Stocks and investing thread

[NorthSideSox72]

If I had the money to do that, I'd still wait. IIRC, the peak of ARM Mortgage resets, the month that most of these sub-prime ARM mortgages see their rates jump, doesn't even happen for another 6 months, so there is a lot of bloodletting still to come before things even can begin to even out.

When I mean now, I don't necessarily mean literally today. I mean in the next few months. And keep two things in mind. One, people are going to become aware of their resets before they happen, because law requires notification/warning ahead of time. So the panic will start prior. Two, when I say buy, I don't mean buy at market. I mean something like... find 10 properties where you think appreciation is likely later, and start making low bids. As you go down the list, someone will bite.

 

[Cknolls]

It isn't a coincidence that the VIX is up almost 27% today and the mkt is in the toilet. Also watch the dollar. IF the $ rises dramatically, I believe stocks will get crushed. Asset inflation vs. dollar denomination

[southsider2k5]

It isn't a coincidence that the VIX is up almost 27% today and the mkt is in the toilet. Also watch the dollar. IF the $ rises dramatically, I believe stocks will get crushed. Asset inflation vs. dollar denomination

 

I don't think you understand the fundementals of VIX. Volatility is a percentage of movement of the whole market. A big point move, divided by a lower priced market, equals a higher vol. The VIX always explodes on large quick downward moves

[southsider2k5]

http://www.reuters.com/article/businessNew...=23&sp=true

 

October hiring strong and boosts consumer outlook

 

WASHINGTON (Reuters) - Employers added a surprisingly strong 166,000 new non-farm jobs in October, well ahead of forecasts in an early sign that consumer incomes may be better supported than thought heading into the fourth quarter, according to a government report on Friday.

 

The Labor Department said the national unemployment rate in October was unchanged at 4.7 percent. It revised September hiring to show that 96,000 jobs were added instead of 110,000 it reported a month ago and said 93,000 new jobs in August instead of 89,000 that it previously reported.

 

Financial markets responded powerfully to the positive labor market news. The dollar's value rose against other major currencies and stock futures climbed sharply, raising hope that some of Thursday's big market losses might be reversed.

 

Treasury debt prices fell across the board as investors bet it reduced chances for more Federal Reserve interest-rate cuts. The Fed on Wednesday lowered its key federal funds rate a quarter percentage point, saying it wanted to head off the risk of a housing-led economic downturn.

 

The monthly jobs report offers one of the first insights into fourth-quarter economic activity. The strong October hiring number may allay some concern that consumers will be so fearful about their jobs that they will be reluctant to spending in the crucial Thanksgiving-to-Christmas holiday season.

 

Economists said policy-makers should also be reassured by the jobs data.

 

"It was a very sturdy number in every respect, certainly giving the Fed confidence that they did the right thing," said Pierre Ellis, senior economist with Decision Economics Inc. in New York. "The main hope for the housing market has always been solidity of employment and income growth and so far that's holding."

 

The monthly report showed that some 190,000 jobs were created in service industries while 24,000 were lost in the goods-producing sector for a much stronger overall result than anticipated.

 

Economist Richard Yamarone of Argus Research in New York said the robust jobs report should reduce some of the concern among consumers about their financial prospects.

 

"The main thing consumers care about is their current employment status and expectations of employment," Yamarone said. "So I can't imagine that the current uncertainty in the financial markets would derail the consumer."

 

Among service industries, business services added 65,000 jobs in October and leisure and hospitality industries hired 56,000 more. Manufacturers cut 21,000 jobs while construction industries reduced payrolls by 5,000 in October, only about one-third of the 14,000 they shed in September.

 

Both the weekly hours of work and overtime hours were unchanged from September at 33.8 and 4.1 hours respectively.

[Cknolls]

Spx blew through 50 DMA this morning. The 200 DMA is a whisker under 1482. If we close below here methinks all bets are off for the bovine crowd.More importantly, a break of 1489.55 will turn the monthly chart to the negative..This is very similar to the failure in October of 2000. The October rally failed to take out the March highs of that year.

[Cknolls]

So the Fed wants us to believe that jobs were ADDED in the real estate and financial sectors in OCTOBER. LOL

[Cknolls]

There is no way the Fed would report a weak number this morning. The mkt sniffed it out and showed the Fed what to do with their numbers.

