Write Downs - CDO's

Goldman Sachs boosted the credit-crunch damage it thinks some Wall Street firms will suffer in the fourth quarter.

Estimated write-downs, for collateralized debt obligations (CDO's), in billions.

Citigroup....$18.7
Merrill Lynch....$11.5
JP Morgan Chase....$3.4

Population up 1%

July 1, 2006 to July 1, 2007 - only two states, Michigan and Rhode Island, lost population. Louisiana regained some ground lost after Hurrican Katrina in 2005, and Nevada was the fastest growing state.

Overall, nearly a three million gain in US Population in one year. From 2000-2007, a 20 million increase or 7%. The largest state, California at 36.5 million or 12.6 million more than Texas.

With the housing downturn, fewer people are moving. That, combined with restrictive lending, and the increased supply of available homes. Home Prices are falling.

Home prices in 11 big metro areas see record drops in October. Making 2007 one of the worst real estate markets since the year the United States entered World War II. The S&P/Case-Shiller index fell in 17 of 20 cities. The biggest falls occurring in Miami 12%, Tampa 12%, Detroit 11% and San Diego 11%. Composite prices fell over 6%. Charlotte 4%, Seattle 3% and Portland 2% were the only cities in the positive - and that will likely end very soon.

Shiller expects composite prices to fall another 5-7% in 2008.

Berkshire to buy Marmon Holdings

Berkshire Hathaway, the conglomerate headed by billionaire investor Warren Buffett announced plans to buy 60% of manufacturing and services group Marmon Holdings for $4.5 billion.

Privately held Marmon is an international group of more than 125 businesses in sectors including cable, transportation services and industrial products. Its collective revenue totals about $7 billion. Berkshire Hathaway said it will acquire the remaining 40% through staged acquisitions over a five to six year period of consideration to be based on Marmon's future earnings.

Peer-to-Peer Lending

As the global credit squeeze leads banks to tighten their lending, a niche industry is emerging. The eBay of consumer loans, peer-to-peer lenders.

Default rates are lower for peer-to-peer loans than for other consumer loans. Typical loan amounts range from $8,000 to $20,000, mutiple lenders may fund a loan, each offering to lend $25 to $200 to a borrower. Rates average 10-16%. Lenders usually decide whether to lend money to a particular borrower - and at what rate - based on the borrower's credit score and existing debt. The decision is sometimes based on social factors as well.

www.VirginMoneyUS.com
www.Prosper.com

The popularity of such loans is skyrocketing!! 2005 saw $100 million in loans, 2006 that amount tripled, 2007 is estimated to have doubled that of 2006. The estimates call for further expansion, a 130% increase in 2008 followed by 100% increases in both 2009 and 2010. This will soon be on every available street corner in America.

Talega Village Center

Opening first, the 46,000 square foot Ralphs Fresh Fare.

Within the next three months the majority of the remaining stores and restaurants located in the 103,000 square foot shopping center.


By the end of January 2008:

• Panera Bread
• Blue-Eyed Girl
• Talega Nail & Spa
• Bella Pilates
• V's Barbershop
• Favorite J's
• Eric Hanan
• Peet's Coffee & Tea
• Paper Annex
• Talega Cleaners
• Toba Salon
• A Fine Affair

By the end of March 2008:

• Sea Smoke
• The Little Gym
• Fairy Tales Children & Maternity Boutique
• Wild's Animal Supplies
• Sundried Tomato Cafe
• Maggie Moo's Ice Cream
• Juice It Up
• First Class Pizza
• Fitness Together
• Wells Fargo
• Verizon
• The Vine's Leaf

www.talegavillagecenter.com

Option ARMS

Option adjustable-rate mortgages, which give borrowers a choice about how much to pay back each month. If they choose to make only the minimum payment on a regular basis, their loan balance can actually rise.

That is a problem, when home prices are falling. Merrill Lynch called option ARM's "ticking time bombs, that will start ticking louder next year. Estimates that losses could total $100 billion on top of the other $400 billion in losses on subprime and other mortgages."

With lending standards getting tighter, refinancing out of these option ARM's may be impossible.

In 2006, $255 billion of option ARM's were originated, up from $145 billion two years earlier. All of these loans are due to reset between 2008 and 2012. Peaking, in 2010-2011. A majority of those borrowers will owe more than their home is worth.

