cutaway house

Home Sweet Home – Crisis

Systemic Crisis in Foreclosures/Mortgages?

A major crisis may be emerging from the opaque shadows of the unregulated American financial system.

Can the Obama administration, Bernanke, Shadow Banks and Wall Street push this problem back in the shadows before it dawns on an ignorant public of just how bad their getting ripped off?

Focus is on mortgage and foreclosures systems from the 2008 shadow bank/housing meltdown.

Remember, because of our over leveraged under regulated financial system your mortgage was turned into a note/bond, chopped up and sold many times (credit default swaps etc) and finally even insurance companies like AIG ended up with a big piece of the action.  Well, who exactly owns your mortgage and there were a lot of crooks (fly by night operators – many are no longer in existence) along the road to chopping up your mortgage and owning part of the action.

Throughout the legal systems people were being foreclosed on by entities that did NOT hold the legal right to do so because the mortgages had been chopped up so many times. This problem reached critical mass in the legal system and now AG’s from 50 states are investigating. (see Thursday & Friday’s Investors411)

Major shadow banks were using unqualified “robo signers” to sweep this problem away ASAP to maximize profits. But now its exploded onto a slow moving US legal system because those who were foreclosed on were being unfairly ripped off by ghost entities who claimed ownership to their house. Major question is who holds the foreclosed mortgage???? Who really holds YOUR mortgage????

Bottom Line – Shadow Banks have used inaccurate (illegal) documents to foreclose on homes. Trust issues abound in an under regulated opaque financial system. Investors could loose confidence.

Sources – In descending order of preference on this, because its really beyond my pay scale to understandhere, here, & here

Major Deficit Creator of Our Time

Obviously the 2008 meltdown. It now supersedes, on a yearly basis, the debt created by the go to war, voting for pork and cutting taxes to create a deficit that started in 2000. This made things horrible and is still in effect.

When unregulated casino capitalism exploded in 2008, we were faced with a choice of another depression or an opaque TARP, Stimulus, and most importantly an opaque Fed Reserve Bank printing who knows how many trillions of dollars.

MIT’s Simon JohnsonThere Are No Fiscal Conservatives Out There” – money quote

“If you want to fix the US budget – keeping the deficit under control and bringing down the size of our government’s debt – you have to address the risk-seeking behavior of big banks.  No fiscal strategy can be credible without addressing the major problem that brought us to this point.”

The latest foreclosure crisis is another 2 by 4 over the head reminder of this.

KISS & Stocks (Keep It Simple Stupid)

If you don’t understand a term look in up at dictionary



Index Percentage Volume
Dow -0.29% up
NASDQ +1.37% up
S&P +0.20% up
Russell 2000 -0.22% -

Technicals, Fundamentals & Analysis

Investors411 record – 5 years of beating benchmark S&P 500

US Stock Markets -

Volume is returning to US markets for the last few trading days and spiked somewhat yesterday. Much of this was due to the foreclosure problem in Shadow mortgage banks, (See below and above) The Dow spiked significantly higher probably due to huge volume in Shadow Banks BAC & JPM.

Apple reports today, and as The Critic points out in the comments section it is very overbought into earnings. It would probably  take a knock your socks off spectacular earnings report to move Apple tomorrow.

Shadow Banks – There are 6 major mortgage shadow banks and they all took another big hair cut again yesterday. Two big volume down days in a row for major banks (BAC down @ 5% each day) is an enormous plunge.

The earnings report and week ahead for US markets

Significant Indexes

  • The Dollar (USD) [Anything daily price move over +/- 0.50 is significant. Dollar usually moves inversely to stocks] The dollar rose +o.52% yesterday. The inverse correlation is not always perfect. However Friday’s rally bearish for stocks.  Overall trend of falling dollar trend for US stocks is = Bullish
  • The Baltic Dry Index (BDI) [measures cost of world trade. Also proxy for China, emerging markets, exporting countries] Fell a minor -0.25% Friday An 8 week bull run, then a two week fall. A very slight stutter and now moving up. Trend  = Bullish
  • McClellan Index – (MO) [The rough guideline is over +60 = overbought market = sell positions or short stocks, & -60 = oversold market = buy stocks.] Fell to -1.86. Lot of room to move both higher and lower. Momentum is with the stock bulls but location= NEUTRAL

Reading Tea Leaves.

Helter Skelter – Major forecasting tools and market coherence moved dramatically in different directions.

  • The Mother of all tech stocks AAPL clearly overbought in front of earnings report
  • MO neither overbought or oversold and parked in neutral
  • Two dramatic down days for big mortgage banks and possible mortgage/foreclosure meltdown
  • Dollar took unexpected significant move higher Friday
  • Major US indexes moving in different direction in big volume
  • Emerging markets consolidating.

Again above my pay grade to explain why all this Helter Skelter in a detailed fashion, but I know chaos when I see it.  There’s big money to be made for the traders who guess the right direction of the market. Best read of tea leaves is down.

So many folks have been long and getting more complacent each month. Something we’ve talked about before – the VIX – shows this. So the highest risk for a big move is DOWN.

Bottom LineThere is a possibility of another foreclosure/ mortgage systemic meltdown.

We have NOT fixed the #1 cause of our growing deficitsregulating the over leveraged giant shadow banksHow can any political group can claim to be concerned about deficits and not address hidden, crony, casino capitalism in our wildly over leveraged shadow banking system ?


The  Positions Section link to latest & former buys and sells  - These are positions I actually own

(I do manage 6 accounts that have other positions)

  • EWS (Singapore)
  • USO (price of oil/commodity).
  • SSO (2x what S&P does) – Tightened stop and may sell/take profit today.
  • TYH (3x tech stocks) Sold the rest of TYH at 38.8 for @ +13% gain. Sure looks like a climax run Friday afternoon. TYH is a trade not an investment. Could re enter this trade at different time. Sorry I made a post on this Friday afternoon and it looks like it did not get posted. See comments by “The Critic” entered under Friday’s blog. It may be still up on the right side. I discussed what’s happening with several of you over weekend.

Both US & EWS will be impacted if things go South.

Time for caution for both Investors and Traders. – Time to bring out the old Lost in Space robot, with all his bells and whistles and warn Danger Will Robinson Danger Danger. 95% of this call is based on the current foreclosure crisis and understanding it is beyond my pay scale.

Look for Paul R’s always enlightening comments on stocks and sectors in the comments section.

Longer Term Outlook - CAUTIOUSLY BULLISH


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