Wednesday, December 13, 2006
Tuesday, September 19, 2006
CNNMoney.com
Mortgage rates lower for seventh time in eight weeks
Thursday September 14, 7:01 pm ET
Mortgage rates fell for the seventh time in eight weeks after a small gain last week, said a survey released Thursday.
The 30-year fixed-rate mortgage (FRM) averaged 6.43 percent for the week ending Sept. 14, down from 6.47 percent, according to Freddie Mac's Primary Mortgage Market Survey. A year ago, the 30-year FRM averaged 5.74 percent.
The 15-year FRM averaged 6.11 percent this week, down from 6.16 percent last week. A year ago, it averaged 5.32 percent.
Five-year adjustable-rate mortgages (ARMs) came in at 6.10 percent this week, down from 6.14 percent last week. A year ago, they averaged 4.46 percent.
One-year ARMs averaged 5.60 percent, down from 5.63 percent last week. A year ago, the one-year ARM averaged 4.46 percent.
"Although 30-year mortgage rates are about three-fourths of a percentage point higher than they were last year, it's good to keep in mind that rates have dropped from the high of 6.80 percent reached just eight weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.
"And with short-term interest rate increases seemingly on hold, for a while at least, interest rates overall should not experience any big shifts in either direction."
"The risk to our forecast of relatively stable mortgage rates is that inflation will unexpectedly heat up, causing bond markets to raise their expectations that the Fed will intervene by raising short-term rates. In that case, mortgage rates will again start to rise," he added.
Freddie Mac competes on the secondary market with Citigroup Inc., Countrywide Financial Corp. and Fannie Mae.
The 3 stages of foreclosures
Mortgage applications keep climbing
Mortgage delinquencies ticking upward
Mortgage rates lower for seventh time in eight weeks
Thursday September 14, 7:01 pm ET
Mortgage rates fell for the seventh time in eight weeks after a small gain last week, said a survey released Thursday.
The 30-year fixed-rate mortgage (FRM) averaged 6.43 percent for the week ending Sept. 14, down from 6.47 percent, according to Freddie Mac's Primary Mortgage Market Survey. A year ago, the 30-year FRM averaged 5.74 percent.
The 15-year FRM averaged 6.11 percent this week, down from 6.16 percent last week. A year ago, it averaged 5.32 percent.
Five-year adjustable-rate mortgages (ARMs) came in at 6.10 percent this week, down from 6.14 percent last week. A year ago, they averaged 4.46 percent.
One-year ARMs averaged 5.60 percent, down from 5.63 percent last week. A year ago, the one-year ARM averaged 4.46 percent.
"Although 30-year mortgage rates are about three-fourths of a percentage point higher than they were last year, it's good to keep in mind that rates have dropped from the high of 6.80 percent reached just eight weeks ago," said Frank Nothaft, Freddie Mac vice president and chief economist, in a statement.
"And with short-term interest rate increases seemingly on hold, for a while at least, interest rates overall should not experience any big shifts in either direction."
"The risk to our forecast of relatively stable mortgage rates is that inflation will unexpectedly heat up, causing bond markets to raise their expectations that the Fed will intervene by raising short-term rates. In that case, mortgage rates will again start to rise," he added.
Freddie Mac competes on the secondary market with Citigroup Inc., Countrywide Financial Corp. and Fannie Mae.
The 3 stages of foreclosures
Mortgage applications keep climbing
Mortgage delinquencies ticking upward
Monday, September 11, 2006
Financing home improvements in retirement
Monday September 11, 6:00 am ET
Don Taylor
Dear Dr. Don,
I'm 64 and need $75,000 for home upgrades. I have $300,000 plus in home equity. Would it be best to refinance with an interest-only loan to keep payments down, and then possibly get a reverse mortgage or use IRA monies and pay the taxes on that distribution?
-- Larry Leverage
Dear Larry,
Thanks for providing some additional information about your financial situation to me so I might better answer your question. You told me you are married, retired, have an annual income of about $45,000 per year and have excellent credit. You also told me that your home is worth about $550,000, and there is about $200,000 in outstanding mortgage debt on the home. You have about $150,000 in retirement accounts and no investments in taxable (nonretirement) accounts.
Lending limits on the two main reverse mortgage programs, HECM, or Home Equity Conversion Mortgage, and Fannie Mae Home Keeper, won't let you get a $275,000 reverse mortgage. That's because the first step in getting a reverse mortgage is to pay off any existing mortgages with the proceeds from the reverse mortgage. Put in your particulars using the reverse mortgage calculator at reversemortgage.org and you'll see the problem in black and white. Besides, it's an expensive way to tap the equity in your home, and I'd like to see you hold that option open for future use. A Bankrate feature, "Reverse mortgages: Retirement's on the house," explains reverse mortgages in greater depth.
I like the idea of using a home equity line of credit, or HELOC, even though, since it's a variable-rate loan, you are taking on the risk that short-term interest rates continue to head higher.
The two reasons why I like the HELOC are: The payments are interest-only in the early years of the loan, and closing costs are minimal. The downside is the national average interest rate on a HELOC is currently 8.21 percent.
A cash-out first mortgage can also make sense if the rate is competitive with the rate on your existing mortgage. The national average for a 30-year fixed-rate mortgage is currently 6.49 percent. Saving 1.72 percent versus the HELOC rate can justify paying the higher closing costs. Although it's not interest-only, the extended loan term on the $275,000 loan balance should make the payments affordable. Try the Mortgage Professor's cash out refinancing calculator to see which of these two options makes sense.
Since I can't give you tax advice, you should ask your accountant whether it makes sense to draw down money from your IRA now to reduce the loan needed for home improvements or to pay down the principal balance on the mortgage(s), or wait until you are required to take distributions in your early 70's. My guess is that it makes sense to wait, but you don't want to guesstimate this decision. For financial flexibility, if you can afford the monthly payments on the mortgage(s), it makes more sense to keep the IRA money invested.
Monday September 11, 6:00 am ET
Don Taylor
Dear Dr. Don,
I'm 64 and need $75,000 for home upgrades. I have $300,000 plus in home equity. Would it be best to refinance with an interest-only loan to keep payments down, and then possibly get a reverse mortgage or use IRA monies and pay the taxes on that distribution?
-- Larry Leverage
Dear Larry,
Thanks for providing some additional information about your financial situation to me so I might better answer your question. You told me you are married, retired, have an annual income of about $45,000 per year and have excellent credit. You also told me that your home is worth about $550,000, and there is about $200,000 in outstanding mortgage debt on the home. You have about $150,000 in retirement accounts and no investments in taxable (nonretirement) accounts.
Lending limits on the two main reverse mortgage programs, HECM, or Home Equity Conversion Mortgage, and Fannie Mae Home Keeper, won't let you get a $275,000 reverse mortgage. That's because the first step in getting a reverse mortgage is to pay off any existing mortgages with the proceeds from the reverse mortgage. Put in your particulars using the reverse mortgage calculator at reversemortgage.org and you'll see the problem in black and white. Besides, it's an expensive way to tap the equity in your home, and I'd like to see you hold that option open for future use. A Bankrate feature, "Reverse mortgages: Retirement's on the house," explains reverse mortgages in greater depth.
I like the idea of using a home equity line of credit, or HELOC, even though, since it's a variable-rate loan, you are taking on the risk that short-term interest rates continue to head higher.
The two reasons why I like the HELOC are: The payments are interest-only in the early years of the loan, and closing costs are minimal. The downside is the national average interest rate on a HELOC is currently 8.21 percent.
A cash-out first mortgage can also make sense if the rate is competitive with the rate on your existing mortgage. The national average for a 30-year fixed-rate mortgage is currently 6.49 percent. Saving 1.72 percent versus the HELOC rate can justify paying the higher closing costs. Although it's not interest-only, the extended loan term on the $275,000 loan balance should make the payments affordable. Try the Mortgage Professor's cash out refinancing calculator to see which of these two options makes sense.
Since I can't give you tax advice, you should ask your accountant whether it makes sense to draw down money from your IRA now to reduce the loan needed for home improvements or to pay down the principal balance on the mortgage(s), or wait until you are required to take distributions in your early 70's. My guess is that it makes sense to wait, but you don't want to guesstimate this decision. For financial flexibility, if you can afford the monthly payments on the mortgage(s), it makes more sense to keep the IRA money invested.
Tuesday, August 01, 2006
Mortgage rates fall, await next Fed meetingThursday July 27, 6:00 am ET Holden Lewis
Mortgage rates are headed into hibernation until the next Federal Reserve rate-setting meeting. The benchmark 30-year fixed-rate mortgage fell 12 basis points to 6.77 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.28 discount and origination points. One year ago, the mortgage index was 5.84 percent; four weeks ago, it was 6.93 percent.
The benchmark 15-year fixed-rate mortgage fell 10 basis points to 6.39 percent. The benchmark 5/1 adjustable-rate mortgage fell 8 basis points to 6.47 percent. 50-50 on another rate hike?All of the declines occurred last week, immediately after Fed Chairman Ben Bernanke made comments to Congress that were deemed lenient on inflation. Bernanke said he didn't know if the Fed will raise short-term rates at its next scheduled meeting, on Aug. 8, and that the decision depends on economic data. The central bank has raised rates 17 times in a row. Before Bernanke's speech, investors were betting that there was a 90 percent chance that Aug. 8 would bring the 18th rate hike in a row. After his speech, another increase was given a 50-50 probability. Long-term rates and bond yields dropped the day of Bernanke's congressional testimony, and have stayed there in the week since. Weekly national mortgage survey Results of Bankrate.com's July 26, 2006, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan: 30-year fixed This week's rate: 6.77% Change from last week: -0.12% Monthly payment: $1,072.38 Change from last week: -$13.21
15-year fixed This week's rate: 6.39% Change from last week: -0.10% Monthly payment: $1,427.37 Change from last week: -$9.05 5-year ARM This week's rate: 6.47% Change from last week: -0.08% Monthly payment: $1,039.66 Change from last week: -$8.68 "Investors are trying to divine what the Fed will do Aug. 8," says Frank Nothaft, chief economist for Freddie Mac. The uncertainty left bond yields at a standstill this week. Mortgage rates have been steady, too, because they are heavily influenced by bond-like financial instruments called mortgage-backed securities. Fixed-rate fixationFixed-rate loans have become more popular at the expense of ARMs, and experts think that trend will continue. To understand why, look at the difference in rates between the benchmark 5/1 ARM and 30-year fixed. This week, the rate on a 5/1 ARM is barely a quarter of a percentage point lower, at 30 basis points. A year ago, the difference was about 40 basis points. A lot of economists expect the gap to narrow further. Nothaft predicts that in 2007, 19 percent of mortgages will be adjustables. Last week 28.6 of mortgage applications were for ARMs, according to the Mortgage Bankers Association.
Talk to a mortgage banker or economist about this, and you'll hear the phrase "flat yield curve." That phrase is another way of saying that there's not much difference between short-term and long-term bond yields. For example, this week the yield on a 10-year Treasury note was 5.07 percent, while the yield on a five-year Treasury was 5.02 percent. At a difference of 5 basis points, that's part of a flat yield curve. A year ago the difference was 18 basis points -- a steeper yield curve. The yield curve has flattened because the Fed has raised short-term rates eight times in the past year, while long-term rates haven't risen as much in response to low inflation expectations. Economists think the yield curve could flatten even more in the coming months. They make that prediction not because they expect the Fed to hike rates several more times (they forecast maybe one more), but because they think the inflation rate will drop.
ARMs still have appealBob Moulton, president of Americana Mortgage, a brokerage in New York, says ARMs will never go away, no matter how flat the yield curve. But they are losing their popularity. "It's my understanding that there's supposed to be a trillion dollars in ARMs that get reset next year," Moulton says. "I think maybe those people are tired of the ARMs, and a big portion will go toward fixed-rate mortgages." David Hall, executive vice president of Quicken Loans, says one factor could keep ARMs afloat: discount points. You get a bigger discount when you pay points on an ARM versus a fixed-rate loan, Hall says.
"A lot of folks who are going to be in their property for a long period of time probably do need to look at fixed rates," he says. But a lot of people know that they'll move within a few years, and it makes sense to look at ARMs. "As a mortgage banker, I always want to give clients that option," he says.
Mortgage rates are headed into hibernation until the next Federal Reserve rate-setting meeting. The benchmark 30-year fixed-rate mortgage fell 12 basis points to 6.77 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.28 discount and origination points. One year ago, the mortgage index was 5.84 percent; four weeks ago, it was 6.93 percent.
