General Electric (GE). One of my first picks from last year (at $11.62), it was $16.40 when I told you to stay put in February and it saw $19.80 recently, before retreating back to $16.95. I’m not overly concerned, so hold it for now, but of you see $19.80 again, sell at take your 70% return.

Hunang Power (HNP). This Chinese energy company bounced of its $22 bottom and has edged up again to $24.50, before pulling back on the recent wave of selling in all China stocks. It’s now $23.45 down from my original price in March 2009 of $29.34. I would put in a limit buy at $22 and if it sells off further, you can average down. China + Energy = Profits.

China Integrated Energy (CBEH). A perfect example of beating the street and the stock goes down. The street had revenue of $88mm and a net of $.26, and they did $109mm and netted $.27. In the case of CBEH, the concern here is margin compression. While on the surface, this did occur, I spoke to the Company and it’s my opinion that this is a temporary affect due to expansion in both the retail gas station business and they heavy oil distribution business. They are at full capacity on the high margin bio diesel business and will be opening another plant by year end and may further expand through an acquisition. I first recommended CBEH at $4.00 in March 2009; it hit $12.05 recently but has backed down to under $8.00, then bounced up to around $9.25. Normally I would take a double and go home, but I can’t find a better place for my cash. If they hit their concensus earnings of $1.08 a share this year, at 12PE puts them back over $12. Hold it if you own it and buy some if it dips under $8.50. (I own this stock).

Bank of America (BAC).  Well at least it’s not Goldman Sachs (GS). Picked last October at $16.50, it moved up, then retreated and is $15.90. Despite the fact that I am getting nervous about the global picture, in the end, the US seems to be better than Europe and BAC is well positioned to ride out the storm.  Hold it for now.

QKL Stores (QKLS).  QKLS reported a huge 1st quarter. They increased their top and bottom lines by over 25%. The stock was over $6 when I said buy it if it dips below $6. Guess what, it went below $5 a few weeks ago and is currently sitting at $5.20. QKL will add another 20 stores this year (a 50% increase) and they have just opened their massive Distribution Center (DC), which is critical to support their rapid expansion program. The concern here was margin compression, but I think that’s bogus…show me a consumer retail expansion where margins aren’t hampered with start-up costs. Same store sales last quarter were up over 9% and the DC will lift margins up from the mid 17% range to over 19%. If you own it higher, consider averaging down. If you don’t, it may be a great time to add it to your portfolio. (I own this stock).

Shengkai Innovations (under new symbol “VALV”, formerly SHE). VALV has had two explosive quarters and I believe we are just at the beginning. Wait until the open the new plant and triple their capacity. With a net income of 35% of sales, you would think they would selling software and not ceramic valves.  I first recommended VALV at $6.00 and it ran up to $10.50, before pulling back to around $8.25 today. Rodman and Renshaw issued at BUY giving a 12 month target of $21. According to Lewis Fan, the report’s author, next year’s revenue will top $125mm (from $45mm) and income will explode to over $45mm (from $19mm). VALV is on a June 30th fiscal year, which means we won’t have to wait long for these numbers to be kicking in. If he is right, this stock may be the cheapest on my list. If you don’t own this stock, I strongly urge you to take a close look. I don’t want to have to say I told you so. Even my son Martin who turns 10 today, likes this pick. (I own this stock).

JP Morgan (JPM) – I said buy it at $38.50 and it went as high as $48, before the massive sell off in the past 30 days. It’s up a little still at $39.70, and like BAC, I’m nervous, but my gut says hang in there.

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It’s early April, 2010, and I have received an email from Jeff Starbling. You may remember the story, no, the saga.  For those just tuning in, here is a quick recap.  Jeff and his wife purchased a townhouse in Florida for $200,000 at the height of the housing boom. Bank of America (BOA) held both the first and second mortgage, $160,000 and $40,000, respectively.  It was the classic ‘no money down’ purchase with a higher interest rate of 8%.

After purchasing the home, the Starbling’s welcomed a new baby to the family.  Soon after, Jeff’s wife lost her nursing job. They began having problems paying the mortgage due to the lack of income and certainly couldn’t sell the home, as the market values in the area had dropped by 30%. Instead, the Starbling’s decided to apply for a loan modification, widely touted as the answer for many struggling families.  After 5 months of negotiations, the news from the lender was not what they wanted or expected to hear.  The Starbling’s were rejected – due to the home being listed for sale. After exhausting every option available, the Starbling’s gave up on BOA and decided to move out last fall.

The Starbling’s home is now under contract to be sold via short sale for approximately $118,000.  Bank of America stands to lose over $90,000 once commissions & fees are paid.

Had the lender taken the time to listen to the Starbling’s situation, BOA may have avoided a significant loss.  The Starblings weren’t looking for anything but a way to lower their monthly mortgage payment. They were prepared to deal with the fact that the house was underwater and understood it would take years before their home would regain enough value to break even. They wanted to do the right thing, but after being rejected on a technicality, the Starbling’s faith in the ‘system’ has been seriously tested.

As for Bank of America, the process would have been easier and certainly a lot cheaper. All they needed to do was lower the interest rate from 8% to 4%. This would have cut the Starbling’s bill in half and would have allowed them to stay in the home they purchased to start a family.  Even at low Fed rates such as 4%, BOA still stood to make a profit.  Instead, a new family is without a home and a lender has a loss on the books.  I don’t get it.

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http://www.thestreet.com/story/10702905/1/chinese-retailer-poised-for-expansion.html

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http://www.thestreet.com/story/10671515/1/buying-opportunities-in-china.html?cm_ven=GOOGLEN.

