TOP STORIES:
A Sea of Unwanted Imports - (www.nytimes.com) Gleaming new Mercedes cars roll one by one out of a huge container ship here and onto a pier. Ordinarily the cars would be loaded on trucks within hours, destined for dealerships around the country. But these are not ordinary times. For now, the port itself is the destination. Unwelcome by dealers and buyers, thousands of cars worth tens of millions of dollars are being warehoused on increasingly crowded port property. And for the first time, Mercedes-Benz, Toyota, and Nissan have each asked to lease space from the port for these orphan vehicles. They are turning dozens of acres of the nation’s second-largest container port into a parking lot, creating a vivid picture of a paralyzed auto business and an economy in peril. “This is one way to look at the economy,” Art Wong, a spokesman for the port, said of the cars. “And it scares you to death.” The backlog at the port is just part of a broader rise in the nation’s inventories, which were up 5.5 percent in September from a year earlier, according to the Commerce Department. The car industry has been hurt particularly, with sales down nearly 15 percent this year. General Motors has said it would run out of operating cash by the end of the year if it does not receive a government bailout. But the inventory glut in Long Beach is not limited to imported cars. There has also been a sharp drop in demand for the port’s single largest export: recycled cardboard and paper products.
Chinese Renege on $1 Billion Scrap Steel Deals, Group Says - (www.bloomberg.com) Chinese scrap-metal buyers have reneged on about $1 billion in contracts from U.S. merchants as the market for the steelmaking raw material collapses, the Institute of Scrap Recycling Industries said. Steelmakers, foundries and traders, ranging in size from ``small to very large'' and some with partial state ownership, have canceled contracts, refused delivery of shipments or demanded lower prices, according to Robin Weiner, president of the Washington-based scrap merchants' trade group. Weiner is lobbying the U.S. government to help stop defaults on contracts between the institute's members and clients in the second-largest market for U.S. scrap steel after Turkey. Scrap merchants worldwide face plummeting prices after mills slashed output amid a worsening global economic recession. ``Some steelmakers and traders did ask to renegotiate the price of lower-valued shipments,'' said Wang Zhenwu, executive vice president of the China Association of Scrap Metal Utilization. ``But the amount couldn't be as much as $1 billion.'' The price of steel scrap No. 1 heavy melting, shipped from the U.S. East Coast, has slumped by 61 percent in the past two months and traded at $120 a metric ton on Nov. 13, according to Metal Bulletin. U.S. sales of scrap to 152 countries last year totaled $22 billion, making it the second-largest commodity export by value, according to the institute.
Citi's Leverage - (optionarmageddon.ml-implode.com) Leverage ratios are important because they tell you how much money is in reserve to cover losses. That’s why you shouldn’t include faux assets like intangibles, deferred tax assets and goodwill. These things are worthless in a bankruptcy court. They can’t be used to pay off a company’s debts. Wouldn’t it be great if you could use your tax loss carryforwards to pay off a credit card bill? (see that Fannie post to understand what I mean). A leverage ratio is basically assets/equity. If assets decline in value, and not because of a reduction in liabilities, then there has to be a one-to-one decrease in equity. This is so because for a balance sheet to “balance,” assets must equal liabilities + equity. In Fannie and Freddie’s case, you knew a long time ago that assets were going to fall at least 5% and that that would be enough to wipe out the company’s equity. At its most fundamental level, a company’s stock price is its equity divided by the number of shares outstanding. If equity = $0, then the stock price equals $0. Fannie’s and Freddie’s stocks both trade pretty close to $0. Now consider Citigroup. It has $2.05 trillion of assets listed on its balance sheet. That includes $63 billion of “goodwill and intangibles,” worthless assets like Fannie’s DTAs. Contrast this with the company’s equity of $151 billion, which would include $25 billion from TARP. That implies a leverage ratio of 14x, not 10x as the bank would have you believe when it publishes its “Tier 1″ capital ratio. Remove goodwill and intangibles from assets and equity and you have a true leverage ratio of 23x. = ($2.05 trillion - $63 billion) / ($151 billion - $63 billion). That’s roughly the same calculation we did to get to Fannie’s true leverage ratio of 100x. By the way, I’m giving Citi credit for the $164 billion of “other assets” on the balance sheet as well as $19 billion of assets of “discontinued operations” held for sale. These sound pretty squishy too…
Deadbeat Houseowners Tap Texas Bankruptcy Laws to Duck Creditors - (www.bloomberg.com) Homeowners fleeing underwater mortgages in California and Florida know where to come up for air: Texas. ``Texas is an extremely friendly place to live if you owe money and do not want to pay,'' said Marjorie Britt, a bankruptcy attorney with Britt & Catrett PC in Houston. ``If you have a lot of money and even more debt and want to shelter your assets, you can live fairly normally.'' Distressed borrowers can hang on to luxury cars, a primary residence, paychecks, retirement accounts, and even jewelry that creditors might claim elsewhere, Britt said. A still-robust job market draws nonresidents trying to get away from houses worth less than what they owe on the mortgage, said Jay Westbrook, a business-law professor at the University of Texas in Austin. These newcomers find employment, buy a home in Texas, and mail lenders the keys to the house they abandoned. Texas bankruptcy filings involving delinquent out-of- state mortgages increased by at least a third in the past year, said Jan Northrup, a lawyer with Hughes Watters Askanase and a bankruptcy trustee in the U.S. District of Southern Texas. Many involve people who moved from Florida, California, Colorado or Arizona, she said.
