Filed under: Consumer experience, Magazines, Housing

BusinessWeek reports that as much as a borrower might hope that a bankrupt lender would take them off the hook for repaying the mortgage, life just doesn’t work that way.

This article caught my eye because a reader of one of my posts about mortgage company bankruptcies asked a question to which I did not have an answer: “I am in the proc of refinancing, but in Pre forclosure on my home. If Novastr files BK can they continue with the forclosure on my home?” (Sic)

The answer, appears to be that if the mortgage company files for bankruptcy, whoever takes over the loan will proceed with the foreclosure. I say this because according to BusinessWeek, in most cases of lender bankruptcy, nothing changes from the consumer’s point of view. When a lender goes out of business, it sells its assets at a discounted price to another financial institution under bankruptcy court supervision and notifies the borrower about the new servicer.

And unless the new servicer has a more lenient policy on foreclosing, it is likely to continue with the foreclosure. Moreover, if the borrower is current on a loan and the lender goes bankrupt, the new servicer will expect those monthly payments to keep flowing.

Peter Cohan is President of Peter S. Cohan & Associates, a management consulting and venture capital firm. He also teaches management at Babson College and edits The Cohan Letter.

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Filed under: Industry, Employees, Options

Manpower (NYSE: MAN) volatility up; on employment growth concerns. MAN, an employment services company with 4,400 offices in 73 countries, is recently down $4.51 to $65.34. MAN has a market cap of $5.5 billion with long term debt of $800 million. MAN, Kelly Services (NASDAQ: KELYA), Labor ready (NYSE: LRW) & Spherion (NYSE: SFN) have aggressively sold off over the last week on U.S. human resource and employment services growth concerns. MAN September option implied volatility of 43 is above its 26-week average of 28 according to Track Data, suggesting larger price risk.

Labor Ready (NYSE: LRW) volatility Up; on employment growth concerns. LRW, a global temporary staffing provider, has a market cap of $878 million. LRW September option implied volatility of 47 is above its 26-week average of 40 according to Track Data, suggesting larger risk.

Volatility Index S&P 500 Options-VIX up 3.55 to 25; 10-day average is 22.95.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

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Filed under: Bad news, Personal finance

Bad news for our country’s future: According to a piece in today’s Wall Street Journal, most high school kids aren’t too sharp on the economics front: “On a zero-to-300 point scale, 12th graders had an average score of 150 points in the first-ever economics test administered under the federal government’s National Assessment of Educational Progress, or NAEP.”

Some of the statistics:

60% could identify factors that lead to an increase in the national debt. That might sound good, but take a look at how the question was phrased:

Suppose that the federal government initially has a balanced budget. Which of the following changes in government tax revenues and expenditures over time will definitely lead to an increase in the national debt?

A) Increase (to revenues); no change (to expenditures)

B) Increase; decrease

C) Decrease; increase

D) No change; decrease

The answer is C. I’m surprised that only 60% could figure out that a decrease in revenue and increase in spending would lead to an increase in debt.

32% of the students could identify how investment in education can affect economic growth.

11% could analyze how a change in the unemployment rate affects income, spending and production.

What’s a shame is that I really believe that economics could be made into the most interesting high school class if it was approached with creatitivity. In recent years, there have been a slew of amazing books on economics: Freakonomics, The Undercover Economist, Travels of a T-shirt in the Global Economy, etc.

I bet that if schools ditched traditional textbooks and adopted a more user-friendly format, we would see these numbers skyrocket. People learn better when they’re not bored.

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Filed under: Private equity, McGraw-Hill Companies (MHP), Entrepreneurs, Chasing Value, Housing

Last year, Wilbur Ross warned about problems in the financial markets. That is, there would be issues with liquidity and that dealmakers - especially on the private equity side - were paying too much on transactions.

So far, he’s looking prescient. Then again, Ross is a restructuring guru and has been spot-on with plays on steel and telecom.

Well, BusinessWeek.com has a great interview with Ross.

What is his perspective on the latest turmoil on subprime mortages?

Interestingly enough, Ross’s investment firm — W.L. Ross & Co - lent $50 million into American Home Mortgage Investment, which went bust because of iffy mortgages.

So will there be a turnaround in subprime? He thinks so - but don’t rush in. After all, Ross looks at the long haul.

Essentially, he thinks that the subprime market is valid - and that there’s a need for it. But, the problem was that loans had rates that did not reflect the risk. Ross calls it “risk-ignored rate of return.”

