Filed under: Good news, Bank of America (BAC), Countrywide Financial (CFC), Housing

The Bank of America, seeking approval of its Countrywide Financial Corp. takeover, announced Monday it will modify at least $40 billion in troubled mortgages during the next two years to keep customers in their homes, Bloomberg News reported Monday.

The action could help as many as 265,000 homeowners, Liam McGee, president of the Bank of America’s (NYSE: BAC) global consumer and small-business banking unit, said Monday in Los Angeles at a U.S. Federal Reserve hearing on the pending purchase, Bloomberg News reported.

“No one benefits from a foreclosed home,” McGee told Bloomberg News. “It is bad business for banks.”

Bank of America’s shares moved 10 cents higher to $38.40 while Countrywide (NYSE: CFC) gained 7 cents to $5.91 on the news in Monday afternoon trading.

Continue reading Bank of America says it will modify mortgages to help homeowners

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

The Federal Reserve is at it again, pumping another $50 billion in short-term loans in to the financial system to prevent a freeze up. That brings the total to a cool $360 billion since the auctions started in December. 83 bidders were represented looking for a slice of the loans which were granted at 2.87% interest.

From the AP on the latest $50 billion money-bomb:

The central bank on Tuesday announced the results of its most recent auction — the 10th since the program started in December, where commercial banks bid to get a slice of another $50 billion in the short-term loans.

It’s part of an ongoing effort by the Fed to help ease the credit crunch, which erupted last August, intensified in December and January and took another turn for the worst in March with the sudden crash of Bear Stearns, the nation’s fifth-largest investment house.

The mighty blows of the housing, credit and financial crises threaten to push the country into a deep recession.

In the latest auction, commercial banks paid an interest rate of 2.870 percent for the loans.
There were 83 bidders for the slice of the $50 billion in 28-day loans. The Fed received bids for $88.3 billion worth of the loans. The auction was conducted on Monday with the results released Tuesday.

Source [blownmortgage]

Share This

Filed under: Bad news, Competitive strategy, Starbucks (SBUX), Marketing and advertising

Starbucks Corporation (NASDAQ: SBUX) was reported last week to be “pulling back” from the company’s one year old record label, Hear Music. The label, which released high profile and chart successes from Paul McCartney and Joni Mitchell, will be turned over to independent label Concord Music Group. Concord will also assume management and promotion for those artists that signed with Hear Music, including McCartney and Mitchell, as well as James Taylor and newcomer Hilary McRae.

In the meantime, Ken Lombard has left the music label and coffee giant “to pursue other business interests” according to MSN. Chris Bruzzo, who had been the chief technology officer, has been promoted to the leadership role in the Entertainment division at Starbucks. According to Billboard, Lombard’s exit and the reorganization of Hear Music “are part of a strategic overhaul to examine all aspects of its business that are not directly related to its core.”

Over a year ago, when the announcement was first made that Starbucks would be starting a music label and had successfully signed one of The Beatles as its first artist, it made headline news. Given the success that McCartney has seen with his only album for Starbucks and the way the marketing for the album was handled, the news that the label is essentially moving back into the industry is shocking. Even though Concord is an independent label, the exciting thing about Starbucks’ music label was that it was so different.

It may not have been any cheaper to buy the album from a Starbucks store, but it was the method with which it had approached selling music that was special. It was inventive and really showcased the full extent of each product. Fortunately, it is doubtful that Starbucks will stop stocking CDs or even Hear Music albums. Perhaps it was just too late for a physical album label to be set up successfully due to the success and promotion that digital music has started to enjoy within the same time period.

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Before the bell, Earnings reports, Deals, Launches, Consumer experience, Competitive strategy, Google (GOOG), Apple Inc (AAPL), Ford Motor (F), IAC/InterActiveCorp (IACI), Verizon Communications (VZ), Harley-Davidson (HOG)

Before the bell: Futures higher following deal news; investors await Fed move

Kirk Kerkorian’s Tracinda Corp. is planning to offer $8.50 per share for up to 20 million shares of Ford Motor Co. (NYSE: F), a 13.3% premium over Friday’s close. Tracinda now owns 100 million Ford shares, or 4.7% of the outstanding stock, which would increase to 5.6% when the offer is completed. Ford shares climbed over 6.5% in premarket trading. The deal, announced recently, is helping stock futures’ upward movement.

