Analysts: Corporate Defaults to Rise "Drastically"
Submitted by
CalculatedRisk on Thu, 01/03/2008 - 2:51pm (233 comments)
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Why doesn't this Buffet buy BSC and HOV?
I am first, but really have noting special to add....
Happy New Years to one and all and a special tip of the hat to our sponsors....CR and Tanta
This has to be a story, as a taxpayer, I want more people to wake up (please):
FHA Reforms
NAR successfully lobbied for the passage of H.R. 1852, the Expanding American Homeownership Act of 2007, which helps modernize FHA by expanding the availability of safe and affordable FHA-backed loans for purchases and refinances. The bill includes provisions to eliminate the 3% down payment requirement, increase loan limits up to 175% of the conforming limit in high-cost areas, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The Senate Banking Committee passed a similar bill. The Senate bill is expected on the floor by the end of the year.
Freddie Mac/Fannie Mae Reform
NAR also successfully lobbied for passage of H.R. 1427, the Federal Housing Financing Reform Act of 2007, which overhauls the regulatory structure of the nations housing finance government-sponsored enterprises (GSEs). H.R. 1427 provides for regional adjustments to the caps on mortgages the GSEs may buy for high-cost areas, helping more working families qualify for safer GSE loans. The House passed H.R. 1427, 313-104. The Senate has taken no action to date.
FHA reform has been a story the whole year 2007. One thing that protected us so far was the election campaigns of Clinton and Dodd, removing them from congress. With any FHA "reform", it is important to make private companies (mortgage insurers) taking the first big hit in any default, to let them judge risk properly and let them set the rates prohibitely high for mortgages without downpayments.
Tanta's Pig: That's all you got? The story references Buffets Inc and then you reference a Buffet buyout... and that is what you come up with? I'm picking up my words and going home. This playground sucks. Just kidding. Gotta cut some corners to be first-to-thread with your comment.
Buffets Inc suffers heart attack after gorging itself on all-you-can-eat debt.
VenerososViewsFinancialCrisis_
http://www.academyfinance.ch/Pdf/VenerososViewsFinancialCrisis_Part_II.pdf
Removing the cap on HECM mortgages is just disgusting.Just another way to F aging boomers who still have some equity in their homes.These puppies are EXPENSIVE to get,and a lot of folks who get them (like 2 out of 3) have better alternatives.They are fine for a small subset,but are seen as the growth area in refi's and the fees are sweet.
Buffets:
In connection with the June 2002 refinancing transactions, we issued series
A senior subordinated notes due 2011 to our preferred stockholders as part of
the redemption of our senior preferred stock and series B junior subordinated
notes due 2011 as a dividend to holders of our common stock and holders of
warrants to purchase our common stock. The subordinated notes were originally
issued on June 28, 2002 with a maturity date of June 25, 2011. The subordinated
notes bore interest at the rate of 3% per annum from June 28, 2002 through
December 31, 2002, and thereafter bore interest at the rate of 4.75% per annum.
Payments of accrued interest on the notes were made annually as of June 28 of
each year. In connection with entering into the amended credit facility, we
redeemed all of our outstanding series A senior subordinated notes. We used a
portion of the proceeds of the offering of the initial notes, among other
things, to redeem the remaining series B junior subordinated notes.
D on Holiday (from Fannie)
Oh no! Not the parent company that owns Home Country Buffet/Old Country Buffet! How am I going to live without all the high sodium, high carbohydrate, high polysaturated fat food I can eat!
The death of another company based on an all-you-can-eat' business model. Poetic.
Pay In Kind (PIK) Toggle Notes & All you can eat debt!
DH
I wonder if this will positively affect the obesity epidemic. Someone should keep track of the numbers and generate a chart, illustrating the association. Maybe there's a thesis in there.
http://www.signallake.com/innovation/ToggleNotes022107.pdf
What's Aiding Buyout Boom: Toggle Notes
An Innovative Means To Structure Debt Helps Defaults Remain Low
By HENNY SENDER February 21, 2007
Public Service of DH Enterprises
Wasn't Buffets the caterer for the Golgafrincham fleet?
Another business model broken. These are all just the satellites orbiting the real things like Starbucks. $4.55 drinks in high priced retail spaces are no more sustainable than condos in downtown Sacramento for exactly the same reasons.
Seems like gut-check time for the bulls. Coincidentally, we haven't heard from O-Joe or Seb in a while...
Maybe they're on holiday still, but I'd love to hear their take on all the bad news, including loads of economists and analysts starting to catch sight of the recession...
polysaturated?
Having eaten at one of these places, I'm willing to believe they invented something even unhealthier than saturated fat or trans fats, but this is the first I've heard of it.
do partial payment count? do they even try that kind'a thing??? just wondering... you know, from a pee-on stand point... missing 500 mil payment...
OT
Was reading the WSJ for some reason and I saw the totals for debt issuances in 2007 and Citi was top of the table for $540b.
I know that isn't all pier loans, but a guy can dream, can't he?
I miss banker. I wish he would post (more often?) again.
I really learned a great deal hearing his viewpoints on this stuff. I think it helped me understand the bullish rationale that wasn't just based on hope and pipe dreams.
Banker, come back.
What's up with the text pop-up ads? Talk about annoying.
The bill includes provisions to eliminate the 3% down payment requirement,
Wow. Why didn't someone think of this sooner?
The entire GSE thing is a fraud.
By raising caps on conforming loans prices will immediately rise more or fall less than the free market dictates. And for what? To prop up high housing prices.
Another pseudo short term fix for long term problem. Idiocy.
If people and businesses can't afford NYC or San Francisco let them move to Detroit, Dallas, or Des Moines.
To make matters worse, Fannie and Freddie are insolvent. No ifs, ands or buts.
"On November 1, 2006, Buffets Inc. was thrilled to join forces with Ryan's Restaurant Group, Inc. This adds over 264 Ryan's Grill Buffet and Bakery® and Fire Mountain Grills® in 23 states to the Buffets family."
The thrill is gone.
If i dont' recognize any of the names of the Buffet's restuarants does that make me an east coast elitist?
Buffets = Centro
Growth for the sake of growth, too fast, in Bumfu*k USA, using money borrowed at too much cost.
You leverage to the moon to buy these two-bit malls and hole-in-the-wall restaurants. Then, you pray to God consumers keep multiplying geometrically to bail you out.
What a business model! Where did all these MBA geniuses come from?
retail + restaurant chains = dot.coms
There is a yawning disconnect between this blog and the MSM.
My bowels are turned to jelly by the fact that this blog seems to deal in demonstrable evidence, while the MSM deals in...God knows what.
I am terrified.
Well, obviously I'm wrong. WSJ is arguably MSM, and the article comes from there.
But the stock market? No problem.
"Banker" has sealed off the bankerdome and is dancing a jig with Mortimer and Mortica Pig behind their gold lined walls.
12th percentile,
No. It means you are under the age of 65 and eat more than one meal a day.
Ask not for whom the bell tolls...it tolls for us. Think of this as the tip of the iceberg and let's start asking how do we pick out the survivors. If this ripples on it'll be bloody in the streets - speaking of broken business models. On the other hand it might be time to start screening for non-broken ones, instead of screaming about the on-coming tsunami. Ritholz and Kass have very good "rules-of-thumb" posted which I took a riff on and pointed to some sources of initial sector/stock candidates from favorite columnists. And added my own three bits on thinking about non-broke models. FWIW try: http://tinyurl.com/28s56x
And I too would like to have bankers pungent observations of where to sort thru all this crxxx that's coming
!
Is this related to the $33 Billion goodwill level 3 (unobservable) issue at BRK with Warren and his buddy Charlie?
OK, prepare yourselves
who would you rather Bo**K,
an anorexic
or
morbidly obese
.... thank goodness buffet's is having problems.
maybe then we can attack america's expanding waistline.
Question to an accountant wizard here: on the Yahoo Finance site when I bring up the data on some financial companies, banks, for example, the company "value" is said to be minus some large amount. The number is explained as being what an acquirer would have to pay to buy the company. Most companies have a positive value, but some are minus. I think Deutsche Bank is one example. Does this mean that their debt if paid down would wipe out all the equity? That they are leveraged beyond what I would think is sensible? Just asking.
Apologies for another OT post looking for comment from our resident bulls... Where's Sebastian to comment on this one from the local paper in his housing-bubble sanctuary:
NewsObserver.com | 404 - Page not found
"Foreclosure filings leap in Triangle"
RALEIGH - Record numbers of homeowners in the Triangle were threatened with losing their homes through foreclosures in 2007.
Foreclosure proceedings were filed against 7,390 homeowners in Wake, Durham, Orange and Johnston counties last year, an increase of 14.7 percent compared with 2006, according to the state Administrative Office of the Courts. Statewide, foreclosure filings rose 9.4 percent to 49,754.
Housing experts blamed adjustable subprime loans which are resetting to higher rates for most of the increase. But the biggest wave of resets won't come until this year, which means foreclosures will keep climbing.
Follow up:
For Deutsche Bank for example, Yahoo Finance has 64.35 billion as the market cap and -1.01 trillion (minus 1.01 trillion) as the "enterprise value." ???
Somebody is fixated on Berkshire's goodwill, for reasons I can't fathom. It has nothing to do with this topic.
