Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.

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March 1, 2010 – Get Set for a Double-Dip in Housing

The Housing Slump renews, hurt by higher building costs due to commodity speculation.
Fannie Mae taps its unlimited line with the US Treasury for another $15.3 billion. Some troubling
FDIC statistics and two more banks failed on Bank Failure Friday.
The Housing Slump Renews - Sales of new homes plunged 11.2% in January to a record low
309,000 units on an annualized basis. Sales of existing homes fell 7.2% to a seasonally adjusted
annual rate of 5.05 million units, the weakest reading since June 2009.
I think that prospective buyers who had hoped to take advantage of the first time $8,000 tax credit, and
move-up buyers seeking the $6,500 tax credit are concerned that they cannot get to Contract by the
end of April if they are applying for a mortgage now. Even if they do, they have to close by the end of
June. If not, they may lose their down payment and do not get the tax credit? If it all goes well, it
still takes six months to get the tax check from the IRS.
Commodity Speculation is Hurting the Homebuilders - Because Bernanke insists on keeping the
federal funds rate at zero percent, speculation in copper and lumber futures is causing problems for
homebuilders and hence the US economy. How can a builder compete with cheaper depressed short
sales and foreclosures in existing homes with higher costs of building materials?

Chart Courtesy of Thomson / Reuters

Since the end of 2008 to the high in January 2010 copper prices are up 182%. Since January 2009 and
February 2010 Lumber Futures are up 112%.

Chart Courtesy of Thomson / Reuters

Bernanke says there are no signs of inflation, so he continues to ignore reality, and that zero rate policy
could actually cause the Double-Dip, or worse.
Fannie Mae Takes a Hit - Fannie Mae will get another $15.3 billion of tax payer money bringing their
total bailout to $75 billion. The total for Fannie and Freddie is now $126 billion, and the total line to the
US Treasury is now up to $415.3 billion and counting through 2012.
FDIC Troubling Statistics - The FDIC Quarterly Banking Profile suggests that "The Great Credit
Crunch" that began with the peak in the housing stocks in mid-2005 will continue right through the new
decade. Community banks peaked in December 2006 and the regional banks peaked in February
2007. Stress continues to build in the banking system as the number of bank failures rise.
• The number of banks on the FDIC List of Problem Banks is up 824% since the end of 2007 to
702.
• The assets among the Problem Banks is up 171% to $402.8 billion
th
• The warnings began when Quarterly Net Income in the banking system crashed in the 4
quarter of 2007, which was the final warning that Recession loomed.
• Nonfarm, non-residential real estate loans have not yet begun to deteriorate as there appears to
be a balance for loans of owner-occupied properties collateralized by business revenue (sales
of goods and services) and business expenses (payroll, supplies and debt services). This is a
fragile balance and a reason for the lack of job creation.
• If you assume Derivatives was a cause of "The Great Credit Crunch" consider this - Since the
end of 2007 the Notional Amount of Derivative Contracts produced by our nation's Banks is up
$48.8 trillion, up 29.6% to $213.6 trillion. I thought we were supposed to reduce derivative
exposures.
Bank Failure Friday
The FDIC closed two community banks on Friday with one publicly-traded Rainier Pacific Bank
(RPFG), which is on the ValuEngine List of Problem Banks.
The 22 bank failures so far in 2010 has cost the Deposit Insurance Fund $4.4 billion bringing the DIF
Deficit to $25.3 billion. The FDIC has $46 billion in prepaid DIF fees for 2010 through 2012 that are
earmarked for the DIF when scheduled.

Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on our
products and services visit www.ValuEngine.com
That’s today’s Four in Four. Have a great day.
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Richard Suttmeier
Chief Market Strategist
www.ValuEngine.com
(800) 381-5576
As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I
have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as
well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the
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issues of my research.

“I Hold No Positions in the Stocks I Cover.”