Posts Tagged ‘Slideshows’

Plunging Rents Will Drag House Prices Down With Them

Plunging Rents Will Drag House Prices Down With Them

Courtesy of Henry Blodget at Clusterstock

Plunging rents are great news for renters, but they’re lousy news for homeowners.  Aaron Task and I discussed this issue on TechTicker this morning:

The vacancy rate for rental apartments in the U.S. is now 7.8% and climbing, says the Wall Street Journal.  This is the highest vacancy rate in 23 years.

Worse, the vacancy rate is expected to keep climbing through the winter, ultimately hitting the highest rate on record.

This is good news for renters and bad news for landlords.  It’s also bad news for anyone who owns and would like to sell a house.

Why are rising rental vacancies bad news for homeowners?

Because rising vacancies put pressure on rents, as landlords have to cut prices to woo a smaller pool of tenants.  As rents drop, meanwhile, one of the key measures of house-price value--the price-to-rent ratio--also changes, and not for the good.

All else being equal, when rents drop, the "Housing P/E ratio" — price to rent — increases as rents decrease.  This is the same thing that would happen to the P/E ratio of a stock if the company’s earnings began to shrink.

The more the rent/earnings shrink, the more expensive the house or company is as a multiple of the rent/earnings.

Will people suddenly refuse to pay as much for houses because the price-to-rent ratio rises a bit?  No.  But they may decide to rent instead of buy, which will remove some demand from the housing market.  And, this, in turn, will put pressure on house prices.

The chart below from Calculated Risk illustrates the price-to-rent ratio over the past 15 years.  As you can see, it got way out of whack during the peak bubble years and has now fallen back within the realm of normal.  As rents fall, however, the ratio will start rising again. 

That is, unless house prices fall, too, which is the more likely scenario.

crpricetorent.jpg 

See Also:  HOUSING RECOVERY!  (How’s Your City Doing?)

 


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Wells Fargo’s Ticking Time Bomb: Credit Default Swaps On Commercial Mortgages

Wells Fargo’s Ticking Time Bomb: Credit Default Swaps On Commercial Mortgages

WellsFlannelManBIG AP 10 03 08Courtesy of John Carney at Clusterstock

Outside experts hired by Wells Fargo to pour through its books are reportedly shocked at the bank’s exposure to derivatives trades it took on when it acquired Wachovia may trigger huge losses at the bank, Teri Buhl reports at BankImplode.com

It appears that Wachovia wrote credit default swaps on the junior tranches of commercial mortgage backed securities it was selling, which means that it is on the hook for losses in the riskiest CMBS tranches it sold. Wells itself might not even know the size of its exposure, Buhl reports.

From Buhl:

According to sources currently working out these loans at Wells Fargo when selling tranches of commercial mortgage-backed securities below the super senior tranche, Wachovia promised to pay the buyer’s risk premium by writing credit default swap contracts against these subordinate bonds. Should the junior tranches eventually default, then the bank is on the hook. Dan Alpert of Westwood Capital says these were practices that he saw going on in the market at large.

Alpert says in reference to how he saw CMBS trades get done, “These guys would say ‘We’ll just take back that silly credit risk you’re worried about.’ Of course that was a nice increase to earnings when they got the security sold. The bank made money at the time.”

Buhl points out that investors might be caught off-guard if Wells has to start paying out on the swaps it sold. Wells, like most banks, almost certainly holds the credit default swap liabilities off balance sheet and most likely does not recognize them as a loss until they actually have to pay, Buhl writes. Wells says it carefully monitors its derivatives exposure. "We have provided extensive transparent disclosures on our derivatives in our 2008 annual report beginning on page 132,” Wells says.

Here’s Wells own calculation of its derivatives exposure as of the day it closed the Wachovia deal.

wachovia-wellscreditdefaultswaps.png

But it seems fair to wonder if Wells really understood all of the derivatives exposure it took on when it acquired Wachovia. Buhl wonders if Wells really has enough capital set aside to handle the derivatives liability.

