This is The Wall Street Digest Hotline Update for Tuesday, October 30, 2007, at 6:00 p.m. EST.
A drop in consumer confidence made investors cautious today ahead of tomorrow's rate decision by the Fed. At the close, the Dow dropped almost 78 points, closing at 13,792, while the Nasdaq lost a fraction of a point, closing relatively flat at a six-year high of 2,817, reached yesterday. Oil closed down $3.15 to $90.38 per barrel, and gold closed down $4.80 at $787.80 an ounce.
The Consumer Confidence Index fell much lower-than-expected in October to 95.6 from September’s revised reading of 99.5. It was the third monthly decline in a row and the lowest consumer confidence reading in two years, when hurricanes caused devastation in New Orleans and to refineries in the Gulf of Mexico. The report raised concerns for retailers and investors alike, as lowered consumer confidence heightens worries for a disappointing holiday season and slowing spending by consumers heightens worries for economic growth.
The Federal Reserve is meeting this week to review monetary policy. The deepening housing slump and declining consumer confidence could force the Fed to cut interest rates by 25- to 50-basis points. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out, but U.S. stock prices should move higher in November and December after the rate cut is announced tomorrow afternoon.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, November 2, 2007, at 6:00 p.m. EST.
Tuesday, October 30, 2007
Consumer confidence trips up Wall St
By Kristina Cooke Tue Oct 30, 5:32 PM ET
NEW YORK (Reuters) - Stocks fell on Tuesday after a weak outlook from Procter & Gamble, disappointing earnings from U.S. Steel and a report showing consumer confidence at a two-year low fueled worries about the economy, consumer spending and corporate profits.
Adding to the nervous atmosphere was some uncertainty about the outcome of Wednesday's Federal Reserve interest-rate decision, while a 3 percent pullback in oil prices hit energy stocks.
Stocks have risen recently, in part, on a widely held view the Fed would cut rates on Wednesday by at least a quarter-percentage point to limit the damage from the housing slump and tighter credit conditions.
But an article by Greg Ip, the Wall Street Journal's Fed watcher, said that a cut is "no sure thing," planting a seed of doubt in investors' minds.
"There is some uncertainty about what the Fed will do tomorrow and that is weighing on the market," said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama.
"Some earnings disappointments and forward guidance is not encouraging, and there is a feeling that if we don't get help from the Fed, then the fourth quarter and first quarter next year could see even slower economic growth."
The Dow Jones industrial average (.DJI) was down 77.79 points, or 0.56 percent, to end at 13,792.47. The Standard & Poor's 500 Index (.SPX) was down 9.96 points, or 0.65 percent, at 1,531.02. The Nasdaq Composite Index (.IXIC) was down 0.73 points, or 0.03 percent, at 2,816.71.
Procter & Gamble(PG.N), a Dow component, dropped 4 percent to $68.95 after its outlook for the rest of the year disappointed Wall Street. That decline marked P&G's second-biggest daily percentage drop in five years.
U.S. Steel (X.N) posted a 35 percent slide in third-quarter profit and warned of an earnings decline in the fourth quarter, sending it shares down 7 percent to $104.62 on the New York Stock Exchange.
Large tech stocks extended their recent rally, capping the Nasdaq's decline. Microsoft (MSFT.O), Apple (AAPL.O) and Google (GOOG.O) gained as investors sought safety in big-cap technology stocks perceived as sheltered from the global credit storm. Technology was the only S&P sector to end higher.
Apple's shares rose 1 percent to $187.00 after the computer maker said it sold more than 2 million copies of its latest operating system.
Google's stock shot up 2.3 percent to $694.77 on a report the Web search leader is expected to announce Google-powered phones may be on the market by mid-2008.
Shares of Merrill Lynch (MER.N) fell after the investment bank ousted Chief Executive Stan O'Neal just days after reporting the biggest quarterly loss in the company's history. No successor was named.
Merrill's shares fell 2.8 percent to $65.56 on the NYSE.
Energy stocks slid with oil prices, which tumbled from record highs as investors locked in profits. Exxon Mobil (XOM.N) fell 2.6 percent to $91.14.
The Conference Board's index of consumer sentiment fell to 95.6 in October, its lowest reading since the aftermath of Hurricane Katrina in 2005. The sharp drop caught economists by surprise. September's reading was revised to 99.5.
Trading was moderate on the NYSE, with about 1.22 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.16 billion shares traded, ahead of last year's daily average of 2.02 billion.
Declining stocks outnumbered advancers by a ratio of about 5 to 3 on the NYSE and by 3 to 2 on the Nasdaq.
(Additional reporting by Jennifer Coogan)
NEW YORK (Reuters) - Stocks fell on Tuesday after a weak outlook from Procter & Gamble, disappointing earnings from U.S. Steel and a report showing consumer confidence at a two-year low fueled worries about the economy, consumer spending and corporate profits.
Adding to the nervous atmosphere was some uncertainty about the outcome of Wednesday's Federal Reserve interest-rate decision, while a 3 percent pullback in oil prices hit energy stocks.
Stocks have risen recently, in part, on a widely held view the Fed would cut rates on Wednesday by at least a quarter-percentage point to limit the damage from the housing slump and tighter credit conditions.
But an article by Greg Ip, the Wall Street Journal's Fed watcher, said that a cut is "no sure thing," planting a seed of doubt in investors' minds.
"There is some uncertainty about what the Fed will do tomorrow and that is weighing on the market," said Bucky Hellwig, senior vice president at Morgan Asset Management in Birmingham, Alabama.
"Some earnings disappointments and forward guidance is not encouraging, and there is a feeling that if we don't get help from the Fed, then the fourth quarter and first quarter next year could see even slower economic growth."
The Dow Jones industrial average (.DJI) was down 77.79 points, or 0.56 percent, to end at 13,792.47. The Standard & Poor's 500 Index (.SPX) was down 9.96 points, or 0.65 percent, at 1,531.02. The Nasdaq Composite Index (.IXIC) was down 0.73 points, or 0.03 percent, at 2,816.71.
Procter & Gamble(PG.N), a Dow component, dropped 4 percent to $68.95 after its outlook for the rest of the year disappointed Wall Street. That decline marked P&G's second-biggest daily percentage drop in five years.
U.S. Steel (X.N) posted a 35 percent slide in third-quarter profit and warned of an earnings decline in the fourth quarter, sending it shares down 7 percent to $104.62 on the New York Stock Exchange.
Large tech stocks extended their recent rally, capping the Nasdaq's decline. Microsoft (MSFT.O), Apple (AAPL.O) and Google (GOOG.O) gained as investors sought safety in big-cap technology stocks perceived as sheltered from the global credit storm. Technology was the only S&P sector to end higher.
Apple's shares rose 1 percent to $187.00 after the computer maker said it sold more than 2 million copies of its latest operating system.
Google's stock shot up 2.3 percent to $694.77 on a report the Web search leader is expected to announce Google-powered phones may be on the market by mid-2008.
Shares of Merrill Lynch (MER.N) fell after the investment bank ousted Chief Executive Stan O'Neal just days after reporting the biggest quarterly loss in the company's history. No successor was named.
Merrill's shares fell 2.8 percent to $65.56 on the NYSE.
Energy stocks slid with oil prices, which tumbled from record highs as investors locked in profits. Exxon Mobil (XOM.N) fell 2.6 percent to $91.14.
The Conference Board's index of consumer sentiment fell to 95.6 in October, its lowest reading since the aftermath of Hurricane Katrina in 2005. The sharp drop caught economists by surprise. September's reading was revised to 99.5.
Trading was moderate on the NYSE, with about 1.22 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.16 billion shares traded, ahead of last year's daily average of 2.02 billion.
Declining stocks outnumbered advancers by a ratio of about 5 to 3 on the NYSE and by 3 to 2 on the Nasdaq.
(Additional reporting by Jennifer Coogan)
Van Wyk Aims to Transform Red Hat for Future Growth
Elizabeth Montalbano, IDG News Service 2 hours, 26 minutes ago
Having established itself as the leading enterprise Linux vendor, Red Hat is in a pivotal phase of reinventing itself as a broader open-source software provider and a long-term technology leader a la Microsoft and Oracle. It's a tall order, and among other things it will take a business plan that lets the company move smoothly through this make-or-break stage.
Coming up with that internal plan lies on the shoulders of 30-year IT veteran Nick Van Wyk. Van Wyk joined Red Hat last year from EMC, taking a newly created role as vice president of operations to optimize Red Hat's subscription model and create better business processes to support the company's channel.
Two weeks ago, Red Hat also appointed him to a new role as senior director, transformation, in charge of examining the company's internal processes and operations to "reposition all of our systems to support the next stage of our evolution," he said.
That stage includes capitalizing on its April 2006 purchase of JBoss and the open-source middleware package that comes along with it, as well as growing from a company with annual revenue of about US$500 million to a billion-dollar company. Red Hat, whose affections toward other vendors can be fickle, also is challenged to build out a stronger ecosystem of partners to support not only Red Hat Enterprise Linux OS but also JBoss and any new technologies it brings to the table.
In the current technology business climate, Red Hat is a bit of an anomaly. The company has managed to exist for nearly 10 years with one core competency: a Linux server distribution it supports and provides maintenance for. The company has branched out into other areas of software, such as desktop Linux and virtualization, but for the most part, the server OS has been its bread and butter.
Recognizing it can't subsist long on this diet in an environment of consolidation and diversification, Red Hat made a calculated risk and purchased JBoss. It's now trying to position itself to make the most out of that and possible other new product developments or purchases, Van Wyk said.
"As we move forward, we will more be described as an open source services and solutions company," he said. "That's an enhanced position for Red Hat."
In its present situation, Red Hat has "a base, a critical mass of applications from which to grow," said George Weiss, vice president and distinguished analyst at Gartner. But investors are more interested in what comes next than in how well Red Hat is currently executing, he said.
"It's not a look at the present basis, it's what you can do to instill market confidence that you have a sufficiently scalable business model, and the operating system alone is not going to be it," Weiss said.
Van Wyk knows full well the pressure on the company, and said that during Red Hat's two-to-three-year transformation, the company will be making changes to ensure it can meet both the internal and the external needs of scaling an IT company.
The company is currently examining how it handles a host of functions, among them lead management, partner relationship management, subscriptions, financial systems and technical support. The next step in the transition will be to make changes where necessary to ensure the business is operating efficiently and providing the highest levels of customer service, he said.
"This whole idea of ease-- the ease of doing business with Red Hat, the ease of support, the automation of those technologies, the time to acquire OS technologies, zero time to subscribe-- those are all built into [our goals]," Van Wyk said. "These are things that have been said to us that customers want to have."
Van Wyk declined to go into detail about exactly how Red Hat will execute on this strategy, saying the company won't really have a clear idea of the changes it will make until the initial assessment is complete.
One thing Red Hat should consider is more acquisitions, said Raven Zachary, open source research director for The 451 Group. But Red Hat should move fast to acquire companies that will help them get into new markets-- such as database and data management-- because larger IT vendors are eyeing similar purchases.
"They have companies like Oracle, Microsoft, IBM and SAP competing for the same targets," he said. "Red Hat doesn't have the capital to compete with those suitors. They need to move very quickly before we get into an era where the largest IT vendors are competing for these targets."
Having established itself as the leading enterprise Linux vendor, Red Hat is in a pivotal phase of reinventing itself as a broader open-source software provider and a long-term technology leader a la Microsoft and Oracle. It's a tall order, and among other things it will take a business plan that lets the company move smoothly through this make-or-break stage.
Coming up with that internal plan lies on the shoulders of 30-year IT veteran Nick Van Wyk. Van Wyk joined Red Hat last year from EMC, taking a newly created role as vice president of operations to optimize Red Hat's subscription model and create better business processes to support the company's channel.
Two weeks ago, Red Hat also appointed him to a new role as senior director, transformation, in charge of examining the company's internal processes and operations to "reposition all of our systems to support the next stage of our evolution," he said.
That stage includes capitalizing on its April 2006 purchase of JBoss and the open-source middleware package that comes along with it, as well as growing from a company with annual revenue of about US$500 million to a billion-dollar company. Red Hat, whose affections toward other vendors can be fickle, also is challenged to build out a stronger ecosystem of partners to support not only Red Hat Enterprise Linux OS but also JBoss and any new technologies it brings to the table.
In the current technology business climate, Red Hat is a bit of an anomaly. The company has managed to exist for nearly 10 years with one core competency: a Linux server distribution it supports and provides maintenance for. The company has branched out into other areas of software, such as desktop Linux and virtualization, but for the most part, the server OS has been its bread and butter.
Recognizing it can't subsist long on this diet in an environment of consolidation and diversification, Red Hat made a calculated risk and purchased JBoss. It's now trying to position itself to make the most out of that and possible other new product developments or purchases, Van Wyk said.
"As we move forward, we will more be described as an open source services and solutions company," he said. "That's an enhanced position for Red Hat."
In its present situation, Red Hat has "a base, a critical mass of applications from which to grow," said George Weiss, vice president and distinguished analyst at Gartner. But investors are more interested in what comes next than in how well Red Hat is currently executing, he said.
"It's not a look at the present basis, it's what you can do to instill market confidence that you have a sufficiently scalable business model, and the operating system alone is not going to be it," Weiss said.
Van Wyk knows full well the pressure on the company, and said that during Red Hat's two-to-three-year transformation, the company will be making changes to ensure it can meet both the internal and the external needs of scaling an IT company.
The company is currently examining how it handles a host of functions, among them lead management, partner relationship management, subscriptions, financial systems and technical support. The next step in the transition will be to make changes where necessary to ensure the business is operating efficiently and providing the highest levels of customer service, he said.
"This whole idea of ease-- the ease of doing business with Red Hat, the ease of support, the automation of those technologies, the time to acquire OS technologies, zero time to subscribe-- those are all built into [our goals]," Van Wyk said. "These are things that have been said to us that customers want to have."
Van Wyk declined to go into detail about exactly how Red Hat will execute on this strategy, saying the company won't really have a clear idea of the changes it will make until the initial assessment is complete.
One thing Red Hat should consider is more acquisitions, said Raven Zachary, open source research director for The 451 Group. But Red Hat should move fast to acquire companies that will help them get into new markets-- such as database and data management-- because larger IT vendors are eyeing similar purchases.
"They have companies like Oracle, Microsoft, IBM and SAP competing for the same targets," he said. "Red Hat doesn't have the capital to compete with those suitors. They need to move very quickly before we get into an era where the largest IT vendors are competing for these targets."
Google in talks with Verizon Wireless: sources
2 hours, 4 minutes ago
NEW YORK (Reuters) - Google Inc is in active talks with number-two U.S. mobile carrier Verizon Wireless about putting Google applications on phones it offers, people familiar with the matter told Reuters on Tuesday.
"There are good useful talks going on and they could result in a deal," one of the sources said.
So far talks between the Web search leader and Verizon Wireless, owned by Verizon Communications and Vodafone Group Plc, revolve around technology and potential business models such as advertising-sponsored services, one of the people said.
Verizon Communications Chief Operating Officer Denny Strigl said during an investor call on Monday that the operator talks to a lot of companies including Google, but did not elaborate.
France Telecom on Tuesday denied its mobile business, Orange, was in talks with Google to introduce handsets running its software after it was named as a potential partner in a Wall Street Journal story earlier on Tuesday.
Google shares rose 2.3 percent on Tuesday to $694.77.
The Journal reported that Google was expected in two weeks to announce advanced software and services, enabling handset makers to sell Google-powered phones by mid-2008, citing people familiar with the matter. Google declined to comment.
Google has moved rapidly in the past year to extend its reach beyond text-based, pay-per-click Web search ads into a variety of new markets, including online video, television, radio and print advertising.
Google has also expanded into enterprise software, which has traditionally been Microsoft Corp's domain.
According to the Journal, the Google-powered phones are expected to meld several of its applications, including Google Maps, YouTube and Gmail.
The ground-breaking part of the plan, according to the newspaper, is Google's aim to make the phone's software "open," right down to the operating system which controls applications and interacts with hardware.
This will grant independent software developers access to the tools they need to build phone features, the Journal said.
(Reporting by Sinead Carew, Ritsuko Ando, Michele Gershberg and Justin Grant in New York, Astrid Wendlandt in Paris)
NEW YORK (Reuters) - Google Inc is in active talks with number-two U.S. mobile carrier Verizon Wireless about putting Google applications on phones it offers, people familiar with the matter told Reuters on Tuesday.
"There are good useful talks going on and they could result in a deal," one of the sources said.
So far talks between the Web search leader and Verizon Wireless, owned by Verizon Communications and Vodafone Group Plc, revolve around technology and potential business models such as advertising-sponsored services, one of the people said.
Verizon Communications Chief Operating Officer Denny Strigl said during an investor call on Monday that the operator talks to a lot of companies including Google, but did not elaborate.
France Telecom on Tuesday denied its mobile business, Orange, was in talks with Google to introduce handsets running its software after it was named as a potential partner in a Wall Street Journal story earlier on Tuesday.
Google shares rose 2.3 percent on Tuesday to $694.77.
The Journal reported that Google was expected in two weeks to announce advanced software and services, enabling handset makers to sell Google-powered phones by mid-2008, citing people familiar with the matter. Google declined to comment.
Google has moved rapidly in the past year to extend its reach beyond text-based, pay-per-click Web search ads into a variety of new markets, including online video, television, radio and print advertising.
Google has also expanded into enterprise software, which has traditionally been Microsoft Corp's domain.
According to the Journal, the Google-powered phones are expected to meld several of its applications, including Google Maps, YouTube and Gmail.
The ground-breaking part of the plan, according to the newspaper, is Google's aim to make the phone's software "open," right down to the operating system which controls applications and interacts with hardware.
This will grant independent software developers access to the tools they need to build phone features, the Journal said.
