Daily Archives: December 12, 2007

Ten Stocks That Could Double In 2008

Not many stocks are likely to double. Even well-run companies like Cisco Systems (NASDAQ:CSCO) are not likely to move 2x even with great results. The market caps are already too large and the law of big numbers won’t allow them to ramp revenue up by a big percentage. There are a couple of exceptions like Apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN), but those don’t come along very often.

There are companies which could have big moves in their stocks next year. Many have been beaten down. A recovery for them is risky, but one good quarter, one management change, one buy-out or financing, or one big new customer could cause a significant price gain. A good example is cable company Charter (NASDAQ:CHTR). When it looked like cable was going to take over the broadband world, shares in the firm moved from $1.10 to almost $5 in a twelve month period. Now that cable is in the dog house, CHTR is back to $1.28.

E*Trade (NASDAQ: ETFC) This company has taken a brutal beating, and for good reason. E*Trade’s banking operation got too far into the hornet’s nest of subprime mortgages even though its discount brokerage business has been fine. But, the mortgage mistake took the share price down from $25 to $3.50 in just a few weeks. The company did get an infusion of $2.5 billion from Citadel Investment Group and its CEO was forced out. Now E*Trade has to prove that that investment was a smart move. If E*Trade can keep its online brokerage arm in good shape like Schwab (SCHW) or Ameritrade (AMTD) have done,and can keep client defections from being excessive, then the market will reward them. But, there can’t be more horrible news out of the firm’s banking operation..After sinking to as low as $3.46 when an implosion seemed likely, shares trade for $4.03 now.

Palm (NASDAQ: PALM) The executives at this company spend all day wishing that they were at Research-In-Motion (NASDAQ:RIMM), their more successful rival. PALM has recently announced a product delay that could hurt earnings. Brokerages have downgraded the stock. The company has a 52-week high of $19.50 and now trades at $5.49 after its recent one-time dividend. The bull case for Palm was recently made by its largest shareholder, Elevation Partners, which put $325 million into the company. The fund has brought in former Apple (AAPL) CFO Fred Anderson and Jonathan Rubinstein who helped develop the current iPod and Mac. That is a lot of management fire power and big capital, all bet on Palm bringing a solid smartphone to market. Apple was under $7 in 2003. Remember?

Sirius Satellite Radio (NASDAQ:SIRI) This is a hard one. If the company’s merger with XM Satellite Radio (NASDAQ:XMSR) does not go through, the debt at the firm could pull the stock way down. But, if the merger is approved, the first thing Wall St. will look for is how much the combined company can knock out of costs. The next thing investors will want to see is that the satellite radio base is growing rapidly beyond its current level of about 15 million subscribers. If a merged operation can hit these milestones in the second or third quarter of next year, the shares should recover. Two years ago, they traded just below $8. Today they change hands at $3.29.

Level 3 (NASDAQ:LVLT) Very few companies are in as big a mess as Level 3. Its core business would seem to be very promising and this is one of Jim Cramer’s Top Picks for 2007. The firm has a 50,000 mile broadband IP network. With the demand for VoIP, data, and video traffic that should be a very good business. But, management is weak. For some reason this team needs to buy a new company every few months. Integration time and cost are something a troubled company can’t afford.In order to begin a recovery, Level 3 would have to swear off M&A and cut more costs. It has a debt load of $6.8 billion, and thin operating margins. The company has some very large customers like AT&T (T) and Comcast (CMCSA). Management is under a lot of pressure to perform. Level 3 needs to focus on its core business, do it well and avoid all distractions. These shares were at $6.40 in June. Now they trade for $3.28.

Dendreon (NASDAQ: DNDN) Shares in this biotech have gone from $24.27 in April to their current price of $5.64. The company is for all practical purposes, in a pre-revenue stage operation and could remain that way for some time to come. Dendreon does have a potential blockbuster prostate cancer treatment in Provenge that still has some hope of getting FDA approval despite a recent setback. It has completed a $130 million financing on top of its already cheap $75 million financing.  If it can get a positive reaction from the FDA in 2008 or if clinical trials take a big step forward, these shares would almost certainly shoot back up.

