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Thread: here comes the REAL unemployment wave

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    Banned Melonie's Avatar
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    Default here comes the REAL unemployment wave

    (snip)"CHARLOTTE, N.C - At the North Carolina offices of mortgage lender HomeBanc Corp., Archie Clark is the only employee left. But in a few days, he’ll be gone, too.

    “It’s pretty much a ghost town over there,” Clark said. “Somebody went in and took the furniture from the lobby. I don’t know who did that. I put some of the other stuff in the back and locked it up.”

    When Clark finishes helping movers from the company’s Atlanta headquarters collect computers and other property, he’ll join the more than 25,000 workers nationwide who have lost jobs in the financial services industry since the beginning of the month — with more than half coming since last Friday. With few exceptions, the cuts are the direct result of woes in the nation’s housing market.

    More layoffs are announced daily. On Wednesday, Lehman Brothers Holdings Inc. closed its “subprime” mortgage business, laying off 1,200 workers at 23 offices; Scottsdale, Ariz.-based 1st National Bank Holding Co. closed its wholesale mortgage unit and cut 541 jobs, and Accredited Home Lenders Holding Co. added 1,600 positions to the heap. The night before, banking giant HSBC said it would close a main financing office and cut 600 jobs.

    Since the start of the year, more than 40,000 workers have lost their jobs at mortgage lending institutions, according to recent company layoff announcements and data complied by global outplacement firm Challenger, Gray & Christmas Inc. Meanwhile, construction companies have announced nearly 20,000 job cuts this year, while the National Association of Realtors expects membership rolls to decline this year for the first time in a decade.

    It’s an employment collapse that threatens to rival the massive layoffs in the airline industry that followed the Sept. 11, 2001, terrorist attacks, when some 100,000 employees lost their jobs.

    “It’s far from over,” said Bart Narter, a senior analyst with Celent, a Boston-based financial research and consulting firm. “The subprime lending collapse will continue to ripple through the financial sector.”

    For five years, the nation’s housing market was booming and mortgage companies grew quickly, at times offering lucrative jobs to people with little experience. But as home values declined and interest rates rose in the past year, rising delinquencies and defaults — especially in subprime mortgages targeted at borrowers with risky credit — have pounded lenders who couldn’t keep pace.

    “These kind of mortgage lenders just sprung up like mushrooms and grew like men,” said John A. Challenger, chief executive at Challenger, Gray & Christmas. “They staffed up and now you have a bust.”

    America’s largest mortgage lender, Countrywide Financial Corp., began an undisclosed number of layoffs this week. Last week, Arizona mortgage lender First Magnus Financial Corp. shut down its operations and laid off nearly 6,000 workers. On Monday, Capital One Financial Corp. said it would shutter Greenpoint Mortgage, its wholesale mortgage banking business, and lay off 1,900 employees.

    “It’s only been weeks,” Challenger said. “These companies are acting remarkably quickly, stopping on a dime.”(snip)


    (snip)" NEW YORK (Reuters) - A deepening U.S. housing slump has caused an alarming surge in job losses at U.S. financial services companies, and the end is nowhere in sight, consulting firm Challenger, Gray & Christmas Inc. said on Tuesday.

    The industry has announced 87,962 job cuts so far this year, 75 percent more than the 50,327 recorded for all of 2006, Challenger said. Nearly one-fourth of this year's cuts have been announced in August alone.

    Of this year's cuts, 35,830, or 41 percent, were tied to housing market troubles, including riskier subprime mortgages. Job cuts by real estate and construction firms totaled 21,620, more than twice the number for all of 2006, Challenger said."(snip)


    What does this really mean ? Well, basically, it's likely to mean that 150,000 relatively high paying white collar jobs in the financial industry, and in relatively high paying blue collar jobs in the home construction industry, will vanish by the end of the year. If you tack on resulting secondary job losses in housing related durable goods and appliances, in building materials, in furniture, hell even in home furnishing related retail, the number of unemployed is likely to be in the 200,000 ballpark if not higher.

    Also, unlike previous layoffs in the airline industry, in the auto industry etc., workers in the housing related industries will NOT be getting generous buy-out offers or severance packages, will NOT be getting ongoing union health insurance coverage, etc. They'll be getting unemployment checks that won't come close to covering their own mortgage and car payments !

    However, just like former auto industry workers, unemployed mortgage brokers etc. are going to find that the 'replacement jobs' which are available will pay far less than their former jobs. Like the decline of the auto industry, the decline of the mortgage banking and homebuilding industry will force thousands of formerly well paid workers to cut pack on their 'non-essential' spending ... which will translate into lower earnings potential for any Americans who dependent on these workers for their source of income ( yes this will mean exotic dancers, along with a host of other 'non-essential' service providers from Starbucks to Lexus dealers )

    If you allow six months for the personal credit default cycle, the US economy in 2008 is going to be UGLY !!!

