Vital Financial Updates Credit – Is it good or bad?

Home Depot Offering Credit Protection Following Security Breach: Here’s How …

No matter where the security breach might be — the latest is Home Depot — the advice is always the same: guard your personal information, change passwords if youve shopped at the retailer recently and monitor your credit report.

Heres information released Wednesday by the state Department of Consumer Protection and the attorney generals office:

JC Penney Credit Protection Balloons, High Yield Bonds Fall On Weak Sept. Sales

JC Penneyshares dropped more than 13% and the company’s bonds tumbled after the department store chain cut its same-store sales forecast following weaker-than-expected September sales.

The 8.125% notes due 2019 tumbled five points to 94.5/95.5, according to sources. That’s a fresh low for the $400 million issue of non-call notes, which were sold at par on Sept. 10 and traded up to 101 on the break that afternoon.

Credit protection ballooned. Five-year CDS in the name gapped out roughly 66% this morning, to 12/13.5 points upfront, according to Markit. That makes protection in the name essentially $500,000 more costly than before the meeting and news, with a roughly $1.3 million upfront payment, in addition to $500,000 payments annually, to protect $10 million of the issuer’s corporate debt.

On Tuesday, investors were purportedly reducing risk in JC Penney in order to position for news ahead of the company’s analyst day on Wednesday, sources said.

JC Penney predicts same-store sales for the third quarter to be in the in low-single-digit range, from original guidance of mid-single digits, the company said in a press release today.

The company reaffirmed all other guidance for the third quarter and full fiscal year 2014. -Staff reports

Follow Rachelle Kakouris on Twitter for more distressed debt news and insights.

Offshore Drillers: Are Dividends in Danger?

By Ben Levisohn

FBR&’s Thomas Curran and Daniel Martins note that offshore drillers like Diamond Offshore Drilling (DO), Transocean (RIG), Ensco (ESV) and Noble (NE) are oversold. That doesn&’t mean they&’re willing to step in and buy. The reason: The soaring cost of credit protection, in the form of credit-default swaps, suggests that their dividends could be at risk. Curran and Martins explain:

Associated Press

While at or very near oversold levels, the stocks should next spend a lengthy period range-bound, not sustainably reverse course. That, as well as the potential for a &“game of chicken&” over older rig withdrawals (SPS spending versus stacking) and, as suggested by soaring CDS spreads, dividend decreases, keep us on the sidelines&…

CDS spreads have surged over recent weeks, approaching heights last hit in the wake of the Macondo catastrophe and, in our judgment, chiefly expressing rising expectations of dividend cuts and/or credit rating downgrades. Notably, spreads for Diamond Offshore and Transocean closed yesterday at 148.5 and 290.2, respectively, up 175% and 97% year over year and just 28% and 22% below their global recession highs. By leveraging its balance sheet, Diamond Offshore has managed to, and may for a bit longer, defend its total dividend payout. But, we have held and maintain that, at some point in this downturn, it will slash the recurring special dividend.

Ensco, meanwhile, has seen its cost of protection rise 43% from a year ago, while Noble&’s is up 25%.

Shares of Diamond Offshore Drilling have have fallen 0.6% top $33.33 at 10:32 a.m., while Transocean has slid 1.9% to $30.46, Ensco has dropped 1.4% to $39.05 and Noble is off 0.7% at $20.94.

ASIA CREDIT CLOSE: Poor sentiment hits Indonesia and China credits

SINGAPORE, Sep 29 (IFR) – Asian credits widened today due to
weak sentiment attributable to a number of factors, including
the intensifying Hong Kong protests, the worse-than-expected
China industrial profits and Indonesias new law that ends
direct regional elections.

Chinese and Indonesian bonds were worst hit with
credit-protection costs rising 6bp and 11bp, respectively. Asia
ex-Japan IG iTraxx widened 3.5bp.

It was a confluence of factors today that pushed the market
wider, especially high-beta credits, like Indonesian bonds,
said a Singapore-based trader.

Indonesias long-end sovereign bonds dropped 1.5 points,
while the 10-year went down 0.75 points. Quasi-sovereign
credits, such as Pelindo, saw its freshly printed bond also fall
0.75 points to 99.

