“If you don’t like the weather, wait a minute”…That’s a saying heard often in places where the weather can turn on a dime, making it very difficult to forecast. And while the weather patterns can change direction quickly, the recent movement of stocks and bonds rivals the rides at an amusement park.

“Turbulent” and “volatile” best describe the action in the markets. Stocks and bonds have had wild swings of late as the possibility of a recession loom. The Federal Reserve is concerned about a recession but doesn’t want to cut rates too deeply because it may stoke the flames of inflation. Keep Reading...

Countrywide Financial (NYSE: CFC, $6.50) is being acquired by Bank of America (NYSE: BAC, $38.42). The deal is a stock swap. Shareholders of Countrywide will receive 0.1822 shares of Bank of America for every Countrywide share, the equivalent of about $7 per share of CFC.

Bank of America is getting a very good deal. Goldman Sachs has a 2008 earnings estimate of $1.50 a share for Countrywide. Argus says Countrywide will earn $1.40 in 2008. With Bank of America now involved, those earnings estimates look a whole lot more realistic. Bank of America is paying just five times these 2008 earnings estimates. Even if the estimates turn out to be too high or at least premature, Bank of America will be looking good in a short while. I won’t be surprised if the deal is accretive for Bank of America’s earnings in the first year after the deal closes. Keep Reading...

In his first speech on the economy since the December 11^th Open Market Committee meeting Fed Chairman Bernanke said today, in light of recent changes in the outlook for risk and growth, additional policy easing may be necessary. He went on to say, Based on that evaluation, and consistent without a dual mandate (control inflation and promote economic growth), we stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks.

Mr. Bernanke made a point of reminding his audience that, financial and economic conditions can change quickly. Consequently, the Committee must remain exceptionally alert and flexible, prepared to act in a decisive and timely manner and, in particular, to counter any adverse dynamics that might threaten economic or financial stability. Keep Reading...

The U.S. Housing Market saw more signs of a decline in the latest report of pending home sales for existing homes. The National Association of Realtors index of pending home sales dropped 2.6%. This index measures the number of Americans signing contracts to buy previously owned homes. The index had shown a gain of 3.7% in October which was a sign that market might be stabilizing, but this latest report is another sign that 2008 is going to be another tough year for the housing market.

This report supports statements made by the Treasury Secretary Henry Paulson when he forecasted on Tuesday that the housing recession will continue and will be the biggest risk to economic expansion. Keep Reading...