We knew it was going to be nasty and the release of this morning’s unemployment report is taking the Dow lower by 241 points to 8,134 a little over an hour into the trading session. The unemployment rate now stands at 6.7% but the fact that 533,000 jobs were lost in November is alarming. Another report this morning showed that delinquencies in the home loan market are also on the rise.
The mortgage snafu started two years ago when adjustable-rate loans starting resetting to higher interest rates for home owners who never should have been home owners. Now with unemployment skyrocketing, the latest wave of delinquencies is coming from the surge in people losing their jobs.
Job losses are also having an impact in rising delinquency rates for traditional 30-year fixed rate loans made to borrowers with strong credit. To sum it all up, a record one in 10 American homeowners with a mortgage are at least a month behind on their payments. Wow.
And I haven’t even mentioned my thoughts on the commercial mortgage market. That is the next crisis that the market may have to fight. We’ve all seen store closing on the rise and there will be many, many more.
A number of our trades continue to do well and the Exxon Mobil (XOM, $73.32, down $2.95) December 75 puts (XOMXO, $4.50, up $1.25) I mentioned last night at $3.25 could be our next winner. The puts opened at $3.25 and are up 40% right out of the gate. I’m not too keen on holding oil puts over a weekend because you never know what kind of news could come out from OPEC or other world events. However, you could close half the position and let the rest ride with the type of return we have already been given.
The CEO’s of the auto industry are about to speak…