17 replies to this topic

[ogm]

[ogm]

Only a couple things to add to this chart.... -Everyone and his brother are heavily short financials.... -Everyone knows about the financial armageddon (not that it hasn't been looking like its starting, but still)... -Valuations at this point in time at least aren't horrible in financials. I posted an example on another thread... Bank of America (BAC), one of my favorite banks, is trading at 9 P/E, 1.6 times book, and is paying 5.4% dividend, and has a history of raising dividend every year. Unless the world IS coming to an end, this is a helluva good stock at this price. - If financials start improving, the whole market will improve. Financials are the leaders.

[traderpaul]

OK, If the house that you have an eye on was selling at $380K.....Now the owner wants just $320K.....There are lots of houses that priced the same way.....Would you buy it now or wait for a lower price?

[uncleharley]

Yes But, I think I'll wait for the turn. Friday was nasty and I know of nothing that has changed over the weekend.

[thespookyone]

OK, If the house that you have an eye on was selling at $380K.....Now the owner wants just $320K.....There are lots of houses that priced the same way.....Would you buy it now or wait for a lower price?

Well, I guess that logic could have, and was used in financing houses, as well. Interest rates were in the 8% range or so, and dropped to 5% fixed, where I refinanced my house-instead of waiting till they dropped lower-glad I did. I guess some of the folks waiting till it got cheaper to finace are still waiting-and good luck with that. Lots of people used the two or three year rates, or variable rates, "sure" that the bottom wasn't in.

Edited by thespookyone, 05 August 2007 - 10:29 AM.

[ogm]

OK, If the house that you have an eye on was selling at $380K.....Now the owner wants just $320K.....There are lots of houses that priced the same way.....Would you buy it now or wait for a lower price?

If its the house that I want, where I want, and I can afford to pay for it, I'll buy it.

From my own personal experience... I have my own house for sale, since I'm moving to another state, and its not the cheapest house in the area. It has been for sale for 4 month. There is plenty of buyers trafic, plenty... I have 1-2 showings every week. But people are scared to buy. But... they keep coming and coming, and I'm not lowering the price, because there is a lot of buyers out there. One of them will buy it eventualy....

One more thing...

My brother in law is a mortgage broker in NYC. Yes their business is down a bit since its harder to do Alt-A and Subprime. But the rest of the business is holding up very well. He's not complaining. Home prices aren't coming down by much either, if at all.

Now, don't get me wrong, its quite possible that we're in for much more trouble with housing and other debt, I think we are.. but at this point in time the financials have priced in a lot of fear and panic. The XLF internals are deeply oversold. The market is very scared. worst environment in 22 years according to bear sterns.

2 ways to look at it.. it can get even worse of course, or it can improve from here, right ?

What I think has really happened, we have this temporary glut of loans for sale on the market. With all these record LBO's and mortgage financing. So the market decided to charge higher rates. Its normal, IMO, since risk premiums were very low. Once this glut dissolves, the envioronment will improve. At least temporarily.

Edited by ogm, 05 August 2007 - 10:29 AM.

[traderpaul]

Only a couple things to add to this chart....

-Everyone and his brother are heavily short financials....
-Everyone knows about the financial armageddon (not that it hasn't been looking like its starting, but still)...
-Valuations at this point in time at least aren't horrible in financials. I posted an example on another thread...
Bank of America (BAC), one of my favorite banks, is trading at 9 P/E, 1.6 times book, and is paying 5.4% dividend, and has a history of raising dividend every year. Unless the world IS coming to an end, this is a helluva good stock at this price.

- If financials start improving, the whole market will improve. Financials are the leaders.

Here is a chart of B of A.....If you are a chartist, not pretty.....She made a tripple top, broke 200Dma with ease....$50 support did not hold......Came back and kissed that MA and broke down again.....Now the MAs are turning down......Look at the volume on this selloff.....$47 better hold or else.....
http://stockcharts.c...0058&r=2462.png

[ogm]

Only a couple things to add to this chart....

