Archive for April 9th, 2008
Posted by: in Politics News
OrochimaruVoldemort writes “In an unexpected move, Microsoft has disclosed 14,000 pages of coding secrets. According to The Register: ‘This is Microsoft’s latest effort to satisfy anti-trust concerns of the European Union, which is possibly a tougher adversary for the company than Google.’ The article mentioned that this will be done in three phases. ‘Between now and June it will garner feedback from the developer community. Then, at the end of June, Microsoft will publish the final versions of technical documentation — along with definitive patent licensing terms.’ Lets just hope those terms are pro open source.”
Read more of this story at Slashdot.
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Posted by: in Housing
Filed under: Economic data, Politics, Headline news, Housing, Federal Reserve, Recession
 Recently, former Federal Reserve Chairman Alan Greenspan announced that the country is currently in a recession and that “the U.S. economy won’t stabilize until the housing markets recover.” He compared this to the Savings and Loan crisis of the late 1980s and mentioned that another organization similar to the Resolution Trust Corporation (RTC) might be necessary to resolve the situation.
I’ve repeatedly highlighted the parallels between the late 1980s and our current crisis. Part of the solution may clearly involve an organization similar to the RTC. This has generated debate over the role of government in resolving the crisis and who should ultimately bear the cost. Nevertheless, based upon comparing this to the S&L crisis of the late 1980s, there’s decent evidence that this crisis won’t be resolved until the housing crisis abates.
We might want to examine the differing ways that the Japanese Banking Crisis and the Swedish Banking Insolvency of the 1990s were resolved for guidelines. Under the Japanese scenario, the banks were given a lifeline and hesitated to write down the bad loans. This resulted in one of the longest economic slumps and bear markets in current history. Only now is Japan starting to emerge from this downturn, almost 20 years after it began.
The Swedish Banking crisis involved the temporary nationalization of insolvent banks by the government. The banks were restructured and then sold. Regulations were put in place to prevent a repeat of the situation. This crisis was much shorter in duration, and the banking system emerged in a much stronger position.
There are many issues associated with such differing solutions, including “moral hazard” and who pays the bill for the cleanup. These are serious matters and should be debated strongly before any action is taken. However, such a discussion and action plan is preferable to the current developing situation — a piecemeal bailout with the taxpayers paying the bill and having no state in the process. To borrow a phrase from the Revolutionary War, there should be “no taxation without representation.”
Doug Roberts is the Founder and Chief Investment Strategist for ChannelCapitalResearch.com and the author of Follow the Fed to Investment Success: The Effortless Strategy for Beating Wall Street . He previously held executive positions at Morgan Stanley Group and Sanford C. Bernstein & Co.
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Posted by: in Housing
Filed under: Products and services, Management, Consumer experience, Housing
 With people increasingly worried about the housing market and the credit crunch, it’s not a surprise that many consumers are saving their money instead of buying furniture and investing in their houses. And given the current market conditions, it’s no surprise that Swedish retail chain Ikea has seen its sales under pressure lately.
Anders Dahlvig, Ikea’s chief executive, recently said that the furniture retailer has been experiencing sales declines in some of its major markets, including Spain, Italy, and Germany. Moreover, the company anticipates the U.S. economic slowdown to affect other European markets as well. Both the global economic slowdown and higher energy and food prices have weighed on consumer confidence, contributing to the company’s weak sales.
Even so, Ikea is not cancelling its expansion plans. The company believes that the weak market conditions lower not only its sales but also those of its rivals. “In bad times the competition is hurting as well and I feel it is an opportunity for Ikea,” Dahlvig declared.
For the moment, is unclear if Ikea’s plan will be successful. However, the company doesn’t plan to expand its business in India due to the country’s restrictive retail investment laws. A change in the legislation is expected, but for the moment the retailer will continue to rely on emerging markets as the ideal expansion ways.
Eliza Popescu is a financial writer for the on the web investment advisory service Investor’s Observer.
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Posted by: in Housing
Filed under: Forecasts, Bad news, Housing
U.K. consumer confidence fell to its lowest level in nearly four years in March 2008, as the housing downturn continued to weigh on consumer sentiment, Bloomberg News reported Wednesday.
Britain’s Nationwide Building Society’s index of sentiment declined one point to 77, its lowest level since records started in May 2004. The result is based on a survey of 1,204 people conducted by Taylor Nelson Sofres from February 18 to March 20, 2008.