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Emails, like the one below, to BOA/Countrywide from Shiffer pleading for help were never responded to:

Lidia and Michelle,
The documents for consideration for a loan modification for the Starblings now have been with Bank of America for more than five months. The only update I ever receive is that “it is under review.” I am never able to get in touch with Lidia or anyone else assigned to this file. There has to be something more than “it is under review” at this point. Has an appraisal been ordered? Are you waiting for investor approval? Who is the investor? My clients are quite frustrated with this whole process and seriously are considering filing bankruptcy in which case Bank of America would receive $0. Please contact me as soon as possible as I find it inexcusable that no one with actual knowledge of the file is ever available to speak with me.
Jennifer

The lack of progress was too much for the Starblings, who decided to take matters into their own hands. On October 1st, they listed the property for a short sale for $129,000. Remember this is 35% below the original purchase price of $200,000 (which is also the loan amount). On October 29th, they Starblings received their first offer for $119,000. Their realtor submitted the offer to the bank the next day.

Less than a week later, on November 4th, attorney Shiffer received the following email from Lidia V. Canedo of the BOA/Countrywide loan modification department:

This loan was assigned to me on 09/21/2009. I am attempting to get through my files as quick as possible. I will give you a status this week but please understand that this loan does require investor approval and that they do take time. Thank you.

The same day (after Shiffer forwarded the email to the Starblings) Jeff wrote back to Shiffer:

I received the response from B of A. We do have an offer on the house, but the realtor said it takes months to complete and that it usually takes about 3 offers to complete a short sale. If B of A gives us a decent loan modification, we would consider staying. We don’t think it’s fair that a new owner can come in and pay far less than we did and get a much better loan. Why don’t they just work with us! Time will tell. Jeff

The next 13 days were filled with requests from BOA’s Canedo to Shiffer for updated W2 info, bank account statements, credit card balance explanation, etc.  Then 13 days later, on November 17th, the bottom fell out. Shiffer received this email from BOA’s Canedo:
 
Jennifer,
 
I just saw that this loan is being looked at for a short sale. The borrower’s agent has sent in a purchase agreement. At this time, the mod review will be closed out, they cannot try to pursue a mod and a short sale at the same time. File is declined.
 
Respectfully,
Lidia V. Canedo

Almost 7 months of work gone. A last minute tirade of emails ensued between Shiffer and Starbling questioning whether or not if the Starblings should cancel the short sale in an attempt to get the bank re-open the loan modification. This was a risky proposition, as there was not guarantee that they would or if they did what they would be willing to offer. After much deliberation, Starbling wrote:
 
It took Bank of America entirely too long to look into our case. We have been requesting a modification LONG BEFORE the short sale process began. We do not want to prolong this situation any longer than it needs to be. At this point, our credit has already been damaged and we no longer want to stay in this house. They had plenty of time to work on this and our situation was not addressed until it was too late.  If they gave us an answer sooner, then maybe we could have worked something out with Bank of America and stayed in the house. We do not want to risk losing the short sale offer.

With that, the Starbling loan modification process officially ended.

A new chapter has begun, the short sale process. As most attorneys and realtors who handle short sales can tell you, this process can take from 4 to 9 months. And, along the way, you may end up getting foreclosed upon and evicted. If there is ever evidence of the right hand not knowing what the left is doing, this process should serve as the highlight film.

For all of us who pay taxes and own homes, this process effects us all. First, we are in one form or another, subsidizing the banks ineptitude with our tax dollars. This adds to the debt which is so out-of-control, I don’t even have enough time to scare you with the facts. Suffice it to say, we (America) is past broke and the result of all this debt will be catastrophic. Second, the fact that the bank can’t seem to work out a “deal’ with a homebuyer who wants to pay his mortgage, but needs a lower rate, makes you wonder how bad is the problem?

To be fair to the banks, I’m sure they are not happy with any of this at all. Jamie Diamon, CEO of JP Morgan Chase, didn’t wake up this morning and gleefully thank his lucky stars that his banks has tens of thousands of Starblings to deal with and that his (and all) banks are simply not set-up to handle this kind of situation. The problem is that the banks don’t consider loan modification a “money making” part of their business and therefore, they are not putting their “best and brightest” on the job. Instead, they are outsourcing call centers to India and having their front line people babble endlessly about nothing. I have been on the calls. I can tell you that the “customer service” representatives (whom I listened to) DO NOT know how to field calls regarding residential loans. Many of them should be selling tickets at the movie theatre.

This is why you should be angry. Congress, the Treasury Department and White House have all banged their fists over the past several months in order the get banks to move resources into this problem area. They warn, they scold, and they threaten and even try to entice the banks to do more, quicker. But the process drags and with it, thousands of Starblings face the loss of their homes and the banks face loan write downs that will total hundreds of billions.

I am no fan of government intervention. In general, I think government screws things up. Private enterprise is the backbone of this country and it’s the only thing that will keep America going. But at times the government should “guide” business in areas that affect the nation. With over 75 million home owners and 140 million taxpayers being affected, the residential home crisis is one of these areas that need urgent attention.

I will continue to update the progress on the Starbling’s short sale in the coming months. As it stands now, BOA will be looking at an $80,000 loss, plus accrued interest. Too bad they didn’t have some bright dealmakers on case in July, they would faired much, much better.

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http://www.thestreet.com/story/10605332/1/sp-500-slayer-fund-gets-job-done.html

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