Verizon Communications Inc. (NYSE: VZ) reported a 9.8% rise in its first-quarter earnings as its wireless division attracted more customers than other carriers. Excluding items, earnings were 61 cents per shares, inline with estimates. Revenue rose 5.5% to $23.8 billion, also inline with estimates. VZ shares are up 1.9% in premarket trading.

According to The New York Post, Barry Diller and Liberty Media (NASDAQ: LINTA) Chairman John Malone are continuing to talk about “a deal that would trade one or more of IAC Interactive (NASDAQ: IACI)’s assets for Liberty’s ownership stake in IAC.” Diller is also “expected to meet with his board this week to restart the process of breaking up his company into five separate pieces.”

Visa Inc. (NYSE: V) shares are up nearly 2% in premarket trading as the world’s largest credit-card processor is expected to post quarterly results late in the day and report strong profits for the second quarter.

Harley-Davidson, Inc. (NYSE: HOG) raised the quarterly dividend 10% to 33 cents a share, payable June 20 to holders of record June 5.

The New York Times reports that Google Inc. (NASDAQ: GOOG) researchers “have a software technology intended to do for digital images on the Web what the company’s original PageRank software did for searches of Web pages.” VisualRank is an algorithm that blends “image-recognition software methods with techniques for weighting and ranking images that look most similar.”

And the latest on the 3G iPhone Apple Inc. (NASDAQ: AAPL) is expected to launch soon comes from a company, Foxconn Electronics (Hon Hai Precision Industry), which has reportedly landed orders for the assembly of the much talked about iPhone. Shipments, it is said, are to begin in June this year, for three million units, but total shipment is expected to be 24-25 million units throughout its life-cycle. Foxconn is currently the sole manufacturer of first-generation iPhones.

Share This

Many people reading this blog from states with moderate housing prices have a very hard time understanding how a family earning $100,000 a year is having a challenging time staying in the middle class ranks. The idea of a six-figure income certainly doesn’t connote the same wealthy status as it did a decade ago. […]
Related Posts:
■Living Large on $25,000 a Year in Southern California.
■The Credit Conundrum: The New Loan Shark is the Fed.
■Are you a Don Quixote or Hamlet of Housing?
■Massive Inventory Decrease in Southern California. Is This the Fabled Bottom?
■Real Homes of Genius: Today we Salute you Downey. $100,000 off in 3 Months.

Many people reading this blog from states with moderate housing prices have a very hard time understanding how a family earning $100,000 a year is having a challenging time staying in the middle class ranks. The idea of a six-figure income certainly doesn’t connote the same wealthy status as it did a decade ago. But where is all the money going then? Now that we are quickly approaching the great Wal-Mart voucher stimulus revolution and will see our accounts increase by $600 to $2,400 depending on our family situation, once we look at the cost of monthly items we realize that this money is a drop in the bucket for most Americans. In fact, there is so much debt out there that many are now saying they’ll use the money to pay off current debt or save; certainly not the intention of what the current government has in mind. They would love nothing more if you went and blew your stimulus check on a new laptop or stove and one month later, are back in the same spot.

This is the problem with deficit spending on many levels. At a certain point debt will crush an economy if it is not handled properly. We have done an abysmal job managing debt over the past few decades and now we are seeing the after effects of this. Today I want to put out a hypothetical budget for a family with 2 kids earning $100,000 a year and show you how easily it is to go into debt. This data is conservative and I will talk about a few of major line items later in the article. So now I present to you going broke on $100,000 a year:

We’ll go into detail on a few line items. First, I want to show you that the above family is running a deficit of $1,076 per month. Nothing unusual from the above profile. Family bought a modest home in Southern California, has 2 cars, and has many of the items we would associate with middle class living. They also save a modest amount for retirement in their 401(k) and pay taxes unlike Blade. They have additional expenses with healthcare, feel the pinch of higher gasoline, and are seeing their grocery bill increase.

