February new home sales prices increased to 8.3 percent which is the largest jump in years.
On the other hand.
U.S. new home sales fell 1.6% in February to a 313,000 units pace. This was lower than what was expected and lower than the 318,000 number which came in for January.
Just as things on the macro side begin to brighten, oil, the price of dark oil begins to rear its ugly head.
It is very possible the U.S. could slip into another recession if oil prices reach around $150 per barrel.
Every ten dollar rise in oil will take take about 20 basis points off U.S. GDP growth in each of the first two
years of the price hike. Its important to remember that Gasoline, motor fuels, and fuel oil account for 5.5% of household spending, and rising.
A $10 rise in crude oil prices will hike gasoline prices by about 25 cents (8%) and cut consumers’ purchasing
power by about 0.4% which is a large number in this fragile recovery.
Monday, March 26, 2012
Monday, March 19, 2012
The case for reits
REITs offer potential for both capital appreciation and dividend increases. When the economy is doing well, companies expand and rent more office space. Employees, in turn, feel confident and rent larger apartments or storage units.
Companies also send employees out on the road to attract new business, so hotels do well. As businesses increase production and distribution of goods, they use more industrial space. And, with all this demand, REITs generally have increased pricing power.
The outlook for residential REITs looks positive. A lower homeowner rate, despite government incentives, and modest new supply (construction) look like they are both working in favor of multi-family operators.
Indeed, residential REITs — which usually own apartment buildings — reported average occupancy figures of more than 95% for the fourth quarter of 2011, allowing a push on new rents to higher levels.
Rents will continue to increase and roll through apartment portfolios in 2012 as U.S. job markets look to slowly recover. Many apartment REITs are also expressing renewed interest in acquisitions. The number of bidders and property valuations has increased in recent months.
It is easy to see a positive fundamental outlook on retail REITs as well. Although challenges remain and raising rents is always a contentious issue, its easy to think that increasing absorption of retail space should present retail landlords with more pricing power. If consumer spending and retail sales improve over the next 12 months, this should prompt a further slowdown in store closings.
The national office vacancy rate has stabilized at about 17.0%, up from about 12.5% at the end of 2007. If the economy improves vacancy levels should edge down in 2012.
Companies also send employees out on the road to attract new business, so hotels do well. As businesses increase production and distribution of goods, they use more industrial space. And, with all this demand, REITs generally have increased pricing power.
The outlook for residential REITs looks positive. A lower homeowner rate, despite government incentives, and modest new supply (construction) look like they are both working in favor of multi-family operators.
Indeed, residential REITs — which usually own apartment buildings — reported average occupancy figures of more than 95% for the fourth quarter of 2011, allowing a push on new rents to higher levels.
Rents will continue to increase and roll through apartment portfolios in 2012 as U.S. job markets look to slowly recover. Many apartment REITs are also expressing renewed interest in acquisitions. The number of bidders and property valuations has increased in recent months.
It is easy to see a positive fundamental outlook on retail REITs as well. Although challenges remain and raising rents is always a contentious issue, its easy to think that increasing absorption of retail space should present retail landlords with more pricing power. If consumer spending and retail sales improve over the next 12 months, this should prompt a further slowdown in store closings.
The national office vacancy rate has stabilized at about 17.0%, up from about 12.5% at the end of 2007. If the economy improves vacancy levels should edge down in 2012.
Friday, March 16, 2012
WELLS FARGO doubled their dividend.
After WELLS FARGO got approval from the FED, they doubled their quarterly dividend from $0.12 to .22 cents.
The increase is much larger than bank buyers were anticipating. This means that WFC is in a stronger position than many of its bank peers. Their capital levels and quality of their credit had to be sound for the FED to approve such a large increase.
The Fed also gave the green light to WFC for its aggressive capital plan. The capital plan includes share buybacks and redemptions of trust preferred securities.
The increase is much larger than bank buyers were anticipating. This means that WFC is in a stronger position than many of its bank peers. Their capital levels and quality of their credit had to be sound for the FED to approve such a large increase.
The Fed also gave the green light to WFC for its aggressive capital plan. The capital plan includes share buybacks and redemptions of trust preferred securities.
Friday, January 27, 2012
Modern Day Wealth Inequity
Here are some dirty stats on Wealth Inequity:
400 Americans own 3percent of all the nations wealth- they own more than 60% of all Americans combined.
top 1 percent own 43 percent of america
top 20% own 93% percent of america.
the bottom 80% own 7% of america
the bottom 50% own .02 percent of america.
in 1970 the bottom 99% owned 70% of america
in 2011 the bottom 99% own 57%
the bottom 90% account for 55% of all consumer spending. the barely middle class and the poor in the bottom 55% pay the majority of sales tax and the evil inflation tax.
