In what many have labeled the dumbest business move of 2007; Circuit City fired more then 3000 high paid workers in March and replaced them with lower-paid staff.
Fast forward the clock to eight months later and Circuit City is begging these former employees to come back. Circuit City has tried to improve its employee image; pushing the concepts of career path, better work environment, improving morale, and superior pay. For the most part most of the former employees are not buying any of it and have told the retailer to get lost.
Most analysts view that Circuit City was on the exact wrong track and the recent changes will not improve the situation. The survival of the company is in doubt unless a strategic partner gets involved; but no outside investors have been willing to step up to the plate to get involved with this dismal retailer.
Circuit City asks ex-workers to return
http://www.reuters.com/article/businessNews/idUSN2117894720071121
Just remember the two golden rules for struggling retailers:
1) Shut down underperforming locations if you must scale back.
2) Make sure that you keep experienced, higher paid staff in place.
Circuit City managed to ignore both of these rules, and both eliminated and infuriated the top portion of its workforce in the process. Some retailers don’t deserve to survive, and according to most analysts this may be one of them.
Sometimes the one year chart says it all:
http://finance.yahoo.com/q/bc?s=CC&t=1y
Wednesday, November 21, 2007
Foreclosures increase crime and drop property values
Suddenly foreclosures rather than “how to flip your home to make millions” is the focus of the majority of homeownership articles. It only took a mere six months to go from one extreme to the other in the financial press.
In a tribute to “Captain Obvious”, recent articles hawk the reality that foreclosed homes are a magnet for crime and cause neighboring property values to drop. One figure to note, each foreclosed house in your neighborhood will cause your home value to drop by 1%.
In the meantime, those turning off the lights at bankrupt mortgage companies wring their hands and exclaim, “Who would’ve thought that lending money to people who never could have repaid it would cause a crisis in neighborhoods across America.”
Empty Houses Home to Crime As Loans Fail
Neighborhoods Suffer As Crime Follows Foreclosures Into Vacant Houses
http://biz.yahoo.com/ap/071113/vacant_homes_crime.html?.v=1&.pf=insurance
Protecting your Home’s Value in the Era of Foreclosures
Foreclosures can affect the value of your property even if you've been paying your mortgage faithfully. Here are some ways you can protect your home's worth if your area is hit hard by foreclosures.
http://biz.yahoo.com/cnnm/071115/111507_toptips.html?.v=2&.pf=loans
In a tribute to “Captain Obvious”, recent articles hawk the reality that foreclosed homes are a magnet for crime and cause neighboring property values to drop. One figure to note, each foreclosed house in your neighborhood will cause your home value to drop by 1%.
In the meantime, those turning off the lights at bankrupt mortgage companies wring their hands and exclaim, “Who would’ve thought that lending money to people who never could have repaid it would cause a crisis in neighborhoods across America.”
Empty Houses Home to Crime As Loans Fail
Neighborhoods Suffer As Crime Follows Foreclosures Into Vacant Houses
http://biz.yahoo.com/ap/071113/vacant_homes_crime.html?.v=1&.pf=insurance
Protecting your Home’s Value in the Era of Foreclosures
Foreclosures can affect the value of your property even if you've been paying your mortgage faithfully. Here are some ways you can protect your home's worth if your area is hit hard by foreclosures.
http://biz.yahoo.com/cnnm/071115/111507_toptips.html?.v=2&.pf=loans
Tuesday, November 20, 2007
Dismal Housing: No End in Sight
Fannie, Freddie, Countrywide, and some builders crowded the front page of the financial press today as their stocks dived to new significant lows.
Freddie Mac (FRE) reported a $2 billion dollar loss as the fair value of its assets dropped by $8.1 billion. Freddie indicated that it must seek outside funding in order to meet regulatory liquidity requirements; meaning an immediate infusion of up to $4 billion is needed to keep the government sponsored mortgage entity afloat. Additionally, the firm was forced to increase its provision for credit losses to $1.2 billion, from $112 million, a year ago. Most investors view Fannie Mae (FNM) as being in a similar situation. The speculation is that the issues will just keep getting worse in upcoming quarters.
