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From Briefing.com
Periodicals Wrap-Up for Friday, September 12th
WALL STREET JOURNAL: According to people familiar with the situation, the Wall Street Journal reported that given Lehman’s (LEH) significant financial troubles, a deal of any sort is “far from certain”. The WSJ said prospective buyers, which reportedly include Bank of America (BAC) and Barclays (BCS), would likely want the U.S. government to help shield them from future losses from any transaction…The Wall Street Journal also reported that Clear Channel bonds attracted few buyers after underwriters sold only $228M of the bonds at 70c on the dollar, less than a quarter of the amount the banks hoped to sell when the deal was last week brought to market. The Journal said that Morgan Stanley (MS), Citigroup (C), Credit Suisse (CS), Deutsche Bank (DB), Wachovia (WB) and Royal Bank of Scotland (RBS) initially shopped a $980M bond deal to investors…NEW YORK POST: According to sources, Treasury Secretary Henry Paulson held an emergency meeting with Lehman in an effort get a plan in place by the weekend for the sinking bank. The New York Post reported that one plan being considered involves a consortium of buyers — involving Kohlberg Kravis Roberts and Bank of America — dividing up Lehman’s assets and liabilities…BLOOMBERG: In an effort to stay afloat, Bloomberg reported that Washington Mutual (WM) may be forced to sell parts of a nationwide 2,300-branch network to raise capital. The bank is facing up to $19B in bad loans and was significantly hurt by a 34% drop in its stock this week…
Asian Markets Wrap-Up for Friday, September 12
Asian stocks advanced for the first time in four days as financial firms and commodity companies lead most markets higher…JAPAN: The Nikkei 225 Stock Average rose 112.26, or 0.9%, to 12,214.76, while the broader Topix Index added 14.48, or 1.3%, to 1,177.20. Resonaack jumped 12% to Y119,700. Mitsubishi UFJ Financial Group (MTU) increased 4.3% to Y858. Orix Corp. (IX) climbed 10% to Y14,830. Kawasaki Kisen added 4.7 % to Y698. Mitsui & Co. (MITSY) was up 5.5% to Y1,617…CHINA: The CSI 300 Index was up 5.72, or 0.3%, to 2,077.85. Guangdong Electric Power Development Co. gained 1.9% to 5.25 yuan. China Petroleum & Chemical Corp. (SNP) increased 3.1% to 8.97 yuan. Sinopec Shanghai Petrochemical Co. (SHI) rose 1.9% to 4.86 yuan. Air China climbed 2.8% to 5.16 yuan. Anhui Conch Cement Co. fell 2.42 yuan, or 9.7%, to 22.54. China Vanke Co. added 0.08 yuan, or 1.4%, to 5.63…AUSTRALIA: The S&P/ASX 200 Index advanced.89.50, or 1.86%, to 4,903.80. Macquarie Group gained 4.8% to A$44.01. Qantas Airways added 3.5% to A$3.54. BHP Billiton (BHP) was up 4.4% to A$36…AROUND ASIA: In Hong Kong, the Hang Seng Index fell -35.82, or -0.18%, to 19,352.90…In Vietnam, the Ho Chi Minh City Stock Exchange’s VN Index slid 4.2% to 476, on concerns that the government will keep interest rates high, hurting growth and company earnings.
Bank of America, KKR reportedly in talks about buying parts of Lehman-NY Post
Treasury Secretary Henry Paulson reportedly wants Lehman Brothers (LEH) to be sold by the end of this coming weekend. Under one scenario being considered, Lehman would divide its assets and liabilities among several buyers. Two firms reportedly involved in discussions about participating in a deal of this kind are Bank of America (BAC) and Kohlberg Kravis Roberts, inside sources say.
Individual investors outraged at Fannie, Freddie losses-WSJ
Some individual investors who suffered significant losses when the federal government took over Fannie Mae (FNM) and Freddie Mac (FRE) are blaming the government for mixed messages leading up to the takeover, according to the Wall Street Journal. One individual, who says he lost money earmarked for his children’s college education is speaking with a lawyer about a possible class action suit against Freddie Mac.
