Crash Market Stocks - Financial Tips On Making Money In A Recession

Bank Stocks to Buy

noreply@blogger.com (Finance Fanatic) — Thu, 11 Mar 2010 07:29:00 +0000

If you just checked Wednesday's closing prices, you may have thought it was just another day of flat trading. However, despite having the Dow only close up a couple points, there was quite a bit of volatility in today's trading. New things are developing in different areas of the market, which perks my interest.

I'm sure by this point, most readers of my site consider me to be a very strong bear trader. Well, that is because most of this site has existed during some of the worst economic days we've seen in a decade. I try to stay close to fundamental economic data, as in times past, that has worked out quite well for me. When economic times are on the upside, I become very bullish. So please do not misinterpret me as a "PermaBear" trader. I want nothing more than for our economy to begin to thrive again, however I cannot cast aside the amazing amount of careless management and spending that has transpired over the past several years. It was only a matter of time until it caught up to us, and it will take some time to rebuild.

On that note, I don't see many appealing "buys" for me, as of now, that gives me complete confidence for my portfolio. However, I may consider pulling some long buys as an upcoming short hedge, as I do see a bit of short term momentum in some financials (if you could believe it!). For the past two days, government backed financial institutions have seen some strong gains, due to investors believing that these institutions are undervalued. Other banking institutions have seen much stronger rebounds than that of Citi, Freddie Mac, and Fannie Mae. As a result, we're seeing quite a bit of money being moved to these institutions. AIG jumped 10% today as they also fall into the government backed stack of institutions. I do feel that bulls are getting anxious and are finding a comfortable sweet spot, for the time being, in the financial sector, which has been a difficult sector to find strength for the time being.

My play in these companies will be very quick with strict stop losses. I do not feel that these institutions have seen the last of their problems, only that there is a quick opportunity at this point. One thing keeping my positions quick is the knowledge that the US government has close to a 30% stake in Citi and is eligible to begin selling those shares (for a profit) later this month. Right now, I think the government will make money anywhere they see fit.

On the short side, one ETF setting up for a soaring is YCS. YCS is the UltraShort Yen ETF. China is facing some serious inflationary problems, and such, should cause for a bit of downward push for the Yen. In addition to that, technically speaking, the Yen is looking very prime on the short side. I may even consider actually shorting YCL, which is the long equivalent of YCS.

It will be interesting to see how markets close out on Thursday and Friday. We are circling back towards earnings season, which can be a spark or downer for the markets. I definitely feel more certainty in the markets will be coming very shortly. Happy Trading.

Making Money From Rising Interest Rates

noreply@blogger.com (Finance Fanatic) — Tue, 09 Mar 2010 00:19:00 +0000

This week started off with a relatively flat trading day, as the Dow closed down just 13 points. It bobbled back and forth from red to green, but remained relatively flat for most of the day. There still lacks a "spark" for investors to get either excited or scared about the market. Each day rotates with positive and negative indicators, which just frustrates investors more. So for me, instead of playing a guessing game, I'm looking harder at things that have a bit more transparency and likelihood.

One thing is almost certain, the government cannot afford to participate much longer in 0% interest rates and other programs that are spiking the deficit. Our deficit for 2010, alone, is expected to be $1.6 trillion, followed by an additional $1.3 trillion added in 2011. We know it is the government's hope and intention to try and minimize the degree of economic decay throughout this recession, however, they are going to have to start picking and choosing their battles.

For just about the past year, we have enjoyed o% interest rates from the Fed. As of now, its presence is almost not even felt, which is scary when you consider just how monumental it is to have, essentially, a 0% discount rate from the Fed. Even though the 0% is a big factor in helping what little lending is being done at the moment, the fact is the Fed can't afford to keep it at such low levels for much longer. We can expect a hike in interest rates shortly. Maybe not the next FOMC meeting, but I believe it is in our very near future. As a result, how can I benefit from such a move? Well, here are a few ETF's that are working their way in my portfolio as a hopeful hedge against the hiking rates.

First off, what affect will climbing rates have on our economy? The most certain answer is a big influence on the debt markets, especially US Treasuries. As soon as volatility in interest rates begin to show, the first hard hit will be seen in long term bonds. US Treasuries are no exception to this. PST and TMV are both SHORT, longer term US Treasuries. PST is the UltraShort 7-10 year US Treasury, where TMV is the SHORT 3X 30 year US Treasury. In a normal supply and demand environment, as interest rates make their way up, we should start seeing rather aggressive selling of these long term bonds, thus making profits from these two ETFs potentially strong.

Well, where will all these liquidating bond holders go? The answer is shorter term bonds. In environments of increasing volatility in interest rates, investors tend to shorten their risk with shorter term lengths. They don't mind giving up some of their yield in return of a much shorter holding period. As a result, investors can then still earn a decent return, while not having to lock themselves in a 30 year bond. Bonds should continue to hold strong in the midst of this tumultous economy, so demand for Treasuries should remain strong. SHY is the iShares 1-3 year US Treasury ETF. Sure, with rising rates even short term bonds could suffer as well, however, I feel that they still have a much greater potential for stronger yields than long term bonds.

For the more sophisticated trader, a put option buy on the inverse of the above ETFs may be a good consideration, in hopes to have any ETF decay play to your advantage. In that case, a put option would be purchased on SHV, UST, and TMF for essentially the same effect. However, do keep in mind that put options have time restraints, where you can hold the actual ETF with no expiration period. For those that are looking for some practice trading, check out Wall Street Survivor, which is a fun fantasy stock trading site. Just some food for thought. Happy Trading.

Buying Gold

noreply@blogger.com (Finance Fanatic) — Fri, 05 Mar 2010 19:49:00 +0000

Gold is once again returning to investor's radar as uncertainty in the economy continues to grow. Also, worries for inflation can create a sharp demand for gold in a short period of time. So many are asking should I be buying gold?

Inflation no doubt is a coming concern. Just how close we are to inflation is a subject many are currently debating. I believe the severe concern is a couple years out. However, some feel that we could see it as early as the beginning of next year. When inflation does indeed begin to show, then buying into gold stock or even if buying gold coins, you will most likely see big gains. As of now, gold seems to be bouncing back and forth, much like oil, trying to find its position in the current market. As markets strengthen, commodities tend to get left behind as investors begin chasing the large returns.

One great way to bring gold into your portfolio is by establishing gold in your IRA accounts. Gold and other precious metals make a great addition to an IRA account as they show great resilience over time. I always like to have a small portion of my retirement accounts in precious metals.

