For all the bashing against hope in politics, the same cynics are the one’s pushing and pumping Orwellian type housing programs like “Hope Now” and “Project Lifeline.” Remember how the White House first said no bailout? Then they proceed to enact the Hope Now Alliance which started off on the great footing with the President giving the wrong number on TV. Since this was the equivalent of spitting into the ocean, they now decided to enact Project Lifeline which is essentially the mortgage moratorium that Senator Clinton was proposing except for a short time horizon! The only difference with Project Lifeline is that we now accept that we are all sub-prime since this also covers prime and Alt-A mortgages. I would argue that thinking the government can somehow stop the correction in housing requires more than hope, it requires an incredible leap of faith.

In Southern California the bottom has essentially fallen out (again) as we discussed in great detail in our previous post looking at the Southern California housing numbers and recent sales. Doesn’t it seem like we hit the supposed “bottom” every month? When we are dealing with a moving target, we have to put on our running shoes since we have further to go. I predicted the housing decline to the actual quarter by simply following housing sales trends, price trends, and the general market psychology of consumers. Once we hit the peak, it was much easier to forecast what would happen especially after the credit crunch in August of 2007. As the media is “astounded” by the recent price trends all we need to do is look at income surveys and a few Real Homes of Genius.

Since I’m in a giving mood, I decided to do a special two for one Real Home of Genius today since it has been awhile since we looked at any RHOG. Many of you dear readers are not from California and have a hard time wrapping your head around what is currently going on. Surely many of you given the current housing crisis must assume that some lower to middle income cities in the Los Angeles region must have already correct. Not so. What we are seeing is a litany of homes that are still hitting the market with absurd valuations. Compton is a prime example. What many don’t realize that many “starter” homes in this Los Angeles city were selling for $500,000. If we really want to see the excesses of the housing bubble we need to go to the lower income areas. Look at Cleveland or Detroit. The incredible financial irresponsibility and destruction of neighborhoods by fly by night mortgage shops and a hungry and corrupt Wall Street will have decade long repercussions. This will not disappear overnight. So today we salute you Compton with our Real Homes of Genius Award.

You know, I think I’m going to put together a new real estate agent DVD kit. The first step will be for people to go online, go on eBay, and buy a freaking decent digital camera! You can get a great camera for under $200. You are selling a home, in this case a $425,000 3 bedroom 2 bath home in a deeply depressed market, and you can’t even upload a quality image? So you say the MLS doesn’t allow quality photos. Download a free photo editing program and change the compression. This isn’t financial engineering. We aren’t talking about collateralized debt obligations or mortgage backed securities. Oh wait! Yes we are! Bwahahaha. I’ve been looking at a few homes out of state for investment purposes and I have seen so many Wall Street firms owning these places. Clearly they do not practice what they preached since they financed areas site unseen. This home has been on the market for nearly 4 months with very low interest. In fact, this short sale has shown no pricing action. Price drops are absent which leads us to believe that many lenders are so busy, they simply cannot deal on a case by case basis with their workload.  Welcome to another unintended consequence of the housing decline, lender apathy. Take a look at the sales history on this place:

Sale History

02/23/2007: $485,000

12/07/2005: $329,000

06/01/2004: $249,000

They’ll be lucky to sell this place at $249,000. And speaking of homes in the $200,000 range, let us move on to our next Real Home of Genius.

I love this depth of perception photography. If you really didn’t know any better, you would expect Robin Leach to pop out and ask you for an interview. This home is actually in the running for one of the smallest ever Real Home of Genius. This place is a 1 bedroom 1 bath home on get this, 452 square feet! So when you take that into consideration, the $198,000 price tag isn’t exactly a great deal. But it is a much better deal from the previous sales price:

Recent sale

Sold 01/03/2008: $289,872

Say what? Someone actually closed escrow on this place last month for $289,872 and now only one month later is selling for $198,000? So we have nearly a $100,000 drop in one month. At that rate, a 31 percent monthly loss, this home will be free by the end of the year. I love how the ad tells us that this is a major fixer and the “value” is in the land. Didn’t everyone get the memo? All cities in Southern California are equally valuable simply because they are in the golden state. You really wonder how many places like this throughout the state were sold on lax lending standards with would be investors popping up everywhere. If you think raising caps or “pausing” foreclosures as if this were some Xbox video game is going to help, I hate to tell you but unless the government mandates that all employers start paying their employees $150,000 per year we have a major correction going on.  Unfortunately there is this thing called a recession looming and employers typically do not give out $100,000 raises during these times.  But we will get Wal-Mart and Target vouchers for $600 come May. Even I had my doubts about seeing 50 percent reductions in California but I am seeing more and more and even some popping up in so-called prime areas. This home had a 30+ percent haircut in one month.

Today we salute you Compton with our Real Home of Genius Award.

