The major banks {Bank of America, JP Morgan Chase, etc) that issue credit to people like you and I, are reporting numbers that will help us understand what people are doing (or not doing) with their debt lately. A good number of the banks reported that chargeoffs are on the rise again. Charge0ffs measure the number of accounts that no longer have the ability to pay off the debt that they've spent. This can happen for a number of reasons and be a sudden occurrence but usually charge0ffs are the end result of the cardholder being delinquent and not paying minimum amounts off for their credit balances. For example, I may chargeoff because I declared bankruptcy, made some type of settlement agreement with the bank, or after a long period of time (7mos) the bank determines that I will not be paying my debt off. So the fact that there are more of these situations occurring is not not a good thing. In general, the banks chargeoff levels mirror the rate of unemployment which is understandable. The one thing this trend tells me is that it appears to be more likely that once a cardholder starts to become delinquent they usually stay that way until the bank writes them off (after 7mos) and determines that they won't get their money back.
If people aren't making good on their existing debts then that means their available credit is shrinking and I go back to my example that indicates the consumer will be pulling back or not making new purchases because they don't have any more room on their cards. This means that most purchases need to come from cash and that is hard to come buy nowadays. Does this signal another leg down for the economy...its hard not to think that we've come too far too fast.
Now before you go and think that I have nothing positive to say, there was some good news. Most of the banks reported that the number of people going delinquent is declining slightly. So its seems like the key will be for the banks to do everything in their power to keep people making those minimum payments.
See the attached link for a view of the "Lifecycle of a Deliquent Card Account" (provided by creditcards.com):
http://www.creditcards.com/credit-card-news/life-cycle-delinquent-debt-1265.php
And the reaction of one credit card issuer is to charge very high interest rates, see the what a 79% interest rate looks like here:
http://www.creditcards.com/credit-card-news/first-premier-79-rate-fees-credit-card-1265.php
Thursday, December 17, 2009
My Take On Things
My goal today for posting is similar to Nike’s slogan of “Just Do It”. I am just going to write and pretty much relay what’s on my mind. As you can tell from the gap in my postings, this has been a busy last few months. I have been impacted by many of the things that all Americans are facing with the downturn in the economy. Job loss has hit close to home and impacted my family members, I am working more hours and seem to be stressed out more, and time seems to keep ticking in the back of my head like one of those old grandfather clocks. Literally (because I reside in the Midwest) and figuratively, its grey outside and it appears that a year ago I was looking into the abyss of what I truly believe is the closest thing that we will experience in our lifetimes to an economic depression. And my goal is not to be depressing, but to keep it real. So I am going to flashback and flashforward in this posting on where I believe our economy WAS and where I truly believe things stand TODAY as it relates to my life. This hopefully will hit home to you and help you understand how all of the things that we hear, read, and see…such as the big Wall Street bonuses, TARP, cash for clunkers and the homebuyer’s tax credit are ALL RELATED but from a regular guy’s perspective like mine (and yours).
Where the Economy Was ~
Depending on how far we go back (let’s say 2.5 years ago), there was jubilation amongst everyone. I seemed to be eating out everyday, throwing bring your own booze ‘BYOB’ events at different restaurants and traveling to either Vegas or South Beach at least twice a year. And I never thought to ask why but before it used to be a small trip between me and my friends that managed their finances well (fiscally conservative) and then it blossomed to the guys that didn’t always manage their finances but who could now make the trip. And I never thought much about the phenomenon but our trip of almost 10 people for a sun filled trip to Miami could have been an indicator of things to come. Where did everyone get the money (steady jobs, bonuses, easy credit) to be able to go all of a sudden…especially when a round of Patron in S. Beach cost each person over 80 bucks??? I didn’t think about that at the time but the other event I did find strange was home buying activities in Chicago. I recall a few years back that everyone was asking me when I was going to buy. So I stuck my toe in the water and found out that buying a home in Chicago was easily going to cost me almost 3x as much as it did in Indiana. And on my average joe salary the numbers didn’t match up??? So what did I do…I BLOGGED about this phenomenon over and over and some people got it, while many others didn’t (see http://urbanomics.blogspot.com/2006/02/huff-puff-blow-houses-down.html . My only mistake with housing was assuming that most of the inventory was being bought by speculative investors with deep pockets, but read on because the investors were average people like you and I caught up in the frenzy…of flipping houses and retiring early. But what I didn’t see was the tsunami effect that was to come of too much easy debt to buy houses and obtain loans, credit cards, etc. I didn’t watch TV outside of sports and the occasional Law and Order episode. If I would have clicked a little bit further I would have known that there were new shows cropping about how to “FLIP That House”, “Buying Tons of Property with Lines of Credit”, and I appreciate Suze Orman’s segment of “Can I Afford It”. I wasn’t in tune to the fact that the nation was building a culture of people that were just buying things with no regards as to whether they could afford it. My rule of thumb is if you have to call into a show to ask whether you can afford something then you probably should not be buying it! And to be fair these tv shows should show both sides by doing a “Where are They Know” segment: helping us understand how long those flippers had to hold that property before they ran out of money or were foreclosed on and their dreams where swept away. That would have been Real TV and not just the happy story of flip every home and make a minimum of $35-50K of each flip in no time.
I don’t know what kicked things off but the house of cards crumbled. Was it finally that the market ran out of easy buyers and found the one’s like me that asked “How Can I Afford This” or “Why Are You Giving Me So Much Debt”? There must have been a peak when the banks realized that the uninformed buyers were running out OR that we had stretched them too thin. Who could keep up with inflated mortgages, debt to furnish this gigantic house, and debt to finance their new life of upgrades (i.e., cars, clothes, dinners, vacations). I am guessing the first realization came as banks began HALTING credit lines à No more borrowing against your home (Home Equity Lines of Credit) and no more extensions for your credit card which has reached it limits. So guess what this halting of initial credit does, it crimps our lifestyles and people stop making extravagant purchases. My first clue was the Recreational Vehicle (RV) market and their predictions of a slowdown. Think this is the ultimate purchase for people with excess money a lavish vehicle to travel around in and still feel at home. Then most people stopped spending on themselves and stopped buying clothing, jewelry, cars, and holiday trips to warm places. This pullback caused all these industries – Retail, RV, auto, transportation to start to cut jobs to match the lack of demand. And hell breaks loose when anyone (but especially overextended people) starts to loose a job. Why, because there is a mountain above your head of things to pay. Let’s start naming them: mortgage/rent, car bills, utilities, credit card, school loans, insurance, and medical bills. And when jobs are cut across entire social classes you begin to realize that even rich people have huge mortgages, autos, boats, vacation properties to keep up with.
For me and my family, the downturn in the economy hit hard and hit fast. It rattled our conservative little family because our family’s employment history represents the entire workforce via construction, legal, business, technology, healthcare, and education. And the first shoe to drop was the construction section and we had a member of our family unemployed. I began writing even further that this wasn’t your normal recession and not to drink the Kool-Aid from all the people on Wall Street like Larry Kudlow who told you to keep waiting for the goldilocks rally that never came as the Dow Jones Industrials dropped from 10K to below 7K. This recession was hitting college educated people in growth fields like construction. And I didn’t believe the hype when they were telling you that this is where capitalism kicks in and the great trickle down effect of rich people spending money would bring us back see http://urbanomics.blogspot.com/2008/03/hey-i-cant-swimand-neither-can-wall.html . This time I wrote it seems different, because this was not like other bubbles and it wasn’t just people on the lower end of the social spectrum being hit with job losses or their dollar not stretching as far. But what they didn’t realize what that the folks of every class where being impacted because everyone was trying to keep up with the next level up.
If you recall, I wrote about conservation and a prudent evaluation of your entire financial landscape. Reassess everything and get rid of excess debt (see http://urbanomics.blogspot.com/2008/07/mystery-market.html & http://urbanomics.blogspot.com/2008/05/hot-topics-oil-housing-economy.html ). For me, I had caught the bug slightly and often bought stocks on margin…what a mistake that was. When you use someone else’s money and the value of your investment goes down, not only do you have to pay them back in full but with interest. So in some ways I felt want the homeowner or credit card borrower was going through. I don’t want to sell while the value was dropping and ohhh great…money has to come out of my bank account to get rid of this extra debt. This prompted me to start taking my lunch to work, and going out less, and shopping less…and buying groceries. There were no vacations this year except for weddings and family get togethers. And that’s when I thought about what would turn this economy around…I didn’t know then but I summed up my hunch saying that it would take a mix of things to stimulate people from “pulling back” (see http://urbanomics.blogspot.com/2008/10/bailout-what-this-means-to-you-plus.html) And I remember saying let’s help the people that have pulled back on spending and can pull no further and need help with daily responsibilities. And while I was right then, I missed the fact that all the temporary band-aids (tax cuts, clunker) only work for so long… and the ultimate area of assistance has always been with JOBS. If there are no jobs, this pull back continues…because while again others may use the phrase “90% of Americans are still working and therefore consuming” they may be a little bit out of touch with the real world. The real world knows that its more that 10% unemployment and it also knows that many of the “90%” are like me and don’t and won’t consume much until things start looking better for the people around us.
And for my flashforward ~ To be continued
Where the Economy Was ~
Depending on how far we go back (let’s say 2.5 years ago), there was jubilation amongst everyone. I seemed to be eating out everyday, throwing bring your own booze ‘BYOB’ events at different restaurants and traveling to either Vegas or South Beach at least twice a year. And I never thought to ask why but before it used to be a small trip between me and my friends that managed their finances well (fiscally conservative) and then it blossomed to the guys that didn’t always manage their finances but who could now make the trip. And I never thought much about the phenomenon but our trip of almost 10 people for a sun filled trip to Miami could have been an indicator of things to come. Where did everyone get the money (steady jobs, bonuses, easy credit) to be able to go all of a sudden…especially when a round of Patron in S. Beach cost each person over 80 bucks??? I didn’t think about that at the time but the other event I did find strange was home buying activities in Chicago. I recall a few years back that everyone was asking me when I was going to buy. So I stuck my toe in the water and found out that buying a home in Chicago was easily going to cost me almost 3x as much as it did in Indiana. And on my average joe salary the numbers didn’t match up??? So what did I do…I BLOGGED about this phenomenon over and over and some people got it, while many others didn’t (see http://urbanomics.blogspot.com/2006/02/huff-puff-blow-houses-down.html . My only mistake with housing was assuming that most of the inventory was being bought by speculative investors with deep pockets, but read on because the investors were average people like you and I caught up in the frenzy…of flipping houses and retiring early. But what I didn’t see was the tsunami effect that was to come of too much easy debt to buy houses and obtain loans, credit cards, etc. I didn’t watch TV outside of sports and the occasional Law and Order episode. If I would have clicked a little bit further I would have known that there were new shows cropping about how to “FLIP That House”, “Buying Tons of Property with Lines of Credit”, and I appreciate Suze Orman’s segment of “Can I Afford It”. I wasn’t in tune to the fact that the nation was building a culture of people that were just buying things with no regards as to whether they could afford it. My rule of thumb is if you have to call into a show to ask whether you can afford something then you probably should not be buying it! And to be fair these tv shows should show both sides by doing a “Where are They Know” segment: helping us understand how long those flippers had to hold that property before they ran out of money or were foreclosed on and their dreams where swept away. That would have been Real TV and not just the happy story of flip every home and make a minimum of $35-50K of each flip in no time.
I don’t know what kicked things off but the house of cards crumbled. Was it finally that the market ran out of easy buyers and found the one’s like me that asked “How Can I Afford This” or “Why Are You Giving Me So Much Debt”? There must have been a peak when the banks realized that the uninformed buyers were running out OR that we had stretched them too thin. Who could keep up with inflated mortgages, debt to furnish this gigantic house, and debt to finance their new life of upgrades (i.e., cars, clothes, dinners, vacations). I am guessing the first realization came as banks began HALTING credit lines à No more borrowing against your home (Home Equity Lines of Credit) and no more extensions for your credit card which has reached it limits. So guess what this halting of initial credit does, it crimps our lifestyles and people stop making extravagant purchases. My first clue was the Recreational Vehicle (RV) market and their predictions of a slowdown. Think this is the ultimate purchase for people with excess money a lavish vehicle to travel around in and still feel at home. Then most people stopped spending on themselves and stopped buying clothing, jewelry, cars, and holiday trips to warm places. This pullback caused all these industries – Retail, RV, auto, transportation to start to cut jobs to match the lack of demand. And hell breaks loose when anyone (but especially overextended people) starts to loose a job. Why, because there is a mountain above your head of things to pay. Let’s start naming them: mortgage/rent, car bills, utilities, credit card, school loans, insurance, and medical bills. And when jobs are cut across entire social classes you begin to realize that even rich people have huge mortgages, autos, boats, vacation properties to keep up with.
