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Happy 4th of July America!

That's One Powerful Idea

Friday, July 3rd, 2009 - By Steve Christ

Since the markets are closed today and I have a date with a beach and a cold beer, I thought I publish a rerun of last year's 4th of July story.

After all, it's as true today as it was 12 months ago.

It read....

If you ask practically any American today about their country they will likely tell you that it is the greatest nation on earth.

In fact, I would even take it a step further by saying that the United States is the greatest country there is, ever was, or ever will be. But then again, I bit of a homer.

Maybe it was all those World War Two movies I watched when I was kid with my great uncle. He was an old sailor that was big on Admiral "Bull" Halsey and by extension so was I.

Or maybe it's just because I'm much older now, and I realize just how dark and brutish the world would be without her. That much I am sure of.

But what I love most about my country is that it was founded on the idea all men are created equal and are born with unalienable rights, among them are life, liberty and the pursuit of happiness.

Now that is something worth fighting for.

Of course, Thomas Jefferson put down those words much better than I ever could on this day some 233 years ago when he penned the Declaration of Independence.

And along with some other great men and their ragtag militia they defeated the greatest power of the day and founded a nation the likes of which the world had never seen. A nation that gave us men like Halsey, Patton, the boys of Pointe Du Hoc, and so many others too numerous to mention.

And while I know that no nation is perfect, I also know that America at least tries to get it right. That's good enough for me.

Here then is how it all began, when 56 men sat down and pledged their lives, their fortunes, and their sacred honor for a cause called freedom. I hope you enjoy it as much as I did. Happy Birthday America!

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Prime Mortgage Delinquencies Double

Home Prices Continue to Slide

Wednesday, July 1st, 2009 - By Steve Christ

This may be starting to sound a bit like a broken record, but please, don't shoot the messenger. I don't make the news. I just report it.

And while I'd much rather write something positive for a change I also know that recognizing the negative is just as vital. It is what is—even if I come off as something of a Debbie Downer.

But denial is tens times as dangerous as the truth.

In that regard, Case-Shiller released their monthly look at exisiting home prices today and they were awful yet again. The closely watched gauge of U.S. home prices, continued to post declines in April.

In all, real-estate values in 20 major cities decreased by 18.1 percent for the month from a year earlier. The only good news is that it was the smallest decline in six months.

However, that wasn't the only bad new on the day because by comparison the Case-Shiller news was kind of tame.

Instead, the worst news of the day came in a Bloomberg story on skyrocketing delinquencies in prime mortgages.

It was written by Margaret Chadbourn entitled: Delinquencies Double on Least-Risky Loans, U.S. Says

"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 with the 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 homeowners 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 houses 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.

"Job losses have mounted and even those with good credit that were able to get a prime mortgage are having a harder time making monthly payments with a loss of income," said Celia Chen, an economist at Moody's Economy.com in West Chester, Pennsylvania.

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; 63 percent were in default after a year. "

The good news is this is the last of the dominos. After prime mortages there nothing left to fail. Unfortunately, this is the biggest domino of them all.

Someday, this war has got to end.

The downward spiral continues....

Until then, here's a chart listing the individual declines in the 20-city index. Phoenix takes top honors with a 35% decline. Ouch.

Metro Area	April 2009	Change from March	Year-over-year change
Atlanta	105.36	0.3%	-14.8%
Boston	146.45	0.4%	-7.7%
Charlotte	118.69	-0.5%	-10.0%
Chicago	122.3	0.0%	-18.7%
Cleveland	98.07	1.2%	-10.5%
Dallas	114.39	1.7%	-5.0%
Denver	122.17	1.5%	-4.9%
Detroit	69.92	-1.5%	-25.4%
Las Vegas	112.39	-3.5%	-32.2%
Los Angeles	159.37	-0.9%	-21.3%
Miami	145.77	-2.0%	-27.3%
Minneapolis	108.63	-0.7%	-22.1%
New York	170.33	-1.7%	-12.5%
Phoenix	104.45	-2.2%	-35.3%
Portland	146.85	-0.6%	-16.0%
San Diego	144.43	-0.1%	-20.0%
San Francisco	118.46	0.6%	-28.0%
Seattle	149.38	0.2%	-16.8%
Tampa	140.41	-0.7%	-21.3%
Washington	167.3	0.8%	-16.9

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To learn more about Wealth Daily click here

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Insiders Sell the Rally

Green Shoots Huh?

