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From Briefing.com
Periodicals Wrap-Up for Wednesday, September 17th
WALL STREET JOURNAL: The Wall Street Journal reported that despite efforts by central bankers to keep money flowing, banks yesterday abruptly stopped lending to teacher other or charged extremely high rates, a move which threatened to spread the troubles of Lehman Brothers (LEH) and American International Group (AIG) to not only financial institutions, but the global economy…NEW YORK TIMES: The New York Times reported that the Federal Reserve agreed to take a nearly 80% stake in American International Group, in exchange for an $85 billion loan, according to people with knowledge of the negotiations…NEW YORK POST: According to sources, the New York Post reports that after Cerberus Capital Management last week abandoned a possible plan to buy Linens ‘n Things, the home furnishings chain may be forced to liquidate. While Linens may find another bidder, the Post says that the fact that Cerberus has passed “doesn’t bode well”…CNBC: Morgan Stanley’s (MS) executives are mulling whether to stay independent or merge with a bank, according to CNBC. While Morgan was not in merger talks as of late yesterday, further declines in its stock may result in the firm merging with a well-capitalized bank, Morgan executives said…
Asian Markets Wrap-Up for Wednesday, September 17
Asian stocks retreated as most markets there fell as the U.S. $85B bailout of AIG (AIG) heightened concerns of further financial failures…JAPAN: The Nikkei 225 Stock Average increased 140.07, or 1.2%, to 11,749.79, while the broader Topix index added 3.86, or 0.4%, to 1,121.43. Torii Pharmaceutical Co. jumped 6.8% to Y1,622. Tokio Marine (TKOMY) was up 5.3% to Y3,400. Sony Financial Holdings was up 3.1% to Y432,000. Sompo Japan Insurance added 2.1% to Y867. Shinsei fell 10% to Y282. Canon (CAJ) rose 3.4% to Y3,970…CHINA: The CSI 300 Index slid 71.52, or 3.6%, to 1,929.14. Merchants Bank slumped 10% to 14.47 yuan. ICBC also lost 10% to 3.42 yuan. China Construction Bank Corp was down 10 percent to 3.83 yuan. Bank of China dropped to 2.97 yuan. China Railway Erju Co. fell 9.8% to 3.98 yuan. China Vanke Co. slipped 7.5% to 5.16 yuan…AUSTRALIA: The S&P/ASX 200 Index retreated -28.60, or -0.60%, to 4,722.20. Macquarie dropped 7.8% to A$33.93. Rio Tinto (RTP) tumbled 4.5% to A$102. BHP Billiton (BHP) was off 2.1% to A$35.65…AROUND ASIA: In Hong Kong, the Hang Seng Index lost 663.42, or 3.6%, to 17,637.19. HSBC dropped 2.5% to HK$115.10. China Communications Construction Co. fell 71 cents, or 8.6%, to HK$7.58. China Eastern Airlines Corp. (CEA) sank 13 cents, or 8.8%, to HK$1.34.
Regulators seek buyer for Washington Mutual-NY Post
The New York Post reports that federal banking regulators have recently approached banks including JP Morgan (JPM), Wells Fargo (WFC) and HSBC (HBC) about the possibility of acquiring Washington Mutual (WM). According to sources, however, no merger discussions are currently in progress between WaMu and anyone else and that investors are likely to want a buy to pay at least $8 per share before they accept a deal.
Banks stop lending to each other-WSJ
The money did not keep flowing as banks yesterday suddenly stopped lending to each other or slapped high rates to any loans that were made, providing more anxiety as the severity of the problems of AIG (AIG) and Lehman Brothers Holdings (LEH) spread throughout the worldwide financial system, reports the Wall Street Journal. Central bankers struggled to keep funds moving.
AIG is rescued, but the long term affect could be market distortion-WSJ
If you’re building a financial institution there’s a lesson in yesterday’s $85B government rescue of AIG (AIG): Make sure that when times get tough the government will have to bail you out. The Wall Street Journal’s “Heard on the Street” says the long term result will be smaller firms having to pay bigger premiums to borrow from the capital markets.
