia, Norway, South Africa, and Canada led the way higher. Even the Mexican peso, which has been beat down as of late was able to claw back a 1% gain vs. the US$. Only the Japanese yen moved lower, (I wrote a few paragraphs on the my feeling regarding the yen in yesterday’s Pfennig which most of you probably missed).

A positive consumer confidence number has convinced traders that the US consumer is becoming optimistic again. It is believed that these higher confidence numbers will carry over to increased retail sales and a bottoming of the global recession. Yesterday’s consumer confidence numbers surprised even the most optimistic economists, coming in at a five month high of 39.2. The report paralleled figures from public opinion polls which have been indicating US consumers are feeling better about the economy, and the prospect of new jobs. A drop in mortgage rates and the bounce in equity markets during the month of March certainly helped to boost consumers feelings. But many (including myself) think the equity market bounce is probably a ’suckers rally’, and unemployment is nowhere near bottoming in the US. Not that I want to throw water on the US consumers new found confidence, but I think we will likely see reality set back in and confidence move back down in mid summer.

The other piece of data released yesterday showed housing prices declined at a slower rate in February than in the first month of 2009. The decline slowed to 18.63% from an adjusted 19% in January. The headlines mostly reported that the decline in home price slowed in February for the first time since 2007. Yes, we did see slowdown in the decline, but should we really be celebrating an 18.63% drop in housing prices? I think the optimists are being a bit too optimistic, as unemployment will continue to climb, keeping buyers from qualifying for new home loans. Unlike many in the popular media, I don’t see where we have hit a bottom in the housing market yet, and don’t expect us to find that bottom until late this year. Until then, the US economy will continue to struggle.

Kristin Kuchem, who made my day by bringing me a latte yesterday morning (THANKS KRISTIN!!), sent me the following quote regarding the housing data: “The number of vacant homes — including foreclosures, properties for sale and vacation properties — jumped to a record 19.1 million in the first quarter as the recession sapped demand for real estate, the U.S. Census Bureau said in a report Monday. The number of homes that stood unoccupied rose from 18.6 million a year earlier. The U.S. financial crisis and falling prices have shattered the confidence of homebuyers. The percentage of people who said they plan to buy a home in the next six months dropped to a 26-year low in March, according to the Conference Board in New York, Bloomberg reported.” Hardly a sign that the housing market has bottomed!

Data released later today will give us a picture of how the US economy did over the first quarter. 1st quarter US GDP is scheduled to be released later this morning, and is expected to show the economy plunged close to 5%. This would be better than the 6.3% contraction in the last three months of 2008, so I expect the media to spin it just like they did with the housing data yesterday. We will hear all about how the US economic slowdown is turning, and we will undoubtedly hear several predictions of a rebound by the end of 2009. But with another negative GDP number in the 1st quarter, the recession which began in December 2007 will be the longest since the Great Depression. And not to sound overly negative (which I seem today) but the employment data scheduled for release tomorrow morning will likely show further deterioration in the US job market – not a good sign for the near term future of the US economy.

One piece of data which would lend support to these predictions of a rebound is the personal consumption figure which will also be released this morning. Consumption is predicted to show a slight rebound during the first quarter, after dropping at an average of 4.1% in the last half of 2008. Consumption probably ticked up as mortgage rates and gasoline prices fell. US consumers were obviously in a positive mood during the first quarter, but will their optimism continue?

Later today the FOMC will be releasing their rate decision. Economists expect the US central bank to announce a move down of just .125% in the benchmark rate. But the Fed will have to walk a fine line with the accompanying announcement. They will want to try and relay confidence in the rebound of the US economy, but if they sound too positive, they could push up longer term inflation expectations. Bond traders are still nervous (as they should be) about all of the money supply the Fed has pushed out into the markets. If the Fed makes a case that the economy is starting to recover, bond yields will likely jump up as investors increase inflation expectations. This increase in rates is exactly what the FOMC wants to avoid, as they have been buying US Treasuries in an attempt to keep rates down.

The Fed surprised the markets in March by stating that it would buy longer-term Treasuries as part of their ‘quantitative easing’. The Fed’s purchase of mortgage backed securities has been credited with helping to manufacture another mortgage refinance boom, and hopefully beginning a rebound in the US housing market. But I don’t expect the Fed to drop any additional bombshells with today’s announcement. In fact, they will likely be happy to just have their announcement be a non event, as the markets seem to be moving in their desired direction.