For current investment purchases, I am refraining from buying gold in my active portfolio. The recent moves have not breached any major support levels, so it is quite grey on both the buy and sell side. I do feel that in the future, gold will bring some record setting gains to portfolios in a very quick amount of time. We're not there yet, but it's on the up and coming radar.

Retail Numbers & Jobless Claims...A Big Thursday

noreply@blogger.com (Finance Fanatic) — Thu, 04 Mar 2010 05:38:00 +0000

After spending most of the day in the green, the Dow was able to make its way down into the red by the closing bell, closing down just over 9 points. Worries in the health care business due to increase in premiums led to a sell off the sector. Personally, I was surprised to see the selling close. Lately, a strong buying turn around has been the closing trend. At any rate, the closing was rather flat and was not too significant.

Tomorrow acts as a hearty day for economic data. The much anticipated retail sales number for February will be announced following the opening bell tomorrow as will initial jobless claims. If this isn't enough, we close the week on Friday with the fun unemployment numbers. Depending on the data, these next two days have been set up to either fuel a short rally or set up an aggressive sell off. Considering how stagnant we have been of late, surprising data (either for better or for worse) should be enough to wake investors up. Investors cannot afford to be as patient in 2010 as they were in 2009. A lot of money was made from 2004-2007. Considering that, many could afford to be patient with their portfolio. However, carrying cash for two straight years starts to weigh heavy for many investors.

The outlook for retail is already set pretty low for tomorrow, considering the bad weather that hit the US. So if we indeed see a very devastating number come in below the already low set expectation, watch out for a pretty strong sell off. If numbers surprise and actually beat expectations, I expect the exact opposite. For the buy side, I expect so see some better than expected numbers in online retailers. One person's problem becomes another person's success. Just as the weather may have kept many people away from the malls, you can be sure that many of those people were still buying, just online. Amazon, Ebay, and Overstock are just a few that I feel could produce some surprising earnings this quarter and get a small run for the time being.

The Fed will most likely look to keep rates low for the time being, considering the continual rises we are seeing in unemployment. One way to quickly kill momentum to a recovery is to hike up rates. As of now, many do not notice the impact that the 0% Fed rate does for the economy. Considering its arrival in 2008, it has almost become a standard part of the economy. However, even a slight raise in rates would shake the economy enough to cause for concern of yet another credit crisis. Considering inflation still remains a distant concern, I don't see the Fed making a move quite yet. Happy Trading.

The Blame Game For The Economy

noreply@blogger.com (Finance Fanatic) — Tue, 02 Mar 2010 21:25:00 +0000

As we continue to kick of 2010, many are still patiently tapping their feet waiting for this so called recovery that many promised would begin early this year. February clearly slowed the anticipation of a quick rebound as most economic data came in well below expectations. As an attempt to calm the nerves of anxious investors, the government, as well as other analysts, are pointing fingers in every direction to try and assign blame to the delay in the recovery. If investors begin to realize that indeed our economy is just not recovering at this time, we would most likely see yet another strong leg down in markets. For this reason, government officials are staying busy trying to come up with new why's.

The newest to be put on the blame list is the weather. No doubt this past winter has been a record setting one for many parts of the country. Going into the stormy seasons, we new we were heading into another anticipated "El Nino" winter, which usually brings significantly more rain and snow. Analysts are stating that much of the recent sluggish economic numbers can be largely blamed on the bad weather. Home sales, consumer confidence, retail sales, and unemployment. Really? Sure, we can assign the weather some portion of blame for certain dragging indicators, but it is hard for me to see how a few bad storms can effect businesses from hiring new employees. Lets just call a spade a spade and realize that the recovery song may have been sung a bit too soon.

In regards to the housing market, the fact that remains is that there is just too much bank owned inventory to bring up prices. Refinance rates are at record lows and even with a massive increase in home mortgage refinancing, foreclosures are still rising. As the Fed looks to increase interest rates, the ability to refinance will not be as easy. Thus, bringing more obstacles to home buyers.

One severe contradiction to the assumption of the weather bringing down the economy is found when we look back in history. In the mid 1990's, we experienced an "El Nino" winter, which amounted to record amounts of rainfall and snow throughout the entire country. Floods damaged cities, hurricanes destroyed homes, and people were snowed in for days. All during this time, the economy was experiencing extreme strides in growth. Job growth was blossoming, retail sales remained strong, as did home sales. What made this weather nightmare such a delight for investors.

As for now, the blame game seems to be working, for the moment, as March has been all green thus far. Investors are already looking forward, hoping that the blip in February blows aways with the storms. As for me, I don't think it will be that simple. Consumers are experiencing a continual drop in confidence, which is making it very hard for retailers to sell through dragging inventories. As a result, blowout sale prices are the majority of goods being sold at this point, which is not enough for retailers to make it at this point. This is main reason why we are continuing to see an increase in jobless claims.

Thus far, much of the bailout and relief programs have been focused on banks and temporary relief to big company's balance sheets. However, not much has been given back to the consumer. Without consumer relief, a change in direction for our economy is distant. Our economy has always been driven by the consumer. The government can try to take the wheel for a time, but without the consumer, the growth is not sustainable. We can be sure that eventually that will become evident in the markets. Happy Trading

Dragging Economic Indicators Bring Down Trading

noreply@blogger.com (Finance Fanatic) — Thu, 25 Feb 2010 19:12:00 +0000

Trading shot downward right out of the gates on Thursday, as continually dragging economic indicators brought nerves back into investors. Currently, we are in one big tug-of-war. It seems like one day investors feel that the recovery is strengthening, so buy buy buy! Then the next day, we receive weakening data results and investors run for the hills. Somethings gotta give, and usually in these scenarios, it is the selling that wins out.

New orders for manufactured goods (excluding transportation), fell for the month of January, which was surprising to analysts. Orders fell .6% after a 2% increase in December. Analysts were expecting a 1% rise, but instead saw a negative number come across their desk. If that wasn't enough to disappoint them, jobless claims also rose this week, which was another thing they did not expect to see. Initial claims rose 22,000 to 496,000 last week, which was a big chunk greater than the expected 455,000.

What this is showing us is that, in reality, no one really knows what is happening with our economy. And how could we? The degree of measurability was thrown out the door as soon as the government shoved their trillions of dollars into the economy as well as participated, in what I believe, to be some strong market manipulation. So it is no wonder to me why economists can't figure out whats happening month to month. What we do know, is that anyone who thought this was going to be a quick turnaround, think again. In response to the weakening data announced today, Chris Low, a chief economist at FTN Financial in New York, said the following, "We can hope this is a temporary setback but it certainly looks as though in the first quarter...the economy is retrenching." That could be the understatement of this year.

