5-yr freeze on subprime-mortgage rates

Yesterday, after the Bush Administration intervened in the market by preventing the Adjustable Rate Mortgage from being reset for 5 years, the market reacted positively. The main mid-term beneficiaries are the housing lenders as they would delay the foreclosures of mortgages and provide more time for the house buyers to repay their loan/installment. I would refrain from playing banks, mortgages lenders and housing stocks until the market have fully absorbed the news (or least until next Tuesday when the Feds decide their next move).

However, yesterday's move by the Bush Administration does not change the weak housing landscape. Among the negative news:

• Moody reported that the U.S. housing market will fall into deep recession next year, with home prices dropping up to 35%.
• Just as starters, Luxury homebuilder Toll Brothers posted its first quarterly loss in 20 years. I am expecting more such news from the other builders.
• LEN sold part of its landbank at 60% discount though they retain the right to buy back at latter date.

Retail Stocks
Retail stocks are also expected to be weak due to expected weak consumer demand. We need to monitor this closely as the Christmas spending is not over yet. There is no plan bailout for retail stocks at the moment.

Among the stocks I am following are TGT, COH and JWN. TGT reported yesterday that it lowered its expectation for the next quarter. I would refrain from shorting WMT as it is a company targeting the mass market. In economic downturn, the middle income earners might have to downgrade themselves and shop at WMT while the mass market will cut down on their spending at WMT. COH focus on the middle income market and sells discretionary items (items that would be in the low priority to buy in an economic downturn).

- PersianCat04 (Millionaire-in-progress)