The Euro bounced up a full 2 cents vs the US$ overnight, benefitting from the general sell off of the US$ and a bounce in European confidence. The stimulus spending by European governments, along with slowing inflation, have boosted the mood of Europeans. An index of executive and consumer sentiment rose for the first time in nearly a year, the EC reported this morning. Another report showed European retail sales declined the least in 11 months in April. European consumer spending has been resilient in the first quarter and is definitely being helped by government stimulus.

Finally, a report released by the German Economy Ministry predicted the German economy will return to growth in 2010, helped by fiscal stimulus spending. The report also predicted the German economy would contract by 6% this year, much more than the previous estimates. The Ministry is predicting a global recovery beginning at the end of 2009, which they say will help propel the Eurozone back out of recession in 2010.

The Mexican Peso gained slightly as the concerns over a global swine flu pandemic eased. Many now believe the swine flu will be contained in the next few weeks as governments across the globes have aggressively moved to stop the spread. But health officials in the US say the swine flu is likely to rear its head again this fall/winter which is the traditional flu season. Tourism to Mexico isn’t likely to recover quickly, as many vacationers have canceled plans and aren’t likely to change them again. I wouldn’t look for a sustained rally for the Mexican pesos, and wouldn’t suggest speculation in this currency.

As I stated in the opening section, both the Australian and New Zealand dollars rose overnight, ending two days of losses. Both currencies have moved back up fairly close to the levels they were trading at prior to the swine flu scare. While I would expect the Aussie dollar to hold on to these recent gains, the New Zealand dollar could be subject to additional selling pressures. New Zealand central bank Governor Alan Bollard will probably decide to cut rates by 50 basis points on Thursday, narrowing the interest rate differential of the kiwi vs. the US$ and euro.

Gold has moved back up along with all of the currencies, approaching the $900 level again. As I stated yesterday, these moves lower by the precious metals are, in my opinion, nothing more than excellent buying opportunities. Once the global recovery begins, inflation will spike and the price of these metals will likely spike up with it.

Running a bit long today, so I’ll end it there.

Currencies today 4/29/09: A$ .7196, kiwi .5703, C$ .8308, euro 1.3263, sterling 1.4751, Swiss .8798, rand 8.5424, krone 6.5851, SEK 8.1015, forint 218.14, zloty 3.3336, koruna 20.14, yen 96.88, sing 1.4856, HKD 7.7504, INR 50.09, China 6.8245, pesos 13.71, BRL 2.1846, dollar index 84.528, Oil $50.74, Silver $12.62, and Gold… $899.22

Hope everyone has a wonderful Wednesday!!

Source: Dollar Falls as U.S. Consumer Confidence Increases

Well… Another day of doldrums in the currencies, with the bias, what little there is, to buy dollars. The stock jockeys received some manna from heaven yesterday when it was announced that the U.S. Treasury Department is considering a plan to halt the slide in home prices that would lower mortgage rates using Fannie Mae and Freddie Mac. The plan could reduce rates for newly issued loans to as low as 4.5%.

Here’s a snippet of the story that ran in the Wall Street Journal yesterday…”Government officials are under pressure to stem foreclosures, which underpin much of the current financial crisis. Treasury has struggled for months to come up with a plan that would ease the market without appearing to bail out homeowners and lenders.

Under the plan, Treasury would buy securities underpinning loans guaranteed by the two mortgage giants, which are temporarily under the control of the government, as well as those guaranteed by the Federal Housing Administration. Fannie and Freddie guarantee a large proportion of all new home loans made in the U.S.”

OK… So they came up with a plan… I have to think about this a bit, as I see the “good” it could do, but there’s always a “bad” to these things too, and once again, I’m sure it circles around the fact that Gov’t is going to be in the mortgage business… We inch closer and closer, all the time to socialism folks… It all began when they mandated that in a free country we HAVE to wear seat belts… Now don’t get me wrong, I wear them because I believe it’s the safe / right thing to do, but shouldn’t that be MY choice and not the mandate of the Gov’t? Any way, please don’t flood my email box with notes telling me how wrong I am on this… It won’t help, this is what I believe, period!

Whew! I really went off on a tangent there, eh? OK, before you begin to think I’m a nut case… Let’s get back to currencies and economies!

