Dear Mortgage Refinance Applicant, Expect Delays

by ilene - May 29th, 2009 2:26 pm

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Dear Mortgage Refinance Applicant, Expect Delays

Courtesy of Mish

Mark Hanson at the Field Check Group has an update on the mortgage mess that started Wednesday.

After the Rate Spike — Mortgage Operations Turmoil…Kick out the Dead Loans Now

As I noted yesterday [see Mortgage Market Locks Up], a rate spike this large results in chaos. Weeks/months of purchase and refi loan applications will be lost. Mortgage operations centers are parsing through thousands of loans focusing only on locked loans and purchases mitigating potential losses. The rest are dead wood.

Rates are all over the map as lenders assess the damage and price cautiously. Now, it is a mad dash to only focus upon the loans that are locked and have a chance of funding. If the locked loans are not funded quickly and the interest rate complex continues to experience this extreme of volatility, serious losses can occur.

The letter below was just sent by a national bank’s wholesale department this afternoon. This is the mortgage operations nightmare I highlighted in Thursday’s report. In a nutshell, they are kicking aside everything that is not locked or not a purchase in contract.

This is the desperation move that overworked, understaffed mortgage divisions have to make in order to salvage what can be salvaged. Kicked aside could be at least half of their past two month’s of unlocked, unfunded originations that may ultimately parish if rates don’t come back quickly…or the borrower can’t be coaxed into an 3/1 or 5/1 intermediate-term hybrid ARM, which are now at about the same interest rate level as a 30-year fixed was at the beginning of the week.

click on letter for sharper image

Mike "Mish" Shedlock

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Mortgage Spread Stubbornly Flat

by Zero Hedge - May 29th, 2009 1:40 pm

Courtesy of Tyler at Zero Hedge

Mortgage Spread Stubbornly Flat

The green shoot police will have a field day beating the drum over how the 30 Year mortgage has massively tightened to the 10 Year…. by a whopping 0.04 bps.

Tags: Mortgage Spread

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JPM And Bank Of America Pay Themselves Back In Yet Another REIT Offering

by Zero Hedge - May 29th, 2009 1:07 pm

Courtesy of Tyler Durden at Zero Hedge

JPM And Bank Of America Pay Themselves Back In Yet Another REIT Offering

In the most recent example of taking from one pocket to pay another, Merrill and JPM underwrote 8.75 million shares at $20/share for Kilroy Realty Corp, a REIT that owns, operates, develops, and acquires Class-A suburban office and industrial real estate in bankrupt southern California. But don’t bother Cohen and Steers with the fundamentals – after all not only are REITs the primary recipient of taxpayer subsidies via the PPIP pumpage of CMBS, now Arnie is making sure taxpayers double dip, and bail out his state as well. As such, for taxpayers going long a REIT debacle such as KRC makes all the sense: at the end of the day the choice is either paying yourself in advance on April 15 by buying the worst garbage Wall Street has to offer, or not paying taxes at all.

And, in a much maligned but extremely profitable tradition, all the offering proceeds of $166.7 million, will go to pay back Merrill’s revolver with KRC. Everyone is eagerly awaiting the upgrades to buy yet another stock which will soon have negative FFO after all California tenants which are not too big to fail stop paying their rents.

But before we get the inevitable Strong Buy boost from the revolver repayment beneficiaries, here is an objective summary analysis of KRC compliments of Dan Amoss of Strategic Short Report:

Kilroy’s 92 office buildings and 42 industrial buildings are located in Los Angeles, Orange, and San Diego counties. The occupancy rate of Kilroy’s 12.4 million square feet of total rentable space was just 89.2% at December 2008, down from 94% in 2007. This is an important metric because not only are many of Kilroy’s tenants in businesses like mortgage sales going away permanently, but healthy tenants are gaining the upper hand in lease renewal negotiations.

Demand for office space tends to lag employment trends. The dramatic recent jump to 10.5% in California’s unemployment rate will make Kilroy’s 2009 and 2010 lease renegotiations very unpleasant. The fact that California’s state government is insolvent doesn’t help Kilroy’s lease renewal efforts. The state will likely impose higher taxes and fees on businesses to balance its budget, driving many more out of the state to havens like Nevada.

