As the summer comes to a close, a later close than normal as Labor Day is the latest it can be, as the first Monday in September is not until next week. So more children are still not yet in school, sales by retailers are delayed, but many are sill enjoying those last lazy days of summer. In many areas it has been a wet summer, but all in all, this summer is a much better summer than this time last year. This time last year we were anticipating the issues of the financial crisis, as well as the anticipated election. So as the summer of 2009 comes to an end, what will we remember of August 2009? These are the items that I will remember from the past month:

•    The Dow Jones ended at 9,496, gaining 325 points or 3.5% this month. Not as high as the 8.6% rise in July, but at least we are on the up-slope. The DJIA is up 45.1% since hitting its low in early March. Meanwhile, the S&P 500 rose above the 1,000 mark, closing the month at 1,020, up 3.4% for the month and 50.9% since its low of early March. An interesting fact is that September has been the worse month for the stock market for over 80 years, so either we continue the trend or we buck the trend – any guesses? 

•    Many economists are questioning whether this is a “V” or “W” shaped recovery. The question and ultimate answer really based on one’s view whether the low of the stock market we saw in early March was the low and we will continue to rise, or since that low have we recovered but awaiting another fall then recovering again, creating a “W” shaped stock movement. Many companies have seen their stock prices rise, even most banks, as they have been prudent at reducing their costs, but the revenue side of their equation has stymied. How far can this continue until the income side of the ledger increases which must be borne by consumers spending?

•    Is it just me or have we seen our share of famous people dying this year? This month we saw the last of the famous Kennedy brothers, Senator Ted Kennedy die of cancer. The 77 year old Senator from Massachusetts served in the Senate for 4 decades.  He was known as the “standard-bearer for liberalism” in this country, but willing to work with the conservatives and moderates in Congress to get things done.

•    The National Football League (NFL) started pre-season games this month, as some teams answered some of their questions, while others had additional questions raised, as the season starts after Labor Day. Interesting stories included the retirement, un-retirement, retirement and ultimate un-retirement by Brett Favre, signing with the Minnesota Vikings for a mere $10+ million a year. Another historic story was my Philadelphia Eagles signing the recently released Michael Vick and the media circus that has followed. Time will tell how these stories ultimately play themselves out and how they affect the NFL season.

•    The U.S. Treasuries continued their move lower in August, as the 10YR started closed July at 3.52%, climbed to 3.89% on 8/7 and ended the month at a 3.40% yield. While the 2YR ended July at 1.13%, climbed to its high of 1.32% on 8/7 and ended the month at .97%. The yield curve steepened a bit ending with a 2YR/10YR spread at 2.43%.

•    Existing home sales for July were released in early August, showing a 6.5% increase and rising for the 4th straight month. However, some of the shine on those numbers were dulled by the fact that over 1/3rd of the sales were foreclosed properties, which continues to depress prices, but on the other hand inventory is starting to be sold, but the question is what homes are being sold? I think very telling and interesting is the breakdown of home prices year-over-year as shown below, which seems to indicate more foreclosed properties are being sold at lower home values and more FHA loans financing those properties:

o    $0 - $100K        + 38.8%
o    $100K - $250K    +   8.7%
o    $250K - $500K    -    6.2%
o    $500K - $750K    -    8.9%
o    $750K +        -  66.3%
                     (Per National Association of Realtors)

•    The FDIC closed additional banks in August, as Colonial Bank (AL) was closed as was Guaranty Bank (TX), Guaranty becoming the 81st closed bank this year. What makes these closings even more impacting are their involvement in offering warehouse lines of credit to non-bank mortgage companies, which already was depressed by more banks exiting this business and stressing the mortgage industry even further. 

•    Initial weekly jobless claims are still relatively high, but have been falling compared to previous months this year. The unemployment rate still remains high 9.4%. But many are concerned that the overall unemployment number is misleading, as many people have stopped even reporting as they either exhausted their benefits or just cannot find work at all. Jobs are the vital cog to the recovery of this economy.

•    Major League Baseball (MLB) ends its 5th month of their 2009 season with the same teams who led their respective divisions at the end of July still holding their leads with one month left until the playoffs; Yankees, Tigers, Angels, Phillies, Cardinals, and Dodgers. Some have increased their leads like the Yankees and Phillies, while others have made it closer and race within their division like the Dodgers and Tigers, and each league’s Wild Card are still up in the air. 

•    The S&P Case-Schiller Housing 20 City Index June data was released in August, while still in the negative, month-over-month saw a 1.4% rise, the second month in a row.  The year-over-year data showed a 15.45 decline, but better than the 16.4% decline that was expected. The small improvement was somewhat based on the $8,000 tax credit for home purchases as well as only 1/3rd of the home sales were from foreclosed properties, down from the roughly 1/2 of foreclosed properties that were making up the numbers earlier this year. Not all 20 city areas saw the small improvement but a majority has and has led many to believe that housing is starting its slow recovery.

•    FHA loans continue to make-up the majority of residential mortgage loans originated in 2009. This was shaken up a bit this month, as Taylor Bean & Whitaker (TB&W), one of the top FHA originating companies in the U.S. this year was suspended by the FHA for “irresponsible lending” and then later stopped doing business altogether. Was this just a renegade company or the beginning of issues with the FHA and HUD, as government originations have dramatically increased in 2009 from the previous 8-9 years and is their system up to the challenge of monitoring and reporting all relative information timely?

•    President Obama made another interesting move, as he re-appointed Federal Reserve Chairman Ben Bernanke to another term. Many believed that President Obama would go in another direction, but he believed as many other did that Bernanke had done a remarkable job in the face of this financial crisis. “Cash for Clunkers” ended in August, and history will show if this government program was a positive for the economy.  

As the sun sets on yet another summer, and one that we will all probably never forget, there are signs of recovery but also still many unresolved issues. From last year’s concerns over the world-wide financial crisis, the up-coming elections, we have started to turn the corner, though very slowly I may add. There are still plenty of questions out there; will oil prices stabilize, will housing prices recover, can the financial community get its hands around the up-coming foreclosures, will the unemployment rate fall or rise, how much longer will the Fed and China continue to purchase U.S. bonds and MBS, and will the Democrats and Republicans come to some mutual agreement in order to improve the economy and create jobs and overall value? Time will tell, but let’s all do what we can to assist each other through these continuing challenging times and look back on this time in our history as just another bump in the road to country wide and individual prosperity. Thank you for reading my article and Have a Great Day!

Scott is Principal of SBW Advisors, an advisory and consulting firm servicing the mortgage, banking and credit union industries. With over 25 years experience, they can offers services in Secondary Marketing, Warehousing, Broker to Banker transitions, Servicing and Accounting. You can reach Scott via www.SBWAdvisors.com and email atscott@SBWAdvisors.com