Tuesday, June 30th, 2009 - By Steve Christ

Green shoots or yellow weeds. That's the battle being waged on Wall Street these days. However, for the people who should know the answer to this eternal question the verdict is already in.

According the "insiders" now is the time to sell stocks-not buy them.

That's because according to InsiderScore.com, CEOs, directors and senior officers have accelerated their sales to the highest level since June 2007, two months before credit markets froze.

In fact, insiders of S&P 500 companies have been net sellers of their own stock for the last 14 weeks even as the broader markets have delivered the biggest stock rally in 71 years.

"If insiders are selling into the rally," Joseph Keating, the chief investment officer of RBC Bank said, "that shows they don't expect their business to be able to support current stock-price levels." Instead he told Bloomberg, "They're taking advantage of this bounce and selling into it."

That is something to keep in mind as you break out the magnifying glass to search for those green shoots.

After all, to quote an old Englishman, lilies that fester smell far worse than weeds.

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The Free Market is Nothing More Than a Fairy Tale

Market Manipulation Rules

Monday, June 29th, 2009 - By Steve Christ

Here is a great clip from CNBC that gives further light to what I wrote about two weeks ago in a story entitled: How the Invisible Hand Moves the Markets

In the video, every single member of the panel admits that the government is skewing the markets to the upside on purpose-even Steve Liesman.

Unfortunately, buried beneath it all is the faulty premise that the free market still exists, which as we now know it does not.

Of course, what happens to the markets when the government hand is taken away is another story entirely.

As for the video, it's a great look at what is moving the markets today and trader Larry Levin absolutely nails it.

Roll the tape....

Related Articles:

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Condo Zombies Haunt Miami

At least the pool isn't crowded

Friday, June 26th, 2009 - By Steve Christ

Here is the beginning of a blog post I wrote some time ago about the oversupply of condos. It dealt with an impending condo collapse in Miami.

It reads...

"Ah condos. Don't you just love them?

I mean what with all of that concrete and blacktop what's not to love?

Throw in the elevators, the creepy hallways, and that collection of busy bodies otherwise known as the condo association and its hard to see why we don't all live stacked up on one another in a neat little box.

It kind of makes you wonder how the condo market could be so down these days. After all if a 1200 sq ft condo isn't worth at least 500K what is?

In fact, as hard as it is to believe, things have gotten so bad in Miami lately that a local bank has "blacklisted" 191 new condo projects there, refusing to make any loans in any of those buildings.

Of course, if you were one of the unfortunate folks that bought one these units before the bank pulled up the ladder you're probably going to have the pool all to yourself now.

That's because it won't be long now before all of the other banks follow suit, and when they do you'll have the place all to yourself, sort of like Jack Nicholson did in "The Shining."

But at least you can solace in this as you race around the empty halls on your Big Wheel—-your losses will be nothing compared to what the banks that funded these empty towers are going to lose now.

After all, how can they possibly get all of those millions back now if nobody else will make the loans needed to sell all of those units?

That's why commercial real estate is pretty much the next shoe drop in this mess."

I bring it up because 17 months later, my sarcasm has turned out to be pretty close to reality.

From the Miami Herald by James H. Burnett III entitled: Condo dwellers finding empty buildings

"Joshua Hamann jokingly compares himself to the last human in a city overrun by zombies. He's not suggesting his neighbors are zombies. The problem is, he has no neighbors.

Hamann dwells in a newly opened condo. And in the six weeks since moving into the gleaming new Everglades on the Bay in downtown Miami, he has felt pretty lonely. Hamann occupies one of only about 50 sold condos in his 49-story tower, out of 409 units.

A couple miles north at Midtown Miami, Alisha Marks knows the same feeling. ''It was pretty much a ghost town when I got here,'' she says.

It's an odd time for South Florida's condo market. Over development compounded by the credit crunch and a sluggish economy created an abundance of condo units.

So, what is life like for the few residents whose lights are on?

''Weird,'' says Hamann, a 28-year-old project manager for a window shading company, who rents the $400,000 one-bedroom, one-bath unit on the fifth floor. Everglades on the Bay opened in April and offers residents great views, clean white walls, spotless carpets, stainless steel appliances, a well-equipped gym, a pool, and even party rooms. Hamann moved in immediately.

Since then, he has one neighbor on his floor. It took two weeks before his first experience of sharing an elevator ride with a neighbor. ''He didn't know how to react,'' Hamann notes.

