Filed under: Earnings reports, Media World

Schawk, Inc. (NYSE: SGK) provides brand management services to clients in a variety of businesses. While the company just posted record operating income in FY 2007, it must also restate 2006 income, and faced flat or declining sales in numerous business segments. Income from continuing operations in 4Q 2007 was $0.24, the same as 4Q 2006. 4Q 2007 sales rose less than 1%. The company was particularly hard hit by the writers’ strike in Hollywood. Its entertainment accounts unit posted an 18% drop in sales due to fewer ad pages produced.

The company kept a very tight rein on administrative expenses. The company has taken a defensive position, choosing to decrease capital expenditures and reduce interest expense while trying to develop more rigorous internal controls for recognizing revenue. CEO David Schawk remains optimistic the company will have all financial accounting weaknesses under control by the end of 2008. He remains optimistic that the company will show gains in income, sales, and profitability in 2008. The majority of Schawk’s clients are in the consumer product packaging unit. Regardless of unfavorable or unstable economic conditions, those accounts will continue to require services.

The stock is currently trading under $15, and may be one patient value investors want to take a look at.

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: India, China, Newsletters, Eastern Europe, Stocks to Buy

“We like to invest in the strongest sectors and we think Industrials are on their way to the top,” note Ron Rowland and Brandon Clay in All Star Investor.

The advisors explain, “Surveying the horizon of industrial companies, the most promising is Bermuda-based, Ingersoll-Rand (NYSE: IR). This is a stock you want for the next 12 months.”

“The stock market is a leading indicator; it starts to decline before the economy slows down, and it starts to advance well before the economy improves. These lags often results in a stock market that starts moving up just when the public becomes ‘convinced’ that the problems are serious.

“Economic reports are likely to get worse. Housing foreclosures are likely to increase. Many more employees are likely to be let go. These are the perceptions that currently haunt investors.

“However, these are often the very same perceptions that create bottoms in the stock market. It is hard to see how the economy will crawl out of this mess, but eventually it will. The groundwork is now being laid.

“It may seem counter-intuitive, but investors should start planning for the next expansionary cycle. Markets move well ahead of facts, and it’s time to invest accordingly. And indeed, industrials have risen in our rankings in recent weeks.

“A global leader of broad-based equipment offerings, Ingersoll-Rand is positioned to capitalize on the next phase of development like no other company in its sector. Here’s why.

Continue reading Ingersoll-Rand (IR): It’s time for Industrials

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Major movement, Bad news, Industry, Centex Corp (CTX), Options, Technical Analysis, Economic data, Housing

Centex Corporation (NYSE: CTX) stock is falling today along with other homebuilders after the National Association of Realtors said February pending sales of existing homes fell 2% from January. Existing home sales are considered a good indicator of the overall housing market, which means more trouble could be ahead for CTX. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CTX.

After hitting a one-year high of $49.85 in May, the stock hit a one-year low of $17.77 in November. This morning, CTX opened at $25.90. So far today the stock has hit a low of $25.00 and a high of $26.09. As of 1:00, CTX is trading at $25.01, down $1.31 (-5.0%). The chart for CTX looks bullish and steady, while S&P gives the stock a neutral 3 Stars (out of 5) Hold rating.

For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $30 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 12.4% return in six weeks as long as CTX is below $30 at May expiration. Centex would have to rise by more than 20% before we would start to lose money. Learn more about this type of trade here.

Continue reading Centex (CTX) tumbles on housing data

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Management, Industry, Google (GOOG), Marketing and advertising

Google Inc.’s (NASDAQ: GOOG) Chief Information Officer Douglas Merrill is reportedly leaving the company to become the president of EMI’s digital section. Google confirmed Merrill leaving the company yesterday, while EMI confirmed the rumors today. According to Billboard, Merrill officially joins EMI on April 28 in the brand new position, but will be based at legendary Capitol Tower in Los Angeles. Much of the business for the fourth-largest record label is conducted in London, which may signal that EMI heavily courted Merrill.

