Business owners that take out such loans will have one year after they take out the loans to start making payments. These loans look like they’ll work a lot like Federal Student Loans which are subsidized by the U.S. government. The government takes care of the interest on the loans until the business owner takes them over, which is in this case one year after the take out the loan.

Sounds like a very cool program.

Source: MSNBC: Small Loans To Keep Troubled Firms Afloat

Mayo feels that the bulk of this pain will be by Merrill Lynch and Citibank. The impact on these loses are felt by the companies and many different aspects of the economy. Merrill Lynch already lost nearly $8 billion this last quarter and now it looks like it isn’t going to get any better and write downs will continue to happen. What is sad is that investors will have to continue to worry about these banks and their assets over the course of the next couple years. Mayo believes that it will continue down this path making it hard for investors like you and me to get good loans with good rates.

The critics will say he’s crazy, but he really may be onto something here. He’s taking a much different approach. All electric cars up to this point have involved the car being a self contained unit in the sense that it carries its batteries and recharges at home. Agassi’s vision is that the batteries will be entirely separate from the cars – the way gasoline is separate from the cars we’re driving today.

The company would set up service stations across the country where electric car owners could exchange their dead batteries for new ones, and a wireless communication network would let the driver know where the nearest battery outlet is. Innovative indeed.

This project will seem far-fetched, but at least it’s not going to be underfunded. Agassi has already raised $200 Million. Not a bad little pile of seed capital.

I only have one question about any project that involves electric cars – what about the environmental impact of generating the electricity to power the cars. Won’t that still involve coal-fired power plants and carbon emissions? Is their a big net reduction in the environmental impact or are we just shifting things around?

It really doesn’t matter what industry you are in or how big your company is, if you are losing that much money with your business then obviously some changes are going to need to be made and heads are going to roll. There have already been changes in other leadership roles to help stop the bleeding that has been going on with the traditionally dominant company in the past. In this case it is starting from the top and will trickle down as Merrill Lynch looks to rebound after such a difficult struggle.

Apparently O’Neal pushed for a merger with Wachovia recently and that helped to accelerate he exit out of the door from the board members of Merrill Lynch. What is sad for companies like Merrill Lynch and their employees is that things do not look like there will get better for the subprime real estate market.

The problem with these loans was they acted like promotional credit cards – they carried a low initial interest rate that would step up to something more normal when the promotional period ended. Unfortunately, consumers borrowed money n0t based on whether they could afford the conventional payment, but whether they could afford the promotional payment.

Fast forward to 2006 and 2007. Interest rates have risen, and these aggressive borrowers are seeing their promotional interest periods end. Their rates are climbing, and worse, they’re variable. That means that in theory their monthly payment could increase every month until they hit their maximum interest rate per the terms of the loan, which could go as high as 15% to 18%. The difference in the monthly mortgage could be hundreds of dollars. That jump in payment would kill almost any family’s budget.

This equation leads to families defaulting on payments, which puts mortgage companies in jeopardy. With lenders in jeopardy, their first move is to severely tighten lending practices. This keeps money out of the economy, and as we’ve seen, kills home sales.

The moral of the story? Both lenders and borrowers will need to be more forward thinking in the future to avoid the type of crisis we’re seeing in the US economy today.

Even as oil prices have gone over $93, the DOW average improved nearly fifty points. This can mostly be attributed to widely held expectations that the Fed will cut the right by at least 1/4%. Back in September the Fed cut the rate by .5%. It’s not widely believed that this cut will be as big, but hopes are high that there will be a corresponding spike in lending and spending.

“It’s kind of a psychological sort of move,” Wren said. “A 25 basis-point cut isn’t going to ease the credit crunch. But it’ll give the Fed a little more time to figure out what’s going on with the economy.*”

So said Scot Wren, an equity analyst and strategist for a major US financial firm.

Optimism about the economy isn’t due entirely to the expected drop in interest rates. Several huge companies are also reporting increases in profits in spite of a sluggish economy. That kind of result in the face of generally adverse conditions gives investors hope, and encourages them to buy.