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Related Posts:
■Real Homes of Genius: $450,000 3/2 Home in Compton? Yes folks, Smoking Housing Bubble Peyote Will Make You See Things Like This!
■Real Homes of Genius: Today we Salute you Compton. $321,000 for 594 Square Feet! Can You Really Get Two Bedrooms Into That Space?
■Real Homes of Genius: Today we Salute you Compton. $294,900 for Your Very own Prison.
■Real Homes of Genius: Today we Salute you Compton. 3 Bedrooms on 806 Square Feet!
■Real Homes of Genius: Today we Salute you Compton. $279,900 for 768 Square Feet.

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Filed under: Oracle Corp (ORCL)

The folks at NetSuite (NYSE: N) certainly have good timing. They were able to launch their IPO late last year - before the equity markets came undone.

Now, the company has released its first quarterly report as a public company. Q4 revenues spiked 57% to $31.7 million and there was a net loss of $3.3 million, which was much better than the loss of $8.1 million in the same period a year ago.

NetSuite, which is majority-owned by Oracle’s (NASDAQ: ORCL) Larry Ellison, is a provider of web-based business applications. Think of it as filling the gap between Intuit’s (NASDAQ: INTU) QuickBooks and mega applications from SAP (NYSE: SAP) and Oracle.

And, it’s a big market opportunity. In fact, NetSuite often says that it is focused on the “Fortune Five Million” companies.

But, as is the case with other web-based providers, there is some uncertainty in the marketplace. While NetSuite isn’t seeing a fall-off, the company is still providing in-line guidance - with a full-year revenue projection of $153 million to $156 million, which is a 44% increase (on the top end).

Keep in mind that NetSuite had to deal with the severe tech recession of 2001-2002 and was able to actually thrive in the environment. A key reason is that companies were looking for cost-effective solutions.

In today’s trading, NetSuite’s stock is down 5.62% to $22.17.

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: Earnings reports, Hewlett-Packard (HPQ), Motorola (MOT), Technical Analysis, Stocks to Buy

CTS Corporation (NYSE: CTS) designs and manufactures electronic components and sensors for original equipment manufacturers in the automotive, computer, communications, medical, defense, aerospace and industrial markets. Products include automotive sensors, oscillators, RF modules, resistors, switches, piezoelectric ceramic components, backplanes and interconnect systems. Hewlett-Packard (NYSE: HPQ) and Motorola (NYSE: MOT) are major customers.

The firm surprised investors late last month, when it announced Q4 EPS of 25 cents and revenues of $178.3 million. Analysts had been expecting 20 cents and $176.6 million. Management also guided FY08 EPS to 78-83 cents (81 cent consensus) and FY08 revenues to about $720.2-$740.8 million ($721.99M consensus). In discussing the positive quarter and solid outlook, the CEO pointed to the recent acquisition of new piezoceramic and electronic technologies.

Continue reading CTS Corporation (CTS): Shares define bullish ‘flag’ consolidation

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Filed under: Newsletters, Citigroup Inc. (C), Stocks to Buy, Recession

“Although I remain bearish on the economy for the time being, I am turning more bullish on stocks,” says Vahan Janjigian, editor of The Forbes Growth Investor.

He adds, “I believe stocks have fallen enough to be attractive to all investors except those with very short horizons. And my recommendation for Citigroup (NYSE: C) conveys my conviction that some of the best opportunities for long-term gains will come from the oversold financial sector.”

“There is much debate about whether or not a recession is coming. In my view, it has already arrived. But whether or not it’s an ‘official’ recession is largely irrelevant. The Federal Reserve is obviously so alarmed it has slashed interest rates at a record-breaking pace

“With more than 300,000 employees serving 200 million accounts in over 100 countries, Citigroup is a financial
services supermarket. But the collapse of the subprime mortgage market erased about $125 billion from the
company’s market capitalization.

“Many financial institutions got burned by the subprime mortgage meltdown. Banks holding mortgage backed
securities (MBS) and collateralized debt obligations (CDO) were particularly hard hit. Citigroup suffered massive writedowns.

Continue reading Forbes quant banks on Citigroup (C)

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Filed under: General Motors (GM), Employees

The head of the United Auto Workers union expects 15,000-20,000 workers to accept General Motors’ latest buyout offer, The New York Times reported Friday.

UAW President Ron Gettelfinger said the latest buyout group would be smaller than General Motors‘ (NYSE: GM) 2006 buyout, when about 34,400 workers — or one-third of GM’s unionized workforce — accepted deals, The Times reported.

GM’s shares were virtually unchanged Friday on the news, rising about 10 cents to $25.92.

Too few taking buyout?

GM’s plan is part of an ongoing effort to substantially reduce operating costs. GM lost $38.7 billion last year, and analysts say another successful buyout program is critical to the auto giant returning to profitability in 2008. Independent stock analyst C. Leonard Bauer, formerly of Prudential, told BloggingStocks Friday a potential 20,000-worker buyout is “a decent number” but he wants more.

