I think probability of 10 yr. going from 3% to 4% in 6 mos. is increasing daily. The ADP job creation was 239,000 way above expectations. I think when this turns to 280,000 unexpectedly in Feb or Mar., you could see 4% by May, not December or March of 2015 like some analyst are projecting. Job creation is starting to heat up, mostly from a tsunami of baby boomer retirements which is starting to accelerate alot faster then gov. experts were anticipating. The job creation could swell to 400,000 per month, which is common in such a delayed and long recovery, this is long over due and payback time big time. You could see 4.5% on the 10 yr. treasury, and Bernanke will be out of the taper by June 2014.
Technically, it could have happened in May-June 2013, and that is when the FED announced a possible TAPER. But then the gov. shutdown messed up the math and threw a wrench into my calculations, but since these are random non-repeatable events, some other random event might come along to throw the wrench the other way, and I believe it did, it is BABY BOOMER DEMOGRAPHICS accelerating retirements of the well to do baby boomers is creating more entry level jobs, I predicted this 3 mos. ago, I mentioned it several times, THAT THIS IS THE BIGGEST random unexpected event that could really stir up the markets. Yesterday, an unexpected 239,000 ADP jobs gains.
AThis is like fishing. You sit wait wait wait, and then October 1987 comes and you buy 20 stocks at 80% off that close the day only 50% off and 3 mos. later are only 30%. Check the math, very lucrative, but you have to be prepared, disciplined and ready in advance and it cost nothing to wait. $100 stock, limit order for $20, buy on the crash day(s) at $20 intraday, closes that day at $50 for 150% gain in one day, and then three months later you $20 cost stock is trading at $70 for 250% in three months.
150% in one day, 250% gain in 3 mos.. This strategy is engineered to make up for any capital you have parked in a CD or bank account at 1-2% for the past 5 years. Like I said many times, wealth will be returned to the deposit savers many times over under Yellen, but you have to understand how to claim your share.
I try to find real winners, not just beaten down stocks. I didn't buy an IPO but really like the stock, the business strategy and the differential advantage this company had, the symbol is TAX. This is the IPO for Liberty Tax Service, the third largest tax preparer in the country and the fastest growing. H&R Block is the largest and biggest dinosaur, and no. 2 Jackson Hewitt Tax Service went through bankruptcy a couple years ago, not growing much and is private. I like the tax business for several reasons, taxes are getting harder to do, the ACA Affordable Care Act is bringing out a new credit and you have to know how to calculate it and apply for it on your tax return in advance of the tax year, very complicated to get the maximum credit and to qualify, you need a pro, and the third reason their is an industry consolidation of the small mom and pop outfits that do taxes due to the giant wave of baby boomers retiring, alot of the tax businesses are owned by people over 50 and they are baby boomers. These people need someone to sell their business to, in order to retire. Liberty Tax (TAX) is run by John Hewitt, the original founder of Jackson Hewitt Tax Service which he sold some years ago to Cendant. Liberty is small compared to HRB and they have an experienced pro for acquisitions and growing the company from all these mom and pop consolidation. I see 20-25% growth for a decade maybe two for these guys and the stock was trading at PE ratio of 8 when I bought, 3 to 1 ration of growth to PE, THIS WAS A GOLD MINE.
Buy the bonds if there is any. Preferreds offer no protection in the event of bankruptcy. You want debt. that will have a claim on assets at the BK court. In all reality, M-REIT's have very little in tangible assets in BK court, except for tax loss carryforwards. Reason is they are so leveraged, 8-10 to one, hence if you load up mortgages at 2.5-3.5% at 10 times your net worth, you have magnified your losses greatly with no fast way out when interest rates rise to 4-5% on those mortgages, you have huge losses on the books and hopefully you can song and dance the shareholders with talk of hedging, rebalancing, etc., but in the end, YOU BOUGHT AT THE HIGH IN PRICE AT THE LOWEST YIELDS IN HISTORY. Buying high and selling low is a sure way to failure. As with common stock of a M-REIT's, the preferred stock is just as risky even though you don't see it now, but when BK comes or if rates keep rising and losses keep rising, preferred will be coming down. Remember, preferred use to yield 8-12%, sometimes higher a few years back, the prices on preferreds are at all time highs and they haven't fallen to the norms due to large number of investors chasing yields. Wait for the correction in preferred to pan out over the next two years and buy them when the yields are 15% +.
You seem like the people in our great urban centers who look the other way or don't want to get involved. I respect those who get involved for one simple fact, Evil will flourish under your scenario.
"All that is necessary for the triumph of evil is that good men do nothing." (Edmund Burke)
So much of the history of the struggle between good and evil can be explained by Edmund Burke's observation. Time and again those who profess to be good seem to clearly outnumber those who are evil, yet those who are evil seem to prevail far too often. Seldom is it the numbers that determine the outcome, but whether those who claim to be good men are willing to stand up and fight for what they know to be right. There are numerous examples of this sad and awful scenario being played out over and over again in the scriptures.
