the Attorney Generals of 40 states are expected to announce a joint investigation in the coming days. Ohio's A.G. has already brought the first lawsuit against Ally Financial. First Obama doesn't sign the bill that quietly swept through Congress, HR3808-apparently he used or will use a pocket veto which makes the situation difficult for the banks. Had he signed the bill, it would help the banks extinguish this mess. Yet David Axlerod made a statement to the effect that they hope this will go away soon. Obama doesn't want a foreclosure moratorium, so I think this will go state to state and I question who much jurisdiction the Feds have in this one.
Think about this (I have as I'm in the market for a house), you buy your dream house, a foreclosure sale. Because of the way things are, you may have waited 6 months for the deal to be approved. According to our realtor, 80% of first time contracts on short sales, the buyer walks away as it takes too much time. However, assume you waited it out, got your home. You spent all kinds of money making it yours, you met your neighbors and have had diner with them, etc. Then the former owner serves you with a notice of eviction because the documents were improper in some way and the foreclosure is thrown out. This is what could happen. I imagine there may be 2 lawsuits there against multiple firms, the bank or owner of the note, the servicer, maybe the company that wrote the title insurance, and...? This really has some ugly potential.
Imagine the numbers on the pending sales reports. We will no longer consider any home that is a short sale. Imagine the attorney's plotting class action lawsuits right now. they may switch from foreclosure attorneys to "Fauxclosure attorneys". Can you imagine how far reaching the tentacles of this one could be? I imagine banks will shortly need to raise their capital reserves, in that case, assets are most likely going to have to be sold off.
QE2 may go to banks just to boost their reserves. Ad how about protracted? This could be years. So this is an emerging crisis that seems to be gaining momentum exponentially.
The food crisis, expect to see inflation in food very soon. We want to be looking at going long in grain producing , agricultural stocks and going short meat producers as the grain prices are and will continue to increase. Cows need to be fed grains. Tyson foods is an obvious short as they are meat producers. This also has a decent chance of becoming another emerging bearish trend.
The High Frequency Trading investigations, you think volume is low now and the markets are volatile, just imagine if these churn and burn firms get shut down or severely restricted.
The currency war appears to be here, does it lead to a trade war? Obama's overseas popularity may fade pretty fast as living standards in a lot of different countries, especially emerging markets fall due to a currency war, much less a trade war. It's a war, no doubt and EVERY citizen of affected nations will feel the pinch, some already at 20+% unemployment.
Then we have are own problems. As I mentioned before the September Jobs Report came out, watch that U6 rate-the one that is the most useful is assessing our economy, but the one that receives little to no attention as the published headline-grabbing U3 rate is nearly half of the U6 rate. So the previous report was a loss of 56k, the consensus was for little to no change, instead we lost 95k non-farm payrolls. However, economists expected the rate to tick up from 9.6 to 0.7 which it did not, as I told you, you'd find the change in U6. U6 surged to 17.1% from 16.7%; this time last year it was 16.1% U3 is bad as well, only two more months above 9% and we'll have 19 consecutive months above 9%-the longest stretch since the Great Depression.
And the market rallies! I think it had more to do with the dollar, but it's pretty clear by the volume, it was pretty much retail buying as the volume was the lowest seen in the last 189 trading days on the Dow-that's back in 2009. 3C was dropping like a rock on the 5 minute chart which is the first short timeframe in which we can observe institutional accumulation or distribution. However, lets put 3C aside for a bit, $11k on the Dow is a psychological level and an important one given our whole number affinity and being a break out high. Volume normally would have surged. This tells me that the move was fueled in large part by the few remaining traders still in the market-or dumb money.
Being we know from the last report there's still a persistent short position in the market, (3C shows this as institutional money), it certainly didn't force a short squeeze and didn't seem t bother the holders of those shorts. Perhaps they know a few things we don't? I think so. Also given the average trader's affinity with going long and scared of shorting, it again suggests it's not retail. If it was retail, we'd probably have seen a short squeeze.
QE2-so what about QE2? Goldman Sachs (interestingly) published a report that says their proprietary system indicates that QE2 at at least $500 billion is already priced in the market, maybe even a trillion. So they are in essence saying, there's no upside to a QE2 announcement of $500 billion maybe a trillion, only downside if it is anything less or doesn't occur.
