Entries Tagged as 'Troubled Companies'

We Have Seen This Before

We Have Seen This Before

We Have Seen This Before

We Have Seen This Before! The Fuse on the Subprime 2.0 Debt Bomb is About to Ignite, says Graham Summers, Chief Market Strategist Phoenix Capital Research:

The Subprime 2.0 story is now gaining traction in the financial media.

By way of brief review, here is the template for Subprime 1.0 (the mortgage meltdown).

1)   Banks, hungry for profits, began issuing mortgages to sub-prime borrowers (people who couldn’t possibly pay the loans back).

2)   Housing prices and sales began to fall.

3)   Subprime borrowers began defaulting on their mortgage.

4)   Subprime mortgage lenders began to collapse.

5)   A crisis unfolds as the issue spreads throughout the banks.

Subprime 2.0 is following the exact same pattern. Just replace the words “housing” with “automobiles” and “mortgages” with “auto-loans.” As the Wall Street Journal  notes…

We Have Seen This Before! Banks Pull Back on Car Loans as Used-Auto Prices Plummet

Car loans have been among the fastest growing consumer lending categories since the last recession. Banks and other lenders began increasing originations about seven years ago in search of more revenue as the mortgage market slumped.

As competition intensified, lenders loosened underwriting standards by courting borrowers with lower credit scores and extending repayment periods on loans. Small nonbank lenders also jumped in, relying on the bond market as an outlet to sell their loans.

But increasing losses have sapped some banks’ enthusiasm. Annualized net losses on securitized subprime auto loans increased to more than 10% late last year, the highest level since February 2009, according to Fitch Ratings. The figure slipped back to 9% in March, but that was the highest loss reading for that month since at least 2001.

Source: WSJ

In terms of the above template Subprime Template, we’re currently at #3 and on our way to #4.

All we need now is some auto-lenders to start blowing up, and the fuse on the Subprime 2.0 Debt Bomb will have been lit.

Keep an eye on Ally Financial (ALLY) and Capital One (COF). Both have large auto-loan exposure.

When Subprime 2.0 ignites the markets will move into crisis mode.


Mover Mike Hit 2,000,000

After an incredible June, Mover Mike hit 2,000,000 page views. I have been blogging since 2004 and it is nice to see that more people are finding this blog. Sometimes, I have considered quitting, thinking why bother, no one reads me. However, conservative fiscally, Libertarian socially, this blog joins many others who don’t like the path the U.S. is on.

No longer can we discuss things rationally and heatedly.  Now it seems the play book says to ignore the message, savage the messenger. We are seeing that currently with Trump and we read that Hillary hasn’t answered the press questions in two weeks. AND…more and more people are considering leaving the country.

Mexico”sends” their unemployed to the U.S.. How long will 93,000,000 unemployed and under employed wait to move south? How long will the drought stricken  in the south west wait to move? What happens when the U.S. becomes like Greece and can’t feed the 43,000,000 on EBT?

Stay tuned, dear reader. I hope to cover it and provide some answers. Thanks for reading Mover Mike

The Next Recession Has Already Begun

The Next Recession Has Already Begun

The following is an excerpt from a recent issue of Private Wealth Advisory.

The official data is out and it shows that GDP collapsed 0.7% in the first quarter of 2015.

The financial world is shocked by this because:

1)   The drop occurred despite the Government massaging the heck out of the data to make it look better.

2)   The world has bought into the idea that the Fed can remove any and all recessions by printing money.

Regarding #1, the Government recently added a bunch of bogus measures to GDP such as intellectual property. How exactly you can accurately measure the value of intellectual property is beyond me. But then again, much of what the Government does in the name of “the better good” is beyond me as well.

Despite adding this and a slew of other accounting gimmicks, the economy collapsed 0.7% in the first quarter. This is shocking only to those who believe that official GDP is an accurate measure of economic growth.

Our readers have been well aware for some time that the GDP number is largely an accounting fiction meant to overstate growth. Indeed, if you strip out the various gimmicks employed by the BLS, you find that the year over year growth for GDP has been at levels usually associated with recessions for years.

Recessionary levels are circled in the chart below.

NOM GPD.png

Small wonder the “recovery” has felt so weak… the economy has been moving at pace usually associated with a contraction!

Who Gets Hurt In A Bankruptcy

Running a business is hard enough. You must service your customers; you must find a way to draw them to your store; you have competitors who want your customers; you must manage your employees and the larger you get, you must offer wages and benefits. Then there are the government regulations and taxes and permits, and construction outside your door, and insurance for fire and earthquakes. Then there are the bankers who will loan you all sorts of money when times are good, but will not share a farthing in bad times.

