Tuesday, February 3, 2009


Bloomberg had this article out about how the U.S. housing market lost $3.3 trillion in 2008 AND that 1 in 6 people with mortgages are underwater, or 17%. It's not getting any better. We have pending home sales coming out today at 10:00AM - consensus 82.3 (range: 78.2 to 84, previous actual: 82.3). I'll be really surprised if pending sales remained "unchanged". Motor vehicle sales are also coming out (total consensus: 7.7M (range:7.3M to 8.1M, previous actual: 7.7M). This is another consensus estimate where it is also "unchanged". Whatever.

You see, 2.6 million people lost jobs in 2008. How in the world are these people going to pay their mortgages? For most families, this is the single largest monthly expense. How are they going to pay it? They can't! This fuels the supply side of the foreclosure market, thus creating more vacancies and pressure on other homeowners to reduce their prices (against their will).As long as there are less buyers who are interested and qualified, this death spiral will continue. It all comes back to the jobs, you see?

I spent some time investing in residential real estate in Baltimore, buying up properties for $1,000-3,000 each. I can tell you that most of Baltimore is in the shitter. But this isn't isolated. Cities all over the US are seeing the effects of this crisis. What do I mean? Consider this: a single foreclosure can cost the local gov't $34,000 (stuff like trash removal, unpaid utility bills, police, inspection, etc.). A vacant house is usually looted within 72 hours of being vacant in some neighborhoods.

It's no wonder then why California, among other states, is getting terminated. In fact, credit-default swaps, for anything that has to do with Cali, has tripled since September. This lost tax revenue is killing the local municipalities. When the locals start asking for help en masse, the states get burdened, and then what? The states have to turn to the federal government. They can't support shit right now. Who's going to support them? The Chinese? Give me a break. This whole thing is ridiculous. It's like a bad dream, except it's a real-life nightmare.

Don't even get me started on these people not paying taxes. Or, how about the fact that BAC spent approx. $10 million to sponsor a bullshit Super Bowl "Fun Fest"? Ask the taxpayers if they're having fun. Daily news like this don't cease to amaze me. Where the hell is all of our money? These banks, I'm tell you, they just don't get it. One of these days...someone is going go apeshit on these bank execs. You know what I'm talking about.

As for the charts. We are back in the 800-855 range once again. This market got crushed on high hopes of a bad bank plan. You know what I don't understand? Why would someone even announce the plan if, in it's entirety, it may not even come into fruition? That's synonymous to a lie. The market floats on this ephemeral feeling that the gov't has the perfect solution. Here's the solution: let the recession/depression take it's course, not matter how many years/decades it will take to recover. History has shown that gov't intervention only prolongs the problem and delays inevitable.

We need these clogged up institutions to fail so we can clean out the system. No one wants to do it, but usually, doing the right thing is harder than taking the easy way out. If these institutions do not fail, and if the same people in the executive ranks are not replaced, then hardly anything will change. According to Ben Franklin, insanity is "the act of doing something over and over again and expecting different results". The firms on the verge of failure deserve to fail.

Anyway, in the ultra short-term, we can see a bit of neutral ranging action between 815-830 SPX. Neutral ranges often mark continuations in the prevailing trend which, in this case, is down. However, an upside breakout reversal is possible as well, thus forming a double bottom. You just have to wait and see. There's so much "breaking news" these days, you really have to be cautious about what comes out of people's mouths. This market is on a heightened news-driven, emotionally-charged roller coaster full of illogical riders.

As for earning, we still have quite few (being the season for it and all). Coming out pre-market are as follows: AMSC, ADM, ADP, CME, AXE, CEVA, CLP, COCO, DHI, DOW, EMR, HCA, HDWR, HNT, KSU, LDR, MGG, MAN, HZO, MKL, MOT, MYGN, NNN, NOC, PTRY, PNR, PRGO, COL, RTI, SGP, SMG, TPP, UPS.

We have more coming out during the day: BKH, CAM, CMI, ETR, MRO, MDU, MRK, NEWP, OESX, PRC, PNC, QUIK, TZOO, TRMB, TRP.


Don't forget to try the Free Trend Analysis. It's FREE, so give it a shot!

No comments: