US Steel: A bright future, but it’s not a play for squeamish investors

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I'm Reiterating my Buy rating for United States Steel Corporation (NYSE: X), first recommended on April 15, 2009 at a price of $27.61. Shares are up a cool 59.5% since that time.

The rationale for owning X's shares remains the same: US Steel will likely be a survivor in the consolidating global steel sector with sufficient scale to either produce raw materials and acquire raw material assets.

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A Realistic Plan and Time Line for Your Survival Homestead

This is a guest post by Todd Detzel, known on The Oil Drum as Todd. You may find his ideas very ambitious. There are other approaches as well, but this post does point out some of the issues you will want to think about.

My guess is that almost all city people underestimate what goes into establishing a homestead. And, most importantly, how long it will take – if you start the process today, you should be ready some time in 2016-2017 -- if you work like a dog and are lucky.

This is part of the orchard. There are 15 varieties of apples, 4 varieties of pears, 2 varieties of peaches, 4 varieties of plums, 3 varieties of English walnuts and 2 varieties of persimmons.

It looks like we still have a problem with word counts. We will get tech support to look at it. There is a post below the fold, if you click "There's more".

No doubt someone is going to look at the following time line (a total of 7 years – 2 years getting ready for the move and 5 years actually building the homestead) and believe they can beat it. In fact, I consider the time to be highly optimistic but if you think you can beat it, I wish you all the best.

I also have no doubt that other people might do things differently or in a different order. That’s fine with me. Nothing is written in stone.

The purpose of this plan is to allow you to continue to live in the 20th century for 10-20 years in the event of total disaster upon completion of your homestead. We rely on a lot of technology and that technology has a given lifespan. Most things like motors, lights, batteries, inverters, and refrigerators eventually die of old age and it will (may) be impossible to replace them so there is no point in planning for a longer period. Although abandoned cities might be “mined” for replacements, this hardly constitutes an acceptable plan for generational survival.

This 10-20 year timeframe can be extended indefinitely by the simple expedient of incorporating generational/sustainable technology right from the start.

This plan assumes that you will be starting with raw land with no improvements. The advantage is that you can tailor things specifically to your needs while allowing time for your skills to develop. Yes, you could buy an old farm. However, I believe that old farms will ultimately cost you more and require significantly more time to rehabilitate than starting from scratch. Further, trying to fix up old stuff is more difficult than new construction. Things are rotted, out of square, foundations and roofs are shot or lack insulation.

The plan also assumes that all property is owned by a single family and that the work will be done by that family (a husband and wife or partner). I know a lot of people believe that a sharing/commune-type structure is the way to go. However, a community timeframe will be little different from that of a family and my experience is that most communities eventually fail.

I’ve learned a lot of lessons since moving to the country over 30 years ago. I should add that I also lived in a rural area until I was 12. However, I sure as hell don’t know everything and some of my suggestions are guesstimates. For example, I grew up around my neighbor’s draft horses but I’m not a teamster. There are thousands of others out there who live far more self-sufficiently (self-reliantly) than my wife and I. But, I’ve also had the opportunity to observe the successes and failures of other people.

The plan below gives a time line that allows time to develop necessary skills, spread out the cost and, most importantly, allows a long enough period to be certain country living is for you before investing everything in something you hate.

Let me begin with the psychological aspects since no one seems to ever discuss them. Not everyone has the personality to survive truly rural living. The vast majority of city relationships break-up within five to seven years because one of the partners absolutely hates everything. It might be the isolation. It might be the mud or having to put on the chains every day to get through the snow (we have friends not that far from us who have to ski or snowshoe out a few months a year from their place to get to their truck almost a mile away). It might be that there is never any time when there isn’t work to be done. It might be having little income. It might be the two-half hour trips each way to the school bus stop if you don’t home school. It might be personal growth. It might be the lack of cultural events. Or, it might be the difficulty of shopping or only being able to afford thrift store clothes.

There are also sex specific landmines: For men, it is the loss of image/status. There is no business card with the grand job title. They are just one more guy in jeans and work boots driving an old pickup truck. For women, it is the loss of support structures/friends.

So, here goes:

First, before you do anything – How much money do you have? Unlike buying a functioning place, starting from scratch means you can’t spread the cost over the period of the mortgage. For example, a septic system in my area of northern California costs between $20-40K including engineering, permits and construction. This money has to be paid out front.

Be sure you have enough money to cover all your living expenses for a minimum of two years in addition to money for construction, etc. In addition, you should have enough basic food for at least a year. This is a good way to learn food preservation skills.

Second, you need to gather information. You need to know about riparian rights/water rights. You need to understand Covenants, Conditions and Restrictions. Are there any local or state ordinances or laws that may impact you? For example, there might be a grading ordinance that requires you to prepare an Environmental Impact Review and hire an engineer if you want to do significant grading such as putting in a long road. You have to find out how much things like power line extensions cost. In my area it is over $50/foot. Real estate ads might say, “Power nearby” or “power available” but it’s not at all unusual for lines to be more than 1,000 feet away (in fact miles isn’t unusual). A thousand feet is 50 grand or more, likely making putting in an alternative system more sense. I have a neighbor who can see my power line but can’t afford to get hooked up.

