Foreclosures aren't just for subprime anymore

From Bloomberg:

Delinquency rates on the least risky mortgages more than doubled in the first quarter from a year earlier as U.S. efforts to help homeowners failed to keep pace with job losses that pushed more borrowers toward foreclosure.

Prime mortgages 60 days or more past due climbed to 2.9 percent of such loans through March 31 from 1.1 percent at the same point in 2008, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said today in a report. First-time foreclosure filings on the loans rose 22 percent from the fourth quarter, the report said.

“I’m very concerned about the rise in delinquent mortgages and foreclosure actions,” Comptroller of the Currency John Dugan said in a statement released with the quarterly report. President Barack Obama’s plan to create “sustainable, payment- reducing modifications is a positive step that should show significant benefits in the coming months,” Dugan said.

Obama’s program, unveiled Feb. 18, aims to help as many as 4 million borrowers by modifying loans and calls for Fannie Mae and Freddie Mac to refinance mortgages for as many as 5 million borrowers who owe more than their homes are worth. Foreclosure filings surpassed 300,000 for a third straight month in May, according to RealtyTrac Inc., and the U.S. economy has shed about 6 million jobs since the recession began in 2007.

Serious delinquencies on prime loans, which account for two-thirds of all U.S. mortgages, rose to 661,914 in the first quarter from 250,986 a year earlier, according to the report. Overall, mortgages 60 days or more past due rose 88 percent from last year, the report said.

Mortgages modified to help struggling borrowers stay in their homes fail within nine months more than half the time, the report said. About 53 percent of mortgages modified in the first quarter of 2008 were 30 or more days delinquent after six months, and increased to a 63 percent default rate after a year.

“Rising serious delinquencies are a leading indicator of increased foreclosure actions in the future,” the agencies said.

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Goldman Sachs lowers view on Oil Refiners to Cautious (VLO, SUN, TSO)

We have done CSP's on these. Just wanted to mention that Goldman Sachs lowers their view on Oil Refiners to Cautious, citing an "ugly" outlook for the group. The firm reiterated their Sell rating on Valero (NYSE: VLO) and downgraded Sunoco Inc. (NYSE: SUN) and Tesoro Corporation (NYSE: TSO) to Sell.

The firm started coverage on Western Refining Inc. (NYSE: WNR) with a Neutral rating and reinstated coverage on CVR Energy, Inc. (NYSE: CVI) at Neutral.

The firm upgraded Marathon Oil Corporation (NYSE: MRO) from Sell to Neutral.

The firm continues to prefer Neutral rated Frontier Oil Corp. (NYSE: FTO) and Holly Corp. (NYSE: HOC).

These will get hammered down for the next few days. Then we can take a look at them.

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CNBC-Larry Levin-"This market continues to be propped up by government intervention and manipulation."

As you all may know, CNBC is just a bunch of noise for nothing. But every once in a while, a nugget comes out. Larry Levin states that this market is manipulated and propped up by the government. At the 2 minute 20 second portion of the clip, listen to what he has to say (2:20).

How much more can you milk the cow?

GS

Sold to close GS OCT140 PUTS @ $15.00 for a $2.00 GAIN per contract. 15.3% GAIN per contract.

I feel this is a good exit point for now, even though I didn't reach the second target price.

FLR and GS Trades

Both FLR and GS have reached my first target price.

Next target FLR: $46.00

Next target GS: $137.00 then $135.00

I will monitor these positions for exit trades.

See previous posts.

FLR

Sell to close OCT50 PUTS FLRVJ @ $7.00. Flour FLR just reached my first target price of $48.

I took half of my position off for a 25% GAIN. Will keep the rest for the next target of $46.00.

