Stormin The Capitol - 2 Different Economies + ESG Investing

Investing In Yourself – Using Pillars to Build Your Core	https://urbanomics.blogspot.com/2015/04/urbanomics-pillars-path-set-for.html
Setting Budgets + Saving for Black Swans	https://urbanomics.blogspot.com/2013/02/personal-finance-budget-101-free-credit.html
	https://urbanomics.blogspot.com/2019/11/hey-henry-high-earner-not-yet-rich.html
How to Open My First Brokerage Account	https://urbanomics.blogspot.com/2015/04/personal-finance-101-starting.html
Diversify your Life (Mind, Body, Soul, + Investments)	Search My Blog

Week In Review (Week of 1/4/2021)

Risky Business 

The biggest headline this week was how domestic terrorists were able to storm our sacred US Capitol building. I cannot think of any other word that would describe the acts of these people. As you cried out "Storm The Capitol", you assaulted law enforcement, caused our lawmakers to fear for their lives, and literally tried to stop Democracy in progress. What seemed like a cute slogan is more akin to treason if your objective is to try and intimidate and tear this country apart. We truly live in two different worlds, when a bunch of thugs think it's okay to lead an insurrection and no response occurred for hours. Luckily patriots in our news, our government, and our nation are speaking out and these people are being held accountable. So as I consultant, I share a simple rule with my readers: "You may be engaging in risky behavior if what you are doing any point in your life (no matter your age) COULD NOT be printed on the front page of the newspaper or be the lead story on your local news."  Your brand always matters and will follow you as the internet never deletes anything. There have been recent stories of students kicked off college campuses for their racist remarks, athletes dismissed from sports teams for being photographed for not wearing masks at gatherings, and yes thugs fired from their jobs as facial recognition and the public reported these bums boasted about damaging our democracy.

Link from the Streets: Corporate Execs Fired for Participating in Riots

Keepin in Real - Why is Housing Breaking Records

Did you know that the housing market was on absolute fire last year. How is this possible in a Coronavirus pandemic environment?? If you recall, I began my rants on having a national holiday to starve the virus in March 2020. As corporations raced to implement Work from Home (WFH) orders to keep Corporate America going strong, corporate workers began to taste another concept I have written about for years: optionality. While I have been working from home exclusively since 2017, many non-front line employees began benefitting from this trend in 2020 while still being productive.  So you have this strange irony:

1) White Collar Employees - Have work, NO commute, earning a paycheck, saving $$

2) Blue Collar/Essential Workers - Many unemployed, forced to work if essential w/ no vaccine (at the time), no PPE, no hazard pay, and still may need to use public transportation to commute to work

We call this the K economy. Using the really cool image that I created, white collar employees are on the space ship that keeps going up and to the right.  They can move outside of the city limits, have more space, keep working, and due to the Federal Reserve providing bailouts to the housing and corporate markets --- their home values, stock, and retirement accounts are sky rocketing too. They are making money hand over fist.

Unfortunately, my image depicts the front-line, blue collar worker as the mouse. There is a pandemic on the loose and while those guys (me included) get to work from home, they are being told they are "essential" -- please risk your life everyday. Often blue collar workers are more likely NOT to own homes, have monies in the stock market, and may only be benefiting IF they participate in a state or federal pension that have monies in the stock market. They also may need to stay close to the city because the hospital, city-county, or federal building they work in is in the city.  Few bailouts have been given here - the primary was unemployment benefits and immediately negative comments were made about how unemployed people were living high of the hog because they were given an extra $600 a month. 

#facts - White collar workers on the space ship are benefiting from a bailout, handout, or an entitlement. The Federal Reserve which has the ability to print money did just. And what did they buy with that printed money?? See for yourself: Fed Buys 1 Trillion in Mortgage Bonds

#facts - The reason why housing prices went up 16% alone from May to June 2020, is because for the last year the Federal Reserve has kept their interest rate at 0%. This means you are earning nada, zilch in your saving account and they are politely "forcing" you to spend your money to earn a return. So many are using low mortgage rates to buy homes as a way to earn a return...the rest of us are throwing our money in the stock market. It's safe to say if you own a home or stocks, you are on a rocket ship flying high.

