The Honeymoon Is Over And I Want A Divorce - Obama’s Interest Rate Quagmire

He lives in Fairy Land and The White House has become His Magic Kingdom.

My last article talked about the quagmire that our economy will be in if Obama's uncontrolled deficit spending, in His attempt to reshape America, is not brought under control. Two days ago He made a speech where He stated the same thing. Bloomberg published this article: Obama Says U.S. Long-Term Debt Load ‘Unsustainable’.

Yes, higher interest rates would devastate the budget causing astronomical deficits – beyond the enormous ones already in the pipeline. But the problem is NOT HIGHER INTEREST RATES, it’s that He will not stop spending money He does not have. It’s the spending that is causing us to borrow in the first place. He will not give up his dreams to reshape the American economy. Here is another campaign speech (oops, Presidential Address) He made a couple of days ago. He recognizes the danger of increased borrowing but places His vision for health care, energy and the environment at a higher level of importance than mere monetary concerns.

The implication is that we will have to raise our level of commitment to society, lowering the level of our bank accounts.

If He will not stop deficit spending then the only way to reduce the governments’ need to float Treasury Notes is to find different ways of raising taxes. He loves hidden taxes; a dime on a coke or candy bar, a quarter on a gallon of gas, a buck a six-pack, 10% on anything plastic. He’ll nickel-dime-quarter us to death but will not raise our taxes.

His carbon tax could devastate the lower income portion of our society, severely curb the spending habits of the middle class and we already know what He plans for the upper class. His health plan would eventually dictate everything that impacts our health. People that are considered over-weight will have restrictions put on them because they are now a burden to the health care system. We will be told what foods we’re allowed to eat, what doctors we will see and our health care will be monitored for our own welfare. The majority of a person’s medical expenses come in the last few years of life, euthanasia would be the single biggest money saver.

He said today that people should pursue fulfilling careers such as volunteering their time or working for a non-profit. That the American People should aspire to higher level of commitment to the society. That leaves government work out, their all about the money. If He thinks He can dictate salaries in the private sector then the next logical step is to dictate salaries of Physicians, Nurses, procedures, medicines and hospital costs. All would benefit society. Doctors should aspire to a higher level and donate their time.

He lives in Fairy Land and The White House has become the Magic Kingdom.

The Recession Of 2011 Caused By A Credit Bubble?

Two years ago I showed a small article in the WSJ to a friend, the article was about two unknown hedge funds that were failing. My point was that this was just the tip-of-the-iceberg, the first signs of a much bigger problem; the unraveling of the credit market.

Since then, the government has tried to fix the collapse of the credit market by re-inflating it with government debt. Every week the Treasury sells $10’s of billions of “Treasury Notes” to fund that debt. Insurance Companies, Pension Funds, and Municipalities that are required to invest in ultra safe bonds buy about 45% of these and the remainder is purchased by foreigners that need to find a safe place to park their money that they get from selling their goods to the U.S..

Increasing the money supply, cash in circulation, stimulates the economy. The more money out there the more it flows around.

The Obama budget spends more than $25,000 per every single person in the U.S. than they are going to take in. That works out to a deficit of $42,500 for every working American. That is $42,500 above what we already pay in taxes.

In the short term this is working, but there are several things that are also working against this vast expansion of the U.S. debt and money supply. As the government prints money the value of that money decreases, that is why Obama went to Europe urging them to step up their stimulus. If they also print money then our dollar wouldn’t shrink as far or as fast. The dollar versus the Euro hit a 6 year high in March but has shrunk 7% since then. It is still strong but as you keep expanding the money supply its value only has one way to go.

A weaker dollar also means higher prices. The big disadvantage here is that foreign investors are not going to buy Treasuries if they get paid 2% on the bond and lose 7% to 10% on the dollar conversion when they trade it in. Why not just invest somewhere else where you don’t have the threat of losing money caused by a dropping value in the dollar.

As the government pushes more Treasuries out on the market, the market will push back by demanding higher interest rates. This phenomenon started yesterday with a 30-year sale pushing the rates up to 4.25%. Still very low but it was the first sign that the Obama administration is going to have to pay a premium for their borrowing needs in the future. Interest on government debt was four times what they paid for education last year, that represented 15% of the entire budget and that was at a historically low interest rate. It’s not unconceivable that as borrowing and interest rates increase, that the cost to the budget will take a much larger piece of the pie.

