The Number at Noon: 1.15 Billion
Mar 12th
A billionaire investor, premier properties and big-name tenants.
What could go wrong?
Investors in £1.15 billion of mortgage-backed securities called White Tower 2006-3 are learning the hard way. The securities are linked to a £1.45 billion loan used by U.K. entrepreneur Simon Halabi to buy 9 premium office buildings in London.
How much of that £1.15 billion they will ultimately get back will soon be determined as eight of the nine buildings in the portfolio have been put up for sale by CB Richard Ellis Loan Servicing.
Included in the sale are 2 properties leased by J.P. Morgan Chase, whereas the Aviva Tower, is the lone building not on the block.
From Dow Jones NewsWires:
CB Richard Ellis said the advice it has received is that the net proceeds from the sale of the eight properties is likely to allow for the full repayment of the White Tower Class A notes and “at least a significant proportion” of Class B notes.
Fitch Ratings said the £466 million price tag on the Thames Portfolio implies that 71% of Class B notes will be paid down, along with all of the Class A notes.
The ratings agency said the start of the sale process is positive as it comes two-and-a-half years before the notes final maturity date, which is sufficient time to achieve an orderly sale of the assets.
“However, any future impact on the rating of the bonds will depend on the sales prices achieved on the properties, either as individual assets or as a packaged portfolio. Fitch will closely monitor the sales process and may put the transaction under review as it progresses,” it said.
And more, from Bloomberg:
Halabi’s towers were valued at 1.83 billion pounds when they were packaged against bonds in 2006. The bonds, issued by White Tower 2006-3 Plc, defaulted when a revaluation last June showed that the buildings’ value had fallen by almost 50 percent.
With that kind of valuation cut, holders of more than 300 million pounds of Class C, D and E notes are set up to get nothing. (From Property Week)
Read the full back story from Property Week here.
IT’S OFFICIAL: The EU Will Bail Out Greece
Mar 12th
Germany has finally capitulated and has agreed, with the rest of the eurozone, to a multibillion-euro bailout of its most embattled member.
The Guardian: The eurozone has agreed a multibillion-euro bailout for Greece as part of a package to shore up the single currency after weeks of crisis, the Guardian has learnt.
Senior sources in Brussels said that Berlin had bowed to the bailout agreement despite huge resistance in Germany and that the finance ministers of the “eurozone” – the 16 member states including Greece who use the euro – are to finalise the rescue package on Monday. The single currency’s rulebook will also be rewritten to enforce greater fiscal discipline among members.
The member states have agreed on “co-ordinated bilateral contributions” in the form of loans or loan guarantees to Greece if Athens finds itself unable to refinance its soaring debt and requests help from the EU, a senior European commission official said.
Join the conversation about this story »
See Also:
- Germany Wants Greece To Sell Off Its Islands In Return For Cash
- Greece Bags $5 Billion From Investors Offering Killer Yield As Investors Bet On ECB Backing
- Heroic Greek Parliament Just Passed Austerity Measure While Riots Erupt In Athens
Why UK Banks Are Bracing For Another Debt Crisis
Mar 12th
The Italian-German group, Europe’s second largest bank, said Britain’s tax structure will make it hard to raise fresh revenue quickly enough to restore confidence in UK public finances.
“I am becoming convinced that Great Britain is the next country that is going to be pummel led by investors,” said Kornelius Purps, Unicredit ’s fixed income director and a leading analyst in Germany.
Mr Purps said the UK had been cushioned at first by low debt levels but the pace of deterioration has been so extreme that the country can no longer count on market tolerance.
Read the whole story at The Telegraph >
Join the conversation about this story »
See Also:
- Even Barclays Is Mocking The UK Pound Crisis In Its Ads
- The UK Orders Banks To Do Double Dip Recession Stress Tests
- UK Manufacturing In Shock Plunge
Time to Purge: FDIC Arranging Rapid-Fire Home Loan Liquidations
Mar 12th
The FDIC has finally decided to ditch the crappy home loans it acquired from failed banks during the financial crisis.
