johnthebear

Dow at 8000 Is Not Out of the Question

Following Friday's trading in which the Dow Jones finally hit the -20% threshold to be called a "Bear Market", I just have to wonder when the talking heads will finally give in and call the current economic downturn a:

"RECESSION"

Dow at 8000 Is Not Out of the Question

Agree, 8,000 is very likely. Keep in mind that all of the world indexes are now trading at or below their 200 day moving average. That has to tell you something.

The problem is we are in the early phase of global recession and the emerging markets will continue falling, probably over correcting to the downside, just as US markets typically do and then take time to test and retest before a solid base is formed that can cause investors to regain confidence and invest again.

No one can claim to be an expert...these are truly remarkable times like nothing we have seen before.

I find oil related stocks and agriculture still to be the most promising on the positive.

The commercial real estate market is toast and there simply is not enough money in the world to sustain the high prices and fund the over rated mortgages to keep prices up. This true all over the world. When Capitalization rates on income property are lower than typical mortgage rates of the past century, you can be sure that the fall will be nasty in the commercial market.

I have SRS, FXP, OIL, TRA as my primary holdings, about equal positive and negative positions. Both doing quite well. Also have puts in FXI.

How Cheap Are U.S. Bank Stocks?

The thing that has not been factored into the value of C mer leh etc is that there is no future income in the bundle business. No more huge fees. That line of works is gone. Transparancy is the name of the game for the future, even for hedge funds! Banks will go back to looking at lower L/V ratios.

And leveraged buyouts...forget it, can't be done like in the old days. It is a different world out there. Remember how many have lost their jobs at each of the investment banks? They are no longer needed. The income they would have produced is forever gone! So, are banks really all that cheap? I doubt it. Everyone is looking in a rear view mirrror, instead of looking down the road, but even those that do, not beyond the end of their nose!

After GE's Miss, Who’s Next?

Great call on GE Chris. Now with this call and your discussion in an earlier post about the REITs and their likely drop in value, I have greater confidence in my short position on IYR. (using SRS) I was just reading in National Real Estate Investor that Capitalization Rates on New York real estate on property bought in 2006-2007 was only 3%-4%. (UK cap rates in this same time period were reported to be 4.56%) In my judgment, a cap rate of 6% would be the lowest reasonable rate justifiable for an all cash purchase.

The projection of revaluation of overvalued prime real estate over the next 6 quarters is bang on, in my book. GE will likely take a hit here as well. I agree with your call of $28-$30 range to buy back GE for a long term hold. Also, I think that we will all be shocked at how long it will take to recover from the housing and commercial property bust. I read that the AIA has reported the architects have almost no new business, which is a 9 month leading indicator for commercial construction. With the lack of bank financing at attractive interest rates this is certainly reasonable. You know, another factor no one seems to appreciate in the home lending business is that there are a huge number of mortgage companies have gone out of business and employment is down sharply. It will take a long time to rebuild the lending process so that each loan approval will be efficient. Just think, they may even require honest appraisals for both residential and commercial property again! The lenders have been forcing appraisers to make values high or they get no work. I am sure that will change. So, from the real estate side of the market, this will be a long painful process, perhaps many years to recover to the 2007 highs in real estate. As for the "real economy" some like to talk about, I am not sure there is a difference. After, it is built on the consumer and with the enormous loss of wealth in markets all over the world there just is no credible wealth to rebuild with except the sovereign wealth funds, and I would not count on that to redeem us.

Breaking Up Is Hard To Do

Sounds like the take over by the democrats! Oh God, please spare us.

Breaking Up Is Hard To Do

Thanks, we should all study this message.

Meredith Whitney Threatens Severe Deflation For Your Portfolio

Stonewall and Mr. Mortgage have a lot to say. I agree that there is a long way to go in terms of both TIME AND PAIN from here!

So is there an answer to this question? What do each of you think the FED and Treasury should do at this point in the down cycle?

