Lehman Brothers, who earlier closed its sub-prime lending arm, BNC Mortgage, announced further changes and consolidation of its mortgage unit.  The Wall Street firm, owners of Aurora Loan Services, announced the closing of one of its Regional Operating Centers and renamed its mortgage operations Lehman Mortgage Capital.  If you received the Mortgage Lender Implode-O-Meter premium service you’d already know this by now. 

In an email to affected brokers the company wrote:

Today Lehman Brothers announced the completion of the restructuring plan for its residential mortgage origination business. The plan sizes the business appropriately for the current market environment. The Firm also announced that it will rename its existing mortgage origination and servicing businesses in the U.S., Japan and Europe, including Aurora Loan Services, Lehman Mortgage Capital.

Changes at Aurora Loan Services
Challenging financial markets and the uncertain mortgage landscape have caused us to make proactive changes to our business model. As a result, we have made the decision to restructure the locations of our Regional Operating Centers (ROCs). Specifically, we have decided to close our Gaithersburg, MD ROC. Our Denver, CO, Florham Park, NJ and Sunrise, FL ROCs will continue operating business as usual.

If you are currently assigned a Gaithersburg Operations team, within the next few weeks, you will receive information on your new Operations team at one of our existing ROCs. In the interim, continue to send your loan files to our National Capture Center in Scottsbluff, NE and work with your existing Operations team using the current telephone numbers, fax numbers, and team mailboxes.

No word on the specific number of people affected by this move to “size the business appropriately for the market” but we’ll do our best to stay on top of it from the sticks of Maine.

If you have any additional information please post in the comments.

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In our continuing series of guest posts Peter Viles, writer of the L.A. Land blog for the LA Times is gracious enough to share his thoughts on housing prices.  We interviewed Peter a while back, you can listen to him here.

How far will home prices fall? Seven percent? 15 percent?? 30 percent??? 50 percent??? On my housing blog at the LATimes,  I put up a post over the Labor Day weekend linking to a post at a favorite LA blog of mine, Manhattan Beach Confidential, that collected various predictions of how far prices will fall from their bubble peaks. Here is my post on LA Land.

The comments I received were, as always, enlightening:  Pat wrote, “Pricing is completely dependent upon the neighborhood. Auctions have shown 30% price drops already in parts of Riverside, San Bernardino, and San Diego counties. Other areas, like the Westside have shown drops of less than 10%.”

Amir wrote, “Anybody who read Fooled by Randomness or The Black Swan knows that most predictions (especially economic ones) are usually wrong. Not some of the predictions wrong, all of them!” (I liked that comment because Morgan recommended “The Black Swan” to me, and I’m enjoying it).

Lastly, investorguy wrote, “75.3% of all statistics are made up on the spot.”

My thoughts: I agree with all three of the above. When all of this is over — 10 years from now — there will still be no clear answer to the question, “How far did prices fall after the great 2005 real estate bubble popped?” There are too many ways to measure prices. There will be no single answer.

But I’m also starting to believe the crash will not be an equal opportunity destroyer of home values. Areas and neighborhoods where sub-prime borrowers were plentiful will be hit much harder. Think it through: who’s the natural buyer of a home previously owned by a sub-prime borrower in a neighborhood full of homes that last sold to sub-prime borrowers? The natural buyer is another sub-prime borrower.

Except:  that loan isn’t available any more. Sadly, I see a downward spiral of prices in those areas. It’s quite likely some of the single family housing stock becomes rental housing. My guess is we’ll see “foreclosure clusters” where prices will fall further, and the government will focus its efforts, once it decides what those efforts will be.

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Filed under: Management, Hewlett-Packard (HPQ)

When it comes to Hewlett-Packard Co.’s (NYSE: HPQ) recent performance, it’s hard to give the company bad marks in any area. From what I’ve seen, CEO Mark Hurd has turned the company around in most aspects, providing investors not only with growth every quarter but with market share leads in many of its business segments. In other words, HP is hitting on all cylinders under “transformational” CEO Hurd than at any other time in the last decade.