According to Asset Backed Alert, Stifel Nicolaus, RBS and HSBC are beginning to pitch loan portfolios to banks and investment firms on behalf of the FDIC. What needs to be noted, however, is that the investors originally thought the FDIC would wind down its positions slowly.
Instead, it’s going to liquidate like there’s no tomorrow.
This is due to the fact that the FDIC expects the number of institutions under its control will expand this year due to increased financial pressure from the crisis. It could be credit card write downs, it could be commercial real-estate. Nobody knows.
Join the conversation about this story »
See Also:
- UK Extends $64 Billion Bailout To Ailing British Banks, CEOs Out
- Why Even Perfect Financial Regulation Could Not Have Stopped This Downturn
- You Have No Clue How Bad Bank Balance Sheets Really Are
The 15 Worst Stock Fund Managers Of 2009
Mar 12th
Unless you were a short-seller it was really, really hard to lose money in 2009
The S&P 2009 returned: 26.46% in 2009. That’s what you could have returned by just by a low-fee ETF and then going to sleep and waking up a year later.
But despite the fees and the longstanding criticisms of the industry, it persists and pulls and gigantic sums of money every year.
We decided to check out the fund managers who didn’t keep up in 2009, and didn’t deliver.
Several made money, but compared to the broader markets, their investors lost out.
Now of course, this is just one year’s performance, but for better or worse, investors tend to look back just one year.
See the year’s 15 worst fund managers –>
Join the conversation about this story »
See Also:
- How To Decode A Mutual Fund Brochure
- Barron’s Bill Miller Cover Story Shows What’s Wrong With The Mutual Fund Industry
- 15 Public Pension Chiefs Whose Funds Are Zooming Towards Collapse
10 Funds That Buy Like Warren Buffett
Mar 12th
When Warren Buffett talks, people listen. Any time the legendary investor weighs in on market matters, either through his words or through the actions of his investment vehicle, Berkshire Hathaway (BRK.B), knowledgeable investors pay close attention. That’s why the release of Berkshire’s annual report each February is such an eagerly anticipated event: It includes Buffett’s annual letter to Berkshire shareholders, in which the Oracle of Omaha gives his take on recent events and drops nuggets of investing wisdom. This year’s letter (released Feb. 27 and available here) is as quotable as ever, as Jason Stipp reported after it came out.
Another reason for the widespread anticipation of Berkshire’s annual report is its insights into Buffett’s investment decisions from the previous year. While many were revealed during earlier disclosure, the annual report provides the big picture, including a list of the biggest holdings in Buffett’s investment portfolio. Morningstar’s Bill Bergman recently analyzed Buffett’s 2009 trading activity, including his top 10 stock holdings as of Dec. 31, 2009. Berkshire’s top equity holding is still Coca-Cola (KO), where Buffett is the largest shareholder (and a board member); the list also includes Burlington Northern, the railroad Berkshire recently bought outright. (The deal didn’t close until this year, so Burlington Northern was still publicly traded as of Dec. 31.) Essentially all of Buffett’s stock holdings are big, stable, profitable companies with solid competitive advantages–the same type of business he has always preferred.
Plenty of mutual fund managers are Buffett fans who emulate his investment approach in one way or another. Last August we took a look at mutual funds with the biggest Berkshire Hathaway stakes, including such excellent funds as Sequoia (SEQUX) and Clipper (CFIMX. When Buffett announced his plans to buy the rest of Burlington Northern back in November, Ryan Leggio looked at funds with the biggest stakes in that stock, which jumped in price when the deal was announced.
In a similar spirit, we decided to look at funds that are the biggest holders of Buffett’s other favorite stocks. We calculated the funds with the largest combined percentage of their assets in Berkshire Hathaway’s top 10 stock holdings other than Burlington Northern. Those remaining nine: Coca-Cola, Wells Fargo (WFC), American Express (AXP), Procter & Gamble (PG), Kraft Foods (KFT), Wal-Mart (WMT), Wesco Financial (WSC), ConocoPhillips (COP), and Johnson & Johnson (JNJ).
