CONservative republicans get bailed out and Flying J update

Ceberus and GMAC get bailed out. Cerberus is run by Dan Potatoe Qualye, John Snow (former Bush Treasury Sec) and about 10 other CONservative republican lobbyists.:

WASHINGTON (Reuters) - The Bush administration on Monday expanded its bailout of the U.S. auto industry, saying it was buying $5 billion in equity in auto and mortgage finance company GMAC and increasing a loan to General Motors by $1 billion.

The action was the latest in a lengthy series of emergency government moves aimed at easing the worst credit crisis since the 1930s and limiting the severity of a year-long recession.

The Treasury Department said it would buy $5 billion in senior preferred equity with an 8 percent dividend from GMAC as part of an effort to ensure the solvency of a company considered crucial to GM's survival.

Flying J Update (& Berry Petroleum):

Flying J's bankruptcy has prompted at least one of Kern's large oil companies to scale back production here and other local suppliers to seek out new customers for crude.

The Big West refinery on Rosedale Highway may even have stopped refining oil -- at least temporarily -- as a result of the Dec. 22 Chapter 11 bankruptcy filing of owner Flying J Inc.

But questions remain as to what the company is doing now that some local oil producers are so worried about being paid that they won't sell crude to Big West.

On Monday, one of Flying J's biggest creditors, Denver-based Berry Petroleum Co., said in a federal filing that Big West last week turned away its oil shipments because of "interruptions in (Big West's) other
relationships."

"They're not refining right now," Berry Chief Financial Officer David Wolf said in an interview. He added that Big West may have shifted to plant maintenance.

For its part, Berry has cut way back on Kern oil production because of Big West's dilemma. On Sunday, Berry's filing said, the company was producing 5,000 barrels a day in Kern instead of the normal 17,000.

Another bubble bursts...another prediction comes true

Recall my post from Sep 2007 regarding the bubble in Almonds. Keep in mind that 80% of the worlds almonds are grown in the Valley. I sure hope John Madden doesn't lose too much money...


Bakersfield.com:

That said, more than a few growers are sweating over a recent dip in the price of almonds, which had previously risen enough to fuel explosive growth in plantings.

Almonds were Kern County’s fourth largest agricultural commodity last year, according to the Kern County Agricultural Crop Report.

Tejon Ranch Co., the Lebec ranching and real estate development company, said in a quarterly report filed with the Securities and Exchange Commission that it received $1.78 per pound for almonds in September. That’s down from a peak of $3.80 in the last three years.

Today, almonds are going for $1 to $1.25 a pound, said Mike Young, an almond grower and president of the Kern County Farm Bureau.

Unable to find sufficient buyers, Young has been reduced to warehousing nuts, which keep for about a year.

“We’re just experiencing the global economic downturn like everybody else,” he said. “Nobody’s buying anything right now.”

San Joaquin Bank update

Recent SEC filing by SJB:

On December 19, 2008, San Joaquin Bank (Bank), a wholly owned subsidiary of the Registrant, entered into a consulting agreement with Melvin D. Atkinson (Agreement), who has been an outside director of the Bank since 2005 and a director of the Registrant since its formation in 2006.

The Agreement engages Atkinson to analyze and review the Bank's impaired real estate loans and to negotiate with the obligors under such loans to reduce amounts outstanding. Atkinson will be compensated at the rate of $175 an hour for his services and he will also receive an additional fee equal to 1% of the first $3.0 million received by the Bank and 0.75% of amounts received in excess of $3.0 million. The Agreement is subject to compliance with applicable law and terminable by either party at any time upon written notice.

Recall one of my previous posts where they actually lowered their loan loss reserves at the end of 2007.

Prices now down 50% from the peak

November 2008 numbers are out. We are now down 50% from the peak. The year-over-year decline is 40%; anyone who told you to buy last year was dead wrong and should be sued...look in the archives for the list of crooks.

Nov 2008 yoy:

Bakersfield -40.2%

Fresno economy is so bad it can't support a crappy minor league sports team

Minor league hockey team (Chicago Blackhawks affiliate and Bakersfield rival) folds like a cheap suit:

"The board of governors advised us Friday that for financial reasons the Falcons were ceasing operations," McKenna said. "That's a violation of league bylaws, which results in automatic termination. Fresno's ownership came to the determination that it couldn't move forward and decided to fold."

McKenna said Falcons players have been declared free agents and can sign with any of the ECHL's remaining 21 teams.

The Fresno Falcons ice hockey team will cease operations at 5 p.m. today, the club's managment announced.

"These losses have been beyond our expectations," Managing General Partner Chris Cummings said in a statement released by the team. "The horrific economy and the resulting decrease in revenue from season tickets, corporate sponsorships and overall attendance has created a situation this year which is not sustainable and we simply cannot continue to operate."

$68.83 per square foot.

Prices continue to decline. Here is a little gem for $68.83 per square foot.

KSFCU Foreclosure:

2115 Butterfield, Bakersfield, Ca 93304
3 Bedrooms
2-1/2 Baths
2
Story
2 Car Garage
1,729 Square feet
Sale Price: $119,000

Crude crash claims first major victim

(UPDATE)Bakersfield.com:

A $200 million revolving line of credit to the Big West subsidiaries from Bank of America, originally set to mature in 2010, was called in Dec. 19, Adams said in court filings, causing Big West to default.

Wasteful ad spender (propoganda spinner) refiner files for bankruptcy protection:

Flying J Inc., an oil company whose operations include the Big West refinery on Rosedale Highway, filed for reorganization bankruptcy Monday.

Operations included in the filing cover about 250 travel plazas, the Big West refining arm and the company’s Longhorn Pipeline unit.

The fuel stops remain open, company officials said in a release, adding the reorganization might be completed without layoffs.

Initial hearings will be held Tuesday afternoon in Delaware district bankruptcy court, where the various companies filed voluntary Chapter 11 petitions.

The largest unsecured creditor of Flying J, which operates out of Utah, is Zion Bank, owed $85.8 million.

Most of the 30 others listed in court documents are oil companies, including Conoco Philips, BP & Oil Co., Valero, Occidental Energy Marketing and others.

Berry Petroleum, which moved headquarters from Bakersfield to Denver in June, is the third largest unsecured creditor, owed $26 million.

Flying J details:

...it faced near-term liquidity pressure from an unprecedented combination of
factors: the precipitous drop in the price of oil and the lack of available
financing from our traditional sources due to disrupted credit markets, said
Flying J President and CEO J. Phillip Adams in the news release. Adams says the
company's employees, customers and suppliers will continue to be paid in the
usual manner.

Flying J Inc. is among the 20 largest private companies in America,
employing more than 16,000 people in the U.S. and Canada.

Fresno California nearing depression.

Fresno Unemployment Explodes:

Fresno County's unemployment rate climbed in November to 12.1% as a gain in health and teaching jobs failed to offset losses in agriculture, trade, government and construction, the state Employment Development Department reported today.

The jobless rate increased from 11.3% in October and 8.9% in November 2007. Officials noted that agriculture lost 4,500 jobs between October and November, and construction employment declined by 1,300 jobs in the year-over-year period. government also lost 1,000 jobs in that period.

Freno RV dealer throws in the towel:

RV king Dan Gamel, struggling with a lousy economy, closed all but one of his dealerships Friday and laid off 150 employees for three months while he sells motor coaches online and by appointment.

The Camp America store on Shaw Avenue and dealerships on Highway 99 in south Fresno, in Modesto and in Rocklin are closing until spring, Gamel said. The Redding outlet is staying open because the store is profitable, he said.

All the real estate -- totaling 85 acres with much of it on prime frontage -- is for sale.

"It doesn't make sense to be in business the way we are in this economy," Gamel said. "I thought we could make it and hang on, but every month brought a
more dire situation."

