Filed under: Products and services, Consumer experience, Marketing and advertising

This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about Fiat below in the comments.

Sometime in the 1970s, some wag dubbed the Fiat Fix It Again Tony, because at the time the Italian cars were awful — they were built with cheap Russian steel that rusted easily. Their reputation among American consumers has never recovered.

“Modern Fiats are actually pretty respectable thanks to modernization of materials and manufacturing processes, unfortunately most Americans still think of the old phrase ‘Fix It Again Tony’ because Fiat has not sold cars in North America since 1982, and therefore that is the last Fiat anyone there has usually seen,” according to the Urban Dictionary.

Maybe Fiat’s absence from the U.S. market is not a bad thing. Writing in BusinessWeek, Helen Walters described the Fiat Punto as being riddled with design flaws, including one that is a safety hazard. “As it happens, I’m not in the market to buy a car,” she writes. “But if I was then the Punto wouldn’t make it anywhere on the list.”

Looks like the old Fiat joke is not going away anytime soon.

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Wow, this keeps getting more and more interesting by the minute.  The latest in the mortgage market meltdown is the news that Citigroup and now UBS will buy back a combined $32 billion worth of auction rate securities that were sold fraudulently.  This is just another blow for cash-strapped mega-banks that have gone to great lengths to raise and maintain capital in this credit crunch.

Billion-dollar buybacks sure don’t help.  Shareholders rejoice! Not really.

From Bloomberg:

UBS AG, Switzerland’s biggest bank, may pay more than Citigroup Inc. or Merrill Lynch & Co. to settle state and federal claims that it fraudulently sold auction-rate securities, a person briefed on the negotiations said.

UBS is close to resolving those claims and may make a promise to retail and institutional clients to buy back the securities, valued at $25 billion by regulators, the person said. Merrill Lynch offered yesterday to buy back about $10 billion in auction-rate securities from individual investors, claiming that was the amount its customers held.

Citigroup agreed yesterday to buy back $7.3 billion of the debt from individual investors to settle state and federal regulators’ claims and to pay $100 million in fines, setting a framework for talks with other banks including UBS. Citigroup also promised to help institutional customers unload another $12 billion in the securities.

“We reach settlements that are appropriate for the circumstance,” New York State Attorney General Andrew Cuomo said yesterday at a press conference announcing the deal with New York-based Citigroup, the largest U.S. bank by assets, that also requires it to help more than 2,600 institutional investors unload $12 billion of the securities. “UBS would be a different circumstance.”

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Filed under: Launches, Competitive strategy, Google (GOOG), Yahoo! (YHOO)

Going into the search business and targeting Google (NASDAQ: GOOG) must carry odds of success which are at least a million to one. But, the market is rich. Google has a market cap of over $150 billion. Even a little piece of that could make a start-up some money. That is if anyone wants another search option beyond Google, Yahoo! (NASDAQ: YHOO), and a number of other services with tiny customers bases.

Some former Google engineers believe they can master their former master. According to The Wall Street Journal, “A startup founded by engineers from Google,Inc. and other tech giants is launching a search engine that claims to cover three times as many Web pages as Google.”

The new service is called Cuil. Wish them luck.

Cuil’s problem is deeper than is evidenced at first blush. Google not only controls over 60% of the US search market. It also probably indexes as much of the web as almost any user would need. Tripling the number of possible search results is not useful to the huge majority of search engine users.

Search usefulness is driven by the relevance of the results. Cuil has not demonstrated that it can out-Google Google on that front. If it cannot deliver that higher level of relevance, and deliver it by an order of magnitude much greater than the largest incumbent, it will not go anywhere.

In search, quality trumps quantity.

Douglas A. McIntyre is an editor at 247wallst.com.