In China, the dollar tranche of BoComs newly issued Tier 2
widened another 8bp today to yield a spread of 303bp/300bp.

The sentiment is likely to stabilise towards the middle of
this week and then people will be watching the non-farm payroll
on Friday, the trader said.

Trading volume, however, is likely to remain low throughout
the week as China, Hong Kong and India will be on holidays for
certain days this week.

In the high-yield segment, cash prices also dropped 0.25 to
0.5 points. Chinese property paper saw some retail selling ahead
of Chinas Golden Week holidays beginning Wednesday.

Berau Coals 2015s were marked down another 2-3 points today
on deepening concerns of the Indonesian coal miners ability to
refinance the paper. There was little trading on the credit,
according to another Singapore-based trader.

Repco Home Finance to recruit graduate trainees

Repco Home Finance Ltd has invited applications for recruitment of Graduate Trainees on retainer basis for one year contract period

The engagement is purely as a Trainee and it will not entitle the trainee to any permanent employment / regular job in this Company during or after completion of contract period or to any of the benefits/ privileges available to the regular staff members of the Company

However, after completion of training, if the performance is found satisfactory, trainee will be given suitable opportunity for regularization under suitable cadre under the extant rules amp; regulations of the Company.

Graduate Trainee
Job Location: Andhra Pradesh
Age not exceeding 25 years as on September 01, 2014

Any graduation, preferably B. Com, in 10+2+3 format through regular classroom course from a UGC recognized university.

Graduates from Open University will not be considered and preference will be given for relevant prior experience in operations/sales/retail credit.

Fluency in Telugu besides English is a must

How to Apply:

Eligible candidates are requested to apply at the location as given below on or before
September 18th, 2014.

Mr. Chitti Satyanarayana Branch Manager
Repco Home Finance Ltd
D.No. 48-14-44,
1st Floor, Anand Towers
Rama Talkies Road, Aseelmetta,
Visakhapatnam – 530016

Important Dates:
Last date to apply: September 18

Aussie Personal Finance Startup Pocketbook Hits 100000 Users

Most people usually neglect keeping track of their personal finances. With multiple bank and credit card accounts, bank fees get all too much for us to handle. To put us back in control of our money, Aussie FinTech startup, Pocketbook has come to the rescue with an intuitive mobile app.

By syncing with all your financial accounts, Pocketbook users are able to monitor how their money is being used or even misused. By automatically categorizing your daily spending habits into areas like food, groceries and fuel – budgeting and goal tracking becomes much easier. Its clever notification system tells you when a bill is due or when a bank fee is charged, which can often be a surprise or a mistake. Pocketbook is able to sync data with 80% of major financial institutions in Australia, including the big 4 banks.

By solving a real need for many people, the app has been heavily adopted in the Australian market. It now has over 100,000 users of which about 35% are monthly active. The app hit this milestone twice as fast as it reached 50,000 users and it achieved this mark within ten months of an initial AUD$500,000 in funding. To further propel their growth and expansion, Pocketbook is actively raising an AUD$2.5 million Series A round of funding from strategic investors in Australia. Pocketbook plays in the same space as, which was acquired for US$140 million back in 2009 by Intuit Intuit.

According to AppAnnie, Pocketbook currently sits at number 21 for Finance apps in the iOS store in Australia and number 729 overall. It has an average of 4.5 stars over 1086 ratings across all versions.

Pocketbook is free to use and the team has no immediate plans to monetize it, as growth is the current primary objective. However, as it grows over time, Pocketbook is generating compelling insights from its data collection and analysis. By completely making its data anonymous and rolling it up to an aggregate level, Pocketbook has been able to glean some fascinating consumer spending trends.

Based on their analysis, Pocketbook discovered that Australian’s pay 31.44% more than Americans for Ikea products. This has convinced Pocketbook that it is cheaper for a small business buying Ikea office furniture to buy and ship it from America. Another piece of analysis shows that Netflix Netflix, which isn’t even officially available yet in Australia, is the second most popular paid content-media (after Foxtel) with 27% market share.

