Study this: Gorgeous charts:  Asset Class Correlations - Bespoke Investment Group 

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BULL VS BEAR:

1.  Bullish:  Wow - READ THIS - Is it a Bottom in Financial Stocks?  Our short answer: yes - The bear market in financial stocks has lasted a punishing 18 months, but signs are emerging that it is over at last. Why First Horizon is especially attractive. Tom Brown explains at bankstocks.com 

2.  Bearish:  A Short Covering Rally - John Mauldin’s Outside the Box E-Letter 

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CW Bondholders scr*wed? - BofA Keeps Countrywide At Arm’s Length - Maurna Desmond - … Chief Financial Officer Joe Price said Bank of America “does not plan to guarantee” Countrywide’s bonds, and that he “understands the potential outcome of withholding payment,” according to TradeTheNews.com. … - Forbes

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Bush Prods Congress, as Financers Are Inspected - STEPHEN LABATON - Bank examiners from the Federal Reserve and the Comptroller of the Currency are inspecting the books of the nation’s two largest mortgage finance companies, Fannie Mae and Freddie Mac, as the Bush administration prods Congress to approve a plan that would enable it to inject billions of dollars into the companies. - NY Times

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Paulson confident of GSE backstop deal this week - Reuters

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Iranians, Saudis have enough oil to buy USA -  The recent price of $140 a barrel, the reserves of those two countries are equivalent to the net worth of the entire US. -  Scott Burns - MSN Money

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Conversation with 3 smart people: Fear and Leverage on Wall Street: A GSE Roundtable: Wallison, O’Driscoll and Rosner - In this issue of The Institutional Risk Analyst, we turn to three experts in the housing finance field for their insights on the GSEs … - Institutional Risk Analyst

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Bad Economic Vibe Means More Securities Litigation? - Kevin LaCroix - interesting lawsuit … failing to reveal that should there develop a significant spread between the U.S. based Fed Funds interest rate (the “Feds Funds Rate”) and the London Inter-Bank Rate (“LIBOR”), the Hedge would decline in notional value. … - more at D&O Diary

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Friedman says GSEs need to raise $10-$15 bln each - Reuters

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Foreclosures will Moderate as Home Prices Continue to Fall - There will come a time when most of the homeowners that intend to walk away from their mortgages have done so. True, whether defaulting by choice or by the lack of the ability to pay. As the 2005, 6 and 7 vintages mature, their default rates will be more tied to the local economies than bad underwriting. Unrealized losses related to the fluctuations in housing prices will become less relevant. - Click Broker

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Menzie Chinn:  Did Fannie and Freddie cause the mortgage crisis? - Some thoughts about the role played by the GSEs in the run-up in mortgage debt and house prices. - Econbrowser

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Americans make drastic changes to their shopping habits, but for how long? - ANNE D’INNOCENZIO - … But this time, experts say the new behavior — fueled by higher gas and food prices, tightening credit and a slumping housing market — are the most dramatic and widespread that they have seen since the mid-1970s. … - AP Chicago Tribune

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Freddie Mac May Slow Mortgage Buys to Prop Up Capital - Dawn Kopecki and Jody Shenn - Bloomberg

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Bill Fleckenstein: Feds can’t fix Fannie and Freddie - The mortgage giants aren’t short of cash. They’re stuck with bad loans that aren’t going away. Also: Short sellers didn’t bring down the lenders — the lenders did it themselves. - MSN Money

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IRA ARTMAN SECTION - thanks Ira:

Fannie, Freddie still favorites in some funds  - Jeff Benajmin - The stocks plunged, but managers defend positions - Investment News

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107 pages of fun: OFHEO Releases “Mortgage Markets and the Enterprises in 2007” - has link to report - riskcenter.com 
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Long-distance commuters’ road to nowhere -  High gas prices, housing market downturn leave some workers stuck -   MSNBC 

   posted by Bill Coppedge