This breakdown of very complex financial market activities was brought to you by Urbanomics. 

Ballin on Wall Street

At the end of 2020 and already in 2021 everyone is buzzing about sustainability. I laugh because now that advanced nations have depleted the Earth of everything she has to offer we finally want to invest in companies that will help to save it. This concept is NEW right?? Not really, but the fact that we have to rally privileged people around the world to do the right thing is mind boggling. So my buddies on Wall Street call our latest mission ESG investing, which stands for Environmental Social Governance. This may be the reason why my boy Elon Musk became the richest man in the world this week. That's a bad boy and his mission to electrify everything is a good start. But shouldn't ESG start at the top?? What about ESG politics, laws, leaders, and then yes companies and investments that support those initiatives. Do we need fancy letters to tell us to be good to the planet? Do we need fancy letters to tell us to STOP killing black men at the hands of the police who have a shield of immunity? What about the widening gap between the rich and poor? The middle class is getting eroded and the working class isn't just black and brown...there are many poor white folks in America now. This increases as non-college manufacturing jobs are shrinking across the nation. Do we need letters to tell Corporate Executives that they should do and say the right thing:

- Did anyone tell Wells Fargo CEO Charlie Scharf after he blamed the lack of diversity at his bank on "a very limited pool of Black talent to recruit from."  #wtfdidhejustsay

- Did anyone tell the former GE CEO Jeffrey Immelt who often jet-setted around the world with two corporate aircraft — one that actually carried him, the other flying just behind as a backup “shadow plane” on the off chance that a mechanical problem might delay his busy schedule. His aircraft was rumored to stock both lobster and steak so the boss could choose his midflight meal. In his 12 years as CEO, Immelt raked in an roughly $168 million as GE sank further and further into irrelevancy.  #newgoals:become Greedy CEO

Similar to politics, I don't need letters to tell me what's right and wrong. There has been a lot of wealth created and benefits and perks realized in politics and Corporate America. Strangely all the while, the earth and poor working class people has been depleted under their governance and supposedly with ESG at the top of their mind. 

Because who needs letters to tell people there is a talent pool of black people or to NOT fly two jets (even if the company is paying for it).  I guess I would storm the capitol too if slowly these perks were being taken away from me or someone that looks like me. 

 But really, at the expense of Democracy?? #DAMN

The Government Makes It Rain --- Stimulus To the Rescue

Coronavirus Update – Shutdown Has Finally Started

Thanks to the great leadership exhibited from New York, California, and Chicago the nation is slowly shutting down city by city --- and state by state. While unbelievable, this is very necessary to starve the virus. There will be debates on how long and I remind people to look to China’s recovery and the timeline they used. For example, Wuhan the epicenter of this crisis will remove the lockdown on April 8th. SO the reality is the longer the better for the hotspots. Why I demanded leadership --- one voice, one plan. Providing risk consultation to large corporations puts you in a position to see some amazing dynamics. People will not do thing unless they know the order has come from the top…it appears countries are no different. The shutdown should be federal because if we all go into shelter at the same time, you hope we can plan to exit strategically around the same time. Let me give you an example, if you have a missing child, technology (like the Amber Alert) has allowed for us to receive notification all at the same time rather than piecemeal.  This speeds up the likelihood of finding the child much better than sending it to one police department at a time. If the coronavirus shutdown does not come from the top, when one state recovers my question is: “Does that state allow you to travel or accept visitors from states that did not shutdown at all or that shutdown much later than your state did. Essentially this recovery could drag on longer than needed if we cannot move in a cohesive manner as a country. There could be a lack of trust in the air which is why I believe countries like Italy, China, S. Korea and others when into lockdowns all at once. Make It Rain – Last Resort to Inflate the Economy I am hoping for better coordination so we can begin to recover quicker and get the economy going.  The importance of the pillars we work on so hard here is to help you during these exact moments. If you have savings, you have some cushion during these bad times. See these articles, ripped from the news headlines: “Many Americans Biggest Worry is April 1st Rent and Mortgage Payments”  -- Washington Post “Real Estate Billionaire Barrack says Commercial Mortgages on a brink of Collapse” – Bloomberg “Jobless Claims Soar Past 3 Million to Record High” -- CNBC  “Mortgage Rates Surge to Highest Level Since January” – Marketwatch “2 Trillion Dollar Stimulus Package” --- See below These are just a few of the necessary reasons why the Federal Reserve is making it rain. It’s basically a blank check to shore up the economy until we can get a handle on the COVID-19.  Like in 2008, the market has responded with a rally since a “handshake deal” was announced just a few days ago. This rally will likely continue into the actual signing of the bill. Use this an opportune time to trade in the relief rally that is not uncommon. But when the dust settles, I am still not risking my individual retirement account funds at the moment because we know there is more to come. Mortgages need to be paid, the rent is due, businesses are asking for a bailout and jobs are being shuttered. Hopefully all this is temporary but it is a big risk. I don’t see an all clear sign, just yet. Urb Lesson of the Day:  Account Diversification · Savings Accounts – Gets you through the rough patches in life · Investment Accounts – Allows you to take risks when others are NOT – like today · Individual Retirement Accounts – This is truly for your future, why NOT wait for a sign that the recovery is strong

