STI Hedge Fund November Performance

I will begin this performance report with something I picked up today from a website I frequent....

 

"The only way to get rich trading."

 

"Traders drawn to the allure of quick riches are virtually certain to ignore proven methods and risk parameters, destroying their accounts as a result. The only path to trading riches is via consistent profits over the long run.
Many novice market timers (traders and investors) have difficulty facing a cold, hard fact about the stock market: You can’t get rich overnight.
Experienced timers know this. They expect to make big profits in the long run, but they focus on making as many reasonably profitable trades as possible. They do not focus on a single, life-changing trade.
Many timers also realize this, but it is hard to accept. And some are initially drawn to market timing with the hopes of making big profits quickly; the kind of money that can be used to finance a luxurious, exciting lifestyle, or money that can be used to show family and friends that one is deserving of envy or respect.
However, it is dangerous to approach trading in the financial markets from this perspective. It directly contradicts the fact that it’s going to take some time before one makes enough money to support a new lifestyle or impress others." 

 

That pretty sums up my approach to trading, consistent profits over the long run, lots of singles and doubles, but few home runs. I opine to my CPA regularly that if I so decided I could make 12% easy with my experience and the structure of the hedge fund.  Yes, most people would be thrilled with such a regular return.  My CPA knows however I am a very competitive person and my trading is really not work, but more an outlet for my competitive streak.  Since my early days I like to compete and I do not like to lose. I find trading against people of equal or superior skill and experience the zenith of competition and winning in this atmosphere just more fun than I can allow to go unchallenged. So some years my return will be less than what would be easy because that competing means I lose some too. My annual goal is 18%. As we near the end of 2011 this year is one of those years where losses taken at year end will take some of the earlier positive cash flow away. But offset that with a year like 2009 when the return was 36% and you can see why I trade like I do. 

 

November was the first month this year where I began taking capital losses in preparation for what I see to be a serious opportunity for profit in 2012 as noted in my October report. My annualized November net return of 14.8% reflects that as just under 5% of my monthly cash flow was taken off due to capital loss year end house cleaning. I would expect December to reflect a negative cash flow since there will be a good bit more taken by the end of the year. Nevertheless we should finish above market averages again and move into 2012 fully cocked and loaded. 

 

November trading continued a recent trend of tobacco option trading that gave us almost 40% of November's positive cash flow. Real estate also continued trend with another good month. We did experience some less than desirable trades in several stocks due to being underwater price wise on the securities.  But even being underwater these trades continue to produce positive cash flow.

 

We are fully prepared to exit as many as 7 positions currently held by the end of December and expect to enter 2012 with no more than 15 trading stocks.  

The December report will reflect our full year end performance and will not note exited positions and costs due to our preference not to disclose everything about our trading techniques. However we will post all our trading positions going into 2012 as usual.

                  

Happy Days are here again...Monetizing your Debt.

Our wondrous central bankers in this world still believe the current economic crisis can be solved by monetizing the debt.  Let me make this clear THIS CRISIS IS NOT A MONETARY CRISIS, it is a debt crisis.  A debt crisis is where countries and citizens spend too much and have too much debt to service and pay down. But this morning the central banks of the world are back at their old game of monetizing debt or printing more money to make things easier when problems occur with liquidity. Oh, it makes markets jump with joy and legislators smile in delight, but like a drug the effects wear off quickly and we are back to the same situation. Either we cut spending and go about paying off debt or we screw the debt holders by either hyperinflation or just default.  This likely buys Europe another week.

 

The real thought this morning is that IF the central banks decided to do this as a group, just how bad is the situation in Europe? Frankly this should make one more worried than filled with joy as an investor.  If you own stocks today would be a good time to lighten up by selling into the upside.

 

Joy was also administered in the form of sharply higher housing sales. But if one reads into the weeds you find the realtors surveyed also cautioned that lately many "sales" are canceled due to bad credit, no credit, no down payment, and bank concerns about loaning to anyone now. Add in that many of the sales are "short sales" where investors are fishing for deals that could likely get turned down at the bank level again. The best way to tell if people really are buying homes is the new and existing 30 year and 15 year loan rates which would move upward if demand improved. Checking Bankrate you will find they have moved down in the last month and are presently stable.

 

Maybe the ADP jobs report that shows nicely increased private sector jobs gains is the real joy of the morning. Well not so quick as these reports have proven not to be too trustworthy an indicator of job gains.  Ditto for the Friday report from the federal government that has proven almost totally worthless other than a political tool for the current administration. Maybe the jobs picture is improving, but frankly I need more proof than these reports. I expect much of this is some of the leveling off of layoffs not any uptick in hiring.

 

Maybe others are filled with joy, but I remain cautious, very cautious. As I mentioned yesterday investors and traders now are more conditioned to emotional moves than thinking moves.

                

Tuesday notes....

"When an individual person dies with debts, what can be collected from their remaining assets is collected and the rest is written off. Yet the opposite occurs with generational debt. Irresponsible borrowing by past generations is foisted on succeeding generations. The sins of the forefathers are preserved with interest to gouge the quality of life of younger people who neither decided upon nor benefited from irresponsible borrowing. The living should not be beholden to the dead."

 

The above post is just one of many I see posted all over the web about erasing debt the past few days.  As I mentioned yesterday Europe is already in process to forgive debts held by private individuals in Greece and likely Ireland. I expect this under the radar way to solve the debt problem in Europe will spread as governments begin to realize they have no other way out of their mess. When the majority of citizens of a country begin pushing the legislators there not to cut benefits the old style idea of "debt jubilees" begin to take hold.  If Obama is reelected and our national debt continues on the current pace consider the fact that a debt jubilee could be coming here as well. Consider that when holding assets that have no hard assets backing other than "full faith and credit".

 

Italian bonds this morning are trending closer to 8% after a "successful" auction where they had to raise rates to get enough buyers. Fools and their money are soon parted.

 

The New York Times yesterday reported hat Obama is abandoning the white working class as voters. The first reaction here would be that he believes his coalition of blacks, hispanics, public unions, big education, and upper crust white wealthy are enough to get him reelected. Digging deeper if this is true it means Obama actually wants the economy to get worse adding people to the public dole and thus voters to his coalition. Is this the moment that many had feared that the huge numbers getting government checks outnumber those paying in?  If so Europe in effect might have just got abandoned since a collapsing Europe is a big plus for Obama's reelection.

 

My belief that only non thinking investors place money in high cost up front industries such as airlines and automotive  where the payoffs depend almost solely on customer tastes comes to the front this morning with the bankruptcy of American Airlines. Oil, which requires large up front money too is almost guaranteed a nice return as consumer tastes mean little to a necessary product.