We are assuming that the above family purchased a $385,000 home here in Southern California with a down payment of $35,000. As many of you may know, over the past decade many families bought with zero, 3, or 5 percent down so we are in fact being conservative with the above number. If we were to use a smaller down payment the actual monthly debt would increase. $385,000 does not buy much home in Southern California. In fact, only until 2008 and the ongoing correction in prices, was $385,000 considered chump change and you’d be lucky to get a condo for this price in a safe neighborhood with good schools, something a family with kids would be concerned about. Where did I get this $385,000 number? I simply pulled it out of data from March 2008 sales:

“The median price paid for a Southland home was $385,000 last month, the lowest since $380,000 in April 2004. Last month’s median was down 5.6 percent from February’s $408,000, and down a record 23.8 percent from $505,000 in February 2007. That peak median of $505,000 was reached several times last spring and summer.”

You’ll also notice that prices for Southern California are now back down to April 2004 levels. Of course prices at this point were in a bubble so assuming we are at a bottom is naïve and ignoring the actual foreclosures and trends that we will be seeing for another few years. California property taxes are capped at 1 percent of the assessed value of the home plus local area bonded indebtedness:

“In 1978, California voters passed Proposition 13, which substantially reduced property tax rates. As a result, the maximum levy cannot exceed 1% of a property’s assessed value (plus bonded indebtedness and direct assessment taxes). Increases in assessed value are limited to 2% annually.”

In the above we are using a 1.25% tax rate which includes local area bonds, again a somewhat conservative assessment. I want to point out that I’ve been hearing on the radio companies looking to help you reassess your property to lower your rate. Through Proposition 8 (not to be confused with Preparation H) you can do this on your own:

“· You must demonstrate that on January 1, the market value of your property was less than its current assessed value.

• You must file a claim form for a Decline-in-Value Reassessment Application (Prop.8)with the Assessor between January 1 and December 31 for the fiscal year beginning on July 1. If December 31 falls on a Saturday, Sunday, or a legal holiday, an application is valid if either filed or mailed and postmarked by the next business day.”

So save yourself some money and do it yourself. Just run the numbers, in the end you are probably saving a few hundred dollars to maybe a thousand a year. Why not use your rebate check to reassess your property! The ironic fact about this is you are still going to pay an appraiser to tell you your property is worth less which if you own a home in Southern California and bought in recent years, is probably the reality.

The next item we are looking at closely is fuel prices. People drive around a lot in Southern California especially in Los Angeles. The current Los Angeles average is $3.85 a gallon:

We’ll assume that you tack on 15,000 miles per year per car. I put on a bit over this and your numbers of course will vary. We’ll assume that both cars get 25 miles per gallon. So how much money are you spending a year on fuel?

(15,000/25mpg) = 600 gallons x $3.85 = $2,310 per car X 2 = $4,620 per year or $385 per month

I’ll leave the $300 per month fuel cost since you may have more economical vehicles and may also drive less but the above equation is simply to give you an idea that we are being extremely conservative here. Plus, how many mega gas guzzlers do you see on the freeway or streets in your neighborhood? Clearly the price can go much higher.

You know many people forget to include the additional costs of owning a home. When plumbing goes bad you have to pay to get it fixed. If your roof needs to be replaced, that comes out of your wallet. What about lawn services? Garbage pickup? There are many other unforeseen costs associated with owning a home which many people simply do not factor into their budget. They simply assume the principal and interest is all they’ll need to worry about. Also, which impacts both homeowner and renter, is the rise in energy costs for homes. Again this eats away at your bottom line. That rebate check makes no impact for the average American because the above line items seem like they are here to stay for the foreseeable future.

What if you want to send your kids to college?

