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The demand of homeHome price fell in USA 6.1% price fall specialist is watching their invest conciously,
Home prices in 20 U.S. metropolitan areas fell in October by the most in at least six years, a private survey showed today.
Property values fell 6.1 percent from October 2006, more than forecast, after dropping 4.9 percent in September, according to the S&P/Case-Shiller home-price index. The decrease was the biggest since the group started keeping year-over-year records in 2001. The index has fallen every month this year.
Prices will probably remain under pressure as the jump in foreclosures puts even more homes on the market just as stricter lending rules make it harder for buyers to find financing. Declining values make it harder for owners to tap home equity for extra cash, posing a risk to consumer spending.
``With supply overhang enormous and mortgage financing tougher to obtain, home prices are going to decline considerably further in the quarters ahead,'' said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc., a New York forecasting firm.
Compared with a month earlier, home prices dropped 1.4 percent, the biggest one-month decline since records began. The figures aren't seasonally adjusted, so economists prefer to focus on the year-over-year change.
The median forecast of 12 economists surveyed by Bloomberg News projected a 5.7 percent decline.
Broad Decline
The index is a composite of transactions in 20 metropolitan areas. Seventeen cities showed a year-over-year decline in prices, led by 12 percent slumps in Miami and Tampa, Florida. Three, including Charlotte, North Carolina, Seattle and Portland, Oregon, showed an increase from a year earlier.
All 20 areas covered showed a drop in prices compared with September.
``The current state of the single-family housing market remains grim,'' Robert Shiller, chief economist at MacroMarkets LLC and a professor at Yale University, said in a statement.
Shiller and Karl Case, an economics professor at Wellesley College, created the home-price index based on research from the 1980s.
A report on Nov. 21 from the National Association of Realtors showed home prices fell in one third of U.S. cities last quarter.
The housing market may continue to weaken as an increase in foreclosures adds to a glut of unsold homes on the market, spurring sellers to cut prices, economists said.
Sales Report
Figures this week from the Commerce Department may show new homes sold at an annual rate of 718,000 in November, down from October's 728,000 rate, based on the median estimate of economists surveyed by Bloomberg News.
Sales of new houses probably will fall 8.9 percent in 2008 after a 25 percent drop this year, according to a Dec. 13 forecast from Fannie Mae, the largest mortgage buyer.
``The market is too challenging to make predictions for fiscal 2008,'' Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., said on a conference call on Dec. 19. ``It will be a difficult year.'' The Red Bank, New Jersey- based company reported a net loss of $467 million for the three months ended Oct. 31.
Residential investment has subtracted from economic growth for the past seven quarters. Home building dropped at a 20.5 percent annual pace in the third quarter, the most since 1991.
The S&P/Case-Shiller index and another by the Office of Federal Housing Enterprise Oversight track the same home over time and more accurately reflect price trends, economists said.
Price gauges from the Commerce Department and the Realtors group can be influenced by changes in the types of homes sold. Higher sales of cheaper homes relative to more-expensive properties will bias the figures down.
Wednesday, December 26, 2007
Restructuring Aims to Give Canada’s Debt Market a $33 Billion Lift
The Crawford Committee managed to secure its rescue effort to restructure $33-billion in asset-backed commercial paper (ABCP) in time for exhausted negotiators to take a holiday break, but some of the banks have still not signed on.
Sources familiar with discussions said some of the Canadian banks have thus far declined to sign an agreement to provide funding support to the sector because the formal request came late last week, when a number of senior executives had already left for the Christmas break.
The committee that's working to fix the sector wanted the banks to contribute more than $2-billion to a $14-billion margin facility that will be key to the restructuring.
A tentative restructuring agreement should unlock a $33 billion portion of Canada’s debt market that has been frozen since August, its chief architect said on Monday.
Fears about subprime lending in the United States led to a liquidity crisis in Canada’s market for asset-backed commercial paper that had been sold by dealers not owned by the country’s six major banks.
A standstill agreement in August prevented the collapse of the market but created problems for some investors, particularly businesses that had bought the short-term debt to park cash they planned to use later.
Under the agreement reached Sunday night, the asset-backed paper, which is mostly made up of auto loans, market rate mortgages and credit card receivables, will be repackaged to make it more attractive.
A crucial element of the plan involves segregating 3 billion Canadian dollars (about the same in American dollars) in subprime mortgage debt, and then packaging it with a similar amount of higher quality debt.