''I'm a sociable guy, but you can't socialize with what isn't there,'' says Hamann, who commutes on weekends to the Gulf Coast where his wife lives. He jokes that before he moved in, he saw brochures featuring smiling ''crowds'' hanging around the pool.

On a recent Friday morning, Hamann encountered exactly three people over the course of several hours — two security guards, and a concierge.

Several stops in the fitness center? Empty.

Several visits to the pool? Empty.

Several visits to the laundry room? Empty.

The building is emptier than the cheap seats during a Marlins game at LandShark stadium.

''This is how it goes every day,'' Hamann said, adding that he interacted with more neighbors growing up in rural Kentucky, where farms were spaced a mile apart."

You just can't make this stuff up.

I wonder if Josh has taken the Big Wheel out for a ride lately.

Have a great weekend.

Related Articles:

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Roubini Sees Significant Risk of a "Double-Dip" Recession

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Green Shoots? Not According to Richard Russell

To learn more about Wealth Daily click here

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Cap and Trade = Cripple and Rob

The Ghost of Smoot-Hawley

Thursday, June 25th, 2009 - By Steve Christ

twain

"History doesn't repeat itself, but it does rhyme."-Mark Twain

Staring down the barrel of the worst economy since the 1930's, the events of the Great Depression have taken on a new found significance.

And as every school kid knows, the Smoot-Hawley Tariff Act of 1930 is one of the ways that the government made the economic situation of the time tragically much worse.

In fact, the bill was so bad that Henry Ford urged President Hoover to veto it calling it "an economic stupidity".

Even still, despite the objections of over 1,000 economists who agreed with Ford, U.S. tariffs on over 20,000 imported goods rose to record levels. And in an instant, an economic war began as everyone else in world decided to lay down the same card.

Go figure.

Soon after, an economy that was merely teetering on the edge went completely over the cliff. A recession quickly turned into a depression.

In the bill's wake, unemployment rose dramatically for years jumping to 16.3% in 1931, 24.9% in 1932, and 25.1% in 1933. Meanwhile, before the bill unemployment was only 7.8%.

All of which brings us back to the present and an abyss of our own.

However, some 90 years later, it's not new tariffs that will put us over the edge, but a 1,201 page boondoggle called cap and trade. Its purpose is save us from a warm winter's day while simultaneously picking our pockets clean.

Why we put up with the BS, I'm not sure.

And in the insanity of the times it's headed for a vote in the House as early as tomorrow since the folks on Capitol Hill desperately need to find new ways to soak us all.

However, just like Smoot-Hawley it may be the straw that breaks the camel's back.

From the Wall Street Journal entitled: The Cap and Tax Fiction

"House Speaker Nancy Pelosi has put cap-and-trade legislation on a forced march through the House, and the bill may get a full vote as early as Friday. It looks as if the Democrats will have to destroy the discipline of economics to get it done.

The hit to GDP is the real threat in this bill. The whole point of cap and trade is to hike the price of electricity and gas so that Americans will use less. These higher prices will show up not just in electricity bills or at the gas station but in every manufactured good, from food to cars. Consumers will cut back on spending, which in turn will cut back on production, which results in fewer jobs created or higher unemployment. Some companies will instead move their operations overseas, with the same result.

When the Heritage Foundation did its analysis of Waxman-Markey, it broadly compared the economy with and without the carbon tax. Under this more comprehensive scenario, it found Waxman-Markey would cost the economy $161 billion in 2020, which is $1,870 for a family of four. As the bill's restrictions kick in, that number rises to $6,800 for a family of four by 2035.

Even as Democrats have promised that this cap-and-trade legislation won't pinch wallets, behind the scenes they've acknowledged the energy price tsunami that is coming. During the brief few days in which the bill was debated in the House Energy Committee, Republicans offered three amendments: one to suspend the program if gas hit $5 a gallon; one to suspend the program if electricity prices rose 10% over 2009; and one to suspend the program if unemployment rates hit 15%. Democrats defeated all of them.

The reality is that cost estimates for climate legislation are as unreliable as the models predicting climate change. What comes out of the computer is a function of what politicians type in. A better indicator might be what other countries are already experiencing. Britain's Taxpayer Alliance estimates the average family there is paying nearly $1,300 a year in green taxes for carbon-cutting programs in effect only a few years.

Americans should know that those Members who vote for this climate bill are voting for what is likely to be the biggest tax in American history. Even Democrats can't repeal that reality."

