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Five Things You Need to Know: All the Chairman's Men; The Next Chapter in Housing? 13.; This House is Your House. Seriously, We Don't Want It.; Apple Fatigue?; Is This a Trend Yet?


What you need to know (and what it means)!


Minyanville's daily Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. All the Chairman's Men

An anonymous senior Federal Reserve official said the central bank's silence on the Master-Liquidity Enhancement Conduit (MLEC) has been "misconstrued" as opposition or lack of support for the proposal, the Wall Street Journal reported this morning.

  • The MLEC was organized and is backed by Citigroup (C), J.P. Morgan Chase (JPM) and Bank of America (BAC) at the urging of the Treasury Department.
  • As we outlined last week, the purpose of the MLEC is to address short-term funding problems for Structured Investment Vehicles (SIVs) so the SIVs don't have to sell large amounts of mortgage-backed assets to finance themselves.
  • The Federal Reserve has not formally backed the proposal and has been largely silent on the issue.
  • "The silence has been misconstrued," the anonymous Fed official said.
  • "The proposal looks reasonably well designed and has the potential to contribute -- rather than to impair -- improvements in these markets and the process of price discovery."
  • Apparently, the Fed is so enthusiastic about the MLEC proposal they have decided to vigorously throw their support behind it by trotting out an anonymous "senior Fed official" to speak to reporters on deep background.

2. The Next Chapter in Housing? 13.

More homeowners are filing for Chapter 13 bankruptcy to try and stay in their homes, according to an interesting story in this morning's Wall Street Journal.

  • Last month consumer bankruptcy filings increased nearly 23% from a year earlier, which translates into about 69,000 people, according to the American Bankruptcy Institute.
  • Overall, consumer bankruptcy filings were up 44.76% during the first nine months of this year, the Journal noted.
  • Ok, but how does filing for bankruptcy allow one to keep ones home?
  • Doesn't bankruptcy generally result in the loss of the home?
  • The difference is Chapter 13 versus Chapter 7.
  • Chapter 7 is what is called "liquidation bankruptcy."
  • Typically it results in the sale of any property one owns.
  • Chapter 13, on the other hand, is individual debt "reorganization bankruptcy."
  • In a Chapter 13 bankruptcy, you use your income to pay some or all of what you owe to your creditors over time.
  • About four in 10 filers today are filing under Chapter 13 -- up from three in 10 two years ago, the Journal said.
  • In California the number of Chapter 13 petitions in the second quarter of the year more than doubled from a year earlier, according to records compiled by the Administrative Office of the U.S. Courts in Washington.
  • Over the same period, Chapter 13 filings increased nearly 40% in the northern district of Illinois, which includes Chicago, and 70% in Massachusetts, the newspaper said.

3. This House is Your House. Seriously, We Don't Want It.

Meanwhile, in more housing news, Countrywide Financial (CFC) announced today that it will restructure or refinance $16 billion in adjustable-rate mortgages.

  • "Unprecedented times call for unprecedented remedies," Countrywide President and Chief Operating Officer David Sambol said in a statement.
  • "We are determined to assist borrowers who have the willingness and wherewithal to remain in their homes, but need a little help to do it."
  • Countrywide said it would refinance about $10 billion in loans and modify another $4 billion.
  • The company is increasingly under pressure to help homeowners who wish to modify their homes.
  • In total, Countrywide's plan would reach out to about 82,000 borrowers for some kind of relief, the Wall Street Journal reported.

4. Apple Fatigue?

Apple reported blow out earnings for the quarter last night, with profit rising 67%. And unlike previous instances the stock jumped on the news.

  • The most closely watched number was the number of iPhones sold for the quarter, reportedly 1.1 million.
  • Apple said the pace of sales was exceeding that of the iPod, which took two years to reach the cumulative sales the iPhone hit after a little more than three months, according to Chief Operating Officer Timothy Cook.
  • Meanwhile, note too the run-on effect of the report:
    AT&T (T) reported a 41% jump in net, boosted in part by Apple's (AAPL) iPhone-driven strength in its wireless business.
  • Have Apple fatigue yet? Sure you do.
  • But the reality is that Apple is an important stock.
  • Apple has accounted for 34% of the entire Nasdaq-100 gain year-to-date.
  • And it has a bigger market cap than IBM, Intel (INTC), and Hewlett-Packard (HPQ).

5. Is This a Trend Yet?

Speaking of important stocks, UPS (UPS) did little to increase enthusiasm for the coming holiday shopping season, predicting domestic retail sales would rise at the slowest pace in four years.

  • Volume on US shipments should slow in the fourth quarter, restrained by only a "modest increase" in retail sales, the company reported.
  • UPS package volume is widely viewed as providing an important preview of U.S. economic conditions.
  • "Retail sales and consumer spending is certainly an area of concern, for all of us," UPS Chief Executive Mike Eskew noted during a conference call.
  • Indeed.
  • Meanwhile, in related news, Target (TGT) downgraded same-store sales growth to a range of 2-4%, versus 3-5%, due to consumer weakness.
  • And Coach (COH) raised caution about store traffic ahead of the holidays.
  • "While we're well positioned for the holiday season, we are however concerned with recent traffic trends in our North American retail stores reflecting the retail environment and the unusually difficult comparisons with last year," Chairman and Chief Executive Lew Frankfort said.
  • Sensing any kind of trend forming here?
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