-Everyone and his brother are heavily short financials....
-Everyone knows about the financial armageddon (not that it hasn't been looking like its starting, but still)...
-Valuations at this point in time at least aren't horrible in financials. I posted an example on another thread...
Bank of America (BAC), one of my favorite banks, is trading at 9 P/E, 1.6 times book, and is paying 5.4% dividend, and has a history of raising dividend every year. Unless the world IS coming to an end, this is a helluva good stock at this price.

- If financials start improving, the whole market will improve. Financials are the leaders.

Here is a chart of B of A.....If you are a chartist, not pretty.....She made a tripple top, broke 200Dma with ease....$50 support did not hold......Came back and kissed that MA and broke down again.....Now the MAs are turning down......Look at the volume on this selloff.....$47 better hold or else.....
http://stockcharts.c...0058&r=2462.png

If it gets to 44, I'll be buying with both hands. I'm much more comfortable owning BAC with near 6% dividend yield then a lot of other stuff. Dividends matter.

As for the volume.. a lot of the times this spike volume indicates reversal points.

Another thought about banks.... Corporations are sitting on record amounts of cash... that means banks are sitting on huge amounts of deposits. That means they have to invest. They can't just pay interest out of their pockets. And now all over suddenly we have much better yields. Banks will be investing. The interest rates have improved significantly. They will make some good money.

We had record LBO's and record mortgages in the past 2 years... that means GLUT, and low spreads. Now we have much better spreads. So good banks will profit a lot from them. It will take time for the glut to dissolve, so brokers will have slower business for sure. But strong banks are in really favorable situation now. The treasury yields came down, so they can pay less on deposits, and on the other hand they can invest with better spreads.

The wild card is how much crap loans they are sitting on, but I don't think its that bads at this point. Financial positons of the major banks are very strong.

btw, you can draw a falling wedge on that BAC chart. And don't disregard that positive divergence on MACD.

Edited by ogm, 05 August 2007 - 10:46 AM.

[traderpaul]

OK, If the house that you have an eye on was selling at $380K.....Now the owner wants just $320K.....There are lots of houses that priced the same way.....Would you buy it now or wait for a lower price?

Well, I guess that logic could have, and was used in financing houses, as well. Interest rates were in the 8% range or so, and dropped to 5% fixed, where I refinanced my house-instead of waiting till they dropped lower-glad I did. I guess some of the folks waiting till it got cheaper to finace are still waiting-and good luck with that. Lots of people used the two or three year rates, or variable rates, "sure" that the bottom wasn't in.

You really think refinance saved you money? Do the math.....You paid closing cost....(hidden in most cses, added to the bill).....You extended the term....Your first payment, $1 went to the principle and the rest went to the interest....So you saved 3% on paper.....I bet you are paying the same if you do the math......Yes, you payment may be lower, but it takes you longer to pay them off....

[thespookyone]

OK, If the house that you have an eye on was selling at $380K.....Now the owner wants just $320K.....There are lots of houses that priced the same way.....Would you buy it now or wait for a lower price?

Well, I guess that logic could have, and was used in financing houses, as well. Interest rates were in the 8% range or so, and dropped to 5% fixed, where I refinanced my house-instead of waiting till they dropped lower-glad I did. I guess some of the folks waiting till it got cheaper to finace are still waiting-and good luck with that. Lots of people used the two or three year rates, or variable rates, "sure" that the bottom wasn't in.

You really think refinance saved you money? Do the math.....You paid closing cost....(hidden in most cses, added to the bill).....You extended the term....Your first payment, $1 went to the principle and the rest went to the interest....So you saved 3% on paper.....I bet you are paying the same if you do the math......Yes, you payment may be lower, but it takes you longer to pay them off....

I paid no closing costs or points. if it was "hidden" in the 5%-I'm good with it. Actually, I'm saving a ton, because the cost of my mortgage 3 percent lower enabled me to cut my mortgage from 30 years to 15 with a very negligible rise in the cost of my payment. So, no, the payment isn't lower, it's a little higher-but will take me much LESS time to pay off.