Third, you have to realistically assess your relationship and whether you both share the same vision. Don’t even think about a country move if there are any problems. This is one area where total honesty is a must.

Fourth, you have to assess your marketable skills and whether you and/or your partner are willing to take any job. Jobs of any kind are hard to come by in the boondocks. It is not terribly unusual for men to work so far from home that they live where their jobs are and come home only on weekends-–not too good for relationships.

Fifth, you need to begin to learn needed homestead skills at least two years before you move. These include things such as engine mechanics, wiring, plumbing, carpentry, animal husbandry, crop production, food preservation, etc. You do not want to have these kinds of things become “on the job” learning experiences. You will go broke if you hire people for work you could learn to do.

One important point; “Learning” homestead skills doesn’t mean reading a lot of books (although you will buy and read a lot of books). It means putting skills into action right now.

Although you will begin using motorized equipment for fieldwork, it is assumed you will use animals once you are established. My preference would be draft ponies with a forecart/hitchcart.

You need to learn that there is no such thing as “man’s work” and "woman’s work.” I can sew if necessary and my wife can run a chainsaw. Sexism is a good way to kill a relationship. I taught myself to sew on a treadle sewing machine when I was 8 or 9 so I could make packs for my trap line and I also do most of our cooking today because I love to cook whereas my wife hates cooking.

Sixth, if your kids are currently going to regular school, it might be a good idea to begin to transition them to home schooling (if that’s your plan). You can buy one of the many programs available and have him/her spend an hour a night on it. I might add that mom and dad should take this time to study their own stuff rather than watching TV/DVD’s while the kid works. In fact, I would suggest that you investigate community colleges for appropriate courses so you can really study too.

Seventh, your plan needs to be designed to do things in small steps so that failure won’t be a disaster. Start with 10 chickens not 100. Start with a small garden not a half an acre. Build a small building before you tackle a major building.

If at all possible, find a mentor! Yes, it will be difficult but it will save you unending periods of re-inventing the wheel. It might be a good idea to ask the real estate agent about this when you are looking for land.

Steps by Year

Year one –
Buy land
Buy basic tools
Clear land
Buy used mobile home
Establish domestic and Ag water systems
Establish septic/cesspool system/outhouse/composting toilet
Establish power system or bring in power
Fence future garden
Plant permanent crops (trees, vines, etc.) in the fenced area
Establish small kitchen garden
Have someone custom fit and drill a high organic matter cover crop into future
pasture and crop area
Build a combination chicken coup (and/or goat shed) and firewood storage building
Cut firewood

City people seem enamored by land quantity rather than quality. The land will be your lifeblood and you cannot skimp on it. It is far better to have 20 acres of well- drained land with Class I soils than 200 acres of land with Class 3 soils that lay low and needs tiling.

Meadow - This is part of the area where the 4 families by me
will expand food production if it hits the fan.

Further, since wood will be of major importance for heat, cooking, future construction and, perhaps, woodgas, the land must currently support a sufficiently large wood lot to supply all your needs in perpetuity.

The mobile home is the key to your first year’s success. It provides instant dry, warm housing and a bathroom. Don’t buy a camper or fifth wheeler! They are too cramped and cost too much. Under no circumstances should you begin building anything large the first year.

Fertilizer costs money and may not be available. Although a great deal of increased soil nutrition can be achieved with legume crops, you really need animals for their manure. Yes, you could make compost from grass and plant waste. However, the nitrogen level of compost is not high enough to help many crops and should be viewed as a soil amendment that improves tilth but nothing more.

The chicken coup/goat shed/firewood storage building will give you a chance to practice your building skills.

Since feeding and taking care of your animals is labor intensive, it only makes sense that they provide some return for your work whether as food or by providing power for things like plowing.

The cost of tools is likely to be an issue. I’m not talking about little home stuff like a couple of screwdrivers. I’m talking about big, expensive stuff that you will have to buy. How do you deal with the reality of saying it is imperative that you spend close to a thousand dollars for chainsaws when your family can’t afford new clothes?

Hammers - Gotta have hammers.

Year two –
Look for work and get a job
Assess finances
Build barn/shop
Fence pasture into paddocks
Begin working fields on your own. (probably with a tiller)
Plant full garden and preserve excess crops
Get chickens or milk goats
Complete house design and any final clearing
Build cold cellar
Decide whether you are going to use corn silage, green chop/haylage or hay along with grains
for animal feed, how you plan on harvesting them and how you plan on storing them (hay
stacks, bins, silos, bunkers, Ag Bags)
Cut firewood

This is the make or break year in many ways. You’ve had your fun playing in the country. You’re starting to talk big bucks to build the barn/shop correctly – anything less than 30x40 or 40x40 is a waste of time. Be sure the door is high enough to get large equipment in and out (Know what equipment you might buy. Some equipment like combines require a 13 foot minimum height – and yes, I have heard of ground driven combines.)

