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From Briefing.com
Periodicals Wrap-Up for Friday, October 3rd
WALL STREET JOURNAL: Sprint Nextel (S), trying to unload its Nextel business, has found potential buyers in several private equity firms — reportedly including Cerberus Capital Management — and NII Holdings (NIHD), a digital wireless communication services company focused on Latin American markets, according to the Wall Street Journal…FINANCIAL TIMES: The Financial Times reported that major investors from the Middle East and Asia have offered to help Daimler (DAI) defend itself against hostile investors or corporate raiders. Daimler CEO Dieter Zetsche said entities from the “east and southeast” have sought to make big investments in the automobile company…NEW YORK POST: Sources informed the New York Post that Morgan Stanley (MS) is not out of the woods yet and is scaling back its prime-brokerage operation, aiming to purchase a retail-banking franchise and may look to work on a way to piggyback on the $1.3T deposit base of Mitsubishi UFJ (MTU)…BUSINESS WEEK: In talking with market strategists and asset managers, BusinessWeek said they seem to agree on only one thing: “These are scary times.” Scott Black, president of Delphi Management concedes that there are values out there, but says it will take three to six months to see the repercussions from the meltdown and any rescue. Arnold Schmeidler, president of investment firm A.R. Schmeidler, is positive on U.S. Steel (X), Anadarko Petroleum (APC) and SPDR Gold Trust (GLD)…Some investors are now more bullish on Take-Two Interactive Software (TTWO), as the stock has plunged since Electronic Arts (ERTS) pulled its offer in early September, and the prospect of another offer is still possible, BusinessWeek reported…
Asian Markets Wrap-Up for Friday, October 3
Stocks in Asia were down and all markets that were open declined on concerns that a $700B U.S. bailout won’t stop a recession and as borrowing costs increased. Markets were closed for holidays in China, Taiwan, South Korea, Indonesia and Pakistan…JAPAN: The Nikkei 225 Stock Average retreated 216.62, or 1.9%, to 10,938.14, while the broader Topix index was down 29, or 2.7%, to 1,047.97. Honda (HMC) lost 5.5% to Y2,835. Toyota (TM) slid 5.3% to Y4,080. Orix (IX) slumped 11% to Y10,690. Mitsubishi UFJ Lease & Finance Co. sank 13%, to Y2,760. Inpex was down 5.8% to Y768,000. Komatsu (KMTUY) dropped 8.1% to Y1,381. Fast Retailing Co. jumped 14% to Y12,370…AUSTRALIA: The S&P/ASX 200 Index tumbled -65.70, or -1.38%, to 4,695.40. BHP Billiton (BHP) fell A$1.25, or 4%, to A$30.42. Rio Tinto Group (RTP), lost A$2.34, or 2.6%, to A$88.91. Macarthur Coal slid 70 cents, or 7.1%, to A$9.20. Incitec Pivot declined 23 cents, or 5%, to A$4.42. Babcock & Brown slipped 16 cents, or 8%, to A$1.84. Equinox Minerals sank 16 cents, or 5.5%, to A$2.74…AROUND ASIA: In Hong Kong, the Hang Seng Index retreated -528.71, or -2.90%, to 17,682.40.
Scary times can bring value opportunities - BusinessWeek
In talking with market strategists and asset managers, BusinessWeek says they seem to agree on only one thing: “These are scary times.” Yet the market’s free fall is creating opportunities of value. Scott Black, president of Delphi Management concedes that there are values out there, but says it will take three to six months to see the repercussions from the meltdown and any rescue. To be safe, he has been putting his cash in short-term U.S. Treasuries until this horrific banking crisis blows over, says Black. Richard Steinberg, president of Steinberg Global Asset Management says, “Beneath what’s going on is a recalibration of values, so investors should set aside ample cash to upgrade their portfolios with stocks of the utmost quality when they drop to attractive price levels.” Arnold Schmeidler, president of investment firm A.R. Schmeidler, agrees investors must be patient, but he hasn’t backed away from buying shares of companies that produce real goods and products rather than financial paper. Schmeidler warns: “We will see lower earnings over the near term.” Among Schmeidler picks: U.S. Steel (X), Anadarko Petroleum (APC), SPDR Gold Trust (GLD), an investment fund�one of the exchange-traded funds (ETFs) that reflect the performance of the price of gold bullion�is a great hedge against the financial crisis, says Schmeidler.
