How the Falling Dollar is Saving the Mortgage Market

How the Falling Dollar is Saving the Mortgage Market

November 28, 2007

Currency Specialist Predicts Immediate Housing & Stock
Market Rebound

    PALM DESERT, Calif., Nov. 28 /Xinhua-PRNewswire/ -- 

    Plunging interest rates helped by a lower U.S. dollar
are about to rescue both the U.S. housing and stock
markets, says US currency specialist Mike McDonald. Not
next year, but immediately.

    McDonald follows the Dollar for a living and has
written two books on investing: A Strategic Guide to the
Coming Roller-Coaster Market (June 2000), and Predict
market Swings with Technical Analysis (2002, Wiley &
Sons). He is currently President of Dollar Crisis and
Recovery Partners, LP.

    McDonald notes that since June, one year U.S. Treasury
bill rates have fallen from 5% to an astonishingly low 3%,
while 10-year Treasury rates (to which 30-year mortgages
are indexed) have declined from 5.2% to 4%, with most of
the decline happening in the last month. 

    McDonald's thesis is that the recent plunge in interest
rates has, almost overnight, changed everything. "The
doomsday scenario painted by Wall Street over subprime
mortgages and housing is suddenly way overblown." 

    WHY IS THIS HAPPENING?

    The Fed controls short-term interest rates; longer-term
rates are at the mercy of foreign investors who are the
primary buyers of U.S. Treasury bonds and bills. Japan and
China combined own close to 60% of the US Treasury debt. 

    "The lower U.S. Dollar finally brought in foreign
investors looking for bargains," says Mr. McDonald.
"The worry that the Dollar could free-fall does not
seem to worry foreign investors today. I agree. In fact I'm
expecting a higher dollar and lower rates. Right now I
believe the dollar is poised for a significant long term
rally." 

    "With much lower interest rates, many people with
variable mortgages will find they can afford the new re-set
payments after all. Foreclosures should drop dramatically,
the housing glut should level off, and housing prices will
then rise. Lower rates should also increase the number of
qualified homebuyers by as much as 40%," says
McDonald. 

    McDonald concludes, "It's not as bad as they say.
Many companies -- such as HSBC, GM, Merrill Lynch, and
Citigroup -- used default assumptions based on higher
interest rates to calculate cash flow yields and wrote off
billions in mortgage-backed CDO assets. This could be way
off the mark. These CDOs now look like bargains to me, and
cash flows from CDOs should come in much higher than
expected."

    Go to http://www.glengarryadvisors.com/ for the
complete article.

    Additional hyperlinks:
    http://www.gm.com/
    http://www.hsbcusa.com
    http://www.ml.com
    http://www.citigroup.com


    For more information, please contact:

     Erin Gilhuly of Dollar Crisis and Recovery Partners
     Tel: [phone]