(Reporting by Sinead Carew, Ritsuko Ando, Michele Gershberg and Justin Grant in New York, Astrid Wendlandt in Paris)
Monday, October 29, 2007
"Market Monitor"-Douglas Jimerson
"Market Monitor"-Douglas Jimerson,, Editor and Publisher of "National Trendlines."
Friday, October 26, 2007
PAUL KANGAS: My guest market monitor this week is Douglas Jimerson, editor and publisher of "National Trendlines." And welcome back to NIGHTLY BUSINESS REPORT, Doug, good to see you.
DOUGLAS JIMERSON, EDITOR & PUBLISHER, NATIONAL TRENDLINES: Thank you, Paul. It's great to be back.
KANGAS: As we know, the big question on Wall Street for some time has been is the worst of the housing slump over or will it linger still longer?
JIMERSON: I fear it has much farther to go and we've been talking about this for several years, but I think that real estate is, is the type of industry that takes many years to work through its cycles. So we're probably looking at the slowdown into 2009.
KANGAS: And will continue to affect the stock market over here?
JIMERSON: I think so. (INAUDIBLE) It puts us in a trading range type of market, most likely.
KANGAS: In your latest market letter, you advise your conservative investment subscribers to allocate 20 percent of their assets in government bonds and the other 80 percent in cash. That sounds like you're awfully bearish on our market.
JIMERSON: We have just taken the money out of the NASDAQ. I think when we have the big news like we had today for Microsoft, the stock jumps 9 percent, that's time to take the money off the table and wait for an opportunity.
KANGAS: During your last visit with us in May you made two great calls. First you said the tech stocks were starting to look awfully good and it turned out to be an excellent call. And you also said take some profits in the energy group and they got hit pretty good there during the summer. So I congratulate you on those two good calls.
JIMERSON: Thanks.
KANGAS: On that last visit with us, you gave our viewers three "buy" recommendations. Let's see how they've done since then. Dennison Mining (DNN), that's a uranium mining company, right?
JIMERSON: Yes, it is.
KANGAS: Down 9.3 percent and still having a tough time convincing the nation to go nuclear.
JIMERSON: Well, but we have our first licensing since '73 of a nuclear plant. So I think the time has come. Now, this is a long-term opportunity so I would stay with it.
KANGAS: Look at the winner you've got, Fidelity China Region (FHKCX) up 57.3 percent. This is where you would put your funds over in Asia now?
JIMERSON: Absolutely. And that represents the whole country and that whole region. So there's an opportunity to be diversified, focused on China, which is like the U.S. of the 1960s.
KANGAS: OK. There was a third recommendation you made back in May, RYDEX Series Trust - OTC (RYDCX), this is a NASDAQ high-tech sector, basically, right?
JIMERSON: Correct. And that was a great buy during the summer. Now it's time to stand aside.
KANGAS: Oh, so now you're out of that?
JIMERSON: Yes.
KANGAS: How about some new recommendations, Doug?
JIMERSON: Well, I think right now the buy is China. So go with that Fidelity China Fund.
KANGAS: The same one that you recommended back in May?
JIMERSON: Absolutely. Look at the momentum.
KANGAS: I know, but you're not afraid of that huge, massive run up?
JIMERSON: There are going to be setbacks. It's going to be volatile. That is a volatile fund but I would stay with it because that's a real, a story of an economy that is really growing.
KANGAS: OK, let's move on to another recommendation.
JIMERSON: And then as we look to Asia, we see that Japan has been lagging for quite some time.
KANGAS: Pretty choppy performance in this fund (FJPNX - Fidelity Japan).
JIMERSON: Correct. And that's why this is an opportunity because I, I think that Japan is undervalued. I think we'll see the yen continue to strengthen. I think that's an opportunity for investors for the long term.
KANGAS: All right. How about a third recommendation?
JIMERSON: Thirdly, we like Bucyrus (BUCY) which is a mining equipment manufacturer. It goes along with that Dennison theme. And what we're doing here is investing in a company that is supplying these mines in countries like China and Australia, that are rich in natural resources.
KANGAS: So Bucyrus is based in the U.S., but does a lot of international --
JIMERSON: .prospering from the international business as we see.
KANGAS: OK. We have a minute left. Any further thoughts you'd like to impart to our viewers?
JIMERSON: I think we have to remember that just as we think in real estate, location, location, location, think in those terms in today's investment environment in the way you invest. The U.S. is not the location to be right now. Real estate is weak here. That's going to continue to drag on our economy.
KANGAS: How about Europe?
JIMERSON: Europe is beginning to slow. And it is more tied to what our growth is. So I think we need to look to Asia. And at the same time, I think we need to be very careful about the areas that have had big runs.
KANGAS: And diversify widely in Asian investments.
JIMERSON: Correct.
KANGAS: Do you personally own any of the securities we mentioned earlier or have any other disclosure about them to make?
JIMERSON: No, I do not.
KANGAS: OK. All right, very interesting things that you've had to say to us this evening. It's always good to have you with us, Doug.
JIMERSON: Thanks a lot, Paul.
KANGAS: My guest, Doug Jimerson of "National Trendlines."
Friday, October 26, 2007
PAUL KANGAS: My guest market monitor this week is Douglas Jimerson, editor and publisher of "National Trendlines." And welcome back to NIGHTLY BUSINESS REPORT, Doug, good to see you.
DOUGLAS JIMERSON, EDITOR & PUBLISHER, NATIONAL TRENDLINES: Thank you, Paul. It's great to be back.
KANGAS: As we know, the big question on Wall Street for some time has been is the worst of the housing slump over or will it linger still longer?
JIMERSON: I fear it has much farther to go and we've been talking about this for several years, but I think that real estate is, is the type of industry that takes many years to work through its cycles. So we're probably looking at the slowdown into 2009.
KANGAS: And will continue to affect the stock market over here?
JIMERSON: I think so. (INAUDIBLE) It puts us in a trading range type of market, most likely.
KANGAS: In your latest market letter, you advise your conservative investment subscribers to allocate 20 percent of their assets in government bonds and the other 80 percent in cash. That sounds like you're awfully bearish on our market.
JIMERSON: We have just taken the money out of the NASDAQ. I think when we have the big news like we had today for Microsoft, the stock jumps 9 percent, that's time to take the money off the table and wait for an opportunity.
KANGAS: During your last visit with us in May you made two great calls. First you said the tech stocks were starting to look awfully good and it turned out to be an excellent call. And you also said take some profits in the energy group and they got hit pretty good there during the summer. So I congratulate you on those two good calls.
JIMERSON: Thanks.
KANGAS: On that last visit with us, you gave our viewers three "buy" recommendations. Let's see how they've done since then. Dennison Mining (DNN), that's a uranium mining company, right?
JIMERSON: Yes, it is.
KANGAS: Down 9.3 percent and still having a tough time convincing the nation to go nuclear.
JIMERSON: Well, but we have our first licensing since '73 of a nuclear plant. So I think the time has come. Now, this is a long-term opportunity so I would stay with it.
KANGAS: Look at the winner you've got, Fidelity China Region (FHKCX) up 57.3 percent. This is where you would put your funds over in Asia now?
JIMERSON: Absolutely. And that represents the whole country and that whole region. So there's an opportunity to be diversified, focused on China, which is like the U.S. of the 1960s.
KANGAS: OK. There was a third recommendation you made back in May, RYDEX Series Trust - OTC (RYDCX), this is a NASDAQ high-tech sector, basically, right?
JIMERSON: Correct. And that was a great buy during the summer. Now it's time to stand aside.
KANGAS: Oh, so now you're out of that?
JIMERSON: Yes.
KANGAS: How about some new recommendations, Doug?
JIMERSON: Well, I think right now the buy is China. So go with that Fidelity China Fund.
KANGAS: The same one that you recommended back in May?
JIMERSON: Absolutely. Look at the momentum.
KANGAS: I know, but you're not afraid of that huge, massive run up?
JIMERSON: There are going to be setbacks. It's going to be volatile. That is a volatile fund but I would stay with it because that's a real, a story of an economy that is really growing.
KANGAS: OK, let's move on to another recommendation.
JIMERSON: And then as we look to Asia, we see that Japan has been lagging for quite some time.
KANGAS: Pretty choppy performance in this fund (FJPNX - Fidelity Japan).
JIMERSON: Correct. And that's why this is an opportunity because I, I think that Japan is undervalued. I think we'll see the yen continue to strengthen. I think that's an opportunity for investors for the long term.
KANGAS: All right. How about a third recommendation?
JIMERSON: Thirdly, we like Bucyrus (BUCY) which is a mining equipment manufacturer. It goes along with that Dennison theme. And what we're doing here is investing in a company that is supplying these mines in countries like China and Australia, that are rich in natural resources.
KANGAS: So Bucyrus is based in the U.S., but does a lot of international --
JIMERSON: .prospering from the international business as we see.
KANGAS: OK. We have a minute left. Any further thoughts you'd like to impart to our viewers?
JIMERSON: I think we have to remember that just as we think in real estate, location, location, location, think in those terms in today's investment environment in the way you invest. The U.S. is not the location to be right now. Real estate is weak here. That's going to continue to drag on our economy.
KANGAS: How about Europe?
JIMERSON: Europe is beginning to slow. And it is more tied to what our growth is. So I think we need to look to Asia. And at the same time, I think we need to be very careful about the areas that have had big runs.
KANGAS: And diversify widely in Asian investments.
JIMERSON: Correct.
KANGAS: Do you personally own any of the securities we mentioned earlier or have any other disclosure about them to make?
JIMERSON: No, I do not.
KANGAS: OK. All right, very interesting things that you've had to say to us this evening. It's always good to have you with us, Doug.
JIMERSON: Thanks a lot, Paul.
KANGAS: My guest, Doug Jimerson of "National Trendlines."
Couple dead serious about selling house
Mon Oct 29, 9:24 PM ET
WEXFORD, Pa. - It could be the deal of a lifetime. A Pittsburgh-area couple, Bob and Ricki Husick, are offering anyone who buys their home full cash-back upon their death and even their full inheritance, currently worth at least $500,000.
The Husicks have been trying to sell their home for almost a year, but have failed to do so in the current shaky market.
Bob Husick said he's asking $399,900 for the four-bedroom, three and a half bath home about 20 miles north of Pittsburgh.
According to the Husicks' offer, the buyer would get the money back when the couple dies. And if the buyer agrees to care for them in old age, they could also inherit their retirement home in Arizona, bringing the estate's current value to about $500,000.
WEXFORD, Pa. - It could be the deal of a lifetime. A Pittsburgh-area couple, Bob and Ricki Husick, are offering anyone who buys their home full cash-back upon their death and even their full inheritance, currently worth at least $500,000.
The Husicks have been trying to sell their home for almost a year, but have failed to do so in the current shaky market.
Bob Husick said he's asking $399,900 for the four-bedroom, three and a half bath home about 20 miles north of Pittsburgh.
According to the Husicks' offer, the buyer would get the money back when the couple dies. And if the buyer agrees to care for them in old age, they could also inherit their retirement home in Arizona, bringing the estate's current value to about $500,000.
Oil strikes record near $94
By Matthew Robinson Mon Oct 29, 3:35 PM ET
NEW YORK (Reuters) - Oil jumped to a record high near $94 a barrel on Monday as stormy weather disrupted supplies from giant exporter Mexico and the dollar wallowed near record lows.
Mexican state oil company Pemex has shut a fifth of the nation's crude production and halted the bulk of exports as storms kept ships bottled at ports across the country, a top U.S. supplier.
U.S. crude settled up $1.67 at $93.53 a barrel after striking a record $93.80 earlier. London Brent settled $1.63 higher at $90.32 a barrel.
Oil prices have soared by more than a third since mid-August as a stand-off between Turkey and Kurdish rebels, dollar weakness, easing interest rates and winter supply fears have lured a fresh wave of investment capital.
"Every new bullish factor pushes U.S. crude irrationally closer to $100 barrel," said SGCIB, adding: "Prices will fall if the FOMC does nothing."
The U.S. Federal Reserve's Federal Open Market Committee meets on October 30-31, and Wall Street is betting on another rate cut as the U.S. housing downturn deepens.
Expectations of a cut have helped push the dollar to record lows against a basket of currencies and boosted the price of dollar-denominated commodities.
FUNDS RUSH IN
Central banks also have poured billions of dollars into financial markets to help ease the credit crisis, and much of that money has been invested in energy, commodities and emerging markets.
"There's huge amount of speculation from hedge funds and others, they are all focused on the $100 barrel mark," said Frances Hudson of Standard Life Investments.
"If volatility decreases significantly, they'd stop playing."
Oil cartel OPEC has shrugged off calls from importer nations to raise crude output, blaming politics and speculation -- not a supply shortfall -- for high prices.
"I haven't any signal that there is any shortage of crude ... I believe a big portion of the oil price today is related to geopolitics and fear factors, and we cannot solve it," Qatari Oil Minister Abdullah al-Attiyah said.
"Sometimes there is a shortage of oil products but not of crude. This is because of limitations of refinery (capacity)."
The possibility of a large-scale Turkish incursion into northern Iraq to root out Kurdish rebels also is keeping the oil market on edge. The tension has sparked worries of a broader conflict in the oil-rich Middle East.
A Reuters poll of analysts ahead of weekly U.S. government inventory data forecast U.S. crude stocks rose 600,000 barrels in the week to October 26. Distillate stocks were seen off 1.1 million barrels while gasoline stocks were forecast to have fallen 300,000 barrels.
(Additional reporting by Janet Mcbride in London; Fayen Wong in Sydney and Elena Moya in London)
NEW YORK (Reuters) - Oil jumped to a record high near $94 a barrel on Monday as stormy weather disrupted supplies from giant exporter Mexico and the dollar wallowed near record lows.
Mexican state oil company Pemex has shut a fifth of the nation's crude production and halted the bulk of exports as storms kept ships bottled at ports across the country, a top U.S. supplier.
U.S. crude settled up $1.67 at $93.53 a barrel after striking a record $93.80 earlier. London Brent settled $1.63 higher at $90.32 a barrel.
Oil prices have soared by more than a third since mid-August as a stand-off between Turkey and Kurdish rebels, dollar weakness, easing interest rates and winter supply fears have lured a fresh wave of investment capital.
"Every new bullish factor pushes U.S. crude irrationally closer to $100 barrel," said SGCIB, adding: "Prices will fall if the FOMC does nothing."
The U.S. Federal Reserve's Federal Open Market Committee meets on October 30-31, and Wall Street is betting on another rate cut as the U.S. housing downturn deepens.
Expectations of a cut have helped push the dollar to record lows against a basket of currencies and boosted the price of dollar-denominated commodities.
FUNDS RUSH IN
Central banks also have poured billions of dollars into financial markets to help ease the credit crisis, and much of that money has been invested in energy, commodities and emerging markets.
"There's huge amount of speculation from hedge funds and others, they are all focused on the $100 barrel mark," said Frances Hudson of Standard Life Investments.
"If volatility decreases significantly, they'd stop playing."
Oil cartel OPEC has shrugged off calls from importer nations to raise crude output, blaming politics and speculation -- not a supply shortfall -- for high prices.
"I haven't any signal that there is any shortage of crude ... I believe a big portion of the oil price today is related to geopolitics and fear factors, and we cannot solve it," Qatari Oil Minister Abdullah al-Attiyah said.
"Sometimes there is a shortage of oil products but not of crude. This is because of limitations of refinery (capacity)."
The possibility of a large-scale Turkish incursion into northern Iraq to root out Kurdish rebels also is keeping the oil market on edge. The tension has sparked worries of a broader conflict in the oil-rich Middle East.
A Reuters poll of analysts ahead of weekly U.S. government inventory data forecast U.S. crude stocks rose 600,000 barrels in the week to October 26. Distillate stocks were seen off 1.1 million barrels while gasoline stocks were forecast to have fallen 300,000 barrels.
(Additional reporting by Janet Mcbride in London; Fayen Wong in Sydney and Elena Moya in London)
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, October 26, 2007, at 6:00 p.m. EST.
Energy and technology stocks pushed the market higher today. At the close, the Dow jumped almost 135 points, closing at 13,806; the Nasdaq gained 53 points, closing at 2,804. Oil closed up $1.40 to $91.86 per barrel, and gold closed up $16.50 at $787.50 an ounce.
Oil set a new record high today on tight inventories and the Turkey/Iraq squabble. Third quarter California Home Foreclosures soared 166.6 percent year-over-year. Mortgage lenders sent out 72,571 default notices during July, August, and September.
The FOMC will meet on October 30th and 31st, to review monetary policy. The deepening housing slump could force the Fed to cut interest rates by 25 to 50 basis points on October 31. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out. U.S. stock prices should move higher in November and December after the rate cut on October 31.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar, which fell to a new low today. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tue
Energy and technology stocks pushed the market higher today. At the close, the Dow jumped almost 135 points, closing at 13,806; the Nasdaq gained 53 points, closing at 2,804. Oil closed up $1.40 to $91.86 per barrel, and gold closed up $16.50 at $787.50 an ounce.
Oil set a new record high today on tight inventories and the Turkey/Iraq squabble. Third quarter California Home Foreclosures soared 166.6 percent year-over-year. Mortgage lenders sent out 72,571 default notices during July, August, and September.
The FOMC will meet on October 30th and 31st, to review monetary policy. The deepening housing slump could force the Fed to cut interest rates by 25 to 50 basis points on October 31. The mortgage mess and the credit crisis will take another 18 to 24 months to sort out. U.S. stock prices should move higher in November and December after the rate cut on October 31.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually and producing a GDP of only 11 percent.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock market because of the falling dollar, which fell to a new low today. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tue
Monday, October 22, 2007
Study Shows Timely Payments On New Mortgages Rise
By James R. Hagerty
From The Wall Street Journal Online
In a glimmer of good news for the U.S. home-mortgage market, more people are managing to keep up with payments on loans made in recent months, according to new data from First American LoanPerformance, a San Francisco research firm.