 

Anyone who believes that housing has hit bottom should take a look at this mornings housing numbers.  The bottom has yet to found and is only being delayed by the continuing federal housing programs that hold up foreclosures.  On my trip to the beach last week I noticed the continuing decline of prices there. Most homes there are priced around 25% or more off purchase prices of 2007.  Even at that price they are not selling since most people expect prices to continue downward in markets that were inflated so much.  Most of North Carolina avoided this housing bubble.

 

 

                

A Chelsea Morning....

As one wakes up this morning looks like everything is just hunky dory again with the Dow futures up over 200 points.  Let's all party and pretend that all is well and no problems to be found. Let's see what is making this a Chelsea Morning.

 

We have Italian soccer players doing ads urging people in Italy to place their money in Italian bonds auctions this morning. If the high interest rate does not get you interested this certainly will. No need to invest in those pesky private stocks and such.  Why we have waiting for you 7.45% interest rates on government guaranteed debt almost 700 basis points above what you can get in US Treauries.  Ignore that German bonds are 2.35% or so too. Also ignore not one single European country can sell bonds for less than 5.0%. Can an ad from Obama be far behind urging Italians to buy their own bonds?

 

We have the emotional lift that Americans went out and bought big on Black Friday, encouraged on by the media in wave after wave of promotional news items. Today Americans will continue that binge with some more media pushed and inspired Cyber Monday sales while they sit at their at work office desks. Never mind that all this buying is on credit cards and the bill will come due in January. No one is saving anymore and why should we since there is happiness all around since things are back to normal. I do wonder how media newsroom types look at themselves in the mirror knowing they have thrown all media pretense of non bias to the wind pushing these buying sprees. When I was in the media we actually asked retailers to PAY for ads to get people to stores. I suppose that is just so !990's now.

 

We all are even more thrilled by the news the IMF might, just might, back some Eurobonds. Did I not just post about this last night? Let's see we got some US taxpayer money coming to the rescue again by taking some European toxic debt, packaging it as AAA and behold we got Eurobonds!  That should allow Europe to keep on it's social spending spree going for awhile longer just past November 2012 and nary a worry about who pays the bill.  $800 billion of US taxpayer money borrowed from the Chinese and re-routed straight to Europe.  Obama needs reelection and golfing in Europe is his originator fee.

 

Let's also celebrate the new GM electric car that the greenies love. No one should consider that the batteries catch fire and burn up the car. The US government, which is the primary owner of GM, let us know this morning that there is no "undue risk" from one burring up in this new car. Just like I expect that we soon will hear there is no "undue risk" from the coming 55 MPG vehicles, including trucks and SUV's this time,  mandated by the greenies via the EPA. You read that right Obama is moving oversight of the Cafe standards from the Auto Safety crowd in government to the EPA. Certainly it is more important to keep some miniscule molecule of carbon dioxide from emitting UNDUE RISK to the enviroment than to save one human life. Thin aluminum doors will give way to cardboard doors. Makes me feel safer already. 

 

The way things are going even I might go buy some gold. Can you imagine how much gold could be sold if some one could come up with a way to sell "gold as the new green?"

 

I will hand it to those "feelings" Baby Boomers we now operate everything, including the financial markets on emotion and avoid actually thinking about our buying and investing. Yes, my friends it is indeed a Chelsea Morning.

 

 

 

 

The worst case scenario?

As I have opined on many postings of late the situation in Europe is serious. Banks there are over leveraged and sovereign governments there are over leveraged. Earlier this year I posted about fearing that a certain Friday could bring us to our on Black Friday like 1929. That moment got delayed by the ECB via Germany chipping in some cash to feed the most debt ridden country Greece with some more drugs known as social spending as no one wanted to deal with withdrawal pains. The problem now is Greece is running out of money again and needs another fix. Add in that almost every bank in Europe will need to rollover just under half their debt in the next 12 months and nobody wants any part of re-lending those banks money. Almost every country in Europe is in the same situation as about 40% of government debt will need a rollover in the next year and nobody wants to re-lend these countries anything either.  European sovereign debt is now considering toxic. The leaders in Europe and Obama want the ECB to take all the toxic debt from debtor countries and package it and rebrand it AAA and sell it to investors. Does this not remind you of the sub prime mortgage crisis in the US?

 

Germany up to now has been the relief value with their "bunds" or bonds. That is until last week when Germany could only sell about 60% of planned bond sales at their regular government bond auction.  Investors obviously now consider German debt toxic as well at a certain level of interest rate.  The ECB could begin printing money like our fed does, but they can only do that with the permission of Germany the banker for the continent. German Prime Minister Angela Merkel knows if she says print then she says goodbye to her position as prime minister since the German people are frankly fed up with working hard and then paying for everyone else in Europe to be lazy via the socialist state.  Germany has a day of reckoning too, it is just longer off.  Germany survives because of it's huge export driven economy. Funny thing is printing money would actually help those exports for a short time.  Obama has also put the US taxpayer on the hook by letting it be known in Europe that any printing of Euros can be partially funded via the IMF.  Congress should oppose this action, but I expect the US Senate stop any investigation of several hundred billion dollars in bailout.

 

Most US citizens do not understand that Barack Obama has taken what was already a mad mad policy of George Bush of using short term borrowing for government debt and made it worse. About half of all our debt is in 5 year or less maturities. The purpose is to mask the overspending and trillion dollar deficits. Wise policy is to spread out your maturities over time and certainly now since long government debt can be funded so cheaply. Imagine taking 8 trillion dollars at .50% interest rate and making it 1.90% and your costs of financing soar. That is why I tell my readers anything is possible when government in the US begins to be really squeezed. It is not inconceivable that US Treasury bonds could be cut to 75% or less of face value just to solve the cash flow problem. Oh, you can print and print money as we are now doing but sooner or later investors and the Chinese quit taking your worthless paper just like in Europe. My best guess is the US has around $7 trillion in free money flow out above what is justified. That is a recipe for hyperinflation when about half your GDP is coming from the federal reserve printing press .  Germans still remember and tell horror stories there about the cartloads of money needed in the 1930's to buy a loaf of bread and that is what is keeping Merkel from saying print.  Americans have begun to forget the real poverty, not today's implied poverty, of the 1930's. If you got someone in their 90's in your family go talk to them now about the Great Depression.

