bank run blog

This segment from CBS News foucues on homeowners who have lost their jobs as unemployment spikes across the US and who now face falling behind on their mortgages and foreclosure.

“I think the foreclosure crisis began as a problem for mostly low income households, its now a problem for all households.” – Mark Zandi, Moody’s Financial

“More than 2 million prime mortgages, traditional loans for people with good credit, are now delinquent…12 million household now owe more than their homes are worth.” Ben Tracy, CBS News

“I’m not going to drain my savings, I’m not going to drain my 401k. I’m going to walk away.” -Judy Jones, homeowner

The San Francisco Chronicle has developed a database to post official announcements by companies in California who plan to eliminate jobs or layoff workers.

In California, a law called the Worker Adjustment and Retraining Notification Act requires companies that are aware that they will be reducing the number of their staff by 50 or more employees to notify the California Employment Development Department. The law is applicable to companies with 75 or more employees, full or part time.

“Beginning today, a database of such news will be available at SFGate.com, consisting of a list of companies doing business in California that have announced major layoffs, plant closures or relocation of workers.

The list of WARN notices is going up on The Chronicle Web site less than a week after the announcement that the nation’s unemployment rate reached a 14-year high of 6.5 percent in October.

State law requires a 60-day notice of plant closures, layoffs or relocation of 50 or more employees under the Worker Adjustment and Retraining Notification Act.”

The Chronicle reports that the Employment Development Department plans to send rapid response teams to the areas where major layoffs are to occur “to give workers information about unemployment benefits and possible job openings.”

Readers of the Chronicle are also contributing to a news group where articles that the Chronicle runs that concern lay-offs, unemployment and business closings in the Bay Area are compiled.

Federal statistics on unemployment claims show that jobless claims increased by 32,000 to a seasonally adjusted 516,000 in October. That figure nearly matches the 517,000 claims reported nationally in the aftermath of the terror attacks in 2001. It is only the second time since 1992 that jobless claims have exceeded 500,000.

links to databases-

San Francisco Chronicle : California Job Cut Warnings

Publishto News Group : Bay Area Company Cutbacks

The study by the Federal Reserve’s Community Affairs department and the Brookings Institution Metropolitan Policy Program found that poverty in the United States is spreading from rural and inner-city areas to the suburbs.

Bruce Katz, a director Brookings Institution Metropolitan Policy Program told Reuters, “Poverty is spreading and may be re-clustering in suburbs, where a majority of America’s metropolitan poor now live…It shows that concentrated poverty is still very much with us, and that it can be found among a much more diverse set of communities and families.”

See story-
Reuters : Poverty spreading in suburbs: study

Although hard figures will not be available until next week, anecdotal reports from the malls of America seem to suggest that shoppers were fewer and more frugal on Black Friday 2008.

In a story titled ‘Big markdowns, short lines on Black Friday’, the Desert Sun of Palm Springs CA reported, “Some shoppers were more reluctant to go after big-ticket items on Friday, using their shopping dollars prudently and snatching up everyday essentials that were marked down.” The Sun quotes a mother who said, “The economy’s really bad. I’m just buying the necessities this year for my baby. I’m staying out of toys and stuff. I’m glad he doesn’t know about toys yet.”

Time reports that on “34th Street, many stores were half empty and some sales staff said they had noticed that shoppers were holding back this year.” A sales person at Macy’s told Time, “They’re not buying the big stuff.”

Reuters writes that Macy’s offered about 200 “door busters” to Black Friday shoppers. Like most retailers, the Christmas shopping season represents 40 to 50 percent of their yearly sales revenues. Macy’s CEO told Reuters that he expects to close about 10 stores next year and delay remodeling projects at its locations across the US. Though the company said that it always closes under-performing stores, Macy’s reported a quarterly loss earlier this month and said it feared a prolonged retail downturn in the US economy.

The Los Angeles Times, noting that “tighter credit and widespread layoffs have caused many consumers to cut back on nonessentials”, writes that Tiffany’s third quarter profits had dropped, with shares falling to 35 cents, less than half of their yearly high. Sales in Tiffany’s Americas region stores declined 7 percent overall and sales at stores open at least a year, dropped 14% in the US.

