ronh

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    • Fri Jul 18th 11:31 AM | Rating: 0 0
      Commented on:
      Harley's Beat: Was High Crude the Buffer?
      while the results certainly appear to be good at first glance, a closer look reveals some much bigger issues.
      1. their inability to sell the financing paper has meant that they are financing the majority of their bikes and taking back the paper on to their balance sheet. They are holding 3.8B of finance receivables on their balance sheet, and increase of 600M qoq.
      2. The default rate on that paper, according to the cc was about 5%, and the ltv is very high (quite a bit of no down payment financing). They are at risk for large write offs down the road if the resale value of the bikes doesn't hold up and if their default rate spike at all. Big bikes are a luxury item for most people, and the default rates and resale value of the boat market would indicate that their are major risks in this regard for HOG.

      HOG's balance sheet now has 3.8B of total financing receivables for bikes, not including their inventory financing to dealers, on total assets of 6.8B.

      Investors in HOG need to appreciate that they are buying a finance company as well as a motorcycle company.
      View article »
    • Fri Jul 11th 15:27 PM | Rating: 0 0
      Commented on:
      Big Three Automakers: Recapitalization or Bankruptcy?
      while I agree with the premise, I believe it is naive to think that you can get negotiated agreeements with the creditors outside of the bankruptcy courts. I have been involved in these types of discussions, and they are simply not practical. Each stakeholder believes the other ones should take the bigger haircuts. It simply never works.
      Chap 11 is almost inevitable for GM, in my view.
      View article »
    • Wed Jun 25th 18:29 PM | Rating: 0 0
      Commented on:
      Jim Chanos: A Short Seller Speaks
      very interesting article. Confirmation of the point about CFOs being asked to falsify reports can be seen currently in the reports of the testimony of the former CFO of Livent. His evidence was essentially that only the naive believe that the numbers are real.
      View article »
    • Mon May 19th 12:37 PM | Rating: 0 0
      Commented on:
      When it Comes to Growth, Try Concor Tech
      CNQR is one of the single most overpriced stocks on the market today.

      The growth referred to in the artice during the last year is mostly from an acquisition, and not organic. In fact, the 10Q of CNQR reveals that CNQR and Gelco (the company it acquired as of October 1st 2007 for 168M in cash) did pro forma combined revenue of 43M in the first q of last year. This quarter, the combined company did 50.8M. The real combined growth of the company is 16%, and not 44% as you suggest.
      As for EPS growth, not hard to show big percentage gains off of miniscule numbers. Actual EPS for the quarter was 8c, which is identical to that number for last quarter (ie, no growth in eps in the last 6 months since the acquisition). Extapolating that rate of earnings out for the year, gives you .32c.
      In fact, the companies guidance is for 53M in revenues (ie flat) for next q, and 211M (ie flat) for the year. The companies own guidance for eps, is 29c for this year.
      At current share price levels (about 38/share), you are paying about 125 x earnings, for a company with revenue of growth that is expected to be 10-20% at best. In addition, note that the company has been using its cash to buy back its stock and support the value. In and of itself, this would not necessarily be a source of concern for a well capitalized company whose management viewed their stock as undervalued, but last quarter they spent 30M of their cash buying back stock, while depleting their cash resources to 17M. Seems very questionable to me.