I'm thinking the Fed, must be thinking about reserves to prop up banks. Do thy want to blow they money to lift the stock market so insiders can sell at they best price or are they concerned that some of these banks are going to need a lot of capital reserves to get them through this emerging crisis? Now is the time you have to think like a crook. This will somehow benefit the Fed, it's their job to make sure it does. Don't forget the Fed is not quite Federal although it has some aspects of a Federal agency, it does have share holders, it is a for profit organization, and there are many "private company" aspects t the Federal Reserve. So think like a crook. They aren't enticing average Joe investor back into the market, maybe it's a failed plan and maybe owning some banks or having some grip on them might be more lucrative? What happens t the market then? I'm just thinking out loud as I type.
I have checked and re-checked and 3C doesn't look good at all. In many ways it looks worse then 2008 before the crash. I've said for a long time the second shoe will drop.
I want to show you something I've mentioned a few times. This is to illustrate just how smart, smart money is, or how connected they are to vital information that the rest of us may never see or when we do it'll b useless.
This is HOV during the tech Crash
This is a macro view of the point I'm trying to make, smart money is well informed, they know about events weeks, months and as you see here, even years before.
So that persistent short position in the market tells me, they know something-maybe it was this fraud in foreclosures, I don't know. I wouldn't have known why they were accumulating HOV until years later. Interestingly, I mentioned several weeks or so ago that I had seen some accumulation in home builders. Here's a scenario, everyone starts to think like me and they don't want to have anything to do with buying a short sale or a bank owned foreclosure, so there is some demand for homes, maybe home builders will fill that demand. Obviously, like we was with the tech rally, the last bull market leader won't be the next bull market leader, but there may be some room for home builders to gain a bit.
In any case, I'm going to be looking for title insurance companies, I'll be looking at several banks, FNM and Freddie, grains companies, agricultural supply, and meat/food companies. If you have suggestions, send them to me and I'll include them in my analysis.
As for tomorrow, the Euro opened strong on a gap up t $1.40. Earlier tonight, in the first 3 hours, it lost nearly half the gain, right now it's off its lows, but still under the open, currently at 139.78. It gapped to $1.40 from the close at 139.16-139.29 (the range in the last 5 minutes).
I'll have some stock ideas for you tomorrow based on the above characteristics I'm looking for.
5 comments:
Greetings Brandt,
Very interesting about looking for the next mark-up. You might take a look at the gas and oil MLP's. I've owned a few in the past but sold them last fall as I felt the market got way ahead of itself. I guess the joke was on me. Some tickers to look at: LINE, ATLS, APL KMP, EEP, NS. Let us know, as they've certainly surged this year.
As for "We will no longer consider any home that is a short sale," short-sales should be OK. The seller is selling the property to you with no question as to the title and alongside that sale he is entering into a contract with the bank to forgive any remaining debt.
Bank owned properties and foreclosure flips are what you would want to avoid. Foreclosure flips are likely to be hard to detect without asking. In any case, ultimately if the foreclosure was fouled up, it is the title insurance company that should be out the money, but certainly it would mean a whole lot of best-if-avoided hassle for yourself. I suspect what is really going to happen is the ownership stays with the most recent buyer and the foreclosing bank has to pay some nominal stipend to the former owner. The thing to remember is, it's not like these properties are going to suddenly surge in value to be worth more than what the foreclosed owner owed. That bubble has popped, especially in places like Florida. As always the people that will really make the money are the class-action lawyers.
The real pain with short sales is the amount of time it takes the bank to decide they will forgive the debt and approve the sale. Typically the first buyer gets tired of waiting and walks away, but the seller doesn't tell the bank. The bank finally approves the short sale and then the seller goes out and finds a second buyer and the thing closes in a matter of a few weeks. Save yourself the effort and only look at short-sales where the bank has pre-approved the sale amount. You want to be that second buyer.
In any case, good luck with your search.
Opps, technically it would be restitution, not a stipend. Sometimes my cynicism gets the better of me.
As of this morning we have given back all the gain on the Euro. It looking to go below Friday's close.
The euro now seems to putting in a bearish wedge in the 15 min time frame. Let's see if it continues. Lot of bull articles out over the weekend in anticipation of the FED.
China tightening may start us on the way down.
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