Empiric Student Property Share Discussion Threads

[briarberry] 06/12/2005 21:09

i don't think it's burst yet but it's looking more likely that it will...


Housing Bubble Bursts in the Market for U.S. Mortgage Bonds

Dec. 6 (Bloomberg) -- In the U.S. bond market, the housing bubble has burst.

Bonds backed by home loans to the riskiest borrowers, the fastest growing part of the $7.6 trillion mortgage market, have lost about 2.5 percent since September on concern an 18-month rise in interest rates may force more than 150,000 consumers to default.

``We've been hearing about risks of a house price bubble, easy credit and loans to borrowers that really don't qualify, and now in the last couple of months we're starting to see things turn for the worse,'' said Joseph Auth, a bond fund manager who helps oversee $135 billion at Standish Mellon Asset Management in Boston. ``We don't know if it's going to be a hard or soft landing.''

Mortgage securities with low ratings and loans from Ameriquest Mortgage Co. and New Century Financial Corp., two Irvine, California-based companies that specialize in lending to the 50 million people with histories of late payments and bankruptcies, yield the most in two years. The rise in yields reduced the value of loans made by lenders, resulting in lower profit margins and higher rates for consumers with bad credit.

The slump in the bonds is one of the first signs the housing boom is ending after the Federal Reserve's 12 interest- rate increases. Real estate has accounted for about half the economy's growth since 2001, according to Merrill Lynch & Co.

Growing Market

About 13.4 percent of all mortgages at the end of June were to borrowers considered most likely to default, such as those with high credit card balances, up from 2.4 percent in 1998, according to the Mortgage Bankers Association. The Washington- based trade group's 2,700 members represent 70 percent of the home-loan business.

The amount of bonds backed by these high-risk loans has more than doubled since 2001, to a record $476 billion, according to the Bond Market Association, a New York-based trade group of more than 200 securities firms.
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[briarberry] 01/12/2005 21:46

longer term, (2006) we're still due a slow-down

[briarberry] 01/12/2005 21:44

the bullish viewpoint...


NYSE today, big white candle, +ve volume and breadth

the Dow is usually up in December (stolen from another site)



even the SOX is at a new high for this year, and SML



bearish viewpoint...

the financials need a Goldilocks number from the Nonfarm Payrolls tomorrow

[briarberry] 01/12/2005 20:32

things have been looking grim for the UK for a while, we're still afloat, but for how much longer ?


Retailers' Christmas fears grow

By Rhys Blakely - Times Online December 01, 2005

"The CBI survey is a real shocker"

Fears are building that retailers could suffer one of the worst Christmases on record after the CBI painted the bleakest picture of high street activity since its closely-watched survey of the sector began in 1983.

More than half of retailers questioned said November sales volumes were down on a year ago while only 17 per cent reported an improved figure. The rounded balance of -35 per cent was far worse than the previous low of -24 per cent reported in September. Expected sales over Christmas were also at their lowest ever level, recording a figure of -23 per cent.

The data followed a GfK report yesterday that said consumer confidence remained at a two-and-a-half year low last month. The most recent Footfall figures also showed shopping visits sharply down from last year's levels with just four weeks to go untill Christmas.

"Consumers have been extremely reluctant to spend money, and shops will be crossing their fingers that the predicted cold spell and the rapid approach of Christmas drive people through their doors and get the tills ringing," John Longworth, executive director of supermarkets chain Asda and chairman of the CBI's retailing panel, said.

Howard Archer, the Global Insight economist, said: "The CBI survey is a real shocker, with the marked weakness of retail sales in November sharply countering most of the recent evidence suggesting that consumer spending is gradually on the mend.

He added: "Consumer spending is expected to remain under pressure from higher debt levels, increased utility and council tax bills, still high petrol prices, the lagging impact of last year's interest rate hikes, significant concern about the general economic outlook, continuing relatively subdued house prices and concern that taxes will eventually rise further."

Separately, another report showed British manufacturing growth slowed last month as a weaker pound failed to boost the sector.

[briarberry] 01/12/2005 19:26

Discounter Target was a big surprise, posting a sales gain of only 2.6% that is sharply lower than trend.




Chain-store sales in November proved mostly soft in a bumpy start to the holiday shopping season. Top performing chains across the shopping spectrum posted disappointing results. Discounter Target was a big surprise, posting a sales gain of only 2.6% that is sharply lower than trend. Upscale department chain Nordstrom posted a soft 2.8% increase while teenwear chain American Eagle Outfitters, which routinely posts double-digit gains, saw only a 1.7% improvement.

Department chain JC Penney was right on trend at 3.6%, while Wal-Mart reported an above trend 4.3% but cut December estimates at the same time.

