I read through the usual suspects in the mainstream media yesterday after the Case Shiller numbers were released and see headlines such as “Home Prices Flatten in October After 5 Months of Gains” and “Mortgage insurers rally after housing data” and wonder just how many of these reporters and analysts actually bothered to look at the data versus repeating sound bites. This has been a bad three quarters for the fundamental bears, but there is absolutely no macro or fundamental reason to turn bullish. As a matter of fact, the only reason I can see to buy stocks is that the stock prices are going up. That, in and of itself, should give one pause.
Let’s take a close look at the “raw” Case Shiller numbers, not the seasonally adjusted ones for which I cannot source the method of adjustment for seasonality. Don’t worry, if one looks at the data over a long enough time frame, you can easily recognize the patterns of seasonality, and more importantly notice how dramatic they have become, leaving open to question how effective the seasonal adjustments are, whatever they are.
Starting with a bird’s eye view of key markets over two decades you can see that the housing boom was enormous and the crash was severe but nearly all major markets ticked up significantly over the last few months, although we are still at roughly 2003 pricing levels, having lost about 7 years appreciation. The question is why. Well, the US government has put more money and resources into re-blowing the residential housing bubble than any other time in its existence.
Click any graph to expand.
Despite this, significant headwinds persist in inventory, foreclosure and distress pipelines, unemployment, etc. Yeah, I know, you have heard this all before, but let’s put it in context this time around.
This chart shows us the month to month changes over the same time period. As you can see, last year was bad, but we again ticked up significantly for several months in a row for an improvement. That improvement has quickly disappeared with several markets dipping back into the negative. and all markets trending sharply downward. This is a negative, not a positive turn of…
Here comes Spain: Spanish banks start to unload property portfolios (WSJ) Some brilliant insight: “Accumulating properties also stopped a sharp drop in prices, avoiding the painful write-downs banks are required to book when the value of their assets falls.” The FHA will not be reading this article
How uou like your strong euro now Europe? After two years of crashing banking systems and economic recession, the euro zone enters 2010 with a full-blown debt crisis (WSJ)
Treasuries set for worst year since 1978 as U.S. steps up sales (Bloomberg)
First Brazil now Russia: Finance Minister Alexei Kudrin says Russian stocks “too expensive”, nobody cares (Bloomberg). In the meantime Templeton’s Mark Mobius, who after a 104% rise is still down relative to 2007 (56% decline in 2008) says “If you compare Russian valuations now with other major countries, it’s not overpriced. There are still opportunities there” One wonders who is pitching their book
E-mails inside AIG reveal executives struggling with growing crisis (WaPo)
Just in case you thought the “recovery” was for real, GMAC to demand $3-$4 billion more from the Obama endless bailout fund (Bloomberg)
More debt supply on deck: $130 billion in Build America Bonds to be sold quickly as congress is set to change subsidy rules (Bloomberg)
Geely bid for Volvo makes Goldman-backed boss disregard Toyota (Bloomberg)
Paris plus Texas equals an American dream of striking oil in France (TimesOnline)
Fidelity and Vanguard lead list of worst performing mutual funds of the decade (Bloomberg)
Keeping the Yemen story on the front page: look for [WMDs/nukes/the great Kindle channel stuffer] to be found there soon to quite soon (Bloomberg, WaPo, NYT)
Is "extortion" too strong a word for what’s being done to us?
Extortion is a criminal offense which occurs when a person unlawfully obtains either money, property or services from a person, entity, or institution, through coercion. Coercion is the practice of forcing another party to behave in an involuntary manner (whether through action or inaction) by use of threats, intimidation, trickery, or some other form of pressure or force. Such actions are used as leverage, to force the victim to act in the desired way. Coercion may involve the actual infliction of physical pain/injury or psychological harm in order to enhance the credibility of a threat. The threat of further harm may lead to the cooperation or obedience of the person being coerced.
$40 a barrel is costing the US consumer $760M a day – and that’s without the refining mark-up. $760M a day is $277Bn a year stolen from US citizens alone and over $1Tn globally – that’s 20 Madoff scams a year! If the oil companies were witholding water or air from us and demanding more money for something they were able to readily produce more of, then we would KNOW it was torture, right? Why should oil be different? It’s not a choice – for good or ill, we need energy to survive in this modern world every bit as much as we need air and water yet we allow both the blatant cartel of OPEC as well as the private cartel of US petroleum producers to manipulate the supply of energy and FORCE…
Las Vegas’ firefighters union has taken a hard stance against the city’s budget cuts, alleging that reductions will hurt emergency responses along with fire insurance rating for homes and businesses.
