Sunday, July 4, 2010

Most Popular Posts of the Quarter

In case you missed them, here are the posts most viewed by readers (excluding the tabs along the top of the webpage) for the second quarter.  Have a good holiday.

  1. Who is Sylvain Raynes and How Did He Make it on CNBC?
  2. Oh My... We're Crashing
  3. John Paulson's Q1 2010 Moves
  4. Goldman Sachs VP Email Jan 2007: "The whole building is about to collapse anytime now."
  5. Kyle Bass of Hayman Capital: Japan Defaults on Debt or Devalues in 3-4 Years, United States in 10-12
  6. A Picture Worth a Thousand Words
  7. One in Ten U.S. Mortgages is Now Delinquent - Which is Great for Consumer Spending
  8. [Video] Dylan Ratigan Explains Thursday's "Flash Crash"
  9. Nouriel Roubini Calls Jim Cramer "a Buffoon"
  10. Weekly Jobless Claims as a Stock Market Indicator

Extra: Hall of Fame Entertainment

Random information - top 10 cities who view FMMF
  1. NYC
  2. San Francisco
  3. L.A.
  4. London
  5. Chicago
  6. Houston
  7. Washington D.C.
  8. Toronto
  9. Seattle
  10. Dallas

    Updated Position Sheet

    Cash: 78.3% (v 76.2% last week)
    21.1% (v 21.8%)
    0.6% (v 2.0%)

    This data is updated weekly and can be found on 'Performance/Portfolio' menu tab on the website. As always the total gain/loss (both dollars and percentages) only apply to the open portion of the position; it is does not apply to portions of the position sold earlier.

    [click to enlarge]

    LONG (1 photo file)



    Friday, July 2, 2010

    Bookkeeping: Closing Sandisk (SNDK)

    Doing some mid summer cleaning, I'm taking my marbles and going home - although the bully named Mother Market took quite a few marbles from me (stole some lunch money as well) - and closing out Sandisk (SNDK) after a very short holding period.  I more or less top ticked this name by buying the "breakout" June 16th - classic.  As this market struggles for another day, SNDK  looks like it will close below the 50 day moving average for the 4th day in a row.  I thought there might be some life to it after it came down to "fill the gap" last Friday but this week has just been too difficult in the general market for this type of holding to keep afloat.  SNDK is a commodity high beta name (risk on, risk off) that was a purchase based on chart alone (a series of higher highs - now kaput)  and until the market shows life, this won't be the type of name to hold its own very well.

    From the original purchase around $50, I sold half at a 10% loss in the $45s once the stock broke down below the 20 day (to reduce risk), and the other half is going to go out the door today for a 17% loss.  Today's allocation was about 0.9%.

    Since this purchase I have been able to buy some other names with the same 'high beta' characteristics but (thus far) more stable.  Of course in a wider selloff, they will take their medicine just the same.  After all, it's the 1:1 correlation market where almost every asset class is the same as the S&P 500.

    No position


    Attitudes Continue to Change in the Mutual Fund / Advisor World...Slowly

    I like Harvey.  We need more Harvey's in the world.

    4 minute video

    [Jun 11, 2010: Marketwatch - More Investors Turning to Flexible Mutual Funds]

    NYT: Economies in Latin America Race Ahead

    A nice piece in the New York Times on the strength in some of the Latin American economies.  While we focus on Brazil here, we've also discussed Chile in the past; actually a fascinating article about how different the Chile financial leaders were than their American counterparts - saving for a rainy day is actually part of the vernacular. [May 28, 2009: WSJ - Prudent Chile Thrives Amid Downturn]

    Peru is more of an issue since the ETF for the country is thinly traded (100K shares a day, with only $130M invested); to be frank until I was writing this story I did not even realize a Peru ETF had been approved..

    Outside of that vehicle I can only find 2 stocks that are based on Peru, and one - Compania Mina Buenaventure (BVN) is essentially a precious metal name.  The other name is a financial that has been showing up on my relative strength list for a few months and I consider a missed opportunity - Credicorp (BAP).  That's about it for Peruvian stocks.  [Southern Peru Copper (PCU) ... now named Southern Copper (SCCO) is based in AZ]

    What is interesting is both the Peruvian and Chilean markets seem to be holding up quite well considering the damage being done in most developing and developed markets the past 2 months.  Considering the perceived reliance on China in Latin America, this 'decoupling' sure raises an eyebrow as its different than in 2008 when every market was crushed together.

    Via NYT:
    • While the United States and Europe fret over huge deficits and threats to a fragile recovery, this region has a surprise in store. Latin America, beset in the past by debt defaults, currency devaluations and the need for bailouts from rich countries, is experiencing robust economic growth that is the envy of its northern counterparts.
    • Strong demand in Asia for commodities like iron ore, tin and gold, combined with policies in several Latin American economies that help control deficits and keep inflation low, are encouraging investment and fueling much of the growth. The World Bank forecasts that the region’s economy will grow 4.5 percent this year.
    • Recent growth spurts around Latin America have surpassed the expectations of many governments themselves. Brazil, the region’s rising power, is leading the regional recovery from the downturn of 2009, growing 9 percent in the first quarter from the same period last year.  After a sharp contraction last year, Mexico’s economy grew 4.3 percent in the first quarter and may reach 5 percent this year, the Mexican government has said, possibly outpacing the economy in the United States.
    • Smaller countries are also growing fast. Here in Peru, where memories are still raw of an economy in tatters from hyperinflation and a brutal, two-decade war against Maoist rebels that left almost 70,000 people dead, gross domestic product surged 9.3 percent in April from the same month of last year.
    • “We’re witnessing what are probably the best economic conditions in Peru in my lifetime,” said Mario Zamora, 70, who owns six pharmacies in Los Olivos, a bustling working-class district of northern Lima where thousands of poor migrants from Peru’s highlands have settled.
    • Latin America’s growth largely reflects a deepening engagement with Asia, where China and other countries are also growing fast. China surpassed the United States last year as Brazil's top trading partner, and is the second largest trading partner in countries like Venezuela and Colombia, Washington’s top ally in the region.
    • Michael Pettis, a specialist at Peking University in Beijing on China’s financial links with developing countries, said the region was especially exposed to Chinese policies that had driven up global demand for commodities, including what appears to be Chinese stockpiling of commodities.
    • Even so, they applaud home-grown policies that are supporting growth.  Chile, for instance, saved revenues from copper exports when commodities prices climbed, allowing it to enact a stimulus plan last year and rebound from the February earthquake. Chile’s economy grew 8.2 percent in April from the previous month, its biggest increase since 1996.
    • Latin America’s recovery is translating into new political sway, particularly for Brazil, which has paid its debt to the fund and is seeking to enhance its voting stake in it. As Brazil posts China-level growth, President Luiz Inacio Lula da Silva is nurturing soft-power ambitions, with ventures like a state television station that will broadcast to African nations.
    • “Like other Latin American countries, Brazil needs to improve its infrastructure and train more engineers,” Mr. Rothkopf said, “but it embodies the rise of emerging powers, one of the great themes of this century.”
    • Peru, whose economic growth is expected to rival or outstrip Brazil’s over the next several years, exemplifies the challenges remaining in a sizzling economy.  The country boasts nimble companies like Ajegroup, founded during the chaos of the 1980s. Now the company’s soft drinks compete with giants like Coca-Cola, not just in Peru but in other Latin American countries as well.  
    • Foreign investment has flowed into Peru, largely in mining. But this investment reveals both weaknesses and strengths. Mining accounts for about 8 percent of economic activity, but about half of tax revenues, creating problems if commodities prices fall, said Pedro Pablo Kuczynski, a former finance minister here.
    • Deep inequalities also persist, especially between the capital, Lima, and the Andean highlands and the forests of the Amazon basin, where factions of the Shining Path guerrilla group feed off the cocaine trade. As much as 70 percent of the labor force still works outside the tax system, depriving workers of benefits and the government of revenue.