To get the full interview, click here.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

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Filed under: Indices, Market matters, Money and Finance Today, Technical Analysis

Since hitting an interim low on March 5, the NASDAQ Composite index has rallied 10.3%. However, the large cap-laden NASDAQ 100 index has done even better, outpacing the broader benchmark by four percentage points.

In part, the relative outperformance of the narrower measure reflects the fact that investors have increasingly favored large, well-known companies with broad exposure to booming economies around the globe.

More recently, unsettled market conditions have spurred investors to seek shelter in the shares of firms that might fare better than those with less resources at their disposal.

Still, given the near-vertical trajectory of the relative advance and the fact that the NDX (which has an equivalent exchange-traded fund, or ETF (NASDAQ: QQQQ) ) is nearing multi-year resistance relative to the Composite, odds are that the narrower measure is poised to lose a bit of steam, at least in the near term.

Michael Panzner is a 25-year veteran of the global stock, bond, and currency markets and the author of Financial Armageddon: Protecting Your Future from Four Impending Catastrophes and The New Laws of the Stock Market Jungle: An Insider’s Guide to Successful Investing in a Changing World.

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Filed under: Forecasts, Politics

Just when you were starting to get worried about the market’s recent jitters. Relax. The man who declared “mission accomplished” in Iraq more than four years ago says not to worry. Everything is fine!

According to a piece in today’s Wall Street Journal, Bush is optimistic. Here are some choice quotes from his remarks to a small group of reporters (apparently most had better things to do than listen to the president give his market forecast — perhaps they were watching Man Band on VH1):

“If markets are given a chance, they will adjust in a way that is a necessary reaction to a flood of liquidity that came into the market over the last couple of years.”

“I happen to believe the war has clouded a lot of peoples’ sense of optimism.”

“It all depends on if you’re a glass-half-full or a glass-half-empty kind of guy.”

With Mr. Bush’s approval ratings hovering at around 35%, the glass is considerably less than half-full for him. More like 65% empty.

It’s really a sign of the president’s lack of credibility that no one really cares what he thinks about the economy at this point.

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Filed under: Bad news, Goldman Sachs Group (GS)

Forbes raises a question about whether The Goldman Sachs Group (NYSE: GS)’s $9 billion hedge fund, Global Alpha, will fail. I don’t know, but rumors to that effect raise serious questions about whether the banks will be able to clean up the messes they make in pursuit of those eight figure bonuses. That’s because Global Alpha is a symptom of a bigger problem — the Black Box Market.

I pointed out that Global Alpha was having problems a few months ago in this post. So it doesn’t surprise me to read that it’s down 16% for the year. Global Alpha lets computers make decisions. Its investors just have to trust that those computers always make money no matter what happens. Unfortunately, the 1998 collapse of Long Term Capital Management demonstrates that smart computer programs can fail at the point of maximum peril.

And this brings us to the Black Box Market. As this morning’s announcement by BNP Paribas that three of its subprime hedge funds will not redeem investors’ money suggests, the global capital markets are at risk because of their opacity. Specifically, The Black Box Market entails four mysteries:

• The public does not know who owns how much of these impossible-to-value financial concoctions;
• The institutional investors themselves do not know how to put an exact value on them;
• For quantitative hedge funds, nobody knows how they are making investment calls — except perhaps a few of the authors of their software; and
• To maintain their competitive edge and keep their investors from fleeing in fear, hedge funds will not disclose how they make money.

The result is that scary surprises on a large scale will keep popping up all around the world. The remaining question is how much money investors will need to lose before policymakers force open the Black Box Market.

Peter Cohan is president of Peter S. Cohan & Associates He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Goldman Sachs.

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Filed under: Products and services, Competitive strategy, Microsoft (MSFT), Dell (DELL), Wal-Mart (WMT)

Here’s a scenario which is quite unneeded by Microsoft Corp. (NASDAQ: MSFT). In the battle to create profit within the world of personal computers, it must be scary for “number one” when numbers two and three join forces. According to a report from Red Herring, that is exactly what is happening, sort of. I haven’t heard yet if Microsoft is scared.

It would seem that Dell and Lenovo are each gearing up behind the Linux operating system and are preparing to take a flying leap right against Windows. Judging by the considerable negative banter I have encountered regarding a less than stellar Windows Vista inaugural performance, I would say Dell and Lenovo’s move comes at a most opportune time.

