Trouble on the Home Front

[HenryTo]

Standard Pacific gets lifeline from a private equity firm. Looks like the bankruptcy question is now off the table for Standard:
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Standard Pacific gets $530 million funding; shares soar
Tue May 27, 2008 11:17am EDT

Standard Pacific Corp (SPF.N: Quote, Profile, Research) said it will receive an equity investment of more than $530 million from MatlinPatterson Global Advisers LLC to strengthen the homebuilder's balance sheet and fund growth, sending its shares up almost 70 percent.

The investment was more than three times the company's market value before the shares jumped on the announcement. It also comes after the company said earlier this month that its first-quarter loss more than quintupled, hurt by the housing slump and the use of incentives to encourage people to buy homes.

Many homebuilders in the U.S. are seeking capital infusions from hedge funds and private investors, amid a slowing economy and a difficult housing market, to keep themselves out of bankruptcy until home buyers return.

MatlinPatterson will buy about $381 million of preferred stock convertible into common stock at $3.05 a share, a premium of 37 percent over the stock's Friday's close.

The stock was up at $3.77 in late morning trade on the New York Stock Exchange.

MatlinPatterson also agreed to exchange about $128.5 million of senior and subordinated debt for warrants to buy preferred stock at an exercise price of $4.10 a share.

The private equity firm will also get three seats on Standard Pacific's board, which is now increased to 11 members.

MatlinPatterson will be entitled to appoint additional directors after the preferred stock is converted to common stock, Standard Pacific said.

Credit Suisse, Miller Buckfire & Co and the law firm Gibson Dunn & Crutcher advised Standard Pacific on the transaction. Broadpoint Capital Inc and the law firm Bracewell & Giuliani LLP advised MatlinPatterson.

[HenryTo]

With the exception of certain market such as Seattle, San Francisco (Google money), Palm Beach, and Manhattan, prices at the very top-end of the national housing market are now starting to feel the impact of the housing slowdown. Following article is courtesy of Barron's.
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Cheap Chic: Home-Price Erosion Hits the $5 Million-Plus Market
by Karen Hube
Friday, May 30, 2008

A slice of the good life -- the really good life -- has gotten a lot more affordable lately. From Miami to Beverly Hills, homes with bowling alleys, theaters, steam rooms, heated decks, six-bay garages and other luxury must-haves are sitting on the market for at least twice as long as they did a year ago, and many sellers are doing what was, until recently, unthinkable: slashing prices. "Sellers are listening to offers they wouldn't have considered before," says Anita Bigelman, a broker/owner at Harding Realty in Miami. "We just sold a house for $10.5 million that was listed for $12 million. Before, that would have never happened."

After seeming impervious to the main market's woes of the past two years, homes in the $5 million-plus market have come down an estimated 10% to 15% in the past two quarters, and they are likely to shed another 10% or more over the next 12 months, according to Housing Predictor, a Destin, Fla., company that crunches data on 250 U.S. regions. "The high-end market is the fortress of the real-estate asset class, and the inner sanctum has been breached," says David Darst, chief investment strategist at Morgan Stanley.

The homes featured in this story give a sense of just how far your real-estate dollar will go now at various pricing levels from $5 million to more than $50 million. You'll clearly get more than you would have even a few months ago, but with some further price declines likely, bargain hunters will want to proceed with caution.

It's not surprising that the top-tier market, which represents a fraction of 1% of the total U.S. residential market, had seemed insulated for so long. The majority of buyers in the $5 million-plus market generally aren't directly affected by credit conditions, which are to blame for sending prices in the broader market down by more than 25% in some areas the past two years. Indeed, buyers in the upper reaches typically have net worths of at least $10 million to $20 million and tend to pay for homes in cash, says Gibran Nicholas, CEO and founder of Nicholas & Co. Mortgage Planners in Ann Arbor, Mich.

But the prolonged decline in property prices in the broad market, combined with escalating layoffs in the financial-services sector and concerns about the direction of the stock market and the economy, has changed the psychology at the top of the real-estate market, Darst says. Some markets, such as Florida, Southern California, Phoenix and Las Vegas, already have seen luxury-home prices fall by 15% to 20% in the last year or two.