Gottchalks update:

Gottschalks Inc. announced this afternoon that it remains in negotiations with a Chinese company to keep the Fresno-based department store chain afloat.

Earlier this week, Everbright Development Overseas Ltd. terminated a deal it had reached in November to provide a $30 million investment in Gottschalks in exchange for a majority stake in the 104-year-old company. In a filing Thursday with the U.S. Securities and Exchange Commission, Gottschalks officials reported that Everbright had terminated the agreement following a due-diligence period that expired Monday.

Retail industry analysts say the cancellation of the November deal is an ominous sign for Gottschalks unless another arrangement can be made very quickly.

Gottchalks update

Bakersfield.com:

FRESNO — Officials with department-store chain Gottschalks Inc. say a company based in the British Virgin Islands has severed plans to invest $30 million to help them develop a wholesale business and implement direct sourcing and consignment product sales.

Paperwork filed Thursday with the Securities and Exchange Commission shows Everbright backed out of the deal with the Fresno-based chain of 59 department stores.

Tulare Business Journal (no link):

Gottschalks (Pink Sheets: GOTT) tumbled deeper into penny-stock territory Friday morning after a Chinese company backed out of an agreement that would have given the troubled retailer a cash infusion of up to $30 million.Gottschalks traded as low as 14 cents per share Friday morning, down 69 percent from Thursday’s close of 45 cents. That broke below its previous all-time low of 22 cents per share set Nov. 21.

The latest selloff gave the company, which has annual sales of almost $600 million, a market valuation of less than $2 million.Gottschalks, which operates 59 department stores and three specialty stores in California and five other Western states, has lost $32 million in the past seven quarters, including almost $20 million in the first three quarters of this year, as a result of the tough economy and questionable strategic moves.

Industry analysts are now pondering the immediate future of the retailer. If suppliers who were bolstered by the deal's prospects cut Gottschalks off, it could be forced to begin a liquidation with closure sometime next year, said Howard Davidowitz, chairman of Davidowitz & Associates, a national retail consulting and investment banking firm in New York.

"Gottschalks needs divine intervention," Davidowitz said. "They are in a very tough place."

Sr Employee sells some shares earlier this month.

Boycott GM and Chrysler!

BOYCOTT GM AND CHRYSLER!

$17 billion dollar loan with no provisions:

NEW YORK (MarketWatch) -- The White House announced plans Friday to extend $13.4 billion in loans to troubled Detroit auto makers, with another $4 billion likely available in February, citing the need to avoid "disorderly liquidation" during an already troubled economic period.

$23 BBL. The oil bubble.

7 year chart...clearly a bubble!

One year chart

Kern River Crude hits $25 bbl

The price of Kern River crude continues to tumble, hitting $25 bbl today.

I have heard of some oil service companies starting layoffs as they think the price will continue to decline.

How much lower will prices go? Anything under $20 per bbl and the shit starts to hit the fan.

California getting closer to bankruptcy

California freezes $3.8 of projects:

The state's top three financial officials voted unanimously today to freeze $3.8 billion in financing on road, levee, school and housing construction projects throughout California in the most drastic fallout yet from the state's cash crisis.

Among the efforts that will be idled or postponed are a carpool lane on the 405 Freeway between the 10 and 101 freeways and $373 million in repairs and overcrowding relief for Southern California schools, including emergency repairs at nine Los Angeles Unified School District high schools and five Compton schools, according to lists compiled by state agencies.

Cal Pers loses 103% on real estate investments:

At the height of the property bubble, California's giant pension fund, Calpers, made a fateful decision: It aggressively poured money into real estate. As a result, today it's one of the biggest owners of undeveloped residential land in America.

Partly because of these investments, California Public Employees' Retirement System is struggling to avoid one of its worst annual declines since its 1932 inception. Calpers has lost almost a quarter of its assets since July 1, the start of the current fiscal year.

Adios.

Bakersfield.com:

El Mexicalo, a weekly bilingual newspaper published in Bakersfield since 1980, has closed due to concerns about the slowing economy

Manzano said she chose to cease publication following the Nov. 13 issue because advertisers are cutting back on spending

Bank Failure Friday...Texas Bank:

On Friday, December 12, 2008, Sanderson State Bank, Sanderson, TX was closed by the Texas Department of Banking and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this
institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Bank failure Friday...Georgia Bank:

On December 12, 2008, Haven Trust Bank, Duluth, GA was closed by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Carl Cole, Racetrack in default and other news

Carl Cole Update:

As the clock ticks down on former Bakersfield real estate broker Carl Cole’s deadline to legally challenge his license revocation, Cole continues to work at a real estate agency in Thousand Oaks under the name of one of his defunct companies, Points West Group

But Points West, which has one active listing for a house in Oxnard, is not properly registered with the state Department of Real Estate, said spokesman Tom Pool.

When asked if the department was looking into the matter, Pool said he “cannot comment on that.”

As of Wednesday, Cole, 61, is described as an “administrative assistant” on his Web site, http://www.yourecoteam.com./

The supervising broker is a former employee of Crisp & Cole Real Estate, the flamed-out partnership of Cole and former sales agent David Crisp, 29. The Department of Real Estate revoked Cole’s license Nov. 14. Points West Group also entered “revoked” status then, where it officially remains.

College degrees not worth the money?:

Lisa Pinson, 23, earned her communications and media studies degree from Azusa Pacific University in Los Angeles in May, but moved back in with her parents in southwest Bakersfield after she was unable to find employment in her field.

The media are among industries hardest hit by the recession. Publications and broadcasters across the nation are cutting staff.

Pinson is trying to be optimistic, and keeping an open mind about applying for jobs unrelated to her major. She doesn’t regret the field of study she chose.

“I know a lot of people who are art majors and film majors who haven’t got a chance,” she said.

“Even the supposedly safe majors aren’t as safe as they used to be. I know some business majors who are working in telemarketing, so it could be worse.”

Would you buy a car from a dealer when the company is bankrupt?:

General Motors Corp. has hired lawyers and bankers to consider whether to file for bankruptcy protection, said several people familiar with the matter, while Senate lawmakers embarked on a last-ditch effort to break an impasse on Congress's auto-bailout package.

GM management recently tapped bankruptcy veteran Harvey Miller of the New York law firm, Weil Gotshal & Manges LP, to handle what would be one of the largest and most controversial filings in U.S. history. Others involved in the matter include restructuring veterans Jay Alix, Evercore Partners' William Repko and Blackstone Group's Arthur Newman.

Racetrack in default:

A $4.5 million loan taken out against the future Kern River Raceway property last March has defaulted, county records filed last week show. A default is the first legal step in a possible foreclosure.

The project has already drawn numerous lawsuits and liens from construction companies seeking payment for work at the site.

Debt from those is more than $2 million, records show.

The half-mile, paved track broke ground in February 2007. But the sagging housing market blindsided the project when financial backer Alan Destefani, a Bakersfield farmer, had a large sale of ag land fall through that spring.

Since then, racetrack partners have been scouring leads to find financing as the economy has gone south.

California finances get much worse

The bankers in the previous post said we were at the bottom...:

California’s budget crisis has gotten worse while the Legislature has dithered and taken time off, Governor Arnold Schwarzenegger says.

The state will now be $14.8 billion in the red by the end of the fiscal year in June if nothing is done, the governor says.

The number is new. The last estimate had the red ink measured at $11.2 billion.

“No one should leave town,” the governor says of the Legislature, now in special session but with few lawmakers actually in Sacramento. “I urge the Legislature to solve this financial crisis immediately.”

Mr. Schwarzenegger says lack of action by the lawmakers, who set spending and taxation levels is making the fiscal crisis worse by the day. “I’m frustrated,” he says. “I cannot make them stay here. I cannot lock them into the building. I do not have those kinds of powers.”

