Daily Archives: November 3, 2007

Open Letter to Citigroup Board of Directors

Dear Board of Directors at Citigroup,

24/7 Wall St. has made no secret since early December 2006 that Chuck Prince needs to go.  Mr. Prince is not incompetent and he is not a crook, at least not at all from what we have been told by industry insiders and outsiders alike.  He was the right man for the time when Sandy Weil’s regulatory mess had to be cleaned up.

But we have read and heard from numerous sources that you are considering Bob Rubin as the possible replacement if Chuck Prince is truly resigning Sunday.  We strongly urge caution against this placement as anything other than interim.  Rubin might be an incredible interim Chairman, but he cannot be considered a permanent fix.  The chances are great that he may end up being dragged into being another financial advisor to the President-elect starting in 2009 and this could leave Citigroup somewhat vulnerable if Rubin is named as the full replacement.

We at 24/7 Wall St. take no joy nor do we take credit for any victory laps over a fired CEO.  Chuck Prince was the perfect man for an interim job at the time, even though we at 24/7 Wall St. said he had to go last year.  Do not make the same mistake by appointing Rubin as supreme commander, and if you do please do not make it anything more than "interim" for posterity purposes.

The officers of 24/7 Wall St. do not own securities in Citigroup.  But Citi is a DJIA component and we do want to see the integrity lost in the company as it such a powerful mechanism.

Wall Street at this point is willing to tolerate a "throw in the towel and throw in the kitchen sink" report along with Mr. Prince’s ouster.  Once again, we mean no disrespect to Mr. Prince nor to Mr. Rubin.  They were appropriate for a time but the best case scenario is for Citigroup to promote either from within or to hire the best gun in town to be sheriff.  You have the budget and this is your opportunity to shine.  At this point you do NOT have to commit to anything permanent, not yet anyhow.

Please don’t make the same mistake thrice.  Your shareholders will greatly appreciate it and benefit from it.

Jon C. Ogg & Douglas A. McIntyre   
24/7 Wall St.

Posted on: November 3, 2007 – 6:46 pm in Management Change, , , , ,

AIG (AIG): Methusela Pays A Visit

AIG’s (AIG) ancient former CEO Hank Greenberg is not happy with how the place is run. He shouldn’t be, but neither should any of the company’s shareholders. The stock is off 10% over the last two year against an almost 30% improvement in the S&P.

Of course, Greenberg, now well into his 80s was booted because of an accounting scandal at the firm where he was CEO from 1967 until two years ago. The Feds are still looking into the matter.

In the meantime, Greenberg controls trusts and foundations that control 13.6% of AIG’s shares. He has filed with the SEC seeking changes at the company because he "believes that there are opportunities to significantly improve [AIG's] performance and strategic direction, as well as the value of their investment."

According to The Wall Street Journal, Greenberg "have not made any decisions regarding their future intentions.". Read that to mean that he intends to bully that AIG board through suits or a proxy fight to get the price of the shares up. This might come through selling off assets, increasing the dividend, of buying back shares.

Instead of playing shuffle board on the Queen Mary II, Greenberg is trying to get the stock price up at his old company. And, he probably will

Douglas A. McIntyre

Posted on: November 3, 2007 – 2:34 pm in Financial Stocks,

Ford (F) Gets Its UAW Deal, Workers Save The Company

The UAW negotiations with Ford (F) went fast. The template was already in place from the deals with GM (GM) and Chrysler. There will be a fund set up so that the UAW can pay out benefit money. Ford will probably have to put up $20 billion to set this up. Workers will be put into two tiers with the lower level employess being paid less.

Ford is in trouble, so getting a contract finished was important. With twelve months in a row of declining sales, the No.2 US car company could not have weathered much of a strike.

The UAW chief Ron Gettelfinger may end up being the man who was most responsible for fixing the wreck that Bill Ford made of his family’s company. Alan Mulally, who was brought in from Boeing (BA) to take over the flagging car company may have his name in the history books. But, if the head of the union had kicked Ford when it was down, it mgiht have been the finish.

Gettelfinger gave up a lot of jobs to give Ford the chance to be financially viable again. And, for that his members may not remember him kindly.

Douglas A. McIntyre

Posted on: November 3, 2007 – 7:52 am in Autos, ,

This Week on Stockhouse October 29 to November 2

The U.S. Federal Reserve elected to again cut interest rates on its benchmark overnight lending rate, to increase liquidity and moderate the pain of the subprime mortgage lending crisis. While the move was widely expected, markets remained on unstable ground.