Gold is benefiting greatly from today's uncertainty. Even with today's successes for gold, I do still feel it is much too early to benefit from inflationary measures. In fact, I feel that here in the short term, gold will continue to show weakness.

There is only so much pushing and pulling bull investors can take. Every time a day like today happens, it slowly begins to drain consumer confidence. This is evident in seeing that our most recent consumer confidence number was the worst in 10 months. Consumers are the number one drive for pushing this economy back up, and with weakening confidence, I do not see how that is possible at this point. Our president is much too concerned with his own agenda and that of getting a health care bill passed, which if he's not careful, could see this economy slip away from him once again. At any rate, not much movement from me at this point. Happy Trading

New Hedge Fund Positions

noreply@blogger.com (Finance Fanatic) — Tue, 23 Feb 2010 18:12:00 +0000

After a green Monday to open up the week, currently, we are seeing the Dow trading down almost 100 points to open up Tuesday's trading. Weakening economic data is frustrating impatient investors who continue to hope to see increasingly better data. However, like I have been constantly saying, that road back up will be a long, steep one.

Consumer confidence saw its worst number in 10 months in February as the dragging economy is starting to take its toll on optimistic consumers. Indeed we have seen rates of decline decrease greatly, however, usually it is the slow, dragged out bleeding process which can really devastate an economy in the long run. During the Great Depression, it was the latter 2 years that consumers suffered most, as their resources became completely depleted and were left with nothing. Hopefully, we can see a quicker turn around.

It is clear that despite continuing concerns that linger in trading markets, hedge funds will continue to move on. Investment banks cannot afford another year of waiting. Their clients are getting anxious and are starting to consider other means of investment that may payoff higher dividends. We should see more and more hedge funds begin to wedge their way in. So where are they looking? A recent survey showed a strong interest in distressed debt. The markets of banking, energy, health care are very much on hedge fund's radar. The survey showed a 53%, increase, from the prior year in the amount of investing being done in distressed debt investments. Many of the funds feel that the risk of bankruptcy is much less at this point as it was in 2009. Although this may be the case for some companies, this content feeling could come back to bite them if the economy continues to struggle. However, the hedge funds are tired of waiting around and so are their clients.

The degree of these downturn head fakes are very unorthodox. Much like a wave, trading needs a gush of momentum to get a good rally or pullback. Recent trends suggest that no such gush exists on the buy side, as many investors are feeling we are very overbought at the moment. When the gushes do appear on the selling side, the momentum gets quickly eaten up by low volume buying. At any rate, volume is ticking up and up and market moving will become more difficult to accomplish. Happy Trading.

Ups and Downs Keep Market Neutral

noreply@blogger.com (Finance Fanatic) — Sat, 20 Feb 2010 00:05:00 +0000

It most scenarios, a week like the one we experienced (in regards to earnings), would usually yield strong gains in equity markets. Most all of earning reports were far better than expectations, as well as pretty decent guidance numbers. So far, it is estimated that 72% of the companies from the S&P 500 that have reported 4th quarter earnings exceeded expectations. However, even with what looks to be decent earnings, the markets are still at odds with each other.

Markets were a little uneasy after the Fed's announcement that it will be raising interest rates. It will be very interesting to see how the economy responds to a bit of pressure being put on government bailouts. After markets dashed down this morning following the announcement, it quickly regained its strength and stayed in the green most of the day. We also saw a "very convenient" rally to pull the market out of the red right before close, which was a very sharp turn around.

The transparency of earnings reports is the reason why investors are no longer cheering for better than expected reports. First of all, now we are comparing numbers to a very dismal 2009, which if companies were to do just as bad in 2010, would most likely result in a bankruptcy. Also, many companies are still adjusting 2010 forecasts (decreasing expectations), even when prior estimates had been made not more than a month ago. Companies are seeing that even with the existence of upward trending earnings, a sluggish 2010 is in our near future. My belief is that best case scenario, we are about as stable as we are now.

The rally which we saw at the end of 2009, in my opinion, was bolstered up to higher levels due to too much optimism. It is very easy to get caught up in the notion of a swift recovery, especially after experiencing one of the worst down turns in 70 years. However, with too much optimism, came buying at unhealthy levels and has now left us with a top heavy market. Now, we find us in a position where we don't really know where we are, we just hope that it gets better. If the government continues to slow the bailouts, we will begin to see just how sluggish this economy really is. As a result, Treasuries are rebounding as investors or steering clear of riskier investment vehicles at this point.

CPI data remained rather flat, which shows just how much deflation is taking place, when you consider all of the government spending and extra printing of currency, a flat CPI number shows the offset with deflationary indicators. No, we are not out of the woods for deflation. I expect to see a more aggressive week next week...investor's money is getting itchy. Happy Trading.

Critical Support Levels

noreply@blogger.com (Finance Fanatic) — Thu, 18 Feb 2010 03:36:00 +0000

Thank you for your patience as I have been out this past week, due to the new baby to the family. Although the stock market has not been nearly as exciting as my personal life, we are at some pretty critical support levels, that if broken, could mean some more heart ache for markets.

Hewlett-Packard announced earnings today, which was favorable when compared to prior earnings reports. The computer company saw a 25% increase in profits for the last quarter. In addition to the increased profits, they also raised their earnings outlook for 2010, which is something analysts love seeing at this point. So far, the trend for most companies has been to cut annual estimates, as economic indicators continue to weaken.

HP's favorable report, as well as Wal-Mart's will most likely set the pace for tomorrow's trading trends. One important thing to note is tomorrow's PPI numbers which will be reported, as well as CPI numbers that will be reported on Friday. From a data stand point, deflationary indicators still remain all around us. The value of the dollar has been growing stronger, commodities are continuing to weaken, housing prices continue to fall, and discretionary income is still shrinking. Thus far, the mass government stimulus has helped disguise the deflationary spiral, for the time being, into what many feel is just a "blip" in downward trending prices. More and more as the prior trillions of spending continue to be dissolved in our economy, in my opinion, deflation will more and more show its ugly face.

Notes from last week's FOMC meeting were released today, which caused for some negative trading in the bond markets. It is clear that it is the Fed's near intention to raise the discount rate, which is something banks and the economy as a whole does not really want to see. We have almost forgotten that we have been borrowing money from the Fed for essentially 0% interest for over a year now, which could be a crutch now when those privileges are removed.

We are hovering around some very critical support levels. The recent 9% correction was quick and aggressive and in my opinion, was just a teaser. However, if markets can hold above a 1053 S&P, I think we could see a 4-5% rebound before the next leg. If we indeed see us head and stay below these levels, then I foresee another 7-10% drop before the next support levels. Whatever the case may be, the fact is that many funds are on the sidelines right now, as to not want to risk losing equity in a swift drop in markets. Things should be getting real interesting real soon. Happy Trading.