    Bookkeeping: Sold Index Longs for Now

    I was hoping for a better session today (a more aggressive bounce closer to 1040) to sell these index longs I put on yesterday.   Perhaps the bounce will happen Tuesday... or not at all.  The action today is very sleepy (identical to last Friday in fact) and not very constructive as of 10:50 AM, it looks like one of those range bound sleepy summer Fridays.  Remember, Monday is a holiday so a lot of people are taking 4 day holidays so I'd expect it to be even more sleepy than usual.   Thankfully, silicon does not take vacations.

    If the market just trades sideways for a few days below S&P 1040 that simply helps work off oversold conditions and sets up a new round of selling late next week or the week after.  But either way this long index play was more short term and thus far the bounce has been quite week.

    I've sold the TNA ETF for about a 1.25% gain, and the SPY calls today for a small gain - however they are actually down today as the premium has been sucked out as volatility is down big time from yesterday.  Net net, a small gain between the two but lunch money.

    If the S&P 500 breaks below 1120 I'd be interested in hedging short again.... conversely a move over the highs of the days (1033) might get me interested in an intraday play to the long side, otherwise I am going to be mostly sidelined.  All in all, a very good week on an absolute and relative basis.


    Overall, I have almost no short positioning on at this minute, and my main hedge is a huge wad of cash.  If I exclude gold and silver I entered yesterday with about 8% long exposure which I most likely doubled with yesterday's purchases.  I like the stocks I bought or added to but a general selloff will spare no one.  My goal is to get more long oriented down in the mid S&P 900s with sporadic purchases of individual long positions, while offsetting the losses that will come from that with short side hedges.  If we simply cannot bounce the short side hedges will be more index oriented (the usual SPY puts and "short TNA").  If the market can put in a nice 3-5% rally sometime next week, I'd like to add individual equities to the short side but almost all names I'd be interested in are nowhere near any resistance...  which is where I prefer to short things.  Hence if the market bounces I'd be taking a lot of losses on the short side so not interested in starting new individual shorts right here.  We're in a bit of no man's land for now.

    Obviously the economic situation is poor, but I still think corporations (especially globally oriented multinationals) will have a good earnings season starting up in 2 weeks... the main issue again is going to be guidance.  Once people adjust to the fact the V shaped recovery is only a mirage and indeed malaise awaits us, a more intermediate term rally can occur.  Bigger picture, being aggressively long other than for a bounce does not work until we get back over the 200 day moving average(s).

    No positions


    Two Markets That Have Held Up Well in the Global Selloff: India and Indonesia

    I follow global markets quite closely, and I've noticed 2 markets that have held in very well despite the global selloff.  Both are in Asia, and while many other markets there see days of -2% these will generally fall 0.3% or even be in the green many times.

    India is well known... and by the way raised interest rates overnight for the 3rd time to try to reign in growth/inflation (talk about a bipolar world)

    Less well knows is Indonesia which is my sleeper pick for the next half decade+. [Apr 1, 2010: Indonesian Market Continues to Shine in 2010; Market at All Time Highs as Country Opens Itself Further to Foreign Investment[May 22, 2009: Indonesia: A Must Own Emerging Market]  [Jul 9, 2009: Indonesia's Star Continues to Rise on Back of Yudhoyono's Re-election  I've had a limit order out there to buy the Indonesian ETF during the last week but the price simply won't come in.

    If one believes the global selloff is over in the intermediate term (not a camp I am in) both have pulled back to attractive support levels.

    Compare and contrast to China or Brazil....

    With that said, unless China's economy is about to burst in U.S. like fashion circa 2008 (I've predicted a lot of bad loans coming from their "Alan Greenspan" like stimulus of early 09), [Feb 16 2009: Is China Pulling an Alan Greenspan?]  [May 27, 2009: How is China Spending Their Stimulus? ... and How Many Loans will go Bad?]  there has to be a valuation case here soon despite a necessary slowing the country is trying to engineer.  Unfortunately the technical set up is horrid and the year has been rough. [Mar 31, 2010:  China's Shangha Composite Falls 5.1% in Q1 2010, 5th Worst in the World]

    No positions

    Percent of Stocks Above 50 Day Moving Average Back to March 2009 Lows

    We're definitely 'oversold'.  This measure is not only below the worst of May (which in and of itself was extreme) but within a hair of March 2009 lows.

    Wax on.  Wax off.  Student body left. Student body right.  Risk on.  Risk off.

    [click to enlarge]

    June Unemployment Rate Falls to 9.5% ... For the Wrong Type of Reason

    Initial view of employment data is a poor report.

    Knee jerk reaction was upward as 83K private jobs were added, offset by some 225K census lost - hence a net -125K, which was a bit below consensus but not off much.  We need about 125K a month just to keep "flat" with population growth.

    Unemployment rate fell to 9.5% (versus last month's 9.7%) which on the surface is improvement but once more it's all about the way America counts its unemployed... if you are not actively looking for 4 weeks you no longer are unemployed in the country.  We've stressed labor force participation is at all time lows... and it got worse.  652,000 people "left" the workforce.... dropped out, disappeared, poof, kazam, etc.  Hence the labor force participation shrunk even more...

