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ADRX- Big volume last few minutes. Short from 15.65.
Joe
RRI- Couple things to think about with RRI. Earnings were not too bad and projections were as anticipated. 240 mil shares were dumped on the market just 30 days ago so there is a ton of supply to eat through. Many of those that got share don't want them because they don't pay a dividend. Also, today is the last day for tax loss selling for a bunch of Mutual funds.
RRI's main problem is a bunch of short term debt coming soon but they knocked a chunk out of that Tuesday.
FWIW, Joe
DYN- Pru came out with a "sell" on DYN this am. That and DYN needs to cut it's ties with CVX is puuting pressure on the stock. Of cousre their $1.8 bil loss reported yesterday doesn't help. Problem I have with you with the trade you mentioned that if you are dealing in any size the percentage loss is too steep on these penny stocks for me unless I have much conviction. DYN is probably the most likely to be voted bankrupt someday of the bunch. I don't think that is the case but that is the perception. I think RRI is the one to buy. I posted this on another board yesterday.
>>RRI- Let's put this into a little perspective with a comparison with DUK. This won't happen, but let's say that RRI has a 1 for 10 "reverse" stock split so we can more closely match the numbers.
Share price: DUK- 19.87 RRI- 18.50
Mkt Cap: DUK- $16.4 bil RRI- $537 mil
Revenues: DUK- $69 bil RRI- $34 bil
Projected 03 earnings DUK- 1.87 RRI- 10.00
Book value per share DUK- $16.90 RRI- $225.00
Debt to equity DUK- 1.60 RRI- 1.07 <<
All that said, if DYN gets down to 53 cents, I may buy a chunk. I don't think I would buy it here at 67 cents. 50 cents is 25% lower.
Joe
>>> I seem to recall that your were once favorably disposed towards CTLM.<<<
Not me. Don't follow it and never have. Sorry. Joe
MIR- Heads up. MIR said in mid October that they would be releasing the much awaited, scrutinized 10Q around November 1. They have put off the date several times. I think they will be hard pressed to do it once again. Everything so far has been fairly positive. At current levels and valuations I don't see much down side. However, a good report could remove much uncertainty and we could see a nice bounce. This whole industry sucks currently so a little contrarin blood may be needed. Just moved above the 20ema and appears to be using it for support the last few days.
http://stockcharts.com/def/servlet/SC.web?c=mir,uu[l,a]daclyyay[db][pc20!c50][vc60][iLb14!La12,26,9]...
Joe
AMT- All those cell towers. Seems there should be a pony tied to one of them! Nice double bottom off the unfounded bankruptcy rumors. Reaffirmed earnings and goals to be cash flow positive in early 2003. Chairman has been buying a bunch at higher prices.
http://stockcharts.com/def/servlet/SC.web?c=amt,uu[l,a]daclyyay[db][pc20!c50][vc60][iLb14!La12,26,9]...
Joe
EXPE- Been up 9 out of the last ten days. Shorted some yesterday afternoon as 70 looked like good psychological resistance. Down day today could start a trend.
http://stockcharts.com/def/servlet/SC.web?c=expe,uu[l,a]daclyyay[db][pc20!c50][vc60][iLb14!La12,26,9...
Joe
CCMP- Tried to short but Schwab has no shares. FWIW.
Joe
HRC- Earnings out Tuesday. CEO cleared yesterday of some wrong doing. Stock up 9% today. Could be a good earnings play. Also, selling for less than book and less than 5X reduced earnings for next year. Nice value play for longer term hold. Yesterday's news put some of the bad stuff behind it.
Joe
Is the book to bill released tonight? TIA Joe
Aug. 14 certification deadline looms for CEOs
By Leticia Williams, CBS.MarketWatch.com
Last Update: 4:21 AM ET July 27, 2002
WASHINGTON (CBS.MW) -- August 14 could be the day of reckoning for some companies, as the deadline for CEO-certified financial statements draws near.
In a move aimed at bolstering investor confidence in the market, the SEC issued an order last month requiring the top executives of companies that have more than $1.2 billion in annual revenue, to personally swear by their numbers.
But some people are worried that the effort will spark a wave of restatements, flooding the market with more bad news and dampening the confidence of scandal-weary investors even further.
Bear Stearns tax and accounting analyst Pat McConnell, sees three areas of concern.
"We feel there are some groups of companies that certifying might prove problematical [for] and those companies fall into three categories," Bear Stearns analyst, McConnell said Friday.
Companies formerly audited by Andersen, companies that have a CFO or CEO that joined after the last fiscal year-end and companies already in talks with the SEC over their accounting practices may have difficulty filing, she wrote in a research note issued Friday.
"Companies in the first two categories are easy to identify. Companies in the third category less so," she wrote.
Donald Langevoort, a Georgetown University law professor and securities regulations expert, says investors can expect longer, detailed filings and not a flood of restatements on the market.
"That is both good and bad. Good, because information is investors' lifeblood and bad because more information could overload investors," Langevoort said.
"I'm not sure we will have a deluge of restatements," he said.
But overall, most of the 945 companies on the SEC's list are expected to comply with the certification requirement by the required dates.
A spokeswoman for 3M Co. (MMM: news, chart, profile), the second name on the SEC's list of companies, said their executives had no problem swearing by the company's books and will have no problem complying with the certification deadline.
Likewise, Cablevision Systems (CVC: news, chart, profile), also on the list, said that CEO James Dolan and principal financial officer Bill Bell will sign the SEC certification and that it expects no changes to its filings from prior reporting periods.
Varying deadlines
About 80 percent of the companies on the SEC's list end their fiscal year when the calendar year ends on Dec. 31, and those are the companies whose certifications are due on Aug. 15, the same day their report for the quarter ended June 30 must be filed. There are 745 companies that are expected to file on this date.
The certification statement deadlines for the other companies on the list vary depending on when their fiscal year ends and when they are required to file their next quarterly or annual report with the SEC.
Companies with fiscal years that end on June 30 don't have to file their statements until their annual report on Form 10-K is due, on Sept. 30.
