Monday, April 6, 2009

FBI Receives a Generous Grade of F- for Investigating Mortgage Fraud/ISM Index of New Orders/Wells Capital-David Swenson/AMAT/

In earlier posts, I ranked the failure of the FBI to investigate mortgage fraud as one of the top twelve causes of our current near depression. Adding Failures of Law Enforcement to my Top 12 Causes
The FBI opened just 734 cases in 2008.Federal Bureau of Investigation - Mortgage Fraud 
Those cases included all categories of fraud, including fraud by lenders, mortgage brokers, attorneys, appraisers, and homeowners.   I opined earlier that it would have been possible to open that many cases by looking just at one lender in one county after watching a report by Chris Hansen.
Aaron Task interviewed Charles Black who was a former senior bank regulator and prosecutor during the S & L debacle many years ago.  He explains that the FBI investigated cases after they were referred to it by the Mortgage Bankers Association, and lenders accounted for as much as 80% of the fraud in the mortgage loans originated according to Black.  Tech Ticker, Yahoo! Finance 

I am not sure why the FBI would depend on the Cosa Nostra (  Wikipedia, the free encyclopedia) for leads about their criminal activity, but apparently the FBI finds merit in that kind of approach. Depending on the Mortgage Bankers Association to refer cases to it,  it is not difficult to understand why so few cases have been opened by the FBI in a widespread epidemic of mortgage fraud lasting several years.  The FBI warned of that epidemic as early as 2004.    Black estimates that there were as many as 500,00 cases of fraud.  In 2007, Fitch examined 45 files of subprime mortgages and found that 16% had clear signs of ID theft, 44% showed questionable stated income, 10% had clear signs of signature fraud, and 44% did not do a stress test to determine payment ability after expiration of those ridiculous teaser rates.    
The FBI deserves a F grade.  My lowest grade is a F-.  Maybe I will go further down the alphabet and create a new grade classification: Z- and even that is a far too generous grade.

One leading indicator of a potential bottom in the economy is the new orders index from the Institute of Supply Management.  This indicator will frequently bottom and start to turn up before the official end of a recession, as later determined by the National Bureau of Economic Research.  This index hit its bottom in December 2008 at 22.7 and improved to over 41 in March.  ISM - ISM Report - March 2009 Manufacturing ISM Report On Business®

I made it further along reading a number of books over the weekend.   I will generally read a few pages from a bunch of books rather than just one all the way.  In his book Unconventional Success, David Swenson makes a number of good points about Well Capital, a firm that use brokers to market interests in its private real estate investment trusts.    A very good description of how much this firm and affiliated entities take off the top in a variety of fees is discussed by Swenson starting at page 71 Unconventional Success: A ... - Google Book Search   Swenson has to say the least a very low opinion of Wells. Anyone considering an investment with Wells, or has one currently, may want to read Swenson's comments. Personally, I would never even consider buying anything offered by this company  based on the details discussed by Swenson.  More importantly, even though I do not use stock brokers, I would ask myself whether any broker who even mentioned such a deal was trying to promote his client's interest as opposed solely to their own .  The answer to that question is obvious.

Sometimes I will invest in a stock knowing that I will have to wait before it has a realistic chance to work out.  A recent example is my purchase of shares in Alcoa.  Buys of DKF, AA and a Lottery Ticket in 50 shares of RF/Heinz & its Boston Market Line/Another example is the purchase last quarter of Applied Materials.  I have no ability to time the end to the downturn in AMAT's business.  I do believe the company has enough cash to weather the storm and will prosper during the next upturn.  So, having no clue when the worm will turn, I will start to nibble during the depth of the downturn, waiting a year or so after the recession starts to start purchasing,  and then wait.   AMAT is featured in a column in this week's Barron's which focuses on AMAT's solar business.
Individual investors have these advantages over many institutional investors, an ability to wait and to be patient, without having to justify any decision or to perform by the end of a quarter or some other arbitrary time period.  