Alvin Singh and Bosco Tan founded Pocketbook just eighteen months ago. After transitioning from working at a large company to a small company, Singh wanted a way to make sure he was in healthy financial shape. “I tried everything but all the tools were really complicated. Most were accounting based products, which I didn’t need. Being an engineer I built something myself. I showed some friends and everyone wanted it and that’s when I realized it could be a thing,” said Singh. One of those friends he showed was Bosco, a long time high school friend. Impressed by the app, Bosco wanted in on the action so they joined forces to launch the company.

The duo believes that there is a mass-market appetite for a product that can help users be more financially aware and in control. With a relatively unstable economy, falling real wages and asset prices rapidly rising; the younger generation needs all the money management help they can get. Pocketbook is still early on its journey to greatness, but the outlook is bright if their current level of traction continues. “One of the litmus tests we have is when we’re on the bus or train and see people with their Pocketbook open,” said Tan.

Home Depot’s credit card breach bigger than Targets


If you bought anything from Home Depot is the last year via check card or credit card it is a good idea to have your bank issue you a new card. On Sept. 2, the cybersecurity experts for Home Depot discovered they had been hacked and their customers’ credit card information had been stolen. As the experts investigated they found out the hackers had been in their system since as far back as April of this year. The hackers stole 56 million credit card numbers, outranking the breach recorded by Target earlier this year by 16 million.

The hackers got into the credit card system by not using a conventional virus but by using malware. Once the malware was in place the hackers were free to come and go, stealing any information they wanted. This is far from the biggest breach in history but is still really large.

I have read in a few articles online that Home Depot knew about this vulnerability a few years ago when it was brought to their attention by their security team. When they did nothing about it apparently people from the security team resigned from their positions. 

Home Depot has removed the malware from its system and is raising its security by putting encryption in place. They are also offering credit protection for all its customers that used a card in their stores since April.

I always harp on the importance of malware protection, not just virus protection. Hackers have gone away from conventional viruses and are now using malware. Hackers can get access to systems easier with malware since it is easier to get these deployed on systems than it is with viruses.  Moral of the story is: invest in good malware protection. I have provided a link to my previous story about malware products.

For all my fellow tech workers out there make sure your networks and servers are protected and up to date with the latest and greatest firmware\updates and security products and standards. To all the companies that take credit cards, if you did not learn from the Target breach please learn from this one. Listen to your IT team when they say there is a security hole and spend the money to fix it now. Cause it will definitely cost you later.

Link to my malware article

Preferred Shares With Rising Rates: Two Picks And A Pan

Preferred shares as a group trade highly correlated. Divergences arise largely based on duration and credit differentials, and to a lesser extent features such as call dates, industry, qdi and cumulative dividends. As the markets and economy change, these features can create a relative discount or premium to preferred shares. For example, during the 2008 crisis, the cumulative feature created a higher premium due its relevancy. Currently with balance sheets repaired higher coupons trumps credit protection. The OTC market, domain of institutional investors, picks up on these trends quicker than the public markets. As rates started creeping up last year, issuances of fixed to floater prefs (FRAPs) where common in the OTC market far earlier than in the public market. These FRAPs were created to address duration fears of preferred stock investors and lowered the duration by 10 years versus its perpetual brethren. A background on FRAPs is found here.

So as duration fears rise, shorter duration preferred shares will exhibit a premium over perpetual ones. The rate rise from May to December of last year serves as useful window as to how different asset classes react differently. FRAPs should outperform since their duration is roughly 7 versus 17 for perpetual preferred stock. We can see that this has indeed happened: as the 10 year yield has risen (lower graph), FRAPs outperformed perpetuals (upper graph) by over 5% (normalized to 100):

(click to enlarge)

Now if we do not get rising rates, these FRAPs will still do well absent a credit crisis as lower rates will lift all high yielding assets. FRAP dividends are marginally lower than perpetuals/fixed dividends for the next 7+ years, as most floating resets only start around 2021. The floating minimum floors are LIBOR plus roughly 350 bps, which will assure they will trade around par if we do not see a rise in rates. Here are some FRAPs versus three random perpetuals:

So it is clear one can enjoy an equivalent yield yet still be better prepared for rising rates. Between the FRAPs its easy to see that MS-I is the one to buy. It is almost identical to GS-K, which is a good FRAP in its own right. Yet its trading 2 percent cheaper and hence enjoys a slightly higher yield. The main reason for this is that MS-I is a recent issue and has yet to be included in the Samp;P Preferred Stock Index. This is the index which is tracked by the PFF ETF. PFF is the dog that wags the tail in preferred land, and can create good buy and sell opportunities due to the sheer size and influence of its buying and selling obligations. MS-I will be included in the PFF in the next rebalance, which is later this month. The subsequent buying could very well end this discount.

