AmEx CEO: "Clear signs of a weakening economy and business environment"
Submitted by
CalculatedRisk on Mon, 01/28/2008 - 1:38pm (133 comments)
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Recent Recommendations
U.S. Card Services reported fourth-quarter net income of $7
million, down from $473 million a year ago.
Well hell, that's only a $467 million dollar drop... no cause for alarm.
Wait - food and energy costs aren't core inflation. Why do they impact people's real lives?
/ snark off /
Earnings today:
MCD: Bad (Dec same-store sales flat)
GLW: Good (LCD TVs apparently now a necessity)
AXP: Bad (goldilocks is maxed out)
YRCW: Bad (economic environment worsening)
Economy humming along......DOW up big....
VMW: Bad (missed revenues, missed whisper number)
But at least P/Es are reasonable?
--
And don't forget the all-important MCD. Last time that MCD went down this much and had bad several months was during the last recession, I believe.
On Wednesday we have the advanced GDP data and it would be fun to hear the spin.
Jas
A great discussion is on npr right now, regarding "jingle mail" and related topics.
I am also waiting on the GDP number, I think the number will be a bunch of phony bs!
Amazing the homebuilders are flying to the moon.
I can hardly wait for the fed to hand out more sugar to wall street.
What we should really be asking is how to restart the investor market for housing. After all, they are the only folks willing to buy surplus housing and get it back into use. Right now we have a squatter's paradise beginning.
Someday this war's gonna end...
AXP already announced this 3 weeks ago, so it was already discounted.
Aheadofthecurve -
Sounds like CNBC, never acknowledge antyhing then after the fact discount as "already priced in"..
BTW - the stock is down 4% AH
They announced 3 weeks ago earnings would be 70-72. They were 71. Where is the news?
AH is generally meaningless.
Let'em talk up the markets -- that'll make good PUTs cheaper!
Heck, SRS & SKF are practically on fire sale now.
Hell they are losing a fortune sending me a pre approved application every week.
What is scary is I know 2 people in the office filing BK. Of course one went out and rolled one more new car loan before she filed. Last new car for a while you know. Anyway however bad they think it will get I am pretty sure they are underestimating it. People are gaming the system and feel they are entitled to free stuff for going BK.
This is going to be messy and it looks like its starting a lot faster than most here expected. Incidentally, Gary, you would not believe the number of people in financial markets that have trotted out the "let them eat cake" argument to minimize the effect of food inflation, including one that argued that obesity is a problem in the US, so if people can't substitute one rising food for another, then they'll eat healthier and that would solve some of america's problems.
In the end all of this is the desperate last stand of the bulls. The Fed is almost saying it will "moniter inflation" which I take to mean that they'll watch it while it roars through the roof. The problem is that inflation today would be much much more painful than in the 1970's because back then, real GDP stayed positive and real interest rates went into negative territory. Today, they can try to do the same thing, but because they depend on foreign capital to fund deficits, they'll quickly find real interest rates stay positive and the real GDP goes massively negative. That's a nightmare 3 years ahead of us.
AH is generally meaningless.
tell that to AAPL longs. also VMW longs.
I love AXP. They pay me hundreds every year to use their card to buy gas, food, etc. They better not mess with their cash back programs!
AH is generally meaningless.
VMW is down 26% AH, nevermind tha is meaningless...
Sorry this is off-topic from Floyd Norris blog on NY times:
Has the Fed solved the mortgage reset problem?
Larry Summers, the former Treasury Secretary, says it has.
At Davos last week, he said that most resets on subprime mortgages are for 5 or 6 percentage points over Libor (London Interbank Offered Rate) and that Libor is now low enough that the resets will therefore not be very large.
Any thoughts on this?
The key will be the guidance - listening to the conference call now. Even though they pre-anounced, its still bad news. Many investors still expected them to beat their prior guidance - or at least hit the high end.
Let see what they say about prospects if anything.
Paul:
It doesn't help declining property values or the neg am they're racking up. The sound of keys hitting the mailbox will grow louder.
Joe
Resets are only one part of the problem - no doubt about that, but are resets structured in a way that this make sense?
"you would not believe the number of people in financial markets that have trotted out the "let them eat cake" argument to minimize the effect of food inflation...."
A pretty large proportion of the ads on television is for food -- prepackaged or restaurant food -- and another large percentage is for exercise and diet... our schizoid culture. If these chest-thumping let-them-eat-cake boys were to think about what kind of food people are to cut back on first, it'll be the high-priced stuff from Fortune-100 companies. They sell the cake. Madness and bravado of the most outrageous sort.
