Market Talk / September 3rd - 9th

[robo]

The Nightmare Mortgage
September 8, 2006

As home prices fall, there are a large number of borrowers out there who not only are worrying about the value of their homes, but also about paying off rapidly rising monthly payments caused by a new and extremely dangerous mortgage called the Option Adjustable Rate Mortgage (ARMs).

Option mortgages offer unrealistically low payments that add monthly-unpaid interest onto the principle of the mortgage. A ticking time bomb. Fully 12.5% of all mortgages nationwide were of this type in the first half of 2006 according to FirstAmerican LoanPerformance. Typically huge prepayment penalties make them impossible to get out of.

These loans are being pushed by deceptive brokers onto unsuspecting buyers who will never be able to pay them off. Beware, the bomb is ticking and will explode during the next recession.

 

[Birchtree]

Robo,

I'm prepared to do some more buying tomorrow before the traders decide that September isn't so bad after all. This action of the last two days is just another pause that refreshes in an on going bull market. So sorry to hear about all the problems in the housing market - poor folks won't be able to participate in the greatest bull market ever known - but I will. And at least they do have shelter. Snort

Dennis

 

[James48843]

The Nightmare Mortgage
September 8, 2006

A ticking time bomb. Fully 12.5% of all mortgages nationwide were of this type in the first half of 2006 according to FirstAmerican LoanPerformance. Typically huge prepayment penalties make them impossible to get out of.

.

Where I am in Michigan, ARM's make up a significant portion of the market. House prices have fallen just slightly, so it's not that angle which is the killer. Here job losses, and lower wages, are killing us. Real wages fell from a household average of $52K per household in 2000, to just under $43K per household in 2005. I don't know if anywhere else in the country has expereinced that kind of statewide household income falling in such a short period of time, and it's still headed down.

Result- Bankruptcies are ballooning, and home foreclosures are double this year what last year was, and last year was double the year before. It's an all out foreclosure bonanza here. These are even some that are simple 30 year fixed at 6 percent being foreclosed, not just the high risk ones.

All those who fell for the "Get a low ARM, " when regular rates were in the 5's and low 6's. are now paying big time here.

 

[James48843]

This action of the last two days is just another pause that refreshes in an on going bull market. .... Snort

Dennis

Birch-

I think just the opposite today. I've been out of stocks 100% only once before this year, and that was in May, just as the downside blew through. I think we are repeating here now- and I'm looking for a good 5 to 7% correction over the next 45-60 days, then followed by a leg up once more to a new high before Xmas.

I guess I just don't see what you are seeing for the positive side, and I'm usually a positive kind of guy. I think the slowing on the downside today was just a pause before another large sink.

Why do you think we'll move back up so quick?

Growl (Bearish this week, thanks).

 

[robo]

Thursday, September 07, 2006

Bears Running Out of Gas
The correction which started following the geomagnetic storm* last weekend seems to be taking on a familiar pattern; namely, the bears get excited and sell the market down, it finds support and the sellers back away. Clearly, there's little impetus to the downside and that's a longer term bullish sign.

Another bullish sign is the fact that bonds are continuing to see great buying support on the correction. The last bond market high occured with bonds extremely overbought, having rallied since late June and needing a pause to refresh. Profits have been taken and investors are finding bonds very attractive, even at levels below 5%. Thus, bonds are likely to continue their rally and that will help support the stock market.

Finally, the extremely bearish sentiment figures in the stock market tell us that the crowd is still bearishly biased even after two months of rally. That's pretty amazing when you think that after all this time, the average trader is still selling short -- and having to cover when the market rudely rallies and hits their stops!

*A study by the US Federal Reserve found a close correlation between geomagnetic storms and subsequent corrections in the stock market. "Geomagnetic solar storms occur approximately 35 days per year. For their study, Krivelyova and Robotti [the Fed researchers] correlated the dates of all such storms over the past 70 years with the behavior of 12 of the world's stock markets over the same period. An unmistakable pattern emerged: When the sun flares up, the markets go down. The condition lasts for about six days after the storms end."

 

[dell]

I am going 15% C and 85% G today. I think we will be soft headed into options expiration next week and will see some pullbacks. I intend to start moving back into stocks.

 

[Pilgrim]

Small relief rally in the cards today? What can screw it up?

From CNN this morning:

"Peter Cardillo, chief market strategist for SW Bach, said a speech by Cleveland Federal Reserve President Sandra Pianalto, a member of the Fed's rate-setting Open Market Committee, set for Friday morning will therefore get more attention than it might otherwise.Any further negative news about the housing market or the economy is going to spook the market," he said. "The focus is turning to the Fed's next move and how bad inflation is."



I don't know what time he is speaking.

http://money.cnn.com/2006/09/08/markets/stockswatch/index.htm?postversion=2006090807

 

[mlk_man]

I don't know what time he is speaking.

10:00am EST

 

[Fivetears]

The Birchtree 500 is making a go of it today; +.20%

 

[Birchtree]

The V8 is just purring today. I'll be doing some more buying just because it's so much fun. But I'll leave a reserve for any back up in price Monday.

 

[Birchtree]

Dipped in for another 18 wall flowers today - they will grow into adorable beauties with the right amount of bull manure. I think I may need a larger shovel to spread this stuff around. Snort.

 

[Birchtree]

Crude is down $1.12 so I just bought another 18 wall flowers that included a driller and a few related industries. Yes, I did find a larger shovel. I'll save the rest for next week in case there is another opportunity. May have to buy on the upside - I don't think this month will be light.

 

[FundSurfer]

Birchy, are you able to effectively follow all those stocks? Seems you use a very diverse approach and are looking long. I know I wouldn't want to follow that many.

 

[tsptalk]

Be careful. It looks like we have a low volume (so far) relief rally on our hands.

 

[tsptalk]

Seasonality hasn't been the greatest indicator lately, but FYI - Monday is the 6th trading day in September. September 11 is positive 50% of the time with an average return of -0.10%.

 

[Spaf]

Some indicators of market conditions

The other day Sept 5th in Tom's thread on Interfund Transfers (Re: Interfund Transfer 8/02 for 8/03/06) I made the comment: Some indicators are in or near overbought conditions!

The Slow-Stochastic (Slow-STO) is considered overbought (OB) above 80 and oversold (OS) below 20.
RE: [$SPX] S&P 500 / (C-Fund).
Sept. 5th the Slow-STO was at 95.19, that was Tuesday.
Sept. 6th the Slow-STO was at 78.54.
Sept. 7th the Slow-STO was at 51.98.
Sept. 8th the Slow-STO was at 32.74, Friday closing!

The Slow-STO is a monentum indicator. There was a wide top in OB before last Tuesday, indicating that the Bulls were strong and any correction is likely to be weak.

Regards, and be careful!..................... .....................Spaf

 

[pyriel]

Seasonality hasn't been the greatest indicator lately, but FYI - Monday is the 6th trading day in September. September 11 is positive 50% of the time with an average return of -0.10%.

Uh Oh! For me....

 

[tsptalk]

Concerns about Wall Street's ability to withstand a terrorist attack, natural disaster or flu pandemic have prompted Hank Paulson, the new US Treasury secretary, to launch a review of disaster-planning for the financial markets. More ...http://www.msnbc.msn.com/id/14738551/

 

[Spaf]

Will be closing the weekly thread and starting anew!
Thanks for all the fine information, enjoyed!
Regards
Spaf