Hedge funds feeding on the problems of each other-WSJ
Some hedge funds smell blood in the water and see an opportunity to make money from the problems of other hedge funds, according to the Wall Street Journal’s “Heard on the Street”. While many funds have plenty of cash to invest, that may be months away. Meantime some funds are dropping or shifting some holdings in other hedge funds with an expectation that shares will be sold to avoid big losses. Some funds could fail and others will hold off on making any big investments.
Royal Bank of Scotland drops MasterCard for Visa-WSJ
Visa (V) has replaced MasterCard (MA) for the debit card business at the Royal Bank of Scotland (RBS), which is one of the biggest debit card issuers in the U.K. and U.S., reports the Wall Street Journal.
SEC may announce naked short selling restrictions today-Fox Business
Analysts Downgrade Summary for Wednesday, September 17th
MOST NOTEWORTHY: CME Group (CME), Quality Systems (QSII) and Tupperware Brands (TUP) were today’s noteworthy downgrades: Keefe Bruyette downgraded shares of CME Group to Market Perform from Outperform as they see risks of slower growth ahead given the acceleration in de-leveraging. The firm lowered their target to $325 from $480. Jefferies cut Quality Systems to Hold from Buy on valuation and higher expenses from the company’s proxy battle. The company’s target was lowered to $37.50 from $40. JP Morgan downgraded Tupperware Brands to Neutral from Overweight citing risks from international markets…OTHER DOWNGRADES: Big 5 Sporting Goods (BGFV) was lowered to Sell from Neutral at UBS. Sony Corp (SNE) was downgraded at Goldman Sachs to Neutral from Buy. Continental AG (CTTAY) was downgraded to Sell from Hold at Societe Generale.
Analysts Upgrade Summary for Wednesday, September 17th
MOST NOTEWORTHY: Goldman Sachs (GS), Investment Technology Group (ITG) and Hoku Scientific (HOKU) were today’s noteworthy upgrades: Wachovia upgraded shares of Goldman Sachs to Outperform from Market Perform on expectations for greater pricing power given Goldman’s position as the largest remaining independent U.S. securities firm. Keefe Bruyette upgraded Investment Technology Group to Outperform from Market Perform as they believe the company will take market share with the reshaping of the large wire-house brokerage community. The company’s target was raised to $37 from $33. Broadpoint raised Hoku Scientific to Buy from Neutral as they believe the contract with Tianwei New Energy reduces financing risk…OTHER UPGRADES: ACE Ltd (ACE) and Travelers Group (TRV) were upgraded to Buy from Neutral at Goldman. Axcelis (ACLS) was upgraded to Buy from Hold and Evergreen Solar (ESLR) was lifted to Hold from Sell at Citigroup.
SanDisk-SNDK: Believe discount to $26/share offer is possible@AMTR
Am Tech believes a discount to the $26/offer is possible if SNDK’s board continues to hold out since the company is likely to report Q3 results that reflect the weakening demand environment and lack of near-term bit growth drivers. The firm maintains a Buy rating.
Morgan Stanley-MS had a very positive quarter@BERN
After Morgan Stanley reported higher than expected EPS for its Q3, Bernstein believes the firm’s balance sheet trends are positive and they think its valuation is attractive. Bernstein maintained their Outperform rating
Internet company price targets lowered@MLCO
Merrill lowered price targets on GOOG (target to $574 from $711), YHOO ($23 from $25), EBAY ($27 from $30), AMZN ($85 from $86), EPXE ($22 from $23), and PCLN ($119 from $141) following the recent sell-off in the group.
ACE Ltd.-ACE is well-positioned to pick up business from AIG@WCHV
Wachovia believes Ace is poised to benefit from the problems facing AIG. The firm believes Ace can gain business both in the U.S. and abroad, and they maintained their Outperform rating.
Morgan Stanley’s & Goldman’s cost of default protection rises sharply-Bloomberg
According to Bloomberg, Morgan Stanley’s (MS) and Goldman’s (GS) credit-default swaps have increased today on investor concnrs that the credit crunch is deepening. Morgan’s credit-default swaps increased to 760 basis points from 680 and Goldman’s increased to 440 from 420.
