Thursday, July 16, 2009

Foreclosures rise as banks make huge profits. What's wrong with this picture?

Here's several related stories which should cause great concern:
"Foreclosures rise 15 percent in first half of 2009" versus then next two stories
"JPMorgan Chase posts 2Q profit, surpasses Street"
"Goldman Sachs sees record profit"

You see both JP Morgan and Goldman Sachs received significant Tarp money to ease the Credit crisis in the Mortgage industry to prevent foreclosures. In this earnings report, JP Morgan also said they had paid back all $25 Billion in TARP funds to the Government. Here's more details on the Mortgage article that should cause concern.

"The data show that, despite the Obama administration's plan to encourage the lending industry to prevent foreclosures by handing out $50 billion in subsidies, the nation's housing woes continue to spread. Experts don't expect foreclosures to peak until the middle of next year.
Foreclosure filings rose more than 33 percent in June compared with the same month last year and were up nearly 5 percent from May, RealtyTrac said.
"Despite all the efforts to date, we clearly haven't got a handle on how to address the situation," said Rick Sharga, RealtyTrac's senior vice president for marketing."

So despite the earnings looking very god in the banking and financial industry, things are not getting better. Compare that to the rising tolls of the unemployed, now expected to go as high as 13% by some estimates, and you have a recipe for a calamity ahead of us. This must affect the stock market negatively if the stock market is truly free of manipulation. But we know it isn't, don't we. My friends, it used to be one could generally predict market direction based on certain outcomes in the economy and based upon data which supports future predictions. The truth is I can't any more and I doubt any one else can as well. That should be the biggest concern of all. When the stock market becomes unpredictable, it is time to consider ending the trust placed in the system and cash in. There is an expression made famous by the man who was shown by the psychologist a series of ink blot charts. Evert time the man was shown a chart and asked what he saw, the man would say, "people naked". The psychologist turned to the man and asked him, Why do you keep seeing naked women. The man replied, it's not my fault, you're the one with the pictures! I see the same thing in the stock market right now, reason to give great pause as to the integrity of the entire system. Just because we are on a slower decline than we were before, we are still in decline with much more expected over the next several years with more people losing jobs begetting more foreclosures and less disposable income to prop up corporate profits and so the cycle continues. Help me see something differently here.

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Anonymous Mac Carter said...


First, the market has ALWAYS had a strong tendency to outwit the smartest traders by turning up or down at unexpected times.

Second, I don't have a clue about the current upward trends vs. the down looking charts. I've simply been going more with my "feeling" (sentiment) that this market VERY much wants it to go up... and VERY much wants to believe we are at the beginning of an economic recovery acceleration.

I've been primarily betting LONG for the last 3 months vs. your short positions. I understood your logic, but felt that the sentiment was going to be positive. It has paid off to take the long view as we all know.

Will that long view continue to pay off? I don't know and I'm nervous about it. I watch it closely and even back off to all cash once in awhile. Then I go back in and mostly come out for the better - like this past last week. I also place the majority of my investments outside the U.S. in China, Brazil and India and only VERY selectively in the U.S.

Those are my thoughts...


6:42 AM  

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