      This is one of the most egregiously overpriced stocks on the market today.
      View article »
    • Sat May 10th 09:56 AM | Rating: 0 0
      Commented on:
      Homebuilder ETF Rises Despite More Bad Housing News
      I am on the bear side of this debate as well. One would not buy this index today unless you thought we were near a bottom in the housing decline. Even if you are a long term holder, you still want to enter your position when it is most advantageous (ie cheapest). There is no indication that the housing market is anywhere near a bottom. All indicators show that there is much more pain to come, and many of these homebuilders will default on their loans, resulting in the total elimination of their 'equity'. Buy the index if you believe we are close to a bottom, otherwise, avoid it.
      I beleive many of these HB stocks will not survive.
      Question for discussion, which one of them is most likely to default. My premlinary thought is CTX. Lots of land inventory in terrible markets, and 60% leverage on the balance sheet. Other thoughts?
      View article »
    • Fri May 9th 18:15 PM | Rating: 0 0
      Commented on:
      GM about to Throw away More Money
      uh21, I certainly did not suggest that GM management was incompetent. I have been following the company for about 3 years, and the current management is doing is a good job in a tough environment. Their overseas growth is impressive. Unfortunately, although they have grown the foreign business, they have not been able to make enough money to make up for the continuing NA losses. The UAW legacy burdens make the long term survival almost impossible. They now have health care and pension responsibility for more than a million pelople, on the back on a much smaller work force. Once they take the pain and reorganize, they will be a force to be reckoned with...but their currrent equity is worthless.
      View article »
    • Fri May 9th 08:32 AM | Rating: 0 0
      Commented on:
      GM about to Throw away More Money
      two other headlines of note today. GM spent 826M buying it building and a couple of other ones in Detroit, and also offered upn 200M to Axle to help break the UAW deadlock. Surprising decisions from GM whose management said quite explicitly that they were very concerned about liquidity and cash flow on the conference call last week. They burned through 3.6B in cash last quarter, and this quarter looks much worse. With only 23B in cash, and over 30B in trade payables, they seem to be in deep trouble....
      View article »
    • Tue Apr 1st 14:04 PM | Rating: 0 0
      Commented on:
      Bill Gross: If Housing Prices Decline Further, So Does the Economy
      The irony in your column is that you are suggesting some form of government intervention, since we are all paying the price anyways. Not true. If the government bails out the borrowers, the taxpayers will be paying the price for the excesses of those who either bought more home than they could afford, or borrowed more than they should have to support their lifestyle. Your suggestion that those who are responsible are already paying since the rates they receive on their saving is low, is not a fair one. Those who have capital can now buy the assets that will be sold at a loss and profit when they reflate, rather than the irresponsible borrowers who are now in trouble.
      Nobody should expect to get rich off their home appreciation. There are no guarantees of real estate appreciation. Some people are learning that lesson now.

      In the end, there is a loss to be taken. The loss should be taken by those who gambled and lost, and not the taxpayers.
      View article »
    • Sun Feb 24th 10:18 AM | Rating: 0 0
      Commented on:
      Shorting the Homebuilders as Their Stocks Surge
      there is absolutely no evidence to show that the housing market is starting to improve. The factual evidence from the marketplace indicates that the market is still declining, and the inventory numbers would suggest that it will decline for the foreseeable future. Buying or shorting based on historical patterns that someone believes will repeat is pure folly. The market is dynamic place, no patterns repeat precisely.
      Those homebuilders that survive will be great buys one day, but there is no reason to buy them yet.
      View article »
    • Thu Oct 11th 15:23 PM | Rating: 0 0
      Commented on:
      Downey Financial's Problems Run Deep
      great post.

      worth noting that their balance sheet is much probably much weaker than they are prepared to admit. As per their last 10Q, they had about 12.5B in loans held for investment. Of those, 76% were negative amortization, and 19% were interest only. 95% of their loans did not have any principal repayments.
      As you point out, many of their loans are ARMs and most have not yet reset.
      They have a great majority of their loans in California, which is the worst performing state in the country.
      Their loans represent about 77% loan to value, according to their last 10Q, but that was based on original values at the time of the loans, and appraised values for lending purposes.
      On any foreclosed loans, they will have very significant costs to realize, including real estate commisions, legals, repairs, and foregone interest. These costs would likely represent, on average, between 7-10% of realized values.

      So, if we take a real estate market that is off by, conservatively 5-10%, add costs to liquidate of 7-10%, add in loans to value on inflated appraisals at 77%, we have a recipe for disaster.

      Their total equity (before this quarters losses) is 1.4B. That represents only 11.5% of their loan portfolio. This company is in deep trouble. The loan loss reserve issue will be a huge one for the auditors when it comes time to signing off on their books for the 10K.
      The truly remarkable thing about this company, is that there has not yet been a run on the bank.
      View article »
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