The benchmark 15-year fixed-rate mortgage fell 10 basis points to 6.39 percent. The benchmark 5/1 adjustable-rate mortgage fell 8 basis points to 6.47 percent. 50-50 on another rate hike?All of the declines occurred last week, immediately after Fed Chairman Ben Bernanke made comments to Congress that were deemed lenient on inflation. Bernanke said he didn't know if the Fed will raise short-term rates at its next scheduled meeting, on Aug. 8, and that the decision depends on economic data. The central bank has raised rates 17 times in a row. Before Bernanke's speech, investors were betting that there was a 90 percent chance that Aug. 8 would bring the 18th rate hike in a row. After his speech, another increase was given a 50-50 probability. Long-term rates and bond yields dropped the day of Bernanke's congressional testimony, and have stayed there in the week since. Weekly national mortgage survey Results of Bankrate.com's July 26, 2006, weekly national survey of large lenders and the effect on monthly payments for a $165,000 loan: 30-year fixed This week's rate: 6.77% Change from last week: -0.12% Monthly payment: $1,072.38 Change from last week: -$13.21
15-year fixed This week's rate: 6.39% Change from last week: -0.10% Monthly payment: $1,427.37 Change from last week: -$9.05 5-year ARM This week's rate: 6.47% Change from last week: -0.08% Monthly payment: $1,039.66 Change from last week: -$8.68 "Investors are trying to divine what the Fed will do Aug. 8," says Frank Nothaft, chief economist for Freddie Mac. The uncertainty left bond yields at a standstill this week. Mortgage rates have been steady, too, because they are heavily influenced by bond-like financial instruments called mortgage-backed securities. Fixed-rate fixationFixed-rate loans have become more popular at the expense of ARMs, and experts think that trend will continue. To understand why, look at the difference in rates between the benchmark 5/1 ARM and 30-year fixed. This week, the rate on a 5/1 ARM is barely a quarter of a percentage point lower, at 30 basis points. A year ago, the difference was about 40 basis points. A lot of economists expect the gap to narrow further. Nothaft predicts that in 2007, 19 percent of mortgages will be adjustables. Last week 28.6 of mortgage applications were for ARMs, according to the Mortgage Bankers Association.
Talk to a mortgage banker or economist about this, and you'll hear the phrase "flat yield curve." That phrase is another way of saying that there's not much difference between short-term and long-term bond yields. For example, this week the yield on a 10-year Treasury note was 5.07 percent, while the yield on a five-year Treasury was 5.02 percent. At a difference of 5 basis points, that's part of a flat yield curve. A year ago the difference was 18 basis points -- a steeper yield curve. The yield curve has flattened because the Fed has raised short-term rates eight times in the past year, while long-term rates haven't risen as much in response to low inflation expectations. Economists think the yield curve could flatten even more in the coming months. They make that prediction not because they expect the Fed to hike rates several more times (they forecast maybe one more), but because they think the inflation rate will drop.
ARMs still have appealBob Moulton, president of Americana Mortgage, a brokerage in New York, says ARMs will never go away, no matter how flat the yield curve. But they are losing their popularity. "It's my understanding that there's supposed to be a trillion dollars in ARMs that get reset next year," Moulton says. "I think maybe those people are tired of the ARMs, and a big portion will go toward fixed-rate mortgages." David Hall, executive vice president of Quicken Loans, says one factor could keep ARMs afloat: discount points. You get a bigger discount when you pay points on an ARM versus a fixed-rate loan, Hall says.
"A lot of folks who are going to be in their property for a long period of time probably do need to look at fixed rates," he says. But a lot of people know that they'll move within a few years, and it makes sense to look at ARMs. "As a mortgage banker, I always want to give clients that option," he says.
Wednesday, June 14, 2006
RealEstateJournal.com
Exotic Mortgages Remain Popular Despite Their Increasing Risks Jun 07, 2006, 9:00 pm PDT
Exotic Mortgages Remain Popular Despite Their Increasing RisksBy Rachel Koning Beals
Call it the triumph of the exotic mortgages.
Such loan innovations allow home buyers to put little money down and make low monthly payments. They've also poured fuel on one of the hottest and longest housing booms in the nation's history.
But in the wake of the Federal Reserve's push to take away easy money, low interest rates and red-hot home prices have faded away. With them went the main conditions that made interest-only and other flexible mortgages worth their risks. So the consumer's love affair with such loans is drawing to a close now, right?
Wrong.
Far from just another financing fad, exotic mortgages have become such a fixture on the U.S. housing landscape that they've proven to be a key lever for many borrowers even as they have become a greater danger at the same time.
"In our changing market, from unprecedented low rates to a steady rising of interest rates, these varieties of loan programs have become much more popular," says Bill Callanan, a partner with Mortgage Management Systems, a San Francisco mortgage broker. "But if you're scraping nickels together, they're not for you."
While traditional long-term, fixed-rate mortgages remain the loan of choice for the majority of home buyers, more borrowers are also shopping for interest-only loans, pay-option ARMs and hybrid fixed-ARM loans.
That's particularly true in high-cost housing markets, where taking one of those loans may be the only way to afford a house.
It worked well when double-digit home-price gains built equity while leaving more cash in homeowners' pockets. Low interest rates muted the potential sting of upward rate adjustments.
But neither of those conditions exist today: Interest rates are well above year-ago levels and home-price gains have cooled or, in some of the hottest markets, already started to erode.
One big problem, says Callanan, is that household incomes haven't been rising as fast as interest rates, creating greater affordability hurdles for home buyers. Borrowers who use these loans now are challenged more than ever to gauge the health of home prices in their area and measure their ability to stay on top of payments, and to know when to refinance.
Paying off
For some, the gamble still pays off. Regardless of the health of the housing market, say mortgage experts, increasingly savvy consumers want more control over their own finances, including being able to invest money that would otherwise be tied up in a mortgage.
They say the mortgage market should never be viewed as one-size-fits-all process, particularly because few homeowners keep the same loan for more than a few years -- they either move or refinance.
"There's a risk-taking attitude," says Anthony Hsieh, president of Lending Tree.com, an online brokerage. "People aren't as motivated to pay off their home. Most people aren't in their home for more than five to seven years, anyway."
That penchant for added risk, including some mortgages that allow borrowers to vary their payments or skip a payment, has drawn several warnings from regulators and from consumer watchdog groups, who anticipate a shock to monthly budgets once the impact of higher interest rates is fully felt. For many, that time is coming soon.
Since the Fed's two-year campaign to tighten monetary policy, there has been a pronounced effect on mortgage rates. The 1-year, Treasury-indexed adjustable-rate loan, for instance, has jumped to a national average rate of 5.68%, according to Freddie Mac, up from 4.26% a year ago and from a low of 3.39% in March of 2004.
Mortgage bankers concede that demand for alternative loans that reduce payments isn't as brisk as 12 months ago, in part due to the warnings. But marketing remains aggressive and mortgage lenders continue to compound the options: qualifying buyers now face an often confusing buffet of loans with terms of anywhere from 1 to even 50 years. Some of them can result in negative amortization -- an increasing monthly principal balance.
The complexity of these options can leave less-sophisticated borrowers at the mercy of lenders, who consumer groups charge are all too willing to entice home buyers with looser financing so that they may go after properties well out of their conventional reach.
"While the lending industry has characterized nontraditional borrowers as financially sophisticated and savvy consumers, the truth is that many are far from affluent and could be betting the house on their mortgage," says Allen Fishbein, director of credit and housing policy at the Consumer Federation of America. "Because homeownership is so critically important in financial security, these Americans are unwittingly putting their entire financial livelihood at risk."
The federation analyzed certain borrower and loan characteristics of more than 100,000 mortgages originated between January 2005 and October 2005. Their findings show that more than one-third of interest-only borrowers earned below $70,000 annually; about 1 in 6 earned less than $48,000. Some 35% of borrowers with the option to make a payment or not earned under $70,000; 1 in 8 earned less than $48,000.
Cash flow
"Truth is, an option ARM is appropriate for a very small part of the population," says Steve Habetz, president of Threshold Mortgage in Westport, Conn. "Think of a doctor just out of medical school, maybe with kids, and who wants a home in a desired school district and so is maybe going after more house. Negative amortization is worth it in this case because ultimately, that doctor's income will pick up and he's cut out transaction costs of moving up in house soon after that income kicks in."
Adds Habetz: "But that's not who [this loan] is being sold to. It's sold as this great cash-flow thing, eating up equity."
Interest-only mortgages carry their own risks, but Habetz says they typically make sense for a wider range of borrowers, offering the benefit of more control over monthly cash flow and providing a tax deduction on the interest payment.
While interest-only loans push back payments on principal to a set date (there's typically no penalty for paying toward principal early), an option ARM allows home buyers to vary their monthly payment. But as with many nontraditional loans, payments early on won't reduce the size of the loan, limiting the equity buildup and increasing the risk of default should home prices falter.
"We're socialized to think we ought to be paying down debt, but you can use debt to create wealth," Callanan says of the rationale behind taking out such loans.
Despite their prominence in the news, exotic mortgages do not, in fact, entice all that many Americans. The good old 30-year fixed-rate mortgage is still used by 72% of U.S. homeowners, although that loan type is less popular in the West, where home prices have been highest.
"Fixed rates are a great deal right now," says Greg Eckert, vice president of Centennial Mortgage in Kingston, N.Y. "Historically, rates under 7% are low and that is what we have at this time. This payment offers stability and predictability."
Even those wooed by adjustable rates are moving out on the spectrum. Five to 10-year ARMs are in much greater demand these days than 1-to-3-year plans, says D.C. Aiken, a North Carolina-based lender with Homebanc.
But that presents another personal-finance dilemma: Many of those holding 30-year mortgages are paying for security they don't need.
Rates on longer-term fixed loans are higher to compensate lenders for the interest-rate risk. With an adjustable-rate loan, homeowners share that risk with the lender and so get a break on rates, at least initially. Since homeowners move, on average, every seven years or so, it makes little sense for them to hold a 30-year loan.
That's why lenders like Hsieh believe demand will remain strong for alternative mortgage products. He says more borrowers will tailor their loan to their predicted stay in a house.
"But plans do change," he says. And then consumers need to be prepared to refinance, and at the mercy of current market rates.
Here's a short list of some of the loans being marketed today, their advantages and their risks:
30-year, fixed-rate, interest-only mortgages
These relatively new mortgages allow the borrower to make interest-only payments for the first 10 years. The principal balance is repaid over the final 20 years.
Advantages: Rate doesn't fluctuate; lower initial payments
Disadvantages: Fixed rates are generally higher than adjustable-rate mortgages; borrower doesn't build equity in the first 10 years (unless the home is appreciating); payments increase dramatically starting in the 11th year (however, lenders assume that the borrower's income has grown substantially over the first 10 years).
Adjustable rate, interest-only loans
The program is best suited for borrowers who have a proven track record for managing their finances well and understand the product's pros and cons.
Advantages: Rate can go down; initial payments are lower; borrower can pay down principal balance at any time and it resets the next month's payment.
Disadvantages: Risk of payment shock as rate can go up; risk of payment shock when amortization period begins; borrower not building equity during the interest-only period; these loans can have a balloon payment at the end of the interest-only period; also, at the end of the initial fixed-rate term the rate can adjust as often as every month.
40-year fixed-rate loans
This loan offers a payment nearly halfway between interest-only and 30-year fixed. The 40-year fixed works for buyers focused on the long-term value of their property and who want to build equity each month.
Advantages: Stability of a fixed rate and predictable payments; lower payments than traditional 30-year fixed rate loan.
Disadvantages: Rate slightly higher than 30-year fixed; longer term to pay off loan (slower equity build); balloon payment after 30 years.
Option ARM
Advantages: A popular product over the past few years because it allows consumers the option of making their payments in one of four different ways: Interest only, fully amortizing over 30 years, fully amortizing over 15 years or a minimum payment for 12 months.
Disadvantages: This loan shouldn't be used to qualify someone who wouldn't normally qualify for a regular fixed-rate loan. Sees gradually increasing minimum payments for the first five years, resulting in a higher loan balance and a significant payment shock in year six, when the loan is recast and fully amortizing payments are required.
'Piggyback' with home-equity loan
A primary mortgage can be combined with a home-equity loan or line of credit.
Advantage: Tends to eliminate the requirement to pay private-mortgage insurance.
Disadvantage: Sees payment shock of 48% over five years, beginning in the second year when the floating rate on the home-equity line of credit begins to adjust and increasing in year four when the fixed period on the first loan expires.
Exotic Mortgages Remain Popular Despite Their Increasing Risks Jun 07, 2006, 9:00 pm PDT
Exotic Mortgages Remain Popular Despite Their Increasing RisksBy Rachel Koning Beals
Call it the triumph of the exotic mortgages.
Such loan innovations allow home buyers to put little money down and make low monthly payments. They've also poured fuel on one of the hottest and longest housing booms in the nation's history.
But in the wake of the Federal Reserve's push to take away easy money, low interest rates and red-hot home prices have faded away. With them went the main conditions that made interest-only and other flexible mortgages worth their risks. So the consumer's love affair with such loans is drawing to a close now, right?
Wrong.
Far from just another financing fad, exotic mortgages have become such a fixture on the U.S. housing landscape that they've proven to be a key lever for many borrowers even as they have become a greater danger at the same time.
"In our changing market, from unprecedented low rates to a steady rising of interest rates, these varieties of loan programs have become much more popular," says Bill Callanan, a partner with Mortgage Management Systems, a San Francisco mortgage broker. "But if you're scraping nickels together, they're not for you."
While traditional long-term, fixed-rate mortgages remain the loan of choice for the majority of home buyers, more borrowers are also shopping for interest-only loans, pay-option ARMs and hybrid fixed-ARM loans.
That's particularly true in high-cost housing markets, where taking one of those loans may be the only way to afford a house.
It worked well when double-digit home-price gains built equity while leaving more cash in homeowners' pockets. Low interest rates muted the potential sting of upward rate adjustments.