35 years in banking and he has no clue

There was an economic meeting in town yesterday and I have a few comments on what was said.

Asleep for 35 years:

A banker with 35 years of experience shared his views on the economy Tuesday with local finance industry professionals and accountants

James Lokey is Rabobank N.A.’s president of community banking and the chairman of the California Bankers Association.

In remarks he prefaced as personal, Lokey said consumer confidence needs to improve and the financial industry is on sound footing.

“Eighty percent of the banks, primarily the commercial banks, had nothing to do with the subprime mess,” he said, speaking to a gathering at Seven Oaks Country Club.

My comments - This has never been a subprime problem. This is a massive credit bubble. Credit in all forms...Residential mortgages, Commercial mortgages, credit cards, CDS, CDO's, SIV's, etc... To say that 80% of the banks are ok because they didn't do subprime only goes to show this guys is asleep and I think he represents a lot of bankers. Many could not see this crisis coming and they still have no idea why it happend.

The banking industry in general is well capitalized, Lokey said, and consumer confidence would be much stronger had the majority of commercial banks told
Uncle Sam, “Thank you very much, we do not need your money.”The economy
is in trouble, in part, because consumers aren’t spending.

My Comments - The banking industry is in no way well capitalized. They (Bush/Paulson) thought the TARP would solve this problem...sorry, didn't work. When these banks need more capital next year, this guy will need to eat his words! Consumers can't spend as much because banks are tightening credit as they are hoarding their capital! Credit is tight for car loans, home loans (non-GSE) and business loans...just look at the Fed's loan officer survey.

Cheerleading?:

“Bakersfield is in great shape,” banker Bart Hill said. “The economy’s coming back.”

My Comment - Then why did you just take a significant charge to earnings for loan loss reserves?

“I think we have a ways to go before we turn the corner,” said meeting attendee Floyd Cogdill, director of student services at National University’s Bakersfield campus.

My Comment - Agree.

High end homedebtors are still dreaming!

Here are a few examples:




This first home is at 2615 EAGLE CREST DR, Bakersfield, CA 93311. It has been on the market for 629 days.

Listing details:

Price Reduced: 05/11/07 -- $1,950,000 to $1,800,000
Price Reduced: 12/03/07 -- $1,800,000 to $1,650,000
Price Increased: 04/14/08 -- $1,650,000 to $1,850,000
Price Reduced: 10/30/08 -- $1,850,000 to $1,650,000

ESTIMATED VALUE PER ZIP REALTY $945,500




House number #2 is located at 11418 HARRINGTON ST, Bakersfield, CA 93311. It has been on the market for 677 days!

Listing details:

Price Reduced: 10/23/07 -- $1,195,000 to $1,095,000
Price Reduced: 02/21/08 -- $1,095,000 to $995,000

ESTIMATED PRICE PER ZIPREALTY $550,000

Old media has died!

LA Times owner may file for bankruptcy:

Tribune Co. is preparing for a possible filing for bankruptcy-court protection as soon as this week, according to people familiar with the matter, in another sign of trouble for the newspaper industry.

In recent days, as Tribune continued talks with lenders to restructure its debt, the newspaper-and-television concern hired Lazard Ltd. as its financial adviser, as well as legal counsel for a possible trip through bankruptcy court, according to people familiar with the matter.

A Tribune spokesman said the company doesn't comment on rumors or speculation. Tribune owns eight major daily newspapers, including the Los Angeles Times, Chicago Tribune and ...

Kern River Crude (Midway-Sunset) now below $30bbl

The price of Kern River Crude dropped to $29bbl today. Are we headed to the teens?

It the price continues to drop, I would expect home prices and the rest of our local economy to get even worse.

I have talked to several local well established businesses that are on the brink of going under. I feel bad for their employees, most of them have no idea they are about to lose their jobs. All of the actions by the government have failed (as expected) and going forward will only make things worse.

It's official...recession began December 2007

NBER website:


Determination of the December 2007 Peak in Economic Activity

The Business Cycle Dating Committee of the National Bureau of Economic Research met by conference call on Friday, November 28. The committee maintains a chronology of the beginning and ending dates (months and quarters) of U.S. recessions. The committee determined that a peak in economic activity occurred in the U.S. economy in December 2007. The peak marks the end of the expansion that began in November 2001 and the beginning of a recession. The expansion lasted 73 months; the previous expansion of the 1990s lasted 120 months.

A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough. Between trough and peak, the economy is in an expansion.
Because a recession is a broad contraction of the economy, not confined to one sector, the committee emphasizes economy-wide measures of economic activity. The committee believes that domestic production and employment are the primary conceptual measures of economic activity.

The committee views the payroll employment measure, which is based on a large survey of employers, as the most reliable comprehensive estimate of employment. This series reached a peak in December 2007 and has declined every month since then.

Mall losing another tenant

Bankrupt jeweler leaving the mall:

The Whitehall Jewelers in Valley Plaza mall will close sometime after the holidays, said manager Nancy Viel.

The store’s entire inventory has been drastically reduced as part of a liquidation sale.
Asset recovery firms Hudson Capital Partners LLC, Great American Group LLC, Silverman Jeweler Consultants Inc. and Gordon Brothers Group LLC are overseeing a court-ordered liquidation sale of Whitehall Jewelers Holdings Inc., which operates 373 jewelry stores in 39 states.

Fixed rate mortgages hit 5%

Fixed rate mortgages hit 5%. This is only for conforming mortgages, not Jumbos (over $417k)

Will this spur a new round of buying?

Will this put a floor under the market?

Prices are back to 2003 levels...Is now the time to start looking again?

Local Ashley Furniture gets bankruptcy protection

More local retail pain:

The owner of the Bakersfield branch of Ashley Furniture Homestore received
Chapter 11 bankruptcy protection this month.

"If somebody orders something at Ashley, they will get that product,” he said. “We have gotten bankruptcy court orders to make sure that happens.”

Creditors named in the Nov. 10 filing include GE Commercial Finance, which is owed $940,000, documents show.

The downturn in the retail market and the tightening of the credit market prompted the filing, Mebby Van Ostrand said. She and her husband opened the Ashley store in August 2006.

Median home price now $146,500.

Their not making anymore land....Now is a good time to buy...You know, real estate only goes up...lies, lies, lies

Median home prices now at early 2003 levels:

Bakersfield homes are now selling for less than $100 a square foot, a price point not seen since early 2004, November sales analyzed by local appraiser Gary Crabtree show.

What’s more, November’s median price has so far dropped more than $14,000 from October’s number to $146,500.

Another mall retailer is going out of business, last one out turn off the lights:

Howe’s Hallmark Shop in Valley Plaza mall, a 20-year-old business, will launch a going-out-of business sale starting at 5 a.m. Friday.

It’s sad,” said owner Pat Howe. “A lot of people come to the mall specifically to see us.” The 3,800-square-foot shop will remain open through the New Year. Howe expects to close around Jan. 20.

A combination of higher rents and the slow economy made the decision unavoidable, Howe said.

2 more Friday Bank Failures (3 total today)

2 more Banks fail today (3 total):

U.S. Bank, National Association, Minneapolis, MN, acquired the banking operations, including all the deposits, of Downey Savings and Loan Association, F.A., Newport Beach, CA, and PFF Bank & Trust, Pomona, CA, in a transaction facilitated by the Federal Deposit Insurance Corporation.

The combined 213 branches of the two organizations will reopen as branches of U.S. Bank under their normal business hours, including those with Saturday hours. Depositors will automatically become depositors of U.S. Bank. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage.

Customers of both banks should continue to use their existing branches until U.S. Bank can fully integrate the deposit records of the organizations. Over the weekend, depositors can access their money by writing checks or using ATM or debit cards.