Morgan Stanley is reportedly making cutbacks, looking for deposit base-NY Post
Morgan Stanley (MS) is reducing the size of its prime brokerage business, sources say. Meanwhile, the firm is trying to buy a retail banking operation, and/or gain access to the deposit base of Mitsubishi Bank UFJ (MTU).
The car slump is not local, it’s global-WSJ
Car buyers are in short supply worldwide. In Europe sales are down and falling, and are expected to last into 2009, according to the Wall Street Journal’s “Heard on the Street”. And that’s more bad news for Detroit.
U.S. equity futures continue to point to a higher open
Stock futures continue to point to a higher open. Earlier this morning Wachovia Corp. (WB) accepted a bid from Wells Fargo & Company (WFC) to be acquired in a deal that would value the bank at $7 a share. The deal was announced on the day the House is set to vote for the second time on a bailout package. The jobless claims report showed a drop in non-farm payrolls of -159,000 versus an expected loss of -105,000 jobs. The change in manufacturing payrolls showed a loss of -51,000 jobs versus an expected loss of -57,000. The unemployment rate remained at 6.1%.
Schwarzenegger says California may need emergency loan-LA Times
In a letter seen by the LA Times, Governor Arnold Schwarzenegger has informed Treasury Secretary Henry Paulson that the state of California may need an emergency loan from the federal government. As tight credit has dried up the funds the state generally relies on, Schwarzenegger warns that the state may seek aid of up to $7B “within weeks”.
Google in talks with ad agencies to help spur growth-WSJ
Long reluctant to paying to advertise its services, Google (GOOG) has been in talks with a number of advertising agencies. Such a move–to paid advertising–would be a significant change in corporate policy and image which has relied on word of mouth and partnerships, and is a sign that the company is looking for ways to jump start its growth, according to the Wall Street Journal.
Japan’s 1990s banking crisis holds lessons for today-WSJ
In the 1990s Japan’s banking crisis suffered from a number of mistakes, and there are lessons to be taken from their experience for today’s U.S. banking crisis, reports the Wall Street Journal’s “Heard on the Street”. For one the Japaneses guaranteed bank deposits in full, slowing a restructuring by protecting the weak links. Economic growth was not helped by sitting on problematic loans. By not upping depositors insurance helps banks to better run their institutions.
IT Services estimates and price targets lowered@PACS
PacCrest lowered estimates for SAY, WIT,HCLT.BO, PTI, TCS.BO, INFY, and CTSH due to (1) uncertainty in the banking and financial services industry; (2) potential for slowdown in Europe and in other industries; (3) poor visibility for demand, which is resulting in weak employee hiring; (4) difficulty of raising prices given the tough economy; (5) appreciation of the USD versus the GBP and the Euro; and (6) depreciation of the Indian rupee against the USD.
Software Industry downgraded to Neutral from Favorable@TWPT
Thomas Weisel downgraded the Software Industry citing the impact from the slowdown in the economy on software spending.
Internet sector estimates lowered on deteriorating macro-economy@CSTI
Collins Stewart lowered their estimates as they believe the deteriorating economy will hurt the Internet sector more than currently believed. The firm lowered their target for Google (GOOG) to $575, for Microsoft (MSFT) to $32, for GSI Commerce (GSIC) to $20, for comScore (SCOR) to $24, for Valueclick (VCLK) to $12, and for TechTarget (TTGT) to $7.25. The firm still likes GOOG, GSIC, MSFT, and SCOR and reiterates a Sell rating for Bankrate (RATE).