But neither of those conditions exist today: Interest rates are well above year-ago levels and home-price gains have cooled or, in some of the hottest markets, already started to erode.
One big problem, says Callanan, is that household incomes haven't been rising as fast as interest rates, creating greater affordability hurdles for home buyers. Borrowers who use these loans now are challenged more than ever to gauge the health of home prices in their area and measure their ability to stay on top of payments, and to know when to refinance.
Paying off
For some, the gamble still pays off. Regardless of the health of the housing market, say mortgage experts, increasingly savvy consumers want more control over their own finances, including being able to invest money that would otherwise be tied up in a mortgage.
They say the mortgage market should never be viewed as one-size-fits-all process, particularly because few homeowners keep the same loan for more than a few years -- they either move or refinance.
"There's a risk-taking attitude," says Anthony Hsieh, president of Lending Tree.com, an online brokerage. "People aren't as motivated to pay off their home. Most people aren't in their home for more than five to seven years, anyway."
That penchant for added risk, including some mortgages that allow borrowers to vary their payments or skip a payment, has drawn several warnings from regulators and from consumer watchdog groups, who anticipate a shock to monthly budgets once the impact of higher interest rates is fully felt. For many, that time is coming soon.
Since the Fed's two-year campaign to tighten monetary policy, there has been a pronounced effect on mortgage rates. The 1-year, Treasury-indexed adjustable-rate loan, for instance, has jumped to a national average rate of 5.68%, according to Freddie Mac, up from 4.26% a year ago and from a low of 3.39% in March of 2004.
Mortgage bankers concede that demand for alternative loans that reduce payments isn't as brisk as 12 months ago, in part due to the warnings. But marketing remains aggressive and mortgage lenders continue to compound the options: qualifying buyers now face an often confusing buffet of loans with terms of anywhere from 1 to even 50 years. Some of them can result in negative amortization -- an increasing monthly principal balance.
The complexity of these options can leave less-sophisticated borrowers at the mercy of lenders, who consumer groups charge are all too willing to entice home buyers with looser financing so that they may go after properties well out of their conventional reach.
"While the lending industry has characterized nontraditional borrowers as financially sophisticated and savvy consumers, the truth is that many are far from affluent and could be betting the house on their mortgage," says Allen Fishbein, director of credit and housing policy at the Consumer Federation of America. "Because homeownership is so critically important in financial security, these Americans are unwittingly putting their entire financial livelihood at risk."
The federation analyzed certain borrower and loan characteristics of more than 100,000 mortgages originated between January 2005 and October 2005. Their findings show that more than one-third of interest-only borrowers earned below $70,000 annually; about 1 in 6 earned less than $48,000. Some 35% of borrowers with the option to make a payment or not earned under $70,000; 1 in 8 earned less than $48,000.
Cash flow
"Truth is, an option ARM is appropriate for a very small part of the population," says Steve Habetz, president of Threshold Mortgage in Westport, Conn. "Think of a doctor just out of medical school, maybe with kids, and who wants a home in a desired school district and so is maybe going after more house. Negative amortization is worth it in this case because ultimately, that doctor's income will pick up and he's cut out transaction costs of moving up in house soon after that income kicks in."
Adds Habetz: "But that's not who [this loan] is being sold to. It's sold as this great cash-flow thing, eating up equity."
Interest-only mortgages carry their own risks, but Habetz says they typically make sense for a wider range of borrowers, offering the benefit of more control over monthly cash flow and providing a tax deduction on the interest payment.
While interest-only loans push back payments on principal to a set date (there's typically no penalty for paying toward principal early), an option ARM allows home buyers to vary their monthly payment. But as with many nontraditional loans, payments early on won't reduce the size of the loan, limiting the equity buildup and increasing the risk of default should home prices falter.
"We're socialized to think we ought to be paying down debt, but you can use debt to create wealth," Callanan says of the rationale behind taking out such loans.
Despite their prominence in the news, exotic mortgages do not, in fact, entice all that many Americans. The good old 30-year fixed-rate mortgage is still used by 72% of U.S. homeowners, although that loan type is less popular in the West, where home prices have been highest.
"Fixed rates are a great deal right now," says Greg Eckert, vice president of Centennial Mortgage in Kingston, N.Y. "Historically, rates under 7% are low and that is what we have at this time. This payment offers stability and predictability."
Even those wooed by adjustable rates are moving out on the spectrum. Five to 10-year ARMs are in much greater demand these days than 1-to-3-year plans, says D.C. Aiken, a North Carolina-based lender with Homebanc.
But that presents another personal-finance dilemma: Many of those holding 30-year mortgages are paying for security they don't need.
Rates on longer-term fixed loans are higher to compensate lenders for the interest-rate risk. With an adjustable-rate loan, homeowners share that risk with the lender and so get a break on rates, at least initially. Since homeowners move, on average, every seven years or so, it makes little sense for them to hold a 30-year loan.
That's why lenders like Hsieh believe demand will remain strong for alternative mortgage products. He says more borrowers will tailor their loan to their predicted stay in a house.
"But plans do change," he says. And then consumers need to be prepared to refinance, and at the mercy of current market rates.
Here's a short list of some of the loans being marketed today, their advantages and their risks:
30-year, fixed-rate, interest-only mortgages
These relatively new mortgages allow the borrower to make interest-only payments for the first 10 years. The principal balance is repaid over the final 20 years.
Advantages: Rate doesn't fluctuate; lower initial payments
Disadvantages: Fixed rates are generally higher than adjustable-rate mortgages; borrower doesn't build equity in the first 10 years (unless the home is appreciating); payments increase dramatically starting in the 11th year (however, lenders assume that the borrower's income has grown substantially over the first 10 years).
Adjustable rate, interest-only loans
The program is best suited for borrowers who have a proven track record for managing their finances well and understand the product's pros and cons.
Advantages: Rate can go down; initial payments are lower; borrower can pay down principal balance at any time and it resets the next month's payment.
Disadvantages: Risk of payment shock as rate can go up; risk of payment shock when amortization period begins; borrower not building equity during the interest-only period; these loans can have a balloon payment at the end of the interest-only period; also, at the end of the initial fixed-rate term the rate can adjust as often as every month.
40-year fixed-rate loans
This loan offers a payment nearly halfway between interest-only and 30-year fixed. The 40-year fixed works for buyers focused on the long-term value of their property and who want to build equity each month.
Advantages: Stability of a fixed rate and predictable payments; lower payments than traditional 30-year fixed rate loan.
Disadvantages: Rate slightly higher than 30-year fixed; longer term to pay off loan (slower equity build); balloon payment after 30 years.
Option ARM
Advantages: A popular product over the past few years because it allows consumers the option of making their payments in one of four different ways: Interest only, fully amortizing over 30 years, fully amortizing over 15 years or a minimum payment for 12 months.
Disadvantages: This loan shouldn't be used to qualify someone who wouldn't normally qualify for a regular fixed-rate loan. Sees gradually increasing minimum payments for the first five years, resulting in a higher loan balance and a significant payment shock in year six, when the loan is recast and fully amortizing payments are required.
'Piggyback' with home-equity loan
A primary mortgage can be combined with a home-equity loan or line of credit.
Advantage: Tends to eliminate the requirement to pay private-mortgage insurance.
Disadvantage: Sees payment shock of 48% over five years, beginning in the second year when the floating rate on the home-equity line of credit begins to adjust and increasing in year four when the fixed period on the first loan expires.
Tuesday, June 13, 2006
ReutersFed's Olson says mortgage data raise questionsTuesday June 13, 11:16 am ET
WASHINGTON (Reuters) - Federal Reserve Governor Mark Olson said on Tuesday data collected under the U.S. Home Mortgage Disclosure Act raise troubling questions about lending to black and Hispanic borrowers and more research is needed.
"Black and Hispanic borrowers are more likely to obtain mortgage loans from institutions that tend to specialize in subprime lending," Olson said in testimony prepared for delivery to the House of Representatives Subcommittee on Financial Institutions.
In remarks that steered clear of the broad economy and monetary policy, Olson said while this may in part reflect such factors as borrower preference or credit scores not included in the HMDA data, there may be "more troubling causes."
"Segmentation may stem from borrowers being steered to lenders that charge higher prices than what is warranted by the credit characteristics of these borrowers," Olson said.
"Borrowers may also have different levels of financial literacy, or their knowledge of the mortgage lending process may be uneven -- for example, they may not understand the importance of shopping and negotiating for the best loan terms," he added, saying more research is needed on these subjects.
"The board will continue to conduct and promote research that explores the racial and ethnic differences in the incidence of higher-priced lending," Olson said.
He said the Fed will conduct hearings in June and July on the home equity lending market.
WASHINGTON (Reuters) - Federal Reserve Governor Mark Olson said on Tuesday data collected under the U.S. Home Mortgage Disclosure Act raise troubling questions about lending to black and Hispanic borrowers and more research is needed.
"Black and Hispanic borrowers are more likely to obtain mortgage loans from institutions that tend to specialize in subprime lending," Olson said in testimony prepared for delivery to the House of Representatives Subcommittee on Financial Institutions.
In remarks that steered clear of the broad economy and monetary policy, Olson said while this may in part reflect such factors as borrower preference or credit scores not included in the HMDA data, there may be "more troubling causes."
"Segmentation may stem from borrowers being steered to lenders that charge higher prices than what is warranted by the credit characteristics of these borrowers," Olson said.
"Borrowers may also have different levels of financial literacy, or their knowledge of the mortgage lending process may be uneven -- for example, they may not understand the importance of shopping and negotiating for the best loan terms," he added, saying more research is needed on these subjects.
"The board will continue to conduct and promote research that explores the racial and ethnic differences in the incidence of higher-priced lending," Olson said.
He said the Fed will conduct hearings in June and July on the home equity lending market.
Monday, June 12, 2006
A&L continues to build on mortgages
By Helen Thomas Mon Jun 12, 4:55 AM ET
Alliance & Leicester, which is being eyed as a possible bid target by France's Crédit Agricole, continued to increase its share of the UK mortgage market in the first quarter of the year.
The UK bank said on Monday that it took 6.3 per cent of net new mortgage lending in the first three months of 2006, up from 5.4 per cent in 2005. The bank's traditional share - its share of the UK's existing stock of mortgage lending - is around 3.4 per cent.
Crédit Agricole was forced to admit in May that it was mulling a bid for A&L but said that its evaluation was at a preliminary stage. The French bank has EU15bn to spend on acquisitions and is looking at Germany, Spain and the UK now it has integrated its last acquisition - the French bank Credit Lyonnais.
Costs for the first half should be broadly similar to last year, A&L said, but the interest margin - a measure of profitability- continued to come under pressure as the bank did more of its business in less profitable segments of the market.
A&L will shortly begin doing business in the risker parts of the UK market, selling buy-to-let, near-prime and sub-prime products in partnership with Lehman Brothers. The specialist loans will sit on the investment bank's balance sheet, enabling A&L to avoid rising charges for bad debts.
The mortgage bank, which has always focused on prime residential lending rather than these riskier areas, said in Monday's statement that its asset quality remained strong, particularly in mortgages and commercial lending.
In unsecured lending, A&L said it had tightened its credit criteria this year as the overall market deterioriates. The proportion of loans in arrears rose to 5.7 per cent at the end of May, up from 5.1 per cent at the end of December.
But A&L said that its leading credit indicators, the quality of the loans it has written most recently, were showing signs of improvement.
Unsecured loan balances remained stable compared to the end of 2005, at £3.5bn, while the UK's shaky consumer environment and A&L's more stringent criteria meant unsecured lending fell in the first quarter to £565m, from £890m last year.
The bank said that sales of new current accounts were "significantly higher" than in the first three months of 2005, while the number of new business accounts opened was more than 30 per cent higher.
Shares in Alliance & Leicester rose 1.6 per cent to £11.82 in early trade.
James Eden, analyst at Dresdner Kleinwort Wasserstein, said that the statement would not prompt a change in his numbers for A&L and that shareholders would be waiting for news from Crédit Agricole, or from Spain's Santander, another potential A&L suitor.
Mr Eden added: "There's no doubt the company looks expensive on a standalone basis...but we have always argued that you should pay something for a take-out hope: A&L remains the best takeover target in the UK."
By Helen Thomas Mon Jun 12, 4:55 AM ET
Alliance & Leicester, which is being eyed as a possible bid target by France's Crédit Agricole, continued to increase its share of the UK mortgage market in the first quarter of the year.
The UK bank said on Monday that it took 6.3 per cent of net new mortgage lending in the first three months of 2006, up from 5.4 per cent in 2005. The bank's traditional share - its share of the UK's existing stock of mortgage lending - is around 3.4 per cent.
Crédit Agricole was forced to admit in May that it was mulling a bid for A&L but said that its evaluation was at a preliminary stage. The French bank has EU15bn to spend on acquisitions and is looking at Germany, Spain and the UK now it has integrated its last acquisition - the French bank Credit Lyonnais.
Costs for the first half should be broadly similar to last year, A&L said, but the interest margin - a measure of profitability- continued to come under pressure as the bank did more of its business in less profitable segments of the market.
A&L will shortly begin doing business in the risker parts of the UK market, selling buy-to-let, near-prime and sub-prime products in partnership with Lehman Brothers. The specialist loans will sit on the investment bank's balance sheet, enabling A&L to avoid rising charges for bad debts.