The Reserve Bank of New Zealand (RBNZ) did cut rates, as I suspected, by 150 BPS yesterday… This brings the total of rate cuts by the RBNZ since September to 325 BPS! I think the RBNZ truly believes that global inflation is taking a major step backwards… And it probably is to a degree, but the RBNZ had better be ready to go the “other way” once this slide in inflation tips back… Of course I don’t believe we’ll see that for some time (6-months at least), so go ahead and frolic in the sun with rate cuts while you can RBNZ… Just be ready, that’s all I’m saying…

Bond holders of New Zealand issues have to be frolicking in the sun for sure, and their “locked in yield to maturity” is now, at least 150 BPS, if not 325 BPS higher than new issues, which makes their bonds “more valuable”…

U.K. Prime Minister Gordon Brown unveiled a scheme to allow borrowers experiencing a temporary loss of income due to the downturn to defer mortgage interest payments for up to two years. The U.K. Gov’t will guarantee the lenders against the risk of loss from the deferred payments… That’s going to be quite interesting to see how that plays out… But shoot Rudy, if the Gov’t is going to let you go Ollie, Ollie, oxen free on your mortgage payment for two years, with NO bad stuff happening to you and your credit, I can see the mortgage holders lining up on the right for this!

The U.S. Fed Reserve’s Beige Book that usually gives us an indication of what to expect in the next FOMC meeting, which will take place December 16th, printed yesterday… And it could be probably listed on Amazon under “horror” books! Put away the sharp objects folks, for it’s not just me ranting about these problems any longer, the Fed Reserve, your Central Bank, you know, the people that are supposed to be protecting the value of our currency, by providing price stability, and full employment (and are failing miserably at both!), now are ADMITTING that the problems are real… Here’s a short review from the Beige Book…

Based on data collected prior to November 24th, the Beige Book painted a grim picture of the outlook for growth in the fourth quarter. Lenders tightened standards for loans and lending contracted over the period. Several districts noted increases in delinquencies and defaults.

Consumer spending, which played a lead role in the growth downturn in the third quarter, was reported to have weakened.

Hey, this little tidbit came across my screen yesterday… The number of days that the S&P 500 has moved up or down by more than 5% during the Trading Day… 1950 – 2006 34 days… 2008 44 days! With 22 of them coming since October 1st!

Talk about volatile! WOW!

OK… One of my fave economic writers, Caroline Baum, wrote a piece on Bloomberg that caught my eye… Hey! That makes sense now, since I really can only see good out of one eye! Anyway… Here’s a snippet of the story by Caroline Baum, titled, “Bernanke should buy Buicks instead of bonds”…

“It tells you just how far we’ve come when the headline, “Fed May Buy Treasuries,” gets a reaction.

Buying Treasuries is the age-old way of adding reserves to the banking system, setting in motion the money-creation process.

Historically, these so-called permanent open market operations were designed to have no impact on the shape of the yield curve. The goal was simply to satisfy the banking system’s demand for reserves.

Treasury securities used to make up the lion’s share of the Federal Reserve’s balance sheet. No longer. As of Nov. 28, the Fed held $476 billion of securities carrying the full faith and credit of the U.S. government, less than a quarter of its balance sheet. One year ago, the comparable figures for the Fed’s Treasury holdings were $780 billion and 90 percent.

When the banking system starts functioning again, and the Fed has to mop up all the excess reserves banks are holding instead of lending, the reality is “it doesn’t have enough Treasuries,” said Paul Kasriel, chief economist at the Northern Trust Corp. in Chicago.

Banks were holding $605 billion of reserves in excess of the amount required as of Nov. 19. “Maybe the Fed will have to raise reserve requirements,” Kasriel says. “It’ll be 1937 all over again.”

Many Great Depression scholars, including the late Milton Friedman and Anna Schwartz, point to the Fed’s doubling of reserve requirements in 1936-1937 as triggering the second leg down in the economy, which was recovering in the mid-1930s.”

OK, back to me… All this talk today is causing me to search for something “fun” to talk about, because it’s all been gloom and doom, eh?

Sweden’s Riksbank announced a 175 BPS rate cut this morning. WOW! Another Huge cut, makes you think that the Bank of England and European Central Bank might have something up their sleeves too! And in Canada, their Central Bank doesn’t meet until next week, but Canada has other problems going on, as there are rumblings about a suspension of Parliament…

The Governorator, Arnold Schwarzenegger, has called a Fiscal Emergency for the state of California… I feel like he won’t be the only governor to do so… You see, the Federal Gov’t is giving all it’s McLovin’ to Financial Institutions right now, and the States are hurtin’ for certain… The states that have for decades told the Fed Gov’t to “get out of their business”, will now be knocking on the Gov’t’s door, and be the next in line to ask for bailouts…

And then, one final thought before going to the Big Finish… I saw this yesterday, and almost fell out of my chair! (now that would not be a good thing!) Let’s see what your take is on this….

