Record 2.9 Million U.S. Properties Receive Foreclosure Filings in 2010 Despite 30-Month Low in December

RealtyTrac® (http://www.realtytrac.com/gateway_co.asp?accnt=137300), the leading online marketplace for foreclosure properties, today released its Year-End 2010 U.S. Foreclosure Market Report™, which shows a total of 3,825,637 foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on a record 2,871,891 U.S. properties in 2010, an increase of nearly 2 percent from 2009 and an increase of 23 percent from 2008. The report also shows that 2.23 percent of all U.S. housing units (one in 45) received at least one foreclosure filing during the year, up from 2.21 percent in 2009, 1.84 percent in 2008, 1.03 percent in 2007 and 0.58 percent in 2006.

Foreclosure filings were reported on 257,747 U.S. properties in December, a decrease of nearly 2 percent from the previous month and down 26 percent from December 2009 — the biggest annual drop in foreclosure activity since RealtyTrac began publishing its foreclosure report in January 2005 and giving December the lowest monthly total since June 2008.

December Default notices (NOD, LIS) decreased 4 percent from the previous month and were down 35 percent from December 2009; Scheduled foreclosure auctions (NTS, NFS) decreased 3 percent from the previous month and were down 20 percent from December 2009; and bank repossessions (REO) increased nearly 4 percent from the previous month — thanks in part to substantial month-over-month increases in some states such as Nevada (71 percent increase), Arizona (52 percent increase) and California (47 percent increase) — but were still down 24 percent from December 2009.

Foreclosure filings were reported on 799,064 U.S. properties in the fourth quarter, a 14 percent decrease from the previous quarter and an 8 percent decrease from the fourth quarter of 2009. The fourth quarter total was the lowest quarterly total since Q4 2008. (more)

Who, How and Why: $140 Oil and $5 Gas

According to a loosely-organized apocalyptic Christian movement, May 21, 2011 will be the "end of days." On or about that same date, the price of oil in the United States will begin to climb to $4 a gallon, according to two savants of the oil industry.

The former is highly unlikely but the latter is very probable.

The escalation in the price of oil is predicted by the legendary oil man T. Boone Pickens, known for his financial acuity as well as his oil expertise, and John Hofmeister, who retired as president of Shell Oil Company, to sound the alarm about the rate of U.S. consumption of oil.

In an interview with a trade publication, Hofmeister predicted that oil would rise to $4 a gallon this year and to $5 a gallon in the election year 2012. Separately, Pickens—who has been leaning on Congress to enact an energy policy that would switch large trucks and other commercial vehicles from imported oil to domestic natural gas—predicts that oil currently selling for just over $90 a barrel will go to $120 a barrel, with a concomitant price per gallon of $4 or more.

The Obama administration appears to have been slow to grasp the political implications of an escalation in the price of oil. When asked about it, outgoing White House Press Secretary Robert Gibbs referred the questioner to the Department of Energy. (more)

BUY: Wynn Resorts, Ltd. (WYNN)

Wynn Resorts, Ltd. (WYNN - Analyst Report) third quarter 2010 earnings results improved on a year-over-year basis, primarily driven by higher-than-expected top-line growth.

With the global economy showing a gradual recovery, the company is experiencing an increase in demand. Its Las Vegas business is also rebounding with increased room rates and conventional bookings. Additionally, with strong momentum in Macau we expect the earnings of the company to increase, going forward.

Moreover, we remain encouraged with the company's strong brand name, healthy balance sheet, strong cash flow position, relatively low capital requirements, future growth driver in Cotai and its ability to execute in a difficult operating environment. Thus, we are upgrading the stock from Neutral to Outperform. (full report)

JPMorgan’s Dimon: More Cities Will Go Bankrupt

JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon said he expects more U.S. municipalities to declare bankruptcy and urged caution when investing in the $2.9 trillion public-debt market.

“There have been six or seven municipal bankruptcies already,” Dimon, 54, said yesterday at his company’s annual healthcare conference in San Francisco. “I think unfortunately you will see more.”