The trend reflects more-conservative lending policies adopted by mortgage companies this year in the wake of a surge in defaults and foreclosures, said Mark Carrington, director, analytical sales and support, at First American LoanPerformance.
Even so, defaults continue to rise in proportion to the overall number of home loans outstanding nationwide, most of which were made between 2003 and 2006, when lending standards were growing more lax. That means foreclosures are likely to keep rising, adding to a glut of homes already on the market and weighing on prices.
To assess recent results, LoanPerformance looks at loans that are four months old or less. During this year's second quarter, 6.6% of subprime loans in that category already had been blemished by payments at least 60 days overdue, LoanPerformance found. That was down from 7.2% in the first quarter and a peak of 7.6% in last year's third quarter. "It's still really high, but at least it's dropping now," Mr. Carrington said.
LoanPerformance says its loan-servicing data base covers about 80% of the national mortgage market. Subprime loans are those to borrowers with weak credit records or high debt in relation to their income.
For prime loans, the rate of new loans going bad declined to 0.6% in the second quarter from 0.8% in the first quarter.
A rash of all-but immediate defaults on loans last year alarmed investors and helped force dozens of lenders out of business. Investors who buy loans often can force lenders to buy back those that go sour within a few months. That can mean big losses for the lenders.
Lenders have blamed the early defaults partly on fraudulent loan applications from people who never intended to make payments and partly on a drop in home prices that has prompted some buyers to walk away from their obligations. Partly as a result, lenders are screening loan applicants more carefully for signs of fraud and requiring buyers to put up larger down payments.
The lax practices of recent years continue to haunt lenders. Including all subprime loans in the database, 18.8% were 60 days or more overdue in July, up from 17.5% in June, according to LoanPerformance. Making matters worse, borrowers face sharply higher payments on those loans after an initial two- or three-year period of easier terms expires.
"Market Monitor"-Jim Grinney
"Market Monitor"-Jim Grinney, Senior Vice President & CIO for Northern Trust Bank of Florida
Friday, October 19, 2007
PAUL KANGAS: My guest "Market Monitor" this week is Jim Grinney, senior vice president and chief investment officer for Northern Trust Bank of Florida. Jim, welcome back to NIGHTLY BUSINESS REPORT.
JIM GRINNEY, SR. V.P. & CHIEF INVEST. OFFICER, NORTHERN TRUST BANK: Thanks for having me back.
KANGAS: Give us your thoughts on today's steep downturn on Wall Street. What's behind it all?
GRINNEY: Markets (INAUDIBLE) was moved from the international growth to the domestic weakness. Remember, we had Intel and Coke report above average earnings because of international growth. Today, Caterpillar and Honeywell and 3M threw water on their parade. Earnings were up, but at the time, they said they were pulling estimates for next year or guiding estimates down because of the domestic weakness. And when the focus turned to that, at the same time, we had oil hitting a new high of $90 a barrel. We also had S&P reducing the ratings on several of the mortgage-backed securities. This is the anniversary of Black Monday.
KANGAS: Psychological impact.
GRINNEY: Psychological impact, yes.
KANGAS: You think we're going to go through this OK and make a comeback?
GRINNEY: At some point, yes. If the other part of the question is, are we done yet, we're not. If you look at the mortgage market in the next 12 months, remember, $480 billion of mortgages are going to re-price in the next 12 months. Of that amount, about $250 billion are considered sub- prime. So we're not done with this yet. Now what's this going to do to corporate America? We're not sure. How is this going to spill off to the consumer? The consumer has been pretty resilient so far. At some point, it's got to take an effect. We're looking for GDP as a result to slow from the 3 or 4 percent level down to 1 1/2 percent, but at this point no recession.
KANGAS: Will the Fed cut rates again to get things moving?
GRINNEY: The bond market is telling you there's 100 percent probability.
KANGAS: This month.
GRINNEY: This month in October. And I personally think it's a little bit more of a 50-50, whether they do it now or later. I do think we're going to see weakness that will prompt them to lower rates and tame inflation.
KANGAS: Speaking of 50-50, will it be a 50 basis point cut or 25?
GRINNEY: No, more like a 25 basis point cut. Again, the growth is not weak enough yet for them to be motivated to do more than 25.
KANGAS: There must be a point where the very weak mortgage lending stocks should be bought. Are we there yet?
GRINNEY: I don't believe so. Given what I just told you about the amount of re-pricing yet to come, I still want to get more of that out of the way. There's too much uncertainty right now.
KANGAS: On your last visit with us in late August, you recommend two stocks to buy. Let's see how they've done since then. Look at that, Cisco (CSCO), nobody liked it, but you did and it's up almost 50 percent. Great call. Still with it?
GRINNEY: Still with it.
KANGAS: Johnson & Johnson (JNJ) can't seem it get out of its own way, but it certainly didn't lose much? Are you still liking Johnson & Johnson?
GRINNEY: Long-term prospects are good.
KANGAS: I know you aren't going to recommend any individual stocks, but which stock sectors do you like and which would you avoid now?
GRINNEY: I think the obvious ones to avoid are any of those that deal with the mortgage-backed market. Secondarily, those that deal with consumer discretionary spending. The ones to emphasize are probably those again that have good international exposure because that area will continue to be relatively strong. And specifically, some of the sectors like the industrials, like the materials, those that are benefiting from the global infrastructure growth, whether you're looking at roads in India or bridges in Minnesota.
KANGAS: So the weak dollar is helping those big international firms, obviously.
GRINNEY: It is. Exports are very strong. The port of Long Beach recently reported that the outbound shipments are up 27 percent over last year.
KANGAS: Jim, our time is up, unfortunately. But thanks for being with us once again.
GRINNEY: Thank you.
KANGAS: My guest, Jim Grinney of Northern Trust Bank of Florida.
Friday, October 19, 2007
PAUL KANGAS: My guest "Market Monitor" this week is Jim Grinney, senior vice president and chief investment officer for Northern Trust Bank of Florida. Jim, welcome back to NIGHTLY BUSINESS REPORT.
JIM GRINNEY, SR. V.P. & CHIEF INVEST. OFFICER, NORTHERN TRUST BANK: Thanks for having me back.
KANGAS: Give us your thoughts on today's steep downturn on Wall Street. What's behind it all?
GRINNEY: Markets (INAUDIBLE) was moved from the international growth to the domestic weakness. Remember, we had Intel and Coke report above average earnings because of international growth. Today, Caterpillar and Honeywell and 3M threw water on their parade. Earnings were up, but at the time, they said they were pulling estimates for next year or guiding estimates down because of the domestic weakness. And when the focus turned to that, at the same time, we had oil hitting a new high of $90 a barrel. We also had S&P reducing the ratings on several of the mortgage-backed securities. This is the anniversary of Black Monday.
KANGAS: Psychological impact.
GRINNEY: Psychological impact, yes.
KANGAS: You think we're going to go through this OK and make a comeback?
GRINNEY: At some point, yes. If the other part of the question is, are we done yet, we're not. If you look at the mortgage market in the next 12 months, remember, $480 billion of mortgages are going to re-price in the next 12 months. Of that amount, about $250 billion are considered sub- prime. So we're not done with this yet. Now what's this going to do to corporate America? We're not sure. How is this going to spill off to the consumer? The consumer has been pretty resilient so far. At some point, it's got to take an effect. We're looking for GDP as a result to slow from the 3 or 4 percent level down to 1 1/2 percent, but at this point no recession.
KANGAS: Will the Fed cut rates again to get things moving?
GRINNEY: The bond market is telling you there's 100 percent probability.
KANGAS: This month.
GRINNEY: This month in October. And I personally think it's a little bit more of a 50-50, whether they do it now or later. I do think we're going to see weakness that will prompt them to lower rates and tame inflation.
KANGAS: Speaking of 50-50, will it be a 50 basis point cut or 25?
GRINNEY: No, more like a 25 basis point cut. Again, the growth is not weak enough yet for them to be motivated to do more than 25.
KANGAS: There must be a point where the very weak mortgage lending stocks should be bought. Are we there yet?
GRINNEY: I don't believe so. Given what I just told you about the amount of re-pricing yet to come, I still want to get more of that out of the way. There's too much uncertainty right now.
KANGAS: On your last visit with us in late August, you recommend two stocks to buy. Let's see how they've done since then. Look at that, Cisco (CSCO), nobody liked it, but you did and it's up almost 50 percent. Great call. Still with it?
GRINNEY: Still with it.
KANGAS: Johnson & Johnson (JNJ) can't seem it get out of its own way, but it certainly didn't lose much? Are you still liking Johnson & Johnson?
GRINNEY: Long-term prospects are good.
KANGAS: I know you aren't going to recommend any individual stocks, but which stock sectors do you like and which would you avoid now?
GRINNEY: I think the obvious ones to avoid are any of those that deal with the mortgage-backed market. Secondarily, those that deal with consumer discretionary spending. The ones to emphasize are probably those again that have good international exposure because that area will continue to be relatively strong. And specifically, some of the sectors like the industrials, like the materials, those that are benefiting from the global infrastructure growth, whether you're looking at roads in India or bridges in Minnesota.
KANGAS: So the weak dollar is helping those big international firms, obviously.
GRINNEY: It is. Exports are very strong. The port of Long Beach recently reported that the outbound shipments are up 27 percent over last year.
KANGAS: Jim, our time is up, unfortunately. But thanks for being with us once again.
GRINNEY: Thank you.
KANGAS: My guest, Jim Grinney of Northern Trust Bank of Florida.
Apple 4Q earnings beat analyst views
By MAY WONG, AP Technology Writer 2 hours, 5 minutes ago
SAN JOSE, Calif. - Apple Inc.'s fiscal fourth-quarter profits jumped 67 percent to cap a year that saw unprecedented momentum in its Macintosh computer business, continued demand for iPods and the successful launch of the iPhone.
For the three months that ended Sept. 30, Apple said Monday it earned $904 million, or $1.01 per share, compared with $542 million, or 62 cents per share, in the year-ago quarter.
Apple easily beat the expectations of analysts polled by Thomson Financial, who predicted earnings per share of 86 cents on sales of $6.07 billion.
Revenue totaled $6.22 billion, compared with $4.84 billion in the same quarter last year.
Apple's stock price, which has more than doubled since January, rose $3.94, or 2.3 percent, to close at $174.36. After the earnings report, shares climbed about $12, almost 7 percent, in extended trading.
Apple said it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent, while it sold 10.2 million iPods, up 17 percent. The debut of a slate of new iPods in September helped accelerate sales and is expected to boost holiday revenues, Apple officials said.
The company has sold more than 120 million iPods since the product's 2001 debut.
Yet the iPhone, a combination cell phone and media player, is already tracking better than the iPod, Apple's chief operating officer Tim Cook told analysts in a conference call.
In the first full quarter of iPhone sales — a number many on Wall Street were waiting for — Apple said it sold 1.12 million units, bringing the cumulative total to 1.39 million since the product debuted on June 29.
"It took us over two years to achieve a comparable number for the iPod," Cook said. "So we're thrilled here."
Sales of the iPhone picked up in September after Apple knocked $200 off the price of the 8-gigabyte model, bringing it down to $399, Cook said, but he declined to be more specific.
The swift price cut just 10 weeks after the gadget hit the market angered some early customers, a response that prompted Apple to make amends by offering them a $100 store credit.
Apple's efforts to prevent customers from modifying, or "unlocking," iPhones to work on networks other than Apple's carrier partner in the United States, AT&T Corp., also frustrated users — and sparked lawsuits.
Apple's "guess" is that buyers of 250,000 of the 1.4 million iPhones sold so far intended to unlock them, Cook said.
In an apparent about-face that allayed developer grumblings, Apple announced last week it will open the device to third-party applications.
Despite the complaints, Apple came out shining.
For the full fiscal year, Apple earned a record $3.5 billion, up more than 75 percent from last year when it earned $1.99 billion. Yearly sales reached over $24 billion, a 24 percent jump from fiscal 2006.
"We had a fantastic quarter and year," said Peter Oppenheimer, Apple's chief financial officer.
Apple's fortunes have skyrocketed in recent years as its iPods became a cultural phenomenon. The portable players, which work with Macs as well as Microsoft Corp. Windows-based machines, have also drawn more people to Apple's software and design, leading to what analysts call a "halo effect" on Mac sales.
After hovering for years with a 2 percent to 3 percent share of the PC market in the United States, Apple's slice has now grown to 8 percent, according to the latest figures from market researcher Gartner Inc.
Now, many investors are betting Apple's foray into the cell phone market will be another lucrative engine.
The iPhone "is a game-changing product," said Stephen Coleman, chief investment officer at Daedalus Capital LLC.
Based on income from the iPhone alone, he said, "I expect Apple's earnings to continually grow materially at 50 percent a year, for the next three years."
Apple reiterated Monday its previous target of selling 10 million iPhones in 2008, helped by the launch of the iPhone in Europe next month, then in Asia next year.
For the current quarter, Apple said it expects earnings of about $1.42 per share on revenue of about $9.2 billion. Analysts on average had been expecting earnings of $1.39 per share on sales of $8.58 billion.
"We're looking forward to a strong December quarter as we enter the holiday season with Apple's best products ever," said Steve Jobs, Apple's CEO.
SAN JOSE, Calif. - Apple Inc.'s fiscal fourth-quarter profits jumped 67 percent to cap a year that saw unprecedented momentum in its Macintosh computer business, continued demand for iPods and the successful launch of the iPhone.
For the three months that ended Sept. 30, Apple said Monday it earned $904 million, or $1.01 per share, compared with $542 million, or 62 cents per share, in the year-ago quarter.
Apple easily beat the expectations of analysts polled by Thomson Financial, who predicted earnings per share of 86 cents on sales of $6.07 billion.
Revenue totaled $6.22 billion, compared with $4.84 billion in the same quarter last year.
Apple's stock price, which has more than doubled since January, rose $3.94, or 2.3 percent, to close at $174.36. After the earnings report, shares climbed about $12, almost 7 percent, in extended trading.
Apple said it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent, while it sold 10.2 million iPods, up 17 percent. The debut of a slate of new iPods in September helped accelerate sales and is expected to boost holiday revenues, Apple officials said.
The company has sold more than 120 million iPods since the product's 2001 debut.
Yet the iPhone, a combination cell phone and media player, is already tracking better than the iPod, Apple's chief operating officer Tim Cook told analysts in a conference call.
In the first full quarter of iPhone sales — a number many on Wall Street were waiting for — Apple said it sold 1.12 million units, bringing the cumulative total to 1.39 million since the product debuted on June 29.
"It took us over two years to achieve a comparable number for the iPod," Cook said. "So we're thrilled here."
Sales of the iPhone picked up in September after Apple knocked $200 off the price of the 8-gigabyte model, bringing it down to $399, Cook said, but he declined to be more specific.
The swift price cut just 10 weeks after the gadget hit the market angered some early customers, a response that prompted Apple to make amends by offering them a $100 store credit.
Apple's efforts to prevent customers from modifying, or "unlocking," iPhones to work on networks other than Apple's carrier partner in the United States, AT&T Corp., also frustrated users — and sparked lawsuits.
Apple's "guess" is that buyers of 250,000 of the 1.4 million iPhones sold so far intended to unlock them, Cook said.
In an apparent about-face that allayed developer grumblings, Apple announced last week it will open the device to third-party applications.
Despite the complaints, Apple came out shining.
For the full fiscal year, Apple earned a record $3.5 billion, up more than 75 percent from last year when it earned $1.99 billion. Yearly sales reached over $24 billion, a 24 percent jump from fiscal 2006.
"We had a fantastic quarter and year," said Peter Oppenheimer, Apple's chief financial officer.
Apple's fortunes have skyrocketed in recent years as its iPods became a cultural phenomenon. The portable players, which work with Macs as well as Microsoft Corp. Windows-based machines, have also drawn more people to Apple's software and design, leading to what analysts call a "halo effect" on Mac sales.
After hovering for years with a 2 percent to 3 percent share of the PC market in the United States, Apple's slice has now grown to 8 percent, according to the latest figures from market researcher Gartner Inc.
Now, many investors are betting Apple's foray into the cell phone market will be another lucrative engine.
The iPhone "is a game-changing product," said Stephen Coleman, chief investment officer at Daedalus Capital LLC.
Based on income from the iPhone alone, he said, "I expect Apple's earnings to continually grow materially at 50 percent a year, for the next three years."
Apple reiterated Monday its previous target of selling 10 million iPhones in 2008, helped by the launch of the iPhone in Europe next month, then in Asia next year.
For the current quarter, Apple said it expects earnings of about $1.42 per share on revenue of about $9.2 billion. Analysts on average had been expecting earnings of $1.39 per share on sales of $8.58 billion.
"We're looking forward to a strong December quarter as we enter the holiday season with Apple's best products ever," said Steve Jobs, Apple's CEO.
High prices draw criminals to copper wire
By Karl Plume 2 hours, 49 minutes ago
CHICAGO (Reuters) - Criminals do not normally monitor commodities markets, but high metals prices have grabbed their attention, fuelling more thefts of copper wire and other items whose metal components can be sold for scrap.
Police across the world have reported a sharp rise in copper wire theft since prices for the benchmark metal hit all time high above $4 (2 pounds) per lb in early 2006 amid rising demand from China and dwindling base metal inventories.
Thieves have been pulling up buried copper wire in remote areas or stripping it from utility poles late at night. The cost of fixing the damage to infrastructure generally is greater than the monetary return at the scrap yard.
Lawmakers in the U.S. state of Missouri have stiffened penalties for buyers and sellers of stolen metal.
"Metal theft has become one of the fastest growing crimes impacting Missouri," said Colonel James F. Keathley, Superintendent of the State Highway Patrol.
Other states also have enacted laws requiring scrap buyers to record all transactions and keep detailed records.
Record high platinum prices have fuelled more thefts of catalytic converters, which can be extracted from parked cars quickly with a power saw and some expertise. Catalytic converters contain only a small amount of platinum, but thefts have increased with platinum prices around $1,400 an ounce.