As of September 30, 2008, Downey Savings had total assets of $12.8 billion and total deposits of $9.7 billion. PFF Bank had total assets of $3.7 billion and total deposits of $2.4 billion. Besides assuming all the deposits from the two California banks, U.S. Bank will purchase virtually all their assets. The FDIC will retain any remaining assets for later disposition.

The FDIC and U.S. Bank entered into a loss share transaction. U.S. Bank will assume the first $1.6 billion of losses on the asset pools covered under the loss share agreement, equal to the net asset position at close. The FDIC will then share in any further losses. Under the agreement, U.S. Bank will implement a loan modification program similar to the one the FDIC announced in August stemming from the failure of IndyMac Bank, F.S.B., Pasadena, CA.

Gottchalks now owned by Communist China

Crappy retailer and current tenant of our local mall, whose stock is worthless, was "purchased" by the Communist Chinese.

Gottchalks throws in the towel on America?:

West Coast department store chain Gottschalks, which has been consistently in the red, is getting a $30 million cash infusion from a company with strong ties to the Communist government of China.

Gottschalks Inc. (Pink Sheets: GOTT) of Fresno says it has signed a definitive agreement for up to a $30 million investment in the company by Everbright Development Overseas Ltd., which is set up as a British Virgin Islands corporation.

For the money, Everbright gets 40 million shares of Gottschalks common stock, to be issued at a price of $1.80 per share, which will amount to approximately 75 percent of the company's common stock.

Community fails

Bank failure Friday...if only it was 2005 again and everyone was a real estate mogul:

On November 21, 2008, The Community Bank, Loganville, GA was closed by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.

Ca unemployment rate at a 14 year high

I sure hope the State and local governments adjust their budgets, its going to get much worse!

California Unemployment soars:

California's unemployment rate rose dramatically in October to 8.2%, its highest
level in 14 years, the U.S. Department of Labor reported this morning.

The increase from 7.7% in September was larger than the national increase in joblessness; the U.S. unemployment rate jumped four-tenths of a point, to 6.5%, in a tally reported earlier this month. California's unemployment is the third-highest in the United States, exceeded only by Michigan and Rhode Island at 9.3% each.

Seasonably adjusted unemployment rose 2.5% between October 2007 and October 2008, representing a loss of 101,300 jobs in the Golden State, the Department of Labor said.

City and County are run by fools!

Why does the County need a new building for its retirement plan? What a waste of taxpayer money!

Taxpayer dollars down the drain:

The board of the Kern County Employees' Retirement Association approved the purchase of 1.25 acres of ground across from the Park at River Walk Wednesday for the construction of new offices.

Escrow on the land is expected to close on Dec. 2, said Dan Robinson of American Realty Advisors, who handled the transaction for KCERA.

The land cost somewhere around $800,000 said KCERA boss Ann Holdren. Efforts are underway to hire an architectual firm to design the new office and a contractor to build it.

Currently KCERA inhabits offices on the first floor of the Kern County Administrative Center on Truxtun Avenue.

No surprise on the next story, the city has been behind the curve for sometime on the coming tsunami of declining tax revenues.

City now $14 million in the hole.

Hit with declining revenue, city officials have frozen more than 100 jobs.

“But that’s not nearly enough to deal with the situation that we face,” City Manager Alan Tandy told the City Council Wednesday. The city’s sales tax has declined, and the city now expects to bring in $2.1 million less in sales tax than it budgeted for just six months ago, said Finance Director Nelson Smith.

And sinking property values have led to zero growth in property taxes, with an expected decline next year, Smith said.

The city will also stop setting aside money for its future health-care liabilities, Tandy said. But that saves the city a total of about $8 million — and the city needs to cut about $14 million.

Now everyone wants some free money

Things are getting worse!

State of Illinois not paying its bills:

State owes $4 billion in unpaid bills

Illinois’ backlog of unpaid bills has hit a record $4 billion, and Comptroller Dan Hynes said Thursday the situation is “potentially catastrophic” if allowed to continue.

In a letter to Gov. Rod Blagojevich and state legislative leaders, Hynes said the backlog will hit $5 billion in March, and it will take his office 20 weeks to pay bills once they hit his office. Often, state agencies hold on to bills for days or weeks before handing them over to the comptroller for payment.

Already, Hynes said, his office has had to expedite payments to two vendors who threatened to cut off services to the state unless they were paid. One provides food service to a state prison, and the other supplies gasoline to state police cars.

Texas Teachers pension has lost $25 billion, since September:

AUSTIN — The Teacher Retirement System of Texas has seen about a $25 billion market value drop since Sept. 1 in the nation's widening financial meltdown, making additional benefits next year for retirees appear unlikely.

Bill Harris, the system's chief investment officer, said however that 275,000 retired teachers and beneficiaries covered by the fund shouldn't fear a change in current benefits.

"These are short-term conditions. We are a long-term fund," Harris said.

Cities of Philadelphia, Atlanta and Phoenix begging for free money:

WASHINGTON (AP) - Three big city mayors asked the federal government Friday to use a portion of the $700 billion financial bailout to assist struggling cities.

The mayors sought help with their pension costs, infrastructure investment and cash-flow problems stemming from the global financial crisis.

The mayors—Michael Nutter of Philadelphia, Shirley Franklin of Atlanta and Phil Gordon of Phoenix—made their request in a letter to Treasury Secretary Henry Paulson.

Nutter said cities are facing an economic crisis not seen since the Depression and need help just like financial institutions.

"I want to make sure that cities and metro areas are at the table, that their voices are being heard, that our challenges and problems are well understood, so that we can get relief," Nutter said.

San Jose has tin cup out:

As cities around the United States start to scramble for a share of the $700 billion federal bailout package, San Jose Mayor Chuck Reed said Friday that he's working with leaders of other large California cities to make sure they're not left behind.

The stimulus package Congress passed last month wasn't designed to dole out money to governments, so it's far from clear whether San Jose will get a piece. But with $1.6 billion in unfunded retiree health care obligations, plus $500 million worth of local and regional road work to be done and $750 million in federal help sought to bring BART to the South Bay, Reed noted the city has a full slate of needs.

There are numerous other links/stories of Insurance companies, Home Builders, Retailers, Governmental entities, Auto companies, etc... All asking for something for nothing. What a sad country!

Carl Cole, Suncal and some rumors

Former Principal and realtor Carl Cole strikes out:

Real estate agent Carl Cole’s bid to keep his license was denied Thursday by the California Department of Real Estate.

But Cole can seek relief through the courts, department spokesman Tom Pool said Friday afternoon.

Cole now has about a month to file an appeal with the state Superior Court.

“We’re really on another 30-day clock,” Pool said.

Attempts to reach Cole and his attorney Glenn Kottcamp Friday afternoon were unsuccessful.

Suncal is run by morons( I know you guys visit, so nothing personal):

4,000-home SunCal development in Castaic and three other projects were placed in involuntary bankruptcy by the Irvine developer Wednesday, bringing a total 15 SunCal developments into federal bankruptcy court.

Wednesday’s four filings were classified as involuntary because lender Lehman Brothers hadn’t consented, said Joe Aguirre, spokesman for SunCal Cos.

Lehman has arranged funding for all 15 sites, including Bakersfield’s McAllister Ranch.

Rumor Mill - Latest rumor is Castle and Cooke is laying off a lot of employees. Maybe they will start lowering the price of their homes?

California finances in bad shape!

California is $28 billion in the hole:

California’s budget woes, which project the current budget is running more than $11 billion in the red, could be seen as the good old day if nothing changes, warns the nonpartisan Legislative Analyst’s Office on Tuesday.

California’s struggling economy signals a major reduction in expected revenues and when combined with rising state expenses, the state will need $27.8 billion in budget solutions over the next 20 months, says the LAO.

“The state’s revenue collapse is so dramatic and the underlying economic factors are
so weak that we forecast huge budget shortfalls through 2013‑14 absent corrective action,” it says. “From 2010‑11 through 2013‑14, we project annual shortfalls that are consistently in the range of $22 billion.”