As the interest rates for Treasuries move up so do the rates for other debt such as home mortgages, business loans, auto loans, credit card and school loans are all going to have to raise their rates to compete. Money will become expensive and as this happens business slows down. Even as the economy starts to pull itself out of the doldrums the system is working to take it back down.

The indiscriminant printing of money is inflationary, so far the dollar has been barely hurt because other countries have also fired up their printing presses but have since put on the brakes. This allows other countries to enjoy a stronger currency while the dollar will keep falling. Economists say that you can’t have inflation without strong demand, but if you look around the world, many countries have had extreme inflation in a terrible economy because their currency was debased.

Again this will take a couple of years to play out but I am seriously concerned for my grand kids and yours.

News Is Out – Circuit City Is DOA

It was just reported on CNBC that a proposed buy-out by the Golden Gate Group, that would salvage Circuit City as a going concern, fell through. The handful of liquidation companies that were standing by are coordinating their efforts that will result in about 35,000 being laid off. So far there is no announcement from the company, but I doubt that any useful information would be in it anyway. Good luck to a very large group of people that have stuck by while Circuit City tried to make the best of a bad situation.

Does Low Wages Equal Strong Management
Circuit City Is Now Hiring – Cheap

Bank Of America Sending 35,000 Packing, Bad News For Merrill Workers

In July Bank of America announced that they would be slashing CountryWide staff down to 7,500 from a high of 50,600 in 2007. That’s 85%. If past deeds is a prediction of future action then BofA will be shrinking Merrill significantly. Some layoffs have already occurred but my guess would be that three out of five Merrill employees will be pink-slipped out. That would account for the 35,000 announced cuts.

If you have any specifics please post them in our comment section.

From Dealbreaker.com: “Bank of America is said to be planning on canning half of its New York equity trading desk in the next 2-4 weeks.”

Sony Closing Last TV Manufacturing Plant In U.S.

From NETWORKWORLD: “Sony has named its Westmoreland, Pennsylvania, plant as the second factory of a planned 5 or 6 that will be shut down as part of a global restructuring. The factory is Sony's last remaining TV manufacturing facility in the U.S. and the closure will see 560 people lose their jobs.”

The plant which manufactures 46” and 52” LCD TVs will stop production in February and the facility will be completely shuttered in March 2010 when Sony also closes their east-cost logistics operations. Sony will now manufacture these TVs in Baja, Mexico.

Westmoreland County web site post this in October: “The park, located in East Huntingdon and Hempfield Townships, further bolsters Westmoreland County’s major employment zone surrounding the Sony Technology Center.”

Here is an interesting comment on MSN QnA Beta by toadhead: “There are no TV currently manufactured in the USA."

"The last one I new of were Phillips not a US company but they had a manufacturing plant in Missouri . As I understand it Wal-Mart said they would not sell there equipment, essentially unless they moved manufacturing to China so they would be cheaper and contain more lead, so they did. That was a few years ago all the other manufactures of TV have also moved over seas.”

Motorola The Falling Star

In the past I have had minimal dealings with the Motorola organization and each time their arrogance left me with a desire to find someone else to work with. I only grieve for the workers being jettisoned from this sinking ship.

From InternetNews.com: “Gartner's market analysis for mobile handset makers, released today, now rates Motorola (NYSE: MOT) in fourth place behind Nokia, Samsung and Sony Ericsson in global sales.”
Motorola Slips in Worldwide Sales

From the chicagotribune.com: “Motorola reported a net loss of $397 million, or 18 cents a share, in the third quarter, down from a net profit of $60 million, or 3 cents a share, in the same period last year.”
Motorola posts hefty 3Q loss, delays spinoff

From USA Today: ”The maker of communications gear said it would get rid of 3,000 jobs by April, with about 2,000 of them coming from the cellphone unit. The company last announced 2,600 job cuts in April.”
Motorola posts big loss, plans to cut 3,000 jobs

From cnet.com: “The iconic American technology company Motorola is in big trouble. But can a last ditch effort by a new top executive help the company pull one of the biggest comebacks in American business history?”
Motorola's struggle for survival

