American Home Mortgage Investment said it is delaying paying dividends on its common stock and may delay payments on its preferred shares because banks demanded it put up more cash after the mortgage lender wrote down the value of its loan and security portfolios significantly. AMH said that the market had caused “major write-downs of its loan and security portfolios and consequently has caused significant margin calls with respect to its credit facilities.” It had $4.01billion of borrowings outstanding under its warehouse lines of credit as of March 31, and total liabilities of $19.3 billion. Its assets had a total book value of $20.6 billion.

What is going on out there? As we mentioned last week, although Treasury yields may be dropping, mortgage prices are not improving by as much due to nervousness (including A-paper), but this may change as investors find them a good buy. Or, as Lehman Brothers puts it, “The general lack of liquidity and flight to quality trade will lead to more spread widening in the short term as pass-throughs continue to under-perform other spread products and credit.  Such underperformance is likely to motivate investors to participate in other products, perhaps jumbo or alt a bonds that have become more attractive as the crackdown on subprime continues.  It is a general consensus that AAA bonds are well protected from losses; however, this sector has experienced significant widening as well due to the concerns surrounding the subprime market. In this case we feel that this sector has become relatively cheap because of the attractive pick up in spread.”

It could be quite a week ahead for the markets. Not only has volatility already picked up, but look below for the huge amount of scheduled economic news due out. There is nothing today, but tomorrow we have Personal Income and Consumption, the Employment Cost Index, the Chicago PMI, Construction Spending, and Consumer Confidence! Things quiet down, but then on Friday we’ll have all of the employment numbers. The Fed meets again next Tuesday, and the market is giving them a 15% chance of easing. But by year-end the odds have increased to 76% chance of an overnight rate cut.

WOMEN'S REVENGE
"Cash, check or charge?" I asked, after folding items the woman wished to purchase. As she fumbled for her wallet, I noticed a remote control for a television set in her purse.
"So, do you always carry your TV remote?" I asked.
"No," she replied, "but my husband refused to come shopping with me, and I figured this was the most evil thing I could do to him legally."