Whoa... relax, its gonna be ok:
On Friday, Bush will receive an update from a working group on financial markets, an interagency panel that meets regularly to discuss market conditions and regulatory policy. Treasury Secretary Henry Paulson is chairman of the group. The other members are: Federal Reserve Chairman Ben Bernanke; Chris Cox, chairman of the Securities and Exchange Commission; and Walt Lukken, acting director of the Commodity Futures Trading Commission.
LOL!
I just have to wonder if Buffets Inc. could have headed off these problems with a simple "No Seconds" rule. Actually, I can think of a lot of mortgage lenders which would also have benefitted from a "No Seconds" rule . . .
Oh my:
An 8,000-Pound Gorilla, With Little Oversight
The combined entity, to be called the CME Group, will have a market capitalization of more than $26 billion, compared with the proposed combination of the NYSE Group and Euronext, which would be closer to $20 billion. The CME Group will oversee average daily trading volume of nearly nine million contracts representing $4.2 trillion in notional value.
STREET SCENE: INSIDER; An 8,000-Pound Gorilla, With Little Oversight - NY Times
DHE
Buffets... bk? Don't worry, be happy. Isn't creative destruction the life's blood and fertilizer of unregulated free market capitalism that makes the advanced industrial economies the envy of the world, and the US the homeland of over-arching triumphalism that continues to rule militarily over planet Earth? {/snark}
Coming (BK) Attractions: How will Blockbuster's (or NetFlix) business model fare as broadband video-on-demand will be quicker than the walk to your mailbox?
And, (metaphorically writing) how'll Las Vegas be faring as an overbuilt yet safety-equipment-free playground when all the cool kids are home nursing scraped knees or busted limbs in casts?
In a speech in June, a commodity futures trading commissioner, Walt L. Lukken, said the modernization act gave the futures market the flexibility it required to foster innovation. While the C.F.T.C. monitors whether a core principle is ultimately met, the exchanges, with their hands-on experience, are given discretion to tailor their rules to their special circumstances, he said.
I think that minor uptick in construction was Banker doing a rush completion of the Bankerdome.
"The J.P. Morgan analyst, Peter Acciavatti, predicts that is about to rise drastically, to 4% by the end of 2009 ... Citigroup expects the default rate to surge to 5.5% ..."
I'm in for the "over"-
10%+
"Coming (BK) Attractions: How will Blockbuster's (or NetFlix) business model fare as broadband video-on-demand will be quicker than the walk to your mailbox?"
If and when we get a seamless and painless TV-to-Internet connection for net-based programming, you can kiss off the networks in short order, at least in their current form.
Actually, Netflix offers video on demand . . . not all of the catalog, but quite a bit. You get one hour per dollar of your monthly plan. My monthly plan costs $17, so I also get 17 hours of "instant viewing".
Love it. What Netflix is about to kill, for us, is the premium cable channels. HBO and Cinemax are getting clipped from the cable bill this week.
And thanks to PV and tj for the laughs!
I watched several hours of the Office with my Netflix time in order to get my quota of managerial training.
Japan opens down 3%.
Anyone notice the avalanche on the NIKKEI? DOWN 550pts. Any ideas? I see the Yen down and some weakness on the US imports front but this is quite a drop.
Peter Acciavatti, predicts that is about to rise drastically, to 4% by the end of 2009 ... Citigroup expects the default rate to surge to 5.5% ...
Ha! Citi has proven that they don't know jack about anything. As for defaults, if the best example they've got is Buffet's I will go back to sleep. Wake me when GM defaults.
And finally an on-topic comment; an increase in defaults like that will be a crippling blow to bank earnings.
As my boss used to put it, when I was in commercial banking: we have to be right 99% of the time to be profitable.
Going from 99.5% to 95% would be devastating.
Just one more loan sir. It's only wafer thin.
YouTube - Mr Creosote (Monty Python)
Cheers,
Put it all in a [CDO] bucket.
Gives new meaning to the words - step away from the buffet.
Japan has a lot of catching up to do after the past few days ... decoupling smecoupling.
Nothing like increasing corporate defaults to help out the ol' credit crisis. One aspect of the crisis that's not characterized by the AA/A2 spread charts is credit availability. Which companies will be unable to receive new credit at any price? Would anyone on this board lend a substantial amount of capital to, say, Trump Entertainment?
MarkS,
You have a point. With CP and business lines of credit drying up, even well capitalized firms may face a payroll moment soon. That would be bad.
Cheers,
gary-
remember we are only talking about the hy space.
james-
ev=(mc+debt+minority interest+preferred) - (cash/eqiv)
uhhhh houston-
http://www.nni.nikkei.co.jp/CF/FR/MKJ
understood, rc, we were in a much more risk averse market . . . but the analogy is the same. Losses are about to increase by an order of magnitude.
And it takes an awful lot of earnings to make up lost principal.
An issue touched on in the Venerosos article linked above is the multiplier effect of the CDS' and hedge funds. Help me out here: I'm trying to mentally map out the source of leverage. My antiquated education taught me that only banks and debt issuance could create money . If Merrill lends money to a hedge fund it must be borrowed from a bank or financed by Merrill's (or some instrumentality's) commercial paper. We know about the problems of the CP markets, and those of bank capitalizations. Is there some way the hedge funds or private equity groups are leveraging themselves without going to Commercial Paper (or mid/long term rated debt) or the Commercial Banks or the Investment Banks? A corolary is who are the ultimate bag-holders? My guess is that pension funds, through their investments in HF's will take a huge hit.
More relevant to the previous thread, but check out
Illinois State Treasurer Shilling for Barclays Bank
to see the direction of credit card marketing.
It will be interesting to see the direction of cc marketing if defaults rise with the rapidity that many fear.
Actually, Netflix offers video on demand . . . not all of the catalog, but quite a bit. You get one hour per dollar of your monthly plan. My monthly plan costs $17, so I also get 17 hours of "instant viewing".
My wife just mentioned this to me and i was going to look into it. thanks for pointing that out. I've been a netflix deadbeat with the same three movies on my TV for a few months. What was that movie that Francis Ford Coppola's daughter did that was set in Japan? Lost in Inflation? I want to watch that tonight. Nothing else going on with Japan as far as I can tell.
"What a business model! Where did all these MBA geniuses come from?"
"Harvard," Conjure Bag said.
Will T, text pop-up ads? Are they in Haloscan? I'm thinking of changing comment providers.
giacutter, I miss banker too. He has some great insights.
risk capital, I was thinking of taking the over too!
Best to all.
Sorry if this got posted already, just back from holiday in the wintery north.
Not seeing any decoupling from Europe, etc., they appear to be all subprime as well.
From a Finnish Housing Blog-
"Finnish machinery rental firm Cramo expects to grow in all of its markets in 2008, despite a slowdown in residential construction, Chief Executive Vesa Koivula said."
That's not what the shareholders or investors are saying. The Cramo share went from 38 euro peak to 17 euro low so more than 50 % loss..."
Finnish Housing Bubble Bursting - Asuntokupla: CRAMO sees a slowdown
brrr... time for more glüg.
OT... but wow, more than 700 points drop on the Nikkei and they close early today.
cr-
don't know if you saw these as well-
Business Week Online > File Not Found
Private-Equity Backed Retailers Look Vulnerable - DealBook Blog - NYTimes.com
People do not like to borrow money to buy depreciating assets,'' says Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York
New Year Brings Another False Dawn for Housing: Caroline Baum - Bloomberg.com
guy should be fired for believing that...
especially after that la times story on rolling car loans into 6-7 year terms.
OT, but Edwards and Huckabee are each performing well in Iowa. And Pon Raul, the candidate who must not be mentioned, doing surprisingly well with 11% so far.
Populist candidates are doing well.
mp,
And methinks the Mathematicians came from MIT.
Cheers,
Speaking of missing/missed commenters, has "back in the day" dryfly deserted?
mbartv
You get the prize dude! Pension Fund Bingo!
If Merrill lends money to a hedge fund it must be borrowed from a bank or financed by Merrill's (or some instrumentality's) commercial paper. We know about the problems of the CP markets, and those of bank capitalizations. Is there some way the hedge funds or private equity groups are leveraging themselves without going to Commercial Paper (or mid/long term rated debt) or the Commercial Banks or the Investment Banks?
Im learning the game very fast and it stinks BigTime; think florida freeze!
DH
Seriously,
"People do not like to borrow money to buy depreciating assets,'' says Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, New York"
They don't like it, but when the 7 year loan on the old rust bucket still has 2 years to go and they're paying $200 a month at the auto shop with the subsequent loss of work time etc., it's often not a choice. the old rust bucket costs more than the roll over.
I know quite a number of couples here in SoCal in this dance of death.
Cheers,
Yah Know,
It pisses me off to no end, that when I go to Google, there are 6 ...thats six s"news" stories on H.R. 1852.
Why would there only be 6 (six) stories out there on H.R. 1852? This is a huge deal and obviously is being swept under the rug as this fine legislation is fast tracked to allow Paulson to pump Jumbo Mortgages, which will be backed by retarded American Tax Payers!