At a time when the music industry is in flux, Merrill’s move from Google to EMI is inventive and should help the music company foster growth into a realm that all music companies have had trouble entering successfully: the digital world. Apart from limited success here and there, the music industry overall has not handled technology that makes many of their marketing and distributing schemes obsolete. The report that commented heavily on Merrill’s move noted how his experience at Google can help EMI form a strategy to compete on the Internet.

For Merrill, the report comments, “the move will require either a huge mental exercise or a near religious conversion.” The report also notes “it will be interesting to see what an executive from a company known for pushing the envelope on fair use can bring to an industry that has rabidly protected its copyrights.” That’s a nice sentiment, but any hopes that a quick or painless transition for EMI and Merrill seems impossible. Like the article says, “maybe he can help them use the Web to make money instead of trying to keep others from using it at EMI’s expense.”

Guy Hands, the chief at EMI, might be despised by some parties for taking a wrecking ball to expenses, but if this move does anything it should indicate that the Internet as a tool for growth is being taken seriously. At the same time, should it really take an Internet executive to reveal that vital piece of information? Either way, since the music industry is in flux, maybe this addition can add another level of change that will excite everyone involved.

Share This

Filed under: Industry, Politics, Recession

First the good news: Congressional Democrats are talking up the idea of a second fiscal stimulus package to help jump start the U.S. economy.

Now the bad news: Congressional Democrats are talking up the idea of a second fiscal stimulus package to help jump start the U.S. economy.

U.S. House Speaker Nancy Pelosi, D-California, said she would raise the prospect of a second stimulus bill when she and other Congressional leaders meet with President Bush this week, CNN reported Monday.

Anemic U.S. economy

Speaker Pelosi did not provide specifics but said March 2008’s “disturbing unemployment numbers” which indicated the nation’s economy lost 80,000 jobs “compels the President to work with Congress on a second stimulus package to get our economy back on track, create jobs, and speed assistance to families struggling to make ends meet,” CNN said.

On Monday, the Bush Administration said it was too soon to talk about the need for a second economic stimulus package because the first one had not been fully implemented yet, Reuters reported.

Continue reading Congressional Democrats talk up second economic stimulus package

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

This post is from the Blown Mortgage Hall of Fame.  It originally appeared back in July 2007 on my series on credit.  Now more than ever your credit score is vital to securing financing.  I’m on vacation from Saturday until Tuesday the 15th so enjoy some of the classics while I’m gone. 

——————————————————–

Credit is king. In the mortgage industry credit makes or breaks loans. In this five-part series we’ll look at credit from a variety of angles:

1. Why credit is so important
2. Understanding elements of credit
3. Improving your score organically
4. Improving your score using 3rd party help
5. Managing your score

In a lax credit environment - like the one we’re quickly coming out of - your credit score is relatively unimportant; there is ample money and credit guidelines are lax. You can get money from almost anywhere. In 2005 whether you had a 500 FICO score or a 720 FICO score you were looking a low-to-mid 5% interest rates on a 30-year fixed mortgage. And only the lowest credit graded borrowers were being denied 100% financing. Credit was rarely an obstacle and money was exceptionally cheap.

In a tightening credit market your score becomes precious. Today you can’t get 100% financing unless you have over a 720 FICO score (or qualify for some niche-type purchase products); and even then, the rates on the second mortgage are not pretty. It has become cost-prohibitive to have high-loan to value (LTV) mortgages, even with excellent credit. Subprime borrowers face exceptionally high interest rates and borrowing cut-offs at 90% for refinance transactions. Poor credit borrowers are being squeezed by tightening credit and falling home prices. Prime borrowers in high LTV scenarios are feeling the crunch as well.

If you are a subprime borrower and in the middle of an Adjustable Rate Mortgage (ARM) with a prepayment penalty and are worried about your loan there is one thing you must be doing: improving your credit. Improving your credit is the key to avoiding the ARM Reset Foreclosure Trap.

