IMF: US housing slump at centre of financial crisis - Telegraph.co.uk
Posted by: admin in Today NewsIMF: US housing slump at centre of financial crisis - Telegraph.co.uk
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Filed under: Earnings reports, Products and services, Verizon Communications (VZ) Verizon Communications Inc. (NYSE: VZ) today reported better-than-expected second quarter results, fueled by growth in its wireless and FioS TV and World wide web customers. Net income rose 12% to $1.88 billion, or 66 cents a share, from $1.68 billion, or 58 cents, a year earlier, according to the New York-based company. Sales rose 3.7% to $24.1 billion. Excluding one-time costs, profit was 67 cents, two cents ahead of the 65-cents expected by analysts surveyed by Bloomberg News. Sales were slightly below the $24.2 billion Bloomberg estimate. “Our second quarter results were on track with our business plan, and top- and bottom-line growth remained solid,” stated Chief Executive Officer Ivan Seidenberg in the earnings press release. “We remain focused on steady improvements in revenue growth and productivity that’ll increase profitability and cash flows and create future opportunities to enhance shareholder returns.” Among the highlights:
Going forward, it will be interesting to see if consumers, who are already stretched thin, begin holding off on ordering FiOS even if the service is better to cable. Also, will stressed consumers quit the service because they’re worried about more pressing needs like their mortgage? Klaus Schmidt writes “Virgin Galactic this day unveiled their WhiteKnight Two mothership, called ‘EVE.’ It is designed to carry the smaller SpaceShip Two into space. The rollout represents another major milestone in Virgin Galactic’s quest to launch the world’s first private, environmentally benign, space access system for people, payload and science. Christened ‘EVE’ in honor of Richard Branson’s mother — Sir Richard performed the official naming ceremony — WK2 is both visually remarkable and represents ground-breaking aerospace technology. It is the world’s largest all carbon composite aircraft and many of its component parts have been built using composite materials for the very first time. At 140 ft, the wing span is the longest single carbon composite aviation component ever manufactured.” Read more of this story at Slashdot.
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2008
Fannie, Freddie bailout — first step toward ending housing sector’s slidePosted by: in HousingFiled under: Forecasts, Federal Natl Mtge (FNM), Politics, Housing, Recession As Washington legislation goes, the housing bailout bill that the U.S. House and Senate passed last week and that President Bush is expected to sign this week, is omnibus in scope and, ultimately, in budget and economic impact. Economist Glen Langan told BloggingStocks Monday the bill’s two key components are the assistance to Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), and a new Federal Housing Administration program. The former, Langan says, “represents an implied guarantee” of Fannie and Freddie by the U.S. Government, which should restore confidence in each, and in the secondary mortgage market. Banks and other mortgage lenders, he said, “will now be more willing to write conforming loans, knowing that Fannie and Freddie will have the funds available to purchase and back these loans.” The latter, a Federal Housing Administration program that enables banks to sell to the U.S. Government mortgages unlikely to be repaid, “will help stem the tide of foreclosures that’s plaguing the housing sector,” as well as “relieve banks/lenders of less-than-stellar to non-performing assets,” Langan said. Beginning of the end of the housing slump? “[U.S. Rep] Boehner’s concern is a valid one. The housing bailout could become an even larger housing-related outlay than the housing bailout in the late 1980s with the Resolution Trust Corporation,” Langan stated, adding that the bill “could add more than $500 billion in federal spending in less than five years.” Nevertheless, the alternative, in Langan’s interpretation, is far worse. Closing Fannie or Freddie, or preventing them from buying mortgages isn’t an option, he said. Further, a failure by Fannie or Freddie would be interpreted by institutional investors as a failure by the United Says Government to back its debt, he stated. “This would send a shock wave through the credit and bond markets. The dollar would plunge. The [U.S.] stock market would sustain its worst losses in decades, as would international markets,” Langan stated. “These events would produce the worst [U.S.] economic recession since the early 1980s, perhaps since the 1930s.” Langan added that, due to widespread borrower and lender errors during the housing boom, the U.S. Government and, by extension, the U.S. taxpayer, is now left with remedies that are “a) not very good and certainly very expensive, b) horrible, or c) catastrophic.” “It’s a mess, and the cleanup will be pricey for taxpayers. But one thing we have the ability to not do is sit here and watch the housing slump jeopardize the productive and functioning sectors of the U.S. economy,” Langan stated. “So in that sense the Fannie/Freddie bailout, by averting a major economic tragedy, marks the beginning of the end of the housing slump.” Economic Analysis: Stark, but sage advise from economist Langan: the cost of the housing clean-up will be enormous, and the policy reforms no easier to implement. For example: What policy reforms will prevent lenders from making reckless loans without hurting their ability to grow their loan portfolios / expand their business? And what policy changes will restrict mortgages to those likely to repay them, without preventing first-time home buyers from buying a home? And should the United Says, as some have suggested, end the mortgage system? Answers to these questions will take years to formulate. In the mean time, as Langan advocated, let’s keep Fannie and Freddie functioning, to prevent a tragedy.
