The spin is out in full force folks. The Southern California housing numbers are now out and once again they show a dismal and pathetic market. Yet even in the face of falling prices ala the Wal-Mart commercials, you can rest assured that some are going to spin the data for all it […]
Related Posts:
■Foreclosures? Housing Bubble? In Southern California? Impossible!
■Real Homes of Genius: Today we Salute you Compton. Once, Twice, Three times a Short Sale.
■Emerging Economic Trends: Housing Swaps, Frugality, and Selling Homes in Lower Priced Areas.
■C.A.R. says 2007 will see a -2% Drop in California. Does This Feel like a 2% Yearly Drop?
■Doing The Housing Bubble Math Dance for California.

The spin is out in full force folks. The Southern California housing numbers are now out and once again they show a dismal and pathetic market. Yet even in the face of falling prices ala the Wal-Mart commercials, you can rest assured that some are going to spin the data for all it is worth. You also need to remember that the recent data on Southern California is for the month of July, a historically strong month simply because of seasonal factors. In addition, the month of August should look similar to this month but expect the report for September due out in October to show the actual pay option ARM smack down.

But even with seasonality the spinsters are going to use the current minor bump in home sales as a major positive:

“(DQNews) La Jolla, CA—The number of Southern California homes sold last month edged up to its highest level in more than a year as bargain hunters swept up foreclosure properties in affordable neighborhoods, a real estate information service reported.

A total of 20,329 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 16.7 percent from 17,424 the previous month and up 13.8 percent from 17,867 for July a year ago, according to San Diego-based MDA DataQuick.

Last month’s sales count was the highest since 21,856 homes were sold in March 2007, though it still fell 23 percent short of the average July sales total since 1988, when MDA DataQuick’s statistics begin. From last September through June, sales for each month were at an all-time low for that particular calendar month, with the exception of April which was the next lowest. Last month’s sales total was the first since September 2005 to rise above the year-ago level.”

Bargain hunters? Foreclosures in affordable neighborhoods? Isn’t that an oxymoron? If the neighborhood was affordable in the first place you wouldn’t be seeing large number of foreclosures but that is an entirely different subject. Even though this report is trying to spin the 21,856 sales as a significant jump it is nowhere close to the sales that occurred during the bubble frenzy. Take a look at this data:

July 2004: 32,988

July 2005: 31,069

July 2006: 25,628

July 2007: 17,867

July 2008: 20,329

It helps to put things in perspective doesn’t it? Of course they aren’t going to say that sales for Southern California are off by 38% from their peak July month only a few years ago. And when they say that the jump was bolstered by “affordable neighborhoods” what they mean is that the majority of the sales were fueled by the Inland Empire were homes are being sold for whatever the market will take. Let us look at the details of the report:

I first direct your attention to the stunning jump in sales for Riverside and San Bernardino Counties. These two counties make up the Inland Empire. But what the report doesn’t highlight is the actual median price of both these counties. They are now down 34 and 35 percent on a year over year basis and carry a median price of $260,000 and $230,000. Do you realize that Riverside County for example hit a high median price of $432,000 in December of 2006? So if we take that peak price to the current median price we get:

$430,000 - $260,000 = $170,000 (A 39% Discount)

Los Angeles County hit a peak of $550,000 and is now at $400,000. Nice $150,000 discount. Orange County? Orange County had a median price of $645,000 in June of 2007. That is a drop of $184,000 in one year. Would you wait a year for $184,000? I think most would.

Across the board prices are getting hammered. The reason sales jumped last month was in large part to the big jump in the Inland Empire. And of course homes are now selling for 50 to 60 percent off peak sales prices. To think this won’t happen in Los Angeles County and Orange County is simply unrealistic. It will happen. Just wait until the pay option ARM loans in these areas hit their anniversary dates.

You’ll love some of the reasons given for the fall off in prices:

“What we’re looking at is a fire sale of properties in newer affordable neighborhoods that were bought or refinanced near the price peak with lousy mortgages. What we’re still not seeing is this level of distress spreading to more expensive or established neighborhoods,” said John Walsh, MDA DataQuick president.