400 Americans own 3percent of all the nations wealth- they own more than 60% of all Americans combined.
top 1 percent own 43 percent of america
top 20% own 93% percent of america.
the bottom 80% own 7% of america
the bottom 50% own .02 percent of america.
in 1970 the bottom 99% owned 70% of america
in 2011 the bottom 99% own 57%
the bottom 90% account for 55% of all consumer spending. the barely middle class and the poor in the bottom 55% pay the majority of sales tax and the evil inflation tax.
Thursday, January 19, 2012
CNBC: This is For all the Michelle Caruso Cabrera fans out there.
I report- you decide.
Fall Reading and Cookbooks.
Wednesday, January 4, 2012
If you own physical gold and silver you may want to hedge it with options.
There are plenty of investors that don’t trust ETFs for as a substitute for owning the physical metal in hand.
While this is completely understandable, it doesn’t’ mean that you can’t hedge what you own by using options on the GLD and SLV ETFs.
If you own thousands of dollars in precious metals, you are completely unhedged against severe market fluctuations.
Silver in particular displayed a lot of volatility in 2011, it had multiple 30% swings to both the upside and the downside.
The roller coaster ride was enough to make most owners a little bit squeamish.
The solution: Options.
If we take SLV as an example. We can purchase an (otm) out of the money put with 100 days till expiration, for .15 cents.
The catch: the put Is 30% out of the money.
That means you have unhedged for a 30% drop in the next 100 days, however, if silver were to drop precipitously the put would increase in value. The put would increase in value even if the spot price of silver didn’t fall below the strike price.
The reason, increased volitilty would make the put worth more than you paid for it. And at .15 cents, its pretty cheap protection for the next 100 days.
Hedging Gold (gld) is a little different. Gold hasn’t been as volatile as silver but you can still purchase a put that is 25% Out of the money for .20 cents. The question is though; with gold’s drop from 2000 does anyone expect it to drop another 25% this year? Either way- purchasing one put for 20 dollars, can protect your expensive gold holdings from a catastrophic drop.
I don’t favor purchasing puts less than 100 days before they expire, and I don’t believe the premium you have to pay for at (ATM) at the money put is worth it.
You are long term bullish on the metal, so it makes little sense to spend a ton of money to marry puts to your position at all times.
But, when the market is uncertain- owning a put is akin to owning insurance.
You insure all of your most precious assets, your precious metals must be thought of the same way.
If silver were to fall, you can sell the put for a profit, and purchase even more silver with it at the cheaper price point.
If the option expires worthless, as most do, then it would be the same as the premium you pay in your insurance policy- even if you never use it.
For bullish investors, I don’t calls work the same way. Instead of paying the premium for a call, you could just buy the physical. Most options expire worthless, so instead of wasting money on a call- you could own the metal in hand.
Its important to remember:
These puts are 30% out of the money. That means if gold or silver drop 15% your puts aren’t going to be worth much. The 15 dollar puts might be worth 100 bucks. Expectations need to correctly set.
While this is completely understandable, it doesn’t’ mean that you can’t hedge what you own by using options on the GLD and SLV ETFs.
If you own thousands of dollars in precious metals, you are completely unhedged against severe market fluctuations.
Silver in particular displayed a lot of volatility in 2011, it had multiple 30% swings to both the upside and the downside.
The roller coaster ride was enough to make most owners a little bit squeamish.
The solution: Options.
If we take SLV as an example. We can purchase an (otm) out of the money put with 100 days till expiration, for .15 cents.
The catch: the put Is 30% out of the money.
That means you have unhedged for a 30% drop in the next 100 days, however, if silver were to drop precipitously the put would increase in value. The put would increase in value even if the spot price of silver didn’t fall below the strike price.
The reason, increased volitilty would make the put worth more than you paid for it. And at .15 cents, its pretty cheap protection for the next 100 days.
Hedging Gold (gld) is a little different. Gold hasn’t been as volatile as silver but you can still purchase a put that is 25% Out of the money for .20 cents. The question is though; with gold’s drop from 2000 does anyone expect it to drop another 25% this year? Either way- purchasing one put for 20 dollars, can protect your expensive gold holdings from a catastrophic drop.
I don’t favor purchasing puts less than 100 days before they expire, and I don’t believe the premium you have to pay for at (ATM) at the money put is worth it.
You are long term bullish on the metal, so it makes little sense to spend a ton of money to marry puts to your position at all times.
But, when the market is uncertain- owning a put is akin to owning insurance.
You insure all of your most precious assets, your precious metals must be thought of the same way.
If silver were to fall, you can sell the put for a profit, and purchase even more silver with it at the cheaper price point.
If the option expires worthless, as most do, then it would be the same as the premium you pay in your insurance policy- even if you never use it.
For bullish investors, I don’t calls work the same way. Instead of paying the premium for a call, you could just buy the physical. Most options expire worthless, so instead of wasting money on a call- you could own the metal in hand.
Its important to remember:
These puts are 30% out of the money. That means if gold or silver drop 15% your puts aren’t going to be worth much. The 15 dollar puts might be worth 100 bucks. Expectations need to correctly set.
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