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Banned
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Originally Posted by Ustwo
Pardon me if I missread the OP but did host just propose war on the rest of the nuclear world?
This is a modest proposal indeed, though he is no Jonathan Swift.
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No problemo.....welcome, fellow conservative and fair tax advocate, let's take a moment to check the pulse of the nation's domestic economy....we'll start with the US manufacturing sector. A milestone was observed last month:
It seems now that GM and Ford will both file for bankruptcy in the next year:
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http://www.bloomberg.com/apps/news?p...uIGZw&refer=us
GM, Ford Sacrifice Car Loan Revenue to Pay $43 Billion in Bonds
Jan. 10 (Bloomberg) -- Things are so desperate for General Motors Corp. and Ford Motor Co. that the largest U.S. automakers are selling their primary source of profit to pay bondholders: car loans that any bank would love to have on its books.
GM and Ford, weakened by price competition, falling sales and junk credit ratings, face record debt maturities this year. The companies need to come up with almost $11 billion in the next month, and a total of $43 billion this year. The amount is equal to almost half of the cash they had in September.....
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Quote:
http://www.usatoday.com/money/autos/...mmercial_x.htm
Posted 3/23/2006 9:32 AM
GM sells part of GMAC division
By Chris Woodyard, USA TODAY
General Motors (GM) said Thursday that it has sold a big chunk of one of its financing divisions, a cash-raising deal that is the latest in a series of bold moves by the financially troubled automaker.
GM says its General Motors Acceptance Corp. arm sold 78% of its GMAC Commercial Holding unit, which is involved in commercial mortgage lending and other services, to a group of investors for $1.5 billion in cash.
GM said the unit also will repay $7.3 billion in loans from within the company, bringing cash proceeds from the deal to nearly $9 billion.
The sale comes a day after GM announced a huge buyout offer to 126,000 hourly employees at its plants and supplier Delphi. The buyouts are designed to help the automaker reach a goal of shedding 30,000 blue-collar jobs.
.......GM had more than $20 billion on hand at the end of 2005, but lost $10.6 billion last year because of high labor costs and sluggish sales.
GM has sold other pieces in recent months, letting go of stakes in Suzuki and Fuji Heavy Industries.....
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GMAC was affected by GM's lowered credit rating. It would soon have become unprofitable anyway, because it could no longer borrow money at a favorable enough rate to offer car loans at an attractive rate and still maintain it's previous profit margin, when it had the ability to borrow money cheaper. GM has no profit engine to offset losses in it's car business, with GMAC sold....
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http://www.bloomberg.com/apps/news?p...uIGZw&refer=us
.....GMAC sold $15 billion of loans in 2005, 50 percent more than the past two years combined, Krell said. More than two-thirds of the company's debt is backed by collateral, compared with 35 percent in 2001, according to Krell.
[...]
The two combined have about $420 billion in debt, according to regulatory filings, almost as much as the $440 billion owed by Brazil, the most indebted nation among emerging markets.
Debt originally sold as investment grade by GM and Ford is now high-yield, high-risk at Standard & Poor's, Moody's Investors Service and Fitch Ratings........
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Quote:
http://www.consumeraffairs.com/news0..._industry.html
......GM spent $5.2 billion in 2004 to provide health care to about 1.1 million employees, retirees and dependents. The company suggests that the bill might rise 7.7 percent to $5.6 billion this year. That amounts to approximately $1,525 per vehicle before GM even begins to manufacture anything..........
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....and here come $8000 cars from China......
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http://www.businessweek.com/bwdaily/...0195_db016.htm
China is closing the quality gap and building a base of low-cost suppliers that could eventually allow it to unleash inexpensive, well-made cars on the West.
And because local production capacity of 3 million vehicles a year is currently outstripping demand by about half a million vehicles, there are already a lot of wheels looking for a garage. "It's inevitable," says Mark LaNeve, chief of sales and marketing at GM. "They'll follow the example of the Koreans and Japanese."
