Stunning news out of California as more homes were foreclosed on in a three-month period since 1992. The LA Times has the full write amidst the backdrop of the legislation wrangling that gets the bigger headlines today. BUT, there's something else here that requires further watching - California's mortgages just might be the indicator everyone has been looking for in the search for the bottom.
Here's why you care : Buried in the article is this, the "latest figures contained one surprise: defaults -- the first step toward foreclosure -- rose by just 6.6% in the second quarter, down from a 39% spike the previous period." Wow. The LA Times rightly points out that the reason is unclear... Completely overwhelmed processors slowing down under the avalanche? Or the bottom? Who knows - but this is why you need to watch that market. It will ultimately put you ahead of the curve.
Meanwhile, as the angst and teeth gnashing continue for investors and home owners, Fortune's senior editor at large, Allan Sloan, has gone and written a terrific, short, clear explanation as to why the Federal Reserve in fact does not set your interest rate. In addition, he offers an explanation that despite any further bailouts the Fed isn't about to run out of money.
Why You Care salutes Fortune for doing this amidst the chaos. You should take a moment and read it if you don't already know the answers. Knowledge is power.
Wednesday, July 23, 2008
Tuesday, July 22, 2008
Seeing is Believing - Is that What it Takes to Not Repeat Past Economic & Political Mistakes?
Last night Why You Care went to the movies. But, not just any movie it was Screen on the Green on the Mall. Which means a large movie screen gets built on the Mall with the Capitol dome perfectly framed behind it. Normally this wouldn't amount to a Why You Care posting but it does. Stick with us because it matters. What was the movie? Well, none other than 1972 Robert Redford political drama The Candidate. Which to jog your memory is about an erstwhile liberal activist who runs a Don Quixote like Senate campaign against the Republican incumbent in California for the purpose of being able to talk about his issues. Sound familiar? But, of course, along the way he begins to gain in the polls, not by sticking to his issues but by using platitudes (his slogan: A Better Way) in order to broaden his message. Kinda interested in where we are going now?
Here's why you care: Against Congress' brilliant bone white dome backdrop, Redford's candidate played out on the movie screams to gasps, guffaws and occasional laughter - but not for the intended reasons. The reason was that the largely 20-something and early 30-something crowd had never seen the 1972 film before. What was old was now new - and the issues in the 1972 campaign sound like our past months of political and economic coverage.
With no irony lost on the crowd here's a sampling of what drew gasps and wows:
* The Republican incumbent candidate talked at length about the environment and cleaning up the smog in California.
* The Republican incumbent candidate talked about need for tighter regulation when it came to offshore oil drilling. (Fortune's got a great article relating to that today).
* Redford's candidate talked about the economy and California's unemployment rate being incredibly high.
* Redford's candidate talked about how addressing issues of guns, crime, etc ignored the underlying issues of race and how we make society work. (Sort of like how the Wall Street Journal wrote about changing city demographics due to real estate in the past few days).
That's to name a few.
Here's why you care again: The crowd was stunned because they read about past bubble's bursting and economies slumping, but they haven't lived through very many. The question for you is do you want to be on the cycle of ridding a bubble, losing money, latching on to another bubble? Or do you want to be a part of a cycle of saving, investing long term in well analyzed remnants of the last burst bubble that will grow for the future? In other words, why you care is because if you are willing to each day take a look at a few prescient business articles then you can be ahead of the curve. Often times that means ignoring the sexy headline and paying attention to something buried in the paper. It is tough, but Why You Care is happy to highlight the reporters ahead of the curve. Even if you are in your 20's, early 30's there's enough coverage out there and analysis that everything old doesn't have to be new again.
And today's example of why you care: There's a new report out (which got a great write in the New York Times) showing that women are now just like men. That is to say, the slacking economy is bouncing them out of employment at the same rate as men. The worst part is that for these women (like the men) it is happening at the height of their financially productive years (25-54). Seems to us that means they'll have less saving moving forward - which means less to invest for their retirement, and most definitely means they can't take advantage of deals to be had when a bubble bursts.
Here's why you care: Against Congress' brilliant bone white dome backdrop, Redford's candidate played out on the movie screams to gasps, guffaws and occasional laughter - but not for the intended reasons. The reason was that the largely 20-something and early 30-something crowd had never seen the 1972 film before. What was old was now new - and the issues in the 1972 campaign sound like our past months of political and economic coverage.
With no irony lost on the crowd here's a sampling of what drew gasps and wows:
* The Republican incumbent candidate talked at length about the environment and cleaning up the smog in California.
* The Republican incumbent candidate talked about need for tighter regulation when it came to offshore oil drilling. (Fortune's got a great article relating to that today).
* Redford's candidate talked about the economy and California's unemployment rate being incredibly high.
* Redford's candidate talked about how addressing issues of guns, crime, etc ignored the underlying issues of race and how we make society work. (Sort of like how the Wall Street Journal wrote about changing city demographics due to real estate in the past few days).