The median price paid for a Southland home was $348,000 last month, down 2.0 percent from $355,000 in June and down 31.1 percent from $505,000 for July 2007. That peak of $505,000 was reached in March, April, May and July of last year.

The median has fallen because of depreciation, especially in inland markets, and because of the steep drop off in home financing in the so-called jumbo category, which until recently was defined as loans above $417,000.

Before the credit crunch hit in August 2007, nearly 40 percent of Southland sales were financed with jumbo loans. Jumbos last month accounted for 15.8 percent of Southland sales.”

First, what qualifies as a more established neighborhood? Are we talking about Malibu or Newport Coast? Sure, those areas are positive but only a fraction of the entire 20,000,000+ people that live in Southern California live there. That reminds me of something said during the Crash of 1929. Mr. Rockefeller during the crash of the Great Depression announced that he was buying stocks while everyone was selling. To paraphrase a market observer, “of course he is buying. He’s the only one left with money.” Well of course these areas are doing fine! They always do well irrespective of the economy. Yet I draw your attention to the chart above again. Every single county is down from 26.9% to 35.2%. That is a major correction in one year and we are yet to see the truly “lousy” mortgages hit the actual market.

Another interesting part of the report is the implication that jumbo loans are somehow hurting the market. Did you look at the overall Southern California median price? It’s at $348,000! You don’t need a stinking jumbo loan anymore. What you need is good credit and a solid income to buy a home and not some banana republic mortgage from the bubble days. Given that our unemployment rate is at 7.3% who really wants to buy a home when their income is at risk? You think those 200,000 state workers are hungry to buy a home given that Arnold is trying to cut them down to the minimum wage? What about all the jobs in housing that are now no longer bringing in good paychecks? If you connect the dots prices are going down because the entire state was turned into a housing casino and mortgages were used as chips.

I recall clearly a few months ago hearing on the radio here in Southern California, these permabull brokers talking about how great the Hope Now program would be for buyers. When this failed, it was going to be the fantastic Fannie Mae and Freddie Mac bailout. Well of course all these idiotic programs failed because they missed one simple yet obvious fact. The economy is in distress! This is like offering lobster to a person with no taste buds. Or offering someone that lives in Palm Springs an Eskimo jacket. They don’t need gimmicks. What we need is for the state to get its budget in order and not offer tax breaks for subprime lenders. We need an infrastructure that is sustainable and not one built around finance, insurance, and real estate. Did people really think that we were going to trade homes to one another ad infinitum? Sure makes that $729,500 loan limit seem like an absolute boneheaded move.

I was going through some of the historical “help” that was going to save the market and have compiled a list here for your mental historical note keeping:

Of course these programs are all failing because they fail to address the structural problems of the system. That is, this was a bubble of epic proportions and the only way to sustain it is to bring back the toxic credit that fueled the market. I was digging through some images I have saved and found this screenshot of Hank Paulson on CNN from December of 2007:

Subprime help is indeed on the way. On the way out the door that is.

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Southern California Housing Report: New Housing Motto: Foreclosure Data is so Bad, it has to be Good! Median Price Down 31% to $348,000.

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Related Posts:
■Foreclosures? Housing Bubble? In Southern California? Impossible!
■Real Homes of Genius: Today we Salute you Compton. Once, Twice, Three times a Short Sale.
■Emerging Economic Trends: Housing Swaps, Frugality, and Selling Homes in Lower Priced Areas.
■C.A.R. says 2007 will see a -2% Drop in California. Does This Feel like a 2% Yearly Drop?
■Doing The Housing Bubble Math Dance for California.

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Filed under: Commodities, Oil, Recession

This post was written by Minyanville contributor Adam Warner:

Smarter minds than yours truly have noted that the oil ETF United States Oil Fund (AMEX: USO) is not the best bullish play on crude here. My understanding of the product is that USO owns futures, and must roll each cycle. And right now oil is in deep contango, which always sounds pornographic but actually just refers to the fact that there’s a particularly steep and upward sloped curve in the futures as you go out in time.