 

The politics are interesting as France and Germany face elections next year and both leaders want to keep their jobs. Merkel has a no win scenario and has Obama telling her to commit political suicide to save his job by allowing the ECB to print. Allowing the ECB to print might keep this house of cards up long enough to keep Obama in the White House past the election of 2012. Either way if this silliness makes it until November 2012 my fear is that Christmas of 2012 could be like Christmas of 1932. We either have a Recession or Depression soon on the way unless someone the ECB begins printing and that only puts off the problem for awhile.  The US Congress and President are doing nothing but dancing around the same problems that Europe is facing now the great debt unraveling. We also have our share of entitlements and welfare that must be budgeted downward. My liberal friends are fools if they continue to believe anything else. We need a serious political leader to replace Obama who is way above his paygrade here despite what his enormous ego is telling him.

 

The US can reduce the pain by taking action to cut government spending and voters will get that choice in 2012. But either way we are going to see a serious recession when Europe collapses.  China is taking notice too knowing that they are likely to see a recession as well since Europe is their largest importer, not the US as most people believe. Hidden beneath all this economic mess is the geo-political issues such as Iran that could drag the world into some kind of serious armed conflict in the next few years. The flash point could be upon us soon in Syria.  I highly suggest keeping an eye on the Syrian situation.  The US has moved a carrier task force from the Gulf into the Mediterranean Sea just for that purpose.

 

Quite honestly I have no idea what will be safe, I do have ideas what MIGHT be safe.  US treasuries as likely safe, but bear in mind a haircut in value is an option especially if there is a President Obama in 2013 since he will see bond owners as rich and able to absorb the cut.  He does not need Congressional approval to commence this action and if the economic trouble is great Congress will not rebuff him and your know the media will go along.  Greek government bonds holders just took a 50% cut in value and are negotiating for more.  

Ireland has already told bondholders there to expect something similar soon. 

 

US state municipals are also likely safe and especially when issued by a fiscally sound state.  States are sovereign entities and the federal government has no real power over them when push comes to shove.  I continue to like very blue chip stocks with dividends, like MCD and XOM, where there is a cash cushion , needed product, and international presence. There also are the agency reits that are guaranteed to the US government and being backed by already depreciated real estate which should hold their value. Lastly one can look at GMNA certificates, but again they could be given a haircut as well.

 

We are following a familiar path in that Europe twice in the last century has plunged the world into chaos, could this be number three?  Let's all remember that Sunday morning December 7 at 8 AM America was at peace, people were awaking in Hawaii from a night of merriment and the mainland was in process of attending church and having Sunday meals,  you know the rest of the story.  I pray I am wrong, but my mind tells me I am not.

               

Morning notes...German bund auction.

Right on cue after my post on the US bond auction yesterday comes the news that the German government could not sell their entire allotment of bonds during the auction. In fact 39% of the issuance had to be retained.  You can gloss that over but there is no other way to put this news but frightening. German bunds, as they call them, are considered almost as safe as US bonds in the world and not having enough buyers means something is really really wrong. My first take is that investors believe Germany is on the hook for all the accumulating debt in Europe and if so Germany does not have the capital to cover the losses. I do not know what the German government plans to do with the next issuance but if this happens again it is time to look for a place to duck and cover. 

 

Again as I noted yesterday keep an eye on the US 10 year bond, if it begins to trade below 1.90% that signals serious problems ahead in the US and worldwide. The reason being that a rate below that signals a wholesale exodus of cash from Europe into US coffers which is evidence of a possible run on banks in Europe.  The fear is that run could expand worldwide.  You might feel comfortable in your own assets, but trust me a run in Europe will make the economy plummet here in the US. We are living in troubled times.

 

The dropoff in commodities such as agricultural products, oil, gold, and others is directly linked to the MF Global situation. Lots of liquidation there as traders are forced to unravel positions. If you are into trading of commodities this would be a good time to do some buying as this downdraft will not last long and you will be rewarded for buying now. Of course JPM just came out with a sell on commodities so I might be wrong, who knows in this market.

 

I continue to watch the nice movement up of my last week selection of ASPS, now almost $10 up since recommendation to just under $46. This stock still has room to run, but I am holding off since I would prefer to buy cheaper and do not chase stocks. The movement in ASPS is likely a negative market indicator in the fact the market believes things are getting worse and more homes are headed for foreclosure.

 

In all today's market action could be ugly. If news continues as it is now we could see a significant selloff by end of day as investors and traders just get out of stocks, bonds, and pretty much everything to de risk before the holiday weekend. We very much could be seeing the final act in the implosion of European economies. Even IMF and Obama do not have enough money do keep this socialist experiment from going broke.  If you think you are worried consider how the White House is viewing these events and election time. The next country to watch is the UK, which is only two steps from the US imploding.

                

US Treasury Auctions show the future of the economy...the key is the 10 year bond.

Two US Treasury auctions in the last two days tells you the economy is not getting better. The Agenda Press and politicians are trying to tell you otherwise, but markets do not lie since people are voting with their money. Obama today is out blaming you, me, and anyone else he can for this misery, but blame all you like it is real and on his watch.

Today's five year bond auction came in at less than one percent which is lower than anyone can remember. It looks to be .937% and was covered over 3 to 1, meaning there was three people lining up for every bond issued pushing rates down. Think about that people are so afraid that they are willing to tie up their money for under one percent for five years.

Yesterday's auction of two year paper came in at ,28% and was covered by over 4 to 1. That kind of interest does not even cover the inflation rate like the five year notes above.

The key rate here is the 10 year Treasury. If Europe continues to slide towards recession and the bond rate dips below 1.90% you can fully expect the US is either in or will be in recession in 2012.  Today's rate on these bonds is 1.94%.

The fed minutes released today are no comfort either. The comments for the November meeting say the committee discussed the weakening of the US economy.  The gloom came with no policy move because frankly the fed has no more bullets to shoot.

Add in the results of what is happening in Europe with today's problems of Austrian and Belgian attempts at selling their government bonds, which have had no problem until now. But with all due respect this is now the silly stage for savers and investors.  Giving your money to the US government money below inflation rate and with the fact the US is printing money at a 40% rate of government spending annually is plainly stupid.

When, not if, inflation finally blows up due to all this printing your bills and bonds will be virtually worthless unless you hold to maturity. I still believe very good blue chip stocks are much preferable to placing money at these rates. Even state issued municipal bonds are better.

Final note. Sooner or later rates WILL go up and if you think we have problems with government spending imagine having to pay even a low 2% or 3% on the huge national debt instead of the rates noted above. Do you not think your bonds could face haircuts and such if someone named Obama thinks you are the evil rich and can take the loss?  Nothing is sancrosant anymore.

                

 

Time to Quit?

I suppose this could be considered a follow up to my post last week of "Opportunity Delayed".  This weekend and into Monday morning I have had that emotional sinking feeling of "why try?"  Usually on the first morning of monthly options trading which was Monday I would be well fed with a Bo's biscuit, well read on the financial issues, and jazzed for the competitive atmosphere ahead.  Making money is nice, but the emotional lift of competition with top level talent is what really gets me going.  Competing against the best is usually an ego boost. Planning my positions and then waiting for people to make trading mistakes on which to pounce is the fix. 