Personally, I already know folks who've quit their latte-a-day habit, and who've figured out that the store-brand canned soup is about as good as the name brand, for half the price.
How does one re-fi when underwater on the 1st mortgage?
No snark, really asking.
Incidentally, Gary, you would not believe the number of people in financial markets that have trotted out the "let them eat cake" argument to minimize the effect of food inflation, including one that argued that obesity is a problem in the US, so if people can't substitute one rising food for another, then they'll eat healthier and that would solve some of america's problems.
Except the cheapest calories are the least healthy. There is a reason why obesity correlates with socioeconomic status...
Yep, those Christmas CC bills are hitting the mail boxes like bricks.
The last dollop of credit is drying up.
I know far too many people burried in debt. Scary.
Cheers,
LIBOR + 5-600 bps is not a problem? That would put rates in the 8-9% range. That doesn't sound so good to me...
Wow those cars must be amazing if Chenault can see all that in the rearview mirror of his SL 600. Personally I think Captain Scarlet's MSV with the rear facing driver position is more befitting.
Alec writes:
How does one re-fi when underwater on the 1st mortgage?
With SCUBA gear...
Oh, I know. Anyone can afford McDonald's dollar menu or jack's 99 cent stores, but what a load of unhealthy crap.
Brklyn renter, what nabe are you in?
Alec- you just can't refi now. it's that simple.
at least until the brand new loan products come out, like the FannieMae 125 (that is, never).
"How does one re-fi when underwater on the 1st mortgage?"
Yeah, I don't think you can. Unlike 90% of Americans, bankers can do math, and they won't loan more money than a house is worth. Hence all that appraisal stuff.
Alec, if you're looking for a cash out scenerio, then stop paying your mortgage, save your money until they foreclose on you (which will be a while the way they are backlogged nowadays).
I'm not being a wiseguy. If you're upside down already in the first few innings of this game, you'll be in a lot more financial trouble by the 9th. Get out now and by the time the 9th inning is played out, you might have already repaired some of the damage to your credit and be in position to buy back a similiar how MUCH cheaper.
Many are doing it already, but the last to act won't reap the benefit of being ready to buy again at the bottom. It takes time to rebuild credit.
Alec,it is simple to refi an underwater 1st mortgage,you just bring money to the table.If you bought the median home in '06 in sonoma county with 25% down,it will be around $25k.simple.Already had this conversation today,but somehow i suspect it won't bother you as much as the FB i spoke to earlier today.
Yeah Alec, dump another another 25 G's in. Now on top of the money you already lost, you lose more. And 3 years from now you are even deeper while your buddies who let go of their house are buying up a house like your's at 50% off. I'm sorry Tom, I disagree. A home is where you live. Alec can find a home in an appartment, save money, rebuild credit and be much better off in 3 years. We must seperate emotions here. If your upside down already, the house is worth losing, not your home.
O-Joe & Sebastian,
American Express is reporting that "consumers are cutting back on their spending," which is consistent with what we have heard from other retailers and restaurants.
How do you reconcile this with your beliefs that the economy continues to be strong?
Consumer spending will no doubt slow down, and real hourly wages will most likely remain flat. With no HELOCs to pull money from, what is the impetus for spending?
I just don't get it.
I thought Seb already thought sh*t hit the fan.
Whoops--I think I mailed my keys to the credit card company and mailed my credit cards to the mortgage company.
WAAHHHOOOOO ! ! ! Dont worry they'll figure it out...
Well, the CEO of AMEX just referred to the current slowdown as "this recession" and said that both small business and the consumer slowed down fairly significantly in December. A trend he said has continued into January. They are going to clamp down on costs and cut discretionary spending and expect writeoffs to increase in 2008 and customer spending to continue at a low level. Not a bullish report, but no doomsday either - although definately recessionary. I was actually pretty impressed with the call - they clearly see things deteriorating and are expecting and managing for things to get worse. Nonetheless, I'm not going out and buying the stock...
On the conference call, the CEO said the December weakness continued into January. So, while Oct and Nov were solid - and Q4 will be OK with only one weak month - it looks like Q1 is going to be really soft.
Best to all.
In the trenches, you beat me to it. Thanks!
Like mashed potatoes.
Who should I believe the CEO of AMEX (and my own companies numbers) or O-Joe/Sebastion?
The economy is slowing, and will be slow all year, not the end of the world, but we are in a recession.
Potential effects of ACA default in CDS market. I thought this was interesting. Why can't they make an auction with a limit above 30 days?