The mortgage bank, which has always focused on prime residential lending rather than these riskier areas, said in Monday's statement that its asset quality remained strong, particularly in mortgages and commercial lending.
In unsecured lending, A&L said it had tightened its credit criteria this year as the overall market deterioriates. The proportion of loans in arrears rose to 5.7 per cent at the end of May, up from 5.1 per cent at the end of December.
But A&L said that its leading credit indicators, the quality of the loans it has written most recently, were showing signs of improvement.
Unsecured loan balances remained stable compared to the end of 2005, at £3.5bn, while the UK's shaky consumer environment and A&L's more stringent criteria meant unsecured lending fell in the first quarter to £565m, from £890m last year.
The bank said that sales of new current accounts were "significantly higher" than in the first three months of 2005, while the number of new business accounts opened was more than 30 per cent higher.
Shares in Alliance & Leicester rose 1.6 per cent to £11.82 in early trade.
James Eden, analyst at Dresdner Kleinwort Wasserstein, said that the statement would not prompt a change in his numbers for A&L and that shareholders would be waiting for news from Crédit Agricole, or from Spain's Santander, another potential A&L suitor.
Mr Eden added: "There's no doubt the company looks expensive on a standalone basis...but we have always argued that you should pay something for a take-out hope: A&L remains the best takeover target in the UK."
Sunday, June 11, 2006
Quicken Loans
Online Chat Helps Deaf Clients Get Mortgages Jun 09, 2006, 11:04 am PDT
News provided by Quicken Loans
Lenders are continually making it easier for clients to get a mortgage. Some have even gone to great lengths by using innovative technology such as the Internet. Lenders such as Quicken Loans have taken it a step further by using popular Web-based features such as online chat. This tool has become particularly valuable for the deaf community who generally either has to use e-mail or rely on a "relay service" to communicate.
And, considering obtaining a mortgage is one of the most stressful situations a person may ever have to deal with, having the appropriate means for communication is key. Innovative lenders give their clients several ways to contact them, be it telephone, e-mail, chat, or telephone and video relay service. But the company's mortgage bankers have learned that their deaf clients prefer online chat and e-mail as their primary form of communication.
"We are embracing the deaf community with our new online chat feature," said Bryan Stapp, chief marketing officer, Quicken Loans. "Using online chat, our deaf clients can conduct the most important parts of their home financing transaction directly with their mortgage banker without having to rely on a third party service."
In a secure setting, clients provide their personal information via chat, allowing mortgage bankers to ask questions about their personal financial goals and needs in order to research the best purchase and refinance programs for the client's situation.
"Online chat is great for hearing-impaired people to communicate with hearing people," said Ted Baldwin, a deaf client who used the Quicken Loans chat service to carry out his mortgage transactions.
Baldwin, of Oakland, Calif., planned to browse the Quicken Loans Web site for home loan information, when he noticed the "Chat Online Now!" button.
"Because of the chat service, I was able to get more information than I expected," he said. "And I'd rather chat directly with a person. It doesn't take a lot of time."
While online chat is popular with Quicken Loans deaf clients, Stapp adds that anyone with a computer and Internet connection can use it, and many do. He said chat is a helpful service for clients who don't have a lot of privacy at work or parents who use chat late at night, so as to not disturb their sleeping family.
By using technology such as online chat, lenders like Quicken Loans are getting ahead of the game by encouraging all types of clients to apply for a mortgage. That kind of technology makes it easier to communicate with the lender and get through a complicated and sometimes overwhelming process.
This article is reprinted by permission from Quicken Loans © 2006 Quicken Loans Inc. All rights reserved.
Online Chat Helps Deaf Clients Get Mortgages Jun 09, 2006, 11:04 am PDT
News provided by Quicken Loans
Lenders are continually making it easier for clients to get a mortgage. Some have even gone to great lengths by using innovative technology such as the Internet. Lenders such as Quicken Loans have taken it a step further by using popular Web-based features such as online chat. This tool has become particularly valuable for the deaf community who generally either has to use e-mail or rely on a "relay service" to communicate.
And, considering obtaining a mortgage is one of the most stressful situations a person may ever have to deal with, having the appropriate means for communication is key. Innovative lenders give their clients several ways to contact them, be it telephone, e-mail, chat, or telephone and video relay service. But the company's mortgage bankers have learned that their deaf clients prefer online chat and e-mail as their primary form of communication.
"We are embracing the deaf community with our new online chat feature," said Bryan Stapp, chief marketing officer, Quicken Loans. "Using online chat, our deaf clients can conduct the most important parts of their home financing transaction directly with their mortgage banker without having to rely on a third party service."
In a secure setting, clients provide their personal information via chat, allowing mortgage bankers to ask questions about their personal financial goals and needs in order to research the best purchase and refinance programs for the client's situation.
"Online chat is great for hearing-impaired people to communicate with hearing people," said Ted Baldwin, a deaf client who used the Quicken Loans chat service to carry out his mortgage transactions.
Baldwin, of Oakland, Calif., planned to browse the Quicken Loans Web site for home loan information, when he noticed the "Chat Online Now!" button.
"Because of the chat service, I was able to get more information than I expected," he said. "And I'd rather chat directly with a person. It doesn't take a lot of time."
While online chat is popular with Quicken Loans deaf clients, Stapp adds that anyone with a computer and Internet connection can use it, and many do. He said chat is a helpful service for clients who don't have a lot of privacy at work or parents who use chat late at night, so as to not disturb their sleeping family.
By using technology such as online chat, lenders like Quicken Loans are getting ahead of the game by encouraging all types of clients to apply for a mortgage. That kind of technology makes it easier to communicate with the lender and get through a complicated and sometimes overwhelming process.
This article is reprinted by permission from Quicken Loans © 2006 Quicken Loans Inc. All rights reserved.
Saturday, June 10, 2006
Realty Times
What Do Wealthy Real Estate Holders Do To Get Richer? Jun 10, 2006, 12:00 pm PDT
Recent reports have suggested that America's wealthiest people don't place much stock in real estate values going up this year. But with the stock market so volatile, where else would they put their money? According to asset manager U.S. Trust in its 2006 Survey of Affluent Americans, nine out of 10 wealthy portfolio holders said they expect an 8 percent return from U.S. stocks, while only 48 percent said they expect real estate to increase in value over the next year. Thirty-three percent of survey respondents expect real estate values to decline, up from 14 percent who felt that way last year. Respondents had an annual adjusted gross income of more than $300,000 or net worth greater than $5.9 million, including real estate.
While the report failed to mention what percentage of their portfolios are held in real estate, it's clear that these investors aren't any better off investing in the stock market (unless they're insiders with inside information that allows them to dump before getting dumped.)
As rising interest rates have cooled housing in formerly hot markets, the stock market has taken several 100-point nosedives over interest rate fears, rising global interest rates, high gas prices, world unrest and rising inflation, illustrating that it's more volatile than housing as far as investment earnings go. Home prices have continued to rise over 2006, but are far from reaching the double-digit increases of the past five years. This year, says the National Association of Realtors, home prices are likely to rise in the 6 percent range, which is about a point or two higher than inflation. That's an historical and far more normal return on residential real estate. So how do wealthy people buy real estate? Do they choose the dividends over capital gains?
Like investors search for beaten down gems in blue chip and other oversold stocks, the wealthy spend their housing dollars on neighborhoods, houses and features that are likely to uphold and grow their investment.
They aren't overly lavish, and they buy for quality. They may have some widely-accepted luxuries such as designer kitchens, media rooms and wine cellars, but they don't tend to spend on amenities such as heated floors, tennis courts, or backyard putting greens.
Says a recent Coldwell Banker Previews International Luxury Survey, owners of million-dollar properties like to live well and they buy for comfort, but they make sure they have enough money left over to fund other discretionary purchases -- like second homes (35 percent) or investment properties.
"What that tells us is that they understand that real estate remains a solid, long-term investment, and one they can enjoy," says Jim Gillespie, president and CEO, Coldwell Banker Real Estate Corporation.
Eating well and entertainment are priorities for million-dollar homeowners, among others, suggests the survey:
65 percent have designer kitchens
37 percent have or are considering adding a wine cellar to their homes
59 percent have a room devoted exclusively to entertainment and of these, 89 percent can accommodate more than six people
84 percent have media systems such as DVD players and surround sound
57 percent have a wet bar
24 percent have movie-theater seating
54 percent own or plan to buy original artwork
86 percent have a security system
67 percent have professional landscaping
38 percent have an in-ground swimming pool
35 percent have a hot tub
Coldwell Banker supplies the investments that U.S. Trust failed to provide. Surprisingly, million-dollar homeowners don't appear to be large risk-takers when it comes to their holdings when they view them as retirement funds:
29 percent own stocks
23 percent own mutual funds
19 percent own real estate
14 percent own mixed portfolios including real estate
11 percent own bonds
11 percent own mixed portfolios excluding real estate
7 percent own a 401K
2 percent own CDs
2 percent own IRAs
2 percent own annuities
1 percent have a pension fund
Forty-three percent of luxury homeowners surveyed made more than $500,000 annually, with 41 percent earning between $200,000 and $500,000.
"Because of smart investments, equity in their homes, and in some cases, inheritances, luxury properties have become attainable for many Americans," says Gillespie.
What Do Wealthy Real Estate Holders Do To Get Richer? Jun 10, 2006, 12:00 pm PDT
Recent reports have suggested that America's wealthiest people don't place much stock in real estate values going up this year. But with the stock market so volatile, where else would they put their money? According to asset manager U.S. Trust in its 2006 Survey of Affluent Americans, nine out of 10 wealthy portfolio holders said they expect an 8 percent return from U.S. stocks, while only 48 percent said they expect real estate to increase in value over the next year. Thirty-three percent of survey respondents expect real estate values to decline, up from 14 percent who felt that way last year. Respondents had an annual adjusted gross income of more than $300,000 or net worth greater than $5.9 million, including real estate.
While the report failed to mention what percentage of their portfolios are held in real estate, it's clear that these investors aren't any better off investing in the stock market (unless they're insiders with inside information that allows them to dump before getting dumped.)
As rising interest rates have cooled housing in formerly hot markets, the stock market has taken several 100-point nosedives over interest rate fears, rising global interest rates, high gas prices, world unrest and rising inflation, illustrating that it's more volatile than housing as far as investment earnings go. Home prices have continued to rise over 2006, but are far from reaching the double-digit increases of the past five years. This year, says the National Association of Realtors, home prices are likely to rise in the 6 percent range, which is about a point or two higher than inflation. That's an historical and far more normal return on residential real estate. So how do wealthy people buy real estate? Do they choose the dividends over capital gains?
Like investors search for beaten down gems in blue chip and other oversold stocks, the wealthy spend their housing dollars on neighborhoods, houses and features that are likely to uphold and grow their investment.
They aren't overly lavish, and they buy for quality. They may have some widely-accepted luxuries such as designer kitchens, media rooms and wine cellars, but they don't tend to spend on amenities such as heated floors, tennis courts, or backyard putting greens.
Says a recent Coldwell Banker Previews International Luxury Survey, owners of million-dollar properties like to live well and they buy for comfort, but they make sure they have enough money left over to fund other discretionary purchases -- like second homes (35 percent) or investment properties.
"What that tells us is that they understand that real estate remains a solid, long-term investment, and one they can enjoy," says Jim Gillespie, president and CEO, Coldwell Banker Real Estate Corporation.
Eating well and entertainment are priorities for million-dollar homeowners, among others, suggests the survey:
65 percent have designer kitchens
37 percent have or are considering adding a wine cellar to their homes
59 percent have a room devoted exclusively to entertainment and of these, 89 percent can accommodate more than six people
84 percent have media systems such as DVD players and surround sound
57 percent have a wet bar
24 percent have movie-theater seating
54 percent own or plan to buy original artwork
86 percent have a security system
67 percent have professional landscaping
38 percent have an in-ground swimming pool
35 percent have a hot tub
Coldwell Banker supplies the investments that U.S. Trust failed to provide. Surprisingly, million-dollar homeowners don't appear to be large risk-takers when it comes to their holdings when they view them as retirement funds:
29 percent own stocks
23 percent own mutual funds
19 percent own real estate
14 percent own mixed portfolios including real estate
11 percent own bonds
11 percent own mixed portfolios excluding real estate
7 percent own a 401K
2 percent own CDs
2 percent own IRAs
2 percent own annuities
1 percent have a pension fund
Forty-three percent of luxury homeowners surveyed made more than $500,000 annually, with 41 percent earning between $200,000 and $500,000.
"Because of smart investments, equity in their homes, and in some cases, inheritances, luxury properties have become attainable for many Americans," says Gillespie.
Friday, June 09, 2006
Fixed mortgage rates fallThursday June 8, 6:00 am ET Holden Lewis
Numbers spoke louder than words this week as long-term mortgage rates fell.
Ben Bernanke, chairman of the Federal Reserve, caused bond yields to rise when he implied that the central bank might raise short-term interest rates again. But in the mortgage world, Bernanke's words were considered just that -- mere words, subject to interpretation.
The thing that moved mortgage rates came a few days before Bernanke's speech, in the May employment report. It needed little interpretation. Job growth was weak, when Wall Street had expected it to be strong. Bond yields tumbled, and long-term mortgage rates followed.
