Daily Blog: Scouting the Internet and World at large

How Bad can it get? Pretty bad, at least according to Time Magazine. A recent article points toward a possible worsening of the credit meltdown which could spread from sub prime into more traditional loan portfolios. Admittedly the Time piece is a bit more hype and uncertainty that an actually analysis of the situation. Still it's an interesting read if you desire a perspective which is likely shared by the average consumer on the street.

How Bad Will the Mortgage Crisis Get?

The credit markets are seizing up and the uncertainty recently drove up short-term interest rates for municipalities and some rock-solid institutions such as New York's Metropolitan Museum of Art to 20%. And now even so-called prime borrowers, the ones who were properly vetted, are being sucked into defaults on their mortgages. Yet it's still a relatively small number of institutions and individuals getting hurt by this not-yet-a-recession. So what's the worst that could happen?

Ever since the multiple failures of undersea communication lines in the Middle East, some pundits have speculated that foul play could be involved. Today story ran in which people involved in the repair operation state that sabotage could be a likely explanation. At the moment no one has state outright that it was deliberate but the mere possibility of such has many dreaming of shadowy conspiracies and terrorism. In my opinion if these cable cuts were in fact intentional it will be difficult to track down exactly who committed the act, especially if a nation state was involved.

A troubled custom homebuilder in Charlotte has its debts called in by lender. Wachovia bank filed to have HouseRaising placed in default on $7.9 million in loans and an additional $84,530 in interest. Wachovia had previously extended a line of credit to the company in November however a deteriorating real estate market has obviously hit the builder very hard. I expect that this is not the last, nor most high profile case of a custom builder going broke. Previously the brunt of the housing fallout has been born by the larger, more commoditized builders such as Toll Brothers and Ryland.

HouseRaising defaults on Wachovia loan

In November, Wachovia agreed to extend to HouseRaising a $2.75 million line of credit to Jan. 2.

According to the filing, HouseRaising hasn't repaid the note, leading Wachovia (NYSE:WB) to declare it in default. Wachovia is also accelerating the repayment on all notes it has extended to HouseRaising.

HouseRaising says it is negotiating with Wachovia, also based in Charlotte, to resolve the matter.

By popular rational the automotive industry is the last place that people would look for stellar fiscal results. While it may seem that manufacturers like Toyota have grown by leaps and bounds the truth is that they have largely does so at the expense of the "Big Three" and more to the point haven't been doing well, just less bad than their competitors. Thus it will be a true miracle if GM can hang on to its crown of #1 auto maker despite a three year span of losses.

I personally don't expect things to brighten for car makers anytime soon. Sure a slowing economy and tepid domestic demand won't help the situation in the near term. However a bigger threat is the long term trend toward a more diverse set of power trains and fuel mixtures which will strain the industry's budget as they scramble to bring to market more energy efficient, reliable, and safer vehicles. Considering that the next great innovation in automotive power plants has yet to be decided, it's easier to believe the prediction that the future fleet of vehicles won't rely upon one particular technology but instead a mix of more finely tuned solutions. As such the development and ultimately manufacturing cost could be significantly higher than in years past. This is certainly not a death kneel for some companies but it's neither an easy task to accomplish.

GM suffers third consecutive year of losses

General Motors on Tuesday reported a third consecutive year of losses in 2007, with strong earnings from emerging economies offset by continuing problems in its big North American and European operations.

The Detroit-based carmaker said that it expected an improvement in automotive operating results this year. But it indicated that the biggest push to earnings would not come until 2010 and 2011, when it reaps the full benefits of last year’s labour contract with the United Auto Workers union and an anticipated full recovery in the US vehicle market.