Research Recap

Research Recap
Contributor since: 2008
If you click on the complimentary download link near the top of this post you can access the full research report that is recapped in the post.
Moody's report says "Our survey indicates that gross exposures are mostly concentrated in a range of private claims comprising business and residential loans, interbank loans and, to a smaller extent, derivatives. The aggregate gross exposure to sovereign or other public sector debt is significant but comes second."
Moody's also made a number of assumptions for degrees of loss in each segment that are much greater than currently forecast. Time will tell if they are right.
Angus Robertson, Editor
Thanks, much appreciated.
Angus Robertson, Editor
Thanks for the comments. Audit Integrity has provided a sample of its methodology using Caterpillar as an example. Click the link below to access it. Angus Robertson, Editor
Thanks for the thoughtful discussion. It seems only a matter of time before the US system is tested by both state and federal deficits.
Not everyone is bullish on Baidu. Check out:
Pulse Check: Can Baidu Sustain Its Expensive Valuation?
Thanks. The use of peaked is incorrect as you point out. It was quoted from another report but still should have been used correctly.
And while the mathematics do imply that growth rates typically slow over time, this does not negate the argument that the iPad will make that growth rate slower than it otherwise would have been: that the iPad will take some market share from netbooks, even if, as seems likely, netbook sales continue to grow, at least for a while.
Angus Robertson, Editor
Thanks for your thoughtful comments. Your final statement applies to many of us over 50 in most industrialized countries. We were lucky.
Angus Robertson, Editor
There's also an irony in Obama calling on Spain to take strong action to tame its deficits.
Angus Robertson
Also check out this perspective on the topic from FTTechblog.
Good / bad news for netbooks?
Angus Robertson
Thanks for the feedback. Munster's 600,00-700,000 iPad first-day sales estimate was issued on the launch day Saturday afternoon and was based on his calls to Apple stores, so I'd say it was more than an administrative error. But give him credit for saying he was wrong and not making excuses. And while he was off on the opening day sales, he was on the mark about the very strong demand for the iPad.
Angus Robertson, Editor
No, we've actually had a couple of positive things to say about SIRI in the short to medium term. Long-term I think the product will be superseded by newer technologies, but SIRI at least has a chance to adapt.
Rite-Aid is also in a challenging longer term position, given the growing strength of CVS, Walgreen's/Duane Reade and Wal-Mart.
SivBum: "Leading suppliers of RFID tags include Intermec Technologies Corp. (IM) and Symbol Technologies, which is a unit of Motorola (MOT)."
WFS: were you able to download the report? It works fine on our end.
Thanks for all the comments. NPR's Alex Blumberg has an interesting piece today on a potential tidal wave of foreclosures if people get over their shame of defaulting and act in their economic self-interest.
It will be interesting to see how this pans out. There will surely be some bargains out their if you can pick the right ones. There's still a lot of CRE risk out there.
Thanks, interesting point. Seems like people are slower to upgrade hardware these days as the gain in performance and attributes are smaller than they used to be.
It's a shame these types revisions don't get the attention they deserve. Economists are always right in the end as they keep revising their forecasts.
Reading between the lines of Moody's report is quite worrisome as is this chart from The Economist that magnifies the point:
Thanks. OECD has some useful reports that are often missed. I thought OxAn's analysis of the OECD paper was interesting, too.
Thanks. That's interesting to hear.
Thanks for all the comments on this post. At Research Recap we try to present solid research from a variety of sources. Audit Integrity's rankings are only element that should be taken into consideration. Sirius XM Radio certainly has some risks, but those should already be reflected in its stock price. Please see this new post on Sirius, which puts Audit Integrity's ranking into a broader context.
Peter Tulupman, Director of Communications at NCR Corporation provides the following statement:
I believe there is some confusion regarding the reporting of NCR and Blockbuster’s role in the roll-out of the Blockbuster Express kiosks. The Blockbuster Express kiosks are owned and operated by NCR. We have a revenue sharing agreement with Blockbuster(BBI). The way your article is written, it appears as though BBI is driving the Blockbuster Express kiosks and that the revenue generated from this business will go to BBI to help that company, versus go to NCR, who owns and operates the boxes. I write this because in your story its stated:
The challenge is that NetFlix (NFLX) is synonymous with home delivery and RedBox’s $1 pricing is hard for Blockbuster to match without foregoing the revenue it needs to maintain its liquidity. Blockbuster has powerful allies in the movie studios who are worried that RedBox’s pricing model is wreaking havoc in the DVD market. Still, they may not succeed in forcing higher pricing on RedBox, or it may come too late to help Blockbuster
Even though we have not publicly stated what our revenue sharing agreement is with Blockbuster, I want to be clear that this business is NCR’s business and we are moving forward with deployment of Blockbuster Express kiosks, as evidenced by an announcement this week to roll out kiosks in Publix Super Markets
NCR, as a global leader in self-service solutions, is applying its expertise to the entertainment industry to offer consumers a fast, easy and convenient way to access entertainment. The company sees entertainment as a very large opportunity and the Blockbuster Express kiosks is a key factor in driving that business. It is the company’s goal to become the leading provider of self-service entertainment solutions.
Thanks for the good discussion and feedback. Another discouraging statistic for economic resurgence is the continued shortening of the average workweek. Employers generally will expand the workweek before taking on new employees.
It's only a glimmer! There are strong factors working against loan modification (eg, loan servicers not holding the loans that need modifying, fear that modification is only putting of the inevitable) it won't have much impact without strong government intervention.
Probably requires a reduction of the principal to really work.
On Jul 29 06:21 PM Karen Consumer wrote:
> "A glimmer of hope: according to emii, Bank of America (
> has kicked off its foreclosure relief program for borrowers from
> its recently acquired Countrywide with a letter of notification regarding
> eligibility. BoA says up to $150 million has been allocated nationally
> for Countrywide borrowers in 40 states as part of a settlement with
> state attorneys general."
> Using mr. calculator here, that breaks down to 3.75 million per state
> for foreclosure relief. If you assume a median home price of $150,000,
> that's a whopping 25 houses per state. I don't think that's going
> to help.
Mark Zandi tells me that housing valuation is determined based on the house price-to-income ratio and the house price-to-effective apartment rent ratio. He uses the Case Shiller indices for house prices. "If the price-to-income and price-to-rent ratios are both well above their long-run pre-bubble average (1980-2003) then it is classified as being significantly overvalued. If one of the ratios is above its long-run average then it is overvalued. If both ratios are near their long-run average it is correctly valued. If both ratios are below their long-run average it is undervalued. These are crude measures of valuation, but informative."
And for what it's worth, is an independent unit of Moody's and not part of the ratings division.