The economy has not dampened the outlook of some players who were formerly on the margins. Reuters reports that the quarterly profit of discount retailer Dollar Tree Inc rose 20 percent last quarter, and the company expects to see further gains. Dollar Tree sales rose to $1.11 billion last quarter and projects fourth quarter sales to reach $1.38 billion to $1.42 billion. The retailer operates 3,572 stores in 48 states and sees bankruptcies of other retail stores as a magnificent opportunity. Reuters writes that the CEO of the dollar discount store, “sees opportunities for Dollar Tree in finding better commercial real estate at lower costs, as some retail chains cut back on store openings while others plan to close existing outlets under bankruptcy proceedings.” The company plans to open over 200 more stores in 2009.

There were signs before yesterday that the 2009 X-mas buying season could result in a decline over last year’s sales figures-which has not happened in 24 years. Reuters reported that retail stores are shipping products to close-out liquidators that were never even placed on store shelves, “Piles of jewelry, clothing and electric drills are bypassing store shelves and heading straight to liquidators by the caseload as stores try to save as much cash as they can.”

Reuters writes;

“At warehouses operated by Liquidity Services Inc., a leading online auction company for surplus goods, there are rows and rows of pallets of offloaded merchandise ranging from jewelry to consumer electronics…

At the company’s Liquidation.com, which auctions surplus goods offered by stores and manufacturers to dollar stores and small businesses that sell on eBay, the number of auctions scheduled for the Thanksgiving weekend has soared to 2,100 — eight times more than last Thanksgiving said chief executive Bill Angrick.”

Reuters suggests, “fear of deflation — is also causing stores to dump inventory.” Richard D. Hastings, a consumer strategist from Global Hunter Securities, told the news service, “Prices are slipping too fast, and so by the time you sell the product, stores are not covering their operating expenses.” And, the downward spiral accelerates;

“But stores are only making matters worse. The more they discount and send to liquidators, the lower the prices become. Consequently, stores generate less in sales.

Still, in the current economy, they have no choice. Carrying inventory is a big expense, and stores need to preserve cash at a time of tightening credit…

This is about survival. This is not about muddling through the holiday season,” Angrick said.”

see stories-
Time : Black Friday Turnout: No Miracle on 34th Street
Desert Sun : Big markdowns, short lines on Black Friday
Reuters : Macy’s CEO sees closing up to 10 stores next year
Associated Press : Tiffany’s third-quarter profit tumbles
Reuters : Dollar Tree profit jumps 20 percent, shares rise
Associated Press : For stores, the holiday season may already be over

The San Francisco Chronicle has a piece that describes a new business opportunity that has great growth potential;

“The nation’s housing bust and economic downfalls have greatly increased the number of homes being foreclosed and taken by banks. The bank typically hires a real estate agent to resell it, but someone has to come in and clean up after the last residents. That’s led to a boom in a new type of startup business — cleaning up foreclosures, also known as “real-estate owned” or REOs…Web sites aimed at wannabe entrepreneurs — like www.explorestartups.com — frequently suggest starting up a foreclosure cleanup business as moneymaker. Entrepreneur Magazine even picked a foreclosure cleanup business called Cyprexx for its 2008 “Hot 100 Fastest Growing Businesses” list.”

In the US, where over 4 million homeowners are at least a month late on their mortgages, and more than 2 million homes will be foreclosed upon in the next 13 month (according to Moody’s Economy.com), the trash out biz op makes sense, but there may be a few negatives associated with the job;

“It’s not as common for the occupant to stay full-term after the foreclosure, but it does happen, Drake said. In one case, his crew found the resident still inside, armed and refusing to leave. Fortunately, he said, police were able to safely resolve that situation. Companies like Drake’s usually try to the “cash-for-keys strategy” first, in which a homeowner facing foreclosure is offered a small sum, usually between $1,000 and $3,000, in exchange for a clean, quick departure and handing over the keys.”

With jobs in real estate sales and mortgage brokeraging disappearing, the new business model may provide gainful employment for some. The Chronicle features Linda Hall who formerly worked as a bookkeeper before starting her own trash-out company All REO Preservation in California, who said of her company, “We’ve been butt-kicking busy.”

see story-
San Francisco Chronicle : From Bust to Broom: Foreclosure cleanups bustling