Research Recap submits: ResearchRecap has been tracking the worrisome performance of Alt-A mortgages for some time, so it comes as little surprise that Moody’s is increasing its loss assumptions for these supposedly “close to prime” loans, along with Jumbo, Option ARM, and Subprime RMBS from 2005-2008.Moody’s said it now expects that a trough in home prices will not be reached until the middle of 2010.Complete Story »
Karl Denninger submits: Hmmmm.... Despite that fact, delinquencies have moved steadily higher with the 30 day + delinquency now reaching close to 50% of all outstanding Option Arms.Complete Story »
Although many are protecting their portfolios from inflation the M1 money multiplier is still giving off the same deflationary signals from 2008. As we continue to see banks hoarding cash, loan growth well below historical levels and consumer deleveraging it’s clear that the risk to this economy lies not on the inflationary side, but the deflationary side. Complete Story »
Vinny Catalano submits:the assumption that my bifurcated earnings season produces underperforming mid- and small-cap sectors (resulting in the long overdue stock market correction), one very attractive investment strategy to employ while waiting would be a barbell approach with large and mega cap on one side and emerging markets on the other. The Smids (small and mid cap) would be held to a minimum. This strategy covers both the short and near-term bases and should enable performance participation as the large- and mega-cap part of the equation benefit from the global growth story (which is where the growth actually is) and weak US dollar. The emerging portion also benefits from the global growth story while also providing the beta trade.Complete Story »
I came across this interesting paper (which can be found in its entirety below) the other day, while perusing Paul Kedrosky’s website, regarding uncorrelated returns. The basic premise of the paper was that there is no such thing as uncorrelated assets. The author conveniently cherry picks the last 36 months to prove his point. Of course the last 36 months can easily be described as unique if not an outlier. Many have been quick to come to the conclusion that the last 36 months not only disprove the efficient market hypothesis, but also disprove the theory of uncorrelated assets. This is highly flawed in my opinion. Let me begin to dissect this issue from the beginning (without getting bogged down in too much mundane theory). Anyone who is a regular reader has likely taken the time to read the “about us” section on the site. If so, you know that my investment theories aren’t just some cookie cutter “fill the Morningstar box” approach. I believe the efficient market hypothesis is one of the greatest tricks ever played on the investment community. Any market is nothing more than the summation of the decisions of its participants. Markets, by definition are highly complex dynamic systems that are susceptible to chaos. To assume that the summation of these decisions is somehow efficient would mean that the decision makers as a whole are efficient. While this might be true to some extent, human beings (and even the algorithms written by humans) are guaranteed to be inefficient decision makers in a chaotic system.Complete Story »
Market Folly submits:In his latest letter to investors, hedge fund manager and legendary trader Paul Tudor Jones outlines his firm's thoughts on the topics of equities, bonds, and currencies. Tudor's letter is one of those 'must reads' as his macro sense is phenomenal and he is one of the greatest traders of all time (performance returns summary here). What's interesting about his latest letter is the fact that they included a special section addressing the all too talked about precious metal.GoldComplete Story »
Michael Johnston submits:Asia Pacific ETFs posted big gains on Thursday following the release of updated growth projections from the International Monetary Fund that included upward revisions for the region for both this year and next. The region as a whole – including Japan, Australia, and New Zealand – is expected to grow by 2.8% for 2009 and 5.8% in 2010, about 1.5% more than the organization had projected in its previous May report. The IMF data highlights the gap between Asian economies and the rest of the developed world, and sets the stage for a change in roles in the recovery that is already underway. While Asian economies and central banks have historically taken their lead from the U.S. following global downturns, that scenario is now reversed. Asian markets, both developed and emerging, have clearly emerged from the recession, while doubts continue to swirl around the U.S. and western Europe. Earlier this month, Australia became the first country to raise interest rates (Norway followed suit on Wednesday, proof that some pockets of Europe are much closer to a sustained recovery than others).Complete Story »
