ParkTwain's Parlor

[IIC]

<< Here are several articles about recent reports from Paul Desmond of Lowry's research about the historical characteristics of stock market tops and bottoms. >>

I have a copy of Paul's 2002 Dow Award paper that discussed identifying market bottoms (I sat on the Dow Award committee that year). If you'd like a copy please contact me via e-mail at [email protected] (not Ernie's private mail) and I'll send you back the paper.

I emailed you Dave...But I just noticed that someone emailed me this yesterday:

http://www.thestreet.com/markets/marketfeatures/10269345.html

<< Here are several articles about recent reports from Paul Desmond of Lowry's research about the historical characteristics of stock market tops and bottoms. >>

I have a copy of Paul's 2002 Dow Award paper that discussed identifying market bottoms (I sat on the Dow Award committee that year). If you'd like a copy please contact me via e-mail at [email protected] (not Ernie's private mail) and I'll send you back the paper.

Wendy Lo's Power Tools trading blog

Here is a just basically great and well distilled set of articles about whittling down to a workable trading approach and system, found at a blog produced by a system-based trader named Teresa Lo. I have not finished reading all of this material, but what I have read so far tells me that this is very valuable information for a new to intermediate level trader, which is the area where I fall.

Starting by reading her series of blog posts about "Key Concepts":

http://powerswings.com/FAQ/2006/02/13/key-concepts/

(Click each successive link found at the top right of the page.)
The posts in this set are:
* Key Concepts
* ATRp - Average True Range Percent (i.e., as opposed to historical volatility)
* Position Sizing Tool
* Relative Performance Counts
* The Sentiment Cycle
* The Age-Old Question
* Ratio Charts Count Too

Then read about her trading system:

http://powerswings.com/FAQ/2006/02/11/the-countdown/

(Click each successive link found at the top right of the page.)

Then read about her "Ultimate Trading Course" ...:

http://www.powerswings.com/tradingcourse.html

...which includes this nice 28-page PDF document:

http://www.powerswings.com/PTM/PTM20050224.pdf

34 stocks that have increased their earnings for 10 straight years:

http://www.crossingwallstreet.com/archives/2006/02/ten_straight_ye.html

Apollo Group-Cl A APOL
Applebee's Intl APPB
Bed Bath & Beyond BBBY
Brown & Brown BRO
Cathay Gen Bancorp CATY
Compass Bancshares CBSS
Capital One Financial COF
Copart CPRT
City National CYN
Donaldson DCI
D.R. Horton DHI
Dollar Tree Stores DLTR
Expeditors Intl Wash EXPD
General Electric GE
Home Depot HD
Harley-Davidson HDI
Health Mgmt Assoc HMA
Hilb Rogal & Hobbs HRH
Heartland Express HTLD
Knight Trans KNX
Lincare Holdings LNCR
Moog-Cl A MOGA
NVR NVR
O'Reilly Automotive ORLY
Paychex PAYX
Patterson Companies PDCO
Ross Stores ROST
SEI Investments SEIC
Synovus Financial SNV
Sysco SYY
Toll Brothers TOL
Trustco Bank Corp/NY TRST
Walgreen WAG
Wal-Mart Stores WMT

Paul Desmond's research on market tops and bottoms

Here are several articles about recent reports from Paul Desmond of Lowry's research about the historical characteristics of stock market tops and bottoms. This looks to me to be very good information that you will want to keep for the longer term.

The starting point is a pair of articles from theStreet.com:

http://www.thestreet.com/_yahoo/markets/marketfeatures/10269345.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

http://www.thestreet.com/_yahoo/markets/marketfeatures/10269355.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

Here is a 7-page article that presents the material in Desmond's own words:

http://www.weedenco.com/welling/Downloads/2006/0803_GP_Desmond.pdf

Here is a link to Lowry's web site, where you can purchase the Desmond reports for about $10.00 each:

http://www.lowrysreports.com/research_studies.cfm

Among many excellent facts that he presents, he makes the relatively common-sense point that a good number of the listings on the NYSE are actually funds and ADRs. When the movements of these issues are included in the daily advance/decline numbers for the entire NYSE, you can get a mistaken impression about what is actually happening among the U.S.-only common stock issues. So in his research, he excludes those issues as he tries to understand what the behavior of the domestic-only issues was when the market was peaking or bottoming.

In the Street.com interview, he also makes the point that he isn't usually interested in investing in foreign markets due to the complication of the effects of exchange rates on one's effective rate of return.

In my ongoing research of watching new 52-week highs, and especially watching for stocks making all-time highs, I have been struck during the last couple of years at the behavior of the water resources stocks. Some of these are categorized (such as at clearstation.com) as "water utility" companies (and also notice the group's relative strength), but there are some microcaps, such as PCYO in the Denver, CO area, that are still below the market's radar and have some very interesting stories going on. Privately controlled water resources across the country are being bid up and consolidated via the stock market, and it is very interesting to watch.

The Old Testament also condones slavery. You have to be selective about where you get your guidance in life, I would say.

Federal legislation in the early 1930s that resulted in increasing the longest available term of home mortgages was one of the domestic economic successes that came out of the Great Depression.

[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 . . . .

[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."
//

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.

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."
//

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.

Ray, see the actual dartboard on this page:

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

[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.

[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.