Friday, March 23, 2012

March Market Madness: BofA's Own to Rent Plan; Apple Flash Crash, BATS batty IPO

College basketball's 68-team NCAA national championship tournament (AKA March Madness) has nothing on US stock markets in terms of sheer insanity and hair-raising antics.

Just when you think it can't get any weirder in our manipulated, over-hyped markets, along comes a day like today to convince you that the absurd is now the new normal.

To start things off, Bank of America announced a plan to "invite" roughly 1000 homeowners in default on their mortgages the chance to rent the home they formerly owned.

Think of it. BofA can now use the catchy, "Rent a Piece of the American Dream" as the tag line for what they're calling, subtly, the Mortgage to Lease Program. No lie. The bank that bought Countrywide Financial and all their horrible sub-prime, Alt-A, no-doc and NINJA loans, now wants to slither out from under the rock of the robo-signing scandal, fraudulent mortgage documentation and a host of other evils, by forgiving the original loan and renting the house back to the (former) mortgagor.

The absurdity of this plan, whereby people who can't afford their mortgage payments, are somehow supposed to be able to afford rent, or even want to, in the very same home they've been living in for free for two or three years or longer, is so over the top, some people might even buy into it. The Bank of America plan is to take title to the homes, tear up the old documents (supposedly before said homeowners rush to the nearest federal courthouse, documents in hand, and file fraud charges), pay the property taxes, rent the property back to the homeowners (or squatters, if you like), at - get this - rent that's less than the original monthly mortgage payment, then flip the house, along with the paying (below market rates) tenants to some investment gang. Are there real estate investors that dumb out there?

There are so many flaws to this abhorrent plan that it is hardly worth discussing, though actual landlords - real people who own and manage rental properties - have been laughing about it all day long. And, of course, the bank won't sully its pristine reputation by dirtying its hands with the mundane tasks of landlording, like maintaining the lawns, fixing leaks and making modest improvements. No, for that, they'll hire professional property managers, adding even more cost.

The plan is supposed to roll out shortly in the states of Nevada, Arizona and New York as a pilot program. Pilot, indeed. This plan is going to crash and burn on the runway. All of this sound and fury is designed for only one purpose: to save face and costly lawsuits, now that people have awakened to the criminality and fraud that Countrywide started and Bank of America openly perpetuated. They'd be much better off and propbably millions of dollars ahead if they'd just give the properties to the people living in them and simply walk away.

With that as a background, the housing market made more ugly noises on Friday when the Commerce Department reported that new home sales fell for the second straight month, dropping 1.6% in February, despite unusually warm weather, great for home-hunting and generational low mortgage rates.

Then there was Apple's flash crash, blamed on a fat-finger trade for 100 shares well below the market price on a trading platform known as BATS, which, incidentally, went public today, but after all of one trade, shut itself down due to technical difficulties, canceling its IPO indefinitely, which, if today's performance was any indication of the quality and integrity of its service, will likely be forever.

As if that wasn't enough, today marked the absolute thinnest volume in the last ten years. It was completely dreadful, yet stocks still finished with meagre gains, though down for the week. Ouch!

Dow 13,080.73, +34.59 (0.27%)
NASDAQ 3,067.92, +4.60 (0.15%)
S&P 500 1,397.11, +4.33 (0.31%)
NYSE Composite 8,180.05, +38.72 (0.48%)
NASDAQ Volume 1,400,164,125
NYSE Volume 3,395,163,250
Combined NYSE & NASDAQ Advance - Decline: 3848-1709 (that's WACK!)
Combined NYSE & NASDAQ New highs - New lows: 133-28
WTI crude oil: 106.87, +1.52
Gold: 1,662.40, +19.90
Silver: 32.27, +0.93

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