A company with a Nov. 30 year end has until Oct.15, the due date of its Aug. 30 Form 10-Q, because that is the next report its required to file after Aug. 14, according to examples provided by Bear Stearns.
The certifications are being processed by the SEC's office of the secretary and will be posted on the agency's Web site as they are received.
Leticia Williams is a reporter for CBS.MarketWatch.com in Washington.
Cholan, >>>In the last 3-4 weeks your "turnips" have been dead wrong with both the targets and turn dates. <<<
I feel your pain. I got the same problem with the local weather guy in trying to get some outdoor projects done. Maybe he should change his system?
No, the market, like the weather is to get the move or direction right at least 50% of the time. Actually with good stops you can do very well with less than 50%. The market is not predictable, if the market was, there would be no need for a market because everyone would know. Kind of like religion and faith. To have a "religion" there must be the presense of faith in the unknown for without the unknown there would be no need for religion because we would know.
IMO, Zeev's "beauty" is his opinion of anticipating the movements within the market. Zeev has good instincts but like the weatherman, the market can move in unpredictable patterns.
Dwelling in the past would be a fool's game for Zeev or anyway else because past "wrongs" are only new ingredients for the next prediction. And like religion, to think otherwise would be "dead wrong".
I like Zeev just the way he is. Not that he is always right but more that he helps me form my own conclusions to make my "own" choices. My expectations are for Zeev to be "dead wrong" sometimes, that's part of trading the market. What is important is the big picture. The mention of QCOM or QLGC's past price movement as an indication skill is just plain silly.
JMO, Joe
BTW, I disagree with Zeev a lot. I got to work on that.
>>>"There is little doubt in my mind that we have either seen the bottom of the Bear market, or we are very close to it. Let's look at the facts:"<<<
Lots of Laughs! Question is, how many other "bottoms" have these folks called over the last two years? Looking at there "facts", for some reason I don't feel convinced. Appears their logic is solely based on past "bounces". Possibly another bounce but not enough info here for me to agree that this bounce is off the bottom.
FWIW, for that "bounce" we had last week it appears to me that we had a fair amount of distribution although the Dow and the NYSE were up for the week. Maybe manipulation of the more "important" stocks to move the averages? Hmmm...
Anyway, this week we saw huge volume on the NYSE at 11.9 billion shares. There were 6.8 bil shares down versus 4.7 bil in volume on up shares. The surprising numbers here are that decliners beat out advancers 2244 to 1200. Almost twice as many stocks ended the week down as up.
The Nas ended the week down 57 points. Total volume was 11.3 bil with up volume at 3.6 bil and down volume at over twice as much at 7.6 bil. Advancers were 1330 and decliners were 2596.
Interesting that the Dow transports ended the week down 3.4% and the industrials were up 2.9%
FWIW, JOe
IBD had an article in yesterday's paper with some interesting facts about Mutual Funds.
Investors will pull out an estimated $60 billion out of stock funds as estimated by Trim Tabs. The prior monthly record is $29.9 billion in September of 2001. $20.9 billion came out in last month in June.
The author states that "the industry is also better to weather the storm. For one thing, the industry has safety nets in the form of lines of credit".
Now that really makes me feel good. Don't you feel better. The mutual funds can borrow their butts out of this. Like there isn't too much debt already.
Anyway, in 1973 industry assets totaled $46.5 billion. As of May 31st this year they are now $6.9 trillion. Stock funds represent 49% of those assets.
In 1973 net outflows were $1.3 billion. The industry got "socked" with net outflow every year for the next decade, except 1977.
The author then states, "in contrast, since the current market downturn began in March 2000, the fund industry has enjoyed net inflow of $818.2 billion." The author said there is a beneficial trend that we didn't have back in the 70's - retirement account now funnel money into the market no matter what happens in the market.
Now the author is spinning all this stuff in a positive manner but I'm seeing "red lights" all over the place.
He has stated three "good" things. Mutual funds can now take on debt, they are better diversified, and money gets dumped into them no matter what. To me the debt is bad, the diversification is good, but, the mindless dumping of money has fed the bubble and once it stops we could see ebevn more massive redemptions by the funds or extreme debt levels leading to bankruptcies.
Individual retirement accounts represent 21% of all retirement investments. (this tells me that many are hurting and may be reconsidering past investment strategies)
Anyway, as I have mentioned before, one of my biggest fears are mutual fund redemptions. If the current outflow trends continue, selling will beget more selling. With the numbers provided above, market weakness could give us many more "bottoms" before we reach "the" bottom many years from now.
Joe
>>>thinking of trying Schwab's StreetSmart Pro<<<
I was with Datek and E-trade. Now with Schwab's Street Smart Pro and love it.
Joe
$19 billion yanked from stock funds in latest week By Craig Tolliver
Stock mutual funds have seen nine straight weeks of outflows with investors yanking another $19 billion in the latest week, according to Trim Tabs. Equity funds that invest primarily in U.S. stocks had outflows of $18.4 billion, compared with outflows of $5.9 billion the week before. International equity had outflows of $900 million, vs. outflows of $400 million the prior week. The Santa Rosa, Calif.-based fund analyst tracks the daily flows of ninety fund families, representing about 15 percent of all equity fund assets, to arrive at weekly flow estimates.
AMGN- Zeev, Don't know if you saw this the other day. Really adds to the overhead supply.
Amgen Inc. (AMGN) registered 98.29 million shares of its common stock with the Securities and Exchange Commissio Tuesday for resale by Wyeth (WYE).
(A headline published at 3:21 p.m. EDT incorrectly said 92.29 million shares were registered.)
(END) DOW JONES NEWS 07-16-02
Came across this with the Greenspan mention which seemed timely for an earlier discussion.
http://www.zealllc.com/2002/spcrash.htm
Excerpt:
>>>Remember Alan Greenspan’s now notorious “irrational exuberance” speech in Washington, DC in December 1996?
It will astound future historians to no end that Greenspan, a famous and brilliant student of economic history, told the world that the markets were dangerously overvalued in 1996, and then proceeded to not only do nothing about it, but throw the credit taps wide open in response to various global “crises” and in effect create what was probably one of the greatest and most destructive equity bubbles in history!