Q&A Session --- Questions About A Coronavirus Recession

Yo, why is Jadakiss as hard as it gets?
Why is the industry designed to keep the artist in debt?

Why you don't stack instead of trying to be fly?
Why is ratting at an all time high?

Lyrics from Jadakiss --- Why ft. Anthony Hamilton

Q&A with the Lyrics from Why

Let me help my guy Jada out really quick: Jada Question: Why is the industry designed to keep the artist in debt? Urbanomics Response: Well Jada the bigger question is why was your song written in 2009 but this question is still applicable even today. Ripped from the headlines: Taylor Swift, Mase, Megan thee Stallion --- all recently complained about contract dealings in the past year. You heard me hear say Jay Z and Master P gave you the blueprint -- independent. Funny you were referring to the music industry but ironically this seems to apply to most every industry I can think off. Let's take the NFL and NBA players who constantly are asking for a fairer share of the total profits as live sports is cable's last hope. We see players as spoiled, rich and entitled but do you find it interesting that someone pays their salary AND no one (main street, public, suburbs, politicians, etc.) ever calls the OWNERS spoiled, rich and entitled? How about the fact that college athletes in America can make universities AND coaches millions of dollars but the players don’t get paid…let alone their are no where near their fair share OR market value of the contribution they made to the profits of the college sports industry. I just saw that disgraced college basketball coach Rick Pitino, who once had a $55 Million dollar at the university of Louisville, is now allowed to coach again at Iona…even though he was the coach during the school’s biggest scandal which uncovered players getting perks and incentives (under the table) to come and play for the school. Did all the players on his team become millionaires during that run -- funny in the business world we have a fancy word called profit sharing. Maybe the NCAA didn't get that economic memo. Jada Question: Why you don't stack instead of trying to be fly? Urbanomics Response: Let me help those who are a little challenged by our smooth language --- to stack means to save money. Trying to be fly --- insert: spoiled, rich, and entitled.  Jada we haven’t even talked about the “economic” industry --- is this designed to keep the aritist public in DEBT? The public continues to take on debt at an alarming rate AND from a young age: Student Loans, Credit Cards, Auto/Car Loans, Home Loans. If the system is working and fair, why is every article about students swimming in debt. Every piece of mail is another company asking me to take my already high credit card debt and “consolidate” it with more debt they are willing to offer me. Wait there’s more --- I can take debt out to purchase my brand new fancy car and of course my home which has more seats and rooms than people in it, respectively.  The US is one of the few developed to offer a 30 year mortgage. What a beautiful concept --- let’s give you debt for something you spend most of your adult life paying for. With interest IF you ever held your home until paid off you likely spent more 40+ years paying for that home. But similar to the whiny NFL players who we complain about --- who are the owners that allow people to take debt out like this?? I could rattle off every company but what’s the point --- the real question is why is main street not taught money, budgeting, debt, savings, retirement, wills, insurance, and how healthcare works?    Real Questions I Received this Week Q: Do you like leverage and is now the time to lever up? A: For those of you out there, leverage is borrowing debt (money you don’t own) and using it for purposes like investing in assets (home, stocks, etc.). I do not think now or ever is truly the time to borrow money.  Something I learned from Warren Buffet is during tough times, when tide comes in you’ll see who was swimming naked. What he is referring to is debt, and the tide is an economic or financial crisis. When it hits, swimming naked means you are OVER LEVERED --- you have too many debts that cannot be paid.  My motto since my dad required I get a job at 14 was that I would never take on true debt. I sacrificed for the greater good and went to a state school so the fees would be less and I earned scholarships to help with the cost. Was it enough – no I used debt (my credit card) to get me through the lean moments which were usually the last few months of each year. But only because I made a promise that every penny of my summer job would go to paying off that debt.  I treat debt like the Lannisters in the Game of Thrones --- don’t get into debt but when you do always plan to pay if off. While I pay my debts on time, it's because I want to have the privilege to access credit (mainly during bad times to benefit on fire sales). Public Service Announcement: If you are in too deep, see if your lendor/creditor will work with you to forgive some of the debt...do not be ashamed many people do this and many corporations go through bankruptcy all the time (it's easier for businesses). A: Now is not the time to borrow more debt because the markets are too turbulent and more downside is to come. I do think you should have Money/Capital/Savings set aside to take advantage of the upside when we do get through this crisis. But those funds should rarely ever be someone else’s money --- then you forgot one our cardinal rules --- never take on debt or you may be the one they find swimming naked. What someone giveth, they will taketh and they usually come knocking only when times are bad. Don’t confuse leverage or debt with equity.  