I’d consider using a large plastic septic tank or water tank for the cold cellar. They are watertight and all you need to do is stick it in a hole and cut in a door/hatch.

Someone has to start bringing in money. Someone has to build the barn/shop. The garden and orchard require significant work. Food preservation takes time and money. Someone has to be responsible for the animals every day. Deer and varmints are no longer cute and cuddly but have to be killed or fenced out. Cutting and splitting firewood is no longer fun. Sorry - forgot the kids. Time is always short.

You have to make a final decision as to what you are going to use for plowing and fieldwork around your place until you switch to animals. You could buy something like a Polaris Ranger 6x6 rather than a tractor. It can be fitted with a forecart/hitch cart for fieldwork but is safe for jobs like hauling firewood out of the woods. Tractors are good at being tractors but not much else. The only thing you’ll miss about not having a tractor is a loader. Incidentally, a forecart is a two-wheel cart that incorporates a manual, hydraulic three-point hitch and a place for the teamster to sit or stand. The advantage of the forecart is that regular three-point implements, rather than horse drawn implements, can be used.

However, I would personally consider a different tractor alternative at this point. I’ve had a wheel tractor and crawler and what I would do were I doing it again is buy a beater, manual trans, non-emissions full-sized 4x4 and convert it to a “tractor” much like was done in the 20’s and 30’s with Model T’s. It could also be easily converted to wood gas when petroleum becomes expensive and scarce.

Don’t buy draft ponies at this time even if that is your final means for fieldwork. And, sure as hell, don’t even consider a draft horse. Large animals are going to be another burden you don’t need at this time.

I guess I should offer my rationale for draft ponies. In the old days, standard productivity was between 11 and 50 acres of crops per horse. The difference relates to the size of the farm – the bigger the farm, the more efficiently horses could be used. Your homestead will be quite small making the use of any large draft animal inefficient for the simple reason that big animals eat more than small ones and require more pasture. This, in turn, requires more work to produce the food for them. Also, draft animals get lazy if they don’t have work to do. By the way, I have mixed feelings about oxen – in a way it’s a good idea but not so good in others.

Typically, all the cutesy-pie, city ideas of making money like selling organic vegetables (right – make $100k per acre growing “greens”) or arts and crafts prove to be non or minor money makers for the time they take. This is when city folks think “Let’s grow dope. All we need is 10 pounds per year…” I don’t care about this morally or even legally. However, everything you have including your land, car, generator, everything, could be confiscated, you could go to jail and your kids could end up in a foster home. Suit yourself.

Now, if you can’t make enough money to live on and can’t build the barn because you still lack the skills or are afraid of making mistakes while you learn, common sense says MOVE BACK TO THE CITY NOW!

Years three and four –
Build the house
Establish permanent pastures including any additional fences and row crops like corn, grains
and hay
Go to work and keep on doing what you’ve been doing
Cut firewood

Woodpile - Gotta have chainsaws. Extra points for anyone who knows what the cable is. (It's a choker.)

These are really the years from hell. By this time you may be wishing you had purchased the piece of crap house on the old farmstead with the falling down barn. You may be right but in the long run what you have will be better off if you can stick it out.

If money is getting short (It’s always getting short), it might be wise to think about something other than a conventional house. There is rammed earth, straw bale, soda can, yurts, domes, stone using the Flagg method and used tires. These can take a long time to build.

However, one idea I have is used mobile homes. You can buy used 10/12’x50/55’ mobiles for under five grand. If you bought three more, you could form a square with an atrium in the center. You could strip off the tin skin, sheet with rigid foam insulation and then wood sheeting (or, maybe, Hardie (cement) board) and put on a regular insulated roof over the tin one. This doesn’t take much skill. Since there are no interior bearing walls, the interiors could be gutted and reframed to whatever configuration you wanted. An added advantage is that they won’t be taxed as a permanent improvement like a house. Think about it.

If I had lots of money and the right location, I would seriously consider building the house, including the roof, out of poured concrete below grade. With a sun scoop, light pipes or atrium, it wouldn’t be like living in a cave. There would be many advantages; essentially no exterior maintenance; little air infiltration; fire-proof; the soil would moderate the internal temperature; plus many more.

Year five –
Add any final animals such as sheep or confined meat animals like swine (although swine can
be run on pastures if you ring them)
Try to finish what you started
Probably try different varieties of vegetables
Build a silage bunker if that’s your trip and grain storage bins
Buy a team of draft ponies and learn to work them (a forecart/hitch cart will work fine with
them and a team can easily pull a one bottom plow which is all you need)
Cut firewood

This shows blueberries on the left and some grape vines on the right. There are three varieties of blueberries and a total of 10 varieties of grapes.

