Posts Tagged ‘credit card’

Ge, which had for all intents and purposes closed down GE Capital, its finance division, in November, has finally announced layoffs.

Back in November, GE very quietly announced that it would not be doing any financing through GE Capital, except to only the highest rated credit risks. They completely killed their Senior Bank Lending programs, their Health Care Financing, their trade financing and reviewing of most new deals.

Their announcement came as a surprise to Wall Street investment bankers, who had come to rely on GE Capital as the leading source for Senior Bank Debt when doing M&A. With GE out of the market, hundreds of deals died on the table in the 4th quarter.

GE had inidicated they would review their position re GE Capital and new lending in the first quarter. They had made some remarks in a news release, but it was very unclear as to what steps they were taking.

With the layoffs announced today, comprising of 11,000 highly paid financial professionals (15% of the employees of GE Capital), GE’s intentions and expected operations are quite clear.

GE Capital, which had once generated approximately half of GE’s net income, will be no more as we knew it. Thus, GE’s earnings, as we knew them, will be no more.

The main questions that still exist have to do with the level of potential write-offs that exist on GE Capital’s balance sheet.

Also check out http://alphainventions.com/ a great website for all new posts!

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Amazingly, the US Department of labor reported only 524,000 jobs were lost in December. The market was almost overjoyed, as they had expected a number in the range of 650,000 to 750,000. The 524,000 did not include the “revision” to the prior months numbers downward by 154,000. Thus, adding the 154k to the 524k, one may come to a sum of 678,000, right in line with the nightmare expectations.

There is also further distortion due to a “birth-death” quotient applied by the Department of Labor, but we will not get into that here, except to say that it is currently making the reported numbers look better than they really are, rather than worse.

Other very weak numbers not reported in the headlines include:

Average workweek has declined to 33.3 hours among all employed workers in December. This is the lowest number of hours worked since Uncle Sam started watching these numbers in 1964. (Some economists anticipate that this number will correlate to another 500,000 job losses in the coming months.)

Since January 1, nine calendar days ago and 6 business days ago, major employers (those with 5,000 plus employees each) have announced job cuts of more than 30,000. On a daily basis this is an average run rate of 5,000 per day, or annualized rate of additional 1.1 million of job cuts!

Some may say that the run rate of 1.1 million is less than half of the newly unemployed of 2.5 million fellow Americans in the US during 2008, but there are numerous other facets as well.

Keep in mind, when an unemployed worker takes a job at because they must at 30%, 50% or 75% of their former compensation, they are no longer statistically unemployed.

Key numbers to continue to watch includes average compensation per hour, average numbers of hours worked, and the U6 unemployment numbers which reflect a much broader and economically relevant calculation of the unemployment levels.

Also check out http://alphainventions.com/ a great website for all new posts!

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Citi yesterday agreed to “cramdowns” for resetting mortgage amounts and rates for troubled borrowers.

Politicians all across America declared that this was a breakthrough, etc.

One would not think it at all surprising though, given the $45 billion pumped into Citi by our great Uncle, and our Uncle’s willingness to absorb more than $300 billion of future Citi losses.

Socialism clearly has some benefits. With a tight leash (like Citi is on), the master can dictate many things.

Two Wall Street Journal columns jump from their website today.
After Dow’s Collapse, Guarded Hope

After the U.S. stock market’s third-worst year in more than a century, many investors are hoping for a turnaround in 2009. But considering the pain that has continued for more than a year, they are reluctant to bet on it.

Stimulus Versus Recession

The U.S. is preparing massive efforts to battle the twin threats of deep recession and deflation in 2009. The results will affect the investment climate for years to come.

These two observations are right on target, but the impact and implications so grand, that the folks at the WSJ should be shouting from the building tops in Manhattan, Greenwich, The Hamptons, and DC.

First, it should not be understated but the International Monetary Fund had estimated financial security losses in the range of $1.4 trillion as of this past October. To date, US institutions have only written off less than $800 billion! The IMF estimates were before the $50 billion evaporation of Madoff assets and the severe financial market declines of late October and November.

Additionally, there have been several estimates in the area of $2 trillion for the total losses to be expected by the inability of the “two pillars” of homeowners/credit users and small businesses to obtain any lifelines quickly and without “strings” of steel to further sink them. The lifelines are not appearing on Uncle Sam’s drawing boards at the moment, which means that we should not count on them in the near future. Uh, oh!!