Danny Deadlock has his eye on a platinum play and a zinc-lead-silver explorer working in Portugal, both of which he highlighted in Two new mining plays.

Maybe it’s time for wealth-based taxation, a view offered by littleguy123 in Income taxation is a failed system.

Buzz on the Boards reviewed the discussions at ECU Silver Mining (TSX: T.ECU, Bullboards) and Paradigm Medical Industries (OTC: BB: PMED, Bullboards).

In Monday trading, traders bid up shares of a junior gold and silver play with a drill program underway in the Stockhouse Canadian Small and Micro-cap Stock Report. An acquisition agreement bolstered shares of a China rare metals play, featured in the new Stockhouse U.S. Small and Micro-cap Stock Report.

On the heel of the Alberta government’s decision to substantially increase oil royalties, , Dr. M. H. Rajabally followed up his first look at the “Oil Barons” in No tears for oil barons, part two.

Thom Calandra is back with a guest column exclusive to Stockhouse, and he wrote about communities among other things in the column entitled So he’s back, melting UP… will anyone care?

Buzz on the Boards looked in at the talk on the Thermal Energy (TSX: V.TMG, Bullboards) and PetroHunter Energy Corporation (OTC: BB: PHUN, Bullboards) Boards.

On Tuesday drilling news from a microcap gold explorer was enough to propel big gains, according to the Stockhouse Canadian Small and Micro-cap Stock Report. Merger news was very palatable to certain shareholders of a medical technology company. Read more in the Stockhouse U.S. Small and Micro-cap Stock Report.

Community member High2 wrote about the exciting potential gains for a junior miner with a zinc deposit, in Dajin could be an elephant.

Pro contributor Aaron Fennell, an account executive with MF Global, wrote a helpful, easy-to-understand overview of the yen carry trade and why it’s important to watch the Bank of Japan, in The yen carry trade: the impact of rising Japanese rates.

Buzz on the Boards highlighted Viterra (TSX: T.VT, Bullboards), and Oragenics Inc. (AMEX: ONI, Bullboards).

On Wednesday, a venture-listed gold miner noted that recent assay results are backed by an independently produced technical report. See the Stockhouse Canadian Small and Micro-cap Stock Report. Just in time for Halloween: some sweet news about the fight against tooth decay cheered investors in a small biopharmaceutical firm. Read the story in the Stockhouse U.S. Small and Micro-cap Stock Report.

Casey Research reprinted some of their prescient writings circa December 2006, but insisted it’s not too late to belly up to the junior resource party. A trip back in time to profit from the unfolding crisis today.

Stacey Laliberte wrote about the second part of his plan to survive in the event of a U.S.: add a healthy dose of uranium to his portfolio for downside protection in What if a recession? Part two of three.

A recap of the recent writings of Thom Calandra, exclusive to Stockhouse, highlighted the contributions from the former MarketWatch columnist.

Buzz on the Boards http://beta.stockhouse.com/Community-News/2007/November/1/Paladin-rides-high-CriticalControl-signs-with-Albe spotlighted Paladin Resources (TSX: T.PDN, Bullboards) and CriticalControl Solutions (TSX: T.CCZ, Bullboards).

On Thursday, earnings from a wireless company pushed its shares skyward. Read more in the Stockhouse U.S. Small and Micro-cap Stock Report, while orders for two venture-listed alternative energy plays zapped their share prices higher. Please read the Stockhouse Canadian Small and Micro-cap Stock Report.

Financially Fit contributing editor Nancy Zambell urged investors to sleuth through company annual reports to avoid making any Enron-type investing mistakes.  http://beta.stockhouse.com/Columnists/2007/November/2/Trick-or-treat—how-to-detect-accounting-tricks

MontyHigh wrote a brief fundamental analysis of Roca Mines (TSX: V.ROK, Bullboards), http://beta.stockhouse.com/Bullboards/SymbolList.aspx?s=ROK&t=LIST

followed by an examination of a recent technical price breakout in Fat Pitch: Roca Mines. http://beta.stockhouse.com/Community-News/2007/November/2/Fat-Pitch–Roca-Mines

Posted on: November 3, 2007 – 7:40 am in Uncategorized

The Week’s Top Issues

Next week we have earnings out of John Chambers & Co., here is the preliminary preview.  There were some major developments this last week ended November 2, 2007:

Jon C. Ogg
November 3, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7Wall St. subscriber-based Special Situation Investing Newsletter.