For example, I plan to invest during the downturn but I would rather put my rainy day savings to use OR my equity in my home.  If I lose my own money, I have no one to blame but myself. Losing someone else’s money may mean a lot of sleepless nights. I am evaluating using my home’s equity but this does involve risk. If you look back to my posts in 2009-2010, I was one of the few who had savings and no debt during the depths of the crisis.  Unfortunately, there were many home foreclosures and asset repossessions going on. I bought my home on a fire sale from a local bank that similar to many people fell in love with giving people too much debt or the wrong people debt. Revisit that process here (note my house is one of those in the pictures): https://urbanomics.blogspot.com/2010/04/homebuying-101-tour-baby-tour.html My equity in my home means I have gains since I first made my purchase and I can borrow against that --- but the risk IS your home is the collateral. So to reduce your risk, I advise if you try this approach DO NOT take the full amount of equity in your home. If we are headed for a downturn and your home value decreases that $100K in gains may be more like $50K. Q: Why is oil going down so much? A: Haha be happy and take advantage of cheap prices. Prices are so low, someone commented to me I don’t remember the last time prices were below $2. The reason prices went down are primarily because of Saudi Arabia, no conspiracy theory here just market forces at work.  And this IS NOT linked to the coronavirus.  The Saudis increased oil output after they could not reach an agreement with Russia to limit oil production. In economics if you have too much product that you cannot sell --- prices WILL come down and they fell to the floor. The virus has made this worse because if people are being quarantined or staying at home the demand for the oil is now dropping.  Urb Lesson 101 – if supply goes up or demand comes down --- the value of a product usually drops. We have both.  I’ve provided a source here as well:  https://www.nytimes.com/2020/03/08/business/saudi-arabia-oil-prices.html Q: Can you believe it, 3 states have just now issued the shelter-in place strategy that you shared weeks ago were needed? A: Yeah and many more states have closed schools and are allowing people to work from home. I think this is a well needed step in the plan to starve the virus. People are its host and you need to reduce people being in close contact for extended periods of time to starve the virus. The concern I still have as testing is finally ramping up, what is the damage by not doing this sooner and because it is NOT a true national strategy and states are electing to shutdown individually we all may not resume being productive as soon as we’ve seen in other places.  I think many people are using grocery store pickup and delivery, drive thru’s, Uber Eats, and I’ve seen stocks around meal delivery services popping but I’m not as big on this service for the masses.  Q: So when I start to process everything I am seeing and hearing is this all a House of Cards? A: To start, I have never seen the show so I don’t fully know the premise. But I truly understand the disbelief people have in how this has been handled. I think there has been poor leadership and people are panicking, hence the toilet paper craze. I think there are two things at play working separately: 1) Poor leadership results in no trust of the data/information coming from the top. It’s displayed when Trump would rather yell at the reporters than calmly answer the questions we are ALL hoping to hear the plan or solutions too. It’s clear when I get FEMA texts minutes apart from many people that everyone is on high alert and susceptible to hoaxes. That does not happen unless if you don’t TRUST the daily briefing you’re receiving from your CEO or leader. 2) If a virus can bring world to its knees because the fact is revealed that most of us do not have enough saving to cover two weeks of shelter-in place that is a scary proposition.  The new questions that will come are: a) When a family is so far in debt you go into bankruptcy….what does a country do to get out of a mountain of debt? b) If a lot of that debt is used on our medical system why is it being called fragile --- and we only have 400K medical beds nationally?  c) Will every virus, major climate change, and/or recession cause panic and markets to crash like this? d) Who get's a bailout --- it seems this time like everyone needs one?  I pray we are all patient to get through this together and help each outer out. Because it will be a long drawn out process that is leading to an economic recession.  Next week, news is already coming out that the unemployment numbers will skyrocket to somewhere between 2.5 to 3 Million people. Stay tuned in and stay positive. We'll provide more on how we hold it down during a recession