Two of the top three funds on the resulting list are consumer-staples sector funds (Vanguard Consumer Staples Index (VCSAX) and Fidelity Select Consumer Staples (FDFAX), which is not surprising given that Coca-Cola, Procter & Gamble, and Kraft are three of the biggest names in that sector.
We restricted the final list to diversified funds with at least $100 million in assets. Within those limits, the following table shows the top 10 funds, including each fund’s category, size, and category-specific annualized return and percentile ranking over the past five years through March 10.
Yacktman (YACKX) tops the list, with sibling Yacktman Focused (YAFFX) close behind. Donald Yacktman and his son, Stephen, manage both funds, employing a Buffett-style investing philosophy. They looks for profitable companies, usually with little debt, that are trading at a substantial discount to his estimate of their intrinsic value. While most of these are big blue chips of the type Buffett holds, including top 10 holdings Coca-Cola, ConocoPhillips, and Procter & Gamble, Yacktman is also willing to hold smaller stocks that fit his criteria, such as AmeriCredit (ACF) and Lancaster Colony (LANC). While this strategy sometimes goes out of favor, as it did in the middle of the past decade, it has worked extremely well over the long term. These two funds are among the best-performing large-value funds over the past five, 10, and 15 years, and Donald Yacktman was one of the finalists for Morningstar’s Domestic-Stock Manager of the Decade.
Clipper stands out because it’s the one fund on this list that’s also among the most prominent holders of Berkshire Hathaway itself. It’s managed by Buffett fans Chris Davis and Ken Feinberg, who also manage Davis NY Venture (NYVTX) and Selected American Shares (SLASX), both of which, along with Clipper, are Fund Analyst Picks in the large-blend category. (Davis and Feinberg also subadvise the #10 fund on our list, MMA Praxis Core Stock (MMPAX).) Berkshire Hathaway was the second-largest holding in each of these funds’ most recent portfolios, and they all also had at least one of the nine “Buffett stocks” among their top five holdings. In Clipper’s case these are American Express and Procter & Gamble, which together take up more than 15% of assets. These stocks represent a higher percentage of the more concentrated Clipper, which has only 24 holdings, in contrast to about 90 each for Davis NY Venture and Selected American Shares.
The rest of these funds have a similar focus on high-quality blue-chip stocks trading at attractive prices. GMO Quality III (GQETX) is advised by Grantham, Mayo, Van Otterloo & Co., whose cofounder, legendary value investor Jeremy Grantham, is a longtime market pessimist who has made some accurate predictions, and a longtime advocate of buying cheap, high-quality stocks. Dreyfus Appreciation (DGAGX) counts Coca-Cola, Procter & Gamble, and Johnson & Johnson among its top holdings; it’s subadvised by Fayez Sarofim & Co., a firm that has achieved excellent long-term results by investing almost exclusively in big, highly profitable companies with strong competitive advantages.
Of the 10 funds on this list, only the two Yacktman funds have beaten Berkshire Hathaway’s 6.4% annualized return over the past five years, illustrating how tough it is to beat Buffett. Even so, these funds have mostly been strong performers over the long term, with all but the two Davis-Feinberg funds beating their categories over the past five years. (Clipper and MMA Praxis Core Stock got hammered by some bad financial bets in 2007 and 2008, but they’ve since rebounded strongly, and we remain big fans of Davis and Feinberg.) That long-term strength illustrates why so many people pay attention to Buffett’s portfolio, and why emulating his general approach has been a winner over time.
