The Falling Dollar Is Saving the Mortgage Market

Attention Business Editors:
How the Falling Dollar Is Saving the Mortgage Market <<>> PALM DESERT, Calif., Nov. 27 /CNW/ -- Plunging interest rates helped by alower U.S. dollar are about to rescue both the U.S. housing and stock markets,says US currency specialist Mike McDonald. Not next year, but immediately. McDonald follows the Dollar for a living and has written two books oninvesting: A Strategic Guide to the Coming Roller-Coaster Market (June 2000),and Predict market Swings with Technical Analysis (2002, Wiley & Sons). He iscurrently President of Dollar Crisis and Recovery Partners, LP. McDonald notes that since June, one year U.S. Treasury bill rates havefallen from 5% to an astonishingly low 3%, while 10-year Treasury rates (towhich 30-year mortgages are indexed) have declined from 5.2% to 4%, with mostof the decline happening in the last month. McDonald's thesis is that the recent plunge in interest rates has, almostovernight, changed everything. "The doomsday scenario painted by Wall Streetover subprime mortgages and housing is suddenly way overblown." <<>> The Fed controls short-term interest rates; longer-term rates are at themercy of foreign investors who are the primary buyers of U.S. Treasury bondsand bills. Japan and China combined own close to 60% of the US Treasury debt. "The lower U.S. Dollar finally brought in foreign investors looking forbargains," says Mr. McDonald. "The worry that the Dollar could free-fall doesnot seem to worry foreign investors today. I agree. In fact I'm expecting ahigher dollar and lower rates. Right now I believe the dollar is poised for asignificant long term rally." "With much lower interest rates, many people with variable mortgages willfind they can afford the new re-set payments after all. Foreclosures shoulddrop dramatically, the housing glut should level off, and housing prices willthen rise. Lower rates should also increase the number of qualified homebuyersby as much as 40%," says McDonald. McDonald concludes, "It's not as bad as they say. Many companies -- suchas HSBC, GM, Merrill Lynch, and Citigroup -- used default assumptions based onhigher interest rates to calculate cash flow yields and wrote off billions inmortgage-backed CDO assets. This could be way off the mark. These CDOs nowlook like bargains to me, and cash flows from CDOs should come in much higherthan expected." Go to http://www.glengarryadvisors.com/ for the complete article. <<>> For further information: Erin Gilhuly of Dollar Crisis and Recovery Partners, +1-760-641-0739 Web Site: http://www.glengarryadvisors.com http://www.gm.com