They Get Nothing Good Done
When good men do nothing, they get nothing good done. To be good, one must do good. The Lord commands his people to do good (Luke 6:35; Eph. 2:10). Christ "gave himself for us, that he might redeem us from all iniquity, and purify unto himself a peculiar people, zealous of good works" (Titus 2:14).
Well you logic makes sense partially. The reason mREIT's sell more shares to public because it is easy when yields are double digits and they have growing book values in recent history, easy to fool an investor into buying more. But the real reason is management fees and compensation of the managers. They get paid as a percent of assets managed. Hence, the will sell as long as there are willing buyers and it is easy and low cost. If you noticed they can't sell, because there are more sellers than buyers, and they are buying back shares to stem the sell pressure. This will get worst in 2014, because I think FED FUND rate will be raised after June 2014, this will be single digits when that happens, I know the FED said the first FED FUND rate will happen in 2015, but 2015 is only 11 mos away, I think it will be sooner. Reason, unemployment dropping big time, it will be 5% area by end of year not 6%, record baby boomer retirements accelerating and extended unemployment bene's ending meaning lots of people forced to work or retire and get out of job market. We are headed back to the mean faster than anyone realizes.
At an alarming rate. Buffet, Soros, etc.
Warren Buffett, who has been a cheerleader for U.S. stocks for quite some time, is dumping shares at an alarming rate. He recently complained of “disappointing performance” in dyed-in-the-wool American companies like Johnson & Johnson, Procter & Gamble, and Kraft Foods.
In the latest filing for Buffett’s holding company Berkshire Hathaway, Buffett has been drastically reducing his exposure to stocks that depend on consumer purchasing habits. Berkshire sold roughly 19 million shares of Johnson & Johnson, and reduced his overall stake in “consumer product stocks” by 21%. Berkshire Hathaway also sold its entire stake in California-based computer parts supplier Intel.
With 70% of the U.S. economy dependent on consumer spending, Buffett’s apparent lack of faith in these companies’ future prospects is worrisome.
Unfortunately Buffett isn’t alone.
Fellow billionaire John Paulson, who made a fortune betting on the subprime mortgage meltdown, is clearing out of U.S. stocks too. During the second quarter of the year, Paulson’s hedge fund, Paulson & Co., dumped 14 million shares of JPMorgan Chase. The fund also dumped its entire position in discount retailer Family Dollar and consumer-goods maker Sara Lee.
Finally, billionaire George Soros recently sold nearly all of his bank stocks, including shares of JPMorgan Chase, Citigroup, and Goldman Sachs. Between the three banks, Soros sold more than a million shares.
And Multi-millionaire, Dr. Klumps, who expects to be a billionaire in next decade, 12 mos ago sold all his REIT's, Utilities, and went to 94% cash, and has calculated the Expected Stock Market Dump Day, as January 17, 2014, variance + or - 6 mos., it is coming we are very close, seize the opportunity to unload into excessive optimism rallies, like today.
The Big Foot Bear is approaching. If you are buy and hold, their is no reason to be malled by a "BIG FOOT BEAR" slide in the markets. This is a rate Big Foot Bear Market, last one was October 1987, when there was just continuous optimism all year and then the Big Foot Bear, which is rarely seen appears and leaves fast, but 50-60% declines are common. GET PREPARED, GET YOUR SHOPPING LIST AND LIMIT ORDERS IN. I have limit orders at $2,3, 4, and $5 for stocks trading at $20. You will make a bundle when the "BIG FOOT BEAR" arrives. Put you limit orders in 75-90% below market prices, you will scalp some real bargains on D-DAY or Dump-Day.
From Hussman Funds weekly market letter: "Confidence abounds. Last week, Investor’s Intelligence reported a surge in advisory sentiment to the highest bullish percentage since October 19, 2007. The National Association of Active Investment Managers (NAAIM) reported that the 3-week average equity exposure among its members increased to the highest level on record. We observe warnings from nearly every variant of overvalued, overbought, overbullish, rising-yield conditions that have accurately warned investors of oncoming market losses in a century of data, not to mention in real-time in 2000 and 2007 (see for example, my October 2007 comment "
I covered in low 19's long time ago. I shorted big time 26, 24 and 22 areas. I sold at 36 and 33 and then started shorting.
I will be shorting heavily if it rises above $21-22 area. Remember, with FED easing, which they forecast the 10 yr. T-rate on their website, you can calculate the Present Value of any M-Reit, THE SAME WAY YOU calculated the PV when rates were dropping, that is how analyst got target prices of $32 and 36 when the stock was 22-24, and target prices of $26 when the stock was 18-20. It is all about Present Values of a future stream of income based on Internal Rate of Return, in this case the 10 yr. Treasury is the IRR. You could trade here if you know what you are doing, but you seem to buy and hold or are trying to minimize a loss. Good luck, hope you make out. Read the Hussman Fund Archive weekly market letter and get prepared. T(c) - 7 and counting.
Mission Control.......we have detected some unpleasant skewness in the markets wings can you check telemetry and verify. Houston Out..........This is "Columbia" unpleasant skewness was detected along with missing reality tiles on the wings and fuselage but vertical trajectory is being maintain, please advise course of action, Columbia Out.....,” Mission Control......maintain trajectory looking good as we climb and its unpleasant precisely because it has historically emerged in conditions that we identify as “overvalued, overbought, and overbullish.” These conditions are often – at least temporarily – associated with persistent further advances to successive marginal new highs, followed by a steep loss.