Then if things go bad and bankruptcy is the only answer look at how many people get hurt through little fault of their own. For example Furniture Brand is seeking bankruptcy. Just look at the creditors who will lose substantial amounts of money:

The creditors are:

Pension Benefit Guaranty Corp., claim amount unlisted, but the company’s most recent quarterly report listed the pension obligation at $208.7 million;
Kasen Group, $2.62 million;
LF Products PTE, $2.1 million;
Zhejiang Ausen Industry Co., $1.6 million;
Yash Technologies, $1.5 million;
Haining Nicelink Furniture, $1.4 million;
Stein Fibers, $1.02 million;
Horizon Retail Construction, $987,362;
Watkins & Shepard, $925,906;
Zhongwang Holding Group, $916,569;
Nippon Yusen Kabushi, $820,750;
Ningbo Furniture Inds., $820,416;
Penske Truck Leasing, $793,299;
World Design International, $745,252;
Rocktenn Co., $693,965;
Shayne International, $611,787;
Golden Fortune Co., $602,840;
Leggett & Platt, $598,077;
Dongguan Yihao Furniture Co., $591,236;
Culp, $586,454;
Nihao Furniture Manufacturing, $582,892;
Omexey Home Furnishing Corp., $554,872;
Donord Craft, $543,723;
Tongxiang Longxiang Trading Co., $522,773;
Standard Register Co., $509,962;
Independent Furniture Suppply, $478,513;
Duke Energy, $466,242;
Yang Ming Marine Transport, $463,760;
Hamilton Park, unliquidated;
Randy Murphy and Dave Shaffer, dba Southwest Furniture Brokers, unliquidated.

Everyone of those companies will lose in some way. If business can be so risky, why does our government make it harder to succeed?


Hey, Let’s Pay Bonuses For Busting The Business

Bankrupt Furniture Brands International Inc. on Wednesday asked a federal judge in Delaware to let it pay more than $5 million in bonuses to 55 employees, including seven company insiders, if its assets are successfully sold at auction.

The manufacturer, which hasn’t made a profit in six years, said the bonuses would be paid for reaching incentives that “will not be easy.”

“A company’s decision to file for Chapter 11 necessarily creates difficulties for its employees and can lead to retention problems, low morale and low…

Are you going to pay bonuses to all the retailers that sold your products and vendors that have no way to earn an income? I’ll bet not!

Two Troubled Companies

Furniture Brands (FBN) has fallen from the $6 to $8 trading range for four months ending in June to a buck (see chart).

FBN “…announced a $40.8 million second-quarter loss. The company reported a $6.8 million loss in the same quarter last year.

Sales declined 4 percent in the recent quarter to $255 million compared with the second quarter of 2012.

The company’s brands include Thomasville, Drexel Heritage, Henredon, Hickory Chair, Maitland-Smith and Pearson. Analysts are openly speculating that FBN’s future includes bankruptcy.

The second troubled company is JC Penny (JCP). The stock peaked at $42.94 in February, 2012 and stair-stepped down to today’s low price of $12.50 (see chart). Now Zero Hedge quotes Bill Ackman, JCP’s top investor as saying the JCP BOARD HAS CEASED TO FUNCTION EFFECTIVELY RECENT WKS

Penney’s credit default swaps also widened on Friday, a sign that estimates there is a 70% chance of a default.

Are We A Heartbeat Away From Lehman Redux?

Jim Willie says there’s an overnight scramble for cash at Deutche Bank in Germany and failure would be Lehman bankruptcy times 5.

The important thing to keep in mind about Deutche Bank is that it won’t go down alone if it goes down at all. If it fails, it will take along with it 3,4,5,6 or 10, or 15 other banks! It will be 1 or 2 quickly, then a 3rd and 4th a few weeks later, another, then before you know it, all of Italy and their major banks would be kaput.

He goes on to say,

A bank failure contagion, that’s whats going to push gold way over $2,000/oz again.
Silver is going to be moving over $100 and gold is going over $5,000, I’m as certain of it as I am that the sun will rise in the east in the morning come January.


J. C. Penny In Trouble

Free cash flow in huge decline, from 9 Months Ended Oct. 29, 2011 of ($737M) to 9 Months Ended Oct. 27, 2012 of ($1.3B).

Penney “must find a way to significantly slow the sales decline within the next six months, and if it doesn’t, management’s attempt to ‘bet the company’ could become more problematic,” (Analyst Michael) Exstein wrote.


Let Obamacare Take Care Of Them!

Health and welfare benefits to 56,000 U.S. retirees and dependents will be discontinue by Eastman Kodak as part of bankruptcy proceeding.

He Saved The Union Pensions, However

If you weren’t union, your pensions at Delphi were not protected.


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