Re: FHA Reforms
NAR successfully lobbied for the passage of H.R. 1852, the Expanding American Homeownership Act of 2007, which helps modernize FHA by expanding the availability of safe and affordable FHA-backed loans for purchases and refinances. The bill includes provisions to eliminate the 3% down payment requirement, increase loan limits up to 175% of the conforming limit in high-cost areas, streamline condominium purchases, and eliminate the cap on Home Equity Conversion mortgages (HECMs). The Senate Banking Committee passed a similar bill. The Senate bill is expected on the floor by the end of the year.
DH
Outside of investors finally cluing in to CRE tanking, why did SRS jump so much today? Was there specific news that set it off?
Misean, you must live in a far more damaging environment for cars than I do. The cars I've had lasted approx. 17 years before being uneconomical to repair. That's with routine maintenance and admittedly less than average miles.
Count me in with the Banker admiration society. C'mon outta da bankerdome for some air and brief conversation.
as a professional in the industry and a salesman i can qualify as a resident bull here at CR.
and i'm sh%%ting my pants.
$2MM in construction projects just vanished in front of my eyes this week.
as we moved away from residential and even commercial, the muni bond market blows up
i've got an 80K monthly nut. mouths to feed. families to finance. one of my directors just had twins over christmas.
you want your schadenfrued or however the F*** you spell it? you got it.
are there 78MM people in generation Y just starting to graduate, yes. are they gonna be buying houses anytime soon? no.
is this country and its currency headed for the sh@tter? yup
are the 'mercantilist' class types like me ready to take it on the chin and vanish?
dunno bout everyone else but it'll take a a tsunami to keep me down
like i tell my wife, ahhh baby its just cash flow!
LeGleceau:
dryfly is one of those working stiff traveling salesman types.
he's the closest thing i have to a brother on this site.
my guess is that he is out there hustling some chinamen for a deal
when he's done he'll be back with his immediately identifiable posts laced with immense amounts of wisdom, humor, and skill
as an old-timer on this blog, i like to think of dryfly as the original Tanta
Dryfly posted yesterday with several comments about the ISM numbers and what he is seeing.
I saw a comment a while back about using the US$/Yen exchange rate as a harbinger of the unwinding of the Yen Carry Trade.
Usually, the correlation is strong. We see some unwinding in the high yield currency play like NZ$ and A$.
However, Asia and Emerging Markets Equity, which is the real game of the Yen Trade is still relatively unscathed.Reason being that the Asia Currency units have also appreciated somewhat against the USD. So the squeeze on the hedgies trade funded out of Japan is not very great this thing.
Things could change fast if this continue. Again, I am looking forward to opportunistic buying some depreciated asset when the right moment arrive, hopefully in the next 1-2 quarters
mndean | 01.03.08 - 9:20 pm |
"Misean, you must live in a far more damaging environment for cars than I do. The cars I've had lasted approx. 17 years before being uneconomical to repair. That's with routine maintenance and admittedly less than average miles."
In SoCal one piles on the miles. I myself don't have this problem, but I know my cars. But you get a lot of emotional buying from people who do 40K+ a year on a car/truck. Different world.
Cheers,
misean, rust in SoCal in 5 years? What do you do, drive in the ocean?
w,
Cliche...quip. They aren't actually rusted, but they are busted. For instance, my Ford Expedition 2002 has ~158000. It's paid off and runs like a top. But I took care of it, and the engine and drive train of this vehicle are quite good. Others drive the miles but delay oil changes and regular service. After 100000 the thing falls apart. Or they get the hated timing chain/belt failure. I replace mine at 100K regardless.
If you get the point.
Cheers,
dc1000,
sorry to hear about the large hit. what part of the country are you in?
personally i got no shadenfreude about this, i'm watching all most all of my youngster grads and unwise boomer and older friends about to get in serious trouble with debt.
makes one feel a bit helpless, but the game's afoot and will be played out.
Misean, I was being glib. Sorry.
I actually have the same problem. I work out of my truck and I put about 30k a year on it. I usually get a new one every 3 years since I cannot be without it for work and repairs can be a major pain. I am actually thinking about trying to stretch this one out another 2 years. I wonder how many businesses are making the same calculation right now.
Back on topic. I understand Buffets Inc.'s problem because I ate their exactly ONCE eleven years ago.
dc1000,
Illegitimati non carborundum!
Schadenfreude reserved for the MOTU types who screwed the party up for everyone...you and dry are actually out there making the wheels go 'round and producing something for your scratch, more power to you both.
Not to nitpick, but it is Schadenfreude
schadenfreude
More or less.
Mish's radio conversation. Start listening around 9 minutes mark.
404 Not Found
wish i spoke latin.
alan: i'm in DC as the moniker indicates. the deals leaving me were not even due to crappy real estate markets. in fact 1.6MM of it were because the land owner ratified a contract that paid him more than the deal would have in five years!
and i'm not tooo tooooooo toooooooooo concerned about the muni market relative to charter school facilities,but being prudent never hurt anyone, except when they were trying to make a lot of money.
cash flow cash flow cash flow
assets minus liabilities equals a nice tidy sum
cash flow minus monthly cash liabilities equals HELL
and if dryfly were around he'd scold me as he's done for years to "watch cash" "watch cash" "watch cash"
yeah i know what you mean, dude!
luckily for me i'm a boot strapper. never known nothing about nothing. this is the best most expensive B school education a fool can buy.
thank GOD my wife loves me and we have two amazing children.
otherwise i'd be climbing the top of the washington monument to jump off, only to be shot by homeland security on the way down
i exaggerate but i think its useful for the ivory tower / upper middle class types to hear what its like to use risk taking for a living
then again, when it all hits, and i swear it will, just give me one more year, i'll laugh all the way to the 529 bank.
LOL F LOL
hey anon, i was just kidding about my german inadequacies.
in fact, ich spreche deutche fine enough to communicate with my first generation german wife and her family. ich liebe dich! oh wait, not you. noch mal bier bitte?
and thats the point, i've got multiple post grad degrees. i speak multiple languages, english being my worst obviously. i know capital markets. i know real estate. i know econ both domestic and international. i know poly sci and political econ.
but CASH FLOW is an art all to itself that they dont teach anywhere
thats why i like to use the term 'mercantilist' still to this day. i aint no stinkin royalty and i aint no peasant neither. i'm the jew with the business you need whether or not you want it.
and yes, i'm jewish.
WHOA OT sorry TANTA and CR. love you guys. and when i can, i'll overflow the tipjar for ya. i hit it when it first came out and then all hell broke loose. what can i do? SMOOCH. enough beer for me!
w,
"Back on topic. I understand Buffets Inc.'s problem because I ate their exactly ONCE eleven years ago."
And you survived!?!?! Are you OK man? Let's get you to the toxicologist. Do you remember what you ate...It's most important!
Cheers,
I am entertained by what they do with restaurants on Wall Street. You are better off with one of those 7 year auto notes than securities on the typical restaurant. There must be a sector loss over the years of 2% to 3% annually, even if you owned MCD all the time in equal shares with the rest of the portfolio.
The big deal here is that they have been rolling debt for a long time. I think they called it crony capitalism in Asia.
There was a comment about bank credit and hedge funds and commercial paper. From what I pieced together a few years back, the money market funds take it outside the banking system and only use the banking system to clear their checks and for temporary liquidity. I have supposed that since there isn't a real convertable balance created in a money market fund that some kind of problem would have to show up as a great shortage of cash. I think we just witnessed that and the Fed had to provide the missing link, along with the bank of England and Eurobank.
dc1000
I'm polish but let me give it a try:
Ich brache ein bier...
(Governator) NOW!
Cheers,
The Methuselah is a term for a type of bond with a 50-year maturity. The term is a reference to Methuselah, the oldest person whose age is mentioned in the Hebrew Bible. The issuance in Methuselahs has been increasing in recent years due to demand for longer-dated assets from pension plans, particularly in France and the United Kingdom. Issuance of Methuselahs in the United States has been limited, however, as the U.S. Treasury does not currently issue Treasuries with maturities beyond 30 years, which would serve as a reference level for any corporate issuance.
DH
Hi
W---I run a one ton company van and they are going to try and get 2 extra yrs out of them.
When I was self employeed and covering the state of Calif. the 1st truck was run to death then after that one every 100,000mi on to the next one.
The other company plan is to gives us pink slips in March 2008.
jo6pac
mannfm11,
"The big deal here is that they have been rolling debt for a long time. I think they called it crony capitalism in Asia. "
They did exactly. And it is the same thing here. No difference...land of the free loan, home of the speculator.
Cheers,
I once "won" 10 free meals to Country Buffet. Ate there once, then "gifted" the rest to my in-laws. No wonder they always are so cold to me.
jo6pac,
"When I was self employeed and covering the state of Calif. the 1st truck was run to death then after that one every 100,000mi on to the next one.
The other company plan is to gives us pink slips in March 2008."
That sucks. Sorry man..those trucks with good maintenace would last 200k +
Cheers,
dc1000, having gone through a similar hell 17 years ago, I can honestly say that I feel your pain.
Everything looked great on paper until I found out that the expenses I thought were variable really weren't.
Solution? I fired the accountant and, after talking nice to the banks, leasing companies, suppliers, etc, didn't work, threatened all of them with a bankruptcy filing if they didn't agree to re-negotiate. It was like a gunfight, and I finally convinced all them that I really would do it. A good woman lawyer helped. A real bitch, God bless her.
