I keep reading and listening to all the news releases, and I don't see anything getting fixed. I can't believe Washington has no solutions. Why do we elect these clowns?

I have a solution for the mortgage crisis, but it's too basic and rational to be accepted. It's just the simple concept of returning to underwriting home loans.

Here's how my solution would work:

Beginning immediately, a home loan for an owner-occupied primary residence would have an interest rate of no more than 6%. Any rate above that would draw a $100,000 fine per violation.

Before any such loan could be foreclosed upon -- if it had been written in the past three years -- it would have to be reviewed by a special master appointed by a bankruptcy court. The property would be reappraised, the borrower's credit would be rechecked, and the loan would have to pass a standard underwriting qualification.

If any of the information had been compromised in the original loan documents, the purchase would be set aside, and the loan agreement would be rewritten by the court.

If the review determined that the borrower never had the financial ability to service the loan, the lender would get back the property without further recourse. If the original appraisal or loan terms were unfair to the borrower, the court would rewrite the loan principal amount and fix the interest rate at 6% or less, with the lending institution taking the loss.

It's very simple: If the borrower had lied, the bank would get the property. If the real-estate agent, loan originator or builder had taken advantage of the borrower, then the lending institution (which should have known better and not written the loan in the first place) would sustain the loss.

No one would get a free ride, but equity should prevail. The guilty party would take the loss.

This may not be a perfect solution, but it is a workable one -- and better than anything the Washington crowd has offered. Nothing can proceed until confidence in the credit market is restored, and that can be done only one properly underwritten loan at a time.

I would enjoy hearing your comments at VanmeertenFund@aol.com.

I would enjoy hearing your comments at VanmeertenFund@aol.com

DISCLAIMER: The stocks selected should not be taken as buy/sell recommendations. They are the stocks that were selected by my stock screening process and then each was analyzed before adding or subtracting from the portfolio. Do not concentrate on the stocks but learn the selection process.

Jim Van Meerten
Strategy Lab Open Winner July 2008
VanMeerten The Amateur Strategy Lab 2008

Comments: View Comments |  Saturday September 27, 2008

If this journal sounds rambling it's because my first draft was 6 pages long and after I deleted all the expletives and name calling that I knew wasn't fit for the public to read there was only one paragraph left.

Investing research as we know it has been destroyed or maybe just been suspended.

In the past investing in US stocks was fairly safe due to regulation, transparency and the "Alphabet Soup"

The Alphabet Soup was our real protection. The SEC, NASD were supposed to properly regulate financial services activity and the Certified Public Accountants (CPA), Certified Internal Auditors (CIA) and all the Certified Financial Analysts (CFA) working not only for the research firms but also the rating services such as S&P, AM Best, Fitch and Moody's and business press and newsletters gave us independent opinions. Then there were the DBAs and PHDs; those business and economics professors that have to publish or perish and will write an article for a journal or be a guest commentator for anyone who asks. You and I if we wanted to make the effort could review the 10K, 10Q and S-8 of any publicly traded company - they were Gospels of the risks.


I really thought that there were no secrets in the US investment scene and that in this Internet information world of web-sites and blogs all that could be known about a company was known. The efficient market theory at work but a realization that sometimes there is a misinterpretation of the data, a slight lag in the analyses of the data and the fact that all of it is tempered by collective optimism and/or pessimism.

I thought that if you did your research and spent the time you couldn't get hurt. Boy was I naive!

I really thought that all the 10ks, 10Qs, S-8s, offering statements and prospectuses that were prepared by the issuers, reviewed by independent counsel and auditors and finally reviewed by the SEC and NASD gave a true and honest picture of the risks and rewards of any offering and company.

The regulators were supposed to regulate and make sure all risks were known and communicated. But they didn't do their job and neither did the rest of the Alphabet Soup - SEC, NASD, CPA, CIA,CFA, DBA, PHD and S&P et al.