I’ll take their word for the contango part, but I’m not entirely sure why that necessarily will knock down USO. They’ll roll when they roll, and even if the spread is wide, won’t it then just depend on what happens in the next month AFTER the roll? I’m thinking out loud here, so if anyone has something enlightening to add on this topic, I am all ears.

I sold and am selling more Nov. puts anyway, so it should not matter a great deal from my standpoint. And I’m not sure I really have a great alternative if I want to do something bullish in oil options.

I don’t trade futures or futures options, and as far as pure oil there’s Super Double Ultra Octane Special (AMEX: DBO), which does not have liquid options.

There’s also Ultra Oil & Gas ProShares (AMEX: DIG) and UltraShort Oil & Gas ProShares (AMEX: DUG), but those track energy stocks.

Playing oil with the United States Oil Fund (USO) ETF originally appeared on BloggingStocks on Tue, 28 Oct 2008 14:42:00 EST. Please see our terms for use of feeds.

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Filed under: Earnings reports, Home Depot (HD), Sears Holdings (SHLD), Lowe’s Cos (LOW)

Well, seems like Lowe’s Companies, Ic. (NYSE: LOW) did much better than expected during the third quarter. And I was apparently too pessimistic in my earnings preview. The call was for $0.28 per share. The home-improvement retailer beat expectations by $0.05 per share, according to Thomson Reuters estimates. Hey, I tip my hat to management.

But I wouldn’t buy the stock just now (unless, of course, you have a very long-term horizon, are willing to ride out the bear market, and intend on improving your cost basis through dollar-cost-averaging). My reasoning is simple: total sales increased only 1.4%, and same-store sales decreased nearly 6%. It’s that bad drop in the comps that really has me worried. All retailers are suffering through lousy comps right now, and I think sales are destined to remain weak.

Yet, the market seems to be saying something else to me. Lowe’s saw its shares rise over 4% on Monday, on good volume, and on a bad day for the major indexes, too. Is the market saying that all the bad news is priced in? You know, I understand the earnings game and how the market loves it when a business beats estimates, and certainly a $0.05 beat is cool, but I’m not sure that better prices are ahead for those who follow Lowe’s and its stock. Consumers just won’t be spending enough to justify the buying seen in Lowe’s equity yesterday.

Continue reading Lowe’s beats earnings in Q3, but I’m not buying

Lowe’s beats earnings in Q3, but I’m not buying originally appeared on BloggingStocks on Tue, 18 Nov 2008 13:00:00 EST. Please see our terms for use of feeds.

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Filed under: Personal finance

While researching opinions for a column I’m writing about people’s current retirement attitudes, I’ve been led to one particularly important question: what would I myself do if I had money to invest for retirement?

The first part of my answer is simple. I have a fairly well performing 401k account through my employer and I stick as much money in that account as I can stand. But what if I had excess funds which I wanted to put into safe haven for the future, what would I do right now? At this point, I believe the option I would use is Treasury Inflation-Protected Securities (TIPS).

You must understand that I hate bonds. I hate them because I think that they’re typically very lazy. They generally pay low rates of return and they sometimes lack liquidity. However, with today’s extreme investment volatility, I have come to recognize the intrinsic wisdom of government backed bonds. The nice thing about TIPS is that they come with inflation protection built right in.

I did a little research, and I found a short discussion about TIPS funds at CNN Money.com. The article mentions a TIPS fund which is managed by Vanguard, a name which I place a fairly high degree of trust in. The article indicates that the Vanguard Inflation-Protected Securities Fund (VIPSX) has an acceptable rate of return and low operating fees. If I had a large sum of cash which I just wanted to place in a save haven until this bear market runs its course, I believe that this Vanguard fund might be one of my first choices.