The benchmark 30-year fixed-rate mortgage fell 3 basis points to 6.69 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index was 5.61 percent; four weeks ago, it was 6.67 percent.
The 15-year fixed-rate mortgage fell 1 basis point to 6.31 percent. The 5/1 adjustable-rate mortgage rose 3 basis points to 6.32 percent.
The rate-moving trioMortgage rates tend to move up and down with Treasury yields, which in turn move up and down in reaction to a lot of economic factors. Lately, Treasury yields have been especially sensitive to three of these: the Consumer Price Index, the monthly employment report and decisions of the Federal Reserve's rate-setting committee. The latter two came into play in the past week.
First came the May employment report, in which the Labor Department said that the economy grew by a net 75,000 jobs last month. That's fine if you're one of those 75,000 people, but investors were dismayed, because they had expected the number to be around 170,000. Wall Street expected the employment report to rumble like a Harley, but it putt-putted like a Vespa.
"Dear Mr. Bernanke: You wanted weakness, you got weakness," wrote economist Joel Naroff, adding that job growth in May was "extremely disappointing." He said it was ominous that the preliminary estimates for job growth in March and April were revised downward.
Given the anemic job growth, it's no surprise that hourly income barely budged upward and the average workweek was six minutes shorter. The employment report painted a portrait of a modestly growing economy in which inflation shouldn't be much of a threat. Investors concluded that the odds were against another Fed rate increase at the end of this month. The yield on the 10-year Treasury note fell 11 basis points, hinting at a corresponding drop in the 30-year fixed mortgage rate.
Inflation concerns reappearThree days later, Bernanke spoke in Washington at the International Monetary Conference, and he complained about inflation. He said core inflation -- consumer prices minus volatile food and energy costs -- might be "at or above the upper end of the range that many economists, including myself, would consider consistent with price stability and the promotion of long-run growth." He called recent price trends "unwelcome developments."
Wall Street saw this as a signal that the Fed is likely to raise the federal funds rate again June 29. The yield on the 10-year Treasury rose only a couple of basis points, because the long-term outlook for inflation is benign. But the five-year Treasury jumped, taking back the drop that came in reaction to the employment report.
Numbers spoke louder than words this week as long-term mortgage rates fell.
Ben Bernanke, chairman of the Federal Reserve, caused bond yields to rise when he implied that the central bank might raise short-term interest rates again. But in the mortgage world, Bernanke's words were considered just that -- mere words, subject to interpretation.
The thing that moved mortgage rates came a few days before Bernanke's speech, in the May employment report. It needed little interpretation. Job growth was weak, when Wall Street had expected it to be strong. Bond yields tumbled, and long-term mortgage rates followed.
The benchmark 30-year fixed-rate mortgage fell 3 basis points to 6.69 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.35 discount and origination points. One year ago, the mortgage index was 5.61 percent; four weeks ago, it was 6.67 percent.
The 15-year fixed-rate mortgage fell 1 basis point to 6.31 percent. The 5/1 adjustable-rate mortgage rose 3 basis points to 6.32 percent.
The rate-moving trioMortgage rates tend to move up and down with Treasury yields, which in turn move up and down in reaction to a lot of economic factors. Lately, Treasury yields have been especially sensitive to three of these: the Consumer Price Index, the monthly employment report and decisions of the Federal Reserve's rate-setting committee. The latter two came into play in the past week.
First came the May employment report, in which the Labor Department said that the economy grew by a net 75,000 jobs last month. That's fine if you're one of those 75,000 people, but investors were dismayed, because they had expected the number to be around 170,000. Wall Street expected the employment report to rumble like a Harley, but it putt-putted like a Vespa.
"Dear Mr. Bernanke: You wanted weakness, you got weakness," wrote economist Joel Naroff, adding that job growth in May was "extremely disappointing." He said it was ominous that the preliminary estimates for job growth in March and April were revised downward.
Given the anemic job growth, it's no surprise that hourly income barely budged upward and the average workweek was six minutes shorter. The employment report painted a portrait of a modestly growing economy in which inflation shouldn't be much of a threat. Investors concluded that the odds were against another Fed rate increase at the end of this month. The yield on the 10-year Treasury note fell 11 basis points, hinting at a corresponding drop in the 30-year fixed mortgage rate.
Inflation concerns reappearThree days later, Bernanke spoke in Washington at the International Monetary Conference, and he complained about inflation. He said core inflation -- consumer prices minus volatile food and energy costs -- might be "at or above the upper end of the range that many economists, including myself, would consider consistent with price stability and the promotion of long-run growth." He called recent price trends "unwelcome developments."
Wall Street saw this as a signal that the Fed is likely to raise the federal funds rate again June 29. The yield on the 10-year Treasury rose only a couple of basis points, because the long-term outlook for inflation is benign. But the five-year Treasury jumped, taking back the drop that came in reaction to the employment report.
Thursday, June 08, 2006
Realty Times
Realty Reality: NAR Adopts Ethics Rules for Internet Jun 08, 2006, 12:00 pm PDT
Over the years the National Association of Realtors® (NAR) has developed a comprehensive Code of Ethics dealing with a wide variety of situations and circumstances that may arise in the real estate business. Members of NAR -- the only persons entitled to claim the designation of "Realtor®" -- agree to abide by the spirit and the requirements of that code.
In recent years, though, it has sometimes not been entirely clear as to how, or even if, the provisions of the Code of Ethics apply to the business activities in which Realtors® engage on the internet. This lack of clarity has no doubt been exacerbated by the anything-goes, no-rules, wild-west atmosphere that has sometimes been associated with the net. For Realtors®, questions about the applicability of the ethics code have recently been answered.
Recently the Professional Standards Committee of NAR submitted to its Board of Directors a number of recommendations for internet-related amendments and additions to the Code. This occurred at the association's mid-year meetings which were held in Washington, D.C. The recommendations were wholeheartedly adopted, and will become effective with next January's publication of the updated edition of the Code. It is clear that these recommendations represented only a beginning, and that further internet-related updates will be forthcoming.
Of the recommendations presented in Washington, those that had to do with internet advertising are the ones that will probably have the greatest impact on Realtor® practices. These fall under the general provision of the Code of Ethics, Article 12, which stipulates that "Realtors® shall be careful at all times to present a true picture in their advertising and representations to the public."
Article 12 deals with more than what most might think of as "false advertising." That is, it doesn't only relate to what is said about a Realtor®'s products (properties for sale) or services. It also requires that an ad must be truthful about who is doing the advertising. Thus, when a Realtor® advertises a property for sale, he or she must include some indication of their professional status. (In California, this is a requirement of state law as well.) Not only does the Code require that the professional status of the individual be indicated, but also it requires that the name of the firm must be stated in the ad.
Article 12 is occasionally breached in print media, but it seems to be done with much greater frequency in the electronic environment. Agent websites, particularly those of teams, will sometimes lack the name of the broker or realty firm with which the agent is associated. The newly-adopted amendment makes clear that, even in electronic environments, the name of the broker's firm must be displayed.
Moreover, it is also required that the Realtor®'s firm name be displayed in "a reasonable and readily apparent manner." We've all seen signs where a firm name appears in considerably smaller print than does that of the agent. On a web page, it is even easier for a firm name to be "lost" as it may take a bit of scrolling even to find it. There is little doubt that this issue will be revisited as disputes arise as to what "readily apparent" may mean. An agent website typically consists of a number of pages, will the firm name have to appear on every page, or on the "frame" of each page?
At this point, more questions than answers have been raised with regard to applying the Code to the internet environment. There will be further discussions about misleading domain names (e.g. nameofcitymls.com) and even meta tags that trick a search engine and lead a consumer to an agent site posing as something else. All of this will get sorted out in time, maybe. But one thing is crystal clear right now: Realtors® should know that the Code of Ethics definitely applies to advertising and other business activities on the internet.
Realty Reality: NAR Adopts Ethics Rules for Internet Jun 08, 2006, 12:00 pm PDT
Over the years the National Association of Realtors® (NAR) has developed a comprehensive Code of Ethics dealing with a wide variety of situations and circumstances that may arise in the real estate business. Members of NAR -- the only persons entitled to claim the designation of "Realtor®" -- agree to abide by the spirit and the requirements of that code.
In recent years, though, it has sometimes not been entirely clear as to how, or even if, the provisions of the Code of Ethics apply to the business activities in which Realtors® engage on the internet. This lack of clarity has no doubt been exacerbated by the anything-goes, no-rules, wild-west atmosphere that has sometimes been associated with the net. For Realtors®, questions about the applicability of the ethics code have recently been answered.
Recently the Professional Standards Committee of NAR submitted to its Board of Directors a number of recommendations for internet-related amendments and additions to the Code. This occurred at the association's mid-year meetings which were held in Washington, D.C. The recommendations were wholeheartedly adopted, and will become effective with next January's publication of the updated edition of the Code. It is clear that these recommendations represented only a beginning, and that further internet-related updates will be forthcoming.
Of the recommendations presented in Washington, those that had to do with internet advertising are the ones that will probably have the greatest impact on Realtor® practices. These fall under the general provision of the Code of Ethics, Article 12, which stipulates that "Realtors® shall be careful at all times to present a true picture in their advertising and representations to the public."
Article 12 deals with more than what most might think of as "false advertising." That is, it doesn't only relate to what is said about a Realtor®'s products (properties for sale) or services. It also requires that an ad must be truthful about who is doing the advertising. Thus, when a Realtor® advertises a property for sale, he or she must include some indication of their professional status. (In California, this is a requirement of state law as well.) Not only does the Code require that the professional status of the individual be indicated, but also it requires that the name of the firm must be stated in the ad.
Article 12 is occasionally breached in print media, but it seems to be done with much greater frequency in the electronic environment. Agent websites, particularly those of teams, will sometimes lack the name of the broker or realty firm with which the agent is associated. The newly-adopted amendment makes clear that, even in electronic environments, the name of the broker's firm must be displayed.
Moreover, it is also required that the Realtor®'s firm name be displayed in "a reasonable and readily apparent manner." We've all seen signs where a firm name appears in considerably smaller print than does that of the agent. On a web page, it is even easier for a firm name to be "lost" as it may take a bit of scrolling even to find it. There is little doubt that this issue will be revisited as disputes arise as to what "readily apparent" may mean. An agent website typically consists of a number of pages, will the firm name have to appear on every page, or on the "frame" of each page?
At this point, more questions than answers have been raised with regard to applying the Code to the internet environment. There will be further discussions about misleading domain names (e.g. nameofcitymls.com) and even meta tags that trick a search engine and lead a consumer to an agent site posing as something else. All of this will get sorted out in time, maybe. But one thing is crystal clear right now: Realtors® should know that the Code of Ethics definitely applies to advertising and other business activities on the internet.
Wednesday, June 07, 2006
Arizona is definitely a hot spot. Who woulda thought the desert was the place to be?
Investing in 'Hot' Markets Like Phoenix Without Getting Burned Jun 01, 2006, 9:00 pm PDT
Investing in 'Hot' Markets Like Phoenix Without Getting BurnedBy June Fletcher
Question: I am looking to buy a couple of condominiums -- having them as rental units and then selling them. I am interested in areas that are up-and-coming and have good growth potential but where property prices are still reasonably inexpensive. From the little research I have done, Phoenix seems like a good place. What are your thoughts?
-- Shivanee Nadarajah, Oakland, Calif.
Shivanee: I certainly can see why you'd be interested in Phoenix. At a time when media chatter is all about how much housing is cooling, Phoenix has been as hot as a mid-summer day in the desert. According to the National Association of Realtors, in the first quarter of 2006, the largest single-family home price increase in the country was in Phoenix, where the median price rose to $268,300, up 38.4% from the same period a year ago. Phoenix topped the list in the condo sector, too -- the median price hit $179,600, up 38% from a year ago. Multi-Housing News says it expects Phoenix to be "one of the better performing markets in the nation," over the next year, with 8,000 new residents expected to come to the metro area each month in 2006, as employers add 71,000 new jobs, an increase over last year of 4%. The trade publication expects that over the rest of the year, vacancy rates will decline 70 basis points, to 7.4%.
But the city's housing heat wave may not last much longer. Arizona State University's Arizona Real Estate Center noted that the housing market in Phoenix and its suburbs slowed in April, with sales of existing homes falling to 5,980, a 32% drop from the year before -- the weakest April since 2000. Price growth is slowing, too, the center notes, since the rapid gains of the past year have made homes less affordable. The financial Web site Bankrate.com recently put Phoenix on its "bubble buster" list, partly because lot prices are rising rapidly and the area is being flooded with new homes.
So I'd suggest that you exercise some caution. While an influx of job-seekers and rising home prices will strengthen Phoenix's rental market in the short run, in the long term, supply may well outpace demand. If that happens, today's hot housing buys will be tomorrow's hot potatoes.
To hedge against that risk -- in Phoenix or any other potentially bubblicious city -- you may want to buy a property and then offer your tenants a lease with an option to buy. A lease option will attract renters who are serious about buying but are put off temporarily because of high prices, rising mortgage interest rates or other factors. No matter what happens to home prices in the area, your tenants will still have an incentive to buy from you, since you won't have to pay a real-estate commission and will be able to offer buyers a lower price -- and the place will already be their "home."