I know that sure seemed as though the Fed and Treasury had found every last way of pushing off debt from one generation to the next, BlackRock’s Peter Fisher has thought of a clever new one: a 100-year treasury bond. That way, the government can keep borrowing money to finance today’s bailouts, and won’t really have to start bleeding cash until after most of us are dead and gone…

Let’s hope that thought by Peter Fisher doesn’t even cross the minds of Paulson and Bernanke!

Currencies today 12/4/08: A$ .6470, kiwi .5365, C$ .7945, euro 1.2640, sterling 1.46, Swiss .8245, ISK 261, rand 10.2585, krone 7.17, SEK 8.3430, forint 207, zloty 3.0650, koruna 20.3425, yen 92.55, baht 35.70, sing 1.5275, HKD 7.7510, INR 49.85, China 6.8820, pesos 13.62, BRL 2.4790, dollar index 87.22, Oil $47.16, Silver $9.57, and Gold… $769.35

Source: Buying Buicks Instead Of Bonds

We finally had some data releases here in the US which look to steer the markets, so I’ll just get right to it.

The dollar continued to strengthen yesterday after another round of bad weekly employment figures. Initial jobless claims increased to 516k during the first week of November, and last weeks numbers were revised up to 484k. The employment picture continues to darken here in the US, and it doesn’t look like it will improve any time soon. This is just what the US consumers don’t need right now. Not only are most consumers living paycheck to paycheck, but now many of those paychecks are being ripped out of their hands.

Personal bankruptcies are heading into record territory, and job losses will only make this worse. While the total size of the consumer credit market is dwarfed by the size of the mortgage market, with home loans there is an underlying asset providing some base from which banks can work. Credit card debt is different, the banks and investors who hold this debt have no underlying assets to fall back on. This fact has not been missed by the current administration, and Treasury Secretary Paulson is now looking to spend some of the bailout package to try and help out the consumer lenders. Unfortunately it looks like we will be taking another step into the deep dark area Chuck has continually talked about.

This morning we got the retail sales numbers here in the US which showed a further deterioration. Retail sales less autos were down 2.2% in October, almost double economist’s expectations. This fall is the largest monthly drop ever, and is just one more sign the US economy is heading for a doozy of a recession!

We did get some good news yesterday morning as the trade deficit narrowed somewhat, a result of a stronger dollar and lower oil prices. But even after the narrowing, we are still running a deficit adding to our need to attract foreign investments. Chuck let me have a sneak preview of December’s Review and Focus the other day before he sent it to the printer. In the latest issue, he talks about our need to finance the twin deficits which the US continues to amass. This financing need is one of the factors convinces me the US dollar will have to get weaker. The current dollar strength will not last, and once the ‘flight to quality’ buying of US Treasuries subsides, we will see the US currency return to its long term decline.

As I said earlier, the dollar continued to strengthen yesterday morning as the stock market fell. But both reversed course early in the afternoon after Paulson started talking. The Treasury Secretary said the big 3 auto makers should receive some government help, but he isn’t willing to take any of the funds already approved by congress to help them. Instead, he urged congress to come up with additional funds to help the car makers. He also said he would look to try and spend some of the already approved rescue package on ‘non-traditional’ lenders who give loans directly to consumers. Looks like Paulson is finally realizing what we have been saying for a while now, that the next big crisis is the consumer credit crunch.

Anyway, just after the news came across the wire about Paulson’s remarks, the stock market jumped 400 points and the euro bounced up over two cents in the matter of a few short minutes. The dollar has really become a contra indicator for the risk appetite in the market. The dollar index and the stock market have moved in opposite directions 88 percent of the time since the beginning of September. As investors feel more comfortable with risk, they sell the short term dollar holdings and invest them into other markets. The Europeans have started to take the dollar back up this morning, but it remains lower than at this time yesterday.