I am not going to use the phrases gun nut or nut with a gun to describe someone.  But what would be the appropriate term to describe someone who answers the doorbell wearing body armor and carrying an AK-47?  He then proceeds to murder police officers responding to a domestic disturbance call.  Apparently, the young man in Pittsburgh, a Mr. Poplawski, was worried that Obama was going to take away his guns.   CBS News
He does not sound like a Democrat to me, maybe a card carrying member of the GOP tribe? The guy in Binghamton was a licensed carrier of two Beretta handguns and was also wearing body armor.  Los Angeles Times  The young man who went on a shooting rampage at Virginia Tech lawfully acquired his firearms. Wikipedia, the free encyclopedia   Personally, just speaking for myself, if I ever decide to buy a firearm, which I have yet to need in my first 57 years, nor do I know anyone who has needed one, it would not be to protect myself against criminals.  There is nothing in my house worth stealing, and the Brentwood police could be at my home in a couple of minutes.  Besides, I have my Louisville slugger autographed by Frank Robinson just in a case.   Instead, I would make the plunge and purchase a firearm-the body armor is optional apparently-to protect myself from what some liberals would call gun nuts and/or nuts with guns.  But, since I am not a liberal, I would never used those terms.  Possibly, I will wait for the  Tennessee legislature to hand out free shotguns and AK-47s at the grocery store next to the deli or the candy isle.   Maybe a grenade launcher and a mortar would come in handy, you never know.   

 Then, and this is just a word of warning to some, not applicable to me of course, there is always that situation where the best laid plans go awry so to speak, pursuant to the law of unintended consequences, sometimes called sh-- happens.   For example, remember the case where the wife retrieved a pump-action shotgun from the closet after an earlier argument about her losing the couples money in some Nigerian scam, pointed it at her sleeping husband, pulls the trigger (denies that?), and plugs her preacher husband in the back while he is sleeping with 77 pellets- and all of that was "accidental" of course, the shotgun just went off.  The reasons had something to do with making her wear high heels as I understood her defense.  She was convicted of manslaughter for those interested in justice. Manslaughter and not first degree murder you ask, well I would simply reply that this happened in Tennessee and the lady in question was a Christian required to do unspeakable acts by her now deceased husband, so 60 days in the slammer after her conviction was more than sufficient punishment for what she called her "big ugly" act.  And, after all, she did tell him she was sorry afterwards before leaving him to bleed to death while she took the children to Disneyland or whatever, having withdrawn $500 of what remained of the couple's savings the day before in five separate transactions at two different banks. - Mary Winkler -  Mary Winkler Reuters   

It is common around these parts for arguments between spouses to be settled with someone dead after the "accidental" discharge of a firearm kept for protection. Frequently, the protection idea does not work as originally planned which is the only reason I bring any of these historical events up  on 

 A local news station found last year 500 potential matches between people who ended up committing murders, attempted murders and other serious felonies and who were licensed by the state to carry firearms in Tennessee. NewsChannel 5.comI have been listening for decades now to the drivel that passes for intelligent conversation by enthusiasts for the second amendment (though generally not equally enthusiastic, to say the least, of any other part of the Constitution's Bill of Rights) to know that nothing sensible can be done.  Brain transplants may be the only cure.   In fact, I am certain that is the only viable option, so why waste your breath is my policy.   Maybe the more rational sorts will prevail, however, on keeping guns out of airports, so that AK-47 can not be taken on the plane after all,which is my best hope under the circumstances.

Bristol Myers extended its contract with a Japanese pharmaceutical company from 2012 to 2015 to market the antipsychotic drug Abilify in the U.S.- WSJ

J P Morgan downgraded Campbell Soup to neutral from overweight and reduced its 12/9 price target to $30 from $35.5. MarketWatch Goldman Sachs downgraded Cisco to neutral from buy based on valuation based on CSCO now selling at 17 times the 2010 earnings estimate from GS.MarketWatch Barclays raised its Intel target to $17 and kept its equal weight rating.

Today, I have many chores to do.  Possibly, later this morning, I will try to focus on selecting either  Kroger (KR) or Safeway (SWY) as my two options for the grocery store component of my consumer staple mini- portfolio.


  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  It is always important to follow the investment process. the investment process/links to further information on canadian energy or royalty trustsInvestment Process Part II: Bonds and Bond Like Investments   NOT A RESEARCH SERVICE/Add of PWE Last Week   These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me. 

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