ETF Database submits: OOK Advisors LLC has launched a new ETF that consists of companies based in the Sooner State of Oklahoma. The ETF, which will trade under the symbol OOK, is the first fund for OOK Advisors. A second ETF (TXF) focusing exclusively on Texas companies is expected soon. The new ETF, which is the first to focus on an individual state, consists of 29 companies and has an expense ratio of 0.85%. Oklahoma, besides being the home state of OOK Advisors, LLC, is often considered one of the more business friendly states in the Union. With an economy based on energy but expanding in other sectors as well, Oklahoma has seen tremendous growth in recent years. Between 2000 and 2008, GDP grew by a whopping 63%, one of the highest rates in the United States. In addition, three Oklahoma-based firms made Fortune magazine’s 2008 list of the 25 fastest growing companies in the U.S. (and six made the Fortune 500). Complete Story »
Richard Shaw (QVM Group) submits: National healthcare wherever it is implemented squeezes prices and profits of the private businesses involved in the system. Obamacare in the U.S. will be no different. For investors in healthcare companies, it is a good idea to begin to think through which companies will be most severely negatively impacted or least impacted, to potentially make deletions or substitutions.Complete Story »
First American (FAF), a title insurance firm (predominantly) reported earnings Thursday, and while they are very good on the quarter, they are guiding for some softness go forward. This is not a surprise since the threat of the end of Cash for Cul-de-Sacs plus seasonality (more homes sell in spring, summer than fall, winter) kick in. I am not sure what the American people are thinking when they believed that there would not be more free handouts after the Nov 30th deadline - they could of read FMMF blog 6 months ago and known more free money from the heavens would be handed out. Speaking of which... Let me add, just as I did after the first Cash for Cul-de-Sacs came out early this year, that as we now see version 2.0 rolling off the presses (which will run through next April)... that the Realtors Association will lobby for Cash for Cul-de-Sac 3.0 right around /February March 2010, saying that the housing market cannot run on its own and what loyal American politician would want to kill the economy by taking away realtors commissions buyers incentives? So we'll certainly need version 3.0. The politicians will say "yes sir thank you sir - please deposit your political contributions at the normal time and place", and we'll have yet another extension. Boo yah fellow Americans.Complete Story »
Greentech Media submits: By Michael KanellosFor the past several years, China has wanted to see its companies become more than just anonymous manufacturers in the background.Complete Story »
Trader Mark submits:Wyndham Worldwide (WYN) reported Tuesday evening; we did not have time to discuss it Wednesday due many other activities happening. This hotel chain continues to be one of our best performers of the year, and as I say in almost every update on the name ... it is STILL cheap. As I'm looking at the chart now the action the past 48 hours allowed the stock to fill a gap, and I'm smacking myself in the head because I completely missed an opportunity to add. Unlike many other names, the stock was able to fill a gap but stay over key moving averages... A closer look at earnings:Complete Story »
Trader Mark submits:Isn't it funny how much the world changes in two minutes? Specifically between 8:29 AM and 8:31 AM. The market was broken, and even after a material selloff was only bouncing along at +2 on the S&P in premarket. This was below the 50 day moving average and things looked dire. Then one economic number and the world changes. I won't even get into the GDP figure, it's like the litany of other government report (CPI - inflation, Labor - employment) that are deeply flawed... not to mention the fact it will get revised multiple times in the months to come. [May 10, 2008: Finally Some Mainstream Reports are Figuring Out the Spin from Government] [Apr 23, 2008: Barry Ritholtz on Disappearing Economic Indicators] [Jun 10, 2008: PIMCO's Bill Gross on the Inflation Fantasy]As long as we keep borrowing from the future to buy cars and homes for our people, heck we can have positive GDP for as long as the eye can see. Mirages are cool like that. Notwithstanding the fact these numbers will be revised in 30 and 60 days and almost every report during this recession recovery has been revised down ... i.e. give the market a better than expected number so it can rally, then quietly revise it down 30 days later when the market is on to the next thing. Complete Story »
