Looking Ahead to the Obama Stimulus Deal

First a quick Why You Care publishing note: We will not publish New Year's Eve or New Year's Day, but Next Week's News Today will return on Friday, January 2, 2009.

After the first of the year all eyes will turn to how the Obama administration will stimulate the economy. Why does it matter what it looks like?

Here's why you care: CNNMoney.com's Jeanne Sahadi does a terrific job of sketching out the different ways a plan could take shape. You are going to hear a lot of different numbers thrown around come January, and she does a good job of sorting through how they can be divided and redivided and who stands to get what. We are highlighting her story on this because it is an excellent base coat of paint to understand what will undoubtedly become a political football on Capitol Hill. Do yourself a favor, read her piece, and come next year you'll be ready.

The Private Equity Story You Need to Read

We'll guess you took a look at the headline "Private Equity" and "IndyMac" and thought it to be a snooze. You'd be wrong.

Here's why you care: Ask yourself why would private equity want IndyMac? The answer of course is they think they can make some money. The New York Times' Zachery Kouwe points out, "the proposed deal is unusual because it is one of the first transactions involving unregulated private equity firms acquiring a majority stake in a bank holding company." You might say, ah-ha!, this is about regulation and the impact of private equity making such a move. Maybe in the long term. But, in the short term, this is a story about money sitting on the sidelines deciding it is time to take advantage of fire sales. Read this story, then keep your eye out for more like it. We suspect when you see a number of them it will be a sign that the gears of the market are slowly moving again.

30-Year Mortgage Rates Fall a Full Point From October

The LA Times' Tom Petruno reports that 30-year mortgage rates are now at 5.47%, down from 6.46% at the end of October.

Here's why you care: The rest of his report notes that the government regulator which oversees the housing entities Fannie/Freddie thinks rates will go below 4%. You care because this is a sign of actual movement - and a positive sign - amidst much of the bad news in the business pages today. At some point the rate goes low enough that people start buying. What's that number? Tough to say, but dropping rates puts it closer.

You also care because as we've noted there is a split of view points between Treasury and the FDIC on how to help mortgage holders in default. FDIC wants the government to help them directly, while the Treasury wants to drive the lending rate lower to stimulate the market in the hopes that will revive housing prices and thus help those behind in mortgages by lifting their home values. You can bet this article will be cited by Treasury folks as progress - and thus the article will help you understand the forth coming stories regarding the Treasury/FDIC debate.

2Million Jobs Gone in 2009!!???? + Next Week's News Today

Before we get to Next Week's News Today there are two stories that you need to give three minutes to: 1) The LA Times' David Pierson reports that UCLA economists are predicting TWO MILLION jobs will be lost in 2009, and 2) the LA Times' Peter Hong reports that the National Association of Home Builders has pivoted and is "now open" to bankruptcy judges modifying delinquent mortgages.

Here's why you care: First, UCLA has been right in predicting the economy's twists and turns. Second, bankruptcy court has been a controversial proposal. Some see it as a solution, others say it has a downside: Modifying the mortgages means a loss for banks, who will then pass along that loss to the next mortgage applicant by raising lending rates. However, there tide may be turning. You'll see more on this in the coming weeks (note the LA Times story says it would not get voted on until January).

So, if it's Thursday, then it's time for Next Week's News Today where we publish our own futures calendar of earnings, reports, hearings and political events which will either drive the news, or deserve more attention. Last week we were right when we said this week would "see press coverage of, and the market driven by, both Capitol Hill oversight moves, and economic reports..." whether it was TARP reports or hearings.

Next week you'll see press coverage of, and the market driven by, the Fed meeting, unemployment claims, and housing starts/building permits. You'll also see retail examined due to Best Buy reporting earnings and financial institutions who have received Treasury cash injects examined anew due to Goldman Sachs reporting.

Another story thread likely to continue is whether the FDIC's proposal to help homeowners underwater with their mortgages refinance should be green lighted. You saw a number of stories this week, and the debate will continue next week.

Here's why you care about next week's trends in earnings and reports:

Big Names/Retail: Best Buy earnings 12/16.

Interesting self explanatory news peg: Goldman Sachs earnings 12/16.

Reports: Building Permits and Housing Starts (12/16) and Unemployment Claims (12/18).

As always notable earnings, events, and reports are below are below:

MONDAY 12/15
Earnings: ABM Industries; Smith & Wesson Holding Corp.

Reports: Industrial Production


TUESDAY 12/16
Earnings: Best Buy, Goldman Sachs, Verifone Holdings Inc.

Reports: Building Permits (for Nov.), Consumer Price Index (CPI - for Nov.), FOMC Statement, Housing Starts (for Nov.)

Meetings: Federal Open Market Committee Meeting; FDIC Board of Directors meets in open session at 10:00a ET.


WEDNESDAY 12/17
Earnings: ConAgra Foods, General Mills, Micron, Nike, Paychex


THURSDAY 12/18
Economic Reports: Initial Unemployment Claims


FRIDAY 12/19
Events: Nobel Prize winner Paul Krugman, National Press Club, 12:30p ET

Did Treasury Get As Good a Deal as Warren Buffet? Could Downtown Real Estate Prices Torpedo Your Town - Or Be the Next Big Opportunity?

