Regarding subprime mortgages that we discussed last week — along with further clarification — our contributor writes back…
“Your response on the non-QM issue is largely accurate. However, the data do not support your conclusions. The most at-risk loans are the lower principal loans, i.e., FHA loans. Those are the loans most associated with those most struggling economically in this crazy lockdown.
“There will, of course, be some business owners who will likely default as a result of the economic suicide we’ve undertaken. That will affect the non-QM market, but my bet is that it will largely be the FHA loans that will have the biggest impact.”
Glad we’ve at least partially satisfied our contributor, and to be fair, our only conclusion was the sliver of non-QM mortgages is just one more rift in an already fragile economy.
We’ll feature your opinions on voting in 2020 come Friday.
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Your Rundown for Wednesday, Oct. 14, 2020…
Debt Domino On-Edge…
One copper-rich African nation, Zambia, is at risk of defaulting on its debts. “It has asked bondholders for breathing space so that it can put a restructuring plan in place,” according to The Guardian.
If Zambia isn’t granted the six-month reprieve it’s asking for, the country will become the first to default since the pandemic’s start.
“All the ingredients were in place for trouble,” The Guardian says. “A lot of countries, Zambia included, had behaved recklessly in the good times… [going] into the crisis with levels of debt that were already uncomfortably high.”
Although the World Bank and the IMF negotiated “a suspension of debt payments for 74 countries for the rest of 2020… the debts still have to be repaid eventually and, in any case, the deal was incomplete.
“Some major countries were involved but China – a big creditor in much of sub-Saharan Africa – was not.”
It’s important to note, poor countries simply can’t open the central bank spigot. While irrational money printing might “work” for richer nations, Zambia and others are at serious risk of hyperinflation.
“For a country such as Zambia,” The Guardian concludes, “which has debts collateralized against its copper mines, the outlook is bleak.”
So China — one of the largest copper importers in the world — isn’t willing to cut Zambia a break. Interesting…
Market Rundown for Wednesday, Oct. 14, 2020
S&P 500 futures are up 15 points to 3,526.
Oil’s rallied 2.16% to $41.07 for a barrel of WTI.
Gold is up $18.50 per ounce to $1,913.10.
Bitcoin’s up $103 to $11,533.25.
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We’ll have more to say Friday; check back then.
For the Rundown,