City officials, meanwhile, said the union is engaging in irresponsible “scare tactics” at a time when the city is facing economic difficulties.
The back-and-forth comes as the city readies for a series of town hall meetings scheduled from January to March to hear resident feedback on what city services are most important.
It also comes as the city is considering back-to-back 8 percent salary rollbacks and freezes for all employees, including firefighters, although a union official declined to comment today on the union’s positions on these wage proposals.
The union has created a Web site as well as a radio advertisement warning that cuts could increase response times, result in fewer people on duty, reduce the city’s ability to respond to disasters and hurt the city’s fire insurance rating, which is at the highest level.
This discussion is just one part of the ongoing wrangling over the city’s budget, which has seen an ever-widening deficit since the economic downturn began.
The city has already cut operating costs, eliminated vacant positions and announced some layoffs. City management has also proposed an 8 percent wage rollback in each of the next two budget years to avoid layoffs, a proposal being evaluated by the unions that represent city workers.
My recommendation to Las Vegas is to declare bankruptcy and let the unions see what they can get in court.
The Simi Valley City Council on Wednesday approved a new agreement with the Simi Valley Police Officers’ Association for an 18-month employee contract that includes a 3 percent salary decrease for sworn police officers and sergeants.
The unanimous approval came after the council went into a closed session meeting late Wednesday afternoon with attorneys and representatives from both the city and police association.
Significant provisions of the MOU approved Wednesday include:
Link. I’m going to post some of the more interesting excerpts, plus my translation/commentary:
GROSS: So you don’t think the bailouts were too friendly to Wall Street?
GEITHNER: The idea that the strategy was unfair and has principally benefited a small number of institutions in New York is a mischaracterization of the design and result of the strategy. I thought people would have understood this after the failure of Lehman Bros. But when you do too little and you leave the system with real fear that everything is going to fall apart, like any financial crisis, it hurts the poorest most. A just and fair strategy, even if it is politically hardest to explain and justify, is to use well-designed but massive force to stabilize the system.
Translation: Ignore the fact that bailouts resulted in record bonuses in 2009. Think about all those poor people who would be without more credit (debt) had we not acted. Ignore the fact that they still don’t have credit, extending more debt to people is not sustainable, and unemployment is still on the rise.
A bloated financial sector subsidized by government is the lifeblood of our economy. I have this on good authority. My mentor, Bob R. (former Goldman CEO, slayer of Glass-Steagall), Lloyd, and Jamie all agree.
GROSS: The biggest downside surprise?
GEITHNER: The [high] level of unemployment relative to what was happening in the economy as a whole. I’m not an economist, but almost all forecasters missed that. And that’s hugely consequential, because it’s the prism through which most people view basic economic health.
Translation: What’s the problem? The market is up. That means the economy is OK. So why is unemployment still an issue? We injected trillions of dollars here. Our projections show sunshine and rainbows into 2010 and beyond.
GROSS: There’s a perception that you regard your portfolio narrowly, as primarily focused on the health of Wall Street, with Main Street a distant second.
GEITHNER: My first and essential responsibility was to fix and reform the financial system. That was necessarily going to be the principal part of what people saw. About half my time from the beginning has been spent on the design of the broader economic strategy. The idea that we did
We have yet another day, where almost all the action is in premarket or the first 15-30 minutes. They just keep piling on, and I reiterate my call to only open the stock market for 30 minutes a day if this is all our market can offer. That leaves us more time to help the US economy by shopping…
Since the market offers little of late outside of speculative daytrades, let us look at the lighter side. Since we are in the annual "prediction season", below the WSJ lists some of the worst "technology" predictions of all time; some of these are classics!* Pertinent to our situation…. as I try to think of what can lead the US out of this employment mess, aside from creating countless more government jobs or a new housing bubble – I am hoping some game changing technologies that are in someone’s garage or a lab can be the next big driver.
*please note – some of these quotes are controversial i.e. claims they were never uttered or taken out of context
"Tis is the season for predictions, so "Information Age" bravely goes out on this limb: Most technology predictions for 2010 won’t come true. The more we learn about how innovation happens, the less straight the lines of advance look.