For me and my family, the downturn in the economy hit hard and hit fast. It rattled our conservative little family because our family’s employment history represents the entire workforce via construction, legal, business, technology, healthcare, and education. And the first shoe to drop was the construction section and we had a member of our family unemployed. I began writing even further that this wasn’t your normal recession and not to drink the Kool-Aid from all the people on Wall Street like Larry Kudlow who told you to keep waiting for the goldilocks rally that never came as the Dow Jones Industrials dropped from 10K to below 7K. This recession was hitting college educated people in growth fields like construction. And I didn’t believe the hype when they were telling you that this is where capitalism kicks in and the great trickle down effect of rich people spending money would bring us back see http://urbanomics.blogspot.com/2008/03/hey-i-cant-swimand-neither-can-wall.html . This time I wrote it seems different, because this was not like other bubbles and it wasn’t just people on the lower end of the social spectrum being hit with job losses or their dollar not stretching as far. But what they didn’t realize what that the folks of every class where being impacted because everyone was trying to keep up with the next level up.
If you recall, I wrote about conservation and a prudent evaluation of your entire financial landscape. Reassess everything and get rid of excess debt (see http://urbanomics.blogspot.com/2008/07/mystery-market.html & http://urbanomics.blogspot.com/2008/05/hot-topics-oil-housing-economy.html ). For me, I had caught the bug slightly and often bought stocks on margin…what a mistake that was. When you use someone else’s money and the value of your investment goes down, not only do you have to pay them back in full but with interest. So in some ways I felt want the homeowner or credit card borrower was going through. I don’t want to sell while the value was dropping and ohhh great…money has to come out of my bank account to get rid of this extra debt. This prompted me to start taking my lunch to work, and going out less, and shopping less…and buying groceries. There were no vacations this year except for weddings and family get togethers. And that’s when I thought about what would turn this economy around…I didn’t know then but I summed up my hunch saying that it would take a mix of things to stimulate people from “pulling back” (see http://urbanomics.blogspot.com/2008/10/bailout-what-this-means-to-you-plus.html) And I remember saying let’s help the people that have pulled back on spending and can pull no further and need help with daily responsibilities. And while I was right then, I missed the fact that all the temporary band-aids (tax cuts, clunker) only work for so long… and the ultimate area of assistance has always been with JOBS. If there are no jobs, this pull back continues…because while again others may use the phrase “90% of Americans are still working and therefore consuming” they may be a little bit out of touch with the real world. The real world knows that its more that 10% unemployment and it also knows that many of the “90%” are like me and don’t and won’t consume much until things start looking better for the people around us.
And for my flashforward ~ To be continued
Thursday, August 20, 2009
My Reality Show: Homebuyer 101 ~ Searching for a Home
So far my reality show is in full swing. Click this link to find the first 3 rules to home buying. Remember to check your credit, get pre-approved, and save for your down payment. First 3 Rules
Once I complete the first 3 rules, I set out to search for my house of dreams. Here are the steps to make sure your ready to find your dream house:
1. Practice Before The Real Thing - This is the first step in your reality check as a home buyer. Before waisting your time and stressing your agent out, practice finding the home of your dreams on your own and see what your pre-approved amount gets you in many different neighborhoods. The web is a great tool for pr acting with specialty sites and sites that tap into all Multiple Listing Service (MLS) listed homes. For Chicago, here are the sites I practiced with:
Dreamtown.com
Trulia.com
Zillow.com
Realtor.com ***
chicagotribune.com (Real Estate section)
Redfin.com ***
*** These sites helped me get the most accurate information
2. Narrow Your Search - Its time to narrow your search by more than just price. Choose the following: Preferred Locations, Total Price, Must Have Features. Here is mine:
Preferred Locations -
Here is a listing of all Chicago neighborhoods: http://www.chicagohome.com/neighborhoodMasterList.cfm
Most of the North Side: (Irving Park, Avondale, Roscoe Village, Logan Square, Bucktown, Wicker Park, St. Ben’s, North Center, Rogers Park, Lakeview, Lincoln Square, Albany Park, Lincoln Park, Uptown, Edgewater, Portage Park, Ravenswood)
South Side (Hyde Park, Kenwood, UIC)
Total Price - Know two key things about the price: 1. List Price, 2. Monthly Payment Price
List Price - The total amount you want to spend. This will impact your down payment.
Monthly Payment Price - Also estimate your total monthly budget which should include the mortgage payments, taxes, association fees...and be aware of insurance costs.
Must Have Options
Property Types: Primary - Duplex, Townhome, Single Family Home
Square Feet - At least 1600
Bed Rooms - At least 2
Bathrooms - At least 2
Balcony/patio/deck
Closet space
Washer/Dryer in unit
Central air or separate unit in each room
High ceilings
Intercom/Security/Buzzer Door Entrance or Locked Fence
Good parking situation
Access to Transportation
Grocery/food/stores
Hardwood
Kitchen - Stainless Steel Package, Update Cabinets
Bathroom - Updated Features
3. Get Professional Help, Choose an Agent
My personal opinion is that if you are well informed your agent is helpful but not vital. Don't be afraid to find your home on your own and then just rely on the agent to show you the property (and then help you close the deal). I would explore a growing breed of agencies that allow you to use a powerful site to 'Narrow Your Search' and choose the properties that meet your criteria...on your own. The catch for you doing all that work is the agency will split the COMMISSION with you. Check out sites in Chicago like Redfin.com and ZipRealty.com. I learned through my experience that a traditional agent will do the exact same thing, however, they put in your 'Narrow Your Search' criteria for you and then you choose the properties that look interesting.
I used Redfin and enjoyed their service. However, I went with a traditional agent because Redfin doesn't focus on short sales...a type of distressed property I was leaning towards. Look for agent that lives works and surrounds in the city for at least 5 years. They have seen highs and lows in the economy.
If you choose a traditional agent, create a questionnaire to grill your potential candidates (yes, they are working for you):
~ Is this your full-time job?
~ Are you familiar with distressed properties (foreclosures & short sales)?
~ Where were you last five deals?
~ Who else will be working with me?
~ Will you show me ALL properties available for sale?
~ When am I committed to working with you?
~ Has a client ever filed a complaint?
~ How are you paid?
4. Tour The Homes - Schedule roughly 4-6 homes in a session. This is a good amount that will allow you to remember each property. I recommend taking a camera with you when touring homes. This was the best tool because I remembered so much more.
Once I complete the first 3 rules, I set out to search for my house of dreams. Here are the steps to make sure your ready to find your dream house:
1. Practice Before The Real Thing - This is the first step in your reality check as a home buyer. Before waisting your time and stressing your agent out, practice finding the home of your dreams on your own and see what your pre-approved amount gets you in many different neighborhoods. The web is a great tool for pr acting with specialty sites and sites that tap into all Multiple Listing Service (MLS) listed homes. For Chicago, here are the sites I practiced with:
Dreamtown.com
Trulia.com
Zillow.com
Realtor.com ***
chicagotribune.com (Real Estate section)
Redfin.com ***
*** These sites helped me get the most accurate information
2. Narrow Your Search - Its time to narrow your search by more than just price. Choose the following: Preferred Locations, Total Price, Must Have Features. Here is mine:
Preferred Locations -
Here is a listing of all Chicago neighborhoods: http://www.chicagohome.com/neighborhoodMasterList.cfm
Most of the North Side: (Irving Park, Avondale, Roscoe Village, Logan Square, Bucktown, Wicker Park, St. Ben’s, North Center, Rogers Park, Lakeview, Lincoln Square, Albany Park, Lincoln Park, Uptown, Edgewater, Portage Park, Ravenswood)
South Side (Hyde Park, Kenwood, UIC)
Total Price - Know two key things about the price: 1. List Price, 2. Monthly Payment Price
List Price - The total amount you want to spend. This will impact your down payment.
Monthly Payment Price - Also estimate your total monthly budget which should include the mortgage payments, taxes, association fees...and be aware of insurance costs.
Must Have Options
Property Types: Primary - Duplex, Townhome, Single Family Home
Square Feet - At least 1600
Bed Rooms - At least 2
Bathrooms - At least 2
Balcony/patio/deck
Closet space
Washer/Dryer in unit
Central air or separate unit in each room
High ceilings
Intercom/Security/Buzzer Door Entrance or Locked Fence
Good parking situation
Access to Transportation
Grocery/food/stores
Hardwood
Kitchen - Stainless Steel Package, Update Cabinets
Bathroom - Updated Features
3. Get Professional Help, Choose an Agent
My personal opinion is that if you are well informed your agent is helpful but not vital. Don't be afraid to find your home on your own and then just rely on the agent to show you the property (and then help you close the deal). I would explore a growing breed of agencies that allow you to use a powerful site to 'Narrow Your Search' and choose the properties that meet your criteria...on your own. The catch for you doing all that work is the agency will split the COMMISSION with you. Check out sites in Chicago like Redfin.com and ZipRealty.com. I learned through my experience that a traditional agent will do the exact same thing, however, they put in your 'Narrow Your Search' criteria for you and then you choose the properties that look interesting.
I used Redfin and enjoyed their service. However, I went with a traditional agent because Redfin doesn't focus on short sales...a type of distressed property I was leaning towards. Look for agent that lives works and surrounds in the city for at least 5 years. They have seen highs and lows in the economy.
If you choose a traditional agent, create a questionnaire to grill your potential candidates (yes, they are working for you):
~ Is this your full-time job?
~ Are you familiar with distressed properties (foreclosures & short sales)?
~ Where were you last five deals?
~ Who else will be working with me?
~ Will you show me ALL properties available for sale?
~ When am I committed to working with you?
~ Has a client ever filed a complaint?
~ How are you paid?
4. Tour The Homes - Schedule roughly 4-6 homes in a session. This is a good amount that will allow you to remember each property. I recommend taking a camera with you when touring homes. This was the best tool because I remembered so much more.
Saturday, August 15, 2009
What's in My New Fave Five Portfolio
Well if I had my T-Mobile Sidekick I would be dialing up these stocks in my Fave Five list. After reading my previous post you see that I am looking to build a base with longer term plays that will offer protection and growth. Stocks like TIP, EPD, and GE are for the long road because they protection you from inflation, provide a nice dividend, and offer large cap value...respectively.
I became to write about clarity and the activity that I am seeing in the markets allows me to return to my screening process. A process that allows me to rely on quantitative data analysis and less on my emotions. Here are my picks and the my views of what the data tells me.
My FAVE FIVE for August with price points:
Interactive Brokers (NasdaqGS: IBKR) - This may be my favorite pick this month. I would be a heavy accumulator between $18.15 -18.60. Also any points when they dip below $19.12 I would start nibbling at the stock. I like the activity in the stock market which allows this company to garner more fees and I am bullish on the fact that they market themselves as a low cost fee servicer.
Americredit (NYSE: ACF) - I am pleased that this stock came up screen. At 16.94, I would be a buyer of this automobile finance contract purchaser and servicer. I believe 'Cash for Clunkers' will be a huge benefit to this company and the proof is in a recent discussion on CNBC with the AutoNation CEO. He directly attributed the program with bringing buyers with good credit scores into showrooms.
Bank of America (NYSE: BAC) This one is simple. Everyone and there mama is buying into BAC and I told you before I don't go against smart money. It came up on my screen and further research shows industry hedge fund smart guys like Peltz, Jana Hedge fund, Dan Loeb and my current favorite John Paulson are jumping on to this train. Take Paulson, my dog owns 168 Million shares. Hmmm, is that enough to make you think twice! I'm struggling with a price point but I'd love to see a small pullback to pick this stock up @ 15.96
Becton Dickinson (NYSE: BDX) - This one is simple. Even though I like Paulson, I am a bigger fan of Warren Buffet. He steered me right with Burlington Northern and now he's on board with BDX. Jump on the wagon @ $65.49
Pfizer (NYSE: PFE) - This was not uncovered by my screen but I like the activity around PFE. This was added at the last minute and switched with my honorable mention Boston Sci. As I was researching PFE, I learned that the management has indicated a plan to raise the dividend by 25% by the end of the year. I can dig that!
