HawthorneVillager.com

FROM MY PAID SOURCE..and you get what you pay for...

So, it's now good news when you raise guidance, lower guidance down, your CEO/CFO stays, your CEO/CFO leaves. And, while I comment mostly about tech stocks, the same "all news is good news" mindset works for housing, finance, transportation, retail, autos, etc.
Of course, from a macro standpoint, we have also learned that higher oil prices are bullish, as are lower prices. And, just this morning we learned that a weak economy is good, as well -- because stocks were barely dented by the fact that the ISM opinion poll printed at a recessionary-indicating 49.3, far lower than the 51.7 expected. (This is the first time that reading has been under 50 since April 2003.) In the wake of that news, the transportation stocks were actually up over 1%, scratching on the door of a new high, and many other GDP-sensitive stocks were very strong.
We are in an environment that is 100% concept-driven, where facts matter very little, though on occasion they might seem to matter for a few moments. As I suggested at the outset, this is the zaniest moment I have ever seen. The 1998-2000 period was silly (new-era thinking), but it was just about massively overpaying for nonstop good news. Today's mentality is: We can do anything we want, because there is no downside. Obviously, this level of lunacy can't continue indefinitely, but while it goes on, it can reach any magnitude. And, there's no determining in advance whether it lasts for five minutes or 90 days. One can only try to tell when it has exhausted itself.

Yesterday's Wall Street Journal ran a sobering story (especially considering the source) titled "Vacant Homes for Sale Crowd Economic Hopes: Data Pointing to Glut Are Worse Than in Decades; Impact Speculators." The story notes that "amid brightening hopes that the U.S. housing market is stabilizing, some economists are zeroing in on a piece of data that could augur badly for the consensus view: the homeowner vacancy rate." The story went on to note that the rate is now up to 2.7%, from 2% a year ago, with 2.7% being the highest number in the 40 years the data have been recorded.
Again, we have yet to have realized the impact of the downturn in the u.s.

Chrysler planning big Ontario cutbacks: Hargrove

Says restructuring `beyond anything I ever imagined'

Feb 07, 2007 04:30 AM
Tony Van Alphen
Business Reporter

DaimlerChrysler Canada Inc. plans big production and job cuts in Ontario as part of the auto giant's North American restructuring, union leader Buzz Hargrove says.

"It's beyond anything I ever imagined," a subdued Hargrove, president of the Canadian Auto Workers, said after emerging from a meeting yesterday with senior company brass.

Hargrove and other top union officials could not provide details of the size or location of the expected production and job reductions because of an agreement not to disclose information before the company announces its restructuring plan next Wednesday.

The confidentiality agreement also gives the union a few days to plan its response in hopes of dampening the blow.

"But right now they are talking some very tough numbers," said Hargrove, a former Chrysler worker. "Make no mistake about it. It is significant."

Stuart Schorr, a spokesperson for DaimlerChrysler Canada, said the company would not comment on Hargrove's remarks until next week.

The Detroit News reported earlier this week the Chrysler Group plans to cut 10,000 of a total of 82,000 jobs in North America through buyouts and layoffs. The Chrysler Group, including Canadian operations, lost $1.5 billion (U.S.) in the third quarter, and red ink for the year will probably top $1 billion.

The cuts will mean closing some assembly and parts operations and the loss of shifts.

Although Hargrove would not reveal any numbers, he suggested that Canada may take more than its fair share of cuts.

In Canada, the company employs about 11,500 workers at an assembly plant, research centre and headquarters in Windsor, another assembly operation in Brampton, an aluminum casting factory in the Toronto suburb of Etobicoke and distribution centres across the country.

Although industry insiders could not confirm where the auto maker will cut in Canada, they said the company will likely idle a third shift or more than 900 jobs in Brampton because of slowing demand for the Chrysler 300 sedan, the Dodge Charger sports car and the Magnum wagon.

Production at the Brampton plant dipped less than 1 per cent to 314,161 in 2006 from 2005. But the company has already scheduled five weeks of shutdowns at the plant until mid-March to reduce high inventories.

I'm not terribly surprised at Chrysler... the north american automakers just don't seem to be getting their act together at making models that Canadians want. I believe it was just last year that Toyota overtook GM as the largest car company in the world.

Of course, that doesn't help the poor employees of Chrysler sleep at night, my sympathies go with them.

nortel laying off 10% of work force...

To this day I'm astounded Nortel keeps going... their newest CFO (CFO-of-the-month) is leaving too...

i wouldnt count on it for any return here...it will probably flounder around here for yrs....i dont think they have ever made money

now it will start to matter.....it will be ugly
vacancy rates in the U.S. AT AN ALL TIME HIGH....

NEW YORK, Feb 7 (Reuters) - Two of the biggest lenders to Americans with poor credit histories said on Wednesday rising subprime mortgage defaults will weigh unexpectedly on results.