Investing in 'Hot' Markets Like Phoenix Without Getting Burned Jun 01, 2006, 9:00 pm PDT
Investing in 'Hot' Markets Like Phoenix Without Getting BurnedBy June Fletcher
Question: I am looking to buy a couple of condominiums -- having them as rental units and then selling them. I am interested in areas that are up-and-coming and have good growth potential but where property prices are still reasonably inexpensive. From the little research I have done, Phoenix seems like a good place. What are your thoughts?
-- Shivanee Nadarajah, Oakland, Calif.
Shivanee: I certainly can see why you'd be interested in Phoenix. At a time when media chatter is all about how much housing is cooling, Phoenix has been as hot as a mid-summer day in the desert. According to the National Association of Realtors, in the first quarter of 2006, the largest single-family home price increase in the country was in Phoenix, where the median price rose to $268,300, up 38.4% from the same period a year ago. Phoenix topped the list in the condo sector, too -- the median price hit $179,600, up 38% from a year ago. Multi-Housing News says it expects Phoenix to be "one of the better performing markets in the nation," over the next year, with 8,000 new residents expected to come to the metro area each month in 2006, as employers add 71,000 new jobs, an increase over last year of 4%. The trade publication expects that over the rest of the year, vacancy rates will decline 70 basis points, to 7.4%.
But the city's housing heat wave may not last much longer. Arizona State University's Arizona Real Estate Center noted that the housing market in Phoenix and its suburbs slowed in April, with sales of existing homes falling to 5,980, a 32% drop from the year before -- the weakest April since 2000. Price growth is slowing, too, the center notes, since the rapid gains of the past year have made homes less affordable. The financial Web site Bankrate.com recently put Phoenix on its "bubble buster" list, partly because lot prices are rising rapidly and the area is being flooded with new homes.
So I'd suggest that you exercise some caution. While an influx of job-seekers and rising home prices will strengthen Phoenix's rental market in the short run, in the long term, supply may well outpace demand. If that happens, today's hot housing buys will be tomorrow's hot potatoes.
To hedge against that risk -- in Phoenix or any other potentially bubblicious city -- you may want to buy a property and then offer your tenants a lease with an option to buy. A lease option will attract renters who are serious about buying but are put off temporarily because of high prices, rising mortgage interest rates or other factors. No matter what happens to home prices in the area, your tenants will still have an incentive to buy from you, since you won't have to pay a real-estate commission and will be able to offer buyers a lower price -- and the place will already be their "home."
Tuesday, June 06, 2006
Is selling for-sale-by-owner worth the risk?
Jun 05, 2006, 5:00 am PDT
Most homeowners who attempt to sell without using a real estate agent do so in order to save the commission. In other words, the impetus to sell without an agent is to net more money from the sale. The irony is that the median price of for-sale-by-owner (FSBO) homes in 2004 was 15.4 percent less than the median price for home sales where an agent was involved.
One risk of selling without an agent is that you sell too low. FSBOs tend to attract buyers who are looking for a bargain. Like FSBO sellers, FSBO buyers want to save money by paying less. The FSBO seller hopes to save the cost of the commission; so does the buyer. Unless the asking price is clearly below market value, a FSBO buyer is likely to think he can negotiate an even lower price because there are no agents that need to be paid.
Another factor contributing to the lower sale price of FSBO properties is that many sell before they even hit the market. The National Association of Realtors (NAR) reported that approximately 17 percent of FSBO sellers sold to a relative, friend or neighbor. Nine percent sold to a buyer who contacted the seller directly.
Maximum exposure is the way to ensure that you sell for the best possible price. Multiple offers and higher sale prices are the result of exposing the property to multiple buyers, not simply to a friend or neighbor.
A big problem for FSBO sellers is determining what price to ask. If you don't know how much to ask, it's understandable that you might inadvertently leave money on the table by selling too low to the first buyer who expresses serious interest.
HOME SELLER TIP: You may be able to find out what price you should ask by interviewing potential listing agents. However, if you don't expose the property, you'll never know if you could have sold for more on the open market.
There are certainly reasons why you might choose not to openly market a property, even though it means accepting less money at closing. One couple sold to a neighbor in a direct sale that netted them approximately $200,000 less that they could have received on the open market. But, health and timing considerations made this an acceptable deal.
Most sellers, however, won't want to give up a significant profit just to avoid having to pay an agent. In fact, according to the NAR, the number of sellers choosing to sell without an agent has decreased in recent years from 18 percent in 1997 to 14 percent in 2004.
FSBO sellers take on other risks. The cost of a commission could be minimal compared to the risk a seller might take for failing to fulfill disclosure and compliance obligations. Disclosure requirements vary from state to state. If you do decide to sell without using an agent, be sure to hire a knowledgeable real estate attorney to help you abide by mandatory disclosure requirements.
Another risk of selling without an agent is that many direct sale transactions never close. Some deals fall apart because the buyers aren't properly qualified for financing before they enter into a purchase contract. A good real estate agent will make sure that you don't accept an offer from a buyer who isn't qualified. Prequalification and preapproval can be accomplished quickly if you know who to call for assistance and when it's appropriate to do so.
Another reason why many FSBO deals collapse is that there's no one with experience working to move the transaction along and resolve problems when they arise. This often involves negotiations.
THE CLOSING: It can be difficult for sellers to negotiate face-to-face with a buyer.
Jun 05, 2006, 5:00 am PDT
Most homeowners who attempt to sell without using a real estate agent do so in order to save the commission. In other words, the impetus to sell without an agent is to net more money from the sale. The irony is that the median price of for-sale-by-owner (FSBO) homes in 2004 was 15.4 percent less than the median price for home sales where an agent was involved.
One risk of selling without an agent is that you sell too low. FSBOs tend to attract buyers who are looking for a bargain. Like FSBO sellers, FSBO buyers want to save money by paying less. The FSBO seller hopes to save the cost of the commission; so does the buyer. Unless the asking price is clearly below market value, a FSBO buyer is likely to think he can negotiate an even lower price because there are no agents that need to be paid.
Another factor contributing to the lower sale price of FSBO properties is that many sell before they even hit the market. The National Association of Realtors (NAR) reported that approximately 17 percent of FSBO sellers sold to a relative, friend or neighbor. Nine percent sold to a buyer who contacted the seller directly.
Maximum exposure is the way to ensure that you sell for the best possible price. Multiple offers and higher sale prices are the result of exposing the property to multiple buyers, not simply to a friend or neighbor.
A big problem for FSBO sellers is determining what price to ask. If you don't know how much to ask, it's understandable that you might inadvertently leave money on the table by selling too low to the first buyer who expresses serious interest.
HOME SELLER TIP: You may be able to find out what price you should ask by interviewing potential listing agents. However, if you don't expose the property, you'll never know if you could have sold for more on the open market.
There are certainly reasons why you might choose not to openly market a property, even though it means accepting less money at closing. One couple sold to a neighbor in a direct sale that netted them approximately $200,000 less that they could have received on the open market. But, health and timing considerations made this an acceptable deal.
Most sellers, however, won't want to give up a significant profit just to avoid having to pay an agent. In fact, according to the NAR, the number of sellers choosing to sell without an agent has decreased in recent years from 18 percent in 1997 to 14 percent in 2004.
FSBO sellers take on other risks. The cost of a commission could be minimal compared to the risk a seller might take for failing to fulfill disclosure and compliance obligations. Disclosure requirements vary from state to state. If you do decide to sell without using an agent, be sure to hire a knowledgeable real estate attorney to help you abide by mandatory disclosure requirements.
Another risk of selling without an agent is that many direct sale transactions never close. Some deals fall apart because the buyers aren't properly qualified for financing before they enter into a purchase contract. A good real estate agent will make sure that you don't accept an offer from a buyer who isn't qualified. Prequalification and preapproval can be accomplished quickly if you know who to call for assistance and when it's appropriate to do so.
Another reason why many FSBO deals collapse is that there's no one with experience working to move the transaction along and resolve problems when they arise. This often involves negotiations.
THE CLOSING: It can be difficult for sellers to negotiate face-to-face with a buyer.
Friday, May 26, 2006
Closed my PEIX puts today. I may have done that a tad bit early, since today its getting sold that they're doing a private placement. A private placement is basically an on the spot secondary offer, which means the company is selling some of its stock to raise some cash.
MUELLER WATER PRODUCTS INC (NYSE:MWA) went IPO today. I got a little action in that, it priced at the lower range of the pricing though.
MUELLER WATER PRODUCTS INC (NYSE:MWA) went IPO today. I got a little action in that, it priced at the lower range of the pricing though.
Thursday, May 25, 2006
Closed my position on BKC, this market is just crazy. I also added 10 June 35 PEIX Puts today. I don't buy this 'Ethanol' hype, but oil is a lil bit oversold. Oil has been on the rise since the Hurrican season is about to start, but that just might be an excuse to either short cover or add some hype to oil prices. Voyage (NYSE: VG) also continues to take a nose dive (I'm not sure what companies brought this public, but they obviously didn't do a very good job) and Mastercard (NYSE: MA) went public today. yay!
For those of you that did not know, Marshall's, the discount close store, sells flat screen (i.e. sharp) tv's. I personally wouldn't buy from Marshalls, but since they do you can take their price and go to a Best Buy or Circuit City to have them match. Marshall's only has this on holiday weekends.
For those of you that did not know, Marshall's, the discount close store, sells flat screen (i.e. sharp) tv's. I personally wouldn't buy from Marshalls, but since they do you can take their price and go to a Best Buy or Circuit City to have them match. Marshall's only has this on holiday weekends.
Monday, May 22, 2006
Friday, May 12, 2006
Trading Ideas for the week of May 15th. Chipotle Mexican Grill (NYSE: CMG) is doing a secondary next week, so apparently someone wants to flip. The stock is up nicely just below 200% of its Initial Public Offering price. Morgan Stanley (NYSE: MS) and S.G.Cowen are the lead managers of this deal. The stock should have some short term upside especially if Burger King is due out next week.
Sunday, May 07, 2006
Trading ideas for the week of May 15th. Another restaurant IPO (Initial Public Offering) coming out (pricing date is expected to be around 5/17/06 so that probably means it will be open for trading on 5/18/06.) The IPO is 'Burger King' (NYSE: BKC.) The lead managers are Morgan Stanley (NYSE: MS), JP Morgan (NYSE: JPM), Citigroup (NYSE: C), and Goldman Sachs (NYSE: GS). The pricing is suppose to be $15-17 and they're offering about 25 MM shares. Diageo is actually spinning Burger King off and I know Diageo from Captain Morgans Rum! Go Parrot Bay Mango (w/ Sprite)!!! Not sure if this is going to be a 'hot' IPO, only b/c they're basically starting off with a 3 B market cap. Whats interesting is all these restaurant IPO's coming out this year (i.e. Morton's, Ruth's Chris, Chipotle, etc.) to name a few. One has to wonder if there's a pullback in the market if the restaurant sector will do well. I'm inclined to think it will seeing how there's probably a ton of institutional holdings in all these restaurant stocks since they were brought public. We shall wait and see.
Saturday, May 06, 2006
Ideas for the week of May 8th. My apologies for not posting any financial 411 as of late. I've been pretty inactive seeing how as most of you know I'm changing demographics. This upcoming week is the Fed making their annoucement on what they're going to do with rates. It seems like the market (i.e. upward movement and gains in the broader markets that we've seen) is pricing in a quarter point raise with the expectation no further hikes to come in our near future. Because this is widely anticipated, the markets might see some selling pressure; hence, the 'buy on rumor sell on news'. The gains we've seen are not purely on earnings provided by a lot of companies, because if any of you all have traded on earnings, you would have noticed that companies that have blown out numbers had got a pop (probably because of short coverings) and then quickly gave them back. So to me, this says headfake.
If you all are looking for ideas, I still think the theme is energy. It currently only makes up 6% of the Standard & Poor Index. I know most people love technology, but when we were all seeing the tech boom, i believe Technology made up as much as 42% of the Standard & Poor Index. Notice the Nasdaq is stuck at 2500, when it was 5000 back in the days? The Dow Jones Industrial & Standard & Poor Index have pretty much recovered whereas the Nasdaq has not. Avoid four letter words (i.e. your nasdaq symbols.) :)
Thursday, May 04, 2006
Monday, May 01, 2006
Friday, April 28, 2006
Thursday, April 27, 2006
Tuesday, April 25, 2006
Picked up 10 June and September Calls for PEIX and ATI. ATI reports tomorrow morning, so we'll see how bloody it is. I dont have much confidence in the market right now seeing how last week was a nice run up with news alerts the Fed was finished raising rates. And then you have todays B#!!$^!T that the market is down, because rate hike fears. With all the bs in the market, why does it continue to attract people to it? Gambling, dont play that game. :P
Friday, April 21, 2006
Closed out my LRCX Puts today, got rocked for a loss of 50%. I also bought 10 APR Call units of BRCM, lost 50% on them as well. That one was a little more of a hoax. BRCM after hours Thursday comes out with great numbers and then get pummeled this morning, because some jackazz firm downgrades it. Damn them hedge fund firms, they need to be shot. Not doing well on these last 2 trades. Whats worst is I didn't even participate in GOOG. I didn't even do 1 freaking call. If anything do the opposite of what I'm doing or do what I'm not doing, because right now things are definitely not working my favor.