US CREDIT-ACA failure would test default swap market
| Reuters
Another market day in which crummy stocks/sectors do well and quality do worse. Not as bad as last week, but still there.
This is a horror for a lot of long/short hedge funds. They may be getting margin calls and cutbacks and having to liquidate. Although the market is up, it smells like unwinding. Could be setting up for a big fall later. Truly a good time to go short financials and REITs.
I just don't get it.
dunham
Don't worry Dunham. Most economists don't get it, either. They are trained and full-time forecaster, yet the majority of them gets it wrong as well.
What works for me is the following way:
a) I tell myself, I don't understand the economy. It's too complex and I'm too stupid. I cannot rely on my gut feeling and honestly have no idea what influence HELOCs have on the economy.
b) I'm looking for (simple) models which in the past have relaiably forecasted the economy or the stock market. Past performance is never 100% foretelling the future, but you can get pretty reliable models.
c) I stick with my models. That's sometimes the hardest part.
What does my model tell me? - It says we'll easily avoid any recession this year and swing up from here quite amazingly. By late 2010 we'll swing down into a real recession. But: there will be no severe recession until past 2019. The recessions in the 2020s will be more like the 70s recessions. Pretty ugly and pretty bad infaltion. Around 2036 inflation will peak and it will be the 80s all over again afterwards. Maybe Ronnie will raise from the grave and be our President again
Wouldn't be the worst in the world, would it?
O-Joe
Owl,the question was how to do it,not whether to do it.I advised the FB in question to consider a short sale or even a BK.I suspect he will get good and drunk tonight.
How does one re-fi when underwater on the 1st mortgage?
Talk to your current mortgage lender about a loan modification -- turn that ARM into a nice 30 year fixed. When the borrower is upside down, the note holder is the only party that has an interest in bettering the borrowers situation.
The mortgage lender has two choices -- preserving the principal via a small reduction of interest payments with a loan mod, or a big loss of principal through foreclosure or jingle mail.
rich,
i thought you were off SKF last week...
TWM and EEV looking tasty though
Oh! Joe! Pass that bong this away, bro!
Q: What would Ronald Reagan be doing if he was alive right now?
A: Scratching at the lid of his coffin.
and honestly have no idea what influence HELOCs have on the economy.
You may want to reconsider ignoring this.
I'm 100% certain it will be in future models that people use to predict the economy.
Signs we are still in a bull (read irrational) market: American Express said fourth-quarter profit fell 10 percent, and net revenue is well below expectations. The CEO said his outlook for 2008 remains "cautious," with slower earnings growth.
STOCK IS UP 4.31%
Old phrase: No news is good news.
New phrase: Any news is good news.
Speed -
That was B4 this news
i thought you were off SKF last week...
TWM and EEV looking tasty though
x-man,
I thought it was a little late in the cycle for financials and their P/Es aren't too out of whack. But if financials keep rising, shorts could look better.
TWM is the best short bet for the next year. Still very high PE (40+) and huge earnings vulnerability. Also, liquidity vulnerability when the bear hits its stride.
It's the end of the world as we know it
It's the end of the world as we know it
It's the end of the world as we know it
And I feel fine
Speed, AXP gave almost all of it back AH. The market is rate-cut-giddy. It's also an excuse for the hedgies to sweep a lot of weak-handed shorts off the table so they can step in on the covering rally and assume the positions, for the next leg down.
O-Joe,
You don't think the professional economists have their own models?
I am sure yours is much better.
Throw those bones, read those tea leaves. . .
Walking through the markets, listening to my neighbors cry about debt, seeing the cold hard debt/GDP ratios, home equity ratios etc., I know the storm is coming.
I saw I.O.U.S.A. at the Sundance Film Festival the other day and got to talk briefly with the Comptroller General of the GAO. He thinks we still have a short window of opportunity to start addressing federal debt before a crisis. He says it is imperative that Americans start saving. Well that's great but we are in an economy that heavily based on consumption and the Fed is cutting rates. LOL! We're FUBAR.
I am standing on the beach looking at the large waves from the leading edge of the hurricane lap the shore and you are telling me it's going to be sunny. LOL
Sorry Tom, my bad
dunham said: "American Express is reporting that "consumers are cutting back on their spending," which is consistent with what we have heard from other retailers and restaurants.
How do you reconcile this with your beliefs that the economy continues to be strong?"
I saw a poll the other day where 79% of respondents thought there would be a recession this year. But they also said it wouldn't affect their spending.
