Filed under: Financial Crisis

This post is part of our feature on Money Losers of 2008. See all 20.

Almost every investor might be counted as a Money Loser of 2008, but anyone who is not living in or invested heavily in Iceland should thank their lucky stars (or anything else they might like to thank). With the global economic situation called as a financial crisis, then I can only assume that the Icelandic meltdown would be a supercrisis or maybe ubercrisis.

Iceland’s three largest banks essentially failed in early October of this year, partially as a result of the crisis in U.S. financial markets. As interbank loans were getting tougher and tougher to acquire, Iceland ran into trouble because its banks were too large for the country’s central bank to backstop.

From January of 2008 through September, the krona, Iceland’s currency, had lost about 35% against the euro. Over the past few years, the U.S. dollar has lost about half of that amount, and it was still a big deal. However, this was just the precursor to Iceland’s problems. At that point, it was roughly 130 krona to each euro. By the second week of October, the currency had collapsed and the last trade was at 340 before the government takeover of the banks halted trading. Currently, the system has been stabilized, but it is still 150 krona to each euro.

Continue reading Money losers of 2008: People of Iceland as its economy collapses

Money losers of 2008: People of Iceland as its economy collapses originally appeared on BloggingStocks on Wed, 24 Dec 2008 18:00:00 EST. Please see our terms for use of feeds.

Permalink | Email this | Comments

Via [bloggingstocks]

Share This

This is a reader response from Jim Brown (no relation) to our recent post: The Blame Game Continued: Is CRA at Fault? Jim Brown is a 25 year veteran of the mortgage business managing sales and marketing.  If you’d like to respond at length to one of our posts send us an email at tips@blownmortgage.com.  Please note responses may be edited for clarity and content.

CRA is NOT responsible for this mortgage debacle. Absolutely not. These programs required full documentation at the time of origination. This means borrowers had jobs also known as employment, credit which also means 5 pieces of proven payment, and a down payment verified.

Why is everyone looking back to 1977? The answer is right in front of us. Blame can go back to as early as 2000. Banks started the demise by offering option arms, negative amortization and started loosening underwriting eliminating the need for a down payment of 20%, waiving job verification, and accepting credit scores above 620 (today that won’t get you any kind of loan).

And people thought “Hey, this Option ARM thing seems to be working,” and loans were coming in. People could afford to borrow more when they only had to pay at say 3% instead of a fully indexed 6.90%. And then what happened?

Things started getting really good. The homeowners were losing equity on the low payment which everyone thought was no big deal in a rising market. But several years later they are now losing the equity due to the changes in the Real Estate market.

No one was looking were they? In the mean time…

The Wall Street companies came along and said we can enhance those old underwriting scenarios which now look like “tough underwriting requirements”. We will do loans to 100% as long as they have a credit score of 620. And if they don’t we can still give them a loan and just charge them higher fees to close.

Hey when your down you need a punch to keep you down.

This is exactly what a higher rate and more points did to those borrowers. You would also hear, we can do that loan self-employed too. Just get me a business license!!!!!

Now the client says…”I want that loan and I can pay for it.” “Ok, sure.” So it gets done. The client thinks “I will be able to refinance when I ‘earn’ 20% more equity by next year with the market going up.”

He asks the loan officer, “Think that can happen?” The common refrain, “Oh sure homes sold today at 300K should easily be worth 360K.”

How sad that one of these Wall Street guys went down in just 2 years. But did they make one good loan?

So stop trying to find blame…it is right in front of us.

What about the responsible ones?

So, it begs the question, who wants bail out for making your payments on time with your sensible “Conventional Mortgage”? Even though you did the right thing you have been penalized by an economic calamity that caused by Greed and Money. What’s the penalty? Your job? Your 401k? Your pension?

Should we really thank the wizards of Wall Street and the banking system for creating this mess with bail out money? Or should we pass it along to the consumer who lost their job because of it while dutifully paying their mortgage on time. I say give them a year of no payments, and let’s bail out the folks who deserve it.

Source [blownmortgage]

Share This

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.

Read | Permalink | Email this | Comments

Via [bloggingstocks]

Share This

Filed under: General Motors (GM)

Imagine going to buy a Chevy in Akron and not being able to find one. The dealer closed due to low sales and lack of financing.

According to The Wall Street Journal, “The National Automobile Dealers Association estimates 700 new-car dealerships will close this year, up from 430 last year, and taking with them an estimated 37,100 jobs.”

So, the government may put as much as $10 billion into a GM (NYSE: GM) buyout of Chrysler which could mean a loss of 60,000 jobs in a consolidation only to find that the new company is having trouble selling cars because it has lost retail outlets.

The car company rescue looks like the mortgage system rescue. The federal government puts a lot of money into large banks in the hopes that it will be loaned out to homeowners. People with houses get almost none of the money and their default rates go up, further damaging bank balance sheets.

If the government is going to save the car industry, it had better save the car dealers. Without them, there is no industry.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The real car bailout candidates: Dealerships originally appeared on BloggingStocks on Tue, 28 Oct 2008 12:12:00 EST. Please see our terms for use of feeds.

Read | Read | Permalink | Email this | Comments

Via [bloggingstocks]

Share This