Those dreading inflation might not like FRAPs, as they fear the FED will unleash inflation imminently. A floating reset in seven years might be too long for them, and is like closing the barn door after the horse has bolted. They can get even shorter duration with a pure floating preferred. Durations can be as short as 2 to negative duration since they trade under par and will gain quickly in price if LIBOR increases. Unfortunately, a basket of floaters would not have outperformed the perpetual basket in the rising rate environment of last year:

(click to enlarge)

So a prudent investor moving to shorter duration would have been wrong to do so. My explanations as to why the shortest duration prefs underperformed are:

  1. Short end of the curve did not budge, the rate rise was at the long end. Floaters are predominantly 3M LIBOR based.
  2. Low liquidity and no institutional investors. Floaters are the most neglected of preferreds due the entrenched policy of zero bound rates.
  3. The yield differential was still larger than the fear of higher rates.

All three factors above can be negated by a rise in short-term rates. Since the central bank mandarins are now actively discussing raising the short end, I expect floaters to be more relevant in the next round of duration trading. In fact, it might result in a premium for the pure floaters. Floaters may become relevant again. Even for those fearless of inflation, at certain levels it makes sense to allocate some of your preferred portfolio to floaters. After all, theoretically a floater at a high enough discount will have a similar yield to a perpetual. We are at the stage again that the floating feature can be had with a minimum of yield sacrifice. I compare 2 floaters with 2 fixed preferreds below. Note that the floaters offer inflation protection as well as larger capital gains.

This leads to interesting pair trades, or at least a clear preference towards the almost equal yielding floaters. We are at less than a tenth percentile of where they trade in relation to one another. The bottom graph shows the spread between the two (MS-A is the white line; WFC-P the red line).

(click to enlarge)

The relationship is starker with GS-D (white) versus CCV (red) where the spread is at less than a 1 percentile point versus its two-year history:

(click to enlarge)

The flip side of course is that you lose a tad in credit quality. This article focuses on a rising rate environment, which generally means a decreased credit risk. One can compare them with BB perpetuals and the yield difference will be around 1%. Even so, I would like to point out that balance sheets of US financial institutions, the main issuers of prefs, have markedly improved since the last credit crisis:

Deutsche Bank for example, has not been buttressing its balance sheet as much, and is still at roughly 25 x Total Assets over Common Equity, yet the ratings of all three are similar.

The floaters I included, GS-D and MS-A, are two of my favorites. I leave you with a floater that is a sell, and in fact is even a very good short. The ticker is UBS-D. Like Deutsche, UBS has double the leverage of its US counterparties. UBS-D is similarly rated to GS-D and MS-A, has a similar floating feature, but has no minimum coupon. With GS-D and MS-A, the holder is guaranteed a minimum coupon of 4%. The minimum coupon is of tremendous importance, as that is what is giving GS-D and MS-A their 5% current yields.

Without this feature, UBS-D is languishing at a mere 1% current yield. LIBOR will need to climb 400 bps+ for the floating yield in UBS-D match the yields of MS-A and GS-D. And even then, it will never have a higher coupon. In other words, UBS-D should be trading at a steep discount. But lo and behold, its trading at the same level. Here is UBS-D (red) versus GS-D (white) non-normalized:

(click to enlarge)

This is a mockery of the efficient market hypothesis, since there are no redeeming qualities that would cause UBS-D to rally $6 and trade alongside GS-D. I have two theories:

  1. UBS wants to delist its preferred from the US market for regulatory reasons. I cannot find any evidence of this; it counts as Tier I capital and UBS cannot get debt any cheaper than this.
  2. UBS-D was included in the PFF and PFF has been buying regularly for the past few quarters. Because PFF is so large (one can argue too large), it now holds almost 7% of the shares. PFF has grown by 25% this year and is forced to add to its holdings by that amount. UBS-D is one of the more illiquid prefs and more sensitive to the marginal buyer.