That's to name a few.
Here's why you care again: The crowd was stunned because they read about past bubble's bursting and economies slumping, but they haven't lived through very many. The question for you is do you want to be on the cycle of ridding a bubble, losing money, latching on to another bubble? Or do you want to be a part of a cycle of saving, investing long term in well analyzed remnants of the last burst bubble that will grow for the future? In other words, why you care is because if you are willing to each day take a look at a few prescient business articles then you can be ahead of the curve. Often times that means ignoring the sexy headline and paying attention to something buried in the paper. It is tough, but Why You Care is happy to highlight the reporters ahead of the curve. Even if you are in your 20's, early 30's there's enough coverage out there and analysis that everything old doesn't have to be new again.
And today's example of why you care: There's a new report out (which got a great write in the New York Times) showing that women are now just like men. That is to say, the slacking economy is bouncing them out of employment at the same rate as men. The worst part is that for these women (like the men) it is happening at the height of their financially productive years (25-54). Seems to us that means they'll have less saving moving forward - which means less to invest for their retirement, and most definitely means they can't take advantage of deals to be had when a bubble bursts.
Monday, July 21, 2008
Overlooked Story & More Telling Than Its Headline: He Trades Real Estate for the Presidential Race
Former New York Mayor/Former Presidential Candidate Rudolph Giuliani made headlines yet again, but this time not with politics but with real estate investment. He's partnering up to create a real estate fund. Boring you say? Nah, we say. Just listen...
Here's why you care: If there was any doubt in your mind that the terrible headlines from the financial firms on Wall Street and from your neighborhood's latest real estate prices then consider this - the smart money is shopping. It is like an after Christmas sale for the financial and real estate inclined.
Mr. Giuliani gets it. So do his new partners and the new fund to be named Berman Enterprises Opportunity Fund according to the New York Times article from Sunday that you likely ignored once you realized it wasn't about whether Mr. Giuliani was seeking another office.
America's Mayor's role? The New York Times says he brings in contacts with foreign investors. His partners supply the real estate know how.
Here's why you care even more: That should tell you that if those who can buy, are buying... Well that means the big money is betting long term on the big picture.
Would you like to go along on that ride too? Is the rollercoaster over? Nope, it's not even August. Give this article a read, then consider that this got covered because it was America's Mayor. But, who else is out there buying and creating funds? We think there's more going on than you think. AND, that may be a good thing, an even BETTER thing would be more coverage of it.
Here's why you care: If there was any doubt in your mind that the terrible headlines from the financial firms on Wall Street and from your neighborhood's latest real estate prices then consider this - the smart money is shopping. It is like an after Christmas sale for the financial and real estate inclined.
Mr. Giuliani gets it. So do his new partners and the new fund to be named Berman Enterprises Opportunity Fund according to the New York Times article from Sunday that you likely ignored once you realized it wasn't about whether Mr. Giuliani was seeking another office.
America's Mayor's role? The New York Times says he brings in contacts with foreign investors. His partners supply the real estate know how.
Here's why you care even more: That should tell you that if those who can buy, are buying... Well that means the big money is betting long term on the big picture.
Would you like to go along on that ride too? Is the rollercoaster over? Nope, it's not even August. Give this article a read, then consider that this got covered because it was America's Mayor. But, who else is out there buying and creating funds? We think there's more going on than you think. AND, that may be a good thing, an even BETTER thing would be more coverage of it.
Friday, July 18, 2008
Another Airline’s Profit Crashes and Burns, and Your City May Pay the Price
Another day, another bad financial report on an airline. You could be forgiven for flying past the New York Times’ posting of Continental’s reported loss today.
The problem is that by overlooking this report you might miss the forest: Several airlines have stopped flying and even a scrubbing in bankruptcy seems to fail to halt the long-term tide of red ink for many “legacy carriers” (By the way, you’ll see that term a lot in airline stories, when you do just think: United, Delta, Northwest, American, Continental, and US Airways).
Fuel has become the lead weight around the planes that they can’t unload. That’s true and understandable, but we’ve often heard the argument that over their history airlines have always lost more than they’ve made. The mantra of the day is “too many airlines and too much capacity”, sooooo guess what? That’s right, airlines continue to shed employees, flights and capacity.
But that begs the question how many flights are truly necessary? Perhaps far fewer than airlines like to admit.
Here’s why you care: The decisions of the airlines affect much more than your next trip to mom and pop or your mean Aunt Tilly. Aside from airline jobs lost, whole industries are affected – hotels, restaurants, and even automobiles through rental cars. Remember, tourism has become a major driver of economics.
But there is more: A loss of easy access to airlines condemns many middle size and smaller cities to failure in their competition for jobs and industry. Transport is a major factor for urban centers to keep business and build new ones. The “hollowing out of America” is hastened when solid smaller cities lose airlines or pay outrageous fares to attract them. The result? Like much of the rest of the global economy, the spread between haves and have nots steam rolls on because only the wealthy cities can afford to keep bustling airports. So is technology somehow the savior? You’ll have to wait in the passenger lounge for the answer.