Anyway, I was able to whittle down the overhead and it paid off. I've been lean and mean ever since.
It was, as you say, a real "education," something you don't get from business school.
dc1000,
not real latin, but signifies "Don't let the b@st@rds grind you down!"
Any Conjure Clock movement on the ABCP expansion?
Wondering how that plays out against the MTN's coming due...
Walt Disney Companys Sleeping Beauty Bonds Duration Analysis*
In July 1993, the Walt Disney Company issued $300,000,000 in senior debentures (bonds). The debentures carried an interest rate of 7.55%, payable semiannually, and were priced at par. They were due to be repaid on July 15, 2093, a full one hundred years after the date of issue. However, at the companys option, the debentures could be repaid (in whole or in part) any time after July 15, 2023 or 30 years after the issue date.
energyecon, no Conjure Clock movement yet. Conjure has been cogitating in his corner for the last three days staring at graphs and spreadsheets. He's gone through almost a full box of cigars.
Something's up. You'll know as soon as I do.
ccording to Grant Kvalheim, a managing director at Merrill Lynch & Co., We went to Coke and showed them the [Disney] bonds.7 Three days later Coca-Cola Co. went to market with its own 100-year issue of $150 million. The Coke 100-year bonds were priced to yield 7.455% or just 80 basis point over the benchmark Treasury, but, unlike the Disney bonds, were not callable.
MP - i've got the scariest B-word lawyer on retainer ready to go to town, knowing that i'm only really bluffing in order to get my own chap. 11 proceedings underway without having to to go the full route. it is a gunfight and the truth is that the old fable of you owe the bank a billion its their problem really applies to anyone who owes anyone anything.
energyecon - even my mediocre google skills brought me to 'dont let the bastards get you down' so thanks! i hear ya.
problem is that i always said in the face of adversity - its not like we dont have a full roster of clients waiting to pay us.
well, sh@t. now we dont!
assets minus liabilities equals gold. cash flow equals hell.
who wants to place a $500k loan at 10% annual with a 20% kicker in 5 years??
back to MP: we're cutting overhead like crazy, moving into a lease that's half the rent (a building i own nonetheless!) and cutting everything we can in the mean time
business cycle never rung so true in my ears
my problem is that i'm in my early 30's and spent my time 'coming up' in a boom.
now i get to cut my teeth and become 'wizened'
FUN!!!!
dc1000,
Sorry, did not understand the severity. My heart goes out. Good luck, Bon Chance, and Fier Gluck.
When CR posters are getting hammered now what?
Some day this war...ah shit!
Cheers,
dc1000, I know it may sound odd to say, but you are fortunate that you're learning how to work the flip side while you're still young.
You're obviously got street smarts and a good family, so I think you'll make it.
In fact, you'll come out the better for it. I know I did.
With 1,400 of 1,800 precincts reporting, Obama had 36 percent of the projected delegates, John Edwards had 30.57 percent and Hillary Clinton had 30.34 percent.
It is time for a CR poll. We have a lot of bright people here and I for one would like to know who is in fear of their job, who expects less work/pay/commission, who sees declining capital expenditure at work or is planning it themselves, etc. If it is bad here, imagine for the rest of the country.
w,
Scaling back a huge database project. Also the DB server is being outsourced. All jack ass office mangers have to ask for pc equipment as I'm pulling from the scrap yard instead of buying new.
Cheers,
dc1000,
As a former DC resident, thanks for sharing your story, and good luck to you. So many stories here are anecdotal, "friend of a friend" type stuff. I've been wondering how soon it starts hitting home with actual CR regulars.
Here in Seattle, all is bliss with my circle of friends, but the "friend-of-a-friend" network seems to be reporting more and more problems.
mp -
thanks for the comments. i tend to think so too.
i started starting businesses at 25. i'm 32 now. i consider 25-35 to be my learning period and the 35-55 period to be the real earning times.
i know that if i have to pull it all in, i can get a job with a firm that needs experienced hungry VP's to make things happen. not that i'd ever work for anyone ever again
but thanks for the kind words, i appreciate it.
can you email my wife too?
well, im worried about my pension/savings getting hammered thru inflation...dont care about the house too much, since its paid for...might have to start raising crops and goats..
Huckabee is the Republicans' worst nightmare.
dc1000- I managed to work for a variety of small businesses that vanished, so I learned with someone else's money. Goodluck. BTW- Chinaman grates (I don't believe you were being pejorative), not really an adjective, no problem with oriental (even though that's supposed to be ethnocentric), and yes, my great grandparents immigrated from somewhere around Canton.
w- existing on a pittance as a property maintenance man, and after I'm dead my wife is going to be rich, since my partners and I will have paid off the rental properties by then I hope.
Misean- missed you the last few days.
sdtfs -
1000 apologies for the slur. it was in context of me calling myself a jew, which i am.
the point was more towards the fact that he's negotiating deals with RMB payers when he's a USD provider. nothing more nothing less. sorry if i offended
and, i hope you can counsel my peeps when we delay their payroll
thats of course after we delay paying uncle sam
LOL LOL!!!!!
j/k
or not
sdtfs,
Thanks man..me too. Holidays and all. It's nice to be back and see still the vibrant chat. I missed it..but other obligations kept me away. Hope your's went well man.
Cheers,
I for one would like to know who is in fear of their job, who expects less work/pay/commission, who sees declining capital expenditure at work or is planning it themselves, etc.
w,
Yes, yes and, uh, yes.
On November 12, 1999, President Bill Clinton signed into law the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933. One impact of this repeal is that certain advisory activities of the banks are now regulated by the Investment Advisers Act of 1940
rich,
"Huckabee is the Republicans' worst nightmare."
That Rebooblikud scares the living poop out of me. Although Benito Guiliani runs a close second.
Cheers,
Anonymous | 01.03.08 - 11:08 pm |
Yes because Bill Clinto is a liberal...coughcough...neo clown.
God save us if we have bush-clinton-clinton-bush-bush-clinton...
This would be bad.
Cheers,
Sorry for politics stuff...I'll stop now.
RealClearPolitics - Election 2008 - Democratic Presidential Nomination
I am self employed so I am as nervous as anyone. I have customers who have not paid off their work from last season and are looking to pay it off with profits from this one. I have been expecting a problem for a while as people have been growing with easy access to credit during the boom. Most customers do not seem to have a plan except to produce more and sell more units than the competition. The market is domestic so it is not growing appreciably. Input costs are all going up double digits (labor, fertilizer, diesel, safety programs). So I sold my house a year and a half ago, have no debt, took on more customers than I wanted and am ready to ride this out. We'll see.
U.S. banks' direct borrowings from the Federal Reserve for the week ended Wednesday surged to the largest amount since the week shortly after the Sept 11, 2001 attacks, data from the U.S. central bank showed on Thursday.
Primary credit borrowings at the Fed's discount window totaled $5.770 billion for the week ended Jan. 2. That was the largest weekly amount since the week of Sept. 12, 2001, when it hit $11.742 billion.
For Jan. 2, the single-day primary credit borrowings totaled $4.918 billion, the largest amount since Sept. 12, 2007 and the second largest single day tally since the $45 billion borrowed just after the Sept. 11 attacks. UPDATE 2-Fed discount window borrowing largest since 9/11
| Reuters
dc1000- no offense taken. I understood the context and pretty sure you're straight forward guy. My dad always used it and it still irritated me. I think he did it really to irritate my mother.
Misean- Xmas went well, visited family in the SF Bay Area and didn't get eaten by a tiger, thanks.
Wells Fargo economic outlook:
"The factors leading the consumer pullback
appear fairly obvious: tighter credit standards,
fewer net new jobs, and decline housing
and perhaps stock market wealth. The
primary driver in my view is the weakening
labor market. In 2006, total non-farm payroll
growth was 1.9 percent. In 2007 payroll
growth slipped to around 1.3 percent, by
2008 we expect payroll growth to dwindle to
a paltry 0.8 percent pace nationally. This
will be sufficiently slow to push the U.S.
unemployment rate up to 5.1 percent by the
third quarter of 2008. Some major markets
like California, heavily exposed to the housing
and financial services downturn, could
even see a period of payroll declines, putting
the odds of an outright economic recession
in California at around 50 percent."
https://www.wellsfargo.com/downloads/pdf/com/research/economic_indicators/eijan2008.pdf
VP of a document management/printing co. in Minnesota. Business began to slow in June of this year and has stayed well below projections since. Just found out today a 730K account will be moving elsewhere in 2Q. The number of orders is down along with order volume. That comes with a steady long term gross and net margin compression.
Everyone except for a very few (niche) in the industry (suppliers/partners etc.) say it is SLOW and most are worried. Our industry was still in recovery mode since year 2000, because of way too much overcapacity. Over the last 6+ years I have seen so much consolidation, downsizing, and elimination. Seems we are going to see another round of change very soon.
Personally, Im well positioned to ride out another storm (thanks to sites like CR), just hope it doesnt last to long.
Cheers!
all this boring talk between truck stop buddies is, boring! What about finance and what this blog is about?
All of this "boring" talk IS about finance. Why don't you just sit back and listen, you might learn something!