Vonage (NYSE: VG) Most people on Wall St. assume that Vonage is dead and buried and many analyst targets are under current prices. But, it has settled many of the patent disputes it had with Sprint (NYSE:S), AT&T (NYSE:T), and Verizon (NYSE:VZ). Making peace with the big telecoms has cost Vonage money and it has convertible notes on its books for $253 million. And, churn rates for subscribers moved up to 3% in the last quarter. Revenue did grow 30% for the period to $211 million and the company has 2.5 million VoIP customers. Vonage needs to show a couple of clean quarters with reduced marketing expense, solid subscriber growth, and lower customer churn. These shares trade at $2.10. A year ago they were at $7.29 and this traded north of $15.00 at its IPO.

Boston Scientific (NYSE: BSX) This big medical device maker got into trouble when it bought Guidant, another medical device company, and paid too much for it. The price tag was $27 billion. The deal was so bad that the entire market cap for BSX is only $19 billion now. After the buy-out, one of Boston Scientific’s key businesses, stents, started to fall-off as studies showed that the devices could cause clots. In less than two years, BSX shares have dropped from over $26 to $12.85. The company has $7.9 billion in long-term debt. Boston Scientific is a potential break-up play. Institutional holders have to be frustrated by the share price. An outsider would have to move in and sell the company off in three or more pieces. It has large businesses in products for cardiovascular disease, digestive and urinary disorders, and treatments for deafness and pain. Without an auction and a serious plan for any pieces the company might keep, these shares go nowhere.

AMD (NYSE:AMD) The company is the second largest maker of processors after Intel (NASDAQ:INTC). AMD’s stock was over $40.00 in early 2006 and over the last year has fallen from $23 to under $9.  A price war with Intel has cost the company tremendously in the gross margin area and it is now losing money. AMD also bought graphics chip maker ATI for $5.4 billion. The combined company carries a little over $5 billion in debt. For these shares to move up, CEO Hector Ruiz will have to be shown the door. Wall Street must wonder why his board has not come to this conclusion already. Hope springs eternal. A new CEO would have to look at auctioning off ATI, even at a loss.  The value of the ATI business was recently written down . Next AMD will need good overall growth in the PC and server market. It has a new chip called Barcelona which has encountered some performance problems that the company says will be rectified in early 2008. If the new chip can get a bit of extra market share and pricing for PC and server chips hold fairly firm, AMD could show a good quarter or two.

KB Homes (NYSE: KBH) The reasoning behind a double here is extremely simple. KBH and  its peers, Pulte (PHM) and DR Horton (DHI), have lost well over half of their market value as the housing market has fallen apart. KB Homes traded over $70 in the summer of 2005 It changes hands at $21.90 now. If interest rates move down and the country does not move into recession next year, there could be a real estate market recovery or at least a stabilization sooner than many expect. A government bail-out of some customers with mortgages, which are about to reset, would help as well. There has also been a hint from Dubai and elsewhere that they might want to acquire a surviving homebuilder.  The bear theory is that housing will stay down for another two or three years.  If that happens KBH and other builder stocks could sell off more.  Some homebuilders could even go to zero.  But, the housing market will ultimately recover. The investor’s question is when.

Charter (NASDAQ:CHTR) The cable company has been hit hard from two sides. After a big run-up when cable stocks were doing well, it collapsed on news that most cable firms were seeing slow customer demand, due in large part to broadband products from telecom companies. And, as the credit markets fell apart, Charter’s $19.7 billion in debt started to look extremely unappealing. But the company does have two things going for it. The demand for broadband internet, HDTV, and VoIP is still there. And, billionaire controlling share holder,, Paul Allen has every reason to want the company to stay afloat. He probably can’t do a financing that would entirely wipe out current shareholders, not without a ton of lawsuits anyway. His holdings in the company are something of a safety net under the stock’s price. Charter almost certainly has to go through a significant refinancing and Allen could offer to take some debt at a lower interest rate as part of a package. If Charter shows reasonable growth in its telecom and digital cable businesses and operating income improves, Wall St. may find this stock attractive again. It now changes hands at $1.28 down from almost $5 in July.

Douglas A. McIntyre

As a reminder, this is a blueprint of what these companies could do under the right circumstances.  Neither Douglas McIntyre nor officers of 24/7 Wall St. own securities in the companies covered.