Posted on: November 3, 2007 – 7:37 am in The Week

Berkshire Hathaway Earnings Winner On No Hurricanes (BRK-A)

Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-A) posted reults after Friday’s close that are probably going to be hard to complain about, and not just because very few analysts make projections on the diversified insurance and investment/holding company conglomerate.  For a company that was a beneficiary of no major hurricanes in the U.S. again, you might wonder why the earnings were’t better on a per share basis.  Maybe the old sage just didn’t bilk the insurance customers enough.   

The conglomerate posted quarterly net earnings of $4.55 billion, or $2,942 per share, up from last year’s third-quarter net income of $2.77billion, or $1,797 per share.  Berkshire’s operating income of $2.56 Billion was actually down slightly from last year’s $2.6 Billion operating income.

24/7 Wall St. still wants to know why Warren Buffett hasn’t done that whale of a deal he said he’d like to do.  We previously gave a long list of candidates the Oracle of Omaha might want to consider.  The company had roughly $47.07 Billion cash on hand at the end of the quarter, yet it has committed about $16.9 Billion to stocks in 2007.

Jon C. Ogg
November 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. subscriber-based Special Situation Investing Newsletter.

Posted on: November 3, 2007 – 5:34 am in Buffett, Conglomerates, Earnings,

Hank Greenberg & AIG, Up A Rope & In The Wind (AIG)

Former head and oustered Maurice "Hank" Greenberg according to an SEC filing is leading a campaign to do a total makeover at his AIG (NYSE:AIG).  There is a problem besides the fact that Greenberg is 82 years old.  He was ousted in 2005 after Eliot Spitzer’s pre-Governorship probe of the industry that led to his demise as leader there. A key consideration is that Greenberg may in fact be blocked from being able to do very much on his own.  Here is the summary of the filing:

The Reporting Persons are considering and evaluating strategic alternatives designed to lead to the maximization of their investment in the Issuer.  The Reporting Persons believe that there are opportunities to significantly improve the Issuer’s performance and strategic direction, as well as the value of their investment.  In this connection, the Reporting Persons anticipate holding discussions with stockholders and third parties that may address a number of issues, including without limitation, their respective views on the Issuer’s business and prospects, the suggested disposition of certain of its operations, investment opportunities and concerns over the direction and management of the Issuer generally, and other opportunities to improve or realize on the value of their investment in the Issuer.  At this time, the Reporting Persons have not made any decisions regarding their future intentions with regards to their plans and proposals with respect to the Issuer.

The Reporting Persons reserve the right to change their plans and intentions, including the right to increase or decrease their investment in the Issuer.  In particular, any one or more of the Reporting Persons may (i) purchase additional shares of Common Stock, (ii) sell or transfer shares of Common Stock in public or private transactions (including, without limitation, transfers among Reporting Persons or between any Reporting Person and any entity affiliated with such Reporting Person, which may include entities not in existence as of the date hereof), (iii) enter into privately negotiated derivative transactions and/or public purchases and sales of puts, calls and other derivative securities to hedge the market risk of some or all of their positions in the Common Stock and/or (iv) take any other action that might relate to or result in any of the actions set forth in response to paragraphs (a) – (j) of Item 4 of Schedule 13D…………….

Unfortunately, this will be a tough one for Mr. Greenberg, despite his approximate 13% ownership.  He may have been unjustly run out of his own company, but the path was already set some time ago.  Many people refer to behemoth companies as battleships that take a long time to turn.  It is hard to imagine that this can be affected immediately, but 24/7 Wall St. will run the math on it.  It is obvious thatthe new management team is not a strong one, at least not compared to when Greenberg was commander in chief of the financial and insurance conglomerate.

AIG traded up over 3.5% to $61.25 in after-hours trading on Friday.  The 52-week trading range is $56.37 to $72.97.  This will create one hell of a Special Situation newsletter report if we get to look at AIG as a break-up or activist candidate. 

One key issue Mr. Greenberg will have to consider is a good old cowboy euphemism: "Once you let the cat out of the bag, it’s hard to put it back in."  Shining light on the hidden financial woes internally may also create some temporary harm to the stock.

Jon C. Ogg
November 2, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he produces the 24/7 Wall St. subscriber-based Special Situation Investing Newsletter.

Posted on: November 3, 2007 – 5:02 am in Activist Investor, Bait Shop, Financial Stocks, Large Cap Stocks, Management Change, Mergers and Buy Outs,