Cities including Detroit and Harrisburg, Pennsylvania, have raised the prospect of bankruptcy. Still, the number of filings has declined. Five municipal entities sought protection in 2010 compared with 10 in 2009, according to data compiled by James Spiotto, head of the bankruptcy practice at Chapman & Cutler, a Chicago law firm. The biggest last year was a South Carolina toll road with more than $300 million in debt, he said.

U.S. states will contend with about $140 billion in deficits in the next fiscal year, the Center on Budget and Policy Priorities, a Washington research group, said in a report issued Dec. 16. Edmund “Ted” Kelly, CEO of Liberty Mutual Holding Co., said yesterday that his firm had reduced holdings of municipal debt in Connecticut, California and Illinois. (more)

VIX Volatility Still on Hold

A funny thing happened on the way to a January volatility spike. Absolutely nothing.

In the chart above the brown line is the 30-day SPDR S&P 500 (NYSE: SPY) implied volatility (IV) versus 20-day historic volatility (blue). The CBOE Volatility Index (VIX) more or less tracks 30 day IV here, printing modestly higher because it gives greater weight to out-of-the-money (OTM) puts than this IV number does. At least we assume that’s the case, the IV formula is proprietary.

The IV sits around 15, which of course sounds quite low. Remember the rule of 16? If you divide any volatility reading by 16, it tells you the percentage range we expect to see in the underlying each day. So a 16 volatility implies that on an average day we will see a 1% range in the SPY*. That’s all of 1.30 points, not much when you consider it can gap that much fairly simply.

Look at that graph again. A volatility of 15 does not look so cheap when you compare it to historical volatility of about six. That’s the pace SPY itself has moved over the past 20 trading days. Clearly if you net sold SPY options 20 days ago and simply traded stock against it you would have done quite well.

But alas, that only tells you how it would have worked; it speaks nothing of going forward. And VIX itself does not even tell the full story. VIX futures expect the VIX itself to shoot higher. For example, April VIX trades at 23. Even factoring in that 23 VIX overstates implied volatility for at-the-money (ATM) options, suggesting that the market expects actual volatility in SPY/SPX to more than triple over the next three or so months. That’s enormous optimism (for options) or enormous pessimism (for stocks). (more)

Goldman: S&P 500 to Gain 18 Percent in ‘Decent’ Year for Bonds

Goldman Sachs Group Inc., Wall Street’s most profitable investment bank, predicts the Standard & Poor’s 500 Index will rally 18 percent to 1,500 by the end of December and Treasurys will have a “decent” year.

“We have a very out-of-consensus view for how much the economy can grow before this growth generates higher inflation and interest rates,” Jan Hatzius, the company’s New York-based chief U.S. economist, wrote in a report he distributed by e-mail today. “If we’re right, the likely implication is a decent environment for the Treasury bond market and a very good environment for the equity market.”

The S&P 500 has climbed 12 percent over the past year, rising to the highest level since Lehman Brothers Holdings Inc.’s bankruptcy in September 2008 as Fed Chairman Ben S. Bernanke pumps $600 billion into the economy and President Barack Obama extends tax cuts. An advance to 1,500 would result in a 19 percent gain for the year. The index has only risen that much twice in the past decade, gaining 23 percent in 2009 and 26 percent in 2003.

U.S. three-month bill rates will average 0.2 percent in 2011 and 0.3 percent in 2012, the report said, compared with 0.14 percent today. Ten-year Treasury yields will rise to 3.75 percent by Dec. 31 from 3.35 percent now, according to Goldman, which is one of the 18 primary dealers that are authorized to trade directly with the Federal Reserve. (more)

McAlvany Weekly Commentary

European Disaster Sets the Tone for Early 2011

Posted on 12 January 2011.

A Look At This Week’s Show:
- Gold Market: Linear behavior now, exponential behavior later
- Euro Crisis: Issing’s misgivings and the ECB’s bond market intervention
- Social Change: Can you adapt and thrive?

Standard Podcast: Hide Player | Play in Popup | Download