Tuesday, January 12, 2010

Alcoa, Markets and Stimulus, Oh My...

Alcoa kicked off "earnings" season with a pretty weak report that sucked the wind out from under the market's sails. The company reported a $0.01 per share proforma profit despite posting a $277 million loss and as I said last quarter, there's only so much companies can cut, eventually you need to grow revenues if you are going to continue to boost profitability.



Alcoa's stock has become a proxy for an aluminum carry trade. This is mind numbing stuff, but suffice to say it's less dependent on end user demand and more closely tied to access to cheap money.



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Many market observers, myself included, have been scratching our collective heads at the low volume grind in the markets to kick off the year. Today that changed a bit, but the Dow still staged a weird late day rally to post a very small loss for the day. It's worth noting though that the Nasdaq has broken to new lows for the year.



I don't know what to make of it yet -- is this just consolidation or the beginning of something more sinister?



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Homeowners may struggle with Option ARM Resets



"It's going to kill off housing," warns Patrick Pulatie, CEO of Loan Fraud Investigations, a predatory lending audit firm. "We have pretty close to 500,000 option ARM payments going higher in California over the next couple of years. The impact of the higher payments will be devastating for homeowners who are having trouble now making ends meet."

Option ARM mortgages, which have been around since 1981 and are aimed primarily for people who had fluctuating incomes, became popular during the housing boom. Terms of the loan usually allowed the borrower to make low monthly payments initially—sometimes by just paying interest only.


But as the terms of those mortgages now readjust, homeowners are facing much higher mortgage payments at a time when the value of their house has plummeted and many are out of work. In some cases, homeowners who chose a very low starting interest rate have actually seen the overall amount of their mortgage increase—known as negative amoritization—putting them even deeper in debt.

Many of those option ARM loans have already re-adjusted to higher payments, but more are on the way. Some 88 percent of Option ARMs originated between 2004 and 2007 are going to adjust higher between now and 2012. Those option ARM borrowers could see their housing bills go up as much as 63 percent, according to Fitch ratings.

Yikes!

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Okay, I won't put this one on the President, this smells of a number cruncher that been a lifer in the political game.

"The White House has abandoned its controversial method of counting jobs under President Barack Obama's economic stimulus, despite mounting a vigorous defense of its earlier count of more than 640,000 jobs credited to the stimulus.

That means that any stimulus money used to cover payroll will be included in the jobs credited to the program, including pay raises for existing employees and pay for people who never were in jeopardy of losing their positions.



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I know "fail" is such a 2009 term, but it fits so well with this photo....







I can't confirm that this isn't photoshopped but it looks pretty legit to my untrained eye. The next time the ticket agent is tapping away furiously at the airport trying to squeeze you onto that over booked flight, keep in mind that he's probably just playing solitaire :)

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Finally, just a quick thanks to all the new and returning readers. I've blasted into the top 100,000 websites in the US and top 400,000 globally according to Alexa. Check out the good news here...

Cheers!







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