Subzero - Mortgage Rate Freeze

My thoughts on the mortgage crisis have been chronicled, like Narnia...get it. All jokes aside, because this is a real serious situation that I sighted her on Urbanomics almost a year ago. I plead that people really think situations through and hold people accountable for the deals, offers, and negotiations that they make with you. And I understand the average person doesn't have time to pay attention to the economic indicators out there in the economy. So my compromise to you is that you tune in here and I will give you the real deal in average people words.
A recent example that I can cite is my dealings with my insurance company. When I got into an unfortunate car accident which wasn't my fault, I really thought the situation through. My insurance company, BELIEVE IT OR NOT, works for me. Let me remind you, I send them monthly payments and because of my good driving record they don't have to use the money on me...rather they reinvest the money so that it can make them more. So, when it comes time and I actually get into an accident...they have the responsibility of making it a smooth transition so that I can get my life back to normal. I will speed up my example by saying there were difference in what my SUV was valued once it was totaled. Here is the ACCOUNTABILITY part! I did not trust their methods for determining the value of my car even though they used a reliable industry expert. I asked many questions and made them explain in plain english how they value my truck. It was my job to be skeptical and guess what!!! We negotiated a higher settlement because I challenged the status quo.

In this article here (http://urbanomics.blogspot.com/2006/02/huff-puff-blow-houses-down.html), we were asking a few questions and challenging the status quo about the housing market. And I wish many more home buyers would have done the same. But whats done is done and now the government is being forced to step in and take unprecendented moves to try quiet the uneasy storm that is developing. I was glad that I did not bite my tongue then and I will continue to write what I believe. I have mentioned before that the data leads me to believe that the economy is grinding into a period that feels like a Recession. I think the markets will rebound slightly but the economy is still feeling like its taking a beating. So to ease the pain good ole Bush and his buddies have decided to get involved and set requirements that will offer struggling homeowners a five-year freeze on their mortgage rates... if they qualify. I agree with others that are protesting that this is a late move on behalf of Bush because the number of foreclosures have risen to the all - time highs.

Again this mainly effects the people who own subprime mortgages, or loans that are offered to people with not so great credit. Subprime loans often get you excited by their low rates for the first few years but then they jump very high making it difficult for your homeowner to keep up with payments. I don't think that this latest effort will change the economy that much in the short term. The plan helps a small group of people whose rates will adjust from 2008 through 2010. So where is the relief for the folks already impacted or that will be impacted before 2008?

This will not help the economy immediately. Again this move helps the investors of the world sleep easier at night. There is now some stability in sight for the markets and Wall Street got what it wanted to hear. Notice the last two days of the market have increased sharply. Because this means that homeowners payments won't rise which helps the retailers (whose customers have $$$ to shop), banks (don't have to take ownership of as many foreclosed homes), and other industries such as credit card companies who were worried their customers would't pay their bills.

Mixed Emotions

Hello all out there. If you have followed our ride this year, you will quickly note that Maximus (NYSE: MMS) has been a crowd pleaser and a favorite of mine. I have written about MMS a number of times and since the beginning we've enjoyed great returns. But now I am at a point where I am struggling with Maximus and I would like a little bit of help. Here's the problem there is currently good and bad news out there about this stock and I will start with...

The Good:

I was alerted to additional comments today on Maximus, which were GOOD. Zacks.com, an investment website has listed MMS on its Zacks Buy list again. The first time it was listed as an Agressive Growth Play at the end of May this year. Now MMS is listed again on their buy list as a Value Play and still considered a buy. Here is an excerpt from Zacks.com's most recent write up:

MAXIMUS, Inc. is doing all the right things. Business is doing well, the company is buying back its own stock and staying friendly to shareholders. Valuations are attractive for the stock. MMS is trading at less than 12x next year's estimates of $3.27 per share. Over the past month, this year's numbers have risen 21 cents to $2.68 per share (Zacks.com)

The Bad:

I also can't believe that I missed something so obvious about 15 days ago by not analyzing volume and chart patterns. Run a one month chart for Maximus and you will see some disturbing trends. The volume on MMS is alarming but I missed the fact that indicators where sounding off all around us. Case in point: On 11.14, you will notice very unusually high volume which is an indicator...and the volume was unusually high selling volume. Ding, Ding, this creates pressure on the stock which caused it to drop from its high of 47 on that day and reached a low of 40. Now this date coincides with Maximus's earnings release so this can be brushed off as understandable volatility on a meaningful day. But even on days of good news, 11.19, when MMS disclosed new contracts they had won for their business and when "TheStreet.com" upgraded the stock, it continued its downward pressure due to high volumes of investors selling the stock. This piece of information is not good b/c when good info comes out you want to see the stock rise. Further, today when the market is up over 1% you want to see you stock rise...MMS was down again today. This tells me that the stock cannot hold up from the current selling pressure and will trend downward for a period of time...which could be short. Finally, I dug even deeper and found the culprit of the large selling volumes was none other than PRIVATE EQUITY...this final indicator tells me what all true 'Contrarians' believe. Its time to sell when the rest of the world is upgrading the stock but Private Equity is bailing.

Urbanomics Easy Read: Its time to sell MMS because some smart money is exiting. I believe the this stock would be a good long term hold if you were in it for a large position. Remember earnings are increasing and in a matter of months this has gone from an aggressive growth play to a value play which means it could be held for a long time but it may not provide the aggressive returns like it once was. For us here at Urbanomics we will get off the ride, but if this stock drops a lot (which I don't believe it will) then get back on.

I am officially telling you to sell Maximus even though there is positive news and recent upgrades on this stock. Get out with the smart money, lock in our over 25% points of gains and wait for another rainy day to build your portfolio with this stock if it drops.

The Mixtape Series: Stockmaster Inc.

I am not overly excited about a lot of music out there right now. I'm still looking for that next great album that I can play all the way through. Its getting a little bit harder these days to finds those types of albums. I was in my ride, and I decided to bump the old Dr. Dre "Chronic 2001" album and I was so glad I could play the album through without having to skip through many of the songs. These days, the music scene is being steam rolled by mixtapes and a few of my personal favorites are the guys over there at Tapemasters Inc. I am also feeling DJ Drama's most recent album release. Drama, a.k.a Mr. Thanksgiving, is apropriately named because he is delivers music's next hottest hits or artists like turkeys are delivered to Thanksgiving tables all across the country.

I am bumping a few of the tracks like 5001 Ones (which has everyone and their moms in the video) but I am really feeling Andre 3000 on Outkast's lastest track featuring Marsha Ambrosius: Da Art of Storytellin Part. 4

And I have to send an honorable mention shout out to The Dream who has produced the catchy track: Shawty is the Shit. And before I hit you up with the video that has me two stepping in the club, I gotta leave you with some picks on my radar.

This is my official MIXTAPE Stock Pick list, I HAVE NOT RECOMMENDED any of these stocks but will be tracking them to see if they will be added to my portfolio:

ATP Oil and Gas (NASDAQ: ATPG) - Not over rosy about the volatility of oil. Build in a margin of safety around 5% and I may give this stock a hard look from it 44.58 price.

Candela (NASDAQ: CLZR) - I would like to see this stock hit its 52 wk low again of 6.05, before I gave it a serious look.

Orange21 (NASDAQ: ORNG) - Showed up on my screen at 4.70 and took off at the end of last week. What for these levels before possibly building a position.

Memory Pharma (NASDAQ: MEMY) .55c; this is your shot at a penny stock that could lift your spirits. A nibble of this high risk play at .55 cents and a serious consideration if it was slightly lower

Black Friday Shopping

Isn't it funny that someone somewhere marketed the day after Thanksgiving as Black Friday. It has become the day where no one gets any sleep and we all get up and spend money selfishly. Kinda the opposite thinking for the day day before...THANKSGIVING! How many people are out there buying things to give them away to the less fortunate. Not many is what I'm guessing, but hey what do I know. But come to think of it a new GPS navigation system has been on my list for awhile and its funny that I am bullish of this industry as I think this will continue to be the trend.

I guess I am feeling like a little bit of a scrooge today because with a little bit of a rebound today in the market (its up roughly 1%) that my portfolio isn't moving in line with the market today. I even have Best Buy in my portfolio so what gives. So on a day like this when I should be shopping, I will give you my random thoughts of stock recommendations and things I've heard as I've kept my ears to the street:

E-trade (ETFC) - The rumors are this stock may be up for SALE, what the #$%$#. How is this possible, those pesky mortgages are likely the reason. Its up roughly 20% today on news that it could sell itself to TD AMERITRADE (AMTD) OR CHARLES SCHWAB (SCHW)

The retailers are making a move today, Target (T), Walmart (WMT), Kohls (KSS), Best Buy (BBY), Circuit City (C), and others are moving higher.

