Online Brokers Hit By Market Slide [NBC: 6-09-2011]

Stocks recover ground after weak employment report

NEW YORK (AP) -- Stocks staged a late afternoon rally after spending most of the day weighed down by an unexpected rise in the unemployment rate. Indexes wound up closing higher for the third straight day.

   YAWwWnn. Why wouldn't stocks go up and continue going up? We're in a bull market. Even though the masses are still scared of the market, it'll continue to go up and as it skies ever higher, Joe Sixpack will bite his lip and stomp his feet as the DOW roars towards 18,000 in the next few years. I've addressed this before but it bears repeating because memories are short and I'm right on this. Could there be a chance that we're not in a bull market? Nah, erase that thought from your mind. The bear is slovenly because he's eaten well and a fatted animal is lazy and apathetic.

   My advice is simple, buy the dips but don't sell the rips. In fact, keep buying the dips and hold the line. Hold on like you've never held before because there's gold in them thar hills and the adage of "buy and hold" is swinging back into fashion.

America Hates Wall Street

   A CNBC article from today reminds me that, "America Hates Wall Street" and one from the WSJ exhorts, "A new form of madness grips investors" which are about Americans' distaste for the stock market.

   These types of stories are indicative of the fear that still grips the American public when it comes to Wall Street. I guess it's understandable because during the 2007-2009 crash, the DOW dropped from 14,279.96 all the way down to 6,440.08. I traded through those days so I know there was irrational trading going on, lots of fear, and a feeling amongst the rabble that the end of America was upon us. Crazy right? Yet, here we are in 2010 and the Dow's recovered all the way to 11,113.91 but folks are still fearful.

   That's why po' folk will never get ahead. They should've been buying with both hands and both feet when the market dropped like a stone in 2008 - mom and pop investors should've been stampeding into the market when Pfizer was $11.62 on March 2009 and GE had dropped to $5.87. Yeah, I know GE is a hedge fund in drag (Thanks, Cramer) but c'mon now. GE has survived wars, turmoil, and recessions before and it's not going out of business.

   So yeah, the social class strata in America is going to stay the same for the next hundred years because of fear and greed. It's as simple as that. When the market dives, Joe Sixpack becomes fearful and sells near the bottom only to watch the market bounce back again. However, he doesn't buy when the market climbs - he stays out because of a fear of being whacked again. That's why Joe will never ever become wealthy or be rewarded by the market.

   Joe Sixpack will probably buy when the DOW's at all time highs in the next few years when prices are dear. A powerful bull market is upon us but the majority of American's won't benefit from what's coming because their fear outweighs their greed at precisely the wrong time.

Is the Government About to Make Mortgage Market Even Worse?

   Ever read a really dumb headline and think to yourself, "Man, that is real dumb?" That's what I thought when I read CNBC's "Is the Government About to Make Mortgage Market Even Worse?" this morning. From the article:

   "Yes, refinancings-which have been running at around 80 percent of all mortgage applications-fell despite a new record low average rate on the 30-year fixed of 4.38 percent.

Not so good.

   But on the other hand, purchase applications rose 2.4 percent, largely driven by a 4.5 percent increase in government purchase applications (FHA).

Great, except for that last part.

    In other words, the government has been propping up a dead real estate market for a year and because they're going to stop propping up a corpse, they're to be blamed for making it "Even Worse?" I guess Uncle Sam's supposed to keep supporting real estate for the next decade until investors wade into the market again. I've stated before that real estate prices have to continue to drop to bring buyers back - prices have to drop to a level where the risk vs reward proposition makes sense. Propping up prices only delays the inevitable and prolongs the pain. 

   Government purchase applications have been driving the market for the past year, accounting for, at times, nearly half of all new loans. That may be about to change. New premium authority (translation: higher prices) goes into effect next week, on Oct. 4. New seller concessions policies are about to go into effect as well.

"These two policy changes will increase the opportunity for private capital to return to the market while improving the safety and soundness of FHA," FHA Commissioner David Stevens tells me. "

Thoughts from J-Sonoma

   Market was down today. Housing's still dead and crude's holding steady. In other news, the company I work for took over another social network today. I had my doubts about the purchase when internal memos starting popping up in the office but now that I've seen the active userbase for myself, I gotta say that I'm impressed.

   Other than the occasional idiot who uploads a photo of his penis for public viewing, the community that we've acquired is respectful to each other and I'm excited to be a part of a network that we'll try to build in the next few months.