…

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Introducing The Oxen Group, Adding GAP (GPS) Trade

by David Ristau - May 29th, 2009 12:30 pm

Introducing The Oxen Group

The Oxen Group was founded in late 2008 by David Ristau with the help of his trading partners and friends. David is a fundamental trader who specializes in day-trades and ETFs. He selects his Oxen Picks based on a combination of fundamentals and loose, basic technicals. All picks are one-day trades with specific entry and exit points that attempt to buy pullbacks in stocks anticipated to move up through the rest of the day. David will be demonstrating his method and sharing his stock picks with us before the market opens so we’ll have an opportunity to follow along and see the results.

Now that we’ve gotten that out of the way, here’s David’s day-trade plan for today. - Ilene

Today’s pick: Gap Inc. (GPS)

The Oxen Group, for Friday, is excited about the prospects for Gap Inc. The company is a solid play based upon J. Crew’s earnings that were outstanding in after hours on Thursday, sending the stock up 18%, in after hours. J. Crew beat analysts’ EPS by 0.25, a large margin, but the stock will be gapping up tomorrow and too volatile for much predictability. One stock that will benefit from this positive news is Gap, which has been continuing to advance on a good retails earning season, as well as its own positive earnings. The positive news in apparel will bring a bullish fundamental position to GPS. The stock jumped 1% after hours. Tomorrow, the market should be somewhat sideways, with the Friday lack of news. The GDP reporting tomorrow could swing things either way, but volume will probably be light. Gap should be able to take advantage of a low volume day, as this news propels the stock forward. The stock should gap up and is a definite buy on a pullback at the beginning of the day. Technicals do scare The Oxen Group, and it will most likely mean that the stock has less upward momentum than if it was undersold, meaning it could need a quick exit and downward momentum towards the latter parts of the day. The fast stochastics have some room for upward movement, but RSI is relatively high, and it is near its upper bollinger band.

Entry: Recommend buying within first 5-20 minutes after slight pullback.
Exit: We recommend exiting after a 2-4% increase.
Upper Resistance: 17.75-18.00.

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Daily Highlights: 5.29.09

by Zero Hedge - May 29th, 2009 11:51 am

Courtesy of Tyler Durden at Zero Hedge

Daily Highlights: 5.29.09

Asian stocks edge higher after Japan industrial production posts biggest gain in 56 years.
Dollar weakens as stock gains increase demand for higher yields.
Fed officials believe the recent sharp rise in Treasury yields could reflect a mending economy.
India’s economy expands 5.8 percent in the three months to March 31, led by government spending and construction.
Japan’s industrial output jumps at fastest rate in 56 years, but joblessness also rises.
Oil dips below $65 in Asia after hitting 6-month high on improving US economy.
Treasuries falls as Obama’s record borrowing spree overwhelms Federal Reserve efforts to cap consumer interest rates.
AOL is now worth half as much as Facebook Inc. and less than 5 percent of Google Inc.
BofA offers to swap $2B Preferred for common shares to meet capital goal.
Chrysler CEO sees sale to Italy’s Fiat closing Friday, but dissenters could force postponement.
Costco Wholesale’s Q3 net falls 29% to $209.6M; revs fell 4.9% to $15.81B.
Dell qtrly net down 63% to $290M as revs dipped 23% to $12.34B. warns PC market hasn’t hit bottom.
FiberNet Telecom to be acquired by Zayo Group for $11.45/sh cash.
Ford sold $1.1B of five-year notes through its finance unit to boost cash.
GM will file for bankruptcy on June 1; accord reached with some bondholders.
HJ Heinz’s Q4 net drops 10% to $175M, hurt by a decline in US restaurant traffic.
Marvell reports in-line, Q1 EPS at $0.05. Revs up 1.7% at $521.4M.
PepsiCo Inc. plays a role in denying $16 million in stock awards for directors of its biggest bottler and withheld support for most of its directors.
Revlon implements worldwide org restructuring; says 2Q09 outlook significantly below 2Q08.
RH Donnelley files for bankruptcy.
Time Warner said it will finally split off its AOL division.
Visteon confirmed it filed for Ch 11 bankruptcy protection.

