Why Low Mortgage Rates Haven't Helped

Ah, the Halcyon days gone by!

Interest rates drop, mortgage activity picks up and home sales get a helping hand.

Those days are over, my friends.

Do you disagree?

Perhaps you spent the last eight months in a housing-bull induced trance. Steady drum beats can be hypnotic. Here is theirs: Massive investor buying, steep price drops of 30%; steep price drops of 40%, steep price drops of 50%; affordability index at all time high. Housing recovery must be just around the corner, hear the drums, just around the corner.

August Ends, Appropriately, With a Giant Raspberry Sound

Well, folks, that was August. Good riddance. From a US credit-rating downgrade to an horrific hurricane, there wasn't much good about August.

The last day of the month ended in appropriately irritating fashion, with a big early stock-market rally losing air and sputtering around the room like an untied balloon at the world's saddest children's party.

The window dressers managed to put everything back into the green at the last moment, but it was touch and go there for a while.

The Dow ended the day up 54 points at 11614, managing to salvage a bit of dignity from a 4% decline for the month, its worst since May 2010 . But hey, the Dow finished the month positive for the year, CNBC reminded us 11614 times.

India Steps Up Rare Earth Metals Search

1:24 (Dow Jones) India planning to boost its production of rare earth metals, according to Mineweb. The mining website reports that a government strategy paper is "in the works" to give impetus to exploration and discovery of rare earth elements, while state-run Indian Rare Earths has received environmental clearance to begin production.

India currently imports the metals from China but has been affected by its neighbor's export cuts. Several Western companies, including Denver's Molycorp (MCP), Canada's Avalon Rare Metals (AVL) and Australia's Lynas (LYSDY), are also racing to find stable sources closer to home. MCP down 1.2%, AVL up 2%.

Bank Of America Mimics Citi For High-Frequency Traders

-- Bank of America share price below $10 has resulted in doubling of share turnover
-- Investment by Berkshire Hathaway among factors that made shares more attractive target for algo traders
-- Bank of America seeing trading volume similar to Citigroup's before its reverse split in May

Chile Peso Ends At One-Month High

Copper prices and Chilean Peso riding in tandem :

SANTIAGO  (Dow Jones)--The Chilean peso gained ground against the dollar Wednesday, ending at a one-month high, as international copper prices rose and institutional investors sold dollars.

The peso ended at  CLP460.70  to the dollar, versus Tuesday's close of  CLP464.50 , after trading in a range of  CLP460.70 to CLP464.50 .

As  Chile  is the world's premier copper producer, accounting for a third of global supply, the peso often takes trading cues from international copper prices.

Swiss Franc Is Rallying Hard, Too

Correlation broken!

The Swiss franc, a popular safe haven lately, is rising today even as stocks and other risky assets rise, too. What gives?

For one thing, it's a sign of lingering anxiety about  Europe . And apparently the Swiss government is not doing quite enough to curb the franc's strength.

Money Flow Table For Major U.S. Indexes and Stocks

Money Flow - Uptick/Downtick Trading Dollar Volume Aug 31, 2011 12:06 PM

Subprime Mortgage-Backed Security to Get Higher Credit Rating From S&P than US

We've already seen how the bond market doesn't really care at all about the  S&P  500's downgrade of the US, and today we get an example of why maybe it shouldn't care:  S&P  is going to give an MBS of subprime mortgages a AAA rating.

You probably recall that AAA-rated subprime MBS nearly fired the entire global economy into the sun a few years back. Well, they're still happening! And meanwhile the US is rated AA+, suggesting you are marginally less likely to get your money back from a US Treasury bond than from one of these subprime MBS. Does that make sense to you?

We've got a call in to  S&P  and will update if and when we hear back from them. The group inside  S&P  that rates sovereign debt is very different, and uses different criteria, than the group that rates MBS. Ultimately the ratings have the same meaning, however.

 Al Yoon  of Dow Jones Newswires reports:
Consumer lender Springleaf Financial on Wednesday will sell  $242 million  in residential mortgage-backed securities backed by subprime loans originated in past years, according to an investor.

The offered subprime bonds are expected to yield 4% when priced on Wednesday morning, according to a note sent to investors from co-lead underwriter  RBS Securities . The bonds are protected by a 51.15% credit enhancement, and rated AAA by  Standard & Poor's , said the RBS note.

The bond is one of several that issuers--including Springleaf under its previous name, American General Finance--have cobbled together with older delinquent and performing loans since 2008. The proceeds are typically used as a financing source.

What Does Canada's Shrinking GDP Say About U.S.?

Grim news just arrived from north of the border that is telling us something gloomy about our economic health.

New data show Canada's economy unexpectedly went into reverse gear in the second quarter of the year, declining 0.1%. That's an annualized drop of 0.4%, down from growth of 3.6% in the first quarter.

It matters because  Canada  is our principal trading partner. Some politicians hoped that international trade would help the U.S. gets its economic mojo back.

