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May 7, 2013
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PACE Loan Boom Echoes Subprime Crisis

WSJ Kristen Grind

Deanna White told a contractor she couldn’t afford the $42,200 loan he recommended for improvements to her house in Inglewood, Calif. The contractor, she recalled, said she wouldn’t be on the hook because the loan was part of a “government program.” She applied and was approved.

Two years later, Ms. White is struggling to make payments on the loan, which was packaged with more than 10,000 similar loans into bonds and sold to investors. Under its terms, Ms. White’s five-bedroom house could be foreclosed on if she defaults.

Her loan is part of a booming corner of the lending industry called Property Assessed Clean Energy, or PACE. Such loans, set up by local governments across the U.S., are designed to encourage homeowners to buy energy-efficient solar panels, window insulation and air-conditioning units.

About $3.4 billion has been lent so far for residential projects, and industry executives predict the total will double within the next year. That would likely rank PACE loans as the fastest-growing type of financing in the U.S.

As the loans spread, so do problems that echo the subprime mortgage crisis. Plumbers and repairmen essentially function as loan brokers but have scant training and oversight. They often pitch PACE loans to help land contracting jobs and earn referral fees from lenders, according to loan documents and more than two dozen borrowers, industry executives and employees.

Creditworthiness matters little to lenders, because loans are based on the value of a homeowner’s property. PACE loans typically require no down payment, and the debt is added to property-tax bills as an assessment. Ms. White’s annual property taxes soared to $6,500 from $1,215.

Loan growth is fueled partly by investor appetite for bonds created from PACE loans, especially among mutual funds and insurers. Investors like the bonds’ relatively high payouts, environmentally friendly reputation and lofty credit ratings. On the other hand, rating firms have said there aren’t enough historical data on PACE loans to forecast potential defaults.

Some local governments that embraced the loans as a way to bring clean energy to the masses didn’t anticipate the messy consequences.

“We wanted to put ourselves in the thick of this,” says Rick Bishop, executive director of the Western Riverside Council of Governments, a group of city and county governments in California that helps run the largest PACE program. “The downside is now we hear about these stories from people who feel like they’ve been misinformed in some fashion.”

The government group tries to resolve problems for borrowers. Riverside County, Calif., has opened an investigation into marketing practices for PACE loans, and California Gov. Jerry Brown signed into law in September new requirements establishing uniform disclosures for PACE loans, an effort to make lending terms closer to those for mortgages. Homeowners who get a PACE loan now have three days to back out.

The largest PACE lender, Renovate America Inc., is accused in three lawsuits filed in November by borrowers of double-charging interest and administrative fees and failing to immediately credit loan payments. The suits seek class-action status. The company denies the allegations and says it will “defend PACE, our company and the program vigorously.”

In November, the Energy Department urged administrators of the loan programs to clearly explain loan costs and other terms, allow borrowers to cancel their loan during a short period and deter kickbacks to contractors.

Industry executives say most borrowers are satisfied with their loans and defaults are rare.

Lenders are working with consumer groups to create nationwide standards “to prevent things that wouldn’t benefit consumers,” says JP McNeill, Renovate America’s founder and chief executive.

The growing pains are largely the result of the industry’s young age, the executives say. The first PACE program was started in 2007 by Cisco DeVries, then chief of staff to the mayor of Berkeley, Calif.

Thirty-four states and Washington, D.C., have passed legislation allowing the creation of PACE programs, according to PACENation, an industry trade group in Pleasantville, N.Y.

Mr. DeVries, who calls himself a “capitalist hippie” and now is chief executive of Renew Financial Group LLC, a clean-energy finance company in Oakland, Calif., says he is “really proud of what we’ve accomplished.” He adds: “We set out to help people save money and save energy, and it’s under way.”

The industry could get a new growth spurt from a July decision by the Department of Housing and Urban Development to allow the Federal Housing Administration to purchase mortgages on homes with PACE loans.

PACE loans range in size from about $5,000 to more than $100,000, with an average of about $25,000, and charge interest rates of 6% to 9% over a repayment period of usually five to 25 years.

