SoCalsurfbum

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14 Comments

    • Wed Nov 12th 18:12 PM | Rating: +2 0
      Commented on:
      Reasons to Bail Out GM
      Why give $25 billion to 2 companies whose combine market cap is $6 billion. Buy them both outright... then you can hand it over to people that might have a better chance of turning it around, like a PE model... and break the union albatross while you are at it.

      All of the guys running the companies now were running it 8 years ago when they had a lot more money and a mandate to change and you can see what they did with it.

      Buy it and clean out the C-suite. Float it for a couple years then flip it.
      View article »
    • Fri Nov 7th 14:07 PM | Rating: 0 0
      Commented on:
      Digging into Shipping
      Shabba,

      You are missing the bigger picture. Ships are expensive capital intensive machines that require a certain utilization rate and pricing in order to cover their "mortgage" with positive cash flow. If they don't get the capacity utilization or pricing, the companies start burning equity at a very rapid rate. Having a ship sitting idle exacerbates this problem. Combine that with the massive amount of new capacity that has come online and is coming, while demand is dropping... and you have a lot of shipping companies with negative cash flow from operations.

      I would wait and see who buys the ships when shipping lines go bankrupt (as they always do in these cycles) and buy their stock then. These lines have about as much transparency as Lehman Bros. but with a lot higher fixed costs.

      By the way, the fact that they need the cash flow to try to cover some of their loan payments/cash flow problem is why you know that what Forbes rumor about ships being anchored intentionally is wrong. That would be very counter-productive for the companies.
      View article »
    • Tue Oct 14th 20:54 PM | Rating: 0 0
      Commented on:
      Are Analysts Being Fooled By The Data?
      Don't believe all of the rumors you read in blogs...

      whoever wrote that line "I heard from a friend who heard from his father"... understands Letters of Credit as much as Sarah Palin understands Fannie Mae...

      A Letter of Credit is, in it's most simple explanation, an escrow account for international transactions so that money isn't released until an order is fulfilled correctly. Banks would always accept them because it means money will be deposited in their accounts.

      If this guy is talking about short term funding for his vessels, he is probably referring to his "Line of Credit" from the bank... which is completely different.

      If the line of credit is what they are talking about then the Baltic Dry index is actually more of an indicator than you think... if he can't sail, there is less capacity and shipping costs should go up... but that isn't happening.

      Yank... if you can't trust the US gov't statistics (which you shouldn't), why do you believe you can trust the Chinese gov'ts economic statistics? The very fact that China is doing a major economic stimulus proves that they are not hitting the 10% GDP number... which are you going to believe, government statistics or your eyes?
      View article »
    • Thu Aug 21st 17:21 PM | Rating: 0 0
      Commented on:
      Interview with Jim Rogers, Part II: China as World’s Best Long-Term Profit Play
      I would add to Chris B's comment that the culture and temperament of the 2 countries are vastly different.

      America in 1908 had a lot of inventors, big thinkers, a developed financial system, room for expansion and a lot of untapped natural resources. Combine this with a competitive, battle tested, entrepreneurial do it on your own mentality with lighter regulation… and you get a boom town.

      I have a lot of Chinese colleagues and it is a lot different over there. Name the last major invention or innovation that came out of China... you can't because their system is not set up to nurture innovation.

      When a Chinese, Indian, (place nationality here), is an innovative thinker... they tend to move to a country like the United States that has a system in place where their accomplishments will be fostered, recognized and rewarded. If you look at all of the geniuses in Silicone Valley it looks like the UN.

      While the Chinese society is shifting, it has a very long way to go and a lot of baggage to shed before I would compare it to the US...

      I think a better comparison would be to Russia of the last decade, where you would be naive to trust the accounting and good luck playing the stocks.

      Chinese entrepreneurs have only known one market direction… up. I’ll wait to see how “built to last” this economic boom is when they have to face an actual business cycle. Then we’ll see what the market and businessmen are actually made of.
      View article »
    • Thu Aug 21st 15:10 PM | Rating: 0 0
      Commented on:
      Really?! Brokers Trade Lower on Citi Call
      His target price for GS is $205 in this new report while it is currently trading at $153... and it is still only a hold rating...

      What... an expected 35% increase isn't big enough for a buy rating?

      I find it amazing how "Analysts" are never paid on their abilities to analyze...
      View article »
    • Mon Aug 18th 12:41 PM | Rating: 0 0
      Commented on:
      Goldman: Readying Short Position Initiation Sequence
      That is an interesting strategy... short it ony after it falls more...

      Why not short it when the price is higher so you can make a couple bucks?
      View article »
    • Fri Aug 15th 18:50 PM | Rating: 0 0
      Commented on:
      Don't Believe the Lies: Ride the Bank Stocks Bull
      JasonC,

      If it is "all about the spread" as you describe and make a compelling arguement for... then how do banks fail in this environment? Why are they failing?

      Why are they not making more loans (since they will make billions of dollars off of them) and instead relying only in FNM FRE to fund new mortgages? This is widely reported around the mortgage community. Banks aren't bringing these new loans with great rates onto their books...

      Also, aren't only the banks with Fed access able to get 2-3% rates? What about the rest of the banks?

      I know this might read a little smart-ass like a lot of the other responses, but it isn't intended to... I'm really curious and I'm trying to wrap my brain around this.
      View article »
    • Wed Aug 6th 10:12 AM | Rating: 0 0
      Commented on:
      Note to NYT: Dick Syron is Not Clairvoyant
      I worked in this industry during this period... and late 2005 was not when bad underwriting began. If I was to put a date on it I would say about 2003-2004 is when we started seeing questionable deals at questionable pricing, etc... It just became overly apparent in late 2005 because the volume ballooned, and writing bad loans became Standard Operating Procedure for some companies.