“They’ve decided quite wisely to firewall that off from the other debt,” said Huston Loke, who heads the structured finance group at DBRS, a debt rating agency in Toronto. “That’s the portion that everyone globally has the biggest question marks around.”
Most debt will be transformed into medium terms notes that will probably mature in five to seven years, Purdy Crawford, the Toronto lawyer who coordinated the negotiations, said in a conference call. That debt will be managed by one of two trusts.
To guarantee liquidity in the market for the restructured paper, several dealers have agreed to provide about 12 billion Canadian dollars to cover margin calls on the notes. Mr. Crawford declined to identify the firms or even to say how many were participating.
Five of six major banks indicated that they might add about 2 billion Canadian dollars to that fund, Mr. Crawford added. If those banks do not ultimately come through, however, Mr. Crawford said that another, non-Canadian financial institution will cover that amount in a contingency plan. He declined to identify the backup financier.
“It will be good paper,” Mr. Crawford said, after indicating that most owners of the restructured debt would probably be repaid if they held it until maturity. The agreement followed the first lawsuits by holders of the paper against dealers as well as threats of more litigation. If the agreement is approved, debt holders will be required to waive their right to sue.
Two ratings agencies, which remain undisclosed, will rate the debt, which was previously only valued by DBRS. As part of that process, Mr. Loke said, investors will be given a detailed breakdown of their debt’s structure. Previously, they were offered general guidance and descriptions from the ratings agency.
“The lesson everyone is taking away from this is that disclosure is very important,” Mr. Loke said.
The Caisse de dépôt et placement du Québec, the large pension fund that is a major holder of the paper and a participant in the talks, said in a statement that it was “very satisfied” with the agreement. The deal requires approval from debt holders, various government agencies and departments. It is not expected to close until March.
Sources familiar with discussions said some of the Canadian banks have thus far declined to sign an agreement to provide funding support to the sector because the formal request came late last week, when a number of senior executives had already left for the Christmas break.
The committee that's working to fix the sector wanted the banks to contribute more than $2-billion to a $14-billion margin facility that will be key to the restructuring.
A tentative restructuring agreement should unlock a $33 billion portion of Canada’s debt market that has been frozen since August, its chief architect said on Monday.
Fears about subprime lending in the United States led to a liquidity crisis in Canada’s market for asset-backed commercial paper that had been sold by dealers not owned by the country’s six major banks.
A standstill agreement in August prevented the collapse of the market but created problems for some investors, particularly businesses that had bought the short-term debt to park cash they planned to use later.
Under the agreement reached Sunday night, the asset-backed paper, which is mostly made up of auto loans, market rate mortgages and credit card receivables, will be repackaged to make it more attractive.
A crucial element of the plan involves segregating 3 billion Canadian dollars (about the same in American dollars) in subprime mortgage debt, and then packaging it with a similar amount of higher quality debt.
“They’ve decided quite wisely to firewall that off from the other debt,” said Huston Loke, who heads the structured finance group at DBRS, a debt rating agency in Toronto. “That’s the portion that everyone globally has the biggest question marks around.”
Most debt will be transformed into medium terms notes that will probably mature in five to seven years, Purdy Crawford, the Toronto lawyer who coordinated the negotiations, said in a conference call. That debt will be managed by one of two trusts.
To guarantee liquidity in the market for the restructured paper, several dealers have agreed to provide about 12 billion Canadian dollars to cover margin calls on the notes. Mr. Crawford declined to identify the firms or even to say how many were participating.
Five of six major banks indicated that they might add about 2 billion Canadian dollars to that fund, Mr. Crawford added. If those banks do not ultimately come through, however, Mr. Crawford said that another, non-Canadian financial institution will cover that amount in a contingency plan. He declined to identify the backup financier.
“It will be good paper,” Mr. Crawford said, after indicating that most owners of the restructured debt would probably be repaid if they held it until maturity. The agreement followed the first lawsuits by holders of the paper against dealers as well as threats of more litigation. If the agreement is approved, debt holders will be required to waive their right to sue.
Two ratings agencies, which remain undisclosed, will rate the debt, which was previously only valued by DBRS. As part of that process, Mr. Loke said, investors will be given a detailed breakdown of their debt’s structure. Previously, they were offered general guidance and descriptions from the ratings agency.
“The lesson everyone is taking away from this is that disclosure is very important,” Mr. Loke said.
