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by Peter Switzer

These are weird times on markets and economies and the weirdness even got weirder over the weekend as the Dow Jones fell and the Nasdaq went up strongly. Even the broader S&P 500 went up but this oddity of Dow down and everything up underlines a new spook factor that has been sent to unnerve investors just as a nice rally looks likely.

This year we have had Euro-debt concerns, Euro-bank worries, concerns about China falling in a hole, double-dip drama, currency wars and now a new mortgage mess in the US.

One US commentator, Dick Bove, financial strategist at Rochdale Securities, says US banks could face $80 billion worth of losses because of this issue. The allegations are that banks were involved in illegal practices in packaging mortgages into bonds, which were on-sold to investors.

The concerns were generated by 50 state attorney generals and could end up as a massive lawsuit. Some banks have halted foreclosures as a consequence and the uncertainty of all of this will not help markets.

This did not help banks on Friday and explains why the Dow lost close to 31.79 points to end at 11,062.78.

Mortgage madness

Not surprisingly, the banks had a shocker on Wall Street with Bank of America down 9.1 per cent but others had a bad day at the office as well. As the biggest mortgage bank in the US, Bank of America might have to repurchase $74 billion worth of mortgages!

And while this mortgage mess sounds potentially worrying, I was surprised to see the VIX or fear index fall below 20, which is a sign that fear is abating. This coincides with other analysts who argue this mortgage mess worry again, like many economic concerns this year, is exaggerated.

Clearly, this mortgage madness will be my big watch for the week.

Company reports and economic reports

Also this week there are a slew of big US company reports. Part of the reason why the Nasdaq went up over 33 points, or 1.4 per cent, to 2468.77 was because Google reported better than expected. This contrasts with GE, which was slightly disappointing.

In economic news retails sales and business inventories were better than expected.

Ahead this week, there should be plenty of thrills and spills with lots of economic data and company earnings’ reports.

Locally, there isn’t much data to excite the media nor the market but the RBA minutes on Tuesday could get some interest rate speculation talk happening.

See more from Peter Switzer.

For advice you can trust, contact Switzer Financial Services.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Monday, October 18, 2010