Join the conversation about this story »
See Also:
- Warren Buffett Paying Top Dollar To Tap Baby Boomer’s Wine Binge
- Warren Buffett Explains How ‘Sound-bite Reporting’ Can Go Wrong
- New Yorker Writer Gets $20,000 Check From Warren Buffett’s Partner
Fitch: Watch What’s About To Happen To Mortgage Investors When The Fed Pulls Out The Supports
Mar 12th
If you don’t think the housing market is still floating on a Washington-inflated lifeboat, think again.
Here’s Fitch analyzing what’s about to happen to Residential Mortgage-Backed Securities values once the fed pulls out the scaffolding:
Fitch Ratings-NY-12 March 2010: Loss severities on distressed U.S.
residential mortgage loans are likely to rise this year as several key
government support programs expire, according to Fitch Ratings.
Low mortgage rates, homebuyer tax credits and government directed
loan-modification programs have led to an improvement in home prices and
loss severities since second quarter-2009. But the expiration in the
coming months of both the homebuyer tax credit and the Federal Reserve’s
$1.25 trillion MBS purchase program will increase negative pressure on
home prices and loss severities, according to Senior Director Grant
Bailey.
Additionally, an increase in the liquidation of loans with unsuccessful
loan modifications is expected to add to the supply of distressed
inventory in the housing market. ‘Servicers are further along in
identifying borrowers ineligible for modifications and will likely be
more aggressive in liquidating those loans this year compared to last,’
said Bailey. ‘Less costly alternatives to foreclosure, such as
short-sales, should help stem rising loss severities due to the lower
costs and speed of the resolution.’
Loss severities on loans resolved through short-sales are approximately
10% lower than loss severities on loans in which the servicer takes
possession of the property. Additionally, the seasonal increase in
housing activity through the summer may delay the full impact of the
withdrawal of the government support programs until later this year.
Loss severity trends continue to be strongly dependent on home price
trends, as shown in Fitch’s most recent ‘RMBS Performance Metrics’
results. In the two years prior to the recent improvement, national home
prices dropped approximately 30% while loss severities on loans which
incurred losses doubled to record highs of 43% for private-label Prime
loans, 58% for Alt-A loans and 72% for Subprime loans.
Fitch’s RMBS Performance Metrics combines loan level data from Fitch
Ratings and LoanPerformance to show delinquency trends, roll rate
movement and loss rates across vintage, sector, and mortgage type. The
report also includes data on mortgage servicing trends, such as
modification activity and advancing percentages, as well as a summary of
bond rating changes.
Join the conversation about this story »
See Also:
- Check Out The Markets That Absolutely Demolished The Housing Bears Last Year
- Soaring Stock Market, And Housing Rebound Means The Wealth Effect Is Back!
- The New Housing Write-Down Program Might Not Be As Big Of A Deal As It Seems
Ecuador Continues Its Defense in Arbitration Commenced By Chevron
Mar 12th
On March 11, 2010, the Honorable Leonard Sand, U.S. District Court for the Southern District of New York, denied the Republic of Ecuador’s Petition to Stay the pending arbitration commenced by Chevron Corp. under the U.S.-Ecuador Bilateral Investment Treaty.
Full article at: Chevron and Ecuador
Did The Market Flush Out The Weak Handed Shorts? (NYSE:SPY), (NYSE:POT), (NYSE:GS), (NASDAQ:AAPL)
Mar 12th
As I research the markets day after day, I find some interesting technical signals and signs recurring. One that I mentioned recently was in relation to the previous 52 week high on the SPDR S&P 500 ETF (NYSE:SPY). The previous 52 week high was $115.14, until it was taken out over the last few days. My previous thesis and call was that the institutions, seeing the markets hit the 52 week high of $115.14, would take the market through that level to approximately $116.00. The rea
Shipping Indices Highlight a Potential Commodities Sell off
Mar 12th
The China Containerized Freight Index has bee-lined upward in 2010. The index tracks shipping prices for goods sailing from China to 11 different regions around the world.
Between January 15 and February 26, the index rose 17%. During the same period, the Baltic Dry Index (which tracks average shipping prices globally) fell 18%.
Full article at: Shipping Indices