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Quote:
http://msnbc.msn.com/id/14409579/
By Bernard Simon in Toronto
Updated: 7:12 p.m. ET Aug. 18, 2006
Ford plans to slash its North American output for the rest of this year, with temporary shutdowns at 10 assembly plants, in a dramatic effort to speed up its turnaround plan, reduce inventories and improve the trade-in values of its vehicles.
The 103 year-old, family-controlled carmaker has come under fire in recent months for not acting as decisively as its Detroit-based rival General Motors to reverse its declining fortunes in a ferociously competitive market.
Ford said that fourth-quarter production would tumble by 21 per cent, or 168,000 vehicles, compared to a year ago. Third-quarter output will be 3 per cent lower......
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<b>Here is an article that will help us to transition over to an examination of the prospects for the housing/real estate industries.....look at what massive job losses do to a market, Danville, IL. Look at the absurd comparison to Cali and Miami housing prices.....</b>
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http://www.usatoday.com/money/econom...me-sales_x.htm
By Noelle Knox, USA TODAY
The loss of manufacturing jobs helped drive down home prices in 26 metro areas between April and June compared with the same period last year, the National Association of Realtors said Tuesday.
That's 10 more areas than in the first quarter, and it spotlights how joblessness in industrial states such as Illinois, Michigan, Ohio and Indiana is rippling through housing markets.
The hardest-hit this year: Danville, Ill., where prices at which existing homes were sold fell 11% in the second quarter after a 12% drop in the first quarter.
CHART : Prices in more than 100 metro areas
General Motors (GM), General Electric (GE) and Hyster (NC), a maker of forklifts, <b>were among the companies to close plants in Danville, leaving behind hundreds of unemployed residents. The median price for a home has fallen to $65,200 — the cheapest in the country.</b>
The exodus of auto, textile and other factory jobs has a direct effect on home prices. People leave town to look for work, boosting the supply of homes for sale. Others sell their homes because they can't keep up with the mortgage. At the same time, foreclosure rates in these cities are among the highest in the country, and banks are quick to cut prices to get the homes off their books.
"There were a lot of divorces, a lot of single mothers — all they could do is refinance their house or put it on the market and let it go cheap," says Jerry Urich of Century 21 Home Team <b>Realty in Danville.</b>
Still, nationwide there's no sign of any bursting real estate bubble......
Quote:
http://www.usatoday.com/money/econom...etroprices.htm
Median home prices in selected metro areas
Metro area.................Median price Q2 2006..Change from 2005
Danville, IL.....................................$65,200..-11.2%
Decatur, IL.....................................$85,300...-1.7%
San Diego-Carlsbad-San Marcos, CA..$613,100....1.2%
San Francisco-Oakland-Fremont, CA..$751,900....3.4%
San Jose-Sunnyvale-Santa Clara, CA.$748,200....0.4%
Sarasota-Bradenton-Venice, FL.........$350,900....0.2%
Youngstown-Warren-Boardman, OH-PA...$78,700...-5.1%
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Here's a letter from the mortgage insurance assoc., MICA, after they become alarmed about the risk that they are facing. They sold too many cheap mortgage insurance policies on loans that are of very low quality. Huge numbers of first time buyers with no money for downpayments were approved for loans.
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http://72.14.209.104/search?q=cache:...s&ct=clnk&cd=1
Hon. John M. Reich
Director
Office of Thrift Supervision
1700 G Street, N.W.
Washington, DC 20552
Dear Sir or Madam:
The Mortgage Insurance Companies of America (MICA) has long been strongly supportive of the banking agencies' work to ensure appropriate prudential standards for mortgage risk. Mortgage insurers of course have all of their risk concentrated in this area, and we are deeply concerned about the potential contagion effect from poorly-underwritten or unsuitable mortgages and home-equity loans. We hope the agencies will soon finalize the draft guidance released last December on nontraditional mortgages [70 FR 77249], in part because the most recent market trends show alarming signs of ongoing undue risk-taking that puts both lenders and consumers at risk.....
......• The most recent data available from a survey conducted by the National Association of Realtors (2) shows that first-time homeowners - 40% of all borrowers in 2005 - had an average down payment of only 2% on homes costing $150,000, but 43% of these homeowners had no down payment at all....