From BusinessWeek: “The company's falling star at AT&T, the largest U.S. mobile-phone carrier, underscores Motorola's persistent failure to release handsets that grab the attention of consumers and the service providers whose marketing is crucial to sales.”
Motorola's Market Share Mess

From rerwireless.com: “It will eliminate about 120 of the 600 positions in Motorola Labs, the unit responsible for basic research in everything from cellphones to radio technology,…”
Moto to cut jobs from R&D unit

More thin gray line articles

The Insult Is Complete At LandAmerica

In August of 2007 I wrote an article, LandAmerica Leaves Much To Be Admired, little did I know that my LandAmerica article would have such a lasting quality. There may be only 11 comments but the consistency tells a condemning story of a company whose management can guide the ship during calm seas but are clueless as soon as the seas get rough.

It looks as if the final insult to the good people at LandAmerica will come from the $150 million in synergies Fidelity National will achieve(from their Press Release) by this merger. To me it doesn’t look like a merger, it looks as if Fidelity is buying their accounts & agents and will be laying off the majority of LandAmerica’s staff that still remains after a year of endless layoffs.

As much as I dislike giving attorneys money, it would seem prudent for the LandAmerica employees to secure legal consul to ensure that they receive any and all compensation promised. At this point of the merger any legal action would have to be dealt with expeditiously. If anyone has retained consul, please post their consuls contact information on the comment section below so others may join as a group.

Good Luck and Best Wishes to all of LandAmerica’s staff.

Dell Computer: Déjà vu 8,800 Last Year, 8,800 This Year

Last year I wrote an article: Dell Computers; Layoffs, Issues And More Layoffs. At that time I had no idea that I would be writing practically the same article this year. But Dell is like their service, consistently bad.

Dell has never given out straight forward information about their plans for staff reductions but rather they throw out a target number for the national business media and the small local layoffs get reported on in the smaller news markets around the country. The most accurate information has come from a NETWORKWORLD article by Dan Nystedt and reports that Dell has already completed 3,200 layoffs with another 5,200 happening soon.

Even though desktop computer sales improved by 10% last year, they will be closing their desk top facility in Austin, Texas and many that aren’t losing their jobs will be forced to take unpaid time off.

For more than a year Dell has been going through an audit that they claim was caused by certain departments fudging their numbers. As a result they will restate their earnings reports from 2002 through 2006 by a mere $150 million. That's a lot of fudge.

Dell is also being sued on two fronts, first for not performing on their extended warranties sold directly to customers and second for falsely advertising the terms being offered by their company owned financial arm. It has been reported that Dell’s financing division is now up for sale.

Dell, IBM, Intel, Cisco, HP and Microsoft have all gazed into the crystal ball and have seen their future in Asia and India. Doing business in the U.S. has just become too tenuous.

The Media Spotlight Catches Nielsen Outsourcing, Downgrading Full-Time Too Part-Time And Aggressively Abusing H-1B Visas

Theresa Blackwell penned a very good article in the St. Petersburg Times on the commitment by the powers at Nielsen to do everything possible to cut payroll. The controversy justifiably received national attention on the Lou Dobbs Show who emphasized the H-1B Visa abuse. Nielsen while putting Americans out of work is replacing the positions with H-1B Visa holders from India.

I’ve consistently written about H-1B Visa abuse and how companies, tech companies and our universities in particular, have shamelessly imported staff where there should have been more than a sufficient supply of qualified Americans to fill the positions. The only motive for the push to hire foreign staff would be to cap salary ranges.

From Ms. Blackwell’s article:

“Just four days ago, Nielsen gave up $3.1-million in future incentives for creating new jobs in Oldsmar, saying the controversy over the government money had become a distraction for employees and a source of conflict with the city.”

This would not be such a controversy or distraction if the Nielsen Company wasn’t absolutely committed to replacing U.S. workers with H-1B Visa holders.

One other point of contention that the article brings up but does not emphasize is the ratio of full time to part time employees at their Dunedin facility. With 4.4 part-time or temporary workers to every full-timer demonstrates that a desire to cut costs by cutting benefits.

Would this be the type of company you want to work for; maybe if you’re from India. You can browse the Nielsen Careers Page here.