Baby Delay

noreply@blogger.com (Finance Fanatic) — Fri, 12 Feb 2010 18:35:00 +0000

I apologize for my brief leave of absence from Crashmarketstocks.com. My wife delivered our baby on Tuesday, which has made it a very busy week, in addition to the movements of the stock market. Things are beginning to settle down, so a return to regular postings is near. I hope trading is going well for you all. The fact that markets have remained rather dismal despite the somewhat "favorable" employment report last Friday, shows that most likely these markets are well overbought. I expect to see this market continue to go lower, especially as we are sustained below 10000. Happy Trading.

Dow May Being Seeing the Last of 10,000 For a While

noreply@blogger.com (Finance Fanatic) — Fri, 05 Feb 2010 01:00:00 +0000

The Dow saw its biggest single day drop on Thursday (down 268 points) since April of 2009, which has cause for concern for many investors, especially heading into Friday's employment numbers. A discouraging employment number would be sure to stick another dagger in the heart of the economy and could very well send us far below 10,000. If there was a good time for the government to smudge the numbers, it would be on tomorrow's employment data. If such things did actually take place, I would not be surprised.

Turmoil in Wall Street was do to the great deal of uncertainty taking place overseas in Europe and with the eurozone members. Many countries announced their struggles with cutting deficits as well as selling Treasuries. The Euro took a beating today as investors are wondering if the currency is sustainable. As a result, we saw some strong gains in the dollar, which weathers well for my portfolio. EEV, the emerging markets short ETF, also surged with the news.

Gold suffered big losses in markets today, sending GDX down over 5%. GDX puts were on fire today, as investors scrambled to sell their shares. Options should start paying out some very good dividends shortly (if you're on the right side), as the VIX jumped 20% just today! Today felt a lot like early 2009. For many, today's huge losses are a surprise, however, for us that have been tracking the fundamental data, it is no eye opener. The fact is, global economies remain weakened, as consumers struggle to find any extra money to spend these days. Export nations are especially seeing hard days ahead, as countries are doing all that they can to keep production, supplies, and resources domestic.

No doubt tomorrow's unemployment will dictate the markets. If hammered by a sore number, we could definitely see another big down day. However, if surprised by a strong number (which I don't see how that could happen), watch out for a strong, aggressive rebound. Either way, my best play is to wait close with my hand on the trigger, waiting for the news. There should still be time to buy into the direction right after the numbers are announced. At this point, all the old inverse ETFS, are coming to the front of my mind. Happy Trading.

To Stay or Walk Away

noreply@blogger.com (Finance Fanatic) — Wed, 03 Feb 2010 23:46:00 +0000

Markets finished down on Wednesday after starting off the week on two good feet. As we step closer and closer to Friday's unemployment numbers, you can sense the nerves in daily trading. Bull investors are hoping for strengthening numbers, however, there are many out there (including me) that feel that we have a ways to go. At any rate, even when we do start the hike back up, we sure have a lot of ground to cover to get back to 2 year's ago numbers.

Massive home devaluation is something that is plaguing millions of Americans across the country. The question, "when do I walk away?," sits heavily on many of their minds. No doubt family memories and emotional connections have been created at their homes, but those can become dulled if sitting on an asset that you are losing money in. The percentage of people who have no equity in their house is amazing and now, for many, walking away from their house, even with the funds to afford the mortgage, makes more sense.

Think about it, why stay paying into house that is worth much lower than your loan amount, when you can give back the house and rent a place bigger and better for half the price. Sure, a foreclosure on your credit isn't ideal, but there are ways to work around that and come out OK. Owners of recently purchased condos are handcuffed, with not only paying off a huge mortgage, but most likely paying ridiculous monthly HOA fees. With this becoming a very real decision for many home owners, it creates a rather dangerous scenario for the housing market.

First American estimated that it would cost approximately $745 billion to restore homeowner borrowers to a point where they are breaking even. Although such a scenario seems illogical for the government to consider, I would not rule it out yet and if such things do finally happen, watch out. All hell will break lose, beginning World War III for the economy. Whatever it may be, the housing problem is an important factor sill lingering, that must be worked out before we progress much further.

Big money has mostly been sidelined recently, as many of the big money managers feel that the market is too unstable to invest at this point. Cash holdings are at record highs and volume still remains low. Slowly, the idleness is priming the market for a big let down, one of which could get out of control if we're not careful. For me, I'm sticking with longing the dollar and shorting commodities. We'll see how it goes. Happy Trading.

New FHA Regulations - Stocks Rise

noreply@blogger.com (Finance Fanatic) — Mon, 01 Feb 2010 22:22:00 +0000

Stocks got a good start for February on Monday as the Dow closed over 100 points. This is following one of the worst weeks the markets have seen in quite some time, so it's refreshing for bulls to see the small climb. A favorable January for factory production helped spark the rally in early trading. Bulls are hoping that this will be the first of many "positive" reports to come forth in February.

Other big news hitting headlines were the changes that were made to FHA loans. It was announced that after today, home flippers will now be eligible for FHA loans. Up until now, buyers were required to hold the property for 90 days before issuing it to market. Considering that much of the inventory being sold (especially foreclosed inventory) is to investment buyers, many have not been eligible for FHA. Well, now the game has changed.

There are some restrictions that come with the new policy change (if you can call them that!). First, buyers can't earn more than a 20% profit in most cases, which I believe most buyers won't have a problem with. Also, transactions must take place an arms length away from each other. That way, prices are not artificially driven up to coerce buyers into paying false market prices.

In addition to new changes to FHA, Fannie announced some more incentives they are now offering. Buyers of Fannie's HomePath properties are eligible for a 3.5% assistance fee if owners close before May 1st. The fee itself can be used for anything to improve the property. Whether its closing costs or adding new appliances. It amazes me how much money the government is putting back into the realms of the economy that got us here in the first place!

To some, this may just seem like everyday news, nothing big. To me, it exposes just how bad the residential market remains and the pessimistic outlook the government continues to have regarding home prices. If housing prices were naturally "bottoming", like many economists are claiming, then there would be not much need for such changes. Demand would take care of itself. However, it is clear that incentives are what is keeping the market stabilized, and even the current ones are running out of steam. When you evaluate just how many homes are and will be on the chopping block this year (foreclosed homes!), it is very clear that the government will need all the buyers they can round up, including all of those old mortgage brokers who are now engaged in flipping homes.