Example: Jirina Koy, a data operator and her husband, Savane, who is disabled, took out an option ARM in 2005 when they refinanced the mortgage on their 1,200 square foot home in Stockton, California, pulling out $60,000 in cash. Ms. Koy did not understand the terms of the loan, and that it carried a $12,000 prepayment penalty. Refinancing is not an option now. The balance on the loan has climbed to $357,000 from $336,000 while the value of their home has dropped to $250,000 or less. Their lender, Countrywide Financial Corp, has offered to freeze the interest rate on her loan at 5.25%, down from its current 8.5%, while requiring her to make payments of principal and interest.

Super SIV

Citigroup, Bank of America and JP Morgan Chase abandoned plans to create a "super SIV" fund that would bail out investments hurt by the subprime mortgage crisis. The move comes after the banks struggled to raise money for the fund.

The banks had been trying since September to set up a fund that would buy securities tied to mortgages and other assets that were controlled by banks in off-balance-sheet funds.

Will Smith - Movie Star

"I Am Legend" marks his 11th #1 film and 6th in the past 6 years.


A look at the opening weekends (in millions):

1. I Am Legend, 2007....$75.4
2. I, Robot, 2004....$52.2
3. Men In Black II, 2002....$52.1
4. Men In Black, 1997....$51.1
5. Independence Day, 1996, $50.2
6. Shark Tale, 2004...$47.6
7. Bad Boys II, 2003....$46.5
8. Hitch, 2005....$43.1
9. Wild Wild West, 1999....$27.7
10. The Pursuit of Happyness, 2006....$26.5
11. Bad Boys, 1995....$15.5

According to Box Office Mojo, the average box office track records of Tom Cruise $97 million, Tom Hanks $103 million, Harrison Ford $107 million, all fall behind the Will Smith average of $120 million.

Experts Picks for 2008 - Stocks

Merrill Lynch, Richard Bernstein

• Ecolab $51.39 ECL
  
• Bristol-Myers Squibb $28.08 BMY
• Torchmark $60.30 TMK
• Chevron $92.02 CVX
• Clorox $65.74 CLX

Charles Schwab, Liz Ann Sonders

• Aetna, $57.85 AET
• Intel $26.29 INTC
• Raytheon $61.66 RTN
• Celanese $44.33 CE
• Travelers $52.69 TRV

Citigroup, Tobias Levkovich

• JP Morgan Chase, $45.20 JPM
• Nymex Holdings $127.85 NMX
• General Electric $36.91 GE
• Intel $26.29 INTC
• Marriott $31.49 MAR

Brian Madsen

• Berkshire Hathaway $4,525 BRK.B

Mission Beach, San Diego

Noisy neighbors can now be fined $1,000.

A press conference was held at the southern tip of Mission Beach, San Diego Police Department Captain Boyd Long, Councilman Kevin Faulconer, code enforcement officials and community leaders.

The new program allows police officers to issue $1,000 fines per tenant responsible for the noise violation. The community wanted a tool to deal with houses that habitually cause problems. The program primarily targets college students and young people who rent near the beach and stay up late making noise.

According to police, more than 4,600 calls were received in 2006 for noise-related service.
As of August, the division has received 3,380 calls this year.

Americans hungry for Smart car

Thousands of motorists want to be among the first owners of the fuel-sipping Smart car in the USA. Demand that is racing past production capacity. Smart, which reaches US dealerships in January, has received $99 deposits from more than 30,000 customers to reserve the two-seater and about 90% are placing full orders.

The 8-foot, 8-inch Smart ForTwo, which can park nose-to-curb, is being marketed toward urban drivers, college students and baby boomers who no longer need a large vehicle.

www.smartusa.com

Brad Pitt - New Orleans Homebuilder

Pitt's Plan, to erect 150 eco-friendly homes in the Lower 9th Ward. The neighborhood was largely destroyed when the levees holding back floodwaters broke in the aftermath of Hurrican Katrina in 2005.

Pitt says, "The goal here immediately is to see the community back, to see families hanging out again, kids riding their bikes in the street. I see nothing in our way right now other than financial support. I know this about the American spirit, we are there to help in a second. I hope that groundbreaking will start in the spring and that people will be moving in as early as summer. I find this place very special...unique. It'd be hard to picture America without it. Only a handful of families have returned to the Lower 9th Ward, which once had 5,000 homes."

The Make It Right Foundation needs $22.5 million to build all 150 homes. Pitt has pledged to match $5 million worth of donations, saying they have raised $2 million so far.

Under the initiative, residents will be able to buy a $175,000 home for $300 a month - or 30% of their monthly income (the maximum percentage one would pay).

www.makeitrightnola.org

Hotels

PKF Hospitality Research, 2008 forecast predicts that the average hotel room rate in the USA will go up about 5.3% in 2008, to just over $109/night.