Almost three centuries earlier, John Law’s hideous inflationary experiment of unbridled monetary growth led to the terribly destructive French equity bubble in the 1720s (aka Mississippi Scheme), from which France never really fully recovered. The creation of the unconstitutional private Federal Reserve by stealth and subterfuge in 1913 led to the obnoxious monetary growth in the 1920s that ultimately led to the legendary 1929 Crash in the States. Almost without fail, every destructive bubble in history is created by excessive money and credit growth perpetrated by unelected and unaccountable bankers and bureaucrats.
The Fed’s almost unprecedented monetary excesses of the 1990s were almost certainly one of the primary causes of our current brutal bear market bust. Like most poor decisions in life, fiat monetary inflation has inescapable consequences that are exceedingly unpleasant. We have only witnessed a fraction of this bitter fruit so far, when the markets begin to slide. The bear market in equities has a long way yet to run. Eventually a portion of that mass exodus of money fleeing the equity bear market will probably migrate towards consumer goods, causing inflation that is impossible for the government statisticians to hide, and into commodities, sparking a legendary commodities rally in the coming decade.
The S&P 500’s current excruciating slow-motion crash, marked by the second white arrow above, is occurring because a supercycle bubble in equities was allowed to grow and fester by unaccountable bureaucrats who control the supply of US dollars. I sure hope history remembers these central-banking hooligans who wrought all this widespread devastation in a very harsh light. In future textbooks, next to the chapter on the 18th century’s notorious mega-inflationist John Law, there will be a chapter on today’s notorious mega-inflationist Alan Greenspan.<<<
Bernie, Housing Bubble- In reference to valuations I was rtalking about residential real estate prices. I have read that 40% of current homeowners could not afford to buy the homes they live in off of their current incomes. When homes get to that level I be;ieve that we are seeing massive overvaluation in housing prices. My point about not buying or build your own is that replacement cost has been greatly discounted to market valuations. Land cost of course would be in bubbleville but materials are cheap as indeed labor is too relative to recent times.
I did reference my commercial property experience but also in the early to mid 80's I bought and renovated homes in the intown area of Atlanta. I know of several cases where homes were purchased from me prior to 1987 and the new buyers were selling those same homes for less than they paid in 1990-91. I see the same scenario in the works now.
You are right. Most people should not attempt to build their own home. I was only suggested that from the economics viewpoint.
From a demographic viewpoint, Harry DEnt wrote a good book in 1993 called "The Great Boom Ahead". In it he proclaims that the average person buys their most expensive home at the average age of 43. Population stats show that we had a surge of births between 1950 and 1957. that would give us a surge in homebuilding between 1993 and 2000. Since new home sales account for much of the grwoth of our economy, robust economic growth was expected too.
Well Dent was pretty much on target with his building boom as we did see a start of slowing in 2000. But, something that he did not count on was the fed flooding the market with liquidity and also the relaxation of lending criteria for new home buyers which extended the building boom or, the creation of a real estate bubble.
Joe
I have to disagree that with those that say we are not in a real estate bubble. By "bubble" I mean that valuations have gotten too high.
If you look at the buliders you will see a significant increase in margins. That tells me that prices have moved up faster than competitors have been able to keep up with demand. Thus, the builders cost structure remains much the same but they have been able to demand more at retail increasing their margin. Since homebuilding has a low barrier to entry this situation will not last long before market forces will correct it.
As real estate valuation is based on three approaches to valuation - market, replacement cost and income. Once you get to a point where replacement cost and income are far exceeded by market valuation you have a "bubble".
What should folks do? If a house was like a stock, now would be time to sell. Of course our residenses are not stocks and we do need a place to live so treating it like a stock investment is not practical in most cases because of the government interest subsidy and other factors such as capital gains.
However, if you do not own a home at this time I would wait to buy or find a lot and build your own home. Rental property I would wait.
Of course I am speaking in general terms and there will be exceptions. When FNM lowered their criteria for lending qualifications it brought many new buyers into the market thus help creating the bubble. But this is also going to have a downside at some point as many of these buyers will not be able to service those loans or become disenchanted as they find they owe more than what there home is worth.
I remember back in 1987 I owned several commercial pieces of property. By 1989 they were worth 20% less than they were in 1987. I see the same type "bubble" valutions now. Of course the bubble doesn't take on the proportions as the stock's bubble, but a "bubble" none the less in my opinion.
Joe
Just pulled up some prospectuses for FNM GSE's. All of them at the top in big bold letters say that these securities are not guaranteed by the government. Thought that was interesting how they point that out first thing. FWIW. Joe
http://www.fanniemae.com/markets/mbssecurities/prospectuses/mbs/mbs_prospectus_table.jhtml?role=pro&...
Good commentary by Doug Noland dated 10-21-2001 where he speaks of GSE's and FNM (last third of the essay).
http://www.prudentbear.com/archive_comm_article.asp?category=Credit+Bubble+Bulletin&content_idx=...
Everything I read doesn't say that the government specifically guarantee's GSE's. It appears that it is more an expectation based on securing our economic system, or bailout in other words. The point I'm making is that if we get to that point where it becomes essential for the government to step in, under the current political environment I think that we may see some hesitation to do so. If we get to that point our problems will be much deeper than who is going to guarantee those bonds. It could get to a point where it's either feed the poor and house the homeless or payoff some "rich guy" for an investment gone bad.
Does anyone know for fact that the government is legally obligated to back GSE's?
Joe
Zeev, What is "essentially backed by the US taxpayer mean"? Here is an article and an excerpt that confuses me.
http://biz.yahoo.com/djus/020701/200207011401000557_1.html
"The perception in financial markets that Fannie Mae and Freddie Mac are implicitly guaranteed by the government limits the benefits of the firms' "voluntary initiatives" to increase transparency and market discipline, according to Congressional auditors."
I guess I'm asking is the perception true or not?