Although it seems that the government has no choice, heading down this path could lead us right where we were before. The government is incentivizing people who already have no business buying a home, to now be able to flip them. I am sure most of you can think of that kooky neighbor who is already signing the loan papers, hoping he'll make a fortune. Eventually, this residential crisis will once again be in the headlines. Despite the gains today, I don't see much longevity in a rally. Happy Trading.

State of the Union Doesn't Sit Well in Wall Street

noreply@blogger.com (Finance Fanatic) — Fri, 29 Jan 2010 01:13:00 +0000

Last night, President Obama addressed the world with the traditional, annual State of the Union address. Every year, all legislative and supreme branches meet together to listen to The President speak about the current "state of the union." Usually, the speech discusses trials that the country has faced the prior year and ways those problems were overcome. Also, plans for the future are discussed and if the watching politicians agree, statements are met with a cheering applaud or even a standing ovation. Considering the democrats and republicans are split in the room, it usually involves half of the room cheering while the other half grunts and moans.

A big portion of President Obama's speech last night focused on the current state of the economy. What really intrigued me, was the amount of contradiction I found between what he was saying to what he is currently doing. He talked of injecting money and tax incentives into small businesses (which by the way is what I have been saying the past year!), however, small businesses are getting killed with increased taxes, higher energy costs, and more stringent government restrictions. He also discussed eliminating capital gains tax for investment in small businesses, however, the recent changes that have been made have been the exact opposite to that. Are these really his plans or was he just trying to get a louder cheer?

Later on in his address, which is what Wall Street took the most offense to, President Obama discusses the banks. He tried to clarify that it was not his intention to declare "war on the banks," but clearly he plans on fighting them. He said if they can afford big bonuses, they can afford higher taxes to payback the taxpayers that loaned them money during the crisis (which we had no say in!). He also alluded to the fact of much tighter regulation of the banks as well as transparency, which are two "no no's" to be saying around big banks. Today's response from the markets, in which the Dow closed over 100 points, shows that Wall Street did not appreciate the remarks.

Microsoft beat earnings expectations today, however, guidance for the next quarter was much lower than analyst were hoping for. This is a trend we are starting to see from most businesses. Companies are proceeding with much caution into 2010, knowing that struggles and pains of our dragging economy are far from over. In fact, we may be seeing the last of a 10,000+ DOW by the end of the week, as dismal data is picking up.

Fed Chairman, Ben Bernanke, was extended another term, which gave Wall Street another reason to cry. In the past, Big Ben has not been the most compatible chairman with Wall Street and has created some problems recently. In addition to that, jobless claims continue to surprise analysts, as more and more jobs are still being loss.

Support levels for the market are crumbling beneath us. We have seen a spike in the VIX since mid January and it seems as if we are beginning the next leg down. Puts on GDX and DIG are appealing to my portfolio, as well as going long on FAZ and EEV. Emerging markets are experiencing even more pain as President Obama made it very clear, he wants things to stay "domestic" going into 2010. I will also discuss some other "Pro-Bama" stocks that should benefit from his next 3 years (possibly more) in office. Happy Trading.

PS - For those that haven't, add me on Twitter for more daily commentary.

Steve Jobs Unveils Apple's iPad

noreply@blogger.com (Finance Fanatic) — Wed, 27 Jan 2010 23:01:00 +0000

Markets experienced mixed trading throughout the day, which closed with all of them being moderately up, however Apple remained strong throughout the entire day. This because of the live presentation Steve Jobs (CEO of Apple) gave to the world, which demonstrates their newest product, the iPad. With this post, I am posting the video of Jobs himself demonstrating the strengths of the product. He claims it to be "the best web browsing experience you've ever had."

One extremely large standout about the iPad, is their new "A4 processor chip." I have been really impressed with the speed my iPhone 3GS runs, however, the new A4 chip is suppose to blow the 3GS away. The 3GS is claimed to have a 600 MHz chip, where the new A4 chip runs at 1.0 GHz. That's almost twice the speed. As always, I am skeptical at just how much this new Apple product can do for me, but it seems I am blown away with every new one. The new product is looking to retail between $500-$800, depending on hard drive space.

I think what made Apple investors happy was not only the release of the new media device, but that Steve Jobs was the face of it. During the past couple of years, there has been a lot of question regarding the health of Steve Jobs and his ability to continue with his responsibilities. He was even forced to take a brief leave of absence during treatments, which caused the stock to trade down over 10% in one day. However, today, he looked healthier than ever. You could feel his excitement in the new product and his anticipation to release it to the world. That was a good move for Apple to get him out there.

The FOMC meeting helped bolster the rest of the markets as it was announced that there is no immediate plan to raise interest rates. The fact that the Fed continues to leave interest rates so low, suggests their concern for the state of the economy if borrowing rates were at normal levels. I mean, when you consider how frozen lending markets are currently, with a 0% borrowing rate, it is scary to think what the activity would be at normal levels. As a result, they are opening up the doors for inflation more and more as money remains extremely cheap.

The dollar has been on a real strong push since the end of the year. I have been saying that a run in the dollar is due, which still points that deflation is still present. If it were not for massive government stimulus and o% rates, it would be manifested much more at this point. Gold and oil should continue to move in the opposite direction as the dollar, at least until signs of inflation start hitting hard. However, I do not see that happening anytime this year.

Commodities continue to fall at this point, which for me, makes the best option to short at this point. Longing the dollar is the only long play that makes good sense to me at this point. I do believe as we head deeper into the first quarter, financials will be back on the chopping block, as will real estate REITS and home builders. Happy Trading

Carbon Sciences : New Technology

noreply@blogger.com (Finance Fanatic) — Tue, 26 Jan 2010 21:28:00 +0000

I have discussed many of my "penny stock" investments on this site and the successes I have had with them. One of my favorites, Carbon Sciences, got a nice boost today in stock price (up over 30%), due to a rather significant announcement regarding their development of capturing carbon emissions and converting it to usable fuel. Considering there has been a lot of interest in this company, I felt it was appropriate to post the press release:

Carbon Sciences Announces Major Breakthrough to Recycle CO2 Into Gasoline

New Process Technologies Also Shorten Time to Market and Reduce System and Operating Costs

SANTA BARBARA, CA--(Marketwire - January 25, 2010) - Carbon Sciences Inc. (OTCBB: CABN) (CABN), the developer of a breakthrough technology to recycle carbon dioxide (CO2) emissions into gasoline and other portable fuels, today announced the development of certain process technologies that will allow for the production of gasoline, shorten the time to commercialization and reduce the system and operating costs of its CO2-to-Fuel technology.