Instead of making monthly mortgage payments, PACE borrowers pay what they owe once or twice a year along with their property taxes. Cities and counties collect the loan payments and pass along the money to lenders.

Local governments collect fees from finance companies. In the fiscal year that ended June 30, the Western Riverside Council of Governments collected revenue of $7.1 million, or about 15% of its budget, from the PACE program.

Another quirk of PACE loans is that the debt usually goes to the front of the line, ahead of the homeowner’s mortgage. Like a typical tax assessment, that means if a homeowner defaults on the PACE loan, the property can be seized as collateral and sold to repay the lender.

That setup puts local governments in the awkward position of potentially foreclosing on their constituents. If that happens and the house turns out to be worth less than the amount owed by the homeowner, other taxpayers could be stuck with a loss on the difference. So far, that hasn’t happened.

Some investors say the extensive involvement in PACE loans by governments across the country amounts to an implicit financial backstop. The belief that governments stand behind the loans is a major reason why investors are attracted to the bond deals, according to investors.

“There is such big national and state backing,” says Mike Warmuth, portfolio management vice president at FBL Financial Group Inc., the owner of Farm Bureau Life Insurance Co. in West Des Moines, Iowa. The insurer owned $22 million of PACE bonds at the end of September.

Mr. Warmuth says the insurer’s broker suggested the bonds, which generally yield about 4%. He says he isn’t aware of any underwriting deficiencies with the loans, adding that Farm Bureau only had access to aggregate loan data before buying the bonds.

Defaults on loans in PACE bond deals overall have been less than 1%, according to Kroll Bond Rating Agency Inc. Cecil Smart, a senior director at the ratings firm, says the bond deals are structured so that lenders bear the brunt of any losses, rather than investors.

Germany’s Deutsche Bank AG is one of the largest packagers of PACE loans into securities and led a $284 million deal in mid-December, which drew far more investor demand than expected. The bank is aware of problems stemming from the role of contractors, says a person familiar with the matter.

Contractors often line up loans while on house calls and can earn a referral fee of at least $500 per borrower, according to current and former employees. The loans also are marketed at county fairs and by cold calling, borrowers say.

Renovate America uses about 8,000 contractors to help line up loans, according to bond documents. Those contractors are overseen by 23 employees at the San Diego company.

The company says it recently put in place a more-stringent contractor management program. Renovate America says only about 200 contractors are actively arranging PACE loans.

Cindi Ventura, 65 years old, says she was urged last summer by her plumber to apply for a PACE loan after sewer pipes eroded underneath her three-bedroom house in San Jose, flooding the property. She said she had recently filed for personal bankruptcy, didn’t have the money to make all the repairs and couldn’t qualify for a home-equity line of credit.

She and her mother, 83, received a $16,732 loan for five years from Ygrene Energy Fund Inc. with a 6.5% interest rate. Ygrene (“energy” spelled backward), based in Santa Rosa, Calif., is the second-largest provider of PACE financing in the country, based on loan volume.

Ms. Ventura, a receptionist, says she was confused about the loan’s terms because it was called an assessment. She says she called and emailed Ygrene several times with questions about her loan documents and never heard back. “I still don’t really understand what the program is,” she says.

Louis Lalonde, chief marketing officer of Ygrene, says company representatives had a call with Ms. Ventura and her mother to answer all their questions before the loan was signed. He says he has no record of any further attempts to contact them.

The 3,200 contractors who drum up business for Ygrene are regularly screened for compliance with contractor licensing requirements and receive training before they are allowed to pitch loans to homeowners, he adds.

Malcolm Scott, 61, was planning to pay in cash the $34,000 it would cost for a new air-conditioning unit, furnace and other improvements at his house in Woodland Hills, Calif. His contractor suggested applying for a PACE loan.

Mr. Scott was surprised to find out less than 24 hours later that he had been approved for $94,000.

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That's right, let the market bleed.
Slight pullback, probably just profit taking.
I hope panic sets in and the sea turns red.

I'm ready to fire off, but not yet. I want a serious 15-20% correction.