    The irony here is if the GOP does not pass extended benefits benefits, the unemployment rate might shrink even further as countless more drop out of the labor force ... which again, by American standards mean they are no longer unemployed.

    The labor work week shrunk 0.1 back down to 34.1.... another negative.  The only positive the bulls had last month was this figure when they claimed an increase of 0.1 work week was equivalent to 300K new jobs.  Well, that just went away.

    Hourly wages look like down 2 cents.

    Birth death model added 147,000 jobs (you can't subtract this directly from any of the figures above)... i.e. the government is telling us small business formation & hiring is BOOMING across America yet again.

    U-6 (a better reflection of national unemployment) dropped to 16.5% (from 16.6%) which is the only positive but I think its affected by the same drop off of 650K Americans.   I can only assume people are going into some form of underground economy to survive or joining programs (if eligible) like welfare or disability.... or simply desperate with nowhere to turn.

    Temp workers increased only 20K which is the lowest I can remember for perhaps 6 months.

    Summary: your local and national politicians will crow about the "improvement" in the economy due to the unemployment rate dropping to 9.5%.  Reality - hundreds of thousands of Americans are disappearing from the official labor force, and have been doing so this entire recession recovery.   No one knows where they are... and the % of Americans working versus the total population remains at levels we've not seen before.


    S&P futures jumped strongly in the opening moments based on the 9.5% print until details came out and then went back to flat and now a bit negative.  If market drops below S&P 1120 and stays there we'll exit the index long exposure and see how the day unfolds.  I am going to give some leeway since the market is grossly oversold and a ton of bad news has been discounted of late by the nearly 110 point straight S&P drop.

    Thursday, July 1, 2010

    The Case for an Upside Move

    Ok, I putting on my CNBC pundit hat and trying to act all cheery.  Every so often I want to remember what it feels like to be a long only fund manager with 2% cash, who has to cheerlead the market.

    Look I run a 3 star mutual fund with -2% annualized over 5 years [Kool Aid Growth Fund (KOOLX)]... I'm killing the S&P 500 by over 0.2% per annum;  plus I have appeared on CNBC repeating the same song and dance (broken down to "keep sending me money, over the long run the stock market always goes up") over 83 times in the past 3 years.  (please do not research what I said the previous 82 times, thank you)  I demand you to listen to my words of wisdom. 

    A month ago we sat here, all cheery because Biden and Obama promised us a "super duper" employment report.  Like lemmings we believed them (would a politician lie to us?) (would a politician not have the sophistication to know we would see through 410K census jobs?).  We were disappointed.  All these fast money types sold... something about "technical analysis" or "charts" (I call it voodoo)... I don't understand it.  I just buy quality stocks ... at least 450 of them so I can mimic the market and keep accepting your 401k contributions by finishing +/- 1% of the S&P 500 over 10 years.

    Here we are a month later no one expects anything good from the employment report.  Which probably is accurate.  Estimates call for about 100K jobs in the private sector minus 200K lost census jobs, for net -100K.  But what if the census holds onto their people for an extra few weeks?  And we had 200K birth death model jobs? Upside surprise baby!

    Aside from that, the market is "cheap" ....especially on 2018 earnings.  Maybe even 2011 earnings based on my trusty dealing with the folk over at Goldman, Morgan, and JPM.  Who only look out for my best interest.  And yours.

    I hear fears about "debt" or other such stuff.  Look, in Ben Bernanke I trust.  If he says green shoots, I say green shoots. He has never led us astray yet and his track record is beyond impeccable.  Said so right in that Time story (Man of the Year baby).

    I hear all this stuff about "1040" being important.  All I know about 10:40 is its usually when I take the first break of the day (who can look at a computer screen for more than 60 minutes straight?), or maybe go hit some golf balls out on the office lawn.

    Now go buy stock, since expectations are low and we're ready for the 2nd half 2010 rally.  Or better yet consider buying KOOLX.  As a paid professional I am better off losing you -2% annum than you are.

    Ok...ok maybe not a 2nd half 2010 rally, I'd settle for a +2% move at this moment as these past 2 weeks have been cruel and unusual.  Mostly I want these masses of redemptions coming through my door by the hour to stop. 

    Bernanke, please do an emergency rate cut! The bears are ruining America!!

    What's that?  Oh... nevermind.  Used all those bullets to smash bears the past 3 years.  Well in that case... QE 2.0 please?  Someone, anyone - save me from this reality.  Attach me back to the Matrix.

    Listen.  There are a lot of words I've just said.  What I really meant to say is not only am I not panicked but I require you to change your 2010 IRA allocation to Kool Aid Fund.  Quickly. 

    Talking My Book, Long & Strong (always!), Shorting is for Losers at Hedge Funds (and unAmerican)

    (on a serious note, is anyone bullish on the jobs number tomorrow?  does anyone expect it to be good?  No.  So when it comes in blah will we sell off on news we already know?  Hard to imagine but anything is possible)


    Bookkeeping: Closing Polaris Industries (PII)

    Are we having fun yet?  A quite tiring day.

    With the addition of 4 new names to the long portfolio, I am going to sell off Polaris Industries (PII).  The stock held up very well during the May selloff but like Valassis Communications (VCI) which we sold earlier this week, it finally could not withstand the pressure cooker of almost 2 months of selloff (with a 2 week break inside that time frame).  I still like the theme here, but I am going to simply keep focusing on better relative strength stocks.  This was one of those names, but not right now.

    Just like Valassis I never had a chance to build up the position since this is not the type of market where intermediate purchases are paying off (long side trades have to be quick and fast), hence I never took profits when they were there since the position size was small.  Therefore I am going to take a 5% loss versus the May 22 purchase price; exposure was only 0.5%.

    If PII can get back over $58, the story might change.

    No position


    Bookkeeping: Some Index Longs On Now

    I am throwing some modest long index exposure on with (mental) stop loss below S&P 1020

    Modest positions here with our normal fare:  4% into TNA and 3% into SPY 103 (July) calls.  My upside target is 1040 where I will sell.  But thus far this has the potential to be a nice reversal day as we had a bout of panic in the morning, are well off the lows and if we close at highs of the days technicians will really like this day.  So 1040 could just be stop #1.  If we break over that level I'll probably buy back the same type of positions and then move the mental stop loss from 1020 to 1040.  We could rally all the way to the 200 day moving average without changing the intermediate outlook which is negative.  As I said this morning we are just very extended to the downside and that is prone to snap back rallies.  S&P 1019 or so will have me out of these stakes with losses, simple enough.

