This shouldn’t surprise anyone: Delinquencies on mortgages made to borrowers who can’t completely document their income or assets are on the rise, according to a recent story by Reuters News.

Standard & Poor’s reported that the 90-plus-day delinquency rate for these loans made in 2006 stood at 4.71 percent. The same type of loans made in 2005 had a 90-plus-day delinquency rate of 1.97 percent.

Again, this news shouldn’t be shocking. Loans made without complete documentation from borrowers are riskier than are standard mortgage loans. Given that delinquencies are up for mortgage loans in general, it’s tiny surprise that a rising percentage of those borrowers who couldn’t verify their incomes or assets are also falling behind in their payments.

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Filed under: Deals

Add Kirk Kerkorian to the list of legendary investors making massive bets on energy. Kerkorian’s trading automobile Tracinda has purchased a 35% stake in Delta Petroleum (NASDAQ: DPTR) for $684 million, sending shares of Delta up more than 20%.

The deal will give Delta a direct capital infusion, since Kerkorian is acquiring the stake from the company, rather than buying shares on the open market as most investors. Delta will use the cash to invest in its drilling activities in the Piceance and Paradox Basins.

Delta also got a fair price from Kerkorian, extracting $19 per share from the investor. That Delta got a premium of more than 20% in the private placement indicates that there was strong interest in the company; often private placements are at substantial discounts to the market price, as was the case with Countrywide Financial (NYSE: CFC) which received a cash infusion from Bank of America (NYSE: BAC).

Kerkorian will be able to control one-third of the company’s board of directors as part of the agreement.

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Filed under: Deals, Merrill Lynch (MER)

It looks like the sale of equity in Merrill Lynch (NYSE: MER) isn’t over, as losses at the firm are likely in Q4. According to The New York Post, “Merrill Lynch & Co. is in talks with Chinese and Middle Eastern sovereign wealth funds to raise capital by selling another ‘big’ stake in the company.”

That is bad news for current Merrill shareholders, who just watched Singapore’s Temasek Holdings put $4.4 billion into the broker. The value of Merrill’s shares is off almost 50% this year to under $53. If the company has to raise another $10 billion, the dilution could take the stock below $40.

Shareholders in Merrill have to wonder why the company does not sell its piece of Blackrock (NYSE: BLK). The investment company has a market cap of $14 billion. Merrill owns about half of the company.

Merrill also has the option of breaking its brokerage and wealth management businesses off from its investment bank.

It is not clear that bringing in cash from outside the firm is the best answer for Merrill shareholders.

Douglas A. McIntyre is an editor at 247wallst.com.

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Few homeowners are thrilled with today’s residential real estate market. And why would they be? Housing prices across the nation are falling. Sales times are rising.

But at least one group of homeowners is benefitting from today’s buyer-friendly real estate market: those opting to move from costly urban areas to less pricey rural ones.

A current story in the New York Times, which you can read here, highlights the good fortunes of New York City homeowners who have sold their pricey condominiums and co-ops and used to them to buy far bigger homes outside the city.

One couple in the story, for instance, sold their co-op for $899,000 and then used their money to purchase a three-bedroom ranch home in Norwalk, Conn., for $690,000. And that’s just one example.

This down market truly is one that favors buyers. But it only favors buyers who are willing to buy homes that cost less than the residences they are selling. If you can accomplish this feat, congratulations, you’ve just beat out one of the trickiest residential real estate markets in decades.

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Each day, it seems, brings more bad news regarding the residential real estate market. Yesterday was no exception.

The U.S. Commerce Department reported that sales of newly built homes fell to a 12-year low in November. Such sales dropped 9 percent from October to November.

The numbers look even worse on a year-to-year basis: New-home sales were down 34 percent this November when compared to the same period one year earlier.

Sometimes I feel like a broken record, but this report offers further proof — as if anyone needed it — that residential real estate’s slump is a deep one, and one that won’t be easing anytime soon.

My advice? If you don’t want to hear any more bad news about the housing industry, don’t read the paper, don’t turn on the Television and don’t listen to the radio. That shouldn’t be too hard, right?

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Filed under: Earnings reports, Deals, Level 3 Communications (LVLT), Akamai Technologies (AKAM)

Level 3 Communications (NASDAQ: LVLT) is one of the most widely traded and widely shorted stocks of any listed on a U.S. exchange. Average daily volume in the shares is over 41 million, and shares sold short as of mid-December were over 167 million. That’s tops of all companies listed on the Nasdaq.

Level 3 would appear to be in a good business. It has 50,000 miles of IP backbone to transport voice, data, and video. It provides services to the country’s largest cable and telecom companies.

Level 3 has taken a beating in 2007 falling form $6.80 to just above $3. Wall Street has to wonder how it gets back toward $7.

For starters, the company has to cease making an acquisition a month. The company’s Level 3’s latest 10-Q lists seven deals. It isn’t unfair for Wall Street to be concerned about the pace of these buys, especially since Level 3 does not make money. In the September quarter, the company had an operating loss of $53 million on revenue of $1.061 billion. Level 3 also made $138 million in interest payments on its $6.8 billion in long-term debt.