Economic Calendar: Data on GDP, Chicago PMI, Mich Sentiment-Rev to be released today.

Earnings Calendar: GHM, GLNG, MAD, NBG, QSII, RY, TIF.

Companies to watch: BofA, Dell, Ford, GM, Revlon, Royal Bank Of Canada, Tiffany & Co.,
Time Warner.

Recent Egan Jones Rating Actions:

VISTEON CORP (VSTN)
AUTOZONE INC (AZO)
ARVINMERITOR INC (ARM)
ALLEGHENY TECHNOLOGIES INC (ATI)
KEYCORP (KEY)
STAPLES INC (SPLS)
HORMEL FOODS CORP (HRL)
GOODYEAR TIRE

…

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Frontrunning: May 29

by Zero Hedge - May 29th, 2009 11:48 am

Tyler Durden’s Frontrunning: May 29

GDP dips at 5.7%, more than 5.5% consensus (AP)
Good overview of black mortgage Wednesday (MND)
Fiat will not attend Open talks (BBC)
Tiffany’s profit tumbles 62%, sales below consensus (Bloomberg)
Oil and gold surge higher (FT)
Mortgage rates: it could be as bad as you imagine (Field Check Group)
A stimulus you can believe in (The American)
Krugman: The big inflation scare (NYT)
A brief incursion into the not so big two (WaPo)
Bloated US consumer unfit for recovery marathon (Bloomberg)
Orwellian headline on the day: Stocks, Oil, Metals Rise as World Recession Eases; Dollar Drops (Bloomberg)

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Friday – The Good, the Bad and the GDP

by Phil - May 29th, 2009 7:03 am

Clearly there are people who will do anything for money.

In the classic movie, "The Good, the Bad and the Ugly," the characters all lie, cheat, steal and kill as they chase after a chache of government gold. They all kill, they all try to kill each other and the only character trait they all share is they will all do anything for money. We are lucky enough to have a modern version of that, with our own government supplying GOLDman Sachs and other bad market manipulators with TARP money, which they are using to, not to lend money to the good citizens of the US but rather to prop up the commodities market, stealing Billions of dollars from the very people they claimed they were going to help.

Since the November bail-out, consumer lending had gone down, home foreclosures have gone up, unemployment has gone up, housing has gone down yet the CRB has gone up 25%, led by oil, which is up 88% at $66 this morning. $66 oil is a noose around the neck of this economy as the it was cheaper oil that helped us begin to recover as it stayed around $40 from November through the beginning of March. On a per barrel basis alone, that was $500M a day LESS than we are paying now but, despite the fact that oil is still 54% in price from this time last year, gasoline has gone up so fast that it’s only down 23% from the prices that knocked the wheels out from our economy. Including refined products, that extra $26 a barrel is costing US consumers $1Bn a day, $365Bn a year or 1/2 of the TARP money going straight out of our economy and back to the countries that fund terrorism through the very ugly hands of GS (who are partners in ICE) and other TARP recipients who have funded and coordinated this commodity "rally," screwing the American people over with our own tax dollars.

Aside from the very obvious upgrades by the TARP-sponsored Financial houses of anything and everything that even smells like oil and the GE-sponsored 24/7 pump-fest on CNBC, we now have Goldman Sachs this morning telling the sheeple specifically to: "sell Petrobras October $34 put options for $1.95 because a U.S. economic recovery and lower petrochemical supplies will limit declines in the price of oil." What Goldman does not mention is…

Tags: BP, Dollar, Euro, GDP, Goldman Sachs, GS, ICE, MRO, Oil, OPEC, TARP, VLO

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Dell Options Follow Up

by Insider Scoop - May 29th, 2009 3:20 am

Trading Updates – Closing DELL

Channel Checkers & Phil’s Dell Option Trade – (posted in this section on May 27)