 

I suspect it began this weekend when I read where it appears Jim Corzine has basically stolen all the money, $1.2 billion dollars,  from his clients accounts in exiting MF Global during the bankruptcy in process at the agency. Then add in that Obama has basically told his CFTC which oversees customers in commodities trading to ignore the law breaking in this case. In showing no concern for the little investors who entrusted their money with Mr. Corzine, Obama is looking after his Chicago style friends. Yeah, most people will never see this but think if it was YOUR money that just got stolen.

 

Then I hear on CNBC this morning that someone in government circles either in Congress or the Obama administration placed a Friday PM option trade for $1.55 per share on a stock that announced a merger Monday morning and now has a derivative value of $55.00 per position. Nice profit and likely completely legal since the law does not punish government officials for such trading. Yeah no skin off my back but again that could have been a position I took and now I would be screwed if I had the other end of that trade.  Legal yes, but makes one think the whole system is rigged.

 

Barnhardt Capital, a commodity brokerage operation, closed their offices this weekend after over two decades in business noting that with all the lawlessness and lack of prosecution from the administration they simply could not in good faith continue to trade their clients accounts. They are sending the assets in their clients accounts back to them. Friends it is getting bad when a COMMODITY brokerage believes things have gotten to risky to trade.

 

Another new item of note this morning illustrates why people are fed up with this government. Jacksonville the home of Camp Lejeune is in full boom mode due to the 15000 or so new Marines that were assigned to the area during the recent base realignment. That is a good thing for the businesses and employees there. However this morning there is the news that the Pentagon has decided to drop the number of Marines about 16000 nationwide and 7000 of that total are coming out of Camp Lejeune. The news story notes that many of the homes, new businesses, and restaurants have already built or in process of building for the new influx. Around 3000 new apartments are built or in planning mode of which now about half will never see a renter.  Most people would just shrug that news off, but if you have spent your saved capital and resources to build for the new Marines and now find the government saying sorry we changed our minds making your investments worthless how would you feel?

 

Obama is morally and fiscally clueless to an extent that now Chris Matthews sees him as not having a plan for the future as he opined on TV this weekend. Either Chris is ready to bring forth a new book or he is off the reservation.

 

Even the supposed Super Committee could not agree on the smallest of budget reductions.

 

Europe remains in the tank and no one seems to care the least about the fact they have lived above their income for so long. Just keep the goodies coming and lets all blame the person who is doing the lending that they no longer want to lend to people that do not want to work and give to the permanent lazy anymore. The US is only a few years from this situation.

 

Don't even get me started on the total and complete cluelessness of the media.

 

So here I sit ready to trade and frankly again wondering "why try?" The market seems to get more rigged daily and political leadership in Europe and the US is non existent. Media coverage is in the tank. I for the first time in my life actually looked in person at a beach home this weekend to just get away from all this silliness and quit trading. Maybe my interior mind is telling me just give it up since it is hopeless. Reminds me of the asteroid movie where a father and his daughter wait beside the eastern seaboard ocean by their house awaiting the sure to come tidal wave knowing of certain death yet pleased to know it does not matter anymore. Maybe it is time for me to go await the tidal wave of insolvency that is coming our way.

               

Hooked on Tobacco

I had an e-mail exchange about tobacco stocks this past week and decided it was time to post on the subject. This posting will be about three subjects who are hooked on tobacco.

 

Tobacco smoking, notably cigarettes, are one of the most addictive products on the planet. People who use the product will give up women, food, money, life years and almost anything to get their fix. Tobacco owns them and it is not a pretty sight. But those who jump on the growers and producers of this legal product make me angry because it is a LEGAL product and will remain so. We tried prohibition of vices and it does not work and ends in black markets. Drugs, alcohol, food, and other vices are addictive as well. Frankly you show me a human being and I will show you someone who has a vice. The people who decide tobacco smoking is the most awful thing on earth are hypocrites. We have pushed tobacco smokers outside in the cold in the name of the awful smell and supposed second hand smoke problems, but at the same time society endures alcohol on the highway which is much deadlier. But be that as it may tobacco users are hooked.

 

Number two hooked on tobacco are the US states, the US federal government, and the trial bar.  This via the legal wonder called the Master Settlement for medicare losses attributed to tobacco smoking and the huge tax haul from selling tobacco. Let me put the situation in perspective with an update of Phillip Morris current budget for next year.  PM will have sales of around $68 billion next year, after accounting for cost of production and sales of around $11 billion PM has EBITDA of $57 billion.  $44 billion of that total is either excise tax, master settlement costs, and income tax or 77% of the total EBITDA goes to government or trial lawyers. Now you can call that what you will but readers with money like that coming your way government is hooked too.  Add in that three other tobacco companies, RAI, MO, and LO are all paying into that pot and you got even in government circles what would be called REAL MONEY.  Now if you really want to see hooked on tobacco try taking away some or all of that pot of money from the parties at the trough. Some years ago a trial judge tried to do just that by telling Altria that it needed to pony up about $15 billion dollars for an adverse trial settlement that was to be appealed. Altria told the then Republican Governor of Illinois that they did not have that kind of money and if forced to escrow the amount they would be forced into bankruptcy. Bankruptcy means no more master settlement and no more big tax haul. Many fellow US Governors called the Illinois Governor and told him to do something as they could not run states without the tobacco tax and master settlement revenue. Panicked at this situation the Illinois Governor called Democratic US Senator Dick Durbin and a then unknown Democratic Illinois State Senator name Barack Obama to go call on the fellow Democratic judge and explain the situation. They explained it like this to the judge. If you decide to carry through with your escrow order we will be forced to cut costs at the state level and one of those costs will be combining judicial districts in the state and one of those might be yours. Later that week the judge relented and allowed Altria to go forward for a few million or so which they won at the next level.

 

 Final note there are several smaller tobacco manufacturers who are not part of the master settlement. Those firms occasionally decide to move their low rent cig business into the higher rent master settlement companies business and take away market share. Last time one tried to do so Reynolds American the tobacco company losing market share picked up the phone and called the US Attorney General who immediately sent out a representative to discuss the situation with the smaller manufacturer who immediately decided they had all the business they needed without going into competition with Reynolds. Loved to have been in that room just as an observer.

 

Now you know why I think owning a tobacco company like MO, LO, PM, and RAI is like being in business with a government protected monopoly. I too am hooked on tobacco. Keep the dividends coming.

 

I currently own either as a long or option MO and LO.

