Archive for October 9th, 2008

The perils of buying at the peak …

October 9, 2008

Ken’s Take:

1) It never pays to buy at the peak — unless somebody is staking you — and the government is ready with a safety net.

2) Nobody that I know is good as calling the peak.

3) 2005-2007 … 3 years that will live in infamy … with their lessons forgotten by 2012

4) Remember: the mortgage mess is highly concentrated to California, Florida, Nevada, and Arizona.

5) Also remember: 1/3 of 75 million are owned free & clear of any mortgages

* * * * *

[McCain Reshuffles Rescue Deal]

http://online.wsj.com/article/SB122351316270117559.html

* * * * *

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

Posted in Government & Politics, Mortgage Crisis | Leave a Comment »

Worth reading: Lessons from the financial crisis …

October 9, 2008

Excerpted from RealClearPolitics.com: “Wall Street 101”, Victor Davis Hanson, October 09, 2008

* * * * *

Until the past few weeks, the financial panic was still mostly far away on Wall Street. But not now.

Car loans, mortgages and college financing are suddenly harder to come by. Millions are stuck in houses not worth what is owed on them. Cash-strapped consumers are cutting back. The economy is slowing. Jobs are disappearing. Who wants to open quarterly 401(k) statements only to learn that everything they put away in retirement accounts the past two or three years is gone?

There is plenty of blame to go around. Greedy Wall Street speculators took mega-bonuses even when they knew their leveraged companies were tottering — and someone else would pick up the tab. Crooked or stupid politicians allowed Fannie Mae and Freddie Mac to squander billions, as they raked in campaign donations and crowed about their politically correct support for millions of shaky — and now mostly defaulting — buyers.

The new national gospel became charge now/pay later and speculate, rather than put something away in case of a downturn. To provide more goodies that we hadn’t earned, politicians ignored soaring annual budget deficits and staggering national debt and kept spending.

* * * * *  

But amid the gloom, there are some valuable lessons that we can take away from the Wall-Street panic.

First, cash really is king. For all the talk of a trillion here or billions there, when the crunch came many of these investment houses and their once-strutting managers found themselves with a minus net worth. They were desperate to find liquidity — any money anywhere they could find it. Pedestrian passbook savings accounts proved wiser investments than all the clever hedge funds, derivatives and subprime schemes put together.

Second, wisdom and blue-chip college educations are not quite the same thing. The fools in Washington and New York who blew up Wall Street had degrees from our finest professional schools. [For example, Barney Frank and Franklin Raines are both Harvard Law graduates.] If these guys are our best and brightest, then it is about time we rethink what constitutes wisdom, since an Ivy League law degree certainly seemed no proof of either intelligence or ethics.

Third, we as a nation need to relearn the old notion of shame — as in, “Shame on you!” Firms like Lehman Brothers and Bear Stearns were once responsible Wall Street institutions, built up over decades by sober men. But their far-lesser successors in just a few months have bankrupted these venerable brokerage houses — with seemingly no shame at what they have done to the image of Wall Street.

* * * * *

Americans used to pay their debts. Somewhere in all the blame-gaming about the crooks and liars in New York and Washington, we never hear that real people borrowed real money that they should not have. And they then defaulted on what they owed to others. Walking away from debts may have been understandable, but it was also a violation of trust — and wrong.

Finally, what one makes is no proof of his worth. Almost every head of a Wall Street firm took tens of millions of dollars in bonuses these past few years, as they posted phony profits by borrowing ever more with ever fewer assets. But if financing facilitates the American economy, we should remember that less exotic and remunerative construction — such as farming, manufacturing and mining — is what really powers America.

* * * * *

How odd that all those boring lessons from our grandparents turn out to be true in the globalized, hip 21st century: Save your money. Don’t borrow what you can’t pay back. Look first at a man’s character, not his degrees. And if a promised return on an investment seems too good to be true, it probably is.

* * * * *

Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University,

* * * * *
Full article:
http://www.realclearpolitics.com/articles/2008/10/wall_street_101.html

* * * * *

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

Posted in Financial Crisis, Government & Politics, Mortgage Crisis | Leave a Comment »

Is the mortgage glass 15% empty or 85% full ?

