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Continue reading Banking stupidity, then and now

20 11 2008

Banking stupidity, then and now

Posted by: in Housing

Filed under: Other issues, Deals, Rants and raves, Competitive strategy, JPMorgan Chase (JPM), Washington Mutual (WM), Entrepreneurs, Housing

Eighteen months ago, banks were throwing money around with very tiny discretion. Now we find that they made a lot of bad loans, took extreme risk and jeopardized the global economy and the well being of hundreds of millions of people.

All this was supported by a simple minded president, corrupt Congress and an over-confident, short sighted investment community maneuvering in and around a sleeping Securities and Exchange Commission.

Having invested in a broad range of real estate assets (as well as stocks), I am feeling the pain like most everyone else. Reduced values, tighter liquidity, and uncertainty rule the market place.

What has me steamed currently is that I think there’s more capital in the marketplace than courage! The lack of courage along with a shortage of leadership and wisdom continues to exacerbate a bad situation. I’m probably superior off than many people having been able to shut two loans in the past month. It was not easy. However, after dealing with many financial institutions that are now doing a better job in the review process, I see that they’ve swung too far to the conservative side.

Banking stupidity, then and now originally appeared on BloggingStocks on Wed, 19 Nov 2008 13:30:00 EST. Please see our terms for use of feeds.

Continue reading Home construction hits record low - could be good news

20 11 2008

Home construction hits record low - could be good news

Posted by: in Housing

Filed under: Money and Finance This day, Economic data, Housing, Financial Crisis

When you read the stories this day about home construction hitting its lowest level since 1959, you probably think it’s just more bad news — but it’s actually good news.

The only way we’re going to even get near the bottom of the housing price drop is for the backlog of available homes to be sold. We’ll only see prices begin to climb back up when demand is higher than the available supply. We’re still a long way off from that scenario, but if builders stop building, we’ll get there a lot faster.

Based on the new numbers released this day by the Commerce Department, the pace of new construction will put the U.S. on track to build the fewest new homes and apartments since the end of World War II. Commerce reported that construction of new homes and apartments dropped to 791,000 on an annual basis. Prior to today’s report the slowest pace since World War II was in January 1991. This was the fourth straight monthly drop and I doubt it’s the last one. There are still too many homes waiting to be sold.

The declines were led by a 31% drop in the Northeast and 13.7% drop in the Midwest. There were modest increases in the South (1.5%) and the West (7.5%). Given that the South and the West were the hardest hit at the beginning of the housing bubble burst, this could be good news that these hard hit areas are nearing their bottom.

Home construction hits record low - could be good news originally appeared on BloggingStocks on Wed, 19 Nov 2008 13:45:00 EST. Please see our terms for use of feeds.

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Continue reading ‘Growing’ assets: Plum Creek Timber (PCL)

18 11 2008

‘Growing’ assets: Plum Creek Timber (PCL)

Posted by: in Housing

Filed under: Newsletters, Commodities, Agriculture, Stocks to Buy, Housing

“Seattle-based Plum Creek Timber (NYSE: PCL), the nation’s largest private landowner with more than eight million acres, has caught our eye,” says Bill Martin.

In his BullMarket.com advisory, he explains, “Earnings have been stunted in recent quarters by the housing slump, but the company sports a strong balance sheet and an asset base that thanks to nature only gets larger and more valuable as time goes by.”

“Plum Creek, which operates as a real estate investment trust, reported surprisingly solid Q3 profit. It posted net income of $69 million, or 40 cents per share, for the quarter ended September 30th, compared with a profit of $59 million, or 34 cents per share, for the same period a year ago.

“In the 2007 quarter, fire losses in Montana forced the company to report a $4 million non-cash expense, or two cents per share, related to fire losses experienced in Montana.

“The company’s EPS results topped the expectations of Wall Street analysts by a penny a share. Revenue grew to $414 million, up 2% from $407 million last year. The sales results were a bit short of the consensus of $419.8 million.

‘Growing’ assets: Plum Creek Timber (PCL) originally appeared on BloggingStocks on Tue, 18 Nov 2008 13:30:00 EST. Please see our terms for use of feeds.