The LAO says it is imperative that the Legislature attack the budget problem ggressively, making permanent improvements to the state’s fiscal outlook.

“If the state has any hope of developing a fiscally responsible 2009‑10 budget, it must begin acting now,” it says.

Valley Plaza Mall owner on the verge of collapse

Valley Plaza & GGP:

Valley Plaza is located approximately 110 miles north of Los Angeles, in Bakersfield, the gateway to northern, southern and eastern California. Valley Plaza is the preferred shopping destination of residents of central California with a trade area expanding an average of 28 miles in each direction.

Mall Owner Is Warning of Default

Ailing mall owner General Growth Properties Inc. warned Monday in a government
filing that its failure to refinance or extend $1 billion in debt due this month could trigger default on billions of dollars in debt and its ability to continue operations would be in "substantial doubt."General Growth has $900 million in debt coming due Nov. 28 on two luxury malls on the Las Vegas strip. It has another $58 million in bonds due on Dec. 1.

From the GGP 10-Q on the economy:

Deteriorating economic conditions will have an adverse affect on our revenues and available cash, and may also impair our ability to sell our properties. General and retail economic conditions continue to weaken, and we expect this weakness to continue and worsen in 2009 as the economy enters a recessionary or near recessionary period. Consumer spending recently declined for the first time in 17 years, the unemployment rate is expected to rise, consumer confidence has decreased dramatically and the stock market remains extremely volatile. Given these expected economic conditions, we believe there is a significantly increased risk that the sales of stores operating in our centers will decrease, negatively affecting their ability to make minimum rent payments and increasing the risk of tenant bankruptcies. In addition to the direct adverse effect of tenant failures to pay minimum rents and tenant bankruptcies on our operations, these events also negatively affect our ability to attract and maintain minimum rent levels for new tenants. These circumstances negatively affect our revenues and available cash, and also reduce the value of our properties, reducing the likelihood that we would be able to sell such properties, on attractive terms or at all.

Fresno is feeling the pain too

Idle development:

Some of the streets are in, but there isn't much else at Tierra Vista, an idle 44-lot subdivision in Dinuba that is a casualty of Estate Financial Inc.'s downfall. The Paso Robles company is in bankruptcy, and its principals have been arrested.

Mother and son Karen Roxanna Guth, 65, and Joshua Morris Yaguda, 40, both of Paso Robles, were charged with 26 felony violations of the California Corporations code, including selling securities to investors using false statements and failing to apply investor money to specifically designated property. The charges capped a six-month investigation.

The San Luis Obispo County District Attorney's Office also filed an enhancement alleging excessive taking of money totaling at least $3.2 million. That could add four years to any prison sentence, said Daniel Hilford, assistant district attorney.

The company issued more than 544 loans totaling $318 million and reportedly had about 2,700 investors, many of them living along the Central Coast and in Southern California. About 100 loans are in foreclosure, and the rest are in default, according to bankruptcy trustees.

The implosion of Estate Financial is being felt from Madera to Bakersfield. The company issued more than $15 million in loans using San Joaquin Valley real estate as collateral. Much of the money was used to acquire land and lots and prepare them for development.

Plant Closure:

About 115 workers at a Fresno container plant are expected to lose their jobs over the next 12 months in a "phased-down closure," officials said Thursday.

Missouri-based Smurfit-Stone Container Corp. is shutting down its cardboard manufacturing plant at 2525 S. Sunland Ave., in the Calwa neighborhood, as part of a consolidation of its regional operations, said Tim Rowden, a company spokesman.

The Calwa plant produces corrugated cardboard sheets used to make boxes. Earlier this year, Smurfit-Stone purchased a 90% interest in Calpine Corrugated, which operates another plant, one that makes boxes, less than five miles away in Malaga.

Yard sales:

It's a good half hour before sunrise as Annie Rini sifts through piles of clothing and stacks of dishes spread on tables outside a northwest Fresno home.

It's the first of more than a dozen garage sales Rini will hit before 11 a.m. on a crisp fall Saturday. She doesn't do it just for fun.

"This is so out of necessity," said Rini, who paid $2 for a ceramic platter and an orange Tupperware bowl with lid.

Like Rini, more and more people are shopping at garage sales to save money in a bad economy. And more people are putting their belongings up for sale for gas money or to pay bills

And their college football team should start playing high school teams:

Fresno State knew Nevada was bringing its pistol. Too bad the Bulldogs don't own a bulletproof vest.

Nevada packed its pistol offense and the nation's second-ranked running game into Bulldog Stadium on Friday night and proceeded to blast holes in Fresno State's defense as the Bulldogs lost 41-28 in front of 33,207 fans and a nationwide television audience on ESPN2.

The Wolf Pack racked up 600 yards of total offense, including 472 on the ground.

Down goes Security,,,Down goes Security

Two on one Friday:

Security Pacific Bank, Los Angeles, California, was closed today by the Commissioner of the California Department of Financial Institutions, and the Federal Deposit Insurance Corporation (FDIC) was named receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Pacific Western Bank, Las Angeles, California, to assume all of the deposits of Security Pacific.

The four branches of Security Pacific will reopen on Monday as branches of Pacific Western. Depositors of the failed bank will automatically become depositors of Pacific Western. Deposits will continue to be insured by the FDIC, so there is no need for customers to change their banking relationship to retain their deposit insurance coverage. Customers of both banks should continue to use their existing branches until Pacific Western can fully integrate the deposit records of Security Pacific.

Over the weekend, depositors of Security Pacific can access their money by writing checks or using ATM or debit cards. Checks drawn on the bank will continue to be processed. Loan customers should continue to make their payments as usual.

Down goes Franklin... Down goes Franklin

Friday Bank Faliure:


I. Introduction
On November 7, 2008, Franklin Bank, SSB, Houston, TX was closed by the Texas Department of Savings and Mortgage Lending and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.
The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions.


II. Press Release
The FDIC has issued a press release (PR-113-2008) about the institution's closure. If you represent a media outlet and would like information about the closure, please contact David Barr at 703-622-4790 (Closing Weekend) or 202-898-6992 (Thereafter).

Mall losing a tenant

Another horrible retail concept is coming to an end, which means our local mall is going to lose a tenant.

Liby Lu is closing:

Retailer Saks Inc. said Wednesday it’s closing all of its Club Libby Lu specialty stores that cater to girls in the 4-to-12 age range.

In a press release, the company cited lack of profitability for the closings ... Birmingham, Ala.-based Saks (NYSE: SKS) has 78 Club Libby Lu stores in malls across America and 20 stores located in former Saks Department Store Group stores, the company said.

Saks expects to close all of its Club Libby Lu retail units by the end of the first fiscal quarter in 2009.

During the fiscal year ending Feb. 2, Club Libby Lu generated revenue of $60 million. The retail units and brand employs 1,700 associates nationwide -- all of whom will be offered severance packages.

$144 million cash “dividend" and Supreme Bean

Suncal update:

McAllister Ranch’s bankruptcy trustee has cast a critical eye on the relationship between Lehman Brothers Inc. and SunCal Co., court filings show —
especially the $144 million cash “dividend” the companies received from a development loan that later defaulted.

The trustee has requested an emergency order to force the Lehman affiliate in charge of $18 million left in a development fund to pay for basic upkeep of McAllister Ranch — southwest Bakersfield’s unfinished 6,000-home development — and two related properties in Riverside County.

The emergency motion filed Tuesday by the Chapter 11 trustee, Alfred H.
Siegel, also said Lehman’s status as first-priority lienholder “may be disputed,” mostly due to emerging details about the $144 million dividend.

A Lehman affiliate got $116 million of the dividend, the motion says.