The safest money spot I can find: TIPS funds originally appeared on BloggingStocks on Tue, 18 Nov 2008 16:00:00 EST. Please see our terms for use of feeds.

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A guest post from Frank Shump. Frank is a veteran from the financial services industry, and currently authors a blog called Thefinancecastle.com, which documents his thoughts on money matters and his adventures in self employment.

From its inception, the primary focus of the $700 billion bailout package was on businesses or, more importantly, banks and financial institutions. The plan was aimed at providing financial support to a system that had ceased to function properly, with credit markets freezing up and firms gasping for the additional capital they needed with no one willing to give it to them. Of course once the government gave them that capital it’s been having a hard time persuading them to lend it out again. Still, it appears that the Treasury is ready to broaden the bailout’s goals and provide assistance to an entirely new demographic: Consumer debt.

Treasury Secretary Henry Paulson came out today to let us know that Uncle Sam would not only be bailing out banks and other troubled lenders, but is going to (attempt) some rescuing of consumer debt firms as well. This “second stage” of the bailout, as it’s being called, officials are hoping to bring in some private money as well, which would give the bailout efforts more weight. In a surprising change in focus, Paulson said that the government will no longer be planning to buy troubled mortgage assets, which was its original intention, but will continue to examine ways to help homeowners so that they can somehow stem the tsunami of foreclosures that’s appeared in recent months to be gaining momentum.

Paulson noted that “Although the financial system has stabilized, both banks and non-banks may well need more capital given their troubled asset holdings, projections for continued high rates of foreclosures and stagnant U.S. and world economic conditions, “Second, the important markets for securitizing credit outside of the banking system also need support,” he said. “Approximately 40 percent of U.S. consumer credit is provided through securitization of credit card receivables, auto loans and student loans and similar products. This market, which is vital for lending and growth, has for all practical purposes ground to a halt.”

What this means is that the Treasury will not be aiming efforts at loosening up another important aspect of our economy: consumer spending. These consumer finance companies that he mentioned are the ones who provide us with car loans, student loans, and credit cards. Much like investors don’t want securities that are backed by mortgages anymore, they’ve lumped investments backed by other loans into that pack as well, and so firms like American Express are having some trouble getting the funding they desperately need.

The thinking is that by providing them with capital, they’ll once again begin lending out to consumers, which should get us to spend more and help support the economy. Then again that was the idea when they bailed out the banks, too, and getting them to start lending again has been much akin to pulling teeth. As a result there’s been a good amount of criticism that these banks are using the money for their own purposes rather than helping struggling homeowners and the overall economy. What’s stopping consumer lending firms from doing the same?

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Source [blownmortgage]

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Filed under: General Motors (GM)

Imagine going to buy a Chevy in Akron and not being able to find one. The dealer closed due to low sales and lack of financing.

According to The Wall Street Journal, “The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs.”

So, the government may put as much as $10 billion into a GM (NYSE: GM) buyout of Chrysler which could mean a loss of 60,000 jobs in a consolidation only to find that the new company is having trouble selling cars because it has lost retail outlets.

The car company rescue looks like the mortgage system rescue. The federal government puts a lot of money into large banks in the hopes that it will be loaned out to homeowners. People with houses get almost none of the money and their default rates go up, further damaging bank balance sheets.

If the government is going to save the car industry, it had better save the car dealers. Without them, there is no industry.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The real car bailout candidates: Dealerships originally appeared on BloggingStocks on Tue, 28 Oct 2008 12:12:00 EST. Please see our terms for use of feeds.

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A guest post from Constantine von Hoffman, veteran business journalist and author of the blog CollateralDamage.biz, a humorous look at marketing, business and his dog.

At this point in the economic down-turn there’s really only one question on most of our minds: How can I become a commercial bank or an automaker?

My old friend Helen Kennedy put it succinctly in The New York Daily News: “Two more pillars of the American economy are coming to Washington hat in hand: American Express and Detroit’s Big Three. The struggling New York-based credit giant reportedly wants a $3.5 billion bailout. American Express got permission to become a bank holding company this week, making it eligible for a piece of the $700 billion bailout.”