The Caisse de dépôt et placement du Québec, the large pension fund that is a major holder of the paper and a participant in the talks, said in a statement that it was “very satisfied” with the agreement. The deal requires approval from debt holders, various government agencies and departments. It is not expected to close until March.
Deal :Berkshire to Pay $4.5 Billion for Pritzkers' Marmon
Warren E. Buffett may be a choosy shopper, but when he sees a firm he likes, he moves fast.
After just two weeks of negotiations, Mr. Buffett, who has been looking for acquisitions on which to spend his company’s billions of dollars, snagged an industrial conglomerate in a deal announced Tuesday. The Pritzker family of Chicago will sell to Mr. Buffett’s firm, Berkshire Hathaway, a 60 percent stake in Marmon Holdings for $4.5 billion.
The deal would go a long way toward unwinding the business holdings of the Pritzkers, a process that started in 2001. For Mr. Buffett, the deal represents his largest acquisition outside the insurance industry and suggests that he is finally finding some deals he can get excited about.
Berkshire will acquire the remaining 40 percent of Marmon over the next five or six years at a price that will be based on the future earnings of the company. In 2006, Marmon posted revenue of $7 billion and profit of $1 billion from operations like wire and cable, railroad tank cars and water treatment systems.
After just two weeks of negotiations, Mr. Buffett, who has been looking for acquisitions on which to spend his company’s billions of dollars, snagged an industrial conglomerate in a deal announced Tuesday. The Pritzker family of Chicago will sell to Mr. Buffett’s firm, Berkshire Hathaway, a 60 percent stake in Marmon Holdings for $4.5 billion.
The deal would go a long way toward unwinding the business holdings of the Pritzkers, a process that started in 2001. For Mr. Buffett, the deal represents his largest acquisition outside the insurance industry and suggests that he is finally finding some deals he can get excited about.
Berkshire will acquire the remaining 40 percent of Marmon over the next five or six years at a price that will be based on the future earnings of the company. In 2006, Marmon posted revenue of $7 billion and profit of $1 billion from operations like wire and cable, railroad tank cars and water treatment systems.
Dec. 26 (Bloomberg) -- Billionaire Warren Buffett's Berkshire Hathaway Inc. will pay $4.5 billion for 60 percent of Marmon Holdings Inc., adding another family run company that prospered without shareholder demands for short-term profits.
Chicago's Pritzker family, which controls Global Hyatt Corp., built Marmon into a group with $7 billion in annual sales and 125 units including operations serving the railroad and energy industries. Operating income more than tripled from 2002 to 2007, Omaha, Nebraska-based Berkshire said in a statement yesterday.
Marmon has ``businesses that are fairly niche-oriented where they have dominant positions established over time,'' said Thomas Russo, who manages about $3.5 billion at Gardner Russo & Gardner in Lancaster, Pennsylvania and counts Berkshire as its largest holding. ``They have a history under the Pritzkers of being liberated from the quarterly earnings game.''
Buffett, 77, built Berkshire over four decades, buying out- of-favor stocks and manufacturers to transform a failing textile maker into a $210 billion holding company. His biggest investment last year was the $4 billion purchase of Iscar Metalworking Cos. from Israel's Wertheimer family.
Marmon is ``our kind of company,'' Buffett said in an interview with CNBC today. ``It's in some very basic businesses but good businesses.''
Berkshire, which had more than $45 billion in cash as of Sept. 30, is as prepared as it has ``ever been'' to buy a ``big business outright,'' Buffett told shareholders at an annual meeting in May. He's said he'd be willing to spend as much as $60 billion on the right company.
The Marmon acquisition is set to be completed in the first quarter of 2008, with Berkshire acquiring the remainder of the company by 2014 at a cost based on future earnings.
Trains, Cranes
Marmon employs 21,500 people, mostly in North America, the U.K., Europe and China, according to the company's Web site. Its businesses include a dozen companies that manufacture wire and cable products for energy and construction use.
The Chicago-based group also has a transportation-services operation that produces railroad cars and leases tank containers in China. Operating income was $794 million last year, according to the Web site.
The businesses ``are not prone to widespread technical obsolescence,'' Russo said. ``They would have a relationship with their suppliers and customers that give them an ongoing partnership.''
Berkshire had about 217,000 employees as of Dec. 31 in businesses ranging from auto insurer Geico Corp. and carpet manufacturer Shaw Industries to ice cream company International Dairy Queen Inc. and business-jet fleet operator NetJets Inc.