This from another article:
"The exact level of government involvement in GSEs is a matter of some debate. While set up by the government, they are shareholder owned and no guarantee of their credit is explicit. But it's customarily assumed by the market that the government wouldn't allow GSEs to fail, which lowers their cost of borrowing."http://www.thestreet.com/_yahoo/markets/rebeccabyrne/10018964.html
Let's say the government does step in. If we get to that point we have many other problems to deal with as if we do we will have a fundamental problem with real estate valuations and other default issues. Since FNM is now privately owned, I'm not so sure how the public will accept a bailout of the shareholders. I see a long and painful resolution if we get to that point.
Joe
If we gap up Monday and do a gap fill and hold on Wednesday, I will cover shorts on Wednesday and go full boat long for about 2 weeks. If we gap down on Monday, I add to short positions and ride it for about 2 weeks.
What's the significance of "two weeks"? Seems dangerous to me to make that kind of committment- especially on the eve of a bunch of earnings reports and the daily accounting screw-ups.
Joe
This essay ties into this subject. Problem that I see is that demographics don't suppport a substantial nor sustainable recovery.
Demographic Reasons For Market Bubbles & Crashes
From Baby Boom To Market Boom To Market Bust
By Ya-Gui Wei
During previous general market commentaries, I have asserted that:
- The stock market’s accounting method makes it a very deceptive pyramid scheme; it requires the continuous recruitment of new players for it to keep going up;
- Movement of money in and out of the market is translated into much bigger changes in the market’s valuations; only a tiny portion of the stockholders’ account balances is real money;
- Based on experience from past market bubbles, once the downward momentum has started, the money exodus is likely to continue until the market indexes have lost at least 2/3 of their peak values.
All these should be ample reasons enough to stay out of the market. Yet many people continue to resist taking losses, believing that the stock market is still the best place to put their savings, and hoping that the bull market will perhaps return in a few years, and Yahoo will again go back to $250 a share. Will this really happen? To answer this, we need to find out how the last bull market had come about, and why it came when it did.
We will approach this through a basic cash flow analysis for the entire market.
The Individual’s Peak Earning Period
For each individual member of society, no matter which metrics you look at, their ability is likely to increase as they grow up, then peak at a certain age, finally decline as they get older. This is true whether you are measuring their strength, their sexual prowess, or their money earning power.
The figure at the right shows the average income for each age group, based on data from the U.S. Census Bureau, indicating that the 45-54 age group has the highest average income. Another indicator is that this age group also constitutes the largest portion (32%) of the top 1/5 income bracket, followed by the 35-44 age group (25%).
One should be able to look at the census data at more detail to establish a more precise period for the average person’s peak earning power. Various authors have put the age for peak productivity and income at around 46 years of age.
If you are the average citizen, before you were 46 years old, your income level is likely to continuously go up. During this period, you’ll also be thinking about your retirement, and have more and more disposable income to put into retirement and saving funds. After 46 yrs of age, your income level is likely to go down, as will the portion of your money available for savings.
The U.S. Economy’s Peak Period
The economy is consisted of many individual persons engaging in their own economic activities. Therefore, the amount of money available in a society is the sum of all individuals’ earning power, and the economy’s peak income producing period is therefore the period when there is the most number of individuals reaching their own peak earning period, or 46 yrs of age.
After WWII, the U.S. experienced a baby boom – there was an explosive increase of newborn babies during the 15 years after the end of the war. Right now, the peak group of these baby boomers have just reached their peak earning years. In Fig. 2 (left), I have taken the year 2000 U.S. demographic data and plot it in such a way that it shows the number of people reaching 45 years of age during each five-year period. (This graph was plotted based on
year 2000 U.S. demographic data, without adjusting for mortality rates.)
Apparently, as a result of the baby boom, the number of people reaching their peak productivity and earning ages has been steadily increasing, and has more than doubled during last 20 years. The productivity and earnings from the boomers propelled one the longest economic expansions during this period (except for a few short interruptions). During this period, the Dow Jones Industrial Average increased from around 1000 points to the peak of around
11,600.
Unfortunately, the number of U.S. peak earners has now peaked and is set to decrease during the next 15 years. This will lead to slower growth in the economy, or even economic contraction, which means slower corporate earning growth or decline in earnings, both of which call for lower stock prices.
Demographic Reasons For Past Market Bubbles
During the 1980’s, there was a similar economic expansion and bull market in Japan, with the key Japanese market indexes increasing more than 1000%. At the end of the decade, the Japanese market collapsed, losing more than 2/3 of its peak value. Eleven years later, the Japanese market decline is still continuing today, although at a slower pace.
If you look at the Japanese demographic data (Fig. 3), there is likewise an apparent peak of 45-year olds around the year 1990. Apparently, the Japanese baby boom occurred immediately after the war, and reached its peak about a decade before the U.S. baby boom.
The 1920s U.S. bubble is also likely to have arisen from the baby boom following the American civil war. The U.S. population increased by almost 30% in the 10 years after the civil war, the babies born during this period would have reached peak earning period during the 1920s, producing the great market bubble of that era.
So here’s how the market bubbles were likely to have developed: as a new generation of baby boomers came of age, their increasing earning power drove economic expansion, and their savings and investments propelled the stock and asset markets upward. The increasing markets began to attract speculators. At the later stage of the bubbles, speculation became the main force driving the markets to sky-high levels.
Market bubbles driven by speculation is simply not sustainable. While the general public’s participation in speculation is quite irrational, there was a group of speculators who were quite rational: they were the first to get in, and the first to get out. Once these speculators have gotten out, the bubble was punctured. Other speculators soon followed, but many lost a lot of money. During the market’s downward spiral, consumer confidence
collapsed, and the economy fell into deep recession. The stock markets’ deflation eventually led to deflations in the real estate markets and consumer goods markets.
The Gold bubble, being a bear market bubble, has arisen from the other side of the coin. The severe baby bust (reduced birth rate) during the 1930s Great Depression era – when the U.S. population grew only 7% in 10 years – would have lead to a shortage of peak earners during the 1970s to early 1980s, causing the economy stagnation of that era. The gold price’s initial rise was caused by its own unique set of circumstances, including the
dollar’s decoupling from gold and the oil crisis, but eventually attracted enough speculators to form a single-sector bubble. In terms of the amount of money involved, the Gold bubble probably cannot compare to the Japan bubble or the current U.S. bubble.