Two stories that will take only a couple of minutes, but you must read today:

1) Last week in our futures calendar - Next Week New's Today - we flagged that the Congressional Oversight Panel for Economic Stabilization's report to Congress was due today. There are a number of great writes today but we like the New York Times' Diana Henriques' report because it lays out the Panel's concern that Treasury's stock purchases in financial institutions at times didn't land the same excellent terms as private investors.

Here's why you care: The story shows that your tax dollars will not get as good of a return as say Warren Buffet or investors from the Persian Gulf buying shares in the same institutions. Also, the report challenges Treasury to explain why they are not embracing the FDIC's proposal to refinance homeowner mortgages currently underwater. We say, call on us, we think we have the answer - in fact explaining that debate is what we posted this past Friday 12/5 - check it out right here.

2) Commercial real estate impacts you in ways you may not think... The New York Times (again) has a must read story by Terry Pristin who reports how vacancies are looming large for downtown commercial space. The reason being is because like homeowners with adjustable mortgages, many of these investors have loans due and were only paying interest on them.

Here's why you care: If you own an apartment or townhouse in an urban area you don't want commercial vacancies, not just because you moved to the city for convenience, but because ultimately it could take down your home value. That said, you care if you are a company doing okay because it means you may be able to negotiate a terrific new lease where you are, or elsewhere. You need to be reading this story. We can tell you, this is what we've been discussing as real estate and finance lawyers. You should be thinking about this as well. One note, Pristin's article uses the term "Special Receiver" - don't worry, it is pretty much what you think. A Special Receiver is essentially a neutral third party that a court can look to for unbiased guidance as to whether the borrower that is behind in payments is keeping to the workout promise. The Special Receiver is a neutral intermediary for the borrower to send the money to, allowing the lender to get a report and payments from the Special Receiver instead of spending time constantly asking the borrower for an update.

Half of Modified Mortgages Back in Default

The Capitol Hill/auto makers story will be in the A section of the papers, so we say the one piece you might miss buried in the business section today is from the Associated Press in the LA Times which reports that, "More than half of all homeowners who had their loans modified to make the payments more affordable in the first half of the year are already in default again." You need to give this story a quick read.

Here's why you care: The question is why? Are they now behind on their credit cards too? Is it simply untenable? Is it due to job loss? Those are the questions. You should read this story, because the Federal Reserve can lower rates again, but eventually that gets to zero and then what? The "what" has to be a multi-front approach, but the exact mix will be the source of the debate. Helping homeowners has been a top agenda item for many on Capitol Hill and elsewhere, and this report will give them pause to consider how to get it right. They'll be reading this piece and you should be too.

Two Big Stories: Financial Rescue Gridlock? & Big Newspapers Cry for Help

1) Financial Rescue Gridlock? Obama vs.Bush
The eye opening business article today is actually a political article in the Wall Street Journal by Jonathan Weisman and Deborah Solomon who report the current administration and incoming administration are at something of a stalemate on the financial rescue/recovery. Here's the operable sentence from their report which you need to read, "Treasury officials believe Obama aides are being short-sighted in their refusal to offer more policy and lobbying assistance, while the transition team sees an administration looking to be rescued from its own miscues."

Here's why you care: What they are talking about is not just a stimulus package, but also whether to green light the FDIC proposal to help mortgage holders underwater refinance. Why You Care doesn't take political sides, instead would like to make an objective observation. The longer it takes to implement all of the recovery tools, the longer the recovery itself gets postponed. In real terms that means anything that can be done to shorten the durations means less jobs lost, less businesses folding/shrinking, and fewer homes in foreclosure.

Meanwhile, speaking of the Obama economic team, the LA Times' Ralph Vartabedian has a well written piece looking at former Federal Reserve head Paul Volcker's rescue suggestions.

Here's why you care: You care because he's advising Obama. Give this story a quick read when you have a moment because it points the way the Obama team may take in the months ahead. Remember, President-elect Obama noted this weekend there would be more pain ahead, this report on Volcker tracks that sentiment.

2) Big Newspapers Cry for Help in the Business Pages
The LA Times' James Rainey reports that the paper's parent, the Tribune Co. which also own the Chicago Tribune, has filed for bankruptcy. And if that were not enough to catch your eye, the NY Times' Richard Perez-Pena reports that the NY Times Co. is going to borrow $225 million against its NYC headquarters. In other words, the NY Times is taking out a mortgage to make ends meet.

Here's why you care: As many Why You Care readers know we are convinced that if you could just read the business pages with a better base knowledge then you'd see the coming economic waves on the horizon and be able to adjust accordingly. Much of what is happening today was warned some time ago in the business pages. The problem is that you didn't know you cared about credit default swaps way back when. Thus, if newspapers continue to shrink staffs - or in the case of community newspapers go under - then the crucial economic reporting will disappear. Blogs are helpful to gather links, and some have interesting opinions, but real reporting on a daily basis comes from full time journalists. Loose that then what have you got?

Why You Care continues to suggest alternative business models to those who will listen. You know where to find us.

Here's why you care one more time: We can understand why the NY Times is turning to its real estate. It is popular for most businesses to say that their employees are their greatest asset. If that's true, then a business' real estate is its greatest resource. You might say, well our business doesn't own but rather leases. We'd then say, well that still might be a resource.