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Back in June of this year, we talked about the financial difficulties facing Ed McMahon. At that time, Ed McMahon was in arrears on his Beverly Hills home by a stunning $644,000 on his $4.8 million dollar home. As we worked out the math on the place, we approximated that the […]
Related Posts:
■Real Homes of Genius: Today we Salute you Beverly Hills. When the 90210 Simply Isn’t Enough.
■Real Homes of Genius: Today we Salute you Beverly Hills 90210. Making $1 Million in Home Equity Disappear.
■Real Homes of Genius: Today We Salute you Huntington Park. Tweedledum and Tweedledee of housing. $500,000 Homes in Wonderland.
■Real Homes of Genius: Today we Salute you Lakewood. A Short Sale with a $100,000+ Loss.
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.

Back in June of this year, we talked about the financial difficulties facing Ed McMahon. At that time, Ed McMahon was in arrears on his Beverly Hills home by a stunning $644,000 on his $4.8 million dollar home. As we worked out the math on the place, we approximated that the carrying cost alone on the home was $30,000 to $35,000 given the size of the mortgage. The home has been on the market for 537 days.

In what has to be the largest one day decrease in price, the home on August 7 was reduced from $6,500,000 to $4,600,000. A $1,900,000 price reduction in one day:

*Source: ZipRealty

Clearly even prime area zip codes such as the 90210 are having their difficulties in this housing market. What is stunning about the price action is during the financial turmoil, the price of the home was lifted by $500,000. I’m not sure if they thought given the media coverage of Ed’s financial difficulties that someone would be feeling bad enough to dish out $6.25 million.

The problem of course was that as it turns out and as time went by, living beyond your means doesn’t only apply to middle class workers. It is possible to be a “millionaire” and live beyond your means. This home had a second mortgage and was maxed out.

Let us do some quick math on the home:

First mortgage: $4,800,000 at 5.25% principal and interest = $26,505 per month

Taxes and Insurance = $5,200

Total monthly nut = $31,705

Yearly housing cost = $380,460

The yearly carrying cost of the first mortgage on this place is higher than the price of a median priced home in California! The Wall Street Journal reported that Ed was $644,000 in arrears back in June. Mr. McMahon unfortunately was injured 20 months ago and has been unable to work. So if we are to break the math down:

$644,000 / 20 = $32,200 per month

Too bad the Zestimate on the place has it much lower even after the nearly $2 million price reduction:

So we are close in estimating the monthly payment. Here are the details from the Wall Street Journal Article:

“(Wall Street Journal) ReconTrust, a unit of mortgage lender Countrywide Financial, on Feb. 28 filed a notice of default on a $4.8 million Countrywide loan backed by Mr. McMahon’s home. The notice was filed with the Los Angeles County Recorder’s Office but hasn’t previously come to light. According to the filing, Mr. McMahon was then about $644,000 in arrears on the loan. It isn’t clear whether Countrywide still owns the loan or is acting on behalf of investors who acquired it. Public records also show that Mr. McMahon had a separate home-equity line of credit from Countrywide of up to $300,000 secured by the same house.

Mr. McMahon’s home has been on the market for about two years, his real-estate agent Alex Davis said. Mr. Davis said the price had been reduced, but he couldn’t immediately provide details. The Christie’s Great Estates Web site, which includes homes listed by Mr. Davis, lists the asking price at $5.75 million and says it has a canyon view and a master-bedroom suite with his and her bathrooms.”

So as you already know, Countrywide is now owned by Bank of America so what was once Countrywide’s problem is now Bank of America’s problem. So let us do a quick recap:

1^st mortgage: $4,800,000

2^nd mortgage: $300,000

Total mortgages: $5,100,000

Current price as of August 7^th 2008, $4,600,000. You can kiss that second mortgage goodbye. This is the problem that in order to get the home to sell, they need to make drastic measures. Since this home has been on the market for such a long time it looks like Bank of America is going through the junk on Countrywide’s books and is simply cleaning house. Dropping the price by nearly $2 million in one move will get anyone’s attention. This may be the move that was needed to move Ed McMahon’s home.

