Nightly Wrap Up

In tonight's wrap up, there's a few thing on the table. One that has me excited as I think it shows that the market analysis here at Wolf on Wall Street (anything other then trade ideas and market updates) does have some insightful merit. You may remember me talking many times about our search for a house and that I would not look at any deals that were anything less then arm's length which was a difficult process as most of the homes on the market are either bank owned REOs or Short Sales, the arm's length deals are few and far in between and usually ridiculously priced as people do not comprehend what they paid for their house and what market value now is, are two separate issues and the first has nothing to do with the second. Roughly translated, arms length homes are still severely overpriced, but I dd not budge. I didn't take the bait they are offering if you buy a FNM/FRE home and get some extra loot to fix it up and the reasons for this are summed up in this post, which is one of many on the subject I've written; this is from November 22^nd, 2010

“we have been looking for a home to buy, since all of the robo-signing talk cropped up, we became very picky. Realtors, which swamped us, probably over 20 contacted us every week with possible homes-I just got a text from one right now, show just how dire their situation is becoming. We've been told over and over that 80% of first time bidders on short sales walk away as the process takes 4-5 months. We decided to stay away. After that Bank REOs were the next bit of available inventory, but because of the putback scenario that is developing and lawsuits in the future, we decided to say away from those as well. True, title insurance will refund us our buying price but not the cost of any upgrades we spend on in case a former foreclosed owner bring suit over robo-signing and wins. This left us with what is amazingly an almost non-existent supply of homes, regular arms reach transactions. If we saw 100 homes, maybe 1 would be an arm's length transaction and usually way overpriced as people paid double what their property is currently worth and they just can not accept that. I feel that these properties, which we had been outbid on one which was an estate sale, even though we offered full asking price, will be few and far in-between and those that are prices reasonably will be quickly snapped up as this trouble in the banking/real estate sector continues to grow and most likely will force real estate prices lower. Although I feel the arm's length transactions will be in high demand as Americans start to take notice of what's going on.”

And on Friday, the Massachusetts State Supreme Court put the issue to rest, ruling in favor of the little guys and against the banks. Here are some notable quotations from the decision via Massachusetts Law Blog:

-Despite pleas from innocent buyers of foreclosed properties and my own predictions, the decision was applied retroactively, so this will hurt Massachusetts homeowners who bought defective foreclosure properties.

-If you own a foreclosed home with an “Ibanez” title issue, I’m afraid to say that you do not own your home anymore. The previous owner who was foreclosed upon owns it again. This is a mess.

-If you purchased a foreclosure property with an “Ibanez” title defect, and you do not have title insurance, you are in trouble. You may not be able to sell or refinance your home for quite a long time, if ever. Recourse would be against the foreclosing banks, the foreclosing attorneys. Or you could attempt to get a deed from the previous owner. Re-doing the original foreclosure is also an option but with complications.

So as I feared, the result of buying a foreclosure of any of several types has real consequences. As I once stated, “Imagine buying a house, making it a home and then having it taken from you because of faulty legal/paper work.” This wasn't a big issue at the time, but because I was in the process, it was something I thought could materialize and now the highest court in Massachusetts has said “IT IS SO!”

The other half of this is the banking sector and what this will do, besides the issue of the pensions funds I mentioned last night, besides the issue of putbacks, and besides the issue of all 50 states AG's investigating fraudclosure, now we may have a huge class action lawsuit of homeowners claiming all kinds of damages when homes they thought they were purchasing according to the laws of the land are suddenly taken away from them. If you've ever been house hunting-you know it's a grueling process and finding the right one is a near miracle. Having it taken from you would probably be enough to join potentially hundreds of thousands of other homeowners in the same situation.

The next tidbit...

I've been talking a lot lately, I think my last post was about baby boomers and pensions massive unfunded liabilities as baby boomers are set to start retiring this month at a rate of 10,000 a month for something like the next 12 years. Well these pension funds are in huge trouble, I mentioned GoodYear Tire and Rubber's Pension fund in covering the larger topic including state, county and city pension funds as well as corporate. Just recently I said this about GoodYear's pension fund:

“In Hackel's”

Today we have news that there's a push being lead by Newt Gingrich to allow states to go into bankruptcy, something that hasn't happened in a hundred years. This would also allow them to discharge their pension obligations. If you read this article I just published Sunday on the retirement onslaught of Baby Boomers, you'll realize just how much trouble our states are in and the pension funds, but maybe more importantly, how much trouble baby boomers could potentially be in. A lifetime of savings for retirement may be swept away forever in a stroke of the pen. Here's the article about Baby Boomers and how dire their situation already is... and now this! 


Is it any wonder I'm long term bearish on real estate and financials?


As for today's trade activity, we had several C&D trades doing well today, as I mentioned in an earlier post we'll be opening up a new front in trades with earnings season. Our last shot at this saw a 90+% success rate.


With the NASDAQ closing up and the S&P/Dow closing down and volume all over the place, it's no wonder that today we didn't have a dominant price volume relationship which means that we don't have any short term oversold/overbought conditions in the market.


Right now the Asian markets are mostly down and it's that familiar theme of contagion in Europe, this time centering on what was sure to be the next victim after Ireland, Portugal. Expect Spain to be the next domino to fall-(see our European bank short trades on the January trade list). This week the auctions in Europe starting Wednesday/Thursday should provide some catalysts for some volatile moves, especially if they come is even worse then consensus. 


As for a couple of trades to keep an eye on that are looking close to ripe, a few more Cats and Dogs: AEN and MRNA.


AEN already gave us a 1 day 32% gain

 This is a 60 minute chart showing a beautiful triangle consolidation above resistance of a big base. Volume is perfect for the pattern and we're not seeing the black box pattern manipulation in the C&D trades, there's just no money in it for them.

 The daily chart showing a rounding base, the breakout and now consolidation with nice volume and a beautiful long term MACD histogram. I see $2.20 as a potential target here.

 Look at the huge 3C daily accumulation through the rounding base!!

And my m/a signal screen is giving 3 long signals. More importantly, AEN has pulled back to the 10-Day m.a. in yellow, this is where I'd expect it to pullback to and the triangle is looking ripe for a breakout.


MRNA

 Daily Chart-look at the triangle-beautiful, volume is right and MACD is right. This one looks ready to breakout anytime.

As far as the daily 3C chart goes, you couldn't ask for a better looking chart. Keep both of these on your radar, they may break VERY soon.