 

 

 

There is just too much bad paper held by the Financials. GS is holding $72 billion dollars worth of level 3 paper. They are supposed to be the best on the street. Granted, not all of that is subprim e, but that is still a lot of weak paper. GS down 10.90 btw. 225 big number for that stock.

[Cknolls]

MER. downgraded to HOLD at Deutsche Bank. Barclay's shares falling 8% in Eurpoe amid funding woes and speculation that the company is telling analysts to cut profit forecasts.

[Cknolls]

Mortgage Lending and Financials were not the place to be on Thursday. Here is the scorecard:

 

 

 

GMAC*, the home and auto lender formerly owned by General Motors (GM) reported a $1.6 billion loss on lower demand for mortgages and higher provisions for failed loans and impaired assets.

 

 

Radian (RDN) , the third-largest U.S. mortgage insurer, reported a $703.9 million loss after writing off $468 million on a unit that invested in subprime mortgages.

 

 

MGIC Investment (MTG), the largest U.S. mortgage insurer, declined $2.25, or 12 percent, to $17.11.

 

 

Washington Mutual (WM), the largest U.S. savings and loan company, fell 7.6 percent.

 

 

Countrywide Financial (CFC), the biggest U.S. mortgage lender, lost 7 percent.

 

 

MetLife (MET) slipped 4.8 percent

 

 

Conseco (CNO) dropped 10 percent, the most since emerging from bankruptcy in 2003.

 

 

American International Group (AIG), the world's largest insurer, fell 6.1 percent.

 

 

MetLife lost $25 million from its $1.8 billion of investments in 25 hedge funds in the third quarter, Chief Investment Officer Steven Kandarian told analysts on a conference call today. The New York-based company had another $47 million of losses linked to investments in homebuilders and CDOs.

 

 

Ambac (ABK) bonds were downgraded to "deteriorating'' from "stable'' by Gimme Credit Publications Inc. because of the world's second-largest bond insurer's risk from CDO obligations.

*GMAC is majority owned by a buyout group led by New York-based Cerberus Capital Management LP. GMAC's results included a $2.3 billion loss at its Residential Capital LLC mortgage unit.

 

The above synopsis thanks to Bloomberg.

 

I am still trying to figure out how anyone could possibly have been interested in buying GMAC from GM. Even more puzzling was GM's reluctance to part with all of it as opposed to 51% of it.

 

 

Urgent Message From Citigroup ©

 

The Mortgage Lender Implode-O-Meter is noting an Urgent Policy Notification from Citigroup: Effective October 31st 2007, Citi Home Equity will discontinue lending on all Purchase Money transactions for properties in California.

 

[Cknolls]

It's a global mkt, right? That's what they keep spewing on T.V.

 

Well then any investor in the S&P 500 whose home currency is the Euro is now looking at prices below the August lows.

 

Currency traders are telling you what they think of the Fed's cuts and the jobs report this morning.

 

 

WAMU's dividend is now at 9.3%. If they maintain that dividend they will have to pay out 79% of next year's $2.83 EPS estimates. If anyone believes that, I have a bridge I would like to sell you.

[southsider2k5]

It's a global mkt, right? That's what they keep spewing on T.V.

 

Well then any investor in the S&P 500 whose home currency is the Euro is now looking at prices below the August lows.

 

Which is exactly what they are trying to do. They want all of the other currencies to be expensive. They are trying to stall out China and Europe, and lessen the profit of $100 oil in the middle east. The more I have read, the more I have realized they are trying to correct the trade balance with the weak dollar. Exports are booming, and imports are going to start getting really expensive. Its the best way to prop up industries like Steel and Auto. Its also the best way to slow down China's growth.

[southsider2k5]

When I mean now, I don't necessarily mean literally today. I mean in the next few months. And keep two things in mind. One, people are going to become aware of their resets before they happen, because law requires notification/warning ahead of time. So the panic will start prior. Two, when I say buy, I don't mean buy at market. I mean something like... find 10 properties where you think appreciation is likely later, and start making low bids. As you go down the list, someone will bite.

 

I am sure you have heard the wise old trading saying...