Did you want the truth or just wishful thinking with some facts thrown in. The TRUTH is what matters in the end, it will help you navigate the snaky financial world more successfully. I can't believe how little due dilligence was done by people who bought this in the high 20's through mid 30's. You have to take into account the origins, WHY were REIT's created? WHAT were they used for? WHO profited? WHEN did they profit? WHO made the most money? If this was so good, why are they sharing so many shares with the public. Why doesn't the management own 50% of outstanding shares or their friends and relatives, why offer most of the shares to the public, over and over and over again. Why was it so important to buy all that 2.5-3.5% MBS with 30 year maturities at the highest prices in history? Isn't value investing mantra, "Buy Low, Sell High? WHY. ...WHO...WHAT....WHEN......WHAT GIVES MAN, DO SOME DUE DILIGENCE.
I short on rallies, then cover 1-3 dollars later. The probabilities favor the downward moves versus upward. Look at the unpleasant skewness to pleasant skewness probability ratios, I am going with the math, I need to have a constant cash flow daily and weekly.
Back in 1979, Harvard economist Olivier Blanchard proposed that financial bubbles could be approached from a “rational expectations” standpoint, where speculators essentially choose whether to exit or continue to speculate for one additional period. If the probability of a loss increases as the bubble proceeds, the result is that toward the end of the bubble, the rate of price advance accelerates, implicitly compensating investors for the smaller probability of continuation (and the increasing expected loss), with a higher immediate reward for holding on for one extra period. This necessity of offsetting the increasing size of the expected loss with an increasing prospect for immediate gain is called a “no arbitrage condition.” As Blanchard and economist Mark Watson observe:
“The probability that the bubble ends may well be a function of how long the bubble has lasted, or of how far the price is from market fundamentals. If the probability of a crash increases for example, the price, in the event the crash does not take place, will have to increase faster, not only to compensate for the increased probability of a fall, but also to compensate for the large risk involved in holding the asset.”
In effect, if the market is adhering to a “bubble” trajectory, we should not be surprised by a phase of persistent advances toward the end, followed ultimately by a sharp decline that erases a significant amount of prior gains in one fell swoop. This is what I’ve often described as “unpleasant skewness,” and is unpleasant precisely because it has historically emerged in conditions that we identify as “overvalued, overbought, and overbullish.” These conditions are often – at least temporarily – associated with persistent further advances to successive marginal new highs, followed by a steep loss.
Reference: Olivier Blanchard & Mark Watson, Bubbles, Rational Expectations and Financial Markets, July 1982, National Bureau of Economic Research
BV isn't static, the Present Value of their tangible MBS value based on FED projections of 10 yr. treasury going out 2 yrs, equals around $19. Adjusted Present Value of Book is $19, it is actually less than $18, if you use 3.03% for the 10 yr treasury now. The treasury rates are running about 10-15% higher than FED projected, so you have to adjust down. I would add 0.5% to what ever FED is forecasting on their website. So you see $25, I see $17, do you see who the market is in-line with. Don't look at the past, project out into the future. Stock price is a mathematical present value expression of a FUTURE STREAM OF EXPECTED CASH FLOWS. I believe after April, those cash flows will be estimated lowered and Present Value will be $15-16. That is the trend, my friend, look for huge loss in 1st quarter due to off balance sheet mark downs and divy will be cut to $.45/qtr.
Spring is coming and that is a huge home buying seasonal demand for mortgages. Couple that with a record amount of babyboomers retiring this past six months, as evidenced by the FED mentioning the biggest reason for declining unemployment is that high paid, good jobs, are being created by a doubliing of the retirement rate this year, which was unexpected sort of by the gov. They though boomers were not prepared for retirement financially too much debt, but they underestimated they really high paid professions, like Medical Drs., Surgeors, College Professors, Law Firm Partners, Business Owners who did well in their retirement 401(k)'s and keogh plans are retiring on time or actually early. I am one, I retired 10 years before my 66 year retirement age, with over $100M in the 401(k), I will never spend this. I will have to start looking into philantropy or the FED gov. will get 70% of this in Fedl estate taxes and IL will get another 28% in estate taxes, my heirs may only get $7 mil. I see why Caroline and John-John Kennedy had it so rough after their mother passed with $100 M., the estate plan wasn't done right and they paid over 90% in estate taxes.
What did you analyze to make your decisions. What was your due diligence on saying buy at 554 or .94, just winging it. I don't wing it, I am successful 99% of the time, only mistakes can be counted on my fingers. What is the story on those, I am interest to here the pitch, why they are such a great value or will rise into the future.
I put this warning out last year, when AGNC was $36, it had no where to go but down. I warned what M-REIT's are, why they were created, to sell something Big Investors had to the little guys. Listen to Station 41, Battalion 4, Simi Valley VCFD, on 9/11, You Tube, heed the warning signs and the sirens.