Filed under: Newspapers, Housing

The Associated Press reports that, not surprisingly, there is a huge surge in the demand for non-profit mortgage counselors in the wake of the subprime meltdown.

A few things come to mind. At the height of the housing bubble, The Wall Street Journal ran a feature story on a former school counselor turned mortgage salesman who was on pace to earn $200,000 in a single year dealing with low-documentation, high interest mortgages — probably subprime — at a company called Benchmark.

That former school counselor is earning about 5 times what a nonprofit mortgage counselor makes. Is it any wonder that we ended up with a crisis? High-octane salesmen are earning 5 times as much on commission as these good-hearted souls who are brought in to clean up the mess.

And, because of the way the system is structured, these salesmen probably didn’t give a darn whether the loans were any good: “Like many mortgage originators, Benchmark doesn’t keep its mortgages long. Of its 2,176 loans last year, all but seven were sold to Wall Street firms and bigger mortgage companies, to be repackaged as bond-like instruments for insurers, pension funds and other investors. Benchmark nets about 1.5% of the value of the loan for its trouble, while freeing up capital to start the lending cycle again. It also means Benchmark doesn’t have a major stake in the long-term fate of its mortgages.”

Maybe the solution is to require mortgage salesman to take the same training program as mortgage counselors. Maybe they’d think twice about selling people mortgages they couldn’t afford. At the very least, they’d be able to make themselves useful when the toxic mortgages they sold to unsuspecting consumers go bad.

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Filed under: Bad news, Magazines, Marketing and advertising

Conde Nast’s magazine empire is storied, full of names that lead their respective empires. Vogue is not only the leading women’s fashion title in the world, but also the inspiration for many a book, movie, and TV show. Gourmet is the formidable leader in food magazines; Travel + Leisure is the first/only name in travel; and The New Yorker is a category in and of itself (far exceeding the geographical borders set by its name). House & Garden is what many consider the premier “shelter” magazine, a title that defined the category for a half-century before the category was even named.

But today, Conde Nast announced in a brief missive that the magazine, along with its companion web site, would both be shuttered after the December 2007 issue, a sudden and final blow to a title whose audience, perhaps, had aged out of the market for aspirational goods like Wolf ranges and Vespas (the magazine’s circulation of nearly six million has a median age of 51, and average income of $124,582). Could the magazine’s advertisers have been affected by the sub-prime meltdown? Without a home equity line of credit, you can’t afford $1,700 tubular fireplaces, I expect, or anything to be found in Gwyneth Paltrow’s abode.

The website still brightly reports that, if you subscribe today, you’re guaranteed the Gwyneth Paltrow issue — her Hamptons home is profiled, along with the Harlem penthouse of Starbucks Corp. (NASDAQ: SBUX) darling Marcus Samuelsson. The sense of doom hasn’t yet struck Gwyneth’s happy purpleness.

Continue reading House & Garden, 100-year-old magazine, abandoned

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Filed under: Time Warner (TWX), Walt Disney (DIS), News Corp’B’ (NWS), Dow Jones and Co (DJ)

Shares of Time Warner Inc. (NYSE: TWX), News Corp. (NYSE: NWS) and Walt Disney Co. (NYSE: DIS) haven’t done well this year. Have they been in Wall Street’s dog house long enough?

Time Warner, down 18% this year, trades, at a multiple of 18. Disney, whose shares are little changed, is trading a forward price-to-earnings ratio of 17. News Corp., also little changed, is the most richly valued of the bunch with a forward p/e of 20. All three of them report earnings this week. To put it diplomatically, expectations are low. Disney is probably the most compelling value there because of strong brands and top-flight management.

Revenue at Time Warner is expected to be $1.41 billion, up 14.8% according to analysts surveyed by Thomson Financial. Earnings are expected to be 11 cents compared with 19 cents a year earlier. The stock rose today after the company announced that Jeff Bewkes would replace Richard Parsons as CEO starting next year. Don’t expect any big changes at AOL, though. The strategy to turn around the Internet unit was developed by Bewkes. The company will come under pressure to divest AOL and other businesses including publishing. Earnings are due Wednesday.

Disney reports Thursday. Analysts aren’t expecting much out of the Mouse House. Revenue is expected to inch up 2.2% to $8.98 billion. Earnings are expected at 41 cents versus 36 cents a year earlier. With the record-low dollar, the company’s Theme Parks are dirt-cheap for foreign tourists. Earnings also should be helped by the “High School Musical” franchise and a solid performance by the ABC Television network.