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    Default Re: here comes the REAL unemployment wave

    Quote Originally Posted by Melonie View Post
    “It’s only been weeks,” Challenger said. “These companies are acting remarkably quickly, stopping on a dime.”
    this was a very interesting quote.

    if these people had ANY confidence in the business they underwrote you would think they'd keep a portion even of their staffing.

    shuttering whole divisions that specialize in the sector doesn't bode well for any kind of residuals they're expecting (or not).

    this is like 100% casualties during a war. yikes.

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    Banned Melonie's Avatar
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    Default Re: here comes the REAL unemployment wave

    ^^^ well in truth it's more like the commander and his general staff making a 'strategic withdrawl' from the battlefield, while leaving the rank and file soldiers to the slaughter.

    Since Homebanc Corp stock trades on the pink sheets, data isn't immediately available in regard to how many stock options were exercised and cashed out by the corporate bigwigs. However, if you look at this data for other mortgage lenders like Countrywide which trade on the major exchanges, the 'insider sales' numbers are simply staggering.




    It would appear that when the first real signs of subprime mortgage troubles started to gain publicity at the beginning of the year (via the bankruptcies of a few 'small' lenders and a few 'small' homebuilders), the bigwigs at CFC, WM and probably a hundred other larger mortgage lenders saw the inevitable handwriting on the wall. 'Coincidentally' they all began to exercise their stock options and sell off the resulting shares at a big profit. However, this was conducted via many many small transactions (which one would have to assume was done to avoid attracting media attentions). So guys like Countrywide's CEO will walk away with something like $680 million in 2007 personal stock option profits when his company goes bankrupt. Hey, that sort of 'severance pay' should allow him a few decades to look for a new job !!!

    shuttering whole divisions that specialize in the sector doesn't bode well for any kind of residuals they're expecting (or not)
    Residuals would matter if HomeBanc or Countrywide actually owned the deadbeat mortgages they have been writing ... but for the most part they don't. Any residuals will flow to the actual owners of the mortgage paper that HomeBanc and Countrywide resold ... i.e. big foreign banks, hedge funds, retirement funds, even city/state gov'ts who have made a big mistake buying high yield mortgage paper that is a ticking time bomb in terms of default risk. In essence these 'mortgage broker' businesses have practically no 'skin in the game' of their own, so they have absolutely nothing to lose by cutting and running (as long as the execs have extracted their millions in personal profits first).

    In fact, the longer they delay the inevitable, the more foreclosed houses they'll get stuck with, the more demands will be made on corporate cash to meet margin / collateral requirements etc. So the name of the game appears to be 'business as usual' right up to the last minute to avoid tipping off the big foreign banks, hedge funds, retirement funds etc., to allow the corporate execs to keep cashing out stock option shares, and THEN pull the plug in the blink of an eye.

    In fact the financial skeptics out there are speculating that the reason that Bank of America bought a piece of Countrywide is to maneuver themselves into 'pole position' on distribution of assets when Countrywide files for bankruptcy. B of A has been playing games with Countrywide preferred stock shares for the exact purpose of placing themselves next to the trough when Countrywide's assets are distributed after bankruptcy. Of course the reason there will be assets is that Countrywide was forced to buy back some of their 'toxic' mortgage paper from the secondary market, meaning that Countrywide is sitting on an ever increasing mountain of foreclosed homes which they cannot sell at a break-even price. However, as holders of preferred stock, when Countrywide files for bankruptcy B of A will get all of their buyout money back and other Countrywide creditors i.e. foreign banks, hedge funds etc. will take a total hosing as these foreclosed properties are dumped at Sherriff's auction !
    Last edited by Melonie; 08-23-2007 at 04:21 PM.

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    Default Re: here comes the REAL unemployment wave

    Oh..so THATS why Arizona clubs have been ghost towns.
    Economy based on real estate.
    Who'd a thunk it???
    Rebecca Avalon







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    Default Re: here comes the REAL unemployment wave

    Quote Originally Posted by britneyireland View Post
    Oh..so THATS why Arizona clubs have been ghost towns.
    Economy based on real estate.
    Who'd a thunk it???
    It's a FIRE economy. Who'd have thunk it? If I had to pick one person, Eric Janszen from itulip.com

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    Default Re: here comes the REAL unemployment wave

    Quote Originally Posted by Melonie View Post
    However, as holders of preferred stock, when Countrywide files for bankruptcy B of A will get all of their buyout money back
    No they won't, they will get something even better.