Largest Since 2005
The Marmon takeover is the largest announced by Buffett since 2005, when Berkshire's utility company agreed to buy PacifiCorp from Scottish Power Plc for $5.1 billion in cash and assume $4.3 billion in debt. Buffett has also been investing in railroads, disclosing in April that he purchased a $3 billion stake in Fort Worth, Texas-based Burlington Northern Santa Fe Corp., the second-largest railroad in the U.S. after Union Pacific Corp.
Buffett prefers buying companies outright rather than investing in stocks because ``that way he can control the reinvestment decisions,'' Russo said. ``He would have the appetite and the balance sheet to underwrite almost limitless investments through their operating entities.''
Marmon has an ``impressive record of growth and profitability,'' Buffett said in the statement. ``The decision to purchase and work out the details of this transaction was done without delay.''
Berkshire spokeswoman Jackie Wilson and Chief Financial Officer Marc Hamburg didn't return calls seeking comment. David Dees, a spokesman for Marmon, had no comment.
Pritzker Breakup
The Pritzker family has discussed breaking up its holdings since the 1999 death of Jay Pritzker, who began the hotel company in 1957 by buying the Hyatt House in Los Angeles. The family's investments range from a global credit-check company to a maker of artificial joints. Marmon was acquired in 1953 by Jay and his brother Robert, according to the statement.
``This transaction is being done in the context of the previously reported restructuring of our family business interests,'' Marmon Chairman Tom Pritzker said in the statement.
In August, the family said it would sell a minority stake in Global Hyatt to investors including Goldman Sachs Capital Partners for $1 billion. In 2006, the family agreed to sell snuff maker Conwood for $3.5 billion to Reynolds American Inc.
In January 2005, actress Liesel Pritzker and brother Matthew Pritzker, settled a $2 billion suit accusing Tom Pritzker and other relatives of cheating them out of their inheritance.
Inheritance Suit Settled
The siblings claimed their trust-fund assets were being transferred to accounts benefiting other relatives and the family foundation. Terms of the deal weren't disclosed.
Tom Pritzker was ranked by Forbes as the 117th wealthiest person in the U.S. with a net worth of $3 billion. Buffett was second with $52.4 billion, the magazine said.
Buffett will work with Tom Pritzker, Marmon Chief Executive Officer Frank Ptak and former CEO John Nichols over the next five to six years ``in continuing to build Marmon,'' Berkshire said in the statement.
Berkshire, which traded at $2,950 on Dec. 31, 1987, is poised to post its 17th annual gain in 20 years. It climbed $3,980 Dec. 24 to $137,980 in New York Stock Exchange composite trading. The stock is up 25 percent in 2007, outpacing the 5.5 percent gain for the Standard & Poor's 500 Index.
The company's largest purchase was the acquisition of General Re, the largest U.S. reinsurance company. The stock deal was valued at $16 billion when it was completed in 1998.
`Simple' Businesses
Buffett's investment criteria include companies with ``good returns on equity,'' little or no debt, ``simple'' businesses that he can understand, and consistent earnings, he said in Berkshire's latest annual report. Buffett doesn't participate in auctions for companies and can tell prospective sellers within five minutes of an offer if he is interested in completing a deal, he said in the report on March 1.
The Marmon acquisition ``was done just the way Jay would have liked,'' Buffett said in the statement. ``No consultants or studies.''
Chicago's Pritzker family, which controls Global Hyatt Corp., built Marmon into a group with $7 billion in annual sales and 125 units including operations serving the railroad and energy industries. Operating income more than tripled from 2002 to 2007, Omaha, Nebraska-based Berkshire said in a statement yesterday.
Marmon has ``businesses that are fairly niche-oriented where they have dominant positions established over time,'' said Thomas Russo, who manages about $3.5 billion at Gardner Russo & Gardner in Lancaster, Pennsylvania and counts Berkshire as its largest holding. ``They have a history under the Pritzkers of being liberated from the quarterly earnings game.''
Buffett, 77, built Berkshire over four decades, buying out- of-favor stocks and manufacturers to transform a failing textile maker into a $210 billion holding company. His biggest investment last year was the $4 billion purchase of Iscar Metalworking Cos. from Israel's Wertheimer family.
Marmon is ``our kind of company,'' Buffett said in an interview with CNBC today. ``It's in some very basic businesses but good businesses.''