Countrywide (CFC) spent most of the day denying bankruptcy rumors as their stock tumbled below $10 for the bulk of the trading day. This is a case of the stronger and more frequent the denials, then the greater the probability of the filing occurring sooner rather then later. Many local investors give them less than six weeks in our bank “death-watch pool”. The situation may possibly end with some sort of merger with another bank in which assets are valued for pennies on the dollar as the last resort
On the homebuilding front, D.R Horton reported (DHI) reported huge quarterly losses today. While there is speculation that many builders will go under due to liquidity issues, Standard Pacific (SPF) sunk over 20% today on this type of concern. Many more will surely follow.
Some traders would look at the huge tumbles of FNM and FRE as short time buying opportunities as the market was over enthusiastic in punishing both stocks for the negative news from Freddie. There is a good likelihood of a short term rebound. However the recent news today that drove the stocks to 10 year lows is just the leading edge of further write-downs that will occur in upcoming quarters. Leaving both government sponsored entities drained of capital and desperately seeking financial assistance. This may amount to further issuing of preferred instruments which smacks the existing common shareholders, to the straight-out begging for a bailout from the federal government (read as “possible bail-out with your tax dollars”).
Housing's Roof Collapsing
http://www.thestreet.com/_yahoo/newsanalysis/realestate/10391123.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
“The drop in housing prices is causing most of the pain. A report from real estate information firm Zillow.com released Tuesday shows that U.S. home values fell 6% in the third quarter, the largest decline in the last 10 years.”
“On top of that, nearly 16% of homeowners who bought houses in the past year now have negative equity in their homes, meaning they owe more than what their homes are currently worth, the report says.”
The turmoil leaves many of those focused on mortgages or housing with a knot in their stomach. The question for many active investors will be “when will it be time to start bottom feeding and grabbing the survivors at rock bottom prices”. Who wants to catch the falling knife or should we just let it bounce off the floor and grab the handle down the road?
Freddie Mac (FRE) reported a $2 billion dollar loss as the fair value of its assets dropped by $8.1 billion. Freddie indicated that it must seek outside funding in order to meet regulatory liquidity requirements; meaning an immediate infusion of up to $4 billion is needed to keep the government sponsored mortgage entity afloat. Additionally, the firm was forced to increase its provision for credit losses to $1.2 billion, from $112 million, a year ago. Most investors view Fannie Mae (FNM) as being in a similar situation. The speculation is that the issues will just keep getting worse in upcoming quarters.
Countrywide (CFC) spent most of the day denying bankruptcy rumors as their stock tumbled below $10 for the bulk of the trading day. This is a case of the stronger and more frequent the denials, then the greater the probability of the filing occurring sooner rather then later. Many local investors give them less than six weeks in our bank “death-watch pool”. The situation may possibly end with some sort of merger with another bank in which assets are valued for pennies on the dollar as the last resort
On the homebuilding front, D.R Horton reported (DHI) reported huge quarterly losses today. While there is speculation that many builders will go under due to liquidity issues, Standard Pacific (SPF) sunk over 20% today on this type of concern. Many more will surely follow.
Some traders would look at the huge tumbles of FNM and FRE as short time buying opportunities as the market was over enthusiastic in punishing both stocks for the negative news from Freddie. There is a good likelihood of a short term rebound. However the recent news today that drove the stocks to 10 year lows is just the leading edge of further write-downs that will occur in upcoming quarters. Leaving both government sponsored entities drained of capital and desperately seeking financial assistance. This may amount to further issuing of preferred instruments which smacks the existing common shareholders, to the straight-out begging for a bailout from the federal government (read as “possible bail-out with your tax dollars”).
Housing's Roof Collapsing
http://www.thestreet.com/_yahoo/newsanalysis/realestate/10391123.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA
“The drop in housing prices is causing most of the pain. A report from real estate information firm Zillow.com released Tuesday shows that U.S. home values fell 6% in the third quarter, the largest decline in the last 10 years.”
“On top of that, nearly 16% of homeowners who bought houses in the past year now have negative equity in their homes, meaning they owe more than what their homes are currently worth, the report says.”
