What's Important in the Financial World (7/13/2012)

Thirty-year mortgage rates fell to a low that has not been seen since numbers were first recorded in the 1980s. The rate reached 3.56%. Will that rate help the housing market? So far, the answer is mixed. RealtyTrac reported yesterday that foreclosures rose year-over-year in June, and it suggested the trend will continue. Foreclosed homes usually bring down prices in the neighborhoods around them. This downward pressure causes potential buyers to worry that prices have not found bottom. Data from Case-Shiller shows that a bottom has not been reached in many large cities. But in a modest number of markets, prices have begun to turn up. Probably home prices are so low there, along with mortgage rates, that they are too cheap to resist.

Italian Bond Sales

A two-notch rate cut of Italy’s sovereign debt by Moody’s from to Baa2 from A3 has not kept global capital markets investors from some small optimism about the country’s prospects. Italy sold $3.1 billion of three-year notes at a yield of 4.65%. According to MarketWatch, this was down from 5.3% in June. The financial site reported: “Borrowing costs were expected to decline after Italian bond yields pulled back from crisis levels following a European Union summit meeting in late June.” The positive trend could be short lived, though. Concerns about austerity programs and VAT increases in some countries, which eventually will include Spain and Italy, have caused many experts to believe that, without some stimulus programs, these economies will fall into deeper recessions.

Video Game Sales

Research firm NPD reported that video game sales fell 29% in June to $699.8 million. Hardware sales dropped 45% year-over-year. This was despite the release of the new Nintendo 3DS. “The 3DS is still up nearly 25 percent over where the Nintendo DS was in a similar point in time after release to market, and has topped portable hardware sales for the last 11 months,” Anita Frazier, an NPD analyst, wrote in the report about June. The problem is that June 2011 was a period in which a lot of new games first came to market. Furthermore, the single greatest challenge to console and game sales is the migration of gaming to smartphones, which have become de facto handheld game devices. Many of the games for these are free or very inexpensive. The challenge is one that the Microsoft (NASDAQ: MSFT) Xbox, Sony (NYSE: SNE) PS3 and Nintendo cannot easily fight off. Smartphone games are easy to download, and the overall use of smartphones for most daily tasks has soared.

Douglas A. McIntyre