Looking Out into the Next Ten Years
So far, the Nasdaq has behaved just as other past bull/bubble markets have. I think history does repeat, as I have time and again tried to remind us during the past 16 months, and I think it is quite valid to look back into the past to try to predict the future. Therefore, to know what will happen in the U.S. over the next 10 years, one only needs to look back at Japan during the last 10 years, or look at the U.S. during the 1930s.
Looking across the next 10 years, I see the following in the U.S. economy:
- Prolonged economic stagnation, with intermittent recessions;
- Deflation in the equity market, with the Dow falling quickly below 5000 and ending the decade at around 4000;
- Deflation in the real estate market, with houses in hot markets falling more than half their values;
- Zero inflation, with intermittent deflation, in the consumer goods market;
- Increased saving rate, with most money sitting in banks, stock market no longer favored as saving vehicle;
- The dollar peaking during 2000/2001 and continues to lose value to Yen and Euro;
- Bankruptcy rates rise, some banks will fail;
- U.S. returns to budget deficit, projected budget surplus never materialized.
On the international front, Germany’s baby boomers would reach their peak earning period around 2005. China’s baby boomers would reach their peak earning period around the year 2010. This would come at the heel of China’s joining the WTO, making China the prime candidate for the next market bubble.
In Japan, the number of peak earners would reverse to a rising trend around 2005, and there would be an echo peak around 2015. The children of U.S. baby boomers would reach their peak at around 2025. These echo peaks do not have the same potential as the original baby boom peaks.
Looking out at the next 40 years, the U.S. bull market of the last 15 years is just not going to repeat.
Housing Bubble stocks seem to be falling apart. FNM and MTG with the financing side. Builders RYL, HOV, LEN, KBH. And now home improvement retailers LOW and HD.
Home building drives our economy. If we lose this sector before capital expeditures pick up it will put any significant recovery in doubt. JMO
Joe
The guy assigned to "churn" RSTO so that it appears that someone cares must have called in sick today. Only 1500 shares traded so far. Good short if you want to hold awhile IMO.
Joe
SGR- Earning out this am. Nice report. Been hit with the utilities. Maybe the tide will change. Chart:
http://stockcharts.com/def/servlet/SC.web?c=sgr,uu[l,a]dacly...
The Shaw Group Announces Solid Results for the Third Quarter of Fiscal 2002
BATON ROUGE, La.--(BUSINESS WIRE)--July 11, 2002--The Shaw Group Inc. (NYSE:SGR - News; "Shaw" or "the Company") today announced a 49% increase in earnings to $26.7 million, or $0.61 per diluted share, for the three months ended May 31, 2002. This compares to earnings of $17.9 million, or $0.42 per diluted share, for the three months ended May 31, 2001. Third quarter fiscal 2002 sales increased 129% reaching $902.6 million, compared to $394.2 million for the third quarter of fiscal 2001.
http://biz.yahoo.com/bw/020711/112036_1.html
HomeBuilders- RYL- Got the 20 ema crossover on the 50ema.
http://139.142.147.218/HistoricalChart_Image.dll?interval_min=5&cus=0&indexSymbol=&secur...
MTG- a mortgage insurer, reported today and was down on large volume.
http://139.142.147.218/HistoricalChart_Image.dll?interval_min=5&cus=0&indexSymbol=&secur...
The cracks in the housing market appear to be getting larger.
Joe
FNM- Scary action in the last 2 hours on this financial /housing bellwether. Above average volume. I think we could be seeing the beginning of the end to the housing bubble. Joe
Intraday chart:
http://139.142.147.22/GifChartEngine.dll?interval_day=6&cus=&indexSymbol=&securityType=1....
Daily:
http://stockcharts.com/def/servlet/SC.web?c=fnm,uu[l,a]dacly...
>>>Gold soaring NEM, ABX Perfect recovery of NEM,ABX at the lower Bollinger band<<<
Some unhedged golds are: GFI, MDG, AEM, GG, GLG, DROOY.
FWIW, Joe
TYC- Jenna, The way I see it it appears that TYC will ahve to write off another $2bil or so for the poor reception on the CIT IPO. That and that they still have a tremendous amount of goodwill on the books and I think we may see some more surprises. I have gotten to a point where I don't trust anything this comapny says and every line must be read between. Looks like they just paid too much for some of these companies and I think the stock prices are show it. With as much press this company has received I bet big money has looked it over well. If there was much there they should have responded better to the IPO since that was what was suppose to be their big hang-up.
JMO, Joe
John Mauldin's take on the housing market. IMO the HomeBuilders are topping out with many moving below the 20 and 50 ema. FNM, another tell, has also been weak. Large short interest in some of the names has lead to some good price movement both up and down. Short interest in RYL is 14%, TOL 29%, KBH 12% and LEN 15%. Some are plump with 80-90% gains in the last 6 months.
http://bigcharts.marketwatch.com/industry/bigcharts-com/focus.asp?bcind_ind=hom&bcind_sid=171546...
Joe
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http://www.2000wave.com/home1/home1.html Excerpt:
This week I begin with a look at the housing market. I probably get
more questions on housing and real estate than on any topic, other
than stocks. I am going to try and do a quick analysis, and then let
that be the jumping off point for my economic predictions.
There has been much written about the fact that we are in a
potential housing bubble. Typical of the concern is that voiced by
Business Week: "Call it the double bubble. A housing bubble may be
developing--right behind the Nasdaq bubble.....In fact, falling
equities have led many well-heeled investors to shift money into
residential real estate. Robert J. Shiller, author of Irrational
Exuberance, which predicted the Nasdaq crash a year before it
happened, now warns that a psychological frenzy not unlike tech
mania is gripping housing. It appears that the Federal Reserve's
dramatic rate-cutting campaign to revive the economy may be
overheating housing."