On Jul 28 01:49 PM Bigman16 wrote:
> Are Moody's values based on the Median Home Price in the first exhibit?
> And what are they comparing that to - average household income?
Thanks for your comments. At Research Recap we strive to accurately convey the key findings of the research we feature. Therefore, this is not RR's view, but a summary of Fitch's views.
The role of the ratings agencies in the financial crisis is well known, so readers will no doubt make their own judgments about how much store to place in their research.
On Jul 17 02:36 PM WAKEUP wrote:
> "With major new home metrics leveling off from fresh lows, the long-awaited
> bottom in U.S. housing may finally be in sight, according to Fitch
> Ratings." ENGLISH TRANSLATION: The "new" metrics have come to rest
> (for now) at some really bad levels. We (Research Recap) are (arbitrarily)
> taking the view that these really bad levels are about as bad as
> it is going to get, even if we have to distort Fitch's actual report
> to do so. Furthermore, we (Research Recap) are telling you, gentle
> readers, that this skewed interpretation of Fitch's report means
> that the bottom in U.S. housing MAY BE IN SIGHT. How far ahead?,
> you ask. Well, we're not really all that sure, about THAT. What we
> ARE sure of, though, is that we are trying ANYTHING AND EVERYTHING
> we can think of to make it SEEM as though the bottom is getting closer;
> we are selecting our words toward that end, because we liked things
> a lot better, when real estate was rosy, and we want things to return
> to that condition, as soon as we can cause this to happen.
Thanks for your comments. With an economics background I am frequently reminded of the limitations of the field, whether you consider it a science or not. The use of "scientific calculations" can give economic forecasts an overstated sense of accuracy and validity, especially given the prevalence of assumptions. The Economist piece provides a valuable service in prompting discussion, whether you agree with it or not.
On Jul 18 01:50 PM Teutonic Knight wrote:
> To Research Recap -
> There is nothing "wrong" with the field of economics itself per se.
> The word "science" in the definition of economics as a "social science"
> is perhaps a misnomer, in my opinion, just as in "political science".
> No offense of mine to those who majored in political science in their
> BA.
> Granted, I know political science is a very popular major in American
> colleges. But to a lowly stoic engineer as myself, how could politics
> be categorized as a science? A science or an engineering discipline
> by defintion is predicated on the application of proven nature principles
> with predictable and measurable outcomes. Is politics predictable?
> The problem of most of today's economists is corruption of power.
> The following excerpt from the Wikipedia sums it well : -
> "...Economics per se, as a social science, is independent of the
> political acts of any government or other decision-making organization,
> however, many policymakers or individuals holding highly ranked positions
> that can influence other people's lives are known for arbitrarily
> using a plethora of economic concepts and rhetoric as vehicles to
> legitimize agendas and value systems, and do not limit their remarks
> to matters relevant to their responsibilities. The close relation
> of economic theory and practice with politics is a focus of contention
> that may shade or distort the most unpretentious original tenets
> of economics, and is often confused with specific social agendas
> and value systems.
> Amen.
> TK

Glad it was helpful. Based on typical lag of commercial real estate compared with residential, bottom may not be reached for another year or more.

On Jul 21 01:21 PM Respirate wrote:
> Useful blurb, thanks. It's worth looking for the bottom in commercial
> real estate for purposes of investment portfolio diversification.
> Real Estate ETFs and trusts can counter balance equity holdings in
> a portfolio and throw off cash for above average yields.
It's certainly not the only issue. See this earlier post on commercial loans.
On Jul 14 10:51 PM Mark54 wrote:
> First CMBS is the NOT real issue here. For the most part banks and
> insurance cos hold AAA 30% credit enhanced senior classes. (Please
> don't confuse these with 5% credit enhanced residential MBS.) While
> there is a distinct risk of a near term downgrade there is a smaller
> risk of principal loss in the next 12 months.
> The real issue is commercial loans and construction and development
> loans held on balance sheet. These are the loans that are going
> to have the largest impact. There is no credit support here and
> there is no secondary market to blow these out to. Loss severities
> have ranged from 20% to 60% and only look to get worse.
> The only saving grace is that large (equity rich) investors are circling
> like vultures for prime properties.
3M was number 12. Click on the Reputation Institute 2009 index link above for the top 25.
Our aim is simply to pass on interesting research whether it is positive or negative. Angus Robertson, Editor