The Federal Reserve gets to make the decision about who gets to be a bank. Since the Fed has already decided to leave us all holding the bag for bank companies, it seems only fitting that we should also get a chance at being a bank holding company as well.

Use the following checklist to see if you qualify:

• Do you need to cut borrowing costs?
• Are your main sources of funding in danger of going away?
• Do you need access to government money?
• Has your inability to get credit endangered your fiscal health?
• Would the ability to issue government-backed bonds keep you solvent?
• Are you willing to take deposits from both consumers and companies?
• Is your current role in the financial system mostly watching your investments lose money?

If you answered yes to all these questions then CONGRATULATIONS!!! You clearly meet all the essential qualifications needed to be a bank holding company.

Not sure of all that it takes to become an American car company but I do know I can fulfill one of the basic obligations: I guarantee no one will want to buy a car I build.

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What may be more amazing than one Olympian swimming for 8 gold medals is the continued revisionist delusion of our former Federal Reserve chairman Alan Greenspan.  Greenspan in typical revisionist fashion, is now stating publicly that the government should have allowed Fannie Mae and Freddie Mac shareholders to be wiped out while breaking up the […]
Related Posts:
■Housing Perception Foreclosing on Reality: The Fundamental Housing Attribution Error.
■Parallel Universe: Housing Still Hurting on Main Street while Wall Street Celebrates.
■The Abyss is Deep: The Housing Abyss is Deep: 4 Major Reasons Why Housing in Southern California is Nowhere Near a Bottom.
■Foreclosure Nation: More Like Foreclosure States. 4 States Made up 50 Percent of all Foreclosures and Distressed Property Action.
■Foreclosures jump statewide by 40% in California in just one quarter! Welcome to California’s Gold!

What may be more amazing than one Olympian swimming for 8 gold medals is the continued revisionist delusion of our former Federal Reserve chairman Alan Greenspan.  Greenspan in typical revisionist fashion, is now stating publicly that the government should have allowed Fannie Mae and Freddie Mac shareholders to be wiped out while breaking up the GSEs into 5 or 10 different units.  Thanks for raising your voice now after the fact!  He is a master of covering his tracks and you need to remember that he was a champion in pushing and cheerleading adjustable rate mortgages which have now become the step child and shame of the housing market.

Amazingly Greenspan is saying the right things in certain respects yet this is only to cover his silence during the actual bailing out of Bear Stearns and also, Fannie Mae and Freddie Mac through the Housing and Economic Recovery Act of 2008 otherwise known as the Crony Capitalism Bill.  Here is what he had to say this week:

“(Reuters) They should have wiped out the shareholders, nationalized the institutions with legislation that they are to be reconstituted… as five or 10 individual privately held units,” which the government would eventually auction off to private investors, Greenspan said in an interview with the Journal.”

Maybe he should have said something during the public hearings.  This is what he had to say about Bear Stearns:

“There’s no credible argument for bailing out Bear Stearns and not the GSEs,” Greenspan told the Journal in an interview, which was reported on Thursday.”

Baloney.  This guy is on a legacy tour trying to revise history.  He is saying the right things but his action speak otherwise.  Here is his prediction on the housing market:

“Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009,” he said.

But Greenspan cautioned that even at a bottom “prices could continue to drift lower through 2009 and beyond.”

To a certain extent I am starting to understand the interworking of the Fed.  Obviously as a lay person like most of you, much of what goes on behind closed doors is a mystery to most.  In fact, that is part of the mystique of the Federal Reserve that when they speak, a fleet of economist are sent out trying to decode the hidden meaning in the talks.  These economist and analyst then try to bring the conversation to the public with a more down to Earth language.  It is ultimately a sham.  The Federal Reserve as we now all know is rather impotent in this credit crisis.  The one thing Alan Greenspan did have was the ability to speak in a way that moved markets drastically.  As you may have noticed, Federal Reserve meetings don’t carry that power anymore.  The history of the Fed is unknown to most of the public not because the information isn’t there, but most simply do not care.