Honorable Mention Fave Fives:
Rait Financial (NYSE: RAS) - I have to give you a 'penny stock'. RAS hits my screen and should be picked up at $2! The only problem is that it took off the other day to the tune of 29%. Well you win some and you lose some.
Boston Scientific (NYSE: BSX) - This gets the dubious number six on my list. It got replaced by an older maybe more responsible friend PFE. But grab BSX @ $11.06.
I became to write about clarity and the activity that I am seeing in the markets allows me to return to my screening process. A process that allows me to rely on quantitative data analysis and less on my emotions. Here are my picks and the my views of what the data tells me.
My FAVE FIVE for August with price points:
Interactive Brokers (NasdaqGS: IBKR) - This may be my favorite pick this month. I would be a heavy accumulator between $18.15 -18.60. Also any points when they dip below $19.12 I would start nibbling at the stock. I like the activity in the stock market which allows this company to garner more fees and I am bullish on the fact that they market themselves as a low cost fee servicer.
Americredit (NYSE: ACF) - I am pleased that this stock came up screen. At 16.94, I would be a buyer of this automobile finance contract purchaser and servicer. I believe 'Cash for Clunkers' will be a huge benefit to this company and the proof is in a recent discussion on CNBC with the AutoNation CEO. He directly attributed the program with bringing buyers with good credit scores into showrooms.
Bank of America (NYSE: BAC) This one is simple. Everyone and there mama is buying into BAC and I told you before I don't go against smart money. It came up on my screen and further research shows industry hedge fund smart guys like Peltz, Jana Hedge fund, Dan Loeb and my current favorite John Paulson are jumping on to this train. Take Paulson, my dog owns 168 Million shares. Hmmm, is that enough to make you think twice! I'm struggling with a price point but I'd love to see a small pullback to pick this stock up @ 15.96
Becton Dickinson (NYSE: BDX) - This one is simple. Even though I like Paulson, I am a bigger fan of Warren Buffet. He steered me right with Burlington Northern and now he's on board with BDX. Jump on the wagon @ $65.49
Pfizer (NYSE: PFE) - This was not uncovered by my screen but I like the activity around PFE. This was added at the last minute and switched with my honorable mention Boston Sci. As I was researching PFE, I learned that the management has indicated a plan to raise the dividend by 25% by the end of the year. I can dig that!
Honorable Mention Fave Fives:
Rait Financial (NYSE: RAS) - I have to give you a 'penny stock'. RAS hits my screen and should be picked up at $2! The only problem is that it took off the other day to the tune of 29%. Well you win some and you lose some.
Boston Scientific (NYSE: BSX) - This gets the dubious number six on my list. It got replaced by an older maybe more responsible friend PFE. But grab BSX @ $11.06.
Saturday, August 08, 2009
Urbanomics ~ Portfolio Plays
It has been a busy summer for me. As you can see from my updates I have been consumed with trying to buy a home. Lately, I have increased my number of posts and this could probably means one thing. CLARITY
I won't admit that it is a perfectly clear picture as to what may be coming down the road but I would say that I have a better feel as to how things may continue to play out.
My personal belief is that this rally is a bear market rally. I will admit that it is a rally nonetheless and you can't try to go against the trend. See a post that I wrote away back about sticking with the trend: Bad Banks Will Rally. So here are a quick summary of my points:
- The goverment's combination of TARP, stimulus, and incentives (Cash for Clunkers, Homebuyer Tax Credit) have been the right recipe to bring the economy from lifelining.
- Unemployment continues to be the thorn in the side of an economic recovery. As a person that is near to the streets, this and foreclosures are the most important issues.
- The economic data is starting to trend up and when you've hit the bottom there is only one direction to go. We've seen gas, homebuilders, banks, credit card delinquencies, and even unemployment start to tick up
After considering these points, I believe that things are getting better but very SLOWLY. I understand that unemployment is a lagging indicator but I think things are different this time. High umemployement, which I believe will continue to rise...is a problem to a primarily service driven economy. This will be a drain on most American businesses ranging from restaurants, homebuilders, banks, etc. I believe businesses have benefited immensely and are recovering but I think the everyday person is struggling to adjust to the NEW NORMAL. The new normal for businesses mean that cost cutting efforts will continue for long while and hiring will not come back as new revenues will be hard to come by. I think that this is an "incentive" driven rally and a pullback is soon to come because nothing has really changed. Money has been pumped to save starving business but not many industries have really been punished for their actions which got us here. This is the fundamental back drop of moral hazard...no one has learned their lesson. If you need proof, then just look act the actions of the big banks once they got out from underneath TARP. I believe the waste and excesses have not been rung out of the system and the average person on main street is left holding the bag. That bag results in job losses, delinquencies, debt, possibly higher taxes, and UNCERTAINTY. I now bring my lunch and limit my Patron shots due to this uncertaintly. So here is my portfolio which reflects an uncertain world that appears to be getting a little bit clearer:
Stocks based on my view of the ecomony:
TIP - Treasury Inflation Protection EFT; inflation will be coming and this is where the smart money is parking some of their stash
DUG - Ultrashort Oil; if you read above, when the economy improves so does the price of Oil. But high oil is not good for this struggling economy
GE - General Electric; an industry stallworth that should rebound, especially since GE Finance won't be the undoing of this company
BBY - Best Buy; this is where I like to shop and now that Circuit City became a casuality of this economy its more pie for Best Buy (hey that rhymes)
GLD - A Gold ETF; this is an inflation protection move.
Stocks based on my screening:
EPD - Enterprise Partners; this is a natural gas pipeline company that has an outstanding dividend and it prime position it commodities move higher
IBKR - Interactive Brokers; asset managers and investment banks that are still around are benefit from the volatility and new business
GLW - Corning; this maker of LCD displays will stand to benefit as flat screens continue tobe the 'it' thing to buy. I can't wait to get my 52 inch bad boy
I won't admit that it is a perfectly clear picture as to what may be coming down the road but I would say that I have a better feel as to how things may continue to play out.
My personal belief is that this rally is a bear market rally. I will admit that it is a rally nonetheless and you can't try to go against the trend. See a post that I wrote away back about sticking with the trend: Bad Banks Will Rally. So here are a quick summary of my points:
- The goverment's combination of TARP, stimulus, and incentives (Cash for Clunkers, Homebuyer Tax Credit) have been the right recipe to bring the economy from lifelining.
- Unemployment continues to be the thorn in the side of an economic recovery. As a person that is near to the streets, this and foreclosures are the most important issues.
- The economic data is starting to trend up and when you've hit the bottom there is only one direction to go. We've seen gas, homebuilders, banks, credit card delinquencies, and even unemployment start to tick up
After considering these points, I believe that things are getting better but very SLOWLY. I understand that unemployment is a lagging indicator but I think things are different this time. High umemployement, which I believe will continue to rise...is a problem to a primarily service driven economy. This will be a drain on most American businesses ranging from restaurants, homebuilders, banks, etc. I believe businesses have benefited immensely and are recovering but I think the everyday person is struggling to adjust to the NEW NORMAL. The new normal for businesses mean that cost cutting efforts will continue for long while and hiring will not come back as new revenues will be hard to come by. I think that this is an "incentive" driven rally and a pullback is soon to come because nothing has really changed. Money has been pumped to save starving business but not many industries have really been punished for their actions which got us here. This is the fundamental back drop of moral hazard...no one has learned their lesson. If you need proof, then just look act the actions of the big banks once they got out from underneath TARP. I believe the waste and excesses have not been rung out of the system and the average person on main street is left holding the bag. That bag results in job losses, delinquencies, debt, possibly higher taxes, and UNCERTAINTY. I now bring my lunch and limit my Patron shots due to this uncertaintly. So here is my portfolio which reflects an uncertain world that appears to be getting a little bit clearer:
Stocks based on my view of the ecomony:
TIP - Treasury Inflation Protection EFT; inflation will be coming and this is where the smart money is parking some of their stash
DUG - Ultrashort Oil; if you read above, when the economy improves so does the price of Oil. But high oil is not good for this struggling economy
GE - General Electric; an industry stallworth that should rebound, especially since GE Finance won't be the undoing of this company
BBY - Best Buy; this is where I like to shop and now that Circuit City became a casuality of this economy its more pie for Best Buy (hey that rhymes)
GLD - A Gold ETF; this is an inflation protection move.
Stocks based on my screening:
EPD - Enterprise Partners; this is a natural gas pipeline company that has an outstanding dividend and it prime position it commodities move higher
IBKR - Interactive Brokers; asset managers and investment banks that are still around are benefit from the volatility and new business
GLW - Corning; this maker of LCD displays will stand to benefit as flat screens continue tobe the 'it' thing to buy. I can't wait to get my 52 inch bad boy
Friday, August 07, 2009
Junk Your Clunker...
I previewed the details of this program awhile back. Cash for Clunkers has been a huge success for the automotive industry and they just got extended another lifeline. The Congress approved another $2 Billion dollar measure that will allow the program to continue. If you still have questions about junking your clunker see the official site here:
Car Allowance Rebate System: http://www.cars.gov/
Car Allowance Rebate System: http://www.cars.gov/
Monday, August 03, 2009
My Reality Show: Homebuying 101
My online reality show is probably the slowest show that you've followed in awhile, but hey its still running! If you recall, my show started with trying to determine if the stimulus bill really had any stimulus to it??? So I read through some of sweet parts of the bill to see if they could get a penny pincher like me off the sidelines and contributing to a deteriorating economy. The one part of the bill that immediately attracted me what the Homebuyer Tax Credit. Yes, welcome, first time homebuyers like me. I searched high and low and I'm sometimes surprised at the lack of direct information provided to help you through what is a huge huge purchase. So far here are the rules to help you finance the purchase of your next home:
Rule 1: From a previous post, you learned to CLEAN UP YOUR CREDIT. Click here to learn about how to view your credit for free ---> Free Credit Check
Rule 2: Find a reputable bank or mortgage broker who will pull up your credit and give you a Pre-Approval amount based on your gross income and outstanding debt levels (i.e., credit card balances, car loan, student loans, etc). Knowing "How Much Home You Can Afford" is critical! My rule of thumb is try not to spend more than 80% of what your Pre-Approval amount is. If you haven't received your Pre-Approval use this rule of thumb, don't spend more than 40% of your net monthly paycheck. Remember net = take home pay. This rule prepares you for a few things things that you may still want to spend money on like: the ability to still save/contribute to your retirement, afford new expenses, and still have a life.
Rule 3: SAVE, SAVE, SAVE for at least of a 10% Down Payment. This will be a huge step in determining if you are really ready to commit to buying a home. For instance, the average condominium (in my book) is roughly $300,000. This means you need to come up with $30,000 as a down payment!!!!
Tricks up my sleeve:
- A trick to Rule #1 is to contest all questionable items on your credit report with support and in writing. The nice thing is contesting your credit history can be done online.
- The trick to Rule #2 is to follow my "Rule of Thumb" notes above. Budget for less and you will be able to sleep easier at night.
- And my last trick! For Rule#3, consider or ask if the home you are looking into qualifies for a FHA Loan. This loan is government sponsored and only requires you to put 3.5% Down!!!
Stayed tuned on how to begin your house search...
Rule 1: From a previous post, you learned to CLEAN UP YOUR CREDIT. Click here to learn about how to view your credit for free ---> Free Credit Check
Rule 2: Find a reputable bank or mortgage broker who will pull up your credit and give you a Pre-Approval amount based on your gross income and outstanding debt levels (i.e., credit card balances, car loan, student loans, etc). Knowing "How Much Home You Can Afford" is critical! My rule of thumb is try not to spend more than 80% of what your Pre-Approval amount is. If you haven't received your Pre-Approval use this rule of thumb, don't spend more than 40% of your net monthly paycheck. Remember net = take home pay. This rule prepares you for a few things things that you may still want to spend money on like: the ability to still save/contribute to your retirement, afford new expenses, and still have a life.
