ParkTwain's Parlor

[Websman]

To be more specific, I'm waiting for a possible gap fill on IED. It's a long shot, but I'll try to buy it under 6.25.

[DSteckler]

<< I'm liking IED. >>

Improvised Explosive Devices? You guys are scaring me....<g>

[ParkTwain]

If I buy PMT at $20 and the stock surprises me and drops to $18, that dividend works to console me and also to drive the stock price back up. It is a nice insurance.

I would respectfully submit that your only practical insurance against risk in a stock is its most recent level of strong support. For an already uptrending stock, the nearer you can buy above that level, the better your return to risk ratio. If that support level is also a previous all-time high peak (or set of peaks that occurred over time), the return to risk ratio is both positive and not bounded!

[ParkTwain]

Food for thought from Yahoo's BHE chat board:

http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=4687401&tid=bhe&sid=4687401&mid=2276

//
A funny thing has happened to the markets. The earnings of S&P500 companies have gone up in double digits (vs. prior year) for 15 quarters straight. That's 15 consecutive quarters with earnings rising > 10% (something that has never happened before in history!). Yet stocks have been stuck in a narrow trading range. The Dow has remained in a +/-6% range for 2 1/2 years! During the first double digit increases (in 2002), the market rose. After the 4th double digit earnings rise, people throught that companies probably can't continue with a 5th double digit earnings climb, so they did not invest much more into stocks. But the companies did achieve double digit growth. People said the same during the 6th quarter, yet the companies again got double digit growth. This went on and on for the
7th quarter,
the 8th quarter,
the 9th quarter ,
the 10th quarter,
the 11th quarter,
the 12th quarter.
People put money into housing. Some said the baby steps in interest rate increases are the reason (this period had the largest # of miniscule 1/4 pt. increases ever).
Company profits contined > 10% rises in the 13th quarter,
in the 14th quarter!!!
and even in the 15th consecutive quarter!!!!!!.
The S&P500 companies continue > 10% earnings rises and they built up record earnings, reduced debt, and built record cash levels now > $700B cash (highest ever).

We continue to see >10% profits rises and with the 16th quarter now nearly half-way through it is likely we'll see another >10% profit growth. Now, the baby steps in interest rate increases are likely to stop. The >10% profit growth continues (proving naysayers wrong for years now) and we still hsve a Dow stuck in a +/-6% level.

Stock price appreciation is soon coming with a boom. Fundamentals are way too good to contine in this +/-6% Dow range forever! The climb in stocks is coming in 2006. We are overdue for at least a 25% climb. This will likely put the Dow at 14,000 by the end of 2006.
//

In response, I say that the S&P500 has been slightly uptrending (at about 100 S&P500 index pts, or a little less than 10%, per year) since Jan 2004:

http://finance.yahoo.com/q/bc?s=%5EGSPC&t=5y&l=on&z=m&q=l&c=

Unlike the Dow Jones 30 industrials:

http://finance.yahoo.com/q/bc?s=%5EDJI&t=5y&l=on&z=m&q=l&c=

[ParkTwain]

Birinyi Assoc. DAILY DART

Ray, Mr. Birinyi is one up on you! The site picks a different, perhaps randomly chosen, stock each day, then tracks how that stock performs and adds its performance to a cumulative performance of other "dart" picks, versus other indexes and picks of other experts.

http://tickersense.typepad.com/ticker_sense/2006/02/the_daily_dart.html

Also, check out the fantastic list of links to technical trading sites on the right side of the page.

[Gatorman]

Ray, Mr. Birinyi is one up on you! The site picks a different, perhaps randomly chosen, stock each day, then tracks how that stock performs and adds its performance to a cumulative performance of other "dart" picks, versus other indexes and picks of other experts.

http://tickersense.typepad.com/ticker_sense/2006/02/the_daily_dart.html

Also, check out the fantastic list of links to technical trading sites on the right side of the page.

Laszlo Birinyi was a favorite of mine when he appeared on Wall Street Week and later on Louis Rukeyeser's program after Louis left PBS. His voice was a bit hard to deal with but his views were always interesting and timely.

[ParkTwain]

yes, I think he's a very sharp guy and try to read his materials as often as possible. I listen to what he says about the entire market more than about individual stocks.

[RL]

Thanks for the link Park If I think I have enough time think I'll throw a dart each day and see how I do compared to his picks. I think he researchs the stock before he calls It a dart throw. I simply throw the dart If It sticks thats the one.

[RL]

I see on his home page his dart throw was LTM on 2\9 I also hit that one. Then ask for advice of J Smith & Doug to no avail but maybe he has been secretly has been tracking me. Yes I also remember him on Rukeyeser's show.

[ParkTwain]

Ray, see the actual dartboard on this page:

http://tickersense.typepad.com/ticker_sense/laszlo_birinyi/index.html

[ParkTwain]

Still holding small long positions in IED and DDD. Hoping DDD has bottomed near-term. IED working well during this past week.