Our Universities Have To Go Offshore To Find Talent
Companies Hiding Offshoring
LSI - More “Partnering” Lay Offs Coming To Kansas City?
Sun Micro's Jonathan Schwartz The Genius?
American Axle Moving More Jobs Out Of The U.S.
California Sending DMV Data To Mexico
Altria Optimizes Worldwide Cigarette Production
Dell Computers; Layoffs, Issues And More Layoffs
Freightliner The Long Haul From North Carolina To Mexico
IBM An Extreme View On Offshoring

Who Says Inflation Is Under Control

Consumer late payments at 16 year high. Could higher prices at the grocery check-out and at the fuel pump be putting the squeeze on our wallets?

Unemployment claims at there highest level in two years.

ATA Airlines shuts down stranding thousands and laying off 2,000. The cost of fuel was listed as one of the primary causes. Last week Aloha Airlines also shut-down operations.

Corn sets new record price of $6 per bushel. At least our all-knowing government officials tell us that inflation is under control.

Gasoline at new national record. Even with oil backing off there peaks, the cost of refined gasoline is starting its summer rise. Every spring refiners increase their crack spread (the mark-up on gasoline) to reflect the increase in demand. This process has just started.

Motorola disconnecting 2,600 more. Last year they had lay offs of 3,500 in January and 4,000 in May. During a cutting stretch in 2000 and 2001 their payroll shrank by more than 47,000 jobs.

Google planning to cut 25% in the Double-Click work force, in the U.S. that is.

Dell needs to find $3 billion more in cuts than the 8,800 they announced last year. From my article last July.

Merrill Lynch to lay off 4,000 to 7,000.

Schering-Plough will be cutting $1.5 billion a year in expenses, no estimate on how many jobs will be lost. Schering-Plough shares are down about 50 percent this year so heads have to roll.

Are you ready to pay for the poor Home Builders losses? Time to E-mail your congressmen.

NASA estimates as many as 7,300 will loose their jobs as the shuttle program ends in the next 2 ½ years.

La-Z-Boy is shipping jobs to Mexico, all of their cut and sew divisions will be relocated with no lay off estimates given.

Hamiliton Sundstrand will be completing its move to Singapore by lying off the last 65.

United Way officials in Dayton said record numbers of families are seeking emergency food assistance because of lay offs caused by the strike at Detroit-based American Axle & Manufacturing. My article: American Axle Moving More Jobs Out Of The U.S.

CBS Moves Ahead With Layoffs in News

1,500 Possible Layoffs at Freightliner Cleveland Plant. My previous article: Freightliner The Long Haul From North Carolina To Mexico

From the CoStar web site that monitors the Fed’s watch list:

The Federal Reserve Banks moved up the planned closing of several of its check processing facilities, most of the cuts will come from permanent result work reductions.

Newsweek announced that 111 staffers on its news and business sides in New York City accepted a buyout last week.

Chromcraft Revington Inc. is progressively shifting manufacturing of products from its Delphi, IN, plant at 1100 N. Washington St. to suppliers primarily in Asia. Manufacturing activities at the Delphi facility will conclude on May 30. The reduction in force is expected to impact approximately 150 Associates at the Delphi location. Within the past 18 months, the company has closed and sold its plants in Sumter, SC, and Warrenton, NC, as well as its warehouse and distribution center in Knoxville, TN. The company also relocated its upholstery operations into its existing facilities in Lincolnton, NC, and sold its upholstery plant.

EMI Christian Music Group confirms layoffs of between 1,500 to 2,000 staffers by this June.

Long-expected layoffs begin at W.Va. steel mill, from a peak of 13,000 to 1,000 after these latest cuts. Steel mills have been devastated throughout the northeast by Asian steel and like most of the problems facing America; all the politicians do is use this issue as political fodder.

Earlier this week, Wheeling-Pitt's parent, Esmark Inc., announced it would shut down a mill in Allenport, Pa., and idle parts of the operation in Martins Ferry, Ohio. Those cuts could cost as many as 360 jobs.

Analysts see 200,000 banking industry layoffs in the next 18 months.

Whirlpool, a great old Mexican brand. 350 Cleveland jobs go to Mexico. Behr Climate Systems plans layoffs, plant closure. From the Germany based Behr Groups web site: “Today we are active in all major markets in Asia and take advantage of the opportunities they offer.”