Continue reading Up to 20k workers seen accepting GM’s buyout, but more may be needed

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Filed under: Economic data, Housing, Federal Reserve, Recession

Alan Greenspan is obtuse no longer.

The former Federal Reserve Chairman, whose incomprehensible musings were parsed by investors for years to find their hidden meanings, startled markets again by telling an audience willing to pay his hefty speaking fee that the economy is “clearly on the edge of a recession.” His remarks underscore those of his successor Ben Bernanke, who has argued the economy is slowing because of the meltdown in the subprime mortgage market.

From the Associated Press:

“If it weren’t for the fact that business was in such extraordinary good shape before this problem hit, I don’t think we’d be questioning at this stage whether we’re in a recession,” Greenspan said during a question-and-answer session with Daniel Yergin, chairman of Cambridge Energy Research Associates, the Massachusetts-based consultancy that sponsored the dinner.

“We’d be talking about how long and how deep,” he said. “And we’re not there yet.”

But we’re awfully close, no?

Freelance writer Jonathan Berr edits the blog Ketchup and Eggs.

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Filed under: Earnings reports, Forecasts, Good news, Management, Consumer experience, Competitive strategy, Marketing and advertising, Abercrombie and Fitch (ANF)

Fears over further economic slowdown are dragging most stocks down as market trading is blood red again after a Labor Department report showed a rise of 1.7% in U.S. import prices in January. But not all the companies are pulled down by investors’ economic concerns. In fact, shares of teen retailer Abercrombie & Fitch Co. (NYSE: ANF) have gained a little over 0.5% in early morning trading, after the company posted a rise of 9% for its fourth-quarter profit.

For the quarter, Abercrombie & Fitch reported that its profit climbed to $216.8 million, boosted by strong sales from its Hollister Co. chain. Lower theft rate and higher profit margins also offset deeper discounts and the company posted earnings of $2.40 per share. Analysts were expecting the retailer to show earnings of $2.36 per share in the quarter.

Abercrombie & Fitch also announced an 8% growth in revenues, to $1.23 billion, up from $1.14 billion a year earlier when the company benefited from an extra week. For the quarterly same-store sales though, the retailer posted a decline of 1%.

Continue reading Abercrombie & Fitch (ANF) fourth-quarter profit rises on higher sales

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Filed under: Options, Bear Stearns Cos (BSC)

Bear Stearns (NYSE: BSC) is recently up $3.78 to $82.10 on renewed buyout chatter. BSC call option volume of 25,768 contracts compares to put volume of 9,600 contracts. BSC March option implied volatility of 56 is near its 12-week average, according to Track Data, suggesting non-directional price movement.

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

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Filed under: Analyst initiations

MOST NOTEWORTHY: Micron, Chico’s FAS and Lifetime Brands were today’s noteworthy initiations:

• Oppenheimer assumed Micron (NYSE: MU) with an Outperform rating and $9.50 target, as they believe price declines in the DRAM market moderated in 2H of the December quarter and that concerns of oversupply are already priced into shares.
• Stanford believes shares of Chico’s FAS (NYSE: CHS) will remain under pressure over the next three to six months given the adverse economic conditions and the company’s “less-than-exciting” fashion assortment. The firm started shares with a Hold rating and $10 target.
• Lifetime Brands (NASDAQ: LCUT) was initiated with a Neutral rating at SunTrust. The firm prefers to wait for greater visibility on the U.S. consumer spending environment before becoming more constructive on the name.

OTHER INITIATIONS:

• Soleil initiated Worthington (NYSE: WOR) with a Hold rating.
• Jefferies started Esterline Technologies (NYSE: ESL) with a Buy rating and $58 target.
• Oppenheimer assumed Spansion (NASDAQ: SPSN) with a Perform rating.

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Filed under: Industry, Economic data, Federal Reserve

Industrial production increased 0.1% in January 2008 for the second consecutive month, the U.S. Federal Reserve announced Friday, in a statement. The statistic was in-line with economists’ consensus estimate.

Meanwhile, the December 2007 output was revised to a 0.1% increase, up from the previous estimate of 0.0%.

At 114.2% of its 2002 average, overall industrial production was 2.3% above its January 2007 level, the Fed said.

In addition, capacity utilization — which indicates the percent of industrial resources in service — was unchanged from the prior month’s revised percentage of 81.5%. At 81.5%, capacity utilization is 0.4 percentage points above its year-ago level and 0.5 percentage points above its 1972-2007 average. Capacity utilization has averaged about 81% over the last three decades: higher utilization rates suggest upward pressure on prices is likely in the months ahead.

Continue reading Industrial production rises 0.1% in January, in-line with estimate

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