Crash Market Stocks - Financial Tips On Making Money In The Stock Market

Welcome back to what looks to be another wild week of trading, as the Dow finished down another 125 points today as confidence continues to struggle with more negative outlook and bad earnings projections. Then to really rub it in, after close, Alcoa announced far greater losses than the market was expecting. They came in announcing a .28 per share loss, when the market was only expecting .10 per share. The same time period last year, they announced earnings of .36 per share. This can’t be a help to the already downtrodden market. However, I do think a green day is due, now that we’ve endured four straight days of downward trading. Also, the S&P didn’t close under 870 today, which was a pretty big momentum point. Plus, each day we get closer to Obama’s big day, may bring a bit more optimism. In any case, don’t expect the green to last long, if it even does at all.

There has been some debate on this site and throughout the news of whether the financial markets and real estate values are going to start coming back soon. If you have been following this site, than you probably know where I stand. I just wanted to share some serious data that doesn’t just affect real estate, but the entire market. Real estate, specifically commercial, has a pretty strong correlation with the movement of the economy. If the data out there is correct, than we are far from over and have a lot more bumps to endure. Also, as I have said before, I specialize in the Real Estate industry, so I hear what’s happening first hand everyday and feel I have a pretty good read on what is going on in that market. Whatever the case, it reemphasizes my bull in SRS and even SKF or FAZ.


In 2006, it was estimated that commercial banks held $1.28 trillion in mortgages. In 1991, that same number is estimated to be $410 billion. As you can see, our banking systems have taken big strides into penetrating this market and adding to volume. How were they able to do that in such a short amount of time? This is largely due to commercial mortgage backed securities (CMBS) and collateralized debt obligation (CDO). Through the help of these vehicles, commercial banks were able to unload a lot of these loans and recover a lot of equity by selling them as securities to consumers. As a result, they were able to put that extra equity into more issued loans. In turn, this has created a ridiculous amount of debt.

As you can see, there was a huge upswing in the issuing of these loans from about 2005 to 2007. On top of that, the valuing and underwriting of these loans got sloppy and many bought in to C-class valued loans, thinking they were A. As the economy began to slow and sales for retailers got worse, the default rate for tenants began to slowly climb. After a while, many of these start to not break even with their monthly debt service. If this continues, it will result in a delinquency of the loan and will end up going back to the bank. So how many of these delinquencies should we expect? Well, according to a report done by Deutsche Bank, they say the delinquency rate could get up to 30%. If so, they said that could result in $447 billion dollars in write offs. This could be disastrous.

One of the main reasons many people believe we started this crisis was the failure in the residential sub-prime market. Well, if that’s the case, then we’re in for a rude awakening. The FDIC estimates that commercial banks own $2.1 trillion of the outstanding debt for residential real estate. They also estimate that commercial banks own $3.4 trillion of the commercial debt. With this huge increase in debt amount, coupled with the current state of our economy, we could be set up the biggest financial crisis we have seen. This doesn't even factor in the ones that don't default, but will be up for refinance, since many of the loans issued were 5-year, interest only loans. I know today Bush said financial markets were “thawing”, but the numbers sure do not read that way. I’ll believe it when I see it.

As a result, that’s why I remain very bullish on my SRS (up over 12% today) and SKF or FAZ. With the huge hit to gold, I also picked up some more GDX today, considering I sold a lot of my options last week. Gold took a $35 hit today and has nowhere to go but up in my opinion. FXP has also enjoyed some serious gains lately. I have really enjoyed my portfolio this past week. I hope you enjoyed the Lending Club update. I will probably post the second half later this week. My first payments are scheduled for this week, so far so good. I got a lot of good feedback from people who are finding success with it as well. I wish you all the best in pursuing your financial future. Happy Trading and we’ll see you tomorrow.

I hope everyone had a good weekend and was able to knock off some holiday shopping. I don't know about you, but I couldn't help but notice the extremely low traffic at my malls, given it being just a few days before Christmas. Sure, there were a lot of people there, but nothing like years past. I guess it is just another sign of people not spending. There is a lot more of that to come in 2009.

My last post generated a lot of interest in Lending Club, a social networking lending club. There were a lot of questions, so I got the following brief summary from their company saying more about them and their strengths. They seem to have their act together pretty well. Here's what they said, "Because of the current financial crisis credit worthy borrowers are not able to get the financing they need to be entrepreneurs, expand current businesses and payoff debt. Lending Club connects these high quality borrowers with lenders. Lending Club offers SEC registered notes to these investors with returns stated from 6.69-19.37%.

Lending Club notes are 3-year fixed term, but can be resold on our secondary trading platform. This brings liquidity to social lending. Lending Club is currently the only peer lending site right now accepting new lenders and borrowers." So there you have it, if you're interested in testing those returns, go to Lending Club for more information.

Today, resulted in an interesting low volume day. No doubt, the holiday vacationers led to the low volume in today's trading. However, the sellers were definitely still by their computers, wherever they were. The market started out with a doozy of very disappointing earnings from both Walgreens, the largest US drug chain, and Toyota. If autos needed even more pessimism. Even the best made, most attractive and definitely most dominate auto company is having severe sales problems. I don't see a very bright future for our US autos no matter what kind of loan they get. Not for at least 2 years.

Another element, which made people a little ornery today, was the study that came out showing where banks have used the issued "tarp money." The results found that many of the banks were still paying out very large salaries to their executives as they did not have an outlined executive payout like the autos do. And as you can tell, not a lot of new "tarp" lending has hit the consumer market. So these funds are getting soaked up one way or another.

Something very interesting caught my eye today during today's trading. Notice below, the huge upswing just before close. Something came into the market during last 10 minutes to help give it a big boost (my guess starts with an F and rhymes with Red). With the low volume of trading and the large amount of bad earnings, I can't see a natural upswing like the one we saw today happening on its own. Can you say manipulation?

All the shorts finished strong, especially FXP and EEV. As we have discussed in other posts, foreign turmoil is building up and the more unstable the US becomes the more it reflects on these emerging markets. I am feeling good about being in them. SRS was up strong and came down towards the end with the market moving. One big reason for the fall as well, is that commercial developers are requesting to be a part of the bailout list, asking for more than 200 billion dollars. That's awesome, we're not even to Obama yet, and they are already asking. Of course, no companies were singled out personally, as their stock would most likely tank, but you can probably guess (Simon, Kimco, GGP, Centro), but their stock did receive some love today, as it seems some people believe they may get help. I cannot see them getting bailed out at all and them even asking shows just how much pain there expecting. You open Pandora's box if you give developers taxpayer's dollars. I am loving SRS next year.

Expect the volume to continue low this week with it being Christmas week. I still think selling will remain most the week as sentiment is getting worse everyday. The market has seemed very bearish the past two trading days, and once the volume comes back, it could get ugly. There should be some great profits made here in the near future. I hope everyone has a good evening, Happy Trading and see you tomorrow.