Filed under: International markets, Housing, Recession

In an article I wrote yesterday, entitled Hitting the skids in Florida, I analyzed the fallout of depressed real estate prices and how folks are coping with a new reality. This day, the FT has an article about how the changes in global real estate are affecting places like Spain.

In Spain’s Property Market Headed for a Fall, the FT examines financial conditions in Spain that are leading to a perfect storm. The story cites tightening credit conditions (ie, it’s harder to borrow money), the oversupply of houses, and rampant price inflation as leading to a precarious present for Spanish residents. Spanish prices have dropped almost 30% from where they were at this time last year.

Sound familiar?

We’re suffering from some of the same malaise but I’ve to say, that after a slow going, our Federal Reserve has moved swiftly and decisively to address some of the same issues on American soil.

The difference between the Spanish situation and our own appears to be government intervention. Where our Federal Reserve has added a lot of liquidity into ailing banks, lowered interest rates, and even orchestrated a bailout, Spain’s Socialist government seems focused on job retraining and stepping up public works projects.

We’ll see where this all pans out.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

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Filed under: International markets, Other issues, Columns, Housing

Financial eras, like social periods, are often defined by moments or epiphanies when decision makers and/or citizens realized that a serious flaw/mistake/problem was occurring through time, and across space, and needed to be corrected.

The ever-incisive FT columnist and economist Martin Wolf describes one contemporary concern that’s apt to be addressed: the failure to align the interests of managers with those of investors.

My BloggingStocks colleagues Peter Cohan and Zac Bissonnette have also written on the subject on several occasions in this space, and now the FT’s Wolf has assembled additional data that might very well lead to public policy changes, both in Wolf’s United Kingdom and in the United Says.

A manager, investor disconnect

Wolf notes that it’s now abundantly clear that the world’s major economies, particularly the United Says and the United Kingdom, have experienced manager/typical investor disconnect, be it in the mortgage banking, hedge fund, or corporate worlds.

In conventional corporations, it took the form of overly generous pay and compensation packages, and low-bar performance thresholds that were antithetical to building shareholder value.

In the hedge fund, or alternative investment sector, it took the form of generous management fees and performance fees (the 2%/20% dictum), that all but guaranteed an absolute return for managers — whether the fund made money or not — at the expense of investors.

And in perhaps the most publicized and egregious practice, in mortgage banking, it took the form of mortgage origination and closing fees paid to loan officers, loan originators, and bank executives for loans that had a 90% chance of reaching default status, to the detriment of the banks’ shareholder value, and as citizens of the United Says are beginning to find out, to the detriment of U.S. taxpayers, as well.

One solution: the Buffett model

Wolf’s solution? First, Wolf notes that the manager/investor disconnect isn’t an easy problem to solve, but the ideal solution centers around not paying the manager, as a manager, at all, but to invest alongside him/her, ala the Warren Buffett system at Berkshire Hathaway (NYSE: BRK.A). Second, once this system is in place, the unscrupulous and the unskilled will be driven out of the system, in much the same way the percentage of shady used automobile dealers decreased after reforms and legal safeguards were passed.

Economic Analysis: Wolf’s realignment of investment entity/investor interests would involve rewarding entities on the basis of final returns, forcing them to hold a sizable equity stake, or levying penalties for underperformance.

All three merit discussion by policy makers, and in particular pay-for-performance and penalty-for-non-performance have great appeal. Further, for publicly-insured entities, if taxpayer dollars (or pounds) are going to be used to pay for managers’ mistakes, managers/executives must be assessed public fines, among other penalties, to help reimburse that public expense.

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Filed under: Products and services, Consumer experience, Market matters, Economic data, Chasing Value, Housing, Recession

We’ve all heard of bus tours showcasing the homes of the rich and famous … but the recent credit crunch that has spread across America has led to another sort of bus tour: the Foreclosure Bus Tour. That’s right, potential home buyers looking to grab up a piece of Orlando, Florida real estate can now take a six-hour bus tour featuring various homes that have been foreclosed in the area.

It’s no secret that foreclosures have been on the rise over the past year to alarming levels, but the Foreclosure Bus Tour is a symbol of just how bad things have become. The cost of the tour was $45 per person ($65 per couple) and included a continental breakfast and lunch at Applebee’s. In addition to the food, the potential buyers were also given information on the homes, as well as some important teaching lessons that any potential home buyer could benefit from.

All in all, it seems like a decent way to go out and look at a whole bunch of properties all at once (the tour featured seven different available properties). At each stop the potential buyers got first hand access to a home inspector who walked them through the home, and between stops they were able to chat with a mortgage broker. The tour also had lawyers on hand to discuss any legal questions that came up during the trip. Not too bad for $45.