Getting itchy...
 
May 7, 2013
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Can Nvidia Prove Critics Wrong?
By Rachel Gunter | Jan 18, 2017 3:06 pm EST
Citron claims Nvidia stock isn’t worth more than $90

Citron Research, a noted short seller, is predicting that Nvidia’s (NVDA) share price will crash in 2017 to $90. But Nvidia was one of the best-performing stocks in the S&P 500 in 2016, having risen from $33.34 at the beginning of 2016 to $117.32 by the end of December, according to a Wall Street Journal report. Of course, Citron’s prediction has caused a stumble in the stock since then.

According to Citron, Nvidia faces significant competition from Intel (INTC) and Advanced Micro Devices (AMD) in the data center market, and the company has lacked growth in new markets.



Citron also sees Nvidia’s position as a fabless producer as putting it at a disadvantage—especially against Intel, which could easily undercut it through the competitive pricing of chips. Citron also claims Nvidia’s customers, including Apple (AAPL) and Alphabet’s (GOOGL) Google, are gradually turning into its competitors as they develop certain chips internally.
Is the picture so grim for Nvidia?

While fierce competition has existed in semiconductor chips market for a long time, Nvidia has consistently raised its revenues over the years. The company has largely fended off competition pressure by continually upgrading its portfolio of graphic processors, and last year Nvidia unveiled Tesla P100 that it said is a high-performance chip featuring 15 billion transistors packed on a piece of silicon.

Nvidia is eyeing corporate data centers with the Tesla P100, and clearly, the company is aggressively vying for a piece of the autonomous driving market. The company used the CES 2017 event to show off two self-driving cars built using its technology—a sign that it’s ready to take on Alphabet, Intel, Apple, and others.

While traditional automakers Ford Motor (F) and General Motors (GM) are developing their driverless technologies in-house, Nvidia could persuade them to use its ready-made autonomous driving technology and solutions, allowing Nvidia to unlock new growth outside its traditional markets.
 
May 7, 2013
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Bollinger Bands is a tool invented by John Bollinger in the 1980s as well as a term trademarked by him in 2011.[1] Having evolved from the concept of trading bands, Bollinger Bands and the related indicators %b and bandwidth can be used to measure the "highness" or "lowness" of the price relative to previous trades. Bollinger Bands are a volatility indicator similar to the Keltner channel.

Bollinger Bands consist of:

an N-period moving average (MA)
an upper band at K times an N-period standard deviation above the moving average (MA + Kσ)
a lower band at K times an N-period standard deviation below the moving average (MA − Kσ)

Typical values for N and K are 20 and 2, respectively. The default choice for the average is a simple moving average, but other types of averages can be employed as needed. Exponential moving averages is a common second choice.[note 1] Usually the same period is used for both the middle band and the calculation of standard deviation.[note 2]

Purpose

The purpose of Bollinger Bands is to provide a relative definition of high and low. By definition, prices are high at the upper band and low at the lower band. This definition can aid in rigorous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions.[3]
Indicators derived from Bollinger Bands

In Spring, 2010, John Bollinger introduced three new indicators based on Bollinger Bands. They are BBImpulse, which measures price change as a function of the bands; percent bandwidth (%b), which normalizes the width of the bands over time; and bandwidth delta, which quantifies the changing width of the bands.

%b (pronounced "percent b") is derived from the formula for Stochastics and shows where price is in relation to the bands. %b equals 1 at the upper band and 0 at the lower band. Writing upperBB for the upper Bollinger Band, lowerBB for the lower Bollinger Band, and last for the last (price) value:

%b = (last − lowerBB) / (upperBB − lowerBB)

Bandwidth tells how wide the Bollinger Bands are on a normalized basis. Writing the same symbols as before, and middleBB for the moving average, or middle Bollinger Band:

Bandwidth = (upperBB − lowerBB) / middleBB

Using the default parameters of a 20-period look back and plus/minus two standard deviations, bandwidth is equal to four times the 20-period coefficient of variation.