Hey, dc1000,
Been there, done that, lived o tell the tale. Sometimes, it's not you - it's everything else (when I was 25, the world was my oyster, and then I had "the accident"). Been up and down twice since then. Life lessons suck, but it wouldn't be a life without them. Do everything you can, but don't stake your life, or even a healthy ego, on anything. Try to think what your ancestors endured to get you here.
As for w's question, I haven't ever seen business this bad.
Misean,
Can you imagine Huckabee standing up at the Republican Convention and talking about Bush's "bunker mentality" and populism?
He'd be booed off the stage.
mp, is conjure related to maximon?
"I for one would like to know who is in fear of their job, who expects less work/pay/commission, who sees declining capital expenditure at work or is planning it themselves, etc."
I am in tech manufacturing, haven't had a raise in 6 years, no commission since 3rdQ'06. I am the last regional manager left after a high of 7, splitting the US, constant travel, waiting for the shoe to drop. Can't see any future of manufacturing in California.
mp,
"All of this "boring" talk IS about finance. Why don't you just sit back and listen, you might learn something!"
Some have no clue. This talk resonates the Tin Foil Hat...I'm good with that.
Cheers,
rich,
"Can you imagine Huckabee standing up at the Republican Convention and talking about Bush's "bunker mentality" and populism? "
He will..and it will cause convulsions. I expect a pepto bismo moment.
And I'm out for tonight. May the Dumborats and Rebooblikuds destroy themselves tonight. And leave a clear wasteland of choice. Good night all.
Cheers,
rich, "Huckabee is the Republicans' worst nightmare"
Why? He's actually kind of likeable. A lot moreso than any of the rest of the candidates on either side. I wouldn't vote for him though, since I don't get the sense that he's capable.
OTOH, Obama might be the Democrats' worst nightmare.
Despite the uphill struggle the GOP has given the complete mess dubya and his cronies made, I have to admit, the dems top 3 don't look sufficiently attractive to win on their merits. It might be an 08 Democrat loss, by default.
Let's cross some of the topics running through this thread.
Do you think that any of the candidates understand the ramifications of what's going on with the economy? Has any one of them addressed this issue? I know that the majority of Republican caucus-goers said that immigration was their burning issue. Would you want the job of the next POTUS?
squeezed, Conjure says that is the Latin branch of the family. Conjure's closest relative is Itt. You can always tell the difference between Conjure and Itt because Itt wears a derby, Conjure wears a homburg.
CR! I once sent you an email. Check out SoapBlox as a blog framework. I run the company. I'd be honored to have you!
SoapBlox - Building Online Communities - SoapBlox Network, Inc.
Despite the uphill struggle the GOP has given the complete mess dubya and his cronies made, I have to admit, the dems top 3 don't look sufficiently attractive to win on their merits. It might be an 08 Democrat loss, by default.
barely | 01.03.08 - 11:37 pm | #
The entire Republican field looks like bad caricatures of 50's era stereotypes. Any one of the 3 top Dems would/will crush any of the Republican hopefuls. Think about it: Romney, Huckabee, McCain, Guiliani, and Fred Thompson.
Yikes!
w,
I wasn't trying to be flippant with my yes, yes and, uh, yes, comment, but being self-employed and living and working in the so-called Inland Empire, it almost doesn't matter what business I'm in. It's really slow for everyone here and has been for a few months.
I would expect to see an office/commercial vacancy rate around 20% by the end of the year (including the newly constructed see-throughs), and the number of residential foreclosures at least doubling, perhaps tripling, what is already a significant level of REOs on the MLS.
People seem to know it's bad with the notable exception of local government officials who haven't acknowledged the sea change as yet.
Re-read the Henry Kaufmann op-ed piece in the WSJ via naked capitalism, and he tears the Fed a new one:
Some of the Special Investment Vehicles (SIVs) that contributed to the recent hemorrhaging of the money market were an off-balance-sheet activity of bank holding companies -- and therefore subject to Federal Reserve supervision. But the Fed seemed satisfied to allow them, as long as it determined that the value-at-risk procedure employed by these holding companies fell within generally accepted parameters.
Rather than focus on the threat posed by the lack of transparency, the Fed has focused on mechanical deficiencies in the market. For instance, regulators tried to insure that the huge volume of trades would be cleared quickly and with correct documentation. This is worthwhile, but by itself cannot forestall credit abuses. By failing to acknowledge and attack risks posed by opaque financial practices, the Fed encouraged them.
Briefly stated, this is the now-prevailing view that monetary authorities do not know when a full-blown credit bubble is upon us, but that they do know what to do once a bubble bursts. I have long argued this approach condones excessive credit growth. Massive infusion of new funds following a major market collapse can provide temporary relief, but it does not repair the long-term political, social and economic damage caused by the meltdown. How can this monetary approach not reduce market discipline before the collapse, or incite a quick return to speculative activities after the Fed rescue?
How indeed?
My wife and I use to eat at Ryan (owed by Buffet) once a year. It reminded us to eat healthy and to keep our weight down. It always depressed me to see the overweight and unheathy individuals who just had to have the closest seat to the buffet table. It actually depressed us each time.
Alright MP... I've been lurking (and very rarely posting) for 6+ months now... there was the "mild" description of frog bones, et'la regarding Conjure's origins but other then that what's the deal with the MP/CB duo? Two sides of the same coin?
Love the comments and the insights and the clock BTW, and maybe I should just let me magic be (and that would be a fine answer to the above, but I just had to ask =)
C
I used to be a real estate closing atty. Sniff. But I do other stuff which make money and my house is paid off. I don't expect to do many closings in the next couple of years--in November, the number of residential real estate closings was down an incredible 59% in Miami-Dade County from the previous year and YOY down about 44% for the previous 2 months. Sellers are refusing to cut prices to sell.
Hard to say if non-re fields are doing ok or not. Tourism is just fine because of the dollar drop.
More undeserved pats on the back for Sheila Bair...FDIC's Bair seen on target with bank accord..."She was right all along." (How far will $50 billion go?)
FDIC's Bair seen on target with bank accord
| Reuters
Did you hear Edwards speech?
That was the best corporate greed speech I've ever heard.
If I was a CEO and heard that speech, I'd stop being so greedy for at least a little while.
Uh oh.. Credit crunch off the starboard bow.
Aussie Banks raise loan rates without Central Bank prompting to cover costs.
"Jan. 4 (Bloomberg) -- National Australia Bank Ltd. raised interest rates on mortgages to recoup higher funding costs, the first time in almost a decade a major lender has increased home loan rates without any action from the country's central bank.
National Australia, the country's second-biggest provider of mortgages, raised its rate for home loans that don't have a fixed rate by 12 basis points to 8.69 percent, according to the Melbourne-based company's Web site.
Commonwealth Bank of Australia and Australia & New Zealand Banking Group Ltd., National Australia's biggest rivals, flagged increases in a nation where households already carry record debt of 161 percent of disposable income. The central bank's quarter- point rise in November added A$42 a month to repayments on an average A$250,000 ($220,000) home loan.
It's just a matter of time before the other banks follow suit, whether or not the central bank increases its own rate or not,'' said Shane Oliver, who helps manage the equivalent of $113 billion at AMP Capital Investors in Sydney.I've been surprised they have managed to hold off as long as they have given how much their funding costs have increased from the debt crisis.''
..."
National Australia Bank, ANZ Raise Mortgage Rates (Update6) - Bloomberg.com
Anecdotal evidence of a slowdown:
About 6 months ago I inquired about a product online (online service type software mostly related to the hospitality industry). Never heard back from them. Suddenly I've heard from them twice in the last 2-3 weeks wanting to talk to me about my project.
Campbeln, Conjure's origins are to be found in toad bones and ground-up dog balls. He can best be described as an autonomous pensieve, whose past, present, and future all merge into a single now. He came into existence in 1299, is a great conversationalist, but insists on communicating through me. Shinies are his passion. He goes out only at night because of his odd appearance, and likes to chase beautiful women. I have to drive him because he can't see out and touch the pedals at the same time. He enjoys Macanudo Duke of Devons (maduro wrapper) and Martel XO in abundance, probably because he's distantly related to Maximon, as squeezed correctly guessed.
That's the simple explanation.
RE: "I for one would like to know who is in fear of their job, who expects less work/pay/commission, who sees declining capital expenditure at work or is planning it themselves, etc."
I'm a NorCal lad living and working in Canberra, Australia (moved down post dot.bomb thanks to being a nerd w/o a job in 2001/2). Least on this end of the world, I've heard anecdotal talk of a "slowing" housing market (Canberra did what Sacramento did without the retraction yet) but short of this everythings still peaches and roses down here (Canberras a huge gov. town, so quite a bit of insulation).
BUT with all my reading of CR, Mish, Dr HB, etc in my effort to research a Sacramento home purchase Im convinced that well see effects down here once China slows after the US slows. Hopefully this is a correct assumption by this non-economist computer nerd and Ill have some time to adjust to the changing conditions but I donno.
As an OT aside any thoughts on what to do with my AUD savings? Im debt free on both sides of the (other) pond but Ive got my war chest waiting for a Sacramento area home or land. Ive currently got it all parked in AUD (earning 7% interest in a straight bank account). Any thoughts on stragities would be greatly appreciated! I know when the carry trade gets antsy, we and the Kiwis get hit so am I nuts to have it in AUD @ 7% rather then USD @ 4.5%?
