Harsh Words

July 30, 2010

This week was a flood of information, and my portfolio suffered.

Nearly all the mREITs declared earnings and held their conference calls, and all the analysts did their immediate reaction reports.  In those reports there was one downgrade (CMO buy to hold at DB ), and ominous phrases like “management risked its reputation” and “slow value erosion continues”  from Merrill Ross at Wunderlich.

The market almost immediately took more than a dividend out of the prices of the stocks.

One thing happened that might help explain the violence of the takedown that may not have been noticed by the analysts.  That was the move by a very seasoned, but small, mREIT to raise additional capital.

Read the rest of this entry »

Unusual Uncertainty

July 28, 2010

A defining phrase, to be sure.  Almost as good as “irrational exuberance.” Also just as likely to result in effective policy action by the Fed.

In response to Egor’s question (no relation to Eeyore, except perhaps in a shared opinion of the other animals in the woods), I was thinking again about the virtual hiring freeze we’ve seen since the financial crisis took hold.

Nearly everyone says that private businesses aren’t hiring because of uncertainty.

That’s true, but the commentators then contort the facts to support a political explanation of what drives that uncertainty.  The real reason is much simpler, and much more powerful than marginal tax rates, or even the cost of health insurance. Read the rest of this entry »

Support For Gloom and Doom

July 27, 2010

When you take a position that spreads gloom and doom is that different than being a gloom and doomer? Perhaps, though the difference may be just how long you’ve been on that team. Another defining factor may be the zeal you have for your stated position.

Bright as they are, it would be fair to call Roubini and Rosenberg gloom and doomers. I’m beginning to feel I may be leaving the land of the “objective” and going over to the dark side with them. Admittedly I’ve been on ECRIs case for a while. I intend to stay there. But its not just me with ECRI.

Read the rest of this entry »

mREIT Q2 2010 Preview

July 27, 2010

A friend forwarded one of the bulge bracket dealer reviews of the quarter just completed.  It was fairly upbeat, with a couple of earnings estimates increased (NLY and IVR).

Perhaps most interesting to me was the big divergence from other analysts’ estimates of quarter-end book values.

In my conversation with the institutional fund manager friend, we both thought the recent Annaly capital raise was dilutive to book value, and this analyst agrees.  In fact, he estimates their Q2 end-of-quarter book value at $18.87, a definite good news / bad news situation.

Read the rest of this entry »

ECRI Needs to Make a Call

July 25, 2010

Two weeks ago ECRI stated they don’t rely just on WLI to make a recession call. No quarrel there. Their position: The Long Leading Indicator, USLLI has not shown enough downward movement yet to make a call. I have previously reported, that to the contrary, LLI has recently trended downward longer than it did when it signaled the 2001 recession.

Last week ECRI stated that LLI had not shown as much downward movement as it had in the only previous double dip recession in 1982. Fair enough, but there is no significance in LLI anticipating a double dip recession or one more typically spaced.

Read the rest of this entry »

Pet Peeves

July 25, 2010

It’s the weekend.  I’m relaxing.  Doing some reading and bouncing around the TV channels for mindless entertainment.

One of the movies I turned on and immediately off was a post-apocalyptic “whatever” that took less than two seconds to see what it was.

How could I know in that short a time?

Easy — the universal nonsense symbol of post-civilization end-of-times — the 55 gallon drums with flames from “scrap” planks of wood being burned.

Read the rest of this entry »

Awesome Buy-Write

July 23, 2010

Have you ever written an option on an ordinary stock with implied volatility north of 200% ?  I just did.

I mentioned Arena Pharmaceuticals the other day when (most of) it was about to be called away.  Sometimes when I feel that a company may be on to something huge that will give me seller’s remorse (the bull market version of buyer’s remorse), I’ll use some of the premium to buy a little extra stock.

Today that stock was ARNA.

Read the rest of this entry »

ECRI Posts Drop On WLI Growth To -10.5

July 23, 2010

WLI stayed even with last week after a minor revision, but WLI Growth dropped once again from -9.8 to -10.5. The drop in ECRI’s Growth Index today will further the view we are heading towards a double dip recession. WLI Growth index is the more important index. It will be interesting to see how bears like Dave Rosenberg react to this data. Recall, he originated the idea if that index falls to -10 then it would signal a recession, even without the blessing of the ECRI team.

Read the rest of this entry »

Double Dip? ECRI at the Crossroads

July 22, 2010

Economic Cycle Research Institute’s leading economic indicators have been a matter of spirited debate the last couple of weeks, because it looks like they are on the verge of calling a double dip recession. Yet no word from ECRI, as the pressure increases for them to make a call. The interest in their stance on the economy is compounded by their correct call for an end to this past recession at the depth of the crisis last year.

First let’s clear up some misinformation about ECRIs leading index, known as WLI.

Read the rest of this entry »

Lottery Tickets and Calculated Risk

July 22, 2010

I was very disappointed in my lottery tickets the past few days.  I haven’t talked about them simply because I didn’t want to encourage anyone else to risk their money on this long shot.

On the other hand, I’ve been upfront with my calculated risk, and today it looks like it might be paying off.

Further discussion of the two stocks after the break.

Read the rest of this entry »