Have been mostly away from the markets this week. Other responsibilities have been taking most of my time. Should be able to get my new highs research caught up to date for Monday's open.

Trading account is +19% YTD 2006.

[ParkTwain]

Amazing mortgage news related to new US Treasury 30-yr notes.

//
Bond Sales May Promote Long-Term Mortgages

By ALEKSANDRS ROZENS, AP Business WriterFri Feb 17, 1:34 PM ET

The Treasury Department's resumption of 30-year bond sales could have an interesting impact on the home mortgage market, with lenders offering more 40-year loans and maybe even 50-year mortgages for the first time to help some consumers qualify for loans.

While the connection between the two — the U.S. government borrowing money through the sale of debt and a home buyer looking for a loan to buy a home — may not be apparent, the two are inseparable. That's because the interest rate the government pays for its debt usually determines the rate consumers and corporations will pay for the loans they take out.

The reintroduction of the 30-year bond means lenders — who had relied on the government's 10-year note for mortgage rate guidance — have a better idea of what to charge homebuyers for a 40-year mortgage. There is also some talk among lenders, who are always looking for new mortgage products, about creating a 50-year home loan.

The longer-term mortgages would lower monthly payments.

"To the extent more consumers have more products available, it will be a help for affordability," said Douglas Duncan, chief economist at the Mortgage Bankers Association.

Keith Gumbinger of HSH Associates, which tracks the mortgage industry, believes lenders will likely generate some borrower interest with the 40-year loans. "Expanding your menu (as a lender) to include as many loan choices means you get a better opportunity to scour borrowers out of niche markets," he said.

After a five-year hiatus, the Treasury Department borrowed $14 billion through the sale of 30-year bonds on Feb. 9, and said it plans to continue regular sales of the bonds. The long bond's revival was a big event on Wall Street and for mortgage bankers because the longest-dated government debt had been the Treasury 10-year note. (On Wall Street, any U.S. government security 10 years or less is called a note.)

"A 30-year (Treasury) security might give lenders a benchmark to track the pricing of longer-term mortgages," said Steve LaDue, president of Affiliated Mortgage in Wauwatosa, Wis.

Forty-year mortgages have been offered by lenders over the last two decades, according to Gumbinger, who recalled that their use last jumped in the 1980s when home prices were high and interest rates were in double digits. Rising home prices are bringing them back, he said, but noted that these loans likely won't account for more than a fraction of a percent of all loans processed by bankers. Last year, lenders underwrote $3.2 trillion worth of mortgages.

By stretching out their mortgage payments over 40 years first-time home buyers can lower monthly borrowing costs and qualify more readily for a loan.

LaDue said bankers could also create a 50-year mortgage because of the Treasury's 30-year bond sale. This would be a product lenders could sell to first-time home buyers, or what LaDue calls "a gateway product."

LaDue doesn't expect borrowers to stick with these loans for the full term. He said these homeowners are likely to eventually refinance into 15-year or even 30-year loans to repay them faster.

Of course, like all longer-term loans, the 40-year mortgage carries a rate that's higher than shorter-term loans, as lenders charge more for taking on the risk of a longer term loan. So although the payments are lower, a borrower ends up paying much more in interest.

Last week, home buyers could get a 40-year $100,000 mortgage at a rate of 6.50 percent which meant their monthly loan payments were $585.00, according to HSH's Gumbinger.

A 30-year loan, meanwhile, had a 6.25 percent rate and a home buyer with a $100,000 loan had a monthly loan payment of $616.

"Could there be some 50s? There could be some 50s" said Gumbinger, referring to 50-year home loans. But he added that he does not expect a large audience for these mortgages.

The new loan products, though, could be of help for a housing market if they improve affordability at time when sales have slowed and inventories have ballooned.

Chris Low, chief economist at FTN Financial, a financial services firm, said longer-dated home loans could prevent a dramatic drop in the housing market because their lengthy payback periods would lower monthly payments at a time when interest rates for other mortgages have risen from historic lows.

"It is a kind of a way to play games with monthly payments," said Dick Bove, banking analyst at Punk Ziegel. "Stretching out the mortgage maturity is simply a way to lower month payments and stimulate sales."
//

[ParkTwain]

How many of you bought the SBUX breakout? (It's still within 110% of its pivot of 32.50/sh.) FDX is about to do the same thing.

[IIC]

40 year and 50 year loans are a bad idea IMO...Selling Dreams...But I guess they are better than the "No Down...Interest Only 3-5 Year Deals"...The Industry is looking for a way to bail themselves out for as long as they can...Thx for posting that article...But it is over for the next 9-10 yrs IMO...I will be looking for RE bargains late this year and next...Doug

Amazing mortgage news related to new US Treasury 30-yr notes.

