Archive for October 8th, 2008

McCain goes long-ball with mortgage buyback … warning track or outta here ?

October 8, 2008

Ken’s Mega-Take: McCain rolled this grenade out last night, but didn’t explode it for impact. 

After researching the terms and conditions (below), I think McCain may be on to something.  A potentially good deal for the economy, but not clear to me how many votes it wins. The mortgage mess is concentrated in a few states:  McCain has Arizona locked and has no chance in California; but plan could help in  Florida, Nevada, Ohio. 

Keep in mind that only 75 million homes are “owned”, and 85% of folks are “above water” and making their payments (1/3 of homeowners own their homes free and clear of any mortgages). There could be backlash from honest, hard-working folks who don’t want slackers and cheats bailed out — whether on Wall Street or down-the-street.

* * * * *

Excerpted from Politico.com: “McCain proposes bailout for homeowners”,  10/7/08 

* * * * *

Qualifiers

The McCain “American Homeownership Resurgence Plan ” would be available to mortgage holders that:

1)  live in the home (primary residence only)

2) can prove their creditworthiness at the time of the original loan (no falsifications)

3) provided a down payment

Ken’s Take: Excludes investor-speculators, frauds, and folks who never had any equity in the home … I think the program is limited to the right group

* * * * *

Structure

The new mortgage would be an FHA-guaranteed fixed-rate mortgage at terms manageable for the homeowner.

The direct “cost” of this plan would be roughly $300 billion, the amount of homeowners’ “negative equity” in some homes.

Funds provided by Congress in recent financial market stabilization bill can be used for this purpose; indeed, by stabilizing mortgages, it will likely be possible to avoid some purposes previously assumed needed in that bill.

The plan could be implemented quickly as a result of the authorities provided in the stabilization bill, the recent housing bill, and the U.S. government’s conservatorship of Fannie Mae and Freddie Mac.

Ken’s Take:

1) What if “they” can’t qualify under the revised terms?  What if housing prices continue to decline and the homes go back under water ?

2) The initial cash out flow to buy the loans will be greater than $300 billion … but the eventual “cost” will only be the buy-out of the negative equity.

3) I like the idea of buying a mortgage versus buying a derivative based on a pool of mortgages owned by a trust and serviced by a third party.  At least I can understand where the money is going.

4) Reminder: in July 2008, Congress enacted a program to do just this — save for the government eating the lost equity

5) By my recollection, this is essentially the business that Fannie and Freddie were originally commissioned to transact.

* * * * *

Political Talk

AMERICAN HOMEOWNERSHIP RESURGENCE PLAN

McCain said he will direct his Treasury secretary to implement an American Homeownership Resurgence Plan (McCain Resurgence Plan) to keep families in their homes, avoid foreclosures, save failing neighborhoods, stabilize the housing market and attack the roots of our financial crisis. America’s families are bearing a heavy burden from falling housing prices, mortgage delinquencies, foreclosures and a weak economy.

“It is important that those families who have worked hard enough to finance homeownership not have that dream crushed under the weight of the wrong mortgage. The existing debts are too large compared to the value of housing. For those that cannot make payments, mortgages must be restructured to put losses on the books and put homeowners in manageable mortgages. Lenders in these cases must recognize the loss that they’ve already suffered.

The McCain Resurgence Plan would purchase mortgages directly from homeowners and mortgage servicers, and replace them with manageable, fixed-rate mortgages that will keep families in their homes. By purchasing the existing, failing mortgages, the McCain Resurgence Plan will eliminate uncertainty over defaults, support the value of mortgage-backed derivatives and alleviate risks that are freezing financial markets.”

* * * * *

Source article:
http://www.politico.com/news/stories/1008/14377.html

* * * * *

Want more from the Homa Files?
Click link =>  The Homa Files Blog

Posted in Government & Politics, Mortgage Crisis | 4 Comments »

Re: Congress – 59% say "throw ’em all out"

October 8, 2008

Excerpted from Rasmussen Reports, Oct. 6, 2008

* * * * *
Congress was front and center in the national news last week and the American people were far from impressed. Just 11% of voters say Congress is doing a good or an excellent job. If they could vote to keep or replace the entire Congress, 59% of voters would like to throw them all out and start over again.