I don't think the economy is strong, I just know it's not weak enough to be recessionary. The economy doesn't expand at a constant rate, but fluctuates between faster and slower rates. That's how expansions can be sustainable for years at a time, because the excesses (like housing) get worked off without crashing the economy.
Sebastia
rich- A few hours ago on a previous thread, you said that foreign investors would avoid the US and put their money in "economies that are growing 5 or 6 % a year". Since the only economies I know of that are growing at that rate are emerging ones, I am surprised to see you recommending shorting them. Even Cramer takes a day or 2 to change his mind.
As AmExp is losing business from the day-to-day useage of their cards, perhaps they are getting a double hit on their income. Poor loans and cc charges dropping from merchants.
O-Joe,
For somebody too stupid to understand the economy, yet smarter than most economists who are even stupider, you sure have a details and firm forecast, going decades into the future.
Give intellectual dishonesty a break.
Semi-OT:
Is anybody else convinced that the 4Q GDP is going to come in real hot - like 3.0%+, setting up a massive short squeeze rally?
Btwn that and the oncoming rate cut, the DOW may go up 1000 points.
Maybe I should close my puts.....
"It's the end of the world as we know it
It's the end of the world as we know it
It's the end of the world as we know it
And I feel fine"
Damn. I was going to post that last week, and didn't. But how about:
"There may be trouble ahead
But while there's moonlight and music
And love and romance
Let's face the music and dance
Before the fiddlers have fled
Before they ask us to pay the bill
And while we still
Have the chance
Let's face the music and dance
Soon
We'll be without the moon
Humming a diff'rent tune
And then
There may be teardrops to shed
So while there's moonlight and music
And love and romance
Let's face the music and dance
Dance
Let's face the music and dance"
Irving Berlin was the man.
dunham,
Man, that would be GREAT! Don't tease me!!!
Thanks everybody, it wasn't for me but a quasi rhetorical question.
It reads as if loss mit folks are really earn their keep in 2008.
Just imagine the tightrope they have to walk between working on a case by case basis vs. self enforced cramdown.
Did BAC write-down any more bad loans after the 3B last year?
Like everything else Shrub does, he will spin any number upward to avoid becoming the worst Resident in American history for all time into the future. This includes some kind of massively delusional GDP number. We need to remember that reality does not exist for Preznit Whiny McPoopypants. Only the political gain is on the table, and any number which kicks his disasterous legacy down the road will be used.
dunham- The expectations are so low that an upside surprize is certainly possible (though 3% is very high). Also Oct was very good and Nov was OK, so the whole Q may well have been alright.
I don't honestly know what effect that would have on the market. It might not be that positive, if people conclude that makes further rates cuts less likely.
Bob-Good one too
SRS fans, what catalysts will drive IYR lower (and SRS higher) and when do you expect to see evidence of that catalyst? Seems to me that IYR has priced in a lot of damage going from an 95 ATH to 66 today. At ~65, the weighted average yield of the underlying REITs is 4.3%. Is this is a high enough dividend rate to set a floor given that short term interest rates are going lower? Sorry for being dense, but I'm not sure SRS is a screaming buy right now.
Best,
Sebastian, "excesses (like housing) get worked off without crashing the economy"
Maybe. Maybe not.
I guess the NASDAQ cratering episode 2001 didn't crash the economy either. So explain that to those that were fully invested and now 7 full years later the NASD isn't back to 50% nominal of where it traded then. I know for certain there are many trigger happy 401k holders that already either sold off or are ready to so they don't experience the same version of pain again.
Better check to see how the WrightB correlates to stock price declines.
LOL!
Just in case not everyone is addicted as I am:
Final Retail Tally: Weakest Year Since 2002. The roar of the cheerleaders this last season are still ringing in my ears.
Red pill,
Ben doesn't want savers now. He wants spenders. That's the irony to me. He has nation of debtors, and yet..he needs more spending. He has a liquidity trap and he is pulling out all the stops in my opinion.
All this in my mind to increase aggregate demand in the US.
The problem, in my opinion, is high energy that is bound to our currency.
How does he deal with this problem?
The one thing I do know is that he will DO ANYTHING to fight deflation.
So financial brains, What is that "anything"?
Tom Stone I advised the FB in question to consider a short sale or even a BK.
Is he in that much trouble with 25% down? Really?
Because that's when it hurts. That's going to be the real long-term hurt to economy - people who have to bail like that but lost real money. I honestly don't care about those who bought with 100% financing. Of course most of them will walk - they couldn't afford it in the first place and they will lose it sooner or later anyway. But in a case like you're citing, the net is much different.
hiker90,
The recent spike to 151+ was simply a preview of what's to come with SRS. IMHO we could see $200 this year.