Why Credit is So Important

1. Get Approved - As automated underwriting (AU) became more popular your credit score was made the driving factor of your interest rate and loan approval.  While it was always a factor in the past - automated systems needed something they could easily incorporate in to simple logic and the FICO score fit that bill.  And with that its importance went through the roof.
2. More Options with Less Equity - As your credit score increases you become eligible for higher loan to value (LTV) loan products.  This is extremely important in a falling property value environment because it allows you to refinance out of adjusting rate mortgage (ARM) loans even with little equity left in your property.  With out a high FICO score it is extremely difficult to refinance out of your ARM loan and in to a new fixed rate product.  The resultant ARM reset can put substantial payment stress on you and your family.
3. Access to Cheaper Money - Late payments on your mortgage can disqualify you from the most consumer-friendly mortgage programs.  Avoiding late payments on your mortgage means a substantially higher credit score and the ability to refuse mortgage products that include prepayment penalties and higher interest rates.  Good credit means cheaper money and more flexible loan terms, in all market conditions.
4. Access to More Programs - Good credit not only makes money cheaper; it also provides you access to credit that isn’t available to all borrowers.  If you are a subprime borrower you can’t get a stand-alone second mortgage these days.  The only option you have is to refinance your complete mortgage.  However, if you have good credit 2nd mortgages are available at competitive interest rates.

Understanding Credit and the ARM Reset Foreclosure Trap

The ARM Reset Foreclosure Trap is one of the biggest culprits for foreclosures in the country today.  Here is how it works:

• Subprime borrower takes out a high-LTV ARM loan (cash out of other) under loose credit guidelines
• Property values decrease reducing equity in the property
• Interest rates rise
• Credit guidelines tighten eliminating high-LTV mortgage products for subprime borrowers
• Subprime ARM loans reset to much higher interest rates and monthly payments
• Borrowers are locked out of high-LTV mortgage products due to poor credit
• Borrowers are faced with payment shock
• Borrower have no option but short sale or foreclosure

The only way to avoid this trap is to short-circuit it by improving your credit score.  It gives you the ability to maneuver at the high loan-to-value limits; your only chance to secure a new loan with out experiencing the pain of super-high payments on your now-adjusting adjustable rate mortgage. Credit is the only thing that can save you if you plan on keeping the home.  It is imperative that if you are in the situation above that you spend however much time you have between now and your rate adjustment date improving your credit score - and don’t stop until you’ve gotten above 720.

If you are in a prepayment penalty period it’s OK.  Work on your credit.  If you have 6 months until your rate resets - start now; same advice applies if you have 2 years!  By improving your credit score you improve your prospects of being able to secure financing at high loan to value ratios.  And that is the key to stemming payment shock and avoiding foreclosure, short sale or other not-so-fun remedies.

Now, some people may be in a negative-equity position.  At that point improving your credit will not help you find new financing.  Please see my post on avoiding foreclosure for recommendations to manage that scenario.

In the next part of the series we will focus on the elements that make up a credit score and how you can use the information to improve your personal credit score.  Please stay-tuned to this important series for the rest of the week - it has the potential to save your home; and with banks sitting on short sales it may be the only way you have out of the ARM Reset Foreclosure Trap.

Source [blownmortgage]

Share This

Filed under: Google (GOOG), Employees

I guess things are tough all over — even Google Inc. (NASDAQ: GOOG) is laying off people.

For the first time, the tech darling of the internet will be cutting a large number of jobs, with the reductions coming from the company’s new DoubleClick workforce. Google completed its purchase DoubleClick on March 11, and it was widely expected that the Goog would fire some of DoubleClick’s 1,500 employees. According to The New York Times, though, the 300 number is larger than expected.

Google is also planning on selling Performics Search Marketing, a unit of DoubleClick. Performics is a search engine marketing company that gets paid to place ads on search engines. This could interfere, or appear to interfere, with Google’s objectivity when ranking — and charging for — page popularity. So bye bye Performics!

Google has about 17,000 employees worldwide, having added over 6,000 in 2007. CEO Eric Schmidt has promised to slow the pace of hiring in the coming months.

Share This

So that’s comforting.  According to mortgage data made available by the federal reserve bank of New York 4 out of 5 homeowners in my zip code state who secured their property with an Alt-A loan used stated income to qualify for their mortgage.  Actually it’s 83%.  And 72% of the loans are ARM loans. That is a jaw-dropping statistic, is it not???  Luckily only about 3% are due to reset in the next 12 months.  So we’ve got some time until the bottom drops out of my zip state.