However easy these heists may appear, several thieves have paid for their crimes with their lives.
Among the most gruesome, a looter in Germany was charred beyond recognition earlier this month after receiving a 10,000-volt shock attempting to steal a live copper cable. Police identified the man by fingerprints on a hand severed from his body by the force of the shock.
CHICAGO (Reuters) - Criminals do not normally monitor commodities markets, but high metals prices have grabbed their attention, fuelling more thefts of copper wire and other items whose metal components can be sold for scrap.
Police across the world have reported a sharp rise in copper wire theft since prices for the benchmark metal hit all time high above $4 (2 pounds) per lb in early 2006 amid rising demand from China and dwindling base metal inventories.
Thieves have been pulling up buried copper wire in remote areas or stripping it from utility poles late at night. The cost of fixing the damage to infrastructure generally is greater than the monetary return at the scrap yard.
Lawmakers in the U.S. state of Missouri have stiffened penalties for buyers and sellers of stolen metal.
"Metal theft has become one of the fastest growing crimes impacting Missouri," said Colonel James F. Keathley, Superintendent of the State Highway Patrol.
Other states also have enacted laws requiring scrap buyers to record all transactions and keep detailed records.
Record high platinum prices have fuelled more thefts of catalytic converters, which can be extracted from parked cars quickly with a power saw and some expertise. Catalytic converters contain only a small amount of platinum, but thefts have increased with platinum prices around $1,400 an ounce.
However easy these heists may appear, several thieves have paid for their crimes with their lives.
Among the most gruesome, a looter in Germany was charred beyond recognition earlier this month after receiving a 10,000-volt shock attempting to steal a live copper cable. Police identified the man by fingerprints on a hand severed from his body by the force of the shock.
Sunday, October 21, 2007
Burned by Real Estate, Some Just Walk Away
By Kemba J. Dunham and Rachel EmmaSilverman
From The Wall Street Journal Online
During the height of Las Vegas's real-estate boom two years ago, property investor Rob Rozzen bought 16 homes, hoping that skyrocketing prices would pump up his retirement nest egg.
Now, Mr. Rozzen says he is considering filing for bankruptcy protection. As the housing market slowed, the 40-year-old was unable to sell the homes, and his full-time job as a real-estate agent was no longer able to support mortgage payments totaling $45,000 a month. So one by one, over the past 14 months, Mr. Rozzen has stopped making payments on his investment properties, for which he paid between $226,000 and $390,000, and lenders have foreclosed.
As a result, Mr. Rozzen's credit score plunged from 730 to the high 400s, he says. The Prada clothes, luxurious vacations, and full-time housekeeper and pool cleaner he once enjoyed are things of the past. Still, he says, walking away from his investment properties was his only option. "You get to a point where your hands are tied," he says.
A growing number of investors like Mr. Rozzen are making the drastic decision to walk away from their properties and ultimately send their homes into foreclosure, lenders and real-estate agents say. Many investors who were hoping to quickly flip their investments are now left with homes that can no longer be sold for more than the mortgage debt. In many cases, these investors can't even find tenants willing to pay enough rent to cover hefty mortgages.
Certain data point to the trend. According to an August study by the Mortgage Bankers Association, defaults on mortgages where the owner doesn't live in the house are a major driver of the defaults in Florida, Nevada, California and Arizona -- four of the states with the fastest rising rates of seriously delinquent loans. Defaulted mortgages are defined as those 90 days or more past due or in foreclosure, according to the study.
But walking away from a mortgage is almost always a bad idea. You can lose your ability to take out future loans, and you might find the lender coming after your personal assets, such as your principal residence, depending on your state's laws and the terms of your loan.
"A lot of these people can't think clearly because the level of financial distress is so great," says David Dweck, president of the Boca Real Estate Investment Club in Boca Raton, Fla., who is also a Realtor. "They're hoping [that by taking this step], it's going to work itself out."
Tom Crossett is one investor on the verge of walking away from his properties. At the height of Florida's condominium boom two years ago, the 53-year-old air-conditioner contractor from Delray Beach, Fla., bought four units with the plan to flip them quickly. He paid between $143,000 and $173,000 for the units.
Mr. Crossett now says the developer of the complex that sold him the converted-from-apartment units reneged on many of the promises, including extensive renovations, making them a tough sell. To help make monthly mortgage payments totaling $4,000, he's been stuck renting the units to tenants who make sporadic payments. He says that next month, he plans to cut his losses and stop paying the mortgages. "The only way I can see for me is to just get out, stop the bleeding and let them go," Mr. Crossett sighs.
Before walking away from a mortgage, legal experts say, investors should approach a lender about a possible loan "workout," in which the mortgage payments are reduced but the investor gets to keep the property. Some investors say they have tried this, but without success. Still, banks don't typically want to act as property managers, nor do they want to have high foreclosure numbers on their books.
"There is a real incentive for both lenders and borrowers alike to do a workout and avoid foreclosure. Lenders are not good at being homeowners," says Fred Witt, national director, real-estate tax services, at Deloitte Tax LLP, in Phoenix.
One of the first effects of walking away from a mortgage is an assault on one's credit. The foreclosure could remain on your credit report for years and will sharply reduce your credit score, experts say. "This makes it more difficult or extremely costly, and in some cases impossible, to do more financing in the future," says Jack Guttentag, a professor of finance emeritus at the Wharton School of the University of Pennsylvania who operates a mortgage-advice Web site.
In some cases, lenders can go after an investor's other assets to satisfy a loan if the borrower defaults. But that often depends on the loan agreement, which sets out what recourse the lender has in the case of a default. In a nonrecourse loan, lenders can take only the property itself to satisfy the debt. Most loans, however, are recourse loans, which means that the borrower's other assets may be at risk.
Individual investors may even be on the hook if they borrowed through a limited liability company or a partnership. Principals of LLCs, or general partners of partnerships, can be personally liable if they act as guarantors; lenders often require personal guarantees as part of the loan agreement.
"Banks want the individuals on the hook," says New York lawyer Gideon Rothschild. Partnerships and LLCs are good to "protect you against slips and falls on your property," adds Jay Adkisson, a Newport Beach, Calif., lawyer, but they offer little protection if a lender requires you to sign a personal guarantee.
What's more, whether other assets, such as insurance policies and personal residences, are shielded from creditors varies widely by state. In Florida and Texas, for instance, your home, life-insurance policy, annuity or retirement plan are generally shielded from creditors. California, by contrast, offers much less protection for debtors. (More details about your state's laws are available at www.assetprotectionbook.com/state_resources.htm.)
Of course, investors can take steps to shield their assets from creditors. But setting up fancy structures, such as offshore trusts designed to keep property off limits from creditors, typically only works if done before creditors appear on the horizon, says Beachwood, Ohio, lawyer John E. Sullivan III. Similarly, assets in a 401(k) are generally protected from creditors if the plan was already in existence. "If you plan when the coast is clear, you should be OK," says Mr. Sullivan. "If you choose to wait, it could be too late."
Mr. Adkisson, the Newport Beach, Calif., lawyer, says he has received about 30 calls a week in recent months from real-estate investors seeking to shield their assets, just as lenders are beginning to chase after them. "There's just an absolute flood of people seeking asset protection, and it's all after the fact. It's like buying auto insurance after the car wreck."
There are a few things you can do to protect your money even as creditors are moving in. One idea: Move to Florida and buy a big house. As long as you can stay out of bankruptcy and qualify for Florida residency, a creditor can't force the sale of your home under Florida law, says Mr. Rothschild, the New York lawyer, who adds that the tactic won't work under new bankruptcy rules if you're forced to file for bankruptcy protection.
Investors who face foreclosure may be left with a big federal tax hit, says Mr. Witt, of Deloitte. That's because, in a recourse loan, the amount of the loan forgiven by the lender, in excess of the property's fair market value, is typically taxed as ordinary income to the taxpayer, he says.
The tax code does offer some relief, but only if the loan is forgiven during bankruptcy proceedings or if the borrower was insolvent immediately before the loan was discharged. However, it's tough to prove insolvency, since the Internal Revenue Service considers many assets, such as 401(k) retirement plans, in determining whether a borrower is insolvent. "These assets are typically exempt from creditors, but not for tax purposes," says Mr. Witt.
One option to avoid, if possible: filing for bankruptcy protection. Laws passed in 2005 make it much tougher in some cases to protect certain assets, such as your primary residence, from creditors during bankruptcy.
Email your comments to rjeditor@dowjones.com.
-- October 19, 2007
From The Wall Street Journal Online
During the height of Las Vegas's real-estate boom two years ago, property investor Rob Rozzen bought 16 homes, hoping that skyrocketing prices would pump up his retirement nest egg.
Now, Mr. Rozzen says he is considering filing for bankruptcy protection. As the housing market slowed, the 40-year-old was unable to sell the homes, and his full-time job as a real-estate agent was no longer able to support mortgage payments totaling $45,000 a month. So one by one, over the past 14 months, Mr. Rozzen has stopped making payments on his investment properties, for which he paid between $226,000 and $390,000, and lenders have foreclosed.
As a result, Mr. Rozzen's credit score plunged from 730 to the high 400s, he says. The Prada clothes, luxurious vacations, and full-time housekeeper and pool cleaner he once enjoyed are things of the past. Still, he says, walking away from his investment properties was his only option. "You get to a point where your hands are tied," he says.
A growing number of investors like Mr. Rozzen are making the drastic decision to walk away from their properties and ultimately send their homes into foreclosure, lenders and real-estate agents say. Many investors who were hoping to quickly flip their investments are now left with homes that can no longer be sold for more than the mortgage debt. In many cases, these investors can't even find tenants willing to pay enough rent to cover hefty mortgages.
Certain data point to the trend. According to an August study by the Mortgage Bankers Association, defaults on mortgages where the owner doesn't live in the house are a major driver of the defaults in Florida, Nevada, California and Arizona -- four of the states with the fastest rising rates of seriously delinquent loans. Defaulted mortgages are defined as those 90 days or more past due or in foreclosure, according to the study.
But walking away from a mortgage is almost always a bad idea. You can lose your ability to take out future loans, and you might find the lender coming after your personal assets, such as your principal residence, depending on your state's laws and the terms of your loan.
"A lot of these people can't think clearly because the level of financial distress is so great," says David Dweck, president of the Boca Real Estate Investment Club in Boca Raton, Fla., who is also a Realtor. "They're hoping [that by taking this step], it's going to work itself out."
Tom Crossett is one investor on the verge of walking away from his properties. At the height of Florida's condominium boom two years ago, the 53-year-old air-conditioner contractor from Delray Beach, Fla., bought four units with the plan to flip them quickly. He paid between $143,000 and $173,000 for the units.
Mr. Crossett now says the developer of the complex that sold him the converted-from-apartment units reneged on many of the promises, including extensive renovations, making them a tough sell. To help make monthly mortgage payments totaling $4,000, he's been stuck renting the units to tenants who make sporadic payments. He says that next month, he plans to cut his losses and stop paying the mortgages. "The only way I can see for me is to just get out, stop the bleeding and let them go," Mr. Crossett sighs.
Before walking away from a mortgage, legal experts say, investors should approach a lender about a possible loan "workout," in which the mortgage payments are reduced but the investor gets to keep the property. Some investors say they have tried this, but without success. Still, banks don't typically want to act as property managers, nor do they want to have high foreclosure numbers on their books.
"There is a real incentive for both lenders and borrowers alike to do a workout and avoid foreclosure. Lenders are not good at being homeowners," says Fred Witt, national director, real-estate tax services, at Deloitte Tax LLP, in Phoenix.
One of the first effects of walking away from a mortgage is an assault on one's credit. The foreclosure could remain on your credit report for years and will sharply reduce your credit score, experts say. "This makes it more difficult or extremely costly, and in some cases impossible, to do more financing in the future," says Jack Guttentag, a professor of finance emeritus at the Wharton School of the University of Pennsylvania who operates a mortgage-advice Web site.
In some cases, lenders can go after an investor's other assets to satisfy a loan if the borrower defaults. But that often depends on the loan agreement, which sets out what recourse the lender has in the case of a default. In a nonrecourse loan, lenders can take only the property itself to satisfy the debt. Most loans, however, are recourse loans, which means that the borrower's other assets may be at risk.
Individual investors may even be on the hook if they borrowed through a limited liability company or a partnership. Principals of LLCs, or general partners of partnerships, can be personally liable if they act as guarantors; lenders often require personal guarantees as part of the loan agreement.
"Banks want the individuals on the hook," says New York lawyer Gideon Rothschild. Partnerships and LLCs are good to "protect you against slips and falls on your property," adds Jay Adkisson, a Newport Beach, Calif., lawyer, but they offer little protection if a lender requires you to sign a personal guarantee.
What's more, whether other assets, such as insurance policies and personal residences, are shielded from creditors varies widely by state. In Florida and Texas, for instance, your home, life-insurance policy, annuity or retirement plan are generally shielded from creditors. California, by contrast, offers much less protection for debtors. (More details about your state's laws are available at www.assetprotectionbook.com/state_resources.htm.)
Of course, investors can take steps to shield their assets from creditors. But setting up fancy structures, such as offshore trusts designed to keep property off limits from creditors, typically only works if done before creditors appear on the horizon, says Beachwood, Ohio, lawyer John E. Sullivan III. Similarly, assets in a 401(k) are generally protected from creditors if the plan was already in existence. "If you plan when the coast is clear, you should be OK," says Mr. Sullivan. "If you choose to wait, it could be too late."
Mr. Adkisson, the Newport Beach, Calif., lawyer, says he has received about 30 calls a week in recent months from real-estate investors seeking to shield their assets, just as lenders are beginning to chase after them. "There's just an absolute flood of people seeking asset protection, and it's all after the fact. It's like buying auto insurance after the car wreck."
There are a few things you can do to protect your money even as creditors are moving in. One idea: Move to Florida and buy a big house. As long as you can stay out of bankruptcy and qualify for Florida residency, a creditor can't force the sale of your home under Florida law, says Mr. Rothschild, the New York lawyer, who adds that the tactic won't work under new bankruptcy rules if you're forced to file for bankruptcy protection.
Investors who face foreclosure may be left with a big federal tax hit, says Mr. Witt, of Deloitte. That's because, in a recourse loan, the amount of the loan forgiven by the lender, in excess of the property's fair market value, is typically taxed as ordinary income to the taxpayer, he says.
The tax code does offer some relief, but only if the loan is forgiven during bankruptcy proceedings or if the borrower was insolvent immediately before the loan was discharged. However, it's tough to prove insolvency, since the Internal Revenue Service considers many assets, such as 401(k) retirement plans, in determining whether a borrower is insolvent. "These assets are typically exempt from creditors, but not for tax purposes," says Mr. Witt.
One option to avoid, if possible: filing for bankruptcy protection. Laws passed in 2005 make it much tougher in some cases to protect certain assets, such as your primary residence, from creditors during bankruptcy.
Email your comments to rjeditor@dowjones.com.
-- October 19, 2007
Housing Slump May Persist For at Least Another Year
By Amy Hoak
From MarketWatch
BOSTON (MarketWatch) -- The Mortgage Bankers Association predicts the housing recession will last until the end of the third quarter next year. And if confidence isn't restored in the credit markets, the wait could extend until 2009, the group's chief economist said.
In the meantime, the slowdown in housing has become a primary cause in the slowing of the national economy, said Doug Duncan, chief economist of the group.
"Tough times," he said, after sharing the group's loan production estimates during a briefing with reporters on Tuesday. Tough times indeed.
On Wednesday morning, Duncan is scheduled to deliver the MBA's economic forecast to its members at the group's annual convention. The forecast calls for home sales to bottom out in the third quarter of next year and for housing starts to hit their bottom slightly earlier, in the second quarter.
Existing-home sales for 2007 will total 5.72 million units, a 12% decline over 2006 sales, he said. Sales will decline another 10% in 2008, before picking up by 5% in 2009.
New-home sales will total 819,000 units in 2007, down by 22% compared with 2006. Sales will also decline an additional 10% next year. In 2009, sales should rise by 6%.
Home prices for new and existing homes will follow suit, with national median prices declining 2% this year and another 2% in 2008, before flattening in 2009, Duncan added.
"We have a ways to go in the housing recession. It is clearly a deep recession; at this point, we figure that will dissipate at the end of the third quarter," he said.
Supply and demand
Local real-estate markets will vary, but overall there's a great deal of housing inventory that needs to diminish before housing recovers, Duncan said.
"Anyway you look at it, there are massive supplies of homes that have to be worked off the marketplace before we return to an increase in activity, and certainly in terms of construction," he said.
In fact, the publicly reported inventory numbers are likely underestimated, considering they don't include contract cancellations for new homes or foreclosed properties that aren't being marketed by a real estate agent, Duncan said.
On the demand side, there are also constraints, he added, as a restricted supply of credit and tightening lending standards curtail housing demand. Borrowers seeking nonconforming loans are especially facing tougher times getting a mortgage, including those who need jumbo loans, which exceed the conforming loan limit currently set at $417,000. Conforming loans are those that may be purchased by housing agencies Fannie Mae and Freddie Mac.
That said, borrowers of conforming loans shouldn't see too many surprises in the near future: The last MBA estimate of mortgage rates clocked the interest rate on a 30-year fixed-rate mortgage at 6.4%, and the group predicts the rate will rise only slightly, to 6.6%, by early 2008.
Industry outlook
As for the mortgage industry, the market conditions naturally amount to sharp declines in the volume of loans that can be made.
The group predicts that total mortgage production, including both purchase and refinance loans, will be $2.31 trillion in 2007, down 15% compared with 2006. Originations should decline another 18% next year. In 2009, they will drop an additional 6%, as purchase loans pick up but loans to refinance an existing mortgage decline.
Already, the industry has seen between 60,000 and 70,000 layoffs since housing markets in many areas turned south; by early next year, the number could reach 100,000 or more, Duncan said.