Uses for %b include system building and pattern recognition. Uses for bandwidth include identification of opportunities arising from relative extremes in volatility and trend identification.
Interpretation

The use of Bollinger Bands varies widely among traders. Some traders buy when price touches the lower Bollinger Band and exit when price touches the moving average in the center of the bands. Other traders buy when price breaks above the upper Bollinger Band or sell when price falls below the lower Bollinger Band.[4] Moreover, the use of Bollinger Bands is not confined to stock traders; options traders, most notably implied volatility traders, often sell options when Bollinger Bands are historically far apart or buy options when the Bollinger Bands are historically close together, in both instances, expecting volatility to revert towards the average historical volatility level for the stock.

When the bands lie close together, a period of low volatility is indicated.[5] Conversely, as the bands expand, an increase in price action/market volatility is indicated.[5] When the bands have only a slight slope and track approximately parallel for an extended time, the price will generally be found to oscillate between the bands as though in a channel.

Traders are often inclined to use Bollinger Bands with other indicators to confirm price action. In particular, the use of oscillator-like Bollinger Bands will often be coupled with a non-oscillator indicator-like chart patterns or a trendline. If these indicators confirm the recommendation of the Bollinger Bands, the trader will have greater conviction that the bands are predicting correct price action in relation to market volatility.
Effectiveness

Various studies of the effectiveness of the Bollinger Band strategy have been performed with mixed results. In 2007 Lento et al. published an analysis using a variety of formats (different moving average timescales, and standard deviation ranges) and markets (e.g., Dow Jones and Forex).[6] Analysis of the trades, spanning a decade from 1995 onwards, found no evidence of consistent performance over the standard "buy and hold" approach. The authors did, however, find that a simple reversal of the strategy ("contrarian Bollinger Band") produced positive returns in a variety of markets.

Similar results were found in another study, which concluded that Bollinger Band trading strategies may be effective in the Chinese marketplace, stating: "Finally, we find significant positive returns on buy trades generated by the contrarian version of the moving-average crossover rule, the channel breakout rule, and the Bollinger Band trading rule, after accounting for transaction costs of 0.50 percent."[7] (By "the contrarian version", they mean buying when the conventional rule mandates selling, and vice versa.) A recent study examined the application of Bollinger Band trading strategies combined with the ADX for Equity Market indices with similar results.[8]

A paper from 2008 uses Bollinger Bands in forecasting the yield curve.[9]

Companies like Forbes suggest that the use of Bollinger Bands is a simple and often an effective strategy but stop-loss orders should be used to mitigate losses from market pressure.[10]
Statistical properties

Security price returns have no known statistical distribution[dubious – discuss], normal or otherwise; they are known to have fat tails, compared to a normal distribution.[11] The sample size typically used, 20, is too small for conclusions derived from statistical techniques like the central limit theorem to be reliable. Such techniques usually require the sample to be independent and identically distributed, which is not the case for a time series like security prices. Just the opposite is true; it is well recognized by practitioners that such price series are very commonly serially correlated[citation needed]—that is, each price will be closely related to its ancestor "most of the time". Adjusting for serial correlation is the purpose of moving standard deviations, which use deviations from the moving average, but the possibility remains of high order price autocorrelation not accounted for by simple differencing from the moving average.

For such reasons, it is incorrect to assume that the long-term percentage of the data that will be observed in the future outside the Bollinger Bands range will always be constrained to a certain amount. Instead of finding about 95% of the data inside the bands, as would be the expectation with the default parameters if the data were normally distributed, studies have found that only about 88% of security prices (85%-90%) remain within the bands.[12] For an individual security, one can always find factors for which certain percentages of data are contained by the factor defined bands for a certain period of time. Practitioners may also use related measures such as the Keltner channels, or the related Stoller average range channels, which base their band widths on different measures of price volatility, such as the difference between daily high and low prices, rather than on standard deviation.