The document also asserts the original $235 million development loan arranged by Lehman defaulted because the dividend payment made the development affiliate —owned by both Lehman and SunCal — unable to pay its bills.

“One fact is certain,” Siegel’s motion says. “If the $144 million had not been disbursed ... there would have been sufficient cash” to pay the developer’s debts.

Numerous construction companies, some based in Bakersfield, are owed about $46 million by SunCal for work done at McAllister Ranch and the Riverside sites.

Supreme Bean busted:

The new owner of now-defunct Supreme Bean, Bakersfield’s chain of eight drive-through coffee stands, has filed for liquidation bankruptcy.

San Joaquin Bank and early October numbers (not pretty)

Recall my post from April 2008 where I questioned the loan loss reserves at San Joaquin Bank. Well, it looks like I was correct.

San Joaquin Bank record first ever loss:

Bakersfield-based San Joaquin Bancorp was forced to record its first quarterly loss in almost a quarter century Tuesday after creating a cushion for itself in case of construction loan defaults among local homebuilders.

The company’s stock price fell $2, or 10.53 percent, to close at $17, its lowest
price in almost five years.

San Joaquin Bank's stock is now down 64% from its all time high.


Median Home price for October is now $165,000:

Bakersfield’s median price for existing homes fell 35 percent in October compared to the previous year, according to the Preliminary Crabtree Report released Monday.

October’s median price was $165,000. A year earlier, the number stood at $254,500.
Last month’s number was also a $10,000 drop from September’s price.

Looking ahead, Crabtree expects prices to drop further.

The median listing price is currently $157,900, he wrote, less than October’s median sales price.

If you look at the previous Crabtree predictions, even from a few months ago, he was still saying we hit bottom...looks like he is finally capitulating.

Freedom fails!

Freedom has failed in America:

On October 31, 2008, Freedom Bank, Bradenton, FL was closed by the Florida Office of Financial Regulation and the Federal Deposit Insurance Corporation (FDIC) was named Receiver. No advance notice is given to the public when a financial institution is closed.

The FDIC has assembled useful information regarding your relationship with this institution. Besides a checking account, you may have Certificates of Deposit, a car loan, a business checking account, a commercial loan, a Social Security direct deposit, and other relationships with the institution. The FDIC has compiled the following information which should answer many of your questions

Stop paying your mortgage?

It looks like George and Hank are trying to spread the wealth around to the average Joe's. They, along with the FDIC, are trying to bailout troubled homeowners by strong arming the banks they bailed out with our tax dollars.

Why should any pay their mortgage now? Why not just ask your lender for a reduction in the balance due or threaten them to walk away? What if ten million home-debtors did it, then what are they going to do? Why should only the most reckless financially among us get a bailout? Why should a home-debtor who refinanced every six months and pissed away the money on junk get to wipe the slate clean?

Below are a few of the latest stories:


Treasury plan irks many:

As the Treasury Department prepares a $40 billion program to help delinquent homeowners avoid foreclosure, it confronts a difficult challenge: not making the plan too tempting to people like Todd Lawrence.

An airline pilot who lives outside Norwich, Conn., Mr. Lawrence has a traditional 30-year mortgage that he has no trouble paying every month. But, thanks to the plunging real estate market, he owes more on his house than it is worth, like millions of other people.

If the banks, which frequently lent irresponsibly, and many homeowners, who often borrowed irresponsibly, are getting government assistance, Mr. Lawrence says he believes sober souls like himself are also due a break.

“Why am I being punished for having bought a house I could afford?” he asked. “I am beginning to think I would have rocks in my head if I keep paying my mortgage.”

“If the lunch truly is free, the demand for free lunches will be large,” said Paul McCulley, a managing director with the investment firm Pimco

“This is not about trying to create fairness,” said Michael H. Krimminger, special adviser for policy at the Federal Deposit Insurance Corporation, which is working with Treasury on the latest plan. “The goal is to keep people in their houses.”

Still, he acknowledged, “a lot of people are angry because they feel some people are getting something they don’t deserve.”

Peter Schiff, the president of Euro Pacific Capital in Darien, Conn., who prophesied doom before it became fashionable, says he thinks just about everyone who is underwater and has few other assets should stop paying.

“If the government says, ‘Prove that you can’t afford your house and we’ll redo your mortgage,’ then people are going to try to qualify,” Mr. Schiff said.

FDIC trying to give free ponies to homedebtors:

The Federal Deposit Insurance Corp.'s program to lower loan payments for truggling borrowers with mortgages from IndyMac Bank has been lauded by consumer advocates and government leaders as a model of foreclosure prevention.

But when the FDIC, which is running IndyMac, mailed out 35,000 letters offering homeowners a chance to rework the terms of their mortgages, more than half the borrowers were apparently so discouraged, scared or stressed out that they didn't bother to respond.

The intent wasn't charity, the FDIC's Bair said; instead, she reasoned, it would be easier to find a buyer for the thrift if more borrowers were current on their loans.

Stop paying your mortgage?:

Seriously.

Assuming your home is worth equal or less on the market today than your outstanding mortgage balance, of course.

You deserve to live free for a year, and you deserve to have your home price come way down so you can buy it back in a few years for much less.

You've already been taxed to the tune of $700 billion for a bailout for the bankers, even though you told Congress "no".

Now the FDIC and Treasury are "working on a plan to curb foreclosures."

In return I recommend that every American with a mortgage immediately stop paying.

Today.

Whether you can afford it or not.

Consult with an attorney and CPA, in the same room before you act to make sure your specific mortgage (and the state in which you live) is a "non-recourse" loan and to understand exactly what impact this will have on you (it will come with a significant impact, most specifically to your credit rating!

Hear me out - you may find that this course of action makes perfectly good sense.)
See, in many states purchase-money first mortgages are "non-recourse", meaning that all they can do is ruin your credit and foreclose on your house.

That's it.

They cannot force you into bankruptcy, they cannot garnish your wages. And from the time you stop paying until the time you get evicted, you get to live there for free.

Finally, after you have been foreclosed upon, your house (and lots like it if your friends and neighbors do likewise) will drop dramatically in price. Presto! In a year or two you will be able to buy it back at half what you paid for it in 2004 or 2005.

Now that's a bargain.

So give the government and the banks back what they're trying to give to you - a royal screw job.

After all, they intend to give your neighbor who behaved imprudently a bailout, and if you were prudent, unless you suddenly become imprudent, you're going to get screwed in the form of being taxed to buy his home for him:

"The program, which might help several million homeowners refinance into affordable loans, would require lenders to restructure mortgages based on a borrower's ability to repay. Under one option, the industry would keep lower monthly payments for five years before raising interest rates, the people said. "

September numbers out - Prices down 46% from the peak

DQ Numbers for September:

Bakersfield Median - $176,500

Down 28.8% YOY and Down 46% from the peak...knife catchers beware, as the economy continues to crater prices will continue to fall. Buyer beware!

The good news, a lot of other areas are crumbling faster than we are.


What were the predictions by the local real estate community for 2008:

I don't think it's as lousy as everyone puts on," said Ray Karpe, the immediate past president of the Bakersfield Association of Realtors, a local trade group....

And, he predicted, home prices will reverse direction, and start an incremental climb. "I think home prices, home values, will creep up," Karpe said.

-----------------

“By mid-2008 the housing industry will show signs of growth,” says Mr. Nevin. “Continued population growth, a reduction of existing inventory and a return to normalcy in the credit markets are a recipe for a more positive 2008. As a result, we are projecting a slight increase in new home sales over last year.”

Real estate "mogul" defaults grow

Real estate only goes up?:

Bakersfield developer Terry Moreland has had two more residential developments default, including one in northeast Bakersfield near City in the Hills, county records show. Four of his projects have now defaulted since August.