Florida has been hit pretty hard in the foreclosure crisis. In February, the state was #3 in the total number of foreclosures, only coming in under California and Nevada at the top of the list. According to a report by RealtyTrac Inc., the state had 32,447 homes foreclosed in February alone. That is 69% higher than the same month last year, and 7% higher from January of this year. Definitely makes you realize that the situation is not exactly turning around just yet.

If you’re interested in picking up some discounted homes, but do not live in Orlando, don’t worry, these tours seem to be popping up all across the country. According to the Associated Press article, tours are also popping up in other major markets in California, and major cities such as Phoenix, Detroit, Kansas City and Jacksonville.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the web investment advisory service Investor’s Observer.

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Filed under: Earnings reports, Consumer experience, Lennar Corp’A’ (LEN), Economic data, Housing

With the financial crisis spreading swiftly, housing stocks have been facing tough times over the past few months. But on the heels of these worries, shares of one of the nation’s largest homebuilders, Lennar Corp. (NYSE: LEN), have been climbing today despite posting a first quarter loss, as its earnings results weren’t as bad as analysts had forecast.

The company announced it swung to a quarterly loss of $88.2 million, or 56 cents per share, compared with a profit of $68.6 million, or 43 cents per share a year earlier, injured by lower new home deliveries and orders. Included in the company’s earnings figures was a charge of 38 cents per share related to valuation adjustments and write-offs. Excluding that, Lennar’s loss would have come at 18 cents per share, exceeding analysts’ forecasts for a quarterly loss of $1.07 per share.

The company’s quarterly revenue saw a big fall of 62% to $1.06 billion, down from $2.79 billion a year ago, on pressure from the average selling price which lost 8%. For this period, the slumping housing market came with a drop of 60% for new home deliveries, and with a decline of 57% for new home orders.

With persistent fears over a possible recession, Lennar had to face a pretty difficult 2007. The tumbling housing market and credit crunch brought a slowdown in consumer spending, and the company believes this is far from over. As supply of homes will continues to exceed the demand, the company still has to face weak volume of new home sales and depressed prices.

Lennar’s positive earnings gave investors’ some hope amid the challenging market conditions, but the lack of home demand is still a major concern. Uncertainties around consumer spending could bring more substantial declines in orders and this isn’t something we have the ability to ignore.

Eliza Popescu is a financial writer for the on the web investment advisory service Investor’s Observer.

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Filed under: Products and services, Consumer experience, Market matters, Economic data, Chasing Value, Housing, Recession

We’ve all heard of bus tours showcasing the homes of the rich and famous … but the recent credit crunch that has spread across America has led to another sort of bus tour: the Foreclosure Bus Tour. That’s right, potential home buyers looking to grab up a piece of Orlando, Florida real estate can now take a six-hour bus tour featuring various homes that have been foreclosed in the area.

It’s no secret that foreclosures have been on the rise over the past year to alarming levels, but the Foreclosure Bus Tour is a symbol of just how bad things have become. The cost of the tour was $45 per person ($65 per couple) and included a continental breakfast and lunch at Applebee’s. In addition to the food, the potential buyers were also given information on the homes, as well as some important teaching lessons that any potential home buyer could benefit from.

All in all, it seems like a decent way to go out and look at a whole bunch of properties all at once (the tour featured seven different available properties). At each stop the potential buyers got first hand access to a home inspector who walked them through the house, and between stops they were able to chat with a mortgage broker. The tour also had lawyers on hand to discuss any legal questions that came up during the trip. Not too bad for $45.

Florida has been hit pretty hard in the foreclosure crisis. In February, the state was #3 in the total number of foreclosures, only coming in under California and Nevada at the top of the list. According to a report by RealtyTrac Inc., the state had 32,447 homes foreclosed in February alone. That’s 69% higher than the same month last year, and 7% higher from January of this year. Definitely makes you realize that the situation isn’t exactly turning around just yet.

If you’re interested in picking up some discounted homes, but do not live in Orlando, don’t worry, these tours seem to be popping up all across the country. According to the Associated Press article, tours are also popping up in other major markets in California, and major cities such as Phoenix, Detroit, Kansas City and Jacksonville.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the on the internet investment advisory service Investor’s Observer.

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Filed under: Products and services, Amazon.com (AMZN), Best Buy (BBY)

Not only is Ideal Buy, Inc. (NYSE: BBY) moving swiftly to kick out the dead HD DVD format from its store shelves, but now the largest consumer electronics retailer in the U.S. is starting to aggressively price the victor format of the next-generation DVD — Blu-ray.