AIG not on the US government’s balance sheet, economist says-Dow Jones
FTN Financial’s Chief Economist, Chris Low, says the U.S. government’s stake in AIG is capped out at 79.9% in order to prevent it from putting AIG on their balance sheet. The U.S. government is required to put entities on its balance sheet if it holds an 80% stake or more.
Solar: Sources indicate bill could come to Senate floor today@SBSH
Citigroup notes the Senate Finance Committee Chairman Baucus announced an agreement to move forward on a larger tax extender package that includes the full 6-year extension of the solar investment tax credit (ITC). Citigroup’s sources indicate this bill could come to the Senate floor today or early next week at the latest and will pass in a landslide. The firm thinks the bill will be seen as most positive for SunPower (SPWR), but they find it even more positive for First Solar (FSLR).
WTI Crude forecast cut to $115/bbl from $140/bbl@GSCO
Goldman cut its its 3 month WTI crude forecast to $115/bbl from $140/bbl and its 2009 WTI crude forecast to $123/bbl from $148/bbl
Jim Cramer’s “Mad Money”
Cramer said if the U.S. government allows American Int’l Group (AIG) to fail, there could be a catastrophic deflation of assets around the world. Cramer said the Dow could fall 1,000 points if AIG is not fixed correctly. He said the number of individuals and businesses that depend on AIG is staggering and the effects of a failure would be felt worldwide. Cramer said a failure of AIG would easily cause European bank failures and possibly failures elsewhere in the world. Cramer said Fed Chairman Ben Bernanke “let us down” with his decision to leave the federal funds rate unchanged earlier today. He said the move “could really screw up the U.S. economy. Then, Cramer told viewers in his “Outrage of the Day” segment, that ” No man has done more to sabotage the confidence of this market than SEC chairman Christopher Cox.” Cramer said the SEC’s removal of the “uptick” rule and failure to enforce other rules designed to prevent naked shorting played a key role in the destruction of the financial sector. Cramer theorized that with adequate protection against naked shorts, AIG may have been able to execute a plan to sell its assets. Next, Cramer talked with Clarence Otis, chair/CEO of Darden Restaurants (DRI), about his recent quarter and the company’s overall outlook. Otis called the company’s forecasts conservative but also said there are still challenges in the marketplace. Otis said he still sees opportunities with the company’s acquisition of Longhorn Steakhouse, which should add to both the top and bottom line of the company’s earnings. Cramer called Darden an excellent long-term growth opportunity and reiterated his buy recommendation. LIGHTNING ROUND: (Bullish) RIMM; ENER; FSLR. (Bearish) STSA; TIE; MELI.
Fast Money Position Recap- Macke Owns (MSFT), (WMT), (UUP): Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (GS); Finerman’s Firm Owns (DVN), (GE), (MSFT), (NOK), (SUN), (TSO), (VLO), (PM); Finerman’s Firm Is Short (XLF), (IYR), (IJR), (MDY), (SPY), (IWM); Finerman’s Firm Owns (DNA) Calls ; Najarian Owns (AAPL) And (AAPL) Collar; Najarian Owns (AIG) And Is Short (AIG) Calls; Najarian Owns (MS) And (MS) Put Spread And Is Short (MS) Calls; Najarian Owns (NOK) And Is Short (NOK) Calls; Najarian Owns (RIMM) Call Spread; Najarian Owns (TSO) Call Spread; Najarian Owns (WB) Put Spread; Najarian Owns (WM) And (WM) Puts; Najarian Owns (XLF) And (XLF) Collar; Seymour Owns (BX).
Ok so the market got the AIG bailout but fear is still lingering and banks are starting to freeze and slowing the lending to each other….the saga continues and I am still keep things nimble and looking for high probability shorts and longs… I like the solar note by C. That could be a big boost to solars esp. FSLR and SPWR. See you in the trading room for ideas and thoughts…..
Pick plays with a high probability of success, have focus and patience, run technicals through support and resistance. Great Luck and Happytrading!
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