HSBC and NEW

[MaxedOutMama]

New Century came clean after the bell today. They’re delaying their fourth quarter financials and restating the rest of 2006. Seems they forgot to calculate their loan losses correctly, and well, they’re going to have to restate profit. Also they expect to report a loss for the fourth quarter.

HSBC said it was setting aside another 1.76 billion for loan losses.

Good links and commentary at Calculated Risk:
http://calculatedrisk.blogspot.com/2007/02/new-century-financial-warns-will.html

[Anonymous]

Great news, NEW stock dropped 15% in after hours trading. I have been shorting them for almost a year now and they are finally living up to all the hype.

[Happy renter]

Thank you for the news of stock, NEW. It dropped 28% today with heavy trading and hits 52 weeks low. The div is 25.3% with P/E 3.21. This company was very very profitable during the “House Bubble” period. It specializes in REIT. Related stock, Toll Brothers drops 4.3%. Here is the link:

http://finance.yahoo.com/q?s=NEW

Europe’s biggest bank, HSBC blames $10B charge on bad U.S. loans and says charge for bad debts in 2006 balloons 20 percent over forecasts due U.S. mortgage woes. HSBC dropped 2.6% today. Here is the link:

http://money.cnn.com/2007/02/07/news/international/hsbc.reut/index.htm?postversion=2007020719

[PerryChase]

It’s interesting that HSBC has a widely circulated paper on froth in housing. That paper was also previously discussed on Piggington. So much for their ability to detect froth.

I think that that HSBC deserves what it’s getting. Foreign companies should know that they can expect to take a bath when they acquire American units at the top of the market. It happens everytime — from the Japanese aquisitions of the 1980s to Chrysler, to Voicestream, to Household Finance.

[JWM in SD]

Ah yes, and so it begins in earnest finally. For all of you clown permabulls that like to come here and post your nonsense occasionally, what have you got to say now??

The Trillion Dollar Train is coming…first stop is San Diego…next stop is OC. All GFs and FBs on board. Final destination – Financial Ruin.

I have cash and I have time…what do you have??

[PerryChase]

Here’s the HSBC paper if anyone is interested. The operations guys at HSBC were too driven by greed to listen to their own economists. It’s the mentality of “the competition is doing it, we can do it better.”

It’s also like a family running out to buy because all the friends were getting “rich” in real estate. If the Jones are buying at $700k house, we can be even richer if we buy a $900k house.

http://neweconomist.blogs.com/new_economist/2006/01/detecting_us_ho.html

http://neweconomist.blogs.com/new_economist/files/HSBC_frothfindingmission.pdf

[uncle_git]

Whats especially sickening about this is I bet NEW were well aware of the situation for the last 3 qtrs.

CFO and CTO’s don’t have to sign off on quarterly reports – now is their end of year report, that due to Sarbanes Oxley has to be signed off by the CFO and CEO under penalty of law.

They hid their situation from the shareholders for 3 qtrs and only let it slip when they could face criminal charges for hiding it longer.

[Happy renter]

NEW closed at 36% drop in one day. This is a good article and the link:

U.S. mortgage carnage bad, but could be worse

http://yahoo.reuters.com/news/articlehybrid.aspx?storyID=urn:newsml:reuters.com:20070208:MTFH44814_2007-02-08_21-48-23_N08301501&type=comktNews&rpc=44

[DaCounselor]

“I have cash and I have time…what do you have??”
______________________

Uh, let’s see….how about 7 figures in aggregate equity and
positive cash flow on 2 properties.

Any other questions?

[JWM in SD]

Yeah, when did you buy the cashflowing properties? If it’s in the last couple years…then you’re probably a liar. How much debt do you have leveraged against that “equity”?

[DaCounselor]

I have posted here numerous times regarding my position. I am long on SD coastal RE.

My first purchase was a coastal condo around market peak in 1991. My second purchase was a coastal townhome in ’96. I purchased my current home in ’01. The first 2 are now free and clear and obviously postive cash flow. Based upon the last sale in my current neighborhood, I have just over 15% equity in that property(used to be over 20%).

Call me liar, call me what you will. I’m not much into name-calling, so I’ll leave that up to you. I just post here from time to time to add my 2 cents from the perspective of someone who has owned SD RE for a number of years, has bought at the previous peak of the market, has ridden the up and downs and has come out in pretty good shape for a pretty regular guy.

[PerryChase]

DaCounselor will be fine. If the market drops as we expect, he’ll still be able to make his payments. However, he won’t feel as prosporeous anymore. He won’t be in trouble like others who went exotic to get a house.

You bought in 2001 and you only have 15% equity? Sounds low to me.

[JWM in SD]

Fair enough. My question / taunt is not really aimed at those your circumstance anyway. However, if you don’t think this is going to get very ugly in the next few years, then you are fooling yourself. The economic implications of this credit bubble are enormous. It goes way beyond housing. In some respects, I hope it doesn’t get that bad, but all the indicators point to some very nasty on the horizon. There will be severe credit contraction and ultimately deflation in hard assets such as RE and stocks. SoCal is subprime central in the US. This news about HSBC and NEW is finally real confirmation that it’s beginning to happen.

[DaCounselor]

“You bought in 2001 and you only have 15% equity? Sounds low to me.”
_____________________

Refi’d & HELOC, paid off rentals.

[JWM in SD]

Uh, are you sure that you really have equity??

[Author]

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