PVN (and some others like ACF, MTX) a possible GTZ, in my opinion. Remember 1998, and the defaults of FP, UC, FACO etc? Would rather prefer a beaten down tech without significant debt and with recovering sales.
biz.yahoo.com
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Reuters
Debt-Heavy Consumers Face Tough 2003
Saturday February 8, 7:23 am ET
By Richard Leong
PHOENIX (Reuters) - U.S. consumers, saddled with huge debt loads, are poised to face even tougher times with more layoffs, rising oil prices and a looming U.S. war with Iraq, credit rating and asset-backed securities analysts said this week.
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If consumers -- whose spending accounts for two-thirds of the U.S. economy -- falter, it spells problems not only for the economy, but also for returns on asset-backed securities, or bonds backed by consumer loans like credit cards, car loans and home equity loans, analysts said.
"The outlook for consumers is not good. They face significant challenges," said Mike Dean, senior director at Fitch Ratings, on Thursday.
Late loan payments and defaults have been climbing. Personal bankruptcy filings are expected to surpass last year's record.
"Our outlook (for consumer credit) is absolutely bleak," said Jeff Salmon, head of asset-backed securities research at Barclays Capital.
Dean and Salmon were speaking in Phoenix in panels at an asset-backed securities conference sponsored by the Information Management Network.
Real estate wealth from rising home prices and cash from mortgage refinancings have cushioned consumers from a generally weak job market and a protracted stock slump. Analysts warned, however, that these positive factors will likely fade by the end of the year.
With interest rates at their lowest in 40 years, some consumers have consolidated their loans at lower rates, shaving interest payments.
But many consumers, enticed by the rock-bottom rates, have taken on more debt instead.
With the United States massing its military might ahead of a possible strike against crude-rich Iraq, oil prices have been high this year, eating into consumers' disposable incomes. Uncertainty over the possible war has also sapped consumer confidence just as it has clouded stock markets' outlooks.
"Today's consumer debt burden is higher than any point. This is troubling," said Michael Kanef, managing director at Moody's Investors Service.
Americans are clearly struggling to make their debt obligations, particularly monthly credit card bills.
In December, credit card companies wrote off 7.5 percent of credit card receivables that they bundled into asset-backed bonds, said Amy Martin, director at Standard & Poor's. That charge-off level is the second highest ever tracked by S&P.
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A small snippet from PVNs earnings announcement:
Managed net interest income for the fourth quarter of 2002 was $734.6 million and the managed net interest margin on loans was 15.67%.
The managed net interest margin on loans for the full year 2002 was 15.46%.
But:
The Company's managed net credit loss rate was 17.34% for the fourth quarter of 2002 and 16.29% for the full year 2002.
This means that their wide interest margin can not remotely make up for their credit losses. Items, of course before operating and SGA costs.
A year ago, I found that Metris is an interesting short after their credit loss rate approached 12%. ...
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