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From Briefing.com
Periodicals Wrap-Up for Wednesday, September 10th
WALL STREET JOURNAL: The Wall Street Journal reported that Berkshire Hathaway (BRK.A) has told its Kansas Bankers Surety subsidiary to stop insuring bank deposits above the federal government-guaranteed amount. The unit will notify nearly 1,500 banks that it will cease offering the “bank deposit guaranty bonds”…The Wall Street Journal also reported that after shares of Lehman Brothers (LEH) fell 45% on Tuesday, debt markets are beginning to consider whether the bank’s creditors could suffer losses. All eyes will be on the Fed, which can supply emergency funds to sustain Lehman, and, if Lehman draws down large amounts on the special credit facility, would have a stronger hold on Lehman’s management to help force its next steps. Also, the Fed could bring an acquirer, as it did with JP Morgan (JPM) and Bear Stearns…BLOOMBERG: Sandy Flockhart, CEO of HSBC’s (HBC) Asia-Pacific region, told Bloomberg that the bank is “highly unlikely” to buy an investment bank, dismissing speculation the bank could invest in Lehman Brothers…New accounting rules for calculating the value of loans have deterred several potential acquirers from buying Washington Mutual (WM) and National City Corp. (NCC), inside sources said. Bloomberg reported that the new rules force buyers of banks to value the target’s assets at market prices, rather than using other factors to obtain a valuation…
Asian Markets Wrap-Up for Wednesday, September 10
Asia stocks generally retreated but markets in China, South Korea, Taiwan and Pakistan were higher…JAPAN: The Nikkei 225 lost 54.02, or 0.4%, to 12,346.63, while the Topix Index added 0.79, or 0.1%, to 1,192.38. Resona leapt 6% to Y118,400. Mitsubishi UFJ Financial Group (MTU) was up 3.2% to Y867. Nomura (NMR) advanced 3.2% to Y1,531. Sumitomo Metal declined 3.8% to Y1,103. Inpex Holdings slid 2.7% to Y988,000. Mitsubishi Corp. was off 2.7% to Y2,520…CHINA: The CSI 300 Index was up 4.03, or 0.2%, to 2,143.18. Wuhan Steel added 2% to 7.02 yuan. Baoshan Iron & Steel Co. was up 0.2% to 6.60 yuan. Citic Securities jumped 4.3% to 19.15 yuan. Haitong Securities Co. rose 5.6% to 14.91 yuan. China Railway Group climbed 0.14 yuan, or 2.8%, to 5.21…AUSTRALIA: The S&P/ASX 200 Index retreated 74.60, or 1.50%, to 4,905.50. BHP Billiton (BHP) lost 3.5% to A$34.80…AROUND ASIA: In Hong Kong, the Hang Seng Index slid 491.33, or 2.4%, to 19,999.78. Shimao was down 5.7% to HK$6.35. China Overseas Land dropped 11% to HK$10.20. Sun Hung Kai Properties (SUHJY) tumbled 5.2% to HK$92.75. Sino-Ocean Land Holdings slumped 3.7% to HK$2.85. Agile Property Holdings lost 7.4% to HK$4.26. Zijin fell 9.3% to HK$3.89. Jiangxi Copper Co. slipped 8.4% to HK$9.34.
New accounting rules deter companies from buying banks-Bloomberg
New accounting rules for calculating the value of loans have deterred several potential acquirers from buying Washington Mutual (WM) and National City Corp. (NCC), inside sources say. The new rules force buyers of banks to value the target’s assets at market prices, rather than using other factors, including the assets’ purchase price, to obtain a valuation.
Morgan Stanley’s Crescent deal may mean more write-downs-WSJ
Last year Morgan Stanley (MS) paid $2.78B for Crescent Real Estate Equities Co. and planned to put their properties in a real estate fund. Instead they kept those assets, now worth $4.6B, on their balance sheet. Unknown at the time the deal also included the assumption of $3.1B of debt, and the entire deal was valued at $6.5B, according to the Wall Street Journal. That was all before the credit crunch hit. Those properties were marked down $150M earlier this year, and more will be coming unless commercial property values turn around.
Message to investors: Read the financials and focus on deeds, not words-WSJ
What’s an investor to think when a company talks about its financial well being? For one, advises the Wall Street Journal’s “Heard on the Street”, look at financial results filed with regulators and don’t pay much attention to what a firm says about non-GAAP measures. Also, watch out for regulatory measures of financial strength and banks’ Tier 1 capital information. Remember: It’s what theses firms do, not what they say.