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07
2008
Worst 10-year performers: First Horizon National rocked by subprime falloutPosted by: in HousingFiled under: Major movement, Bad news, S and P 500, Housing
First Horizon National Corporation (NYSE: FHN) operates as the holding company for First Tennessee Bank, making it one of many regional banks on our roster. If you’re the intelligent, discerning audience that I assume you to be, I probably need only mention that FHN is in the mortgage-lending business for you to guess what might be ailing the stock. What went wrong? At number 15 on our list of SPX laggards, FHN shed 76% of its value during the 10-year period ending June 30, 2008. The stock peaked at $48.65 in March 2004, but didn’t begin to plunge in earnest until July 2007. Say it with me, people: subprime. While the share price didn’t plummet immediately in response, FHN first revealed mortgage-related weakness in August 2006. The bank warned that quarterly earnings would be dented by deteriorating mortgage-market conditions, and profits fell during the next two quarters. FHN cited “lower gain on sale margins, further reductions in new mortgages and increased costs to hedge the servicing risks for mortgage loans” for the earnings weakness. On September 4, 2007, FHN’s head of employee services got chatty with The Memphis Daily News. John Daniel admitted that the bank was trimming its headcount gradually in a cost-cutting effort, but reassured the paper that the subprime crisis didn’t have too deep an impact. “We don’t see any significant reductions in staff as a result of what’s happening in the mortgage industry right now,” he asserted. Just a week later, on September 13, the Daily News reported that FHN was slashing 50% of its mortgage sales force, about 2,000 total positions. Daniel’s initial confidence seemed to stem from the fact that FHN offered only a small percentage of non-conforming loans. However, that couldn’t shield the company from a housing slump and foreclosure crisis that smacked the entire industry. FHN posted steep losses in its third- and fourth-quarter reports. In January 2008, the company slashed its dividend by 56% in a defensive move. Shortly thereafter, Moody’s and Standard & Poor’s both lowered their debt ratings on the bank. Following another sharp loss in the first quarter, FHN priced a public offering of 60 million shares of common stock at $10 per share in an attempt to shore up capital. In June, the company announced the sale of its mortgage business outside of Tennessee to MetLife, and stated it expected its mortgage banking assets to decline by at least $3 billion by the end of the year. What next? On July 15, First Horizon released its quarterly earnings ahead of schedule; investors were up in arms following a sharp drop-off in FHN’s share price sparked by the failure of IndyMac. Revenue surpassed expectations, while the per-share loss was wider than expected; in any event, the equity recovered its losses, and then some, after FHN reiterated previous forecast for full-year charge-offs. It seems that no one is sure what lies ahead for FHN. In the days following the most current earnings report, the stock was hit with multiple price-target cuts, upgrades, and downgrades. Overall, though, the tone is bearish — Zacks notes that 81% of the stock’s analysts’ ratings are either “holds” or “sells.” Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer’s Investment Research. She is featured in the weekly video series Option Basics on SchaeffersResearch.com.
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2008
Developers scale back mega housing projects - Arizona RepublicPosted by: admin in Today NewsDevelopers scale back mega housing projects - Arizona Republic
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