The problem is that by overlooking this report you might miss the forest: Several airlines have stopped flying and even a scrubbing in bankruptcy seems to fail to halt the long-term tide of red ink for many “legacy carriers” (By the way, you’ll see that term a lot in airline stories, when you do just think: United, Delta, Northwest, American, Continental, and US Airways).
Fuel has become the lead weight around the planes that they can’t unload. That’s true and understandable, but we’ve often heard the argument that over their history airlines have always lost more than they’ve made. The mantra of the day is “too many airlines and too much capacity”, sooooo guess what? That’s right, airlines continue to shed employees, flights and capacity.
But that begs the question how many flights are truly necessary? Perhaps far fewer than airlines like to admit.
Here’s why you care: The decisions of the airlines affect much more than your next trip to mom and pop or your mean Aunt Tilly. Aside from airline jobs lost, whole industries are affected – hotels, restaurants, and even automobiles through rental cars. Remember, tourism has become a major driver of economics.
But there is more: A loss of easy access to airlines condemns many middle size and smaller cities to failure in their competition for jobs and industry. Transport is a major factor for urban centers to keep business and build new ones. The “hollowing out of America” is hastened when solid smaller cities lose airlines or pay outrageous fares to attract them. The result? Like much of the rest of the global economy, the spread between haves and have nots steam rolls on because only the wealthy cities can afford to keep bustling airports. So is technology somehow the savior? You’ll have to wait in the passenger lounge for the answer.
Thursday, July 17, 2008
Can Washington Steady Wall St. by Nixing Nudity and Regulating Shorts?
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Tuesday, July 8, 2008
First Buy Bear Stearns, THEN do Charlie Rose
The uber quotable J.P. Morgan Chase CEO Jamie Dimon got the Charlie Rose treatment last night. It is one thing to read it in the pages of the Wall Street Journal a few days before (the interview obviously being taped) but another to watch it on Rose's show. You can see a clip here that the Rose program evidently posted on YouTube. Dimon is waxing Bear Stearns and it is helpful to hear a CEO walk through the reasoning for buying the wayward company. What you miss in this limited clip is 1) Dimon calling for a full SEC investigation of the rumor mill that he thinks ultimately killed Bear Sterans by guaranteeing a run on the bank; and 2) his embrace of more regulation for the industry in the wake of the credit crisis. Most notably he didn't say what type of legislation - which is the real debate.
Why do you care? You care because listening to his decision making explanation gives you a sense of how and why Wall Street acts.
Why do you care? You care because listening to his decision making explanation gives you a sense of how and why Wall Street acts.
Monday, July 7, 2008
A Boring Headline That's Really the Whole Enchilada
Let's call the mortgage mess and credit crisis a flood for a moment. If your village flooded you'd build a dam right? Well what if you built a dam, and a passer by said, "Hey, I see a leak." Or better, what if an actual engineer said, "Hi, I do this for a living, and I see a leak and the dam is going to give way." What would you do? Would you ignore them or focus on the problem?
That's what is going on right now. The Wall Street Journal's story today, "Finance Group Questions Bond-Rating Proposals" likely sounds boring to those not following the market. That's a shame. Why you care is because it really is the whole enchilada when it comes to making sure we don't have another Wall Street meltdown. In fact, if done right it would inject the type of confidence into the market that would get the bulls frisky.
The story is about how the agencies that rate investment products are susceptible to pressure and their own internal controls are not working they way they would want. In other words, the ratings that you and other investors count on may not be entirely on the nose. These are supposed to be the dams that hold back developing problems like the credit crisis by pointing out that someone's math doesn't add up. If this doesn't get fixed we'll have another flood.
AND, the rating agencies are not the only ones under this type of pressure. We recently published an op-ed on how the same thing is happening with accounting firms. Both the rating agencies and the accounting firms are the lynch pin in whether you/we trust what Wall Street tells us.
This is a big deal. The dam is leaking.
That's what is going on right now. The Wall Street Journal's story today, "Finance Group Questions Bond-Rating Proposals" likely sounds boring to those not following the market. That's a shame. Why you care is because it really is the whole enchilada when it comes to making sure we don't have another Wall Street meltdown. In fact, if done right it would inject the type of confidence into the market that would get the bulls frisky.
The story is about how the agencies that rate investment products are susceptible to pressure and their own internal controls are not working they way they would want. In other words, the ratings that you and other investors count on may not be entirely on the nose. These are supposed to be the dams that hold back developing problems like the credit crisis by pointing out that someone's math doesn't add up. If this doesn't get fixed we'll have another flood.
AND, the rating agencies are not the only ones under this type of pressure. We recently published an op-ed on how the same thing is happening with accounting firms. Both the rating agencies and the accounting firms are the lynch pin in whether you/we trust what Wall Street tells us.
This is a big deal. The dam is leaking.
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