Stock Trading

Some more gory details of the mortgage mess. Looks like a distinct possibility that the mortgage securitization might not hold legal muster. This opens the door of home owners to be able to sell their homes before having to pay the mortgage holder! Explosive stuff. A must read article.

The problems with MERS began to come to light when “vice presidents” of the firm began to submit affidavits in foreclosures, saying the original note had been lost. In some cases those notes were signed by people who signed thousands of such affidavits, and have now admitted they did not actually review the files, as the affidavits said they had.Nor were those people really employees of MERS. It turns out that MERS allows financial institutions that are its members to name anyone a vice president or assistant secretary of MERS. It seems a little unlikely that someone who had never been hired or paid by a company could be a vice president.

via Some Sand in the Gears of Securitizing – CNBC.

Informative piece about Foreclosure Freezes at major banks across US. In short, the Banks are in some cases unable to provide proof that they own the mortgages. Due the multiple resales, and mortgage securitization, the paperwork transferring the ownership of mortgages did not make it through from the sellers of mortgage loans to the buyers. Ooch!!!

Also, don’t forget to see this article on the whole mortgage securitization process.

But during the height of the housing bubble, investment banks were churning out mortgage bonds in such a frenzy, sometimes the assignments never got executed and mortgage notes never got delivered. Keep in mind that this was during the years when lenders were giving out low-doc and no-doc mortgages. It was inevitable that the fast and loose and slightly documented culture would not stop at the mortgage originator but stretch all the way through the process. For more on this, see RortyBomb’s excellent discussion of the securitization process, complete with nifty and highly informative charts.

via A Primer On The Foreclosure Crisis – CNBC.

This is a scary thought. I hope saner minds prevail, and the world leaders do better than our political leaders who cannot think beyond whether they get to save their ‘seat’ in the Congress. It is time that politicians showed some statesmanship,, both, locally as well as world leaders.

World leaders must defuse currency tensions before they worsen to avoid repeating the mistakes of the Great Depression, the head of the World Bank said Thursday.The spirit of global economic cooperation, first forged in 2008 during the darkest days of the financial crisis, was weakening as the recession gives way to an uneven and shaky recovery, the head of the International Monetary Fund said separately.Fears of global currency and trade wars, which were key factors in the Great Depression, have jumped to the top of the agenda at IMF and World Bank meetings this weekend, and are also expected to be a primary topic of discussion when Group of Seven finance leaders gather Friday.

via Global Currency-Trade Battles Prompt Fears of New Depression – CNBC.

The Jobs Report came out better than expected. The market was bracing for losses in private sector jobs. However, the private sector added 83,000  jobs. In addition, the unemployment rate dropped to 9.5 percent from 9.7 percent.

This is the best economic news that we have seen for over couple weeks.

Futures are slightly lower. On this better than expected jobs report, we would expect the stock market to go higher. If it does not, then the market tone is still bearish, and we could break through the 1000 level on S&P 500. And probably go much lower.

Let us see how we close on the regular session.

When trading the stock market, it is important to see how the market reacts to news. The headline might not tell the complete story. If the stock market trades lower on good news, then the stock market trading tone is bearish.

On the other hand, if the stock market rallies on negative economic news, the stock market trading tone is bullish.

June unemployment rate drops to 9.5 percent but 125,000 jobs lost

The official June unemployment rate came in at 9.5 percent, down from 9.7 percent in May, the lowest number since last summer.The economy shed 125,000 jobs last month, BUT that includes letting go of 225,000 temporary U.S. Census workers. If there was good news in this report it was that the private sector added 83,000 jobs in June, which was more than the ADP private-sector jobs report, released earlier this week, predicted would be added. This is an increase over 33,000 private-sector jobs added in May.The number of long-term unemployed in June came in at 6.8 million, unchanged from May.

via Economy Watch – June unemployment rate drops to 9.5 percent but 125,000 jobs lost.

We are now below the key 1040 support level on S&P 500 on a closing basis. Additionally, S&P 500′s 200 day moving average turned negative. It is takes a lot of sustained selling to turn a 200 day moving average to turn down. Not good a news for the bulls.

Weekly Jobless claims increased for last week to 472,000 showing that employment is still lagging the economic recovery.

According Alan Greenspan, Former Fed Chairman, this is largely due to increased productivity, and fear that economy might stall or reverse course.