This is the problem people.  80% of folks in my typical state, California, zip code bought their home with stated income.  Max out the loan limits, offer modifications, expand FHA, make Fannie and Freddie buy more and leverage their capital.  Guess what?  It doesn’t matter!  Folks in these areas can’t afford their homes.  Unless you are planning on forgiving the mortgage debt you are not going to save folks from these exploding mortgages, period, end of story.

So, how many people stated their income in your zip state? 

Update: Thanks to commenter Robert for pointing out that these numbers are for the state, not just my zip code.  While I’ve been accused of using that fact to “spin” my story (also in the comments) I believe it is far scarier that the entire state is built on stated-income loans and not just an outlying, over-priced zip code in Orange County.  Now I’m truly convinced that we’re in for much more pain.  If 4 out of 5 people are using non-traditional mortgage products and 3 out of 4 people are using ARMs what are they going to qualify for when those ARMs reset and the universe of non-traditional loan products is infinitesimally smaller. 

P.S. If you’re a mortgage originator this could be the ultimate farming tool.  Check out ARMs due to reset in the next 12 months.  Get farm packs from title in those zips with >75% reset rate and cross your fingers people have equity.  Free marketing advice - just like that.  You’re welcome.

Hat tip to Matt at Inman for the link.

Source [blownmortgage]

Share This

There is something to be said about creative marketing and the influence it has had on this credit bubble. Yes, it is one thing to go after the Federal Reserve, Wall Street, greedy speculators, or unscrupulous lenders since we tend to associate a sense of responsibility with them in creating this credit bubble. […]
Related Posts:
■The Abyss is Deep: The Housing Abyss is Deep: 4 Major Reasons Why Housing in Southern California is Nowhere Near a Bottom.
■True American Idol: Subprime Mortgage Lenders Send off a Blast Heard Around the World.
■When will my home cost me an ARM and a leg?
■Dr. Housing Bubble Celebrates Monumental 100th Post! Top 10 Housing Articles.
■Foreclosures jump statewide by 40% in California in just one quarter! Welcome to California’s Gold!

There is something to be said about creative marketing and the influence it has had on this credit bubble. Yes, it is one thing to go after the Federal Reserve, Wall Street, greedy speculators, or unscrupulous lenders since we tend to associate a sense of responsibility with them in creating this credit bubble. Yet not much has been examined about those that played on the psychological strings of the public and enticed them with dreams of golden brick roads and endless sunshine. The advertising behind the credit bubble has been amazing in its subtlety and deep in misguided financial advice. Let us take for example a current ad that has a woman talking about a Pay Option ARM mortgage.

The ad plays along this script:

“With my flexible mortgage, I have the option to pay what I can, when I can. I can pay:

[use ridiculously low negative amortization monthly payment here]

[use financially destructive interest only option here]

[use with no emphasis fixed interest rate here]

The next part of the ad shows us a quick clip that subliminally tells us a lot of how people perceive credit. It uses the difference between the negative amortization payment and the fixed payment and calls it, get this, your savings.”

Maybe some of you have seen this ad or some variant of it. Frankly, I’m astonished they are still marketing this stuff given the political negativity surrounding the current housing market. This is one of the few that is currently airing and I’m not sure how much longer it will be going for given the nature of these mortgages. Yet the striking point of the ad is the message that whatever you don’t pay today is the same as you actually saving for tomorrow. This in fact is not only factually incorrect but also financially destructive. Think about what a negative amortization loan does. If you are to elect to pay only the lowest payment option, you are in effect increasing your mortgage balance each month. This in the world of reality and mathematics has the effect of growing your balance, the opposite of saving.

Now keep in mind that many of these Pay Option ARM mortgages were taken on by “financially savvy” folks with good credit that would never be mixed in with those sub-primers. Yet there is just as much of a risk for these to default since practically every loan of this category given out in the past two years in the state is now underwater. The entire state of California is now facing multiple challenges that will put significant pressure on prices for the next few years. So even a 5 or 10 percent down payment is now wiped out. Needless to say all those no money down loans with second mortgages are just waiting to be walked away from; that is if the government doesn’t step in and starts picking them up in the great mortgage swap meet of 2008.