DELL – "My favorite play on Dell would be the simple July $10 calls for $1.55, which have just a .41-cent premium, fairly low if Dell does indeed take off. A more conservative approach would be to buy Nov $11 calls for $1.60 and sell the Nov $12 calls for $1.15, which is a net of .45 and will make .55 (122%) if Dell is good enough to finish at $12 in November." Phil

Dell released earnings after the market closed yesterday. According to AP, "shares of Dell edged up 12 cents to $11.60 in after-hours trading. Before the earnings report, they rose 36 cents, or 3.2 percent, to end the regular session at $11.48."

We’ll provide an update on closing the trade after the market opens today.

10:05 am: Sell July $10 calls at $1.76, Sell Nov. $11 calls at $1.77 and buy back the Nov. $12 at $1.29.

General rule to keep in mind: "Always sell into the initial excitement!"

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Dave’s Daily

by David Fry - May 28th, 2009 10:46 pm

MARKET COMMENT

Dave Fry at ETF Digest, May 28, 2009

The current rules are simple:

Use light volume to push your book and the financial media. (Bill Gross)
Use government money to trade. (TARP)
Paint the tape at the end of the month. (Business as usual)
Ignore any bad news. (All the downward revisions to previous data today)
Little guys should stay out of the way. (You and me?)

Okay, one day down and one more to go before the end of the month. Bulls got in a “relief rally” that bonds didn’t collapse after another auction. It’s a little too comical that Bill Gross comes on the airwaves to talk his book that bonds were good value now. It’s laughably transparent.

If bulls can bust it out of this range we’ve been in bully for them. Then the “sell in May and go away” maxim will be forgotten. Or, a “June Swoon”?

Volume did pick up some today but it’s still relatively light while breadth was positive.

We’ll do things a little differently today with daily/monthly views of just the major indexes and a few other key markets.

This is all I’m going to do today. As we wrap up May we should step back and look at just a few charts from short and long-term perspectives. I think it’s helpful—besides, I’m pooped.

If you want to play the game you first should know the rules. It wouldn’t hurt if you were a major bank that screwed-up big time. Then you’d get taxpayer money to trade.

The bulls have another shot at it tomorrow with GDP, Chicago PMI and more Consumer Sentiment data. Let’s see how they spin it since they did well today ignoring all bad data.

Disclaimer: Among other issues the ETF Digest maintains positions in: IEF, TLT, TBT, UDN, GLD, and DBC.

The charts and comments are only the author’s view of market activity and aren’t recommendations to buy or sell any security. Market sectors and related ETFs are selected based on his opinion as to their importance in providing the viewer a comprehensive summary of market conditions for the featured period. Chart annotations aren’t predictive of any future market action rather they only demonstrate the author’s opinion as to a range of possibilities going forward. More detailed information, including actionable alerts, are available to subscribers at www.etfdigest.com.

Tags: Dave Fry ETF Digest

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Your Field Guide To The Mortgage Collapse

by ilene - May 28th, 2009 9:48 pm

Courtesy of Henry Blodget at ClusterStock

Your Field Guide To The Mortgage Collapse

The housing market is crashing, and it’s taking us, our banks, our economy, and our government down with it. Why? Because of the debt! The value of our houses is plummeting, but the value of our debt is staying just the same.

You knew that already. What you didn’t maybe know, or at least fully appreciate, is exactly what’s happening in the mortgage market that’s causing all this hideousness.

Well, thankfully, Whitney Tilson has laid it all out for us. START THE TOUR >

Whitney’s the managing partner at T2 Partners, a hedge fund and mutual-fund company. He’s also just published a book called More Mortgage Meltdown: 6 Ways To Profit In These Bad Times.

In the book, Whitney lays out the whole mortgage disaster in pictorial form, and he has been kind enough to allow us to reprint some of his charts here. If you’d like to see updated, interactive versions, please visit www.moremortgagemeltdown.com. Or just head over to Amazon and buy the book.