Archive for September 27th, 2008
Filed under: Forecasts, Deals, Industry, Newspapers
Journal Register was knocked off The New York Stock Exchange and is in the process of liquidation. The value of its properties has dropped so low that its common shareholders will get nothing and creditors will not recover the amount of their loans. Gatehouse Media (NYSE: GHS) has traded under $1 for weeks and also face delisting. Odds are that its properties will have to be auctioned off. Banks may be employing a new tactic in the hope of getting their money out of the newspaper industry. Extend loans, let the companies cut expenses to the bone, and pray that advertising will get better. If it does, they might get their money back. McClatchy (NYSE: MNI), the nation’s third largest chain, was the next company in the industry to head toward liquidation. Based on a new lifeline from its creditors, it may dodge that for awhile. According to The Wall Street Journal (subscription required), “The publisher of the Sacramento Bee and Miami Herald said Friday its banks agreed to loosen restrictions on the company’s level of debt compared to cash flow, and its ratio of interest payments to cash flow.” The banks are making a big mistake. McClatchy’s has many of its properties in California and Florida were the economies could be troubled for years. By letting McClatchy stay in business, the banks are risking that the value of the company’s papers will drop even more. If McClatchy is sold off in pieces now, creditors might get most of their money back. The holders of McClatchy’s debt may have saved the company, for a few months at least. They have also put themselves in a position to lose most of their money. Douglas A. McIntyre is an editor at 247wallst.com. Permalink | Email this | Comments
27
09
2008
The great leadership disconnect: I bet the farm and you losePosted by: admin in Stocks Money News
Filed under: International markets, Other issues, Management, Rants and raves, Microsoft (MSFT), Berkshire Hathaway (BRK.A), Market matters, Scandals, Money and Finance Today, Politics
What made so many bright minds all around the world foolishly bet the farm? One after another, that is what they did. Now we are all paying for it, some more than others. It was not just greed. It was something else. How did this happen? I call it ‘The Great Disconnect’. When the managers of public companies do not suffer the same fate or consequences as their shareholders you have a disconnect! When politicians give lip service to understanding the pain of their constituencies but accept huge contributions from the enterprises they are supposed to regulate and oversee creating gargantuan conflicts of interest, you have a great disconnect. When investment houses create financial instruments that are so complex that they cannot fathom the risk and the ratings agencies put candy coated frosting on them, you have a great disconnect! I would propose that legislators not be allowed to accept any contribution creating a conflict of interest based on the committees they sit on. $700 billion reprise: Conservative bankers? Surely you jest! I might even consider creating an independent committee of citizens selected from the willing, be placed in a position to review such matters. Continue reading The great leadership disconnect: I bet the farm and you lose Permalink | Email this | Comments
27
09
2008
Washington Mutual Failure and Collapse: WaMu Largest Savings and Loan Failure in U.S. History. The Rise and Fall of Washington Mutual.Posted by: admin in Real-estate newsWashington Mutual also known as WaMu, failed Thursday making it the biggest savings and loan failure in the history of our country. What makes this event more astounding that it comes on the heels of stalled bailout talks regarding the absurd and poorly planned $700 billion bailout package. A recent CBS News and New York […] Washington Mutual also known as WaMu, failed Thursday making it the biggest savings and loan failure in the history of our country. What makes this event more astounding that it comes on the heels of stalled bailout talks regarding the absurd and poorly planned $700 billion bailout package. A recent CBS News and New York Times poll shows that only 16 percent of people actually think the plan is a good idea. If that is the case, why are politicians pushing so hard to get this thing rammed down the throats of Americans? Could it actually be that tomorrow is the target adjournment date and many of these politicians simply want to go back to their districts to campaign?