There will be plenty of talk about the acquisition of Dow Jones & Co. (NYSE: DJ) on Thursday’s News Corp. earnings conference call. There will also be discussion about the surging popularity of Facebook. Though so far the Fox Business Network has underwhelmed critics, Murdoch will no doubt put a positive spin on the channel’s debut. Revenue for the quarter is expected to increase 9.6% to $6.48 billion. Earnings are pegged at 23 cents versus 19 cents a year earlier.

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Filed under: Consumer experience, Newspapers, Coach Inc (COH)

The conventional wisdom is that luxury couturiers tend not to be impacted much by broader economic woes. The high-end consumer they cater to isn’t likely to be impacted to the point that they cut back on their Coach, Inc. (NYSE: COH) and Louis Vuitton.

But that not be so true anymore. As luxury goods have found a wider audience, the financial status of their average consumer has declined. Now a lot of people are buying this stuff who can just barely afford it, or can’t afford it. If you called Suze Orman on her “Can I afford it?” segment and asked if you could put a Coach bag on your credit card, she’d probably use her magical powers to have you struck by lightning. Unfortunately, it seems that many people are buying luxury goods this way.

MarketWatch reports that “After three consecutive years of double-digit percentage growth, retailers that cater to those shoppers are suddenly dealing with leaner forecasts. Now their sales are on track to rise only 4% to 7% this coming holiday season, according to the Luxury Institute, a New York-based research group.”

This is great news. You have to be a complete moron to be buying Coach bags if you earn $60 thousand a year, the average household income of the lowest quarter of the company’s shoppers. Apparently people were getting high off of soaring home prices and, now that they’re declining, they’re realizing that the party is over.

The shift in recent years toward a larger group of less affluent shoppers buying luxury items changes the profile of these stocks. They’re no longer something you can count on to stay strong in the face of broader economic weakness.

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Filed under: International markets, Other issues, Federal Reserve

In the coming weeks, bloggingstocks.com will review those stocks most likely to benefit under each scenario: a weak dollar or a strong dollar.

Commodities expert Jim Rogers is on-record with where he thinks the U.S. dollar is headed in 2008: down. That, in and of itself, is not news.

“It doesn’t take a genius to figure out that it’s a currency that’s going to be going down for some time to come,” Rogers said in an interview with the Financial Times. Rogers added that in his interpretation the U.S. Federal Reserve’s and the U.S. Treasury’s willingness to print money and drive down the greenback is clear.

Among other consequences of the dollar’s continued fall, Roger sees higher commodity prices, a rise in U.S. inflation, and a rise in China’s currency, the yuan (if the Chinese government lets it rise more). Rogers, chairman of Beeland Interests Inc., said he is also shorting shares of Citigroup (NYSE: C). [Citigroup’s shares closed down $1.92 to $35.81Monday after the company said it will have to write-off $8 billion-$11 billion to account for the reduced value of subprime mortgage-related securities.]

All of which begs a good question by the investor / reader: How did the U.S. dollar drop so much in value?

Continue reading Rogers sees more dog days for US dollar in 2008

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Filed under: Good news, Magazines, eBay (EBAY)

If you’ve read Muhammad Yunas’ amazing book Banker to the Poor, you know what a profound impact microlending can have on third world countries. Tiny loans (as little as $10 in some cases) have allowed poor families to invest in the rudiments of a business, in some cases breaking the cycle of poverty.

Now MicroPlace.com, with the backing of eBay Inc. (NASDAQ: EBAY), wants to make it easier for those of us in the Western world to finance these endeavors — and earn a return too, as high as 4%.

While the site may not be profitable and certainly isn’t a material contribution to a company the size of eBay, it could help the company where it needs help these days: its reputation.

The minimum investment is only $100, and subsequent contributions can be as little as $50. It’s definitely something worth looking into, and the fact that you can earn interest makes this an ideal way to “do well by doing good.”

If you’re a parent, I would suggest opening up an account for you children this holiday season. It’s a way to give them the gift of giving back, along with that Nintendo Wii or pair of Heelys.

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Filed under: Other issues, Bad news, Industry, Scandals, Citigroup Inc. (C), Merrill Lynch (MER), Housing

How is so much money made on Wall Street? If you’re guessing that a most use a “buy and hold” strategy ala Warren Buffett, you’re way off. Just like with any stockbroker, the money is made by revolving stocks (i.e., buy and sell all the time) instead of holding them with a well-researched strategy and hoping for the best. Without transaction fees and commissions, many trading houses would be belly-up. Want $9.99 trades to encourage as many trades as possible in a given month? There are plenty of trading companies that would love to help you.