Let's set the stage: The total price for all homes in America was
$6.6 trillion dollars in 1990. The collective value of homes rose by
another trillion over the next five years, and since then has
exploded to $12 trillion. There has been a rise of 20.9% in just the
last two years. (EIR)
We are spending more and more of our income on housing. The ratio of
after tax income to the total real estate valuation is at its
highest level in 50 years. Total outstanding mortgage debt is $5.7
trillion, or about one-half of total home value. 60% of today's
families cannot afford/qualify to buy an average home. By some
measures, it takes roughly twice the income to buy a house today as
it did 40 years ago.
The strong housing market gave homeowners a safe-haven during the
recent economic storms. For instance, the national average price of
an existing single-family home is now $192,400. A year ago, the
average was $179,500. For new single-family homes, the national
average price is now $226,800, while a year ago, it was $205,500.
The increases have created a sense of economic security, the so-
called wealth effect. (ABC News)
A Ceiling on Housing Prices
Let's look at what has led to the recent run-up in housing prices
and see whether that is sustainable.
First, one primary driver is lower mortgage rates. A drop of 2% in
mortgage rates lowers the monthly payment of a median house by
almost $300. Conversely, if a family can afford to make $1500
monthly payments, they can now buy "more" home for their monthly
payments. Mortgage rates have been dropping for over ten years. This
increases demand, and thus prices rise.
As noted above, people see housing as a safe investment. Many buy
"too much home" as a "forced" way to save money. Since homes have
risen in value, especially of late, this seems reasonable to the
average home buyer. Since for much of America, the bulk of their net
worth and the greatest increase in their net worth is in their
homes, it only makes sense to them to keep doing more of the same.
Demographics have led to rising values. There are more people
wanting to buy homes, and even though home building has stayed at a
feverish pace throughout the last recession, the supply of homes
available is still historically low.
Two other factors contributed significantly. Mortgage banks created
new classes of loans available to first time buyers and those with
problem credit histories. The number of people who can now qualify
for home loans has exploded. These families buy smaller homes which
cost less, thus driving up prices at the lower end of the market and
allowing those home owners who sold and now have large equity to
move up to a higher priced home. This is not a bad thing, but it is
a real driver on prices. Secondly, low unemployment levels have
fueled demand.
I believe most of these growth factors have run their course. Rates,
while they could drop some more (and I think they will at some
point), are not likely to drop another 2%. There is not much fuel
left in that engine. Demographics, while still positive, do not
suggest that demand will be as big in the future. There are no new
classes of potential borrowers on the horizon. We have made loans
available to almost anyone who can demonstrate economic viability.
But does this mean that like the Nasdaq we will see a bubble burst?
I don't think so, and for the following reasons.
First, a home is an altogether different type of asset than
Amazon.com or Cisco. We can live without the latter, but we all
have to have a place to hang our hats. While the demand for
Amazon.com stock is very elastic, the demand for housing is
universal.
Further, Amazon.com stock can be created quite easily, and for very
little real value. Homes are not created easily, and there is an
intrinsic replacement value to a home.
As our population increases, the demand for housing will increase as
well.
This is not to say that homes cannot fall in value. When and if in
some future time interest rates rise by 2-3%, you can bet home
values will drop. It is not inconceivable that prices could drop 10-
15% or more, as they have in the past because of rising interest
rates. But they are not likely to drop 50% in all but the most
doomsday scenarios. I think doomsday is quite unlikely.
But we may have reached the top in terms of significantly
compounding home prices. If homes were to rise in value by just 7%
per year (forget about 10%), in ten years that means the value of
our homes would double. If incomes were to grow at 3% a year, the
portion that we allocate to housing would have to rise by 50% to be
able to buy the same house.
That is fine if you buy your home today, lock in your mortgage rate
and watch your income rise over time. But when you go to sell in ten
years, a person who makes the same as you do would have to be
willing to spend a great deal more of his income to buy your home.
If your home cost you 25% of your income, your prospective buyer
would have to be willing to spend 37% of his income, or he would
have to make a lot more than you do.
On the average, that is not going to happen. (I will mention
exceptions below.) We are at an all-time high in the percentage of
our incomes we spend on housing. How much more can it grow? We are
also at all-time debt personal debt levels. We have just about
reached the end of the road.
I think growth in average home prices is going to be limited to
inflation plus growth in real income over the next decade, at best.
The key factor in the future growth of housing prices is going to be
affordability.
The next recession could bring about an altogether different result
in the housing markets as opposed to this last recession. Normally,
recessions cause home prices to drop, as more homes come on the
market, and there are fewer buyers. Those of us who live in Texas
experienced the pain of being in a regional recession and watching
our housing values drop significantly. It was not fun to bring a
check to the closing table in order to get someone to buy your home.
So, when you write and ask me if you should buy a home in (your
town), what do I say? I never answer that question. It all depends
upon local situations, and I don't know your local conditions. How
stable is the local employment? How well will your local economy
weather the next recession? Are people wanting to move to your town,
or is there a net drain of buyers? Is there reason to think local
businesses are likely to expand employment? How long do you want to
own your home? The longer you will stay in your home, assuming your
income is stable, the less problem you will have.
Plus, how desirable is the home you want to buy? If it is one of a
kind Maine beach front property, as long as there are rich people,
there will be a demand. (Hint: there will always be rich people.
Like the poor, they are always with us.) If it is a home in the
suburbs, where there are 50,000 homes just like it, then you have to
carefully consider the future economic stability of your area.
PPDI Reports July 17th. 55% projected earnings growth and 43% y-o-y revenue growth. YE Dec02 projected pe of 19.
Recent insider buys
http://biz.yahoo.com/t/p/ppdi.html
Interesting article explaining the recent price action:
http://www.thestreet.com/_yahoo/comment/moreland/10026342.html
Chart:
http://stockcharts.com/def/servlet/SC.web?c=ppdi,uu[l,a]daclyyay[dc][pc20!c50][vc60][iLb14!La12,26,9...
Joe
ACDO-Earnings out this month but don't have a date. Already reaffirmed. Earnings up 61% and revenues up 25%. Has taken it on the chin recently but has had a couple good days. Has beaten last four quarter and has at least 15 quarters of sequential revenue growth and 11 q's of sequential earnings growth. y-o-y earnings growth of 75% for 03 over 02 and a projected PE for June 03 of about 21.
http://stockcharts.com/def/servlet/SC.web?c=acdo,uu[l,a]daclyyay[dc][pc20!c50][vc60][iLb14!La12,26,9...