15 11 2008

Why a stock market rally can’t be sustained

Posted by: in Housing

Filed under: Forecasts, Housing, Recession

Yesterday, the market had a swing of over 900 points as indexes hit new lows for the year and then pushed upward to close 6% or so higher. Overnight, markets in Asia and Europe staged rallies of their own.

The stock market may march up for a while, but that can’t be sustained and the odds are likely that it will crash and make new lows again before year’s end.

The fiction is that the markets trade based on what they see six months into the future. Perhaps they see GDP recovering by then. Not a chance.

George Soros said yesterday that there is some chance that the world economy will enter a depression next year. That may be extreme, but a majority of business leaders and economists who want to be heard on the subject state that this is the most significant downturn of their lifetimes.

There’s a view that falling housing prices are at the core of the disaster that has overwhelmed the financial structure of the country and is now hurting everything from retail sales to tech company revenue. Housing may be helped by government programs, but if unemployment hits 8% or superior next year, the number of people who have to give up their homes could rise sharply. Lower interest rates do not help people out of work.

Another misconception about the future is that oil prices will continue to fall. With some OPEC nation’s facing budget deficits due to crude dropping from over $140 to $55, the cartel will have to cut production to meet demand. That might mean a massive cut, but OPEC can match the drop in the global need for oil with a paltry supply.

The stock market has not stopped going down.

Douglas A. McIntyre is an editor at 247wallst.com.

Why a stock market rally can’t be sustained originally appeared on BloggingStocks on Fri, 14 Nov 2008 09:15:00 EST. Please see our terms for use of feeds.

Continue reading Mortgage applications inch higher last week

15 11 2008

Mortgage applications inch higher last week

Posted by: in Housing

Filed under: Forecasts, Good news, Money and Finance Today, Housing, Recession, Financial Crisis

The main question that everyone keeps asking regarding the housing market is: when are people going to start to purchase again? Last week we saw a tiny encouragement in this area, as mortgage applications rose a bit higher, possibly in reaction to lower interest rates.

Almost everyone concurs that the troubled housing market is a key ingredient to the current economic troubles that the American economy is dealing with, but today we got a bit of good news, as mortgage applications reportedly rose by 11.9%.

Last week’s move is a nice sign, but we also have to remember that just the week before, we were looking at applications running at their lowest level since all the way back in December 2000, so we can’t grant ourselves to get too excited over today’s news. We still have a long way to go before the country is able to crawl its way out of the current housing melt down.

Mortgage applications inch higher last week originally appeared on BloggingStocks on Thu, 13 Nov 2008 17:20:00 EST. Please see our terms for use of feeds.

14 11 2008

Foreclosures keep moving up

Posted by: in Housing

Filed under: JPMorgan Chase (JPM), Housing, Recession

There are a number of theories that claim that until housing prices recover bank earnings cannot get better. Financial firms hold too many home loans and mortgage-backed securities. Another set of theories says consumers won’t start spending as long as home prices and the threat of foreclosures keep them frightened and cautious.

If these things are true, the economy has a long way to go to get superior as U.S. foreclosure in October rose 25% from a year earlier.

The U.S. government and several large banks including JP Morgan (NYSE: JPM) have begun the process of extending payment plans for some homeowners. Many of the programs are even offering lower interest rates to help keep people in their homes. But these effort might only go a tiny way to help solve the problem.

As long as people believe they may lose their jobs, they’ll think about abandoning their homes if things get rough. Feeding kids and keeping gas in the vehicle to get to work might, in many cases, trump keeping up on a mortgage on a home that loses more of its value every day.

Some predictions put unemployment at 9% or 10% toward the end of 2010. As long as layoffs keep marching toward those numbers, foreclosure rates are not prone to drop.

Douglas A. McIntyre is an editor at 247wallst.com.

Foreclosures keep moving up originally appeared on BloggingStocks on Thu, 13 Nov 2008 08:30:00 EST. Please see our terms for use of feeds.

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Continue reading Houses lose value for 7th straight quarter, where is the help?

13 11 2008

Houses lose value for 7th straight quarter, where is the help?

Posted by: in Housing

Filed under: Housing

What started as a subprime mortgage mess has morphed into a much larger problem of home value destruction. Houses have now lost value for the seventh consecutive quarter with no end in sight. Are we anywhere near an end to this carnage?