But the recent mortgage and subprime lending mess is a little different. Very simplistically put, instead of turning around bonds and other holding vehicles, companies like Merrill Lynch and Co., Inc. (NYSE: MER) and Citigroup, Inc. (NYSE: C) were buying up collateralized debt using bonds that were backed by subprime home loans. If those loans went into default, the risk to all that debt to these large financial companies is pretty scary. Err, wait…that is exactly what has happened, and as a result of this risky procedure, both of those finance houses are writing billions down in value and Merrill’s O’Neal and Citigroup’s Charles Prince have been sacked in the span of a week. Whoa!

Ignoring the fundamentals of finance (as in, risk management) is pretty easy for many of us, but when you lead some of the world’s largest financial companies, it’s gets a tad bit more thorny. If that risk balloons into a problem, you have a huge thorn in your side. This is precisely what happened to Merrill Lynch, Citigroup and many others reeling under the pressure of writing down assets backed by floppy loan foundations. When will the vision increase from a short-term one to a long-term one? On Wall Street, maybe never unless the market implodes upon itself.

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Filed under: Management, Scandals, Countrywide Financial (CFC)

Generally, the point of stock options is to reward executives if the stock performs well — if it doesn’t, they don’t get a reward, and their options expire worthless.

Well there’s generally, and then there’s Countrywide Financial (NYSE: CFC). The stock has had an absolute meltdown this year, and everyone with the exception of the company’s board of directors is demanding change at the top. CEO Angelo Mozilo’s sky-high compensation has attracted criticism, and the SEC is investigating his all-too timely stock sales.

Well now, more compensation madness at the company. Countrywide Financial has granted restricted stock and postponed the expiration dates on the stock options on some of the company’s top executives including its executive managing director for residential lending who, presumably, had something to do with the subprime loans that have been the company’s downfall.

In other words, the executives were, as part of their pay packages, given options that would reward them if the stock appreciated in a certain amount of time — Well, obviously, it didn’t, so now Countrywide is just extending the expiration date.

This is the logical equivalent of a ref declaring that the bottom of the 9th inning will consist of 43 outs because the home team is losing.

You really have to wonder about Countrywide’s management these days and, perhaps more importantly, its well-paid board of directors.

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Filed under: Google (GOOG), Headline news, Technology

Being from LA, I have a variety of friends in the entertainment industry. No doubt, my talent agent friends are sweating. What will the writers’ strike mean?

Well, at first, probably not much. Hollywood studios have anticipated things — and have stockpiled content. But this can only last for a couple months. After that, things can certainly get dicey (hey, entertainment is the #3 employer in LA county).

After all, look what technology did to the music industry. Might the same happen with network television and movies - especially in a world of Google Inc.’s (NASDAQ: GOOG) YouTube And what about the popularity of multi-player gaming? Or social networks?

I had a chance to interview Chase Norlin, who operates Pixsy (an online video search engine). According to him:

“The strike likely doesn’t impact the online video industry. Today, online video generally falls into two large categories: customer generated content (CGM) on the low end and professionally produced video content on the high end, typically originating from existing video assets (e.g. TV production, movie trailers, etc). The semipro content production market, which falls in the middle, will likely become the next new market for online video production on the web. When this happens, a strike could significantly impact the online video industry in a negative way.”

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates DealProfiles.com.

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Filed under: Newspapers, Marketing and advertising, Walt Disney (DIS)

After months of fighting, Tornante/Madison Dearborn Partners’ deal to acquire Topps finally received the approval of the company’s shareholders in September.

Now former Disney (NYSE: DIS) CEO Michael Eisner, who controls Tornante, has a plan for Topps. In an interview with the USA Today, Eisner said that he has big plans for Bazooka Joe: “Bazooka Joe is my new Mickey Mouse.”

Eisner points out that most movie heroes from the past few years have been old comic book characters: Spider-Man, X-Men, and Superman.

Depending on how you look at it, Eisner is one of two things: a visionary, or an idiot. The problem is that Bazooka Joe is just not as iconic as any of the cartoon characters that have recently had big resurgences. If they put together an amazing movie, anything is possible, but I just don’t see anyone flocking to the theater to see the new Bazooka Joe movie — unless that can get Zac Efron to play Joe. And if they can do that, Efron needs to fire his agent.

His other ideas for the company are more reasonable. Eisner believes that the trading card industry has been taken over by hardcore collectors, and that the company needs to focus on making cards fun for kids again, the original intended market.

One thing’s for sure: Eisner has big plans for Topps. And if he can pull even a fraction of it off, the controversial Topps buyout is going to look like one of the greatest fleecings of minority shareholders in recent memory.

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