                  

Cornicopia of ideas for Thanksgiving for long term capital gains.

Today's posting is on some long term capital gain ideas that have some risk involved. But everyone needs some of these for a balanced portfolio. I am personally not recommending any of these, but they do have my interest and stay on my watch list for possible purchase.

 

BAC..Bank of America is the second largest consumer bank in the country. The federal government decided two years ago that allowing this large bank to fail would be a disaster and moved in and bailed out the company. Stock investors got hit badly and lost most of their investment and the nice dividend.  The stock selling for around $6 now has seen a five handle in the last three months.  I expect we have seen the lows here as well. Here is my trade. Wait for Europe to blow up again with some bad news which should push BAC down. Then sell a $4 or $5 put for some month up to January 2013 which are attractively priced. That should be some safe cash you can use for one year with little risk.

 

NSBC..This one has some serious risk, but might be worth some part of your portfolio. North State Bank is a small community bank that has most of it's branches in Raleigh NC. Raleigh escaped most of the housing bubble and despite having some housing issues NSBC has never shown an operating loss during the financial crisis.  The stock is selling around $3 to $3.50 and bounces around due to the low float and small daily volume. Selling at lower than book value, which frankly at this level of business is only a talking point, still NSBC looks like a value. Insiders have been slowly and carefully buying shares in the last year.  Take a close look and if you like it buy in small blocks and be sure to set your price, do not buy at market. If you could buy at $3 and sell some years down the road at $6 you could do a double.

 

 BBT...This medium sized bank has also done well during the financial crisis. Admittingly it has had some issues with it's commercial lending unit as well as it's residential lending portfolio as well. However this bank has as solid a management as you can find.  John Allison, one of the smartest bankers around gave up the chairmanship a few years ago to Kelly King in almost a seamless move and BBT has continued to improve it's prospects since bottoming out during the financial mess. BBT took TARP basically that was forced on it and has paid it back. Dividends were cut, but still pays just under 3%. BBT will never make you rich, but it will evolve into a safe place to find capital gains and safe dividends . Banks will be like utilities going forward and I think BBT is perfectly positioned.  Wait patiently for a price nearer $20.

 

BP...This company still recovering from the oil spill in the Gulf of Mexico has lots of potential upside and also lots of danger. The danger is obvious as the lawsuits and overhang of costs from the oil spill continue to add up against the cash position of $20 billion set aside for the oil spill payouts. There also is the worry that BP will end up selling off so many oil resources that the company will no longer be able to survive without a merger. That being said BP continues to fascinate me with upside potential coming from what could be the end of oil spill losses and the realization that as much as $10 billion of that pot could be coming back to the company. BP actually noted pleasure in a recent week that one of the projects they had up for sale earlier fell through so maybe the worse is over. If it is over the company which has intense pressure in England to move the dividend back up might be doing so sooner than expected. Many retirees in that country receive pension income from BP dividends. Also note that is Iran gets the bomb or Israel attempts military action to stop Iran BP could be one of those companies that sees a big tick up in price due to the increase in oil cost already happening now.

 

I do not own any of these stocks either as a long or option.

 

 

 

 

Is this the Small Town Investor effect?

Several weeks ago I highly suggested that CTL was an excellent buy in the lower $30's one morning in my blog. The stock went up about $2 that day and has continued to trend upward since then. For the record CTL is still a good buy, just not as good as earlier.

Last week I suggested ASPS as a good capital gain purchase and the stock jumped from around $37 to $42 within the first couple of days.  I even made the point the next day that maybe I needed to start taking my own advice.

Today I suggested two selections in DM and ASPS again. So as if right on cue DM had it's best day in awhile and ASPS jumped another dollar to settle at $44. 

Is this the Small Town Investor effect? Are my readers going out and actually buying selections I suggest? Do I need to register with the SEC?  Maybe it is time to pump and dump on my behalf?  We will see if this trend continues to future selections.

Foreclosure Investing

There is more news today about foreclosures picking up pace since many legal obstacles seem to be coming to an end.  This pace should quicken soon if the Obama administration does not put another roadblock in the path via some package to save delinquent homeowners.  Frankly I believe we might have reached the point that blocking these foreclosures has run out of legal means to stop them. As I have posted earlier the best thing that could happen to the housing situation is for foreclosures to pick up pace which would allow the over inventory of homes to begin to come down via the buying up of foreclosures by investors and people looking bargains.  So if you are an investor how do you take advantage of foreclosures and home inventory opportunities.

 

One is to invest in companies trying to keep people in their homes through means other than legal obstacles. I mentioned a stock last week Altisource, symbol ASPS, that offers the investor a chance to get into this business in a big way. ASPS helps find ways for homeowners to stay in their homes and lenders would much prefer this since they lose anytime a house is in foreclosure.  ASPS has moved up smartly in the past year and just reported stellar earnings which resulted in another $5 pop, so buying  here at a value price is critical. I would put this on my watch list and consider buying if it dips near of below $40.  The PE is reasonable and the company just passed $1 billion in market cap which will put it on the radar of some investment professionals. If you are looking for a long term capital gain buy I recommend this stock highly. 

 

Another company that might fit your investment idea to get into the home foreclosure upside is Dolan Company, symbol DM.  Dolan has over the past few years reinvented the company from primarily a business and law publishing operation into a law and foreclosure servicing business. Dolan uses it's publishing side to do business with lending institutions and law firms when they need to publish the legal ad of foreclosure. Then it has a law firm specialty side that has software and expertise in knowing how to process the foreclosure itself.  Dolan has been languishing as a company and stock for some time now as the expected foreclosures have not commenced due to legal holdups and government efforts to keep more people in their homes.  Frankly there are huge backlogs of these foreclosures and once they commence Dolan should see a sizable share of this business and profits.  The question is when and how long you will need to wait for this process to commence. Dolan stock could be an immediate move once foreclosures start or a long wait if they hold off awhile. But it is almost pure play on the foreclosure side. Dolan has a reasonable PE, but is a small company by market cap just over $250 million.  This stock tends to be thinly traded so be careful if you decide to take a position.

 

I do not own ASPS or DM either long or as an derivative option.  However I did work for Dolan as an employee and was assigned employee stock options prior to Sept. 2008. I no longer own any stock or stock options in Dolan. I also have no inside information on the company. I am not recommending Dolan and this posting on DM is only for informational purposes.        

Opportunity Delayed or put off forever?

Yesterday's decision on the Keystone XL pipeline sealed it for me. I frankly do not trust the Obama administration to do the right thing. I already did not trust him to do anything that was business friendly. He can say what he wants about wanting to help create jobs, but past decisions to pile on regulations and taxes on investment makes one reconsider their options when looking how to deploy assets.  Yesterday's decision is nothing more than political games to satisfy extremists and kills job creation.

