Monday, June 17, 2013

What Rising Mortgage Rates Mean for Banks

If you've been thinking about refinancing your mortgage, then you might want to get on top of that sooner rather than later. According to Freddie Mac, the average rate on a 30-year fixed-rate mortgage increased this week to 3.91%. That's nearly 60 basis points higher than the trough at the end of 2012.

Besides the immediate implications to your monthly payments, however, a more nuanced question is: What does this mean for the banks? I'm talking specifically about Wells Fargo (NYSE: WFC), JPMorgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), and U.S. Bancorp (NYSE: USB), which collectively account for a majority of home loans in the United States.

It's tempting to conclude that this is bad news. Take Wells Fargo as an example: in the first quarter of this year, it originated a staggering $109 billion in home loans -- by comparison, the other three banks combined underwrote $99 billion dollars' worth. If one were to believe the laws of supply and demand, it seems all but certain that these astronomical numbers will come down as the price of mortgages (expressed via its interest rate) goes up. Wells Fargo's CFO Timothy Sloan alluded to this on a recent conference call saying that, "it's probably likely that revenues and margins [in the mortgage business] will come down a little bit." (more)

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Mining (Gold) Update & Outlook - June 2013: NEM, GG, AEM, ABK, IAG, HMY, KGC

Tale of Gold: What Has, Is and Will Happen

Gold may have lost the battle to diamonds in becoming a girl’s best friend, but the yellow precious metal can very well qualify as historically the most desirable metal. The attributes including malleability, resistance to corrosion and tarnishing, and the glitter makes it ideal for many jewelry purposes. But there is more to Gold; and that is the opportunity that the metal provides for investors.

Gold investors buy gold bullion, official coins as a hedge against inflation or a safeguard against the collapse of paper assets such as stocks, bonds and other financial instruments. Gold ETFs (Exchange-Traded Funds) have also become very popular as an investment option.

Gold ETFs are units representing physical gold, which may be in paper or dematerialized form and are traded on the exchange like a single stock of any company. Governments, central banks and other official institutions hold significant quantities of gold as a component of exchange reserves. (more)

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ABR, TCBI, TNP: 3 Preferred Stocks to Buy Now

If you’re looking for new types of stocks to buy now to ramp up your portfolio yield, you should consider preferred stocks.
Preferred stocks trade like regular stock but they are more like bonds in that they provide a higher fixed-dividend payment than their common stock counterparts and they generally have less upside potential.
They’re called “preferred” because they have higher claim on the assets and earnings of the company.
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CarMax, Inc (NYSE: KMX)

CarMax, Inc., through its subsidiaries, operates as a retailer of used vehicles in the United States. It operates in two segments, CarMax Sales Operations and CarMax Auto Finance. The company sells vehicles that do not meet its retail standards to licensed dealers through on-site wholesale auctions, as well as sells new vehicles under franchise agreements. It also provides customers financing alternatives through its finance operation, CarMax Auto Finance, as well as through its third-party financing providers. In addition, the company offers a range of other related products and services, including the sale of extended service plans, guaranteed asset protection, and accessories; the appraisal and purchase of vehicles directly from consumers; and vehicle repair services. As of April 10, 2013, it had 119 used car superstores in 59 markets. The company was founded in 1993 and is based in Richmond, Virginia.
To review CarMax's stock, please take a look at the 1-year chart of KMX (CarMax, Inc.) below with my added notations:
1-year chart of KMX (CarMax, Inc.) Over the last 12 months KMX has consistently moved higher. Since October though, the stock has formed a nice trendline of support (navy). Always remember that any (2) points can start a trendline, but it's the 3rd test and beyond that confirm its importance. Obviously KMX's trendline is important to the stock since it has been tested on multiple occasions over the last(8) months.
The Tale of the Tape: KMX has created a nice trendline of support over the last (8) months. A long position could be entered on a pullback to that trendline, which is approaching $44, with a stop placed below that level. A short position could be entered if KMX were to break the trend line support.

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5 Dividend Stocks for the Next 50 Years

Dividends are one of the main ways companies pay back investors, and it's one of the best ways to generate a solid return. Steady dividends display consistency in operations and are an incentive for management to make prudent decisions with excess cash.

What many investors don't realize is that dividends are often the largest portion of a stock's return, even more than stock price appreciation. In the chart below you can see that 3M's (NYSE: MMM) stock has gone up by 995% since the early 1970s, but the total return, including dividends, is more than double that because of a steady dividend that grows year after year.
MMM Chart
MMM data by YCharts.
So, what are the best dividends on the market, dividends you can count on for generations to come? Here are my top five steady dividend stocks.

If you're looking for a steady dividend, the first place to go is 3M, one of the most diverse companies in the world. 3M has paid a dividend for 386 consecutive quarters and increased its annual dividend for 55 straight years, an incredible run.  (more)

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US Weekly Economic Calendar

time (et) report period Actual CONSENSUS
8:30 am Empire state index June
0.9 -1.4
10 am Home builders' index June   45 44
8:30 am Consumer price index May   0.2% -0.4%
8:30 am Core CPI May   0.1% 0.1%
8:30 am Housing starts May   940,000 853,000
2 pm FOMC statement  
2:30 pm Bernanke press conference        
8:30 am Weekly jobless claims 6/15
338,000 334,000
9 am Markit 'flash' PMI June   -- 52.3%
10 am Existing home sales May   5.00 mln 4.97 mln
10 am Philly Fed June   -1.0 -5.2
10 am Leading indicators May   0.2% 0.6%
  None scheduled        
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