[briarberry] 30/11/2005 21:31

Subprime Woes Point To 2006 Problems: WSJ

The Wall Street Journal reports on credit conditions and subprime borrowers. "Despite high debt levels, consumers have been making good on their loans for the past several years. Defaults and late payments at credit-card and mortgage companies remain low. But what seems clear is that credit indicators have bottomed and started to worsen."

"Bill Ryan, an analyst for the independent financial research firm Portales Partners, has been on the lookout. Since the home has replaced the credit card as the consumer's ATM of choice in recent years, the proper place to look for early warnings signs is from delinquent mortgages, he reasons. And the likely area for those would be the subprime sector, which caters to high-risk folks."

"The 2005 data through September reveal that these mortgages are faring worse than in comparable periods in each of the three previous years. This year, 6.23% of the loans are delinquent, on average, in their first nine months, a rate not surpassed until the 20th month for 2004 mortgages. By September 2004, that year's mortgages had a delinquency rate of only 3.72%."

"The conclusion seems obvious: These folks were among the last to get mortgages during a great boom, and laggards tend to be worse credit risks. They flocked to short-term, floating-rate mortgages, interest-only loans and loans that require little documentation."

"Home prices don't need to fall a great deal to wreak havoc. They simply need to stall, and a big source of extra spending green dries up. Keep in mind that most of these mortgages were two-year hybrids, which have a fixed rate for two years and then float for the remaining 28. If rates rise during the first two years of the mortgage, at the end of that period the monthly payments would shoot up and lead to payment shock. The only out is to refinance, but that's impossible if the home's value hasn't risen. This year, rates have risen and, predictably, home prices mostly have stalled or gone down."

"At around 24 months into the 2003 mortgages mortgages, just when the popular two-year ARMs were resetting to higher rates, delinquencies shot up. At 24 months, the percentage of folks 30 days late on their payments was 10.2%. Six months later, the delinquencies had spiked to 16.6%."

"What makes this so troubling is that the dollar amount of two-year ARM mortgages was much smaller in 2003 than in 2004 or this year. Mark Agah, another analyst at Portales, estimates that there were about $220 billion in two-year ARMs in 2003. That soared to about $400 billion last year and should be around $440 billion this year. That means at the two-year point for the 2004 mortgages, we are likely going to see a lot more mortgage problems."

[briarberry] 30/11/2005 21:30

BKX took a dump, i guess the BKX bulls were hoping that Greenie would stop raising, but it looks like there's too many signs of inflation, despite the drop in crude prices. that GDP growth figure didn't help either

have to wait for the employment figure on Friday

[briarberry] 29/11/2005 23:02

Demand for Option ARMs, Which Helped Fuel Boom, Wanes Amid Rising Rates, Growing Risk

By RUTH SIMON - Staff Reporter of THE WALL STREET JOURNAL
November 29, 2005; Page D1

The cheap mortgage that helped pump up the housing boom is finally in retreat.

Demand for so-called option adjustable-rate mortgages has dropped 25% in recent months, according to estimates by UBS AG. Just this summer, these loans accounted for more than 30% of jumbo mortgages, UBS says. Option ARMs carry teaser rates of as low as 1% and give borrowers multiple payment choices, but can lead to a rising loan balance.

At Washington Mutual Inc., option ARMs accounted for 29% of mortgage volume in the third quarter, down from as much as 40% a year earlier. IndyMac Bancorp says option ARMs fell to 31% of its loan volume in the third quarter from 39% the previous quarter.

The recent decline in option-ARM demand could mark the end of an era in which new mortgage products have made it easier for borrowers to afford ever-more expensive homes. Option ARMs have been especially popular in high-cost markets, such as California. They also allowed many homeowners to refinance existing mortgages in order to tap the equity in their homes while keeping their monthly payments low. By helping borrowers stretch, these loans helped boost demand for housing in the hottest markets. "The fact the loans are no longer available on such attractive terms ... could mean that the boom is ending in some of those markets," says Arthur Frank, director of mortgage research at Nomura Securities International in New York. Existing-home sales fell 2.7% in October from September as inventories of unsold homes continued to creep higher.

Many borrowers have been attracted to option ARMs by the low introductory rate, which is used to set the minimum payment for the first year. But that teaser rate is in effect for only a short period, typically one to three months. After that, the rate on the loan can jump above 5% or 6% and continue to rise as short-term interest rates move higher. Option ARMs are considered particularly risky because borrowers who elect to make the minimum payment can see their loan balance grow, also known as negative amortization.

They could regain some of their popularity if the gap between short-term and long-term interest rates widens, making these loans more attractive.
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[briarberry] 29/11/2005 22:44

Durable goods...


