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Despite Auto Loan - Investors Are Still Unsure About The Future
Posted On Friday, December 19, 2008 at at 3:16 PM by Finance FanaticWell, our rally streak has ended, at least for the DOW, as we saw it close down just under 26 points today. The Nasdaq remained strong today with the help of some better than expected earnings the past few days from tech companies like RIMM. In fact, if any of you are looking for some quick ways to way money, I found an interesting site where you can borrow from other people or make money(up to 19% return) by lending to other people(all secured). It's pretty interesting and worth checking out, It's called Lending Club. Hey, even in a recession, there's ways to make money.
The S&P barely closed up, ending today at 887. As we discussed yesterday, 920 was the magic number for all the graph and trend analysts. Many of the formulas and trends they use to determine this number is much too left brain for me, but they can definitely help in showing direction of trends. Closing today below 920 is suppose to show that the Christmas rally is done with and we should start heading the other direction. As I have said before, take this information how you may, as they can be wrong, but I do give them credit, so we'll see how next week makes out.
Seeing that we opened up a little fickle, despite the auto loan approval made me more believing that indeed we may have reached the end of this holiday rally. I mean here we had our usual Friday rally day, great news with the 17 billion auto loan to be approved for Chrysler and GM, even good earnings news for tech, and lowering oil prices and we still ended down today. So I definitely think, at least for now, momentum has shifted.
So with me believing we have the bears returning, I decided to make some moves today. I put a decent amount of cash into SRS at $61.00. Being that retailers, despite being downgraded by banks, had a push today, I felt like it's just too low for me to pass up. In fact, I actually transferred some of my FXP investment into SRS, it being my favorite of all the etfs right now. I do still see a lot of upside for FXP, it's just with SRS at $61, I can't pass it up. So, we'll see how that goes. It may go down a bit more in the short term, due to our recent huge rate cut, but with the woes heading for commercial real estate next year, I can't help but to love this fund.
I still think Apple is a bit undervalued, considering that RIMM performed well on earnings recently, and the Iphone has been outperforming Blackberry in mobile phone sales. Sure, Apple's computer sales may be down, but their product mix is so solid, I can't see them hurt too much during these times, especially with their cash balance. We'll see though, I still own some April expiring options.
So, I am now mostly out of my longs, with a few remaining GDX and Apple options. I personally feel that during next week, we should start to trail off. Maybe not too much with Christmas in the mix, but I definitely feel we're close to retesting the lows we've reached already. Hopefully, I can regain some traction on my short position as my latest buys seem very low. I hope everyone has a good weekend and is gearing up for a holiday. Go shopping this weekend, retailers are having RIDICULOUS sales (especially Macy's) to try and stimulate money spending. I am sure it's been a pretty slow December thus far. Happy Trading and we'll see you next week.
when are the hedge funds going to sell? They need to do selling. Right?
They hedge funds have been sidelined the past month. Most likely there will be some forced selling in the beginning of 2009. Right now, they are just praying somehow the market can keep going up.
I'm also hoping the options will pay off at some point, but not immediately.
Thanks for the Lending Club find. I just tried it and it's a fascinating concept. Will be putting in $1K to see how it performs.
In regard to the lending club... if it is anything like prosper.com they will have to register with the SEC (which takes several months). Prosper.com is currently undergoing that process and is not currently accepting new lenders or borrowers. I have had success on sites like this thus far with the small amt of money I have invested. So far the 500ish that I lent out about a year ago has been earning an average of 16% payments with no late payments as of yet. Anyways I think all of these sites are fantastic free market tools to cut out the middle man.
I couldn't agree with you guys more, especially in this market, it could be a great place to see some nice returns.
The main problem I see with lending club is as follows:
1) You are dealing with anonymous borrowers. You really only have the word of the site's "proprietary" credit analysis system.
2) I'm PRETTY sure people can borrow money from banks for less than 19% annually (took the max for shock value; come to think of it though, this is even AFTER service charges), so why are borrowers using this? A 19% rate generally corresponds to a substantially high amount of risk. Given the efficient markets theory (the principles behind it, not neccessarily the prediction that everything is perfectly priced), something seems wrong here.
3) "If it sounds too good to be true, it USUALLY is." Key words to remember, especially right on the heels of the Madoff scandal. 18 months is not nearly long enough for most people to go bankrupt after having borrowed money (unless you're GM, OH SNAP!), especially if it IS a pyramid scheme (not suggesting it is, but the very principle of a pyramid scheme running is to attract new people with high payouts so that it can maintain those high payouts to make it look legit and thus attract even more people).
Anyhow, my two cents.
Anon,
In most circumstances I would agree with you in dealing with high interest rate loans. However, in this market, it is amazing the lack of lending that is going on. I do a lot of work in real estate, and for commercial real estate loans, we are seeing rates edge up to 8% with 60% down payments, and that is with good credit and a good property.
In an essence, sites like these act almost like a mini CMBS market. I wouldn't put all my eggs in this site, but I think it's definitely looking into. I cannot vouch for other sites, but I have heard good things about lending club.
@Finance Fanatic: thanks for the Lending Club mention
@Dinadur: Lending Club is the first and only social lending platform registered with the SEC. Glad to hear you've had a good experience so far.
@Anonymous: Lending Club typically offers lower interest rates than most banks and credit cards. You can verify this on www.bankrate.com's personal loan table. Our borrowers have shown good credit history, with an average FICO of 713.
Rob Garcia from Lending Club
hi. does anyone know what happened at the end with srs? why the sudden drop, and what does it signify for the future?
Sounds good... I might take some of the interest I've been piling up in Prosper and move it to the Lending Club since I cant roll it in to a new loan at Prosper.
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