U.K. housing sector weighs
Economist Mark Chandler, based in London, told BloggingStocks Wednesday the fall in housing prices is beginning to weigh on U.K. consumer confidence. The average home price in the United Kingdom fell 2.5% in March 2008 to 191,566 pounds or $379,000, according to a survey by mortgage lender HBOS Plc., according to Bloomberg.
“Like America we’ve had an incredible run up of housing prices the last four or five years, and like America there were excesses, including a lot of curious mortgages and speculative activity,” Chandler said. “But it appears the boom is over now, if the actual bubble hasn’t already burst, and that reality is beginning to affect consumer confidence. There’s definitely a more cautious stance toward housing, the economy, and regarding the prospects for growth now, as opposed to six months ago.”
Lawson’s comments
Further, Chandler said comments former finance minister Nigel Lawson, who served as Prime Minister Margaret Thatcher’s finance minister from 1983 to1989, that the U.K., like the United Says, is headed for a recession, also have contributed to U.K. residents’ more-modest attitude regarding economic growth prospects, near-term.
“We aren’t affected as much by oil price rises, but everything else, job growth, the ability to secure a mortgage . . . they’re all affected by the economic downturn,” Chandler said. “Lawson’s comments have tended to cause people to reassess expectations. People are becoming more cautious regarding major financial decisions, and no one is simply throwing money at housing anymore, and that’s beginning to show up in house prices.”
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Posted by: in Housing
Filed under: Bad news, Adobe Systems (ADBE), Economic data, Housing, Federal Reserve
 American high school students know little about the basics of finance and economics, and the problem is getting worse, according to a report from the AP today.
The majority of high school seniors answered basic questions about finance incorrectly in a nationwide poll conducted by the Federal Reserve. Fed chairman Ben Bernanke called for better financial education, and linked the woeful state of basic economic knowledge to the housing crisis.
Bernanke said, “In light of the problems that have arisen in the subprime mortgage market, we are reminded of how critically important it is for individuals to become financially literate at an early age so that they’re better prepared to make decisions and navigate an increasingly complex financial marketplace.”
It’s hard to disagree with him on this point, but a cynic might wonder if a poorly educated population is really the source of the housing crisis. Sure, Americans don’t know much about the power of compound interest or how to compute net present value, but that’s not why the economy is in trouble. The housing bubble was produced by people who knew what they were doing — mortgage brokers who winked at “liar’s loans” and sophisticated bankers who created new financial instruments to get rid of the bad debt. All of these people were highly educated in economics and finance. The problem isn’t ignorance but a lack of integrity and regulation.
Whatever the cause of the housing crisis, it’s hard not to be concerned about how poorly educated many Americans are. Here are some of the findings from this year’s survey:
- On average, high school seniors answered correctly only 48% of questions about personal finance and economics — this is down from 52% last year.
- Only 16.8% knew that stocks likely would offer the higher growth over 18 years of saving for a child’s education, while 37.3% thought a U.S. savings bond — one of the most conservative investments — would offer the highest growth.
- Nearly 53% stated they would have no liability if their credit card was stolen and a thief ran up $1,000 worth of debt. (Liability is limited to $50 after the credit-card issuer is notified.) Only 13% knew they might have to be responsible for $50.
Bernanke is certainly right when he calls for superior education for American high school students. Fortunately, we have a national election coming up, and education policy is a good thing to pay attention to as you head to the polls.
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Posted by: in Housing
Filed under: Rich in America, Housing
 The New York Times reports that in 2007, the median family made less — $60,500 — than it did in 2000 — $61,000. Meanwhile, that family’s costs have spiked — oil is up 342%; wheat, milk, and egg prices have doubled or tripled. And the dollar has lost 65% of its purchasing power. But no worries — hedge funds are making out well. DealBook reports that John Paulson, who famously profited from selling subprime short last year, made $3 billion in 2007. I don’t know how much he made in 2000, but I’d bet that he’s better off now than he was then.
Newsweek reports that people like Paulson are part of a new Superclass that’s prospered in the last seven years. The Superclass is a group of a few thousand government and business people who control most of the world. How many and how much? Newsweek notes: “The top 50 control nearly $50 trillion in assets. The heads of the world’s biggest corporations are also members; the top 2,000 support perhaps 500 million people, generate nearly $30 trillion in sales and have well over $100 trillion in assets.”