Excluding the transportation sector, however, orders rose just 0.3 percent, far slower than the 1 percent increase forecast by analysts. Orders excluding transportation dropped 0.2 percent in September, a figure the Commerce Department revised today from the 1 percent decline it had reported earlier.

[briarberry] 29/11/2005 22:42

US retail, interesting insight, IF true...


nick818 said...

My brother in law is a Junior V.P. for target. I was talking to him and he advised me that even though there was a lot of traffic and sales, profit margins were close to nothing on the special advertised items. Target had hoped to get people into the store with special priced items and hopefully they would buy higher profit products as well. Something which he claims as of Sunday did not work. Everyone just bought the special priced no profit items. I believe the same goes for majority of retailers. So wait till quarter profits come, it will be horrible for many. I myself went to sears on Friday morning where I bought a flat LCD TV at a great bargain. The sales guy tried to sell me warranty, surround, stand, wiring, DVD, etc. I said just give me the TV and that is it. Now it all makes sense, these retailers will bite themselves in the butt.

[briarberry] 29/11/2005 18:17

US New Home Sales - another record for home sales - i must admit i thought sales would be going down by now


home builders have been offering larger and larger incentives to keep inventory moving. that could be one reason why HGX isn't retesting July's all time high as we speak


lots of anecdotal signs of slowing - San Diego is in the top 10 of property hot spots, people are even converting large apartments into condos to try to squeeze money out of the market

[briarberry] 29/11/2005 17:15

Daily Treasury Yield Curve Rates - almost flat


Date . . 1 mo 3 mo 6 mo 1 yr 2 yr 3 yr 5 yr 7 yr 10 yr 20 yr
11/28/05 3.94 3.98 4.31 4.32 4.33 4.32 4.32 4.35 4.41 4.71

[briarberry] 27/11/2005 23:52

Options Expenses Now a Factor in S&P 500

New policy will result in a 4.2 percent decrease in earnings for the S&P 500 this year - and an 18 percent decrease for companies in the information technology sector

Stephen Taub, CFO.com - November 21, 2005

Standard & Poor's has announced that it will include option expenses when it calculates earnings for its U.S. indices, including the widely followed S&P 500. The new Standard & Poor's policy will result in a 4.2 percent decrease in earnings for the S&P 500 in 2005 - and an 18 percent decrease for companies in the information technology sector - according to S&P.

This has been a controversial issue since the Financial Accounting Standards Board began considering stock-option expensing, which for most public companies took effect for periods beginning after June 15, 2005.

Earlier this year, Thomson Financial's First Call - perhaps the most widely followed earnings estimating service - asserted that if a majority of analysts supplied earnings estimates without allowing for the expense of stock options, then First Call would highlight the unexpensed number. According to The Wall Street Journal, however, Thomson subsequently stated that it would provide two sets of earnings estimates: one that would include option costs and another that may not.

Several months ago, the Council of Institutional Investors urged Thomson and the research departments of investment banks to create a single, consistent policy to reflect stock option-related expenses in net earnings estimates. In August, the council sent letters to the heads of 31 research houses expressing support for policies including option expenses in estimates and valuation models. "There should be no doubt regarding the desire of long-term investors to have the cost of employee options represented in financial statements and earnings estimates," stated Ted White, the council's deputy director, in the letter.

In September, Merrill Lynch announced that its equity research analysts would include options and other equity-based compensation expense in their GAAP estimates (and their pro forma estimates, if different) as of the first quarterly reporting date for each company after September 30. The policy applies also to forward-looking quarterly and fiscal-year estimates, the company added. In addition, Merrill added that research reports would lay out the variance between estimates that included and that excluded equity-based compensation expense for at least the next two quarterly reporting periods after September 30.

"The ability to compare costs across company and sector levels is vital to the investing community," said S&P equity analyst Howard Silverblatt, in a statement. "A consistent earnings methodology that builds upon accepted accounting standards and procedures is a vital component of investing. By including option expense in operating and as-reported earnings, Standard & Poor's is contributing to a more transparent and informed investment environment."

The ratings agency stated that based on 2004 fiscal data for the S&P 500, as-reported earnings would have been reduced by 4.4 percent if all options expenses had been factored in.

Standard & Poor's noted that options expenses increasingly represent a much smaller but still significant component of earnings. S&P also pointed out that with the inclusion of options expenses, price-to-earnings ratios will be slightly elevated but will still remain under historical averages.