Lehman’s 24,000 employee’s paper losses about $10B-WSJ
“We’re all a lot poorer,” says one banker at Lehman Brothers Holdings (LEH). With employees owning about 25% of the company, the recent $4 share prices means they collectively have losses of about $10B, reports the Wall Street Journal. The biggest paper loss belongs to CEO Richard Fuld Jr. who accumulated 10.9M shares, or about 1.4% of Lehman shares outstanding, over 41 years at the firm. Those shares were worth $695M in January; now their value is $45.8M, a 93% dive.
Will AIG start sell assets?-WSJ
It may be waiting to announce its strategic plan at month’s end, but the Wall Street Journal’s “Heard on the Street” says American International Group (AIG) needs to reconsider and make its move now as its share price tanks and its choices become fewer. Reading the market the message appears clear: Pull the company apart and start selling assets.
U.S. equity futures continue to point to a lower open
U.S. equity futures are pointing to a lower open. Investors received a dose of economic news when the producer price index and other numbers were released. The PPI showed that prices fell -0.9% versus an expected increase of 0.2%. When the volatile components of food and energy are removed from the figures they showed prices rose 0.2% versus an expected increase of 0.2%. The advance retail sales figure was released and showed August sales fell -0.3% versus an expected increase of 0.2%. But if you remove autos from the equation they fell -0.7% versus an expected decrease of -0.2%. The futures tumbled as a result of these numbers and currently are at their lowest point of the morning.
Baidu.com-BIDU target lowered to $360 on decelerating growth@PACS
Pacific Crest lowered their target to reflect expectations for decelerating growth, but remains above consensus and thinks new product should improve monetization in Q4. Shares remain Outperform rated.
Potash-POT shares trade at lowest multiple ever, reiterate Buy@SBSH
Citigroup points out that following the recent sell-off, POT shares are trading at the lowest multiple in its public history. The firm highlights the company’s increased buyback as an indication management believes shares are undervalued.
Transocean-RIG added to Top Picks Live list@SBSH
RIG is Citigroup’s top offshore driller pick given its dominant deepwater position and exposure to highly supply-constrained markets. Shares are Buy rated with a $159 target.
Intel-INTC estimates and target lowered following channel checks@FBRC
Friedman Billings’ checks into Q3 PC builds were modestly weaker than the firm’s month-ago checks and reflect slightly muted seasonal shipments. Friedman believes INTC is tracking towards the midpoint of its Q3 revenue guidance range but thinks Q4 estimates could be at risk. The firm cut their 2009 estimate to $1.40 from $1.45 and target to $26 from $27. Shares remain Market Perform rated.
Bank of America-BAC likely to win the auction for Lehman Brothers@LTCO
Ladenburg believes BAC will win the auction for Lehman Brothers (LEH), which they point out will give the company access to one of the best fixed income trading desks in the country. Ladenburg tells investors that if the deal is done for stock, it will add to BAC’s equity. The firm believes a Lehman acquisition would be a major plus for BAC and maintains a Buy rating on the stock.
BioMarin Pharmaceutical-BMRN initiated with an Outperform@WBLR
Chipotle Mexican Grill-CMG: Bearish Gap Down on Negative Pre-Announcement
The shares are down (-8.66%) following a negative pre-announcement of Q3 results. There was an irregular bearish triangle in formation yesterday on the chart that will now become active as long as share price remains below $66. The downside potential for this pattern is to the $45 area.
