Posts Tagged ‘Bankruptcies’

PARTS OF THIS MARKET ARE LOOKING IRRATIONAL

PARTS OF THIS MARKET ARE LOOKING IRRATIONAL

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…
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Business Bankruptcies Up 38% In 2009; BLS Birth/Death Model Review

Business Bankruptcies Up 38% In 2009; BLS Birth/Death Model Review

Courtesy of Mish

sale

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


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Bankruptcy Filings – As Ye Sow So Shall Ye Reap

Bankruptcy Filings – As Ye Sow So Shall Ye Reap

Courtesy of Mish  

Hand holding out empty pocket

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


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A Tsunami of Red Ink

A Tsunami of Red Ink

red inkCourtesy 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


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Sunday Readings

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

Tyler Durden’s Sunday Readings

  • 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.

 


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Zero Hedge

Low Wages & Unemployment Are An Existential Crisis For Millions

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Daniel Drew via Dark-Bid.com,

This post is a response to The End of Meaningful Work: A World of Machines and Social Alienation, an article I posted earlier. It is conducted in an interview style.

Jeff W:

There is a huge and growing problem of low wages and unemployment. It is an existential crisis for millions. If millions of young Americans don't start earning more money, they can't afford to have children, or take care of them properly, and that is the end of us as a nation. Eve...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




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...

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Phil's Favorites

Run on Greek Banks Accelerates; ECB Halts Emergency Funding Hike; Untangling the Lies

Courtesy of Mish.

The curious story of the day is back-to-back reports, minutes apart, by the same news agency, saying different things.

I commented on that just a bit ago in Greece Says Creditor Agreement Deal Close, Senior Eurozone Official Says "I Wish it Were True".

There is no proof Greece is the one lying, but Greece certainly benefits more from such a lie, two different ways.

  1. Lies buy Greece more time to prepare capital controls
  2. Lies may stop some panic out of Greek banks

Assuming point number two is in play, I did a search for "Greek bank deposit outflows". Three stories from today popped right up. Here are two of them.

Run on Banks Accelerates

Please ...



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Kimble Charting Solutions

Super strong Health care ETF near another breakout!

Courtesy of Chris Kimble.

CLICK HERE TO ENLARGE

When one looks back over the past year, Health Care ETF (XLV) has been a good place to be. The above table looks at the 9 key sectors of the S&P 500, which reflects that XLV has done really well, grabbing the #1 spot over this time frame. Year-To-Date, XLV remains in the top spot as well.

Can this hot performance continue? Check out the pattern XLV has been forming the past few months

CLICK ON CHART TO ENLARGE

Over the past 90-days, XLV remains at the top spot as well, up a little over 2...



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Chart School

STTG Market Recap May 26, 2015

Courtesy of Blain.

Last week we remarked how the S&P 500 finally had broken out of a multi month range… but then it did little.  Usually once a stock/ETF moves out of a long range it has a pronounced move; but the S&P 500 didn’t – it barely budged.  Today that move collapsed.  The S&P 500 fell 1.03% and the NASDAQ 1.11%.   Most pointed to some vague increase in a chance of a rate hike but this is too much tea leaving – the Federal Reserve has said everything is data dependent.

U.S. Federal Reserve Vice Chairman Stanley Fischer said Tuesday that markets should not be surprised by the timing or pace of rate hikes.

In economic news, durable goods for April showed a decline of 0.5 percent, roughly in-line with expectations. Non-defense...



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Sabrient

Sector Detector: Stocks provide a tepid breakout as Fed greases the skids. So now what?

Courtesy of Sabrient Systems and Gradient Analytics

Early last week, stocks broke out, with the S&P 500 setting a new high with blue skies overhead. But then the market basically flat-lined for the rest of the week as bulls just couldn’t gather the fuel and conviction to take prices higher. In fact, the technical picture now has turned a bit defensive, at least for the short term, thus joining what has been a neutral-to-defensive tilt to our fundamentals-based Outlook rankings.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, including a sector rotation strategy using ETFs and an enhanced version using top-ranked stocks from the t...



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OpTrader

Swing trading portfolio - week of May 24th, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

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. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Pharmboy

Big Pharma's Business Model is Changing

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Understanding the new normal of a business model is key to the success of any company.  The managment of companies need to adapt to the changing demand, but first they must recognize what changes are taking place.  Big Pharma's business model is changing rapidly, and much like the airline industry, there will be but a handful of pharma companies left at the end of this path.

Most Big Pharma companies have traditionally done everything from research and development (R&D) through to commercialisation themselves. Research was proprietary, and diseases were cherry picked on the back of academic research that was done using NIH grants.  This was in the heyday of research, where multiple companies had drugs for the same target (Mevocor, Zocor, Crestor, Lipitor), and could reap the rewards on multiple scales.  However, in the c...



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Digital Currencies

Nasdaq's bitcoin plan will provide a real test of bitcoin hype

 

Nasdaq's bitcoin plan will provide a real test of bitcoin hype

By 

Excerpt:

Bitcoin, the virtual digital currency, has been called the future of banking, a dangerous fad, and almost everything in between, but we're finally about to get some solid data to help settle the debate.

On Monday, the Nasdaq (NDAQ) stock exchange said it would ...



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Market Shadows

Kimble Charts: US Dollar

Which way from here?

Chris Kimble likes the idea of shorting the US dollar if it bounces higher. Phil's likes the dollar better long here. These views are not inconsistent, actually, the dollar could bounce and drop again. We'll be watching. 

 

Phil writes:  If the Fed begins to tighten OR if Greece defaults OR if China begins to fall apart OR if Japan begins to unwind, then the Dollar could move 10% higher.  Without any of those things happening – you still have the Fed pursuing a relatively stronger currency policy than the rest of the G8.  So, if anything, I think the pressure should be up, not down.  

 

UNLESS that 95 line does ultimately fail (as opposed to this being bullish consolidation at the prior breakout point), then I'd prefer to sell the UUP Jan $25 puts for $0.85 and buy the Sept $24 call...



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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 

Since...



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Promotions

Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene

 

The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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About Phil:

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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Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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