Filed under: Earnings reports, Dell (DELL), Hewlett-Packard (HPQ), Home Depot (HD), McDonald’s (MCD), Nokia Corp. (NOK), Lowe’s Cos (LOW), Trina Solar ADS (TSL)

Here are some highlights from this past week’s earnings coverage from BloggingStocks:

• AnnTaylor Stores Corp. (NYSE: ANN) posted dismal Q3 results as same-store sales sank.
• Autodesk Inc. (NASDAQ: ADSK) declined to release an outlook for next year due to the economic turmoil.
• BASF AG (OTC: BASFY) profit warning resulted in analysts’ upgrades and downgrades both.
• Dell Inc. (NASDAQ: DELL) handily beat Q3 expectations due in part to share buybacks.
• GameStop Corp. (NYSE: GME) missed Q3 earnings expectations and same-store sales declined.
• Hewlett-Packard Co. (NYSE: HPQ) forecast Q4 results above estimates on cost cutting and global reach.
• Home Depot Inc. (NYSE: HD) reported better-than-expected Q3 results though sales had declined.
• LDK Solar Co. Ltd. (NYSE: LDK) Q3 earnings more than doubled and revenued surged 70%.
• Lowe’s Cos. Inc. (NYSE: LOW) posted better-than-expected Q3 results though same-store sales slipped.
• McDonald’s Corp. (NYSE: MCD) 2009 earnings prospects resulted in an analyst’s upgrade.
• Nokia Corp. (NYSE: NOK) earnings warning resulted in upgrades from a few analysts.
• PetSmart Inc. (NASDAQ: PETM) topped expectations and forecast full-year profits higher than estimates.
• Suntech Power Holdings Co. (NYSE: STP) fell short of earnings expectations and lowered its guidance.
• Trina Solar Ltd. (NYSE: TSL) Q3 earnings quadrupled and revenue more than tripled on increased demand.

Continue reading Earnings highlights: Dell, Home Depot, Lowe’s, PetSmart, Trina Solar and others

Earnings highlights: Dell, Home Depot, Lowe’s, PetSmart, Trina Solar and others originally appeared on BloggingStocks on Sat, 22 Nov 2008 15:10:00 EST. Please see our terms for use of feeds.

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Culver City is considered an upper-middle class city here in Los Angeles County.  For a very long time, it would seem that the West Los Angeles region was somehow immune to the rules and economic laws that impacted the entire country.  This is not the case.  It may have taken a longer time […]
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■Real Homes of Genius: Today we Salute you Westminster. $500,000 for 886 Square Feet of Orange County Goodness.
■Rent versus Buying: Should you Buy With Housing Prices Crashing? Culver City Case Example: Reasons to Wait Another Year.
■Real Homes of Genius: Today we Salute You East Los Angeles. $395,000 for 780 Square Feet.
■Real Homes of Genius: Culver City Pricing Dysfunction! Prices all Over the 405.

Culver City is considered an upper-middle class city here in Los Angeles County.  For a very long time, it would seem that the West Los Angeles region was somehow immune to the rules and economic laws that impacted the entire country.  This is not the case.  It may have taken a longer time for certain niche markets like Santa Monica and Culver City to start seeing any significant drops but the drops are now here.  In today’s article we will examine a home in Culver City that has all the HGTV touches but is now a bank owned foreclosure.  But first, let us discuss what has been going on in other news.

I have been examining the wealth of data at the Bureau of Labor and Statistics.  One piece of data that I haven’t seen being talked about but serves as a leading indicator of Main Street pain is the mass layoff data.  What exactly is mass layoffs and how is it calculated?  These are monthly numbers gathered from establishments where 50 or more unemployment claims have been filed in a 5-week period.  Why is this important?  Because it can give you a sense of the severity of layoffs.  Larger layoffs come from bigger institutions which are normally a bit more resilient than mom and pop shops.  In fact, many small business have less than 50 employees so they would rarely show up in this data.  The information here is big companies laying off large numbers of people.  Let us look at a chart:

As you can see from the chart we had the most mass layoff events since September of 2001.  In September of 2008 we had 2,269 mass layoff events.  Keep in mind this can also mean that a company has had more than 50 unemployment claims filed against it.  This will be an important data set to look at to determine the severity of the recession we are in.

In addition, it is simply stunning who is looking to get a piece of the $700 billion TARP bailout action.  It’s as if an uncle hit the lottery and all of a sudden opportunistic family members want to spend quality time with him.  Let us quickly run a list of some of those who have already been given government welfare assistance:

Support Already Received or Committed

A.I.G.

