Archive for March, 2010
Cloud computing is the hot buzzword these days. This seems to be true whether you’re trying to find a safe online environment for your toddler or implementing some new mortgage technology. Everyone wants to be in the cloud or at least have their software there, but few seem to understand what it really means and, more importantly, which benefits accrue from the cloud and which from what you put in that cloud.
This is not a new problem. We went through the same marketing gyrations when we were all excited about OnDemand software, and Software as a Service (SaaS) before that. We saw the same general confusion when people started selling Services Oriented Architecture (SOA) as an improvement over Active Server Pages (ASP).
Battle of the buzzwords, one could conclude. But that’s not totally it. There are actual technology enhancements hiding behind each of these terms. Some are more subtle than others, but once they move out of the software engineering or R&D departments and over to marketing, they get reduced to whatever sound bite is most likely to gain traction in the marketplace. The danger here, of course, is that companies will begin to believe that their buzzword is the innovation. That’s never the case.
We’re seeing quite a bit of that floating in and out of the cloud right now.
Jacob (Gaffney, my editor) sent me an interesting piece of SPAM e-mail just this morning. Another company marketing a “private cloud” for kids, where everything would be safe and no one would ruthlessly rip away a child’s innocence. Hundreds of words, many of them buzzwords, and not a single comment about what the company will actually put in this private cloud, other than it would be warm and fuzzy, safe and sound.
This company will probably get funding, too. A quick trip to their webpage gives one access to more marketing speak, the promise that all basic services are free (though no mention of what they actually are) and an invitation to sign up and provide another data point to the company’s investors. And what do the site’s visitors get in return? Well, a visit to the cloud, of course. A huge welcome message fills the company’s home page.
This will probably work fairly well for people who have no idea that the cloud is simply a cluster of web servers sitting behind a node on the Internet, which, by the way, is exactly what the internet has been since the very beginning of its existence. The only difference between the so-called cloud computing of today and the original Internet is that users can now store their own software on these servers and execute it on their local computers through a web browser instead of simple HTML and little applets designed to run on those early browsers.
By that way, that’s not an insignificant advancement in computing. But no one is talking about how virtualization evolved out of screen scraping software to provide a user experience similar in most respects to that provided by software on a local machine or a local area network even though it’s delivered through a wide area network, like the Internet. No, instead, they just say, “Welcome to the Cloud,” like that’s what makes it cool.
To me, that’s like welcoming someone in off the street in front of my office and then releasing the confetti and striking up the band. “Welcome to the atmosphere! Smell that air? You’re breathing bona fide atmosphere, my friend. Drink it in! Our basic services are all free! Fill out this form so I can impress my investors.” That’s a little too P.T. Barnum for me.
I couldn’t care less about the cloud. It means nothing to me. Sure, having your software distributed across a server farm in a secure environment with anywhere access and automatic load balancing with seamless cutover in the event of a disaster is great. Knowing that server virtualization is allowing the data center managers to squeeze the most performance out of every server in the farm is fine and dandy. This is all great, but it’s also all commoditized. Data centers are not the source of competitive advantage. They are a basic requirement for cloud-based computing. Everyone in the game has to have one and they’re all pretty much the same, if they’re any good at all.
At the end of the day, it’s the software you put in your cloud that makes all of the difference. Any time a company spends more time talking about the cloud than the software, I know I’m just talking to another clown—or someone who thinks I’m one.
Subprime-mortgage securities are rising at an accelerating pace as the US begins to encourage reductions to homeowners’ balances, which may lead to fewer foreclosures and a quicker end to the housing slump.
A Markit ABX index of credit-default swaps tied to 20 subprime-loan bonds rated triple-A when created in the first half of 2006 climbed 3.2% last week to 49.1, the highest since January 2009, according to Markit Group.
Senior-ranked bonds tied to borrowers with poor credit will mostly benefit after the Treasury Department said for the first time it would seek to cut the size of mortgages, reducing the likelihood that loan modifications will fail, according to JPMorgan Chase, Morgan Stanley and Barclays. The revised plan also supports the housing market by helping avert more foreclosures, Amherst Securities Group analyst Laurie Goodman said.
The new US policy “will dramatically improve the success rate on mortgage modifications,” Goodman, who is based in New York, wrote in a March 26 report. “This will, in turn, help cushion future home price depreciation and limit further housing market deterioration.”