    I am *not* interesting in making mad money on the upside - just looking to pilfer some additional bucks for quick in and outs.  And avoiding the snap back rallies messing with the short side plays.  So far so good.

    Eventual goal is to be more long oriented in the mid 900s on S&P 500 if and when.

    NAV is at all time high.

    EDIT - Bought some Netflix (NFLX) and Las Vegas Sands (LVS) as well, about 1% into each.

    Long stuff above in fund


    This Guy Really Hates Apple (AAPL) as Stock Sits at Key Levels

    I cannot call Apple (AAPL) a general of the market... it is more like Commander in Chief.  The stock has broken the 50 day moving average but no big deal - we've seen it 3 other times the past 2 months and each time that has simply shaken out the technical traders, and the stock has reversed right back up.  What would worry me more is a "lower low" i.e. a break below $240.  Close but no cigar thus far today.

    Let's keep an eye on this name since it's so influential, especially on NASDAQ.

    As an aside, a video from a technician yesterday on CNBC - this guy says Apple has potential to fall to $115.  While seemingly impossible as this is Teflon Stock #1, it is true that Apple was in the $70s during the panic of 2008.  Someone remind me to put the whole portfolio into Apple if it gets below $120.

    I just would advise Mr Zimmermann not to show up at any Apple store with that sort of thinking -- he might get tomatoes (or iPods) thrown at him by fanboys.

    Walter Zimmermann, chief technical analyst at United-ICAP, tells CNBC he sees a "bearish rising wedge" in Apple's stock and advises investors to unload the stock.

    No position

    Bookkeeping: Taking Off Short Index Exposure

    Yesterday just under S&P 1040 I added what I consider modest short exposure.  I shorted about a 4.5% exposure in TNA ETF (3x Bullish Small Cap) ... in the real world I'd go long TZA for simplicity but to keep my record keeping easier between long v short, I do 'short TNA' for model fund purposes.    I sold about a third of that exposure this morning for a 4%ish gain and I am going to sell the rest here for about a 12% gain.

    Yesterday, I bought 2 series of puts, 2.5% allocation into each: SPY 103 puts and SPY 102 puts.  Total 5% allocation.  Both are up around 60% so I am going to sell them both and take my quick and dirty gains.  They did an excellent job hedging off any long losses and for 3-4 hours of work, I'll take 60% anytime.  I'm posting a screen shot only so when someone asked "how did you make XX% with 80% cash!?" I can refer them to this post.

    Could there by more downside?  Certainly.  I just believe this rubber band to be very stretched at this point and risk is now as large for bears as bulls.   When I feel some comfort a real bounce may be coming, I'll do the exact opposite of these 2 trades.

    Any upside target for now would be to S&P 1040.

    No positions


    Bookkeeping: Starting VMWare (VMW) and Acme Packet (APKT)

    One of the stock market generals of late has been VMWare (VMW) - it just "filled the gap" (from mid May) but now is below the 50 day moving average.  A tough one.  I am going to begin a modest 1.1% stake here, and then add on either (a) a move over $67 or (b) a move down to the mid $50s.  The former would signify a nice bounce back over support and the latter would coincide with a big move down in the greater market.  I don't really care which it is.

    Acme Packet (APKT) - same idea, but better chart.  It has fallen right to the 50 day moving average.  Hence I am going to throw 2.5% exposure  its way.   Another 'networking/tech' stock.

    Long both names mentioned in fund; no personal position


    Bookkeeping: Beginning 2 New Stakes - Dr. Reddy's Laboratories (RDY) and Polypore International (PPO)

    I am going to start 2 new positions in names the hedge fund HAL9000 money is not that interested in. 

    First, a stock I've mentioned a few times - effectively an Indian generic drug maker who is making big strides into the immensely lucrative U.S. market Dr. Reddy's Laboratories (RDY).  The relative strength has been excellent of late, and it is finally being sold down to near its 50 day moving average today.  The one caveat are 2 gaps in the chart below $28 and below $27, but again gaps in individual stocks need not fill ... or can take a long time.  Maybe they fill next week - who knows.  But I'll begin with a 1.2% stake and add on weakness.

    Fundamental details on the company in the pieces below:

    [Jun 1, 2010: Dr. Reddy's Laboratories Stock Continues to Impress]
    [Nov 9, 2009: Dr. Reddy's Laboratories Impressive on Both Fundamental and Technical Basis]

    Second, is a name I completely whiffed on - I mentioned Polypore International (PPO) about 6 weeks ago [May 20, 2010: Polypore International - Derivative Play on Electronic Battery Growth], and it has run...and run... and run... without me.  I've been impressed but grinding my teeth watching it move without my participation.  There was a gap in the mid $17s that had me waiting for it to "fill" (mu limit order at $17.50 now looks laughable).  The stock has only fallen to the 20 day moving average even with this traumatic market selloff, which is incredibly impressive.  I hope it falls more but I will begin a 1.5% stake here at the 20 day and look to buy more on a pullback.

    Long both names mentioned in fund; no personal position

    Bookkeeping: Closing U.S. Dollar (UUP) - Changing to British Pound (FXB)

    The U.S. dollar has been benefiting from being the least ugly sheep; eventually this will end as the U.S. remains the only country who could care less about its long term obligations and spends like a drunken sailor.  An interesting thing has happened in the past few weeks... the mini U.S. aka Great Britain has seen its currency benefit since it announced REAL steps to cut government spending. [Jun 22, 2010: UK Joins Austerity Parade]  Its currency has surged as people realize they seem serious versus certain countries which are "forming commissions" to look at their debt. (in fact it began surging a few weeks before the public announcement)   Remember, Cameron said they were looking to slash each public department by a whopping 25%!  Can you imagine the U.S. even cutting a department by 5%?  The federal government worker would not stand for it. ;)   There *may* be a sea change happening here.  Either way I am going to sell my US Dollar position, and give the British Pound a whirl.

    I sold the last 1% exposure in Powershares DB US Dollar Bullish (UUP) with a 1.5% loss, and will start a 1.5% stake in Currency Shares British Pound (FXB).

    Volume is weak in this ETF with only 110K shares a day, so it's more difficult to move in and out of. 

    My prefernce would be to buy the German mark if it were available... but of course I am about a decade late on that one.  If the Austrlian and Canadian dollar were not hammered each time the risk trade were taken off, those would also be good choices.

    I am also interested in purchasing long equity positions here to begin hedging long.  If you exlude my dollar long, gold long, and silver long I am only about 8% long.  It's time to take some long side risk for a trade at least; I have not sold my short hedges...yet.