Sharper Image Gift Cards - The New Collectors Item

My intent was to lambast the mean corporations that cheated their customers out of a few bucks by refusing to redeem the gift cards they had sold them and turning them into collector items. As it turns out a gift card is “loan” to the company to be repaid in merchandise at a future date. So if you have a gift card the company is not allowed to “repay” your loan until the court decides who gets what. But then I have never heard of a bankruptcy proceeding where the customers who were cheated were also represented.

We need a change in the bankruptcy law that puts employees and customers before other financial creditors.

As it turns out the Sharper Image story is interesting. Wikipedia takes a good look at the company along with some links to background stories. The building of this brand started in 1977 and their growth was based on adult gadgetry, soon after the Ionic Breeze hit the store shelves it dominated their product line. That same product turned out to contaminate the environment with the very agent that it was designed to remove; ozone. Law suits ensued and the Ionic Breeze was discontinued. With the loss of their numeral uno product to drive traffic to their stores a steady decline in customer counts and sales was initiated.

Journalists familiar with the company have estimated that they will shutter about halve of their stores. But at the time of the bankruptcy they only had $700,000 in cash, without significant additional funding they just don’t have the bucks to close only halve. They will be forced to do an over-night skedaddle leaving customers, employees and vendors on the hook.

CitiGroup Puts Our Oil Money To Work

Yesterday CitiGroup announced the Abu Dhabi Investment Authority will invest $7.5 billion in our nation's largest bank. The investment was made through the purchase of convertible bonds that pay 11% and will convert to common shares, at a maximum price of $37.42, anytime during the fourth year of the note.

Citi must need that money fast because under the above terms an 11% convertible (2% over junk bonds) would have been grabbed up by US investors. Then again there is the possibility of doing significant business with the sovereign investment trust in the future. With Citi pointing the way, many more opportunities should open up for the group.

Still, if CitiGroup’s stock regains half of its value, then these convertibles are extremely valuable and I would rather see Americans rewarded for their years of investment into CitiGroup.
If the company announces layoffs of in the 40,000 neighborhood, then their stock should take a good jump on the strong cost cutting news. There is also a consensus that CitiGroup would release significant value to shareholders if the company were broken up.

Joseph Altman, AP Business Writer wrote an interesting article: Citi Sells Stake to Abu Dhabi Fund

Sprint - The Computer Did It

As written about in Sprint – Boomers Under Attack Again, the $58 million settlement was finalized in Kansas City and the 1,706 plaintiffs will average $21,688 each. The 20 attorneys representing the plaintiffs will have to get by on only a mil each. Sprint also settled a $5.5 suit earlier this year in Atlanta.

From a Kansas City Business Journal article, Sprint/Nextel blames the mess on a computerized evaluation program that singled these people out. It must have been the “computer” that moved older workers to departments that the “computer” decided to disband. It was also the “computer” that programmed itself to make it difficult for a higher paid and more senior worker to be as productive and their lower paid counterparts.

If Sprint would have gone about this in an open and honest way by offering the senior workers a fair compensation package, the only losers would have been those 20 attorneys.

Countrywide Shifting Gears But Still Aggressive

Jonathan Stempel in his July 16th Reuters article, stated that Countrywide Financial Corp CFC, has added jobs in every month for the first half of this year. While other banks and mortgage companies where closing or severely scaling back, Countrywide viewed the drying up of the subprime funding market as an opportunity to grab market share.

Through July, the Calabasas, California-based company said it ended July with 61,586 staffers, up from 59,011 in May and 54,655 at the beginning of the year. As competitors where closing Countrywide’s revenues continued to grow.

Stuart Plesser, an analyst at Standard & Poor's, said their increase in loan volume may not be all that it seems:

“Much of Countrywide's volume gains in June came from correspondent lending -- where the company buys loans from other lenders -- rather than from more profitable retail lending,...”

“June correspondent lending grew 43 percent to $21.88 billion. Retail lending fell 5 percent to $14.04 billion. The loan servicing portfolio grew 18 percent to $1.42 trillion.”

Just four weeks later Countrywide experienced a run on its banks. From the LA Times:

“At Countrywide Bank offices, in a scene rare since the U.S. savings-and-loan crisis ended in the early '90s, so many people showed up to take out some or all of their money that in some cases they had to leave their names.”

Countrywide immediately drew down their credit lines of 11.5 billion they had with 40 banks. This bought the company some time, but the real shot-in-the-arm came a week later when Bank of America invested $2 billion in convertibles. That gave B of A a 16% ownership stake and $145 million in annual income from the 7.25% interest convertibles.

