Wednesday, June 23, 2010

June 23, 2010 The ORP Giveth, the ORP Taketh Away


June 23, 2010 The ORP Giveth, the ORP Taketh Away

If you are a regular reader here you will note that ORP is the prestigious brain trust of Obama, Reid, and Pelosi. OOOoooppps, hope I don’t get removed from my post for that comment.

Existing and new home sales are in the dirt and the conclusion of the housing stimulus program is to blame. Let me offer a different perspective. I think there are three groupings of people in the US at this moment in time. We have about 2-3% of the population who can and will and are buying homes when ever they like because they are filthy stinkin rich. Then you have the 10-17% of the US who at this moment in time not employed. That is a squishy number but almost everyone agrees with the 10-17% spread, so let's use 13.5%. Then there are the rest of us who are potential home buyers and sellers. There are two questions we must ask ourselves. How much of an incentive is it going to take to buy a home we are not sure we can or will be able to afford? And do we want to buy a home that we know that we cannot sell?

Banks must clean up their inventory of questionable mortgages; prices need to come down to clear this 8.5 months of housing inventory. Until that happens, no incentive is going to be effective or sustainable.
 Now if you compare to the shake out of the cash for clunker campaigns and the first month or two after the program there are some parallels to be drawn. Auto sales did drop significantly at the end of the program then in a couple of months returned with vigor. We might see that happen in housing, but we eventually have to address the inventory and the value. Click here for the actual details of the housing report.

Because of the terrible housing news, a lot of the housing stocks came down more than need be. Cramer, in his subscription based Action Alerts was pimping SWK, Black and Decker (He bought some shares today, but I didn’t tell you that.) If you do the homework, it is an attractive story. Do some Google searches about today’s analyst meetings and comments by the COO James Loree, or join The .

OK, I know I bummed some of you out with all my negativity of late, so here is a ray of sunshine. There has been a giant bag of doodoo news over the last few weeks.

There is a lot of talk about a double dip recession. Short term, I do not think that is the case. All indications are that manufacturers and retail inventories are lean. Labor income, not jobs is up a bit. China is growing in almost every economic indicator. Remember those rail car indicators mentioned here a couple of weeks ago, they still look very attractive. In fact there should be some healthy growth in many sectors for the balance of this year.
 The market came back to even today which surprised me immensely. We did add to a few positions before lunch today near the bottom of the trading day. Those would be BAC, 2 more of the January 20.00 calls for INTC, and one more September 45 dollar ITW call. And we stopped out of one we have to take another look at. I did and I am ashamed to say I accidently set a limit on WPRT and not a stop limit order. I basically broke even on the trade (Down .2%) but will re-establish my position in the morning. I should be back in at 17 looking for a 22 price by the end of summer.

Sorry, no linkage today but I am working on two possibilities. Some very promising tourism travel news was reported in the WSJ and there are developers beginning to buy land parcels in distressed areas like Las Vegas and Phoenix. I’ll tell you what I’m thinking in a day or two once I get some solid linkage. Do you have any ideas for these two pieces of news?

Salve Lucrum


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