Today we salute you Bank of America with our Real Homes of Genius Award.

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Real Homes of Genius: Ed McMahon Decides to Lower Price on Beverly Hills Home by $1,900,000 This Week.

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Related Posts:
■Real Homes of Genius: Today we Salute you Beverly Hills. When the 90210 Simply Isn’t Enough.
■Real Homes of Genius: Today we Salute you Beverly Hills 90210. Making $1 Million in Home Equity Disappear.
■Real Homes of Genius: Today We Salute you Huntington Park. Tweedledum and Tweedledee of housing. $500,000 Homes in Wonderland.
■Real Homes of Genius: Today we Salute you Lakewood. A Short Sale with a $100,000+ Loss.
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.

Via [DrHousingBubble]

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Filed under: Good news, Bad news, Consumer experience, Magazines, Scandals, Personal finance

Barron’s (subscription required) reports that the news this week about Auction Rate Securities (ARS) leaves $220 billion worth of the $330 billion market still frozen. Those among the two-thirds of ARS holders who have not gotten any good news must have mixed feelings — happy that some of their colleagues have the potential for relief, but wondering when they will get their money back.

The ARS market is complicated because the securities were issued in many different forms. Barron’s reports that these issuers include “municipalities, closed-end funds, student-loan trusts and collateralized debt obligations [CDOs].” Many of these issuers have announced little, if any relief for those frozen in ARS hell. For example:

• Municipal ARS market has fallen 40% from $175 billion to $105 billion since the beginning of 2008 and only “5% to 8% of muni auctions are proceeding — at interest rates of 8% to 15%.”
• Closed-end funds have reduced the amount of ARS outstanding by 37% from $64 billion to $40 billion. For example, Nuveen’s closed-end funds sold $500 million of variable-rate demand-preferred shares (VRDPs) last week to replace the same amount of ARS. (VRDPs’ interest rates reset in auctions but have a put option that allows an investor to sell the VRDP to the bank running the auction if it fails). Barron’s thinks that if the VRDP market functions, “more than 50% of closed-end-fund ARS could be redeemed” by the end of 2008.

Continue reading Barron’s: Miles to go before Auction Rate Securities holders can sleep

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Filed under: Industry

This post is one in a series on prominent company nicknames. See all 25, and share your thoughts and memories about Roadway below in the comments.

Once or twice a year, the family and I take a long, cross-country drive to one vacation spot or another. So when I heard that that the nickname of the freight hauler Roadway Express was “always on the Road and in the Way,” I knew exactly what that meant. It never seems to fail: just as I’m about to catch up to a semi truck, it suddenly swings over into my lane, the passing lane, and then spends the next five to ten miles inching past a very slightly slower truck. In the meantime, I get a nice close-up view of the Yosemite Sam mud flaps, while impatient traffic builds up behind me.

According to their website, Roadway Express, now a division of YRC Worldwide Inc. (NASDAQ: YRCW) has been on the road and in the way since it was founded in 1930 by a pair of brothers hauling freight between Akron, Ohio, and St. Louis, Missouri. By the end of its first decade, it had offices in 22 cities and operating revenues of more than a million dollars. After the Interstate system was established, that expanded to 65 cities and more than $40 million in operating revenue from nearly 1,000 trucks. The company celebrated its 75th anniversary in 2005, and now delivers to all 50 states, Puerto Rico, Canada, and Mexico with more than 8,500 trucks.

Continue reading Company nicknames: Roadway is on the road and in the way

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The New York Post is reporting that a large sovereign wealth fund is angling to buy up US property on the cheap.  With a weak dollar and REO piling up, these foreign funds are looking for 50-cents on the dollar discounts in American residential and multi-family property.

Sovereign wealth funds are well-known for their high-profile purchase of American assets like the Chrysler Building in NY, but now they’re expanding to pick-up foreclosed properties at a huge discount.