Two construction loans totaling more than $25 million taken out by Moreland’s Barcelona LLC defaulted last week. The loans, both from First Bank, were borrowed against property on Paladino Drive, east of Vineland Road, immediately north of the City in the Hills community. The tract’s two recorded phases show 96 lots are planned on 55 acres.

More than $18.7 million was in arrears on the loans as of Oct. 10, the default filings show. The loans were made in 2005 and 2007.

What will the bankers do with the money and Suncal Update

Bailout Update:

What will the trillion dollar bailout do for America- so far nothing. What will it do for the large national bankers - allow them to pay billions of dollars in bonuses and dividend payments.

I have had several intersting conversations lately on this subject. One of them came from a mid-size California bank. This bank was offered a $50 millon from Hank Paulson and George Bush.

The offer is similar to the offer received by the nine large banks a few weeks ago. What will the bank do with the money? Will they stimulate the economy by lending the money to businesses (which is the intended purpose)? NO! They are planning on using the money to buy out other small California banks - this will only DECREASE the level of competition and allow them to raise their fees and rates! Nice plan Hank and George!


Suncal Update:

McAllister Ranch could become part of a liquidation bankruptcy case Thursday, court papers filed late Wednesday afternoon indicate.

Lawyers for SunCal Cos., the Irvine-based developer behind the troubled project, will ask a federal bankruptcy judge to convert an existing involuntary bankruptcy proceeding to a Chapter 7 case at a previously scheduled hearing Thursday afternoon in Santa Ana, the document shows.

Recent filings also show companies owed money by SunCal want to know what happened to a $144 million “dividend” payment to SunCal subsidiaries and/or its president in 2006. One lawyer says the money was probably used for cruises, charter flights and other extravagances during the real estate boom.

Local shopping center about to become a ghost town

It looks like the shopping center that held the Mervyn's store on California is going to have another large vacancy. Shoe pavillion announced they are too tired to continue selling crappy shoes. Within one mile of this shopping center is an additional 300,000 square feet of empty commercial real estate space...what were those experts saying about CRE again?

By the way this shopping center is owned by the large Australian group that has had many CRE problems lately...more pain for them...good day mate.


Shoe Pavillion going bust:

Shoe Pavilion going out of business

Last update: 5:02 p.m. EDT Oct. 20, 2008

SAN FRANCISCO (MarketWatch) -- Shoe Pavilion Inc. said late Monday it will close all of its 64 stores after 29 years in business. Shoe Pavilion was once the largest independent discount footwear retailer on the West Coast.

Bailout money to be used to pay Wall Street Bonuses

The massive government bailout given to Wall Street bankers will be used to pay billions of dollars in bonuses.

Looks like George and Hank got what they wanted - a failed bailout with Taxpayer dollars that will help the wealthy Wall Street bankers and do NOTHING for the other 99.9% of America. What a great country!

Wall Street banks in $70bn staff payout:

Financial workers at Wall Street's top banks are to receive pay deals worth more than $70bn (£40bn), a substantial proportion of which is expected to be paid in discretionary bonuses, for their work so far this year - despite plunging the global financial system into its worst crisis since the 1929 stock market crash, the Guardian has learned.

Staff at six banks including Goldman Sachs and Citigroup are in line to pick up the payouts despite being the beneficiaries of a $700bn bail-out from the US government that has already prompted criticism. The government's cash has been poured in on the condition that excessive executive pay would be curbed.

Pay plans for bankers have been disclosed in recent corporate statements. Pressure on the US firms to review preparations for annual bonuses increased yesterday when Germany's Deutsche Bank said many of its leading traders would join Josef Ackermann, its chief executive, in waiving millions of euros in annual payouts.

The sums that continue to be spent by Wall Street firms on payroll, payoffs and, most controversially, bonuses appear to bear no relation to the losses incurred by investors in the banks. Shares in Citigroup and Goldman Sachs have declined by more than 45% since the start of the year. Merrill Lynch and Morgan Stanley have
fallen by more than 60%. JP MorganChase fell 6.4% and Lehman Brothers has collapsed.

At one point last week the Morgan Stanley $10.7bn pay pot for the year to date was greater than the entire stock market value of the business. In effect, staff, on receiving their remuneration, could club together and buy the bank.

In the first nine months of the year Citigroup, which employs thousands of staff in the UK, accrued $25.9bn for salaries and bonuses, an increase on the previous year of 4%. Earlier this week the bank accepted a $25bn investment by the US government as part of its bail-out plan.

At Goldman Sachs the figure was $11.4bn, Morgan Stanley $10.73bn, JP Morgan $6.53bn and Merrill Lynch $11.7bn. At Merrill, which was on the point of going bust last month before being taken over by Bank of America, the total accrued in the last quarter grew 76% to $3.49bn. At Morgan Stanley, the amount put aside for staff compensation also grew in the last quarter to the end of August by 3% to $3.7bn.

Commercial Real Estate about to get much worse

Mervyn's is DONE and they are Filing Chapter 7:

HAYWARD (CBS 5) ― Department store chain Mervyns LLC will announce Friday that it is filing for chapter 7 bankruptcy protection — which means the Hayward-based retailer must shut its doors and liquidate its inventory, sources told CBS 5.

Over the summer, Mervyns had filed for chapter 11 protection from its creditors in U.S. bankruptcy court for the District of Delaware. The company said at the time that it planned to continue business as usual while it reorganized.

The privately-held retailer, which has languished for several years, operates about 175 locations in seven states - but primarily in California

Office vacancies rise and rents fall:

In some parts of the region, office buildings that once housed mortgage lenders and other housing-related businesses stand 20% empty, according to brokerage Cushman & Wakefield. Even in desirable Santa Monica, vacancies have almost doubled as companies have shunned the coastal area's still-pricey digs in favor of cheaper rents elsewhere in the region.

Altogether, Los Angeles County had a vacancy rate of 11.6% including sublease space at the end of the third quarter, up slightly from 9.5% a year ago."We are certainly going to see vacancy rates go up as we go into this economy," said Joe Vargas, regional manager of Cushman & Wakefield. "Rental rates will be slow to adjust down, but we are going to see it happen."

The situation is worse in Orange County, where office vacancy rates rose to 16.2% in the third quarter from 11% a year ago, spurred in large part by the closing of several lenders that specialized in subprime mortgage loans. In the buildings around John Wayne Airport, however, vacancy has surpassed 20%.

End of office party is coming:

The next shoe? After years of plunging residential property valuations, commercial real estate is heading into the danger zone as office vacancies rise, stores close and hotel bookings fall.

This could mean another body blow to already struggling financial institutions. Alan Todd, head of research on commercial-mortgage-backed bonds at J.P. Morgan Securities, projects commercial-property losses of as much as $250 billion over the next 10 years, or about 7% of the $3.4 trillion outstanding debt. That would rival the roughly 9% cumulative loss rate during the real-estate carnage of the early 1990s.

Something positive

From cnbc.com: (hat tip sm_landlord)

Bakersfield, California is known for three things: Buck Owens, Merle Haggard, and oil. All three were always pretty good at sad songs. But oil's boom over the last year has helped rejuvenate Bakersfield's fortunes.

It is one of the few places in America where the economy is growing, according to Moody's Economy.com. And even as oil prices come back down, they remain at levels elevated enough to unleash billions of dollars in new drilling in Bakersfield's Kern County, the largest oil-producing county in the lower 48.

This is helping offset an awful foreclosure problem in the area. The video clip has some interviews I did with a couple of local oilmen, Chad Hathaway, who runs his own operation, and Steve Black, the VP of Operations for Bonanza Creek Energy. These guys are not spending money based on $100 oil. As Chad Hathaway told me, "I base it on $30 oil."

3 posh projects go bust as Valley dreams bite the dust

Sacramento Bee has a story on the golf course community bust in the Valley

Sacbee.com:

In the Central Valley these days, the bankruptcies and foreclosures don't just affect individual homeowners.