The June 2010 Jobs report is due to be released at 8:30am Eastern time on July 2, 2010. The market is expected a disappointing number. If jobs come below expectations, watch out!

However, there is room for a positive surprise. If we do get a positive surprise, then we might see a decent bounce. Let us wait and watch.

In Tuesdays market mayhem, the 200-day moving average on the S&P 500 turned negative for the first time since last year, an ill omen to some. However, Birinyi Associates took a look at the occurrences of the 200-day turning negative since 1945, and found that its mostly preceded positive stock market moves in the next week, the next month, the next three months and even the next year. “On average, over the next month the market is up 2.37 percent, and it posts gains about 78 percent of the time. Its totally counterintuitive. Its something people who are bearish…are going to say is a change in trend. When you look and this actually happens, thats not the case,” said Cleve Rueckert of Birinyi Associates.

via Stock Market and Investing: S&Ps Negative 200-Day May Be Positive for Stocks – CNBC.

Revised GDP growth for Quarter 1 is 2.7 percent. While not as hot as what was expected, it is still a healthy growth by historical standards. The one naggingly stubborn statistic that is worrying the market is unemployment level — over 9.7 for the entire 2010.

Read the full news item at CNBC.

U.S. economic growth was slower than previously estimated in the first quarter as estimates of business and consumer spending were cut, according to government data on Friday.

In its final estimate, the Commerce Department said gross domestic product expanded at a 2.7 percent annual rate instead of the 3 percent pace it reported last month.

Although the growth pace was below market expectations for a 3 percent rate, it still marked three straight quarters of expansion as the economy digs out of its most brutal downturn since the 1930s.

However, recent data have suggested the recovery lost some momentum in the second quarter, with persistently high unemployment restraining consumer spending, and home building and purchases faltering.

The Federal Reserve this week struck a cautious note on the economy and said the recovery was “proceeding.” The economy is, however, not expected to fall back into recession.

via Economy: US First Quarter Growth Revised Down to 2.7% – CNBC.

The news agencies have to find a reason for the late selloff, and usually blame it on the wrong issue. The only thing that matters is what the big players are doing. We should watch the market action closely for clues about the direction of the market.

We are going into the earnings with expectations that companies will be reporting less than stellar results, and potentially, revising guidance for futures quarters.

Should we get positive surprises from key companies, we will go higher.

To go down and break the 1050-1040 level on S&P 500, we would need to see a consistent theme of negative surprises from companies.

Investors took a one-two punch of bad news this morning: Existing-home sales fell 2.2 percent in May from April, and Fitch Ratings slashed its rating on BNP Paribas, the largest bank in the euro zone by deposits.

But while some experts say the grim economic data is pushing the markets toward a double dip, Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel said investors should not be worried.

“You’re not going to see a double-dip—but it’s going to feel like it as the market becomes more volatile,” he told CNBC.

via US Stocks: Dow Loses 1.4% After Late Selloff – CNBC.

While this not the best of news, it was expected. Till April 30, 2010 the first time home buyer tax incentives kept the home buying interest alive. The expectations were too high for the May 2010 numbers.

A drop of 2.2 percent month over month after an upward revision of April numbers is not bad at all. This shows that there is considerable latent demand in the housing market.

The National Association of Realtors said sales fell 2.2 percent month over month to an annual rate of 5.66 million units from an upwardly revised 5.79 million-unit pace in April. Analysts polled by Reuters expected May sales to rise 5.5 percent to a 6.12 million-unit pace from the previously reported 5.77 million units in April.

via Existing Home Sales Fall Unexpectedly in May – CNBC.

Wonder how this will impact businesses and consumers. As is so often the case, the devil is in the implementation. Hopefully, the implementation does not mask the good things that the law promised — to lower the total healthcare costs across the board.

Quoted from CNBC news article below:

The law’s consumer safeguards, called the patients’ bill of rights, are limited steps that take effect this year. The main provisions, including federal funding to help 32 million uninsured people get coverage, won’t come until 2014. The administration worries that escalating premiums will force more people drop their policies before the law is fully implemented.

Consumers who buy their policies directly face increases averaging 20 percent this year, according to a survey released Monday by the private Kaiser Family Foundation. Although most Americans are covered on the job, about 14 million purchase insurance on the individual market and have the least bargaining power when it comes to costs.

via Health Care—Obama Revealing Health Law Details, Warns Insurers – CNBC.