Rob Black - Market Notes Notes July 12 - Groupon Falls, Jobless Claims, Buffet Speaks, Wells Fargo, NBA and more

By: Rob Black - Thu, 12 Jul 2012 12:45:36 -0800

Winner: Jobless Claims in U.S. Plunge on Fewer Auto Shutdowns
Loser: Groupon Trades at Record Low -75% Lower than I.P.O
Winner: Housing Rebound Signaled as Banks Resume Foreclosures
Winner: Wells Fargo Settle Loan Probe for $125 Million
Winner: 30-Year Mortgage Rates Hit Record-Low 3.56%
Winner: Merck Halts Trial of Bone Drug After Favorable Result
Loser:  Buffet Speaks, We Listen -  He’s More Bearish
Winner: NBA Players Forced to Save For Retirement


Of note:  Over the last month, the Dow has now rallied 4%, fallen 4%, rallied 4%, and now fallen 4%, putting it right back where it was on June 12. If you still like housing, XHB has pulled back to its 50-day moving average today. Housing indicators start up again next week. After 3 straight swoons, summer has quickly become the most depressing season of the year for investors. Bring on winter they say!  Sure it was a holiday week, but jobless claims were very good, even on a non-seasonally adjusted basis. Wal-Mart has the longest winning streak of any stock in the Russell 1,000 at 6 days.   Looks like this will be 9 of last 10 trading days that the market has rallied in the final hour. Smart money indicator says that's good.

 
Winner: Jobless Claims in U.S. Plunge on Fewer Auto Shutdowns
 
Automakers including Chrysler Group,  Ford and Nissan  are keeping more plants than normal open during this time of year to fulfill demand and replenish inventories. For that reason, it may take time to determine if the labor market is making any progress.

You can never take claims at face value because of the July shutdowns and July 4 holiday.
 
 
Loser: Groupon Trades at Record Low Lower than I.P.O
 
Groupon, the biggest online coupon company, fell to the lowest price since the company’s initial public offering in November amid concerns over its ability to profit from daily deals.

The stock dropped 5.7 percent to $7.33.

Through yesterday, the shares had declined 61 percent since they.

The company generates revenue by selling discounts --called Groupons -- from businesses such as restaurants and nail salons.

ts business model is under seige from daily deals offered by competitors such as Google Inc., Amazon.com  and Yelp
 
People are assuming that Groupon is going to have a difficult quarter. There hasn’t been much communication so we’ll have to wait until they report June quarter numbers.”
 

Winner: Housing Rebound Signaled as Banks Resume Foreclosures
 
U.S. lenders are notifying more delinquent homeowners they face foreclosure, a step toward clearing a backlog of properties and helping to accelerate a housing recovery.

Initial notices of foreclosure, the start of the process, jumped 6 percent in the second quarter from a year earlier, the first annual increase since 2009.

Banks at the same time found alternatives to the final step of seizing the home, either by working with the borrower or by agreeing to sell properties for less than what was owed, with repossessions falling 22 percent.

The housing market’s rebound has been restrained by the so-called shadow inventory of homes with mortgages at least 90 days delinquent. They started to pick up again after the nation’s five biggest banks settled the probe for $25 billion in February.

The market has to deal with these distressed properties at some point and I believe we’ve delayed it long enough so seeing these increases isn’t necessarily a bad thing. The market has strengthened and is more equipped to absorb this additional foreclosure inventory.

Mortgage delinquencies are dropping, with the share of home loans at least 30 days late dropping to 7.4 percent in the first quarter from 7.58 percent in the prior three months.

 Demand for real estate is rising amid record-low borrowing costs and tight inventories of available real estate. Contracts to buy previously owned homes rose 5.9 percent in May, matching a two-year high reached in March.

It will hurt a bit over the next six to 12 months, but it is necessary to get housing and the economy on a solid foundation.
 

Winner: Wells Fargo Settles Loan Probe for $125 Million

Wells Fargo, the largest U.S. mortgage lender, will pay $125 million to settle federal claims it violated fair-lending laws.

The case relates to independent mortgage brokers who worked with the bank.
 