HSBC Holdings Plc (HSBA.L: Quote, Profile , Research)(HBC.N: Quote, Profile , Research)(0005.HK: Quote, Profile , Research), Europe's biggest bank, said it plans to set aside $10.6 billion companywide for bad debts, 20 percent more than the $8.8 billion it said analysts expected on average, because of struggles in its HSBC Finance Corp. lending business.

Chief Executive Michael Geoghegan is directly involved in trying to fix the problems, it said.



Meanwhile, New Century Financial Corp. (NEW.N: Quote, Profile , Research) projected a fourth-quarter loss, and said it expects to restate each of the previous three quarters' earnings lower because it did not set aside enough money to buy back subprime loans that went bad. Analysts polled by Reuters Estimates had on average forecast a fourth-quarter profit of $1.06 per share.

Both companies announced their forecasts after U.S. markets closed. New Century shares fell almost 16 percent in after-hours electronic trading, while HSBC's shares fell 1.9 percent in early trading in Hong Kong on Thursday morning.

The lenders are the latest in the subprime sector to warn of poorer results as home prices rise more slowly or decline. This makes it tougher for many borrowers to refinance adjustable-rate loans as rates reset higher, resulting in an increase in defaults.

New Century and HSBC Finance are respectively the second- and third-largest subprime mortgage lenders in the United States. Irvine, California-based New Century made $13.8 billion of subprime loans from July to September, while Prospect Heights, Illinois-based HSBC Finance made $11.7 billion, according to National Mortgage News.

from my paid source

Ignorance aside, it pays to state the obvious: The subprime industry was absolutely critical to the inflating of the real-estate bubble, because if loans were made only on a responsible basis -- to people who put money down and looked like they could actually pay the loans back, irrespective of rising house prices -- that bubble would never have achieved anything close to the heights it did.
That game is obviously over. Let me repeat that -- over. The real-estate market of the last few years will not be seen again in our lifetime. The only thing we don't know is at what rate this unwinding will play out across the economy and, more importantly (to me), in the minds of the Goldilocks-enthralled community on Wall Street.
Would You Woo WaMu?
To show you the current state of complacency, Washington Mutual is just a couple dollars away from its all-time high. I mention WM because although it's a large financial institution which is deemed to be soundly managed, I believe that it has an inordinate amount of exposure to subprime loans -- and therefore is an accident-in-waiting. What holds the stock up is the belief that JP Morgan will take over the company, which is one reason why I've been afraid to short WM. (Yes, JPM, in my opinion, would be crazy enough to buy it.)
In the dark-matter universe, the BBB tranches have been annihilated, and now the A tranches are weakening. Supposedly, the real pain will start when the higher-rated AA and AAA tranches start to weaken. But really, one won't need access to dark-matter market quotes to know that trouble is at hand. It will be obvious when stocks like Washington Mutual (as well as other housing-finance-related stocks) start sinking.
Getting Squeamish Over Subprime
Today my friend in London provided a clue as to when, via this email: "Really interesting day. I mean you and I and a select group of others have been all over subprime for months now. But today is the first day where equity managers have been in to us, asking questions about subprime.
"Until today, most of the equity managers knew something bad was happening in subprime, but were prepared to assume it was not going to be a problem for the wider credit market, the economy, and so on. When we take them through the numbers, and show them the charts of ABX (when was the last time a CDO on ANTHING traded at or through 1000bp?), they are stunned.
"Slowly but surely, people are starting to get it, and slowly but surely, I am starting to think that the tipping point in credit -- via a subprime-generated shambles in CDO land -- is closer than anybody imagines."

great day on the markets lol....and its all about real estate.....beware

Essentially, the subprime industry is gone, and Alt A will be next (virtually eliminating approximately 40% of the market). Freemont is closing its doors, in part, according to company filings, because of new rules released Friday afternoon by the Office of the Comptroller of the Currency -- which basically require folks making loans using federally guaranteed depositor funds to behave in a somewhat intelligent fashion.
If you were to go down the list of what was once the top 25 subprimes, you'd see that only a handful are still standing at this point. And, according to my friends in the industry, there will probably be even fewer by the end of the week. This credit collapse is an unequivocally important event, because the ability of anybody with a pulse to get a loan for any amount is what drove the real-estate market, and the real-estate market is what drove the economy. Sometime in the next three to six months, the real-estate market will basically just freeze up. Of course, inventories are going to explode, and prices will eventually drop rather dramatically, as a vicious cycle feeds on itself.
Since the pendulum swung as far as it could in the direction of reckless lending, which the whole bubble was about, it will now swing back towards the quaint notion of folks being lent only the amount of money they can reasonably be expected to pay back. And, the lenders will want their loans to have a margin of safety, in the form of downpayments. Thus, I believe that the ingredients for the "next time down" are now at hand.