Joe
NextBank- Doug Noland writes an interesting essay that includes the rise and fall of NextBank. Here's the excerpt about NextBank from this site.
http://www.prudentbear.com/archive_comm_article.asp?category=Credit+Bubble+Bulletin&content_idx=...
>>>>>>>>>>>>>>.
The fragile underpinnings of contemporary consumer lending were brought to light this week, as the American Banker reported on the escalating cost of the failure of pioneer Internet credit card lender NextBank. It is now estimated that this failure will cost the bank insurance fund between $300 million and $400 million, rather shocking news (although I don’t believe it was covered in the Wall Street Journal). When the Office of the Comptroller of the Currency closed this bank on February 7th, it’s assets totaled only about $700 million and insured deposits were $554 million. Just a few months ago (April 17th), a spokesperson from the FDIC stated that losses were expected to be about $25 million. This proved an especially poor estimate. The ugly fact is that this bank was closed down only 30 months after NextCard acquired it. At the time, it had only $3 million of assets. NextCard proceeded to aggressively market insured jumbo CDs that enabled it to easily raise more than one-half billion of deposits. We live in an exceedingly dangerous financial environment.
The NextCard fiasco is pertinent today on many levels. For one, the company and investors believed that the company had developed a “better mousetrap” for lending – that its systems and credit scoring allowed it to capture quality borrowers through its 30 second approval process and aggressive Internet marketing. It is now clear that the Internet model of aggressive lending was an unmitigated disaster. This leaves us deeply concerned about the continuing boom in Internet mortgage lending, and how quickly enormous future credit losses can be created in the contemporary environment.
From the American Banker: “Since the FDIC took over NextBank (Feb. 7, 2002), the value of the bank’s $2 billion of credit card loans has dropped 40%, to $1.2 billion, and put the agency into a quandary. It missed its self-imposed goal of finding a buyer within three months, and now chargeoffs in the securitized portion of the portfolio – which holds the lion’s share of the damaged receivables – are about to trigger an early amortization clause, which would effectively prevent NextCard’s credit card holders from making any more purchases on their cards...NextCard, which stormed onto the scene in 1998 with a Visa card that could be obtained only through the Internet...had prided itself on selecting only the most creditworthy customers and screening out marginal or subprime applicants. However, the FDIC discovered that, because of either fraud or a failure in its screening methods, the company had customers who defaulted on their loans. Predicting that the FDIC would be left holding the bag for NextCard’s bad loans, both Standard & Poor’s and Moody’s...last week lowered their ratings on the securitized portion of the portfolio.”
Interestingly, the FDIC and the rating agencies initially expected a relatively quick sale of NextCard’s interest in its securitizations. S&P stated in March “that a purchaser will be found within the next two months.” However, things have deteriorated significantly for NextBank’s receivables, as well as the general Credit system, over the past few months. At 11.56%, charge-offs were high in January, but still provided sufficient cashflow to service the holders of the asset-backed securities. By June, charge-offs had surged to 16.61%, with the trusts now having reached the point where they no longer received sufficient cash to meet requirements (negative “excess spreads”). A negative “excess spread” over a three-month period would trigger a “breach” and force an “early amortization.” From S&P: “...if the base-rate trigger associated with each series is breached and cardholder collections are passed through to investors, [this would make] them unavailable to finance new receivables...principal collections will be passed through to the certificateholders in sequential order. Consequently, these collections would be unavailable to fund new purchases made by the cardholders.”
Let there be no doubt, when borrowers are informed that they will not be able to use their NextCard visas for new purchases, defaults will skyrocket (with rising servicing costs) and the value of card receivables (and related securitizations) will plummet. It is no mystery why there is little interest in acquiring NextBank trust assets. The NextCard experience (with loss estimates as high as 70% of deposits) does not bode well for the FDIC’s exposure to other troubled lenders. Metris ended the first quarter with deposit liabilities of $1.725 billion and managed card receivables of $11.78 billion. Providian ended the quarter with deposits of $14.4 billion and a “managed consumer loan portfolio” of $22.1 billion. How could it have ever made any sense to allow subprime lenders to finance reckless lending with insured deposits? It is also worth mentioning that Internet mortgage king Countrywide Credit ended March with over $2.2 billion of deposit liabilities.
It is interesting to observe the timeline of the NextCard fiasco. From the company’s website: “NextCard was so-founded on June 6, 1996 by Jeremy and Molly Lent…The first NextCard Visa was issued on December 23, 1997. Although many applied, only the best consumers passed the strict credit quality guidelines we established… The NextCard team is “not afraid to take chances.” The company’s founder (Jeremy Lent), CEO and president all learned their trade at Providian.
May 14, 1999: NextCard issues 6 million shares in a public offering at $20, with the stock trading as high as $40.75 before closing its first day of trading at $37. Donaldson Lufkin & Jenrette (DLJ) was lead manager.
June 9, 1999: NextCard shares surge 37% to $44 on buy recommendations from DLJ, U.S. Bancorp Piper Jaffray, and Thomas Weisel Partners.
June 17, 1999: NextCard announces that its loan portfolio has grown to $150 million and is increasing $1 million daily. The stock gains $4 to $39.
August 16, 1999, Bloomberg headline: “NextCard Buys Bank to Gain Access to Cheaper Funding.” NextCard purchased Textron National Bank with assets of less than $3 million and renamed it NextBank. From Bloomberg:“ ‘This transaction will allow us to further diversify our funding sources,’ John Hashman, NextCard’s chief financial officer, said in a statement. Gaining access to the Federal Deposit Insurance Corp.-insured ‘deposits market will further enhance our liquidity position and funding costs.’” Also from Hashman: “We expect to begin originating FDIC-insured deposits soon, and we will focus on developing a unique Internet-based experience for these consumers.”
