Under The Radar News - Tuesday

by: SA Eli Hoffmann
  • Broad predicts more housing pain. KB Home (NYSE:KBH) co-founder Eli Broad says we're nowhere near a housing bottom. "We're going to have a big inventory of unsold, unoccupied homes that's going to take three or four years to clear out." He expects U.S. home prices to drop another 20%.
  • Housing prices worse than they seem. Mortgage guru Lewis Ranieri, who is credited with developing the financing of the modern U.S. mortgage industry, thinks current housing prices don't fully reflect the actual decline, because so few houses are being sold.
  • Only 1/3 of the way there. Former World Bank President James Wolfensohn thinks global credit-crunch losses could still climb to $1T. If he's right, this is nowhere near finished, with banks having posted a paltry $309B in credit losses and writedowns to date. "I don't think in my working lifetime, I've seen challenges to the major institutions in terms of writedowns and impact on market capitalization," he says. Be ready for more writedowns from the ilk of UBS (NYSE:UBS), Citigroup (NYSE:C), Merrill Lynch (MER) and Wachovia (NASDAQ:WB).
  • Get them while they're cold. Carlyle Group CEO David Rubenstein says downtrodden financial stocks are the "single biggest opportunity" in the U.S. markets today. He says Carlyle will go after financials battered by the subprime collapse. It's also looking to buy back some of its own LBO debt at a discount from banks who got stuck with it on their balance sheets.
  • Contrarian play? Oil bears now outnumber bulls by a factor of almost 2:1. 39% of car owners say they've already altered their driving habits at current gas price levels, but 16% they won't change no matter how high gas goes.
  • A little less junky. Spreads on corporate junk bonds are down a full 20% from their St. Patrick's Day inflection point. Mind you, they're still up 180% from last June's lows.
  • Morose morale at Microsoft. Even as Microsoft (NASDAQ:MSFT) CEO Steve Ballmer readies himself for a potential proxy fight for control of Yahoo (NASDAQ:YHOO), most of Microsoft's employees are against its proposed merger -- they're just too scared to say so. It's tough to integrate a new company where its employees don't want to work for you (just ask JPMorgan), but its even harder when there's discord within your own ranks.
  • Ford zigs, GM zags. Ford (NYSE:F) seems unstoppable over the last week. Meanwhile GM (NYSE:GM) is cutting 88,000 pickups off its 2008 production target, and another 50,000 SUVs. This despite the near paralysis of SUV and pickup production due to a UAW strike at parts supplier American Axle & Manufacturing (NYSE:AXL). GM says full-size pickup and SUV sales are down 15% and 26% respectively through Q1. SUV sales plunged 22% in March alone.
  • iMac gets earlybird chip. iMacs (NASDAQ:AAPL) got a new 45 nm Core 2 Duo Extreme X9100 Montevina CPU, courtesy of Intel (NASDAQ:INTC), although the chip is not yet on sale for other vendors. Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL) are not likely happy about having to wait another 45 days. For its part, Intel said the new chip is not a true X9100, only a special SKU of the 45 nm Penryn.
  • PC demand surprisingly strong. Number-one worldwide laptop maker Quanta raised its 2008 shipment target to over 40M, up from a forecast of 36M, citing a clearer view of demand. Good news for HP (HPQ) and Dell (DELL), both Quanta customers. The forecast doesn't even factor in a burgeoning market for ultra-low-cost machines.
  • Hedge fund refund. Citigroup (C) is eyemarking funds to pay back clients who invested in a pair of fixed-income hedge funds last year on the say-so of Smith Barney brokers. The funds are down 75% and more since then. Sources say Citi plans to "scale back" its marketing of hedge funds to retail customers.
  • Royal Bank undaunted by credit turmoil. Royal Bank Of Canada (NYSE:RY) says it's well equipped to handle the current crisis. "We have excellent access to wholesale funding and are growing deposits at the same time," CEO David McKay says.
  • Need no Mentor. Royal Bank of Scotland (NYSE:RBS) is selling Mentor, a small-business advisor, for about £150M. RBS continues to aggressively pursue avenues to raise capital.