.........MICA has noted that industry practice did not change as significantly as required following the final guidance in 2005 on home-equity loans. (7) Although the non-traditional guidance is now only in draft form, one would have expected a far slower growth in industry reliance on non-traditional products in anticipation of final standards with far-reaching market impact. The fact that this did not occur reinforces the suggestion in our earlier comment letter (8) that the final guidance be accompanied by clear language regarding not only consistent enforcement by the agencies, but also clear penalties for those who disregard it.
We would be pleased to provide additional background on the findings noted above or any other market analysis that would be of assistance as your agencies finalize the nontraditional mortgage guidance.
Sincerely,
Suzanne C. Hutchinson signature
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The nation's largest mortgage bank sends courtesy warning letters to it's "interest only" ARM customers:
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http://www.baltimoresun.com/business...te-headlines-1
Interest-only loans may start cheap, 'reset' scary
Originally published August 18, 2006
...... To head off potential problems, the largest mortgage originator in the United States, Countrywide Home Loans, quietly has begun sending out letters to thousands of borrowers who have been making only the minimum payments on the company's popular "PayOption" adjustable-rate mortgages.
The letters explain that "this is an early message to alert you that, based on your current payment trends and potential future interest rate changes, the monthly payment you will be required to pay may increase significantly."
A model letter provided to me by Countrywide includes this hypothetical example of what could be ahead for a California homeowner currently making only minimum payments monthly on a $402,000 loan.
The current full interest rate on the loan is 7.6 percent, but the borrower has been paying just $1,348.47, far less than what's needed to fully amortize the mortgage over its 30-year term.
If the loan reset at today's rates, the letter explains, the full payment required would be $2,887.50 - more than double what the homeowner has gotten used to paying. Future reset rates could be even steeper, making the potential payment crunch much worse. ........
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Quote:
http://www.dfw.com/mld/dfw/news/15265587.htm
Posted on Sun, Aug. 13, 2006
D.R. Horton has strategy for recovery
By MITCHELL SCHNURMAN
STAR-TELEGRAM STAFF WRITER
We know how D.R. Horton deals with success: <b>It racked up more than 100 consecutive quarters of higher revenue and profits and became the nation's No. 1 home builder.</b>
Now we'll see how the Fort Worth company handles adversity.
It won't be pretty, it won't be subtle, and it won't be alone.
In an extraordinary call with analysts last month, Chief Executive Don Tomnitz and several executives laid out Horton's strategy for retrenchment after <b>the company reported its first-ever decline in business.</b> The call was unusual in its length, detail and candor, and the approach was quite a counterpoint to RadioShack's bashful Julian Day......
.....A few moves are reminders that the big picture always matters. Even as Horton dumps lots and slashes margins, it's looking to pick up choice property for a bargain and choosing to wait out the slump in some primo neighborhoods like Northern Virginia.
The takeaway is that Horton is on the case big-time, moving urgently on multiple fronts, and it's spreading the pain.
"Our belief is: It is better to overreact and overcut than it is to underreact and undercut," Tomnitz said, according to a transcript of the July 20 call. "Every time we've gone into a downturn in the home-building industry, they've always been longer and deeper than we've all imagined, so we're preparing for the worst."
Horton's response is worth examining, because the company has been a sterling performer for three decades, and it has been prepping for this day for years. Horton diversified its business -- it builds homes in 83 markets in 27 states -- to insulate it from regional slowdowns.
It has also anticipated the housing bubble bursting, saying a downturn could work to its advantage. With its buying power, landholdings and deep pockets, the company expects to pick up market share and perhaps some distressed competitors during a prolonged slump.
Those plans are being tested.
Let's note, however, that Horton is hardly in danger. For the nine months that ended June 30, home-building revenue rose 16 percent to $10 billion. Net income increased 5 percent to $955.6 million. Those are killer numbers.