Overall economic growth will continue to slow through the rest of 2007, then should return to normal in the second half of 2008 and into 2009, according to the forecast. Also in the forecast: a quarter-point rate cut by the Fed, due to the spiking of energy prices, increasing of food costs and other stresses on household budgets, in addition to the decline of housing prices, Duncan said.
"We have not yet seen fully the impact of the credit shock to the U.S. and world economies," Duncan said in a news release announcing the forecast, "and the severity of that impact will depend on how long it takes for the markets to return to normal functioning and where credit spreads ultimately settle."
Email your comments to rjeditor@dowjones.com.
-- October 18, 2007
From MarketWatch
BOSTON (MarketWatch) -- The Mortgage Bankers Association predicts the housing recession will last until the end of the third quarter next year. And if confidence isn't restored in the credit markets, the wait could extend until 2009, the group's chief economist said.
In the meantime, the slowdown in housing has become a primary cause in the slowing of the national economy, said Doug Duncan, chief economist of the group.
"Tough times," he said, after sharing the group's loan production estimates during a briefing with reporters on Tuesday. Tough times indeed.
On Wednesday morning, Duncan is scheduled to deliver the MBA's economic forecast to its members at the group's annual convention. The forecast calls for home sales to bottom out in the third quarter of next year and for housing starts to hit their bottom slightly earlier, in the second quarter.
Existing-home sales for 2007 will total 5.72 million units, a 12% decline over 2006 sales, he said. Sales will decline another 10% in 2008, before picking up by 5% in 2009.
New-home sales will total 819,000 units in 2007, down by 22% compared with 2006. Sales will also decline an additional 10% next year. In 2009, sales should rise by 6%.
Home prices for new and existing homes will follow suit, with national median prices declining 2% this year and another 2% in 2008, before flattening in 2009, Duncan added.
"We have a ways to go in the housing recession. It is clearly a deep recession; at this point, we figure that will dissipate at the end of the third quarter," he said.
Supply and demand
Local real-estate markets will vary, but overall there's a great deal of housing inventory that needs to diminish before housing recovers, Duncan said.
"Anyway you look at it, there are massive supplies of homes that have to be worked off the marketplace before we return to an increase in activity, and certainly in terms of construction," he said.
In fact, the publicly reported inventory numbers are likely underestimated, considering they don't include contract cancellations for new homes or foreclosed properties that aren't being marketed by a real estate agent, Duncan said.
On the demand side, there are also constraints, he added, as a restricted supply of credit and tightening lending standards curtail housing demand. Borrowers seeking nonconforming loans are especially facing tougher times getting a mortgage, including those who need jumbo loans, which exceed the conforming loan limit currently set at $417,000. Conforming loans are those that may be purchased by housing agencies Fannie Mae and Freddie Mac.
That said, borrowers of conforming loans shouldn't see too many surprises in the near future: The last MBA estimate of mortgage rates clocked the interest rate on a 30-year fixed-rate mortgage at 6.4%, and the group predicts the rate will rise only slightly, to 6.6%, by early 2008.
Industry outlook
As for the mortgage industry, the market conditions naturally amount to sharp declines in the volume of loans that can be made.
The group predicts that total mortgage production, including both purchase and refinance loans, will be $2.31 trillion in 2007, down 15% compared with 2006. Originations should decline another 18% next year. In 2009, they will drop an additional 6%, as purchase loans pick up but loans to refinance an existing mortgage decline.
Already, the industry has seen between 60,000 and 70,000 layoffs since housing markets in many areas turned south; by early next year, the number could reach 100,000 or more, Duncan said.
Overall economic growth will continue to slow through the rest of 2007, then should return to normal in the second half of 2008 and into 2009, according to the forecast. Also in the forecast: a quarter-point rate cut by the Fed, due to the spiking of energy prices, increasing of food costs and other stresses on household budgets, in addition to the decline of housing prices, Duncan said.
"We have not yet seen fully the impact of the credit shock to the U.S. and world economies," Duncan said in a news release announcing the forecast, "and the severity of that impact will depend on how long it takes for the markets to return to normal functioning and where credit spreads ultimately settle."
Email your comments to rjeditor@dowjones.com.
-- October 18, 2007
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Friday, October 19, 2007, at 6:00 p.m. EST.
Third-quarter profit worries and lowered expectations for the fourth quarter sent stock prices plummeting today, with all major indices closing at their lowest levels of the day. At the close, the Dow plunged 367 points, closing at 13,522; the Nasdaq sank 74 points to 2,725; and the S&P 500 closed 39 points lower at 1,500 points. After hitting an all-time high of $90, oil closed down $0.87 to $88.60 per barrel, a 6-percent gain for the week, and gold closed $0.30 lower at $768.40 an ounce.
Despite another spectacular earnings report from tech-leader Google, the markets overwhelmingly reacted today to lowered third-quarter earnings and expectations, cautious fourth-quarter guidance, ongoing worries in the financial and energy sectors, overbought technical conditions, and options expiration.
Ironically, today’s sell-off coincides with the 20-year anniversary of the Black Monday crash that erased more than 500 points, or 23 percent, from the Dow in a single session. By comparison, today’s 366-point drop on the Dow represents a minor 2.6 percent loss, the Nasdaq’s 74-point drop represents only a 2.7 percent loss, and the S&P 500’s 39-point drop represents a 2.6 percent loss.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually. The August 2008 Summer Olympics in Beijing is the driving force behind a massive expansion effort to convince the world during the telecast of the Olympics that China is a global super power.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock markets because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, October 23, 2007, at 6:00 p.m. EST.
Third-quarter profit worries and lowered expectations for the fourth quarter sent stock prices plummeting today, with all major indices closing at their lowest levels of the day. At the close, the Dow plunged 367 points, closing at 13,522; the Nasdaq sank 74 points to 2,725; and the S&P 500 closed 39 points lower at 1,500 points. After hitting an all-time high of $90, oil closed down $0.87 to $88.60 per barrel, a 6-percent gain for the week, and gold closed $0.30 lower at $768.40 an ounce.
Despite another spectacular earnings report from tech-leader Google, the markets overwhelmingly reacted today to lowered third-quarter earnings and expectations, cautious fourth-quarter guidance, ongoing worries in the financial and energy sectors, overbought technical conditions, and options expiration.
Ironically, today’s sell-off coincides with the 20-year anniversary of the Black Monday crash that erased more than 500 points, or 23 percent, from the Dow in a single session. By comparison, today’s 366-point drop on the Dow represents a minor 2.6 percent loss, the Nasdaq’s 74-point drop represents only a 2.7 percent loss, and the S&P 500’s 39-point drop represents a 2.6 percent loss.
Record global liquidity is producing a global boom unlike anything we’ve seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China’s money supply is growing at better than 18 percent annually. The August 2008 Summer Olympics in Beijing is the driving force behind a massive expansion effort to convince the world during the telecast of the Olympics that China is a global super power.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock markets because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Tuesday, October 23, 2007, at 6:00 p.m. EST.
Thursday, October 18, 2007
Google 3Q profit soars 46 percent
By MICHAEL LIEDTKE, AP Business Writer 2 hours, 41 minutes ago
SAN FRANCISCO - Google Inc. rode the Internet advertising wave to another sparkling quarter, justifying the investor confidence that lifted its stock price by more than $100 during past month to establish the online search leader as Silicon Valley's most valuable company.
Overcoming a traditionally slow season for Web surfing, Google said Thursday that it earned $1.07 billion, or $3.38 per share, for the three months ended in September. That was a 46 percent improvement from net income of $733.4 million, or $2.36 per share, at the same time last year.
If not for the cost of awarding stock to its steadily expanding work force, Google said it would have earned $3.91 per share. That topped the average estimate of $3.78 per share among analysts surveyed by Thomson Financial.
Revenue for the period totaled $4.23 billion, a 57 percent increase from $2.67 billion last year.
After subtracting commissions paid to its thousands of advertising partners, Google's revenue stood at $3.01 billion — about $70 million above the average analyst estimate.
The performance represented a return to form for Google after its second-quarter earnings disappointed Wall Street. The company has surpassed analyst estimates in all but two of the 13 quarters since its August 2004 initial public offering.
"We're strong and getting stronger," Google Chairman Eric Schmidt said in an interview Thursday. "What I am most pleased about is our model works."
Wall Street already had been counting on a stellar quarter from Google, especially after its smaller rival, Yahoo Inc., beat analyst expectations with its third-quarter earnings released earlier this week.
The enormous expectations contributed to a 19 percent increase in Google's stock price during the past month, propelling shares through $600 for the first time.
Google shares added $6.14 Thursday to finish the regular session at $639.62, leaving the 9-year-old company with a market value of just below $200 billion. That enabled Google to edge past Cisco Systems Inc. as Silicon Valley's most valuable company.
After the third-quarter results came out, Google shares rose $7.38 in after-hours trading, signaling the stock will likely reach a new peak on Friday.
Google is thriving because advertising that once went to television, radio and newspapers is shifting to the Internet, where Google's search engine steers a highly effective system for finding prospective customers.
Although it relies on complex technology, Google's formula is fairly simple. As it processes a search request, Google also scans its database for text-based ads related to the same topic as the query and displays the commercial messages along the side and top of the results page.
Google gets paid when someone clicks on an ad on its pages or one of its partners' sites.
There's ample opportunity to display the ads, with Google fielding about 1.2 billion search requests worldwide per day, based on the latest data from comScore Inc. That's more than quadruple the number of requests handled by Yahoo, which runs the second largest search engine.
While becoming even more dominant in search, Google also is branching in new directions that are creating new ways to sell ads and opening up potential new revenue channels in the software applications market.
In the past few months, Google unveiled a way to show text-based ads across the bottom of videos supplied by its YouTube subsidiary and also began distributing ads within "widgets" — the interactive capsules that are becoming Internet staples.
"Each of these initiatives give advertisers new and interesting ways to build relationships with customers," Schmidt told analysts during a conference call.
Google is hoping to become even more powerful by buying an online ad placement service, DoubleClick Inc., for $3.1 billion. Facing protests from privacy activists as well as Google's rivals, the deal is under review by antitrust regulators in United States and Europe.
Schmidt said Google remains confident regulators will approve the acquisition, although he declined to set a timetable for obtaining the necessary clearance. When Google first announced the deal, it hoped to take control of DoubleClick before 2008.
In sign of its ambitious expansion plans, Google added another 2,130 employees in the third quarter — more than in any three-month period in its history. Management said the summer additions included about 1,000 hires right out of college and 300 employees inherited in its $625 million acquisition of e-mail specialist Postini Inc.
Schmidt assured analysts Google is closely monitoring the size of its work force and indicated the hiring will be more modest in the current quarter.
As of Sept. 30, the company's payroll totaled 15,916 people, including hundreds who have become millionaires because Google's stock has increased by more than sevenfold from its IPO price.
SAN FRANCISCO - Google Inc. rode the Internet advertising wave to another sparkling quarter, justifying the investor confidence that lifted its stock price by more than $100 during past month to establish the online search leader as Silicon Valley's most valuable company.
Overcoming a traditionally slow season for Web surfing, Google said Thursday that it earned $1.07 billion, or $3.38 per share, for the three months ended in September. That was a 46 percent improvement from net income of $733.4 million, or $2.36 per share, at the same time last year.
If not for the cost of awarding stock to its steadily expanding work force, Google said it would have earned $3.91 per share. That topped the average estimate of $3.78 per share among analysts surveyed by Thomson Financial.
Revenue for the period totaled $4.23 billion, a 57 percent increase from $2.67 billion last year.
After subtracting commissions paid to its thousands of advertising partners, Google's revenue stood at $3.01 billion — about $70 million above the average analyst estimate.
The performance represented a return to form for Google after its second-quarter earnings disappointed Wall Street. The company has surpassed analyst estimates in all but two of the 13 quarters since its August 2004 initial public offering.
"We're strong and getting stronger," Google Chairman Eric Schmidt said in an interview Thursday. "What I am most pleased about is our model works."
Wall Street already had been counting on a stellar quarter from Google, especially after its smaller rival, Yahoo Inc., beat analyst expectations with its third-quarter earnings released earlier this week.
The enormous expectations contributed to a 19 percent increase in Google's stock price during the past month, propelling shares through $600 for the first time.
Google shares added $6.14 Thursday to finish the regular session at $639.62, leaving the 9-year-old company with a market value of just below $200 billion. That enabled Google to edge past Cisco Systems Inc. as Silicon Valley's most valuable company.
After the third-quarter results came out, Google shares rose $7.38 in after-hours trading, signaling the stock will likely reach a new peak on Friday.
Google is thriving because advertising that once went to television, radio and newspapers is shifting to the Internet, where Google's search engine steers a highly effective system for finding prospective customers.
Although it relies on complex technology, Google's formula is fairly simple. As it processes a search request, Google also scans its database for text-based ads related to the same topic as the query and displays the commercial messages along the side and top of the results page.
Google gets paid when someone clicks on an ad on its pages or one of its partners' sites.
There's ample opportunity to display the ads, with Google fielding about 1.2 billion search requests worldwide per day, based on the latest data from comScore Inc. That's more than quadruple the number of requests handled by Yahoo, which runs the second largest search engine.
While becoming even more dominant in search, Google also is branching in new directions that are creating new ways to sell ads and opening up potential new revenue channels in the software applications market.
In the past few months, Google unveiled a way to show text-based ads across the bottom of videos supplied by its YouTube subsidiary and also began distributing ads within "widgets" — the interactive capsules that are becoming Internet staples.
"Each of these initiatives give advertisers new and interesting ways to build relationships with customers," Schmidt told analysts during a conference call.
Google is hoping to become even more powerful by buying an online ad placement service, DoubleClick Inc., for $3.1 billion. Facing protests from privacy activists as well as Google's rivals, the deal is under review by antitrust regulators in United States and Europe.
Schmidt said Google remains confident regulators will approve the acquisition, although he declined to set a timetable for obtaining the necessary clearance. When Google first announced the deal, it hoped to take control of DoubleClick before 2008.
In sign of its ambitious expansion plans, Google added another 2,130 employees in the third quarter — more than in any three-month period in its history. Management said the summer additions included about 1,000 hires right out of college and 300 employees inherited in its $625 million acquisition of e-mail specialist Postini Inc.
Schmidt assured analysts Google is closely monitoring the size of its work force and indicated the hiring will be more modest in the current quarter.
As of Sept. 30, the company's payroll totaled 15,916 people, including hundreds who have become millionaires because Google's stock has increased by more than sevenfold from its IPO price.
Economy - Thursday
Investor's Business Daily 2 hours, 44 minutes ago
Dollar index falls to record low
The greenback fell to a record low vs. a basket of currencies as well as the euro after Bank of America missed profit views on big and ongoing credit losses. It's the latest in a series of corporate, monetary and economic news raising concerns about U.S. growth, bettering the odds of further Fed rate cuts. The euro rose 0.88 cent to $1.4291. The yen rallied as risk-averse investors unwound carry trades.
N. Calif. home sales at 20-yr low
Sept. sales of new and existing homes in N. Calif. dropped to 5,014, down 31.3% vs. Aug. and 40.1% vs. a year earlier, DataQuick said. That's the lowest since the research firm began keeping records in 1988. DataQuick said Tue. that Sept. S. Calif. home sales dived 48.5% vs. a year ago to 12,455, also the lowest level recorded. Lenders cracked down on loans, especially "jumbo" mortgages for Calif.'s pricey homes.
Fed's Pianalto: housing 'very weak'
But jobs and output remain relatively firm, said Cleveland Fed President Sandra Pianalto. She said fin'l markets have stabilized since the Fed cut rates by 50 basis points on Sept. 18, but policymakers are ready to do more if needed. Inflation and inflation expectations are "moderate and well-anchored." Pianalto isn't a voting member of the FOMC in '07.
The 30-year fixed mortgage rate was flat at 6.4% this week, Freddie Mac said. The 15-year fixed rate rose 2 basis points to 6.08%; the 1-year adjustable climbed 3 ticks to 5.76%. With Treasury yields falling again, mortgage rates could retreat. Many Americans see recession
Almost half of Americans -- 46% -- feel the U.S. economy is in a recession, according to a poll by the CNN-Opinion Research Corp. 51% don't think the economy is in a slump. More than two-thirds of black citizens feel the country is in a recession vs. 42% of whites.
Leading indicators index up 0.3%
Sept. gains were in line with Wall St. forecasts. The data suggest continued economic growth over the next several months, but it's based on already-known indicators. Higher stock prices, lower jobless claims and better vendor performance fueled gains, while building permits were the big negative.
Dollar index falls to record low
The greenback fell to a record low vs. a basket of currencies as well as the euro after Bank of America missed profit views on big and ongoing credit losses. It's the latest in a series of corporate, monetary and economic news raising concerns about U.S. growth, bettering the odds of further Fed rate cuts. The euro rose 0.88 cent to $1.4291. The yen rallied as risk-averse investors unwound carry trades.
N. Calif. home sales at 20-yr low
Sept. sales of new and existing homes in N. Calif. dropped to 5,014, down 31.3% vs. Aug. and 40.1% vs. a year earlier, DataQuick said. That's the lowest since the research firm began keeping records in 1988. DataQuick said Tue. that Sept. S. Calif. home sales dived 48.5% vs. a year ago to 12,455, also the lowest level recorded. Lenders cracked down on loans, especially "jumbo" mortgages for Calif.'s pricey homes.
Fed's Pianalto: housing 'very weak'
But jobs and output remain relatively firm, said Cleveland Fed President Sandra Pianalto. She said fin'l markets have stabilized since the Fed cut rates by 50 basis points on Sept. 18, but policymakers are ready to do more if needed. Inflation and inflation expectations are "moderate and well-anchored." Pianalto isn't a voting member of the FOMC in '07.
