I would like to just repeat that 'THE BEAR MARKET" started July 4, 2015. The Market internals were very negative and were very similar to market internals seen before the 1929 crash, around September 9, 1929 and before other market crashes, 1972, 1987, 2000 and 2007. This was not hard to predict, the indicators all were very negative that July 4 week. Fewer than 60% of the S&P 500 was above their 200 day average. Advisory sentiment was below 27% at a record breaking 15.6% bears. The Schiller PE is over 27. THIS WAS A NO BRAINER. Expect a 50-80% haircut within 24 months. Maybe sooner. Some funds exposed to China are totally liquidating, very hard to sell liquidity issues.
The Doc is on his boat feasting on his favorite nourishment, Captain Morgan Rum with a couple shots of Chivas. During the holiday, I suspend my formal name Dr. Klumps and would like to be called Captain Jack, if you want to get formal, call me Captain Jack Klumps. I have been here, but am now vacationing more taking it easy. China is crashing and AGNC is making new lows, I made a bundle. Still a lot more to make in the next bear market. Get prepared.
Just the facts from Captain Jack Klumps. I am working on a tune to herald in the new bear market. I have settled on the title, "Is This The End of It All", a ballad about the end of the 7 year Zero Interest Rate Bull Market. Coming soon, exclusively to the AGNC message boards. Entertainment as you have never seen before, well except maybe on the message boards I visit.
Captain Jack, signing out....on my boat this Fourth of July, I am using my title Captain Jack or my close friends call me Captain Jackie......but yuse don't have to call me Jack, yuse can call me Johnnie or Johnny or Jackson or Johnson,, but yuse dusnt have to call me Jack. I've got to go now, I just hit a wave and my cartons of Captain Morgan and Chivas just shift and the boat is lisping in the water now, I've got to straighten her out and move them carton, I hope no bottles broke.
It was a subjective algorithm, it analyzed macro events and assigning values, 1 for low chance of bear market to 5 the highest chance for bear market. The subjective events have to be not quantitative, just surface impressions of the event are used, almost like a painting or work of art. Here is the key indicators that TRIGGERED MY BEAR MARKET CALL this week.
1. US fighter jet takes down a Cessna two seater with a direct collision, pilot ejects and is safe, two passengers still can't be found, or whats left of them. This has a 5 rating due to the shear insanity of how something of this nature could happen with all the money we pay this senior, "Top Gun" pilot. This indicates we are at the top, there is only one way to get off the apex, it is straight down.
2. Police officer pulls over car, suspect is totally unclothed while officer checks car, the subject is told to put hands on police car. Officer warns repeated to stay put while he searches car, man said he was poisoned and got into police car drove off to hospital emergency room with the flashing lights on. This triggered another 5 point rating for this simple fact, a Flasher arrived to the emergency dock with flashing lights on.
3. Movie Star of all time, Tom Selleck is caught in the streets stealing water in California. This is so similar to unclothed people fighting over week old bread in the streets, so this rates a 5 for the bear market indicator.
4. Chinese Market falls another 7% on top of the 30% already dropped, and no one in this country seems to be concerned. By itself, this is not surprising, but taking into account what happened this past week, it rates a 5. Things that happened this week that are cumulative in the rating system:
a. Greece Defaulted on ALL, I repeat ALL of its debt on June 30.
b. Puerto Rico Governor states they can never pay their debt back, rates soar to double digits and still rising.
c. Illinois stops payments...
with a 7%+ yield or 11% yield. I think the mid twenties in 12-24 mos. is a good estimate. My prediction is based on a simple rule of thumb, the more oil capacity you create and the more oil you store above ground will lower prices of the intermediate to long term. This will all cause from FED "Zero Interest" policy, "THE ROARING STOCK MARKETS" ensued from investors chasing yield and a lot of money went into oil production, oil transportation and distribution and oil storage. You increase all of that you destroy the monopoly of OPEC and the rigged prices. Hence, we have free markets and lower lows will take out weak producers and a shakeout will correct the capacity issues. Hence, enjoy the ride to the mid twenties and the 11-12% yield. Big Oil will trade like BDS's and MREIT's, they really have a lot of similarities, HIGH RISK, HIGH YIELDS to match.
I would like to be the first one to say that the NEXT BEAR MARKET has arrived and started the week of July 4, 2015. If this algorithm is correct, we should have lower prices going forward for 18-24 months and worst case 18 - 37 months. This is the beginning, still lots of time to short stuff. Sell early in the morning before they close the markets early. I've notice the regulators try to stop the selling by closing the markets and putting propaganda out, like they are doing in China, but it is not working, the only thing that will stop China's stock market crash is the same thing that stopped our 1933 stock market crash, a 95% mark down in prices from the highs of 1929.
It seems the exchanges are reheasing how they will handle a Market Crash in China or a Rate Hike in the US if there are all sell orders and no buy orders. I believe a computer takes the order imbalance and either marks up or down the price. When there is 1 billion shares for sale and 0 order to buy, does the price drop to $1, 1 penny or Zero? Is anyone familiar with the algorithms that determine the prices based on buy and sell order ratio's?
If you like small regional banks then you like shorting treasuries. They are both the same theme, "Higher Rates". I bought TBT at 43, 44 and it sank to 37, I just added more.
Also, what criteria did you use to choose Arrow, BMTC and UVSP, low price to book, high divvy, Equity/Asset greater than 8, Earnings/Equity greater than 1, ??????
What do you think of PSEC, just hit near low for year, with 13.3% yield.