Let me give you a clear example of the squeeze. I have taught adjunct at the same U here for a long time. Every night before class, I go to the same cafeteria and get a diet Pepsi (I lose my voice...it's a 3.5 hour lecture) and a bag of cookies that they make there (hey, I need the sugar!). It was 2.35 for as long as I can think of. This last night? 2.65, a .30 cent hike. I leave you to calculate the percentage rise for homework
Must be the chocolate chips from Hershey, who just hiked wholesale prices 13 perent today.
Domo arigato Bernanke-san.
Nikkei + 325.97
--
"Amazing the homebuilders are flying to the moon"
Moon is a virgin territory and un-built.
CR estimates the demand on moon beginning 2011 at 17 homes annual rate. The demand far exceeds the inventory. Therefore, the price will shoot to the moon. At 3 billion American pesos a pop the Hopebuilders will make a killing.
I am buying Hopebuilders tomorrow at the open at mkt.
Jas
"It was 2.35 for as long as I can think of. This last night? 2.65, a .30 cent hike. I leave you to calculate the percentage rise for homework :)"
Ipodius, I live in a college town graced with many locally-owned bakeries and breakfast joints. Prices are up ten to 15 percent over the last few months. Food, energy, all those non-core things... they add up.
I was wondering if anyone could recommend a good text book on the bond market, bond valuation and bond construction. I'm having trouble keeping up with some the posts here!
I'm in Boston Bob, and I'm just shocked at the price increases here in things, especially oil. I heat with gas, but my parents have oil and I can't believe what it is costing them. Even in inflation-adjusted dollars it is much, much higher than times past. Over $3 a gallon. And they are retired. Can you imagine what that cost is doing to consumption numbers? I know they have cut way back on everything, especially travel. They are worried. Next week I'll take the student pulse and see what they think.
Long term, emerging markets will outgrow U.S. Short-term, they are vulnerable to: overvaluation, earnings contraction, weak exports, high energy costs, global recession, re-coupling, etc. Okay?
You can't go wrong shorting emerging markets over the next year, if you can ride through volatility. No big hurry to get in. No big hurry to get out.
What got Amex in trouble is that most of their growth over the past couple of years has been in subprimish consumers. They charge an annual fee, and many consumers with crappy credit were happy paying it for access to a card. The company figured, hey, the extra write-offs don't matter that much because we have a hefty fee upfront that covers any expected bad debt.
Big mistake - and I can see why company thinks Q1 is going to blow chunks.
By the way, 9 out of 10 analysts on Asian CNBC basically agree that emerging economies and markets are vulnerable at this time. They are straight shooters over there, not like CNBC smiling stiffs here.
SRS may not be a screaming buy but it is still overvalued and vulnerable. Just hang in there. It has a way of popping really hard and fast to the upside. I wouldn't sell it here, because it doesn't seem like the recent selling pressure is all that firm or real. A lot of it seems to be short hedge fund unwind.
The biggest part of CRE carnage is ahead, and SRS also has a small residential component.
After the mortgage default fad, I wonder if it will become socially acceptable to walk from credit card debt. Now that would be the end of the world. Imagine having to "save money" in order to buy something.
Save (e.g., not to spend; to retain, esp. money).
O/T to Robyn from previous thread:
Runoff is simply where the company no longer writes policies and permits the existent policies to expire as per the date on the policy. My recollection is that if the company has been purchased by another entity, the new entity assumes the book. If, as in the case of Kemper or Reliance, the firm goes belly-up, then I believe that the insured would have some recompense via the state department of insurance. BTW, not all state Departments of Insurance are created equal. NY has one of the best.
For your vanilla property/marine policies, this is a no-brainer. In this country however, the liability policies can be around for-ev-er. Ask the folks in London who bought the argument that there was real cachet to being one of the "names" at Lloyd's of London.
I'd have to go back to some old professonial journals to bone up on that.
Re weakening consumer, let me give you an example: Me.
I owned 8 different residential properties in the last 10 years, most of them primary residence. Yes, I made money when I sold (except for 1 and that wasn't too bad). But in the meantime I lived over my salary income which is 150k a year (no kids, no obligations). It wasn't that I was profligate, I was spending so much fixing up houses, paying mortgages (tax deductible), paying RE commissions, that any day to day expenditures were peanuts in the overall scheme of things. A year ago I sold the last 2 pieces of RE, and started living on my salary. Guess what, its murder! Not bitching, I live in a high rent building and put a lot of money into the 401K, but the exercise of living on the monthly (without running up credit cards) is a cold bath. I do my own grocery shopping and I'm here to tell you the average bag of groceries is up 20%. Now if you think about the vast majority of Americans living on lots lower income than I have, seeing food, gas and medical prices spiraling, they have to cut back. Its baked in - I'm long TWM!