The 30-year fixed mortgage rate was flat at 6.4% this week, Freddie Mac said. The 15-year fixed rate rose 2 basis points to 6.08%; the 1-year adjustable climbed 3 ticks to 5.76%. With Treasury yields falling again, mortgage rates could retreat. Many Americans see recession
Almost half of Americans -- 46% -- feel the U.S. economy is in a recession, according to a poll by the CNN-Opinion Research Corp. 51% don't think the economy is in a slump. More than two-thirds of black citizens feel the country is in a recession vs. 42% of whites.
Leading indicators index up 0.3%
Sept. gains were in line with Wall St. forecasts. The data suggest continued economic growth over the next several months, but it's based on already-known indicators. Higher stock prices, lower jobless claims and better vendor performance fueled gains, while building permits were the big negative.
Wednesday, October 17, 2007
New home construction plunges
By MARTIN CRUTSINGER, AP Economics Writer 1 hour, 38 minutes ago
WASHINGTON - Construction of new homes plunged to the lowest level in 14 years in September as turmoil in credit markets intensified the problems in the housing industry. Consumer prices, meanwhile, rose at the fastest pace in four months, reflecting higher energy and food costs.
The Commerce Department reported Wednesday that construction of new homes fell 10.2 percent in September to a seasonally adjusted annual rate of 1.191 million units. The decline was more than double the 4.2 percent drop that analysts had been expecting and it pushed activity down to the lowest level since March 1993.
Meanwhile, the Labor Department reported that consumer prices rose by 0.3 percent in September, slightly more than the 0.2 percent that analysts had been expecting as energy prices rose after three straight declines and food costs shot up at the fastest pace since June.
Core inflation, excluding energy and food, remained tame, however, rising by 0.2 percent, in line with expectations.
Analysts said the bigger-than-expected drop in housing construction could be signaling that the housing downturn, already the worst in 16 years, may be headed for bigger troubles. Housing activity is now 30.8 percent below the level of a year ago.
Asked whether the housing slump could push the country into a recession, President Bush told a news conference that "I feel good about many of the economic indicators" and said his administration was working to help homeowners deal with rising mortgage delinquencies. "When you got more houses than you got buyers, the price tends to go down. And we're going to have to work through the issue," Bush said.
But private economists were not as certain that the steep housing slump will not cause a recession.
"The contraction in housing is transitioning from an average downturn to among the worst in the post-World War II history," said Michael Gregory, an economist with BMO Capital Markets.
On Wall Street, the Dow Jones industrial average fell 20.40 points to close at 13,892.54 as investors worried that rising oil prices — a barrel of crude momentarily touched a fresh high of $89 — might spark more inflation problems.
After a five-year boom in which housing sales climbed to record highs, demand for both new and existing homes fell last year and prices, which had been soaring at double-digit rates, have been stagnant.
The slump has intensified in recent months as mortgage lenders have tightened standards for giving loans in response to soaring defaults. The higher defaults and the inability of prospective buyers to qualify for mortgages have contributed to record high levels of unsold new and existing homes.
Both Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson warned this week that the housing downturn was likely to persist longer than had been expected.
In its latest look at business conditions around the country, the Federal Reserve said that economic growth slowed in the early fall as the troubles in the housing and credit markets weighed on businesses and consumers.
"Contacts in a number of industries indicated a higher-than-usual degree of uncertainty," the Fed said in a report that will form the basis for discussion when policymakers meet on Oct. 30-31 to decide whether to cut interest rates further.
Many economists expect housing will trim growth by more than a full percentage point in the current quarter, but they believe the country will avoid an outright downturn because the Fed, which cut rates for the first time in four years in September, will cut rates again should further weakness develop.
The National Association of Homebuilders reported this week that its index of builder confidence fell to an all-time low in October.
"Builders are in a panic mode and are trying to catch up with a rapidly falling market," said Mark Zandi, chief economist at Moody's Economy.com.
The government report showed that applications for building permits, considered a good sign for future activity, fell sharply in September, dropping by 7.3 percent to 1.226 million units, also the weakest pace in 14 years.
Only the Northeast showed construction gains in September with activity rising by 45.4 percent in that region. Construction starts fell by 10.1 percent in the West, 11.7 percent in the South and 28.4 percent in the Midwest.
The 0.3 percent increase in consumer prices in September was the largest rise since a 0.7 percent surge last May. Energy costs were up 0.3 percent, while food costs jumped by 0.5 percent.
Analysts expect energy prices to rise even further in the months ahead, reflecting the fact that oil prices have been trading at record highs this week.
Wall Street Digest Hotline Update
This is The Wall Street Digest Hotline Update for Tuesday, October 16, 2007, at 6:00 p.m. EST.
Worries over rising oil prices and the housing market pushed stock prices lower today. At the close, the Dow fell almost 72 points, closing at 13,912, while the Nasdaq lost 16 points, closing at 2,763. Oil closed up $1.48 to $87.61 per barrel, and gold closed down $0.20 at $762.00 an ounce.
September Home Starts in Southern California plunged 30 percent from August and 48.5 percent from last year. The Consumer Price Index will be released tomorrow morning at 8:30, along with housing starts and building permits. The inventory of homes and condos for sale continues to rise, along with foreclosures. Numerous realtors do not expect a bottom in housing until 2009.
Record global liquidity is producing a global boom unlike anything we've seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China's money supply is growing at better than 18 percent annually. The August 2008 Summer Olympics in Beijing is the driving force behind a massive expansion effort to convince the world during the telecast of the Olympics that China is a global super power.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock markets because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, October 19, 2007, at 6:00 p.m. EST.
Worries over rising oil prices and the housing market pushed stock prices lower today. At the close, the Dow fell almost 72 points, closing at 13,912, while the Nasdaq lost 16 points, closing at 2,763. Oil closed up $1.48 to $87.61 per barrel, and gold closed down $0.20 at $762.00 an ounce.
September Home Starts in Southern California plunged 30 percent from August and 48.5 percent from last year. The Consumer Price Index will be released tomorrow morning at 8:30, along with housing starts and building permits. The inventory of homes and condos for sale continues to rise, along with foreclosures. Numerous realtors do not expect a bottom in housing until 2009.
Record global liquidity is producing a global boom unlike anything we've seen before. China, India, Brazil, Asia and the emerging markets are leading this greatest of all bull markets. China's money supply is growing at better than 18 percent annually. The August 2008 Summer Olympics in Beijing is the driving force behind a massive expansion effort to convince the world during the telecast of the Olympics that China is a global super power.
Stay fully invested! Stock prices in China, India, Asia and the emerging markets will outperform the U.S. stock markets because of the falling dollar. Global/international investments will enhance your investment returns as the dollar declines against other currencies. Stay close to our telephone/e-mail/website Hotline Updates.
The next Hotline Update will be on Friday, October 19, 2007, at 6:00 p.m. EST.
Tuesday, October 16, 2007
Stocks are poised for another retreat
By JOE BEL BRUNO, AP Business Writer 18 minutes ago
NEW YORK - Wall Street appeared headed for another tough session Tuesday, as stock futures retreated on comments from Federal Reserve Chairman Ben Bernanke that housing remains a drag on the economy.
Bernanke's comments late Monday during a speech at the New York Economic Club revived concerns that a recovery from the summer's credit crisis might take longer than expected. Investors also remain concerned about third-quarter earnings and rising energy costs.
Stocks had their biggest retreat in more than five weeks Monday after a consortium of banks led by Citigroup Inc. set up a fund to help bail out the credit markets. The nation's largest financial institution also reported a 57 percent decline in profit earlier in the day.
Investors might get a broader glimpse about how tightening credit markets and subprime mortgage woes affected several big regional banks. KeyCorp said before the open that profit fell 33 percent because of credit market volatility; while Wells Fargo & Co. is among other banks still scheduled to report.
Also putting pressure on stocks was a warning from Sweden's Ericsson that third-quarter operating profit will plunge 36 percent and margins would shrink sharply. The handset maker blamed the weak results on lower demand for mobile network upgrades.
Dow Jones industrial average futures fell 51, or 0.33 percent, to 14,015. Standard & Poor's 500 index futures fell 6.20, or 0.40 percent, to 1,553.80. Nasdaq 100 index futures fell 11.75, or 0.54 percent, to 2,169.00.
Oil prices pushed further into record territory on fears Turkey will pursue Kurdish rebels into Iraq and disrupt oil supplies in the region. Despite expectations of higher inventories in the weekly U.S. supply report released on Wednesday, a barrel of light, sweet crude rose $1.32 to $87.45 in premarket trading on the New York Mercantile Exchange.
Investors will get some more economic data on Tuesday with the National Association of Home Builders/Wells Fargo housing market index for October scheduled to be released at 1 p.m. EDT. The report is expected to show a decline from September.
Bernanke said in his speech the deepening housing slump probably will be a "significant drag" on economic growth. However, he again pledged to "act as needed" to help financial markets that were sent reeling this summer.
However, he did say that inflation remains in check. That could be a key factor for policymakers when deciding to cut interest rates at its Oct. 30-31 meeting.
Besides housing stocks, investors will also be looking closely at the technology sector. Quarterly profit reports from Yahoo Inc., International Business Machines Corp., and Intel Corp. will be released Tuesday.
Biotechnology shares might also weaken after Genentech Inc. reported third-quarter results barely beat Wall Street estimates. Analysts believe competition and market saturation might slow future earnings growth.
Overseas, Japan's Nikkei stock average closed down 1.27 percent. Britain's FTSE 100 fell 0.42 percent, Germany's DAX index fell 0.36 percent, and France's CAC-40 fell 0.87 percent.
NEW YORK - Wall Street appeared headed for another tough session Tuesday, as stock futures retreated on comments from Federal Reserve Chairman Ben Bernanke that housing remains a drag on the economy.
Bernanke's comments late Monday during a speech at the New York Economic Club revived concerns that a recovery from the summer's credit crisis might take longer than expected. Investors also remain concerned about third-quarter earnings and rising energy costs.
Stocks had their biggest retreat in more than five weeks Monday after a consortium of banks led by Citigroup Inc. set up a fund to help bail out the credit markets. The nation's largest financial institution also reported a 57 percent decline in profit earlier in the day.
Investors might get a broader glimpse about how tightening credit markets and subprime mortgage woes affected several big regional banks. KeyCorp said before the open that profit fell 33 percent because of credit market volatility; while Wells Fargo & Co. is among other banks still scheduled to report.
Also putting pressure on stocks was a warning from Sweden's Ericsson that third-quarter operating profit will plunge 36 percent and margins would shrink sharply. The handset maker blamed the weak results on lower demand for mobile network upgrades.
Dow Jones industrial average futures fell 51, or 0.33 percent, to 14,015. Standard & Poor's 500 index futures fell 6.20, or 0.40 percent, to 1,553.80. Nasdaq 100 index futures fell 11.75, or 0.54 percent, to 2,169.00.
Oil prices pushed further into record territory on fears Turkey will pursue Kurdish rebels into Iraq and disrupt oil supplies in the region. Despite expectations of higher inventories in the weekly U.S. supply report released on Wednesday, a barrel of light, sweet crude rose $1.32 to $87.45 in premarket trading on the New York Mercantile Exchange.
Investors will get some more economic data on Tuesday with the National Association of Home Builders/Wells Fargo housing market index for October scheduled to be released at 1 p.m. EDT. The report is expected to show a decline from September.
Bernanke said in his speech the deepening housing slump probably will be a "significant drag" on economic growth. However, he again pledged to "act as needed" to help financial markets that were sent reeling this summer.
However, he did say that inflation remains in check. That could be a key factor for policymakers when deciding to cut interest rates at its Oct. 30-31 meeting.
Besides housing stocks, investors will also be looking closely at the technology sector. Quarterly profit reports from Yahoo Inc., International Business Machines Corp., and Intel Corp. will be released Tuesday.
Biotechnology shares might also weaken after Genentech Inc. reported third-quarter results barely beat Wall Street estimates. Analysts believe competition and market saturation might slow future earnings growth.
Overseas, Japan's Nikkei stock average closed down 1.27 percent. Britain's FTSE 100 fell 0.42 percent, Germany's DAX index fell 0.36 percent, and France's CAC-40 fell 0.87 percent.
Oil sprints towards $88
By Janet McBride 41 minutes ago
LONDON (Reuters) - Oil thundered towards $88 a barrel on Tuesday, hitting a new record and extending a rally that has added eight dollars in a week on tight supplies, strong demand and tension in northern Iraq.
Oil is closing in on the inflation-adjusted high of $90.46 seen in 1980, the year after the Iranian revolution and at the start of the Iran-Iraq war. Prices this year have averaged $67.
At 7:08 a.m., U.S. crude was up $1.33 at $87.46, off a high of $87.97. London Brent was up $1.22 at $83.97.
Oil has set a series of records over the past three days.
Investors have cited rising tensions between Turkey and Kurdish separatists in northern Iraq, sturdy world energy demand growth, tight inventories in consumer nations heading into winter and unprecedented weakness in the U.S. dollar.
"There's a lot of risk there and that is being reflected in the price," said fund manager David Dugdale of MFC Global Investment Management.
"It is difficult to find any bearish factors now. There's the Iraq-Turkey issue, a weak dollar, and inventory levels for U.S. heating oil are much lower than a year ago," said Tetsu Emori, a fund manager at Japan's Astmax Futures Co. Ltd.
The Turkish cabinet asked parliament on Monday for permission to launch an attack on the separatists.
Iraqi oil exports via Turkey have been sporadic since 2003, although Turkey is also now a major conduit for Caspian oil exports to the Mediterranean.
But some analysts said the easing of a global credit crunch was a bigger factor driving oil.
Moves by the U.S. Federal Reserve to cut interest rates and add billions of dollars of temporary reserves to the banking system have added liquidity that is finding its way into oil, seen by some as a one-way bet.
FREIGHT TRAIN
"We suspect massive long-side commitment by sidelined money has had more to do with it," said Edward Meir of MF Global.
Oil has climbed from below $70 in mid-August and surged 10 percent surge since October 9. The rally has also been aided by fund buying as a hedge against a weaker dollar. Gold hit a 28-year high and platinum breached record levels.
Indonesia's OPEC governor said there was no fundamental justification for oil's spike towards $88.
"The market fundamentals are in balance. There is too much money coming into the market," Maizar Rahman told Reuters.
OPEC officials said they had heard no discussion within the organization about raising output beyond the 500,000 barrels per day agreed in September, which takes effect on November 1.
Oil prices have more than quadrupled since 2002 and climbed 43 percent since the start of 2007.
"Barring a massive selloff, the path of least resistance seems to be higher still, although like many others out there, we are hard-pressed to justify such high valuations," MF Global's Meir said.
"Still, we learned long -- and many dollars ago -- that it is best not to take on a speeding freight train."
LONDON (Reuters) - Oil thundered towards $88 a barrel on Tuesday, hitting a new record and extending a rally that has added eight dollars in a week on tight supplies, strong demand and tension in northern Iraq.
Oil is closing in on the inflation-adjusted high of $90.46 seen in 1980, the year after the Iranian revolution and at the start of the Iran-Iraq war. Prices this year have averaged $67.
At 7:08 a.m., U.S. crude was up $1.33 at $87.46, off a high of $87.97. London Brent was up $1.22 at $83.97.
Oil has set a series of records over the past three days.
Investors have cited rising tensions between Turkey and Kurdish separatists in northern Iraq, sturdy world energy demand growth, tight inventories in consumer nations heading into winter and unprecedented weakness in the U.S. dollar.
"There's a lot of risk there and that is being reflected in the price," said fund manager David Dugdale of MFC Global Investment Management.
"It is difficult to find any bearish factors now. There's the Iraq-Turkey issue, a weak dollar, and inventory levels for U.S. heating oil are much lower than a year ago," said Tetsu Emori, a fund manager at Japan's Astmax Futures Co. Ltd.
The Turkish cabinet asked parliament on Monday for permission to launch an attack on the separatists.
Iraqi oil exports via Turkey have been sporadic since 2003, although Turkey is also now a major conduit for Caspian oil exports to the Mediterranean.
But some analysts said the easing of a global credit crunch was a bigger factor driving oil.
Moves by the U.S. Federal Reserve to cut interest rates and add billions of dollars of temporary reserves to the banking system have added liquidity that is finding its way into oil, seen by some as a one-way bet.
FREIGHT TRAIN
"We suspect massive long-side commitment by sidelined money has had more to do with it," said Edward Meir of MF Global.
Oil has climbed from below $70 in mid-August and surged 10 percent surge since October 9. The rally has also been aided by fund buying as a hedge against a weaker dollar. Gold hit a 28-year high and platinum breached record levels.
Indonesia's OPEC governor said there was no fundamental justification for oil's spike towards $88.
"The market fundamentals are in balance. There is too much money coming into the market," Maizar Rahman told Reuters.
OPEC officials said they had heard no discussion within the organization about raising output beyond the 500,000 barrels per day agreed in September, which takes effect on November 1.
Oil prices have more than quadrupled since 2002 and climbed 43 percent since the start of 2007.
"Barring a massive selloff, the path of least resistance seems to be higher still, although like many others out there, we are hard-pressed to justify such high valuations," MF Global's Meir said.
"Still, we learned long -- and many dollars ago -- that it is best not to take on a speeding freight train."
S&P sees Fed cutting U.S. rates in Dec or Jan
By Yoo Choonsik Tue Oct 16, 2:39 AM ET
SEOUL (Reuters) - The Federal Reserve will probably cut U.S. interest rates again over the next few months and Asian central banks have room to do so once their exports lose steam, Standard & Poor's economists said on Tuesday.
Asian countries have sharply increased trading inside the region and would weather to some extent the slowing U.S. economy, or if necessary they will be able to lower interest rates to boost domestic demand, they told reporters in Seoul.
"There are two pieces of good news. The first piece of good news is that the Federal Reserves is reacting," David Wyss, global chief economist at the ratings agency, told a news conference.
"The second piece of the good news is that the rest of the world is ignoring the slowdown in the U.S., with growth remaining strong particularly in Asia."
He said Asia -- home to the world's two fastest-growing economies of China and India -- would probably post about 7 percent growth in 2008, although a U.S. recession would chop 1 percentage point off the forecast.