Certain other parts of the country have held up fairly well: Prices on top-end homes in Seattle, San Francisco, Westchester County, N.Y. and Fairfield County, Conn. have only inched lower, and the town of Palm Beach as well as Manhattan have bucked the national trend altogether. In Palm Beach, the number of sales of $10 million-plus homes almost doubled in this year's first quarter over the first quarter of 2007, says Leslie Evans, a real-estate attorney. In Manhattan for the same time periods and price level, the transactions increased from 17 to 71, reports realty company Brown Harris Stevens.

Until now, the luxury-housing market has benefited from wealth generated by financial services and technology jobs, as well as an increase in international buyers making use of the weak dollar. "U.S. property is a tremendous bargain right now for foreign buyers," Nicholas says. "Last May, when the exchange rate was approximately $1.35 per euro, a $1 million home cost €740,000, whereas it would cost €633,000 today." Foreign buyers won't buoy the market much longer, because too many forces are beginning to work against the trend, including worries about where the U.S. economy is headed.

More pain in all regions is yet to come, says Mike Colpitts, editor and founder of Housing Predictor. Here's why: Prices in the broader market are expected to keep falling until at least mid-2009, according to Fiserv Lending Solutions, a home-price research firm in Cambridge, Mass. This, along with predictions of unprecedented job cuts in the financial-services field over the next year, is likely to hurt confidence levels at the high end and keep more prospective buyers on the sidelines, prompting sellers to make big compromises on price to secure deals.

What's more, the continued broad-market decline will crimp the trade-up market, as would-be buyers of $5 million-plus homes find they are unable to get rid of their lower-priced digs. This is already happening: Janet Milligan, a realty broker at Sotheby's in Greenwich, Conn. -- one of the largest luxury markets in the New York City area -- says that one of her clients started looking in the $6 million range 12 months ago but has had to lower her price target to $4 million because the value of the home she is trying to sell has eroded so dramatically.

Signs of pending trouble in the luxury market started appearing over the past year or two as sales volume began easing in many regions. "Changes in sales volume typically lead changes in pricing by nine to 12 months," says David Stiff, Fiserv's chief economist.

During the real-estate boom, the typical turnaround time to sell a home in the $2 million to $10 million range was from 24 hours to three months, says Gary Gold, executive vice president of Hilton & Hyland, a real-estate brokerage firm in Beverly Hills, where the number of luxury homes sold has declined 15% this year. To sustain prices at their current levels, the turnaround time should be no more than six months, Gold says. "Now it's at seven to eight-and-a-half months."

Money isn't vanishing among the moneyed, and certain sales still sizzle. In Palm Beach, Fla., in April, John L. Thornton, a former Goldman Sachs partner and chairman of the Brookings Institution, paid $77.5 million for a 32,000-square-foot mansion with 300 feet of ocean frontage. That was only 4% off its original listing price of $81 million.

In an exclusive area of Las Vegas called The Ridges, a 6,946-square-foot home sold for the asking price of $5.6 million earlier this month, after only 23 days on the market. And in San Francisco, a four-bedroom, 4,000-square-foot home on Divisadero Street near the Golden Gate Bridge was originally listed at $3.995 million, had 10 offers, and was bid up to $5,050,000. Aldo Congi, vice president of McGuire Real Estate in San Francisco, explains the sale in two words: "Google money."

Properties most likely to fetch top dollar are those in tip-top shape with state-of-the-art finishing touches and such niceties as remote-control systems for heating, electricity, shades and appliances. "New properties or newly renovated properties are the ones that are still selling quickly," says Niki Higgins, president and broker of Seaside Properties Group, which covers South Beach to Palm Beach, Fla.

Certain characteristics carry a premium in particular markets. In Miami, for instance, it is "the ability to jump on your jet ski at the edge of your property and take off," says Ilene Tessler, a vice president of Turnberry International Realty in Bay Harbor Islands, Fla. In New York City, it's square footage. In San Diego, it is ocean frontage. In Aspen, Colo., it's the view, and in northern Westchester County, it is "the desire that everything as far as you can see belongs to you," says Craig Siano, owner and broker of Sally Ciano & Associates in Bedford Hills, N.Y.