The company has one big asset it could sell and that may have some real value. It has a content delivery business not unlike that of Akamai (NASDAQ: AKAM). In the last quarter, it brought in about 10% of the company’s revenue. A sale of the unit could be used to reduce debt. The value of the business has a much higher multiple than Level 3 itself. LVLT has a sales to market cap ratio of .6x. Akamai’s is 20x. Even with an adjustment for Level 3’s debt, that is a very massive difference. Even at 10x multiple of revenue, the content delivery operation could be worth $1 billion.

Level 3 is going to have to show investors that its M&A days are behind it and that it is willing to focus on the business of charging for use of its broadband “pipe.” Being in other lines of work only hurts the shares.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Earnings reports, Deals, Competitive strategy, Intel (INTC), Advanced Micro Dev (AMD)

Advanced Micro Devices (NYSE: AMD) comes to the end of year at a 52-week low of $7.62. Very few stocks have done as badly over the last couple of years. In February 2006, the shares traded above $42.

When the company was doing well, it was taking market share in the server and PC industries by producing better chips than more massive rival Intel (NASDAQ: INTC). In some of these segments, the company had about 25% of the market and stated it could get to 40%. Intel fought back. It pushed its R&D to produce superior products and cut what it charged for chips, which hurt AMD’s gross margins and drove the company to a loss.

AMD made matters worse by purchasing graphics chip company ATI. That loaded AMD’s balance sheet with debt, just as its operating income fell apart.

AMD could do a few things to improve its position.

The chip company says it will have an operating profit by the end of next year. But, it keeps releasing its products late, and they’re often underpowered. The firm’s new Barcelona chip has been a disappointment. AMD might be better off giving conservative release dates and product information and then doing superior than forecasts.

Another part of AMD that troubles Wall Street is its debt, which is over $5 billion. As painful as it might be, AMD should sell ATI. The company’s operations brought in $252 million of AMD’s $1.62 billion in revenue last quarter. And, the unit had negative operating income.

The last thing AMD needs to do it let CEO Hector Ruiz go. He has been the architect of the current disaster and investors are unlikely to think he can have a hand in fixing it. After all, the company has lost well over three-quarters of its market value.

Douglas A. McIntyre is an editor at 247wallst.com.

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Filed under: Business, Google, Microsoft, Search

The year of 2007 is coming to an end, and so, it seems, is Microsoft’s attempt to regain some ground in the hotly contested search market.

According to the data, Microsoft has two main troubles: getting people to use Live Search, and converting people to using Live Search as their main search portal. Translation: they ain’t doing so good.

The latest statistics published by Nielsen On the web give Live Search and MSN a share of just 12.0% of all the searches on the U.S. market in November, compared to 13.8% in October. Those numbers pale when put next to Google, who recorded less queries in November but still increased its market share to 57.7%.

So why the disparity? Simple: the name. You can easily tell someone in a casual conversation to “Google” it, but telling someone to “Live Search” it is just so not cool (okay, okay, it’s not the name; we simply didn’t want to elucidate on the myriad factors behind the philosophy and practice of web searches, and were looking to save some time).

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Filed under: Business, Web services, Microsoft, Mozilla, AOL

This day AOL announced plans to discontinue development on the beloved Netscape browser. As you may know, Netscape was the first mass market Internet browser, originally released in October 1994. AOL will stop developing the browser on February 1, 2008 according to the Netscape blog.

This blog’s parent company, AOL gained control of Netscape when they acquired it in November 1998 for the whopping price of $4.2 billion. The software, which is currently on version 9, was dominant in the 1990’s until Microsoft unleashed Internet Explorer. Recent figures show that Netscape has less than 1 percent market share after having more than 90 during the browser wars of the 1990’s.

The Netscape browser code has not been maintained to the community’s expectations. AOL has also done a pretty good job of obscuring the Netscape name. Netscape.com was briefly a Digg-style social news site, and now the internet site is basically a landing page for AOL.com. In order to even find the latest version of the Netscape web browser, you have to go to browser.netscape.com.

What was once a great Internet Suite gave birth to the Mozilla foundation when Netscape code was released to the Open Source community. Mozilla Firefox and Mozilla Thunderbird are remnants of the once-great Netscape Internet Browser.

Netscape will always have a dear place in our hearts. For many of us it was our first window in to the World Wide Web. Rest in Peace, Netscape Navigator.

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Filed under: Deals, Industry, Citigroup Inc. (C)

The Wall Street Journal reports that Citigroup (NYSE: C) and HSBC (NYSE: HBC) may sell units to raise capital. Citi has an auto loan unit and a piece of a credit card company in South America. However, with potential write-offs in the billions of dollars still expected in the fourth quarter, the sales of small units might not be enough.

It is more likely that if Citi is pressed for cash it might sell a huge unit like Smith Barney. There are no public numbers on what the unit is worth, but the opeartion does have over 9.3 million clients and nearly $1.3 trillion is assets. Giving that TD Ameritrade (NYSE: AMTD) is worth about $8 billion with just over six million clients, Smith Barney may be worth a great deal.

If current news about Citi’s problems are right and the bank might be facing a dividend cut, selling a huge unit might be the bank’s best chance at making its financial picture more stable.

Douglas A. McIntyre is an editor at 247wallst.com.

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