Berkshire, which had more than $45 billion in cash as of Sept. 30, is as prepared as it has ``ever been'' to buy a ``big business outright,'' Buffett told shareholders at an annual meeting in May. He's said he'd be willing to spend as much as $60 billion on the right company.
The Marmon acquisition is set to be completed in the first quarter of 2008, with Berkshire acquiring the remainder of the company by 2014 at a cost based on future earnings.
Trains, Cranes
Marmon employs 21,500 people, mostly in North America, the U.K., Europe and China, according to the company's Web site. Its businesses include a dozen companies that manufacture wire and cable products for energy and construction use.
The Chicago-based group also has a transportation-services operation that produces railroad cars and leases tank containers in China. Operating income was $794 million last year, according to the Web site.
The businesses ``are not prone to widespread technical obsolescence,'' Russo said. ``They would have a relationship with their suppliers and customers that give them an ongoing partnership.''
Berkshire had about 217,000 employees as of Dec. 31 in businesses ranging from auto insurer Geico Corp. and carpet manufacturer Shaw Industries to ice cream company International Dairy Queen Inc. and business-jet fleet operator NetJets Inc.
Largest Since 2005
The Marmon takeover is the largest announced by Buffett since 2005, when Berkshire's utility company agreed to buy PacifiCorp from Scottish Power Plc for $5.1 billion in cash and assume $4.3 billion in debt. Buffett has also been investing in railroads, disclosing in April that he purchased a $3 billion stake in Fort Worth, Texas-based Burlington Northern Santa Fe Corp., the second-largest railroad in the U.S. after Union Pacific Corp.
Buffett prefers buying companies outright rather than investing in stocks because ``that way he can control the reinvestment decisions,'' Russo said. ``He would have the appetite and the balance sheet to underwrite almost limitless investments through their operating entities.''
Marmon has an ``impressive record of growth and profitability,'' Buffett said in the statement. ``The decision to purchase and work out the details of this transaction was done without delay.''
Berkshire spokeswoman Jackie Wilson and Chief Financial Officer Marc Hamburg didn't return calls seeking comment. David Dees, a spokesman for Marmon, had no comment.
Pritzker Breakup
The Pritzker family has discussed breaking up its holdings since the 1999 death of Jay Pritzker, who began the hotel company in 1957 by buying the Hyatt House in Los Angeles. The family's investments range from a global credit-check company to a maker of artificial joints. Marmon was acquired in 1953 by Jay and his brother Robert, according to the statement.
``This transaction is being done in the context of the previously reported restructuring of our family business interests,'' Marmon Chairman Tom Pritzker said in the statement.
In August, the family said it would sell a minority stake in Global Hyatt to investors including Goldman Sachs Capital Partners for $1 billion. In 2006, the family agreed to sell snuff maker Conwood for $3.5 billion to Reynolds American Inc.
In January 2005, actress Liesel Pritzker and brother Matthew Pritzker, settled a $2 billion suit accusing Tom Pritzker and other relatives of cheating them out of their inheritance.
Inheritance Suit Settled
The siblings claimed their trust-fund assets were being transferred to accounts benefiting other relatives and the family foundation. Terms of the deal weren't disclosed.
Tom Pritzker was ranked by Forbes as the 117th wealthiest person in the U.S. with a net worth of $3 billion. Buffett was second with $52.4 billion, the magazine said.
Buffett will work with Tom Pritzker, Marmon Chief Executive Officer Frank Ptak and former CEO John Nichols over the next five to six years ``in continuing to build Marmon,'' Berkshire said in the statement.
Berkshire, which traded at $2,950 on Dec. 31, 1987, is poised to post its 17th annual gain in 20 years. It climbed $3,980 Dec. 24 to $137,980 in New York Stock Exchange composite trading. The stock is up 25 percent in 2007, outpacing the 5.5 percent gain for the Standard & Poor's 500 Index.
The company's largest purchase was the acquisition of General Re, the largest U.S. reinsurance company. The stock deal was valued at $16 billion when it was completed in 1998.
`Simple' Businesses
Buffett's investment criteria include companies with ``good returns on equity,'' little or no debt, ``simple'' businesses that he can understand, and consistent earnings, he said in Berkshire's latest annual report. Buffett doesn't participate in auctions for companies and can tell prospective sellers within five minutes of an offer if he is interested in completing a deal, he said in the report on March 1.
The Marmon acquisition ``was done just the way Jay would have liked,'' Buffett said in the statement. ``No consultants or studies.''
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