Although there’s now just one next-generation DVD format available, consumers still haven’t ponied up tons of cash to purchase Blu-ray hardware players and accompanying $29,99 Blu-ray motion picture titles. Why? Standard DVD is good enough for most of us.

That’s, until the prices come down on the players and the movies themselves. Blu-ray players are still costly at $399 and up in most cases, but Ideal Purchase is taking the sting out of some movie prices by cutting many popular titles to $19.99 each. Psychologically, that gets Blu-ray pricing on some level of parity with normal $14.99 and $16.99 DVD prices. Even some new releases on standard DVD begin at $19.99 as well.

And not only that, on the web competitor Amazon.com (NASDAQ: AMZN) started offering more than 100 Blu-ray titles this week at up to 47% off. Is this the begin of aggressive Blu-ray motion picture pricing meant to finally spur sales of the new DVD format? Now that the competing HD DVD format is out of the way, the path becomes much easier for retailers. Perhaps aggressive movie titles will actually cause the more costly hardware to move faster off shelves.

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Filed under: Other issues, Bad news, Products and services, Management, Consumer experience, Scandals, Boeing Co (BA), Southwest Airlines (LUV), AMR Corp (AMR), Delta Air Lines (DAL)

For anyone who has plans to fly on American Airlines, AMR Corp (NYSE: AMR) or Delta (NYSE: DAL) today, you might want to call ahead and verify that your flights are still taking off as planned, as both airlines are canceling hundreds of scheduled flights today.

Both carriers are grounding a huge number of flights as they continue to hold inspections on wiring bundles on some of their planes. For American, the company is planning to ground 132 of its flights today, while Delta is canceling 275 flights.

The Federal Aviation Administration is in the middle of a big inspection project, in which it stated that it will be inspecting 10 safety orders (also known as airworthiness directives) at each single major airline by March 28. This comes after a scandal broke out over missed inspections at Southwest Airlines (NYSE: LUV) earlier this year.

The Southwest scandal resulted in a $10.2 million dollar fine after the company continued to fly planes for a 10-day period after they missed their inspections. Southwest is appealing this decision, stating that the manufacturer of the planes, in this case Boeing (NYSE: BA) stated that continuing to fly the planes wouldn’t pose any threat to passengers. As it turned out, six of the planes in question had to be repaired for small cracks and have since been put back into service.

Small cracks? No danger? I don’t know about you … but I definitely hope I never board any plane that has any “small cracks” in it. Is there really even such a thing as a small crack when it comes to airplanes flying at 35,000 feet? Not to me there isn’t.

So, while these current cancellations are definitely going to cause some people a bit of inconvenience, at least travelers can sleep a tiny easier on their flights knowing that they’ve all passed their required inspections.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor’s Observer.

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Riding with Robots writes “As previously reported, the robotic spacecraft Cassini recently flew through the mysterious geyser plumes at Saturn’s icy moon Enceladus. Today, NASA released the preliminary results of the flyby, including some intriguing findings, such as organic materials 20 times denser than expected and relatively high temperatures along the fissures where the geysers emanate. ‘These spectacular new data will really help us comprehend what powers the geysers. The surprisingly high temperatures make it more likely that there’s liquid water not far below the surface,’ stated one mission scientist.”

Read more of this story at Slashdot.

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smooth wombat writes “In what can only be considered a bizarre court case, a former nuclear safety officer and others are suing the U.S. Department of Energy, Fermilab, the National Science Foundation and CERN to halt the use of the LHC (Large Hadron Collider) until its safety is reassessed. The plaintiffs cite three possible ‘doomsday’ scenarios which might occur if the LHC becomes operational: the creation of microscopic black holes which would grow and swallow matter, the creation of strangelets which, if they touch other matter, would convert that matter into strangelets or the creation of magnetic monopoles which could begin a chain reaction and convert atoms to other forms of matter. CERN will hold a public open house meeting on April 6 with word having been spread to some researchers to be prepared to answer questions on microscopic black holes and strangelets if asked.”

Read more of this story at Slashdot.

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mattnyc99 writes “There’s a new entry in the race for the first space tourism jet: XCOR Aerospace, a California-based rocket builder. The company says its clean-burning, two-seat Lynx spacecraft will lift off by 2010. After we only saw a mockup of Virgin Galactic’s SpaceShipTwo a couple months back, you’d think this was serious competition in the ‘New Space’ race, but these photos show that Burt Rutan’s Scaled Composites is well on its way with construction.”

Read more of this story at Slashdot.

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