Firms like Lehman were allowed to leverage 30 times their equity and keep a superior rating with some hedge funds leveraging even more. Freddie and Fannie leveraged themselves 60 times their equity.

Sub-prime debt, and all sorts of derivatives were packaged and repackaged, sold and resold with offering statements and credit ratings that were sheer fantasy.

None of the Alphabet Soup was protecting the everyday investor like you and me.

Our only protection was the true protector of the market - the short seller. When these brave investors saw a company that was over-rated and/or over valued by the Alphabet Soup they shorted it and that information was public. Short interest was a figure that was known and published. They were the true whistle blowers of the public investment world.

This week the FED published a list of 799 financial institutions that could no longer be sold short. These are the very institutions that intentionally caused the publication of over inflated income statements, balance sheets, offering statements, prospectuses, 10Ks, 10Qs and S-8s. These were the institutions that hide the Ponzi scheme that they were playing on the little guys like you and me.

The whistle blowers - the short sellers saw this so what happened? The Fed came in and rather than admit that they had not properly regulated the financial services industry, they punished the whistle blowers and rewarded the Ponzi Scheme creators.

Overnight the Fed's actions made a lot of the financial service stocks rise by double and triple digit percentages. The officers and Boards of Directors of these financial institution are the ones who caused the leveraged economy to fail and they hold trillions of dollars of company stock and stock options in these companies. The gift the Fed gave then made them whole, punished the whistle blowers and will cost the rest of us dearly.

This time the Fed rewarded the Ponzi perpetrators and punished the short selling whistle blowers.

Do you remember the child in the story "The Emperor has no clothes"? He was a whistle blower and I bet his parents gave him the switch when they got him home. The Fed gave the switch to the true protector of our public markets the whistle blowing shorts seller.

Go green. Burn all the 10Ks, 10Qs, S-8s and Annual Reports you may have have lying around the house in the fireplace to heat your home this winter because they are not worth the paper they are printed on.


I would enjoy hearing your comments at VanmeertenFund@aol.com

DISCLAIMER: The stocks selected should not be taken as buy/sell recommendations. They are the stocks that were selected by my stock screening process and then each was analyzed before adding or subtracting from the portfolio. Do not concentrate on the stocks but learn the selection process.

Jim Van Meerten
Strategy Lab Open Winner July 2008
VanMeerten The Amateur Strategy Lab 2008

Comments: View Comments |  Sunday September 21, 2008

I really hate the Financial sectors. MER and all the other big boys are bleeding. Is there any bright spot in this sinking industry.

Bright Spot? How about Broadpoint Securities Group BPSG.

This little engine that could has been chugging along making increasing revenue for the last 4 quarters and has rewarded investors with a 160% total return in the last 12 months.

Right now this stock is trading at its 20 day moving average and above its 50 and 100 day moving average.

Where else in this industry will you find sunshine??

I would enjoy hearing your comments at VanmeertenFund@aol.com

DISCLAIMER: The stocks selected should not be taken as buy/sell recommendations. They are the stocks that were selected by my stock screening process and then each was analyzed before adding or subtracting from the portfolio. Do not concentrate on the stocks but learn the selection process.

Jim Van Meerten
Strategy Lab Open Winner July 2008
VanMeerten The Amateur Strategy Lab 2008

Comments: View Comments |  Friday September 12, 2008

Bernake has been quoted on Larry Kudlow's show tonight as being in favor of this "bailout that isn't a bail out" of Freddie & Fannie and why not? He and His "Gang of 12" caused it and it gets them off the hook.

There was a very interesting article in the Charlotte Observer by Dr. MIke Walden this Sunday. He is the William Neal Reynolds Distinguished Professor and Extension Economist in the Department of Agriculture and Resource Economics at the NC State University. Google the article, it's worth your time.

He claims that following 9/11 the Fed kept lowering and lowering the interest rate. Again I don't have an original thought in my head but I'm starting to connect this with some other dots. Lower interest rates eventually mean lower mortgage rates right?