    Long Currency Shares British Pound in fund; no personal position

    Dismal Economic News Flow Continues

    ISM Manufacturing, while still expansionary at 56.2, was a massive miss versus the 59 expectation. (I believe last month was 59.7)

    Pending home sales index for May came in 30% below April's propped up by government handouts level, and more important a 16% year over year drop versus quite weak levels in 2009.

    Again, I cannot stress enough how May, June, July are the key months of real estate in Cramerica.  If there is such weak organic (non government influenced) demand these months, you are not going to see anything positive in October or February. The economy is weakening considerably without government assistance in every part of the economy. 

    While I think the GOP is just bluffing with this stalling on extended emergency unemployment benefits, if they are firm on that, this will be another blow as millions are now dependent on government checks (our current era's only stop gap versus soup lines).  I read 2M will lose benefits in the coming weeks with 200K each additional week from here on out if the federal government does not keep sending out checks. 

    My thesis that this is indeed one big Great Recession, only interruped by a massive inflow of government/Fed monies creating a false dawn is looking more realistic.  Again, if you throw $3-4 trillion into the economy you can make any economic figure dance... for a while.  So I won't call it a double dip if this trend continues in the next 6 months (even though officially it will be viewed as one).  It was instead 1 big dip interrupted by never seen before levels of intervention aka green shoots.  What should be scary is all the bullets that have been shot and yet here we seem to be descending at roller coaster pace.

    Market seems to finally be facing reality again after the premarket markup; will hold these puts for a bit more.

    EDIT 10:18 AM - we are now at the S&P 1020 level mentioned in previous post, and reached in premarket before the 'urgent buyer' showed up.


    The Washout Open is Ever Elusive

    Despite poor news in both weekly employment claims and global manufacturing, and a sharp drop in futures at 8:30 AM when weekly employment claims were released, the market's "urgent buyer" showed up to get futures back to flat in the ensuing hour.  Hence the washout open I yearn for remains elusive. 

    We have ISM Manufacturing in 30 minutes and aside from that not much to go on until tomorrow.  On one hand we are very oversold, and took out a support level everyone was watching yesterday (1040) so a case could be made for "the" oversold rally.  On the other hand still no real panic and most of the generals are still holding in there.  With the positive nature of 'opening days' of the quarter [What Should We Expect for Day 1 of the Quarter?] I have no real feel for the outcome today.  The "easy" trade was that 1040 would be broken as there is no such thing as a quadruple bottom - we got that.  We should view S&P 1040 as our new pivot point but making large directional bets going into tomorrow's employment report is not going to be my cup of tea. 

    My thought process is to make my unrealized gains in the SPY puts (a very nice return due to the last hour action yesterday) realized and then simply sit with a portion of my TNA short as a much less aggressive hedge against a small long book.  One could see this market trailing right back up to 1040 very easily in light trading (if ISM makes people happy) since this morning's bad news was ignored.  If ISM is poor maybe we get another round of selling. 

    While the intermediate term is negative the S&P 500 is now down nearly 9% in 8 sessions. (after being up 8.2% in 10 days 2 weeks ago - bipolar action as usual)  One would expect a pressure valve to be released at some point soon but from what level?  Any such rally should be sold and shorted in my opinion but the longer we go without any bounce the more risk to bears that arrives (in the very near term).

    Repeat of the chart shown a few days ago of potential support areas, we hit the October 2009 support level in premarket (S&P 1020ish)  I would think we would need to retest it in the normal hours - we'll see. 


    Drunk British Trader Moves Oil $1.65 Single Handedly

    Ah the commodities futures market ... a place where supply and demand come together, leading to market clearing prices based on good old fashioned economics.  Not.  [Jan 11, 2009: 60 Minutes - Speculators and Oil]

    A couple interesting tidbits from this piece.  First, it continues to show commodity prices are as much a function of speculative bets as they are of 'supply and demand'.  We saw this in 2007 to mid 2008 when apparently every hedge fund and investment bank were levered to the hilt and "supply and demand" (ahem) took hard and soft commodities on runs never seen before.  Second, a relative small amount of money by financial oligarch standards (half a billion) can move markets significantly.  Third, if one man (acting like a fool) can do this can you imagine what a firm with great expertise (such as one that rhymes with Moldman Machs or Maybee Porgan) can accomplish?  For example if they want a price at a certain place to end a trading day, do you think it would be that hard?  (might help explain those 100% winning quarters!)  Fourth, what kind of system of global checks and balances do we have when 1 soul can move prices like this.  Fifth,... well I could go on, but I've aired these grievances in the past.  It's talking to the wind - ironic as 'financial regulation' is in its final stages. 

    But the next time you see futures surge 0.8% overnight out of the blue or oil charge $1.50 at 3 AM, just remember it's "supply and demand". (wink wink) 

    Via NYT:
    • Britain’s financial regulator disclosed on Tuesday that Steven Noel Perkins, a former oil futures broker, single-handedly engineered a jump in the price of oil a year ago and cost his firm millions of dollars with a string of unauthorized trades after a weekend of heavy drinking.
    • Mr. Perkins had just returned from a liquor-soaked golf weekend with colleagues in June of last year when he sat down in front of his laptop at his home east of London and started to place bets on Brent crude futures, according to a report by the Financial Services Authority. He continued to drink and place bets through the night, and by the morning of June 30, Mr. Perkins had placed more than $520 million worth of trades, at one point pushing the price of oil to $73.05, an eight-month high. The trades by Mr. Perkins were the main reason the price gained about $1.65 a barrel in just over two hours in the middle of the night, according to the report.
    • “Mr. Perkins’s explanation for his trading on 29 and 30 June is that he was drunk,” the F.S.A. said. “He claims to have limited recollection of events on Monday and claims to have been in an alcohol-induced blackout at the time he traded.”   When a back-office clerk called Mr. Perkins at 7:45 a.m. on June 30 to ask for details about the trades, Mr. Perkins lied and said he made them on behalf of a client.
    • But by 10 a.m., PVM, where Mr. Perkins had worked since 1998, had discovered that his trades were unauthorized and suspended his access to the trading system. The trades cost PVM almost $10 million, the company said last year.
    It is one thing for JPMorgan to take the Fed's nearly free money to rent oil tankers across the globe to store oil, but quite another for levered up hedgies and investment banks to use the carry trade to drive corn, wheat, and other such foodstuffs to unprecedented advances circa late 07 to mid 08, causing instances of starvation in certain 3rd world countries  (We had quite a few of those pieces on the blog 2-3 years ago) [Feb 12, 2008: Wheat is Being Ruined by ... what else... Hedge Funds and Speculators]

