Bernanke: Markets Still Far From Normal

Today Bernanke said that the financial markets are still “far from normal” and that the Fed is ready to lend money to banks as needed to help them maintain their liquidity. Bank of America [[boa]], the second largest US bank, might want to give Bernanke a call as it said that it estimates losses of over 2.5% in its $118 billion home-linked loan portfolio. Putting it in dollar amounts it would be a loss of over $2.95 billion - a paltry sum compared to some of the other writedowns we’ve seen lately, but nonetheless worse than they had previously expected.

Adding to the overall market gloom is the report that the U.S. median price for a single-family home fell 7.7% in Q1. The biggest decline took place in Sacramento, California, with a 29% fall in home prices. And as expected, homes in neighborhoods with a large amount of subprime loans have taken the worst price hit as reposessed homes have been sold at fire-sale auctions which have pushed down the prices of other houses in the neighborhood.

During this time of financial uncertainty, you’d think consumers would be shopping for bargains, and indeed they have. Wal-Mart [[wmt]] reported a 7% increase in profit to $3.02 billion, or 76 cents a share, from $2.83 billion, or 68 cents per share. This increase was due to a 10% increase in sales, and a 22% increase in international sales. This would seem to be in line with what Bank of America said that spending of bare necessities had increased overall spending on their credit card portfolio and we can just imagine that Wal-Mart, Visa [[v]], and Mastercard [[ma]] are benefiting from this. Despite this, Wal-Mart lowered its expectations for the next quarter leaving investors wondering just how stretched consumers really are if even Wal-Mart, one of the cheapest retailers, is expecting slower growth.

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Comment by Corren

2008-05-13 16:45:46

At least he’s not playing bridge!

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Comment by Qurious

2008-05-13 18:07:29

Thought warren buffett said something about the crisis being over

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