Bear Stearns

Fannie Mae and Freddie Mac

Bank of America

JP Morgan

Wells Fargo

Consumer Debt

Student Loan Debt

American Express

Hartford Financial Services

Those Standing in Line

GM
Ford

Chrysler

States

Cities

Insurance Companies

There is no reason or rhyme to who may qualify for access to the $700 billion TARP.  Initially, at least from the preliminary plan, the major focus was on buying toxic mortgage assets at face value prices.  An extremely stupid idea.  Well, after some thought they decided to become a symbolic manifestation of the spending habits of Americans and bailing out practically everything within walking distance.  How many requests are coming in?

“WASHINGTON (AP) — At least 110 banks have requested more than $170 billion from the Treasury Department’s rescue fund, and many more are expected to have submitted applications before Friday’s deadline.

The requests would come from the $250 billion the Treasury set aside from the $700 billion fund to purchase stock in banks.”

The line is getting busy.  There may be a G20 meeting/photo op this weekend but the real group is lining up outside the U.S. Treasury.  Talk about your tax payer money well spent.  I have to make a quick comment.  I was watching CNBC last week and they were grilling the bailout for American automakers.  They were criticizing how American autoworkers are paid excessively, have inflated pensions, and suck on company healthcare resources.  A bailout for them would be absurd they yelled!  We’re talking about $50 billion here, twice the amount already flushed down the toilet at AIG.  It was fascinating to see the passion they had railing against the auto industry yet I have never seen such passion against over compensated Wall Street CEOs who make multiple times that of those in the auto industry.  They never screamed so loud against the $700 billion TARP or the already large allocation of capital to a select number of banks.

I’m not saying I’m for the auto bailout.  What I am saying is these pundits are the biggest bunch of hypocrites I have ever seen and they seriously have contempt for the American middle-class.  Even though I disagree with bailing out the American auto industry, I see just as much merit as say bailing out American Express.  Yet they have this arrogant attitude of the middle class and blue-collar workers.  To them, it is all about financials.  What a sad state of affairs.  As I was watching the talking head orgy go after the American auto industry I only kept thinking to myself, “and yet we have $2 trillion in off balance sheet securities in the Fed from banks and another $250 billion already allocated to some of the largest banks.”  No yelling or screaming about that.  These arrogant chatterboxes have probably never worked with their hands in their entire life.

Real Homes of Genius - Culver City   

Today’s home takes us to the West L.A. area.  The city we will be looking at is Culver City.  Once thought by many expert L.A. agents, actors, and otherwise tarot-reading brokers to be an unstoppable region in Southern California.  Culver City it was thought had a moat built around the city that only allowed appreciation to come in but the bridge would close when any of it tried to leave.  That bridge has now fallen and the appreciation is leaking out of the city.

The above home is a 969 square foot palace with 2 bedrooms and 2 baths.  It was built in 1954 and has been sitting on the market for 54 days.  This home has the nice touches which we have all come to love via the HGTV network or Flip this House shows.

Nice bathroom.  Simple and affordable upgrades.  A bucket of bright paint and a few accessories from your local Home Depot or Lowes.  We also have the standard kitchen with standout tile:

I’ve seen enough of those shows to see what is going on here.  So the home is in good shape.  What are they asking for it?  How about $459,900.  Before you think this is a fabulous deal, let us look at the sales history:

01/20/2006: $630,000

10/28/2004: $415,000   

Already we see a 27% price decline from the previous sale.  That is a significant drop in a so-called prime area.  Recently, I’ve noticed a new trend.  Now, whenever I pick out homes in prime cities like the last Pasadena Real Home of Genius I get some people saying, “well, its not in the prime area of the city.”  So now we went from prime cities to prime locations in the city.  Do you notice that the places to hide are getting smaller and smaller?  This mega economic crisis will impact every area especially all those in California.  Now that the U.S. Treasury and Fed have stated they won’t be using TARP money for toxic assets, 2009 is going to be a watershed year for the $300 billion in pay Option ARMs here in California alone.

The average household income isn’t high for this area.  It is currently at $71,203 which will in no way cover the payment for this home.  That puts the current yearly income to home price ratio at 6.459.  We’ve mentioned before that the mortgage amount on a home should never be more than 3 or 4 times (max) your yearly income.  Let us say the average household income family puts down 10% to buy this places:

Down payment:         $45,990

Amount financed:     $413,910

Mortgage amount to yearly income ratio:       5.81

The ratio is still too high.  The mortgage amount would have to be no higher than $284,812 to fall within these guidelines.  Assuming a 10% down payment, that would put the estimated housing price at $300,000.  Still a lot further to go.  I’m not the only one who thinks prices will fall further.  Let us look at the Case-Shiller futures market:

The last trade for a May 2011 contract put Los Angeles at 152.  What is the current index value for Los Angeles?  189.18.  What this means is people are betting that Los Angeles still has 19.6% more to go before hitting a nominal price bottom.  I tend to agree.  If you need 10 reason as to why California won’t see a bottom until May of 2011 read further.