This story illustrates the huge factor human emotion plays in the movement and success of markets. Many of us may think that markets have a mind of their own, and individual outlooks aren’t a big factor. But you have to realize that every person has a perspective and when you aggregate those perspectives what you get is the ebb and flow of markets in general. That’s why in can be so dangerous to follow the crowd in your investing strategy.

It seems that there isn’t as much cause for panic as some would have us believe.

The first quarter of the year was actually an all time low for the country housing market. This shows exactly what has happen since there has been so much overbuilding in many markets and way too many 100% financed loans lent out to people that are not prepared to pay back their loans.

There are so many people that have been forced out of their homes and they can’t find people to buy the homes and are either forced to make monthly payments, find renters which are rare, or potentially foreclosures. In essence people got a little too greedy too fast.

There are many people that believe the market will continue to drop since there is so much supply and that this could continue for years because population and the economy catches up with the vast amount of property. Experts believe that this number could reach 3 million to 4 million homes in the next several years. Countrywide, the nations largest lender already has announced a loss of 1.2 billion dollars. In turn this is going to hurt a lot of builders, real estate agents, and lenders looking to offer loans and property.

Public opinion of the Merrill CEO is so low that the company’s stock jumped the most it has in several years when word got out that the board of directors was going to meet to discuss whether he should be retained, fired, or asked to step down. Board members seem confident that retaining Mr O’Neal is the least likely option. The movement the price of Merrill shares is proof that public opinion favors his removal, so stock holders can’t be happy.

O’Neal took the reigns at Merrill in 2002 amidst somewhat similar circumstances. The CEO at the time had come under fire for causing what were then the biggest losses in company history. As of the latest round of losses though, O’Neal is the CEO to be held responsible for the biggest write-downs ever for Merrill Lynch.

In the wake of this turmoil and the general drop in Merrill’s stock price, experts view the company as a prime target for a takeover by a competitor. Time will tell if another big financial will take advantage of O’Neal’s mistakes.

Does that mean no one in the financial world is concerned about the billions of dollars in mortgage resets coming in the next few years? No. The financial world is concerned….about themselves. Right now some of the major players are negotiating an $80 Billion fund to bail themselves out of trouble as their customers are unable to make their new, higher payments.

Jim Jubak of msn.com reports that all of this will lead to the inevitable – a massive flood of foreclosures and delinquent loans. Tens of thousands of homeowners will lose their homes or at least see their personal credit destroyed.

So who’s to blame? A lot of people want to blame the lenders for acting irresponsibly when they extended all this credit to questionable borrowers. I guess that’s one angle you can take, but I only agree to a certain extent. On one hand, the lenders are the experts and they should have advised the borrowers the real risks of such unorthodox loan packages. On the other hand, buyer beware. If you got caught up in the hype and bought way too much house for your budget, then shame on you. Foreclosure, and potentially bankruptcy, will be your reward. I’m sorry.

What can borrowers do? Well, the first thing you need to do is ring your bank’s phone off the hook. It will be tough, because they don’t want to hear from you, and they definitely don’t want to cut you a break on your payments or interest rate. But it’s worth a shot. Just a day or two ago we posted here about how Countrywide is helping over 50,000 of its borrowers so they can stay compliant with the terms of their loans.

“Three dollar gasoline in this market is unavoidable,” said Stephen Schork, publisher of the industry newsletter the Schork Report. “At this rate, we’re going to see $4 a gallon.”*

Is there cause for alarm? On one hand, of course we do. Nobody wants to pay $4 for a gallon of gas. If you’ve got one of those big SUVs, you could easily put $100 worth of gas in your vehicle in one trip to the pump. Can you imagine it – $400 to $500 per month in gasoline. That could really put a dent in your leisure budget.

On the other hand, there may be hope. Certain analysts disagree that prices won’t jump that much by the holidays. They look at flat demand for gasoline as a sign that oil refiners will be able to keep up with demand through the holidays. But if crude prices don’t fall, it won’t matter. The holidays won’t see the spike in price, but we’ll have it by the spring.

Source: cnn.com