HP is beating Dell and others in the PC segment and from its direct and retail (and corporate) presence, it may continue that charge long into 2008 unless Dell comes up with something substantial to grab share back. How did Hurd do it? Easy — he’s an operations guy with a large knack for fundamentals and logisticsand it took just that to transform HP back from where it had been under former CEO Carly Fiorina. Fiorian is often credited for setting up HP for its current success, but I don’t see it that way at all, regardless of her take (which I’ve read). HP’s current success is all Hurd.

Market screamer Jim Cramer interviewed Hurd recently, and his answers to what HP has done under his guidance sounds completely appropriate: focus on the fundamentals, work on the cost structure and product innovation. Additionally, 65% of HP’s revenue is outside the U.S. (and the U.S. is already strong for the company), and Hurd pointed to strong growth in mobility (laptop PCs). HP’s consumer laptop lineup, in my estimation, has one of the most stylish designs combined with competitive prices and retail availability almost everywhere.

Want more proof that Hurd knows what he’s talking about? When asked about PC market differentiation, he answered like this: design, service, support, features and innovation. Notice that “design” was mentioned first. Consumers buy design before all else, right? Perhaps HP is taking a page from Apple, Inc.’s (NASDAQ: AAPL) product design playbook, and having seen HP’s recent consumer laptops, I think this is the case. With HPQ being up 20% so far in 2007, where does it sit in your portfolio?

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Filed under: Indices, Market matters, Money and Finance Today, Technical Analysis, S and P 500

Based on an analysis of data from 1979 - 2005, the next four-to-six weeks has been a seasonally weak period for the Nasdaq Composite index and the Russell 2000 index relative to the S&P 500 index.

While it’s hard to say for sure why those two measures have tended to underperform the broad market around this time of year, several possible explanations come to mind:

• Pressure from mutual funds cutting losing positions in volatile or thinly-traded issues before the books are closed at the end of October

• Asset allocation shifts in favor of larger, more defensive shares amid uncertainty over back-to-school sales and the upcoming holiday selling season

• Attempts by traders and portfolio managers to cut risk exposure and dampen portfolio volatility as the time approaches for end-of-year bonuses to be decided

Of course, seasonal factors aren’t the only driver of share prices, and the pattern this year could turn out altogether different than in the past.

Nevertheless, the possibility that small cap and Nasdaq shares could lag other issues in the weeks ahead is something worth keeping in mind.

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.

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Filed under: NIKE, Inc’B’ (NKE), Options, Technical Analysis

Warren Buffett’s 8 million shares of Nike Inc. (NYSE: NKE) make up about 0.75% of his portfolio. Buffett is famed for his simple buy-and-hold stock strategy, and he’s had tremendous success in identifying stocks that will perform very strongly over the long term. Though NKE has stalled for the last six months, it’s a stock that this guru has been holding onto. If you think that Buffett’s presence in Nike will keep the stock from falling too much, then now could be a good time to look at a bullish hedged trade on NKE.

After hitting a one-year high of $60.35 in July, the stock has settled back down near the $55 line over the past month, where the stock traded flatly throughout the spring and early summer months. NKE opened this morning at $55.26. So far today the stock has hit a low of $55.26 and a high of $55.90. As of 10:50, NKE is trading at $55.76, up $0.47 (0.9%). The chart for NKE looks neutral and improving, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. This particular trade will make a 6.4% return in just 6 weeks as long as NKE is above $50 at October expiration. NKE would have to fall by more than 10% before we would start to lose money.

NKE hasn’t been below $50 since February and has shown support around $53 recently. This trade could be risky if retail slumps in the next 6 weeks, but even if that happens, this position could be protected by strong support between $50 and $55, as well as from the stock’s 200 day moving average, which is also at $53 and rising.

Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in NKE.