October 9, 2008

Ken’s Take:

1) The headline in the WSJ says “1 in 6 underwater”.  I’m more impressed that almost 85% of home owners owe less than their home is worth, and that almost 1/3 own their houses free and clear — with no mortgage balance at all.

2)  Though home prices have slid 13% in the past year or so, they’re up over 70% since 2000.  That’s not bad appreciation.

3) McCain went long-ball last nite with the mortgage buy-back proposal. Note that Congress enacted a “foundation” bill in July that provides a framework for doing so.

* * * * *

Excerpted from WSJ: “Housing Pain Gauge: Nearly 1 in 6 Owners ‘Under Water’, October 8, 2008

* * * * *

The majority of homeowners still have equity, and even among those who don’t, many continue to make their mortgage payments on time.

In contrast with the 12 million home borrowers estimated to be under water, 64 million have equity in their homes. These include 24 million households who own their homes free and clear, and 40 million whose homes remain worth more than is owed on them.

About 75.5 million U.S. households own the homes they live in. After a housing slump that has pushed values down 30% in some areas, roughly 12 million households, or 16%, owe more than their homes are worth.

The comparable figures were roughly 4% under water in 2006 and 6% last year, Among people who bought within the past five years, it’s worse: 29% are under water on their mortgages.

* * * * *
The result of homeowners being “under water” is more pressure on an economy that is already in a downturn. No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.

And having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home’s value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.  As home values slip, growing numbers of would-be borrowers lack sufficient equity to refinance. The falling values also make mortgage lending look riskier to banks, spurring them to tighten credit standards.

Even for folks with equity in their homes, some borrowers fret that declining prices and tighter lending standards could make it hard for them to tap their equity.

* * * * *

Prices are back to 2003 levels in the San Diego and Boston metropolitan areas, and back to 2004 levels in Las Vegas, Los Angeles, San Francisco, Fort Lauderdale, Fla., and Minneapolis.

Among mortgages on one- to four-family homes, 9.16% were a month or more overdue or were in foreclosure in the second quarter.. That compared with 6.52% a year before and was the highest level since the association began such surveys 39 years ago.

Most mortgages in default were issued in 2006 and 2007, when lending standards were loosest and the housing market was peaking. Many who bought then made small down payments or none, so they had little equity in their homes from the start.

In July, Congress enacted legislation designed to help borrowers who owe more than their homes are worth by allowing them to refinance into a government-backed loan, provided their mortgage company forgives part of their principal. It’s not clear how many borrowers the program will help, because before reducing the principal, lenders would almost always try first to freeze or reduce borrowers’ interest rate to make payments more affordable.

* * * * *

How much pain homeowners feel varies greatly from place to place. The most severe drops in home values are in parts of California, Florida, Nevada, Arizona and other areas where speculation pushed prices up and builders far overestimated demand.

On a national basis, home prices peaked in mid-2006 after rising 86% since January 2000, according to the First American index. Since peaking, that index has fallen 13%.

The declines have made homes more affordable, bringing prices in many areas closer to their long-term relationship to incomes. In the second quarter, the median home price of about $203,000 was 1.9 times average pretax household income. That was close to 1.87 times income for 1985 through 2000, prior to the housing boom.

 

 

[Home Economics]

http://online.wsj.com/article/SB122341352084512611.html

* * * * *

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

Posted in Government & Politics, Mortgage Crisis | 1 Comment »

What's Your Google Score?

October 9, 2008

Excerpted from BusinessWeek, “Making Social Networks Profitable”, by Heather Green, September 25, 2008

* * * * *

Imagine there was one number that could sum up how influential you are. It would take into account all manner of things, from how many people you know to how frequently you talk with them to how strongly they value your opinion. Your score could be compared with that of pretty much anyone in the world.

Maybe it’ll be called your Google number. Google has a patent pending on technology for ranking the most influential people on social networking sites like MySpace and Facebook. In a creative twist, Google is applying the same approach to social networks it has used to dominate the online search business. If this works, it may finally make ads on social networks relevant—and profitable.