The Europeans are taking the euro down after it was confirmed that the European economy fell into its first recession in 15 years during the third quarter. Germany had already reported a third month of negative growth, and the European Union confirmed the GDP shrank .2% in the 15 euro nations during the third quarter. France, Europe’s second largest economy, unexpectedly grew in the third quarter as consumer spending gained and exports rebounded. I am still convinced that while things are bad across the pond, Europe’s economies are still in better shape than the US economy. And while some here in the US have given the ECB trouble about not lowering interest rates as quickly as the US; I believe they have done a better job navigating the current crisis, and Europe will be able to recover more quickly than the US.

And finally, the RBA was in the markets protecting the Australian dollar again. Lately, the RBA is intervening to hold the AUD$ up while there are rumors the Bank of Japan may start intervening to stop the appreciation of the yen. Officials at the Swiss National Bank have also been complaining about the rise of the Swiss franc. Both the Japanese yen and Swiss franc continue to strengthen as investors reverse carry trade positions. So we have a couple central banks intervening to hold their currencies down, and others who are intervening to try and keep theirs from falling further. Crazy Times!!

Currencies today 11/14/08: A$ .6585, kiwi .5595, C$ .8188, euro 1.2671, sterling 1.4738, Swiss .8409, ISK (No Quote), rand 10.152, krone 6.890, SEK 7.894, forint 213.42, zloty 2.9408, koruna 20.015, yen 96.39, baht 34.97, sing 1.5184, HKD 7.7501, INR 49.01, China 6.8250, pesos 12.97, BRL 2.30, dollar index 86.89, Oil $58.25, Silver $9.65, and Gold… $747.24

Source: Data Shows Just How Bad Things Are

Sofa retailers have been hammered. Anyone involved in selling ‘big ticket’ items, such as white goods (fridges, freezers, etc), has seen their share price tank too. Meanwhile, Homebase owner Home Retail Group (LON:HOME) warned that like-for-like sales at the home improvement chain had fallen 12% in the 13 weeks to May 31st.

But it’s also claiming some surprising victims. Carphone Warehouse (LON:CPW) took a pounding yesterday as it warned that broadband growth would be slower than it expected this year. Why? Because if you’re not moving house, there’s usually no impetus to go to all the hassle of changing your broadband provider.

But the property crash is far from being the only thing consumers have to worry about…

The house price boom has meant good times for retailers. Homeowners have been borrowing more money against the rising value of their homes (mortgage equity withdrawal), and then spending it on the high street.

But now that house prices are falling, the amount of equity left to withdraw is falling sharply. On top of this, lenders are now demanding that remortgagers have as much equity as possible in their homes, if they want to get decent rates on their home loans.

This can only be bad for the high street. Mortgage equity withdrawal fell from £13.7bn in the last quarter of 2006 to £7bn in the last quarter of 2007. Bear in mind that house price growth hadn’t even turned negative by that point. So MEW for the first half of this year will plunge again.

It’s not just about the amount of money people can borrow against their homes. It’s about confidence as well. Anyone who owns a home – even those with a reasonable equity cushion – is thinking: “how bad is this going to get? I’d better build up some savings, or pay a bit more towards the mortgage.”

And anyone who at some point in the last decade has said: “my home is my pension”, is now terrified that they will be spending their dotage living on baked beans and sleeping in soup kitchens. Suddenly that new widescreen plasma TV seems very much a luxury, not a necessity.

And they’re right to be worried. As Phil Dorgan of Panmure Gordon tells The Times: “The British consumer is more geared to house prices than almost any consumer in the world. There’s a high level of consumer debt as a proportion of GDP – if home prices fall it absolutely affects consumer spending and if we move into negative equity it will get even worse.”

All bad news. Hopefully if you’re a regular reader, you won’t be invested in any of the consumer-facing sectors (such as retailers) that have been battered in recent weeks. But even if you are, it’s not too late to get out – there’s plenty of scope for further falls.

Because, it’s not just about falling house prices anymore. Property prices may be tumbling, but the cost of everything else is going up. And consumers are very aware of it. The Bank of England’s quarterly inflation survey showed that the average consumer believes that annual inflation was at 4.9% in May. In February, they thought it was 3.9%. The Retail Price Index (RPI) shows that inflation is actually at 4.2%. And the official figure – the Consumer Price Index, which the Bank is meant to keep at 2% – is only at 3% so far.

This is a big worry for the Bank. For a start, it’s the highest that consumers have perceived inflation since it started conducting the survey in 1999. That’s no surprise really – the past nine years have seen China swamp the world with cheap goods, offsetting the central banks swamping the world with cheap money, so we haven’t seen inflation in all the places we’d normally expect to see it.