Trendy touches can also help move a property. Wine bars, indoor sport courts and elaborate outdoor patios with fireplaces all are popular right now. In Miami, says Jill Hertzberg of The Jills at Coldwell Banker, Miami Beach, contemporary properties are getting far more interest these days than the traditional Mediterranean style. And in Manhattan, the gritty Meatpacking District and Greenwich Village get two to three times the price per square foot as stately Park Avenue, says David Michonski, CEO of Coldwell Banker in Manhattan. "Who would have thought that would happen 10 years ago?" he asks.

One of his hottest listings: a $9.6 million, 5,000-square-foot condominium in a former industrial building at 704 Broadway in lower Manhattan. The unit has a 2,000-bottle wine-storage room, a media room and neighbors such as Macaulay Culkin -- "but no doorman," Michonski says.

Building materials can dramatically impact a home's value at the luxury level. "When you get to over $4 million and $5 million, you're in a whole different ball park," says Ian McCann, owner of Ian McCann General Contractors in Westport, Conn. Homes priced less are generally made with off-the-shelf materials for molding, stonework, trim and flooring. But for homes that go for upwards of $5 million, "it can take more than $100,000 to complete a room," McCann says.

Kent DeReus, vice president of architecture at Orren Pickell Design Group in Lincolnshire, Ill., says he has seen it all, from rare limestone flooring imported from a French castle to $1,000 sets of door hinges to $120-per-square-yard carpets spun from New Zealand wool. "The options for customization are unlimited -- and at the ultrahigh end, you can even tweak the color of limestone just the way you want it to be," DeReus says. "Instead of all beige, maybe you'd prefer a blend in some cool grays."

But all the tweaking in the world may not be enough to command the asking prices of last year. Susan Smith, a broker at Hilton & Hyland in Beverly Hills, says she sees more sellers getting more realistic about pricing -- and those who do generally close deals much faster. In early May, one-third of the 321 properties listed in Los Angeles County for more than $5 million had their prices reduced, according to ZipRealty, a market-research firm based in Emeryville, Calif. In Miami, one-quarter of 774 top-end homes had price reductions.

Prices could well fall more than the average 10%-plus seen in the past six to 12 months; big double-digit price declines aren't unprecedented in the luxury market. The last collapse occurred in the late 1980s following the savings-and-loans crisis. Then, the $5 million-and-up market saw average price drops of around 25% over three years, with some areas seeing much steeper declines, Housing Predictor's Colpitts says. In comparison, today the broader market's declines are outpacing the collapse of the early 1980s, but the luxury market is holding up better.

At the lower end of luxury, the mortgage woes so common in the broader market have started hitting home. While most ultrawealthy homebuyers pay cash, some in the $5 million to $10 million segment take out mortgages and may be shying away from high rates on jumbo loans. Typically, jumbo rates are about a quarter of a percentage point above standard mortgages -- but lately, the spread has risen to almost two percentage points.

At the higher echelons of the market, by contrast, the primary factor at work is the performance of the stock market, says Celia Chen, director of housing economics at Economy.com in West Chester, Pa. It's largely a liquidity issue, she says: If people have to sell stock to raise cash to buy a home, and stock-market values are down, they will wait for the market to rebound.

Prices at the ultrahigh end -- say, $25 million and up -- are generally more insulated from declines, because deals typically aren't struck out of necessity. "Sellers don't need to sell, so they aren't reducing prices, and buyers don't have to buy, so they're sitting on the sidelines," says Joshua Saslove, owner and broker of Christie's affiliate Joshua & Co. in Aspen. That firm happens to have recently had the most expensive listing in the nation: a 56,000-square-foot home on 95 acres for $135 million, owned by Prince Bandar bin Sultan, the former ambassador to the U.S. from Saudi Arabia.