FBI probes scam aimed at Hawaiians - (www.mauinews.com) The FBI is investigating several local companies that allegedly bilked homeowners out of more than $300,000 on Oahu, the Big Island and Maui with false promises to help them avoid foreclosure, according to local lenders and law enforcement officials. The families, many of which are Native Hawaiian, were charged between $2,500 and $10,000 to attend seminars or counseling sessions on avoiding foreclosure, and were told they would receive bonds worth $1 million that could be used to pay off the outstanding balance of the mortgage. Officials said the bonds were bogus and no mortgages were paid off. Andrew Bayron, owner of Sapphire Mortgage in Wai-luku, said a client nearly got caught up in the scam, while another person he knows recently purchased one of the bogus bonds. "It's disgusting. I've been beside myself since I heard about it and I've been telling everyone I know about it," said Bayron. "I try to protect my clients as best I can. These people are really slippery. They hook you so well that you believe it."
Who owns your loan? - (www.tbo.com) Natalie Fuentes was about to lose her foreclosure battle when her lender said it would work out a loan modification so she could stay in her home of 13 years. The lender, Washington Mutual, agreed to hold off on an eviction until the new loan was final, she said. So she was stunned last month to find the locks had been changed. Her belongings, including her children's baby photos, clothes and toys, were gone. The lawn and windows were blanketed with realty signs advertising the Carrollwood home for sale. "I called the bank, and they said they didn't know who had done this," Fuentes said. "I called the real estate company and was told my stuff was trash and had been thrown away. We're talking about stuff that can't be replaced." It turns out the lender Fuentes had been dealing with no longer owned her loan. Without her knowledge, it had been sold to mortgage finance giant Freddie Mac. Washington Mutual remained the servicer of the loan. In a surprise to both Fuentes and the Washington Mutual officials she was working with, Freddie had moved forward with selling the home.
Russia Suffers Plunging Reserves as Ruble Struggles - (www.bloomberg.com) Russia's foreign-exchange reserves are draining fast and may take almost a decade of economic stability with them. Russia's international reserves, the third-biggest after China's and Japan's, have fallen $122.7 billion, or 21 percent, since Aug. 8 as the central bank tried to shore up the ruble. At the same time, President Dmitry Medvedev, 43, has pledged more than $200 billion of tax cuts, loans and other measures to maintain economic growth, threatened by plummeting oil prices and investor flight. The reserves' decline increases the chance the central bank, which signaled last week it is willing to gradually weaken the ruble, will stop supporting the currency. And rising bailout costs would make it harder for Russia -- which Prime Minister Vladimir Putin, 56, earlier this year called an ``island of stability'' -- to blunt the impact of the financial crisis. ``The draining of reserves is dangerous,'' said Elena Sharipova, an economist at Moscow-based Renaissance Capital. ``They ensure macroeconomic stability.''
OTHER STORIES:
Junk Bond Yields Reach Record 20 Percent as Economy Declines - (www.bloomberg.com)
Commercial-Mortgage Bond Risk Rises After Loan Delinquencies - (www.bloomberg.com)
Ugly reaction to Tarp U-turn - (www.ft.com)
GM, Ford bond spreads widen, another blow to junk - (www.marketwatch.com)
Loan Prices Fall as Funds Forced to Sell, Default Risk Rises - (www.bloomberg.com)
Commodity volatility now favoured by hedge funds - (www.ft.com)
Citigroup to Liquidate Hedge Fund, Report Says - (www.nytimes.com)
Pandit Girds Citi for Tight Times - (online.wsj.com)
Insurers Buy Banks in Effort to Get Aid - (online.wsj.com)
For Wall Street, Less Is More - (online.wsj.com)
Automotive Rescue Is Threatened By Impasse - (www.washingtonpost.com)
Home Depot Profit Declines as Wary Consumers Rein in Spending - (www.bloomberg.com)
GE plans $2 billion in finance arm cuts next year - (www.reuters.com)
Alternative energy bulls face bear market - (www.marketwatch.com)
Silicon start-ups finished - (www.ft.com)
Clout Has Plunged for Automakers and Union, Too - (www.nytimes.com)
Fed Won't Reveal Details on $2 Trillion in Loans - (www.bloomberg.com)
NYSE warns Fannie Mae it may delist its stock - (biz.yahoo.com)
Sex, Lies, and Subprime Mortgages - (www.businessweek.com)
Price of Southern California homes falls 41% from peak - (www.latimes.com)
NZ house sales plummet by record amount - (www.nzherald.co.nz)
Glut of unsold houses lowers rents in England - (news.bbc.co.uk)
We'll be in Great Depression 2 by 2011 - (www.marketwatch.com)
The Formerly Middle Class - (www.nytimes.com)
The 28-33% Mortgage Payment Rule: Confronting Reality - (www.seekingalpha.com)
A Fictional Scenario of the Future: The Final Bailout - (www.moneyandmarkets.com)
Brock, Rock and Sheila's Bailout Shock - (theaffordablemortgagedepression.com)
Insurers buy crappy banks to get their bailout cash - (www.bloomberg.com)
Washington debates bailout - (www.reuters.com)
Should The Government Stop Dumping Money Into A Giant Hole? - (patrick.net)
No comments:
Post a Comment