Thanks to tax cuts passed in 2001, Paulson probably paid a lower tax rate on his $3 billion than the median American paid on his or her $60,500. Specifically, Paulson could have paid 15%, the long-term capital gains rate, on his income from shorting subprime. The median family paid a 25% rate on its income. That capital gains rate was 20% in 1997 so Paulson may have paid $150 million less in taxes thanks to that 15% rate. But the most interesting part is how Paulson profited.
DealBook reports that Paulson profited while the typical homeowner suffered. It notes that, “By standing conventional wisdom on its head and deciding that housing prices could decline on a national level, and that investment-grade mortgage bonds would be subject to default in record numbers, Mr. Paulson, 52, set a new record for payouts on Wall Street…” And since he’s part of that Superclass, Paulson can afford to hire self-pitying former Fed Chair Alan Greenspan as an advisor.
Meanwhile, DealBook cites an IMF estimate that the loss of value that lined Paulson’s pocket may hit $1 trillion. That global loss in value springs from the disaster in the subprime market which will likely result in millions of home foreclosures in America. The Superclass will probably need to find new ways to make its billions this year because the word is out on the subprime short trade.
And for those who voted the current regime into office, if you’re not in that top 2,000 people, you voted against your own economic interests. The miracle is that a country of 300 million people was hijacked by a little elite that was able to persuade millions of voters to give them power in order to implement economic policies that favored the Superclass at the expense of the average American.
I admire Paulson’s prescience and nerve in profiting from the subprime collapse. I just think it’s interesting that he is paying less tax on his $3 billion in earnings than the typical American on the losing end of that subprime trade.
Peter Cohan is President of Peter S. Cohan & Associates. He also instructs management at Babson College and edits The Cohan Letter.
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esocid writes “Until very recently, asking what happened at or before the Large Bang was considered by physicists to be a religious question. General relativity theory just doesn’t go there — at T=0, it spews out zeros, infinities, and errors — and so the question didn’t make sense from a scientific view. But in the past few years, a new theory called Loop Quantum Gravity (LQG) has emerged. The theory recommends the possibility of a “quantum bounce,” where our universe stems from the collapse of a previous universe. This may be similar with beliefs of Physicist Neil Turok of Cambridge University who has theorized about a cyclic universe, constantly expanding and compressing.”
Read more of this story at Slashdot.
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Posted by: admin in Today News
Travelers and RIFCO announce strategic alliance for repair finance - bodyshop
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Filed under: Deals, Products and services, Consumer experience, Google (GOOG), Yahoo! (YHOO)
 Websites produce large amounts of data - which can be quite valuable and is a large business, as seen with operators like Omniture (NASDAQ: OMTR), WebTrends, CoreMetrics, and Google (NASDAQ: GOOG) Analytics.
Well, Yahoo! (NASDAQ: YHOO) is jumping into the game. This day, the company announced that it has purchased IndexTools (the price tag was not disclosed).
Founded in 2000, the company has built a nice offering of analytics tools to measure web behavior. For example, you can analyze things like the return-on-investment for paid search.
According to its website, IndexTools has grown 100%+ per year for four years (since 2002). What’s more, the customer retention rate is an impressive 98%.
Simply put, web analytics is completely critical for a major player in on the web advertising. Unfortunately, in the case of Yahoo, the company allowed Google to get a head start.
Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar On the web Guide to Decoding Financial Statements . He also operates MergerBook.com.
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Filed under: Products and services, Management, Consumer experience, Housing
With people increasingly worried about the housing market and the credit crunch, it’s not a surprise that many consumers are saving their money instead of buying furniture and investing in their houses. And given the current market conditions, it’s no surprise that Swedish retail chain Ikea has seen its sales under pressure lately.
Anders Dahlvig, Ikea’s chief executive, recently stated that the furniture retailer has been experiencing sales declines in some of its major markets, including Spain, Italy, and Germany. Moreover, the company expects the U.S. economic slowdown to affect other European markets as well. Both the global economic slowdown and higher energy and food prices have weighed on consumer confidence, contributing to the company’s weak sales.
Even so, Ikea is not cancelling its expansion plans. The company believes that the weak market conditions lower not only its sales but also those of its rivals. “In bad times the competition is hurting as well and I feel it is an opportunity for Ikea,” Dahlvig declared.
For the moment, is unclear if Ikea’s plan will be successful. However, the company doesn’t plan to expand its business in India due to the country’s restrictive retail investment laws. A change in the legislation is expected, but for the moment the retailer will continue to rely on emerging markets as the ideal expansion ways.
Eliza Popescu is a financial writer for the on the web investment advisory service Investor’s Observer.
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