*Source: State Farm Insurance

Where are you going to save for that given that the above hypothetical family is already running a $1,076 deficit? If you pull back on say cable that will create job losses in certain areas connected to this field. Maybe you cut back on clothing. Retailers are already seeing this pain. And in fact, that is what we are seeing even with the recent announcement that Target is seeing an increase in their charge-off rate:

Calculated Risk: “Target Corp., the second-largest U.S. discount chain, said it wrote off 8.1 percent of its credit-card loans in March as consumers grappled with job losses and the biggest housing slump in a quarter century.

Defaults during the month totaled $55.5 million, the Minneapolis-based retailer said in a regulatory filing today. The charge-off rate was 6.8 percent in February.”

And there you have it. Going broke with a $100,000 income. And these people aren’t the folks leasing BMWs or Lexus cars but living a more modest middle class lifestyle. The fact of the matter is, life just got a whole lot more expensive because your green dollar in your wallet is magically disappearing and we don’t need David Blaine for that kind of magic. You can thank the true magicians on Wall Street and Washington D.C. for that.

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

Share This

Related Posts:
■Living Large on $25,000 a Year in Southern California.
■The Credit Conundrum: The New Loan Shark is the Fed.
■Are you a Don Quixote or Hamlet of Housing?
■Massive Inventory Decrease in Southern California. Is This the Fabled Bottom?
■Real Homes of Genius: Today we Salute you Downey. $100,000 off in 3 Months.

Via [DrHousingBubble]

Share This

From a recent Wells Fargo email to brokers submitted to us from friendly Blown Mortgage commenter vicatibm:

If you have any Loan in our system that is floating and not locked, you may want to consider locking it today to protect your commission.

We are hearing of illiquidity in the secondary mortgage market, so there may be a new price adjuster of up to 3.00% coming on Monday to any loan locked after the implementation of a Credit Policy-related retraction or change, regardless of the status of your loan at the time of lock.

Basically, we have loans in the pipeline that are in some form of approval or may even have a commitment BUT are not locked. A new price adjuster may be applied if a loan is not locked prior to the effective date of a policy change which eliminates or retracts a product, program or parameter. For committed loans, the adjuster will be added when the loan is locked.

We do not know what changes may be coming, and we do not know what products or LTV’s will be affected until it is too late to protect your commissions.

I know we talk a lot about pull through, but if you have a deal in our system and you’re waiting to get to docs before locking for a better price, you may want to lock today for 30 days and save your deal.

A couple of things: 1) the liquidity issues have not gone away. Even with the Fed pumping cash in to the system we’re still seeing the secondary market continuing to lock up as cash becomes scarce. 2) I love how the emphasis is on “protecting your commission” - AE’s know the way to a broker’s heart.

Let’s see what Wells does on Monday as far as guidelines revisions - it could set the direction for the rest of the banking community. I have one guess - the guidelines will be much tighter.

Source [blownmortgage]

Share This

Filed under: Earnings reports, 3M Corporation (MMM), Johnson and Johnson (JNJ), duPont(E.I.)deNemours (DD)

There were a lot of earnings reports this week — if you weren’t setting up some trades before the reports were released, you’re probably digesting the numbers now. I had a look at 3M (NYSE: MMM) this morning. The famous Dow component, which competes with Johnson & Johnson (NYSE: JNJ) and DuPont (NYSE: DD), reported this past Thursday. Net sales increased 9%, but diluted earnings per share unfortunately took a whopping decline of 25%. However, you need to take a look at what caused this drop — there was a gain in last year’s quarter from the disposition of a European pharmaceutical business, as well as some other items. Excluding these elements, you’ll find that earnings per share grew by 8%.

According to the company’s release, 3M did rather well in the free-cash-flow department. Last year at this time, free cash flow came in at $276 million. This past quarter saw free cash flow grow to just under $700 million. I liked that; I also liked that most of the company’s divisions reported double-digit profit growth. This is a healthy, blue-chip dividend player — plus, 3M is comfortable with its previously stated forward guidance of at least $5.47 in adjusted earnings per share for 2008 (or, as the release put it, management believes net income will see an increase of “a minimum of 10% over 2007 earnings-per-share of $4.98″), and it beat the street this past quarter by three pennies, according to Briefing.com.