Thanks to all, and sorry for the OT!
C
MP: Magic (or maybe Majik), got it!
Well all... there you go! Conjure's origins (I know I've been wondering =)
35, ran your company to bk and you wanna be a vp?
the bubble attitude continues...
sheesh, Walt Disney did it younger than that. In fact, he did it twice before he was 35.
AUD at 7% makes more sense to me than USD at 4.5%. In fact the USD doesn't make any sense to me at any rate in the single digits. JMO.
sheesh, care to comment on whether you've ever built a company? As someone who has, it's a little tough to take comments like that seriously from people who haven't walked the walk.
MP, forgive the intrusion, but would this be helpful in describing the background of conjure bag?
Mojo - Wikipedia, the free encyclopedia
"...
Other regional names for mojo bags, or for specific types of mojos, include gree-gree (a Bantu word typically spelled gris-gris by people in Louisiana because of the state's Francophone origins), mojo hand, conjure bag, conjure hand, toby, jomo, and nation sack.
...
Mojo hands are carried for their supernatural powers, such as protecting from evil or crossed conditions, drawing love, or bringing good luck or success in gambling and other money matters.
..."
FFDIC,
Re: As the first step in carrying out the Basel II plan, U.S. banks this year will launch a one-year parallel run in which they apply complex computer models while maintaining their current capital.
After the parallel run, banks will be allowed to start lowering their capital levels based on what the models show.
At the same time, Wall Street analysts expect big U.S. banks to take additional big write-downs, on top of the more than $70 billion in write-downs already announced by financial companies due to the global credit crisis. U.S. banks' loan-loss provisions surged to a 20-year high of $16.6 billion in the third quarter and analysts are bracing for more bad news in the fourth quarter.
Take a close look at pension fund reform in regard to computer models!
DH
Comments on the NAB (National Australia Bank) comment above...
Remember that the NAB got caught out big time (well, Australian for big time) with some sour FX trades ($300 mil AUD if I remember correctly) so I'm sure they are still a little lighter then their competition.
Secondly... it seems that every industry down here in Oz functions as an oligopoly. Rather then well cut into our margins to gain market share the rallying cry seems to be well damn, if they can charge that then we might as well have a go charging that as well!
The first no annual fee credit card down here started in 2004 (there may have been others, but I couldnt find them). And Qantas charges an annual fee to be a part of their frequent flyer club (or you could just join AAs club and earn miles anyway, as I suggest to the Aussies).
"Bidness" is different down here. So Im not too sure this is indicative as it may seem.
W ...
For myself and 300+/- of my favorite co-workers ... no raises in 08 and a cut in employer matching for the 401k
We already had a round of layoffs in 07 and the talk around the cell block (cubicles) is more cuts are baked into the cake. On top of that ... corp. just sent down a directive for a focus on 'outsourcing'
My cell mate and I came up with a little saying. He says - "The only reason we still have a job is because they haven't figured out how to outsource us yet" ... then I follow up with - "It's a good thing we're being led by a bunch of bafoons"
waa..waaa..waaaaa
Paul Craig Roberts via boom2bust:
In order to reassure itself, Wall Street claims that foreign countries are locked into accumulating dollars in order to protect the value of their existing dollar holdings. But this is utter nonsense. The U.S. dollar has lost 60 percent of its value during the current administration. Obviously, countries are not locked into accumulating dollars
The sharp decline in the dollar has not closed the trade deficit by increasing exports and decreasing imports. Offshoring prevents the possibility of exports reducing the trade deficit, and Americans are now dependent on imports (including offshored production) for which there are no longer any domestically produced alternatives. The U.S. trade deficit will close when foreigners cease to finance it.
We have arrived at the point where it is no longer bold to say that nothing now can be done. Unless the rest of the world decides to underwrite our economic rescue, the chips will fall where they may.
Gadzooks & good luck to us with that.
franz,
That's why they make those seats extra wide and extra strong.
Andrew, yeah, kind of. He looks like a big hairy bag with little hairy feet and hands.
I worked for a small private (28 million)company for 15 years which turned into a medium (650 million)sized company. Owners promised over and over that the 8 of us who help run the company would be millionaires when they sold or went public. Company sold to private equity 2 years ago only one employee was given a equity grant before buyout. She liked to go on business trips with CEO. I then left to start a small consulting business with small jobs that paid OK and allowed me to make up for the time I spent away from my kids. Then my wife was laid off job of 22 years and she strongly desires security and wants me to get job with benefits. Job market is slooooow. Difficult to near impossible even get an interview. I have only had two interviews in my life when I wasn't offered a job. Can't get a damn interview. Due to saving and investing our net worth is strong but the cash flow is keeping me up at night. I have had 3 calls in the last week (after having none forever) from friends with jobs asking me about the job market because they don't feel secure.
Campbeln, that's an interesting point to consider and may be as you say, local Aussie business practice. However, part of me wonders if it might be more (wasn't there liquidity/insolvency rumors about Macquarie just a little while ago?), and another part of me worries that, if nothing else, it might give the cover and temptation to other world financial organizations that are being squeezed to start to apply the credit screws to shore up their bottom lines.
Buffets, Inc. runs Old Country Buffet and other eateries of that type. I hope that this doesn't eat into their Friday Night All You Can Eat Fish menu...
Thems good eatin'.
Link for the above story:
Father of Reaganomics: Nothing Can Be Done To Save Economy Boom2Bust.com
Joseph McCabe, a verbal promise is still a promise, no? Especially, with 6 others promised the same thing.
thanks guys for saying to sheesh 1/100 what i was thinking. it will suffice.
truth is, we'll not hit bk ever. its a good threat to negotiate debts with. half of your margins can be made on the 'flip' side in hair-cutting creditors.
at 32 i've realized what dog-eat-dog means and that you can still live that way and have morals at the same time.
or can you?
as my accountant was famously told me, companies dont go bankrupt, their clients/customers do.
and thats the case here. we're left with an entire overhead/payroll/ap structure naked as $2MM worth of construction projects walked out the door due to exogenous reasons. that means, not my fault, to the less informed.
and to anyone who hasn't managed the cash flow V. net worth situation, please dont bother to comment.
and to the guy that said this truck stop crap aint worth damn, i'd say - this is where the 'rubber meets the road' and its the real deal stuff. esoteric and abstract write downs have less impact on the real economy than small and mid sized business travails. so listen up buddy. we all know what the deal is with cdo's of cdo's of cdo's is. do you know what its like on the streets?
Andrew,
I dont necessarily disagree with the article (well the excerpt anyway) but its more a note of caution to not read too much into it. Im sure that there is probably a good reason for the NAB to do this, but the others hanging on Im pretty suspect on (damned Aussie-isms creeping into my originally NorCali vernacular!).
We did have the 2 hedge funds blow up shortly after the GS ones mid/late 2007, and Ive not heard about the Macquarie rumours Also the Centrex (?) mall owner thingy going on now Australia certainly has had and will continue to have direct fallout from the US (and EU/UK) problems but most of what Ive seen thus far seems to indicate that its more on the periphery.
Its when China stops buying the dirt to make factories, shipyards and products for the US that the fit will really start hitting the shan down here. course there was the fall in consumer confidence mentioned a few weeks ago, which frankly confused me. Xmas seemed just fine here in Oz from where I was standing, and I was looking for a comparison to the US (then again the wife could still get me a Wii less then 10 days from Xmas so maybe it was slow-ish
.
dc1000- "...or can you?"
Yes, absolutely.
Anyone here ever seen a series of British documentaries called the Seven Up series?
yes mp thats my point. its a bitch. and being the moral guy in a room full of rogues is hard. but we press on. hanging dearly on to the hope that in the end you'll be rewarded. reputation and esteem shall carry you through and give you the just deserves at some point.
but negotiating payables on the back end is a part of business. no?
mp, always wondered whether Itt belonged to Gomez or Mortia's side of the family. Insights appreciated, but got no black cat bone, no mojo toof, so I won't look gift entity in the mouth. Eagerly awaiting the latest word.
It is a series done every seven years and follows some kids from England and who they become starting in the sixties I believe. The premise is that social status will pre determine their success or failure. In the last film from 2-3 years ago one of the main characters they spend a lot of time on is buying a second home in Spain and plans to spend half his time their. He is a cab driver making an honest but modest income. I am interested if this strange time capsule of a program will capture the real estate bust in all of its glory.
dc1000, my experience honed my thinking, in a manner of speaking. I became much more cautious, more demanding, and more analytical. I won't make a move of any kind now without a playbook. It's a lot of work, but worth it.
I'm willing to work with people, but will not hesitate to kneecap them instantly if they try to game me. They know the rules. Nothing immoral about that.
Marcus Aurelius, don't we expect too much of presidents, generally? Anyway, whoever it is will have greatness thrust upon them, or else. God knows none of the likely suspects are bringing it with them.
Andrew..It might be a good idea to see lending rates and central bank rates side by. We have seen many lenders not adjust lending rates as per the recent UK interest reduction because a) they dont want/need the business or b) they have costs to cover.
The markets can move on their own. Consumers must shop around and get the best deal.