Dell Inc. (NASDAQ: DELL) has fully embraced Linux, which has had fairly good response from domestic open source enthusiasts. Dell, for its part, is taking the operating system on a worldwide road show. Dell will be hard selling PCs loaded with the Linux operating system in several countries across the pond.

For number three PC maker Lenovo (OTC: LNGVY)’s part, it plans to introduce a broad range of Linux-outfitted laptops, a particularly strong endorsement of the operating system. To me this signals a recognition by manufacturers in the field that Windows Vista is shoddy, expensive and perhaps a bit arrogant, if I can use that word in this context.

To be honest I must admit that Dell has lost me as a customer. That is mainly due to Dell’s decision to succumb to the wiles of Wal-Mart (NYSE: WMT). I thank Dell however for giving the nod to Linux, as that may very well be my chosen operating system for the computer I am soon to build. My computer building project shall be introduced on Friday and shall be fully chronicled on our sister site, DIYLife. I’m hoping that our BloggingStocks friends will come share their opinions as I build a computer from scratch. I will be soliciting reader input to help complete that project successfully.

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Filed under: Launches, Industry, Competitive strategy, DaimlerChrysler (DCX), General Motors (GM), Toyota Motor Corp. (TM), Sony Corp ADR (SNE), Oil

Due to potential safety problems, Toyota (NYSE: TM) has decided to delay the launch of new high-mileage hybrids with lithium-ion battery technology by one to two years, according to The Wall Street Journal, which cited people familiar with the strategy. The decision destroys any chance of Toyota meeting its goal of selling 600,000 hybrids a year by early next decade, up from almost 200,000 in 2006. The move allows General Motors (NYSE: GM) and others the opportunity to narrow the gap of future vehicle technology.

Toyota has also postponed its plans for the hybrid versions of the Sequoia SUV and the Tundra pickup until 2013-2014. That puts Toyota way behind General Motors and Chrysler’s plans to launch hybrid SUVs in 2008.

The “potential safety problem” Toyota says, is the development of lithium cobalt oxide particles in its batteries, which have a tendency to overheat, catch fire or even explode. According to the company, similar problems have been seen in Sony Corp. (NYSE: SNE) lithium-ion batteries in laptops — mostly because the chemistry of Sony’s batteries was similar to that of batteries they were attempting to use in future hybrids.

The next-generation Prius will instead use the conventional nickel-metal-hydride batteries for its launch in early 2009. The first Toyota hybrid with lithium-ion battery technology will not arrive in the U.S. until 2011.

GM will have an opportunity to launch its first lithium-ion hybrid, the Saturn VUE Green Line model, as soon as late 2009, and before any competitors. Toyota’s delays also give Honda Motors (NYSE: HMC) the opportunity to highlight its launch of a subcompact hybrid with improved nickel-metal-hydride batteries in 2009. Volkswagen (OTC: VLKAY), BMW and DaimlerChrysler (NYSE: DAI) all plan to create clean diesel engines for U.S. cars starting in 2009. The automakers say they now have obtained the technology to meet tough American clean-air standards.

Regardless of which company produces the first lithium-ion hybrid, Toyota’s delays push back J.D. Power’s estimates on future hybrid sales. Hybrid sales totaled 2.3% of all auto sales this year and were expected to reach 5% by 2010.

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Filed under: Motorola (MOT), Lehman Br Holdings (LEH), Initial public offerings

The prospects for magnetic sensor integrated circuits (ICs) have been bright lately. For example, with the focus on fuel efficiency, the auto industry has been using more and more of these chips.

According to Gartner, the leading provider of magnetic sensor ICs is Allegro MicroSystems. And, now the company has filed to go public.

Allegro has more than 325 products, and has relationships with about 140 OEMs and 33 distributors across the globe. Some of its partners include Motorola (NYSE: MOT), Seiko Epson, and Siemens (NYSE: SI).

What’s more, the company has a long-standing relationship with Sanken, which is the majority owner (listed on the Tokyo Stock Exchange). Sanken provides tremendous distribution capabilities as well as manufacturing support.

Last year, Allegro posted revenues of $320.7 million and profits of $21 million.

The lead underwriters on the deal include Lehman Brothers (NYSE: LEH) and Daiwa Securities America. The proposed ticker symbol is ALGM.

You can find the prospectus on the SEC website. Also, if you want to check out other recent IPO filings, click here.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

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