Here are some things to think about regarding 3M’s stock. If it does earn close to $5.47 a share, then the company sports a forward P/E ratio of a little over 14. The yield on the shares is well over 2%. And, as of Friday’s close, the price of the stock — $77.82 — is well off the 52-week high of $97 and a little ways off from the 52-week low of $72.05. Taken together, this 3M scenario seems like an interesting set-up for a decent trade. The stock looks like it will probably meander for a bit, but it nevertheless should be looked at.

Disclosure: I don’t own shares in any of the companies mentioned here; positions can change at any time.

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: Google (GOOG), General Electric (GE), Walt Disney (DIS), Viacom (VIA), News Corp’B’ (NWS)

According to an AP article citing data from comScore Inc., people are still in love with the internet. In fact, they love to watch videos on the internet. Furthermore, views of videos online experienced an ecstatic rate of growth in February — they shot up 66% compared to the year-ago period. Incredible, right? And if you’re a media company, you love the data, right?

Well, if you’re Google (NASDAQ: GOOG), you love it. If you’re a Disney (NYSE: DIS) or a General Electric (NYSE: GE), you would be of two minds about it. For you see, while people are watching videos, oftentimes they are doing it on a platform like Google’s YouTube — they aren’t necessarily watching them at ABC.com. The data show that YouTube increased its video views by 15% in February 2008 versus February 2007, and that it captured one-third of the 10 billion video views that occurred in February of this year. Amazing. But sites like ABC.com captured much, much less of those views — that site, in fact, had a measly 1% share of the pie.

Major content players want surfing eyeballs to come to their sites so they can monetize their online libraries via methods of their own making. Media companies, simply put, still haven’t figured out how to adapt to this new electronic entertainment economy, and they still haven’t come to terms with YouTube. In an era of social networking and clip sharing, users love to copy content and upload it to sites like YouTube that are very easy and friendly to engage, thus bypassing the owners of such content. How does one fight this?

There’s no easy answer, but the upside is that media entities like News Corp. (NYSE: NWS) and Viacom (NYSE: VIA) — which I wrote about the other day — in addition to the ones mentioned here, have a lot of growth ahead of them on the web. Intense marketing, plus investments in video platforms that have interfaces that are as user-friendly as YouTube’s (Hulu.com is one such experiment), are obvious solutions, but one thing media companies need to keep in mind is that the ‘net is constantly changing, and that things might eventually swing their way at some point. All they can do for now is focus on producing quality content and hope they can get it out there before it gets YouTubed away from them.

Disclosure: I own shares of Disney and General Electric; positions can change at any time.

Share This

Filed under: Walt Disney (DIS)

The New York Times reports that the Walt Disney Company (NYSE: DIS) could be in for a world of hurt. That’s because its $1 billion Miley Cyrus franchise is at risk thanks to the June 2008 cover of Vanity Fair. That’s where you’ll find the 15 year old Cyrus draped in a satin sheet — and nothing else.

In case you don’t have children of the right age, Cyrus is the star of the wholesome Disney Channel blockbuster “Hannah Montana.” Retail sales for the franchise are expected to total about $1 billion in 2008. A motion picture is in the works for 2009 and Cyrus signed a seven-figure book deal with the Disney Book Group last week.

But all this money could be at risk for Disney. That’s because people like Lin Burress who writes a marriage and parenting blog, Telling It Like It Is, is not a happy camper. Referring to the mountain of Hannah Montana retail items - makeup, shoes, clothes - in the marketplace the Times quotes her as saying: “Parents should be extremely concerned. Very young girls look up to Miley Cyrus as a role model.”

Continue reading Should you dump Disney on topless Miley Cyrus mag cover?

Permalink | Email this | Comments

Via [bloggingstocks]

Share This