//
Bond Sales May Promote Long-Term Mortgages

By ALEKSANDRS ROZENS, AP Business WriterFri Feb 17, 1:34 PM ET

The Treasury Department's resumption of 30-year bond sales could have an interesting impact on the home mortgage market, with lenders offering more 40-year loans and maybe even 50-year mortgages for the first time to help some consumers qualify for loans.

While the connection between the two — the U.S. government borrowing money through the sale of debt and a home buyer looking for a loan to buy a home — may not be apparent, the two are inseparable. That's because the interest rate the government pays for its debt usually determines the rate consumers and corporations will pay for the loans they take out.

The reintroduction of the 30-year bond means lenders — who had relied on the government's 10-year note for mortgage rate guidance — have a better idea of what to charge homebuyers for a 40-year mortgage. There is also some talk among lenders, who are always looking for new mortgage products, about creating a 50-year home loan.

The longer-term mortgages would lower monthly payments.

"To the extent more consumers have more products available, it will be a help for affordability," said Douglas Duncan, chief economist at the Mortgage Bankers Association.

Keith Gumbinger of HSH Associates, which tracks the mortgage industry, believes lenders will likely generate some borrower interest with the 40-year loans. "Expanding your menu (as a lender) to include as many loan choices means you get a better opportunity to scour borrowers out of niche markets," he said.

After a five-year hiatus, the Treasury Department borrowed $14 billion through the sale of 30-year bonds on Feb. 9, and said it plans to continue regular sales of the bonds. The long bond's revival was a big event on Wall Street and for mortgage bankers because the longest-dated government debt had been the Treasury 10-year note. (On Wall Street, any U.S. government security 10 years or less is called a note.)

"A 30-year (Treasury) security might give lenders a benchmark to track the pricing of longer-term mortgages," said Steve LaDue, president of Affiliated Mortgage in Wauwatosa, Wis.

Forty-year mortgages have been offered by lenders over the last two decades, according to Gumbinger, who recalled that their use last jumped in the 1980s when home prices were high and interest rates were in double digits. Rising home prices are bringing them back, he said, but noted that these loans likely won't account for more than a fraction of a percent of all loans processed by bankers. Last year, lenders underwrote $3.2 trillion worth of mortgages.

By stretching out their mortgage payments over 40 years first-time home buyers can lower monthly borrowing costs and qualify more readily for a loan.

LaDue said bankers could also create a 50-year mortgage because of the Treasury's 30-year bond sale. This would be a product lenders could sell to first-time home buyers, or what LaDue calls "a gateway product."

LaDue doesn't expect borrowers to stick with these loans for the full term. He said these homeowners are likely to eventually refinance into 15-year or even 30-year loans to repay them faster.

Of course, like all longer-term loans, the 40-year mortgage carries a rate that's higher than shorter-term loans, as lenders charge more for taking on the risk of a longer term loan. So although the payments are lower, a borrower ends up paying much more in interest.

Last week, home buyers could get a 40-year $100,000 mortgage at a rate of 6.50 percent which meant their monthly loan payments were $585.00, according to HSH's Gumbinger.

A 30-year loan, meanwhile, had a 6.25 percent rate and a home buyer with a $100,000 loan had a monthly loan payment of $616.

"Could there be some 50s? There could be some 50s" said Gumbinger, referring to 50-year home loans. But he added that he does not expect a large audience for these mortgages.

The new loan products, though, could be of help for a housing market if they improve affordability at time when sales have slowed and inventories have ballooned.

Chris Low, chief economist at FTN Financial, a financial services firm, said longer-dated home loans could prevent a dramatic drop in the housing market because their lengthy payback periods would lower monthly payments at a time when interest rates for other mortgages have risen from historic lows.

"It is a kind of a way to play games with monthly payments," said Dick Bove, banking analyst at Punk Ziegel. "Stretching out the mortgage maturity is simply a way to lower month payments and stimulate sales."
//

[New-born baby]

7 years--max

If you think 50 year loans are bad--here's a few facts to consider:
In Japan, mortgages can run 100 years or more. Most Japanese buy a house with a mortgage, and the father, son and grandson spend their lives paying the mortgage off.

In the Old Testament, God outlawed debt exceeding 7 years. He doesn't
want His people slaving in debt.

In the USA, bankers followed the Biblical model of a maximum of 7 year loans up until the 1920s. It was during the "Roaring 20's" that this practice was abandoned for loans of longer terms. The stock market crashed in Oct, 1929, due to too much 'easy credit.'

Every American has to pay higher prices due to US gov't debt. It is US gov't debt that sets the interest rates that borrowers must pay. And it is US gov't debt that drives inflation higher. And it is inflation that is stealing the value of your work. A retirement nest egg of $250,000 isn't what it used to be . . . .