 
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Home Office Deduction
https://www.irs.gov/businesses/small-businesses-self-employed/home-office-deduction

中文 | 한국어 | TiếngViệt | Pусский

If you use part of your home for business, you may be able to deduct expenses for the business use of your home. The home office deduction is available for homeowners and renters, and applies to all types of homes.
Simplified Option

For taxable years starting on, or after, January 1, 2013 (filed beginning in 2014), you now have a simpler option for computing the business use of your home (IRS Revenue Procedure 2013-13, January 15, 2013). The standard method has some calculation, allocation, and substantiation requirements that are complex and burdensome for small business owners. This new simplified option can significantly reduce recordkeeping burden by allowing a qualified taxpayer to multiply a prescribed rate by the allowable square footage of the office in lieu of determining actual expenses.
Regular Method

Taxpayers using the regular method (required for tax years 2012 and prior), instead of the optional method, must determine the actual expenses of their home office. These expenses may include mortgage interest, insurance, utilities, repairs, and depreciation. Generally, when using the regular method, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.
Requirements to Claim the Deduction

Regardless of the method chosen, there are two basic requirements for your home to qualify as a deduction:
1. Regular and Exclusive Use.

You must regularly use part of your home exclusively for conducting business. For example, if you use an extra room to run your business, you can take a home office deduction for that extra room.
2. Principal Place of Your Business.

You must show that you use your home as your principal place of business. If you conduct business at a location outside of your home, but also use your home substantially and regularly to conduct business, you may qualify for a home office deduction. For example, if you have in-person meetings with patients, clients, or customers in your home in the normal course of your business, even though you also carry on business at another location, you can deduct your expenses for the part of your home used exclusively and regularly for business. You can deduct expenses for a separate free-standing structure, such as a studio, garage, or barn, if you use it exclusively and regularly for your business. The structure does not have to be your principal place of business or the only place where you meet patients, clients, or customers.

Generally, deductions for a home office are based on the percentage of your home devoted to business use. So, if you use a whole room or part of a room for conducting your business, you need to figure out the percentage of your home devoted to your business activities.

Additional tests for employee use. If you are an employee and you use a part of your home for business, you may qualify for a deduction for its business use. You must meet the tests discussed above plus:

Your business use must be for the convenience of your employer, and
You must not rent any part of your home to your employer and use the rented portion to perform services as an employee for that employer.

If the use of the home office is merely appropriate and helpful, you cannot deduct expenses for the business use of your home.

For a full explanation of tax deductions for your home office refer to Publication 587, Business Use of Your Home. In this publication you will find:

Requirements for qualifying to deduct expenses (including special rules for storing inventory or product samples).
Types of expenses you can deduct.
How to figure the deduction (including depreciation of your home).
Special rules for daycare providers.
Tax implications of selling a home that was used partly for business.
Records you should keep
Where to deduct your expenses (including Form 8829, Expenses for Business Use of Your Home, required if you are self-employed and claiming this deduction using the regular method).

The rules in the publication apply to individuals.

videos
http://www.irsvideos.gov/BusinessUseofYourHome/
 
May 7, 2013
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I have been see-sawing my way through this shark-tooth market. small profits from KBH, HRL, MYL, KEY (through buying and short selling). Stopped out on TWTR for small loss last week. Bought FL today, hoping for a $4-6 dollar gap up within the next several days, stop in place in the event it becomes unfriendly (up $0.40/share at this moment).
 
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I read Amazon makes less than a penny per dollar spent.
High volume, extremely low margins.

I'm not big on e-commerce, let alone anything web related (fads come and go) but I would buy Ebay over Amazon. Just higher margins...lower overhead.
 
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I put a small play on chevron yesterday knowing Trump is gonna b beefin with a iran. What other stocks do u thinknwill skyrocket once that beef kicks off. I feel it's inevitable
CVX is great. I have both CVX and XOM.

You can go WLL if you want to get risky.
If oil spikes, WLL will see a greater increase than CVX and XOM.

Chevron and Exxon have a lot of leverage, meaning if oil goes down they still make money in other ways. If oil goes down, WLL gets smashed (see their chart). They are oil price heavy.

I hope we can close at around 60-65 at the end of the year. I don't see anything greater than that. The days of 100 a barrel are long gone.