Aug
28
Ben Stein’s take on the Market
Filed Under mortgage, rates, real estate | 1 Comment
I usually rely on Andy Rooney Ben Stein to make sense of whatever ails America. His self-effacing wit tends to overshadow his knowledge. He’s like the “very rich and very eccentric” grandfather we wished we had, the one who was wise beyond his years who spoke from the heart. My maternal grandfather fit this profile except there a distinct language barrier as he spoke Tagalog and I didn’t.
Earlier this month Ben Stein wrote a piece called How Speculators Exploit Market Fears. It discusses what hedge fund managers do to create action in the stock market. Rather than take snippets from the article, here’s the full article:
Here’s a fact: The speculators and hedge fund managers who run today’s stock market need market volatility in order to make money.
They can’t make enough money if the market stays flat or moves only a bit, so they like extreme and unexpected price movements. They especially like sudden, surprise movements down, when they can make money off stocks they borrow and sell — or, as they say, “sell short.”
Money Lust Satisfied
That’s what’s been happening the past couple of weeks. But it’s not interesting to say that the speculators are whipping the market around to satisfy their money lust. So the speculators themselves make up reasons for why the market is fluctuating, flog those reasons to the media, and then profit if some other speculators believe the jive reasons and jump in the way the manipulators want them to.
Supposedly, the market is “correcting” because of worries about the housing slowdown, and also because of fears that the debt markets that support mergers and acquisitions is drying up.
These are interesting theories, and people who don’t know a lot about the stock market or the economy might find them beguiling. What follows are a few truths that show how shallow these “reasons” for the stock market moves are.
Housing a Theory
Yes, the housing market has slowed from a spectacular bubble level to a simply pretty good level. Housing sales and starts are now about what they were in 2002, and no one thought we were in a housing depression then.
In any event, housing is only about 5 percent of the economy. If it falls by 15 percent, that would represent a fall-off of about .75 percent. That’s not trivial, but it’s also not the stuff of which recessions are made.
The fact is that there is no recession. The economy is suffering from a labor shortage, not a surplus of unemployment. The Fed is worried about excess demand, not slack demand.
Corporate profits set new records every day. Whatever’s happening in residential sales and building is simply not slowing down the economy. Why should a Boeing or a Merck or a Pfizer have any reaction to housing at all? Because the speculators sell everything they can when nervousness sets in — and for no other reason.
A Minor Major Mess
Subprime is a mess. But it’s a small mess. Subprime mortgages account for roughly 20 percent of mortgages even in the most heavily exposed states. About 20 percent of them are delinquent in some way. That’s 4 percent of mortgages.
Of these, maybe half, or 2 percent, will go into foreclosure. There will be roughly 50 percent recovery on sale of these. This is a loss of 1 percent in the mortgage market — a sum the lenders have already made many times over because of the hefty fees on those deals. In the context of the size of the U.S. financial sector, it’s nothing.
And why should a crisis in subprime drive down stocks in Mexico and Thailand? Again, because the speculators seek to create panic to make money by selling short, and they sell short everything.
There’s simply no connection between subprime and developed or developing nations’ stocks. This by itself shows the thin context of the selling wave late last month.
Money’s Still Cheap
What about the supposed drying up of loans for mergers and acquisitions by private equity firms? Well, here’s a good, simple test of just how valid that explanation is for stock market moves: The majority of private equity takeovers are financed with junk debt.
If there really were a major shortage of funds for these deals, the interest rate on the junk would skyrocket. Instead, while the rate has risen by about 150 basis points in the past month, the spread between junk and investment grade is now about 290 basis points, according to leading junk analyst Martin Fridson.
This is a lot lower than the year-end average of the spread from 2002 to 2006, and far below the almost 800 basis point spread during a true interest-rate crunch like the one after the tech meltdown in 2000-2002.
So that’s phony, too. Interest rates have risen, but not anything like what they’ve done in real crises. And besides, the Dow fell by about 550 points the week before last, yet not one of the Dow stocks is involved as either acquiror or acquiree in a private equity deal.
In short, money is no longer virtually free the way it was for private equity deals in the past year. But it’s not expensive by historical standards, either.