Well, that’s it. I’ve left a lot (a whole lot) out but you get the idea. Trying to do it all in a short period of time guarantees failure. Lack of money guarantees failure. Not taking the time to educate yourself before your move guarantees failure. Thinking your partner isn’t working as hard as you are guarantees failure as does telling your partner what to do. A poor relationship guarantees failure. Being afraid to make mistakes guarantees failure as does someone bitching about not meeting some preconceived notion of perfection.

And, last of all, and most importantly, not taking time for yourself guarantees failure. I cannot emphasize this enough! When we were building our houses (I built three for us and a few more for other people), my wife and I made a decision to stop work from 2 to 4 PM and go down to the creek to skinny dip each afternoon. Then we would work until 6, have dinner and then work until it was twilight and go to bed at 8:30 or 9 (in our 6’x9’ tent for the first house). You have to do something like this because there are always 28 hours of work each day when you are establishing a homestead. You might like to read or sew instead but you have to force yourself to take a break or you’ll break.

You might ask how much a homestead like this will cost. All I can say is, “It depends”: It certainly depends upon the geographic location. It depends upon the skills you have or can develop. It depends upon the climate since this will influence how much food you can grow easily and your heating demands. It also depends upon whether you just want to establish a framework for survival without living a survival lifestyle.

It also depends upon how willing you are to “make do.” Those of us living in the country often “make do” for the simple reason that there is no financially viable alternative. For example, one of our cars is 5 years old, two are 25 years old (they are all used for different purposes) and my main truck is 19 years old. They’ve been well taken care of and should last many more years. Same thing with chain saws – one is 2 years old, one is 5 years old and two are 29 years old. Why replace them when they run since the money can be used for something else… and I don’t believe in debt.

So there you have it. Time is getting short. Let me close by saying that I intentionally haven’t provided a book list and only one Internet link. Most of my books are old (like me) and there might be difficulty getting them. As far as the Internet goes, I think it’s far better for each individual to do his/her own searches since what might be of interest to me might not be to you.
Be that as it may, here is “the” link: (A companion link is but the titles are not visible unless you download each section.) This will take you to a page containing about 4,000 titles, a total of 13 gigabytes. It can be downloaded a book at a time and given its scope, you will probably want to put it on a flash or external drive and then select what to print out (see below). Most of the material is oriented toward the third world; perfect information for a homestead.

One last, last thing: On Internet information, print it out and put it in a notebook(s) when possible. Information comes and goes. If you only download it your hard, flash or thumb drive, there is no guarantee that your computer will still be working when you want it. You can also just sit in a comfy chair and peruse printed material and it requires zero technology to assess regardless of where you are. I’m not saying this for effect. I have five 4”, 3 ring notebooks of stuff relating to survival; certainly over 2,500 pages. The power can go out and it’s there. I can throw it in my truck and not break it. And, because each one has a contents page, stuff is easy to find.

Happy Homesteading!

Dr Pepper earnings preview: Q2 not too sweet?

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Dr Pepper Snapple Group Inc. (NYSE: DPS), the bottler and distributor whose brands also include A&W, Clamato, Country Time, Hawaiian Punch and Motts, is scheduled to discuss its second quarter 2009 results tomorrow morning in a conference call at 9:00 AM ET, featuring CEO Larry Young and CFO John Stewart. You can catch the live webcast on the company's website.

For the quarter in which Dr Pepper entered a marketing agreement with Electronic Arts, Inc. (NASDAQ: ERTS) and expanded its product offerings to McDonald's Corporation (NYSE: MCD) and Jack in the Box (NASDAQ: JACK), analysts surveyed by Thomson Reuters expect the Plano, Tex.-based beverage giant to report that earnings fell 18.3% from a year ago to $0.49 per share, though that's up from better-than-expected $0.37 per share in the first quarter. Revenue for the second quarter is expected to be 3.4% lower to $1.5 billion. Earnings beat estimates in three of the past four quarters, by as much as 8 cents per share.

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LPs Ask Sun Capital To Cut Fund Size

Sun Capital Partners has a new headache to worry about, in addition to its rash of bankruptcies, personnel defections and NY Post antagonists.

Certain investors in Sun’s $6 billion fifth fund have informally asked the firm to consider a fund size reduction. The discussions are still at a preliminary stage, without any formal proposals having been yet been presented.

“It’s really the larger LPs who are having liquidity issues, which is as much of a driver here as anything,” says a longtime Sun investor. “They probably want all of their GPs to cut fund sizes, but you have to pick and choose… and Sun is an easy target right now.”

Why the bulls-eye? One reason is simple math: Sun has invested just around 26% of Fund V, which means there is plenty of dry powder that can be returned to sender. Moreover, the existing fund portfolio is littered with dogs like Kellwood, which has pushed its overall value underwater by approximately $500 million. Some LPs apparently like the idea of starting fresher sooner, with visions of Sun’s former glory dancing in their heads.