 

"Those who pick bottoms, get s*** on their fingers."

[Cknolls]

Which is exactly what they are trying to do. They want all of the other currencies to be expensive. They are trying to stall out China and Europe, and lessen the profit of $100 oil in the middle east. The more I have read, the more I have realized they are trying to correct the trade balance with the weak dollar. Exports are booming, and imports are going to start getting really expensive. Its the best way to prop up industries like Steel and Auto. Its also the best way to slow down China's growth.

 

I'm a seller with both hands. The Fed can't do anything about the falling dollar unless foreign centarl banks do it for him because the FED and the Treasury have no foreign reserves to speak of with which to defend the dollar. You can't buy dollars with more dollars. When you spew confetti into the system, you depreciate it even further. The U.S never needed to have foreign currency reserves given that it prints the world's reserve currency. Un fortunately, when you abuse that privelege, as the U.S Fed has repeatedly done over the past decade or so, the mkt eventually says, "No MAS", and you get a break down in the global monetary system, just as we are seeing today.

 

The U.S does have one reserve asset, and that is GOLD Is it any wonder that gold is rallying in all paper currencies today, just as it did the last time the global monetary system broke down, in the eraly 1970's?

Edited November 2, 2007 by Cknolls

[NorthSideSox72]

I am sure you have heard the wise old trading saying...

 

"Those who pick bottoms, get s*** on their fingers."

That is, of course, the flipside. But looking at how real estate has performed in this country historically, any sort of real downturn is very unusual. I have a hard time imagining it will get a lot worse - maybe a little, though. And I have almost no doubt that even if it does fall further, that will only further entice opportunists, and we'll see that much steeper a recovery.

 

[southsider2k5]

That is, of course, the flipside. But looking at how real estate has performed in this country historically, any sort of real downturn is very unusual. I have a hard time imagining it will get a lot worse - maybe a little, though. And I have almost no doubt that even if it does fall further, that will only further entice opportunists, and we'll see that much steeper a recovery.

 

Its just like anything in investing... Only risk money you can afford to lose.

 

Secondly, recognizing the trend is the important thing. If you try to be exact about things, odds are you will miss the upswing. Real Estate is the one thing we can't create more of as an investment opportunity. It might dip for a while, but it will be back. You can protect yourself against a short term capital paper loss with a fixed loan, and not planning on selling short term.

[NorthSideSox72]

Its just like anything in investing... Only risk money you can afford to lose.

 

Secondly, recognizing the trend is the important thing. If you try to be exact about things, odds are you will miss the upswing. Real Estate is the one thing we can't create more of as an investment opportunity. It might dip for a while, but it will be back. You can protect yourself against a short term capital paper loss with a fixed loan, and not planning on selling short term.

That's pretty much what I'm saying. If you can afford to buy real estate, on a fixed-interest instrument, and with a fair amount of equity cushion... then it looks like a pretty good time to buy, to me.

 

[Cknolls]

Merrill Off-Balance-Sheert Shenanigans Drarw Scrutiny

 

Meanwhile, in the real world, regulators may be investigating whether Merrill Lynch (MER) violated accounting rules to delay reporting of subprime losses, the Wall Street Journal reported.

 

 

The heart of the Journal story rests on "unidentified people" who say Merrill engaged with some hedge funds in deals designed solely to delay disclosing losses on bonds or derivatives positions backed by subprime mortgages.

The U.S. Securities and Exchange Commission has opened an informal inquiry and is likely to investigate the transactions, a person familiar with the investigation said apparently told the Journal.

Ok, so what does all this really mean? What kind of "deals" are we talking about here?

The deals effectively move the securities off the balance sheet of one of Merrill's sponsored entity's and onto the balance sheet of the hedge fund involved.

How does that work? Well, Merrill prices the assets and the hedge involved fund agrees to "buy" the assets at that price and hold them for one year in exchange for a guaranteed minimum return.

Sounds shady, huh?

It's actually more common than one might think, and assuming the "pricing" is on the up-and-up, really not that shady at all.

Where the water turns murky is in the pricing.

In one case the Journal says Merrill sold commercial paper issued by one of its entities for $1 billion.