The difficulty for buyers at all levels of the market is figuring out whether they're getting a bargain. "At the higher end, this is harder to do because there aren't as many comparable properties, and they tend to be unique" says Bill Andruss, a broker at Sotheby's in nearby Greenwich.

Colpitts recommends getting at least two independent experts to value your property. And don't be distracted by national pricing trends. "Focus on what's going on in your market," Andruss says. "If you're buying in Greenwich and comparing it to Kansas City or Chicago, it's not going to help."

In other words, location, as always, is still the name of the game in real estate. But even at the high end of real estate, there aren't many safe places left.

Karen Hube is a free-lance writer based in Westport, Conn.

[HenryTo]

Morningstar's latest take on the housing market as well as a tidbit on Sears:

http://link.brightcove.com/services/link/bcpid1184614598/bctid1581582894

[HenryTo]

Bucking the trend in the Twin Cities and in Orange County:

http://www.bankstocks.com/WebLog.aspx?ArticleID=5127&ArticleTypeID=5#5127

[rffrydr]

For some, no trouble at all:

ome Buy a New Home to Bail on the Old
Fannie Plans Rules
To Avoid Practice
Described as Fraud
By NICK TIMIRAOS
June 11, 2008; Page A3

Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.

"I can find the same exact house as what I live in right now for half the price," says Ms. Augustine, 44 years old, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn't want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago.

In markets hit hardest by falling home prices and rising foreclosures, lenders and brokers are discovering a new phenomenon: the "buy and bail," in which borrowers with good credit buy a new home -- often at a much lower price -- then bail out of the "upside down" mortgage on their first home.

Homeowners are able to pull off this gambit -- which some lenders and real-estate agents call mortgage fraud -- by taking advantage of mortgage-lending practices that allow them to buy a new primary residence before their existing residence has been sold. And with the lending industry in disarray as it tries to restructure millions of mortgages, some boast they are able to pull off the strategy with ease.

In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it. Some blame the phenomenon in part on lenders' unwillingness to cut deals or restructure loans made when home prices were inflated. "It's just a business decision," says Linda Caoili, a Sacramento real-estate agent who is working with Ms. Augustine and others who are considering walking away from their mortgages. "If you're upside-down $250,000, why would you keep it? It just doesn't make sense."

To be sure, walking away from a mortgage, even if legal, has plenty of drawbacks: Borrowers lose the ability to take out unsecured loans, since foreclosures can stay on a credit report for seven years. In some states, lenders can sue for assets, including a new house. Fannie Mae, the government-sponsored mortgage underwriter, recently revised the amount of time borrowers with a foreclosure must wait to receive a home loan to five years from four. Proposed Fannie Mae guidelines, which could take effect later this month, also would require those borrowers to make a 10% down payment and meet a minimum credit score after the five-year period.

While buy-and-bail is on the rise, the practice doesn't appear to be widespread. Credit is much tighter now than it was during the real-estate boom, and most families with an upside-down mortgage likely will hold on to their homes and hope the market improves in the future -- even though many of them could lose their properties.

Still, with home prices falling rapidly in some parts of the country, a growing number of frustrated consumers are willing to take the risk -- especially in so-called nondeficiency states such as California and Arizona, where it is more difficult for a lender to sue consumers who walk away from their mortgages. Borrowers who bought or refinanced their home with a personal line of credit, however, instead of a home-purchase loan -- a common practice during the housing boom -- could be sued by a lender in those states. Borrowers also could be on the hook if lenders can show that homeowners committed fraud by misrepresenting themselves on their loan application.

Yet even in cases in which a lender could attach a lien on the new home, some homeowners simply assume that lenders are too swamped. "So many people are foreclosing, is it cost effective for lenders to go after all of these people?" says Steve Hawks, a Las Vegas real-estate agent who handles lender-owned properties.

That works in the favor of borrowers such as Blair Morrow. Last year, he rented out his Sacramento home when he moved to Houston for a new job, but he lost those renters in February. He quickly arranged to buy a new home in Houston, fearing that his old residence would be foreclosed and he would take a big hit on his credit.