The company's current approach is an enzyme-based process used to transform CO2 into low-level fuels, such as methanol. Dr. Naveed Aslam, chief technology officer of Carbon Sciences, has now discovered a new and more cost efficient process to produce gasoline, a high-level fuel, from CO2. The key features of this breakthrough includes (1) the of use flue emissions directly from coal-fired power plants or industrial factories, eliminating the need for "clean" CO2, (2) the use of brackish water, eliminating the need for distilled freshwater as the source of hydrogen and reaction medium, (3) mild operating conditions, eliminating the need for capital intensive stainless steel equipment, and (4) a highly scalable system to transform large quantities of CO2 into gasoline for use in the existing transportation infrastructure.

Elaborating on the business implications of this new breakthrough, Byron Elton, CEO of Carbon Sciences, said, "We always wanted to produce high-level fuels, such as gasoline, but knew that additional steps would be required to reach this goal. Now, we have the way to go directly to gasoline." Mr. Elton commented further, "The United Nations' IPCC estimates that the cost of simply capturing CO2 for applications, such as underground sequestration or transformation into products, can range from $45 to $73 per ton of CO2. This cost is perhaps the single biggest economic barrier to any large-scale CO2 applications, such as carbon sequestration. However, by being able to use a raw CO2 flue gas stream in our CO2-to-Fuel technology, we are no longer dependent on the success or commercial availability of carbon capture systems. In addition, unlike biofuels based on growing plants to absorb CO2 from the air, our CO2-to-Fuel process is an industrial process that can produce fuel in minutes to hours, not months to years, to meet the demands of the world. These breakthroughs demonstrate why we continue to believe that Carbon Sciences is developing the most powerful and sustainable fuel technology in the world."

Commenting on the development roadmap, Dr. Aslam stated, "We are very excited about these new processes. Our end-to-end CO2 to fuel system will have several modules. We have determined that one of these modules can function as a standalone system for use by a sizable part of the energy industry for the production of gasoline. Inquiries from potential strategic partners have further validated our decision to focus on this module. We are anticipating a shorter than normal development cycle for this module and are hoping to achieve commercialization in less than one year."

Apple Tops Earnings - Government Cuts

noreply@blogger.com (Finance Fanatic) — Tue, 26 Jan 2010 03:36:00 +0000

Markets slightly rebounded on Monday after the devastating two days of 200+ points of down trading to close out last week. I was surprised to see only a 23 point gain for the Dow today, as I thought the market might rebound a bit more given the two big consecutive down days. However, it is clear that investors are not excited about buying at current market levels.

Apple once again had a solid report of earnings (as they always do). Apple was one company that I mentioned last year, in which I felt that would be able to weather this recession very well and may actually come out of it stronger and they have done just that. The popularity of the Iphone continues to spread like a wildfire. I am always amazed when I attend large business conferences and see at least 80% of the people sporting the Iphone. Two years ago, AT&T probably only owned about 15% of their business. AT&T really does owe Apple a big one (I know they're paying for it). The huge increase in Iphone sales muffled the small decline in Ipod sales. It has already been announced of Apple's new release of a new media device. This acts as perfect timing for Apple, as it seems the Ipods are starting to lose their flare. As long as Jobs is still at the head of that company, I see nothing but good days for them.

President Obama announced his plan to seek a 3-year spending freeze beginning in 2011, as he has set new records for the national deficit. In addition to the spending freeze, he is also looking to tax increases to also help pay off the debt. With this plan, he is angering both parties and will most likely find little support for his plan. I agree that indeed government spending should be severely re-evaluated and re-allocated to areas that will directly assist the consumer. However, to also raise taxes at this point in the recession is, in my mind, a big mistake. Consumers need to become confident in the economy and their own reserves until they start spending again. An increase in taxes will only take a big bite in what little is available to spread throughout the economy. Also, consumer spending, usually directly effects the economy. Government spending is much less effective. President Obama should go back to the drawing board and find other ways of paying back the debt. There is a lot of real estate available to invest in!

At this point, I believe the market is building momentum downward. Thus far, 2010's economic performance has been quite dismal and has disappointed several economists hoping that we would begin to see much bigger seeds of recovery. Like I've always said, this will be a very long road home. Happy Trading.

More Signs of PPT

noreply@blogger.com (Finance Fanatic) — Fri, 22 Jan 2010 19:17:00 +0000

Readers of this site already know my firm belief in the existence of market manipulation coming from the government. I mean, as influential as the stock market is, 100 billion dollars could go much further bolstering up the stock market then it would in the hands of Ford of GM. So why not? Sure it's absolutely deceiving and unethical, but in desperate measures, I believe those principles are thrown out.

A friend forwarded me a very interesting article talking about this very issue from people who see it first hand. I enjoyed it so much, I had to share it with all of you. This story, like many other, bring up a lot of questions of just how manipulated the market could be. So enjoy:

Is the Government Manipulating Stock Prices?

By Jeff Clark (www.growthstockwire.com)

After a 20-year career trading S&P 500 futures contracts on the floor of the Chicago Mercantile Exchange, my friend Charlie suddenly retired last November.

"There was no way to protect yourself," Charlie said to me over lunch a couple weeks ago when I asked him about his unexpected decision. "This guy would walk into the pits and just start buying. It was unconventional. He'd buy at times when it really didn't make any sense – at least not to those of us who'd been around for a while. And he'd buy HUGE."

"It got to the point," Charlie continued, "that we'd have a bunch of our interns just watching the guy when he was off the floor. We'd know if he took a phone call. We'd know if he'd gone outside for a smoke. And we'd know if he started walking in the direction of the pit. That was our cue to start buying futures contracts ourselves – just to get in front of the guy.

"I knew it was time to retire," Charlie sighed, "when I started planning my trading day around this guy's bathroom breaks."

For the past 20 years, conspiracy theorists have engaged in stories about the "Plunge Protection Team" – a group of traders funded by the Fed whose sole purpose is to prop up the stock market. I never really bought into the argument, though. After all, an awful lot of people "in the know" have to stay quiet in order to keep the conspiracy going. And it's unlikely any group of people can maintain that sort of silence for two decades.

But Charlie's story got me thinking.

Then, last week, Charles Biderman, CEO of TrimTabs – one of the most respected and widely read financial research organizations – published a report that raised the possibility that the Fed is actively involved in boosting stock prices.
In the article, Mr. Biderman suggests it would only take $5 billion to $15 billion each month to buy enough S&P 500 futures contracts to boost the market 70%. Surely, with all the hundreds of billions of dollars used to prop up the real estate, auto, and banking industries, it's reasonable to suspect the Fed might use a few bucks to prop up stock prices, too.

At least it's something to think about.

I'm still not sure if I can completely buy into the whole conspiracy theory just yet. There is, however, one thing I do know for sure...

