Guest View
User: Pass: | become a member
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?)

 


Tags: , , , ,




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


continue reading


Tags: , , , , , ,




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:

 


Tags: , , , ,




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


continue reading


Tags: , , , , , , , ,




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 >

 

 


Tags: , , , , , , ,




 
 
 

Zero Hedge

Thomas Piketty's "Sensational" New Book

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Hunter Lewis via The Mises Economic blog,

This 42 year economist from French academe has written a hot new book: Capital in the Twenty-First Century. The US edition has been published by Harvard University Press and, remarkably, is leading the best seller list, the first time that a Harvard book has done so. A recent review describes Piketty as the man “who exposed capitalism’s fatal flaw.”

So what is this flaw? Supposedly under capitalism the rich get steadily richer in relation to everyone else; inequality gets worse and worse. It is all baked into the cake, unavoid...



more from Tyler

Phil's Favorites

French Telecom Company Does Biggest Junk Bond Sale Ever; Bidding Wars for Junk; AOL Flashback

Courtesy of Mish.

With central bankers globally suppressing interest rates, the such for yield elsewhere is on. One of the places investors have turned is speculative junk bond offerings.

Please consider French Company Does Biggest Junk Bond Sale Ever.
Numericable (NUM), which provides cable and internet service in France and other European markets, sold a record amount of high-yield bonds Wednesday with some priced in dollars and others in euros.

It's sold $7.78 billion and €2.25 billion in notes that yield 5% or more, according to a statement from Altice, the multinational telecom group that owns Numericable. Altice issued $2.9 bill...



more from Ilene

Chart School

Get Ready for Europe to Print

Courtesy of Doug Short.

Summary:

  • Core Eurozone CPI inflation rate falls to 0.70%, a multi-decade low
  • This occurs at a time when the PIGS' average unemployment rate rests near 24%
  • Deflation threat in Europe real as GDP in Europe likely to peak this year
  • European hawks moving towards dovish side of the fence, opening door for more QE
  • Implications: stronger European stock market, stronger USD, weaker commodity prices, stronger global growth

Back in February I laid the groundwork for why we should expect to see the European Central Bank (ECB) massively expand its balance sheet (see article). The case for expecting to see the ECB print is only increasing as core Eurozone inflation is c...



more from Chart School

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...

more from David

Insider Scoop

Yum! Brands Conference Call Highlights; All About China

Courtesy of Benzinga.

Related YUM China Drives Yum! Brands Q1 Earnings - Analyst Blog Market Sentiment Flat Due To A Barrage Of Unimpressive Q1 Earnings Reports - Economic Highlights Rallying Ahead of Earnings (Fox Business)

Yum! Brands (NYSE: YUM) reported its first quarter earnings on April 23, 2014. Shares of the company are down 0.86 percent or $...



http://www.insidercow.com/ more from Insider

Market Shadows

Soy Numero Uno

Soy Numero Uno

By Paul Price of Market Shadows

Bunge Limited (BG) is the world’s largest processor of soybeans. It is also a major producer of vegetable oils, fertilizer, sugar and bioenergy.

When commodities got hot in 2007-08, Bunge’s EPS shot up and the stock followed, rising 185% in 19 months.

The Great Recession took its toll on operations, dropping EPS to a low of $2.22 in 2009.  Since then profits have recovered.  They ranged from $4.62 - $5.90 in the latest three years. 2014 appears poised for a large increase. Consensus views from multiple sources see BG earning $7.04 - $7.10 this year and then $7.83 - $7.94 in 2015.

...



more from Paul

Option Review

Casino Stocks LVS, WYNN On The Run Ahead of Earnings

Shares in Las Vegas Sands Corp. (Ticker: LVS) are up sharply today, gaining as much as 5.7% to touch $80.12 and the highest level since April 4th, mirroring gains in shares of resort casino operator Wynn Resorts Ltd. (Ticker: WYNN). The move in Wynn shares appears, at least in part, to follow a big increase in target price from analysts at CLSA who upped their target on the ‘buy’ rated stock to $350 from $250 a share. CLSA also has a ‘buy’ rating on Las Vegas Sands with a $100 price target according to a note from reporter, Janet Freund, on Bloomberg. Both companies are scheduled to report first-quarter earnings after the closing bell on Thursday.

...

more from Caitlin

Sabrient

What the Market Wants: Market Poised to Head Higher: 3 Stocks to Consider

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

Courtesy of David Brown, Sabrient Systems and Gradient Analytics

Yesterday, the market continued its winning ways for the fifth consecutive day.  The S&P 500 closed within 1% of its all-time high, and the DJI was even closer to its all-time high.  Healthcare, Energy and Technology led the sectors while Financials, Telecom, and Utilities finished slightly in the red.  All three sectors in the red are typically flight-to-safety stocks, so despite lower than average volume, the market appears poised to make new highs.

Mid-cap Growth led the style/caps last week, up 2.87%, and Small-cap Growth trailed, up 2.22%. This week will bring well over 100 S&P 500 stocks reporting their March quarter earn...



more from Sabrient

OpTrader

Swing trading portfolio - Week of April 21st, 2014

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...



more from OpTrader

Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Click here and sign in with your PSW user name and password, or sign up for a free trial.

...

more from SWW

Digital Currencies

Facebook Takes Life Seriously and Moves To Create Its Own Virtual Currency, Increases UltraCoin Valuation Significantly

Courtesy of ZeroHedge. View original post here.

Submitted by Reggie Middleton.

The Financial Times reports:

[Facebook] The social network is only weeks away from obtaining regulatory approval in Ireland for a service that would allow its users to store money on Facebook and use it to pay and exchange money with others, according to several people involved in the process. 

The authorisation from Ireland’s central bank to become an “e-money” institution would allow ...



more from Bitcoin

Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



more from Promotions

Pharmboy

Here We Go Again - Pharma & Biotechs 2014

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

Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.

And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference.  Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014?  The Biotech ETF beat the S&P by better than 3 points.

As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...



more from Pharmboy



FeedTheBull - Top Stock market and Finance Sites



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...

Learn more About Phil >>


As Seen On:




About Ilene:

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.

Market Shadows >>