Winner:  Mortgage Rates Decline, With 30-Year at a Record-Low 3.56%

U.S. mortgage rates dropped, with 30-year loans reaching a record low for a fourth straight week, amid signs of improvement in the housing market.

The average rate for a 30-year fixed mortgage fell to 3.56 percent in the week ended today, the lowest in Freddie Mac records dating to 1971, from 3.62 percent. The average 15-year rate dropped to 2.86 percent, also a record, from 2.89 percent.

The number of homes with loans for more than the properties are worth fell in the first quarter to 11.4 million, or almost 24 percent of all homes with a mortgage, from 12.1 million, or more than 25 percent, in the fourth quarter of last year.
 

Winner: Merck Halts Trial of Bone Drug After Favorable Results

Merck  will stop testing an experimental therapy meant to prevent bone fractures in women with osteoporosis because the drug has worked so well in a late-stage trial.

The drug, odanacatib, has been tested in post-menopausal women with osteoporosis since 2007.
An advisory panel monitoring the results recommended closing the phase 3 study early due to robust efficacy and a favorable benefit-risk profile.

Merck is seeking new products while cutting jobs in preparation for facing generic competition next month in the U.S. to its best-selling asthma treatment Singulair.

Sales of odanacatib may reach $1.1 billion by 2020.

Loser: Buffett Speaks, We Listen  . . He's Sounding More Bearish
 
The "Oracle of Omaha" Warren Buffett, the CEO and chairman of Berkshire Hathaway, is in as Sun Valley, Idaho talking about the U.S. and global economy and the deficit.

Buffett shares his thoughts on U.S.

"For a couple years now, I've been telling you everything but residential housing was improving at a moderate rate--not crawling but not galloping either--... the general economy in the U.S. has been more or less flat so the growth has tempered down."

He added that in the last two months he's been seeing a pickup in residential housing.

"It's noticeable. It's from a very low base. It doesn't amount to a whole lot yet."

He said residential housing is picking up, but the rest of the economy is slowing down adding that it's not heading downward.

 On Europe.

He said that Europe is starting to slip "pretty fast."

"Europe is really it's headed downward in the last six weeks or so. It wasn't going that way before”.
It means that a fundamentally flawed system was designed some years back. They've been trying to patch it during the last couple of years. It's hard to change a very fundamental system with patches..."
He says consumer spending is slowing down.

Consumer spending is slowing down and that is affecting businesses.

On the Fed and Politicians.

"They shouldn't be bicyling like crazy at the Fed, well maybe they should be bicylcing like crazy, while Congress sits there on the sidelines and basically squabbles."

He added that people have the feeling that Congress is inept right now.

On Fiscal Cliff.

We need something done, he says.

  Buffett says a debt to GDP ratio of 2.5% is sustainable.

Buffett says the decifit problem and the solution are obvious.

 Buffett says "everyone knows you're going to have to change the debt limit....Just raise it and get on with the next problem."

Instead of talking about the Bush Tax cuts he says what we should be talking about instead is how do we reform the tax code to broaden the base and simplify the code.
 

Winner: NBA Players Forced to Save Toward Retirement for First Time

Former NBA players Scottie Pippen, Latrell Sprewell and Antoine Walker are among retired professional athletes who have experienced financial difficulty after careers in which they earned tens of millions of dollars. Walker filed for bankruptcy after being paid more than $100 million over 12 years in the NBA.

National Basketball Association players, who were paid an average of about $5 million last season, will be forced for the first time to save money for retirement.

Players in the league this past season will receive $34 million, or 1 percent of what the league and union call basketball-related income, to be invested in an annuity.

Basketball-related income in the NBA will top $4 billion next season, meaning the amount of forced savings also will rise.

Beginning next season, players also will surrender 5 percent to 10 percent of their salary for retirement. They automatically will be enrolled in the program and would have to opt-out to keep from participating in the plan.

This is awesome as NBA is teaching Americans about retirement.

 
 

** Please note these are my notes that I use for radio/television and I
believe my sources are accurate buy you should not confuse this within
investment advice
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