With funding for nonconventional loans disappearing, Countrywide has said that they will emphasize their mortgage activities on the mundane “plain vanilla” mortgages that Freddie and Fannie can purchase. The change in emphasis from the companies aggressive pursuit of subprime lending to “plain vanilla” mortgages has caused Countrywide to lay offs of 500, 900 and now as many as 12,000.

On September 7 Countrywide put out a Press Release and stated that they plan to fund their subprime loan activity internally. “Migration of the Company's residential lending business into its federally chartered thrift entity, Countrywide Bank, FSB, will continue.” With the portfolio of subprime loans showing abysmal results, the profits from these loans must be excessive.


From a Gretchen Morgenson article for the The New York Times:

“Countrywide's entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers, according to interviews with former employees and brokers who worked in different units of the company and internal documents they provided. One document, for instance, shows that until last September the computer system in the company's subprime unit excluded borrowers' cash reserves, which had the effect of steering them away from lower-cost loans to those that were more expensive to homeowners and more profitable to Countrywide.”

“Homeowners, meanwhile, drawn in by Countrywide sales scripts assuring ''the best loan possible,'' are behind on their mortgages in record numbers. As of June 30, almost one in four subprime loans that Countrywide services was delinquent, up from 15 percent in the same period last year, according to company filings. Almost 10 percent were delinquent by 90 days or more, compared with last year's rate of 5.35 percent.”

“Many of these loans had interest rates that recently reset from low teaser levels to double digits; others carry prohibitive prepayment penalties that have made refinancing impossibly expensive, even before this month's upheaval in the mortgage markets.”

'In terms of being unresponsive to what was happening, to sticking it out the longest, and continuing to justify the garbage they were selling, Countrywide was the worst lender,'' said Ira Rheingold, executive director of the National Association of Consumer Advocates. ''And anytime states tried to pass responsible lending laws, Countrywide was fighting it tooth and nail.'

“Mr. Mozilo has ridden this remarkable wave to immense riches, thanks to generous annual stock option grants. Rarely a buyer of Countrywide shares — he has not bought a share since 1987, according to Securities and Exchange Commission filings — he has been a huge seller in recent years. Since the company listed its shares on the New York Stock Exchange in 1984, he has reaped $406 million selling Countrywide stock.”

One very unhappy customer of Countrywide has a website, Countrywidehomeloansucks.com where hundreds of unhappy customers and ex-employees have told their stories. It does not paint an admirable picture of the company.

LandAmerica Leaves Much To Be Admired

From the company website and their Press Release:

"LandAmerica is recognized as number one in the mortgage services industry on Fortune's 2007 list of America's Most Admired Companies."

After a lay off of 700 FTE’s (full-time equivalents), that is what the company calls their employees, earlier this year they announced another round of 1,100 people being sent packing.

With the housing market working off the last five years of speculative excesses, it is understandable that they need to reduce staffing. What I find objectionable is that it is packaged with an additional stock repurchase program and in a way intentionally meant to support the company’s stock price.

In their Press Release they discuss the cuts after the stock repurchase announcement: “Also, as part of an effort to reduce costs…”. There is not the slightest bit of compassion or concern shown, nor will they even refer to the employees as people. They only mention severance because it is part of an expense.

From the company’s website:

"LandAmerica Shared Resources Center in Richmond, Virginia, supports over 900 company-owned offices and a network of more than 10,000 active agents. LandAmerica serves agent, residential, commercial, and lender customers throughout the United States, Mexico, Canada, the Caribbean, Latin America, Europe, and Asia."

New artical: The Insult Is Complete At LandAmerica

Barclay Ensures That EquiFirst Has Viable Future

In a Reuters interview with reprter Jonathan Stempel, company spokesperson Jennifer Sharpe, stated that the companies plan for lay offs “will help to ensure EquiFirst has a viable future”.
Also from the article: “EquiFirst, based in Charlotte, North Carolina, employed about 1,400 people before the latest cuts.”

Since the company is not in the talkative mood, SockPuppet posted this on the grapevine at Broker Universe almost two weeks ago on August 15, 2007:

“EquiFirst is getting ready to cut off the bottom 10-20% of its sales force. ELT (leadership team for those of you outside of building 5) may think this is a well guarded secret but everyone seems to know its coming. I've heard layoffs in ops are certain to follow.”