[briarberry] 27/11/2005 22:13

US natural gas... storage levels are high, but production is still down


November 23, 2005

Today's shut-in gas production is 3.196 BCFPD. This shut-in gas production is equivalent to 31.96% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in gas production 8/26/05-11/23/05 is 473.547 BCF, which is equivalent to 12.974 % of the yearly production of gas in the GOM (approximately 3.65 TCF).





Working Gas in Underground Storage Compared with 5-Year Range





even if the price drops, i'm guessing the up trend will hold...





starting to see a few cold nights (last week and next)



input price inflation...

Natural gas has a multitude of industrial uses, including providing the base ingredients for such varied products as plastic, fertilizer, anti-freeze, and fabrics. In fact, industry is the largest consumer of natural gas, accounting for 43 percent of natural gas use across all sectors.

Natural gas is consumed primarily in the pulp and paper, metals, chemicals, petroleum refining, stone, clay and glass, plastic, and food processing industries. These businesses account for over 84 percent of all industrial natural gas use.

[briarberry] 27/11/2005 21:25

UK natural gas


The tragedy is that everyone saw this banana skin coming. North Sea production has been steadily falling (gas by about 13% a year, oil more slowly) for several years. The old, publicly owned British Gas never built big storage reservoirs against a cold winter, relying instead on production contracts that meant it could vary its take from gas producers by up to 50% and not pay over the odds. Deregulation of the power market soon broke up that old safety buffer, and our native supply of gas, and safeguards against shortages, have been slowly whittled away.

[briarberry] 27/11/2005 19:47

US risky loans...


One economist is pushing the government to tighten up regulations on high-risk loans. "NARs' chief economist David Lereah is concerned enough about the proliferation of so-called 'exotic' mortgages that he has gotten the government to consider a limit on them. In the first six months of the year..the share of first-mortgage originations that were interest-only loans rose to 23 percent from 17 percent during the same period last year, and the Alt-A share increased to 11 percent from 8 percent."

[briarberry] 26/11/2005 22:34

On November 27, 1975, President Gerald Ford proposed a $2.3 billion aid package to prevent New York City from going bankrupt. Congress passed the bill a month later. New York City's financial situation had been spiraling down toward disaster as a result of the serious 1973-74 recession, and plunging stock market.

In this week in 1990, the stock market was just beginning to pull out of the 1990 bear market, but not everyone was believing it. Real estate prices were depressed and not yet recovering after the late 1980s real estate bubble popped. Even more serious, the U.S. banking system was in a mess.

Many of today's investors may not realize that the 1980s and early 1990s witnessed the greatest crisis in the U.S. banking system since the Great Depression.

Between 1980 and 1991 some 1,500 commercial banks, and savings banks, insured by the FDIC, plus 1,200 Savings & Loans (S&Ls) insured by the FSLIC, failed, and were closed by regulatory agencies. They represented 10% of all banks, and 25% of all S&Ls in the country. In addition there were an even larger number of banks listed by the FDIC as being in "financial distress" and precarious financial condition. The cost of bailing out the failed banks, and strengthening the weak ones by forcing strong banks to merge with them, was some $150 billion beyond the resources of the insuring agencies, and was charged to U.S. taxpayers.

Later studies blamed the crisis, in which the U.S. banking system was actually technically bankrupt, on the large number of risky loans bankers had taken on in their lust for higher profits. Does that seem similar to the creative financing in the real estate sector over the last few years?

[briarberry] 23/11/2005 20:24

more cost-push inflation ?

[briarberry] 23/11/2005 20:14

FTSE250 June, put a small short on, may add to it

will scale in a larger short on the, End of Year 06 contract, in December/January

I think we need higher wage growth for a good bull market, I'd be bullish if the bullish story was anything more than debt

[briarberry] 23/11/2005 19:31

started to get overbought, chart stolen from another site :)

Trin 10ma @ 3 year low

[briarberry] 23/11/2005 18:57

Nasdaq, still has long-term negative divergencies, still has a high PE ratio and small dividends

NDX, I've got a feeling this is going to be a good short, I still expect the gap left at 1600 to be tested sometime. I'll probably wait for the, End of Year 2006 or June contract in December, before I put a big short on, especially as it's still bear burning season, the last bear wins :)

NDX, also waiting to see what happens at 1700

NDX has reached new highs with less breadth, 68 stocks over their 150dma today, NDX had over 80 last Christmas and over 90 the year before






Nasdaq composite

[briarberry] 23/11/2005 17:22

Oil - I'm still bullish on crude prices, especially long-term but not betting on it yet


Ike from Marketviews - Notice that it has "dug in" the $57-$56 zone. If it continues to hold for the next 2-3 trading days, we would expect a break above resistance at $60, and a subsequent rise above $80. Our top three stocks in the oil complex would be: MRO, OXY, and UPL.