Wednesday, April 12, 2006
Sold the GOOG Put. Lost a nice chunk of change on that, but the premiums was still high in my opinion considering there's only 2.5 weeks remaining for the option to expire. GOOG actually reports on the 20th, so expect some volatilty before then. I will probably re-enter another Put since I'm gambling that the numbers are going to be rosy at best.
Picked up 25 units of EICU @ 23.00. This will probably be one of the positions I slowly build up. I really like the fact that this company is a 'telemedicine' play. Not too many of these companies around and I really think 'telemedicine' is the future of medical devices and healthcare.
Picked up 25 units of EICU @ 23.00. This will probably be one of the positions I slowly build up. I really like the fact that this company is a 'telemedicine' play. Not too many of these companies around and I really think 'telemedicine' is the future of medical devices and healthcare.
Tuesday, April 11, 2006
Sold off my remaining shares of TWTC at low 16s and closed the position on MHGC. The market seems to want to sell off since we were in a trading range of fresh highs for the broader markets. We're approaching earning seasons and already its not looking good. http://biz.yahoo.com/ap/060411/aftermarket_mover.html?.v=1 Genentech (NYSE: DNA) reported today after the bell and it was down after hours. Whats amazing is that they beat estimates and guided higher for 2006, but apparently that was not good enough for the so-called 'whisper number' that Wall Street looks for. If you ask me, this is just a bunch of bulls#!T, because the institutions are just looking for a means to 1) get in cheaper 2) loosen up some shares, since the general public probably a large % of interest currently on the buy side. Looks like biotech might have a sell-off, but its a great opportunity to pick up some shares cheap and flip later this year.
Wednesday, April 05, 2006
Monday, April 03, 2006
Saturday, April 01, 2006
Thursday, March 30, 2006
Monday, March 27, 2006
Trading ideas for the week of March 27th:
Nasdaq: AMLN (Amylin Pharmaceuticals) Get in on or before 3/29.
Nasdaq: HIMX (Himax Technologies) they're going public with pricing to occur on 3/30. Lead Manager is: MWD Co-managers: CSR, BAC, PJC, ABN Amro Rothschild, and HSBC. Not sure if this one is gonna be a hottie, but I will know by my allocation, if i get any shares at the IPO. Just a small debriefing based on what I read from the prospectus. This is a 'foreign' play, so if you want some foreign exposure, this is an ADS (American Depository Shares.) These ppl are in the business of creating components for flat panel display semiconductor industry (not bad seeing how every household known to man is upgrading their televisions in some LCD form.) They also do most of their business in asia (another bullet point to buy this stock: asian play!) If you want a prospectus, email me. I have it in .pdf format.
Nasdaq: AMLN (Amylin Pharmaceuticals) Get in on or before 3/29.
Nasdaq: HIMX (Himax Technologies) they're going public with pricing to occur on 3/30. Lead Manager is: MWD Co-managers: CSR, BAC, PJC, ABN Amro Rothschild, and HSBC. Not sure if this one is gonna be a hottie, but I will know by my allocation, if i get any shares at the IPO. Just a small debriefing based on what I read from the prospectus. This is a 'foreign' play, so if you want some foreign exposure, this is an ADS (American Depository Shares.) These ppl are in the business of creating components for flat panel display semiconductor industry (not bad seeing how every household known to man is upgrading their televisions in some LCD form.) They also do most of their business in asia (another bullet point to buy this stock: asian play!) If you want a prospectus, email me. I have it in .pdf format.
Friday, March 24, 2006
Thursday, March 23, 2006
Topic: Home Mortgage
There are many types of mortgage loans. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM).
In a FRM, the interest rate, and hence monthly payment, remains fixed for the life (or term) of the loan. In the U.S., the term is usually for 10, 15, 20, or 30 years.
In an ARM, the interest rate is fixed for a period of time, after which it will periodically (annually or monthly) adjust up or down to some market index. Common indices in the U.S. include the Prime Rate, the LIBOR, and the Treasury Index ("T-Bill"). Other indexes like 11th District Cost of Funds Index, COSI, and MTA, are also available but are less popular.
Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where unpredictable interest rates make fixed rate loans difficult to obtain. Since the risk is transferred, lenders will usually make the initial interest rate of the ARM's note anywhere from 0.5% to 2% lower than the average 30-year fixed rate.
In most scenarios, the savings from an ARM outweigh its risks, making them an attractive option for people who are planning to keep a mortgage for ten years or less.
A partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding principal balance is due at some point short of that term. A balloon loan can be either a Fixed or Adjustable in terms of the Interest Rate. Many Second Trust mortgages use this feature. The most common way of describing a balloon loan uses the terminology X due in Y, where X is the number of years over which the loan is amortized, and Y is the year in which the principal balance is due.
All text is available under the terms of the GNU Free Documentation License
There are many types of mortgage loans. The two basic types of amortized loans are the fixed rate mortgage (FRM) and adjustable rate mortgage (ARM).
In a FRM, the interest rate, and hence monthly payment, remains fixed for the life (or term) of the loan. In the U.S., the term is usually for 10, 15, 20, or 30 years.
In an ARM, the interest rate is fixed for a period of time, after which it will periodically (annually or monthly) adjust up or down to some market index. Common indices in the U.S. include the Prime Rate, the LIBOR, and the Treasury Index ("T-Bill"). Other indexes like 11th District Cost of Funds Index, COSI, and MTA, are also available but are less popular.
Adjustable rates transfer part of the interest rate risk from the lender to the borrower, and thus are widely used where unpredictable interest rates make fixed rate loans difficult to obtain. Since the risk is transferred, lenders will usually make the initial interest rate of the ARM's note anywhere from 0.5% to 2% lower than the average 30-year fixed rate.
In most scenarios, the savings from an ARM outweigh its risks, making them an attractive option for people who are planning to keep a mortgage for ten years or less.
A partial amortization or balloon loan is one where the amount of monthly payments due are calculated (amortized) over a certain term, but the outstanding principal balance is due at some point short of that term. A balloon loan can be either a Fixed or Adjustable in terms of the Interest Rate. Many Second Trust mortgages use this feature. The most common way of describing a balloon loan uses the terminology X due in Y, where X is the number of years over which the loan is amortized, and Y is the year in which the principal balance is due.
All text is available under the terms of the GNU Free Documentation License
Tuesday, March 21, 2006
TOPIC: Mortgage Refinancing
Refinancing refers to applying for a secured loan intended to replace an existing loan secured by the same assets. The most common consumer refinancing is for a home mortgage.
Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to pay off other debts, to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to liquidate some or all of the equity that has accumulated in real property during the tenure of ownership.
Certain types of loans contain penalty clauses that are triggered by an early payment of the loan, either in its entirety or a specified portion. Also, some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.
Refinancing can be a good idea for homeowners who:
* want to get out of a high interest rate loan to take advantage of
lower rates. This is a good idea only if they intend to stay in the
house long enough to make the additional fees worthwhile.
* have an adjustable-rate mortgage (ARM) and want a fixed-rate loan
to have the certainty of knowing exactly what the mortgage payment
will be for the life of the loan.
* want to convert to an ARM with a lower interest rate or more
protective features (such as a better rate and payment caps) than
the ARM they currently have.
* want to build up equity more quickly by converting to a loan with a
shorter term.
* want to draw on the equity built up in their house to get cash for
a major purchase or for their children's education.
If you decide that refinancing is not worth the costs, ask your lender
whether you may be able to obtain all or some of the new terms you want
by agreeing to a modification of your existing loan instead of a
refinancing.
Should You Refinance Your ARM?
In deciding whether to refinance an ARM you should consider these
questions:
* Is the next interest rate adjustment on your existing loan likely
to increase your monthly payments substantially? Will the new
interest rate be two or three percentage points higher than the
prevailing rates being offered for either fixed-rate loans or other
ARMs?
* If the current mortgage sets a cap on your monthly payments, are
those payments large enough to pay off your loan by the end of the
original term? Will refinancing to a new ARM or a fixed-rate loan
enable you to pay your loan in full by the end of the term?
What Are the Costs of Refinancing?
The fees described below are the charges that you are most likely to
encounter in a refinancing.
* Application Fee. This charge imposed by your lender covers the
initial costs of processing your loan request and checking your
credit report.
* Title Search and Title Insurance. This charge will cover the cost
of examining the public record to confirm ownership of the real
estate. It also covers the cost of a policy, usually issued by a
title insurance company, that insures the policy holder in a
specific amount for any loss caused by discrepancies in the title
to the property.
Be sure to ask the company carrying the present policy if it can
re-issue your policy at a re-issue rate. You could save up to 70
percent of what it would cost you for a new policy.
Check out this nifty mortgage refinancing calculator.
All text is available under the terms of the GNU Free Documentation License
Refinancing refers to applying for a secured loan intended to replace an existing loan secured by the same assets. The most common consumer refinancing is for a home mortgage.
Refinancing may be undertaken to reduce interest costs (by refinancing at a lower rate), to pay off other debts, to reduce one's periodic payment obligations (sometimes by taking a longer-term loan), to reduce risk (such as by refinancing from a variable-rate to a fixed-rate loan), and/or to liquidate some or all of the equity that has accumulated in real property during the tenure of ownership.
Certain types of loans contain penalty clauses that are triggered by an early payment of the loan, either in its entirety or a specified portion. Also, some refinanced loans, while having lower initial payments, may result in larger total interest costs over the life of the loan, or expose the borrower to greater risks than the existing loan. Calculating the up-front, ongoing, and potentially variable costs of refinancing is an important part of the decision on whether or not to refinance.
Refinancing can be a good idea for homeowners who:
* want to get out of a high interest rate loan to take advantage of
lower rates. This is a good idea only if they intend to stay in the
house long enough to make the additional fees worthwhile.
* have an adjustable-rate mortgage (ARM) and want a fixed-rate loan
to have the certainty of knowing exactly what the mortgage payment
will be for the life of the loan.
* want to convert to an ARM with a lower interest rate or more
protective features (such as a better rate and payment caps) than
the ARM they currently have.
* want to build up equity more quickly by converting to a loan with a
shorter term.
* want to draw on the equity built up in their house to get cash for
a major purchase or for their children's education.
If you decide that refinancing is not worth the costs, ask your lender
whether you may be able to obtain all or some of the new terms you want
by agreeing to a modification of your existing loan instead of a
refinancing.
Should You Refinance Your ARM?
In deciding whether to refinance an ARM you should consider these
questions:
* Is the next interest rate adjustment on your existing loan likely
to increase your monthly payments substantially? Will the new
interest rate be two or three percentage points higher than the
prevailing rates being offered for either fixed-rate loans or other
ARMs?
* If the current mortgage sets a cap on your monthly payments, are
those payments large enough to pay off your loan by the end of the
original term? Will refinancing to a new ARM or a fixed-rate loan
enable you to pay your loan in full by the end of the term?
What Are the Costs of Refinancing?
The fees described below are the charges that you are most likely to
encounter in a refinancing.
* Application Fee. This charge imposed by your lender covers the
initial costs of processing your loan request and checking your
credit report.
* Title Search and Title Insurance. This charge will cover the cost
of examining the public record to confirm ownership of the real
estate. It also covers the cost of a policy, usually issued by a
title insurance company, that insures the policy holder in a
specific amount for any loss caused by discrepancies in the title
to the property.
Be sure to ask the company carrying the present policy if it can
re-issue your policy at a re-issue rate. You could save up to 70
percent of what it would cost you for a new policy.
Check out this nifty mortgage refinancing calculator.
All text is available under the terms of the GNU Free Documentation License
This is not an endorsement, but something I found of interest that should be put in consideration if you're accumulated a lot of debt.
Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, which is most commonly a house (in this case a mortgage is secured against the house.) The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset in order to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.
Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.Check out our debt consolidation calculator!
All text is available under the terms of the GNU Free Documentation License.
Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, which is most commonly a house (in this case a mortgage is secured against the house.) The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset in order to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.
Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.Check out our debt consolidation calculator!
All text is available under the terms of the GNU Free Documentation License.
Monday, March 20, 2006
Sunday, March 19, 2006
Saturday, March 18, 2006
Good week for stocks considering it was option expiration week. Then again, thats expected. Usually during option expiration week, broader markets are going to either go up or down in one direction. Market looks like it once to position itself for a major move up or down (there's a genius prediction.) No, but seriously, investor sediment does seem negative yet the markets are going higher? Honestly, I dont think there's much uncertainty out there. We hear the same ole uncertainties day after day: higher oil/energy prices, real estate bubble, new Federal reserve chairman's transiion (although, this one is only most recent), interest rates, Iraq, etc. The bottom line is, and as much as we don't like to hear these things, they're becoming a part of our every day life. Tell me this. Whenever we see on the news that there are more deaths in Baghdad, does that really phase anyone? Of course, we're compassionate about the situation and our condolences to the the families of the lost one's, but wasn't it not so long ago (i.e. years) that when the media said someone died over there, the markets tanked/triggered sell-off? Anyway, sorry, just watned to vent.