Urbanomics Recommendation of the Day:

I have had this one on my BUY list but I can't remember if I have ever formally recommended it here. The stock is Electro Scientific Industries (ESIO) Buy Price @ $19.47

Drink and My 2 Step

Well this is one of my favorite tracks out there right now by the artist Cassidy. If my investing right now were phrased as a remix to this song it would be "I had too many drinks and made a MIS-STEP!"

I say this because all good analysts must own up when the make a huge mistake. My big mistake would be holding onto Rite Aid for way too long. So here today I would recommend that you reduce your holding or sell outright RAD. I think the turnaround story will take a long time to develop. I am playing the fence and say if you have years to wait then this will be a nice play...if you keep dollar cost averaging down. RAD can be picked up at these prices for $3.5 a share. So I've admitted my mistake or mis-steps and would recommend getting off the RAD bandwagon.

Next, is a lesson learned about the power of the market. Remember one of my rules to investment that I speak of very often is "sticking to your strategy". Well, I broke that rule yesterday. I was reading up on stocks that may be big momentum movers and I got in on the wrong side of a trade. it was an industry that made sense, Electronic Retailers...specifically video games. The stock was GameStop (GME) and I wanted to get a jump on a stock that all of Wall Street said was going up during the earnings call. Don't believe me, do a quick search for GME and read the articles leading up to their earnings release. So I bought GME, the earnings came out, they numbers were great for the quarter, but they communicated that their next quarter won't be as good. This began the sell-off of GameStop and I had to get out of my position. So I took a nice hit, but I had to get out of this bad investment.

The bright side is that I will remain firm in my little old strategy from college that has produced BIG sized gains. I repeat to all of you young and new investors out there to stick with a strategy, and enhance it over time but don't try to be something that you're not. Warren Buffet taught us that when he didn't invest in technology stocks during the technology boom of the 90's. It wasn't something he was good at so he stayed away. So no more stock chasing for me on raggedy Wall Street preictions!!!

Now back to proof that our strategy is a beautiful thing. Check out the performance of our most recent recommendation. Online Resources (ORCC) has moved impressively to the upside to gains of almost 10%. This is a positive sign because currently the markets are in steep declines each day. And when you have a stock that is moving up during down market periods you've got a strong pick.

And now for my 2 NEW URBANOMIS PICKS:

I am re-recommending ZHONE TECHNOLOGIES (ZHNE) as a BUY @ $1.25. Do a quick search here on my blog and you will see that it was originally recommended at $1.10. If we were long term holders (like we should have been), we would still be owning the stop and adding to our position. But we took the nice gain and ZHNE has come up again in my stock screen. I love this play because one, we have seen positive momentum when we previously owned it and we are seeing that same type of activity again.

Next, i am recommending MedCath (MDTH) @ $22.45. I love this stock for all types of reasons. The first would be that I realize that my investing strategy often leads me to undervalued plays and beaten down stocks. MedCath appears to fall into the beaten down stock play. After reporting 4th quarter earnings this stock took a big hit. I believe it dropped from the range of roughly $26 dollars to around $22. It is also a healthcare play which is always a great play with the surge of baby boomers across the country. My buy price is listed above, the stock could have be bought TODAY at @22.25...but note it is beginning to move to the upside.

Honesty is the best key, so my job is to keep it real! So enjoy these picks.

Disclosures:
I sold Rite Aid for a 16% loss
I bought and sold Game Stop in the same day for a loss
I bought Zhone Technologies @ the BUY price listed above
I bought MedCath @ the BUY price listed above
I already own ORCC at the BUY price listed in my previous post

Contrary to Popular Belief...

This phrase seems to define the stocks that are produced from my technical screens these days. As you may recall, Rule 1 that we defined here at Urbanomics is to have a strategy and stick with it. I guess I have to give props to my Purdue Univ business program that made me a quantitative investor by nature. I believe there are hidden indicators behind the numbers. I have taken a interesting approach as I attempt to document my every move so that we can both learn and prosper together.

