Sunday, January 31, 2010

And Mr. Barofsky says...

My wife and I are selling our house. We have actually picked an agent, and will be signing papers tomorrow. According to our agent this is the "right" time to make a move. After all, there is a current $6,500 tax credit available to all home buyers. (This applies to those who have lived in their home for five years or more and are moving up). Even though I am aware of the next wave of ARMS to reset... an unemployment rate that exceeds 10% nationally, and a rash of bank failures, we have made a decision to place our home on the market.

Chances are, we will not get anything close to what we "think" our home is worth... However, we will definitely sell it for more than we bought our home for. According to the demographics of our little town, the burg is still a desirable place to raise a family. As a result, home prices have not fallen as hard as other locations... at least not yet. However, we have taken a slight sip of reality and acknowledged that our home is not worth the original asking price that our old agent cooked up this summer. So we will settle.

Yet things are not so bad, after all we will be "buying up" in a depressed housing market. Rates are still low... (I was quoted 4.75% for 30 years the other day), and I believe the best days of our community are still ahead of it. Even as Chrysler prepares to shudder its doors.

Interesting enough, Mr. Barofsky has a more critical view of the housing market. Barofsky suggests that a home buyer tax credit actually artifically inflatea housing prices. That, a re-inflation of housing at this point in the game only causes a another bubble to start. Barofsky also believes that Federal officials are putting pressure on institutions to make loans just when the banks are trying to recovery from the last batch of bad loans.

As for my wife and I, we are going ahead with the house sale and purchase... At the end of the day, we have to remember that life is for living, not fretting over the what-ifs all the time.

Stock Watch
I exited my position in SLV a bit late. Still holing on to over 35% profits, I had a lock on numbers well over 55%. Supposedly the sell-off was due to a reduction in stimulus from China's government. Since silver also serves industiral applications it took a beating, although not as much as some of the basic metals miners life CLF.

I am anxiously watching NEOP continue to move as my original investment is nearing the 200% return mark. I entered a second position which is up an additional 20%. The greedy side of me sees another run that could make this one a real homerun. Still though, I am reminded of the stellar performatnce of 2008 followed by the over-zealous beating I took in 2009... and I stil feel a sense of caution in the air of an all-in type approach. Once bitten twice shy!!!

Monday, January 18, 2010

Points to Ponder

Points to Ponder

#1. While my wife and I have continued to interview realtors, a common theme has come out. Let's price this home to sell while there is a tax credit. My wife and I questioned whether the real estate market was going to get better or worse in the next two years, again the the chorus echoed that things were probably going to get temporarily better... then turn worse.

TC: "So what would make things get worse I asked?"

Realtor "To start with, there is a gigantic wave of ARMS that are coming due this year. Many of these people bought at the top of the bubble, and now are stuck in homes they cannot afford. Secondly, many of these folks belong to the legions of unemployed who have been living off savings and have depleted those savings and 401 K accounts."

TC: "Doesn't this mean that the government will be forced to keep interest rates low, and extend home-buyer programs to sop up all the extra inventor?"

Realtor: "Not necesarily. Congress had a difficult time pusing through the last credit and now it is more than likely that the Federal government will start addressing the national debt."

Okay, I get the point. If only one realtor told me this it is a pressure sales tactic. However, this seemed to be a common theme so now I am likely to believe them all... even if instinct tells me something different.

#2. Maybe it is appropriate to think of a Civil Rights slogan on Martin Luther King Day. "No Justice. No Peace." Congress seems poised to consider place some regualtion on the books that would not allow banks to get too big. (See Glass-Stegall Take Two Yet, don't think Jimmy Dimon and friends who probably have the most effective D.C. lobbying group are going to roll over on this one. According to Dimon, they need big banks that offer many different vehicles which can compete against other big banks. (See Dimon) Afterall, a Wall Street banker would argue that the natural selection did take place, and that the surviving banks should not be made to pay for the sins of banks like Lehaman, Merrill, and Bears Sterns which do not exist any more. If is my belief that lots of talk, and little action will be the end result of this game.

