Wrate's rants... and predictions

Housing Update

Wed, 16 Jul 2008 16:33:35 GMT

I'm re-reading John Talbott's 2003 book "The Coming Crash in the Housing Market". Since his predictions were spot on, I'm particularly interested in his assessment of mortgage giants Fannie and Freddie. My fear is that they ultimately will have to be nationalized and the ensuing debt taken on by the government will ultimately lower the government's credit rating... lowering the value of outstanding bills and bonds and hastening the United States descent into the number 2 spot in global power.

On Monday I moved most of my remaining money from WAMU into Wells Fargo so I can begin the long, painful process of setting up and transferring all the bill pay, auto debit, etc.
IndyMac bank (founded by Mozilo) failed on Friday. It will prove the costliest bank failure in US history, approaching $8 billion (roughly 20% of the FDIC reserves). Soon, the inevitable failure of WAMU will be an even bigger blow and certainly gobble up the remaining FDIC reserves - and then some.

The Housing Bubble

Fri, 14 Mar 2008 18:41:52 GMT

In the process of researching the housing bubble, I've come accross several instructional charts and graphs. They basically speak for themselves, but I'll provide some additonal explanation. First and foremost, I'm a believer in the concept of 'reversion to mean'... more simply put, 'what goes up, must come down'.

Chaos

Thu, 13 Mar 2008 03:28:55 GMT

The market was up over 400 points (to 12,150) the other day after the Feds announcement to pump $200 billion into credit pipeline. I think they're running out of ways to juice the economy. The rebates are coming, the next interest rate cut could be the last and I don't know how often they can throw good money after bad.

Now if I can just figure out a way to beat the ensuing inflation...

Bernanke is as big a fool as Greenspan.

Wed, 30 Jan 2008 20:40:27 GMT

It was only a year ago that Bernanke was criticizing Greenspan for all his interest rate cuts. Last weeks 'emergency' 75 basis point cut and today's 50 points add up to one of the most aggressive rate cuts in history. Specifically, Bernanke was saying it was a clumsy way to manage things and he favored more subtle approaches. Apparently he's changed his tune. No doubt he inherited a mess, but he's equally guilty in sharing Greenspan's need for Wall Street's approval.

What I've learned:
You can't time the market. I unloaded my last funds the Friday before the emergency rate cut. If that hadn't happened on Tuesday (Monday was MLK Day), the markets would have tanked 100s of point (following 10% declines in Asian markets)

The Future
People will slowly start to realize that the only reason that the Fed has taken such drastic measure is that things are really looking bad. Certainly the cuts will bring the day traders back into the market, but a 300-400 point bump in the DOW following the 125 basis point cuts doesn't indicate that the long term investors are back. If the market is trading over 12K in 6 months I'll bow once more to TGH (Fisher's acronym - 'The Great Humiliator').

Recession?

Sat, 12 Jan 2008 07:28:07 GMT

The market's tanking. We're at 12,600 and nerves are rattled. BofA is buying Countrywide for $4.1 billion, but the market isn't happy as it's less than the stock was trading for yesterday.

My prediction is that the market will be volitile, but will break 13K at some point in the not too distant future at which point I'll unload my last mutual fund. This year, the carnage will continue. BofA's purchase will be a disaster as they're taking on 1+ trillion (!!!) in loans serviced by Countrywide and sending their slimy CEO off with a $100+ million parachute. If I had to guess as to how low the market will go, I would say 8K. Recession is a foregone conclusion with the mortgage / subprime mess excacerbated locally by Hollywood's strike, and (most recently) California's proposed budget cuts.

I'm in the process of consolidating all my accounts by getting out of Etrade and WAMU (both companies which might be in bankruptcy soon) and into a brokerage account at ? where I will be buying muni bonds and T-bills... and maybe (bravely) shorting the market.

Pulled the trigger on mutual funds

Wed, 12 Dec 2007 00:21:31 GMT

It finally seemed a good time to get out of my mutual funds. The market has been creeping up slowly and broke 13,700 yesterday. Earlier that day I called up my guy at WAMU and told him to sell everything at the end of the day. I figured there would be turmoill today when the fed announced it's interest rate decision (it dissappointed by only dropping rates 25 points). I was also following the old adage of 'buy on the rumor, sell on the news'.

As (bad) luck would have it, my guy screwed up and only sold 2 of my 3 funds. The market plunged and the value of the money in the remaining fund is down $12K. Time will tell if this really screwed me up, or if there is a short term recovery. Regardless, I'm very upset as I'm having to second guess things and keep focused on the market to find a good time to dump the final fund.

Business section article in the LA Times today.

Thu, 15 Nov 2007 17:45:51 GMT

The article explained that home prices are now at 2005 levels and may dip in to 2004... but bottom fishers are coming back into the market so we must not be too far from the bottom.

Wrong! I expect prices to fall below 2002 levels at a minimum. The turmoil in the mortgage market has barely begun. 2008 will be a record year for foreclosures.

The market

Fri, 07 Sep 2007 16:42:28 GMT

It's been volitile. Should I stay or should I go? I expect more bad housing data and everytime some comes out, the market drops 200 points.

It's universally expected that the Fed will lower rates by at least 25 points by their next meeting (Sept 18th, I think). Bond funds (MFS specifically) have taken it on the chin during the recent credit crunch. I bought at 5.86 and it has been as low as 5.62. In the last week it BOUNCED back up to 5.74 and I expect that to continue as rates are lowered.

The duplex is sold!

Fri, 31 Aug 2007 16:35:06 GMT

Summer was coming to a close and I was getting worried that I'd stay a landlord forever. A little luck and a great realtor took over and we closed August 31st. It was the longest 30 day escrow in history. 2 weeks into it, all the bad housing data flooded from Wall Street dropping the DOW from it's high of 14K down to 13K.

Signing up as Associate at CitizenRE

Wed, 21 Feb 2007 01:00:00 GMT

I signed up so I can test this thing out once and for all. A friend of mine is going to request a system. If someone goes out and tries to collect $500 [ beyond any doubt ] it's a scam!