Record Unemployment Rates in 8 States

Michigan again reported the highest jobless rate, 14.1 percent in
May. The states with the next highest rates were Oregon, 12.4 percent;
Rhode Island and South Carolina, 12.1 percent each; California, 11.5
percent; Nevada, 11.3 percent; and North Carolina, 11.1 percent. Six
additional states and the District of Columbia recorded unemployment
rates of at least 10.0 percent. The California, Nevada, North Carolina,
Oregon, Rhode Island, and South Carolina rates were the highest on re-
cord for those states. Florida, at 10.2 percent, and Georgia, at 9.7
percent, also posted series highs. Nebraska and North Dakota registered
the lowest unemployment rates, 4.4 percent each. Overall, 12 states
and the District of Columbia had significantly higher jobless rates than
the U.S. figure of 9.4 percent, 29 states reported measurably lower rates,
and 9 states had rates little different from that of the nation.

GS

Bought to open a small position in Goldman Sachs. Weekly looking good and 233 unable to push through 50ema. First target @ 139.50 and second target $135.00.

GS OCT140 PUTS GSVH @ $13. Will keep a conditional stop order in place if underlying breaks above $144.

EEM

Sold to close EEM JUL32 PUTS EEMSB @ $2.00 for a 33% GAIN in 1 day.

WNR

I don't like the price action. Keeping a close eye for a possible bail. Will update.

SRS

$$ Closed the remaining naked put positions JUN19 PUTS SAKRM @ $.10 for a 92% GAIN. I no longer hold any naked put positions on SRS. Currently holding stock with covered calls at the JUN20 and JUN21 strikes.

SRS

Closed more of my SRS JUN19 NAKED PUTS @ $.15 for a 88% GAIN. Still holding a small position now. $$

VLO

Stopped @ $17.061 for a small loss. Maybe next time. Purchased @ $17.20. $$
Less than 1% loss.

VLO

Bought Valero Energy Corp VLO @ $17.20. Have a $.25 trailing stop. Short term target of $17.70.

FLR

Bought to open FLOUR CORP FLR OCT50 PUTS FLRVJ @ 5.60. Target $48. $$

EEM - Ishares MSCI Emerging Markets Fund

$$ Bought EEM JUL32 PUTS EEMSB @ $1.50. Target of $31 on the underlying.

SRS

I closed half of my position JUN19 PUTS SAKRM @$.50 for a 61% GAIN. I will watch closely for an exit on the rest. There is some housing news at 1:00pm today that could move it.

SRS

I bought to close JUNE18 PUTS SAKRL @ $.25 for a 77% GAIN.

SRS

The previous post stated JULY puts on SRS. I meant JUNE.

SRS

If anyone has any JUNE cash secured or naked puts on SRS, think about your profits and close some positions. If you don't mind possibly being put the stock hang on until Friday. I say this because we are so close to the strike prices of our puts. I would not hang on if there is only $.25 cents left in the option.

Economics...Innocent Bystander

It is the month of August, on the shores of the Black Sea. It is raining, and the little town looks totally deserted.

It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town.

He enters the only hotel, lays a 100 Euro note on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 Euro note and runs to pay his debt to the butcher.

The Butcher takes the 100 Euro note, and runs to pay his debt to the pig grower.

The pig grower takes the 100 Euro note, and runs to pay his debt to the supplier of his feed and fuel.

The supplier of feed and fuel takes the 100 Euro note and runs to pay his debt to the town's prostitute that in these hard times, gave her "services" on credit.

The hooker runs to the hotel, and pays off her debt with the 100 Euro note to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 Euro note back on the counter so that the rich tourist will not suspect anything.

At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 Euro note, after saying that he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.

And that, ladies and gentlemen, is how the United States Government is doing business today.

www.silverbearcafe.com

Banks of the Living Dead

UNG

Buy to close UNG JUL13 PUTS UNYSM @ $.40. FILLED. 53% GAIN.

WNR

Sell to open WNR WNRSU JUL7.5 PUTS @ $.55 FILLED.

WNR

Sell to open WNR WNRSU JUL7.5 PUTS @ $.55. Working order.

Peter Schiff on John Stewart.

Peter Schiff predicted the housing bubble bust. Listen to what he has to say now.

The Daily Show With Jon Stewart	Mon - Thurs 11p / 10c
Peter Schiff
thedailyshow.com
Daily Show Full Episodes Political Humor Newt Gingrich Unedited Interview

The truth about 'Green Shoots'

Please take the time to watch this video about Green Shoots. Its about 10 minutes of truth, humor and a few cuss words (just a 'few'; so check your volume or wear headphones if at work/kids, etc).



