Dow, Up 15%, Has Best Quarter Since ‘98

The stock market continued to confound the skeptics in the third quarter, ending near its highs for the year, with many of the riskiest stocks leading the charge.

The rally that began in early spring gained steam over the summer as the market had its biggest quarterly gain since the fourth quarter of 1998. In many cases, the market’s leaders were stocks that investors had left for dead earlier in the year. One winner was MGM Mirage, up 88%, and another was Hartford Financial Services Group Inc., up 123%. American International Group Inc. nearly doubled, even though many long-term investors believe its shares are essentially worthless. In the bond market, too, the rule of thumb was low credit quality equals high returns.

The Dow Jones Industrial Average rose 1,265.28 points, or 15% to 9712.28, its best third quarter since 1939. Even after a 0.3% decline on the last day of the quarter, the Dow is up 48% from its March 9 low and up 11% this year, although still down 31% from its October 2007 record. The 28% gain over the past six months was the best performance since the two quarters ended in March 1987.

Wall Street Wizardry Reworks Mortgages

Repackaged Investments Are Good for Bankers and Ratings Firms, but the Regulators Scoff

Source:  Wall Street Journal – BY LESLIE SCISM AND RANDALL SMITH

A new wave of financial alchemy is emerging on Wall Street as banks and insurers seek to make soured securities look better. Regulators are pushing back, saying the transactions don’t have enough substance and stand to benefit bankers and ratings firms.

The deals come as Wall Street firms, buoyed by surging markets, are seeking to profit from the unwinding of the complicated securities that helped fuel the credit crisis. Regulators, meanwhile, are struggling to prevent a recurrence of the crisis.

The popular deals are known as “re-remic,” which stands for resecuritization of real-estate mortgage investment conduits. The way it works …

Tax Credit Extension Draws Increasing Attention

Source:  National Association of Realtors

Increasing media coverage has drawn attention to the reality that the $8000 first-time homebuyer tax credit will expire November 30, but that prospective purchasers need to act quickly to assure that they will qualify for the credit. To receive the credit, purchasers must actually close the transaction before December 1.

Ways and Means Chairman Rangel (D-NY) has introduced legislation that would extend the benefit of the credit through 2010, but has limited eligibility for that extension to a limited group of potential purchasers. His bill (H.R. 3590) would make the credit available to individuals who have served in the military, Foreign Service or in the US intelligence community outside the US for 90 days or more during 2009. They must also be first-time purchasers.

NAR has sent a letter of support to the Chairman and has also urged him to include an extension of the first-time homebuyer credit when the full House considers that legislation. The House will likely require that any extension of the credit be “paid for.” Paying for an extension of the current credit is said to “cost” just less than $1 Billion per month of extension. NAR is working aggressively through its grassroots and also at the staff level to convince Congress to extend current law.

In the Senate, Senator Ben Cardin (D-MD) has sponsored S. 1678. It offers a straight extension of the credit for 6 months. Majority Leader Harry Reid (D-NV) is a cosponsor, as is Senator Johnny Isakson (R-GA), an early advocate for a tax credit. The Senate does not yet have a strategy for moving that bill, as all revenue measures must originate in the House.