U.S. equity futures now point to a lower open
U.S. equity futures are now pointing to a lower open. The big news of the morning was the pre-announcement of earnings by Lehman Brothers (LEH). The futures were higher in anticipation of the company’s announcement but after its release the futures, and the shares of Lehman Brothers, came off their highs. Lehman clarified their quarterly losses and outlined initiatives and options they would explore, but the plan seemed to fall short of investor’s expectations. As a result the futures came off of their highs of the morning and the share price of Lehman, which was up more than two points, is now only fractionally higher.
Capital One dodged mortgages and stuck to credit cards-WSJ
Luckily for Capital One Financial Corp. (COF) it decided to avoid the mortgage business when it became a bank. Yes its share price is down, but not nearly as bad as some, and it has maintained and raised its dividend. By sticking to what it does best it has been able to sit out the mortgage mess. And there’s a good reason why: CFO Gary L. Perlin, a one-time Fannie Mae (FNM) treasurer, and Chairman and CEO Richard Fairbank had their doubts about the mortgage business. They say mortgage lending is a big risk because lenders rely too much on housing collateral value.
PIMCO’s Bill Gross says still doing business with Lehman-LEH-CNBC
Citigroup-C reports Fannie & Freddie exposure in an 8-K
As of September 8, 2008, Citi’s net exposure to the preferred and convertible preferred shares of the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation was approximately $50 million. Citi holds this exposure primarily in its Institutional Clients Group trading account, which is marked-to-market through revenues. The quarter-to-date pre-tax impact on revenues from trading losses and write-downs of this exposure is approximately $450 million. The exposure, which stood at approximately $1 billion at June 30, 2008, has been reduced substantially during the quarter through sales, hedges and write-downs. The final impact on Citi’s quarterly financial results could differ from the quarter-to-date impact disclosed above. Citi also has an insignificant amount of net exposure to the common shares of Fannie Mae and Freddie Mac.
Believe consensus estimates are too high for AT&T, Verizon@JPMS
JP Morgan lowered their Q3 estimates for AT&T (T) and Verizon (VZ) to reflect pressures in the wireline and wireless businesses and believes consensus estimates for both companies are too aggressive.
FedEx-FDX: Trading up on Positive Pre-Announcement
The shares are up +3.7% in the pre-market after the company pre-announced better than expected earnings last night. Prior to the announcement the shares had been on the rise since the market lows back in mid-July. On a technical basis the major upside obstacle is going to be resistance at the $90 area. Resistance levels to watch as potential upside objectives are at $88.35, $89.75, $91.43, $93.69, $95.32. Support is at $85.96 based on current pre-market price. The current uptrend would only be reversed on a breakdown below the 10-day moving average at $83.35.
American Int’l-AIG volatility Elevated at 115 on risk position concerns
AIG closed at $18.37. AIG October option implied volatility of 115 is above its 26-week average of 61 according to Track Data, suggesting larger price movement.
Lehman-LEH says credit markets deteriorated significantly in Q3-CC
GOOG/YHOO: Believe DoJ challenge is not in companies’ favor@CSTI
Collins Stewart believes the chances for a DoJ challenge are not in Google’s (GOOG) and Yahoo’s (YHOO) favor given the companies’ 80%+ combined market share in US search and probably about 90% in Europe and much of the rest of the world. Collins believes such a scenario will have negative impact on both companies, but mostly YHOO.
FedEx-FDX: Positive Q1 pre-announcement on fuel benefit@BARD
Baird said FDX positively pre-announced Q1 on a fuel benefit but they believe the outlook remains difficult given the external demand environment and signs of slowing international freight trends.
American Int’l-AIG is not similar to Lehman, reiterate Buy@SBSH
Citigroup believes AIG is not similar to Lehman (LEH) as the company has several options before even considering the impact of a controlling partner. The firm points out AIG shares trade well below intrinsic value.
Research in Motion-RIMM: Expect flip phone to be positive for shares@SBSH
Citigroup believes the flip Pearl 8220 could lead to increased guidance when RIMM reports on September 25 since the current guidance is only based on announced products. The firm expects this product announcement to be positive for shares and maintains a Buy rating with a $160 target.
