So far there is no symptom of heavy short selling from market manipulators. Lack of panic selling may make it not easy to make profit by short selling and the risk of short covering rally may drive speculators away from short selling. As individual investors are thin on portfolio holding, there is no sign of panic selling even market has declined for extended period of time.
The continuous market pullback weakens the confidence of market participants. And the loss of wealth also has impact on the overall economy. However, the loss is spread among the population and it is mostly paper loss without significant impact on money flow. Market manipulators and traders do not make huge profit as in the panic selling late last year.
Some nervous investors realize part of the profit for the stocks purchased during market bottom last year. However the selling pressure is not heavy as there is no need to liquidate in fire sale.
There is tremendous sideline cash, especially from individual investors. Instead of selling at the bottom, they have learned to exploit the cash on hand to pick up bargain. Current stock price is still above the fire sale price last year. Therefore they will wait patiently for the opportunity. Traders still have room to drag down market further until the bottom last year. If this can be reached, it may attract individual investors to replenish the portfolio. But it may have attracted smart traders to pick up the bargain before cautious hot money.
Market is finding the bottom as traders attempt to drag down market while risk money is picking bargain. If selling creates more market fear, more investors may take profit on the stocks purchased during the bottom last year. When these stocks are exhausted, the selling from speculators will disappear and the herd of market participants may rush to buy from the market.
Market participants should watch the development closely. Liquidity in the market will move fast and traders will acts swiftly to protect the profit.
Facebook IPO has halo effect for venture capitalists
In a business in which the best investment opportunities flow to a small number of firms with big reputations, the prestige boost that Accel Partners, Greylock Partners and Meritech Capital have gained from their Facebook investments dating back to 2005 and 2006 could pay dividends for years to come.
Facebook's earliest backers are sitting on a veritable fortune. Meritech's and Greylock's slices of Facebook will be worth more than $1 billion each.
But Accel Partners, which initially invested $12.7 million in Facebook at a $98 million valuation back in 2005, the year after it was founded, is clearly the big winner. Come the IPO, the current stake of Accel and its affiliates will be worth $6.3 billion, assuming a mid-point stock price of $31.50. It plans to sell a portion of that stake worth about $1.2 billion, according to the IPO prospectus.
"If you look at the cycle, every four to six years another company of (Facebook's) caliber gets created," said Chi-Hua Chien, currently a partner at Kleiner Perkins and a former associate at Accel who first brought Facebook to the Accel team's attention. He rattled off a list of names including: Amazon, in 1994; Google, in 1998; and Facebook, in 2004.
The outsized importance of the occasional monster deals means that venture capital firms sometimes find it worthwhile to get in - even late in the game.
Homes for Sale Grow Scarce as Sellers Await Higher Prices
Real estate agents, who spent the six-year U.S. housing collapse coaxing buyers off the fence, are now hunting for sellers as home inventories hover near lows last seen in 2005. A scarcity of properties signals the housing market's uneven recovery as purchasers trying to take advantage of record affordability run up against homeowners choosing to stay put in properties that aren't worth as much as they owe.
A housing affordability index that's based on a combination of resale prices, household income and mortgage rates reached an all-time high in the first quarter, the National Association of Realtors reported today. The index shows that a family with the median income of almost $61,000 could afford a $325,500 house, which is more than double the median existing single-family home price of $158,100 in the U.S.
Prices haven't recovered even as demand rises. Existing home sales this year through March were the highest for a first quarter since 2007, the National Association of Realtors reported on May 9. The median price in 146 metropolitan areas tracked by the group fell 0.4 percent from a year earlier to $158,100.
The inventory has tightened as investors, drawn by bargain prices and rising rents, bought 22 percent of homes sold in the first quarter, according to the National Association of Realtors. That's up from 21 percent of deals a year earlier.
Another source of supply, the inventory of new homes, fell to 144,000 in March, the fewest on records dating to 1963, the Commerce Department reported April 24. Homebuilders, still reeling from the construction and land-buying spree of the past decade, have cut the number of so-called spec homes, which are built without a buyer already lined up.
As sellers sit on the sidelines, bidding wars are flaring up in Denver, Miami, Minneapolis, Phoenix, Seattle and Washington, where bargain hunters, sensing a market bottom, have stepped up shopping.
Housing Starts Surge, but Don't Trade the Headline
April housing starts, at 717,000, were well above expectations and at the highest level since October 2008; March was revised upward as well.
Foreclosures Plunge to Five-Year Low in U.S. Recovery: Mortgages
Foreclosure filings in the U.S. fell to a five-year low last month as lenders sought to avoid seizing property and a housing recovery showed signs of taking hold.
The number of default, auction and seizure notices sent to homeowners in April totaled 188,780, down 14 percent from a year earlier and 5 percent from the previous month, according to RealtyTrac Inc. It was the lowest tally since July 2007, before the onset of the biggest housing crash in seven decades, the Irvine, California-based data seller said today in a report.
"Things are getting better and the number of vulnerable households is going down," Paul Willen, senior economist at the Federal Reserve Bank of Boston, said in a telephone interview. "The pool of borrowers is much more stable than it was two or three years ago."
The national home-price data belies improvements in many markets where "tighter inventories are beginning to lift home prices," CoreLogic Chief Executive Officer Anand Nallathambi said in a May 8 statement.
Affordability for homebuyers increased to the highest on record in the first quarter, based on the combination of low mortgage rates, low prices and improved incomes measured in a Realtors index.
"Housing demand is slowly beginning to recover," according to Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York. "Banks are showing increasing willingness to lend to consumers, which should bode positively for the mortgage market. In turn, this would help shift the housing recovery into a higher gear."
As One JPMorgan Trader Sold Risky Contracts, Another One Bought Them
For hedge funds that could smell blood in the water, it seemed to be an opportunity to take on JPMorgan Chase and win.
Even as a trader for JPMorgan in London was selling piles of insurance on corporate debt, figuring that the economy was on the upswing, a mutual fund elsewhere at the bank was taking the other side of the bet.
That one hand of the bank was selling while another was buying is not uncommon in the dog-eat-dog world of Wall Street. Yet that trading is typically done on behalf of clients, not in a way that, inadvertently or not, undermines what the bank is doing for itself.
"You've got so many different businesses, they are not coordinated and they are not telling each other things and that turns out in this case to have been a virtue," said Robert Litan, vice president for research and policy at the Ewing Marion Kauffman Foundation. "But that also feeds into another concern, and that is that JPMorgan is not only too big to fail but too big to manage."
The rationale for the hedge funds was simple: with JPMorgan selling so much of this insurance, the price was artificially cheap. In buying it, the funds were betting that the cost would increase when the bank eventually stopped selling. Such a move would notch them a tidy profit while causing steep losses on paper for JPMorgan.
Similarly, any hiccup in the markets for corporate debt would also potentially hurt the bank's position, as it would make the cost of insuring the corporate debt more expensive. That, too, would be lucrative for the buyers.
Even Pros Don't Like Stocks: Could That Be Bullish Sign?
Wall Street strategists are the most negative they've been on stocks since the bull market began more than three years ago.
The consensus view of U.S. equity strategists from major banks is for investors to allocate just 52 percent of their portfolio to stocks and the rest to fixed income, commodities or cash, according to a Bloomberg survey.
This is the lowest allocation for stocks since the nearly 50 percent level that the survey reached back in March 2009.
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