(1) "Inventions have long since reached their limit, and I see no hope for further developments," said Roman engineer Julius Sextus Frontinus in 10 A.D.
This end-of-progress view has been echoed many times, including by Charles Duell, commissioner for the U.S. Patent Office, who in 1899 said, (2) "Everything that can be invented has already been invented."
Here are the rest of my Top 10 Worst Technology Predictions, which prove that when it comes to tech, optimism pays:
(3) "The Americans have need of the telephone, but we do not. We have plenty of messenger boys," Sir William Preece, chief engineer at the British Post Office, 1878.
(4) "Who the hell wants to hear actors talk?" H.M. Warner, Warner Bros., 1927.
(5) "I think there is a world market for maybe five
As the ‘naughties’ (what a perfectly descriptive name for the 2000-2009 period) come to a somewhat anti-climactic close, it is important for those of us in the investment community to take stock of what new lessons have been learned, what immutable laws have been reinforced, and what changes in policy, strategy and execution need to occur in order to avoid a repeat of the booms and busts of the last decade.The reason I think such an analysis is critical is that I do not believe most investors are cognizant enough of the dangers lurking in the world’s financial markets. Memories are very short and despite suffering through a number of serious market downturns over the last 10 years, I worry that we have already started a snowball rolling that has the potential to cause even more lasting damage than the dot com bubble or the real estate bubble and subsequent financial collapse. Therefore, it may be true that only by understanding the past can we hope to avoid such a fate.
The following list is not meant to be all encompassing. I’m sure each individual investor can come up with additional items and could justifiably disagree with some of my conclusions. Also, you will surely recognize some of these rules and guidelines as often repeated clichés. That is the point. I am not trying to re-invent the wheel or point out things that are not relatively obvious. However, I do believe that people who keep these beautifully simplistic lessons in mind have a much better chance of successfully navigating through persistently treacherous financial waters than those who ignore the past.
1. Trees cannot grow to the sky: This rule is number one for a reason. No matter how many times this idea is repeated or shown to be true in the market setting, another hot investment invariably comes along that causes people to forget that appreciation has its limits. However silly it may sound at a time of irrational exuberance, the restrictions on unending price increases consist of these pesky little things called fundamentals. For example, since no company can compound revenue growth at 20% indefinitely, fundamentals rarely justify paying exorbitant…
I will keep an open mind about this forecast, but act slowly having been surprised in the past by the Fed’s ability to throw caution to the wind and levitate the stock market from 2003 through 2007, while inflating an enormous housing bubble as a side effect.
Will there be a new asset bubble and carry trade? It is possible.
Given there has been a financial recovery of sorts, but no recovery at all on main street, it should not be surprising to see Credit-Card Delinquencies Rise Again.
The rate of charge-offs on U.S. credit cards rose more than a half-percentage point in November, snapping a two-month run of drops from an all-time high in August, and delinquencies rose for the fourth consecutive month, Moody’s Investors Service said.
Charge-offs, which are those loans a credit-card company doesn’t think it will be able to collect, were 10.6% for November, compared with 10% in October. The ratings firm also said the delinquency rate, which gives a glimpse of issuers’ potential losses and how much they may need to set aside in reserves, rose to 6.2% in November.
Bank of America Now Choking on Growth at any Cost Policy
When Bank of America Corp.’s new chief executive takes over next week, one of the first problems he will face is one he’s already been grappling with—the bank’s credit-card business.
"We gave a lot of cards out to our customers," Mr. Moynihan said in a Nov. 5 speech. "We were giving them to too many people." He discussed a "repositioning" of the business that would rely less on borrowing and more on card transactions, while acknowledging that the business won’t be as big or as profitable as it used to be.
Bank of America is the second-largest U.S. card issuer, after J.P. Morgan Chase & Co., and the card division accounts for 23% of BofA’s revenue through the first nine months of 2009. Yet cards also lost $4.5 billion during that same period, making it the worst-performing Bank of America business line. It also had a default rate higher than other major rivals, at 13%.
The current problems have their root in Bank of America’s push to become No. 1 in the card business. In 2006, it purchased MBNA Corp., one of the nation’s biggest credit card issuers, for $35 billion, hoping to combine the card company’s marketing and underwriting skills with its own massive branch network.