Interactive Brokers has plenty available for locate to put on a pair trade with a neutral or even positive carry.

Conclusion: 2013 proved that FRAPs outperform fixed in a rising rate environment, as the Fed signaled an exit from QE. There was no large yield sacrifice involved. Pure floaters did not outperform, most likely because the focus was on the long end of the yield curve. This can change if the focus on rates is at the short end. 2015 might be that year as the Fed is showing a real desire to normalize the front end of the curve. Regardless, in most scenarios FRAPs and floaters should have a place in a preferred portfolio.

REPCO Home Finance Limited is hiring

REPCO Home Finance Limited has invited applications for recruitment at various posts. Candidates can apply by October 6.


Post names:
Branch Manager
Technical Officer
Clerical Cadre (Recovery)
Manager (Legal Mortgages)
Manager (Inspection)
Credit Officer

Branch Manager: Tamil Nadu, AP, Karnataka, Maharashtra, Kerala amp; Gujarat
Technical Officer: Tamil Nadu, AP, Karnataka, Maharashtra
Clerical Cadre (Recovery): Chennai
Manager (Legal Mortgages): Chennai, RO West
Manager (Inspection): Chennai
Credit Officer: Tamil Nadu


Branch Manager: Candidates applying for this post are required to be graduates having acquired three years of experience in Housing Finance/Retail Lending works.

Technical Officer: Candidates applying for this post should be graduates in any subject from UGC recognised university and should have good communication and interpersonal skills.

Clerical Cadre (Recovery): Candidates applying for this post should have acquired a BE degree in Civil Engineering. They should have obtained three-year experience in HFCs/Banks/FIs in technical appraisal of residential/commercial properties.

Manager (Legal Mortgages): Candidates applying for this post should be graduates in Law and should have working knowledge of Hindi language.

Manager (Inspection): Candidates should be graduates (BBM/B.Com/B.Sc) in any subject having acquired three-year experience in branch operation/inspection/credit.

Age limit: Candidates applying for the posts should not be more than 28 years.

How to apply: Candidates are required to send their duly filled application forms to The General Manager (HR), Repco Home Finance Limited, 3rd Floor, Alexander Square, New No. 2/Old No. 34 amp; 34 Sardar Patel Road, Guindy, Chennai- 600 032. Candidates are required to send the attested copies of relevant documents along. Also, the candidates should affix passport size photographs.

The Top Ten Mistakes Potential Home-buyers Make When Purchasing A Home

For most people, purchasing a home is the largest financial transaction that theyll ever make. The purchase decision is without a doubt, one that must be made with careful thought and attention to detail. A potential homebuyer has many things to consider when purchasing a home. A Muslim homebuyer has the added concern of finding Sharia -Compliant financing. With the help of our Guidance Residential Account Executives, who have decades of experience working in the home-finance and residential real estate industries, weve compiled a list of the top ten mistakes homebuyers tend to make.

Learn more about how Guidance can help you with your home purchase or refinance.


Choosing the right professional for one of the most expensive purchases of your lifetime is essential. With the ease of access to tools like Google and Zillow unfortunately many people think they know it all. Dont fall into this trap! You need to have an expert who has your best interest in mind, since the listing agent is representing the seller(s).

Your real estate agent should be is equipped with all the modern tools and technology, should have the knowledge of the local communities, ability to write proper contracts, negotiate on your behalf and most importantly hold your hand and walk you through every single step of your transaction. A good real estate professional will protect his/her client from potential issues that could arise from appraisals, inspections, and financing contingencies. Your real estate agents credentials are of utmost importance! It is a good idea to interview a few real estate agents before moving forward with one. Interview questions, such as the following can help you make the best decision for you and your family: 1) How many homes have you sold in the last year 2) How many clients are you currently working with and 3) Where have most of your clients purchased a home.


When looking for a home, the customer may not be fully aware of the characteristics of different areas. Start making a list of Make or Break Deals for you in a home and those characteristics that are Icing on the Cake, this will help narrow down your search list. Some common factors to consider include: School districts, ease of access, type of home, number of bedrooms and bathrooms, and Masjids.