So now we have lower and lower mortgage rates and No Doc loans that are either Adjustable Rate or in some cases interest only and in the worst case the "pick your poison" negative amortization loans. People who really can't afford houses are buying them for nothing down and just barely making the payments. These mortgages are packaged and repackaged and a lot of investors don't realize how poorly underwritten these loans are.

Now Uncle Ben is not a stupid man and neither is the "Gang of 12". Not only are they smart but they have a whole army of analyst to give them data. They knew or should have known that if they began raising interest rates that pretty soon the ARMs would reset higher and even worse the people who were paying interest only or the negative amortization loans would be forced into foreclosure.

As Dr. Walden puts it: "Beginning in 2005, the Fed began to systematically and continuously raise interest rates and reduce credit availability." He explains that buyers who were already strapped got squeezed from rising payments and lower home values.

Is there anyone reading this journal that believes that Uncle Ben and the "Gang of 12" didn't know what the effect of every 25bp increase in the Fed Funds rate would do to the foreclosure rate of the ARMs, interest only and negative Amort mortgages???

How do we fix it? Maybe from here on out the only loan that should be guaranteed is a properly underwritten 15 or 30 year fixed mortgage with at least a 10% down payment.

At this writing only 5 of the 11 Leading Economic Indicators are positive. Real economic recovery can't start till a few more turn around.

I hope that today's rally isn't unwarranted exuberance but only time will tell.



I would enjoy hearing your comments at VanmeertenFund@aol.com

Comments: View Comments |  Wednesday September 10, 2008

Seems a lot of people are predicting the salvation of the home builders. But is Toll Brothers (TOL) the best of the breed?

I like to compare a featured stock to it's index and then see if there is another stock in the sector that may even be better.

TOL seems to be beating the index but let's look at a 2 1/2 month chart comparing the Home Builders ETF (XHB) with Toll Brothers (TOL) and Beazer (BZH).

I think I'll bet on Beazer BZH.

I would enjoy hearing your comments at VanmeertenFund@aol.com

DISCLAIMER: The stocks selected should not be taken as buy/sell recommendations. They are the stocks that were selected by my stock screening process and then each was analyzed before adding or subtracting from the portfolio. Do not concentrate on the stocks but learn the selection process.

Jim Van Meerten
Strategy Lab Open Winner July 2008
VanMeerten The Amateur Strategy Lab 2008

I would enjoy hearing your comments at VanmeertenFund@aol.com

DISCLAIMER: The stocks selected should not be taken as buy/sell recommendations. They are the stocks that were selected by my stock screening process and then each was analyzed before adding or subtracting from the portfolio. Do not concentrate on the stocks but learn the selection process.

Jim Van Meerten
Strategy Lab Open Winner July 2008
VanMeerten The Amateur Strategy Lab 2008

Comments: View Comments |  Sunday September 7, 2008

This is a republication of a blog I wrote on July th shortly before Harely (HOG) it its 5 year low of 32.18. If you bought on this blog you would be up 25% for just 60 days. Hope you heeded the blog!

When I was about 12 there was a crane operator across the street that rented a room from one of our neighbors. Wayne, I still remember his name, was a rough dude but he had a really pimped out DuoGlide. He rode with a motorcycle club and some nights when all his buddies came over to see him the street resonated with the sound of rollin' thunder. Most of them had lights in the spokes and the patterns of the lights and the sound that those big V-Twins made as they all rode down the street was unforgettable. I knew right then I had to have one.

I've read a lot about Hogs. I know they are expensive, undependable, not very economical and the Jap Crap is cheaper, runs better, longer but even when they try to duplicate it they can't sound like a Harley. I NEEEED a Hog.