Tell Me What's Happening: Interest Rates Rising / Homebuyers Are Hurrying

There are a few themes going on around me right now.  Is it just me or does everything seem a little 'CHOPPY'!  This seems to apply to the weather, the stock market, jobs, interest rates...and definitely GAS prices.  So I wanted to start a dialogue to help us understand why.  There is no point in me writing (or talking) much I want to post a few videos that may help explain why.

First up is Interest Rates. These rates help determine what our mortgage rates will be.  The Federal Reserve can manipulate interest rates to help speed or slow down our economy when it needs to...think like a treadmill.  They have hinted they may be doing less tinkering with the economy and that is making rates move higher.  Oddly enough, this may be great for homeowners as buyers may race to get in on this historically low rates BEFORE its too late.

Check this video out:

How Low Can Mortgage Rates Go...

Its interesting as I look back almost a year ago... we wondered how low the mortgage rate environment could go. A year ago I remember following a CNBC article that quoted a market expert who said the 30 year mortgage rate would fall to nearly 4 percent!!! Its safe to say that we didn't hit that historic mark on the 30 year rate but as we dropped under 5 percent there were days when we wondered.

History books will go back and reflect on this time period and wonder whether the monetary policies by the Federal Reserve were helpful. The policy used by the Fed was commonly called monetary or quantitative easing and involved their buying of mortgage backed assets in large amounts to keep pushing down the rates. In turn, by depressing rates you attempt to spur economic activity in a housing market that was on its death bed. The overall goal is and was to put a floor on the troublesome housing market and now it appears its working. Home prices now appear to be stabilizing but a few things appear to be forming like clouds that will predict the direction of rates.

The first is the admission by the Fed that they will stop by mortgaged back assets by the end of March. This will begin to have an immediate impact on rates. I would anticipate that rate inch up from there and they will then move up further on the potential that the Fed may raise interest rates by the end of the year.

So look for rates to move up in April, possibly hampering the stabilization seen recently in housing. But you wonder if the government has already anticipated that. The timing of newly communicated program look to spur one last effort in demand before rates begin to creep up. Here is a quick summary of programs (new and improved):

- Home Affordable Mortgage Program - new requirements to have documents before you get the modifications

- The FHA allows investors who "FLIP" homes to buy FHA homes in a bid to offer remodeled homes to first time home buyers. With pricing guidelines included this should keep prices affordable

- Fannie Mae is offering new incentives to home buyers. 3.5% in assistance can be used for closing costs or brand new appliances and only for owner occupants.

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...

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.

Trying to Catch My Breathe...

Or better yet, "Let Me Clear My Throat". I am trying to catch up to a few things so far. For example, I wanted to follow-up on a previous post and I'd like to respond to a reader's comment left recently and of course I want to drop my personal thoughts on something that I nailed right on the head.