On a side note, Iowa hurt me in the NCAA tourney. They lost to a last second 3 pointer by Northwestern state. It was a tough shot by the Northwestern player, and there wasn't anythign Iowa could do. In poker terms, it was like someone getting burned on the river card!!! Anyway, I had them going to the Final 4. I was bummed, because I thought this was going to be the first year ever (dating back to 91) that I would have ALL my sweet 16 teams alive after Day 2. Instead, I go 15/16. So go Villanova (who struggled against Monmouth) to win it all. I have them playing Pittsburgh.
On a side note, Iowa hurt me in the NCAA tourney. They lost to a last second 3 pointer by Northwestern state. It was a tough shot by the Northwestern player, and there wasn't anythign Iowa could do. In poker terms, it was like someone getting burned on the river card!!! Anyway, I had them going to the Final 4. I was bummed, because I thought this was going to be the first year ever (dating back to 91) that I would have ALL my sweet 16 teams alive after Day 2. Instead, I go 15/16. So go Villanova (who struggled against Monmouth) to win it all. I have them playing Pittsburgh.
Saturday, March 11, 2006
Trading Ideas for the Week of March 13th:
Watching NYSE: LVS (Las Vegas Sands). Goldman Sachs is lead manager in this secondary, so depending on my allocation from MWD (Morgan Stanley) of which I have based on how many shares I receive, I can "try to" guage how much of the secondary is being allocated to both the retail and institutional side.)
Looking to accumulate some Nasdaq: FORM (Formfactor, Inc.) Entry price is < $38. If you look at the charts, this stock took off after it reported. By them blowing out numbers, its probably a lock they're going to blow out next quarters earnings since the analysts have to be reasonable about their estimates. Semiconductors have done very well this year so far (i.e. BRCM, RMBS, NVDA, etc.) So it will be no surprise that this stock shouldn't be any different. Another reason why I like this stock, is b/c they just did a secondary last Thursday. And I didn't get a single share. What does this mean? Chances are the institutions gobbled it up for their personal use and will guide the stock to go higher.
Energy Play: NYSE: CHK (Chesapeake Energy) Did everyone forget this is going to be added to the S&P500? Stocks hovering around the prices it was at when they made the annoucement was made that the were going to be added. Someone is trying to manipulate the price to get these S&P500 managers to add it to their index portfolio's cheaply. I'm not saying to go 'all-in', but this stock has to be part of your portfolio. And whats not to like about natural gas?
I'll post my positions as soon as I buy them. I've been busy at work since last week and this week are my final weeks. Did anyone do WCG? It had that nice 5% pop the day after I said to get in! arghhh.
Watching NYSE: LVS (Las Vegas Sands). Goldman Sachs is lead manager in this secondary, so depending on my allocation from MWD (Morgan Stanley) of which I have based on how many shares I receive, I can "try to" guage how much of the secondary is being allocated to both the retail and institutional side.)
Looking to accumulate some Nasdaq: FORM (Formfactor, Inc.) Entry price is < $38. If you look at the charts, this stock took off after it reported. By them blowing out numbers, its probably a lock they're going to blow out next quarters earnings since the analysts have to be reasonable about their estimates. Semiconductors have done very well this year so far (i.e. BRCM, RMBS, NVDA, etc.) So it will be no surprise that this stock shouldn't be any different. Another reason why I like this stock, is b/c they just did a secondary last Thursday. And I didn't get a single share. What does this mean? Chances are the institutions gobbled it up for their personal use and will guide the stock to go higher.
Energy Play: NYSE: CHK (Chesapeake Energy) Did everyone forget this is going to be added to the S&P500? Stocks hovering around the prices it was at when they made the annoucement was made that the were going to be added. Someone is trying to manipulate the price to get these S&P500 managers to add it to their index portfolio's cheaply. I'm not saying to go 'all-in', but this stock has to be part of your portfolio. And whats not to like about natural gas?
I'll post my positions as soon as I buy them. I've been busy at work since last week and this week are my final weeks. Did anyone do WCG? It had that nice 5% pop the day after I said to get in! arghhh.
Friday, March 03, 2006
Wednesday, March 01, 2006
Trading ideas for the week of March 6th:
I'm watching WCG (WellCare Health Plans). I will be picking up some on or before March 7th and I'm watching WTW (Weight Watchers International, Inc.), of which I will be picking up some on or before March 8th. I will keep you posted on how much and when I do it. Another thing, my most successful buy and hold positions I have had were New York Stock Exchange (NYSE) stocks. So, we'll have to wait and see what kind of positions I do in these.
I'm watching WCG (WellCare Health Plans). I will be picking up some on or before March 7th and I'm watching WTW (Weight Watchers International, Inc.), of which I will be picking up some on or before March 8th. I will keep you posted on how much and when I do it. Another thing, my most successful buy and hold positions I have had were New York Stock Exchange (NYSE) stocks. So, we'll have to wait and see what kind of positions I do in these.
Tuesday, February 28, 2006
Recap for February 2006
Realized %'s:
ASPM (options) -40%
NVDA (options) +47%
ARXT (stock) -4%
Total = +3%
Unrealized %'s(Note #1):
MHGC (stock) -2.5%
Note #1: %'s are based off of closing price of 28-Feb-2006
Broader markets got killed today. And I hope someone actually took my advice on shorting GOOG. Thing fell off the map after the CFO said 'growth' was going to slow down (duh.) I was watching this other stock- COGT which reported after the bell today and unfortunately, they're getting killed after hours. COGT does biometrics (i.e. thumbprint scans, eye retina scans, etc.) I love their product and with all the terror going around these days, Big Brother is just going to keep watching and watching and watching. I think if anything COGT would be a nice takeover buy a major large cap (i.e. GE). They bought out INVN which detects bombs at major airports.
Realized %'s:
ASPM (options) -40%
NVDA (options) +47%
ARXT (stock) -4%
Total = +3%
Unrealized %'s(Note #1):
MHGC (stock) -2.5%
Note #1: %'s are based off of closing price of 28-Feb-2006
Broader markets got killed today. And I hope someone actually took my advice on shorting GOOG. Thing fell off the map after the CFO said 'growth' was going to slow down (duh.) I was watching this other stock- COGT which reported after the bell today and unfortunately, they're getting killed after hours. COGT does biometrics (i.e. thumbprint scans, eye retina scans, etc.) I love their product and with all the terror going around these days, Big Brother is just going to keep watching and watching and watching. I think if anything COGT would be a nice takeover buy a major large cap (i.e. GE). They bought out INVN which detects bombs at major airports.
Monday, February 27, 2006
Friday, February 24, 2006
While you all are patiently waiting for some stock ideas, I thought I'd share my Tahoe Trip - February 17th-19th. (I jacked up the pictures, the beginning of my adventure starts at the bottom.)
Rich, Kwan, Moi, & Wendy. Thanks to Kwan (www.kwandom.com) who made this trip happen!
The next bunch of photos were taken at the way top. Just simply amazing.
Getting ready to go down the Black Diamond. I was at the highest point of the mountain, and you can barely make out Lake Tahoe in the background. Although you can't see it, it was really beautiful in the horizons. Pretty breathless if you ask me.
After some small trails, we reached another lift and it would be this lift that took us to the way top.
We had to go thru this path to get to the next lift. It was pretty flat, so BAD for snowboarders and NOT so bad for Skiers. There was a ton of skiers and rightfully so, since there was a lot of flat patches (i.e. give that cross country feeling.)
Here's me on the right getting ready to rock and roll. Poor Kwan had to fix his bindings, because he forgot to switch the bindings since he let someone else borrow his board.
When the Gondala dropped us off, this is where we exited. But were we at the top?? Nope. We had to go some local trails and take another lift to the top. so higher we go!
We're pretty much at the top of the Heavenly resort mountain. Here's an even better view of Lake Tahoe!
Nearing the top of the mountain, kind of an opposite view from above. The top of the picture is Lake Tahoe.
Pretty steep mountain! Total elevation was about 10K feet. BTW...I'm still on the Gondala.
I was sporting this nice teal sleeve provided by the attendants on my board so it didn't scratch the glass of the Gandola. The ride up the mountain was at least 15 minutes, but here's me putting my game face on for the camera.
Thats me with the Oakley's on the left. Our group was waiting in line for the Gandola, which was the only way up the mountain. This Gandola fit only 6 people, but there was another Gandola which sat 30 people (a lot slower), so it took longer. The park was open from 8-4pm.
This is the backyard. You can't see it but there's actually a jacoozee(sp?)
Here's the front end of the cabin (3 bedrooms, 1 full bath) that I stayed at in Tahoe-South Lake.
Rich, Kwan, Moi, & Wendy. Thanks to Kwan (www.kwandom.com) who made this trip happen!
The next bunch of photos were taken at the way top. Just simply amazing.
Getting ready to go down the Black Diamond. I was at the highest point of the mountain, and you can barely make out Lake Tahoe in the background. Although you can't see it, it was really beautiful in the horizons. Pretty breathless if you ask me.
After some small trails, we reached another lift and it would be this lift that took us to the way top.
We had to go thru this path to get to the next lift. It was pretty flat, so BAD for snowboarders and NOT so bad for Skiers. There was a ton of skiers and rightfully so, since there was a lot of flat patches (i.e. give that cross country feeling.)
Here's me on the right getting ready to rock and roll. Poor Kwan had to fix his bindings, because he forgot to switch the bindings since he let someone else borrow his board. 
When the Gondala dropped us off, this is where we exited. But were we at the top?? Nope. We had to go some local trails and take another lift to the top. so higher we go!
We're pretty much at the top of the Heavenly resort mountain. Here's an even better view of Lake Tahoe!
Nearing the top of the mountain, kind of an opposite view from above. The top of the picture is Lake Tahoe.
Pretty steep mountain! Total elevation was about 10K feet. BTW...I'm still on the Gondala.
I was sporting this nice teal sleeve provided by the attendants on my board so it didn't scratch the glass of the Gandola. The ride up the mountain was at least 15 minutes, but here's me putting my game face on for the camera.
Thats me with the Oakley's on the left. Our group was waiting in line for the Gandola, which was the only way up the mountain. This Gandola fit only 6 people, but there was another Gandola which sat 30 people (a lot slower), so it took longer. The park was open from 8-4pm.
This is the backyard. You can't see it but there's actually a jacoozee(sp?)
Here's the front end of the cabin (3 bedrooms, 1 full bath) that I stayed at in Tahoe-South Lake.
Thursday, February 23, 2006
Two people (and you know who you are) have asked me why I haven't had any trading/investing ideas since last week. I definitely do not try to force my ideas and come up with something every day. My strategies have very strict criteria and as I said I don't try to force it. The market right now probably doesn't even merit a long term aspect, so thats why most of my funds are tied up in cash. So hang in there! I know it's not the easiest thing to sit in cash, but sometimes sitting on the sidelines is probably the best thing one can do.
Tuesday, February 21, 2006
Follow-up for BIDU: As insignificant as their small growth story is, this might reinforce a good short for GOOG. Although i'm not a big fan of shorting stock (this is because the stock market over time/history goes up not down), I feel GOOG might have some near term selling pressure only because the stock basically hit a high of $475 and was quickly sold off to the low 400's, then the earnings annoucement, then it took another dive to $370s. Unfortunately, BIDU does not trade options (yet.) If I take a position (put options only), I will notify every one. I'll have some ideas shortly, so keep on checking in. Thanks!
Friday, February 17, 2006
Follow-up for NVDA: One thing i forgot to mention is that, it would be wise not to be holding 100% my 'trade' ideas for long. Although, timing things as you all know is impossible, my ideas are simply for pops and nothing more. NVDA did what it was suppose to, and thats open up in the low 50s. However, since the stock is pretty much at the mercy of the broader markets following earnings, I think the U.S. markets will have some rough waters ahead for a lot of uncertainty (i.e. new Fed chief, energy prices, IRAN, internatinal markets being attractive, etc). So i'm glad NVDA worked out like i thought it would, but please just use extreme caution on any trades. Happy Trading and have a good weekend.
Thursday, February 16, 2006
Addition: Picked up MHGC x 150 @ 20
Also, I mentioned NVDA as a play this week. Because of option expiration tomorrow, I think it would be wise to pick up some March Calls. Something similiar happened to RMBS last month, where it reported the day before earnings. I believe the stock may take off next week after the February Calls have expired. So watch for good news, if so, buy some more for a short term trade.
Also, I mentioned NVDA as a play this week. Because of option expiration tomorrow, I think it would be wise to pick up some March Calls. Something similiar happened to RMBS last month, where it reported the day before earnings. I believe the stock may take off next week after the February Calls have expired. So watch for good news, if so, buy some more for a short term trade.
Tuesday, February 14, 2006
Nasdaq: IPAS A friend of mine (Smiley) likes this stock(and options.) After doing some due diligence, I would have to agree that the stock showed both relative strength from both a technical and fundamental standpoint. Technically speaking IPAS took a one day drop due to earnings, but bounced back the following day and hasn't really looked back since. Fundamentally speaking, the stock has reiterated guidance will be within the same if not better range then what they reported to Q4. On top of that, they're going thru a merger which was shareholder approved the results will be reflected in Q1 of 2006. Although nothing will happen any time soon in terms of M&A (mergers & acquisitions) you have to like its chances of being both an acquiree and acquiror.
Monday, February 13, 2006
Friday, February 03, 2006
Subscribe to:
Posts (Atom)