Rule 3: SAVE, SAVE, SAVE for at least of a 10% Down Payment. This will be a huge step in determining if you are really ready to commit to buying a home. For instance, the average condominium (in my book) is roughly $300,000. This means you need to come up with $30,000 as a down payment!!!!
Tricks up my sleeve:
- A trick to Rule #1 is to contest all questionable items on your credit report with support and in writing. The nice thing is contesting your credit history can be done online.
- The trick to Rule #2 is to follow my "Rule of Thumb" notes above. Budget for less and you will be able to sleep easier at night.
- And my last trick! For Rule#3, consider or ask if the home you are looking into qualifies for a FHA Loan. This loan is government sponsored and only requires you to put 3.5% Down!!!
Stayed tuned on how to begin your house search...
Saturday, June 20, 2009
Urbanomics Market Update - June 20th
Urbanomics Market Update
~the update for people that don’t watch the “stock channel”
~the update for people that don’t watch the “stock channel”
GAS, the last time I wrote my update I predicted gas prices were going to rise and boy did they take off. As of a couple of days ago, the price of gas at the pump has risen for 50 (this is not a typo) straight days!! AAA, noted recently that the nationwide price average is around $2.679 and every state is joining in this party at the pump. Since I was sport on with my last analysis I will include my most recent prediction on the direction of gas.
Gas Prediction: My thoughts are that gas will start to top out at these levels. The fundamentals of economy just can’t support gas at these levels…people will take other measures as they did last year to ease this costly burden. At the right price, I would look to make an investment that gas begins to drop.
STOCK MARKET, this week the stock market was down roughly 3%! You may think that there are a few signs that things may be improving but I would not be running to join the crowd. Be afraid because a number of experts are betting that the rally is running out of steam just as the everyday investor is starting to pump money back into their investment portfolios, mutual funds, and retirement portfolios. My prediction won’t change…so check out my write up from last time below.
Market Prediction: if you had peeked at the stock market you might have seen that it has been doing really well in the last couple of months. If you feel like you missed the party…DON’T. The reasons vary as to why it was moving up rapidly (like people spending their tax checks at the beginning of the year) but it probably won’t continue going up so quickly much more. This is my opinion but the economic data doesn’t lie. The data recently released says:
- Consumers are saving and not spending money
- Housing foreclosures are on the rise again (And rates continue to rise!)
- Unemployment continues to reach record monthly numbers (Unemployment dipped last month and is on the rise again!)
WHAT TO EXPECT NEXT,
Cash for Clunkers – The Congress just passed a bill known on the streets as “Cash for Clunkers”. It probably took a cue from Germany which has passed a wildly popular strategy in their country. This bill was going to be hard to argue against as it helps boost a lagging industry, cleans up the environment, and lowers the consumer’s bills. The bill requires you to buy a car that is more fuel efficient that your last car and you will get a voucher of up to $4500 to make this switch. The real name of the program and a link to the website can be found here: www.ConsumerAssistanceToRecycleAndSaveProgram.org
Or try the auto industry’s site aimed at promoting the bill:www.CashForClunkersHeadquarters.com
Home Buyer Tax Credit – A new proposal is moving around the senate to INCREASE the existing tax credit. Senator Johnny Isakson of Georgia is the brains behind this new proposal which want to raise the existing $8000 credit to $15000!!! The other changes are this bill would be for ALL homebuyers in contrast with the last which was just for first time buyers. The other change would be to eliminate the income limits which are currently capped at $75000.
Prediction: My opinion is this will have some trouble passing through Washington. At a time when Wall Street and the Real Estate industry have lost our trust, this bill will raise too many questions about who is really benefitting from the latest home tax credit. By removing the income limit and opening it up to anyone this could potentially benefit wealthy homeowners and property investors…two groups who may need the least assistance out there and have the least amount of trust out there.
HOUSING, things still look uncertain for this part of the market.
- A new wave of foreclosures are still set to hit the market
- The tax credit deadline is looming
- Rising interest rates are not positive for consumers
Gas Prediction: My thoughts are that gas will start to top out at these levels. The fundamentals of economy just can’t support gas at these levels…people will take other measures as they did last year to ease this costly burden. At the right price, I would look to make an investment that gas begins to drop.
STOCK MARKET, this week the stock market was down roughly 3%! You may think that there are a few signs that things may be improving but I would not be running to join the crowd. Be afraid because a number of experts are betting that the rally is running out of steam just as the everyday investor is starting to pump money back into their investment portfolios, mutual funds, and retirement portfolios. My prediction won’t change…so check out my write up from last time below.
Market Prediction: if you had peeked at the stock market you might have seen that it has been doing really well in the last couple of months. If you feel like you missed the party…DON’T. The reasons vary as to why it was moving up rapidly (like people spending their tax checks at the beginning of the year) but it probably won’t continue going up so quickly much more. This is my opinion but the economic data doesn’t lie. The data recently released says:
- Consumers are saving and not spending money
- Housing foreclosures are on the rise again (And rates continue to rise!)
- Unemployment continues to reach record monthly numbers (Unemployment dipped last month and is on the rise again!)
WHAT TO EXPECT NEXT,
Cash for Clunkers – The Congress just passed a bill known on the streets as “Cash for Clunkers”. It probably took a cue from Germany which has passed a wildly popular strategy in their country. This bill was going to be hard to argue against as it helps boost a lagging industry, cleans up the environment, and lowers the consumer’s bills. The bill requires you to buy a car that is more fuel efficient that your last car and you will get a voucher of up to $4500 to make this switch. The real name of the program and a link to the website can be found here: www.ConsumerAssistanceToRecycleAndSaveProgram.org
Or try the auto industry’s site aimed at promoting the bill:www.CashForClunkersHeadquarters.com
Home Buyer Tax Credit – A new proposal is moving around the senate to INCREASE the existing tax credit. Senator Johnny Isakson of Georgia is the brains behind this new proposal which want to raise the existing $8000 credit to $15000!!! The other changes are this bill would be for ALL homebuyers in contrast with the last which was just for first time buyers. The other change would be to eliminate the income limits which are currently capped at $75000.
Prediction: My opinion is this will have some trouble passing through Washington. At a time when Wall Street and the Real Estate industry have lost our trust, this bill will raise too many questions about who is really benefitting from the latest home tax credit. By removing the income limit and opening it up to anyone this could potentially benefit wealthy homeowners and property investors…two groups who may need the least assistance out there and have the least amount of trust out there.
HOUSING, things still look uncertain for this part of the market.
- A new wave of foreclosures are still set to hit the market
- The tax credit deadline is looming
- Rising interest rates are not positive for consumers
Friday, May 15, 2009
Urbanomics Market Update ~ May 15
Urbanomics Market Update
~the update for people that don’t watch the “stock channel”
~the update for people that don’t watch the “stock channel”
GAS, the price of a barrel of oil (better know as gas you put in your car) continues to rise, so this means that the cost you pay at the pump will be rising also. I know you want to know why, and all I can tell you is that has to do with the season, speculation, and investors betting the economy is turning around.
STOCK MARKET, if you had peeked at the stock market you might have seen that it has been doing really well in the last couple of months. If you feel like you missed the party…DON’T. The reasons vary as to why it was moving up rapid (like people spending their tax checks) but it probably won’t continue going up so quickly much more. This is my opinion but the economic data doesn’t lie. The data recently released says:
STOCK MARKET, if you had peeked at the stock market you might have seen that it has been doing really well in the last couple of months. If you feel like you missed the party…DON’T. The reasons vary as to why it was moving up rapid (like people spending their tax checks) but it probably won’t continue going up so quickly much more. This is my opinion but the economic data doesn’t lie. The data recently released says:
- Consumers are saving and not spending money
- Housing foreclosures are on the rise again
- Unemployment continues to reach record monthly numbers
WHAT TO EXPECT NEXT, the talk around the investing water coolers is the next shoe to drop is the realization that the Credit Card and Commercial Real Estate industries are hurting. In a nutshell, unemployment is bad for consumers who stop paying their credit card bills and a recession is bad for businesses that stop paying for the buildings they use. Both of these problems affect banks and real estate companies which have hundreds of billions of dollars at risk.
DOES THE STIMULUS WORK, surprisingly the answer might be yes. The stimulus plan appears to be working with estimates stating that roughly a billion dollars a day has been released in the first 80 days, I will let you do the math ($80B). And states representatives have indicated that they are putting the money to work quickly. For example, I was shocked by the potential numbers noted by the state of Texas, which says they estimate that 69,000 jobs will be saved or created through the implementation of stimulus money for transportation projects.
HOUSING, number from two key sources, the National Association of Realtors & RealtyTrac (foreclosure experts) are out.
- Home Prices fell 14% since this time last year (Largest decline ever)
- First-time homebuyers accounted for HALF of all new sales
- “Distressed” (foreclosures and short sales) accounted for HALF of all transactions
- Foreclosures filing up 32% from a year ago (RealtyTrac record)
- 1 in every 374 housing units received a foreclosure notice
Industry Predictions: Housing may not return to normal until 2010, until then BUYERS are running the show
Monday, April 13, 2009
Genworth Financial, Genuinely A Mistake
This may have been a strategic move on Genworth Financial's part to not become a bank holding company due to all the restrictions being imposed by the government...but I think I will note that they may be strategic idiots for missing a very big opportunity to become a holding company as a savings and loans institution. This would have given them access to the Federal Reserve free flowing, cheap capital!! What else can we add to the list of things to take away from this strategic company. How about the ability to be eligible for the Treasury's purchase program and now they can't complete the acquisition of Interbank. So I won't pile anything else on this company, because all this news just broke and I take a calculated gamble here and say that this stock will get punished for its...how should I say strategically dumb move. SHORT GNW
I imagine that news will create a negative morning for GNW which will give us some time to determine what is a good exit point by researching whether this move has ANY possible upside for this company.
I imagine that news will create a negative morning for GNW which will give us some time to determine what is a good exit point by researching whether this move has ANY possible upside for this company.
Thursday, April 09, 2009
Banks Rally on Wells Fargo...Don't Believe It
My response is don't believe the hype of the banks! I know in my last post I told you to take advantage of the banks and buy FAS which is a fund that gives you 3x the normal returns of owning a basket full of bank stocks. This has worked out perfectly as FAS was recommended on April 2nd and if we use the price at the close of the stock market, you would have purchased them around 6.42. My recommendation is to sell FAS today and pocket a big gains in only a matter of seven days. I hope you enjoyed the ride up, the stock closed @ 8.74!!!
Play Defense!!! Here are my reasons why you should stay cautious of the banking sector.
First, the entire sectored rallied on just Wells Fargo (WFC) and let me remind you that every bank isn't built the exact same way WFC is!!!!
- One of biggest reasons why WFC is doing well and the other banks may not is WFC does not have an extensive consumer credit loan portfolio!!! Yep WFC doesn't have to worry about the risks associated with battered consumers who can't pay off their plastic.
- Second, just listen to the CFO, Howard Atkins who openly mention the huge profits can directly be attributed to large writedowns on Wachovia's bad loans. Wells Fargo is probably an exception that every other bank may not be able to replicate. A huge write-down do to their acquisition of Wachovia and a first quarter provision isn't in the cards (no pun intended) for most of the other banks.
So how to play the Fake Bank Rally:
- Start with the bad apples like Capital One (COF) They just got the big smack down by Moody's and Fitch Ratings who downgraded the stock due to the expectation of rising credit costs.
- How about American Express (AXP) and the fact that their default rate was leading the industry. WOW, now I would be slower here to pull the trigger because two firms just upgraded their shares...from basically Don't Touch to Think about it...Maybe
- Finally I am not a believer in Citigroup as their are being propped up by the government
Play Defense!!! Here are my reasons why you should stay cautious of the banking sector.
First, the entire sectored rallied on just Wells Fargo (WFC) and let me remind you that every bank isn't built the exact same way WFC is!!!!
- One of biggest reasons why WFC is doing well and the other banks may not is WFC does not have an extensive consumer credit loan portfolio!!! Yep WFC doesn't have to worry about the risks associated with battered consumers who can't pay off their plastic.
- Second, just listen to the CFO, Howard Atkins who openly mention the huge profits can directly be attributed to large writedowns on Wachovia's bad loans. Wells Fargo is probably an exception that every other bank may not be able to replicate. A huge write-down do to their acquisition of Wachovia and a first quarter provision isn't in the cards (no pun intended) for most of the other banks.