Thanks Tyler Durden from ZeroHedge

SRS

Bullish divergence developing on SRS D and 233. Starting to break through 50ema on smaller chart. Lets see what develops. $$

UNG

UNG JUL13 PUT UNYSM order filled @ $.85

UNG

Sell to open UNG UNYSM JUL13 PUTS @ $.85. Working order.

40 Bits of Trading Wisdom

Courtesy of: www.esecfutures.com

1. Trading is simple, but it isn’t easy. If you want to stay in this business, leave “hope” at the door and stick to your stops.
2. When you get into a trade, start looking for signs right away that you are wrong. If you see them, then get out before your stop is hit.
3. Trading should be boring, like factory work. If there is one guarantee in trading, it is that “thrill seekers” get their accounts ground into parking meter money.
4. Amateur traders turn into professional traders when they stop looking for the “next great technical indicator” and start controlling their risk on each trade.
5. You are trading other traders, not the actual stock. You have to be aware of the psychology and emotions behind trading.
6. Be very aware of your own emotions. Irrational behavior is every trader’s downfall. If you are yelling at your computer screen, imploring your stocks to move in your direction, you have to ask yourself, “Is this rational?” Ease in. Ease out. Keep your stops. No yelling.
7. Watch yourself if you get too excited—excitement increases risk because it clouds judgment.
8. Don’t overtrade—be patient and wait for 3-5 good trades.
9. If you come into trading with the idea of making “big money,” you are doomed. This mindset is responsible for most accounts being blown out.
10. Don’t focus on the money. Focus on executing trades well. If you are getting in and out of trades rationally, the money will take care of itself.
11. If you focus on the money, you will start to impose your will upon the market in order to meet your financial needs. There is only one outcome to this scenario: you will hand over all of your money to traders who are focused on protecting their risk and letting their winners run.
12. The best way to minimize risk is to not trade. This is especially true during the low-volume “chop and slop” found during the afternoon trading session between 11:30AM Eastern and 2:30PM Eastern. If your stocks are not acting right, then don’t trade them. Just sit and watch them and try to learn something. By doing this you are being proactive in reducing your risk and protecting your capital.
13. There is no need to trade 5 days per week. Trade 4 days per week and you will be sharper during the actual time you are trading.
14. Refuse to damage your capital. This means sticking to your stops and sometimes staying out of the market.
15. Stay relaxed. Place a trade and set a stop. If you get stopped out, who really cares? You are doing your job. You are actively protecting your capital. Professional traders actively take small losses. Amateurs resort to hope and sometimes prayer to save their trade. In life, hope is a powerful and positive thing. In executing a trade, hope is a virus that can infect and destroy.
16. Be right on day one or get out. Don’t take a “red” position home overnight.
17. Keep winners as long as they are moving your way. Let the market take you out on a trailed stop.
18. Money management is the secret to success. Don’t overweight your trades. The more you overweight a trade, the more “hope” comes into play when it goes against you. Hope is to trading, as acid is to skin. The longer you leave it in place, the more painful the outcome will be.
19. There is no logical reason to hesitate in taking a stop. Reentry is only a commission away.
20. Professional traders take losses. Being wrong and not taking a loss does damage to your wallet, mind, and soul.
21. Once you take a loss you forget about the trade and move on. Especially if it is a small one. Do yourself a favor and take advantage of any opportunity to clear your head by taking a small loss.
22. You should never let one position go against you by more than 2% of your account equity. This means if you have a $50,000 trading account, you should never let one stock turn into a loss of more than $1,000. This means if you max out your 2 to 1 margin account and buy 2000 shares of a $50 stock, you must have a stop loss of 50 cents. That is tight and bound to get hit. Do yourself a favor and buy 400 shares of this $50 stock and use a $2.00 stop to start. That is only an $800 dollar loss and gives you room to trail your stop up to break-even before you are taken out on a wiggle. Is there ever a time when it is okay to take more than a 2% portfolio loss on a position? NO! Never means exactly that. This is a maximum loss by the way. Setting up your plays for losses of 1% of your equity is even better.
23. Use daily charts to get an idea of the 30-day trend, hourly charts to get an idea of the 1-day trend, and 5-minute charts to establish your entry points.
24. If you are hesitating to take a position, that indicates a lack of confidence that is not necessary. Just get into the position and PLACE A STOP. Traders lose money in positions everyday. Keep them small. The confidence you need is not in whether or not you are right, the confidence you
need is in knowing you will stick to your stop no matter what. Therefore you can actually alleviate this hesitancy to “pull the trigger” by continually sticking to your stops and reinforcing this behavior.
25. Averaging down on a position is like a sinking ship deliberately taking on more water.
26. Build up to a full position as it goes your way.
27. Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.