Vulcan Materials-VMC downgraded to Underweight from Neutral@JPMS
Martin Marietta-MLM downgraded to Neutral from Overweight@JPMS
Apple-AAPL coverage assumed with a Market Perform@JMPS
BB&T-BBT downgraded to Underperform from Market Perform@KBWI
Keefe Bruyette downgraded shares on valuation. Target remains $27
(Important note on how to use this upgrade/downgrade list with analyst comments and news….you must parse out the factual data (Factual data is the most important) from the opinionated data and always take all analyst comments with a grain of salt. Do not follow blindly with their recommendations. Remember that technicals are the most powerful force in short term direction for stock prices due to the law of supply and demand.)
Jim Cramer’s “Mad Money”
Cramer said its time to speak out about Lehman Brothers’ (LEH) CEO Richard Fold’s “inaction” to save his failing company. He criticized Fold for missing multiple opportunities to either sell the company, monetize its many great assets or at least recapitalize itself while its share price was high. Cramer reluctantly added Fold to the second spot on his “Wall of Shame” list of the worst CEOs in America. He also warned two other CEOs, Vikram Pandit of CitiGroup (C) and Robert Willumstad of AIG (AIG), may also face similar fates if they too don’t take swift action to save themselves. Next, Cramer said it’s the lack of Chinese demand for steel, coal and fertilizer that’s largely to blame for the severe decline in commodity prices. Cramer also blamed the inexperience of “young gun” hedge fund managers. Then, Cramer said oil could hit $80 a barrel or $3 a gallon at the pump if McCain is elected. Investors worry that more drilling with lead to greater supply and even lower prices. In the worst case scenario, he predicted there could be a repeal of the run-up commodity prices as they retreat to their April 2005 levels. This would result in a 68% decline in stocks like Companhia Vale (RIO), a 50% decline in US Steel (X) and a 30% decline for many oil and natural gas producers. Cramer said the only way to stop this “worst case” scenario would be for the world’s central banks to cut interest rates aggressively. Cramer turned his attention to Whirlpool (WHR), up 44% despite negative news on the company and the current economic slowdown. Cramer credited Whirlpool’s rise to the work of large mutual funds, who are buying the stock based on the long-term business cycle. He said the company is a perfect “early-cycle” play, the kind of stock one would buy in an economic slowdown in anticipation of a recovery. Two other “early-cycle” plays or “pre-recovery” trend stocks are Sears Holdings (SHLD) and Toll Brothers (TOL). Cramer is not ready to recommend Whirlpool given the topsy-turvy market conditions, but he did want investors to keep an eye out for this trend to continue as the recovery draws near. Cramer talked with Joe Herring, chair/CEO of Covance (CVD), about his company’s ability to lower costs for big pharma. Herring said that Covance saves drug companies as much as 20% by helping them to effectively manage their clinical trials to accelerate the FDA approval process. Cramer said there’s money to be made in Covance. LIGHTNING ROUND: (Bullish) FRO; ONXX. (Bearish) JNPR; UAUA.
Fast Money position recap- First Moves: Jeff likes RIMM, Guy likes MCD, Karen likes MSFT, Pete liks NVS.
Macke Owns (MSFT), (WMT), (UUP); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (ETFC); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (LEH) Puts And (LEH) Put Spreads; Najarian Owns (RIMM) Call Spread; Najarian Owns (XLF) And (XLF) Collar; Finerman Owns (GS); Finerman’s Firm Owns (GE), (MSFT), (SUN), (TSO), (VLO); Finerman’s Firm Is Short (WB), (WFC), (XLF), (IYR), (IJR), (MDY), (SPY), (IWM), (BBT), (COF), (BAC).
Market reversing all the recent gains is not good technically. LEH dragged everyone down. There is no faith in the LEH CEO. None. Dick Fuld has ran it into the ground. These anemic bounces are not going to help. Every trader should not be fighting trends and should be adhering to the old maxim of the trend is your friend. If you are going long be sure your buying stocks in uptrends and not trying to call bottoms. On downtrends you should be shorting rallies not buying knives….we are in a big distribution pattern across the markets. The list of bubbles this year is extensively long and expensive. Keep nimble, the volatility can be traded but must be timed correctly. Pick plays with a high probability, run technicals through supply and demand, have focus and patience. Great Luck and Happytrading!
Think in Fractals, nature and the markets are both run on formulas.
A double rainbow frames termite mounds in Australia’s grasslands. Double arcs happen when light is reflected more than once in an atmospheric water droplet.
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