by ilene - April 16th, 2010 4:49 pm
Courtesy of The Pragmatic Capitalist
I haven’t thought the 75%+ rally was particularly irrational over the course of the last 12 months. Surprised by the strength? Absolutely. But irrational, no. As of late, we’ve begun to see signs that the consumer is back, but the equity action implies that the consumer is not only back, but ready to break records. In late 2006 I wrote a letter that said:
“So here we sit with a relatively healthy economy, signs of inflation and record housing prices. Sounds pretty good, right? Not so fast. The markets could certainly move higher if housing doesn’t collapse, but we see very few scenarios in which that can happen. When the housing market slows consumers will spend less and businesses will begin to suffer. The US economy will then fall into a recession and European and Asian countries will quickly follow suit as the world’s greatest consumers wilt under the environment of low liquidity and higher debt….The credit driven housing bubble remains the greatest risk to the equity markets at this time.”
I said the market was due for a potentially crippling recession as the yield curve inverted, consumer balance sheets were turned upside down, and a housing bubble was brewing. Just days before the market crashed in 2008 I said the market had all the ingredients for a crash. In late 2008 I said the market had overreacted and would likely revert towards the mean in 2009 for a total return of 18%.
The day before the market bottom in March 2009 I said government intervention would likely generate an equity rally. But I did not come close to predicting that we were on the precipice of a 75% 12 month move. Not even close. On the other hand, I have never thought the move was particularly irrational and didn’t fight the tape through 2009.
I was very constructive on the market heading into 2010 and maintained that stimulus, strong earnings and an accommodative Fed would result in higher stock prices in H1. I point this out not because I am trying to toot my own horn or gloss over my many imperfections (many can be emphasized), but overall I have been able to not only foresee the macro mechanics driving the market, but have also done a fine job translating that into…
Tags: Bankruptcies, consumer credit, consumer spending, Economy, Employment, Foreclosures, Housing, income, inflation, irrational markets, market rally, Recession, Recovery, Retail, retail sales, Stock Market
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by ilene - January 6th, 2010 11:16 pm
Courtesy of Mish
Not only are personal bankruptcies soaring, U.S. business bankruptcies rise 38 pct in 2009.
U.S. business bankruptcies rose 38 percent last year, to a record since bankruptcy laws were changed in 2005, according to a bankruptcy data firm on Tuesday.
There were 89,402 bankruptcy filings by businesses last year, compared with 64,584 the previous year, according to data compiled from court filings by Automated Access to Court Electronic Records, which is part of Jupiter eSources LLC in Oklahoma City.
Personal bankruptcies jumped to 1,357,565 last year, from 1,031,562 the year before.
The data included bankruptcy codes Chapter 7, 11 and others. Consumers often use Chapter 7 to get a new start on their financial lives. Chapter 13 lets people discharge some debts. Businesses typically use Chapter 7 to relieve themselves of debt and Chapter 11 to restructure debt and operations.
The numbers have been "steadily up," said AACER President Mike Bickford. "I don’t think (2010) will be less than 2009. I think what’s going to tell the tale for 2010 is the first quarter."
US home sales plummet, personal bankruptcies soar
Inquiring minds are reading US home sales plummet, personal bankruptcies soar
An important measure of future home sales fell far more sharply in November than economists had expected. The National Association of Realtors (NAR) index on pending home sales—contracts agreed upon but not finalized—dropped by 16 percent in November, more than three times what economists interviewed by the Dow Jones Newswires had anticipated.
The pending home sales index registered declines in every region: 26 percent in the Northeast and Midwest, 15 percent in the South, and 3 percent in the West.
The NAR report follows the release last week of a Case-Schiller report showing home prices were flat in October, in spite of the surge in purchases based on the home buyer tax credit and exceptionally low mortgage interest rates. This was not enough, a Tuesday New York Times editorial points out, “to overcome the drag created by a glut of 3.2 million new and existing unsold single-family homes—about a seven-month supply.”
“The situation, we fear, will only get worse in months to come,” the Times writes, citing increasing mortgage rates, the eventual ending of the home buyer tax, and
…
Tags: Bankruptcies, birth death model, Employment, home sales, unemployment
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by ilene - January 5th, 2010 11:49 am
Courtesy of Mish
Two quick ways to dump debt are to walk away from no recourse mortgage loans and file for chapter 7 bankruptcy.
The debt slave act of 2005, better known as the bankruptcy reform act of 2005 was supposed to prevent the latter but it is no surprise in this corner that it didn’t. In fact, the law encouraged banks (and was purposely written to allow banks) to make high-risk loans thinking they could make debt slaves out of people forever.
It is fitting the law backfired. As ye sow so shall ye reap.
And now, with unemployment at 10%, the surge is on. The Wall Street Journal notes Personal Bankruptcy Filings Rising Fast.