"I had 30 days to make a decision: Live in a rental house the rest of my life or buy a house and walk away from the one in California," says Mr. Morrow, 56, who works at a car dealership. He wrestled with the decision for a while, but justified it once Countrywide Financial Corp., the lender for his first home, approved the new home loan. "Countrywide didn't say peep," he says. Countrywide didn't return calls seeking comment.

Ms. Augustine, the Sacramento day-care provider, became a first-time homeowner in November 2006 by taking out two loans with nothing down to cover the $426,000 home purchase. With her home valued at about $220,000 now, she is actively looking in nearby communities for another one to buy before the bank forecloses on her current home.

The mortgage industry is starting to wise up to the practice and is scrambling to fight back. Buy-and-bail is "certainly fraudulent and unfortunately on an uptick," says Gwen Muse-Evans, vice president for credit policy and controls at Fannie Mae. Although she doesn't have data to quantify the size and scope of the trend, Ms. Muse-Evans says overwhelming anecdotal reports have prompted the agency to draft tougher regulations aimed at closing one big loophole that allows underwater homeowners to qualify for new home loans.

That loophole currently works like this: Homeowners provide a rental agreement showing that they will rent out their first home, and underwriters allow rental income to cover as much as 75% of the mortgage payments on the first home when determining whether the borrower can make payments on two homes. This allows homeowners to secure a second mortgage that they might not otherwise afford.

Under revised Fannie Mae guidelines, which could take effect next week, loan applicants who claim they will rent out their first home will have to produce supporting evidence, including an executed lease agreement. Borrowers also will have to prove that they can pay the mortgage, property taxes and insurance for both residences. The guidelines will make an exception only for borrowers who have at least 30% equity in their current home.

Of course, many individuals still can qualify for that second loan because of a strong credit and cash position. If they "have the intention of fraud, then at the end of the day there's really little you can do to totally prevent that," says Ms. Muse-Evans.

Some private lenders aren't waiting for Fannie's lead. In April, underwriters handling bank-owned properties at IndyMac Bancorp Inc. told brokers they would require borrowers purchasing new homes while retaining their existing home as a rental to prove that they could make full payments on both homes to qualify for a loan. A memo sent to a Southern California broker said the policy change was prompted by "losses from individuals walking away from properties after the acquisition of a new home."

An IndyMac spokesman said the bank hadn't changed its policies and had always "underwritten loans with an eye towards insuring that our borrowers could readily rent out their current property and/or reasonably support both payments."

Realtors say the new guidelines could put further pressure on sales, but Lawrence Yun, chief economist for the National Association of Realtors, says the impact of such guidelines on sales would be marginal. He calls Fannie Mae's response appropriate because any artificial increase in home sales hurts the average consumer.

Meanwhile, Mr. Hawks, the Las Vegas broker, says he receives one to two dozen inquiries every week from individuals inquiring about a buy-and-bail. "People are starting to ask how much their good credit is worth," particularly when their home is underwater by hundreds of thousands of dollars.

The tactic doesn't appeal to people such as John Ristuccia, a 48-year-old Buckeye, Ariz., paper-company sales director whose job was moved to Houston in August. He is trying to complete a "short sale" for $425,000 on his five-bedroom, 4,000-square-foot home, which was appraised for $800,000 last year. In a short sale, a lender allows the sale of property for less than the amount due on the outstanding loan and often forgives the remaining debt.

Even though he might be able to qualify for a second home loan, Mr. Ristuccia says he wouldn't consider sticking his bank with his suburban Phoenix property. "Just personally I've got a problem with that," he says. "I really can't put it in terms other than it feels wrong."
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

CNN questions whether America's "suburban dream" is coming to an end:

http://www.cnn.com/2008/TECH/06/16/suburb.city/index.html?iref=mpstoryview

[rffrydr]

Both phenomena have been seen in Los Angeles:

Once from the shear exahaustion of commuting four hours a day led to divorce, foreclosures and moving in of tenents with time--"welfare."