Another stunning message in the ad is the person talking said something to the effect, “this mortgage is great. One month I can pay the full payment and the other month I can pay the minimum. I can decide to pay whatever I like.” Yet another free lunch mentality. I’m sure you know of folks in your immediate circle of friends and confidants that have back breaking credit card debt and yet you hear them say, “but I only pay [insert minimum payment that does nothing to the balance here] a month!” And not only do they say this with a straight face, they are proud of it. Even the wording of the loan is Orwellian. Pay Option? How about I take option D and simply not pay at all. Seems like a lot of folks are electing to use that one. These loans should be called, “pray that housing keeps going up while I make the minimum payment so I can unload the property in this forever Ponzi scheme of housing before my mortgage recasts in 2 years” loans. A little truth in advertising there.

Everyone Makes $250,000

The media for some reason doesn’t like pointing out that American household incomes simply do not support home prices. The implication is the problem is the loans and not that wages simply do not reflect current housing prices. After all, if everyone was making $250,000 prices would be cheap today. Right now the topic du jour of course is the bailout of Bear Stearns. It’s almost as if Bear Stearns held some sort of capitalism kryptonite and if the box where to be open, the world would start trembling. Glad it only took $29 billion to right the entire global economy. I think we got a great deal on that one! Let us once again re-examine the income breakdown of American households:

One of the charges leveled a few years ago when I started posting was ironically a common message that stated, “you’ll be surprised how many households in California make $250,000.” I’m not sure if this figure was given in some late night lending infomercial but the number seemed to stick and was used often. Now that the tide is drifting out to the vast blue Pacific Ocean those people were right, I am surprised how many households make $250,000 in California. Clearly it isn’t enough since those people with Pay Option ARM mortgages only make the minimum payment at a rate of 70 percent. Now I’ll give it to many that there are many households in the coastal regions that are in the six-digit range but this doesn’t go far in high cost areas. Yet there is a difference from a household making $120,000 and a household making $250,000. I think the above statistics put a major cloud on the prospects for higher housing prices.

Now why is this data important? Well let us look at the data for the entire state of California to see what sub-prime mortgages are looking like:

Source: FirstAmerican CoreLogic, LoanPerformance Data via the New York Fed.

If we dig deeper into the data we get these astonishing numbers:

California housing units: 12,214,549

Number of sub-prime: 500,958

Average balance: $325,672

What this means is California alone currently has $163 billion in active sub-prime loans in which, 47.5% were done with low or no documentation. This doesn’t even examine the Pay Option ARM mortgages. What you’ll be happy to hear is most of these loans were originated at the height of the bubble:

And the sub-prime loan of flavor in California was the 2/28 mortgage. Guess how many of those 2/28 loans will be resetting this year? How about 43.2 percent. Does that make this now infamous chart make more sense?

And guess how many folks actually took cash out of their homes on these toxic mortgages? How about 256,630 or over 50 percent of the entire sub-prime California mortgage pool. Don’t you just love the flexibility these mortgages offered like the creative advertising was telling us? Talk about a gigantic mess. As we discussed in a previous article the FHA $300 billion bailout proposal would most likely leave all these loans out on a vine since it is very likely that for the most part, these are underwater or very close to it given the date of origination and market conditions. That $29 billion to Bear Stearns doesn’t seem so large when the amount of California sub-prime loans is over 5 times as much. A billion here a billion there and soon we’re talking about pulling out the real American Express card. Put it on our tab and we’ll pay it later.

Did You Enjoy The Post? Subscribe to Dr. Housing Bubble’s Blog to get updated housing commentary, analysis, and information

Share This

Related Posts:
■The Abyss is Deep: The Housing Abyss is Deep: 4 Major Reasons Why Housing in Southern California is Nowhere Near a Bottom.
■True American Idol: Subprime Mortgage Lenders Send off a Blast Heard Around the World.
■When will my home cost me an ARM and a leg?
■Dr. Housing Bubble Celebrates Monumental 100th Post! Top 10 Housing Articles.
■Foreclosures jump statewide by 40% in California in just one quarter! Welcome to California’s Gold!

Via [DrHousingBubble]

Share This