Current LIBOR based mortgage rates are in the area of 2.25% currently for up to $2 million!!! The rates are less than the average yield of a local CD for a few months. Fixed rate conforming mortgages are at less than 5% for 30 years. We can expect mortgage rates to further decline as the Fed continues to intervene in the market for Fannie and Freddie securities. (They have billions of $ in their pockets to manipulate the market and lower the rates further.) Unfortunately, other than the variable LIBOR loans, jumbo fixed mortgages are still in the range of 8% or so. Because the government is ignoring this sector of the market, there has been only increases in the rates as the riskiness of the credits have increased.

Banks are demanding more collateral, rather than less. In a time of declining asset values, with collateral worth less, fewer and fewer are able to meet the stricter lending requirements. Where is Super Paulson and our Hero Bernacke when we need them???????? Will HOPE and CHANGE help? Or should we turn to God as our only salvation?

Today’s WSJ made the analogy of an individual escaping from a very painful marriage. The journalist stated that this individual would be very likely to resist remarrying. The journalist paralleled the experience to a stock investor during 2008 and their fear of buying stocks in 2009. I thought this very appropriate.

In a world of great interconnection, with great uncertainties, the need for faith and confidence in systems and governments, unified and coordinated efforts are crucial. Given all we have seen from our government over the past year and years, can we have confidence? Should we have hope?

Given the way America has been raped and brutalized by Wall Street, can we have faith in the Heroes of Capitalism to save us?

Please share your thoughts and ideas………

According to a press release, “The Federation of Small Businesses is . . . calling on the Government, the banks, local councils and consumers to play their part during the year by providing support to small businesses in fighting regulation, accessing finance and maintaining cash flow to buck the increasing trend of business closures.”

The Federation for Small Businesses needs to do more than just issue a press release.

The government has financed the banks, protected Wall Street and back stopped the auto industry, but government and our political and financial leaders have ignored the needs and potential catastrophic impact of the small business failure.

Limiting interest rates is just one limited step. Encouraging banks to lend, promoting a major SBA program similar to “HOPE for Homes”, encouraging lenders to extend credit rather than reduce amounts available, are but a few of the many steps they could take.

The FSB is to be commended, but at the same time must call upon the communities across the US to mobilize and lobby Uncle Sam to work to protect our small businesses, their employees, and the core of the American Economy.

As a small business owner suffering from a reduction in income levels due to the recession, I am very familiar with the shortage of credit for small businesses. It impacts the small businesses directly, as credit cards and other signature loans are their liquidity lifeblood. Also, customers and clients rely on credit to purchase services and products and with credit levels being reduced and credit needs not being fulfilled, consumption and purchase levels are down significantly.

Much comes back to the Federal Government and their missteps regarding the TARP and providing capital to our banks. One would think that the government bailout would have helped the small businesses indirectly, but then again, nothing has been as “one would have thought” over the past 6 months.

Yesterday’s Wall Street Journal reported that the number of miles driven in America had fallen by 8.9 billion miles or 3.5% in October 2008 versus October 2007.  The Department of Transportation reported that this was the largest decline for the month of October since 1971.  They noted that this decline came despite the fact that gas prices have declined from above $4 per gallon to less than $2 over the past 4 months.

The Federal Tramsportation Secretary, Ms. Mary Peters, was quoted as follows:  “The fact that the trend persists even as gas prices are dropping confrims that American’s traveling habits are fundamentally changing.”

What??????????? Since when do a few months when the world is in a state of economic and social chaos make a “trend”?  What about other factors besides “Americans’ Passion to Drive”?

Does Ms. Peters know and understand that unemployment levels across the country are tremendously elevated?  Has she read or heard anywhere that many hundreds of thousands and more are threateden with job loss?  Has she been informed by her brilliant staff that the volume of new car purchased have crashed?  That the equivalent of more than 2 million cars are being retired off of the American roads?

Has she heard the pundits and “talking morons” saying “The American People have voted.  And, they have voted they do not want GM, Ford and Chrysler vehicles?”

Has she thought about the connection between consumer credit and vehicle usage, whether for personal enjoyment purposes, business travel, or shopping?  With available credit lines being reduced cumulatively by hundreds of billions of dollars and interest rates on cards rising to up to 35% per year, might these things have an impact on driving patterns?