But when we look inside the Canadian data that's just where the weakness is. The big driver in  Canada's  weakness was a huge drop in exports, down 2.1%. At least part of the drop can be explained by a fall in energy sales due to wildfires; and lack of components caused by the earthquake in  Japan .

What it also points to is a slowing U.S. economy.

SEC Set To Seek Comment On Mutual Funds' Derivaties Use

 What a joke. The SEC trying to restrict leverage.

WASHINGTON  (Dow Jones)-- The Securities and Exchange Commission  is set to vote Wednesday to issue a release asking the public a series of questions about the use of derivatives by mutual funds and other investment companies.

A so-called "concept release" is often used by the  SEC  as a first step in assessing the need for further regulation.

Wednesday's release would pose questions on a wide range of issues raised by funds' derivatives use, including how to measure the amount of leverage a fund incurs when it invests in a derivative and whether the  SEC  should issue guidance on how funds should value derivatives in their portfolios. The release would follow a broad review of funds' derivative use that the  SEC started in  March 2010.

Toronto Stocks Open Higher As Bank Earnings Trump Poor GDP

--Strong earnings from CIBC spur financial sector higher
--Market also cheered by CIBC's dividend hike
--Poor GDP data an offset, but factors dragging down the economy in second quarter seen as temporary

BASE METALS: Copper Climbs On Chinese Buying, Supply Worries

--Comex December copper up  5.25 cents , or 1.3%, at  $4.1940  a pound
--Signs that Chinese copper demand is perking up boost copper prices
--Concerns about supply fan buying amid quiet trade

August Chicago PMI Better Than Expected

The August Chicago PMI was just released, and it came in much better than expected.
The reading was 56.5, versus estimates of 53.3. Prior print was 58.8.

Rising University Tuition Fee Burden Squeezing Ontario Families

OTTAWA ,  Aug. 31, 2011  /CNW/ -  Ontario's  system of financing higher education is becoming less equitable and more regressive for families, says a study released today by the  Canadian Centre for Policy Alternatives  (CCPA).

According to the study, if a middle-income  Ontario  family dedicated every cent of their after-tax earnings towards the cost of their child's university tuition fees starting on  September 1, 2011 , they would have to work until  March 14, 2012  (195 days) before they paid for a four-year degree.

In 1990, it would have taken the same family only until  November 27 th, 1990 (87 days). For those students who gain entry into professional programs like medicine or law, it may take a middle-income family over a year of earnings to pay just tuition fees.

" Ontario  families are being forced to play priority roulette," says  Erika Shaker , director of the  CCPA Education Project . "The trifecta of stagnant incomes, household debt, and rising tuition fees means that families are having to make difficult choices around the kitchen table about what to prioritize: meeting basic expenses, saving for retirement, paying down their debt or sending their kids to university. This hits lower- and middle-income families especially hard."

Canada GDP Contraction Raises Recession Risk -TD

9:35 (Dow Jones) Risk of another recession in Canada has risen following weak 2Q GDP report, but this will largely depend on how US economy unfolds, says Mazen Issa, Canada macro strategist at TD Securities. He predicts that if there's a slump, it will be mild and short-lived and unlikely to prompt the  Bank of Canada  to cut rates, noting that the benchmark overnight rate level of 1% is still very stimulative. "Even if you're in a recession, that should provide enough stimulus to offset the drag on growth," he says in an interview. Issa believes that the central bank will only cut rates if there's "some sort of seizure in the credit markets." (nirmala.menon@dowjones.com)

Stocks Flash "Get Ready To Buy" Signals

9:21 (Dow Jones) Some "trend quality" indicators have produced longer-term " get ready to buy" signals, according to  Miller Tabak  chief technical market analyst  Phil Roth . He said the percentage of  NYSE  stocks above their 200-day moving average has climbed to 23% from a oversold level of 7% on  Aug. 8 . Also, the  NYSE  new high-new low index is at 13%, climbing back above a key 10% threshold after falling to 2% earlier in the month. "The 'get ready to buy' signals become 'buy' signals if after a rally and a correction, the indicators hold above their previous lows and the market starts up again," Roth said. DJIA futures up 121. (tomi.kilgore@dowjones.com)

Weak Canadian GDP May Add To Market Volatility

From Dow Jones' Market Talk:

9:13 (Dow Jones) Disappointing Canadian GDP figures will likely only add to recent stock-market volatility by reinforcing investor concerns that economic growth in  Canada  and elsewhere in the developed world is slowing, signalling less demand for  Canada's  commodities and other exports. Canadian economy shrank unexpectedly in 2Q, with annualized GDP down 0.4%, the first decline in two years. That said, the TMX main index will likely gain some support today from CIBC's (CM) strong 3Q results and dividend increase, the first by the bank in four years. (ben.dummett@dowjones.com)

CEO Pay Exceeds Taxes at 25 Companies, Study Finds

WASHINGTON  (AFP)--Twenty-five major U.S. corporations paid more to their chief executives than to federal tax collectors in 2010, with most of the companies receiving tax refunds, a liberal-leaning think tank said Wednesday.

