September 26, 2012 Comments

Markets were a bit weak again today. Toll Brothers was down 3.8% to $34.16 and its recent high was just over $37. New house prices continue to rise in the U.S. but the number of new home sales in August failed to rise as expected from the July number. Overall the housing market in the U.S. continues to recover. But as indicated in our updated report of late August I thought that Toll Brothers was starting to look expensive since it is already pricing in a lot of growth. So I have trimmed my position in Toll Brothers as noted in several posts in recent weeks.

Research in motion was up 5.8% today but has been very volatile. I continue to think it might be a good speculative pick but I have not so far added to my very small position in this company. It releases earnings after the close tomorrow, Thursday.

New figures are out for Canadian credit card delinquencies and the figures continue to show improvement. Which indicates that either 1. More people havve the earnings to pay their credit cards on time or 2. More people can borrow from other sources to pay their credit cards on time (or some combination of the two). Anyhow, it is a small positive indicator.

http://www.cba.ca/contents/files/statistics/stat_creditcarddelinquency_en.pdf

Also just released today are the latest Canadian mortgage delinquency statistics. One again the 90-day delinquency figures seem unbelievably low at just 0.33% or just 1 in 300 mortgages. The fact that the number is low and getting better is a positive sign. But I frankly don’t believe this number is really accurate. I suspect what happens is the banks don’t like to report a 90 day delinquency. So by day 60 they make some deal with the homeowner to let a couple missed payments get added to the mortgage principal if he makes one payment and this probably starts the 90 day clock over. Or Canadians simply have great access to lines of credit and the unemployed make the mortgage that way. I just don’t believe that delinquencies can be this low. I understood they were at least 10 times higher than that in the U.S.

One reason delinquencies are low however is that house prices kept rising. In a rising market a homeowner that gets in trouble with job loss can just sell the house. I wonder what will happen in a flat to declining house price market? I just don’t see delinquencies staying quite this low. At the same time there is certainly no sign of any real trouble for the banks and after all these mortgages are insured (mostly) by CMHC, so the banks will tend to get paid come what may.