Follow-up to My Previous Post

First thing, is I wanted to briefly follow-up on my previous post that I was just now able to get around to. I really like Radisys (RSYS) at these levels and even in this volatile market...I stray away from posting a new Superman Price, but if I were it would go a little something like this. I am sticking to my original price point of $12.25, but I would Superman RSYS @ $11.85. Hopefully you'll remember some of my writings on price points because as I become better reading charts I really like using these points to determine my buys and most importantly my REPEAT BUYS. My real life example is today my limit order for RSYS filled at 11.85 and that is my repeat buy.

Next matter on hand, China Digital Holdings (STV). Warning, this is a very volatile stock so those with queasy stomachs beware. I will need to continue to monitor this one close but I stick to my earlier price points from my previous post. I bought at $21.50 and noticed quick profit taking at resistance levels of 22.70, maybe 23. Since then I have purchased and sold at the prices described here. And to show that I stand by my points I had a limit order fill today at roughly $21.50, and I will sell again at 23. Note: Although volatile, I believe this will continue to trade in this range for awhile. As noted I have already bought and sold this stock in the range and I will keep doing so for small but effective 5% gains. The first time it took two days to reach my 5% target and today when my 2nd limit order filled, I was please to see that our target hit again on the same day! I will be selling STV, very likely by tomorrow and looking to buy again and continue picking away at the 5% target.



Reader Response

Click here for my Reader Response to: Subzero Mortgage Freeze

That nasty word...RECESSION:

and stay tuned for why I called the recession awhile back!

Disclosure: I own shares of RSYS & STV

Damn Gina!

Yeah, I had to steal my favorite line from my Urb flashback sitcom "Martin", featuring Martin Lawrence. What does Martin have to do with investing, yeah you guessed it Damn Gina! That's what I say when I get something right but I am too weak to pull the trigger. I have to give some credit to a stock star (not rockstar) friend of mine that goes by "The Great". We were all over the fact that the mortgage world is imploding as we speak. Need proof read a few of my columns that date back to last year when we called the top of the market...need more proof check out American Home Mortgage!!! But I will get back to that story in a minute.

We are here to say DAMN GINA! to the fact that I wanted to:

MAKE MONEY off of the real estate market. Specifically I wanted to SHORT MORTGAGE companies. So I had this convo with "The Great" only 2 days ago and we plotted a master plan to make so dough off of this scenario. The scenario is simple but the buzz from my friends at Fast Money on CNBC is that shorting this sector was old news. But "The Great" mentioned a few great points. The bloodshed has only begun on the books of these real estate companies. They have assets that are deteriorating in value and they can't pay back their damn loans. So our strategy was to pick a few sectors in real estate and get to work SHORTING those stocks, or betting that the value would go down for these stocks. So J. Gotti wanted to take the least risk adverse road possible and I will not guess what stocks will tank I want some certainty.

Urb "Living Legend" lesson of the day: My main man, Warren Buffett says make big bets on highly probably events.

Guessing which real estate stock will tank is like shooting darts. So I want to pick a fund that has exposure to: Mortgages and Homebuilders and short the whole damn sector. Now this is highly likely that the sector will fall over time. So what did I come up with:


(REM) an Exchange Traded Fund that specializes in Mortgage companies

The Damn Gina part -> http://finance.yahoo.com/q?s=rem
REM was down over 9% today

So what have we learned today...go with your gut. And my gut is telling me that the main reason REM tanked today was because of American Home Mortgage fears. This stock is done, finished...beat it, scram. And the kicker is they issued over 50 billion in loans last year and non of them were sub prime. That means, none of their loans were really janky!!!! Janky is a lovely word for horrible. But guess what, most of their loans were Alt -A or almost Janky. And if companies are going bankrupt on loan portfolios that are not even sub prime then we are in big trouble folks. Alt -A loans are going to a lot more almost "normal" home buyers.

So to wrap things up folks I am going out a limb and say if the market hasn't punished the finance companies that specialize in Alt - A loans then its time for us to do it, before the market realizes the obvious. Here is a quick list of companies that I found that specialize in Alt A loans:

Alliance Bancorp - already bankrupt
M+T Bank

Hey if you know any public companies that specialize in these loans, let me know!