So how to play the Fake Bank Rally:
- Start with the bad apples like Capital One (COF) They just got the big smack down by Moody's and Fitch Ratings who downgraded the stock due to the expectation of rising credit costs.
- How about American Express (AXP) and the fact that their default rate was leading the industry. WOW, now I would be slower here to pull the trigger because two firms just upgraded their shares...from basically Don't Touch to Think about it...Maybe
- Finally I am not a believer in Citigroup as their are being propped up by the government
Thursday, April 02, 2009
Where Did Your Toxic Assets Go, Mr. Bank...
That's the question for an accounting group that sets up standards for companies reporting financial information. They have a standard that determines how to account for assets on companies books. Well today they decided to give companies more room when valuing these assets, and this could give a big lift to those banks we have grown to hate.
The group is called the Financial Accounting Standards Board and they are supposed to be independent when establishing these rules. But it appears they may have caved to the pressures of Congress and Wall Street when it came to political pressure around the somewhat unpopular rule.
The rule, called mark-to-market, is supposed to increase transparency for investors because we can see what these assets are valued by today's standards. But the problem some critics say is what happens when the market tanks (like it has been) and their is NO VALUE. Well, what happens is the financial statements of the banks become horrible.
My Opinion - Keep the rule because it provides transparency and uncovers assets that are beginning to decline in value. But as the rule has been adjusted I won't cry I will just buy and that is the BANKS for a short period of time. The assets are still bad on the banks books the difference is now they don't have to tell is they are!!!!
BUY: Direxion Shares Financial Bull 3x Ticker: (FAS) - This gives you 3x the returns for the banks going up. But just buy a little cause it will take you for a crazy ride!
The group is called the Financial Accounting Standards Board and they are supposed to be independent when establishing these rules. But it appears they may have caved to the pressures of Congress and Wall Street when it came to political pressure around the somewhat unpopular rule.
The rule, called mark-to-market, is supposed to increase transparency for investors because we can see what these assets are valued by today's standards. But the problem some critics say is what happens when the market tanks (like it has been) and their is NO VALUE. Well, what happens is the financial statements of the banks become horrible.
My Opinion - Keep the rule because it provides transparency and uncovers assets that are beginning to decline in value. But as the rule has been adjusted I won't cry I will just buy and that is the BANKS for a short period of time. The assets are still bad on the banks books the difference is now they don't have to tell is they are!!!!
BUY: Direxion Shares Financial Bull 3x Ticker: (FAS) - This gives you 3x the returns for the banks going up. But just buy a little cause it will take you for a crazy ride!
Tuesday, March 24, 2009
File Taxes for Free...
If you are a procrastinator like me its about that time to do your taxes. If you are wondering how to save a little bit of change and want some help filing your taxes, check out the list of software companies that have partnered with the federal government to help you file for free:
http://www.irs.gov/efile/article/0,,id=118986,00.html
Use the following websites to get discounts/promotions at TurboTax:
T. Rowe Price - http://individual.troweprice.com/public/Retail/Planning-&-Research/Tax-Planning/TurboTax-Discounts
Scottrade - www.scottrade.com (See the tax preparation section)
Fidelity - http://personal.fidelity.com/planning/tax/tax_content.shtml.cvsr?refhp=pr&ut=A22
http://www.irs.gov/efile/article/0,,id=118986,00.html
Use the following websites to get discounts/promotions at TurboTax:
T. Rowe Price - http://individual.troweprice.com/public/Retail/Planning-&-Research/Tax-Planning/TurboTax-Discounts
Scottrade - www.scottrade.com (See the tax preparation section)
Fidelity - http://personal.fidelity.com/planning/tax/tax_content.shtml.cvsr?refhp=pr&ut=A22
Monday, March 23, 2009
Wall Street - When is Toxic Good?...
The resounding answer to this question is when you don't have to hold the toxic stuff anymore. That appears to be the solution to the problems plaguing America's banking system, which is clogged with these non-trading pools of mortgages that are usually packaged together to be sold off to investors. (Note: Other assets can be packaged together and sold off...like credit cards debt, however for this discussion we will just focus on mortgages)
The investors who usually bought these packages of assets lost faith in them and ran away and the market just dried up. So the assets began selling for less and less and the banks soon became stuck with these assets that "currently" had little to no value. But here is the tricky part for most people to understand: These assets could have value some day if the economy stabilizes.
So what the government is attempting to do is bring all the key players bank to the table and make it worth everyones while. Here are the players and how they will benefit:
Banks - They benefit, if and when they get these assets that "currently" have little value off of their books
Investors (Private Firms) - They benefit by being able to buy these assets again at reasonable prices, because they provide consistent income
Government - They benefit if both the Banks and Investors come together and hold hands again and start trading these assets again. It will help to stabilize the banks and assist in stabilizing the economy
How the Government plans on doing it:
The stock market is on the rise today because the government has officially unleashed its plan to loan $1 Trillion dollars to private firms(investors) who will share in the costs to find a price and buy these toxic assets from banks and split both the profits and losses around these assets.
This gets all the major players involved again and could change the way Wall Street looks at the banks.
Urb Thoughts:
I think that this plan is a well put together solution to the troubling problem around toxic assets. Ironically it helps and hurts the banks but overall it helps the banks and I will explain why. This hurts the banks because "one day" these assets will have value and they will miss out some of those gains but the biggest plus is getting these toxic assets off of their books. And in my opinion, once these assets are off the books, the banks should have no excuse to not make money. They are borrowing money and pay next to nothing for these dollars because the rate at which banks are being charged is at historic lows (Fed Funds Rate)...its between 0 and .025%!!! I could make money if I was borrowing money at these levels. Now the explosive part is all those bad assets that were sagging down their balance sheets will be sold off...this definitely puts the banks in a better position. The one thing to note is that as banks sell off these assets they will have to take a write-down and earnings for the next few quarters may not be pretty but LONG-TERM the banks may be the best BUY of the century.
I'm not sure how I will play this but I will gain some exposure to:
Direxion Financial Bull 3X Shares (FAS)
Also adding the banks that I belive have the best ability to survive will be key:
Wells Fargo (WFC)
JP MorganChase (JPM)
Bank of America (BAC)
The investors who usually bought these packages of assets lost faith in them and ran away and the market just dried up. So the assets began selling for less and less and the banks soon became stuck with these assets that "currently" had little to no value. But here is the tricky part for most people to understand: These assets could have value some day if the economy stabilizes.
So what the government is attempting to do is bring all the key players bank to the table and make it worth everyones while. Here are the players and how they will benefit:
Banks - They benefit, if and when they get these assets that "currently" have little value off of their books
Investors (Private Firms) - They benefit by being able to buy these assets again at reasonable prices, because they provide consistent income
Government - They benefit if both the Banks and Investors come together and hold hands again and start trading these assets again. It will help to stabilize the banks and assist in stabilizing the economy
How the Government plans on doing it:
The stock market is on the rise today because the government has officially unleashed its plan to loan $1 Trillion dollars to private firms(investors) who will share in the costs to find a price and buy these toxic assets from banks and split both the profits and losses around these assets.
This gets all the major players involved again and could change the way Wall Street looks at the banks.
Urb Thoughts:
I think that this plan is a well put together solution to the troubling problem around toxic assets. Ironically it helps and hurts the banks but overall it helps the banks and I will explain why. This hurts the banks because "one day" these assets will have value and they will miss out some of those gains but the biggest plus is getting these toxic assets off of their books. And in my opinion, once these assets are off the books, the banks should have no excuse to not make money. They are borrowing money and pay next to nothing for these dollars because the rate at which banks are being charged is at historic lows (Fed Funds Rate)...its between 0 and .025%!!! I could make money if I was borrowing money at these levels. Now the explosive part is all those bad assets that were sagging down their balance sheets will be sold off...this definitely puts the banks in a better position. The one thing to note is that as banks sell off these assets they will have to take a write-down and earnings for the next few quarters may not be pretty but LONG-TERM the banks may be the best BUY of the century.
I'm not sure how I will play this but I will gain some exposure to:
Direxion Financial Bull 3X Shares (FAS)
Also adding the banks that I belive have the best ability to survive will be key:
Wells Fargo (WFC)
JP MorganChase (JPM)
Bank of America (BAC)
Thursday, March 19, 2009
Wall Street - The PULSE
Hey everybody I am back to hit you with a quick post to keep you in the loop with what's going on in the stock market. By now, I know the average person is paying attention on a daily basis because I get a weekly call from my sister asking me about why things are falling or more importantly what should I be doing with my money. And if you recall when you don't hear much from me I am usually doing one thing and that's reading. I am constantly reading about what everyone has to write and listening to what everyone has to say...to get a feel of the market's temperature. How can you do this?!?! Well simply start by tuning in here as often as you can to get a pulse, not always daily but a frequent pulse as to what may be changing out there. And if you get tired of reading, check out CNBC's homepage and select the VIDEO tab for very frequent video posting of their on air show.
Wall Street's Pulse - Awhile back I compared Wall Street to a prized fighter that was down and out, maybe like one of my favorite fighters Roy Jones Jr. The latest prognosis is still not that good...the patient needs help getting up in the ring right now and the count keeps going to about 8 (get to 10 and the fight is over). For those of you that don't know what a knockout blow is for Wall Street, well its would be a depression. And the trainers right now are the Obama Administration, The Treasury Department, and The Federal Reserve. They are constantly looking at the fighter, checking its vitals, and assessing how to help him keep fighting. But right now the vitals of Wall Street do not look good:
Investors (who are like the fans in the stands) have sobered up to these realities and almost given up on the fighter, but the trainers keep working. And their work seems to be helping the fighter get a little bit better:
Now onto what I believe and what I'm doing:
I believe the fighter is still hurt badly which means don't cheer (or buy stocks just yet). I truly believe that safer alternatives are out there and should be evaluated for your portfolio. I still like OWNING CASH, and not doing a whole lot especially in your retirement portfolios...don't be the hero or the only one cheering when the fighter just got knocked down again. Invest in safer alternatives:
Cash
Gold (GLD)
High Yield Corporate Debt (LQD)
Municipal Bonds (TFI)
And if you feel like you need to be in the markets, be careful and be a bottom feeder...the nastiest thing out there. Wait until things gets really bad and nibble on the most beaten down sectors. For instance I do this when the banks look really bad, like when everyone though Citigroup was going out of business and I buy just a little bit of the bank stocks ETF on steroids (FAS)...it gives me 3X the returns of bank stocks, but I bite just a little. And when things start to look like they are on a roll I sell. I don't panic about selling to early because in a few days I start to look for a point to be a top feeder and bet that things will come back down and buy the FAZ, which bets the banks will fall...TIMES 3X! But don't stick around to long in these trades or else you'll be writing me with heartburn as I have often had, but irrational fans sober up eventually.
Wall Street's Pulse - Awhile back I compared Wall Street to a prized fighter that was down and out, maybe like one of my favorite fighters Roy Jones Jr. The latest prognosis is still not that good...the patient needs help getting up in the ring right now and the count keeps going to about 8 (get to 10 and the fight is over). For those of you that don't know what a knockout blow is for Wall Street, well its would be a depression. And the trainers right now are the Obama Administration, The Treasury Department, and The Federal Reserve. They are constantly looking at the fighter, checking its vitals, and assessing how to help him keep fighting. But right now the vitals of Wall Street do not look good:
- Unemployment numbers continue to rise and have now been estimated to reach over 10% within the next year or so.
- Companies continue to cut jobs left and right and give not so rosy outlooks for the rest of 2009
- Consumer Savings rates were above 5%, which is at levels that we haven't seen in a long time!
- Retail Sales numbers are barely off their lows, which means people ain't buying!
- The consumer and companies are still having difficulty getting access to capital.