It was the summer of 2004. People were camped out in Hollywood, Florida for the chance to buy one of the 285 units in a condo development called Radius. All of them sold out in 10 hours — half a year before construction was scheduled to begin. Many of the units were bought by flippers who intended to put them up for resale before the development was finished, often as soon as the purchase was completed.
This buying frenzy was not confined to the overheated condo markets in Las Vegas, San Diego, Chicago, Phoenix and much of California and Florida. The following spring, panicked buyers were camping overnight to bid on a $700,000 two-bedroom house in a suburb of Washington DC.
What had led the American dream of owning a home to come to this? It was three essential ingredients. The housing bubble and its inevitable collapse would never have been possible without (1) hordes of speculators (2) absurdly easy financing and (3) widespread mortgage fraud.
By the end of 2010, about half of all commercial real estate mortgages will be underwater, said Elizabeth Warren, chairperson of the TARP Congressional Oversight Panel, in a wide-ranging interview on Monday.
“They are [mostly] concentrated in the mid-sized banks,” Warren said. “We now have 2,988 banks—mostly midsized, that have these dangerous concentrations in commercial real estate lending."
As a result, the economy will face another “very serious problem” that will have to be resolved over the next three years, she said, adding that things are unlikely to return to normalcy in 2010.
An industry group sponsored by the New York Federal Reserve that promotes best practices in the US Treasury market said on Tuesday it is expanding its focus to include agency debt and agency mortgage-backed securities.
The Treasury Market Practices Group said in a statement that the expansion reflects the "extensive overlap" of trading and settlement structures and investors across the Treasury, agency debt and agency MBS markets.
The group said it will focus on trading and settlement in the $2.7trn market for agency debt issued or guaranteed by Fannie Mae, Freddie Mac and Federal Home Loan Banks and in the $5trn market for MBS issued or guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae.
A combination of factors was negative for mortgage markets last week, and mortgage rates ended higher. Large budget deficits and economic troubles in smaller European Union nations made bonds less attractive to global investors. In addition, stock market gains sent the Dow to an 18-month high, which pulled funds out of fixed income investments. Finally, with just one week remaining for the Fed's mortgage-backed securities (MBS) purchase program, comments from Fed Chief Bernanke about potential future MBS sales added to the pressure in mortgage markets.
For months, investors have been concerned that the enormous supply of debt needed to fund US government spending would force yields on US Treasury securities to rise to attract purchasers. This is what took place this week. Demand was surprisingly weak at all of this week's record Treasury auctions, especially from foreign investors, and yields were pushed higher. Since MBS compete for investors with Treasuries, MBS yields rose as well, pushing mortgage rates higher.
Every day more homeowners are underwater — meaning they owe more on their house than it's worth — and a growing number of them across the country are simply walking away.
They pack up, throw the house keys in the mail to the bank and start over. Sounds like an easy solution to a difficult problem.
"Anything that sounds really easy or guaranteed is not," says Anne Balcer Norton, director of the foreclosure prevention division at St. Ambrose Housing Aid Center in Baltimore.
Indeed, in Maryland and the majority of states, walking away is no guarantee that mortgage debt won't come back to haunt you. These are so-called recourse states, where a lender can pursue you for any shortfall after it sells the house. So if you walk away from a $350,000 mortgage and the lender turns around and sells the house for $250,000, you can still be on the hook for $100,000.
High net-worth individuals see high-end residential property as one of the best asset classes to own, predicting growth in 2010.
London-based Knight Frank, a global property consultancy, and Citi Private Bank recently published "The Wealth Report 2010," a 45-page report that surveys the outlook of high net-worth individuals towards global high-end residential property.
Reviewing property in cities from Dubai to Shanghai, the report talks about price changes, market-by-market insight, spread of global wealth, risks and even the expanding role of Islamic banking.
UK mortgage loans fell to a nine-month low in February — despite a drop in lending rates.
Newly approved loans to home buyers fell to 47,094, the lowest number since last May, says the Bank of England. That was despite average rates falling to 3.83%.
Total lending rose to £11.5bn [US$17.4bn] as remortgaging picked up.
Simon Rubinsohn, of the Royal Institution of Chartered Surveyors, said cold weather may have put off house-hunters but lending should pick up after the Chancellor exempted homes under £250,000 from stamp duty for first-time buyers.