Jim Cramer’s “Mad Money”
Cramer called today’s 370-point swing in the Dow “insanity.” He said it was clear that the hedge funds were betting on a market collapse as worries about Lehman Brothers (LEH) and Washington Mutual (WM) continued. However when that theory failed to materialize, the market turned volatile after the funds frantically covered their positions. Cramer said, two companies did fight back against the onslaught of selling and naked short-selling. The first was mining equipment maker Joy Global (JOYG) which has seen its stock price cut in half, to just $44, amidst the voracious sell-off in the commodity markets. They fought back by announcing Thursday that it was buying back two-fifths of its capitalization, or $2B worth of stock, between now and 2011. Second, was CSX (CSX) whose embattled CEO Michael Ward won a proxy battle with hedge funds to keep his job. CSX Thursday reported a better-than-expected quarter and was up 10.7%. Next. Cramer talked about his “Black hole” theory. That is when things get bad enough, a single company can bring down a sector or even the entire market. He singled out: AIG (AIG), Washington Mutual (WM), Citigroup (C), Lehman Brothers (LEH) as the black holes in the financial sector, along with General Motors (GM) and Ford (F) in the auto sector. Cramer warned, “These stocks could simply vanish”. Cramer said the markets simply cannot have a meaningful advance until all of these black holes are filled. He then outlined his plan for fixing all the financials in one foul swoop, while acknowledging the plan could cost upwards of $1 trillion. Cramer said first the federal government must step in and give these companies 30 days to raise capital or be taken over. Next, Cramer said the Fed must lower interest rates by 50%. Finally, Cramer said the government must then take advantage of the low rates, and refinance and restructure as many as possible to save both homeowners and the economy. SELL BLOCK: Cramer called Legg Mason’s (LM) CIO Bill Miller, a “one-man wrecking crew,” adding he expects the exodus of capital from the firm’s funds to accelerate. Cramer noted that one of the firm’s largest holdings remains that of Freddie Mac (FRE). Cramer also faults Legg Mason for other abysmal investment choices, including: BSC, CFC, WM AOG, Q, S and EK. All of which are down huge on the year. Cramer advised swapping into a stock like T. Rowe Price (TROW), a money manger which has performed well and has a growing asset base. MAD MAIL: Cramer is taking another look at Owens-Illinois (OI) after the stock has pulled back to just 8x its earnings. Cramer told a second viewer that he expects a resurgence in retail, and while Best Buy (BBY) is good, Urban Outfitters (URBN), Lowes (LOW), Home Depot (HD) and Sears Holding (SHLD) are better. Cramer told a third viewer that he’s not a buyer of ConAgra (CAG). Instead he prefers Campbell’s (CPB) after it recently reported a great quarter. SUDDEN DEATH: (Bullish) DISCA, NUE. (Bearish) LDG. LIGHTNING ROUND: (Bullish) APC; CHK; XTO; FSLR. (Bearish) NVO; YGE; TTWO; EBAY.
Fast money position recap- Macke Owns (WMT), (UUP), (MSFT); Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (AKS) Call Spread; Najarian Owns (MER) Put Spread; Najarian Owns (MS) And Is Short (MS) Calls; Najarian Owns (XLF) And (XLF) Collar; Terranova Owns (AAPL), (EOG), (FCX), (GS), (NOV), (KOL), (POT), (RIMM), (SA), (X), (VLO), (YHOO); Terranova Owns (AIG) Puts And Owns (AIG); Terranova Is Short December 2008 Dollar Index Futures.
Ok so LEH is finally putting itself up for sale but there are no buyers or skittish buyers even with a gov’t backstop. What does that tell you about the environment and fear? This is what needs to occur….A COMPLETE PURGE! The gov’t is waiting for fires to get a little bit out of control before stepping in and “fixing” it. You can expect the market to struggle if the Fed and Treasury wait to give CPR to each individual “too big too fail” companies. This overhang will last until that will be completed. Ok good news…that WILL happen only a question of time. AIG, WM, LEH all need to be purged and/or fixed, employees of those firms need to be saved and clouds need to be removed so they can do their job. There is some concern about the FNM/FRE deal because the Treasury handicaps those firms from growing any bigger in the future…well how are we suppose to fix the problem and have FNM /FRE help all or many more homeowners if they cannot EXPAND their portfolios? It is a ctach 22, when is too big too fail too big? Can it get bigger to help homeowners out who were mislead or misdirected into bad loans and they have great credit. Listen, I have friends and family who are getting screwed right now not because they bought too much house but because they were reassured by their mortgage buddies who clearly had conflicts of interest sending them to these loans….what, all of a sudden Joe Schmo knows more about these complex mortgages then their trusted mortgage advisor ( And we have idiots blaming the consumer/homeowners when the gov’t failed to do their job and REGULATE!)? The misleading went down the line up to the investment houses who MISLEAD everyone …the global system was fooled and LIED too (China, SWF’s, allies , enemies, banks, hedge fund managers, mom and dad) by those investment houses. Cat is out of the bag and we need to fix this problem soon and help families struggling not the scammers who perpetrated the largest ponzi scheme ever created…..
Pick plays with a high probability of success, have focus and patience, run technicals through supply and demand. Great Luck and Happytrading.
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