Investors (who are like the fans in the stands) have sobered up to these realities and almost given up on the fighter, but the trainers keep working. And their work seems to be helping the fighter get a little bit better:
- Banks are receiving more and more capital
- The stimulus plan and housing bills are aimed at helping home owners and generating jobs
- There is talk about adjusting mark to market (how banks place a value on assets they own)
Now onto what I believe and what I'm doing:
I believe the fighter is still hurt badly which means don't cheer (or buy stocks just yet). I truly believe that safer alternatives are out there and should be evaluated for your portfolio. I still like OWNING CASH, and not doing a whole lot especially in your retirement portfolios...don't be the hero or the only one cheering when the fighter just got knocked down again. Invest in safer alternatives:
Cash
Gold (GLD)
High Yield Corporate Debt (LQD)
Municipal Bonds (TFI)
And if you feel like you need to be in the markets, be careful and be a bottom feeder...the nastiest thing out there. Wait until things gets really bad and nibble on the most beaten down sectors. For instance I do this when the banks look really bad, like when everyone though Citigroup was going out of business and I buy just a little bit of the bank stocks ETF on steroids (FAS)...it gives me 3X the returns of bank stocks, but I bite just a little. And when things start to look like they are on a roll I sell. I don't panic about selling to early because in a few days I start to look for a point to be a top feeder and bet that things will come back down and buy the FAZ, which bets the banks will fall...TIMES 3X! But don't stick around to long in these trades or else you'll be writing me with heartburn as I have often had, but irrational fans sober up eventually.
Wednesday, March 11, 2009
My Reality Show: Pt.3 Homebuying 101
The good thing is I've picked the provisions in the stimulus bill that seriously has me thinking about getting me off the coach and spending money again. Now the catch is will I put in the work to get the job done. But my next dilemma is trying to find a step by step help to determine how to buy a house...oops forgot I live in Chicago and should say a condo or townhome.
I hope my steps will will assist anyone who is a first time homebuyer looking for answers.
Step one in my Homebuyer 101 steps:
1. I definitely will be needing a mortgage and my to get me going down the right path I wanna make sure that my credit history is clean and clear. My first goal this past weekend was to search through my credit report and make sure that there isn't any surprises in there. The only strange issue I ran into was that some of my father's credit history was mixed with my but luckily he has been reliable when paying his bills. At this point, take the time to dispute anything on your credit reports that you believe shouldn't be there. I've heard that it's best to submit your disputes in writing but the internet has made it pretty easy to also dispute something online. Don't forget to look at ALL 3 reports from the major credit bureaus,
Experian, TransUnion, and Equifax...because when it comes to a mortgage most banks and brokers pull ALL 3 to get a feel a good feel of your credit history.
The best thing is our work is now easier as the government has passed a rule that allows you and I to have a FREE view of our credit history, once a year...and it can all be done at one website! Please note that there is the only one website that will allow you to do this for free and it is attached here: https://www.annualcreditreport.com/cra/index.jsp
The others websites claim to offer this service but they come at price...so get it done for free.
I hope my steps will will assist anyone who is a first time homebuyer looking for answers.
Step one in my Homebuyer 101 steps:
1. I definitely will be needing a mortgage and my to get me going down the right path I wanna make sure that my credit history is clean and clear. My first goal this past weekend was to search through my credit report and make sure that there isn't any surprises in there. The only strange issue I ran into was that some of my father's credit history was mixed with my but luckily he has been reliable when paying his bills. At this point, take the time to dispute anything on your credit reports that you believe shouldn't be there. I've heard that it's best to submit your disputes in writing but the internet has made it pretty easy to also dispute something online. Don't forget to look at ALL 3 reports from the major credit bureaus,
Experian, TransUnion, and Equifax...because when it comes to a mortgage most banks and brokers pull ALL 3 to get a feel a good feel of your credit history.
The best thing is our work is now easier as the government has passed a rule that allows you and I to have a FREE view of our credit history, once a year...and it can all be done at one website! Please note that there is the only one website that will allow you to do this for free and it is attached here: https://www.annualcreditreport.com/cra/index.jsp
The others websites claim to offer this service but they come at price...so get it done for free.
Tuesday, March 10, 2009
One in a Zillion...
One of the coolest things coming to TV maybe ZillionTV. It launched last week (I believe) in a mission to bring the web to your TV. Yeah I know we've heard this theme before maybe this one brings the best of all worlds together. The service will be free to you and me and allows us to easily be able to watch whatever we want because they are best friends with all the big dogs in the media business like Sony, Universal, NBC, Warner Bros, and Disney. So they've got a deal to let us watch anything from new shows, old sports classics, to chick flicks, to the best in Sci-Fi...when we want and how we want (like commercial free). Hmmm imagine that I don't have to pay an arm and a leg for basic shotty cable service....tight!
Wanna see check it out: http://www.zilliontv.tv/
Wanna see check it out: http://www.zilliontv.tv/
Monday, March 09, 2009
My Reality Show: Pt. 2 First Pick in The Stimulus Bill Draft
I have decided to announce my first pick in the economic stimulus bill draft! After reviewing the contents of the bill, I realized the Obama administration did some things right in crafting the stimulus bill. For me, there is a provision in the stimulus bill that has the upside of a Lebron James. Yup, there is some first round potential in the First Time Home Buyer Credit. A close second, my Chris Paul pick, was the Higher Education Tax Credit. I tip my hat to the administration because the bill provides just enough incentives for me to help do my part and stimulate the economy. Although I would have loved to take advantage of the original amount, I am glad that $8000 in credits will be available to assist me in possibly buying a place in the expensive city of Chicago. I was surprised after rereading my own post that I had missed the provision on going back to college and the assistance that is provided there. So we'll see but after I get a place...maybe I'll start studying for the GMAT. Now I will likely miss the 2009 credit but I could take advantage of the 2010 credits.
Friday, February 27, 2009
My Reality Show: Pt.1 What's In The Stimulus 4 Me
I hope that by now you have had an opportunity to read the last few posts to understand some of the high - level aspects of the stimulus bill. Part one of my new reality show is the evaluating what parts of the stimulus bill make sense for me. Here goes my quick analysis of the parts of the bill that peak my interest.
My SWV, "I Get So Weak In the Knees" parts to the bill:
Income Tax: This provision stands to give me and every other single taxpayer, who qualifies, a tax credit of up to $400 in 2009 and 2010.
Unemployment: N/A
Health Insurance: N/A
Social Security: N/A
Car Buyer Tax Deduction: Wish I would have waited a year because the SUV would have been a little bit cheaper this year...but I don't see this tax deduction helping me out.
Pell Grant: N/A
Higher Education Tax Credit: This has seriously got me thinking about graduate school...AGAIN
First-Time Home Buyer Credit: Of all the provisions, this one has me thinking my timing may just be right. The $8,000 first-time homebuyer tax credit, low mortgage rates, and sinking home prices create a mix that may be to tempting to pass up.
Transit Accounts: Outside of last week, I am a pretty loyal Chicago Transit Authority rider and can benefit from the larger pre-tax provision.
Alternative Minimum Tax (AMT): N/A
My SWV, "I Get So Weak In the Knees" parts to the bill:
Income Tax: This provision stands to give me and every other single taxpayer, who qualifies, a tax credit of up to $400 in 2009 and 2010.
Unemployment: N/A
Health Insurance: N/A
Social Security: N/A
Car Buyer Tax Deduction: Wish I would have waited a year because the SUV would have been a little bit cheaper this year...but I don't see this tax deduction helping me out.
Pell Grant: N/A
Higher Education Tax Credit: This has seriously got me thinking about graduate school...AGAIN
First-Time Home Buyer Credit: Of all the provisions, this one has me thinking my timing may just be right. The $8,000 first-time homebuyer tax credit, low mortgage rates, and sinking home prices create a mix that may be to tempting to pass up.
Transit Accounts: Outside of last week, I am a pretty loyal Chicago Transit Authority rider and can benefit from the larger pre-tax provision.
Alternative Minimum Tax (AMT): N/A
Thursday, February 19, 2009
My Reality Show...
Now I am no longer a huge fan of the reality television craze as I often pass on keeping up with American Idol, Survivors, Big Brother, The Biggest Loser, The Real World, College Hill or any of the dance shows. However, I am a fan on a new economic reality show that I may personally star in. In true “reality tv” form, it would be all about me and the focus would be to prove or disprove my theory that there is definitely a need for a stimulus bill.
Logic:
My logic was included in a recent post written here at Urbanomics that describes the need for an economic stimulus bill and how it can and should be crafted to help those that can stimulate the economy the fastest. My version of a bill would evaluate most Americans based on different scenarios and the respond to their needs within the bill, accordingly. I have attached a link to the post that described a number of scenarios that are playing out across American households across the US:
http://urbanomics.blogspot.com/2009/02/stimulating-economy.html
Concept:
The scenario that I most represent is: SCENARIO #4
“4. An employed young man is not going to the bar, eating out, or vacationing”
Note: I haven't shaken my weekend bar trips!
My goal is to create a series of posts that will evaluate whether there are provisions (i.e., goodies) in the bill that impact me and also help stimulate the economy. I will document the provisions that affect me and if they really work in the end!
Logic:
My logic was included in a recent post written here at Urbanomics that describes the need for an economic stimulus bill and how it can and should be crafted to help those that can stimulate the economy the fastest. My version of a bill would evaluate most Americans based on different scenarios and the respond to their needs within the bill, accordingly. I have attached a link to the post that described a number of scenarios that are playing out across American households across the US:
http://urbanomics.blogspot.com/2009/02/stimulating-economy.html
Concept:
The scenario that I most represent is: SCENARIO #4
“4. An employed young man is not going to the bar, eating out, or vacationing”
Note: I haven't shaken my weekend bar trips!
My goal is to create a series of posts that will evaluate whether there are provisions (i.e., goodies) in the bill that impact me and also help stimulate the economy. I will document the provisions that affect me and if they really work in the end!
Sunday, February 15, 2009
Stimulus Bill and How it Helps U...
I wrote a previous post describing my thoughts on the overall bill. But I know most of us out there are saying if we are a bailout nation, what contents of the bill will assist me. I have attached two links that detail the main points of the bill that affect most Americans:
http://www.cnbc.com/id/29179184
Highlights: Tax Incentives, Unemployment, Insurance, Social Security, Auto Tax Deduction, Education Tax Credits, 1st Time Home Buyer Credits
First Time Home Buyer Tax Credit
I have been following this development of the bill very closely and as a potential first time home buyer I believe that this will provide an incentive for me to do my part in reviving the economy. I know many others are very interested in the developments of this part of the bill so here are some important details:
http://www.savingtoinvest.com/2009/02/15000-first-home-buyer-tax-credit-in.html
http://www.cnbc.com/id/29179184
Highlights: Tax Incentives, Unemployment, Insurance, Social Security, Auto Tax Deduction, Education Tax Credits, 1st Time Home Buyer Credits
First Time Home Buyer Tax Credit
I have been following this development of the bill very closely and as a potential first time home buyer I believe that this will provide an incentive for me to do my part in reviving the economy. I know many others are very interested in the developments of this part of the bill so here are some important details:
http://www.savingtoinvest.com/2009/02/15000-first-home-buyer-tax-credit-in.html
Stimulating the Economy...
The hardest question I received so far this year is, "Do I agree with the stimulus bill?" It is a very difficult question because we are facing a very tough economy that has a number of different scenarios currently in play. Consider the following scenarios:
1. Young, middle, and old aged people are unemployed
2. A single mother working retail has her hours cut because demand is slowing
3. Governors fear slashing jobs if the state doesn't balance its budget
4. An employed young man is not going to the bar, eating out, or vacationing
5. A young couple with children did everything right but is underwater on their new housing purchase after buying at the height of the real estate market
6. The parents of a well off family of four still lives their daily but are shopping less and saving more than ever do to declining investments and the declining value of their home.
I went to answer this question and tried to address as many of these different scenarios as possible. The realization I quickly came to is there are a FEW small measures that will help everyone and those should be the focus of the government. Here is what I've got to assist in each of these scenarios:
1. Jobs, Immediate Assistance(to pay bills)
2. Jobs (More work hours or new job options), Immediate Assistance(to pay bills)
3. Immediate Assistance (to balance budget, and maintain Jobs)
4. Confidence (in the economy) and Incentive (to spend his hard earned money)
5. Confidence (in the economy) and Extra Help (with underwater mortgage and kid)
6. Confidence (in the economy and Incentive (to spend their hard earned money)
After analyzing these scenarios a true stimulus bill would address the areas that can help the most people. Here is what my stimulus bill would include:
~ Developing Jobs is needed to provide work and options to those in need and improve the confidence in the overall market (Scenarios: 1,2,4,5,6)
1. Young, middle, and old aged people are unemployed
2. A single mother working retail has her hours cut because demand is slowing
3. Governors fear slashing jobs if the state doesn't balance its budget
4. An employed young man is not going to the bar, eating out, or vacationing
5. A young couple with children did everything right but is underwater on their new housing purchase after buying at the height of the real estate market
6. The parents of a well off family of four still lives their daily but are shopping less and saving more than ever do to declining investments and the declining value of their home.