 

So I have decided to engage in a policy of Opportunity Delayed in that I will deploy no more capital into investments than I currently have until after the election. I know there are others who have made the same decision and after chatting with some of those investors this past week and I see no reason to do anything but wait. 

 

In the past couple of months I have had seven investment opportunities placed on my table,  three of them would employ additional people.  During that time I have highly considered moving forward on all of them via either existing capital or borrowed capital which would make better use of resources.  The reason they were on my table is that others have passed over them for the same reason I am now passing them over too.  That reason is not wanting to take risks where Obama could change the rules after investment has begun. There is also the sense of impending health care costs via Obamacare and the continuing threat of rising investment taxes beyond those already added since Obama took office.

 

My actions here, and actions of others like me, keeps jobs from being created, keeps me and others from using capital to it's best use, and most importantly keeps me from using my skill set in the marketplace past only my hedge fund activities. I personally want to do more but the risk of losing my hard earned and saved capital is just too great with Obama.

 

So if you are out there unemployed remember my thoughts here when you vote in just under one year as to your future. You can continue to be without a job and any hope for a future one or you can give incentive for those of us who want to move forward by replacing the current president. Otherwise if Obama is reelected I will stop all investment activities and spend my time enjoying the beach. I expect I will find others like me to have dinner with there and discuss the good times when we could use our resources and talent to it's best effect.

              

Today's Market Action.

Near 400 point drops tend to rattle most investors and traders nerves.  I took the day to do some other activities and came back after the market closed. Not to act like I never worry, but when I got up this morning and surveyed the scene I could almost sense this drop coming.  Investors are concerned with good reason that Italy is in trouble. Frankly if Italian bonds stay above 7% they really are in trouble. Not only will that make it harder for Italy to sell government bonds, it will make it much much harder to pay the interest on those bonds. Above 7% Italy frankly does not have the cash flow to make it work, yes it is that tight budget wise there. Europe is putting off the day of reckoning and no one knows what to do to protect assets if you have interests on the continent. Note that we are seeing what will happen in the US in a few years if we do not get our house in order too. Anyway I frankly do not know what is going to happen in any of these countries other than Greece will sooner rather than later default and that will happen in my opinion before Christmas.  For the other peas in this sorry pod Spain and Portugal will likely default too, but Italy is the biggie on the count right now. Add in that France is next up to bat and that is what makes markets go down 400 points in one day.

I have a post coming soon about the US economy, in which I will opine some positives. However if Italy gets in real trouble here all bets are off.  Smart investors now are looking for safe yielding investments and I again give you two. One, look for US states that have solid AAA ratings and have shown some understanding in getting their house in order. Two, there are many rock solid corporations in this country that pay good dividends and will survive most any problems in Europe.   Example I would gladly trade any US treasury measly less than 1% yield for McDonalds 3% rock solid yield.  Almost every stock I own in the hedge fund was off less than 75 cents today and that is why I tell you US blue chip companies are safe havens.

                

Four updates on suggested stocks.

I suppose I should take my own advice. Having suggested buying ASPS back just a few days ago in "New Stock for your Consideration" at $37 per share it shot up to $42 per share on superior earnings for the past quarter those earnings being up 40%. I will again suggest one wait for a selloff and consider purchasing ASPS for capital gain opportunities.  This company is in the right place at the right time and I only regret I did not know about is sooner. You can expect as foreclosures actually start to be done at a more timely pace this stock will reflect the additional sales ASPS will gain.  The only reason I am not buying this stock into the STI Hedge Fund is because the rules prevent me doing so. You are under no such rules so keep it on your watch list and when a selloff occurs jump in.

 

TCAP, Triangle Capital, which I suggested as a buy a couple of days ago as well has continued to move up form the $16 buy to now just over $17 per share.  This stock will continue to pay you nice dividends and likely some capital gains as the underlying business produces profits going forward.  Like the stock above look for a pullback to around $16 and jump in for some nice profits. Again TCAP does not fit the rules for our fund so we will not consider it but do not let that stop you from considering it for your portfolio.

 

Another capital gains opportunity still lies in CTL, which I like even now at around $36.50 on a continued uptick in price.  The dividend still strong at around 8.0% adds juice to your buy.  I suggested this stock about $3 lower and expect another $5 to $7 up when investors consider the true value of this company and stock. In the meantime the dividend beats a CD and any US treasury and is secure via a double covered cash flow.  I own a sizable position in CTL.

 

If you are a risk taker consider BP, yes I said BP.  This company is continuing to unravel claims from the Gulf oil spill and continues to add cash to it's portfolio of assets.  Knowledgeable people believe BP will get back as much as half the $20 billion set aside for claims since those claims are trending much less than expected. BP is also settling lawsuits against it's partners in the spill and just got a $4 billion settlement and would expect a couple more in that range. Not too much longer BP will be raising their dividend substantially due to pressure from pension groups in the UK and when they do so this stock will rip nicely in price and add some capital gains.  Again wait for a buy closer to $40 and wait. You will get almost a 4% dividend now while you wait. BP does not currently fit the rules for inclusion in the hedge fund but remains on my watchlist.

                

My Monthly Double...high end trading illustrated.

This morning I get to enjoy one of those events that occur for a trader maybe a dozen times annually.  I call them the monthly double. A monthly double is when a position you take at the start of the monthly options trading period gets assigned or called from you during the month long period of the position. Nothing is more sweet than being able to double up on your profits in a 30 day period on the same position. Note that I plan for these events to occur regularly which means it involves a lot more factors than just plain luck.

 

Here is how mine worked this month. I was assigned 1200 shares in HCN on Oct. 21 having sold a put option on the stock the month prior in late Sept. So I had already made money on this position of $1.55 per share on the put option having owned nothing.  Now owning the 1200 shares I sold a call option on the 1200 shares for $1.30 per share on October 24.  Friday the 1200 share position was called from me after owning it less than 2 weeks. Today I sold another put option on this stock for the final two weeks of the option month for $1.05 per share  That's $3.90 per share for the period on a $50 stock , or 7.8% over at most only two weeks of actual ownership. Annualized that is 46.8%% since I will hold this position through the two month cycle. Add in that I will get to do this again at the end of two weeks. This is why a monthly double is so sweet.

 

HCN is one of my favorite plays with solid fundamentals, good dividends which just got raised this week, and high options opportunities. It illustrates why stock selection is so critical to trading derivatives in a hedge fund model.             

We ain't in Beautancus anymore..., only one spoke left.