Would one (with any clue) conclude that with all these changes going on in the economic and cultural climate, that the use of one’s car and the miles driven may be impacted?  Would one consider these changes permanent (which in my mind is defined as “set forever”)?

I think not.  But then again, I am not in DC and nor am I a “leader”.

Maybe President-Elect Obama will select his DC Leaders based on intellect, ability, reading comprehension, and their understanding of the area they are to oversee?  Would that be asking too much?  Might that have a positive influence on the future of America?

May God help us!

The biggest banks that have received the biggest free giveaway of American taxpayers’ wealth, are now stealing the life blood of every household and the economy and our government is either blessing the theft or ignoring it.  The Red Plague of losses, illiquidity and falling values and prices continues.

Traditionally, interest rates on credit cards were competitive and set based on one’s credit ability, payment history, and market rates.  Today, credit card companies are bumping their rates up to 30+% because they want to.  This is in the face of the 10 year Treasury bond below 3% and the billions in free dollars they have received to stimulate the economy from our dear Uncle Sam.

At these rates, the amounts due will double over less than 3 years. These rates are userious, abusive and immoral.  But, Mz. Nancy and Mr. B Frank ignore the issue.  This is an issue that can not be ignored.

If outragious mortgages are reset, foreclosures abayed, and homeprices attempted to be stabilized to protect the American citizens’ balance sheets and financial solvency, the system will collapse around the explodign levels of consumer debt.

The average American with outstanding balances will get eaten in userious rates and ensuing fees.  Bankruptcy and further financial chaos of the American financial system, banks, Wall Street and Main Street can not be too much further behind.

God help America from the Death Wish of America’s Financial System and Greed (and the Blindness and Ignorance of the regulators tasked with protecting us)!!!!

The biggest banks that have received the biggest free giveaway of American taxpayers’ wealth, are now stealing the life blood of every household and the economy and our government is either blessing the theft or ignoring it.  The Red Plague of losses, illiquidity and falling values and prices continues.

Traditionally, interest rates on credit cards were competitive and set based on one’s credit ability, payment history, and market rates.  Today, credit card companies are bumping their rates up to 30+% because they want to.  This is in the face of the 10 year Treasury bond below 3% and the billions in free dollars they have received to stimulate the economy from our dear Uncle Sam.

At these rates, the amounts due will double over less than 3 years. These rates are userious, abusive and immoral.  But, Mz. Nancy and Mr. B Frank ignore the issue.  This is an issue that can not be ignored.

If outragious mortgages are reset, foreclosures abayed, and homeprices attempted to be stabilized to protect the American citizens’ balance sheets and financial solvency, the system will collapse around the explodign levels of consumer debt.

The average American with outstanding balances will get eaten in userious rates and ensuing fees.  Bankruptcy and further financial chaos of the American financial system, banks, Wall Street and Main Street can not be too much further behind.

God help America from the Death Wish of America’s Financial System and Greed (and the Blindness and Ignorance of the regulators tasked with protecting us)!!!!

With the Dow up more than 500 points, after breaking through 8000 on the low at about mid day, we are seeing what will likely be the rythym we will experience over the next six to none months.

There should be much optimism regarding future legislation in the first quarter of the coming year, but at the same time, great fear as to the risks facing the US and global economy.  Thus, there is great opportunity for profit given the volatility and the ability to trade quickly.

For long term investors, there is great hope that the systems will be stronger after this chaos and that growth willbe more consistent moving forward.  Bond yields should be more normalized and defaults after 6-9 months should decline.

Be careful in the short term.  The rallies make for great trading opportunities.

We are seeing credit card rates sky rocket for those who are paying and have credit cards with a balance.  What is happening to those who are not paying?  Please leave a comment, as this is important to monitor and track!

New credit card issuance is at a screaching halt.  If you are seeing new credit issuance, please let me know.

Current mortgage rates here in Florida are as low as 3%, yes 3%, with 1% points, tied to the 30 day LIBOR plus a margin.  Thus money is cheap, if you can get it.  Loan to values on mortgages on these rates is 50% for a cash out refinance and 60% for a $ for $ rate refi.  Thus, if this kind of mortgage would serve you, let me know, but for 90% of those looking to refi or buy a home, the rate is great but the LTV is too low!

I understand that the SBA is beginning to issue loans for those stressed by the economic challenges.  Let me know if you have had success!

Speak with you tomorrow!

God Bless!