    But no worries - as long as the rainmakers make their money by "providing liquidity"... it's all good.  Thankfully early in 2010 we saw news that JPM and GS were busy buying up industrial metals storehouse capacity [Mar 5, 2010: Copper Demand Now Weak but No Worries - Goldman Sachs and JPMorgan on the Scene] to help make those metals dance to their own tune.... errr, provide liquidity.
    • Traders say the bank decision will reshape the close-knit warehousing industry as Goldman Sachs and JPMorgan will control the depots where more than half of the LME’s registered stocks are held. The LME is the world’s largest metal exchange.
    It's good to be an oligarch!  [Jul 17, 2009: Jon Stewart - the Pyramid Economy, with Goldman Sachs as the Eye] [Jul 21, 2009: NYT - In Washinton, JPMorgan's Dimon Increasing Sway]

    Global Manufacturing Indexes Slow

    The bad news: Chinese (and European) manufacturing indexes came in light.

    The good news:  While hitting those markets quite sharply, the U.S. premarket has mostly been rallying off overnight lows this AM, hence one could claim bad news is losing its effect.  (EDIT 8:32 AM - Weekly jobless claims just put the hammer to futures... if only we could stop releasing news; those darn facts keep getting in the way of Kool Aid)

    US manufacturing (ISM) will be released this morning as the last major data point before tomorrow's employment data.  (expectation = 59) Keep in mind this has been the main bright spot in the U.S. economy - unfortunately it now accounts for roughly 13% of GDP and 9% of American employment as we've rushed to get rid of as much mfg capability as possible.

    Please note there are 2 reports out of China, one private; one public.  The private report is close to contraction.

    Via Bloomberg:
    • Manufacturing growth from China to the euro-region slowed in June, suggesting the global export-led recovery is losing strength.   In China, manufacturing growth slowed more than economists forecast, and a gauge of factory output in the 16-member euro region weakened for a second month, two surveys showed.
    • Today’s purchasing manager index for China indicated manufacturing expanded at the slowest pace in 16 months, excluding a Lunar New Year-affected February 2010.  The government’s Purchasing Managers’ Index declined to 52.1 from 53.9 in May.
    • HSBC's China Purchasing Managers' Index fell to a 14-month low of 50.4 -- just above the 50 mark that divides expansion from contraction -- from 52.7 in May, with both output and new orders dropping outright for the first time since the depths of the global downturn in March 2009.
    • In India, where the central bank has raised interest rates twice since mid-March to curb inflation, the purchasing managers’ index fell to 57.3 from 59 in May.
    • “We expect data to soften from here,” said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London. “It’s going to raise some question marks about the outlook, about a double dip. It’s an environment with significant downside risks.”
    • Limited demand in advanced economies has left the world reliant on emerging markets, led by China, to drive a recovery that Group of 20 leaders this week described as “uneven and fragile.” Signs of a slowdown as the Chinese government clamps down on property speculation and the effects of its stimulus package fade have unsettled investors.   Baosteel Group Corp., China’s second-biggest steelmaker, this week scaled back its growth plans, cutting its target for capacity in 2012 by 38 percent and forecasting a “bumpy, unpredictable and long” global recovery.

    In Europe ex-UK, a slight dip:
    • The final euro-zone manufacturing purchasing managers index, a gauge of activity based on a survey of some 3,000 manufacturing firms, eased to a four-month low of 55.6 in June from 55.8 in May.   Although manufacturing production, new orders and new export orders all rose for the 11th month in a row, forward-looking indicators in the survey suggested output may have peaked in April.

    • The bounceback in Britain's manufacturing industry showed signs of cooling last month as export order growth almost ground to a halt, according to latest figures.
    • The Chartered Institute of Purchasing and Supply's (CIPS) activity index, where a reading over 50 indicates growth, eased to 57.5 in June from 58 in May.  Export orders - a key support to the recovery in recent months - slowed sharply as the eurozone debt crisis and a stronger pound hit sales to mainland Europe.

    Wednesday, June 30, 2010

    S&P 1040 Breaks. For Real this Time?

    After teasing and flirting with us for a few months, including yesterday before Lucy pulled the ball away from Charlie Brown and many hours today, it appears the citadel that is S&P 1040 has been overtaken by the barbarians.  The first few generals have been taken out, and now we see if the rout snatched away in the last 25 minutes yesterday may come to fruition.   Can the defense stand as the "miracle buyer" shows up in the closing half hour 2 days in a row? Seems too cute.

    I've obviously added back some downside (index) hedges once more with 1040 broken but not as aggressively as yesterday since the headline risk is rising exponentially in the next 36 hours.  If not for those events that cause bipolar reactions, the technicals scream bad things.

    Unless you are counting on China PMI to save you overnight, don't be this guy.


    First 2 Generals Down: VMWare (VMW) and Baidu (BIDU)

    "Sergeant, we got one!  The bullet went right through the teflon!  He is strong like ox, but we finally staggered him."

    Two generals down, about 8 more to go (including some stocks we own)

    No positions


    [Video] Barry Ritholtz 75% Cash, Says Too Early to Call it the New Bear Market

    Hey this 75-80% cash thing is catching on!  Barry Ritholtz of 'The Big Picture' blog explains he has moved from 100% cash in May, back to 75% cash (but hedged) and is awaiting more information before calling this a new bear market.  Fair enough.  Ritholtz has had a pretty good track record staying long and strong since spring 09 up through May (I was much more of a doubter of the rally).  So for now all the human drones will simply sit and stare at their screen waiting to see what the silicon machines do with S&P 1040.   Thus far I find the dead cat bounce today very uninspiring.  Carry on humans.

    [email readers will need to come to site to view video]

    "Everyone is watching 1040 on the S&P," says Barry Ritholtz, CEO of Fusion IQ. "If those lows hold we'll see a bounce back. But by and large this market is looking much less healthy than it was just three or four months ago."

    While that may seem obvious, it should be noted that Ritholtz turned bullish in March 2009 and didn't turn bearish again until May 2010 when he went to all cash just ahead of the "flash crash".

    As of midday Tuesday, Ritholtz's firm was 75% in cash and long a handful of names, including BJ Services, Navistar and the ProShares UltraShort QQQ, a bearish hedge. "We're certainly voting with our feet and carrying a lot of cash," he says. "Cash is better than losing money."