Today, just 23% have even a little confidence in the ability of Congress to deal with the nation’s economic problems and only 24% believe most Members of Congress understand legislation before they vote on it.

Less than half (49%) believe that the current Congress is better than individuals selected at random from the phone book.

* * * * * 

Despite these reviews, more than 90% of Congress is likely to be elected this November due to an electoral system designed to benefit incumbents. The biggest advantage offered those in the House of Representatives is a process known as Gerrymandering where Congressional Districts are loaded with friendly voters from Representative’s own party. In effect, Members of Congress—working through their state legislature–get to choose their voters rather than letting voters choose their Congressman.

Also aiding incumbents is high name recognition from news coverage, large staffs funded by taxpayers, and other perks.

* * * * * 

When the Constitution was written, the nation’s founders expected that there would be a 50% turnover in the House of Representatives every election cycle. That was the experience they witnessed in state legislatures at the time (and most of the state legislatures offered just one-year terms). For well over 100 years after the Constitution was adopted, the turnover averaged in the 50% range as expected.

In the twentieth century, turnover began to decline. As power and prestige flowed to Washington during the New Deal era, fewer and fewer Members of Congress wanted to leave. In 1968, Congressional turnover fell to single digits for the first time ever and it has remained very low ever since.

Full article:
http://www.rasmussenreports.com/public_content/politics/election_20082/2008_presidential_election/59_would_vote_to_replace_entire_congress

* * * * *

Want more from the Homa Files?
Click link =>  The Homa Files Blog

Posted in Government & Politics | Leave a Comment »

Positioning for "Precycling"

October 8, 2008

Excerpted from Brandchannel.com, “Pre-thinking Recycling: the New Eco-Consciousness”, by Claire Ratushny, September 22, 2008

* * * * *

Companies and their marketers should take note of a new consumer trend that has been dubbed “precycling” in some quarters. That’s because it’s all about “pre-thinking recycling”, and it highlights a fundamental shift in consumer values.

Basically, people are opting to pare down and simplify their lives. Many consumers are becoming more selective about the products they purchase. The concept of “excess” is causing revulsion more than ever before, prompting consumers to purchase fewer products, to buy more in bulk, and then to repurpose as much as they can. Even trendsetters are reorienting their lifestyles in an effort to eliminate unnecessary waste.

Hence the notion of pre-thinking recycling. This cuts down on waste and on recycling. Good news for the environment and overflowing landfills, and, over the past couple of years, this trend has been catching fire with more mainstream consumers than ever before.

* * * * *

Examples:

–  45 percent of trendsetters and 14 percent of mainstream consumers have “cut down on bottled water purchases.”

– Many consumers are using canvas shopping bags to avoid plastic, and even cut down on paper bag use.

– Fewer people are subscribing to newspapers, preferring to get their media news online, cutting down on paper.

– Eco-conscious consumers are opting for washable dinnerware again and washable cloth napkins to cut down on paper waste.

* * * * *

At a time when brand loyalties are plummeting, eco-conscious brands are giving consumers reasons to believe.

* * * * *

Illustrating the marketing story of brands that are implementing environmental measures on company websites, product brochures, media outlets and packaging will dovetail with emerging values in the marketplace. They will resonate with consumers.

Selling new value propositions of brands is more important than trying to advertise and sell products through as usual, especially now when the economy is making it hard to do anything as usual. Advertising that continues to push new and improved products, tries to favorably compare with competitive products, or uses price as leading value indicators is increasingly falling on deaf ears.

However, brands and products marketed in an authentic eco-conscious way enable marketers to respond to emerging culturally driven values meaningfully. Companies, large and small, can begin to reposition their brands to be in sync with the communities they are doing business in, and by doing so, to offer greater perceived value to consumers than their competitors do.