28. Look for opportunities NOT to trade.
29. You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point—which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of “failed” breakouts).
30. Embracing your opinion leads to financial ruin. When you find yourself rationalizing or justifying
a decline by saying things like, “They are just shaking out weak hands here,” or “The market makers
are just dropping the bid here,” then you are embracing your opinion. Don’t hang onto a loser. You
can always get back in.
31. Unfortunately, discipline is typically not learned until you have wiped out a trading account. Until you have wiped out an account, you typically think it cannot happen to you. It is precisely that attitude that makes you hold onto losers and rationalize them all the way into the ground. If you find yourself saying things like, “My stock in EXDS is still a good investment,” then it is time to start following the basic principals all professional traders follow. (That would be protecting your capital, aggressively cutting your losses, and letting your profits run by not giving in to the temptation to sell just because you have a quarter profit).
32. Siphoning out your trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business and not a place to seek thrills. If you want an adventure, go live in Minnesota for a winter. If you want excitement, deliberately forget your anniversary. Just don’t trade.
33. Professional traders only place a small portion of their assets into 1 position. Or if they take on a large position, then they strictly limit their risk to 1-2% of their current equity. Amateurs typically place a large portion of their assets into 1 position, and they give it “room to move” in case they are actually right. This type of situation creates emotions that ruin accounts, while professionals are able to make decisions and cut losses because they strictly define their risk.
34. Professional traders focus on limiting risk and protecting capital. Amateur traders focus on how much money they can make on each trade. Professionals always take money away from amateurs.
35. In the stock market, heroes get crushed. Averaging down on a losing position is a “heroic move” that is akin to Superman taking a spoonful of Kryptonite. The stock market is not about blind courage. It is about finesse. Don’t be a hero.
36. Sadly, traders never learn the importance of “the rules” until they have blown their account out of the water. Until you “lose it all” it never seems that important to have to follow the basics of professional trading. (Cut your losses; let your profits run, etc).
37. The market reinforces bad habits. If early on you held onto a loser that went against you by 20%, and you were able to get out for break-even, you are doomed. The market has reinforced a bad habit. The next time you let a stock go against you by 20%, you will hang on because you have been taught that you can get out for break-even if you just be patient and hang on long enough. Tell that to the folks who bought VERT at $145. When’s it going to get back to break-even? Well, if your timeframe is “never,” then you have nothing to worry about. Control your risk by sticking to your stops.
38. This next “bit” is brutal, but true. The true mark of an amateur trader who is never going to make it in this business is one who continually blames everything but his or herself for the outcome of a bad trade. This includes, but is not limited to, saying things like:
• The analysts are crooks.
• The market makers were fishing for stops.
• I was on the phone and it collapsed on me.
• My neighbor gave me a bad tip.
• The message boards caused this one to pump and dump.
• The specialists are playing games.
The mark of a professional, however, sounds like this:
• it is my fault. I traded this position too large for my account size.
• it is my fault. I didn’t stick to my own risk parameters.
• it is my fault. I allowed my emotions to dictate my trades.
• it is my fault. I was not disciplined in my trades.
• it is my fault. I knew there was a risk in holding this trade into earnings, and I didn’t fully comprehend them when I took this trade. The obvious difference here is accountability. For amateurs, everything having to do with the market is “outside their control.” That is not reasonable thinking, and really just points to an individual who has, probably for the first time, had to confront their “real self” as opposed to the perfect self or idealized self they have constructed in their mind. This is also known as “living in a fog.” A person can drift around through life in their own private world, where they are pretty special and can do no wrong. Unfortunately, trading rips off this mask, because you cannot dispute what has happened to your account. This is also known as “confronting reality.” For many people, when they start trading they are suddenly confronting reality for the first time in their lives. Just to see the world as it really is requires a lifetime of training, and for many people trading
the stock market is their first real step in this journey. Some people say that traders are born, not made. Not so. If you choose to see the world as it is, then you can start trading successfully tomorrow.
39. Amateur traders always think, “How much money can I make on this trade!” Professional traders always think, “How much money can I lose on this trade?” The trader who controls his or her risk takes money from the trader whose head is in the clouds.
40. At some point traders realize that no one can tell you exactly what is going to happen next in the market, and that you can never know how much you are going to make on a trade. Thus the only thing left to do is to determine how much risk you are willing to take in order to find out if you are right or not. The key to trading success is to focus on how much money is at risk, not how much you can make.