While I do not support Hillary, I wonder if she is may be right about putting a freeze on interest rates for home loans for the next 5 years so that the re-sets do not take an additional toll of home foreclosures? Let's face it, bankruptcy and foreclosure will hurt consumer spending for years to come as well as cause the break up of countless families. I suggest maybe a freeze should be retroactive to 1/2007. This may hurt the banks and their shareholders, but who better to pay the price for the fraud on the public in promoting loans they knew were designed to fail?

Maybe some of the j6p crowd might survive to continue paying their way for the lovely homes they could not have afforded at the time of their purchase. By the end of 5 years, hopefully we will have seen the bottom of the recession, and maybe Joe will still have a job and can keep his home during the next 5 years of recovery. I am looking at a 10 year recession-depression from where we are now. What do you think?

Financials and Retail: Not as Dire as They Seem

Valuking, so where am I wrong? I am not a slave to the media and the administration that wants to put lipstick on a pig. It is the truth that hurts so bad.

Sorry about that, but facts speak for them selves, regardless of political spin.

Financials and Retail: Not as Dire as They Seem

It would nice if Goldy was alive and well, but she is dead. The banks have no money to finance buyers of all those foreclosed homes. Remember, it takes new loans to enable buyers to those homes. Without new buyers, the housing market cannot recover.

The US treasury simply does not have the money sitting around to finance a home for everyone who wants one. Those who lost their homes are now homeless, looking for an apartment to rent.

Also, the same real estate bubble we have had also exist in England, Ireland, Span, China and many other countries around the world. Lets face it the writedowns mean the money is lost.... gone, never to return. And the 7 trillion already lost in the stock markets all over the world will not recover enough to repay those who lost their wealth. So, were does the worlds wealth end up? The oil exporting countries. They have the wealth, not us. They are buying into our financials for a reason.

Next, elect Obama be president and you can start praying with the koran, just like the one he used when he was sworn in to the Senate. Tough to be a prophet.

Uncovering Material Information at Merrill Lynch

So did you see the story about the First Republic suit? The sale was stock and cash for $1.8 billion last January. It was clear in November 2006 that 2007 was going to be a bad year for CDOs. I have a friend at Merrill that told me in Nov. that the subprime problem was less than 1% of the market and would have no effect on stocks this year. I bought puts, disregarding the inside info at Merrill.

The other shoe will fall when many smaller banks all over the world take writedowns and all residential lending dries up except for the most qualified buyers. When you lose several trillion dollars of lending capacity, it has to lead to a recession for more than just banks and real estate. It is amazing how little info about lending practices and real estate inflation is discussed by our media.

Housing Market Tracker - Subprime Review

Then, when you put into the equation that most stock indexes around the world are below or only slightly above their 200 day moving average, it really gets scarry. No wonder everyone is pretending that we are not already in a recession.

Don't Say Citi Didn't Warn You

I was reading about "tranche's" today in wikipedia and found an interesting discussion of how CDO are sliced into 4 classes, with the "bank" holding the slice with the first 25% of the loss based on being the slice with the greatest risk. So does this mean that Citi is absorbing all of it's 25% share in all of it's many bundles of commercial and residential mortgage and debt obligations or only 10% of what is possible? That would really be interesting to know. If the loan has a 110% LTV ratio, (no equity by the mortgage holder, how can there be less than a full 25% loss of it's share? What about the poor saps that own the other 75%? Where is that recorded?

Also, commercial mortgages may not be in default now while the economy is still buzzing along, but with very low cap rates (equity return sometimes less than the mortgage interest rate and a 110% loan) and purchased while still 10% vacant, and assumption that with creative leasing the buyer plans to increase rents at 5% per year in a slowing economy.... I just wonder when they plan to recognize this potential loss? This problem goes way beyond Citi.... on to the big German banks that have been buying US real estate because of favorable currency ratios. Funny, no one is talking about this risk. Seems they would rather blame only the USA for creative financing gone amuck. Might be time to short some of those banks as well.