    Given the S&P 500 is down about 15% after rallying nearly 80% from its lows of March 2009, "it's a little early to say the bull market is over," Ritholtz says. "Gun to my head, I would say this is a regular correction...but it's better to step back and not be involved when things are unclear than just throw a dart and lose money."

    What Should We Expect for Day 1 of the Quarter?

    After failing to produce the traditional end of quarter 'mark up' (remember it does not happen on the last day of the quarter but generally in the 2-4 days before the closing session), what can we expect on day 1 of the new quarter?  Generally of late we've seen a nice gain with talk of "mutual fund inflows" and other such nonsense, even as equity funds have seen withdrawels the past 2 years.  Let's look at how day 1 of the quarter has performed since the market bottom of March 2009, with the caveat we have massive headline risk coming in the next 2 days as I believe China Purchasing Managers (which actually has moved markets a lot lately) is released overnight, ISM Manufacturing tomorrow morning, and the employment data Friday.  Will investors be taking Clint Eastwood's "Are you feeling lucky punk?" to heart, or still play their reindeer games?

    Using the S&P 500....

    Apr 1, 2009: +1.70%
    Jul 1, 2009: +0.90%
    Oct 1, 2009: -2.60%
    Jan 1, 2010: +1.60%*
    Apr 1, 2010: +0.74%

    Average gain: +1.24%
    Average loss: -2.60%
    Average: +0.47%

    *obviously not only the 1st day of the quarter, but 1st of the year

    Hence, using this most simplistic of analysis, with a limited data set of 5 days during this move off March 2009 lows, we should expect tomorrow to be up (80% chance hah).  But the one time people anticipated the move they got squashed.  What would Clint do?

    [If you are curious, Jan 1, 2009 was +3.2%]

    BW: Vancouver, Canada - Housing Bubble North of the Border?

    I can't speak to all the specifics of the Canadian housing market, as I don't know everything about their version of Fannie/Freddie but I do know they have this crazy idea that people need to document their income (outlandish and an affront to 'financial innovation') and for the most part require 5% down.  There does seem to be a far more emphasis on adjustable rate mortgages, much like Australia versus the U.S. which is more of a fixed rate environment in general. 

    All that said, parts of this story remind me of one of the two stories that woke me up to what was happening in many parts of Cramerica (we never had a housing boom in Michigan so I had nothing first hand to rely on).  As I wrote in [Jan 14, 2009: WSJ - Would You Pay $103K for this Fixer Upper?]

    So when was your "I see the light moment" regarding real estate? 2007? 2008? Maybe even 2006 if you were lucky. As I've written in the past [Aug 13: Option ARMs- Who Thought Up these Time Bombs?], my moments started happening in mid 2005 (I'm usually early on these things) as I read about Zareh Tahmassebian in a Fortune article [May 30, 2005 - Fortune: Riding the Boom]. I was aghast at the tale of an early 20s mortgage broker in Las Vegas, making $100s of thousands a year churning out mortgages, driving fast cars WHILE flipping 8-9 houses he owned. I have to tell you, I was 10 years older than him and felt like the biggest slacker in the world after reading about his exploits. But I could see this was nonsense... and it would blow up "someday". If you have never read the article, it truly is an awe inspiring tale and I suggest you follow the link and take some time out to review (a reader has since emailed me that a google search revealed Zareh has fallen on hard times - easy come, easy go I suppose)

    So are we seeing a repeat in Vancouver?  Hard to say - I assume Vancouver is a lot like San Franscico where there is a limited area to build, along with a large amount of Asian money coming in that will keep prices elevated well over the national average.  But I sense the ghost of Zareh Tahmassebian none the less as I hear about "contracts" being flipped like they were in the good ole days in the U.S.  

    The other interesting situation is national, and international wealth arbitrage (I made that term up).  In the U.S. you had Californians extracting their bubble value home equity via cash out refinance and going to other parts of the country (namely Las Vegas, Portland, Seattle, and Phoenix) to "crowd out" the local market prices.  Suddenly you had an influx of buyers who could take $300K out of their homes to bid on "cheap" homes in other locales (what, you only paid $220K for the whole house? That's 2 rooms in Cali!), which led everything up.  Until it all came crashing down of course.  Now we see a similar situation on a more global scale, as rich foreigners (in Vancouver's case, it seems to be Chinese) can come in and bid up the local market, in an almost exact repeat of what Californians did to many parts of this nation.  Yet another fascinating development as global borders become less meaningful and capital flows like water.