If the Fed has been actively engaged in manipulating stock prices higher, then it can manipulate them lower as well. You won't want to be the one left holding the bag when that happens.

Best regards and good trading,

Jeff Clark

Obama vs Banks

noreply@blogger.com (Finance Fanatic) — Fri, 22 Jan 2010 09:16:00 +0000

Despite favorable earnings from both Goldman Sachs and American Express, markets were able to have one of the biggest down days on Thursday they have had in a while. The Dow closed down 212 points today as new worries are brewing from investors. Not only that, but volume levels were finally showing levels of normality, which goes to show that much of the new volume was selling volume. It could very well be reality setting in for investors that indeed this market is way too overbought.

President Obama spoke on Thursday, declaring his willingness to take on Wall Street and the big banks and to make a change. Many feel that his bold declaration was due to the recent election upset, in which Republican Scott Brown won the Massachusetts senate race. At any rate, today's reaction shows that investors are very skeptical of President Obama's ability to take on banks without severely altering economic growth. Just as I have said in recent posts, liquidity in banks will be a contributor to a recovering economy, as available residential, commercial, and business loans keep the money supply fluid and also helps spur employment. Sure, President Obama has a good reason to want to take on the banks and their regulation, due to recent years of extremely poor underwriting. However, too much regulation could very likely cause an adverse effect, sending this economy even deeper down than it is already. It was a failure of confidence in the banks that took the Great Depression of the 1930's into new lows.

Tomorrow's movement, particularly in financials, will be a big indicator of the true momentum of today's fall. If weakness in financials persist tomorrow, I believe a clear manifestation of investor's expectations will be solidified. As a result, big trades in my portfolio could be coming as early as next week.

President Obama should worry less about "declaring war" on the banks, and focus more on how to responsibly get money from banks into hands of responsible consumers. Sure, recent lending standards became much too lax and sloppy, but complete regulation could even be worse. Look for Friday's market performance to be a big indicator of whether or not we are seeing a turn in the market. Happy Trading.

Republicans Spur Rally?

noreply@blogger.com (Finance Fanatic) — Tue, 19 Jan 2010 23:15:00 +0000

Well, it's hard to imagine that indeed one State Senate election could create enough momentum to move the market as a whole. However, today's election race in Massachusetts is doing just that. As of now, the republican candidate, Scott Brown, is leading in polls and seems to be the majority favorite for the job. Usually, an election like this would not make much difference, however, a change in party could have huge effects in the economy as a whole.

Even though Brown's election would not give control to republicans, it would most likely give them enough votes to block the big health bill, which has been circulating throughout Congress for months now. Many feel that passing the bill will bring several new regulation practices to the health care field, which in turn could end up making a big crater in profits. The health care industry is the most profitable industry on Wall Street, so it is no wonder that many eyes are watching this election closely and why we saw a lot of green in trading today, especially health care.

I had the opportunity to attend a large, national equity conference this past week. The results, were quite alarming, especially for those in the real estate industry. Most of the break out sessions focused on equity in relation to commercial real estate, but the forums were all encompassing, no matter what field you're in.

As of now, the FDIC is and has been poorly prepared for the amount of loans and properties that has been acquired by them. This has led to a poor disposition of distressed properties, which has severly affected real estate companies all across the country. The point is, both the banks and the government do not have the man power to manage the distressed assets that plague their balance sheets. There have been attempts to sell certain propeties, but much of them have been C grade assets that do not have much appeal to legitimate investors.

For many of these hedge funds, they all agree that illiquidity is something that will be present long into 2010 and 2011. Most firms said they were lending on secured assets, with a close to mid and upper teens interest rate! What is amazing is that people are taking those loans. This is my fear if indeed the government decideds to pull the plug on fannie and freddie debt purchasing (which they have said they want to!). It is clear that problems still very much exist and that it is much to early to blow the victory horns. Happy Trading.

Small Business Frustration

noreply@blogger.com (Finance Fanatic) — Thu, 14 Jan 2010 23:26:00 +0000

Despite continuing discouraging data hitting headlines, somehow markets are finding ways to keep going up. Volume still remains critically low, especially from a historical average comparison. It is clear that investors on both sides do not know what's driving this beast and where it is headed. In the long run, I always like to stick with fundamentals, as I do believe they eventually are forced to be revealed in stock market performance.

As of now, fundamentals are still remaining quite sluggish. Intel did produce higher than expected earnings today, however, the bar for favorable earnings has been set extremely low. The real question is whether or not these earnings levels are sustainable, because circumstances do not seem to be getting better anytime soon. My occupation gives me the opportunity to have a lot of interaction with a variety of small businesses. As such, from what I've gathered, many of the small businesses around the nearby cities (restaurants, clothing retail, service business, construction) are performing at record low levels. Many have a lot of frustration, due to much of what is on the news (that the recovery has begun and stock market rallies). Many feel that they are doing something wrong, which is why their numbers are still suffering. I try to tell them that indeed most businesses are still in their same position and that it is not an isolated incident.

Real economic results from real consumers will need to return in order to fully bring us out of this recession. If not, we will see many of the small businesses around the country, which we all love, not survive. Hopefully, we can see a change in the consumer this coming year, or unfortunately, more problems are ahead.

Retail sales were surprisingly lower than expectations for December, which was a downer for analysts. On top of that, last week's initial jobless claims were 11,000, compared to an expected 3,000. Most analysts are hoping that we take expressway back to economic health, where most likely, we will be taking side streets and hitting every light on the way. I, of course, hope for the speedy recovery, but also realize the improbabilities of such a recovery following years of loose underwriting and waste less spending. So, for now, I am waiting out this flat market and waiting for more significant volume and movement. Happy Trading.

Sam's Club Closings

noreply@blogger.com (Finance Fanatic) — Tue, 12 Jan 2010 21:38:00 +0000

Wal Mart, the nation's leader among retailers, is showing signs of pain from this recession, as they will be closing 10 Sam's Club locations around the country. Sam's Club, which is the second largest warehouse retailer behind Costco, announced that the following locations would be closed down: Nampa, Louisville, Rolling Meadows, Houston, Sacramento, Irvine and Clay. Such a move is evidence, that even though many believe our worst days are behind us, retailers are still being greatly affected.