I opine to my wife occasionally about the future of churches and if they will be here 20 to 30 years from now.  Most main stream protestant and catholic churches in larger towns now are nothing more than glorified social clubs where people who want to "perform" the act of worship gather to relieve whatever guilt they have from being associated with these bodies of worship for many years. Oh, they make contributions and help people of lesser means and some have soup kitchens the such that serve good purposes, but mostly the people who are members do not have a strong and active belief in God.

 

I have similar concerns about the future of extended family reunions and thus it is with my family the Dixon family of Beautancus NC. Many rural families now are seeing the thrid generation of their families spread out far and wide. These members no longer have the link of having grown up together and spent time during youth as an extended family. That link to a shared past is fading quickly and that link is the key to holding a family together. Rarely today do families consist of 5 or more children who come back "home" regularly.

 

One of the most wonderful blessings I have is to have been born into a large family of aunts and uncles on my father's side. Ten aunts and uncles in the original family meant I had plenty of eyes keeping an eye on me and plenty of love dished out by this extended family. Plenty was the word too when it came to the fact that once this extended family married there were 20 of these aunts and uncles in all. Now many of these aunts and uncles took God's instructions to heart and went forth and multiplied.  When at their highest number we had well over 100 people who would gather at my grandmothers house on Christmas for the family dinner and gift giving. Unless you have had an experience like that there is no way to describe the excitement and joy one had from extended family Christmas Days.  Add in that on many Sunday's we gathered at the old home place in Beautancus as well and you got some serious extended family time.  This my friends is what you get when 10 children grow up on a farm together in the early to mid 1900's.  Blessed truly is the only word to describe this feeling.

 

After my grandmother passed on the family would gather for Christmas Eve at the oldest sisters house and have Christmas Day at their own homes.  Somewhere  along the way that stopped too.  When my mother passed on 1984 the annual family Thanksgiving gathering ended. Then we began to gather in November at a local community building for annual family reunions.  Through all this time one by one the original ten uncles and aunts began to pass from this earthly world. Maybe we cousins realized it at first, maybe we did not since they all seemed to be there forever keeping an eye on us. But as the first few left the world the children left of the original ten would have a wagon wheel of flowers prepared for the funeral with 9 spokes, then eight spokes, then seven spokes, and so forth. Somewhere along the way this tradition ended. Maybe due to the fact the countdown past a certain number did not have the same feeling later on I suppose.  I do not remember when this occurred, but what I do know there is only one spoke left now.  Trust me that is one lonely strange feeling when you realize the wonderful memories of family Christmases will eventually be over for the original ten who made sure we remained family. The final wheel spoke so to speak has worked as hard as anyone could to hold the family together and indeed we still meet the first Sunday in November for a family reunion, now going on 35 years.  

 

But it is not the same as the old days when we would gather regularly.  One spoke of the family has continued their own family gatherings with regular get together's about three times a year and I am blessed to be invited and have a chance to reminisce and watch the young ones there do it all again so to speak. Someday the final spoke in the original ten spokes will be gone and frankly I do not know how to deal with that. Oh, I am sure I will cry and do the funeral stuff.  But not having that anchor to the original family is something I do not want to think about. I suppose I could "think about it tomorrow" as Scarlett did, being a Southerner and all, but think about it I must eventually.

 

Once that happens there is only the cousins left and they are already thinning out. The real thinking here is that I am one of the youngest.  It could very well be me as one of the last limbs on the original family tree that gathered at the old home place to be left somewhere down the road. How does one deal with having simply no one to talk to about the old days?  Do you sit around and daydream, do you get in the car and go back to the old places and experience some sort of melancholy, do you go looking for someone anyone who can talk to you about what used to be.

 

Darned if I know. What I do know is that is likely how the last spoke is thinking right now and I expect I, or whoever it the last one,  will not like it any more than I expect he does.  We ain't in Beautancus anymore.              

                

Italy looks to be next.

Protests this morning in Italy are cause for investor alarm. It also is cause for man on the street in the US alarm. Italy is a large economy measuring in the trillion dollar range unlike Greece which is in the low hundred billions dollar size. Everyone knows Greece is over leveraged and it's economy is due for free fall since they have and continue to live beyond their means. All this due to the social programs that have been piled on and on by Greek politicians wanting to get votes.  Oh yes they have taxes, high taxes over 50%, but the national game in Greece is tax avoidance. So default as I mentioned earlier is not if but when.

 

Italy has similar problems, but is a few years behind Greece in living beyond their means. However Italy is catching up and in their case the problem is that the debt load there is huge, as in trillions of dollars huge.  Citizens there are already responding to the much smaller cuts in social programs and the protests in the streets this morning are something to cause alarm. The president of Italy is starting to get the lack of confidence thinking that just got voting on in Greece.  Haircuts on bonds, bank failures, and the thought of default in Italy makes me consider putting my money between the mattresses. 

 

Consider that if Italy starts down the path of Greece the banks in Europe who hold much of this sovereign debt are going down. Consider if Italy takes a haircut or defaults on anything the smallish stake the US has in Greek banks looks like a joke compared to our stake in Italy and European banks. Yes I said OUR, as in the US banks via a little thing called the International Monetary Fund.  The IMF is the lender of last resort here for non-US banks via the US taxpayer whose taxes fund this operation. So if Italy goes down you lose some serious money yourself. The US taxpayers will asked to refund the IMF to keep it stable.  If you are wondering just who signed you up for this look no further than past and current Congresses and US Presidents.

 

Now if you think you are worried consider Mr. Obama. I expect his sleep problems over Greece, are now becoming sleepless nights over Italy. His reelection, if Italy goes down, is doomed as well as his party.

 

Let's add in that France this morning announces it's first round of "austerity measures" and you got even more headaches over the horizon.

 

So the beat goes on in Europe. Years of living over your means, years of social programs too big to fund are coming home to roost. if this sounds familiar it is since the US is headed down this same path. No amount of taxes can save them or us from this disaster despite what Mr. Obama says, if you do not believe that take a look at Europe.  The world needs some leaders and there are none to be found.

 

If you have investments frankly nowhere is safe from this collapse if it happens. US Treasuries will take yet another dip as investors pile in and values go down for current holders. Truth here is if Europe becomes a domino event you can expect some of those "haircuts" coming to US Treaury holders too. As I said the mattress is starting to look interesting.  Anybody checked for bedbugs lately?

                

TCAP..Triangle Capital does it again.

I have posted on this security at least twice before and both times praising the company and the management. Yesterday TCAP blew the doors off with almost a 50% increase in earnings and that in an economic environment which is less than great. They did it with savvy investment selections and again conservative fiscal management. Garland Tucker and his team just keep doing almost everything right. They also reported a very nice INCREASE in their dividend from 44 cents to 47 cents per quarter and at yesterday's closing price that is around 11.5%. 