If, for example, regulators were able to determine that the transaction was unreasonably priced - say, if the assets that were transferred for $1 billion were really worth $500,000 million - then this is a serious problem.

In fact, then it becomes virtually identical to the off balance sheet transactions that were structured at Enron to hide losses.

This story is just beginning.

Unfortunately, if the old adage is true - news follows price - then Merrill's 11.8% move lower so far today is not encouraging for the outcome.

 

also:

 

Fitch Tosses a Little Kindling on the Fire

 

According to Fitch there were $92.1 billion worth of US corporate bonds downgraded in the third quarter of this year – 88% higher than the $49.1 billion through the first half of the year.

 

 

That's the highest level in almost two years, and worse, almost all of the cuts were on investment-grade borrowers.

Investment-grade bonds accounted for $88.1 billion of the cuts, while speculative-grade debt represented just $9.9 billion.

The industries most affected, as one might guess, were Finance and Banking.

Meanwhile, Standard & Poor's today said its bond downgrades outpaced upgrades in the third quarter by the widest margin since 2003.

S&P cut the ratings of 95 companies in the U.S. in the quarter and raised the ratings of 44, Bloomberg reported.

Again, this story is just beginning as well

 

 

 

 

[southsider2k5]

I'm a seller with both hands. The Fed can't do anything about the falling dollar unless foreign centarl banks do it for him because the FED and the Treasury have no foreign reserves to speak of with which to defend the dollar. You can't buy dollars with more dollars. When you spew confetti into the system, you depreciate it even further. The U.S never needed to have foreign currency reserves given that it prints the world's reserve currency. Un fortunately, when you abuse that privelege, as the U.S Fed has repeatedly done over the past decade or so, the mkt eventually says, "No MAS", and you get a break down in the global monetary system, just as we are seeing today.

 

The U.S does have one reserve asset, and that is GOLD Is it any wonder that gold is rallying in all paper currencies today, just as it did the last time the global monetary system broke down, in the eraly 1970's?

 

Please DO NOT feed some some hokey outdated conspiracy crap about the gold standard. All that did was to artificially limit the growth of the United States to our mining activity. The Gold Standard is completely inane, and has been proven so by pretty much the best looking long term economic growth in the history of the USA. The reason gold has rallied, is the same reason that every other commodity has rallied over the last few years... demand. With logic like that, I could make a case for the Soybean Standard as a peg for money supply.

 

Anyway, back to what I was talking about with reducing the trade balance, and taking growth out of other countries, here is a prime example of it, just to our north.

 

http://www.businessweek.com/bwdaily/dnflas...gn_id=rss_daily

 

Why Canadians Shop in America

Though the loonie's worth more than the greenback, Canadians head south for deals—and gripe about the high prices at home

by Diane Brady

 

Five years ago, Canadians had to put up with paying more than Americans for everything from Buicks to books when their dollar, or loonie, dipped to a low of 62¢ (U.S.). But while the soaring loonie is now worth more than its U.S. peer, prices north of the border remain high.

 

That has turned the grumbling into open rebellion. Canadians, 88% of whom live within 200 miles of the border, are increasingly crossing into the U.S. to shop and are going south for a record number of overnight trips.

 

"The general feeling is: Don't shop in Canada at all anymore if it's possible," says Larry Kristof of White Rock, B.C. During a recent trip to Washington, Kristof bagged a $150 rotisserie he says "would be at least $100 more here." Others are shopping abroad without leaving home: Online purchases from U.S. companies are up by as much as a third this year.

 

Call for Retail Reductions

Haunted by the specter of fleeing tax revenue, Canadian officials are prodding domestic retailers to cut prices. On Oct. 31 the loonie hit a 50-year high of 106.17¢. The U.S. dollar has weakened because of America's slowing growth vs. the rest of the world, which tends to lower U.S. interest rates and profit growth. Longer term, many investors also worry about the large, albeit shrinking, trade deficit Uncle Sam has with the rest of the world.

 

On Oct. 23, Canadian Finance Minister James Flaherty convened a special meeting with retail groups in Ottawa to pressure them to "be responsive to the need to reduce their prices," though he conceded that "we're not going to force prices down." A few days earlier, Bank of Canada Governor David Dodge told consumers to shop around and demand "the best prices that they can get," while Ken Georgetti, the president of the Canadian Labour Congress, which represents unions nationwide, accused retailers of "greed, gouging, and bad citizenship."