Finally, there is the issue of how much it actually costs to run Sun. The firm has laid off around one-third of its investment staff so far this year (although it does plan to hire new junior folks soon) and has been virtually new stagnent in terms of new deals. In other word, Sun’s current overhead and deal capacity are both lower than what they were when the $6 billion was raised.

But this is where things get a bit tricky. Most firms use management fees (i.e., a percentage of committed fund capital) for overhead. Therefore, a smaller staff can easily justify a fee cut. Sun, however, uses most of its management fee for the general partner contribution to Sun’s fund, on behalf of Sun’s co-CEOs and a group of other senior managers. To “keep the lights on,” Sun mostly relies on transaction fees (currently nonexistent) and portfolio company monitoring fees.

Given this system, one partial solution could be for Sun’s senior managers to alter their management fee structure so that they actually fund their GP commitment out of their own pockets. I say “partial,” because it’s not likely to be large enough to sate liquidity-strapped LPs. As such, my best guess — and it’s only a guess — is that Sun will ultimately reduce its fund size by between 10% and 20 percent (probably on the lower end). It also may alter its management fee structure, but that would be more to satisfy disgruntled junior staffers than to satisfy investors.


Caterpillar is poised to break out

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I'm reiterating my Buy rating for Caterpillar (NYSE: CAT), first recommended on April 13, 2009 at a price of $33.02. If you purchased CAT at that time, you're up a solid 41%.

Back in April, I put CAT in the not-for-the-squeamish category, due to the uncertain timetable for the U.S./global recoveries: the upside was always there, but so was the potential for a 30% hair cut.

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Hope Springs…a Disastrous Leak

Hope springs eternal in the human breast;
Man never Is, but always To be blest:
The soul, uneasy and confin'd from home,
Rests and expatiates in a life to come.

--Alexander Pope,
An Essay on Man, Epistle I, 1733

Most people would probably agree that the English poet's words aptly describe the human spirit -- relentlessly optimistic even in the face of great adversity. Unfortunately, when the odds are overwhelmingly bad, hanging on in hope, rather than cutting-and-running, can prove disastrous. For one sector of the economy, the decision to ride out the early stages of the Great Unraveling appears to have been a serious error of judgment, as Reuters reveals in "Clock Ticks for Debt-Laden US Suburban Developers":

After three years of trying to wait out the worst U.S. housing crisis since the Great Depression, debt-laden suburban developers around the country face a tough choice -- sell at a discount or go bust.

That crunch may also spell fresh trouble for U.S. housing and banking sectors still struggling for stability under mountains of foreclosures, debt and doubt.

Hannaford Farm in the northwestern Chicago suburb of Sugar Grove, Illinois, is a typical example of how the irrational exuberance that gripped the construction industry and the banks that financed them during the property boom has now gone sour.

At the market's peak the "McMansions" -- huge homes on small lots that typified the excesses of the boom -- in this half-built development sold for up to $1.3 million. The peak national U.S. average home price hit $230,300 in July 2006.

There are still roads, sewer lines and water mains in place for what should have been 131 homes at Hannaford Farm. But half of those lots display thick, tall weeds instead of houses.

Unable to sell the remaining vacant lots here, the developer was forced to offer them at a steep discount -- fast.

"We are dealing with a seller who is very motivated and doesn't have the luxury of choice," said Jim Blanchard, the broker at Inland Real Estate Auctions Inc brought in to run the "Summer Land Rush" for Ed Saloga Builders. "The developer here needs to cut their debt and inventory quickly."

Empty lots originally sold for $205,000. But in the recent auction 20 of them were priced starting at $66,500. A dozen bids were received, and nine lots are now under contract.

Paul Amore, a home builder himself, owns a home in Hannaford Farm that had been valued at $825,000 and he said the auction had under-cut that value by more than $120,000.

"The banks are forcing developers to sell and sell cheap," he said. "Everybody's getting a bailout except people like us. We're stuck just trying to ride this out."

Hard numbers on the nationwide number of "developable" lots are scarce. But what evidence there is suggests many developers -- especially those selling lots for luxury homes -- face a similar choice to that of Ed Saloga Builders.

"The inventory of these lots dwarfs the inventory of existing homes," Blanchard said. "There will be a lot more product like this coming through the pipeline."


Before house prices began falling in late 2006, developers were in a land rush of their own, snapping up prime farm land like Hannaford Farm at any cost.

"During the boom, developers couldn't wait around because prices were rising so fast," said Dave Hanna, head of the Chicago Association of Realtors. "Now some of them can't give that land away."

U.S. home prices have fallen 32 percent in the past three years, erasing trillions of dollars of equity. Foreclosure filings hit a record of 1.9 million in the first half of 2009. Although there are some signs the market is stabilizing, there are also untold numbers of empty lots out there.

The National Association of Home Builders uses filings from the publicly traded home builders, which account for 30 percent of the market, to provide a best guess.

