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.