Companies on the other hand now pay market rates whatever the cost..if cash is available. A Spanish concern was paying a whopping 400bps over libor to satisfy rolling paper...they are now in the shitter and will be belly up in a few weeks (imho).
So my questuion to the group: Interest rates fall but no money changes hands...does this nullify the role of cenral bankers>
Sportsfan,
Thanks for the encouragement. The raw numbers look like a no-brainer for me as well. Add to those that the FED is more likely to cut then anything over the next 6 months while the Aussie CB will probably raise 1-2 more times in that same time. So interest rate differentials alone again seem to make it a no-brainer.
The problem seems to (ironically enough) be in those differentials, but not between the AUD/USD but with the AUD/Yen. Thanks to Japans CB rate of what, .5%? The carry trades seem to like the AUD and NZD (New Zealand Dollar, which has an even higher CB rate). Now that is pro-AUD con-Yen until the carry trades start to unwind, when happens with there are too many jitters in the US (and EU/UK I suppose). So despite the strong fundamentals of the AUD we seem to bob around a bit based on the carry trade.
Now there are a number of analysts that seem to think the AUD will do a Loonie and reach par sometime early mid this year (which I tend to agree with / hope will happen). But with all this inflation vs- deflation vs- stagflation vs- flationflation speculation going around Im not sure long AUD is the best rout to take anymore.
Anyway just my 2c (with roughly equalts 1.8c USD
C
Japan down 616, closed early. Clearly this is the result of ____ doing ____ in Iowa - 'cause the world rotates around the US, dontchaknow.
^N225: Basic Chart for NIKKEI 225 - Yahoo! Finance
mp -
) -
my experience has brought me to this final conclusion (at 32 years old no less!!
i hate people
Spot gold was trading at $864.50/865.30 an ounce as of 2:50 a.m. British time, up from $862.90/863.60 late in New York on Thursday
Clearly the US buck is in trouble..lets watch FX positions..
(I am happy!)
dc1000- "but negotiating payables on the back end is a part of business. no?"
Simple answer: Absolutely.
Kou Jie- "mp, always wondered whether Itt belonged to Gomez or Mortia's side of the family."
Kou Jie, Itt sprang from the Addams side.
mp, thanks, so that explains the derring-do.
btw, HK stocks up despite Japan. Zijin mining, which despite being in the gold business rarely tracks the spot price, is up over 5%.
dc1000- "mp -my experience has brought me to this final conclusion..."
dc1000, many years, father of mp said, "mp, consider yourself lucky if, at the end of your life, you need the fingers of both hands to count your friends."
He was right. Further, all of us are "autonomous entities." Although we may have the comfort of our friends and family, we will suffer own heart attacks and fight our own battles. And we will die alone.
Although you will occasionally meet a soul brother, soul sister, or soul mate, who understands your world, most people are too engaged in their own reality to engage you in yours.
Cousin Itt was a cousin on Gomez's side of the family. Fester was originally on Morticia's side in the original TV series, but was flipped to being Gomez's brother for the movie.
mp - amen and good night
catch you on the 'flip' side (not if you're lucky lol)
Anonymous @12:44 am - As I understand it, markets are inherently averaging machines where the going market quote is an average of the individual transactions. The more participants in the market the better/stronger the quality of the average. This was one of the problems with CDOs, etc, not enough buyers/sellers to tell the average and mark to market, particularly when the activity dried up. The operation of Central Banks on markets have always always been as a market maker. Or, to put it another way, the large bowling ball in the middle of the taut sheet of the market that pulls all other players towards it and it's set rate due to it's size.
So, IMHO, Anon, it doesn't matter if no money changes hands, the size of the CB anchors the rate to what it wants whenever money would change hands between two theoretical market participants (I know, I know, consumers don't have access to CB's, banks do, but any two banks could lend to the consumer and thus should compete). This is because the participants are aware that the other could call off the transaction and do it with the CB at the stated rate, keeping market rates orbiting around where the CB sets them.
Gaffa, I was a devotee of both the TV series and the movies. The series got it all wrong.
The movie documentary, at least, got the facts right.
Coming (BK) Attractions: How will Blockbuster's (or NetFlix) business model fare as broadband video-on-demand will be quicker than the walk to your mailbox?
Well, it's far from clear VOD is going to kill the DVD business.
First, VOD hits bandwidth snags all the time. As the services roll out to more homes and markets, the paucity of infrastructure will be even more irritating. Comcast's subpar implementation of its On Demand service, for instance, regularly freezes or drops connections. And Netflix's streaming is OK in low-res on, say, a laptop or CRT TV, but pales once upscaled on an HDTV.
Second, the movie industry is responsible for a huge rights muddle that keeps many films bound to format and licensing restrictions. That's essentially why Netflix has so few films available currently for VOD streaming. Hollywood won't sort this out overnight.
So, for years to come, there's going to be tens of thousands more films available on old school plastic than are digitized. That's not a problem if all you want to watch, say, is Spiderman 12 (and lots do); it's a problem if you are looking for that elusive Vittorio De Sica comedy from the 70s (and I am).
"He looks like a big hairy bag with little hairy hands and feet"....
Poor Conjure.... I take it he has little luck with the ladies then? Good thing he's smart, that's gotta be some consolation. The mind is a wonderful thing that can take you many places. My best to Conjure.
HC, I think it will mature, like any new technology. If I was Netflix or Blockbuster, I'd be making plans.
On a related note, an acquaintance who owns a couple of movie theaters told me the industry is about to shift to HD projectors, and receive feature films via satellite. Big cost savings. No more prints, etc. Should be interesing.
Poor Conjure? Please. When he pulls out his wad of euros, he becomes the life of the party.
Speaking of broken business models, Hollywood should be very worried. I don't watch any movies anymore because it is WAY TOO EASY to download these movies now, and these are movies that are near DVD quality for anyone with a DivX player, which is a format carried by most DVD players less than $100. Why even go to theaters except for the very best movies? Every movie I have gone to in the past four years has had some member in the audience checking out their cellphone in the middle of the show, a supernova beacon in a dark theater which has interfered with my enjoyment of the movie; hence, the download route, played on a DVD/DivX player, on a big-screen TV...hey, presto! A movie-going experience in my own home w/o the intrusion of a cellphone idiot. Entire seasons of TV shows can be downloaded from bittorrent - commercial-free, and HD-quality for most of them. The time of reckoning for many business models is at hand...this is just my 2 cents about the entertainment industry.
don't forget that j6pac, after working twelve hours on the docks , is loath to figure out this dvd thingy your talking about, and is very happy to guzzle 9-12 beers in front of whatever they put on tv, and drink whatever is advertised cheapest.
Point taken. But the college and high school kids are wise on this technology. How else did I find out that all you had to do was download a movie or show in AVI format, simply burn it onto a DVD-R/DVD+R as though you were backing up your hard-drive, slip it into the dvd thingy, and lo and behold, it's playing just like a DVD. It's just a matter of time...
RIAA never should have messed with them college kids. Now they're mad and taking it out on the entire entertainment industry.
It is time for a CR poll. We have a lot of bright people here and I for one would like to know who is in fear of their job, who expects less work/pay/commission, who sees declining capital expenditure at work or is planning it themselves, etc. If it is bad here, imagine for the rest of the country.
I've been out of work since October, 2005, except for a short stint delivering pizzas. I've been trying to get back into the job market. I've applied for something like 150-200 jobs over the last six months. They range from ones where I'm stretching it a bit, to ones where I'm grossly overqualified. Of those applications, I've gotten exactly one interview, and no offers.
Of course, the two year gap in my resume may be frightening potential employers off as much as the job market, so I may not be a good indicator. Nevertheless, I'm not encouraged by what's out there. I'm taking classes, working towards both the actuarial exams and a CPA. Hopefully, finishing one or both of those will cause people to overlook the resume gap. In the meantime, I live off of my disability insurance.
I hope things look up for you J.
i hate people
I volunteer for a dog rescue, and therefore know exactly what you mean.
Do what you gotta do, dc, just take care of your own.
mp,
Yes, digital projection will virtually eliminate distribution costs. Unfortunately, the new equipment is quite expensive and the burden shifts from the studios to the theater, so it's been slow to rollout as they work out the cost-sharing.
Drowning in red ink
Watching T-bills stink
Should have invested the money in oil
Planning my next gig, drivin' a big rig
Smell those shareholders
They're beginning to boil
Wasted away again here in deadbeat-a-ville
Searchin' for more corporate defaults
Some people claim that JP Morgan's to blame
But I know it's nobody's fault
Don't know the reason
I lended to Beazer
With nothing to show but an empty account
But their lawyer's a beauty
A smooth talkin' cutie
I guess I'll just see her in bankruptcy court
"Why bother? First, the loans disappear from Zions books. Second, the bank regulators accept that fiction when they calculate how much capital Zions needs to have. As Clark B. Hinckley, a Zions senior vice president, told me, It enabled us to essentially originate these loans and not have to keep tangible capital behind them."
HIGH & LOW FINANCE; Securities, In a Swoon, Come Home - NY Times
"In one case, Prudential Retirement Insurance and Annuity Company asserts that its clients 165 retirement plans covering 28,000 people lost $80 million by investing with State Street.
The lawsuit asserts that State Street last year used borrowed money to invest in subprime mortgages and related derivative contracts in a fund that was supposed to invest only in Treasuries and corporate bonds. When Prudential sought information about the investments, the suit alleges, its representatives received evasive and incomplete answers.
