| Kern County's economic outlook bleak
The Career Services Center has seen an increase in the number of people looking for jobs, but a drop in the number of companies offering them. "Let's don't say a recession," U.S. Presidential Republican candidate Fred Thompson has said. Actually avoiding a recession therein lies the difficulty. As some sub-prime mortgage rates reset, many Kern County residents will find: -Their mortgage payments this year aren't so low anymore. -Gone are the days homeowners tapping home equity to buy toys. -Average existing home prices dropped about $40,000 in the past six months. -New home construction hit a major low last month. -Building permits was at 74, an all-time low. That's the all time-low, since they started keeping track of building permits.
After the Deluge
In addition, companies like Citigroup (ticker: C), Merrill Lynch (MER) and others have to re-equitize their balance sheets, and that process is just beginning. People are way underestimating the dilution this will cause financial-services companies. They are in an awkward position. The faster they take writeoffs, the less capital they have and the less lending they can do. The market has not fully appreciated how much more equity will have to be raised. The first half looks awful, but it doesn't mean the whole year will be awful. I'm a big believer in not trying to anticipate the end of the world. Hickey: Only home mortgages have blown up. There are problems in auto loans, student loans, leveraged-buyout and junk-bond loans. Wherever people were lending, they were lending stupidly. Delinquencies have risen across the board, but defaults haven't come yet.
ALL BUSINESS: Banks face more woes from rising delinquencies on second ...
Contrarian investors who think now is the time to start buying beaten-down banking stocks could be in for a shock if they don't carefully review those companies' distressed home-equity loan portfolios. Massive losses tied to subprime-mortgage investments knocked down bank earnings over the last year, spurring investors to flee those stocks. But that could be only the start: Rising delinquencies in home-equity loans and other second mortgages could keep the banks' results from improving anytime soon. In recent days, executives at Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. said missed loan payments were a factor in their quarterly earnings declines. Most said the problem would only get worse. Why? A so-far small, but growing, number of homeowners who used their homes like an ATM to fund their spending and investment bets are finding themselves in a financial pinch.
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