MaxedOutMama writes:
Tom Stone I advised the FB in question to consider a short sale or even a BK.
Is he in that much trouble with 25% down? Really?
This is where the "Cold Equations" kick in. Forget all that responsibility crap and run the numbers MoM.
Recently purchased and now down 25%.
Flat to small annual appreciation.
AMT consequences and flat to small income appreciation.
Add them together and the NAR "forced savings plan" aspect of a mortgage makes no sense at all. Their effective interest rate is much much higher than the note APR would indicate. Even inflation doesn't help this time. Many are adjustable and even then it doesn't appear that rents can rise to close the rent/buy gap anytime soon.
if anything u should be accumulating SRS now as its consolidating. the CRE debacle will begin to clarify soon.
who the heck made that stupid comment about Asians not leading?
sinking into the emerging markets level as time goes by is gonna be tough especially when yhey start to bail us out
It doesn't help declining property values or the neg am they're racking up. The sound of keys hitting the mailbox will grow louder.
What will also grow louder is the sound of money leaving the US mortgage market. How long before the money decides it's had enough of both the lenders and buyers states side and seeks better and safer returns in other markets.
OK bong boys time to man up, get out the Hookah and the blow torch. Pack that baby tight set back and go for it.
Words can't say
The way I feel
Words can't save me
Faith has been broken
I'm no longer blind
Faith has been broken
Time after Time
Harsh words are spoken
By those who deny
Harsh words are spoken
Lies always Lies
He whispered, "Be kind to me
Come kill me one more time
I'm lost in bitter rage"
Why tell me why
Holding on to the pain
Holding on, watch life fade
Holding on, to the past
Holding on, to wasted time
I can't see though delusion
Oh I'm trying
Isn't life strange
When youre living a lie.
from the album Within the Veil
No more messing around with this one hit wonder stuff!
Bush sees no signs of recession perhaps because the Idiot-in-Chief has been living in a bubble for his entire life.
I work for a major non-financial US Company. In Nov at the national meeting for my technical area we were recruiting heavily for three positions. I learned today that all three positions have been closed, and that outstanding offer letters have been retracted.
On Sunday I was at the mall with my daughter. We ate lunch in the food court, where 5/14 eating establishments were out of business.
Feels gloomy out there to me.
Sandy what part of the country are you in?
I work for a major non-financial US Company. In Nov at the national meeting for my technical area we were recruiting heavily for three positions. I learned today that all three positions have been closed, and that outstanding offer letters have been retracted.
Yep. I'm in tech and that's exactly how things got started in early 2001. Late 2000 we were recruiting like gangbusters - we were even planning to hire a student from Ireland (we're on the west coast of the US) who wasn't going to finish his degree til May 2001... Well, by the time May 2001 rolled around we had retracted his offer and a month or two after that layoffs started. We tend to forget how fast things can change.
ades writes:
Sandy what part of the country are you in?
Northeast
MoM and Dawg,the property in question was purchased in june '06,with 25% down and a fixed rate 30 yr mortgage by a single man who works 70-80 hours a week and makes a good income.He wanted a rate/term refi into a 15 year fixed.Purchase price was just over $600k,current value is right around $450k.This is a beautifully maintained 3/2,90's built home in a solid middle class neighborhood with good schools.given the cost of sale,he is underwater today,given that homes in this area are losing value at the rate of 1.5% PER MONTH,and that there have been NO SALES for 3 months in his neighborhood he is certainly an FB.
I like Amex. I paid my December bill late and they didn't even charge me anything because they were just so happy to get paid at all!
Then again I've had an Amex card for over 25 years. They ought to pay me to carry it. ;^)
JC Penney, otoh, just pissed me off royally. They charged me shipping even though I had a free shipping code and when I complained wouldn't reimburse me. OK, fine. No more JC Penney card, no more online purchases, hundreds of dollars in potential sales gone because they really had to have $11 for shipping me a couple of bras and panties. Oh well, too damned bad, you idiots.....
Be very careful who you start raising fees on and charging late fees, and all your other little let's make up a few extra dollars plans, credit card companies. Very, very careful.....
