Fannie Mae says they need upwards of $16 billion from the US Treasury to cover additional losses.
WSJ:
[...]The disclosure late Monday from the government-backed provider of funding for mortgages came three days after its main rival, Freddie Mac, estimated that it would need $30 billion to $35 billion from the Treasury. That is on top of $13.8 billion that Freddie received from the Treasury late in November; Fannie hasn’t yet drawn funds from the Treasury.
The announcements raise concern about whether Congress will have to allot more federal money to shore up the two companies, which own or guarantee nearly half of U.S. home loans outstanding. In September, when the companies’ regulator took over management control of them in the face of growing losses, the Treasury agreed to provide as much as $100 billion of capital to each firm if needed.[...]
I hope our new Treasury Secretary Tim Geithner (who was approved today by a vote of 60 to 34) has a recurring payment system setup for all the banks and other institutions. Anyone who thought the Government bailouts would be a one time thing are mistaken. We will see companies going back to our wallets many times in the coming year.
Dow Chemical (DOW) is in the process of backing out of the deal to acquire Rohm & Haas (ROH) and now Rohm & Haas has filed suit in Delaware Courts. The only thing Dow Chemical is saying is that Rohm & Haas will know by June 30th if they intend to complete the acquisition.
Dow, of Midland, Mich., blamed its unwillingness to finalize the deal on “the continued crisis in global financial and credit markets” and the collapse of a joint-venture agreement with Kuwait that would have helped Dow fund the deal. Dow said it hopes to continue discussions “but recent events have made closing untenable at this time.”
When Kuwait backed out of a multi Billion dollar deal with Dow Chemical back on December 28th I said that the purchase of Rohm & Haas may be in trouble. And indeed today we find out that it is. I Believe this will end up being a long court battle with no winners in the end, and Dow Chemical will not acquire Rohm & Haas. That is how I see events unfolding.
Job losses today were shocking…
Texas Instruments (TXN) 3,400
Brooks Automation (BRKS) 550
Lincoln National (LNC) 540
Freeport-McMoran (FCX) “laid off thousands of miners”
Caterpillar (CAT) 20,000
Sprint (S) 8,000
Home Depot (HD) 7,000
Pfizer/Wyeth Merger 8,000
General Motors (GM) 2,000
ING 7,000
Philips Electronics 6,000
Corus Steel 3,500
Barnes Distribution 800
And this is just the larger losses reported today. Retail spending will continue a slow and painful demise as unemployment figures continue to mount. And remember that 70% of the nations GDP is dependent on consumer spending.
Home price data released today showed that prices for homes in the United States continue to fall. The decline for the month of December was -3.8%. At the same time the report showed home sales were up 6.5%. But I need to remind you that it is also being reported that 45% (or higher) of homes being sold in the United States at this time are ‘distressed sales’. Those are homes in foreclosure and with such a huge number like that there is virtually no way to gauge what the ‘real’ housing market situation is.
I know from my own discussions with realtors whom I am acquainted with through professional associations that many homes are simply being puled from the market due to the sellers giving up. This is helping to reduce the ‘months of supply’ figure, but it says to me that there are still many people who want (or need) to sell their homes to get our from being underwater on their mortgages or for other financial needs.
Don’t expect to see a quick and healthy turnaround in the housing market anytime soon.
Auto dealers – Another big shoe to fall…
From the WSJ:
The nation’s car dealers are bracing for the biggest shakeout in U.S. franchising history.
Thousands of dealer-franchisees are threatened with losing their businesses in coming months amid falling sales and uncertainty over the future of Detroit’s Big Three auto makers and their many brands.
Auditing firm Grant Thornton LLP’s Detroit office predicts that 3,800 of all of the country’s 20,000 dealerships would need to close to maintain sales per dealer at last year’s level. General Motors Corp. alone forecasts paring at least 1,700, or about a fourth, of its dealers by 2012 as it contemplates a restructuring.
Because the economic consequences for those franchisees could be catastrophic, some dealers’ attorneys aren’t waiting for what one called a “tsunami” to hit. Instead, they’re urging clients to review their franchise contracts to better understand what options they might have should their franchiser-manufacturer decide to drop a brand, merge with another company or simply go out of business.[...]
I think it is safe to say that auto dealers will somehow find their way into our wallets for bailout money in the future.
Time for Charts…
Again we look at the S&P 500 E-Mini Futures. The very short trend line was breached to the upside this morning and later in the day pulled back to re-test that very same line and it held. Now we are sitting above that level are I am presented with a pattern that has no clear up or down predictive powers for the near term.
The trend line that was breached this morning is now support for the short term. That may be enough of a catalyst for the market to attempt a move towards the upper triangle line in the coming days.
This is a very tough call here at this time to say how we open tomorrow. We must continue to watch and see how the patterns develop, or not develop. This is an hour by hour (if not minute by minute) forecasting event.
As I stated in the video posted yesterday, the pattern that is taking shape is a large symmetrical triangle. And that pattern has two very important levels to watch, the upper and lower trend lines which I have highlighted on the chart with ‘important level’ tags.
S&P 500 Futures - Break above short term trend
S&P 500 Futures - Triangle Pattern
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