It is becoming rather apparent that many saw this market imploding yet did nothing.  The logic is rather simple and not necessarily conspiratorial.  The boom of the housing market brought untold riches to many people.  The solution was simple.  Stop the massive and rampant fraud and speculation.  Hike rates up.  Yet these acts would assuredly pop the bubble and blame would be placed on whatever agency or person that took these actions.  The politics got in the way of good policy.  Even during the Great Depression, the Fed was voicing concern in 1928 and 1929 wanting to raise rates and attempt a reigning in of speculation but Wall Street vilified the Fed and they backed off.  No one wants the punchbowl to be taken away and the public got drunk off easy credit.

Sadly this bubble at least on a human nature level is no different from Dutchmen buying tulips, or people investing in Florida real estate in the 1920s, or those trying to get rich quick on any company with a dotcom during the 1990s.  People in speculative manias want to get rich as quickly as possible with the least amount of work.  This idea is appealing to the dark green matter in our psyche that fuels those that buy lottery tickets.  There is an easy meal ticket and all it takes is a little bit of faith and a small payment.

Just like those that saw the oncoming collapse during the late 1920s, many saw it this time around too but realized they did not want to be the one to take the flak for bursting the bubble.  So what happens?  The bubble infects the psyche of the populace and runs to a point where it is simply unsupportable and implodes on itself.  Many are too blame.  Some more than others.  Yet at this point no single organization takes the entire blame.  The games then begin and the mess is much larger than say someone stepping in during 2004, causing a pullback and correcting the ship before it hit a massive iceberg.  At this point, the ship has careened into shore and now it is only a matter of who is to blame for this?  Certainly Greenspan is politically savvy and realizes he needs to get out in front of this ball.  He is a reed in the wind.  During the height of the bubble he fed into the public speculative fervor and championed adjustable rate mortgages and made credit much cheaper through lowering the Fed funds rate.  Now, it is time to spank Bear Stearns on their Fannie Mae.

Look at the current rally today in stocks.  This is a perfect example of delusion.  Today the nationwide foreclosure filings were released and guess what?  They are the highest ever!  Take a look at this chart:

This was the largest number of foreclosure filings ever recorded yet if you look at some of the financial and housing stocks, they rallied because sales increased a bit.  Again, you should read this article to give you an idea of how these numbers are being massaged and you’ll quickly realize that things are not improving.  And you’ll also notice how Greenspan talks about national housing prices bottoming in 2009.  Which is a nice way of covering yourself since 5 states make up 57% of all foreclosure filings.  Places like California won’t be hitting a bottom until May of 2011 and the data points to this.

Here is a breakdown of foreclosure filings from the top 5 states:

Clearly states like California with $300 billion in pay option ARMs set to hit their anniversary dates is in a much more precarious situation than say states that have homes priced within the $100,000 to $200,000 price range.  Even with the massive 38% drop, California home prices are still $368,250 while the median household income is $53,770.  This ratio is simply unsupportable even at current levels.

I’ve noticed a few mainstream articles cover the so-called shadow inventory issue.  We talked about this in the previous article but I’ve raised this issue for months on end.  Call it what you want but this is shady manipulation of the market and toying with nuisances of the MLS.  Want some proof?  Take a look at the July 2008 foreclosure filings for California:

July 2008 Data
REO:               23,406

NTS:                12,506

NOD:              36,373

Approximate California Inventory:    310,000

Total Southern California Foreclosure inventory today:    8,548

June 2008 sales California:     35,202

June 2008 SoCal sales:            17,424

Think about that for a second.  Southern California made up 49.4% of all California sales in the month of June.  We had 23,406 homes go back to lenders in July and 12,506 trustee sales yet the MLS foreclosure sales are only at 8,548 for Southern California?  Let us assume that out of 35,912 homes that were foreclosed in July half are in SoCal.  That would push up the inventory numbers by 17,956 just in one month!  Keep in mind that we are using multiple sources to look at information from Realtytrac, DataQuick, ZipRealty, and yet from most places that do track foreclosures, the numbers are steadily rising yet somehow, the MLS data doesn’t reflect this.  In fact according to their data months of inventory is actually getting healthier.