As many of you remember with the collapse of IndyMac Bank on July 11th of this year, all the media headlines had this running as a top story for nearly a week. WaMu fails and it is a footnote on the stalled bailout talks. We are now dealing with multiple fires all at once. Let us first discuss some history of Washington Mutual before we discuss the failure of the S & L. WaMu - History
WaMu was founded in 1889 and was initially called the Washington National Building Loan and Investment Association. At the time of the formation, Seattle was in tatters after a major fire had nearly destroyed the city and put the economy in a difficult situation. The bank in one respect was setup as an attempt to help the local economy. The first loan made by WaMu was in 1890 and of course happened on the West Coast. Over time WaMu started to grow. Showing business savvy and ultimate marketing prowess, over the next 50 years WaMu pioneered cash machine networks and telephone banking. In fact, this early start in machines to easily access money served them well when they decided to go nuts and create a virtual ATM which clients were able to attach to their own home and suck every dime and nickel from their home equity. One of the their initial slogans was “The Friend of the Family” which ironically has little to do with toxic pay option mortgages. In 1983 WaMu bought Murphey Favre a brokerage firm and by 1989 its assets had doubled. Purchasing subprime credit issuer Providian in October 2005 for $6.5 billion may have not been such a smart deal especially when they paid prime dollar at the peak of the market insanity. Serious problems started hitting WaMu as the United States housing market started to collapse. Not only was this bad news for WaMu, but it also didn’t help that Washington Mutual made a large amount of pay option ARM loans in California and Florida:
In December of 2007 WaMu closed 160 of their 336 home-loan offices resulting in 2,600 people being laid off. Things only got progressively worse from there. In April 2008 WaMu took a $7 billion cash infusion from TPG Capital out of Texas to stay afloat. How well did that work out? Let us take a look:
The company went from having a market cap of $62.3 billion to $753 million in one year. That is definitely not a way to run a company. As time went on WaMu could not fend off the issues it had with its loan portfolios. The losses kept on mounting over and over. On September 25 federal regulators took over WaMu’s assets and sold them off to JP Morgan Chase & Company and many of the directors at WaMu were kept in the dark about the announcement. The FDIC made that pretty official on their site:
JP Morgan acquired WaMu for $1.9 billion with all assets and retail branches. What is more fascinating about this situation is that JP Morgan released during their press conference their expectation of the toxic loan portfolio and in this information, they gave us a little perspective on the future of the California housing market:
Right off the bat they are expecting to write-down approximately $31 billion in the toxic loan portfolio. Yet they have a few different scenarios that can play out:
JP Morgan is estimating that California from peak to trough will drop 44%! That is assuming things stay as they are. If we hit a deep recession, they are predicting a drop of 48%. Should we hit a severe recession, the number would jump to 58%! Even Dr. Housing Bubble is surprised by the doom and gloom in those numbers. I don’t rule that out but it is something else hearing JP Morgan come out and publicly make that prediction. Again, the current economic situation in California is horrible. Our unemployment rate is 7.7% and JP Morgan announced a closing of branches which of course will lead to more layoffs in the state:
When IndyMac Bank failed, they had no buyers and it ate into the FDIC fund to the tune of $8.9 billion. The FDIC is adamant that no one will lose money here (aside from the shareholders and bondholders). With this one move, JP Morgan Chase WaMu and [insert blank] will now be the 2nd leader in retail banking and number 1 in deposits:
The big are swallowing the small. That is if you can consider WaMu with $309 billion in assets and 44,000+ employees small. This move by JP Morgan is smart. It gives them a major stake in the west coast. I’m not sure who they are going to get money from since many people went broke with toxic WaMu loans. In fact, they now will be one of the large contenders here in California:
Like Bank of America buying Merrill Lynch to have a stake in the investment banking world, JP Morgan now has a major stake in retail banking. I wonder if they’ll keep that Wooo Hoo campaign going? One thing to consider is that fewer and fewer banks are getting bigger and bigger. In fact, JP Morgan tells us in their presentation that one of their motives for doing this move is “cross selling” more products to customers:
Think of what occurred with Bank of America buying out Countrywide Financial, one of the pioneers in the subprime game. These banks are buying up more and more and it looks like we are going to have 3 or 4 major banks that will provide all services to clients from investments, credit cards, deposits, checking, mortgages, auto loans, and everything debt related. Can you imagine what will happen if one of these 4 gets into a troubled spot? Do you see any conflicts of interest? WaMu was a sitting duck. They made absurd loans and simply had no sustainable model. My guess given the current derailment of the $700 billion bailout program in D.C. is that this move is intended to light a fire in Washington. Why not wait until the typical Friday night? After all, every other bank failure this year occurred on a Friday night. Was WaMu in such bad shape it couldn’t wait one more day? Of course not. This feels more like a move to scare the public from that 16% opposition to a more palatable number. I think most Americans are now hyper aware of the shady tactics being employed by those on the hill. They do not want this bailout plan. They do not understand nor do they want it. In fact, some are ready for the unexpected even if we don’t have a plan. Look what happened here with WaMu. A very clean and orderly demise. Heck, it cost the FDIC $0! Representatives are listening to your calls and letters. Here again are the links to reach your local representative: If you do not find your representative, contact another one. The majority of Americans do not want this corporate welfare bill. This bill will do nothing to help the average American family. $700 billion bailout bill and they can’t even explain how the money will be spent. Is it any wonder a 119 year old institution like WaMu, the biggest S & L in the country just went down with a wimper?