…So could Wells really have enough capital to handle the liability of credit


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10 Bubbles In The Making

10 Bubbles In The Making

bubble bubbles kid child gum tbiCourtesy of Lawrence Delevingne at Clusterstock

One year after America’s brush with economic catastrophe, there’s plenty of looking back at the bubbles that caused financial chaos.

But what’s next?

There are surely dangerous economic bubbles forming as we speak. As Alan Greenspan warned this week, "They [financial crises] are all different, but they have one fundamental source," he said. "That is the unquenchable capability of human beings when confronted with long periods of prosperity to presume that it will continue."

The trick, of course, is spotting them. By definition, most people don’t spot a bubble before they form and burst.

Here’s 10 for which you should be on alert →

And if history repeats, bubbles tend to share a common fate:

 


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House Price Crash Rate Finally Beginning To Ease

Good news! and bad news!

House Price Crash Rate Finally Beginning To Ease 

Courtesy of Henry Blodget at ClusterStock

Good news! The rate of the price decline in the housing crash has finally begun to ease.

Bad news! Prices are still falling 18% year over year.

Specifically, in April, according to the Case Shiller index, the rate of decline in nationwide house prices eased slightly in April--to 18% from 19% in March. The rate of decline has hovered around 19%-20% for the last several months.  And prices have now declined a staggering 33%-34% from the peak.

As we’ve noted over this period, before house prices can start recovering, they have to stop falling.  And the first step toward prices stopping falling is a decline in the RATE at which they are falling.  And we are finally beginning to see that.

But we’re still talking about an astonishing rate of collapse.  And we’re still looking at a peak-to-trough decline of at least 40% and probably closer to 50% nationwide, which would be unprecedented.  And even today, with prices down 33%-34% from the peak, prices are still above fair value.

So the folks who use this slight moderation in the rate of decline to spin tales of a "bottom" or, worse, a "recovery" are smoking something.  Prices have at least another 10%-15% to fall, and they’ll likely be falling for at least another year or two.

Here’s the small uptick in the rate of decline:

caseshillerrateapril.jpg

Prices have now rolled back to mid-2003 levels.  They’ll likely be back to 2000 levels before we’re through.

S&P/Case-Shiller Home Price Indices 

And here’s the positive spin from the S&P press release (always look on the bright side!):

The 10-City and 20-City Composites declined 18.0% and 18.1%, respectively, in April compared to the same month in 2008. These are improvements over their returns reported for March, down 18.7% for both indices. For the past three months, the 10-City and 20-City Composites have recorded an improvement in annual returns.  Record annual declines were reported for both indices with their respective January data, -19.4% for the 10-City Composite and 19.0% for the 20-City Composite.

“The pace of decline in residential real estate slowed in April,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “In addition to the 10-City and 20-City Composites, 13


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Your Field Guide To The Mortgage Collapse

Courtesy of Henry Blodget at ClusterStock

Your Field Guide To The Mortgage Collapse

mortgage meltdown, chart 5-9The 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.

START YOUR FIELD GUIDE TO THE MORTGAGE COLLAPSE >

 

 


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Zero Hedge

Final Q2 GDP Comes At 1.4%: US Set To Grow At Slowest Pace Since Financial Crisis

Courtesy of ZeroHedge. View original post here.

While the second quarter is now ancient history and the debate is how much the predicted rebound in Q3 GDP will fade into Q4 which is set to begin in just three days, moments ago the BEA released its final revision for Q2 GDP, according to which real GDP increased 1.4% in the second quarter of 2016, 0.3 % higher than the “second” estimate released in August, and fractionally higher than the 1.3% expected. In the first quarter, real GDP rose 0.8 percent.

...



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ValueWalk

Here's Why The Pundits Are Wrong About Warren Buffett

By VW Staff. Originally published at ValueWalk.

Here’s Why The Pundits Are Wrong About Warren Buffett via Roger Lowenstein, Fortune

]]> Get The Full Warren Buffett Series in PDF

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It takes a lot of cherry-picking to make him look bad.