Rates in the luxury segment will rise 6.6% to an average of nearly $309/night.

American Express Travel Forecast for 2008 paints a similar picture for hotel price increases next year: up 4-6% in the midmarket segment, up 5-7% in the higher-priced segments.

Plan to Slow Foreclosures

Treasury Secretary Henry Paulson plans to unveil a plan being hammered out with the mortgage industry that's intended to slow the record number of homes falling into foreclosure and ease the damage from the housing recession.

Mark Zandi, chief economist for Moody's Economy.com says, "This is the most serious housing recession since the Great Depression". Zandi predicts that home prices, on average, will fall 7% more through next year.

At the Movies - Box Office

"Enchanted" continues to charm audiences and becomes Disney's third release this year to hold the top spot two weeks in a row.

1. Enchanted
2. Beowulf
3. This Christmas
4. Hitman
5. Awake
6. Fred Claus
7. August Rush
8. The Mist
9. Bee Movie ($117 million)
10. No Country for Old Men

Commodities go ka-ching

2007 percentage change:

Lead - up 78%
Wheat - up 73%
Heating Oil - up 58%
Soybeans - up 58%
Gas Oil - 53%
Crude Oil - up 45%
Gold - up 22%
Cotton - up 3%
Coffee - down 1%
Corn - down 1%
Lean Hogs - down 11%
Aluminum - down 13%
Sugar - down 17%
Nickel - down 21%
Zinc - down 41%

Commodity prices are jumping for a host of reasons. Two in particular: India and China, whose economies are racing. Also, much of Asia and the Third World in general are seeing dramatically higher standards of living. And, poor weather hurt this years world wheat crop. Rising demand for corn-based ethanol means not only that agriculture prices are more closely tied to oil prices, but that farmers are devoting more acreage to corn and less to other crops - a big reason soybean prices jumped bout $6 a bushel on futures markets last year to nearly $11 this year.

NFL Network

Available to less than 40% of TV homes.

The NFL, which built its popularity, and its considerable wealth, by making games widely available on free tv, turned up the heat on cable operators such as Time Warner, Comcast and Charter during the second half of the 2006 season when it began showing regular season games on the the four-year old NFL Network.

Fox, is in the 2nd year of a 6-year deal paying the NFL $712 million annually to air NFC regular-season games and playoff games, plus two Super Bowls.

The Dallas Cowboys are the league's top national TV draw. In 2007, two of their games are on the NFL Network.

Home Prices Plunge

October 2006 6.27 existing home sales @ $218,900 median price.
October 2007 4.97 existing home sales @ $207,800 median price.

The median price for an existing home plunged by a record 5% in October 2007, shrinking values back to March 2005 levels.

Naroff Economic Advisors, "That light at the end of the housing-meltdown tunnel appears to be an oncoming train. With so many choices and so few buyers, the median sales price is cratering."

In Southern California, sales financed with mortgages above $417,000 have dropped by 60% since the summer.

Bank of America & Countrywide

Three months since Bank of American made a $2 billion investment in Countrywide Financial, the value of the country's biggest mortgage lender has fallen by nearly 50%.

Year-to-date stock performance:
Bank of America down 16%
Countrywide down 80%

The Dollar

Doomsayers have warned for years that a sharp drop in the dollar could scare away foreign investors in US Treasury's and send interest rates soaring. The good news, just the opposite is happening.

The dollar has fallen in value by 4.6% against a broad swath of currencies over the past three months, according to the Federal Reserve. Over the same time, investors have flocked into government bonds, sending yields on 10-year US Treasury notes to about 4% from 4.6%.


Net foreign purchases of US Treasury's in September totaled $26.3 billion, above 2006 average monthly purchases of $17.3 billion. Foreign investment purchases are fleeing US corporate bonds, down 76% from one year ago.

E*Trade Financial

E*Trade Financial is getting a $2.55 billion cash infusion from Citadel Investment, a move aimed at restoring confidence and liquidity in the discount brokerage.

Citadel will make a two-part investment in E*Trade.

The first component is the purchase of E*Trade's entire $3 billion portfolio of asset-backed securities for a value of around $800 million. (Twenty-six cents on the dollar.)

The second component is the purchase of $1.75 billion worth of 10-year notes, paying an annual interest rate of about 12.5%.

After regulatory approvals, Citadel is expected to own almost 20% of E*Trade.