Post from: Dr. Housing Bubble Blog Related Posts:
Filed under: Financial Crisis
Apparently, they believe that standing behind conservative fiscal ideologies for the next 40 days will keep them in their seats in Washington. No one can blame them for disliking the so-called Paulson Plan. Let’s consider the most recent set of facts:
What if we don’t do anything at all? What if we let the market sort this out on its own? Isn’t this socialism at its worst? As much as I believe in free markets ability to self-regulate, I no longer believe nothing is an option. We cannot afford to lose credibility with foreign investors while we’re $9.6 trillion in debt. It would be disastrous if foreign countries no longer purchased our debt because they didn’t trust the financial markets. If we let this linger, retirement investment accounts and pensions could be seriously impaired. How do we know that a $700 billion bailout will work? Haven’t we already pumped hundreds of billions of dollars into the economy? How can we claim that this money is working when Washington Mutual (NYSE: WM) just failed tonight and was bought by JP Morgan Chase & Co. (NYSE: JPM) on the cheap ? There is no simple answer to this. The fact is nobody knows the right number. It’s simply a guess. So what should happen? Here are some things that Ryan believes are critical when a bailout plan eventually gets finalized.
Ryan hopes that Washington is able to set aside both partisan and Presidential politics in order to put together a plan that has a chance of succeeding in a timely fashion.
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27
09
2008
Updated: Chase Mortgage Wholesale Slimming Down - not closingPosted by: admin in mortgage industry
We’ve received multiple reports that Chase Mortgage Wholesale will be shutting down operations within 45 days and will no longer accept applications as of September 30th. Apparently conference calls are happening nationwide to inform employees today. If you can confirm these reports please email us at tips@blownmortgage.com. More, of course, as this develops. Update: Chase isn’t closing wholesale, rather they’re closing a bunch of ops/sales centers to streamline the operations. From Chase:
27
09
2008
Closing Bell: Dow, S&P up, although markets remain mixed with no “New Deal” yetPosted by: admin in Stocks Money News
Filed under: Research in Motion (RIMM), KB HOME (KBH), Marvell Technology Group (MRVL), Potash Corp. of Saskatchewan (POT)
Below are the unofficial closing bell levels: KB Home (NYSE: KBH) posted really ugly numbers with its losses growing four-fold and sales down over 50%. Yet somehow, traders are hoping a bailout will drive the future. Shares were actually up 1.2% at $21.42 immediately before the close. Research In Motion Ltd. (NASDAQ: RIMM) was downgraded across the board after its earnings disappointment. Shares were down 26%, or $21.50, right before today’s close. Marvell Technology Group Ltd. (NASDAQ: MRVL) was crushed on R-I-M’s disappointing numbers. Shares hit a new 52-week low and were down 10.4% at $9.64 in the final minutes of the day. Potash Corp. of Saskatchewan (NYSE: POT) was down over 7% in today’s final minutes at $146.57. An analyst downgrade from RBC and a cautious sector call from Citi is to blame. The concern here is easy. Farmers are having their credit cut and they can’t afford to pay endless increases in agriculture prices. Permalink | Email this | Comments |
Within the past years, several public newspaper companies have been pushed to the cliff of insolvency. They have taken on too much debt and the downturn in advertising has put them in a position where they cannot cover interest payments.
Any smart gambler, amateur or professional, knows that you only risk what you can afford to lose. That may be $1, $100, $500, or even a million dollars in a real estate or other major transaction. But only a fool bets the farm. Only a fool risks all.
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I thought I’d share some thoughts from Ryan Pfenninger 
Today was all about financial bailout packages being on and off, and on and off, and on and off. Financial stocks were most of the news, but you’ve heard enough about that you will only hear about non-financial companies today. Q2 GDP was revised lower than original projections, but that number is older than dirt now. The funny thing today was that they started ringing the closing bell on NYSE a minute early on accident. 
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