Signs of hope in the economy

I’m still encouraged by signs of hope in the economy, and I’ve pulled a couple of articles.

First, Target Stores fared a wee bit better than Wal-Mart in the 2nd quarter. If you recall, Wal-Mart was one of two organizations (the other being McDonald’s) that showed a sales increase over the last recession.

Target Corp., which reported softer-than-expected sales Wednesday, said company initiatives like more grocery options and credit-card discounts should help offset tepid consumer spending.

The retailer’s two key steps—adding more fresh produce to stores and giving customers 5% off for using their Target credit and debit cards—should bring in more customers and spur buying that otherwise wouldn’t have occurred, executives said during a conference call.

“It’s clear that the second quarter marked a change in recent trend,” Chief Executive Gregg Steinhafel said. “Following stronger results in the last two quarters, gross domestic product growth softened considerably and our sales trends leveled off as well.”

The shift has Target positioning for a “slow and inconsistent” recovery in which comparable-store sales could grow as little as 1% in the third quarter but likely fare better in the holiday season’s fourth quarter, Mr. Steinhafel said.

Given that some 70% of our economy is driven by consumer spending, retail is now the new heavy industry, and hopeful signs here are appreciated.

As well, we’ve seen the emergence of new private, profit-based organizations that are actually making money by helping homeowners to avoid foreclosures:

As the nation struggles with the worst foreclosure crisis since the 1930s, Mr. Ranieri’s investment fund and others like it are emerging as the best hope for the roughly seven million U.S. households behind on their mortgage payments. Nimble, flush and willing to strike deals with borrowers, these funds have an edge over banks and other lenders that can be mired in bureaucracy and hampered by government rules about which loans can be renegotiated and how.

Borrowers less lucky than the Reynolds family must work with middlemen—loan-servicing firms that don’t actually own loans, but represent banks and investors, and collect mortgage payments on their behalf. These firms follow often-ambiguous rules set by the owners of the loans. In cases where a loan has been bundled into a security, it might have thousands of owners scattered around the world, making it impossible to know all their preferences.

By contrast, Mr. Ranieri’s Selene is the sole owner of its loans and has a servicing affiliate that can negotiate directly with borrowers. “Every case is individual,” Mr. Ranieri says. “There’s no template.”

But the main reason Mr. Ranieri can strike deals with borrowers is that his firm buys loans, mostly from banks, at steep discounts to the balance due. If his fund pays $50,000 for a loan with a $100,000 balance due, for example, it can make a profit even if the borrower ends up paying back only $70,000.

Since mid-2007, nearly 3.4 million households have received loan modifications, according to industry data from the Hope Now alliance of loan servicers.

Creative entrepreneurs will always find a way around government regulations and through the tough economic times.