Adam Smith added to the tread:

“As someone who has gone through product cuts, then ops cuts, I can tell you the worse is yet to come (especially in service): double number of AE´s on an AM´s desk, 1 less person in file setup, 1 less person in broker setup, 1 less u/w etc. It will be painful, not as rosy as you picture it. Volume will be less, but it will feel like triple because there is no support. Plus, morale will drop because everyone will be worried about their jobs (I think you had ads that said you never had a layoff-now the security is gone) and u/w will kill more than approve loans because they to will be worried about keeping their jobs. Files you once got an exception will be a thing of the past."

“Also, if it has not happened by now, I would expect your products to start falling off the matrix weekly (I believe you guys sell alot to Citi and Citi just got hammered for all the subprime they have on their books).”“Lastly, if this is the first time layoffs have occurred, expect many more to follow. I know of many lenders that are on their 3rd round of cuts (AE´s and ops)”

“Anyway, good luck, and welcome to 2007.”

EarthLink Cutting Nearly Half It’s Staff

EarthLink, Inc. (NASDAQ: ELNK) is joining the herd of companies that announce lay offs and stock repurchases at the same time in an effort to support the companies stock price. While 900 people will be laid off, at least Mr. Huff showed respect for the people that were instrumental in building the company.

Rolla P. Huff, EarthLink President and CEO, announced in their Press Release:

“We are extremely appreciative of our employees’ dedication and contributions, and we hope that the benefits and services we have put in place to provide assistance will help during this time of transition,” stated Huff. “While we recognize this is a difficult time for those affected individuals, this was a needed action for the company to better align our cost structure with our existing business.”

Lehman Breaks Silence

This afternoon Lehman announced the closing of their subprime lending unit BNC Mortgage LLC. This action will close their 23 offices putting 1,200 out of work. They have stopped taking applications but will process current mortgage approvals through their Aurora Loan Services LLC.

Accredited Home – From Milk And Honey To S**t And No Money

Accredited agreed on June 4 to be acquired by Dallas-based Lone Star for $15.10 per share, or about $400 million. Less than two weeks ago it filed suit against Lone Star to complete that merger. Lone Star has said Accredited may be entitled to nothing more than a $12 million breakup fee.

Accredited Home issued a news release this morning stating that 1,600 staffers will be let go. As companies go, they gave a little more information than most. From their news release:

"Substantially all of the retail lending business consisting of 60 retail branch locations and 5 centralized retail support locations will be effectively closed as of September 5, 2007, impacting approximately 480 positions nationwide. Accredited will continue to operate its San Diego-based customer retention unit that assists the Company's loan servicing customers."
"Five of the Company's ten wholesale divisions will be substantially closed effective September 5, 2007. These closures, combined with reductions in staff at the remaining five divisions, will reduce the wholesale workforce by approximately 490 positions, leaving approximately 340 employees in the wholesale operation."
"Effective immediately, no new U.S. loan applications will be accepted, although the Company will honor existing commitments. Accredited intends to resume wholesale loan originations based upon improvement in market conditions."
"The Company's settlement and insurance services division, Inzura Settlement Services, which provides appraisal, title insurance and other settlement services, will be substantially reduced. Headquarters staff in San Diego, CA will be significantly reduced to approximately 220 people from its current workforce of approximately 400."

Movie Gallery And Hollywood Video Receive NASDAQ Notices

From a Aug. 21 PRNewswire-FirstCall release Movie Gallery Inc. (MOVI) has been given till February 11, 2008 to bring their share price above $1. The second letter gives them till November 15, 2007 to bring their minimum market value up to $15,000,000. If they can not meet NASDAQ's minimum requirement to maintain an OTC stock listing, they will be delisted and the stock will move to Pink Sheet heaven.

This site has had a rash of inquiries looking for info concerning the possibility of lay offs or of a bankruptcy. That usually happens just prior to a major announcement.

I posted this at 4 AM so it would be out first thing.

You can read the PRNewswire here. My previous articles:
Movie Gallery & Hollywood Video Gets Extension
Movie Gallery Parent Of Hollywood Video Will Be Adding Pink Slips To Their Shelves