Norman Pearlstine, the vice chairman and longtime editorial soul of Time Inc., which publishes Fortune, once said that every feature story fit into one of three archetypes: &...



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Phil's Favorites

India Raids Pakistan, Claims "Significant Casualties" Inflicted: Don't Worry It's Just a "Surgical Strike"

Courtesy of Mish.

Border skirmishes between India and Pakistan have been going on for years. But with social mood darkening everywhere, and with India making the claim ‘Significant casualties’ inflicted on ‘launch pads’ for militant attacks, one can’t help but wonder when this erupts in a major way.

The Financial Times reports India launches ‘surgical strikes’ on Pakistan terror targets.

India said it had carried out “surgical strikes” overnight across its disputed border with Pakistan to target groups of militants that were allegedly planning to carry out terror attacks on Indian territory.

...

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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Just as it's been announced, US oil producers may readying to thwart OPEC's plan (Business Insider Australia)

While the specifics over how it will be achieved are as yet unknown, and there are already signs that some members are uncomfortable with the decision, it appears that OPEC will reduce oil output for the first time in eight years when the grou...



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Mapping The Market

The Industry That Was Crushed By The Obama Administration

By Jean-Luc

Good riddance – cleaned up a lot of frauds there:

The Industry That Was Crushed By The Obama Administration

In early 2009, the seven largest publicly traded college operators were worth a combined $51 billion. Today, they’ve been all but wiped out.

When Barack Obama took office, America’s seven largest publicly traded college operators were worth a combined $51 billion, with more than 815,000 students enrolled at campuses spread across the country. The schools were flooded with with people seeking shelter from the recession, returning to school to pick up new skills.

Almost eight years later, the industry has been decimated. The seven largest listed operators are worth just over $6 billion, and the most valuable co...



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Kimble Charting Solutions

Japanese YEN testing triple breakout level

Courtesy of Chris Kimble.

Below looks at the Japanese Yen over the past 20-years.

For the majority of the time, the YEN has remained inside of rising channel (A). Now a big test is in play, after breaking support.

CLICK ON CHART TO ENLARGE

The Yen remained inside rising channel (A) from the mid 1990’s until 2014, where it broke below rising support. The rally that has taken place since the lows ...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker.

Please review a collection of WWW browsing results.



Date Found: Saturday, 26 March 2016, 02:36:15 PM

Click for popup. Clear your browser cache if image is not showing.
Comment: ZH: Its a BULLARD market, the FED jaw boning is keeping the market up!



Date Found: Sunday, 27 March 2016, 02:31:30 PM

Click for popup. Clear your browser cache if image is not showing.
Comment: RTT: World trade near 2008/09 lows. SP500 near all time highs. PLACE YOUR BETS! Roll up! Roll up!



Date Found: Tuesday, 29 March 2016, 02:42:11 PM

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OpTrader

Swing trading portfolio - week of September 26th, 2016

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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Members' Corner

Market Liquidity and Macroeconomic Bullshit

 

Market Liquidity and Macroeconomic Bullshit

Courtesy of The Nattering Naybob

STJL - "Apparently macroeconomics is all bullshit – ROFL! Paging Naybob now… Famous Economist Paul Romer Says Macroeconomics Is All Bullshit."

The Nattering One muses... Macroeconomics as practiced by academics and those in charge is pure voodoo. Better to chant over goat blood, bird feathers and scattered entrails...

As for reality, overnight CNH HIBOR (...



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Digital Currencies

Gold, Silver and Blockchain - Fintech Solutions To Negative Rates, Bail-ins, Currency Debasement and Cashless

Courtesy of ZeroHedge. View original post here.

By Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.

...



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Biotech

Epizyme - A Waiting Game

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

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...



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All About Trends

Mid-Day Update

Reminder: Harlan 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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We know you love coming here for our Stocks & Options education, strategy and trade ideas, and for Phil's daily commentary which you can't live without, but there's more!

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News: If you missed it, you can probably find it in our Market News section. We sift through piles of news so you don't have to.   

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