There have been at least five such impulses to a new urbanism in long dead LA: each time beaten back by the endless sirens, drugs, hassles and an underclass that can stretch farther than the eye can see. Usually it's New Yorkers who come to realize they don't know what Hell's Kitchen really means. Property prices and rooftop pools have done wonders on this last effort. It's hanging in there. J. Depp has a loft and you can even get a loft in the old Federal Reserve building. Yet over time only the japanese have remained--cause they HAD to.

Defnitely in conflict with the "safety-culture" in which these people were raised.--maybe that's while they'll pull it off.
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Mexican buyers/investors providing support for Texan real estate:

http://www.bloomberg.com/apps/news?pid=20601109&sid=alUJZgGm4GUI&refer=home

[HenryTo]

Vulture investors starting to wade in - but the spread between what these buyers are willing to pay for and what banks are asking are still high:

http://money.cnn.com/2008/06/30/real_estate/vulture_investors_take_flight/index.htm?postversion=2008070507

[HenryTo]

Relatively optimistic cover story on Barron's this weekend on housing. This should be supportive for stock prices next week - as long as the Feds bail out the GSEs:

http://online.barrons.com/article/SB121581623724947273.html?mod=ba_mp_view&page=sp

[Rubedo]

http://bigpicture.typepad.com/comments/2008/07/barrons-cover-g.html

Why Barron's Housing Cover Is So Terribly Wrong
Saturday, July 12, 2008 | 09:49 AM
in Data Analysis | Financial Press | Real Estate | Valuation

New Home Completions, 1968-2008
click for ginormous chart
Completed_new_housing_3

Major New Home Building Housing expansions since 1968 are marked as a red horizontal line at bottom. They previously lasted 2-4 years (71-73; 76-79; 83-87) The most recent boom far exceeded all previous expansions, running form 1992 - 2003 -- then exploding upwards for another 3 years til 2006.

~~~

During the Bull Market of the '90s, I used to read Barron's for their hard edged, skeptical look at many of the excesses on Wall Street.

During the past 5 years or so, that skepticism seems to be fading. Sure, Alan Abelson is still a curmudgeon, and Randall Forsyth is no cheerleader. The trader column is always worthwhile, and Santoli is usually interesting. But lately, the magazine seems to be drinking the same Kool-Aid my pal Larry Kudlow seems to enjoy so much.

Barrons_housing_cover The latest evidence of this is the wrong headed cover story on Housing, declaring "Home Prices Are About to Bottom," and why "This Real-Estate Rout May Be Short-Lived." I expect this cover to suffer the same ignominious fate as the recent cover story on General Motors (Buy GM) will.

The reason a bottom is in the offing, argues the article, is based upon specific data points:

• The U.S. housing market typically begins to improve after housing starts have fallen by a million units (which has now happened);

• Prices rose rose slightly in April in eight of the 20 markets covered by Case Shiller index;

• $300 billion congressional bailout is coming for troubled subprime mortgages;

• A government takeover of loss-ridden Fannie and Freddie is possible;

• Several analysts expect home prices to be steady by years end;

• NAR economist Lawrence Yun is optimistic home prices will stabilize in the next five months and begin to recover next year;

We've covered each of these in great detail over the years, but what the hell, once more won't hurt:

• The explosion in home construction has so totally exceeded previous home construction as to make the prior 1M drop meaningless (see chart at top);

• Housing completions past the minus 1MM figure a year ago -- by the same logic, you could have called a housing bottom in August 2007 . . .

• Prices are rising because less inexpensive starter homes are selling; Its the mix of homes reported that is skewing the numbers;

• Takeover of Fannie and Freddie? Not according to Bernanke;

• These same analysts have been incorrectly expecting home prices to stabilize for years;

• The bailout will only delay the inevitable repricing that needs to take place;

• NAR economist Lawrence Yun? Puh-leeze!



We can easily dismiss this article based on the simple Housing facts we know to be true. But this article discusses what might happen in the near future. Perhaps this author is seeing things the present facts obscure. Maybe he has an ability to see what others miss. How has his track record been in making these articles forecasting improvements in weak companies or sectors?

Short Answer: Not so good.

Longer answer: Here's a few excerpts from the past year:

Aig_feb_08_2 1. AIG's Selloff: A Huge Opportunity (FEBRUARY 18, 2008)
http://online.barrons.com/article/SB120312653758273245.html

Excerpt: Last week's plunge was way overdone ($44.10). The stock could jump nearly 50%. (Yesterday's close: $23.0

Mbia_jan_08 2. MBIA: Priced for Catastrophe (JANUARY 21, 2008)
http://online.barrons.com/article/SB120071150488302379.html

Excerpt: MBIA's shares were savaged anew last week, and now its stock looks cheap. It trades for about $8, well below a conservative liquidation value above $30 a share. (Yesterday's close: $3.90)

Shld_oct_07 3. A Storied Name on Sale? (OCTOBER 22, 2007)
http://online.barrons.com/article/SB119283873785565563.html

Excerpt: Money-management wunderkind Eddie Lampert is likely to succeed in turning around Sears. For investors, the big payoff lies in real estate. Sears Holdings sells for $134 a share, but could have a break-up vaule of more than $300. If Lampert turns around its retail operations, the shares could rally to 200 or more. (Yesterday's close: $70.91)

Macys_july_074. Miracle on Private-Equity Street (JULY 23, 2007)
http://online.barrons.com/article/SB118497718683573586.html

Excerpt: The shares, now about $42, could fetch more than 52 in a takeover. And there's ample room for the current management to improve marketing and cut costs. (Yesterday's close: $15.51)