They swallow entire developments – and the people who conceive them.

Winchester Country Club in rural Placer County, which went into foreclosure and sent legendary Sacramento highway contractor C.C. Myers into bankruptcy protection, isn't the only lavish golf-course housing development to fall on hard times. Three massive high-end projects in the San Joaquin Valley have fallen into bankruptcy proceedings in the past two years.

The three insolvencies symbolize the California housing bubble at its most extreme. Combined, they have cost lenders and investors tens of millions of dollars – and offer clues about the roots of the financial crisis that has gripped Wall Street and the world's economies.

President Bush in 2004

From the Idiot in charge: (hat tip bigpicture.com)

"One other thing I've done, is I've called on private sector mortgage banks and banks to be more aggressive about lending money to first-time home buyers. And the response has been really good. There's a lot of people in this -- our communities around the country that deeply care about the issue of homeownership, and they've been responsive."

- George W. Bush, U.S. President, March 26, 2004.

Halloween 2008

What was this "insider" saying during the bubble years?

Before we look at today's article, I mean sales pitch from the long ago dis-credited REIC, lets discuss what this insider was saying during the bubble years.

I listened to Stan and Susan Ferguson's show during the bubble years and was absolutely disgusted with their mind numbing drivel. Every show started off with "its a great time to buy", "prices are not going any lower" and all of the other crap Realtors spew. Now we get another story from the local newspaper about how "now is the time to buy" (no really, this time).

Why doesn't the newspaper call these people out for what they said in the past? How about some real reporting instead of just parroting what they said? How many thousands of people have been foreclosed in our are because they listened to the horrible advice of a realtor?


Bakersfield.com:

Right time to buy a home? For some, definitely

Realtor Susan Ferguson of Coldwell Banker counsels clients to make sure they want to live in the home they would buy for five to 10 years. Gone are the days of buying a house and flipping it to make a quick profit.

The home you buy needs to be affordable, with payments you can comfortably manage.

“Prices right now are the best that they’ve been,” Ferguson said.

Instead of paying rent to somebody else, people with good credit and the resources for a down payment can “make that investment in yourself,” she said.

Latest bailout plan is to suspend fair-value accounting

Bloomberg:

Representative Todd Tiahrt, a Kansas Republican, said the House probably would have approved a $700 billion bailout of financial companies yesterday had the legislation included a suspension of fair-value accounting. The House rejected the measure 228-205.

It would have passed ``easily'' if the rules had been suspended, Tiahrt, who opposed the legislation, said today in a Bloomberg Television interview.

It looks like the Wall Street crooks are trying to change the accounting rules and they are using this bailout as an excuse. Unfortunately, it appears Congress is buying their bs hook, line and sinker!

Where were these crooks when the value of their assets was going up year after year? They were booking these increases in fair value to their bottom lines and paying out big bonuses based on these fair-value increases. Now that the assets are declining they want to stop this rule; so they don't miss out on another big bonus!

What is fair-value accounting?

For many years, standard setters have grappled with the issues associated with accounting for financial instruments. Decisions with regard to what valuation method should be applied have been difficult and in some cases controversial.

In 1994, FAS 115 was introduced into US GAAP as a partial solution. It required fair value accounting for many investments. In 2000, FAS 133 was introduced to improve the accounting model for derivatives by requiring fair value measurement. FAS 157, issued in 2007, established a common definition of fair value. Then FAS 159 expanded the ability of companies to elect fair value as their measurement basis for certain financial assets and liabilities.

Recently the US markets began experiencing significant illiquidity and volatility, creating conditions that made fair value assessments more controversial. The value of today’s innovative and complex financial instruments, such as derivatives, mortgage-backed securities and other structured financial products is subject to market illiquidity and volatility. Although fair value accounting could apply to other assets and liabilities, the focus of this piece is on financial instruments (particularly financial assets).

Implications of fair value accounting

While many agree that fair value yields a more relevant measure than historical cost, it is not perfect. Two controversies surround fair value measurements today: (1) the application of fair value accounting in illiquid markets, and (2) how and when modeling should be used as the method to determine fair value.

Fair value measurements in illiquid markets

Recent credit market conditions have resulted in large write-downs through the application of fair value measurements. Most of the charges have occurred within the banking and broker-dealer industries. Companies providing credit protection through credit default swaps on the under­lying asset, as opposed to insurance contracts, have been impacted by fair value measurements. Even though the default that would trigger protection may not have occurred, companies are required to recognize unrealized losses on the contract when the fair value of the underlying assets has significantly decreased. Also affected have been some corporations with investments in auction rate securities which suffered declines.

The requirements to use fair value measurements have been criticized for producing inaccurate results in the unusual market conditions recently experienced. Such results, it is argued, hurt the company in the long run. If a company must record losses in such an environment, critics claim, it signals bad news to investors that may ultimately be misleading. Therefore, they say, it is preferable to record only realized gains and losses.

In considering this controversy, it is important to recognize that accounting principles such as fair value are developed with the objective of providing information that will best serve the interests of investors, businesses and policy makers over the long term.

Summary

Balancing the factors, fair value still represents the most effective method to reflect the economic realities of market conditions. If fair value were suspended or replaced with some method based on historical cost, investors would be left to their own devices to determine the current value of these instruments—which would be less reliable and could delay any market recovery.

Although it has generated controversy, fair value continues to represent the best available methodology for determining and reporting the value of financial instruments. Markets naturally respond to financial information that fair value provides. The impacts of such measurements—whether positive or negative on a given company—are the results of market forces, not accounting methodologies. When market conditions result in volatility in values and earnings, investors benefit when companies transparently report on these circumstances and their impact on financial reporting.

A bailout solution we can live with

There are thousands of people who come to this site (I have no idea why, but thank you), I figure I better offer a solution to this mess that we can all live with. A solution that does not reward the crooks on Wall Street and helps Main Street.

Solutions that I can live with:

1) Raise the FDIC limit to $5 million on bank deposits and $5 million insurance on money market accounts.

2)Once #1 is in place and the risk of capital flight is gone, start shutting down the insolvent banks and fire the management. Lets not let some Zombie banks stay alive for the next 3-5 years and get this credit crisis behind us.

3)The economy is in a recession and will be in one for some time, lets get on to some Keynesian Economics and start investing in jobs and projects that will move us forward. We need to re-build our crumbling infrastructure and construct projects that will allow us to become energy independent (nuclear, wind and solar investments). If we are going to spend trillions of dollars, why waste it on buying garbage from insolvent banks? Why not invest the funds in the USA and on projects that will create millions of jobs?

Some common sense thinking on this horrible bailout plan.

From CNN.com:

Commentary: Bankruptcy, not bailout, is the right answer

The obvious alternative to a bailout is letting troubled financial institutions declare bankruptcy. Bankruptcy means that shareholders typically get wiped out and the creditors own the company.

Bankruptcy does not mean the company disappears; it is just owned by someone new (as has occurred with several airlines). Bankruptcy punishes those who took excessive risks while preserving those aspects of a businesses that remain profitable.

In contrast, a bailout transfers enormous wealth from taxpayers to those who knowingly engaged in risky subprime lending. Thus, the bailout encourages companies to take large, imprudent risks and count on getting bailed out by government. This "moral hazard" generates enormous distortions in an economy's allocation of its financial resources.

Thoughtful advocates of the bailout might concede this perspective, but they argue that a bailout is necessary to prevent economic collapse. According to this view, lenders are not making loans, even for worthy projects, because they cannot get capital. This view has a grain of truth; if the bailout does not occur, more bankruptcies are possible and credit conditions may worsen for a time.

Talk of Armageddon, however, is ridiculous scare-mongering. If financial institutions cannot make productive loans, a profit opportunity exists for someone else. This might not happen instantly, but it will happen.

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth