Regular readers know I have a short position in WCI, a home builder based out of Florida. Well the analyst thats following the stock at JMP securities definitely doesn’t know what the hell is going on.
According to Yahoo Finance’s Analyst Opinion page, the JMP analyst downgraded the stock on April 10th, followed by an upgrade on August 15th followed by another downgrade on September 25th.
What is this guy getting paid to do????
I wish I had a job like that!
Merck has been sued by the IRS for $2.3 Billion for back taxes and penalties. It set up a company in Bermuda which owns its patents and then its pays that company royalties.
It took advantage of what is often called “tax arbitrage.” The usual strategy: lower a company’s tax bills by structuring transactions so certain types of income or expenses are classified as one thing by the IRS, but something very different by another country’s tax regulators.
Apparently Al Capone wasn’t kidding when he said “A good lawyer with a briefcase can steal more than ten men with machine guns.”
CNN’s money site has an interesting article on insider trading.
David Pajcin had set up an intricate network of spies to provide him with insider information including Businessweek and Merrill Lynch employees, a grand juror and of course strippers. [Whats a wall street story without exotic dancers?]
To read more about the scam Fortune magazine has a little more coverage.
There’s a good article in the local paper on how San Diego is saturated with Condo Conversions that aren’t selling. There are nearly 7,000 units in 111 complexes sitting on the market. In fact, in some places the developer has decided not to continue to sell them and just keep them as rentals.
As a comparison, Los Angeles which is 3 times the population of San Diego has only 1,325 units!!!
Thats how bad the market has stalled here.
You can read about it here.
I actually know 1 guy who’s been burned by this. He’s stuck with tons of inventory that he overpaid for and can’t even breakeven if he rents the units out. I guess he didn’t have a backup plan.
Interestingly enough there’s a company that will take your $10,000 and put it in their “robot forex trader” program. You don’t need to know anything about forex trading, the software algorithm takes care of it for you!
According to their data, its been back tested and it should get 81% profit per month. Well, I guess I can retire now and sail away into the sunset!!!!!
http://www.forex-day-trading.com/forex-trading-robot.htm
Sounds a bit like those high-yield investment scams. There were companies based out of the bahamas that were offering a 100% return per week. [They were nothing but a ponzi schemes.]
They say those that forget history are doomed to repeat it. [They also say history never repeats, it only rhymes].
A hedge fund called Amaranth reportedly lost about 4.5 billion in 2 weeks when a 32 year old trader apparently bet the farm on natural gas futures. When you have a huge position in a shallow market, the rest of the market is bound to know. And just like the billionaire Hunt brothers who tried to corner the silver market and went BK, the market rallied against him and he lost big time. Also like Long Term Capital Management[Read the extremely interesting story here
What are the lessons we can take away?
– never bet against the market.
– never bet the farm.
– don’t put all your eggs in one basket.
– don’t forget history.
– use leverage with extreme caution
– don’t become arrogant just because you got lucky a few times.
A city boy, Kenny, moved to the country and bought a donkey from an old farmer for $100. The farmer agreed to deliver the donkey the next day.
The next day the farmer drove up and said, “Sorry son, but I have some bad news, the donkey died.”
Kenny replied, “Well then, just give me my money back.”
The farmer said, “Can’t do that. I went and spent it already.”
Kenny said, “OK then, just unload the donkey.”
The farmer asked, “What ya gonna do with him?”
Kenny: “I’m going to raffle him off.”
Farmer: “You can’t raffle off a dead donkey!”
Kenny: “Sure I can. Watch me. I just won’t tell anybody he is dead.”
A month later the farmer met up with Kenny and asked, “What happened with that dead donkey?”
Kenny: “I raffled him off. I sold 500 tickets at two dollars a piece and made a profit of $898.00.”
Farmer: “Didn’t anyone complain?”
Kenny: “Just the guy who won. So I gave him his two dollars back.”
Kenny grew up and eventually became the chairman of Enron.
According to the WSJ, parts of the Midwest might experience a drop in house prices even though they didn’t have any appreciation. Its mainly due to job losses.
Midwest May See a Sharper Housing Slowdown
By LINGLING WEI
September 21, 2006; Page D3Homeowners in the Midwest — the nation’s industrial heartland — are starting to see a housing bust without ever experiencing a housing boom as more job losses trigger mortgage delinquencies and foreclosures.
For months, the biggest worries over the slowing housing market in the U.S. have mainly focused on parts of the country that have seen exceptional price increases from 2000 to 2005, places with growing populations and strong economies such as California, Florida and Nevada. But recent data from the federal government and private-sector researchers point to areas in the Midwest that are witnessing a more dramatic slowdown in home prices and, in some cases, higher borrower defaults than the rest of the country.
Home prices in the region have hardly budged over the past few years because of its weaker economy as compared with other regions. Michigan, for example, has lost nearly 300,000 jobs since 2000, and its jobless rate has been consistently higher than the national average.
A recent report by the Office of Federal Housing Enterprise Oversight looked at housing prices in 275 metropolitan areas across the country. Six of the seven metropolitan areas that showed housing-price declines for the 12 months ended June 30 were in Indiana and Michigan. The study also stated that housing prices in states like Indiana, Ohio and Michigan were fairly flat over the past year but actually declined in the second quarter.
An analysis conducted by First American LoanPerformance, a research firm in San Francisco, based on the latest information available, found that the percentage of loans in foreclosure in the Midwest states of Michigan, Ohio, Illinois and Wisconsin reached 0.93% in June, while foreclosures across the country averaged 0.5% — still historically low. Michigan, hurt by job losses in the automobile industry, booked a 26.8% jump in foreclosure rates — to 0.69% in June from a year earlier, the largest year-on-year increase within the Midwest. Meanwhile, the percentage of loans delinquent for more than 90 days in the hard-hit area was 15% higher than the national average.
Rising foreclosures as a result of job losses are likely to depress local markets even more. According to a residential real-estate risk-scoring system maintained by analysts at Credit Suisse, which ranks the likelihood of home-price declines within a year, the most troubled metropolitan areas are mainly in Michigan — cities including Detroit, Saginaw, Holland, Ann Arbor, Monroe and Jackson — and New England areas such as Boston. The least troubled metropolitan areas are in the Northwest.
Remember to do you due diligence before investing anywhere! Always look for job growth and inward migration.
Home Depot, Kolh’s and RadioShack have announced plans to start selling High-Def flat screen Plasma TVs soon. Since they’re not doing well in their regular businesses, it makes sense to start selling TVs. Of course, this will cut into the profits of Best Buy and Circuit City, both of whom are relying on flat-screens as a large part of their profit growth.
Should be interesting to see how this affects their stock prices in the short & long term.
But when I finally decide to upgrade my 8 year old 19″ TV, I think I’ll stick to Costco!
I’m a big fan of Ben Stein’s books
I also read his column, How Not To Ruin Your Life. This weeks issue is about letting the non-financially savy spouse in on what to do after you pass away. But best of all, he professes his love for real estate!
We’re currently somewhat overweighted in real estate — not because I bought it with a view toward investing in real estate, but because I love houses. So my wife should know how much we owe, if anything, on various properties; which ones I would advise her to keep and which ones to sell; and whether she should refinance if rates fall.
You can read the whole thing here.