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Stephen Meister of Meister Seelig & Fein breaks down the market’s reaction to the downgrade of the mortgage lender’s senior debt.
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We introduce you to -- mr.
Stephen months stuff he's -- guy on the topic of the real estate market He wrote commercial real estate restructuring revolution He knows what he's talking about and He joins us right now.
-- -- So glad you did.
I say that we're going to get full percent all low on thirty year fixed rate mortgages very very soon and you say.
I say it's not gonna go lower because.
Fannie and Freddie were just downgraded.
And what's happening is all the US backed bonds.
Which backed the mortgage market of course are being downgraded so I don't see the rates going.
Lower really -- got 2.4.
1%.
On the US ten year treasury right now.
This is not the baseline for mortgages you -- about a point and a half C get the 390.
Know.
Look in the short term you're having a muted effect to the downgrade because America is the world's tallest midget.
Right what you is you have the European sovereign debt crisis you have business off globally.
As you have cash sitting on the sidelines -- exact is not going to last.
I predict that that Moody's will join the ranks of Standard and -- -- -- because unless we attack entitlement reform.
We are not solvent as a nation.
Although a second seat not going to bring our audience up to date was on the breaking developments in the last few seconds literally kind of force has father downgraded Fannie and Freddie.
That has not stopped a huge inflow of money into the ten year treasury.
That pushes the price up and the yield all the way down to 2.4.
0%.
Now show me the stock market because that started another round of selling when that Fannie and Freddie news -- Down 300 points it is about to him.
It really was on the verge of going down 300 points believe -- ladies and gentlemen that puts -- back to 111150.
It did did drop 300 very very briefly dated.
It's gonna come because Fannie -- issued -- release is on financial institutions insurance public finance and structured finance sectors they said they would release this this morning and Fannie and Freddie was the first the government related securities.
This is gonna get worse unfortunately before it even shoals -- I think that look our housing sector hat has got to come out of this through.
Up people who can make 20% down payments through the cash buyers.
I think we've got to I've been saying this for two years Stuart you know this very well the market clearing forces have to work.
I do think they'll be new the fact that -- said to the ground great initially but ultimately you're gonna see a fifty to 75 basis point rise in treasuries that will translate eventually.
It bit that will translate into mortgage rate rises and that will put further pressure.
All right on the announces that's my view of Obama's second -- got a report to the audience that only four of the 500.
Stalks in the -- -- by 500 only four of them are off that means 496.
Of them.
On down.
I'm looking at the board on the do now 29 of the thirty down -- -- -- down.
265270.
Points -- for the Dow Jones Industrial Average quick question -- you Steve wants to still with us.
Fannie and Freddie -- downgraded moments ago by standard and pause that down of a 13%.
I believe.
Now why does that match -- to the stock market I don't get that -- well.
I would've thought I was going to say.
Until it happens seconds before I satin sheet that -- imports weren't going to downgrade Fannie Freddie I don't see it doesn't surprise but it's obviously.
Not good.
We started -- that's linked to the US government that Fannie and -- linked to the US government events are looking at is like -- -- good.
We -- one.
More even if you something interest things to what you're gonna see Bernanke and other banking regulators.
Doing what they normally don't do and they're gonna say that financial institutions can hold Fannie and Freddie debt.
Without capital reserves are quite second I want to summarize see a so we've got a ripple effect do you think we are rippling effect we've downgraded the US treasury is now we've downgrading Fannie and Freddie and you think next step is downgrading towns and cities.
Look at what ever is connected to US government and then it's actors is well it could be the insurers that -- you've got some news on this fullest -- police say here's the point the point is they downgrade Fannie and Freddie about the big picture is they really weren't lot worth much anyway but it just chatting with Jason Weisberg and He was saying.
The whole point is that S&P is now looking at other US entities and that really brings a negative town to the market that being said we're down 300 points.
And we've broken through Friday support levels and our lows of the level which is 1158.
On Friday nauert 1161 and the S&P 500 are not.
Only down 300 points for just tough to 300 point drop and even if I'm not mistaken.
Fannie Mae just asked for another five billion dollars -- One billion and just last week that was enough to -- -- get out my and they're gonna get that money they're continuing to hemorrhage cash.
And now of course this security's been downgraded the last thing I'd like to say the notion that this is a key part of downgrade is -- This is the downgrade because.
-- -- politicians specifically the Democrats wouldn't taught Social Security reform and without it we.
