Shadow inventory building up on elite homes

Posted February 16, 2012 at 12:15 am

by Tim Reid

The careworn house not far from Santa Monica Boulevard resembles millions of other homes that have been foreclosed on since the calamitous U.S. housing crash four years ago.

Garbage spews from trash bags behind the property. A smashed television leans against broken furniture. A filthy toy dog lies on its side, an ear draped across its face. The garden is overgrown. The house needs a paint job.

Yet the property on North Rexford Drive, Beverly Hills, California, is no ordinary foreclosure.

A sprawling, Spanish-style estate, fringed by majestic pine trees and located near the boutiques of Santa Monica Boulevard, its former owners were served with a default notice in 2010; they were $205,000 behind in their payments on mortgages totaling $6.9 million.

Welcome to foreclosure Beverly Hills-style.

Some 180 houses in Beverly Hills, the storied Los Angeles enclave rich with Hollywood stars and music moguls, have been foreclosed on by lenders, scheduled for auction, or served with a default notice, the highest level since the 2008 financial crash, according to a Reuters analysis of figures compiled by RealtyTrac, which tracks foreclosures nationwide.

As in the default-ravaged suburban subdivisions of Phoenix, Arizona, and Tampa, Florida, plunging real estate prices are [continue]…

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New home builder sentiment is at a five-year high

Posted February 15, 2012 at 8:49 pm

by Jeff Bater and Alan Zibel

U.S. home builders’ sentiment rose in February to the highest level in nearly five years, a clear sign of improvement for an industry trying to climb out of a deep slump.

The National Association of Home Builders said Wednesday its housing market index grew to 29 from 25 in January. The increase was the fifth in a row and carried the index to its highest since May 2007. The results were better than expected. Economists polled by Dow Jones Newswires had forecast a reading of 26.

Historically, the reading still is low. A reading above 50 in the NAHB index would mean more builders view conditions as good rather than poor. The gauge has not been in positive territory since April 2006 [continue]…

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Leading pessimist breaks rank

Posted February 7, 2012 at 2:47 am

via NPR

For more than five years before the recession began in December of 2007, I was one of the leading economic pessimists, warning of the housing bubble and the damage that its collapse would do to the economy. I based this pessimism on my analysis of the housing market, not a genetic disposition to pessimism.

Given the economy’s current situation, I find the warnings of the pessimists – the double-dip gang – to be wrongheaded and seriously counterproductive.

First to the economy’s near-term prospects: the economy is growing and will in all probability continue to grow. Economies do generally grow. We see new investment, leading to more employment and higher productivity, which leads to higher profits and higher wages.

In the past when the economy has fallen into a recession it has been the result of plunges in house sales and car sales. Neither possibility seems plausible at the moment, primarily because both remain at extraordinarily low levels that leave little room for them to fall further. Even if they did fall, it would have only a limited impact since current demand is already so depressed.

It’s difficult to see what else could cause another recession at this point. Cutbacks in government spending have been a drag on the economy the last two years. But state and local governments have largely adjusted to the plunge in tax revenues caused by the recession. There will be further cuts in many places, but they will likely be much smaller than the ones we have seen thus far.

Similarly, the federal budget deficit will [continue]….

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7 startling numbers we now know about facebook

Posted February 3, 2012 at 1:55 am

by Rick Aristotle Munarriz

Now that Facebook has filed its paperwork to go public, we’re getting our first real glimpse at the inner workings of the world’s largest social networking website.

It’s pretty impressive.

Let’s set aside the potential for Facebook’s valuation to get out hand. We’re still several weeks away from actual deal pricing and retail investor reactions. What we have now are the company’s fundamentals.

Let’s dive into a few of the numbers that may surprise you.

845 million: Facebook has 845 million monthly active users. Yes, that’s impressive. Some skeptics who thought Facebook was celebrating milestones of cumulative registrations probably didn’t realize the dot-com darling only counts current users.

483 million: There are 483 million daily active users. In other words, more than half of Facebook’s users are on the website in any given day. The key point here is that while active monthly users have climbed by 39% over the past year, daily active users have increased by 48%. In other words, Facebook continues to get stickier with consumers.

100 billion: There are 100 billion — yes, billion — friendship [continue]…

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Stocks are as cheap as they’ve ever been

Posted February 2, 2012 at 3:48 am

via The Guru Investor

Contrarian guru David Dreman says he’s finding stocks as cheap as they’ve been at any time since 1982.

Dreman tells Forbes’ Steve Forbes that he’s bullish because valuations are low and companies have good cash flows and financial positions that are as strong as they’ve been in years.

(A tip of the cap to Zack Miller of Tradestreaming.com for drawing our attention to the interview.) He says investors have been running from stocks because they fear volatility and they fear the economy will be in a depression-like malaise forever.

He doesn’t see that happening, and thinks all the fear has created numerous opportunities.

Dreman also talks a bit about portfolio management, saying he keeps a diversified portfolio of 50 to 60 stocks, with all the stocks weighted similarly.