A slowing U.S. economy would prompt the Federal Reserve to act in the near future, Wyss said.
"We expect another quarter-point cut probably not in October, more likely in December or January, in response to weaker income and economic data," Wyss said.
The Federal Reserve slashed U.S. interest rates by a hefty half-percentage point on September 18 in a bold bid to shield the economy from a housing slump and financial turbulence, taking the benchmark federal funds rate down to 4.75 percent.
ASIA TO WEATHER
But Wyss said the Bank of Japan would probably hold the country's interest rates at least until the end of this year before raising them early next year.
"Not this year," he said on the sidelines in response to a question about the BOJ's timing on an interest rate rise.
"I think that will be because of a mix of domestic politics and the financial market turbulence," he said, without elaborating on the politics.
Subir Gokarn, S&P's Asia-Pacific chief economist, said at the conference the Asian economy has grown more resilient against a slowing U.S. economy as a result of efforts to expand trade with countries in the region.
"In the longer term, Asian economies are beginning to leverage regional growth through expanding regional integration," Gokarn said.
"Most Asian economies are at or close to the peak of their interest rate cycles, providing opportunities to offset global risks with expanding domestic demand."
S&P forecast South Korea's economic growth would slightly accelerate to between 4.5 percent and 5.0 percent in 2008 after reaching between 4.3 percent and 4.8 percent this year, presentation material showed.
South Korea's economy, Asia's fourth-largest, expanded 5.0 percent in 2006 and the central bank expects this year's growth rate to reach close to 5 percent.
Gokarn declined to forecast the Bank of Korea's interest rate policy.
SEOUL (Reuters) - The Federal Reserve will probably cut U.S. interest rates again over the next few months and Asian central banks have room to do so once their exports lose steam, Standard & Poor's economists said on Tuesday.
Asian countries have sharply increased trading inside the region and would weather to some extent the slowing U.S. economy, or if necessary they will be able to lower interest rates to boost domestic demand, they told reporters in Seoul.
"There are two pieces of good news. The first piece of good news is that the Federal Reserves is reacting," David Wyss, global chief economist at the ratings agency, told a news conference.
"The second piece of the good news is that the rest of the world is ignoring the slowdown in the U.S., with growth remaining strong particularly in Asia."
He said Asia -- home to the world's two fastest-growing economies of China and India -- would probably post about 7 percent growth in 2008, although a U.S. recession would chop 1 percentage point off the forecast.
A slowing U.S. economy would prompt the Federal Reserve to act in the near future, Wyss said.
"We expect another quarter-point cut probably not in October, more likely in December or January, in response to weaker income and economic data," Wyss said.
The Federal Reserve slashed U.S. interest rates by a hefty half-percentage point on September 18 in a bold bid to shield the economy from a housing slump and financial turbulence, taking the benchmark federal funds rate down to 4.75 percent.
ASIA TO WEATHER
But Wyss said the Bank of Japan would probably hold the country's interest rates at least until the end of this year before raising them early next year.
"Not this year," he said on the sidelines in response to a question about the BOJ's timing on an interest rate rise.
"I think that will be because of a mix of domestic politics and the financial market turbulence," he said, without elaborating on the politics.
Subir Gokarn, S&P's Asia-Pacific chief economist, said at the conference the Asian economy has grown more resilient against a slowing U.S. economy as a result of efforts to expand trade with countries in the region.
"In the longer term, Asian economies are beginning to leverage regional growth through expanding regional integration," Gokarn said.
"Most Asian economies are at or close to the peak of their interest rate cycles, providing opportunities to offset global risks with expanding domestic demand."
S&P forecast South Korea's economic growth would slightly accelerate to between 4.5 percent and 5.0 percent in 2008 after reaching between 4.3 percent and 4.8 percent this year, presentation material showed.
South Korea's economy, Asia's fourth-largest, expanded 5.0 percent in 2006 and the central bank expects this year's growth rate to reach close to 5 percent.
Gokarn declined to forecast the Bank of Korea's interest rate policy.
Sunday, October 14, 2007
U.S. Real Estate Snapshot Update
Chart Notes:
U.S. real estate hit a high during the week of Feb 9, 2007, it hit an Elliott Wave 5 reversing into a Elliott Wave 3 downward on this weekly chart of iShares Dow Jones US Real Estate (IYR). Elliott Wave 3 is always the longest wave. We are at the 50 FIB RET right now, which looks like we will be heading south, since the credit crunch will only get worse this winter quarter.
iShares Dow Jones U.S. Real Estate Index Fund (the Fund) seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Real Estate Index (the Index). The Index measures the performance of the real estate sector of the United States equity market. The Index includes companies in sub sectors, such as real estate holding and development, and real estate investment trusts (REITs). The Fund uses a representative sampling strategy in seeking to track the Index that collectively has an investment profile similar to the Index.
MORTGAGE MELTDOWN NEIGHBORHOODS CRUMBLE IN WAVE OF FORECLOSURES
One street's nightmare: People bail out, those who remain suffer
Erin McCormick, Carolyn Said,Kelly Zito, Chronicle Staff Writers
Sunday, October 14, 2007
Manuel Juarez stood in the middle of his patch of green lawn and gestured at the dead, brown yards of the empty tract homes in all directions.
"There are no people in that house there," he said, pointing at a large stucco home with a for-sale sign next door to his right. Then he pointed at two nearly identical houses for sale across the street, then to the one on his left and finally to the house directly behind his. "There are no people there, there or there either," the 51-year-old appliance repairman said in his native Spanish.
<< Epidemic repossessions hit several ZIP codes >>
The dead lawns and for-sale signs are stark evidence of the Bay Area's foreclosure crisis - and Antioch's Meadow Creek Estates, where Juarez's two-story home stands, is at the epicenter of it.
With 271 homes - or more than 2 percent of all residences - already foreclosed upon in the first eight months of this year, the 94531 ZIP code where Juarez lives has the Bay Area's highest foreclosure rate, according to a Chronicle analysis of housing data provided by DataQuick Information Systems, a La Jolla (San Diego County) research firm. In this southeastern corner of Antioch, another 671 households - or 6 percent of the total - have received bank notices this year that they are behind in their payments, the first step of the foreclosure process.
The foreclosure rate here is seven times that of the region as a whole and nearly 1,000 percent higher than it was a year ago. This small area of Antioch, with 23 foreclosures for every 1,000 homes, has twice the bank repossession rate of greater Stockton, an area often cited as the No. 1 foreclosure spot in California. On Juarez's block, at the eastern end of Catanzaro Way, the numbers are even grimmer. Nine out of 40 properties have been repossessed by the lender; another four are in default. That means almost one-third of the homes are in or facing foreclosure. You wouldn't know it if not for the dead lawns and for-sale signs that line the street. The neighborhood of spacious Mediterranean-style homes appears placid and pleasant, no different than any other California subdivision.
Built in 1994, the three- and four-bedroom homes tower over their small lots and share a color palette of beiges and tans. Most have two-car garages, high-ceiling living rooms with fireplaces, and master-bedroom suites.
Catanzaro Way and the 94531 ZIP code are a virtual petri dish for foreclosures because they share so many of the factors that fuel the trend: oversupply of homes, rampant price run-ups followed by swoons, lower-income residents, subprime adjustable-rate mortgages.
Hans Johnson, associate director of the Public Policy Institute of California in San Francisco, said the concentration of foreclosures in Antioch exemplifies an area on the geographic and financial fringe during a period when many people were struggling to get into a housing market gone mad.
"It's no surprise that you'd find more foreclosures in Antioch," Johnson said. "There's a lot of new housing, a lot of new homeowners, and those are the homeowners who are most financially stressed. (They are) taking out alternative loans, but also using a lot more of their incomes to pay for those alternative loans."
Erwin Solorzano remembers watching the neighborhood spring to life from a row of dusty lots when he moved here as a teenager in 1994.
"There was a green orchard over there and back there was just rolling hills," said the 28-year-old Muni maintenance worker, pointing east down Catanzaro Way to what now is a mass of tract homes. "That block there was the last to be built. When I moved here, it was just vacant lots."
Until six years ago the 94531 ZIP code didn't even exist. It was carved out from the 94509 ZIP Code as developers went on a building spree.
Antioch's population mushroomed from 43,000 in 1980 to nearly 100,000 two decades later, as it became a magnet for first-time home buyers looking for affordability, and families seeking alternatives to the inner city. Today it is the second-largest city in Contra Costa County after Concord.
Driving through the area, one sees block after block of nearly indistinguishable earth-toned homes, punctuated by strip malls and schools.
That burgeoning growth caused prices to rise rapidly. Houses on Catanzaro sold for about $150,000 when they were new in 1994. Two years ago, they went for more than $500,000.
Now prices have fallen precipitously. Catanzaro homes today are selling in the low $400,000s - if they sell at all.
Solorzano said last year his parents tried to sell the family's longtime home, located one house off Catanzaro on Waterford Way.
"It sat on the market for nine months," he said. "Now they've decided just to rent it out."
An analysis of housing price data provided by research firm First American LoanPerformance shows the median price in the 94531 ZIP code has fallen 15 percent since the Bay Area's housing market peaked in May 2006. That's the biggest drop of any ZIP code in the nine-county region.
For people who bought their homes at the peak of the market with 100 percent financing, a plunge in home values puts them "under water" - owing more on their mortgage than the house is worth.
Starting in the summer of 2004 and continuing until the end of 2006, more than 90 percent of all home purchases in the 94531 ZIP code were made with adjustable-rate loans, according to information from DataQuick. While adjustable loans became more popular throughout the Bay Area and the nation at the same time, the Antioch ZIP has an unusually high number of loans that were destined to reset higher after an introductory period, most commonly two or three years.
The combination of plunging values and higher mortgage payments created the perfect breeding ground for foreclosures. Homeowners who could not afford escalating monthly payments also could not refinance if their homes were worth less than the mortgages, and could not sell for enough to pay off their loans. That left foreclosure as the most likely outcome.
Studies have shown that a few foreclosures in a neighborhood can make a big difference in home prices of other properties. A study by Chicago's Woodstock Institute, a nonprofit that researches topics affecting low-income communities, found that each foreclosure of a conventional mortgage within one-eighth of a mile of a single-family home results in a decline in property value of between 0.9 and 1.1 percent.
A white sticker plastered on the door of the house at 5316 Catanzaro announces that the property has been declared vacant and the mortgage holder has been notified. An orange sticker says the locks have been changed. Public records show that the house was scheduled for a foreclosure auction this month.
But nobody on the street can remember who last lived in the house. Real estate records show the house changed hands in 2005 and offer no forwarding address for the woman who last held title.
"I think some people from Florida bought it, but never moved in," said Xavier G. Bustos, 70, who has lived on the block for eight years. Bustos and other neighbors are just as unclear as to who lived in other foreclosed houses that are now on the market.
"I think the for-sale signs scare everyone away," said Tommy Jenkins, who has rented a house on the street for two years. "If I came to this block and saw half the people selling their homes, I'd say, 'What's wrong with this neighborhood?' Really, there's nothing wrong with this neighborhood."
Most of the Catanzaro foreclosures appear to have affected people who bought about two years ago, presumably with low initial rates that later skyrocketed. Many of the foreclosed homes also appear to have been owned by investors. Property records suggest that at least five of the nine houses taken back by banks were owned by people who lived elsewhere.
Trinette Nastor of Fairfield owned two of the Catanzaro foreclosures. She said she bought the three-bedroom homes, located across the street from each other, for $530,000 each in late 2005, as an investment in a partnership with two acquaintances who arranged the deals but disappeared once property values fell. She thinks the acquaintances got her into the deal because she owns her own skin-care business in Vacaville, so she had the credit to qualify for mortgages.
"The plan was we were going to fix them up a little bit, flip them and then go from there," she said. Instead, "As soon as the market went for a loop, they were worth $470,000."
Nastor said one home was briefly occupied by renters and the other stayed vacant as far as she knows. She made a couple of monthly payments of about $3,000 each, but then couldn't keep up.
"I kept getting paperwork (from the banks)," she said. "I was like, 'Look, we've got to do something about this.' " That's when her partners disappeared, she said.
"I went crazy, I didn't know what to do," she said. "I had to let (the houses) go because they would bring my business and my health down."
She stopped making payments and the lenders foreclosed on both homes in January.
Many Bay Area homeowners in recent years looked to their houses not merely as shelter, but as piggybanks for funding renovations, educations, vacations or cars. There are ominous signs that some longtime Catanzaro residents who tapped into their home equity may turn into foreclosure victims as well.
Two doors down from the Juarez home, Patience White and her family are scrambling to avoid becoming another part of the grim statistics that have swept their neighborhood.
Having bought their home six years ago, White's family has imbued it with the pride of ownership, planting rose bushes in the front yard and hanging gold chenille curtains in the living room. Over the years, the family has built some equity in the house.
But White said an adjustable loan the family took out in a refinance last year is nearly killing them. The rates reset this year.
"We used to pay $1,700, and now we're paying $3,200," White said.
She said she was injured on her job as a licensed vocational nurse and has been able to work only part time. Her husband is pulling double shifts in his maintenance position with a San Francisco museum to try to make the payments.
"They didn't tell us there was a prepayment penalty. Now we've tried to refinance. We've gone to so many places and nobody will give us a loan."
She said the family began falling behind three months ago and is now being pestered with daily phone calls from collectors.
Her husband is trying to negotiate with the loan company.
"I just see the for-sale signs going up all around us," said White. "It's sad to see people put years in their homes and now they're getting kicked out.
"What can we do? Times are just getting harder."
Bustos works to maintain the close-knit neighborhood he remembers from the Catanzaro Way he moved to eight years ago.
He often stands beneath the Mexican flag he flies outside his two-car garage, keeping a watch on the street. He mows his neighbors' lawns and acts as an interpreter for a family three doors down that speaks only Spanish.
But Bustos said the neighborhood lost its feeling of cohesion over the past few years as there was rapid turnover. There used to be neighborhood block parties, he said, but lately some of his new neighbors came and went so quickly that he never got to know them.
Now he and other neighbors who remain say they are concerned for their home values and vexed about crime at the vacant properties.
"Oh sure, I worry," said Bustos, who has retired from his upholsterer's job and now works in the sporting goods department at Wal-Mart.
Pointing across the street to a for-sale house with a dead lawn, he said, "That house there was vandalized several times; they tore the banisters down, made holes in the wall."
Solorzano agrees the character of the neighborhood has changed - from a close-knit community to a place where neighbors hardly know each other.
"When I first moved here, it was like 'Cheers' - everybody knew your name. Everybody knew everybody's car. There were a lot of little kids."
In about 2001, he said, the market got so hot and the bidding for homes got so competitive that people could hardly buy a house.
"Then a lot of people started selling their homes and cashing out," he said.
"Now nobody knows anybody," said Solorzano's friend Tommy Jenkins, who moved to a rented house on Catanzaro Way 21/2 years ago and has lived nearby since the mid-1990s. He said the area's growth has brought a lot of urban problems like traffic and crime.
"We've seen Antioch grow from nothing to something and then back to nothing again," said Jenkins, 27, who works in construction.
The Juarez family is hoping to hold on in the neighborhood until things turn around and they get some stable neighbors.
"There's constant turnover; people move in, they move out," said Juarez's grown daughter, Esmeralda Juarez, who lives in the house with her parents and her two children. She added that one set of neighbors had disappeared in the middle of the night.
"We like it here, except for the ..." she pointed to the empty houses around them and across Catanzaro Way.
Resources
Places homeowners facing foreclosure can seek assistance:
Your bank - Lenders emphasize that financially stressed homeowners should contact them well before the loan is scheduled to reset higher. Ask if your loan can be modified, for example, by fixing the rate below the scheduled reset amount. Ask if you qualify for "forbearance" - temporary reduction or suspension of payments. Consumers can also ask a community group to contact the lender on their behalf. Phone numbers of major servicers' loss mitigation departments are at links.sfgate.com/ZTG.
ACORN Housing - www.acornhousing.org; (866) 672-2676 or (888) 409-3557. This nonprofit has programs with many lenders to help homeowners negotiate affordable loan workouts, payment agreements and foreclosure prevention. It also advocates for policy reforms to stop predatory lending.
Homeownership Preservation Foundation - links.sfgate.com/ZMV, (888) 995-4673. This community development group offers free foreclosure-avoidance counseling and assistance contacting lenders.
Counseling agencies - links.sfgate.com/ZMW, (800) 569-4287. The U.S. Department of Housing and Urban Development sponsors housing counseling agencies throughout the country that offer advice at little or no cost.
State government Web sites - California recently began Web sites in English and Spanish with tips on foreclosure prevention at www.yourhome.ca.gov and www.sucasa.ca.gov.
The Internal Revenue Service - Answers to questions on the tax implications of foreclosure and debt cancellation are at links.sfgate.com/ZBDG.
Source: Chronicle research
By the numbers
The total number of foreclosures from January to August 2007 by city within the San Francisco Bay Area:
Antioch
525
Oakland
337
Vallejo
337
Pittsburg
223
Brentwood
197
Richmond
179
Fairfield
153
San Pablo
151
Oakley
121
Concord
91
E-mail the writers at emccormick@sfchronicle.com, csaid@sfchronicle.com and kzito@sfchronicle.com.
This article appeared on page A - 1 of the San Francisco Chronicle
Erin McCormick, Carolyn Said,Kelly Zito, Chronicle Staff Writers
Sunday, October 14, 2007
Manuel Juarez stood in the middle of his patch of green lawn and gestured at the dead, brown yards of the empty tract homes in all directions.
"There are no people in that house there," he said, pointing at a large stucco home with a for-sale sign next door to his right. Then he pointed at two nearly identical houses for sale across the street, then to the one on his left and finally to the house directly behind his. "There are no people there, there or there either," the 51-year-old appliance repairman said in his native Spanish.