December 9, 1999: NextCard’s secondary offering of 8 million shares at $35.94 raises $287.5 million. The company sold 4.5 million shares with selling shareholders liquidating 3.5 million shares ($125.79 million). The offering was co-managed by DLJ and Goldman Sachs.
February 22, 2000: NextCard announces $500 million of customer receivables. CEO Jeremy Lent: “We are very pleased to reach these major growth milestones ahead of the market’s expectations. Even more important, we continue to beat our aggressive growth targets while maintaining very strong parameters in the other core elements of our business model…The reason for our continued success is that we are the leaders in applying credit card target marketing techniques to the Internet channel. Our real-time profile-based pricing system, which encourages high credit quality consumers to transfer balances to us from their other credit cards, has been one of the reasons why we have been able to achieve dramatic and sustainable growth with high average balances and good credit quality.”
March 20, 2000: A Bloomberg story has company insiders filing to sell $28 million of stock, part of a record $23.4 billion of insider filings to sell shares during February 2000.
November 2, 2000: Business Wire: “Nextcard, the leading issuer of consumer credit on the Internet, today held its first annual Investor Day, during which the company provided an update on several exciting growth strategies. At the meeting, NextCard announced that it expects revenues of $1 billion in 2003, implying a three-year annual revenue growth rate of 75%. Further, NextCard initiated earnings guidance of $150 million…in 2003 and increased guidance to $75 million for 2002. The company also announced it expects that assets under management will exceed $6 billion by the end of 2003… From company President John Hashman: “We are very excited about our Company’s long term vision and growth prospects. NextCard has built the foundation for a very successful company… The opportunity in front of us is as big as ever. There is no question this works on the Internet. It is fundamentally a better way to provide consumer credit.”
But Mr. Hashman’s words were anything but the truth. From the San Francisco Business Times (Ron Leuty, Feb. 25, 2002): “In the four years since it introduced nearly instantaneous online approval for Visa cards, NextCard grew to 1.2 million accounts with $2 billion in credit card loans. It bulked up on risky subprime customers… Problems started to appear soon after the company bought the former Textron National Bank in September 1999. A routine examination by the OCC in second-quarter 2000 revealed ‘deteriorating’ credit quality… At the OCC’s request, NextCard and NextBank entered into an agreement Oct. 26, 2000, to ensure that the bank’s total capital…stayed above 12 percent of assets.”
July 25, 2001: “NextCard Reports 144 Percent Growth in Second Quarter Operating Revenue; Company Reaffirms Guidance for Fourth Quarter 2001 Profitability... Total managed loans rose over 115 percent to $1.789 billion...”
August 3, 2001: “Lent Family Trust Files to Sell 415,000 shares.” John Hashman files to sell 17,900 shares.
October 31, 2001: “NextCard, Inc. announced today that its Board of Directors has retained Goldman, Sachs & Company to explore opportunities for the sale of the Company to a larger, more established financial institutions with the resources necessary to support the Company’s continued growth. The company’s decision resulted from its belief that, given newly imposed regulatory limitations on its business operations, as well as the current market environment, it can best enhance shareholder value through a transaction with a larger and better-capitalized entity. From CEO Hashman: “NextCard has established a strong leadership position in the Internet channel, which is the fastest growing channel in the credit card business. We believe we have created tremendous value in our business model, and we should be in a better position to unlock that value for our shareholders through a transaction with a larger entity.” The stock drops to 87 cents.
February 7, 2002: NextBank closed down by the Office of the Comptroller of the Currency. “NextBank’s unsafe and unsound practices were likely to deplete all or substantially all of the bank’s capital, and there was no reasonable prospect for the bank to become adequately capitalized without federal assistance.”
February 11, 2002: FDIC mails $525 million of checks to NextBank’s depositors.
April 17, 2002: FDIC spokesman estimates loss to insurance fund at $25 million.
July 3, 2002: American Banker runs story stating FDIC now expects NextBank-related losses to the insurance fund of between $300 million and $400 million.
While off the radar screen, we view the collapse in the value of NextBank’s securitization interests as an ominous portent for the aggressive consumer lenders and their mountains of asset-backed securities. Combining the more than $400 million raised in the equity markets with the $400 million potential FDIC loss is a frighteningly large sum compared to the $2 billion of outstanding receivables. With troubles for the likes of much larger Metris, Providian, Americredit, and others, we would expect a risk-averse marketplace to move away from riskier consumer asset-backed securities. This trouble at the margin will mark a key inflection point for consumer lending generally, with reduced Credit availability at the fringes of subprime Credit cards and autos. That this sector will join the impaired corporate sector only exacerbates already significantly heightened systemic risk. It is no hyperbole to aver that the risk market is today in complete disarray.
It is today especially important to appreciate how quickly things turned sour for NextBank when it was forced to reduce its aggressive lending – how quickly the “better” mousetrap was exposed as ultra-reckless lending (and pretty close to financial fraud). Earlier in the week, it appeared that the U.S. Credit mechanism was sinking quickly into a state of systemic crisis. While a stock market rally does help to stabilize the Credit system, we unfortunately in no way believe the risk of a serious dislocation has dissipated. At the same time, we remain petrified of the disastrous financial and economic consequences that mount from the runaway mortgage finance Bubble. We suggest the Federal Reserve, bank regulators, and the Office of Federal Housing Enterprise Oversight take a cold, hard look at the NextBank Meltdown.
PRX- Breakout Friday on volume. Nice fundies support this stock.
http://stockcharts.com/def/servlet/SC.web?c=PRX,uu[l,a]daclyyay[db][pc20!c50!f][vc60][iLb14!La12,26,...
Worth a look. Strong buy upgrade last week (but what do they know!!)
Joe
INTC- is a bellwether to the tech industry. Think it says much about the weakness in tech to see how this one is reacting. Having nmuch trouble getting off the mat. hardly any buying of the dip.
JOe
AMZN- Added to my short position this am @ 17.95(posted on another board.) I think this one hsa much more downside to go with minimal risk. Next blip and I'll add more to my position trade.
Joe
F.Goelo, Thanks for the reply. It is an interesting situation and may provide a good trading op.
Joe