    • The Olympics are over, and the Village is for sale. The complex in Vancouver, British Columbia, that housed the athletes during the 2010 Winter Olympics has been converted into 1,100 luxury condos. About 450 have been pre-sold, and the sales of the remainder may well render a verdict on a mystery that looms over this city like Grouse Mountain: Did Canada prudently steer its way clear of the worst of the financial crisis only to be rewarded with a massive housing bubble of its own?
    • Millenium Water is a city of the future, built with enviro-touches like green roofs and automatic shades that moderate the temperature inside the apartments. An 815-square-foot, one-bedroom apartment is on sale for C$879,000, which works out to C$1,078 per square foot, or $12 higher than the average price in Manhattan, according to The Corcoran Report.  
    • Millenium Water isn't in downtown Manhattan, of course. It's not even in downtown Vancouver, which is across an inlet known as False Creek. It isn't really even in a neighborhood; the nearest establishment is the sales office for another condo development. If all this is starting to sound a little irrationally exuberant, especially given the shaky international outlook, well, that's Vancouver for you.
    • "Real estate is like a sport here," says Tracie McTavish, president of Rennie Marketing Systems, which is overseeing the sale of Millenium Water. In the last 12 months alone, the average home price has risen 14%, to around C$1 million.
    • To a visitor, it can seem as if Vancouver's main industry is real estate, like it used to seem in Las Vegas or Orange County. A newcomer, emerging from the gate for international arrivals, is greeted with three separate backlit billboards, all offering architects' renderings of planned communities. Aspac Developments promises that they're "building a legacy of excellence." Concord Pacific describes each of its multiple developments as "a master planned world unto itself with park, schools, daycares, shops, restaurants, and resort-style amenities." Polygon calls itself "Vancouver's Builder of Choice," and offers contact information in English and Chinese. Driving out of the airport and up Vancouver's main thoroughfare, Granville Street, one notices billboards for brokers and advertisements on the backs of buses for Realtors and developments.
    • "Some of the brokers in Vancouver think they're rock stars," says Grant Connell, a broker with Sotheby's (BID). According to Connell, they are getting paid like them, too. "Many have made $500,000 or $1 million this year," he says. Connell, a former professional tennis player who spent years on tour, is among Sotheby's top-producing brokers. As of June of this year, he had amassed 52 "ends," as he calls a completed sale. (that's on pace for 100 sales in a year - or 2 a week - amazing)
    • The market in Vancouver wasn't entirely unscathed by the financial crisis. Like the rest of the world, it took a hit. But prices rebounded, and the average home in the city is now about 10 percent above the pre-crash peak.  As Canada headed into 2009, Canadians jumped back into buying homes. Home prices in Canada have been strong from coast to coast, especially relative to the U.S. Vancouver prices, however, have run with special gusto.   In the second half of 2009, says Connell, "it was just spastic."
    • Canada was supposed to have been safe from flippers, teardowns, bidding wars, and the other markers of the bubble that covered the States. Its banking system was voted the soundest by the World Economic Forum's most recent Global Competitiveness Report.  The mortgage default rate in Canada is less than half a percent, compared to 3.73 percent in the U.S., and its first quarter 2010 gross domestic product growth was a robust 6.1 percent. 
    • Canada's banking system is healthy in part because it went through a reform after a crisis in the early '90s. Though Canadian banks are among the largest in the world, and appear similar to the big American ones, they are much more tightly regulated—in ways that keep loan quality high and increase banks' incentives to hold those loans.
    • Terms are largely dictated by the Bank of Canada; borrowers putting less than 20 percent down, for example, are required to purchase insurance from providers like Genworth or the Canadian Mortgage & Housing Corporation. (which used to be the case in the U.S. before "financial innovation" found its way around it Unlike in the U.S., the big Canadian banks write the majority of those loans.
    • Lastly, the majority of Canadian loans are recourse, meaning that lenders can go after a borrower's earnings and assets; walking away is a very unattractive option. (so old fashioned - being held responsible for debts.  No "innovation" in that - how the heck do you support a nation of strategic defaulters with lame rules like that?)  All this has made Canadian home loans sound and banks stable.  
    • All that safety and stability has come with a price. It may have overinflated prices. At least that's how some doubters see it. Among the skeptics is Petr Pospisil, a teacher in Vancouver who created a website called "Crack Shack or Mansion," in which the visitor attempts to guess whether a pictured bungalow is a bombed-out home of little value or a real Vancouver listing with a price of over a million Canadian dollars. Pospisil, alternately concerned and amused by what he saw as an irrational mania for real estate, got 30,000 views on the first day he put up the site. Within five days, 200,000 had played the game.
    • "Canadians defend their bubbles, especially here in Vancouver," says Pospisil. "People get angry when you tell them it's a bubble. They say it's different here, that this is such a beautiful place and everything is different. Everywhere there is a bubble, they say it's different."  
    • Professionals like Robert Hogue, a senior economist at RBC Royal Bank, use less exciting language but fundamentally agree. "The type of price increases that we've seen in Vancouver are unlikely to be sustained," says Hogue. "There might be some downside risk to that market."
    • Some, like Garth Turner, a financial writer and former member of Parliament, see Canada going all the way down the road the U.S. took. "My basic view," he says, "is that we have a Canadian version of the U.S. real estate bubble. Not exactly the same, but close enough. We've relaxed lending standards, we have high unemployment, and we've reached a point of unsustainability in the housing market. I see real estate values falling shockingly."
    • Rosenberg notes three factors that have spurred home sales in recent months. First, as in the U.S., near-zero interest rates have kept mortgage prices at historic lows, sustaining demand for housing. Until June 1, the overnight rate target set by the Bank of Canada was one-quarter of a percent. Second, the Canadian Mortgage & Housing Corporation, Canada's hybrid version of the Housing & Urban Development Dept. and Fannie Mae, announced in February that in April it would be moderately tightening its standards for loans, decreasing the maximum length of loans from 40 years to 35 and increasing minimum down payments for certain types of loans. Third, a sales tax on services in Ontario and British Columbia goes into effect on July 1. The imminence of all three together has likely pushed some buyers to jump into the market, especially in Ontario and B.C.

    Of course, much like the United States NAR - whose chief proganda official economist Mr. Yun* we made fun of in 2007 and early 2008 [Oct 10, 2007: Realtors Group Lowers Forecast but Chief Economist Lawrence Yun Still on Kool Aid] [Nov 14, 2007: Housing Will be Flat Next Year! Whew!]. as he spew Kool Aid in every direction even as we called for a crash, [Dec 6, 2007: What Should Median Housing Prices be Today?] the Canadian Real Estate Assn chief economist claims nothing to see here, move along.
    • Cameron Muir, chief economist for the British Columbia Real Estate Assn., argues for Vancouver's special situation, as do many in the trade. "Vancouver has had the highest prices in Canada for some time," says Muir. "The geography is constrained. You've got the Pacific on the West, the mountains to the north, the U.S. border to the south, and land reserves to the east. That puts tremendous upward pressure on land prices. We also have solid population growth with a sizeable proportion of immigrants."
    • Vancouver is a city of just over 2 million, and Muir expects 40,000 immigrants this year. On top of that, says Muir, there are "high-net-worth Asian purchasers buying as investments, as second homes, or for satellite families."
    *still employed despite being wrong for about 4 years in a row or I suppose if you look at it from NAR's perspective... batting 100% at promoting real estate as a cool investment, even during a crash.  Life inside the Matrix rocks.

    Of course, Chinese money is having some effect... this is not Topeka, Kansas for example.
    • Mainland China buyers are a fixture in conversations about Vancouver real estate, though reliable data on their numbers is elusive. "I'd say over half our high-end listings go to China buyers," says Connell. "Yesterday we did an open house for a $3.5 million home, and six groups came through. They were all Chinese."
    • Broker Andrew Hasman sees 70 to 80 percent of his high-end listings go to mainland Chinese. He oversaw an open house recently for a $1.8 million home. Of 100 visitors, 91 were from China. Spend enough time speaking with Rosenberg, Hasman, Muir, and others, and prices in Canada seem to make a kind of sense, a rational response to market forces that just so happens to have pushed prices way above the norm.


    Aside from quotes like "It's a sport" and "it's different this time here" the following should ring a bell for anyone who was following the U.S. bubble mid decade forward.  Remember how people would camp out in new developments so they could buy and "flip that pre-construction contract"?
    • In Vancouver, new developments are pre-sold via "assignment letters," or commitments to buy. Throughout 2009, say Connell and others, assignment letters were being flipped. "The minute I actually heard a taxi driver talking about flipping assignments," says Connell, "I knew something had to give."  
    Should be an interesting place to revisit in 2012.

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