It is absurd.  REOs are being understated to the point of being criminal.  Yet in manias people want to believe fudged data just like they saw nothing wrong with subprime lending.  When you look at various sources, isn’t apparent what is going on?  Greenspan should win a medal for revising history.  Clearly people are now trying to underplay the actual market data and want to believe that housing is at a bottom.  Anyone with an ounce of logic can see the numbers above and see something is clearly wrong.

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Olympic Gold Medal: Greenspan Tells us Housing will Bottom in 2009. Meantime Foreclosure Filings hit Historical Record.

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Related Posts:
■Housing Perception Foreclosing on Reality: The Fundamental Housing Attribution Error.
■Parallel Universe: Housing Still Hurting on Main Street while Wall Street Celebrates.
■The Abyss is Deep: The Housing Abyss is Deep: 4 Major Reasons Why Housing in Southern California is Nowhere Near a Bottom.
■Foreclosure Nation: More Like Foreclosure States. 4 States Made up 50 Percent of all Foreclosures and Distressed Property Action.
■Foreclosures jump statewide by 40% in California in just one quarter! Welcome to California’s Gold!

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Filed under: Major movement, Earnings reports, Bad news, Industry, Options, Technical Analysis

Texas Roadhouse (NASDAQ: TXRH - option chain) shares are dropping today after the company reported a third-quarter profit of $8.6 million, or 12 cents per share, missing analysts’ estimates of 13 cents per share. TXRH also warned that earnings for 2008 will be flat with last year’s numbers.

It has been common wisdom that worried consumers won’t be spending their cash on casual dining until they feel more confident about the economy, and the flat full-year forecast from TXRH seems to add weight to that thesis. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on TXRH.

This morning, TXRH opened at $6.91. So far today the stock has hit a low of $6.23 and a high of $6.96. As of 12:20, TXRH is trading at $6.21, down $0.93 (-13.0%). The chart for TXRH looks bearish and S&P gives TXRH its lowest 1 STARS (out of 5) strong sell ranking.

For a bearish hedged play on this stock, I would consider a December bear-call credit spread above the $7.50 range.

Continue reading Texas Roadhouse (TXRH) Q3 earnings show consumers staying away

Texas Roadhouse (TXRH) Q3 earnings show consumers staying away originally appeared on BloggingStocks on Tue, 28 Oct 2008 12:52:00 EST. Please see our terms for use of feeds.

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Filed under: International markets, Financial Crisis

Notch another day of modest progress for the credit markets.

Short-term interest rates declined early Tuesday, as several central banks in Europe injected more cash into the financial system. The London rate for three-month loans in dollars fell 4 basis points to 3.47%, its 12th straight daily decline. The three-month rate for the euro, or Euribor, fell 5 basis points to 4.85%. However, interest rates in Asia rose, with the Hong Kong interbank offer rate, or HIBOR, rising 10 basis points to 3.84%

In addition, the difference between what banks and the U.S. Treasury pay to borrow dollars for three months, the TED spread, narrowed 14 basis points to 262 basis points Tuesday. The TED spread has now declined 172 points from 434 basis points more than a week ago.

Short-term rates, including overnight rates, are key sources of cash for corporations and other large institutions, which use the cash to pay suppliers, make payroll, roll over debt etc. Hence, very high overnight and short-term rates will discourage corporations from conducting business, restricting commerce and slowing the economy, economists say.

Continue reading Short-term interest rates fall on central bank cash injections

Short-term interest rates fall on central bank cash injections originally appeared on BloggingStocks on Tue, 28 Oct 2008 09:55:00 EST. Please see our terms for use of feeds.

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