Spreading the Fear
In other words, it’s all the speculators trying to panic us so their sell programs will make money. And they’ll make money as long as they can spread their panic. When they can’t do that any longer, they’ll work the long side — and make up reasons for that, too.
In the meantime, the economy is strong. Profits are great, and interest rates are low and will stay that way. Don’t sell. With all the shrieking about the market, it only fell to what it was about five weeks ago — and we didn’t think we were poor then.
So let the speculators shout “fire.” As of right now, they’re not blowing anything but smoke.
Two quick points:
131+ mortgage companies have shut down. If you’re a consumer chances are you’ve never heard of these companies. If you’re in the mortgage business, you’ve probably heard of a fraction (i’d say 25%) of these companies. For the most part, those that bet on high risk loans (subprime, alt-a, non-owners, etc.) lost. The ones that bet on low risk loans (conforming) are still open for business.
However, one quick look at Google Trends and you’ll notice that countrywide, mortgage, credit, or liquidity don’t show up as “hot searches” in Google.
Sometimes you need Ben Stein to make sense of a nonsensical world.
Dec
1
Musings on my search results
Filed Under blog | Leave a Comment
I’d like to think that my blog is unique, I don’t just blog about mortgages cause quite frankly mortgages isn’t the most exiting subject on the planet. Most mortgage brokers don’t blog (do they even know what a blog is?) so I thought blogging would separate me from the pack. Most of my traffic is derived via Google searches. When I started blogging I sent my url to my past clients, friends, etc. and over the past couple of months I’ve received links from other blogs and sites, but I still get more traffic from google than any other medium. It’s not even close.
Here are some of the search terms (in UPPER CASE) that were used to find my site:
- NY PIZZA in DENVER: If there’s something I know, it’s NY Pizza. The site for Original New York Pizza is www.originalpizza.us and it’s located here: 1300 W Midway Blvd in Broomfield, CO 80020 to order a pie call (303) 469-9117. Pantaleone’s is another good NY Pizza joint despite the owners being from Soprano country (NJ) here’s their address: 2120 S Holly St # 6 Denver, CO 80222 and number (303) 757-3456.
- My DENVER BLOG covers Denver real estate, Denver trends, Denver mortgages, and just about anything the gooey substance above my medulla oblongata comes up with.
- TEDY BRUSCHI of the New England Patriots is one of my favorite NFL players because he plays the way the game should be played and yes, he’s HALF-FILIPINO and HALF-ITALIAN. DEAN CAIN and WILL FERRELL are not Filipino.
- You can buy STARBURY SNEAKERS in DENVER, Colorado, you can go to Steve and Barry’s located at 8501 West Bowles Avenue in Littleton, CO 80123 call them at 303-904-7513 for directions.
- FORECLOSURE is a hot topic in COLORADO and DENVER. Fellow Colorado bloggers have tried to minimize the problem. When 90% of the leads that I get from my websites is from Colorado Home Owners facing foreclosure, I’d say foreclosure is a problem. Any way you cut it, people don’t want to lose their homes and saying “sorry, I can’t help you” really sucks!
- KOSI 101 plays CHRISTMAS MUSIC. Tune to 101.1 on your FM dial.
- DENVER is not going through a HOUSING BUBBLE BURST. Denver may have flat lined in terms of property value over the past 4 to 5 years but Denver’s real estate hasn’t popped. Who in their right mind would want to move to a booming city that features 300 days of sunshine a year, skiing in our backyard, hiking, biking, great sports, light rail, international airport, great restaurants, and affordable housing? (sarcasm)
- THE NEXT WASHINGTON PARK could very well be Stapleton, Lowry, Riverfront or anywhere near the Pedestrian Bridge. A realtor would probably be a better person to ask (now there’s an idea for a blog post) so if you need a realtor, just ask. I only work with realtors that won’t waste your time or mine.
- The DIFFERENCE between a MORTGAGE PLANNER and a MORTGAGE BROKER: a mortgage planner actually gives a rats ass about you as a human being and your long term future. For the record, I consider myself a MORTGAGE PLANNER.
