Filed under: Exxon Mobil (XOM), Market matters, Citigroup Inc. (C), Centex Corp (CTX), Federal Natl Mtge (FNM), D.R.Horton (DHI), KB HOME (KBH), Lennar Corp’A’ (LEN), Toll Brothers (TOL), Economic data, Housing, Cramer on BloggingStocks

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• What The Fed? Credit Card Con
• Banks May Burn Through TARP Quickly: Analyst

TheStreet.com’s Jim Cramer says you just can’t be as negative as you were before the latest actions.

It’s been right to be more than the average bear for months now. But if you believe that housing played some role in the downturn, then you have to believe that the latest moves are very meaningful for that trashed market.

We have had two major problems in housing: affordability and the ease and cost of mortgage money. We got news this week that ameliorated both difficulties, and we cannot sniff at them as much as it has paid to sniff at everything else that has been done.

First, the government’s buy of GSE paper revives a moribund market and ends a lot of federal indecision. If you recall when the government confiscated the Fannie (NYSE: FNM) (Cramer’s Take) and Freddie (NYSE: FRE) (Cramer’s Take) preferreds and therefore made FNM paper more dangerous, the government at the same time said that it would make mortgage rates come down, presumably by buying a ton of Fannie/Freddie paper. Instead it made a half-hearted effort by buying about $25 billion in paper and then disappeared!

Continue reading Cramer on BloggingStocks: Recent moves finally address housing

Cramer on BloggingStocks: Recent moves finally address housing originally appeared on BloggingStocks on Thu, 27 Nov 2008 09:00:00 EST. Please see our terms for use of feeds.

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Filed under: After the bell, Deals, General Motors (GM), Market matters, Citigroup Inc. (C)

If you ever wondered what a quick stealth 1,000 point move in the DJIA looks like, you just have to look at the move from last week’s lows. Today’s economic reports came out fairly dismal again, although the deterioration in “some” areas was not quite as bad as expected. Enjoy tomorrow’s tryptophan laziness after turkey on Thanksgiving.

Here are today’s unofficial closing bell levels.

Top Analyst Upgrades
Top Analyst Downgrades

BCE, Inc. (NYSE: BCE) announced that KPMG found that BCE might not fit within the solvency test at the December 11 closing date on a post-merger basis because of the added debt, which may throw the going-private deal led by the Ontario Teachers Pension Plan in jeopardy. Shares were down before the close.

Citigroup, Inc. (NYSE: C) shares rallied again today after it was reported last night that Mexican billionaire Carlos Slim bought a stake of over $100 million in Citigroup. Shares were up before the close.

General Motors Corp. (NYSE: GM) rose sharply on rumors and reports that it and the other automakers would outline some sort of formal plan next week. Shares were up before the close.

If you want a little bear market humor, here is a quick take on some familiar financial terms that have been redefined to fit the new economy.

Closing Bell: Dow rallies nearly 3%; C, GM soar, BCE plunges originally appeared on BloggingStocks on Wed, 26 Nov 2008 16:19:00 EST. Please see our terms for use of feeds.

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Filed under: Books, Oil

Memo to T. Boone Pickens: before you write another book about the art of the comeback, make sure your comeback is complete and that your career is on stable ground.

On September 2, Pcikens’ book The First Billion Is the Hardest: Reflections on a Life of Comebacks and America’s Energy Future hit the stores. Now he’s in need of another comeback as a huge pullback in energy prices and investor withdrawals have sent the value of Pickens’ hedge fund assets down to less than $500 million. When his fund peaked in June, he was managing $2 billion.

With the market in the toilet and investors fleeing for the exits, Pickens has reportedly moved the fund almost entirely into cash — perhaps a sign that he has abandoned his long-term bullish outlook on oil prices.

However, Pickens’ contributions to America now go beyond wealth-building. While he initially made his name as a Carl Icahn-style corporate raider back in the 1980s, he’s moved on to finding solutions to our dependence on foreign oil. The Pickens Plan has garnered the support of the Sierra Club, former Clinton Chief of Staff John Podesta, and even Senator Barack Obama — an impressive feat given that Pickens is an ardent Republican.

And he’s not out money yet. Apparently he just gave $63 million to Oklahoma State to pay for a football stadium.

T. Boone Pickens faces investor withdrawals originally appeared on BloggingStocks on Tue, 28 Oct 2008 13:32:00 EST. Please see our terms for use of feeds.

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Filed under: Earnings reports, AT and T (T), Sprint Nextel Corp (S), Verizon Communications (VZ), Qwest Communications Intl (Q)

Telecommunication concern Verizon (NYSE: VZ), whose competitors include AT&T (NYSE: T), Sprint Nextel (NYSE: S), and Qwest Communications (NYSE: Q), reported earnings for the third quarter on Monday, and investors could not have been happier. As Wall Street continued its painful bearish slide, shareholders of Verizon were bragging about the 10% rise in the company’s stock price. Question is, should you be a buyer of Verizon’s stock at this point?

The numbers were decent enough. According to the press release, earnings per share were $0.66. Management only succeeded at matching expectations for Q3, according to this earnings-preview piece by Brent Archer. Honestly, I was surprised at the big pop in the stock yesterday. Considering how badly the markets have been doing, and the fact that we’re facing a global recession, I would have figured on a more muted response to Verizon’s numbers. After all, if we are facing a tough recession (and I’m fully on board with that sentiment), what’s going to happen to the growth rate of the FiOS product? That product is doing well, as are other parts of the Verizon portfolio, but I wouldn’t have been a buyer into the stock’s strength today. And I say that without a doubt.