Courtesy of: www.esecfutures.com

Unemployment and Retail

I am on a rant today!

This morning showed 621K Americans filed for unemployment benefits. All you hear is we have hit the bottom because 4000 less people filed than last week. Is 4000 really an improvement? Come on! 621K still filed. It will only get worse with the automaker bankruptcy fallout. I'll bet tomorrows non-farm payrolls will be weak, but the market will shrug that off. And last months number, I'm sure, will be revised so no one will notice. What are the silver linings here?

People are not spending money. People have less money and wealth to blow away. The home equity ATM is empty and it's not getting re-filled.

We have a rally because of inflation (dollar decline and commodity speculation). There are no 'green shoots' with this rally. The American consumer will get squeezed to the last drop with $3-$3.50 gas again. Crude demand is not back. It's just that our friends at Goldman Sachs and others bought boat loads of crude at $35-$40 (literally) with TARP money. Then they talk their book that crude will reach $85 by years end. Once it hits $75-$80 they will sell it and pay back TARP at the cost of the American consumer. Once again a painful summer for the average American.

Click: Oil Climbs to 7-Month High as Goldman Forecasts Rally to $85 (Bloomberg)

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How can the US be in a recovery?

How can high unemployment, higher interest rates, higher commodities and tightening credit be healthy for an already beaten down consumer? I think the average person has lost more wealth in this recession than in the past. That is what is different. I don't think you can expect as fast a recovery as in the past. The move up in the markets is driven by government money being pumped into the system and global demand (ex US) for commodities to kill the $$$. The average person doesn't have the money to put in the market. People are just trying to survive the higher costs associated with day to day living and uncertainty for the future.

This problem is a lot deeper than I care to write about. Please share your thoughts.

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U.S. chain store sales were down 4.6 percent in May

U.S. chain store sales for May were down 4.6 percent on a year-over-year same-store basis according ICSC’s index. A tough year-over-year comparison was the main factor behind the decrease. Last year the Federal government distributed $50 billion in tax rebate money and an ICSC consumer survey at the time showed that one-third of that amount was spent in the retail sector during the months of May and June.

"Despite the weakness in May, there are ‘green shoots’ within the retail sector," said Michael Niemira, ICSC’s chief economist and director of research. "Although overall retail demand was weak, there were individual retailers that have begun to see some notable improvements," he added.

May 2009 is the first month that the ICSCs Chain Store Sales Trends Report will no longer include Wal-Mart’s sales data. In April Wal-Mart announced that they would no longer report sales on a monthly basis and will be issuing quarterly sales reports only. For June 2009 ICSC Research expects comparable store sales will be down between 3 and 4 percent year-over-year, slightly better than May.

Courtesy: www.icsc.org International Council of Shopping Centers

A good read for Thursday

Read the investment outlook by Pimco's Bill Gross for June 2009.

Click Here

Auto Supplier Fallout Spreading

Auto suppliers one by one are going they way of GM. Today, TRW announced that it would breach covenants of its credit facility. Yesterday, Lear and last week Visteon bankruptcy. The fallout is only beginning.

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