~~~

To be fair, this has been a very difficult environment -- particularly for financials and retailers. But while the market has fallen since these stories came out, they are all down 40-50% -- far worse than the overall S&P500 has done.

The famed Barron's Bounce has also become a bit of a misnomer -- it is looking more like the Barron's Trounce . . .

[HenryTo]

Not sure where he gets his housing starts numbers from, but housing starts just hit one million in December and did not decline below the one million number until March of this year:

http://research.stlouisfed.org/fred2/series/HOUST/downloaddata?cid=97

Make no mistake: The Feds will bail out the GSEs if their hands are forced. Ben Bernanke and Tim Geithner, president of the NY Fed, are two of the most dovish Fed presidents in the last 10 to 15 years, and Hank Paulson must know the consequences of not bailing out the GSEs. Even if they do not want to, Congress would not allow it. It is going to get done soon.

Perversely, the market forcing the Fed's hand with the GSEs will actually increase liquidity in the mortage markets, and bring mortgage rates down as the Feds inject liquidity into the GSEs. That is, the near collapse of the GSEs is actually bullish for housing, and not bearish.

As for Alan Abelson - one cannot be more wrong by reading him during the late 1990s. The late 1990s was a mere expression of new-found economic freedom and our "animal spirits" as much of the world starts to adopt capitalism and as we saw significant Schumpeterian Growth (in the form of the adoption of the PC and the World Wide Web) and Ricadian Growth from the liberalization of borders across the globe. Moving to bubble to bubble is a mere part of the capitalist process. You can call it "excesses" or whatever, but it was inevitable and once the trend started in early 1995, you could either buy in or sit on the sidelines, but to continually read Alan Abelson while he criticizes the bubble was a major waste of time unless it led you to time the top perfectly by shorting in July 1998 (right before the onset of the Russian and LTCM crises) or March 2000.

[rffrydr]

Yeah, that article was weak and no place for Barrons Cover. My faith in the major publications (as well as analysts) has been shaken of the last years. Where there should be contrarian indicators many times there are just what look to be plants.

Fed involement with the GSEs will be better for the housing market--proven in the last couple days. And Abelson did his job inthe 90's while missing some very powerful trends masked by the excesses--including the biggest trend of all, the money.

But here's some better thoughts from the N. Califonia epicenter:

http://www.sacbee.com/103/story/1074999.html

[rffrydr]

"Return of the Flippers:"

http://latimesblogs.latimes.com/laland/2008/07/theyre-back-ret.html
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

BCA on the housing bill and its potential impact:

http://www.bankcreditanalyst.com/public/story.asp?pre=PRE-20080725.GIF