Robert Shiller

US home prices fell 4.5% in the third quarter from a year earlier, the sharpest drop since Standard & Poor's began its nationwide housing index in 1987. One of the index's creators, Robert Shiller, predicted a significant chance of a recession. "Over 50%. We're in the aftermath of the biggest housing boom in history, so how do we use historical data to judge the outcome? We're out of the range of the normal variation in the data, and I take that as very significant."

After 13 years of rising home values, the market has started to unravel.

Credit Crunch

18% of economists who responded to a survey by the National Association for Business Economics, put the probability of a recession starting within the next 12 months at 50% or greater. That's up from the 11% of economists who said so in August.

In a recession, investors have to be prepared to absorb a 20%, or more, decline in the value of their portfolios.

Home-equity withdrawals accounted for up to $324 billion a year in consumer spending from 2004 to 2006, according to estimates from a Federal Reserve economist. These withdrawals and related consumer spending plunged in the first half of this year. By the time the housing slump bottoms out, $1.7 trillion in housing wealth will have been lost. For each dollar that a home falls in value, consumer spending falls by 4-9 cents, Fed Chairman Ben Bernanke told Congress.

• January 2003 6.03 million existing home sales
• June 2003 The Federal reserve cuts the benchmark federal funds rate for the 13th time in 30 months, to 1%, the lowest since 1958.
• June 2004 The Federal reserve begins raising interest rates, 17 times in 24 months to 5.25%, the highest since early 2001.
• July 2004 Homeownership hits a record 69% of US households, 73 million Americans owning their own home
• September 2005 The Peak, 7.21 million existing home sales
• September 2007 Projected, 5.04 million existing home sales

Total non-conforming (loans that do not meet Fannie Mae's or Freddie Mac's standards for purchase) mortgage market, during the 2nd quarter of each year:

• 2003 $718 billion
• 2004 $825 billion
• 2005 $1.4 trillion
• 2006 $2.0 trillion
• 2007 $2.4 trillion

Leading banks to write down billions on securities, 7 banks, $31 billion in write-downs: Citigroup $13.7, Merrill Lynch $8.4, Morgan Stanley $4.6, JP Morgan Chase $1.6, Goldman Sachs $1.5, Lehman Bros $0.7, Bear Stearns $0.7.

According to Zillow.com, almost 16% of homeowners who bought in the past two years owe more on their mortgage than their properties are worth.

VibeAgent.com

Hotel rating TripAdvisor.com has new competition. Recently launched, VibeAgent.com, targeting travelers slightly younger than TripAdvisor users (two-thirds of whom are 35+), is a hotel review and booking site heavy on personalization and social networking.

Co-founder of VibeAgent, Adam Healey says "TripAdvisor doesn't provide context to who's writing the reviews". VibeAgent, "agents", provide photos and more info about themselves. As with Facebook and MySpace, members can keep a network of friends informed of their doings.

So far, VibeAgent has more than 10,000 people who have signed on so far. It remains to be seen whether it can compete with TripAdvisor's 5-million-plus members and 10 million reviews of hotels, eateries and attractions. TripAdvisor is also going after young users and launched a networking function in June.

For Sale: Land in San Clemente (Surf Shop)

Since the 1970's, the small, unassuming structure on the corner of El Camino Real and Avenida Pico in North Beach has been a surf shop.

1755 N. El Camino Real, San Clemente, CA 92672.

For Sale: $3.2 million
Size: 6,600 square feet, the building is 2,800 sq. ft.
Contact: Howard James Co. (714) 553-0702 Scott

Hopeful that the property can continue as a surf shop. Possibly a surf shop expanded with a Tommy Bahama's restaurant or a Javier's Cantina & Grill.

Fed Lowers outlook for 2008

Yesterday, the Fed cut its forecast for growth in 2008.

Projected range of percentages in 2008 for:

Real GDP growth: 1.8% - 2.5% (in June, they forecast 2.5-2.75%)
Unemployment rate: 4.8% - 4.9%
Personal Consumption Expenditure inflation: 1.8% - 2.1%

The 3-year forecast, indicates that the Fed officials see a 1.6% - 1.9% inflation rate as a longer-term goal.

Freddie Mac

Stunning Wall Street with a $2 billion quarterly loss, Freddie Mac warned that the worst is yet to come. It said its mortgage losses will deepen through 2009, and its considering slashing its dividend in half and issuing a "large" amount of preferred stock to raise cash.

The stock fell 29% yesterday, to below $27.