Horton kept the pedal to the metal on home building, even as experts warned about a growing bubble, and sales stayed strong until recently. In the first quarter of the current fiscal year, sales were up 19 percent; they rose nearly 10 percent in the second quarter; May and April sales were both stronger than the year before.
<b>Then, Tomnitz said, "June absolutely fell off the Richter scale for us."
The problem is too many homes and too few buyers who can afford them,</b> as builders nationwide have gone on a construction binge and prices escalated to dizzying heights. Horton's sale orders for the quarter were down 4 percent, after years of quarterly growth in double digits.
Twenty-nine percent of Horton buyers walked away without closing their deals in the quarter, the highest bust-out rate in company history.
Horton responded by canceling option contracts for more land, eating the earnest money and other fees. It took a $57 million write-off in the quarter, primarily because of the land deals. More important, it slashed its earnings guidance by more than 30 percent for the fiscal year that ends in September.
Profits will be squeezed, because Horton will have to give more incentives to move homes; it expects to cancel more land contracts; and its average home price is falling.
<b>Horton's stock price, on a tear for five years, has fallen 43 percent in 2006.....</b>
.....Horton had 396,000 home lots, 43 percent of them secured through options. It plans to reduce that to 340,000 and get a 50-50 mix of lots owned and optioned.....
<b>....Tomnitz said framers and plumbers will have to get used to making less per hour than they did last year, which prompted an analyst to ask whether it was reasonable to squeeze their "thin" margins......</b>
......Some Horton markets are doing well; Texas sales increased 20 percent in the quarter, and Arizona was up, although a slowdown is under way there. California, Horton's biggest market, had the biggest decline in sales, 25 percent. Florida fell almost as much, and Colorado and Nevada both declined by double-digit rates.
The biggest problem, in Tomnitz's view, is affordability. Prices have climbed too high, and wage growth isn't close to matching it. As a result, too many new homes are sitting in the pipeline.
Horton has weathered other downturns, including the Texas real-estate bust in the 1980s, and he says the company will adjust.
"The beautiful thing about our business is we can redesign our product and pull cost out of it and make it smaller," Tomnitz said. "And in three to six months, we're right back out there in the marketplace with a more-affordable product."
<b>Sounds smart and realistic, with one caveat: Businesses are usually tripped up by problems they don't foresee.
What happens if too many Horton markets crash at the same time?</b>
817-390-7821 schnurman@star-telegram.com
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Well, there you have it. The nations largest automaker went from, just 12 months ago, holding $10 billion in cash, to experiencing diving auto sales, huge losses, and the loss of the $2.2 billion annual profit from it's auto loan division, GMAC. Combined, GMAC & Ford owe $440 billion....as much as Brazil.
The nation's largest homebuilder, D. R. Horton, has seen, after racking up 100 consecutive quarters of healthy profits and growth....it's first reported quarterly losses, and it is in 83 US housing markets and commented that
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May and April sales were both stronger than the year before.
Then, Tomnitz said, "June absolutely fell off the Richter scale for us."
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After 3 manufacturing plants closed at once in Danville, IL, average housing selling price dropped to $65,200. The good news is that the average home price in San Francisco Bay Area is $751,900....
So....it looks like the auto and housing industries are "done" and prices of homes in most markets are suddenly stangnant or retreating. Nickel hit a record price of $29,100 per 2200 lbs. this week, double the price of 8 months ago, with two days of world consumption currently stocked in warehouses around the globe, oil holds stubbornly above $70/bbl, and there is plenty of evidence that the US leaders plan to use pre-emptive military intervention to "manage" raw materials and WMD. The "evidence" is only as far away as the quote below, in my sig:
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http://news.google.com/news/url?sa=t...6-6.html&cid=0
....."Leaving before we complete our mission would create a terrorist state in the heart of the Middle East, a country with huge oil reserves that the terrorist network would be willing to use to extract economic pain from those of us who believe in freedom," Bush said.....
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Maybe we aren't ready yet for this discussion. Maybe we should postpone it for a year....until our economy and our dollar are flat on their asses....
Last edited by host; 08-20-2006 at 12:37 AM..
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