The new technology could track not just how many friends you have on Facebook but how many friends your friends have. Well-connected chums make you particularly influential. The tracking system also would follow how frequently people post things on each other’s sites. It could even rate how successful somebody is in getting friends to read a news story or watch a video clip.

* * * * *

How would this improve advertising on social networks? Say there’s a group of basketball fans who spend a lot of time checking out each other’s pages. Their profiles probably indicate that they enjoy the sport. In addition, some might sign up for a Kobe Bryant fan group or leave remarks on each others’ pages about recent games they played or watched. Using today’s standard advertising methods, a company such as Nike would pay Google to place a display ad on a fan’s page or show a “sponsored link” when somebody searches for basketball-related news. With influence-tracking, Google could follow this group of fans’ shared interests more closely, see which other fan communities they interact with, and—most important—learn which members get the most attention when they update profiles or post pictures.

The added information would let Nike both sharpen and expand its targeting while allowing Google to charge a premium for its ad services. If Nike wanted to advertise a new basketball shoe, for example, it could work with Google to plop an interactive free-throw game only on the profile pages of the community influencers, knowing the game would be likely to draw the most attention in these locations. And because the new technique ranks links among groups, Google could also target the ads to broader communities.

“I would pay a premium to get a particular video in front of someone who [shares] with others, and an even bigger premium for a lot of people who would share,” says Ian Schafer, CEO of online ad firm Deep Focus, whose clients include Sean Jean and Universal Music Group.

Edit by DAF

* * * * *

Full article:
http://www.businessweek.com/magazine/content/08_40/b4102050681705.htm?chan=top+news_top+news+index+-+temp_news+%2B+analysis

* * * * *

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

* * * * *

Posted in Internet - Soc Networking | Leave a Comment »

Captive Brands Compete Big in Beauty

October 9, 2008

Excerpted from Brand Week “Retailers Rally Behind Their ‘Captive Brands'” by Elaine Wong, September 28, 2008

* * * * *

Retailers have come a long way from the no frills aisle.Rather than marketing store brands as some lesser, cheaper alternative to brand name products, Wal-Mart, Walgreens, CVS and others are increasingly creating and promoting their own “captive brands”… 

Carrying no evidence of the store’s affiliation, these brands, manufactured by a third party and sold exclusively at the chains (hence “captive”), let the retailer command a price similar to brands produced by consumer packaged goods companies like P&G. They also let the retailers gain ground in a category—beauty—for which consumers generally take a dim view of traditional private label brands….

P&G has taken notice. “We treat them just like we do any other competition,” said P&G rep Dave McCracken. “We try to out-innovate anyone, whether it’s a captive or retailer brand or other competition.”…Competition among retailers is driving the captive brand movement, said Walgreens rep Tiffani Bruce. “It’s a way of differentiating. If there’s something we have that other retailers don’t have, it’s an opportunity for us to build loyalty.”
Walgreens created an internal “brand police” to regularly evaluate its product portfolio. “They protect the standard and quality for our brands so we know that we are competing side-by-side with national brands,” Bruce said. “We have limited shelf space so we try our best to pinpoint which brands are resonating well with customers and what needs are being met.”

One reason why the shift has affected beauty care more than other industries is because the category itself is “over-SKU-ed,” said Mike Moriarty…”If you look at the haircare aisle, it has way too much product in it anyway.”  The influx makes it particularly tempting for retailers to introduce their own offerings because they can identify certain niches not yet met by their consumer packaged partners, Moriarty said.Since the retailer ultimately controls the display units, the result is a shelf space war. That’s a circumstance in which captive brands have a distinct advantage…This, however, does not mean that captive beauty brands will eventually displace their branded rivals, CVS’ Pensa said.. 

Edit by SAC

* * * * *  

Full article:
http://www.brandweek.com/bw/content_display/news-and-features/packaged-goods/e3if624dc1ee34cd1b5f24e9d19408550b8?imw=Y

* * * * * 

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

Posted in Mktg - Brands | Leave a Comment »