But in its pursuit of market share, Bank of America made poor underwriting
Markets died and then rallied to flat again as European leaders “prepared contingencies” for a possible Grexit
Markets died hard and fast earlier today as major indexes registered as much as 1.5% of losses after news that Euro zone officials were unofficially “preparing contingencies” for a Greek exit from the Euro. Unofficial statements were not enough to keep markets down however, as major indexes rallied back to flat levels by the end of the day.
So the world continues to wait on Europe, as the SPDR S&P 500 ETF (NYSEACA:SPY) gained .05%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA:...
The ratings agency Fitch on Tuesday lowered its assessment of Japan’s sovereign credit to A+, an investment grade just above the likes of Spain and Italy, and criticized Tokyo for not doing more to pare down its burgeoning debt.
Japan’s public debt will hit almost 240 percent of its gross domestic product by the end of the year, Fitch warned.
The new rating also heightens the pressure on Prime Minister Yoshihiko Noda to rein in spending and raise taxes at a delicate time, when the Japanese economy is still recoverin...
Europe tanked today, with all most of the major indexes losing two to three percent. The US markets followed suit, with the S&P 500 hitting its intraday low, off 1.53%, during the lunch hour. But the index began a slow afternoon rally that began accelerating in the final 90 minutes of trading. Amazingly enough, the index closed the day with a fractional gain of 0.17%. CNBC reports that "Italian Prime Minister Mario Monti and French President Francois Hollande have agreed to consider all measures to boost European economic growth, including eurobonds...." No word yet on Angela Merkel's take on the topic.
The index is now up 4.87% for 2012, which is 7.06% off the interim closing high.
ONEOK, Inc. (NYSE: OKE) today announced that shareholders voted to increase the number of authorized shares of ONEOK common stock to 600 million from 300 million in connection with the company's previously announced two-for-one stock split.
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T - AT&T, Inc. – U.S. equities are on the decline as Europe’s woes once again take center stage. Shares in AT&T, down 0.90% at $33.24 this afternoon, are faring better than most of the other Dow components so far, though options activity on the wireless carrier suggests some strategists are bracing for further declines ahead of the long w...
To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...
Top 5 RisersStockRatingAnalysisWDCSTRONGBUYWestern Digital is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run.KROSTRONGBUYKronos Worldwide is gaining higher expectations and its recent history of its earnings increases is significant.URIBUYProjected value continues to rise for United Rentals while long term increases in earnings growth are also becoming more widely expected.SWHCBUYAn increasingly attractive expected long term growth rate and a significantly higher projected valu...
The market remains a mess right now as we are back to the environment of latter 2011 and middle 2010 where random comments from officials across the Atlantic move everything en masse. Today the market was hit by word that preparations for Greece's exit from the EU are being considered.
Of course a denial by another official would send the market up 1% immediately. Rinse, wash, repeat – year #3.
The bigger picture right now is all stocks are moving as one asset class as our massive correlations return. Until that changes it is very difficult to bother to be a stock picker.
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
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In this article, please revisit an article written two years ago titled, "The Calm Before the Storm." This article focused on the patent cliff that was looming in the pharmaceutical industry, that was later picked up by the New York Times and several other bloggers! Subsequent articles were written about big pharma company's revenue streams, and the pros and cons of of their later stage pipelines. Other articles have also attempted to identify smaller biotechs with the potential to reap big reward...
My last weekend update is dated from January 30 so after a long hiatus, here is an update of our virtual portfolio. Since the last update, we have closed the AA Money portfolio due to a lack of enthusiasm (and activity) and I have stopped tracking the FAS strangle as the low VIX makes it hard to get rewarded for the risk! But we have added a small $5KP virtual portfolio which does not use any margin.
FAS Money
We have had to recover from a big move up by FAS and a low VIX which keeps option prices low. But the portfolio has gaine about 10% since the last update.
Last update P&L - $5499.00
IWM Money
Not a lot of activity in this portfolio where the main focus is on the large IWM BCS. But the portfolio has grown over 20% since the last update.
Last update P&L - $1998.00
$5KP Portfolio
This is the virtual portfolio that replaced the AA Money portfolio. It does not use margin and we will keep holdings under $5K.
AAPL $50K P...
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Is "extortion" too strong a word for what’s being done to us?
$40 a barrel is costing the US consumer $760M a day – and that’s without the refining mark-up. $760M a day is $277Bn a year stolen from US citizens alone and over $1Tn globally – 
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(