Brokers: Recommend buying SCH, BLK, AMTD and BX@SBSH
Citigroup believes Schwab (SCHW), Blackrock (BLK), TD AmeriTrade (AMTD) and Blackstone (BX) are the best positioned in the current market environment and positioned to benefit from a potential market recovery. On the other hand, the firm believes E-Trade (ETFC) and Fortress (FIG) are not well positioned.
Wachovia-WB: Deal Consummated with Wells Fargo
In a bit of a turn-about, WB has elected to merge with WFC at a ratio of 0.1991 shares of WFC for each WB share. That means we will see WB’s price fluctuate with WFC’s price using that ratio as a multiplier. That has already happened in the early going to the tune of +/-20% in range in the course of about 15 minutes. The loser of the day on this deal appears to be Citigroup (C) which had enjoyed a rather large rally over the last week on the assumption the WB deal would be completed. It is down (-6%) in the early pre-market.
Jim Cramer’s “Mad Money”
Cramer told viewers Thursday evening that, “Whether there’s a bailout plan or not, there’s a crash looming on the horizon.” He said that every company that exports commodities or helps ship commodities is in big trouble. Cramer said its as if the countries of Brazil, Russia, India and China, once ravenous importers of commodities have seen a sudden downward turn in demand, leaving U.S. exporters holding the bag. Cramer said, “It’s impossible to know how low these commodities will go.” Cramer said fertilizer companies like Mosaic (MOS), and railroad companies such as CSX (CSX) and Union Pacific (UNP), are now the targets of relentless hedge fund selling as the commodities keep falling and fund redemptions keep growing. The only international stocks Cramer would recommend and which are defensive, are soft -goods names like Heinz (HNZ), General Mills (GIS) and Colgate-Palmolive (CL). According to Cramer, one of the best ways to make money in a down market is to invest in what he calls “money machine stocks,” with big, serious dividends that pay you to wait for the market to turn bullish. Cramer’s favorite four dividend stocks include Poermian Basin (PBT), Linn Energy (LINE), Enterprise Product (EPD) and Kinder Morgan Partners (KMP). Cramer warned that these 4 stocks are trusts in the energy sector and there is downside-risk if the price of oil continues to decline. He said the dividends, though, are safe. Next, Cramer said it’s time to ditch the once-loved stock of American Express (AXP). He noted that Amex it’s the only credit card company that’s not a bank and does not have a deposit base to fund its operations. This makes Amex both economically and financially sensitive to market gyrations. Poor lending is a concern, said Cramer, with 32% of Amex’s cardholders now considered high-risk. He said the company also has increased exposure to mortgage defaults. Cramer said he’s seen estimates as low as just $2.25 for FY09 (consensus $2.92). LIGHTNING ROUND: (Bullish) KMB; CLX. (Bearish) ES; CFX; HK; SPLS; EK.
Fast Money position recap- First Moves: Guy likes ORCL long, Tim likes long ERJ, Pete likes BKC, Jeff says just duck and cover. Macke Owns (UUP), (MSFT), (WMT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Seymour Owns (AAPL), (BAC), (MER), (MS); Seygem Asset Management Owns (FXI); Pete Najarian Owns (AAPL) And (AAPL) Puts; Pete Najarian Owns (GS) Call Spread; Pete Najarian Owns (MS) And (MS) Put Spread; Pete Najarian Owns (NCC) Call Spread; Pete Najarian Owns (RF) And Is Short (RF) Calls; Pete Najarian Owns (SPLS) Put Spread; Pete Najarian Owns (WB) Call Spread; Pete Najarian Owns (XLF) Call Spread; Finerman’s Firm Owns (MSFT), (PM), (GS).
The House Vote today will be the big catalyst…. I hope they pass it…staying nimble and looking for plays after the vote and some scalps before. Staying mostly in cash and looking for high probability setups. See you in the trading room.
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