 

Retailers are now nervous about the prospect of a weak holiday season, as shoppers head south to load up on gifts. Canada's strong economy, aided by the rising price of oil and budget surpluses, should spur healthy holiday sales—if people shop at home.

 

Retail chains such as Wal-Mart Stores (WMT), Zellers, and Indigo Books & Music cut prices to reflect the stronger loonie. But don't expect Canadian prices to sink to U.S. levels anytime soon. Diane Brisebois, CEO of the Retail Council of Canada, says high wages and transportation costs, along with the fixed exchange rates at which products are ordered in advance, make it hard for local retailers to match their U.S. peers on prices. And, she notes, "suppliers don't always lower prices to retailers."

 

Bargain Hunting

Canadian consumers aren't buying it—especially since the loonie hit parity with the U.S. dollar in late September. "Now, we're all equal," says Markham (Ont.) executive Tania AuYeung. She is among the many who are miffed at having to deal with dual price tags, listing one price in U.S. dollars and another that can be 25% higher in Canadian currency. Even some of the toll booths coming into Canada still give a discount for U.S. cash.

 

The rising discontent has U.S. retailers, especially those along the border, rubbing their hands together in glee. Even with longer lines at border crossings, their northern neighbors continue to come. "We see more Canadians in our store, and online sales are growing with the shift in their dollar," says Carolyn Beem, a spokeswoman for L.L. Bean in Freeport, Me.

 

And why not? Rachel Barney of Toronto goes to Amazon.com (AMZN)—instead of Amazon.ca—for her book purchases these days. As she puts it: "I won't pay a 50% markup for no reason."

 

Brady is a senior writer for BusinessWeek in New York. With Joseph Weber in Chicago.

[Cknolls]

So were letting the dollar fall so we can take growth out of other countries? LOL

 

 

So much for the strong dollar. How would you suggest we could raise the value of the dollar if we didn't want to take growth away from other countries?

[kapkomet]

So were letting the dollar fall so we can take growth out of other countries? LOL

So much for the strong dollar. How would you suggest we could raise the value of the dollar if we didn't want to take growth away from other countries?

Actually, there's some truth to that. Think about it.

 

[southsider2k5]

So were letting the dollar fall so we can take growth out of other countries? LOL

So much for the strong dollar. How would you suggest we could raise the value of the dollar if we didn't want to take growth away from other countries?

 

I know, its macroeconomic theory, and it runs counter to what most people have been brainwashed to believe.

 

Its not difficult at all to reduce growth and still strengthen the dollar... Find a way to cut production costs of American goods across the board. Cut things like wages, benefits, material costs...

[kapkomet]

I know, its macroeconomic theory, and it runs counter to what most people have been brainwashed to believe.

 

Its not difficult at all to reduce growth and still strengthen the dollar... Find a way to cut production costs of American goods across the board. Cut things like wages, benefits, material costs...

Which is coming, sooner rather then later, I think.

[NorthSideSox72]

Major equity markets currently down 2 to 2.5% (Dow down 2.64% ~ 330 points) on further credit market fears, oil pushing $100/bbl and GM posting a whopping $39B loss (including a $1.8B operating loss AFTER special items). Ouch.

 

[mr_genius]

So were letting the dollar fall so we can take growth out of other countries? LOL

So much for the strong dollar. How would you suggest we could raise the value of the dollar if we didn't want to take growth away from other countries?

 

 

Actually, a lower dollar is good for conducting business with other countries. Many economists suspect the low dollar is a major factor which is staving off a recession.

 

However, a dollar this low creates a very real chance of inflation. It also lowers dollar based investments .

[mr_genius]

Major equity markets currently down 2 to 2.5% (Dow down 2.64% ~ 330 points) on further credit market fears, oil pushing $100/bbl and GM posting a whopping $39B loss (including a $1.8B operating loss AFTER special items). Ouch.

 

Oil prices are a major problem IMO. The US needs to seriously start working on alternative fuels and conservation.

Edited November 8, 2007 by mr_genius