Thursday, July 10, 2008

More financial comment, the good, the bad, and the ugly

---In an interview on Bloomberg radio today it was said that "90% of the increase in residential housing foreclosures in 2008 have been non-owner occupied new houses in Florida, California, Arizona and Nevada". That's a fascinating bit of information. These homes or units have never been occupied, so the losers here are the developers and the banks. The suggestion by much of the media and politicians that foreclosures are dumping more and more families out of their homes may be somewhat of an exaggeration. The foreclosure numbers are not a good situation, and banks and real estate businesses are getting clobbered, but perhaps the painful impact on the consumer is actually moderating.
---Wachovia's choice of Robert Steel for CEO looks like an exceptional choice---ex Goldman vice chairman, government experience, most recently engaged in the Bear rescue and mortgage market issues, and on top of that he's a native North Carolinian who is on the Duke Board of Trustees. It will take time for a new leader to make an impact and we can see an ugly example of that at AIG where Robert Willumstad, former President of Citibank, took over from the ousted Martin Sullivan less than four weeks ago. At that time AIG's stock was at $34 and with no significant company specific news in the interim the stock is now at $24, a huge 30% drop. Steel appears to be a relatively more powerful choice but it clearly doesn't mean that Wachovia's portfolio is granted a reprieve in the near term.
---Don't gamble on gambling stocks, that's double jeopardy. Las Vegas Sands(LVS) was trading at $149 a share in November '07, nine months ago. The company has a major presence in Las Vegas(duh) plus in Macao and Singapore which are viewed as huge long term growth markets. Today it's at $34 a share, 78% lower, and falling every day. Ask me, I decided to stick my toe in the water a few days ago at $39 and already feel like I've got a lousy dealer. Gambling is an addiction. It's supposed to be recession proof, or at least resistant. Something's wrong with this table, or me.

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