Do not go out and rush and buy it today because I expect you will see a move up in price with these earnings. TCAP is known as a micro cap basically and is generally beneath the radar of the big investment houses and all the talking heads in the media so they are not well known. Based in Raleigh NC people there know them however and knew Mr. Tucker before he started this Business Development Company and it was clear he would steer this company to success and nice profits for his shareholders.

If you have interest in a company that never cut their dividend during the financial problems three years ago and is almost as solid a performer as a utility TCAP needs to be considered for your portfolio. No, do not run out and use half your portfolio on this stock, but 5% would not be too risky in my opinion. Look for a pullback below $16 and you will get it again when Europe announces another bad event and then buy.

I do not own TCAP either long or as an option.               
    

Here's your investing and trading plans for the next 15 months.

I opined earlier this month that stocks were at that point about fairly priced for economic conditions currently. Today I find that statement still valid.  However this past week has been one day of up 300 points and the next day down 250 points. All this volatility is causing some INVESTORS to either give up on the market or just take their money and put in bonds. Each person has to make their choice there, but for me I consider the situation quite differently.

As an investor I frankly am fine with the current market knowing that the market is valued correctly for the current economic climate. I am hopeful that the economy will improve and changes will occur in Washington next November that will improve those prospects. Europe is another matter and as long as you avoid financial stocks you will avoid much of the pain.  If Europe does get really stupid and finally let the economy blow up there then stocks will go down to match the fact that the world will again go into depression. The good news is that the problems in Europe will be addressed either by taking the correct budgetary options or it will be corrected by significant economic collapse where Europe can begin digging out of the mess in the right way.

As a TRADER I love this market. Reminds me of Warren Buffett's comment in the early 2000's when asked if he was again deploying his assets he said he was " like an oversexed guy in a whorehouse now is the time to invest and get rich".  Well if you are a trader this market is as good as it gets. I noted in my October hedge fund report this market activity will likely continue through 2012 and I am salivating at the opportunities it offers to make money as a trader as I clean out my portfolio at year end to position for 2012.

So settle down and relax, do not panic, wait and see if Europe and then the US makes the right choices in budgetary concerns and elections. Sometime early in 2013 you should get a clear choice of either salting your money away in bonds and going to the beach for a long visit or begin to invest money for real returns again.  If you are a trader settle in for what appears to be some good clean trading fun and profits.

Democracy in Greece could push our day of reckoning sooner.

As I opined in an earlier posting this week (Today's Relief Rally) the European deal announced last week that lifted the market was nothing more than window dressing since the deal did not name or address who or what would be taking the bond haircut of 50%.  Now comes the news that Greece is going to hold a referendum on the deal, instead of voting on it in the legislature. Imagine that Greece, where democracy was founded and something the country has run from for several centuries has rediscovered that form of government at just the wrong time. I suppose the representatives in legislature do not want to deal with the issue, so much for a republic.

 

Anyway if you believe the Greek people will actually vote FOR austerity measures then call me about buying some overpriced stock from me now.  The worry here is not that Greece is going to default on it's loans, since anyone with a brain and involved in investing or finance knew this all along, it is that this idea of democracy just might spread.  So imagine Italy, Portugal, Ireland, Spain, and France deciding to let their people vote on defaulting on their bonds and moving along without a care in the world after all of course voting No. Pensions, social programs, and such continue as they are for some time longer since the pressure of paying for those messy loans is gone. But of course soon the need for more loans will arrive since these countries were already living above their means and someone else needs to loan them to the money to continue to do so. Trust me no credit cards will be coming in the mail and REAL austerity will be at hand.

 

Now if you think all this democracy stuff has not escaped the attention of a certain US president then you are correct.  Mr. Obama felt relief just last week when he and German Prime Minister had created what they thought was a document that would make "peace in our time" or at least hold the house of cards together until after a date in next November. This idea of democracy threatens to make this house of cards collapse nicely before that date and blow the world economy apart.  That of course will make the September 2008 financial problem and resulting Democratic takeover of the government be put in reverse next year. How much you want to bet Mr. Obama has placed a call to the Greek Prime Minister with words such as "what the hell are you doing"? 

 

Now all this democracy could bring our day of reckoning for the world debt bubble to finally go boom. Yes, the real problem here is the worldwide buildup of debt. Household debt, government debt, and in some cases company debt. The only good news here is that US states and many corporations have trimmed their debt and started to get their houses in order, but the BIG debt bubbles remain. Not sure when this fun will begin, but it will begin and it will not be pretty. Will democracy continue in Greece? Will Mr. Obama squeeze the Greek Prime Minister enough to make him delay this a few more months? Will Angela Merkel say to heck with it all and go back to Germany and her safe warm economic blanket there? Will investors sense the end and flee? Of course the question is flee where?  Believe it or not the bond king Bill Gross has begun hiding his funds money in US government guaranteed mortgage issues instead of US government debt, so go figure there. Think about that again,  hiding money in MORTGAGES, how about that for back to the future. As I have said earlier if you own US Treasury bonds you might want to move some capital elsewhere.

 

Our date with financial destiny could be at hand or it could be put off awhile longer stay tuned.  Frankly there are NO safe places to hide.               

New stock for consideration.

The stock reviewed in this posting is not for those who can not sleep at night from an investment, but if I call this one right you have the opportunity to make some serious money. Serious money in something like a 5 bagger or more. Since starting this review the stock has moved up about $4 per share from a nice earnings report. 

 

Altisource,  symbol ASPS,  is one the best positioned companies on the planet. They service delinquent home loans and help lenders keep loans active and home owners in their homes. Contrary to popular opinion banks and lenders DO NOT want to foreclose on homes. They certainly do not want to foreclose on homes right now that have asset values under the loan value. So enter companies like ASPS which try to bridge this gap. ASPS is a one stop operation doing loan servicing, title and closing , residential valuations, default processing, and the list goes on. Their profits doubled last year and we are only in the top half of the first inning of dealing with all these home loans that will need attention in the next several years, and frankly decades.  The stock has gone from $13 per share to now around $37 per share in the last year. Do you not wish you had known this about one year ago when it was $13?

 

I have been looking for a way to get in on the home loan and processing action from the overbuild of the last decade and this stock looks to be the way. It has no dividend so the only way to make money here is either via capital gains or options. 

 

One final note I got onto this stock via Doug Kass, who I followed into Goldman Sachs earlier so buyer beware.  But with that said I believe if you are a risk taker ASPS offers an excellent opportunity to invest capital gains. Do your due diligence here, but consider an investment.

 

I do not own ASPS as long or as a option.