Doug MacGray’s Weekly Financial Update – Week of October 22, 2007
John Thomas
October 23, 2007
BLACK MONDAY – Last week marked the 20th anniversary of Black Monday on Wall Street. From a total US stock market capitalization of $2.3 trillion following the losses of 10/19/87 the total value of US stocks has rebounded to $18.7 trillion today, an annual growth rate of +11% over the past 2 decades.
HERE COME THE BABY BOOMERS: At an event hosted by the Commissioner of Social Security, the nation’s first Baby Boomer, Kathleen Casey-Kirschling, filed for her Social Security retirement benefits online at www.socialsecurity.gov. Ms. Casey-Kirschling, who was born one second after midnight on January 1, 1946, will be eligible for benefits beginning January 2008. http://www.socialsecurity.gov/pressoffice/pr/babyboomerfiles-pr.htmTHE SINKING U.S. DOLLAR: The value of the dollar to the Euro sank again this past week, and is now down almost nine percent against the Euro for the year. That’s going to make foreign products more expensive for us to buy but should help U. S. exporters, which may create jobs. The Treasury’s International Capital (TIC) report, a monthly report that shows how much foreigners have invested in the U. S. through their purchase of stocks, bonds, Treasuries, and other securities, showed that flows were negative. That’s the first time that’s happened since August 1998. Outflows in August were -$69.3 billion compared with inflows of +$19.5 billion in July and +$99.9 billion in June. This is likely to put a lot more pressure on the dollar, causing it to fall even further against other currencies. If this pattern of negative flows continues, it would put upward pressure on U. S. interest rates, especially long-term rates.
THE FED CHAIRMAN’S TAKE: Uncertainty remains unusually high in U.S. markets as a result of the subprime- mortgage meltdown, Federal Reserve Chairman Ben Bernanke said last week. The market is in better shape than it was over the summer, partly due to the Fed’s September move to lower its fund’s rate, but housing remains a significant drag on economic growth, he told the New York Economic Club in a speech in New York. As a result, a full recovery is likely to take some time, Mr. Bernanke said. That doesn’t bode well for the market in the short-term, but it’s near- and long-term prospects looks good, he said.
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