The closings are expected to terminate more than 1500 jobs, which Wal Mart has claimed they will utilize those being fired by finding them new employment in their nearby stores. Regardless of what happens, the closings are just the beginning of what should be a very popular year to close shop. We are talking about a top retailer in some very high income demographics. Clearly, consumer spending has not and is not projected to return to stable levels anytime soon. As I said last week, retailers are ripe for shorting. Happy Trading

Unemployment Results...Not So Good

noreply@blogger.com (Finance Fanatic) — Fri, 08 Jan 2010 23:37:00 +0000

It is becoming very easy for investors to get ahead of themselves thinking that from here on out, incoming economic data should be a lot more rosier than last year's. However, such early anticipation could end up in massive losses if conditions are once again weakened. I was very surprised to even see the market end up, despite some discouraging employment data that was released today. However, market volume levels remain record setting low, which could cause for the lack of reaction (no one is in the market!).

Analysts were expecting flat numbers to come in regarding job losses for December. However, an estimated 85K jobs were lost in the big holiday month, which relatively speaking, is much worse than expectations. Sure, it's not the -500k number we saw in some months last year, but for a December, holiday month, which is suppose to be on the forefront of a recovery, today's results are not good news.

In my opinion, businesses are not done trimming the fat. Corporate cuts are never fun or encouraged during the holiday season, which is why many save the bad news for the first few months of the new year. It gives the company a new beginning with new faces at new positions. Considering last year was a year that many companies will like to forget quickly, I expect quite a bit of new faces and changes.

Not only was employment data rather dismal, but consumer credit numbers came in horrible. A $5 billion loss was expected for the month of December. However, analysts were shocked when a 17.5 billion loss was the actual results. Sure, the measure can be quite volatile, which is why many don't pay too much importance to it, but the variance was a bit much for my liking. Credit tightening is something that can and will be detrimental, to this attempt of recovery.

There are many different distractions going on in the market. When evaluating the performance of the market in the 30's and when compared to our performance now, we really do not differ much yet. When you transfer the rebound that occurred, which lasted 224 days, in today's terms, that would put us at 10,544 at Dec. 27th. Sure, this date has come and gone, and no crash thus far, but it is important to take holiday skewed volume into account. If indeed this comparison held true, a drop in the Dow to 7,960 by July 17, 2010 would be the next move. Of course, this data cannot be compared as apples to apples, but it is interesting to see just how closely we have moved with depression crash. It is a friendly reminder that we are not the first to experience such a quick, rapid rebound in markets following a devastating crash.

The market will most likely begin to find its trend this coming week. Extended holiday travelers will most likely be returning home, as most schools are back in session. Sidelined money is becoming itchy and anxious investors are running out of patience. Look for some good moves this week. Happy Trading.

Retail Looks to Slow Down

noreply@blogger.com (Finance Fanatic) — Wed, 06 Jan 2010 22:51:00 +0000

Now that the super bowl of shopping has ended, many retail stores are biting their nails, hoping that they can survive the coming months. I had the opportunity to speak to several different retailers over the holiday and most had the same story. It was a very scary year for them, and many are still holding on by a thread, hoping that indeed we've seen the worst days, and that it will begin to get much better soon. Unfortunately, for some of them, that will just result in wishful thinking.

Shorting the retailers at this point is very tempting to me. Most have made recent jumps, due to favorable holiday spending. However, I believe there will be a rather strong whiplash, as now consumers do not have much reason to shop. In fact, most retailers have to wait until late spring to start seeing better numbers, as they switch out there winter inventory for summer products. Even still, summer sales usually bows in comparison to back to school and holiday times. The recent run retailers have seen, should pull back for the next few months. Bed, Bath and Beyond jumped today on favorable results, which is one on top of my list to short.

The market is still seeing incredibly low volume, which is typical for the first week of the year. Investors are anxious to see the tone that 2010 sets. Most likely, we are going to see a lot of legislative changes this year, as President Obama has made it very clear that he plans to change a lot of things this year. Such changes are bound to have a performing effect on certain industries. Of course, the big one being health care. Health care companies are very nervous to see what this year brings.

For the time being, I am continuing to wait for more volume in the market. Under 200M volume is a very low number to be playing out there. Banks clearly have separated themselves from Uncle Sam and have their own agenda for 2010. Unfortunately, I do not believe "making loans" is on that list. Happy Trading.

New Year...New Problems for 2010

noreply@blogger.com (Finance Fanatic) — Tue, 05 Jan 2010 04:53:00 +0000

I took a bit of a hiatus on the site during the bulk of the Christmas holiday, to spend time with the family. Volume remained very light to end the year and news was pretty minimal to the point that nothing earth shattering occurred. Anyways, I'm back and ready to take on 2010, with an outlook of good returns.

Being that we started the first full week of 2010 with a 150+ for the Dow, many investors believe we are taking where we left off. The Dow now sits above 10,500, which is well above what many (including myself) thought it would ever be by this time. However, there still exists much too many economic pressuring elements that could surprise many in 2010. With the help of government stimulus, for the time being, things have appeared to somewhat return to status quo. Few worry anymore of big bank failures, deflationary down spirals, or a even further deepening recession.

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Big banks are finding themselves in a much better this point then they were a year ago. Balance sheet transparency has been blurred, with help from government legislature giving them permission to manipulate accounting numbers to their benefit. The government has been very active in keeping borrowing interest rates low as well purchasing conforming mortgage loans. Also, bank stops have rebounded phenomenally, which has allowed many banks to be able to payback their "bailout liability."

One problem with the banks now is that not much has been learned from this past deep recession. Due to government intervention, many banks did not suffer the consequence of careless lending. All that has been learned is that if times get too tough, and your big enough, Uncle Sam will bail you out.

Now that equity is building up in the banks, the first thing most are doing is paying back TARP funds. This is not being done as a duty of responsibility or means to strengthen their balance sheets. It is more to enable the banks to release themselves from the puppet strings that come with the TARP balance. In fact, for many of the banks, paying back TARP, has only made them less willing to lend. After Bank of America paid back their share, their first order of business was to pretty much completely shut down their loan modification division. Now that their debt is repaid, they no longer need to play by the rules. They can now benefit from the 0% borrowing as well as not have to work with their struggling loans. Puffed up executive salaries can also now come back to the table. Unfortunately, the lesson of greed, and its consequences, has not been learned.

There is no doubt that lending will remain quite scarce throughout 2010. The government has made it clear of its intentions to put the brakes on the purchasing of securitized debt. Commercial lending will continue to remain slow as retail tenants continue to struggle and the job market has a slow bottoming. In fact, the commercial real estate market as a whole, will most likely struggle downward well into 2011. Residential led us into this crisis, and commercial will most likely be the caboose.

Such an environment is prime for opportunity. Potential for big gains is at the door. We have most likely not seen the last of big, volatile days. Most of the general consensus now agrees on the general direction of the market, which usually means the market is primed for a change. It is this part in recessions/depressions that can do the most damage. Happy Trading.