In 2005 those home builders either owned or had options to buy 2.25 million developable lots, which fell to 735,000 in 2008 as they sold off lots or did not exercise buy options.

"This means a whole lot of lots didn't get built on," said Stephen Melman, the association's economic services director.

He said the worst-affected areas mirror the housing crisis -- Florida, California, Nevada and Arizona.

Small lots for cheaper homes are easier to sell.

Steve Dallenbach, a partner at home builder Dallenbach & Larson in Des Moines, Iowa, said smaller "starter" homes left over by the collapse of regional developer Regency Homes in April 2008 "are moving at a discount of around 30 percent."

But selling lots for luxury homes is a different matter in the credit-scarce world of the recession.

"The majority of people who would have qualified for a home like this a few years ago can't get financing," said Michael Lefevre, head of the National Association of Mortgage Professionals. "It's depressing."

Developers therefore have no choice but to slash prices.

"Home owners and developers are waiting as long as they can to sell," said Dennis Hedlund, founder of iEmergent, a forecaster for mortgage and real estate companies. "But in the end, someone has to take the loss."

Hedlund says his forecasts for 2010 include the possibility that the year could be worse than 2009.

"In the meantime, communities may have trouble maintaining the infrastructure on unused land," he added. "Eventually, many lots will have to be bulldozed."

Economic Rebound in Europe; VW, Porsche Feud

Euro area economic decline slowed sharply in the second quarter and the economies of Germany, France and Greece expanding. Volkswagen will acquire 42% stake in Porsche. Aegon posts €161 million loss in the second quarter. Celesio second quarter net increased 1.1% on lower taxes.

Wanted: Assistant General Counsel, McGraw Hill

I have to think this person is going to have their hands full for a few years . . .


Help Wanted: Standard & Poor’s, a division of The McGraw-Hill Companies (NYSE:MHP), is the world’s foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research and data. With over 10,000 employees, including wholly owned affiliates, located in 21 countries, Standard & Poor’s is an essential part of the world’s financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit S&

The Assistant General Counsel will be responsible for working on regulatory legal matters and rendering advice in multiple areas of S&P’s Ratings Services and will obtain significant professional development in a fast-paced high growth Financial Services company. This candidate must have substantial experience in a major financial services firm or law firm and be a highly motivated team player with superior legal ability, written and oral presentation skills and superior interpersonal and communication skills. Management experience and skills a plus.

Essential Accountabilities:

* Development and Implementation of Regulatory Programs ; Regulatory Reviews
* Identifies regulatory and related legal requirements and attendant legal and reputational risks and opportunities
* Monitors and analyzes regulatory initiatives; assists with developing strategy; coordinates with counterparts globally for consistency and impact
* Prepares and updates regulatory filings; advises on policies and procedures to comply with laws
* Renders advice on regulatory implications for new products, including licensing, registration and training requirements
* Coordinates with other legal functions and compliance on investigations/audits and policy interpretation
* Prepares written submissions to regulators and briefing materials for management.
* Reviews marketing materials; assistance with contracts
* Supervises outside counsel
* Communication
* Provides clear, timely and quality legal services toRatings Services and employees at all levels.
* Ensures that managers and staff are properly advised on regulatory legal issues related to their business and products, including firewall requirements.
* Outreach to regulators as appropriate
* Training
* Assist with the development of training programs for analysts.

Equal Opportunity Employer


* Law degree
* 7 - 10 years regulatory legal background in investment advisory, broker dealer, funds and/or credit ratings business
* Experience in securities laws, and policies and procedures ideally with a multinational corporation
* Familiarity with risk management principles and philosophies.
* Strong leadership, interpersonal, and negotiation skills; demonstrated ability to drive consensus across business groups and deal with challenging situations at all levels of the business in a resilient, confident and practical manner; excellent problem-solving skills informed by deep and varied experience in forging solutions
* Demonstrated success in designing and implementing process improvement and training programs including evidencing the ability to influence others who are not in the same line of authority.
* Excellent presentation, writing and analytical skills; able to communicate industry rules and regulations effectively to employees at all levels of the businesses.
* Self-motivated and well organized; able to prioritize tasks and work well under pressure; able to stay abreast of changing regulatory rules and procedures in a developing industry.
* Excellent communication and listening skills.
* Excellent influencing skills
* Active member of a US State Bar or the Bar of another country where legal expertise is required.
* Exceptional organizational skills with the ability to handle multiple, high-priority projects with a keen attention to detail.
* Possess sound decision-making ability and understand risk and crisis management.
* Superior interpersonal, leadership, negotiation, consulting, analytical and problem solving abilities.
* Hands-on, energetic and motivated self-starter.
* Ability to conduct legal analysis.
* Professional demeanor, team player, ability to interface with internal/external parties.
* Proficiency in MS Office (Word, Excel, PowerPoint).

