March 15: Mortgage delinquency and foreclosure data-this may shock stocks

I examined some data released tonight from the Mortgage Banker's Association's National Delinquency Survey. Delinquencies for all loans in the fourth quarter increased 4.95%. Year or year, delinquencies deteriorated 4.70%. This represents the highest level in several years.

The level of mortgages that entered foreclosure increased to a record level nationally at 0.57%. The previous peak was 0.49% in 2002.

The deterioration in overall delinquency rates is likely going to inflict economic pain in the quarters ahead, despite continued job growth. Wit home prices under pressure in the face of increased regulatory scrutiny and a significant amount of ARM resets expected, I am concerned of the systemic risks to housing as the mortgage liquidity crisis unfolds. It is possible that the large amount of foreclosed units slated to hit MLS listings in the next 2-5 months implies that total inventory provided by the NAR could be price cut more than -20%. Furthermore, if the employment situation were to come under pressure as a result of the current housing situation, the delinquency trends would be further exacerbated.

In short, I strongly urge readers to consider bailing out of retail stocks,large US banks that are non-diversified, credit card companies, home builders and building supply companies. In addition, playing defense with your portfolio and further allocating resources to Japan (strong currency), Switzerland (ditto) and Singapore (ditto) through pure currency plays or through ETFs of those countries may be looked at. I am not spreading fears of a depression, or even a severe recession. What we are faced with will be rising negative sentiment and emotional redemption of mutual finds and ETFs, and 'sticker shock" as stocks prices drop in the above industries.


An MRI today confirmed what I suspected. A knee problem will almost surely require routine surgery. I have been researching "global warming" stocks for a few weeks and hopefully will have a timely report tomorrow, if the pain killers don't dull everything. I hope you will enjoy the findings. It was fun doing the research.