But now that we are seeing inflation rear its ugly head, the problem is that consumers will start to want more money from employers to compensate. Now the fact that the economy is heading into a downturn will offset some of that pressure – it’s not that easy to get a pay rise if you’ve got the threat of redundancy hanging over you – but it doesn’t simply mean it will go away.

The unions for one thing, have got their teeth into the idea, and not just in the public sector. The strike by drivers for oil giant Shell just goes to show what happens when you have a combination of weak government, a collapsing economy, and workers in positions of power.

But even if wage inflation doesn’t become an issue, the perception that life is becoming more expensive is even more bad news for the high street. If people are increasingly worried about stockpiling the necessities of life before they become even more costly, then they won’t be keeping money over to pay for luxuries.

That means all those second-line consumer-dependent stocks are also heading for trouble. The travel industry? Forget about it. This idea that they will somehow resist the downturn is laughable. Hotels, tour operators, airlines – I’d sell them all.

When the banking sector ran into trouble last year, the papers ran page after page of articles talking about how banks were an undervalued bet for ‘brave contrarians.’ All those ‘brave contrarians’ who bought the hype were then faced with collapsing rights issues and soaring mortgage arrears.

Expect to see similar articles about retail stocks. Just remember what happened with the banks, and ignore them.

At some point in the future, things will get better. At some point in the future, it’ll be time to go bargain hunting. But that’s a long way off from here.

Turning to the wider markets…

Overnight in Asia, Japanese stocks rallied 0.6% as the Nikkei 225 added 85 points to end at 13973, but in Hong Kong, the Hang Seng declined 0.8% to 22833.

Brent spot was trading this morning at $136, while spot Gold was at $870. Silver was trading at $16.52 and Platinum was at $2038.

In the forex markets today, sterling was trading at 1.9435 against the US dollar and 126.17 against the euro. The dollar stood at 0.6491 against the euro and 107.95 against the Japanese yen.

Source: The Stock Market Sectors You Should Sell Out of Right Now

Home prices fell 3.1% in the first quarter compared with last year, according to The Office of Federal Housing Enterprise Oversight. This from AP:

Declines in the government index, which focuses on less expensive properties and includes fewer houses bought with risky home loans that have gone sour over the past year, show the depth of the housing market’s troubles.

Prices fell in 43 states, with California and Nevada showing the biggest declines. Home prices dropped by more than 8 percent in those states. The government index also fell 1.7 percent from the fourth quarter of 2007 to the first quarter of 2008, the largest quarterly price drop on record.

Adam York, an economic analyst with Wachovia Corp., said Thursday’s data was unsurprising. “It was pretty widely expected that we would see declines this quarter and for some time to come,” he said.

“Look at a nationwide map of foreclosures, and you just might be looking at a hollowed-out future of exurban America,” says Dave Gonigam in The Daily Reckoning.

“The fact is that ever-rising energy costs will alter American driving and dietary habits with no government intervention at all. $7 gasoline (or $12, now that Robert Hirsch of Hirsch Report fame has repeated Charlie Maxwell’s $12 forecast on CNBC) will make the 40-mile one-way commute unsustainable.

“The map tells one part of the story that’s undoubtedly true: there’s a whole lot of fairly new housing stock out there, 40 or 50 miles from major cities, that’s being steadily abandoned… and may never be occupied again.”

“Three things about the decade-long inflation in real estate prices now imploding on both sides of the Atlantic continue to amaze us here,” says Adrian Ash in The Daily Reckoning UK.

“First, the sheer volume of foreclosures sweeping the former hot spots of America. Second, the size of house price ‘discounts’ about to hit the United Kingdom. And third, how-in-the-hell anyone ever thought subprime mortgages sounded like a good idea.”

According a report in the LA Times, the number of foreclosures in the state in the first quarter this year is up a staggering 327% from year-ago levels — an average of 500 foreclosures a day.

Ominously, the paper quotes research from DataQuick warning that the widening foreclosure problem could “spread beyond the current categories of dicey mortgages, and into mainstream home loans.”

Bill Bonner sees a paradox at work.

“The sky is said to be falling…but investors aren’t running for cover. The S&P is still selling at nearly 20 times earnings. In other words, a person who buys a share is willing to wait 20 years to get paid back out of earnings — if all remains the same. Twenty years is a long time in the stock market. Like dog years, companies measure time in quarters, not years. Only one of the original Dow companies — General Electric — is still on the list. So, a 20-year outlook is fairly optimistic.”