Closing Bell: FOMC keeps the euphoria going (C, JASO, YRCW, NOK, TOL)

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Call today a Bernanke-induced euphoria that rates will stay very low, even if the Fed has still hinted at an exit of the free and endless money supply. The trade deficit was narrower than expected and oddly enough, we are running a trade surplus if you don't consider China and foreign energy. Even the yield on the 10-Year auction came in at lower levels. Here were today's unofficial closing bell levels:

Dow 9,361.61 +120.16 (1.30%)
S&P 500 1,005.81 +11.46 (1.15%)
Nasdaq 1,998.72 +28.99 (1.47%)

Top Analyst Calls

Continue reading Closing Bell: FOMC keeps the euphoria going (C, JASO, YRCW, NOK, TOL)

Closing Bell: FOMC keeps the euphoria going (C, JASO, YRCW, NOK, TOL) originally appeared on BloggingStocks on Wed, 12 Aug 2009 16:00:00 EST. Please see our terms for use of feeds.

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ShoreTel FY Q4 Revs, EPS Top Estimates

ShoreTel (SHOR) posted better than expected results for its fiscal fourth quarter ended June 30.

For the quarter, the company reported revenue of $32.4 million, down from $34.7 million a year ago, but up 4% sequentially, and ahead of the Street at $32.1 million. Non-GAAP profits of 3 cents a share beat the Street consensus of a penny a share.

For the September quarter, the company sees revenue of $30 million to $35 million; the Street has been expecting $33.2 million.

I like the boilerplate description of the company: ShoreTel describes itself as “the leading provider of brilliantly simple IP phone systems with fully integrated Unified Communications.” They may not be a leader in IP phone systems overall, but in the sub-category of “brilliantly simple” IP phones, they apparently consider themselves the top of the heap.

After hours, SHOR is unchanged at $7.73.

Update: In an interview with Tech Trader Daily this afternoon, Shoretel CEO John Combs noted that the company took nearly a point of market share in the latest quarter, and now has about 7.5% of the IP phone business. Combs noted that the company has about 880 distribution partners, including AT&T; today he’s announcing that the company has also signed on Verizon and Qwest as partners as well.

While Cisco is the largest player in IP phones, Combs knocks their systems as “pretty clunky,” haveing been built through 20-plus acquisitions. Combs says that while Cisco is the leader, the biggest competitor for Shoretel is simply not being considered. He asserts that when Shoretel is at the table, they win the deal more than 50% of the time.

Paulson & Co. Rides the Financials Both Ways

As mentioned in our prior post, institutions are currently overweight the Financial sector (as of the end of June). It's also interesting to see that Paulson & Co., which made billions from shorting the financials and the products they sold, now appears to be taking a very big bet on the sector from the long side. Based on its 6/30...

Data Explorers – Focus Stock – E Trade Financial Corp [EFTC] – 12 August 2009

The short base (as measured by Percent Shares Outstanding On Loan) for E Trade Financial Corp (ETFC) has increased 121.78% over the past 3 month and now stands at 14.94%. This is up over 285.56% from the 52 week low hit on June 26, 2009.

When compared to other North American Financial Services Companies, the short base is well above average for the sector. It is considerably higher than Stifel Financial Corp 10% and Raymond James Financial Inc 12.98% who also have large short bases, and well above the rest of the sector, as represented by Charles Scwab 0.99% and TD Ameritrade Holding Corp 0.76%.

Download the full report by clicking here.

U.S. mortgage applications index drops 3.5% in the week ending August 7

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The Mortgage Bankers Association reported that its index of mortgage applications dropped 3.5% to 499 in the week ending August 7.

Celia Chen of Moody's said that higher rates were responsible for the drop off in applications. A 30-year fixed mortgage, excluding fees, stood at 5.38% up .21 from the previous week. Interest rates last year were 6.57%.

Chen went on to say: "The bigger obstacle to home buying is job losses and tight qualifying conditions for borrowing."

Home prices are still under pressure due to growing foreclosures. Moody's is expecting 3.85 million defaults this year compared with 2.7 million last year.

Continue reading U.S. mortgage applications index drops 3.5% in the week ending August 7

U.S. mortgage applications index drops 3.5% in the week ending August 7 originally appeared on BloggingStocks on Wed, 12 Aug 2009 15:40:00 EST. Please see our terms for use of feeds.

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Data Explorers – Focus Stock – Aegon Nv [AGN] – 12 August 2009

The short base (as measured by Percent Shares Outstanding On Loan) for Aegon Nv (AGN) has increased 98% over the past 3 months and now stands at 1.8%. This is up over 100% from the 52 week low hit on June 25, 2009.

When compared to other life insurance companies, the short base is in line with Ing Groep Nv 0.9%, Prudential Plc 1.9 and Principal Financial Group Inc 1.6%. However this is below Sun Life Financial Inc which currently stands at 3%.