I went to answer this question and tried to address as many of these different scenarios as possible. The realization I quickly came to is there are a FEW small measures that will help everyone and those should be the focus of the government. Here is what I've got to assist in each of these scenarios:
1. Jobs, Immediate Assistance(to pay bills)
2. Jobs (More work hours or new job options), Immediate Assistance(to pay bills)
3. Immediate Assistance (to balance budget, and maintain Jobs)
4. Confidence (in the economy) and Incentive (to spend his hard earned money)
5. Confidence (in the economy) and Extra Help (with underwater mortgage and kid)
6. Confidence (in the economy and Incentive (to spend their hard earned money)
After analyzing these scenarios a true stimulus bill would address the areas that can help the most people. Here is what my stimulus bill would include:
~ Developing Jobs is needed to provide work and options to those in need and improve the confidence in the overall market (Scenarios: 1,2,4,5,6)
- Create new jobs through state and federal projects that put people to work
- Maintain jobs through by increasing the demand for American goods domestically and internationally
- Food stamps assist will immediate help and will be spent immediately at grocery stores everywhere (circulating money and keeping jobs intact)
- Cash to only those that need immediate help with Utilities (No jobs and low income)
- Utility and Day Care assistance as an incentive for middle income families to spend money and not hoard any cash given by the government
- Housing and Auto Credits will provide incentives to Americans with discretionary income to help revive two major industries
- Temporary reduction in sales tax (but will this hurt state budgets)
- Tax Cuts will put more money in our pockets but I don't think this measure should be heavily relied upon because it would not cause me to spend the money...rather to save it.
These are the pillars to what I would recommend in a stimulus package. Ironically, I believe that the government has gotten the bill correct but the allocation of the bill is what I believe is out of what. Roughly 80% of the package should have gone towards DEVELOPING JOBS and providing IMMEDIATE ASSISTANCE. The remaining 20% should have focused on providing incentives to those who have been impacted the least but can provide additional help in stimulating the economy.
Monday, February 09, 2009
Twist And Shout...
The reason why I call this post twist and shout is because I am definitely about to throw my readers for a twist. The twist goes a little something like this:
I have recommended since last September/October that we MOVE all of our positions into Cash, and Cash-like assets (Treasurys,etc). And I mentioned we would hold those positions until we hit a relevant level that may help form a bottom. At this point, with the new Treasury secretary (Tim Geithner) delivering his plan for the banks TOMORROW...AND the Senate finalizing the vote on the stimulus plan TODAY I am under the assumption, that any hint of news (as minimal as it might be), may cause the market to start rallying in anticipation of both announcements. I would increase your exposure to the market however incrementally. At this point no more that MAYBE 25% of your CASH position should be used to take advantage of this situation.
Now here is the TWIST, I am resigned to say that we are purely taking advantage of what will probably go down as a BEAR MARKET RALLY. This simply means that there are pockets, during an economic downturn where the markets need a breather and goes in the opposite direction. And that direction would be UP.
But this will be short-lived and the hard part to determine is how long this BEAR MARKET RALLY will last. I will go out on a limb and say it the market top 9000 to head for the hills as I believe that it will be trading in a range for a long time. I know I continue to deliver news that you may not want to hear but I believe that once we hit those levels the markets will continue to decline until critical things are addressed such as unemployment, foreclosure, and failing banks.
I have recommended since last September/October that we MOVE all of our positions into Cash, and Cash-like assets (Treasurys,etc). And I mentioned we would hold those positions until we hit a relevant level that may help form a bottom. At this point, with the new Treasury secretary (Tim Geithner) delivering his plan for the banks TOMORROW...AND the Senate finalizing the vote on the stimulus plan TODAY I am under the assumption, that any hint of news (as minimal as it might be), may cause the market to start rallying in anticipation of both announcements. I would increase your exposure to the market however incrementally. At this point no more that MAYBE 25% of your CASH position should be used to take advantage of this situation.
Now here is the TWIST, I am resigned to say that we are purely taking advantage of what will probably go down as a BEAR MARKET RALLY. This simply means that there are pockets, during an economic downturn where the markets need a breather and goes in the opposite direction. And that direction would be UP.
But this will be short-lived and the hard part to determine is how long this BEAR MARKET RALLY will last. I will go out on a limb and say it the market top 9000 to head for the hills as I believe that it will be trading in a range for a long time. I know I continue to deliver news that you may not want to hear but I believe that once we hit those levels the markets will continue to decline until critical things are addressed such as unemployment, foreclosure, and failing banks.
Tuesday, January 27, 2009
A House of Cards...
where the numbers keep falling:
The sobering forecasts for the housing foreclosures in the next few years is over roughly 8 million homes. And to give validity to these numbers, the source is as close to the problem as possible...the FDIC, whose responsibility is regulating the nations federal banks. The response from top officials at the FDIC is that programs to reduce the epidemic have been frequently discussed for the last year. However, they have pretty honest in their assessment of these programs so far by admitting that the problem continues to get worse.
The next dilemma is a large number of people, who are staying in their houses, are seeing the prices from that investment sharply dropping. Take the Standard & Poor's/Case-Shiller housing index. This measure the price movements of the 20 largest city and it describes a record 18.2 percent drop in November when compared to the previous year.
As the housing numbers fall, the unemployment numbers rise:
The sobering forecasts for the housing foreclosures in the next few years is over roughly 8 million homes. And to give validity to these numbers, the source is as close to the problem as possible...the FDIC, whose responsibility is regulating the nations federal banks. The response from top officials at the FDIC is that programs to reduce the epidemic have been frequently discussed for the last year. However, they have pretty honest in their assessment of these programs so far by admitting that the problem continues to get worse.
The next dilemma is a large number of people, who are staying in their houses, are seeing the prices from that investment sharply dropping. Take the Standard & Poor's/Case-Shiller housing index. This measure the price movements of the 20 largest city and it describes a record 18.2 percent drop in November when compared to the previous year.
As the housing numbers fall, the unemployment numbers rise:
The housing numbers become even more sobering when you take into account that The Labor Department stated that unemployment rates across the states rose sharply in December, and leading the way was Indiana (my home state) and South Carolina with the largest monthly gains.
Now I have receive a few questions that range from:
~ Where does the economy go from here?
~ Will the government stimilus bill work?
~ What does this mean for the stock market, my city, or my job?
I will try to do my best to tackle the problem in a way that is easy to understand in my next few posts. Stay tuned!
Sunday, January 25, 2009
Exchange Traded Funds (ETF) Mania...
There has been a lot of buzz about the ETF industry and the flexibility it gives the average investor of trading like the pros. You can buy or sell short industries and sectors and even multiply the effect of your returns 2x or 3x the daily amount. One ETF that I would like to discuss is Direxion Financial Bear 3x Shares (FAZ)
FAZ seeks to increase the magnitude of a decline in financial stocks by the tune of 3 to 1. When you pick up these shares be ready for the crazy ride you will be on. On any given day this ETF can fluctuate from a difference of over 10 points from the high and low prices of the day! With the banks desparate for the release of the second half of the 700 Billion dollar TARP fund this could continue to fuel FAZ's rise. I see one of two scenarios coming down the pipeline:
1. More investments from the government into financials mean more stock dilution; or
2. A program to get rid of the bad bank assets means huge write-downs for the banks
Use FAZ for no longer than a day as you can end up on a downward slide very quickly. I am already in the red on the timing of this play and will cut my losses short. However, I will intently watch the financial sector and during periods of weaknesses this will definitely be a way to use a little bit of money to maximize your returns.
FAZ seeks to increase the magnitude of a decline in financial stocks by the tune of 3 to 1. When you pick up these shares be ready for the crazy ride you will be on. On any given day this ETF can fluctuate from a difference of over 10 points from the high and low prices of the day! With the banks desparate for the release of the second half of the 700 Billion dollar TARP fund this could continue to fuel FAZ's rise. I see one of two scenarios coming down the pipeline:
1. More investments from the government into financials mean more stock dilution; or
2. A program to get rid of the bad bank assets means huge write-downs for the banks
Use FAZ for no longer than a day as you can end up on a downward slide very quickly. I am already in the red on the timing of this play and will cut my losses short. However, I will intently watch the financial sector and during periods of weaknesses this will definitely be a way to use a little bit of money to maximize your returns.
Thursday, January 22, 2009
You Are What U Read...
Time to play "What the Headlines Tell U"! Again I think reading is definitely fundamental and taking a look at the latest headlines can give you some insight into what's going on in the market and what direction it may be headed. Here are some headlines from today:
Parsons is in as Citigroup's Chairman
GE's earnings results are expected to drop
UK, US having thoughts of nationalizing banks
State Street downgraded
AIG losing key employees
Commercial Real-Estate could begin collapsing
Satyam could be sold
UK Pound hits 23 year low
Cold Weather makes Orange Juice and Nat Gas Prices Rise
Microsoft Earnings to Take a Hit
Dow Gains 280 pts, but at 8200
After going through some of the larger stories of the day. Here is what they mean to me. Citigroup, GE, State Street, and UK & US nationalizing banks all mean that the financial sectors is still heading lower. Note some of these banks received money from the government already through the Troubled Assets Relief Program (TARP). And if there earnings are still dropping then the outlook doesn't appear good.
Microsoft earnings to take a hit cannot be a positive sign for the technology sector. This will affect PC makers, chip makers, and retailers. A mainstay in the home like Microsoft is having softer sales and that can't be a good sign either.
Satyam is exploring options of selling themselves and this further highlights that transparency is needed and greed is bad. This Indian company's CEO managed to distort their earnings for years and billions of dollars were reported incorrectly.
The Dow was up yesterday, however notice the level is at 8200. Let's flashback to my post in November which called for the Dow to fall under 8000...like it did the other day and possibly see some resistance at the 7700 level.
Dow Prediction
Staying the course:
I have purchased the Direxion Financial Bear 3x, (NASDAQ: FAZ) because for a small investment I will be able to mimic the returns of shorting the financial markets...TIMES 3!
With Microsoft sales softening, I think again investors should consider owning the Exchange Traded Funds (ETF):
Proshares Ultrashort Semiconductors (SSG)
Parsons is in as Citigroup's Chairman
GE's earnings results are expected to drop
UK, US having thoughts of nationalizing banks
State Street downgraded
AIG losing key employees
Commercial Real-Estate could begin collapsing
Satyam could be sold
UK Pound hits 23 year low
Cold Weather makes Orange Juice and Nat Gas Prices Rise
Microsoft Earnings to Take a Hit
Dow Gains 280 pts, but at 8200
After going through some of the larger stories of the day. Here is what they mean to me. Citigroup, GE, State Street, and UK & US nationalizing banks all mean that the financial sectors is still heading lower. Note some of these banks received money from the government already through the Troubled Assets Relief Program (TARP). And if there earnings are still dropping then the outlook doesn't appear good.
Microsoft earnings to take a hit cannot be a positive sign for the technology sector. This will affect PC makers, chip makers, and retailers. A mainstay in the home like Microsoft is having softer sales and that can't be a good sign either.
Satyam is exploring options of selling themselves and this further highlights that transparency is needed and greed is bad. This Indian company's CEO managed to distort their earnings for years and billions of dollars were reported incorrectly.
The Dow was up yesterday, however notice the level is at 8200. Let's flashback to my post in November which called for the Dow to fall under 8000...like it did the other day and possibly see some resistance at the 7700 level.
Dow Prediction
Staying the course:
I have purchased the Direxion Financial Bear 3x, (NASDAQ: FAZ) because for a small investment I will be able to mimic the returns of shorting the financial markets...TIMES 3!
With Microsoft sales softening, I think again investors should consider owning the Exchange Traded Funds (ETF):
Proshares Ultrashort Semiconductors (SSG)
Welcome President Barack Obama...