CR-
If I were Chenault, I would have my collections dept working the phones 24/7 to offer discounts to the delinquent holders urging them to sign over whatever stimulus package check they get and apply it at a premium to the unpaid balance.
More than likely the last opportunity to nab the helicoter drop on the delinquents.
That's really a shame, Tom. It's not like you don't know they're out there, but each one makes my teeth hurt a bit.
A weakening economy has cut down consumer spending only one thing probably can help us now the Internet
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There's lots of misinformation about insurance company bailouts, run-offs, etc.
NY State Guaranty Fund doesn't cover bond insurance.
NY State doesn't regulatory jurisdiction over Ambac. Can they sue Ambac? Sure, but that's different than regulating and hard to see how it would help. The Wisconsin Insurance Commissioner is no shrinking violet and has already expressed interest in presiding over Ambac.
A big part of Kemper, personal lines, was purchased and did not run off.
Runoffs are rare and nasty and really don't apply to the bond insurers. It's hard to imagine regulators would allow it, because the structured and asset-backed losses would overwhelm "legacy" policies.
There's no easy, quick or attractive solutions. It's an insolvent quagmire and will only get worse as muni revenue bonds start to default.
MoM it does hurt.This is a good guy who played by the rules and expected others to do so as well.I talk about the others,the gamblers, more often but a lot of innocents are getting hurt and I do not like it.I think he will keep the home,he bought it to live in and as long as he keeps working he can afford the payments.This is not the kind of man who walks away from his debts.Just ugly.
Tom,
I know a number of people in the same predicament. It's sad. Good people are gonna get slaughtered with the bad.
Cheers,
So, whats "Ben the Great Deflation Figher's" next move.
No tantrum for a few days on Wall St so a little of the heat came off. In fact, a lot came off today. Thoughts?
Tom Stone writes:
MoM and Dawg,the property in question was purchased in june '06,with 25% down and a fixed rate 30 yr mortgage by a single man who works 70-80 hours a week
Two answers. First, I feel. No, really. I will lose sleep. Doing everything "right" and getting screwed anyway. This is too sad.
Second. The deal went sour. The deal is sour. No amount of sugar or attention makes it sweet. The correct thing is to move on. Income or by implication hours worked doesn't matter. Price is wrong and nothing else fixes price.
rich,
You're right about an insolvency quagmire. Just wait until the trash they shoveled into the re's has to go back on balance sheet.
Cheers,
back in my fortune 500 days at the end of the year we would always be told to cut back on travel expenses, conference call instead of fly across the country for a meeting (something that always seemed idiotic to me in the first place). That was november december. Needed to make the numbers.
A family member is currently an executive in a company with very solid financials and growth prospects who's stock has been on a tear the last two years. The word is that they are to cut expenses now in case things get bad . They are currently very profitable and have little debt. One month ago they were having their sales meeting. I asked what the outlook was. The reply was "bullish".
If I had any real balls I'd set some stops, turn off the computer for a month and go do something productive. Actually three months might be better.
barely,
He's got one button. I think he'll push it.
Cheers,
recession or stagflation hmmmmm
"The outstanding number of call options contracts that give the right to buy at $100 a barrel in June 2008 has declined by 25 per cent since last November."
FT.com / Global Economy - Investors shift bets to oil slide
He has 4 buttons --
0bpts
25bpts
50bpts
75bpts
Which one?
Tom Stone | 01.28.08 - 8:57 pm |
Man that does suck. This was pretty common in a friends hood in Diamond Bar around '94. He bought a VA repo for 112k in a previous 300k hood. I know of at least three and probably five people that had put 10-20% down and walked by the time it was all said and done...
I wish him the best of luck whatever he decides...
Chris
100 bps cut and they will talk of how they are still 'watching' inflation [grow].
Guys, do not fall into the homebuilder bull trap. Check out the short interest ratio on BZH or WCI ... it's 70-80%!
This rally can easily be explained by short-covering, possibly egged on by a European hedge fund or two in full liquidation mode.
That being said, it is dangerous to go short as well. Today I was itching to short RYL with both guns blazing at the open. Glad I held back.
Most of the remaining ownership of these stocks are institutional trapped longs caught in a deadly game of chicken. Who will be the first big player (Legg Mason, Fidelity) to flinch and dump millions of shares, thereby leaving the rest holding a flaming bag of doo-doo?
Only two scenarios I can see - they all go down together (not likely), or someone uses a rally like today to pull the wheel hard left.
When this happens, it is likely to happen so fast as to be untradeable. LEAPS on BZH, SPF and WCI look like the ticket.
barely,
Bernutty scares me. If he were smart he'd say that last weeks emergency cut was sufficient and do 0bps. I think it's between 25 and 50. Which is of course nuts.
