Buy low , refinance high!

From the last post "25 cent for a dollar", I blog some of my friends were able to get a super bargain discount price from Bank owned property. It 's very lucrative business and I decide to do a similar deal in the area I'm interested on. I'm going to make numerous offers on the area I'm interested on R.E.O properties. I will start out with 75% discount as my initial offer price. I expect there will be many rejections before I can nail down one deal. But it will all worth my effort. After I acquire the property, I will refinancing it with the market value, so I can pull out equity loan from the house and roll it over to next deal. This is going to be very exciting. I'll update my progress to you from time to time.

25 cent for a dollar

Recently, I met a friend sharing with me a very inspiring story. I thought that was very interesting and I want to share this with you. Recently, one of the area he lives nearby has tremendous amount of R.E.O available in market. R.E.O stands for Real Estate Owned. These are the property that the bank bought back from the auction when the previous owner fails to pay back the mortgage obligation and bank foreclosure upon it. Because bank is not in real estate business, these properties holding bring no financial benefit from the bank point of view. The bank would like to GET RID of these R.E.O houses as soon as they can. First, they list the property at the market price. However, with recent slowdown in real estate market, houses become harder to sell. The Bank starts to accumulate more of these R.E.O as more foreclosure pop in the market. What my friend did is that he focus in these type of R.E.O. He use a creative criteria to narrow down the properties of interests and he is able to get a bargain deal with 25cent for a dollar. This is his technique
1)R.E.O
2)Has been on market for more than 100 days
3)Asking price 10% below fair market value
After he narrow down the houses into these criteria with the area he is interested, he make an all cash offer with 25% of the asking price. After many many rejections, he finally got one bank accept his deal. It's amazing how cheap he can purchase the property from R.E.O.

Stock is NOT for LONG Term

"This stock is for long run" We usually hear this comment from people when they bought a stock and saw the price drop, drop and drop. Seeing the money draining day, after day, after day. Instead of selling the stock and cut the loss early, people will say "That's ok, this stock is for long run, it will come up" This is a losing mentality. Why would a person want to hold the stock for long time? What's the reason you want to buy stock at first place? The simple answer is: You want the stock price go higher your purchase price so you can profit the difference. If a stock does not do that, why'd you still holding it and HOPE for the long run? Stock is not like real estate, when a particular stock go down in value, it's not necessarily come back up. There are zillions of reasons why stock price go down. And if you don't understand why price go down, you wouldn't understand why stock price will go up neither. So, the smarter things to do is : Cut your loss immediately, preferably less than 10%, so you can limit it from serious downfall of the stock price when you see the trend is turning against your expectation.

what I learn from recent market crash?

Dow Jones index drop almost 1000 point from the last 10 trading days. This is the biggest drop and bear market for the entire year 2007. Many people lost the entire year profit in just one single week. Wow, that's a really bloody market! My positions also get hurt in the last few days, especially for the purchase I made in last few weeks when the market was peak. Anytime I make a mistake or bad move in the stock market. I like to go back and study what went wrong and what could I do next time. Over the last weeks, I spent a lot of time to learn different kind of technical indicator and check the validity of them. For example, if the indicator is correct, it should have told me to stay out the market BEFORE the crash. While most indicator fail to indicate, I do find one particular impressive one that I find useful to indicate bear market. That is MACD. Moving average convergence divergence. I encourage you to check out this interesting indicator to keep track of the market so you can learn to STAY OUT the market when bear is coming. When you Google MACD, you can find great info on the net. Whenever divergence becomes negative, that's the signal to stay out!

stockcharts.com

Recently, I'm spending tremendous amount of time to learn more about stock market. I want to learn the in and out and use Internet to gather useful resource to analyze stocks. I was using yahoo and msn's financial charts in the past. However, the more I learn different type of analysis, the more I found them less efficient and effective. The chart is not very up to date and sometimes even inaccurate. One of my friend recommend me to give a try on one of these site, and I found them very helpful. This is WWW.STOCKCHARTS.COM .
I highly recommend it, the interface are user friendly and professional. All the popular type of technical analysis, like MACD, William %R, Moving Average data are well displayed and updated. I think from now on, I'd rely on the chart information from there to do my stock study.

Holiday Real Estate on Sale

Tonight, I received a phone call from a home builder representative. His name is Mike, he is sales agent for this new home tract I went to visits six months ago. He called me around 9pm tonight. I was quite surprised he worked so late. Basically, he told me on this weekend, there will be a special deep discount on all the houses for sale. The discount is as big as 20% with special in-house financing, no money down required, no closing cost, interest rate can be offered as low as 5.5%! Wow, I told him, this sounds too good to be sure. And Mike explained, "Yes it is a great deal, the builder is doing the year end sales push and want to get rid of all the inventories. While I think this is a great bargain, my gut feeling tells me to be patient. It's because I'm believing the price could come down even more in the next few months. So, I told Mike, I'm very interested, but I'd pass on the opportunity. I'm waiting for more and more mouth-watering bargain at a even deeper discount price pop out in next few more months or so.

Opportunity: Commercial mortgage industry companies

With the recent turmoil in sub prime market, many financial lenders are badly affected in their quarter's earning performance. CitiBank, Wamu, WellsFargo are all trading currently at their 52 week low due to overall negative mortgage industry environment. But if we look at it closely, the sub prime mainly affecting "Residential" market. What I mean is these are related individual with low income or bad credit bought a house with price they can't normally afford. With interest rate resetting, these borrowers 's payment is increasing dramatically, and because of their lower income, they can't afford it anymore. They walk away leaving the bank's bunch of bad loan in their account, badly hurting bank's business. However, it rarely happens in the "Commercial" market. Commercial here refers to projects like shopping mall, hospital building, office building, apartment, warehouse. Since the underwriting guideline in commercial market are much more tightened and require a significant high down payment from buyer to initatie the loan process, commercial lenders are seldom at risk for their mortgage not getting paid on time. Therefore I believe commercial lenders 's business is minimum, if any, affected by the sub prime. With recent drop overall mortgage companies in stock market, I'm betting the commercial lender are going to perform well. These are the lists of stock I'm betting on . Check it out here. The earning for these companies are coming out next week, it'd be interesting to see how they do in 3rd quarter and their projection of future business.

Stock chart technical analysis : Candle Stick

Tonight, I want to share some of my recent learning on stock technical analysis. Basically technical analysis is more for short term trade. It doesn't pay as much attention on company's fundamental, earning, sales growth, debt level, etc. Instead, it focus on the price movement, the volume, the trend. Understand the technical analysis can potentially help you to decide the entry and exit signal and increase your chance of winning. The above chart is the first step to understand technical: Candlestick. It shows the open, close, high and low price of the stock you're interested every trading day. You can view the price 's past performance using candle stick in the stock chart. Check out an example here (link) There are many analysis and price pattern evolve around candle stick. I will take next few nights to demonstrate a couple of useful and powerful signal to tell investor the entry and exit point of a stock.