The payoff: Consumers are increasingly attuned to supporting the brands that are perceived as doing something positive for the planet because that’s where their values are increasingly headed.

Edit by DAF

* * * * *

Full article:
http://www.brandchannel.com/brand_speak.asp?bs_id=202

* * * * *

Want more from the Homa Files?
Click link =>  The Homa Files Blog

* * * * *

Posted in Environment - Green | 1 Comment »

Cheap & Chic Brands Pay Off

October 8, 2008

Excerpted from BrandChannel “Value Store Brands: High-end Taste for Low Spenders” by Barry Silverstein, September 29, 2008

* * * * *

Arguably, the king of cheap chic is US retailer Target. Faced with intense retail competition years ago, Target chose “to reposition itself as a mass merchandiser of affordable chic goods”…While Kmart was approaching bankruptcy and Wal-Mart was dominating the retail market with low prices, Target “successfully associated its name with a younger, hipper, edgier, and more fun image than its competitors. Target is often pronounced in faux French, ‘Tar-zhay,’ to connote its trendy sensibility.”

Target achieved differentiation…This ‘cheap chic’ strategy enabled Target to become a major brand…Target’s strong sales results over the past several years prove that the strategy has paid off…the chain is doing better than many of its competitors, buffered by well-regarded store brands, clever advertising, and novel merchandising.

…One reason Target’s brands have achieved cheap chic status is Target’s emphasis on design. Fashion designers such as Mossimo, Isaac Mizrahi, Philippe Starck, and Sigerson Morrison have developed exclusive lines for Target…These collections have the cachet of name-brand designer merchandise, but at a price point far less than the typical designer-driven brands sold at more expensive retailers.

Other value stores use this strategy. Kmart, for example, sells Jaclyn Smith-branded fashion and Martha Stewart-branded housewares. Sears is currently featuring the exclusive LL Cool Jay Collection. Retailer Kohls has joined in, exclusively marketing Simply Vera Vera Wang, a premium fashion and lifestyle brand, and a Food Network-branded line of kitchen and home goods.

Price-cutting giant Wal-Mart has tried its hand at designer brands as well…Despite these efforts, however, Wal-Mart has not seen significant financial gains from its designer clothing—nor has Wal-Mart been able to match Target’s trendiness…

* * * * *

Target has exerted its cheap chic strategy in another area: upscale foods. Target markets a premium brand called Archer Farms…Archer Farms uses upscale packaging, often depicting full-color product photography on elegant boxes, bottles and jars. As with Target’s other upscale brands, however, the prices are unusually affordable.

Value-priced upscale food is a growing market in its own right. Chains such as US-based Trader Joe’s supermarkets…trade on the consumer’s desire for affordable gourmet products. Trader Joe’s unique differentiator is that…most of the items on its shelves are actually its own store brands. These products are largely specialty items priced considerably below gourmet food stores…

There is already a fair amount of evidence that store brands, chic or not, are seeing a significant uptick in sales because of the economy. In September 2008, Kroger, one of the largest US supermarket chains, reported that its own store brands accounted for a record 26 percent of its fiscal second quarter sale…

* * * * *

Whether it’s fashion, food, or any other product category, cheap chic is clearly a global trend…Global economic conditions are likely to keep the interest in cheap chic brands high. While the average consumer likes trendy merchandise at bargain prices, the wealthy shopper may find cheap chic increasingly attractive as luxury goods become too pricey…

Retailers like Target, who already know how to create and market cheap chic brands, stand to benefit the most. But adopting a cheap chic strategy could help many other retailers insulate themselves from an economic downturn. That would be a welcome development for consumers who don’t want to sacrifice quality design for price.  

Edit by SAC

* * * * *

Full article:
http://www.brandchannel.com/start1.asp?fa_id=442

* * * * *

Want more from the Homa Files?
Click link => The Homa Files Blog

Posted in Mktg - Brands, Retailing | Leave a Comment »