- HGTV is scouting for new home buyers in the DENVER metro area for their show, MY FIRST PLACE. However, I think this train came and left.
- REAL WORLD DENVER takes place in LoDo (Lower Downtown) and no I won’t be making any cameos on the show. I believe they filmed the show on Market Street a stone throw away from Coors Field. I’d actually like to see MTV show music videos like they did when I was a kid.
- CASEY SERIN is facing FORECLOSURE and blogging (www.iamfacingforeclosure.com) about it. The guy is going through hell.
- DENVER FIX and FLIP and FLIPPING HOUSES in DENVER, please refer to Casey Serin’s blog before you call me about a loan.
- Yes, there are NY JETS FANS IN DENVER. I’m a die hard NY Jets fan but I don’t know what bar the NY Jets fans congregate. A few years ago it was the Sports Column but when I showed up in my Vinny Testaverde Jersey, there were more Pats fans in the house. Old Chicago on 14th and Market is always a good bet, they show all the games.
- ALTUS HOME LOANS is not the most reputable mortgage company in Colorado. Their DECEIVING ADS are what they are that’s why they’re in trouble. What’s more concerning is that we want politicians to clean up the mortgage mess. What’s the difference between politicians and a mortgage company? They too make just about any promise necessary to get the deal (elected), then fall short of expectations time and time again.
- You really need TITLE INSURANCE in Colorado it’s necessary and not a JUNK FEE.
- WHAT IS WRONG WITH THE DENVER BRONCOS? I don’t have that line anywhere on any of my posts but here’s my answer is “Jake the Snake is not John Elway and neither is Jay Cutler!”
May
18
Trendy stuff from the boys at Google
Filed Under mortgage | Leave a Comment
One of the best ways to find out about cool sites is through other people’s blogs. I found a link on Todd Carpenter’s site to Dave Savage’s blog. Dave Savage is the CEO of Mortgage Coach, a tool used my mortgage planners.
SIDE NOTE: If your mortgage broker said to you “I can get you the best rate!” chances are he’s not a mortgage planner. If your mortgage broker said to you, “let me show you how the mortgage you choose affects your financial future”, chances are he’s a mortgage planner. For the record, I consider myself a mortgage planner.
Dave’s Blog has a great article that alerted me to Google Trends. Basically Google Trends allows you to see the search pattern for a particular keyphrase.
I checked it out by typing in “mortgage.” Turns out Denver is #6 in terms of cities that search for mortgage. Tampa, FL is number one.
Next I typed “Denver mortgage” and surprisingly Denver is not number one for that search term, they’re #4. Aurora, CO is number one. Basically more people in Aurora, CO search for Denver Mortgage than people in Denver, CO. After Aurora, it’s Englewood and Littleton.
Then I read the fineprint:
Google Trends aims to provide insights into broad search patterns. As a Google Labs product, it is still in the early stages of development. Also, it is based upon just a portion of our searches, and several approximations are used when computing your results. Please keep this in mind when using it.
That being said, you can have endless hours of entertainment:
- Minneapolis searches for “George W Bush” than any other city.
- More people in Ottawa search for “Canada” while Washington (lets assume it’s DC) search for “United States” then again these are the capitals of each country.
- For the term “beer,” Philadelphia, PA is numero uno.
- Austin, TX likes to search for “pizza.”
Oct
24
Blogging using Blogger
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Recently Mark Cuban the owner of the Dallas Mavericks posted “Get Your Blogspot Shit Together Google.” A synopsis of this blog is basically that blogspot has unleashed a wave of spam blogs aptly named splogs. Blogspot is Google’s host for their blogger software. These splogs typically have links to nefarious sites and artificially inflate those sites page rankings.
Today’s Rocky Mountain News reprinted an article by David Kesmodel of the Wall Street Journal called “Spammers’ blog clog searches on Internet.” In his article, Mr. Kesmodel cited the aforementioned blog by Mark Cuban.
Here are my thoughts:
- There will always be spam on the internet. It’s part of the internet culture.
- There will always be spam in Hawaii. It’s part of the Hawaiian culture.
- The tides have turned. Typically blogs summarize events in major publications, now major publications are summarizing blogs.