He adds that he [continue to article, with video interview]…

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Putting facebook’s evaluation in perspective

Posted January 31, 2012 at 12:22 am

by Pascal-Emmanuel Gobry

We’re all awaiting with bated breath for the Facebook S-1 to drop this week. According to various leaks, Facebook’s operating profit was around $1.5 billion in 2011 and its revenues were something like $4 billion.

We’ll know soon enough whether that’s true, but if so, it makes Facebook’s reported $85-100 billion valuation sound insane.

Is it?

Well, anyone can argue that it’s high. But we don’t think it’s insane.

First of all, the value of an asset is the net present value of its future cashflows. This means that a company’s value doesn’t depend on how much revenue it generates today, but on the profits it’s going to generate in the future.

The value of the current financials is in helping someone figure out what are going to be the future financials. That’s more of an art than a science, obviously. But we have to remember that assessing whether a valuation is insane is about assessing the future of an asset.

So, what’s Facebook’s future like?

It’s very bright.

The basic reasoning behind Facebook’s valuation goes something like this: every new technology cycle is dominated by one company, and that company usually ends up being worth around $200 billion.

Microsoft dominated the PC era, and Google dominated the search era. Facebook is going to dominate the social era, and therefore it’s going to be worth $200 billion some day. Discount that to today and $100 billion looks like a steal.

But how likely is it? [continue]…

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The grass is greener than many think

Posted January 30, 2012 at 12:40 am

by Fisher Investments Editorial Staff

In Friday’s report, US real GDP accelerated in Q4 2011 for the third consecutive quarter—logging +2.8% growth. Based on this advance estimate, 2011’s four quarters now read as follows: +0.4%, +1.3%, +1.8% and +2.8%.

Full year growth came in at +1.7%, a deceleration from 2010’s +3.0% rate, but growth nonetheless.

To be sure, that’s not the quickest rate we’ve ever seen in America, and Q4’s report missed consensus analyst estimates of +3.0% growth.

Predictably, this led some to label growth “anemic.” Others continue to claim, “At this rate, we’ll never reduce unemployment.” But do the facts support such assertions? Much of the answer hinges on how you define the economy.

In general, inherent calculation quirks make headline GDP growth a less-than-perfect reflection of economic health. And Friday’s report was no exception [continue]…

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What’s going on with oil, gold, and copper?

Posted January 25, 2012 at 1:52 am

by Frank Holmes

I recently spoke with Matt Nesto, host of Breakout at Yahoo! Finance, about the current climate for commodities and what I expect to see during the first half of 2012.

We kicked off our discussion talking about oil’s surge above $100 per barrel and what price implications rising tensions with Iran could have if the situation boils over.

I explained that I don’t think a European Union (EU) ban on Iranian oil imports would have a significant long-term effect on oil prices.

The real long-term catalyst is increasing demand for oil from the developing world. Regions such as Africa don’t have debt problems like the U.S. and the EU, and the GDP growth rates for many of these economies is around 7 percent.

Matt and I then transitioned our discussion to gold where I explained how the Fear Trade and the Love Trade are driving gold prices. I highlighted the staggering amount of  [continue]…

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13 signs of a bull market

Posted January 23, 2012 at 3:14 am

by Ivan Hoff

1) The market reacts positively to bad news. Negative headlines and terrible earnings reports are ignored. As the saying goes, reaction to news is more important than the news itself. Good reaction to bad news is the ultimate indicator of positive sentiment. Never underestimate the power of optimism in the market – it feeds on itself and creates positive feedback loop.

2) Plethora of high-volume breakouts to major new highs, representing different industry groups. The so called “market of stocks” environment.

3) Low correlation market, which produces both winners and losers. There are good ideas for both bulls and bears.

4) Defensive sectors underperform. Capital leaves perceived safety and rotates into more economically sensitive sectors.

5) High beta names outperform as the fear of missing out becomes higher than the fear of losing. Small caps, emerging markets, low priced stocks outperform.

6) The financial blogosphere will be filled with skepticism. Six months of trend-less , volatile market that was dominated by mean-reversion could certainly condition even the most experienced market participants to be extremely cautious with new breakouts. The rule of thumb is that during pronounced uptrends, there will always be people who will complain that the market is overbought and warn for an impending correction. As Schopenhauer stated long time ago: ““Every truth passes through three stages before it is recognized: In the first it is ridiculed; in the second it is opposed; in the third it is regarded as self-evident.”

7) There are so many breakouts that you are [continue]….

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The street continues to hate the Euro

Posted January 23, 2012 at 12:57 am

by JC Parets

They keep on piling into this trade. I’ve never seen anything like it. This marks the fourth week in a row that net short positions against the Euro have reached a new record.

Last week I wrote a post titled, “10 Things I hate about you: Euro Edition”. I mentioned that I couldn’t think of a single person that thought the Euro was going higher against the Dollar. It remains true.

And sure, I look at charts all day and I see all the data. But with this one, it’s not even about that. I open my eyes, I talk to people, the negative sentiment is all around us. It’s obvious that the street hates the Euro.

And this is how a monster trade is born.

The squeeze could be on. According to a report from the CFTC, speculators held [continue]…

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