When purchasing a home, also consider the expenses associated with the type of home you are purchasing. These expenses may be Homeowner Association Fees (HOA), Condo Fees, and insurance. Also, consider how long you plan on staying in the home because this will make an impact on your return on investment amount. You should ask yourself: “Are home prices in this area rising or declining?” “Do I plan to stay here for 5 or 10 years?” If you plan on residing in your home for a significant amount of time, consider improvements that are being made near your neighborhood, ie new developments or a new metro being built. These will (usually) positively impact your home value when you sell your home.

If you arent familiar with where you want to buy, we recommend asking your local real estate agent to show you 5-7 properties in different neighborhoods so you can familiarize yourself with the kind of house your money can buy in different areas, you can then start narrowing down your search.


Dont forget about your real estate taxes! Property taxes can be a big game changer for a potential home buyers ability to qualify for financing. Even if you plan on paying your taxes separately from your mortgage, your monthly taxes will still be taken into consideration when you are applying for financing. Make sure to ask about the homes property taxes early on in the process!


Some homebuyers tend to think that a home inspection is the same thing as an appraisal, and decide to skip out on ordering a home inspection. They are 2 different reports with 2 different purposes. The purpose of the appraisal is to give a market valuation of the home, while the purpose of a home inspection is to find out if there are any, hidden or apparent, defects in the home. Make sure to hire a licensed and reputable inspector who will explain things while going through the inspection!


It is vital that your purchase contract has an appraisal contingency clause that will allow you to back out of the contract and receive a refund of your earnest money deposit if the appraisal comes in lower than the sales price. It can actually be the cause of renegotiating the sales price and saving you some money! If the difference between the sales price and the appraised value of the home is significant you have strong grounds to argue that the seller of the home is overvaluing the home. If the seller is eager to sell the home then you as a home purchaser would be in a strong position to renegotiate the sales price.

On the flip side, if you and your family love the home and are willing to pay above market value for it, than the appraisal contingency does not have to kill the deal! Keep in mind, in a very competitive market or if you have a large down payment, it isnt uncommon for buyers to waive the appraisal in order to make their offer more competitive.


Unless unable to, a potential homebuyer should always try to make a significant down payment. The mark that every homebuyer should aim to reach is 20%. A 20% down payment will give the homebuyer the best rate and give them significant equity right from the start of their mortgage.

On the flip side, you also want to consider the profit rate in Sharia-Compliant Home Financing. Sometimes first time home buyers will want to save up 20% down, but at the expense of a higher profit rate. This ultimately will work against your original purpose of saving money. Consider all your options and speak to your local Guidance Residential specialist to determine the best option for you.


One of the main criteria needed in order to receive any type of financing is to have good credit. Anybody who is thinking about buying a home will have to be mindful of their credit standing as it will play a major role in their qualification. It is important to remember that building credit does not have to be through paying interest. A potential homebuyer can build their credit through applying for secure credit cards, 0% car loans, and making sure bills are always paid on time!


It can be very tempting for business owners or self-employed individuals to claim every expense under the sun in order to lower their taxable income. Unfortunately, that means that theres less money entering their pockets in the form of profits at the end of the year. When applying for financing, your gross income is irrelevant. What banks will consider is your profits, or your net income.


Finance in general is a field that can seem intimidating and confusing. Unfortunately, financial literacy is not as prevalent in the United States as it should be. The Muslim community, being a part of the broader society is affected by this issue. It is important that you work with a financial institution that you trust, and are aware of all the ramifications of the type of financing that you choose. There are many important differences between Sharia-Compliant or Islamic Financing and conventional financing. The first and most important difference is the fact that Islamic Financing is not based on a system of borrowing and lending. Islamic Financing is nearly always asset-backed financing. Sharia-Compliant Financing can provide protections not available in conventional financing. Learn more here.


Not all Islamic financing options are created equal. When seeking home financing a homebuyer should consider whether the mode of financing they are choosing is non-recourse or allows the financier to take recourse against the homebuyers personal assets. A potential home buyer also needs to consider whether this form of financing will allow them to refinance or restructure their contract. Another important consideration to make is whether the Islamic financial institution will take any risks along with the homebuyer.

Learn more about how Guidance can help you with your home purchase or refinance.

Thank you to our contributors: Shabeer S., Omar J., Sami K., Abdessamad M., Salah E., Mohamed H., Riffat L. 


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