      The government lifted capital restrictions because the company lobbied heavily to take on more loans so that they could make more money even though they were undercapitalized even at that time.

      Syron's 'Foresight' comment is about as believable as Mozillo's "No one saw this coming"... a lot of people saw it coming in 2003-4 when housing was overpriced then... and we prepared for the end of the mania appropriately.

      If Syron truly believed a 3 standard deviation move in housing price and volume was sustainable and appropriate... his resume might have a lot of pretty titles on it but he obviously didn't have enough real world experience to hold that job.
      View article »
    • Thu Jun 12th 11:08 AM | Rating: 0 0
      Commented on:
      Is the Long Commute Still Worth It?
      Sorry Stephen... I wish public transportation worked in So Cal but the geography and layout of the cities make it impossible for a European solution. Temecula will be stuck being a long car ride to San Diego, Orange County, and even Riverside (which is where a lot of Temeculites work).

      Temecula and places like that outside of Los Angeles are where people bought "the house of their dreams" for a reasonble price... and then they spend all of their time on the roads so they never get to see it.
      View article »
    • Wed May 14th 16:02 PM | Rating: 0 0
      Commented on:
      2009 Home Price Forecasts: Up or Down?
      A Ph.D., huh? I don't understand the point of this post.

      How useful is a home price forecast when what it is forecasting (average home price) is a grossly inaccurate measure in and of itself, heavily affected by vagaries such as sales mix and misrepresented selling prices? How can it help anyone make a better decision? Are these the same forecasters that didn't see the downturn happening in the first place?

      What would be more helpful is if you had some insight on market drivers or other factors that will change the nature of the current market and cause an inflection point for buyers / sellers.
      View article »
    • Mon Mar 10th 11:50 AM | Rating: 0 0
      Commented on:
      UBS: U.S. Bailout for Homeowners Will Arrive by October
      I guess this just shows how little the capitalists believe in capitalism, and it's ability to self-correct. The only believe in capitalist principles when they are not in the crosshairs...
      View article »
    • Tue Feb 12th 13:14 PM | Rating: 0 0
      Commented on:
      Standard Pacific’s Fiscal House Needs Restructuring
      Why do you think they would do Ch 11 and not Ch 7 bankruptcy? Usually, Ch 11 happens when the underlying business is still good, but the operational cost structure was managed poorly.

      The problem with StanPac is not that their operational cost structure is broken… The problem with StanPac is that they loaded themselves up with assets that are only worth a fraction of what they paid for them... this cannot be solved with a contract re-negotiation or a debt restructure. The situation that this has caused is that StanPac is selling houses and land for less than they paid for them. Even if all debt is forgiven tomorrow, Standard Pacific’s continuing operations are running cash-flow negative.

      And entering bankruptcy the creditors have a decision to make…

      1. Liquidate the company (Ch 7) who’s only real value is in the assets, (especially in this market… the ability to build homes is not a unique, desirable, or profitable skill in the foreseeable future) and be the first ones out before other companies go bankrupt and flood the market and depress prices even more. If they close shop and sell the assets they do not have to fund the on-going operations and overhead which just keeps burning more of their money… and with negative margins and falling housing prices, recovering any of the cost of overhead looks like a long-shot at best…

      Or

      2. The creditors take control of the operations from the current shareholders (Ch 11) and then sell off the company assets in a less “liquidation sale” type way and hopefully recuperate more money... after drastically reducing overhead. This only works if the company can find a way to get positive gross margins. I would think this approach is less likely because it is riskier. The Ch 11 proceedings take a long time and if they finally decide to liquidate a year or two from now… who knows how much the asset prices will have fallen. And you are still paying overhead.
      View article »
    • Wed Feb 6th 19:42 PM | Rating: 0 0
      Commented on:
      What the Housing 'Apocalypse' Prophets Aren't Revealing
      You are trying to make the information fit your desired result. In 2007 vs. 2006 on a week-by-week basis so seasonality is included in the analysis, 30 yr fixed rates are higher in 2007 only 35% of the year… in the month of January (+7bp) and the month of August (+5bp)… not exactly high volume months. In the prime selling season (April through July) rates were on average (-20bp) from 2006 levels. We started 2006, 2007, and 2008 at 6.21, 6.18, and 6.07 respectively.

      And during this time even the rosiest assessment of units sold (from NAR) showed a -12.8% decrease in units. Rates are currently at 5.68% and it still isn’t stopping the slide in sales... meaning it isn’t the catalyst you thought it was.

      As for ARMs… if you believe people are going to start snatching up ARM loans in large numbers and that is what is going to get us out of this mess, I don’t think you have properly gauged the mood of both buyers and lenders… especially with the specter of inflation peaking around the corner.
      View article »
    • Tue Feb 5th 14:53 PM | Rating: 0 0
      Commented on:
      What the Housing 'Apocalypse' Prophets Aren't Revealing
      You are missing the other little data point... every housing cheerleader is saying that if fixed 30 yr mortgage rates go lower, it will stimulate sales and re-invigorate the housing market. Well... fixed rates actually have fallen YoY and in that time housing sales (units) have fallen between 15-40% (depending on which market you are looking at). This is the stimulus you are counting on? It doesn't seem to work very well. The only way more units will be sold is if the current owners take very substantial losses on their properties they over-paid on... buyers now are only willing to buy at a reasonable price. And as the saying goes, I have a lot more patience than you have cash to remain solvent... or something like that.
      View article »
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