<< Epidemic repossessions hit several ZIP codes >>
The dead lawns and for-sale signs are stark evidence of the Bay Area's foreclosure crisis - and Antioch's Meadow Creek Estates, where Juarez's two-story home stands, is at the epicenter of it.
With 271 homes - or more than 2 percent of all residences - already foreclosed upon in the first eight months of this year, the 94531 ZIP code where Juarez lives has the Bay Area's highest foreclosure rate, according to a Chronicle analysis of housing data provided by DataQuick Information Systems, a La Jolla (San Diego County) research firm. In this southeastern corner of Antioch, another 671 households - or 6 percent of the total - have received bank notices this year that they are behind in their payments, the first step of the foreclosure process.
The foreclosure rate here is seven times that of the region as a whole and nearly 1,000 percent higher than it was a year ago. This small area of Antioch, with 23 foreclosures for every 1,000 homes, has twice the bank repossession rate of greater Stockton, an area often cited as the No. 1 foreclosure spot in California. On Juarez's block, at the eastern end of Catanzaro Way, the numbers are even grimmer. Nine out of 40 properties have been repossessed by the lender; another four are in default. That means almost one-third of the homes are in or facing foreclosure. You wouldn't know it if not for the dead lawns and for-sale signs that line the street. The neighborhood of spacious Mediterranean-style homes appears placid and pleasant, no different than any other California subdivision.
Built in 1994, the three- and four-bedroom homes tower over their small lots and share a color palette of beiges and tans. Most have two-car garages, high-ceiling living rooms with fireplaces, and master-bedroom suites.
Catanzaro Way and the 94531 ZIP code are a virtual petri dish for foreclosures because they share so many of the factors that fuel the trend: oversupply of homes, rampant price run-ups followed by swoons, lower-income residents, subprime adjustable-rate mortgages.
Hans Johnson, associate director of the Public Policy Institute of California in San Francisco, said the concentration of foreclosures in Antioch exemplifies an area on the geographic and financial fringe during a period when many people were struggling to get into a housing market gone mad.
"It's no surprise that you'd find more foreclosures in Antioch," Johnson said. "There's a lot of new housing, a lot of new homeowners, and those are the homeowners who are most financially stressed. (They are) taking out alternative loans, but also using a lot more of their incomes to pay for those alternative loans."
Erwin Solorzano remembers watching the neighborhood spring to life from a row of dusty lots when he moved here as a teenager in 1994.
"There was a green orchard over there and back there was just rolling hills," said the 28-year-old Muni maintenance worker, pointing east down Catanzaro Way to what now is a mass of tract homes. "That block there was the last to be built. When I moved here, it was just vacant lots."
Until six years ago the 94531 ZIP code didn't even exist. It was carved out from the 94509 ZIP Code as developers went on a building spree.
Antioch's population mushroomed from 43,000 in 1980 to nearly 100,000 two decades later, as it became a magnet for first-time home buyers looking for affordability, and families seeking alternatives to the inner city. Today it is the second-largest city in Contra Costa County after Concord.
Driving through the area, one sees block after block of nearly indistinguishable earth-toned homes, punctuated by strip malls and schools.
That burgeoning growth caused prices to rise rapidly. Houses on Catanzaro sold for about $150,000 when they were new in 1994. Two years ago, they went for more than $500,000.
Now prices have fallen precipitously. Catanzaro homes today are selling in the low $400,000s - if they sell at all.
Solorzano said last year his parents tried to sell the family's longtime home, located one house off Catanzaro on Waterford Way.
"It sat on the market for nine months," he said. "Now they've decided just to rent it out."
An analysis of housing price data provided by research firm First American LoanPerformance shows the median price in the 94531 ZIP code has fallen 15 percent since the Bay Area's housing market peaked in May 2006. That's the biggest drop of any ZIP code in the nine-county region.
For people who bought their homes at the peak of the market with 100 percent financing, a plunge in home values puts them "under water" - owing more on their mortgage than the house is worth.
Starting in the summer of 2004 and continuing until the end of 2006, more than 90 percent of all home purchases in the 94531 ZIP code were made with adjustable-rate loans, according to information from DataQuick. While adjustable loans became more popular throughout the Bay Area and the nation at the same time, the Antioch ZIP has an unusually high number of loans that were destined to reset higher after an introductory period, most commonly two or three years.
The combination of plunging values and higher mortgage payments created the perfect breeding ground for foreclosures. Homeowners who could not afford escalating monthly payments also could not refinance if their homes were worth less than the mortgages, and could not sell for enough to pay off their loans. That left foreclosure as the most likely outcome.
Studies have shown that a few foreclosures in a neighborhood can make a big difference in home prices of other properties. A study by Chicago's Woodstock Institute, a nonprofit that researches topics affecting low-income communities, found that each foreclosure of a conventional mortgage within one-eighth of a mile of a single-family home results in a decline in property value of between 0.9 and 1.1 percent.
A white sticker plastered on the door of the house at 5316 Catanzaro announces that the property has been declared vacant and the mortgage holder has been notified. An orange sticker says the locks have been changed. Public records show that the house was scheduled for a foreclosure auction this month.
But nobody on the street can remember who last lived in the house. Real estate records show the house changed hands in 2005 and offer no forwarding address for the woman who last held title.
"I think some people from Florida bought it, but never moved in," said Xavier G. Bustos, 70, who has lived on the block for eight years. Bustos and other neighbors are just as unclear as to who lived in other foreclosed houses that are now on the market.
"I think the for-sale signs scare everyone away," said Tommy Jenkins, who has rented a house on the street for two years. "If I came to this block and saw half the people selling their homes, I'd say, 'What's wrong with this neighborhood?' Really, there's nothing wrong with this neighborhood."
Most of the Catanzaro foreclosures appear to have affected people who bought about two years ago, presumably with low initial rates that later skyrocketed. Many of the foreclosed homes also appear to have been owned by investors. Property records suggest that at least five of the nine houses taken back by banks were owned by people who lived elsewhere.
Trinette Nastor of Fairfield owned two of the Catanzaro foreclosures. She said she bought the three-bedroom homes, located across the street from each other, for $530,000 each in late 2005, as an investment in a partnership with two acquaintances who arranged the deals but disappeared once property values fell. She thinks the acquaintances got her into the deal because she owns her own skin-care business in Vacaville, so she had the credit to qualify for mortgages.
"The plan was we were going to fix them up a little bit, flip them and then go from there," she said. Instead, "As soon as the market went for a loop, they were worth $470,000."
Nastor said one home was briefly occupied by renters and the other stayed vacant as far as she knows. She made a couple of monthly payments of about $3,000 each, but then couldn't keep up.
"I kept getting paperwork (from the banks)," she said. "I was like, 'Look, we've got to do something about this.' " That's when her partners disappeared, she said.
"I went crazy, I didn't know what to do," she said. "I had to let (the houses) go because they would bring my business and my health down."
She stopped making payments and the lenders foreclosed on both homes in January.
Many Bay Area homeowners in recent years looked to their houses not merely as shelter, but as piggybanks for funding renovations, educations, vacations or cars. There are ominous signs that some longtime Catanzaro residents who tapped into their home equity may turn into foreclosure victims as well.
Two doors down from the Juarez home, Patience White and her family are scrambling to avoid becoming another part of the grim statistics that have swept their neighborhood.
Having bought their home six years ago, White's family has imbued it with the pride of ownership, planting rose bushes in the front yard and hanging gold chenille curtains in the living room. Over the years, the family has built some equity in the house.
But White said an adjustable loan the family took out in a refinance last year is nearly killing them. The rates reset this year.
"We used to pay $1,700, and now we're paying $3,200," White said.
She said she was injured on her job as a licensed vocational nurse and has been able to work only part time. Her husband is pulling double shifts in his maintenance position with a San Francisco museum to try to make the payments.
"They didn't tell us there was a prepayment penalty. Now we've tried to refinance. We've gone to so many places and nobody will give us a loan."
She said the family began falling behind three months ago and is now being pestered with daily phone calls from collectors.
Her husband is trying to negotiate with the loan company.
"I just see the for-sale signs going up all around us," said White. "It's sad to see people put years in their homes and now they're getting kicked out.
"What can we do? Times are just getting harder."
Bustos works to maintain the close-knit neighborhood he remembers from the Catanzaro Way he moved to eight years ago.
He often stands beneath the Mexican flag he flies outside his two-car garage, keeping a watch on the street. He mows his neighbors' lawns and acts as an interpreter for a family three doors down that speaks only Spanish.
But Bustos said the neighborhood lost its feeling of cohesion over the past few years as there was rapid turnover. There used to be neighborhood block parties, he said, but lately some of his new neighbors came and went so quickly that he never got to know them.
Now he and other neighbors who remain say they are concerned for their home values and vexed about crime at the vacant properties.
"Oh sure, I worry," said Bustos, who has retired from his upholsterer's job and now works in the sporting goods department at Wal-Mart.
Pointing across the street to a for-sale house with a dead lawn, he said, "That house there was vandalized several times; they tore the banisters down, made holes in the wall."
Solorzano agrees the character of the neighborhood has changed - from a close-knit community to a place where neighbors hardly know each other.
"When I first moved here, it was like 'Cheers' - everybody knew your name. Everybody knew everybody's car. There were a lot of little kids."
In about 2001, he said, the market got so hot and the bidding for homes got so competitive that people could hardly buy a house.
"Then a lot of people started selling their homes and cashing out," he said.
"Now nobody knows anybody," said Solorzano's friend Tommy Jenkins, who moved to a rented house on Catanzaro Way 21/2 years ago and has lived nearby since the mid-1990s. He said the area's growth has brought a lot of urban problems like traffic and crime.
"We've seen Antioch grow from nothing to something and then back to nothing again," said Jenkins, 27, who works in construction.
The Juarez family is hoping to hold on in the neighborhood until things turn around and they get some stable neighbors.
"There's constant turnover; people move in, they move out," said Juarez's grown daughter, Esmeralda Juarez, who lives in the house with her parents and her two children. She added that one set of neighbors had disappeared in the middle of the night.
"We like it here, except for the ..." she pointed to the empty houses around them and across Catanzaro Way.
Resources
Places homeowners facing foreclosure can seek assistance:
Your bank - Lenders emphasize that financially stressed homeowners should contact them well before the loan is scheduled to reset higher. Ask if your loan can be modified, for example, by fixing the rate below the scheduled reset amount. Ask if you qualify for "forbearance" - temporary reduction or suspension of payments. Consumers can also ask a community group to contact the lender on their behalf. Phone numbers of major servicers' loss mitigation departments are at links.sfgate.com/ZTG.
ACORN Housing - www.acornhousing.org; (866) 672-2676 or (888) 409-3557. This nonprofit has programs with many lenders to help homeowners negotiate affordable loan workouts, payment agreements and foreclosure prevention. It also advocates for policy reforms to stop predatory lending.
Homeownership Preservation Foundation - links.sfgate.com/ZMV, (888) 995-4673. This community development group offers free foreclosure-avoidance counseling and assistance contacting lenders.
Counseling agencies - links.sfgate.com/ZMW, (800) 569-4287. The U.S. Department of Housing and Urban Development sponsors housing counseling agencies throughout the country that offer advice at little or no cost.
State government Web sites - California recently began Web sites in English and Spanish with tips on foreclosure prevention at www.yourhome.ca.gov and www.sucasa.ca.gov.
The Internal Revenue Service - Answers to questions on the tax implications of foreclosure and debt cancellation are at links.sfgate.com/ZBDG.
Source: Chronicle research
By the numbers
The total number of foreclosures from January to August 2007 by city within the San Francisco Bay Area:
Antioch
525
Oakland
337
Vallejo
337
Pittsburg
223
Brentwood
197
Richmond
179
Fairfield
153
San Pablo
151
Oakley
121
Concord
91
E-mail the writers at emccormick@sfchronicle.com, csaid@sfchronicle.com and kzito@sfchronicle.com.
This article appeared on page A - 1 of the San Francisco Chronicle
Consumers Struggle to Refinance
By Emily Friedlander and Lauren Baier Kim
Home builders down, have more to fall
Stocks for the largest U.S. home builders have dropped 65% since the beginning of this year, but home builders may have more to fall before they hit bottom, says Business Week. The magazine's Web site includes a slideshow of "America's Most Battered Home Builders," with Technical Olympic USA of Hollywood, Fla., showing the worst hit and posting a yearly return of -84.2%. Across the U.S., builders have been offering drastic price cuts of as much as $100,000 on a new home, Business Week says. Builders are likely to feel more pain next year when adjustable-rate mortgages are due to reset, which could push the number of U.S. foreclosures higher and hurt sales of newly built homes, the publication says.
Sub-prime standards haven't changed
The sub-prime loans backing mortgage bonds created early this year are going bad even faster than those issued in early 2006, a year that set a record for delinquencies on such loans, according to two new studies reported in the L.A. Times.
"It really is astonishing," says the author of one of the studies. "It's as if the lessons of the past two years were ignored in early 2007."
Lender may lose from failed condo deals
A few years ago, when the housing market was still hot, Corus Bankshares began financing condo projects in several locations across the U.S. Today, as many buyers of units in those projects aim to avoid closing on their purchases (many were speculators who had hoped to flip their properties), the lender may be forced take a big hit on its loans -- developers owe Corus $4 billion, 92% ($3.7 billion) of which are for condominiums, says the New York Times. Of the condo projects Corus financed, approximately 25% are in the Miami area and 9% are in Las Vegas, the Times says. This year, with the number of condos completed expected to rise 45% and with condo sales down (sales fell 12% through August of this year), other banks may find themselves in a similar predicament, the Times says. About 15% of all banks' loans are to construction, the publication says.
Bubble bloggers burst on scene
A few years ago, “bubble bloggers” who were predicting doom and gloom in the housing market, like Patrick Killelea, of Reality Parser, were largely overlooked and not taken seriously, reports the San Francisco Chronicle. But now that the housing market has taken a turn for the worse, these blogs are getting more attention, the article says.
There are scores of such blogs out there, including thehousingbubbleblog.com, housingdoom.com and bubblemeter.blogspot.com. Such bloggers are often distrustful of most anyone in the real-estate industry or related sectors and aren’t afraid to say it.
For instance, in his blog, Mr. Killelea writes: “Who disagrees that house prices will continue to fall? Real-estate related businesses disagree, because they don’t make money if buyers do not buy. These businesses have a large financial interest in misleading the public about the foolishness of buying a house now.”
Refinancing Gets ‘Freakish’ in Bay Area
Homeowners are struggling to refinance their homes in the East Bay Area, according to this article in the Contra Costa Times, which reports on that region of Northern California. The story says that many of these homeowners have incomes of $150,000 and more.
“Getting a loan is no longer a go-ahead no-brainer,” says one agent. “It’s a freakish set of circumstances.”
Bay Area home prices have finally ground to a halt, the piece says. From 2000 to 2005 median home prices rose an average of 11.5%. But last year they rose just 0.5%.
-- Ms. Kim is a senior editor at RealEstateJournal.com.
Home builders down, have more to fall
Stocks for the largest U.S. home builders have dropped 65% since the beginning of this year, but home builders may have more to fall before they hit bottom, says Business Week. The magazine's Web site includes a slideshow of "America's Most Battered Home Builders," with Technical Olympic USA of Hollywood, Fla., showing the worst hit and posting a yearly return of -84.2%. Across the U.S., builders have been offering drastic price cuts of as much as $100,000 on a new home, Business Week says. Builders are likely to feel more pain next year when adjustable-rate mortgages are due to reset, which could push the number of U.S. foreclosures higher and hurt sales of newly built homes, the publication says.
Sub-prime standards haven't changed
The sub-prime loans backing mortgage bonds created early this year are going bad even faster than those issued in early 2006, a year that set a record for delinquencies on such loans, according to two new studies reported in the L.A. Times.
"It really is astonishing," says the author of one of the studies. "It's as if the lessons of the past two years were ignored in early 2007."
Lender may lose from failed condo deals
A few years ago, when the housing market was still hot, Corus Bankshares began financing condo projects in several locations across the U.S. Today, as many buyers of units in those projects aim to avoid closing on their purchases (many were speculators who had hoped to flip their properties), the lender may be forced take a big hit on its loans -- developers owe Corus $4 billion, 92% ($3.7 billion) of which are for condominiums, says the New York Times. Of the condo projects Corus financed, approximately 25% are in the Miami area and 9% are in Las Vegas, the Times says. This year, with the number of condos completed expected to rise 45% and with condo sales down (sales fell 12% through August of this year), other banks may find themselves in a similar predicament, the Times says. About 15% of all banks' loans are to construction, the publication says.
Bubble bloggers burst on scene
A few years ago, “bubble bloggers” who were predicting doom and gloom in the housing market, like Patrick Killelea, of Reality Parser, were largely overlooked and not taken seriously, reports the San Francisco Chronicle. But now that the housing market has taken a turn for the worse, these blogs are getting more attention, the article says.
There are scores of such blogs out there, including thehousingbubbleblog.com, housingdoom.com and bubblemeter.blogspot.com. Such bloggers are often distrustful of most anyone in the real-estate industry or related sectors and aren’t afraid to say it.
For instance, in his blog, Mr. Killelea writes: “Who disagrees that house prices will continue to fall? Real-estate related businesses disagree, because they don’t make money if buyers do not buy. These businesses have a large financial interest in misleading the public about the foolishness of buying a house now.”
Refinancing Gets ‘Freakish’ in Bay Area
Homeowners are struggling to refinance their homes in the East Bay Area, according to this article in the Contra Costa Times, which reports on that region of Northern California. The story says that many of these homeowners have incomes of $150,000 and more.
“Getting a loan is no longer a go-ahead no-brainer,” says one agent. “It’s a freakish set of circumstances.”
Bay Area home prices have finally ground to a halt, the piece says. From 2000 to 2005 median home prices rose an average of 11.5%. But last year they rose just 0.5%.
-- Ms. Kim is a senior editor at RealEstateJournal.com.
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