A journey into Main Street economics.

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Changes coming soon…

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It’s been a while since I made a post here, but we’ll be back in action in 2010 with more content than before. I’m hoping to get this moved to a new domain to give me more freedom in designing the site and adding additional content, so stay tuned.

In the meanwhile, let’s look back at a couple of old entries and see what the latest developments are:

Time To Get Short: “My opening strategy: Find 3X long ETF’s and buy OTM LEAP puts. I’ll average down every month that the Dow and S&P stay above current levels and roll into longer maturities if these levels are sustained through Q1 ‘10.”

Status: Right now, about break-even. I brought some Jan ’11 puts on FAS (3x Financials) the day after this post, October 15th, and the S&P closed at 1,096 on that day. S&P now stands at 1,110 as I write this….. but this is where the magic of this play comes in…

10/15: FAS @ 91.96…. Russell 1000 Financials @ 817.26

12/15: FAS @ 70.81 (-23%)…. Russell 1000 Financials @ 755.92 (-7.5%)

As long as markets continue to track sideways, this position is faring well. I’m maintaining delta despite losing time premium and waiting for the inevitable volatility spike in 2010 to increase my option’s value. I’m hoping to add to this position in Q1 ’10 and maybe expand to some Jan ’12 puts.

House Hearing on FHA Capital Reserves:

“Because of the inherent risk involved with exiting the market completely, I’d be in favor of the following changes to protect the taxpayer against risk:

1. Raising downpayment requirements from 3.5% to 5% for loan values above the local median home price.

2. Lowering the loan limits to 125% of the local median home price, up to $417,000 in high-cost areas.

3. Increasing UFMIP from 1.75% to 2% in a declining market.”

Status: Apparently the FHA is taking this issue somewhat seriously and is exploring raising UFMIP and the amount needed to close (not necessarily downpayment as some have reported). However, without #2 in the above list I’m not sure what these steps accomplish other than taking more reserve money from their alleged target market (low-income borrowers). This simply confirms that FHA loans are the new middle-class product. One thing I do expect is for higher downpayment and UFMIP to have a negative impact on home prices in 2010 and 2011 as home buyer leverage is reduced.


Written by Myron

12/15/2009 at 2:05 PM

Posted in Uncategorized

The Week Ahead: 10/12 – 10/16

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Monday, October 12

Tuesday, October 13

  • Tentative: Federal Budget Balance for Sept.

Wednesday, October 14

  • 8:30 AM – Import and Export Prices for Sept.
  • 8:30 AM – Retail Sales for Sept.
  • 10:00 AM – Business Inventories for Aug.
  • ~2:00 PM – FOMC Minutes from Sept. 23 Meeting

Thursday, October 15

  • 8:30 AM – Initial Jobless Claims for week ending 10/10
  • 8:30 AM – Continuing Jobless Claims for week ending 10/3
  • 8:30 AM – CPI and Core CPI for Sept.
  • 8:30 AM – Empire State Manufacturing Index for Oct.
  • 10:00 AM – Philadelphia Fed Business Outlook Survey for Oct.
  • 10:30 AM – Natural Gas Storage for week ending 10/9
  • 1:00 PM – Crude Inventories for week ending 10/9

Friday, October 16

  • 9:00 AM – Net Long-Term TIC Flows for Aug.
  • 9:15 AM – Capacity Utilization and Industrial Production for Sept.
  • 9:55 AM – Prelimimary Michigan Consumer Sentiment Index for Oct.
  • 9:55 AM – Preliminary Michigan Inflation Expectations for Oct.

My Take

We get off to a slow start this week with a holiday, but have some very important data released in the latter half of the week. Thursday morning is the highlight of the week as either the jobless data or CPI could have a huge impact on all markets.

Things will get very interesting if we get a huge jump in CPI and the inflation concerns start growing at the Fed. The number one question right now in the U.S. economy is deflation or inflation. We’ll be one data point closer to answering that question after this week. Bond market action at the end of last week shows that inflation is a growing concern.

In the equity markets, we get earnings reports this week from Intel, Johnson & Johnson, JPMorgan Chase, Goldman Sachs, IBM, Bank of America, and GE. Obviously a lot of attention will be paid to the bank earnings and I don’t expect any bad news from them since they have been given every opportunity to turn risk-free profits for the past 12 months.

Written by Myron

10/12/2009 at 12:43 AM

The Week Ahead: 10/5 – 10/9

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Monday, October 5

  • 10:00 AM – ISM Services Index for Sept.
  • 10:30 AM – Crude Oil Inventories

Tuesday, October 6

Wednesday, October 7

  • 2:00 PM – Consumer Credit for Aug.
  • 2:00 PM – Treasury Budget for Sept.
  • ~4:00 PM – Alcoa’s Q3 Earnings

Thursday, October 8

  • 8:30 AM – Initial Jobless Claims for week ending 10/03
  • 8:30 AM – Continuing Jobless Claims for week ending 9/26
  • 10:00 AM – Wholesale Inventories for Aug.
  • 2:00 PM – House Financial Services Committee, Subcommittee on Housing and Community Opportunity Hearing: “The Future of the Federal Housing Administration’s Capital Reserves” Assumptions, Predictions, and Implications for Homebuyers”

Friday, October 9

  • 8:30 AM – Trade Balance

My Take

Not much to get excited about this week which could mean volatility in the markets from the key employment data on Thursday. Last week’s negative sentiment and breaches of key technical levels in the S&P and Dow could mean we’re at the start of the next downturn, but the start of Q3 earnings with Alcoa this week will determine how steep of a downturn we’re likely to see.

I expect consumer credit to remain about the same for August with the end of “Cash for Clunkers” skewing the results. The real downturn in consumer credit will likely follow with September’s data.

I’ll be interested to see what comments come out of that Senate subcommittee hearing on Thursday. The FHA is the key to any kind of housing price stability and their reserve situation is frightening to say the least.

Written by Myron

10/05/2009 at 12:44 AM

Welcome to HomeEconomics

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Welcome to HomeEconomics… no, not that boring class you took in middle school to teach you how to become the next Martha Stewart. This version of HomeEc features unconventional discussions about economic issues facing the American public (aka Main Street) and how they impact our lives. I’ll also be sharing my day to day thoughts and perspectives on how to take advantage of the current and upcoming economic landscape.

… But if you want to bake cakes and pies while reading this, be my guest.

Written by Myron

10/02/2009 at 2:59 PM

Posted in Uncategorized

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