With large-scale property acquisition Americans will be saddled with the debt of their excess while the property asset resides in the portfolio of a foreign state.  We’ve outsourced everything - we might as well start outsourcing our property as well.

From the New York Post:

There’s a new land grab starting in America.

Foreign money, which up to now has focused its attention on investing in iconic commercial real estate - like Barneys New York and the Chrysler Building - is now moving to scoop up tens of thousands of discounted foreclosed homes across the country.

One sovereign fund, said to have earmarked $29 billion to purchase foreclosed residential real estate, recently hired a West Coast mortgage broker and is starting to search for bargains, The Post has learned.

The search, which is being carried out, in part, by Field Check Group mortgage consultant Mark Hanson, who was retained by the broker, Steve Iversen, is concentrating on single- and multi-family REO (real estate owned) homes, or homes that have already been taken over by the mortgagee.

Neither Iversen nor Hanson would disclose the name of the client, but sources told The Post it’s a sovereign fund.

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Filed under: International markets, Newsletters, Mutual funds, Stocks to Buy

Jim Lowell is known for his expertise in assessing mutual funds; in particular, he is the newsletter advisory world’s leading authority on Fidelity funds.

In his Fidelity Investor, he recently conducted his mid-year ranking of Fidelity managers, and based on these results, offers four favorite funds offering global diversifcation.

“Stephen DuFour, manager of Fidelity Focused Stock (FTQGX), is no stranger to our ranking top notches. He took over this fund in March last year, and turned its performance up a notch (finishing the year up 17% vs. .5.5% for his S&P 500 benchmark): Bam!

“With 52 holdings, this fund is focused. His top 10 basically says it all - a diversified play on global growth in a stock picker’s portfolio: Southwestern Energy, Norfolk Southern, Range Resources, T. Rowe Price, NRG Energy, Unilever, Eaton, Cisco, Cabot Oil & Gas, and Apple.

“Tom Soviero, manager at Fidelity Leveraged Company Stock (FLVCX), has jumped from the third spot in the December rankings to the top spot this time around.

“His top-ranked status reflects his stock picking expertise. The portfolio continues to become even more concentrated in his top 10 picks (29.4% of the fund’s assets now vs. 27% six months ago).

Continue reading Four favorite Fidelity funds

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Filed under: Google (GOOG), Small business

Former Google, Inc. (Nasdaq: GOOG) engineers recently launched a new-fangled search engine, called Cuil. The goal was pretty ambitious; that is, to be the next Google.

Well, the debut was shaky, as the online reviews were mostly negative. Basically, the quality of the search results were lackluster — and the overall performance was erratic.

No doubt, in the social media world, things can get brutal. Yet, it’s something that many businesses need to think about.

So, how do you deal with negative reviews?

First of all, it’s a good idea to monitor the chatter about your company. To this end, you can use services like Google alerts. There is also a free application called Social Media Firehose that monitors various social media channels.

Show Up

In many cases, an online review site will provide for comments. And, according to Todd Defren — a principal at SHIFT Communications — it’s a good idea to respond to negative comments. However, be diplomatic.

Here’s one of his approaches:

“We were really sad to see that you had a bad experience with our product. Even though we have thousands of happy customers, we’re always striving to improve and I can assure you that we’re going to use your review as ammunition to make sure we do a better job in the future. We appreciate the time you took to put our product through its paces; even though we seem to have stumbled this time, our success is a marathon not a sprint, and you’ve helped us train for more success in the future.”

Having such an approach shows that you are serious about customer feedback and that you’re proactive. And, in light of the fact that many customers research the Net before buying products, it’s a good idea to have some participation.

“A bad review is an opportunity for a company to learn about a failing they might not have otherwise known about, connect with and win over a consumer and fix a problem,” said Marc Karasu, who is the president of MeasuredUp.com.

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 MergerBook.com.

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