Oh well this is looking good, so a cut would be adding fuel to the fire:
24-hour Spot Chart - Gold
Cheers,
For those who listened to the call: Did they give any sense as to the FICO and geographic breakdown in deliquencies and charge offs in US cards.
Irving Berlin was the man.
Bob Dobbs | Homepage | 01.28.08 - 6:58 pm | #
I love Irving Berlin! Put "Radio Days" on your Netflix, Bob. Good stuff for these times.
"... we saw clear signs of a weakening economy and business environment in December,
Kenneth I. Chenault, chairman and CEO.
What Genius! I saw the exact same thing! Where is my CEO-hood?
He's got one button. I think he'll push it.
As Homer Simpson once said...
"If you want results, press the red button. The rest are useless."
Homer's qualified to be a Fed Governor.
dryfly,
LOL
Cheers,
Mise - I agree with your 9:32 post. BB should go 0 bips... tell the market they get nothing and will like it.
There is more than enough juice now. If solvency really is the issue then its time to get FDIC & bankruptcy courts buzzing. Create RTC II if they have to to keep get it on. Hell that's what those orgs are there for - they are the fungus of the financial world, turning mighty fallen trees into fertile soil. But quit dicking with the rates... at least until we can CLEARLY see there is a need. It isn't clear to me we need more cuts and I'm FAR from being a monetary purist.
ades:
IMO, the best book on bonds and asset-backed debt is:
The Handbook of Fixed Income Securities
by Frank J. Fabozzi
I used it while studying for the CFA. It is expensive. Don't drop it on your foot or you will need a trip to the ER.
A cheaper solution is to Google articles by Fabozzi. The public accounting firms often have simplified versions of his stuff on their websites. They use it so the newbie accountants can pretend to understand all the weird stuff they are auditing.
Brklynrenter-
I think you're right when you say that the Fed saying they are going to "monitor inflation" in all likelihood means they will "watch as it goes through the roof".
That is what they did as they "closely monitored" the "subprime " problem afterall.
For them, "monitoring" or "closely monitoring "seems to mean "sit by and watch the situation deteriorate".
They let the lending madness continue for so long that by the time they began "closely monitoring" there was nothing they could do to save a horrendous situation.
But they lowered rates anyway, useless as it was, and now they'll sit by and "monitor inflation" as it wreaks havoc in the economy.
That's my expectation anyway.
Tom, well I can't sleep thinking about your guy. Two things - either he walks or he negotiates with his current creditor. If he was looking for a 15 year he is older, right? There's a limit to how long they can do that work schedule, and as is he won't have any equity for years and years, so no cushion, so unless he's got a lot of savings he'll likely end up losing it anyway.
Current creditor might well deal, because your guy certainly can walk. The other thing to do, if he's got all his disclosures and closing docs, is ask for a payoff figure, and go over everything with a fine-tooth comb. Surprisingly often you can find something that they did wrong, and it gives you negotiation leverage. Check current balance calculation, escrow, compliance, APR calc, EVERYTHING. If you can find anything wrong at all, you can probably get the current creditor to write off enough to get him in the 15 year without plunking money down with the threat of a documented complaint to the relevant agencies.
Only thing you can do with lemons is make lemonade with whatever sugar you got, then drink it with a smile no matter how sour it is.
"Go to Heaven for the climate, Hell for the company."
Mark Twai
I owned 8 different residential properties in the last 10 years, most of them primary residence. Yes, I made money when I sold (except for 1 and that wasn't too bad). But in the meantime I lived over my salary income which is 150k a year (no kids, no obligations).
I've been out of work since Oct 2005, so I can feel your pain, mbartv.
Many thanks NorkaWest!
I was looking on line and i noticed everything was written by Frank. Must be a smart cookie!
MOM, you are truly a nice person.
President in State of Union tells lenders,
Why Don't U Walk Away!?"
President attempts to stick the US Taxpayers with the Fraudulent Loan Portfolio.
When if not now has there ever been a more appropriate time to speak up and show this man to be immoral and a mountebank???
"My administration brought together the Hope Now alliance, which is helping many struggling homeowners avoid foreclosure.
And Congress can help even more. Tonight I ask you to pass legislation to reform Fannie Mae and Freddie Mac, modernize the Federal Housing Administration and allow state housing agencies to issue tax-free bonds to help homeowners refinance their mortgages. These are difficult times for many American families, and by taking these steps, we can help more of them keep their homes."