Today we salute you Culver City with our Real Homes of Genius Award.

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Real Homes of Genius: Culver City 969 Square Feet Dreaming. When Prime Real Estate gets tough, the tough get West Los Angeles.

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Related Posts:
■Real Homes of Genius: Today we Salute you Santa Monica. 929 Square Feet for $969,000. And You Thought the Bubble was Over.
■Real Homes of Genius: Today we Salute you Westminster. $500,000 for 886 Square Feet of Orange County Goodness.
■Rent versus Buying: Should you Buy With Housing Prices Crashing? Culver City Case Example: Reasons to Wait Another Year.
■Real Homes of Genius: Today we Salute You East Los Angeles. $395,000 for 780 Square Feet.
■Real Homes of Genius: Culver City Pricing Dysfunction! Prices all Over the 405.

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Filed under: General Motors (GM), Politics, Financial Crisis

General Motors Co. (NYSE: GM) Chief Executive Rick Wagoner, the longest serving head of an automaker, is personally lobbying members of Congress to back a federal bailout of the struggling automaker, which wants to merge with its much weaker rival Chrysler LLC.

Bloomberg News, which broke the story, reported that Wagoner’s “involvement includes attending meetings, such as one with Treasury Department officials last week in Washington.” You can bet that Michigan’s powerful senior member of Congress, John Dingell, is attending many of the same meetings as Wagoner. GM no doubt is employing an army of lobbyists — both Republicans and Democrats — to press its case. The company, which for now may be the largest, has little choice.

GM and Chrysler would need between $10 billion and $12 billion to integrate their operations, according to a Citigroup note cited by Bloomberg. Combining the two fading industrial behemoths would be a logistical nightmare. Imagine trying to combine disparate systems for everything from personnel to purchasing to accounting. Let’s not forget the byzantine IT systems at both companies as well.

Economically, it’s hard to justify bailing out GM. Decades of incompetent management at the Big Three resulted in the industry drowning in billions of debt. The problem with telling the industry “no” is political. Dingell is a 1,000-pound gorilla in Congress. The auto industry continues to have considerable clout in Washington as well. Their argument is simple: if Wall Street fatcats can get a federal bailout, why not us?

The problem with rescuing Wall Street is that lots of struggling industries are going to pass the hat in Congress. What about the airlines? The retail sector? Pharmaceuticals? When does it end?

Can GM CEO Rick Wagoner’s lobbying help land federal bailout? originally appeared on BloggingStocks on Tue, 28 Oct 2008 13:12:00 EST. Please see our terms for use of feeds.

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A guest post from Frank Shump. Frank is a veteran from the financial services industry, and currently authors a blog called Thefinancecastle.com, which documents his thoughts on money matters and his adventures in self employment.

I guess it’s not all that surprising given the increasing number of foreclosures across the nation over the past few months, but the FDIC officially came out with detailed plans as to how the government will come to the rescue of delinquent borrowers. The announcement was made earlier today by FDIC Chairwoman Shella Bair, and caught a number of experts off guard.

Apparently, the proposal is built upon 2 crucial points. The first is that housing payments on delinquent borrowers two months or more late would be reduced to 31% of gross monthly income. How do they intend to do that? By setting mortgage rates lower for awhile…possibly as low as 3% for five years. Loan terms are also likely to be extended to as long as 40 years (so you’ll be dead before you actually own your home…?). In addition, the FDIC will “encourage” servicers to participate as well, as the government would share 50% of the losses if the borrower they help still doesn’t pay up and ends up defaulting anyhow.. is this really what it’s come to? The FDIC will also start paying servicers who process mortgages $1,000 for reworking loan terms to keep homeowners in their homes and to prevent additional foreclosures. The cost? An estimated $24.4 billion, which will come from the $700 billion bailout program that Congress approved in the previous month. The FDIC also released a statement Friday stressing the importance of reducing foreclosures: “It is imperative to provide incentives to achieve a sufficient scale in loan modifications to stem the reductions in housing prices and rising foreclosures.”