    That 2 billion dollars was the equivalent of BoA licking the cupcake to call dibs. What they want is the servicing rights to over 1 trillion dollars worth of CFC mortgages.

    If CFC tanks BoA wins. If CFC triumphs, BoA wins.

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    Default Re: here comes the REAL unemployment wave

    ^^^ I usually don't follow Eric Jantzen, but he certainly hit a 'weiner' this week by coining the following phrases ...

    - Credit Love Canal(s)
    - Risk Pollution Superfund



    I also love Eric's assorted quotations from famous financial figures that were originally uttered soon after the October 1929 'market adjustment'


    Re Countrywide and B of A, I agree that that situation is a guaranteed winner no matter what Countrywide's fate turns out to be.

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    Default Re: here comes the REAL unemployment wave

    Quote Originally Posted by Melonie View Post
    ...However, just like former auto industry workers, unemployed mortgage brokers etc. are going to find that the 'replacement jobs' which are available will pay far less than their former jobs. Like the decline of the auto industry, the decline of the mortgage banking and homebuilding industry will force thousands of formerly well paid workers to cut pack on their 'non-essential' spending ... which will translate into lower earnings potential for any Americans who dependent on these workers for their source of income ( yes this will mean exotic dancers, along with a host of other 'non-essential' service providers from Starbucks to Lexus dealers )

    If you allow six months for the personal credit default cycle, the US economy in 2008 is going to be UGLY !!!
    What would be some jobs or careers which would be "recession/depression" proof? I can't think of any, offhand, but I know they exist.

    I also wonder how this is going to affect immigration, both legal and illegal, once it hits full-force. E.g., the software engineers from India here on work visas, and an illegal immigrant construction worker vs. an illegal immigrant employed in the fields. It seems to me the one harvesting crops(people still have to eat) might be better off in the long-run(even though not being paid nearly as well as those in construction), but I can't really say whether this will end up being true or not.

    And with Mexico and Canada being our two largest trading partners, how will this affect the economies of these two countries?

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    Default Re: here comes the REAL unemployment wave

    What would be some jobs or careers which would be "recession/depression" proof? I can't think of any, offhand, but I know they exist.
    Repo agent ... lawyer ... any job related to the alcohol / tobacco industries ... Repair technicians for cars / appliances ... bottom rung retail ... bottom rung fast food ... and lest us not forget civil servants.

    I also wonder how this is going to affect immigration, both legal and illegal, once it hits full-force. E.g., the software engineers from India here on work visas, and an illegal immigrant construction worker vs. an illegal immigrant employed in the fields.
    it is rumored that more than 40,000 construction jobs have already been lost by illegal immigrants, with many having difficulty finding alternate employment. At the same time DHS has been targeting certain industries known for employing illegal aliens (i.e. meat packing, farm labor) and has been fining the employers this time along with rounding up the illegal alien employees.

    Where importing lower cost skilled labor is concerned, yes there are a lot of requests to expand the H1B work visa program to bring in more Indian / Chinese / middle eastern professionals, but so far the ceiling has not been raised. What IS happening on a larger scale is that work is being outsourced to engineering firms in India / China / Dubai rather than bringing the professionals into the USA.

    And with Mexico and Canada being our two largest trading partners, how will this affect the economies of these two countries?
    well, where Mexico is concerned, one statistic which is available is 'remittances' from the US to Mexico - which are WAY DOWN from last year. On the other hand, I'm not sure this statistic really means all that much. After all, Mexican illegal aliens could walk into Bank of America, give them a Tax ID number instead of a Social Security number, take out a high interest rate personal loan or obtain a high interest rate credit card with virtually no questions asked, then take the money / max out the card and return to Mexico without ever paying back one dollar !

    Canada's economic fate is more closely tied to the general fate of US industries. It is also very closely tied to the relative exchange rate of the Loonie vs the Buck. While the Loonie was 'low priced', lots of US manufacturers tried to buy / produce a fair percentage of their needs in Canada to take advantage of the 'discount' in manufacturing costs. However, as the Loonie strengthens the 'discount' vanishes.

    Plus the Canadian financial industry has their own problems, but they don't have Ben Bernakke's helicopter squad ... ... as a result, the Loonie is again rising relative to the Buck, Canadian interest rates are rising (which will further strengthen the Loonie), Coventree can't find takers for it's 'toxic' paper, and US auto execs are discussing which CANADIAN auto plants to shut down.

    The skeptics would tell you that Canada has really tied its financial fate to Europe rather than to the USA. As such the Canadian financial industry is likely to take a BIG hit.

    .
    Last edited by Melonie; 08-24-2007 at 03:43 PM.

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