One executive at State Street told Prudential employees that its strategy had changed and it forgot there was a lot more risk in the strategy, according to the suit."
State Street Corp. Is Sued Over Pension Fund Losses - NY Times
risk capital -
Good article, I think this illustrates part of the reason why bank stocks are getting pummelled.
Someone please explain to me how this is any different than Enron. Hiding losses off balance, creating dummy corporations to buy bad paper and shelter it, isn't exactly the kind of transparency that shareholders desire.
Why anyone would keep holding let alone buy ZION is beyond my ability to comprehend. Judging by it's five year chart, it does appear that others are making the same conclusion as I am.
central-
I think the bigger question in regard to these off balance sheet vehicles (especially now) is how the consensus can expect double digit earnings growth on a forward basis for the S&P with such a high financial concentration?
Undeniably, current accounting rules allowed "reported" peak earnings to soar, we are likley in a very long-term credit cycle here, longer than most expect and where the excesses of the past will literally take years to work through the system.
That said, credit markets have shown improvement, whether it is sustainable is the key question.
If you are a hedge fund manager, it is my belief that you are currently sweating hand grenades due to the forced delveraging in/working its way through the system. Volatility reigns in the foreseeable future.
Tough period, but manageable ahead.
My eyes brightened up when I read this in your second link, risk capital:
Mr. Hindy said defendants in subprime securities lawsuits would most likely argue that investors made money from the investments for a time and knew or should have known that there was a risk they could lose money. They will also assert that the bonds in question were highly rated by credit ratings agencies.
Somewhere out there, fresh out of law school, there is a hungry young trial lawyer just waiting to make a career off the hide of Moody's or other credit rating agencies. Picture a young John Edwards, trolling the backwoods for class action plaintiffs.
Tough period for somebody, that's for sure.
" Anyone notice the avalanche on the NIKKEI? DOWN 550pts. Any ideas?"
Tokyo was closed for a while and in the mean time the U.S. and Europe and USD/JPY were down. So a lot of got-to-hedge-at-any-price players had to sell. It's mechanical, nothing to worry about.
Japan's vulnerabilities are strong yen and imported oil. Sad.
risk cap, you inspired a third verse (ducking for cover):
I blew out my stop-loss
Fled to Caracas
Feds movin' in had to cruise out the door
But there's cash in the Swiss bank
Some friendly ex-pat yanks
And my new buddy Chavez, he helps me hang on
Wasted away again here in dead-beat-a-ville
They're searching for my alleged defaults
Some people claim that Fitch or Moody's to blame
But I know, it's my own damn fault
central-
the thing about this period that puzzles me most is that nobody is discussing the end effect of across-the-board credit tightening.
The fact is that there is absolutley no way for the economy to resume a growth trajectory given the credit tightening that has taken place, it may take months to works it way through the system, but, the end effects will be widespread.
This leads me to the conclusion that either market participants are blind or utterly ignorant.
--
"I want more people to wake up (please)"
And do what? Dance naked in the streets? When would born-and-bred American dopes come to terms with the fact that they are politically impotent?
Crooks -- the Debt Pushers -- control the Congress, the Executive Branch and the Federal Reserve. Live with it because it is the truth.
A taxpayer, I mean one of the tens of millions of helpless American victims of extortion,
Jas
For those who are missing Seb and O Joe, I will try to make the bullish case:
That said, I never put much much faith in my, or anyone's, predictions for "The Market". I have over quite a few years, been successful at building a portfolio that has outperformed in both up and down markets. My current favorite investments are:
Please do your own due diligence before investing.
This leads me to the conclusion that either market participants are blind or utterly ignorant.
A lot of investors seem to be clinging to hope as a strategy. As in, we "hope" the worst is over, we "hope" the consumer doesn't finally throw in the towel, etc.
Over the longer term, rationality must prevail. Right now I get the sense we are on the precipice of a big "Wile Coyote" moment, but I've had that feeling since July and the market has managed to stay airborn.
central/risk,
I don't have alot of time to post these days, but I enjoy reading your exchanges when I get into work.
VIE's are an interesting topic. Funny, Vie's were originally proposed to make financials more representative of the ongoing business, in contrast to temporary projects that were unrelated to the main business. Kind of like glue that was designed to repair things but ends up being sniffed.
--
Breaking News... UR AT 5%!!!!!!!!! Up 0.6% from the cycle low.
RECESSION FULLY CONFIRMED. When the UR rises 0.5% from the low in the cycle the economy was is recession every time.
Jas
So feds cut in a few days and the numbers will be 'revised' to the usual +100K?
private sector payroll -13k
Bulls constantly say something like this. Yet, they rarely understand what it means.
For business valuation purposes, interest rates are a discounting mechanism for determining what a company is worth.
You develop a stream of projected future earnings, cashflows, EBITDA or net income. You then discount those amounts by THE COMPANY'S OWN AVERAGE COST OF CAPITAL.
You don't discount by Treasury rates.
Right now, earnings are falling. And for most companies (especially the Centros and Buffets of the world) the company's own average cost of capital is rising. Therefore, lower valuations.
Some bulls want to use a cheap shorthand method. They say stocks at a P/E of 16.7% represent an "earnings yield equivalent" of 6%, and Treasuries are only yielding 4%. This is bogus. On the Capital Markets Line, stocks are riskier than Treasuries. At times (like now) a lot riskier and earnings and P/Es are shakier.
aheadofthecurve, you are smart enough to know some of this.
What does Seb's and OJoe's models say? Is it still less than 25% chance of a recession?
Kind of like glue that was designed to repair things but ends up being sniffed.
Judging by the futures reaction to the employment report, there will be a lot of longs wishing they had a spare tube or two to sniff!
RE: "I for one would like to know who is in fear of their job, who expects less work/pay/commission, who sees declining capital expenditure at work or is planning it themselves, etc."
dc1000
My SIL, an attorney (comercial real estate), when asked. "Hows the biz?" gets the deer in the headlights look.
I don't ask anymore.
My BIL, Furniture distribution, vet recovering from cancer, just looks down and then talks about deer hunting.
My other BIL at Wachovia is a walking explosion.
These are all in the DC area.
My Sis and her husband run a contracting company in Arizona.
Me, I remember the 81-82 period. I was working on a loading dock in DC and people with MA's wanted my job.
Do I worry now? Of course. Stuff happens no matter how secure you think you are. I started working full time at 15. I can tell you all my senses including, and primarily the 6th, are screaming "Fight or Flight" alarms.
Did Citi include themselves in their higher default estimate?
How the mighty have been laid low.
Most of you glad handing with DC1000 don't recall his MOTU posts mocking many posters here as chicken littles, 12 months ago.
I do.
At least he is honest, it is obvious he hates people.
PS, enjoy that slice of humble pie.
To be fair, DC posted a lot of good things about his biz but he also reported the bad, like getting out of residential projects a while back.
Tanta, Clever post using Buffets and Buffet Inc.!
to be fair to myself, i'll admit that last night i had had a cocktail or two and was enjoying a bit of my own personal schadenfreude if that is possible. the carnage is limited to our building division. architecture, design, leasing, development all continue robustly. in fact, just this morning we executed a lease with an anchor tenant for a commercial development we're planning here in washington. have the entire building leased before we even break ground.
not too shabby.
and wrt to my MOTU (what does that mean by way?) comments prior - i've only ever expressed whats been going on on the ground here in DC. i've reported the slow down in residential sales and construction, as well as the positives.
as well, i've been a reader here since before tanta even came on the scene - i'm watching this whole thing like a hawk. if i didnt believe i wouldnt be here.
dc1000 isn't the only one on this blog that may like individuals and really hates people. Anyone who's had to deal with the public knows the feeling.
Aheadofthecurve | 01.04.08 - 8:30 am |
you make interesting points and thanks for playing devils advocate (as in pretending to be seb or joe)
but with regard to boeing...yes they had a banner year. but it would be inaccurate to interpret their sales as primarily reflective of a strong domestic economy, on two counts.
first...the sales are worldwide with, for recent example Dubai purchasing nearly 10% of the recent 1000 plus plane annual orders. note brazil alone is on the hook for 40 aircraft!
second the increased air traffic that the larger plane sales require reflects a shift from west to east of the global center of gravity. that with the damage to the purchasing power of the USD is not good news for those of us who are rooted here the the USofA.
Thanks for raising these and other issues on your list. We all here at CR need to continue to examine all sides of the economic puzzle.
rich-I must disagree. If you are buying a business as an operational entity your analysis is correct. When you are investing in the market, however the question is where should I put my money to get the best risk/reward ratio? There the choices are stocks, bond or cash (ignoring RE, commodities, etc.). So bond yields vs P/E are important. A 16 P/E is good when T-bill rates are 3 % or lower. You are of course correct that E's may fall, thus raising the P/Es. How much and for how long is the question.
mock turtle- Appreciate your opinion. I am not seb or joe in disguise (honest). I never said Boeing sales reflected a strong US economy. they are a US-listed company and their sales show US companies can profit by overseas sales. And they provide a lot of jobs in the US. directly and through subcontractors. I enjoy and respect the bears here and agree one should listen to all sides.