TV - Nielsen Top 10

1. Dancing With The Stars (ABC) 21.8 million viewers
2. CSI (CBS) 21.4
3. Grey's Anatomy (ABC) 19.6
4. Dancing With The Stars - Result Show 17.6
5. NCIS (CBS) 17.4
6. House (Fox) 17.0
7. Criminal Minds (CBS) 15.7
8. CSI Miami (CBS) 15.5
9. Survivor China (CBS) 14.7
10. 60 Minutes (CBS) 14.6

CBS: 12 of the Top 20 viewed shows.
NBC: 1 (NFL) in the Top 17 viewed shows.

North Beach San Clemente

The development group, LAB Holdings, LLC, selected by the city to transform the parking lot area at North Beach into a retail center presents its latest site design plans to City Council today.

"The main thing is that with these kinds of projects there are a series of committees and groups we have to satisfy and, for the most part, they have different needs - city councils, Coastal Commission. When you're doing this size of a project, there's going to have to be compromise. With the right amount of compromise, we think that after 14 months of working with the city staff that the project is positioned really well." said Shaheen Sadeghi, principal of LAB.

Most recent changes to the plans include: The removal of the single level of underground parking at the Ole Hanson Beach Club side of the project, a reduction in scope from 65,000 square feet to 47,000 square feet due in part to a building setback from the beach club and some conflicting underground utilities.

The City Council will review the new plans. If council were to green light the plans, another 18-24 months of work with getting the environmental impact report completed and working through plans with Coastal Commission.

Story Corps

Awed by the historical power of the recordings made by Works Progress Administration folklorists and writers who toured the country in the 1930's and 1940's, Dave Isay started the non-profit StoryCorps in 2003 to gather the stories of everyday Americans.

The idea caught on, and StoryCorps has become one of the fastest growing US non-profits.

Anyone can make an appointment at a StoryCorps recording booth, bringing along a loved one. A StoryCorps facilitator guides the 40-minute interview. Some suggested questions: What was your happiest moment? What are you most proud of? Is there anything you've always wanted to tell me? The fact that the two people are already connected makes for unguarded, intimate conversations with riveting results.

At the end of the session, a CD of it is given to the participants. Another CD - if the participant approves - goes to an archive at the American Folklife Center at the Library of Congress.

Though StoryCorps asks for $10 as a suggested donation for a session, its costs more than $250 t0 record each interview.

www.storycorps.net

Renters

Residential Renters, Orange County and Elsewhere.

1 in 4 renters pay over 50% of their income on rent.

Ten years ago, 1 in 5 fit this category. Thats a 25% increase in the last decade, in the number of people paying over one-half of their income on rent.

Rental Rates are expected to rise 4% this year (Nationwide).

Average Rates & Annual % Increase

• Orange County $1,449 6%
• San Diego $1,223 4%
• New York $2,591 8%
  

Oil Price - Range of Motion

Year Low-High
2003 $25-$40
2004 $32-$55
2005 $41-$70
2006 $55-$78
2007 $50-$79

Home Services of America

The 2nd biggest residential brokerage company in the USA.

Owner: Warren Buffett

Based in Minneapolis

Marblehead Coastal - Specific Plan

http://san-clemente.org/sc/Inf/Forms/Planning/Download/429996%20SunCal%20MarbleHead%20Specific%20Plan.pdf

San Clemente - Marblehead Coastal

Marblehead Coastal development proposes 69 custom-lot homes. Marblehead Coastal, a 248-acre community of 313 planned homes borders Colony Cove. Colony Cove, an established community of 1,200-1,300 square foot homes.

The developer of Marblehead Coastal, SunCal is seeking permission to convert 69 of the 313 residential lots into custom lots. City staff is recommending allowing houses as big as 8,000 square feet. The Planning Commission has recommended six of the lots be buildable up to 9,600 square feet. By merging as many as three lots into one under a proposed formula, a home could approach 19,000 square feet.

Council members asked SunCal to provide view simulations.

In a separate action, the City Council approved a Mello-Roos Community Facilities District to levy a special tax on owners of the 313 Marblehead Coastal homes to finance up to $60 million worth of community infrastructures.

The yearly tax could range from $5,988 to $15,000 per home, depending on the size of the home, a report to the City Council said. Councilman Wayne Eggleston speculated that it could go as high as $45,000 a year if a home is built on three merged lots.

The special tax doesn't apply to the Marblehead Coastal commercial center, which SunCal sold for separate development under an agreement that took into account proportionate infrastructure costs, officials said.

In a third action Tuesday, the City Council approved an updated agreement defining how SunCal will deliver its obligations to provide for parks, trails, a hotel conference center and other community improvements. It represents a $6 million increase in SunCal's funding obligations, officials said.