The number of Americans filing for personal bankruptcy rose by nearly a third in 2009, a surge largely driven by foreclosures and job losses.
And more people are filing for Chapter 7 bankruptcy, which liquidates assets to pay off some debts and absolves the filers of others. That is significant because a 2005 overhaul of federal bankruptcy laws aimed to encourage Chapter 13 filings, which force consumers to sign onto debt-repayment plans in exchange for keeping certain assets.
Overall, personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data. It is the highest level of consumer-bankruptcy filings since 2005. Consumers rushed to file in 2005 before the new bankruptcy laws took effect in October of that year.
Chapter 7 filings were up more than 42% as of November 2009, compared with the same period a year earlier, according to the research center. November is the most recent month with analyzed data available. Chapter 13 filings rose by 12% and made up less than a third of 2009 filings as of November.
"I can’t see over the top of the files on my desk," said Cathleen Moran, a bankruptcy attorney at Moran Law Group in Mountain View, Calif., likening it to the rush of clients before the revised law went into effect. In a three-month period before those rules changed in 2005, her firm filed five times as many cases as usual.
Ms. Moran’s clients in 2008 typically were people who earned between $40,000 and $80,000. That
…
Tags: Bankruptcies, Economy, Foreclosures, Fraud, Housing, unemployment, wages
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by ilene - November 7th, 2009 11:17 pm
Courtesy of Michael Panzner at Financial Armageddon
Just over a week ago, Bloomberg revealed in "Geithner Says Commercial Real Estate Woes Won’t Spark Crisis," that the U.S. Treasury Secretary did not appear to be overly concerned about the threat posed by brewing problems in the commercial property sector:
U.S. Treasury Secretary Timothy Geithner said commercial real estate woes won’t set off a new banking crisis, in remarks to the Economic Club of Chicago.
“I don’t think so,” Geithner said, when asked whether commercial real estate could set off another banking meltdown. “That’s a problem the economy can manage through even though it’s going to be still exceptionally difficult.”
The global economy has accelerated since the worst of the recession and banking crisis last year, Geithner said, noting a U.S. Commerce Department report today showing the economy expanded 3.5 percent in the third quarter.
“You can say now with confidence that the financial system is stable, the economy is stabilized,” Geithner said. “You can see the first signs of growth here and around the world.”
Is he serious? All you have to do is spend about 15 minutes reading through just a few of the reports that were published recently and it quickly becomes apparent that a tsunami of red ink is forming in the sector, ready to come crashing down on the whole of the banking sector — as well as the economy — in the immediate period ahead:
"Why This Real Estate Bust Is Different" (BusinessWeek)
Unrealistic assumptions, layers of investors, sky-high prices, and possible fraud will make it hard to clean up the mess in commercial real estate
When Goldman Sachs (GS) sold complex bonds backed by the Arizona Grand Resort and other commercial properties in 2006, it suggested the returns would be strong. The 164-acre luxury Arizona Grand, set against the Sonoran Desert in Phoenix, boasted an award-winning golf course, deluxe spa, and several swank restaurants. The on-site water park was named one of the best in the country by the Travel Channel. With the resort’s new owners planning to refurbish hotel rooms and common areas, Goldman told investors that the renovations would help boost cash flow.
As was so often the case during the real estate boom, the lofty projections didn’t pan out. When the economy softened and business travel
…
Tags: $6.4 trillion commercial real estate market, Bankruptcies, commercial mortgage-backed securities, Commercial Real Estate, Foreclosures, Fraud, Geithner, Housing Market, loans, Michael Panzner, oversupply of money, Real Estate Bust
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by ilene - June 7th, 2009 6:13 pm
Interesting interview with Justice Antonin Scalia (below). Click here for a free subscription to PSW Report, it’s really easy and you’ll have immediate access to all the articles. – Ilene
- Gordon Brown repeats vow not to go away (Telegraph)
- Airline execs say industry outlook still grim (Reuters)
- Extreme dumb money bullish sentiment (Technical Take)
- Blackrock set to become largest quant fund in the world (Telegraph)
- Monetizing debt: The grandest of larcenies (Daily Reckoning)
- Evans-Pritchard: Merkel’s inflationary fretting may wake the bears from hibernation (Telegraph)
- Bankruptcy filings rise to 6,000 a day (USA Today)
- Daniel Gross: The bond war – Krugman vs Ferguson (Slate)
- Roundup of (un)employment charts (Big Picture)
- Justice Antonin Scalia: "The US Constitution is dead" (Fora)
- Eli Broad’s remedy for the auto industry (Fora)
Chartology
Big thanks to Gayle and Sherrie for their donations and support.
Tags: Bankruptcies, Blackrock, bonds, Justice Antonin Scalia
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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...
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