Please note that when the public backlash against bankster pay came up, Dimon just walked away... Even Dimon would turn a little red in embarassment as the Wall Street Journal reported that Wall Street pay is up 18% from last year. Maybe this is why some many firms have tripped over themselves to pay back TARP funds... no obligations to the pbulic means no government regulations right?

#3. The esteemed Professor from Michigan has a few interesting points to ponder regarding Obama, Healtcare, and the Senate race in Massachussetts. A Republican senator from MA...come'on!
Stock Watch

NEOP move to $1.54 doubling my original investment amount. While I am inclined to take profits, I may well hold out on this one to see if the firm is bought out by a competitor. If big business cannot think of a way to build their business, they always have the option of buying someone else's "good ideas."

CLWR I bought 1/12.50s and will look for this to be a winner if technology and global infrastructre continue to be a theme.

SLV lost a little this week, however it appears that this is only a breather... as long as interest rates stay low, and China continues to use silver in industrial applications there will be a part two to this story.

Saturday, January 2, 2010

Another Day... Another Dollar... Stock Watch...

Another Day... Another Dollar...

This title seemed to be a logical summary for the market over the past year. Dollars for TARP, Dollars for TALF, Dollars for Healthcare, Dollars to held states meet budget short-falls, and Dollars to the bloated numbers of unemployed Americans. As mentioned in previous blogs the U.S. Dollar's reserve currency status will be challenged over the next five years. Representative Steve LaTourette in a townhall meeting back in August made reference to the weakening dollars suggesting that a day could come where no other countries are interesetd in purchasing U.S. Treasury Bills (see Bank of England's last ditch effort to support the Pound Sterling) and suggested that the same could happen here in the United States. Congressman Ron Paul stated it more plainly suggesting that no government fiat currency ever stands the test of time because there is such an overwhelming urge to always spend more than the government makes, therefore driving the true value of that reserve currency into the dirt. Should this trend hold true, then one could continually make a case for GLD, SLV, and oil as the inflationary hedges.

Still though, he are reminded that Time Magazine Man of the Year Ben Bernanke is an expert on the Great Depression. That part of the reason Time Magazine raised Bernanke to this level was due to his financial engineering and manipulation along with the help of Boy Wonder Tim Geithner. Bernanke's insistence on pumping money into the economy was seen as a way to keep the wheels of U.S. credit mechanisms greased. We are reminded of his promise to sop up extra dollas before the inevitable wave of inflation weakens financial markets further, and send T-bill holders to the exit dors. With another wave of 2010 ARM's to hit, CRE on wobbly legs, and an unemployment rate of near 10.5% you can count rates staying low. This is not to sway financial institution into lending again, actually it is quite the opposite. With easy profits on Free TARP cash, we can only believe that cash positions + TARP repayment does not = an all clear sign for the economy.

I am led to believe that the thinly traded rally that started last March and has continued to the waning days of 2009 might be up. TARP funds are being repaid and banks are holding cash. While some investors are considering a re-entry into the market, to many it would seem almost fool-hardy to do so. Some experts are predicting a pull-back in early 2010. Others seem to think that this train will gain another 25% by year end. As one market strategist put it "If there is inlfation it is a flood of money into the market. All boats rise with the new flood of water."

Stock Watch
What started off to be the third and fourth leg up in my investing portfolio became much more of a roller coaster ride than I had anticipated. Call it tunnel vision if you would like, put I watched much of my hard-earned profits of shorts ebbed away with the rally of 2009. If I would have been the student of history and remembered the Great Depression charts, I would in theory have anticipated that whip back. Instead though, I created a few positions which have become my financial Gibraltir. SLV, D, and NEOP stand as my success stories. Also, I should include a profitable move in PQ which removed a bit of the sting I suffered in other losses. I have, and will continue to evaluate a few companies that will surely find success on this new playing field including Lucent and maybe even look-sees at FNM.