Is The Bottom Near?

• ECONOMIC NEWS: The price for crude oil is now nearing $120 a barrel. Several large corporate acquisitions made headlines; Microsoft attempting to buy Yahoo is still on going, Mars (candy bars) and Warren Buffett are acquiring William Wrigley Jr. Co (Juicy Fruit, Wrigley’s) and a little closer to home Safeco is being bought by Liberty Mutual. The most anticipated earnings report this week is from Visa, which IPO’d last quarter. Overall, the markets are up today. Stimulus checks begin going out this week with the hope that they will stimulate the economy. With the housing market still in the dumps and credit card balances growing, the stimulus package will probably not be enough to “save” the country from recession.
• LENDING MARKET: The Federal Reserve meets this week and will lower the Fed Funds rate. Many see this as the last time the rate will be lowered as credit market conditions are showing signs of stabilizing. There are also concerns that continuing to lower the rate will devalue the dollar more and increase inflation. Banks will be most affected by the Fed rate drop, making it easier for the banks to lend money. Life Insurance Companies (and the non-existent CMBS lenders) won’t have much reaction to the lowering Fed Funds rate unless the rates on Treasury Bills move significantly. T-Bill rates have not moved much since last week, most likely due to the upcoming Fed meeting
• FINANCE TERM OF THE WEEK: Debt Service Coverage Ratio (DSCR) The ratio of net income divided by the annual debt payment. It determines the ability to meet and exceed annual debt payments. Typically 1.25 or higher is needed for a loan. (See this article for more information.)