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Filed under: Products and services, Launches, Apple Inc (AAPL), iPhone

As I was following Apple. Inc.’s (NASDAQ: AAPL) “The beat goes on” event yesterday, I caught myself wondering this: can Apple roll out incremental features to its iPod line and get the market excited once again? I’m not sure that happened, as Apple shares remained stagnant during the event and then closed down almost nine points. This on a day when the company refreshed its entire iPod lineup with new “models.” Ehh.

Did Apple just suffer along with many other tech stocks in yesterday’s downtick, or was it something more? Apple CEO Steve Jobs has a wonderful way of making the world think each ‘new’ Apple product is somehow a first or one-of-a-kind, but most aren’t any longer when it comes to the iPod line (save the iPhone, which is easily a revolutionary product).

Basically, Jobs trotted out the same products — from the iPod Classic to the iPod Nano to the iPod Touch — with incremental feature upgrades and more marketing glitz than a glazed donut. The market seemed unimpressed, all things considered. But, there’s more.

Continue reading Apple’s (AAPL) new iProducts underwhelm market

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Filed under: Good news, Abercrombie and Fitch (ANF), Options, Technical Analysis

Abercrombie & Fitch Co. (NYSE: ANF) is looking to break past resistance today after the company reported a same-store sales increase of 6% for August, far surpassing analysts’ estimates of a 2.1% increase. If you think the company’s stock isn’t likely to fall too far over the next few months, then now could be a good time to look at a bullish hedged trade on ANF.

After hitting a one-year high of $84.92 in April, the stock has seen volatile trading over the past six months. Shares have been sharply up over the past month, but turned down after meeting resistance around $80 in late August. ANF opened this morning at $78.88. So far today the stock has hit a low of $78.25 and a high of $80.40. As of 10:40, ANF is trading at $78.50, up $1.38 (1.8%). The chart for ANF looks bullish and steady, while S&P gives the stock a very positive 4 STARS (out of 5) strong buy rating.

For a bullish hedged play on this stock, I would consider a November bull-put credit spread below the $65 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. This particular trade will make a 9.9% return in just 10 weeks as long as ANF is above $65 at November expiration. Abercrombie would have to fall by more than 17% before we would start to lose money.

ANF hasn’t been below $65 in more than a year and has shown support around $75 recently. This trade could be risky if the retail sector doesn’t have a good back-to-school quarter due to credit problems, but even if that happens, this position could be protected by strong support around $70, where ANF bottomed in July and August.

Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in ANF.

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Filed under: Analyst reports, Microsoft (MSFT), Analyst initiations, salesforce.com inc (CRM), Zoltek Co (ZOLT)

MOST NOTEWORTHY: European pharmaceuticals, Microsoft, Salesforce.com, Taleo and McAfee were today’s noteworthy initiations:

• UBS resumed coverage of Novartis AG (NYSE: NVS) with a Buy rating and AstraZeneca (NYSE: AZN), Roche Holding (OTC: RHHBY), Sanofi-Aventis (NYSE: SNY) and GlaxoSmithKline (NYSE: GSK) with Neutral ratings.
• Deutsche Bank believes new product leverage can bring upside to consensus operating margin expectations at Microsoft Corporation (NASDAQ: MSFT) and they view shares as attractively valued given its growth profile. The firm started shares with a Buy rating and $33 target.
• Keybanc initiated shares of Salesforce.com (NYSE: CRM) with a Hold rating and sees slowing growth rates for revenue and net subscriber additions throughout the remainder of FY08 and beyond and thinks investor expectations are too high.
• Keybanc also started shares of Taleo Corporation (NASDAQ: TLEO) with a Buy rating and $27 target, as it is well-positioned to gain market share in the Human Capital Management space.
• Thomas Weisel believes McAfee Inc (NYSE: MFE) will benefit from PC market growth, enhanced awareness of the company’s brand, and its renewed focus on product development for the midmarket corporate segment, and started shares with a Market Weight rating and $37 target.