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“It’ll Be An LP-Friendly World For Awhile:” Q&A With TA Associates

Today TA Associates closed one of the first “LP-friendly” buyout funds to emerge from the credit crunch. The firm raised $4 billion for TA XI, its fund for U.S.-based investors. (The firm has a separate fund for foreign investors.)

The fact that it was oversubscribed by $500 million only proves that one nice gesture goes a long way.

To refresh your memory, the Boston-based firm lowered the carried interest on the fund from 25% to 20%, lowered its management fee to an average of 1.74 percent of commitments, agreed to offset management fees with transaction and director fees, and added a no-fault divorce clause.

The fund received commitments from City of Philadelphia Board of Pensions and Retirement; Fire and Police Pension Association of Colorado; Indiana State Teachers’ Retirement Fund; Los Angeles City Employees’ Retirement System; Los Angeles Fire and Police Pensions; Montana Board of Investments; Purdue University and San Francisco Employees’ Retirement System.

I spoke with Managing Director Brian Conway about the motivation behind the change in terms, the negative IRR of TA’s tenth fund, and the firm’s strategy as a growth investor deploying cash in a not-growing economy.

It’s been widely reported that you lowered your carried interest from 25% to 20%. What was the motivation behind that?

We have a history of making moves like this that were voluntary and LP-friendly. In the past, voluntarily gave up a scheduled management fee increase when we thought the investment pace didn’t merit it. It was scheduled increase between June 2001 through June 2004, and we gave up because our investment pace was slow after the tech bubble burst and led to a modest recession. We also did a voluntary “makewell” across a number of funds after the tech bubble burst, between December 2000 and March 2003. The funds were up but the value had fallen for investors. It would have come out the same in the wash but we wanted to be on par with investors.

This is sort of the same thing. We did it without being asked, before people were going to committee (to discuss investing in the fund). We felt it was 2009 and the private equity industry was under pressure and our LPs were under pressure from their committees. We also thought some of the details that justified our fees in the past wouldn’t have come through to investors. So we voluntarily changed the carry. It was extremely well-received, less for the economic impact but more for what it said about GP/LP relations.
We think long term it was the right thing to do to.

Is it a permanent change?

Who knows. My guess is that it’ll be awhile before any terms improve for the GP. It will be an LP-friendly world for awhile.

How will the recession affect TA’s investment strategy?

We’ve had to visit 50% more companies to make less investments. There are fewer high-growth companies in our areas of interest in this economy. We’re covering more geography to find the same number of investments.

In which areas are you looking?

There continues to be growth companies in technology, particularly online businesses. We see that as a growing area for us. We’re doing less in consumer but there are selected areas that continue to grow. Asset management is an area that will continue to be a long term area for TA XI to invest. We’re well-known for asset management investments, and long term, it’s a great business but it took some lumps in 2008.

TA Associates also invests in financial services tech companies. How is that industry holding up?

We’re still visiting deals in fin-tech. Those companies are doing surprisingly well given the environment. There continues to be innovation in capital markets and financial services technology. It’s a tough area now, given the shrinking customer base, but we expect to invest there in TA XI.

Have you fully deployed your tenth fund?

We’re finishing off TA X, which is 75% invested. We’re still investing it, just at a slower rate.

I noticed that that fund has a negative IRR of 17.5%. Is that because it’s a young fund or are there some problem companies in there?

It’s a complicated answer. In a new fund, with the implementation of FAS 157, you get a sharp hit. The public markets are down 25% to 35 % depending on which index you look at, and we chose a particularly conservative valuation methodology. The majority of our companies are held at a discount to public comparables.

But is the portfolio healthy?

On a relative basis its healthy. The average leverage on our companies is under 3x. Our average leverage going into a new del is 3.5x. So they’re not overleveraged. Some of them were hit by the recession, but relative to other private equity firms, I think it’s in decent shape.


Note: I also asked how fundraising for the firm’s $750 million subordinated debt fund was going, but Conway declined to comment.


Large Layoffs in Second Quarter, Few Plans to Rehire

Mass layoffs were still rampant in the second quarter of this year and fewer employers said they had plans to rehire their employees.

A rare site in the second quarter. (Getty Images)

Employers engaged in 2,994 mass layoffs last quarter, the Labor Department said Wednesday, taking 534,881 workers off the job. That’s more than 70% higher than the 1,756 mass layoff events in the same period last year, as the economy continued to weaken through the end of 2008 and into the beginning of this year.

The mass layoffs survey, which comes out quarterly, measures layoffs of 50 or more people from a single employer that are out of work for at least 31 days.

Employers said business demand was the reason for the layoffs in nearly 45% of cases. The vast majority of those were caused by slack work, insufficient demand or a non-seasonal business slowdown.

The worse news could be that just 38% of those employers that had mass layoffs said they expected to recall some of their workers, down from 51% a year earlier. It’s the lowest portion of anticipated second-quarter recalls since 1995, the earliest the data is available.

Most of the employers that said they planned on rehiring some of their laid off workers expect to do so in the next six months.