Although my quantitative approach is great, I don't have enough money to invest in every stock that meets my screening. So I have to ALSO take a qualitative approach and try to find the BEST of my already BEST screen. To do this you must keep your ear da streets...that is pay attention to the markets around you. This is what I attempt to do as often as I can to make "general" assumptions. Now I am no economic genius, even though I play one on TV, but I can put the basics together when I assume that the mortgage and financial markets are in turmoil. I can also reason that oil at $97 a barrel can't be the best thing for you and me. Finally I can also guess that when enough well paid analyst are saying the same thing, they are either right or will influence the markets in a way to become right. Now that is another subject for another day so lets finish what we started. Remeber, when I was telling you that the market was whispering that there is a "Flight to Technology". You should do a search on my blog if you can't remember the post where I spoke on this subject. Then my investing began to shift in that direction, let's quickly recap:

Adaptec - telecommunications
Zhone Tech - can't remember what they do, but hey they have Tech in their name
Advent Software - financial software firm that increased 50% in only a few months
Radisys - Semiconductor company that was up %50 this year for us
Emcore - Semiconductor company that was a quick 10% gainer in 1 month, and can be traded in frequently

So my URBANOMICS November Play is another technology winner: ONLINE RESOURCES
(NASDAQ: ORCC)

This company provides technology services for financial companies. And I love this business line because I actually know something about it. Do you know how many times I get an offer from a company to "Pay My Bills" online! You'll love the fact that I make all my payments through my bank, via Internet Banking online. That is the service this company provides.

Here is yet another stock that I am beginning my evaluation after it has recently reached its 52 week low. Most investors are a little gun shy about approaching a stock at these levels and so am I. However, I also realize the BIG REWARDS can be made by a stock that hits bounces off of its lows and produces great returns for us. This can be a difficult science sometimes, don't believe me...see Rite Aid and how it keeps falling through my price points. Online Resources went into a deep free fall after its earning release and dropped around 29%. The next trading day it dropped even further and reached levels that hadn't been seen in over two years. Now I won't jump into this stock on blind faith. I have a little backing from the chairman and chief executive officer, Matthew Lawlor who in an open letter stated that ORCC "is a better investment than ever before" and his intention is to begin the stock as of November 1. Even better I have an idiot analyst who has downgraded the stock to $12 a share, but still rates it as a Market Outperform do the the potential for high growth. This is music to my ears, talk about hedging your stance. At these levels I will gladly buy this stock and take an exit point at 12 and if they "just so happen" to outperform...I get the extra $$.

ONLINE RESOURCES (NASDAQ:ORCC) BUY @ 8.93 (This is the price the CEO bought his shares...good enough for me). Take your time and accumulate the stock at 9.17 or lower with the price listed above as an optimal entry point.

I would SUPERMAN this stock at $8.75 but I need more time to see if this is a CRANK IT UP price.

Ballin' on Wall Street...

We fly high, no lie and you know this Ballin'!!!!
Foreign rides, outside, it's like showbiz

Yeah boyyyyy, that is the song we play when our stocks do what we want them to do and that's move up. The lyrics above are from Jim Jones, a member of the Diplomats, who raps one of my all time favorite club anthems "We Fly High" or better know by the infectious hook "BALLIN". I've been working like crazy so I haven't had as much time to follow the market as I would like too. But again, ladies and gentleman you can tell my level of activity in the stock market by the amount of my posts. October was a time when I had to digest all of the data that was out there in the markets. Go back and check the story lines and news stories are littered with references to OIL, CREDIT CRISIS, FORECLOSURES, DEBT, UNEMPLOYMENT, and EARNINGS. I even wrote a post of the dreaded "R" word RECESSION because I will continue to REITERATE LOUD AND CLEAR that the turbulent markets are something that I have never witnessed in my short investing life.

But the reason why we are BALLIN' right now is because of solid stock picking. See, I can't remember which on my mentors told us that you know you have good stocks when they rise on the days that everything in the market is down. And that's what we have, our recommend list right now is on fire even on a day like today when the market is down over 300 points which is roughly a 2.6% decline. Well check some out one of my favorite stocks:

RadiSys (Nasdaq:RSYS) - They reported earnings a few hours ago and in after hours trading RSYS is up 18%....BALLIN

Let's get it!