Monday Feb 23rd 2009, dailystocktracking

Street - Problems with Obama Housing Plan; The rules will require that banks modify mortgages such that the maximum debt-to-income ratio (the amount of money you spend each month on your mortgage), or DTI, for a homeowner is 31%. Banks will write down mortgages by principle reduction, lowering rates, extending out the length of the loan or dropping payments - or all of the above - to meet the 31% DTI requirement. The government (taxpayers, 90% of whom are still paying their home loan on time) will then split the difference with the bank. The plan won't work. It doesn't address jumbo mortgages, many of which are about to reset this year and through 2011 and don't qualify for Freddie or Fannie mortgages. It doesn't address the moral hazard of so many people I read about and hear from that are literally not paying their mortgage, but instead are waiting for a government handout. It doesn't address those who are frustrated by seeing big banks and the "Big 3" given billions of our taxpayer dollars while they pay their negative amortization mortgage on a home that is $200,000 under water -- homeowners that are now encouraging their spouses to quit their jobs so they can get an even lower payment under the new 31% DTI. People will re-default on their loans if the property value goes down to have their payments lowered again. Perhaps the most toxic component of the plan is what's known as the cramdown -- allowing bankruptcy judges the ability to force lenders to write principle balances down to something affordable and reasonable by the homeowner. This plan is highly flawed. It doesn't address the jumbo markets and the next wave of foreclosures. It certainly does nothing for those who are dutifully paying their mortgage. It encourages lack of competency and accountability. It will allow refinances through Fannie and Freddie that are paid for and subsidized by the taxpayer. It doesn't stop people who lied on their mortgage applications the first time from lying for a modification. It may hurt many honest hardworking people.
Article - Deflating the hype about Deflation; Deflation is caused by a reduction in the supply of money available in an economy, relative to the goods and services available. The most classic example of this is in Japan. Many people believe that the U.S. is headed for a similar fate because of our housing and stock market collapse combined with the credit crisis. First, the U.S. government has moved forward with these anti-deflationary policies, zero interest rates, quantitative easing and massive government spending, in short order. Second, it is in the national interest of the U.S. and the personal interest of most American consumers to create inflation. This will decrease the value of the dollar and make it easier to repay debt. Third, Japan produces too much and consumes too little, relative to the size of its economy and its stage of development. This is exactly the opposite of the U.S. We are far less likely to fall into a long-term deflationary spiral because there are not likely to be too many goods and services produced relative to demand. People should not confuse short-term declines in commodity prices and asset prices caused by a recession with long-term deflation. Gold and other hard assets are a good long-term value to protect your cash against future inflation. On a relative basis, oil is probably the best value of any investment today, because it has collapsed down to unsustainably low levels and almost has to go up substantially over the next six to 12 months. Consider U.S. Oil Fund ETF(USO) or (UCO), also oil stock funds like (XLE) or (OIH). Wait on a pull-back on gold to buy (GLD) or (DGP). Another way to benefit from future inflation is to take advantage of low-interest rates and lock in long-term financing to buy income property. Cramer, dividen stocks, Terra Nitrogen(TNH) yield 9.8%, and FPL Group(FPL), a Florida based electric utility, yield 3.9%. Bull on, (WMT),(RIMM),(CAT),(AGN),(GS),(V),(MA). Top 5 fast-growth, (GILD), (DV), (STRA), ManTech International(MANT) technologies for national security, and Haemonetics(HAE) is a global leader in blood processing equipment. 5 Buy-rated drug stocks; Johnson&Johnson(JNJ), Novartis(NVS), Abbott Labs(ABT), Wyeth(WYE), and Bristol-Myers Squibb(BMY). Each company's shares are attractively priced at less than 14 times analysts' estimates for 2010 earnings, they're forecast to increase profits next year, and their cash flow and balance sheets are healthy, and they have dividend yields of 2.6% to 5.7%. Upgrades, Intuit(INYU) $27, Limited Brands(LTD) $10, Mylan(MYL) $16, Psychiatric Solutions(PSYS) $34, Exxon Mobile(XOM) $80.
TheStockAdvisors - PepsiCo(PEP) has built an impressive lineup of 18 brands, Aquafina, Gatorade, Amp, Lipton and Starbucks partnerships, Frito Lay division which includes Doritos, Tostitos, cheetos, Ruffle's, and Cracker Jack. The stock has pulled back in the last year and now trades at 15x earnings, a discount to the normal 20x. The company is spreading through regions that represent 86% of the worlds population, and 45 of the 50 fasest growing economies. yield is 3.3%. Three China ETFs, iShares FTSE/Xinhua China 25 Index Fund(FXI) is the Chinease version of the Dow and covers 25 companies, iShares MSCI Hong Kong Index Fund(EWH) is much more broadly based covering 85% of Chinease stocks and yields 5.9% at current levels, PowerShares Golden Dragon Halter USX China Portfolio(PGJ) is comprised of U.S. companies that derive a majority of their profits from China.
Zacks - ResMed(RMD) and Steris Corporation(STE) both beat earnings estimates.
Fool - Petroleo Brasileiro(PBR) has several promising big finds offshore. Talks are under-way with China to finance up to $10 billion to recover this oil. This only serves to increase the interest in Petrobras.