But, with Verizon, there is that great dividend yield and cash-flow growth. Operational cash flow from continuing operations was up almost 6%, and capital expenditures decreased. That’s great news for dividend investors, as more free cash was left over. I think the market looked at Verizon as being oversold and decided to buy in. The company seemed to have a good Q3, and I think long-term investors will definitely do well with the stock; in fact, the press release mentioned that management saw fit to increase its dividend 7% during the quarter, expressing confidence in the company’s current business models. But I believe even longer-term thinkers would do well to wait for a pullback in the share price before either initiating a new position or adding to an existing holding. I simply think there was too much excitement around the stock after its report.

Disclosure: I don’t own any company mentioned; positions can change at any time.

Verizon: Good dividend stock (at a lower price) originally appeared on BloggingStocks on Tue, 28 Oct 2008 09:40:00 EST. Please see our terms for use of feeds.

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Fitch Ratings and Standar & Poors (S&P) Ratings services both published their methodology and assumptions for evaluating residential mortgage-backed securities (RMBS) in November. Look for both services to issue updated ratings over the next few weeks.

Fitch Ratings has revised its surveillance methodology for U.S. sub-prime RMBS to reflect increased emphasis on ResiLogic, their loan-level and loss model. Going forward, ResiLogic will be used to guide collateral loss projections by estimating the frequency of foreclosure for all mortgage pools regardless of seasoning and the loss severity of pools seasoned less than 30 months. For pools seasoned more than 30 months, Fitch believes actual loss severity trends exhibited by the pools are the best indicator of future severity trends. This loan-level analysis will be used in conjunction with Fitch’s existing break loss analysis to determine each bond’s loss coverage ratio.

The ResiLogic stressed mortgage pool loss scenarios will also be used in determining targeted loss multiples at each rating category resulting in pool-specific category thresholds as opposed to using a static set of thresholds. Other adjustments to the methodology include:

• An adjustment to the ResiLogic derived default rates for performing loans to account for the actual performance of each transaction relative to original expectations.
• The use of historical loan-level loss severities on seasoned (greater than 30 months) pools.

Fitch is reviewing its rated transactions for 2005, 2006 and 2007 and will be releasing revised ratings soon. The current revised cumulative loss expectations for these years are 12 percent, 27 percent and 31 percent respectively. The Updated Surveillance Criteria for U.S. Subprime RMBS are available online at www.fitchratings.com.

Standard & Poor’s Rating Services also recently published the methodology and assumptions fo rating U.S. RMBS backed by non-performing or re-performing mortgage loans. Given the current market conditions and the stresses on lenders, borrowers, and the real estate industry, S&P aexpects the volume of transactions backed by non-performing or re-performing collateral submitted for review to increase.

Collateral for RMBS can be real property or loans. Loans which are more than 90 days delinquent are considered non-performing if the borrower has not exhibted consistent payment behavior. Re-performing loans are loans which have been delinquent more than 90 days in the past year but are currently less than 90 days delinquent or that are 90 days delinquent but the borrower is exhibiting consistent payment behavior. When assessing the expectations regarding the timing and liquidation values of non-performing loans the following factors are taken into account:

• The accuracy of a licensed real estate broker’s opinion of the property’s value (the so-called broker price opinion or BPO value.
• State foreclosure and REO time-line variations and expenses.
• Housing market conditions.

Re-performing loans are assessed using substantially credit analysis to estimate foreclosure frequency and loss severity. The analysis of the age of credit scores, treatment of arrearages and loan seasoning adjustments differ for re-performing loans.

S&P continues to update methodologies and assumptions for the analysis of non-performing and re-performing loans based upon performance trends and updated economic projections. In addition, S&P believes unique risks must be evaluated in proposed transaction structures with regard to liquidating trusts. The methodologies are published on the S&P web site at www2.standardandpoors.com.

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Source [blownmortgage]

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In the grips of a brutal financial crisis that continues to worsen despite all efforts by the governments across the world to stop it, and foreclosures continuing their unstoppable climb, there’s no question that things are pretty bad out there. Banks, in particular, have been given no reprieve at all by shareholders even as they tap into government provided funds to shore up their balance sheets and (supposedly) use that money to continue lending. With all of this chaos and hardship caused by an industry that lost sight of any sense of risk management and proper diversification, someone has to be responsible right? This wasn’t all one big mistake, obviously, someone was there to knowingly pull the trigger. The question is, two years into this crisis, who?

The answer, according to William Black, who was counsel to the Federal Home Loan Bank Board during the Savings and Loan Crisis and one of the men who blew the whistle on the “Keating Five” in 1989, says that while we know the lenders that were involved (looking at you IndyMac and Countrywide), we don’t have the investigative power or resources to know yet. The answer to why not is actually pretty straightforward, according to Black: “There is no poster child [for the housing scandal] because you need to investigate, and you need to bring cases and we haven’t done either against the major players.”

That’s because the FBI made a “strategic alliance” with the Mortgage Bankers Association which, as you might have guessed, served the major industry players. So while investigations were focused on individual mortgage brokers, major industry leaders were responsible for plenty of recurrences of fraud as well. So, as the article puts it: “In this case, the foxes truly were guarding the hen house”

What’s that mean for the future? There will undoubtedly be investigations and arrests and someone will be punished along the way, but it’s going to take time as the FBI ramps up investigations that they should have opened previously. It’ll be especially difficult for them to gather that evidence since these firms in many cases have already shut their doors, so the FBI can’t send in undercover agents to catch them in the act. The FBI will also need a lot of additional resources if we expect them to track these fraud cases down and prosecute those responsible. Unfortunately for all of us, however, plenty will still get away.

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Source [blownmortgage]

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