By the way, if you enjoyed the tech bubble and the housing bubble, be aware that cap and trade may eventually kick off an even bigger bubble in time-sort of like Enron but on much larger scale.

That's because a cap-and-trade law would create a market - including derivatives- for carbon emissions and would multiply the trading opportunities for emitters, traders, brokers and investors.

As such, you will be happy to know that among those who want to buy these credits are a collection of investors that aren't major emitters at all. They include the trading units of Barclay's Plc (BCS), Goldman Sachs (GS) , JP Morgan Chase & Co (JPM), Merrill Lynch, now a unit of Bank of America (BAC) , and Morgan Stanley (MS).

Gee I wonder why those guys want in on this one?

I guess we haven't learned our lesson after all.

Related Articles:

Buffett: Economy is in a "Shambles"

Roubini Sees Significant Risk of a "Double-Dip" Recession

Prechter: U.S. to Lose AAA Rating

The Plunge Protection Team: How the Invisible Hand Moves the Markets

Green Shoots? Not According to Richard Russell

To learn more about Wealth Daily click here

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Buffett: Economy is in a "Shambles"

No to Green Shoots

Wednesday, June 24th, 2009 - By Steve Christ

Here is the latest word from Warren Buffett. He's been talking today on the state of the economy with his favorite CNBC reporter, Becky Quick.

And as usual, it has made for plenty of headlines ahead of the Fed's meeting today.

As it turns out, he doesn't see any of Ben Bernanke's green shoots either, despite recent cataract surgery.

In fact, according to the Oracle of Omaha, the reality if just the opposite. The economy he says, in a "shambles"

Here's today's headline making video...

Great stuff Warren.

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Kodak Dumps Kodachrome

Film goes the way of the buggy whip

Tuesday, June 23rd, 2009 - By Steve Christ

At the ripe old age of 45, becoming a living and breathing anachronism is something that is kind of hard for me to admit. But the truth is, this far into it the world has left me in its dust.

Anything and everything is different these days. They call it all progress but sometimes I'm not real sure if I agree with them.

Take TV, for instance. Now that is something that's gotten considerably worse, not better.

In fact, it has gotten so bad that I can't even let my kids watch the commercials anymore for fear that they will ask me about the dangers of a four hour long erection— whatever that is.

By the way, is it just me or does anyone else ever wonder why they have to broadcast that little tidbit at dinner time? Some things are better off left for the fine print.

But that's not to say that everything new isn't worthwhile because what's new is what entrepreneur capitalism is all about. After all, if you build a better mouse trap the world really will beat a path to your door.

Of course, one of those better mousetraps is the digital camera. It's an invention so good it has sent the film of my youth the way of the buggy whip. And when I think about my Uncle's old Polaroid camera I just have to laugh.

Thirty years later, it is not exactly as cutting edge as I thought it was back in the day.

Neither, evidently was the Polaroid Corporation. After over 80 years of making instant film cameras, Polaroid went bust in 2008.

Even still, Polaroid's biggest rival managed to adjust and adapt to it all. Kodak survives, but in a slightly different form.

Kodachrome, however, has bitten the dust.

From the AP entitled: Sorry, Paul Simon, Kodak's Axing Kodachrome

"Sorry, Paul Simon, Kodak is taking your Kodachrome away.

The Eastman Kodak Co. announced Monday it's retiring its oldest film stock because of declining customer demand in an increasingly digital age.

The world's first commercially successful color film, immortalized in song by Simon, spent 74 years in Kodak's portfolio. It enjoyed its heyday in the 1950s and '60s but in recent years has nudged closer to obscurity: Sales of Kodachrome are now just a fraction of 1 percent of the company's total sales of still-picture films, and only one commercial lab in the world still processes it.

Those numbers and the unique materials needed to make it convinced Kodak to call its most recent manufacturing run the last, said Mary Jane Hellyar, the outgoing president of Kodak's Film, Photofinishing and Entertainment Group.

"Kodachrome is particularly difficult (to retire) because it really has become kind of an icon," Hellyar said.

The company now gets about 70 percent of its revenue from its digital business, but plans to stay in the film business "as far into the future as possible," Hellyar said.

Because of the complexity, only Dwayne's Photo, in Parsons, Kan., still processes Kodachrome film. The lab has agreed to continue through 2010, Kodak said.

Hellyar estimates the retail supply of Kodachrome will run out in the fall, though it could be sooner if devotees stockpile."

Someday it will all be gone.

Even still, watching that film develop before your very eyes was pretty cool.

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