The turmoil leaves many of those focused on mortgages or housing with a knot in their stomach. The question for many active investors will be “when will it be time to start bottom feeding and grabbing the survivors at rock bottom prices”. Who wants to catch the falling knife or should we just let it bounce off the floor and grab the handle down the road?
Quick Takes: More Economists Predict Recession
The number of U.S. economists predicting a recession in early 2008 has nearly doubled over the past two months. The impact from the housing slump, credit crunch, reduced consumer confidence, and higher energy prices will reduce economic growth in the upcoming quarters.
More Economists See U.S. Recession Ahead, NABE Says
http://www.bloomberg.com/apps/news?pid=20601068&sid=a8OB88_sjTvw&refer=economy
More Economists See U.S. Recession Ahead, NABE Says
http://www.bloomberg.com/apps/news?pid=20601068&sid=a8OB88_sjTvw&refer=economy
International Housing: Home Prices Drop in U.K.
The housing tumble is not a phenomena contained to the U.S.; the housing prices in the United Kingdom dropped in the most recent report. The U.K. market shared many undesired similarities with the U.S. market over the past few years; weak lending standards, out-of-control speculation, rampant price increases, a bank-driven secondary derivative market for mortgages, and other disconcerting parallels.
Resembling the U.S., the situation is now coming home to roost in the U.K. Many British banks are under pressure from mortgage defaults and there is an increasing likelihood that several will have to be bailed out; potentially leading to more bank runs similar to the recent panic where British mortgage lender Northern Rock PLC saw unnerved customers withdraw billions of pounds from their accounts.
U.K. Home Prices Fall; Sellers Told to Ask for Less
U.K. home values dropped this month in every part of the country except London and sellers shouldn't hesitate to reduce prices further because a more protracted slowdown is on the way.
http://www.bloomberg.com/apps/news?pid=20601102&sid=ain.XyjSVu5I&refer=uk
“If you have to sell, then seriously consider dropping your price and taking an offer now rather than holding out,'' Miles Shipside, commercial director at Rightmove, said in a statement. ``You could be offered even less in a few months. Prices are set to flat-line.''
Resembling the U.S., the situation is now coming home to roost in the U.K. Many British banks are under pressure from mortgage defaults and there is an increasing likelihood that several will have to be bailed out; potentially leading to more bank runs similar to the recent panic where British mortgage lender Northern Rock PLC saw unnerved customers withdraw billions of pounds from their accounts.
U.K. Home Prices Fall; Sellers Told to Ask for Less
U.K. home values dropped this month in every part of the country except London and sellers shouldn't hesitate to reduce prices further because a more protracted slowdown is on the way.
http://www.bloomberg.com/apps/news?pid=20601102&sid=ain.XyjSVu5I&refer=uk
“If you have to sell, then seriously consider dropping your price and taking an offer now rather than holding out,'' Miles Shipside, commercial director at Rightmove, said in a statement. ``You could be offered even less in a few months. Prices are set to flat-line.''
Quick Takes – Wall Street
Q: So what do you get when you have lost $74 billion of your shareholder’s equity?
A: Record Bonuses of $38 Billion.
The large investment banks appear to be out of touch with the overall dissatisfaction with their performance. Once again as shareholders of Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos get crunched, while the insiders walk away with record bonuses. Where is the alignment of share performance and financial compensation?
Wall Street Plans $38 Billion of Bonuses as Shareholders Lose
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahE8xVisWsbE&refer=worldwide
“They're paid very handsomely in good times because they're supposed to take a hit in bad times,'' Fitzpatrick said. ``Performance has dwindled this year, and I think they should feel that.''
A: Record Bonuses of $38 Billion.
The large investment banks appear to be out of touch with the overall dissatisfaction with their performance. Once again as shareholders of Goldman Sachs Group Inc., Morgan Stanley, Merrill Lynch & Co., Lehman Brothers Holdings Inc. and Bear Stearns Cos get crunched, while the insiders walk away with record bonuses. Where is the alignment of share performance and financial compensation?
Wall Street Plans $38 Billion of Bonuses as Shareholders Lose
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahE8xVisWsbE&refer=worldwide
“They're paid very handsomely in good times because they're supposed to take a hit in bad times,'' Fitzpatrick said. ``Performance has dwindled this year, and I think they should feel that.''
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