No one knows for sure. That’s because we are no longer looking at loans gone bad because people overextended themselves; we’re now looking at such a significant fall in home prices that about 30% of homes that were sold in the third quarter were sold at a loss. That’s up from 23.7% in the second quarter. We’re no longer just dealing with people who made bad credit decisions, we’re also dealing with the fallout from large layoffs and the financial hardships that follow.

Houses being sold now are primarily foreclosures or short sales, but people who must move because of a job loss or for other personal reasons can only do so if they’re willing to sell at the same distressed prices. So if you don’t need to sell, don’t. Unfortunately, as job losses continue to mount, more and more people will be forced to sell, driving prices even lower.

Houses lose value for 7th straight quarter, where is the help? originally appeared on BloggingStocks on Wed, 12 Nov 2008 14:15:00 EST. Please see our terms for use of feeds.

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Continue reading Cramer on BloggingStocks: Fix the home glut

13 11 2008

Cramer on BloggingStocks: Fix the home glut

Posted by: in Housing

Filed under: Market matters, Citigroup Inc. (C), JPMorgan Chase (JPM), Federal Natl Mtge (FNM), Amer Intl Group (AIG), Wells Fargo (WFC), Housing, Cramer on BloggingStocks, MBIA Inc (MBI)

From TheStreet.com Network

TheStreet.com’s Jim Cramer states that’s the real problem, and every little bit helps.

Many are decrying that the AIG (NYSE: AIG) (Cramer’s Take) bailout now helps the holders of the collateralized debt obligations (CDOs) who bought insurance against them from AIG. The idea is simple: These CDOs are worth, in many cases, next to nothing depending upon the vintages, geographies and FICO scores, but they will now be paid back at pretty much face value — AIG CEO Ed Liddy said the prices will be negotiated, but I don’t see how they have the ability to get any less because AIG guaranteed it and the U.S. isn’t abrogating any of these guarantees.

It’s an obvious windfall and still one more piece of the stinking puzzle that involves unwinding the bogus real estate finance that prevailed from 2004 to 2007. The more massive issue, though, is whether the government will then take over MBIA (NYSE: MBI) (Cramer’s Take) and Ambac (NYSE: ABK) (Cramer’s Take) — I know people at those companies say they don’t need it, so OK, they don’t … but let’s say they do for the purposes of reality — and have them make good on all of the credit default swaps they wrote against bad CDOs.

If the government is willing, they can buy several trillion dollars of these easily through this method and then sit on them and hopefully they’ll come back to some value.

Cramer on BloggingStocks: Fix the home glut originally appeared on BloggingStocks on Wed, 12 Nov 2008 09:30:00 EST. Please see our terms for use of feeds.

Continue reading How much more for AIG?!

12 11 2008

How much more for AIG?!

Posted by: in Housing

Filed under: Amer Intl Group (AIG), Politics, Housing, Recession, Financial Crisis

With apologies to actor William Shatner, How big could the bailout of AIG get? Really big.

The U.S. government — which is all of us, citizens and taxpayers — may have to increase its investment in American International Group (NYSE: AIG) by still another $70-80 billion to keep the insurer solvent through the end of 2009.

Just call it USG-AIG

AIG, which reported $43 billion in losses tied to home mortgages in the past quarter, “will probably not function properly if it doesn’t receive another cash infusion by September 2009,” economist David H. Wang told BloggingStocks Tuesday. Wang based his forecast on his projection for cashed-in credit default swaps stemming from home mortgage defaults.

AIG is a major issuer of credit default swaps, actually a type of credit default insurance, which many holders of mortgage backed securities and bonds bought to hedge against bond issuer defaults.

“If we project a rise in home mortgage defaults through Q2 2009, that will likely take credit default claims to levels that will require more money for AIG in late 2009,” Wang stated, even though he qualified his projection by stating that it is contingent on negative U.S. GDP for Q1/Q2 2009. A U.S. economic recovery in Q2 2009 is possible, but not likely, Wang said.

AIG’s shares fell 15 cents to $2.14 on Tuesday at mid-day, amid a broader market sell-off.

How much more for AIG?! originally appeared on BloggingStocks on Tue, 11 Nov 2008 16:45:00 EST. Please see our terms for use of feeds.