OTHER INITIATIONS:

• Lululemon Athletica (NASDAQ: LULU) was started at William Blair with an Outperform rating and at UBS with a Neutral rating and $37 target.
• Merrill Lynch initiated shares of Zoltek Companies Inc (NASDAQ: ZOLT) with a Buy rating and $50 target.
• Bear Stearns started shares of Capital Product Partners (NASDAQ: CPLP) with a Peer Perform rating.
• Oppenheimer initiated shares of BFC Financial (NYSE: BFF) with a Buy rating and $3.50 target.

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Filed under: Analyst reports, Analyst upgrades and downgrades, Apple Inc (AAPL), Time Warner (TWX), Level 3 Communications (LVLT)

MOST NOTEWORTHY: Applix, Time Warner, Apple and Level 3 Communications were today’s noteworthy downgrades:

• Applix Inc (NASDAQ: APLX) was downgraded to Neutral from Buy at First Albany and SunTrust Robinson Humphrey following the acquisition by Cognos Inc (NASDAQ: COGN).
• Time Warner Inc (NYSE: TWX) was downgrade to Neutral from Buy at Pali Capital. The firm has lost faith in Time Warner’s executive management team and Board of Directors and feels the outlook for AOL is concerning.
• Gabelli downgraded Apple Inc (NASDAQ: AAPL) shares to Hold from Buy on iPhone concerns and valuation as they view the iPhone price cut as an indication that sales are not living up to management’s expectations.
• Buckingham Research downgraded shares of Level 3 Communications Inc (NASDAQ: LVLT) to Underperform from Neutral citing deterioration in demand for some key products.

OTHER DOWNGRADES:

• SL Green Realty (NYSE: SLG) was downgraded to Equal Weight from Overweight at Lehman Brothers.
• Citigroup downgraded shares of Volkswagen AG (OTC: VLKAY) to Sell from Hold.
• Zumiez Inc (NASDAQ: ZUMZ) was downgraded to Market Perform from Outperform at Morgan Keegan.
• JP Morgan downgraded Northeast Utilities (NYSE: NU) to Neutral from Overweight.
• Goldman Sachs downgraded Radiation Therapy Services Inc (NASDAQ: RTSX) to Neutral from Buy.

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Filed under: Analyst reports, Analyst upgrades and downgrades, General Mills (GIS), Rio Tinto plc ADS (RTP), Reuters Group ADS (RTRSY)

MOST NOTEWORTHY: Refiners, MasTec, Cognos, Forest Labs and Reuters Group were today’s noteworthy upgrades:

• Bernstein upgraded shares of Marathon Oil Corporation (NYSE: MRO), Tesoro Corporation (NYSE: TSO), Sunoco Incorporated (NYSE: SUN) and Valero Energy Corporation (NYSE: VLO) to Market Perform from Underperform.
• MasTec Incorporated (NYSE: MTZ) was upgraded to Buy from Accumulate at Think Equity and to Buy from Hold at SMH Capital on valuation following yesterday’s sell-off.
• JP Morgan upgraded shares of Cognos Incorporated (NASDAQ: COGN) to Overweight from Neutral citing solid end demand, expanded sales capacity, indications that C8 adoption should see an uptick, and the Applix Inc (NASDAQ: APLX) acquisition.
• Forest Laboratories Inc (NYSE: FRX) was upgraded to Buy from Hold at Jefferies, as the firm believes Forest’s victory in the Lexapro patent case eliminates a major overhang and returns the focus to the company’s pipeline.
• Lehman upgraded shares of Reuters Group (NASDAQ: RTRSY) to Overweight from Equal Weight to reflect benefits from the company’s merger with Thomson Corporation (NYSE: TOC).

OTHER UPGRADES:

• UBS upgraded shares of General Mills Inc (NYSE: GIS) to Buy from Neutral.
• Thornburg Mortgage (NYSE: TMA) was upgraded to Sector Perform from Underperform at RBC Capital Markets.
• CIBC World Markets upgraded EDO Corporation (NYSE: EDO) to Sector Outperformer from Sector Performer.
• Bernstein upgraded shares of Rio Tinto (NYSE: RTP) to Outperform from Market Perform and shares of Anglo American (NASDAQ: AAUK) to Market Perform from Underperform.

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