So..if delinquent homeowners are getting a piece of the bailout, what about everyone who happens to pay their mortgage on time and live within their means? Will they get a check in the mail to say hey thanks for doing a good job with your finances..sorry you have to eat trillions of dollars in debt over the coming years? The bailout’s focus has been constantly expanding, and there’s been no shortage of people and organizations lining up for their “share.” The mayors of Philadelphia, Phoenix, and San Jose among others have already requested that cities be added to the bailout list as well.

So that means for the bailout candidates list we have banks, delinquent home owners, credit car companies, failing U.S. Automakers, insurance companies, and cities (I’m sure I missed some).

Everyone except the average taxpayer.

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When there is a stock market boom, and everyone is scrambling for common stocks, take all your common stocks and sell them,” he elucidated. “Take the proceeds and buy conservative bonds. No doubt the stocks you sold will go higher. Pay no attention to this–just wait for the depression which will come sooner or later.” When this depression–or panic–becomes a national catastrophe, sell out the bonds (perhaps at a loss) and buy back the stocks. No doubt the stocks will go still lower. Again pay no attention. Wait for the next boom. Continue to repeat this operation as long as you live, and you’ll have the pleasure of dying rich.

Source [blownmortgage]

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In Los Angeles and other big cities many people get lost in the concrete jungle of urbanism.  In fact, hundreds of people die alone each year without any human contact with the outside universe.  It is as if they have disconnected from the actual grid of social interaction.  Every year a service in Los Angeles […]
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■The Fed Scorecard: 9 Months of Cutting and Red Queen’s Race. Is the Fed Done Cutting Rates?
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■Stop Saving Now and Spend Those Rebates! The Home Refinancing Well Has Run Dry.

In Los Angeles and other big cities many people get lost in the concrete jungle of urbanism.  In fact, hundreds of people die alone each year without any human contact with the outside universe.  It is as if they have disconnected from the actual grid of social interaction.  Every year a service in Los Angeles is done with cremated remains of those who have passed away and city workers, with all their abilities try to find ties with potential family members.  You would think that in a technologically advanced age that everyone would have at least one connection to another human in this world.  That is not the case.

The reason I bring up this point is how disconnected we have gotten from one another and how this is simply one additional facet to this economic calamity.  A few years ago I was getting a loan for an investment property.  Nice little place that was out of the state and met my criteria for a good buy and hold rental.  I shopped around for the best mortgage rate and found a place online in Arizona.  The broker I worked with was a good salesman and all the paperwork was done via the phone and e-mail.  Never met the guy.  Got an excellent rate and didn’t even have to show one W-2 form.  In fact, I could have gotten a loan 5 times as big if my heart desired and that was a scary prospect because it made me realize how little oversight was in the system.

I remember at the time that the broker was trying to push me into an option ARM but I had to explain to him that I strictly dealt with 30 year fixed mortgages.  He was sincere in that he believed what he was trying to sell was truly the best product.  It was more a case of ignorance and lack of future planning.  I think of the $500 billion in option ARMs that will be striking down upon this nation in 2009 and 2010 during the worst economic crisis of our lives.  The broker worked for a company that has long ago imploded.  Not sure what he is doing today.

That is the ease in which a decentralized economy has allowed people to eliminate any face to face contact.  Loans were made across the country to people who could have claimed anything on paper.  No one really cared.  Everything was front loaded and long-term planning didn’t matter.  Like the person that passes away alone, usually the city workers find years and years of unpaid bills, QVC bought items that remain unopened, and observations that may seem incredible to the general public.  Yet this is what we have on our hands at the moment.  A decade of hidden bets, horrible investments, and toxic waste is now coming to the surface.

The Mighty are not Immune

Warren Buffet who once stated derivatives were “financial weapons of mass destruction” is now facing the wrath of the derivatives market.  It is incredible that the cost to protect against Berkshire being unable to meet its debt payments based on credit-default swaps has more than tripled in two months.  The swaps jumped over 475 basis points from 129 only two months ago.  Berkshire is now down a stunning 43 percent for the year when the previous worst year in its 40 year record was a drop of 6.2 percent in 2001.  Seeing this massive conglomerate take a near 50% hit is stunning and a blow to confidence.  If the Oracle of Omaha can’t get it right in this market, who can?