Please join me in welcoming our 44th President of the United States of America! I am elated that we have a brilliant, young, motivating commander in chief to lead us our country. We must also realize that the odds are not in his favor as the economy continues to purge itself from years of toxic mortgage assets, greedy investment schemes gone wrong and overall lack of confidence. I realized that I too for a brief second thought that the market would forget all of its ills and start fresh, sorta like America is starting anew. However, the market reared its ugly head the day of the inauguration when we witnessed the Dow Jones Industrial Average drop below 8000!
But I am optimistic that a new direction is in store for us all and even the markets. Regulation, transparency, and sharing the economic pie are some of the ingredients that I would serve up during this time of weariness. So President Obama, good luck and if you need any advice...just call.
But I am optimistic that a new direction is in store for us all and even the markets. Regulation, transparency, and sharing the economic pie are some of the ingredients that I would serve up during this time of weariness. So President Obama, good luck and if you need any advice...just call.
Friday, January 16, 2009
Been Busy...
Some would say being right on the money. Well lets look back at over four months ago, when we told you to re-allocate your portfolios because the worst ain't here yet. And what have we seen is that are call is right on. The Dow has continued to plummet to the level I thought we wouldn't hit for awhile. and that is roughly around Dow 8000. This is a compelling moment because months ago I said that I would recommend that we all start inching back into the market, but at this point the news continues to be bad. Just searching articles on the internet you may come across these themes: Banks Need the rest of the TARP Bailout - Citigroup is selling their brokerage unit! - Bank of America is showing signs of cracking Retailers are not looking good. - Even Walmart sales are declining - Circuit City can't find a buyer and is liquidating all their stores!! Unemployment rates continue to rise - GE Capital is set to shed 11000 jobs Downgrades send stocks to their 52week/all-time/all world lows There is no strategy when the headlines read like this. The only thing is to stay the course with the consistent message that we've had before. I repeat I am and have recommended that you are completely out of the stock market and fully allocated to Treasurys and cash assets. This is especially true for your 401K portfolio because it primary purpose is capital preservation...not appreciation. A portion of your portfolio needs to be exposed to the market and I recommend that you have your own trading account where you can DO IT YOURSELF (DIY)...I don't need Bernie Madoff or any other scandalous investors out there losing my money...when I can do that on my own. It this portfolio you should be shorting more that buying things. Find attractive price points (see previous posts on price points) for both buys and shorts:
SHORTS:
- SSG: ETF that shorts the Semiconductor Sector
- KBE: EFT that shorts the Retail Banking Sector
- Also short the retail, and credit sensitive sectors
BUYS: - BBY: Best Buy is primed for increased earnings now that Circuit City is going BANKRUPT
- V: VISA is down towards their Initial Public Offering (IPO) again after being downgraded
I'll be back to update this post later
SHORTS:
- SSG: ETF that shorts the Semiconductor Sector
- KBE: EFT that shorts the Retail Banking Sector
- Also short the retail, and credit sensitive sectors
BUYS: - BBY: Best Buy is primed for increased earnings now that Circuit City is going BANKRUPT
- V: VISA is down towards their Initial Public Offering (IPO) again after being downgraded
I'll be back to update this post later
Wednesday, January 07, 2009
Is the Stock Market Glass Half...
Empty or full??? Well if I were looking into what most economists have predicted for 2009 I would take the glass and break it!!! Now I know that isn't the rosiest outlook that you would like to hear but hey I am just being honest. The picture for 2008 wasn't pretty so I find it strange that all of a sudden once again you have so called web and tv stock "pro's" still telling you the coast is clear and head back into stocks just because we change the calendar year.
The strange thing is if you were to call or write in and have these pro's substantiate why they want you to get back in they give you the same tired response (this is my guess):
~ Treasury yields are so low, its time to get out and make some money.
~ Rebounds start 4-6 months before everyone finally recognizes the "recovery" period is happening...don't miss the rally
~ Many evaluations used to evaluate stock prices tell us that stocks are cheaply priced
Now my goal is not to sound pessimistic, but I want to be the voice from the other side that levels the playing field. DON'T MAKE THE SAME MISTAKES YOU DID LAST TIME! Follow the one thing that doesn't lie and that would be the numbers. I am not asking you to be an expert but find relevant information, like the fact that the unemployment numbers come out this week and read articles about those key numbers. I read that unemployment numbers are going to come in around the 690K level for the month of December. I read this and said WOW, I don't really know what this means...but its sounds important. Then I read further and they said the unemployment numbers for November came in around 490K job losses that month. Now I can start guessing what these numbers could mean. It didn't take me long to determine on my own that an increase from November to December has to be a very bad sign and this can be backed up when we read articles last month when people talked about how bad November's numbers were. The last trick is to read more articles that are consistent with this prudent thought that if unemployment continues to rise then the economy will continue to struggle. Seek out these articles over time and start to determine themes that surface around the key numbers that you are researching (i.e., major stories).
I have determined high unemployment is a bad thing. See I keep it simple! And recent headlines that seem highlight high unemployment, a cold winter, and people like you and me not wanting to spend our money on anything. So I take these points and turn them into trades:
Article "Intel warns for the 2nd time on their quarter results" - Confirms that people ain't got money to buy expensive gadgets and computers!
Trade: The easy one is Intel and if they are best in breed all chip stocks will suffer. BUY the ETF: Ultrashort Semiconductors (this is like shorting chip stocks twice...double your bang)
Article "Friday unemployment numbers above 670K) - Confirms job losses are rising
Trade: This one logically tells me more job losses mean that people won't be paying off bills and especially debt! SELL: Companies that sell consumer debt - Banks (Capital One, American Express, Citigroup)
Article "Cold winter across certain regions" - When I'm cold I turn the heat on, and you either got gas or electric! Trade: Natural Gas and utilities may be solid here because people need them in this weather and they traditionally offer steady dividend returns.
StockPicker Highlight:
This year I am playing the headlines...logically of course to spot trends. Look at the results from our bailout article. 3 out of the 4 auto parts makers we bought have risen...not bad.
And shorting Capitol One hasn't proven to be the smartest trade yet but this proves price is an important factor. I still like this trade but if I were to have this in my portfolio I wouldn't short it until it reaches 34.
Stay tuned.
The strange thing is if you were to call or write in and have these pro's substantiate why they want you to get back in they give you the same tired response (this is my guess):
~ Treasury yields are so low, its time to get out and make some money.
~ Rebounds start 4-6 months before everyone finally recognizes the "recovery" period is happening...don't miss the rally
~ Many evaluations used to evaluate stock prices tell us that stocks are cheaply priced
Now my goal is not to sound pessimistic, but I want to be the voice from the other side that levels the playing field. DON'T MAKE THE SAME MISTAKES YOU DID LAST TIME! Follow the one thing that doesn't lie and that would be the numbers. I am not asking you to be an expert but find relevant information, like the fact that the unemployment numbers come out this week and read articles about those key numbers. I read that unemployment numbers are going to come in around the 690K level for the month of December. I read this and said WOW, I don't really know what this means...but its sounds important. Then I read further and they said the unemployment numbers for November came in around 490K job losses that month. Now I can start guessing what these numbers could mean. It didn't take me long to determine on my own that an increase from November to December has to be a very bad sign and this can be backed up when we read articles last month when people talked about how bad November's numbers were. The last trick is to read more articles that are consistent with this prudent thought that if unemployment continues to rise then the economy will continue to struggle. Seek out these articles over time and start to determine themes that surface around the key numbers that you are researching (i.e., major stories).
I have determined high unemployment is a bad thing. See I keep it simple! And recent headlines that seem highlight high unemployment, a cold winter, and people like you and me not wanting to spend our money on anything. So I take these points and turn them into trades:
Article "Intel warns for the 2nd time on their quarter results" - Confirms that people ain't got money to buy expensive gadgets and computers!
Trade: The easy one is Intel and if they are best in breed all chip stocks will suffer. BUY the ETF: Ultrashort Semiconductors (this is like shorting chip stocks twice...double your bang)
Article "Friday unemployment numbers above 670K) - Confirms job losses are rising
Trade: This one logically tells me more job losses mean that people won't be paying off bills and especially debt! SELL: Companies that sell consumer debt - Banks (Capital One, American Express, Citigroup)
Article "Cold winter across certain regions" - When I'm cold I turn the heat on, and you either got gas or electric! Trade: Natural Gas and utilities may be solid here because people need them in this weather and they traditionally offer steady dividend returns.
StockPicker Highlight:
This year I am playing the headlines...logically of course to spot trends. Look at the results from our bailout article. 3 out of the 4 auto parts makers we bought have risen...not bad.
And shorting Capitol One hasn't proven to be the smartest trade yet but this proves price is an important factor. I still like this trade but if I were to have this in my portfolio I wouldn't short it until it reaches 34.
Stay tuned.
Saturday, January 03, 2009
2009...The simple approach to investing this year
As we bring in the New Year, I have learned how important it is to continually look into the future. 2008 was the year that we all would love to forget even happened from a stock perspective. Oddly enough, most of us would only like to forget the last quarter of the year as my portfolio didn't start its downward spiral until September/October. It was then my blogging activity picked up with a frantic pace and I was constantly tuned into the markets hourly. I can safely say in my brief investing life that I have never been a part of a market where new and relevant information was breaking rapidly throughout the day. I took a drastic approach and recommended that everyone take a defensive approach in their portfolio because I honestly felt the news and the data was taking the market in a negative direction. Looking back this may have been a solid decision and the leading indicators were: 1. The rules were been changed daily which caused volatility and panic; 2. Interpreting market data was critical 3. Some of the largest money managers tipped us off by reallocating their portfolio
Now as we look into 2009 what should we expect. Well the New Year has gotten off to a great start as the Dow Jones Industrial Average has just topped the 9000 mark, levels we haven't seen in awhile. Ironically, following Dec 16 where the Dow Jones again approached 9000 the next 5 five market sessions were downward days and bottomed at around 8400. I have repeatedly mentioned that I believe market history has given us a important level that may market a psychological bottom. I will have to go back and check to see how consistent the numbers that I have noted match with what some experts are now calling the market bottom on November 20th!
So what I am looking to do is gradually get back into the market. Taking the information we discussed above about where the bottom may be, I have recognized that 8400 is going to continue to be an important area where I want to get back into the market. I will be mainly shifting my RETIREMENT portfolio when these target levels are reached. As far as my investment portfolio I think people still need to take a defensive approach. As money has been and will be printed to get us out of this difficult economic time, I don't think things are improving on Main Street. And my gauge is the everyday person that you run into on the street. Simply polling my friends: less and less of them were actually going out and buying expensive party packages this year.
So I still believe shorting the financials whenever they run up, more exposure to bonds (corporate and high yield), less exposure to treasury bill (inflation may start creeping up), and buying oil, gas, and gold.
Stock Tracker Update: I really want the stock tracker to eventually do one of 2 things: 1. Reflect my actual portfolio or 2. Reflect the future stocks I'd like to buy/short... because currently it does neither!
Now as we look into 2009 what should we expect. Well the New Year has gotten off to a great start as the Dow Jones Industrial Average has just topped the 9000 mark, levels we haven't seen in awhile. Ironically, following Dec 16 where the Dow Jones again approached 9000 the next 5 five market sessions were downward days and bottomed at around 8400. I have repeatedly mentioned that I believe market history has given us a important level that may market a psychological bottom. I will have to go back and check to see how consistent the numbers that I have noted match with what some experts are now calling the market bottom on November 20th!
So what I am looking to do is gradually get back into the market. Taking the information we discussed above about where the bottom may be, I have recognized that 8400 is going to continue to be an important area where I want to get back into the market. I will be mainly shifting my RETIREMENT portfolio when these target levels are reached. As far as my investment portfolio I think people still need to take a defensive approach. As money has been and will be printed to get us out of this difficult economic time, I don't think things are improving on Main Street. And my gauge is the everyday person that you run into on the street. Simply polling my friends: less and less of them were actually going out and buying expensive party packages this year.
So I still believe shorting the financials whenever they run up, more exposure to bonds (corporate and high yield), less exposure to treasury bill (inflation may start creeping up), and buying oil, gas, and gold.
Stock Tracker Update: I really want the stock tracker to eventually do one of 2 things: 1. Reflect my actual portfolio or 2. Reflect the future stocks I'd like to buy/short... because currently it does neither!
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