Bernanke critics are on the attack (Joe Raedle/Getty Images)
What is the most likely cause today of civil unrest? Immigration. Gay Marriage. Abortion. The Results of Election Day. The Mosque at Ground Zero. Nope.
Try the Federal Reserve. November 3rd is when the Federal Reserve’s next policy committee meeting ends, and if you thought this was just another boring money meeting you would be wrong. It could be the most important meeting in Fed history, maybe. The US central bank is expected to announce its next move to boost the faltering economic recovery. To say there has been considerable debate and anxiety among Fed watchers about what the central bank should do would be an understatement. Chairman Ben Bernanke has indicated in recent speeches that the central bank plans to try to drive down already low-interest rates by buying up long-term bonds. A number of people both inside the Fed and out believe this is the wrong move. But one website seems to believe that Ben’s plan might actually lead to armed conflict. Last week, the blog, Zerohedge wrote, paraphrasing a top economic forecaster David Rosenberg, that it believed the Fed’s plan is not only moronic, but "positions US society one step closer to civil war if not worse."
I’m not sure what "if not worse," is supposed to mean. But, with the Tea Party gaining followers, the idea of civil war over economic issues doesn’t seem that far-fetched these days. And Ron Paul definitely thinks the Fed should be ended. In TIME’s recent cover story on the militia movement many said these groups are powder kegs looking for a catalyst. So why not a Fed policy committee…
In October the FDIC held a large auction of properties it had acquired as a result of failed banks in Georgia. I thought this was an interesting story and wrote about it before the auction took place. It was my intention to write about it again after the results of the auction were released. No such luck. The FDIC has decided to keep us in the dark on this one. The following is an email I got from JP King, the auction house who ran the Georgia auction:
“Unfortunately, FDIC has prohibited us from releasing any information regarding the auction. We’ve been trying to get them to let us release the results, but they have denied our requests. We aren’t allowed to release any details.”
I would have thought that the results of a pubic auction of properties owned by FDIC would have to be publicly disclosed. So why is the FDIC trying to cover this up?
The answer is that the REO problem for the D.C. lenders and the FDIC is reaching a crisis level. In spite of every effort to avoid foreclosures the fact is that the number of properties owned by the Feds is rising on a daily basis.
There are approximately 55 million mortgages outstanding today. At least 10% will/have gone into default before this is over. Of those half will result in foreclosure. These numbers create an estimate of the Federal share of REO at about 1.5 mm homes. Depending on unemployment and the economy going forward that number could be much higher. Before this is over the Feds could own up to 5% of all residential RE.
D.C. is struggling with this. The Treasury Department has created HAMP and HARP, two programs designed to restructure bad mortgages and keep homeowners in the house at all costs. So far the results from these programs have been terrible. More than half of the restructured loans re-default within nine months.
Fannie and Freddie are going into the rental business with their REO. They are charging “market rates” of rent to defaulted owners who are willing to stay in the home. Given that market rents today are equal to the costs of ownership I doubt that the new ‘Renters’ are going to be able to make the payments. So this program…
We've seen this movie before, and if I recall correctly, it didn't end terribly well.
In fact, we're still living through the seemingly-endless backlog of delinquent loans and distressed properties that the massive housing boom and bust cycle left us with back in 2008. A cycle that was fueled by free-flowing capital, and built bad loan by bad loan by bad loan.
Imagine my surprise to read today about a new loan product that requires 0% down; has no private mortgage insurance requirement; provides cash from the lender for up to $4,500 of the ...
Another day, another successful defense of breakout support. The S&P held on to its 20-day MA and is well placed to bounce of this moving average tomorrow. Volume was down, which for a higher close was maybe a little disappointing.
The Nasdaq closed with a small doji in a very nondescript day for the index. Volume was lighter too.
The Russell 2000 continued to hold its breakout. Like the S&P, the 20-day MA is available to lend support too.
Extending the longest streak since the 2008-2009 recession, Factory Orders Unexpectedly Decline 6th Month. New orders for U.S. factory goods unexpectedly fell in January, posting their sixth straight monthly decline, a sign of weakness in the manufacturing sector.
The Commerce Department said on Thursday new orders for manufactured goods slipped 0.2 percent after a revised 3.5 percent decline in December.
Economists polled by Reuters had expected factory orders to gain 0.2 percent in January after a previously reported 3.4 percent tumble in December. Bloomberg Consensus Estimate
Chris Kimble shared his chart of the Utilities Select Sector SPDR ETF, XLU, with us.
The one month performance inset shows XLU’s uninspiring performance compared to every other ETF on the list. However, the rather steep bullish falling wedge pattern says that it may be time for a bounce.
[Click on chart to enlarge]
Chris likes XLU for a short-term bounce off the 200 day moving average at $44. One way to play this setup is to buy the XLU outright. Chris suggests a 3% stop loss on the shares.
Another bullish play is to use options in a strategy designed by Phil:
Despite low trading volume, a strong dollar, mixed economic and earnings reports, paralyzing weather conditions throughout much of the U.S., and ominous global news events, stocks continue to march ever higher. The world remains on edge about potential Black Swan events from the likes of Russia, Greece, or ISIS (or lone wolf extremists). Moreover, the economic recovery of the U.S. may be feeling the pull of the proverbial ball-and-chain from the rest of the world’s economies. Nevertheless, awash in investable cash, global investors see few choices better than U.S. equities.
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 ...
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PSW Members - well, what a year for biotechs! The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down! The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months. What could go wrong?
Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.
Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies. A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...
Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...
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 email@example.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.
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