Now, it isn’t that the [once] wealthiest man in the world is feeling the pain of the markets but what investments he made to feel the pain.  He holds large stakes in American Express and Wells Fargo who haven’t done well in the current market.  Berkshire’s income stream largely from insurance holdings is down 77%.  His public buy of Goldman Sachs led many sheep to the slaughter thinking he saw value in the once Golden boy of Wall Street.  Since that time, Goldman has been cut in half:

We also see the massive banking giant Citi taking a major pummeling in this current market.  It is now trading well in the single digits even after announcing a major job cut of 52,000 for the upcoming months.  It was the second biggest mass job layoff announcement in history.  Take a look at Citi:

This market has no mercy for anyone.  It would appear that the only safe place to be right now is in cash.

Consumers Forced to Save

There is a silent depression hitting the nation that is finally coming to the surface.  That is the life of living on the edge of financial ruin with only one paycheck keeping you liquid.  With unemployment sky rocketing, many people are being forced off that edge in a wave of insolvency.  I think a story that highlights this is how a colleague thought that his home equity line and his credit cards were his “emergency savings” and this was his buffer.  If he ever needed cash desperately, he had access to a $50,000 home equity line and $20,000 in credit cards.  Well guess what?  WaMu which was the home equity line provider  closed his line down here in California since he was now in a negative equity position and his credit cards have been chopped down to $5,000.  In his mind, he has had $65,000 in his savings wiped away.  How many others are in this kind of mindset?

You also don’t want to count or trust the government completely.  Remember that $700 billion TARP plan that was supposedly going to buy toxic assets?  As it turns out, that never happened.  Much of the funds went as capital injections to banks.  This wasn’t the essence of the plan but these people are making it up as they go along.  Ironically, since the bailout bill was passed the market has tanked even further:

A near 3,000 point drop in less than 2 months is a crash.  Wasn’t the bailout suppose to stop a crash?  Are you meaning to tell me that if the bailout didn’t go through the market would be 5,000 points down?  Consumers unlike the government have to operate in a world of money reality.  They have no access to bailouts.  And people are actually focusing more on servicing current debts:

If you look at the above chart, this is the first significant decline since the early 90s recession.  This may on the surface look like a good sign but all it is showing is the massive contraction in debt but also all the debt destruction via bankruptcies and foreclosures where debt is literally evaporating.  Think of it this way.  You lose your home and go bankrupt and that is all your debt.  You technically have no debt at least on paper.  But would you really claim this person is in good shape?  Many Real Homes of Genius are hitting the market here in California, in fact every 30 seconds to 1 minute a home is being foreclosed on here in the state.

Job Protectionism

The few remaining doubters keep saying this won’t be that bad because we won’t see the Great Depression soup lines.  Well what about job fair lines?

Source:  Gawker

Someone sent me the above picture taken from a Monster job fair in New York on Wednesday November 12.  Normally you would see a sizable line but this time the line curves around the entire avenue block.  People are doing all they can to look for work.  This is merely a reflection of the poor economic landscape.  Maybe it isn’t as powerful as a soup line but you can rest assured many people in that line are distressed.

The climate is such where everyone is on pins and needles worrying about their jobs.  Some rightfully so.  October was horrible but just look at November.  November is already on pace to being the worst month on record this year for the markets and we still have a few days left.  What good news is going to come out?  Unemployment insurance claims are at 16 year highs which only mean the next job report is going to be brutal.

In addition, many states are cutting budgets back with hiring freezes and also cutting pay for employees.  They are not in good shape.  California is currently in a  special session which seems to be going nowhere.  It also doesn’t solve next year’s budget which will be horrific.  Things are grim.

Being protective of your job is a natural and human instinct.  But even many places are seeing over qualified employees vying for retail jobs (those that are still open).  Times are tough and all the data is pointing to tougher times.  Gear up and now you know why people are saying, “what the TARP just happened?”  What just happened is the crony capitalist on Wall Street with their idiotic politicians just suckered you for a nice chunk of change.

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What the TARP? Cutting Back to the Necessities: 3 Emerging Trends in this Economic Crisis. The Mighty are Falling, Consumers Forced to Save, and Job Protectionism.

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Related Posts:
■California Financial Stagpression: Budget Deficit Hits $11.2 Billion Deficit 6 Weeks after Signing Budget. 5 Reasons Why California will see a Deteriorating Economy in 2009.
■Three Emerging Trends of a Depressed Economy: Pundits Screaming for Economic Socialism, People Going Back to College, and 99 Cent Stores Taste Inflation.
■The Fed Scorecard: 9 Months of Cutting and Red Queen’s Race. Is the Fed Done Cutting Rates?
■Emerging Economic Trends: Housing Swaps, Frugality, and Selling Homes in Lower Priced Areas.
■Stop Saving Now and Spend Those Rebates! The Home Refinancing Well Has Run Dry.

Via [DrHousingBubble]

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