The study by the  Institute for Policy Studies  comes ahead of another expected round of fierce partisan bickering over whether the debt-laden U.S. should raise taxes on the wealthy and close loopholes to boost revenues.

The 25 CEOs -- many from well-known companies such as  General Electric Co.  ( GE),  Verizon Communications Inc.  (VZ),  Boeing Co.  (BA) and  eBay Inc.  ( EBAY ) -- were among the 100 highest-paid chief executives in the country, with 2010 pay averaging  $16.7 million , the report said.

US Stocks Primed For Higher Open To Close Out Tough August; DJIA Rises 98 Premarket

Could this be just an "end-of-month" performance gaming? S&P500 at 1217, but don't forget the bigger picture where the month's high was 1307. Roughly a 7.4% decline in one month.

--Stocks futures point to a fourth-straight gain
-- Europe markets broadly higher, Asian bourses also gain
--ADP employment survey shows 91,000 August increase in private-sector employment
-- Chicago -area manufacturing data still ahead at  9:45 a.m. ET

European Equity Index Technicals: European Rally Faltering

Intraday FTSE 100: Short-term bulls will look to extend the rally to meet the 5333.5 target - the minimum upside requirement. Tuesday's gains left an upside gap floor at 5172.0, and while Tuesday's low at 5199.0 holds, the near-term wave structure remains positive. Reaching 5333.5 would then create room for more gains to the mid-August reaction high at 5385.0. Only a break below the distant 5058.0 projected support level would concern bulls.

Taiwan Hospitals Fined Over HIV Organ Transplants

TAIPEI  (AFP)--Two prestigious  Taiwan  hospitals were fined  NT$150,000  ($5,170)  each for negligence which led to five patients receiving organs from an HIV- positive donor, authorities said Wednesday.

The National Taiwan University Hospital  and  National Cheng Kung University Hospital  would also face criminal charges and additional fines if their patients contract HIV from the transplants, the health department said.

The family of a 38-year-old man, surnamed Chiu, decided to donate his organs after he fell to his death last week, unaware that he was an HIV carrier.

Medical technicians performing standard blood tests found Chiu was HIV positive before his liver, lungs and kidneys were harvested.

However, the message was wrongly relayed and doctors were given the green light to carry out the operations.
Health officials have called the cases "critical medical negligence," and said random inspections would be carried out at the hospitals.

  (END) Dow Jones Newswires
   08-31-11   0028ET

September is the cruelest month

By Mark Hulbert, MarketWatch

CHAPEL HILL, N.C.  (MarketWatch) -- The stock market definitely has its work cut out for it in September.

The month's historical record is nothing short of dismal, and there doesn't appear to be any easy way to wriggle out from underneath the sheer force of that record.

Since 1896, for example, when the Dow Jones Industrial Average (DJI) was created, the Dow has lost an average of 1.07% in September. The average gain for all other months is 0.71%. That spread of 1.78 percentage points is statistically significant at the 95% confidence level that statisticians often use to determine if a pattern is most likely genuine.

Fed's Bullard: Another Round of Quantitative Easing "One Option"

From Dow Jones Newswires: 

TOKYO  (Dow Jones)-- Federal Reserve Bank of St. Louis  President  James Bullard  said that another round of quantitative easing is "one option," the Asahi Shimbun reported in its Wednesday morning edition.

But Bullard, who does not have a vote on the Federal Open Market Committee this year, stressed in an interview with the paper the importance of examining data to see which direction the U.S. economy is moving in the second half of 2011.

He also said that any further signs of inflation could be problematic.

"Before we would take action, we would want to verify whether inflation has eased," Bullard said, noting he expects the U.S. economy to grow 2.5% in the second half.

Poland Central Banker: Euro Bonds Look More Likely

Full article after the jump.

Bank Of America Faces Fresh Mortgage Suit

Here's a word cloud of the article, full article after the jump.

From Dow Jones Newswires:

Bank of America Corp.'s  (BAC) legal woes deepened Tuesday, as a big bank filed suit over soured home-loan bonds and a flurry of investors said they might object to a high-profile mortgage-bond settlement.

(This story and related background material will be available on  The Wall Street Journal  website, WSJ.com.)

The news sent  Bank of America  shares down 3% on a day when most financial stocks were only modestly lower. The drop ended a relief rally that took root last week, after billionaire investor  Warren Buffett's  company took a  $5 billion  stake in the bank.

The lawsuit represents the latest blow for  Bank of America , which has been pummeled by problems related to its 2008 acquisition of  Countrywide Financial Corp.  The deal left the  Charlotte, N.C. , lender saddled with hundreds of thousands of delinquent borrowers and exposed it to scores of requests from angry investors that it repurchase poorly performing mortgages that were packaged into securities.

S&P/ASX 200 Offshore Leads Mixed; SPI Down 0.3%

 Word cloud for this article is found after the jump.

 

Major Stock Market Indexes (8/30/11)