My biggest positions or areas of risk is TBT and TMV. I laddered in on all those TBT 39-42, TMV 27-31.50, both up nice. I don't want to sell these, they are long term investments for 2-3 years out. Expected target prices for TBT 175-225, TMV 300-325.
What banks and Biz Dev Cos.......symbols please. Thanks for the correction, ANCX. I got in this 2X (200% gain) ago. Should I sell, it is at Pr/BV = 2.0. I collected a nice rising dividend while holding.
Lower Lows, Lower Highs, a descending triangle as predicted.
Buy the regional banks like, Access National (AGNX) my fav. up over 400% in 5 years and this should average 35-50% gain a year for 10 years of rising interest rates. No brainer.
Short AGNC on any rallies, in 5 years this will be below $5, as the 10 yr treasury soars.
Its here and will be here as the dominos fall. Cash is the safest investment since January 2015, when I said to buy UUP, the dollar etf is up 6% for 6 months, should easily do 12% return. This is better than AGNC divvy of 12%. Remember, the 12 % divvy only covers half of the 25% capital loss.
YOU HAVE SOMETHING VERY DISTORTED IN YOUR VALUATION METHODOLOGY. Your terms, "value of the portfolio", "costs are down", "the gov. still guarantees the loans" are very general statements, not well defined. Your conclusion, why is this trading for 25% off book value and dropping.
You are an amateur, if you are a professional investor, and you have well defined decision criteria, you would see this is an excellent stock to short or hedge against bond losses by shorting AGNC. The stock asset mixed and other variables are positioned so that value goes down if rates rise and value goes down if rates drop. They have to stay the same in order not to loose, which is very unlikely. VERY VERY VERY GOOD SHORT.
You guys should look to my post over year ago, predicting a Holiday Crash, where some sovereignity like Greece would close banks and then the stock market for a Holiday, except on this holiday it will last weeks if not months and result in catastrophic losses.
I beg to disagree. I was preaching before it even was $36, I believe at $26 before it got to $36, that if this goes higher you get out. Check it out, I went over the history of M-REIT's, there are only good for 5 years after IPO or at bottom of easing cycle. I said you should only trade and get ready for the enormous losses from buying 2-3%, 30 year fixed mortgages and leveraging 10 to 1 to buy even more had to be the dumbest investment ever. Only someone looking at the current yield and nothing else would even touch this or someone trading. This was not suitable for an intermediate or long term investment. TBT is smoking.
A very large stock price crash, bringing the share price to .25 - .30 of book value would do it. You would see buyings come in. That would price in some of the negatives of FED FUND rate going to 4%. If inflation picks up like it appears, and goes over 4-5% a year, the FED FUND RATE will have to go to 6-8% or higher to reverse this pent up inflation pressure. Rents are rising double digits everywhere, labor is rising double digits, it is really smoking. Unemployment is making new lows. Turnover is skyrocketing both hourly and salaried jobs. The economy is smoking. I am surprised the FED didn't raise in June, this just puts more pressure or probability of bigger and faster increases in the future. Smokin.......really smoking now, everywhere you look.
My take, look at the regional small bank stocks. There balance sheets are loaded with 68-90% adjustable rate mortgages. Only the dumb M-REIT's were loading up on fixed rate 30 yr at record low interest rates.
Two ways to play this with cash. But TBT, short the treasuries. Look at the chart Yellen put out yesterday, it shows FED FUND rates will be 1-1.5% by year end 2015, 2.0-3.0% by year end 2016 and 3.0% - 4.0% by Jan 2017. In about 2.5 years, rates will be back to 4.0%, 1/2% variance.
The levered Agency Mortgage REIT's will be single digits, like Annally, except the will be low singles, like $1 - 2.
Inflation is moving up real nice, 0.4% in May, more than double the FED target. I checked the indicators, inflation is actually taking off. Wage inflation (expecially the lower wages) are going up 10-20%, with Walmart, McDonalds, Home Depot, Costco leading the pack. Also, rent paid, is skyrocketing. 1 br apartments renting for $800, rents rising to $1,100, over 30% increases in the big cities. The smaller towns about half that, 15-18%, occupancy is over 97%. Inflation may soar and the FED may be forced to Jack Rates back up to try and get ahead of the curve, right now they are two years behind. Or maybe they wanted this all along.....HYPER INFLATION, DOUBLE DIGITS. The FED FUND rate should equal the inflation rate. Hence if we go to 7-8% inflation in 2016, that 2.5-3.0% FED estimate may be way off for the FED FUND rate by a factor or 2.
Over next 12 months. How to play. Right now, there has been no buying conviction or boost up in stock price as the stock makes trends straight down. This indicates a long drawn out descending triangle. If there was any buying conviction of traders or investors, there would be strong moves up. But only more distribution comes in when price firms, enough to hold prices very steady down. I expect some support come in when it hits the IPO price of $15. If none comes in to form a bearish wick then, it is $10 sp in less than 2 years. Short term FED FUND rate will be 2% soon, money market accounts and short term money will be 2%, hence the spread compression and pressure will cause the divvy to be cut to 10 cents. Just my opinion, based on my humble experience in the mortgage and bank investment scene.
If you want some really good investment advice try my Bank Fund LLC, private only 4 investors out of Chicago website. Click on "New Issues", recent purchases or look at the 290+ total issues held, over 85% are small regional banks, buy these on dips, by the dollar UUP on dips and especially short the 10 and 20 year treasuries, buy TBT on the dips, anything under 50 on TBT is a gold mine.