All around the country there are guys like me that are reading articles that with gas prices on the rise thousands of grown commuters are looking for economical transportation alternative to their SUV and looking at Vespas, Tomos and all sorts of DUI scooters but do you really want to be seen on a pastel minibike? Real dudes stride HOGS. We will convince our wives that a Hog is a good, economical and dependable alternative to our SUV's. You can't ride your Ole Lady on the back of a kiddie scooter!

That's the mystic the bike has going for it and that's the mystic the stock has too.

Harley has a following for both the bike and accessories. It will be around. They have a marketing genius and there always will be a demand not only for the bikes but also for the gear and endorsement items. This is a company with stable sales, stable margins, stable earnings. The company isn't as exciting as the bike, so why buy it?

It's on sale for 50 cents on the dollar. In November of 2006 the prices was around $75 now it's on sale at less than $35.

If you've always wanted a Harley, they are as good as ever and tell your wife; I mean Ole Lady it's on sale.

Wednesday July 09, 2008 : 09:04 PM
Comments: 0

Comments: View Comments |  Thursday September 4, 2008

At the time I'm writing this journal the Value Line Index is trading above its 20/50 & 100 day moving averages and the total Market has 57% of all the stocks trading above both their 20& 50 day moving averages. Not a rally but a definite upside momentum.

Journal:

Believe it or not I got a call once from a guy who said all his friends had office jobs and day traded at work. He had a job where he was out at job sites all day away from a computer but wanted in on the action. Could he day trade at night?

I was very tempted to show him how FOREX trades 24/7/365 but some little cricket on my shoulder told me I would be leading a lamb to slaughter. He had no idea what he was doing. I convinced him to subscribe to a good newsletter and then put in stop losses that would trigger during the day so he'd feel like he was always in on the action. He eventually did quite well.

The Strategy Lab has been in play for a full month now so it's time to evaluate what has happened. Well really nothing has happened. I'm about dead even.

I have gotten some emails that accuse me of being very close to an evil day trader and been called a speculator not an investor. There is a difference. A day trader wants in and out with small profits sometimes even in the same stock. I'll buy a stock that shows present promise and hold it until it no longer shows that promise. It might be for a week or it might be for several months. If it meets my criteria I stick with it, when it doesn't I move on.

How is that any different from value or growth investors who makes a watch list and remove stocks when "They no longer meet my criteria"?

At the 30 day mark John Reese is leading the pack with a 4.37% return. I'm dead even. What's wrong? The portfolio I run on Marketocracy VMNHI that uses the same methodology is up 3.92% for the month.

I compare my results in the Strategy Lab to my Marketocracy portfolio VMNHI. I started that portfolio in March of 2005 to test the theory that if I added stocks making new highs and sold them when they begin reversing I'd make money. The old "Cut your losses and let your winners run" theory. It's worked pretty well. At the end of June Marketocracy compared my results to the other 81,000 portfolios they monitor and found that out of 81,000 I ranked #42 for the quarter, #65 for the past 6 months and #24 for the past year. I think being in the top 100 out of 81,000 portfolios for all three periods verify my theory. So why the difference?

The only difference between the 2 portfolios is that all the Marketocracy positions are long positions and the Strategy Lab contains both long and short positions.

Either this is not the time to be short in anything or I don't know how to pick short positions are the problem.

So that brings us back to the title of this journal and some of you are asking what the title has to do with all this? The guy who called me wanted to day trade even though he didn't know how because everyone else was. I guess I decided to short some stocks just because everyone else was too.

Moral of the story: Stick to what you know works and don't do something just because everyone else does.

I would enjoy hearing your comments at VanmeertenFund@aol.com

DISCLAIMER: The stocks selected should not be taken as buy/sell recommendations. They are the stocks that were selected by my stock screening process and then each was analyzed before adding or subtracting from the portfolio. Do not concentrate on the stocks but learn the selection process.

Jim Van Meerten
Strategy Lab Open Winner July 2008
VanMeerten The Amateur Strategy Lab 2008

Comments: View Comments |  Wednesday September 3, 2008