Posted on: December 12, 2007 – 8:51 pm in HI/LOW, Shareholder Issues, Small Cap Stocks, Value Investing, , , , , , , , , , , , , , , , , , , , ,

Biogen Loses BAIT SHOP Status, Officially & Again (BIIB, PFE)

Biogen-Iden (NASDAQ:BIIB) is seeing its shares pummeled in after-hours trading.  The company didn’t have another biotech drug crisis though.

Biogen had been under a corporate strategic review where it was evaluating strategic alternatives, but after today’s close the company issued a release that it has completed its review.  The key issue is that the company said WE ARE REMAINING INDEPENDENT.  Biogen had hired Goldman Sachs & Co. and Merrill Lynch & Co. on October 12 and at the conclusion of this process it did not receive any definitive offers to be acquired.

We gave this a preliminary review for our own Special Situation Investing newsletter long before the company announced its formal strategic review.  We had looked at this as a potential BAIT SHOP candidate (takeover candidate, not a minnow) that could have been acquired but that was after the implosion in early 2005 when the BAIT SHOP was just a free service.  We determined that after this reached back above $50 that it had become fairly valued and that after it reached north of $60 to $65 that it was priced too high.

The market cap before today’s after-hours drop was roughly $22.25 Billion, so that is going to spill over into other biotechs.  Shares of Pfizer (NYSE:PFE) are actually up almost 1% because Pfizer had been the believed would-be acquirer by many on Wall Street.  With the problems Pfizer has now and with its aging pipeline we think that this is the best $22 Billion that Pfizer never spent.  They need another biotech player with a better pipeline.

Shares of Biogen-Idec (NASDAQ:BIIB) are down a massive 27% in after-hours trading at levels around $55.00.  The valuation on this just went well under its "review date announcement" share price, mainly as many had already speculated the company was going to try to sell.  The value is better, but this one still isn’t a value stock.

We’ve also covered some of these developments for our open email distribution list as well.

Jon C. Ogg
December 12, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 12, 2007 – 4:44 pm in Biotech, Mergers and Buy Outs, ,

The 52-Week Low Club (SLM)(WM)

SLM (SLM) Buy-out is dead and company revises numbers down for 2008. Down to $27.63 from 52-week high of $58.

Office Depot (ODP) Soft guidance. Falls to $14.68 from 52-week high of $41.06.

Continental Airlines (CAL) High fuel cost, low fares. Trades down to $23.63 from 52-week high of $62.40.

AMR (AMR) Ditto for this airline. Dips to $16.25 from 52-week high of $41.

Washington Mutual (WM) The mortgage mess, write-offs and all. Down in flames to $15.73 from 52-week high of $46.38.

Eastman Kodak (EK) What’s wrong with this picture? Falls to $21.81 from 52-week high of $30.20.

Force Protection (FRPT) Military orders for vehicles being cut. Sells off to $4.70 from 52-week $6.96.

Douglas A. McIntyre

Posted on: December 12, 2007 – 4:13 pm in HI/LOW, , , , , ,

Oil Up 5% To $94.39

Tightening supply and the Fed rate cuts helped move oil above $94.

Douglas A. McIntyre

Posted on: December 12, 2007 – 3:17 pm in Uncategorized

Can Lehman Escape The Broker Earnings Hat Trick? (LEH, GS, BSC, C, XLF)

We are set to get the highly awaited earnings report out of Lehman Brothers (NYSE: LEH) on Thursday morning, and this could be the largest catalyst for brokers and financial stocks since the FOMC.  First Call lists this last quarter’s estimates at $1.44 EPS on $4.29 Billion in revenues.  Estimates have been lowered across the board over the last 60 to 90 days and even more recently, but this is still a call for earnings from operations.  Frankly the range of estimates is so wide on earnings and revenues compared to the past that we’d only advise any such estimates to be a ball-park estimate full of dart boards and blindfolds.

We have seen many comments from the Wall Street community warning that Lehman may through out many CDO write-downs and charges and frankly we wonder how with the current "off balance sheet" or "unknown values" items how any earnings estimate can be used.  We’ve also seen some comments noting that Lehman may escape the scythe.  Can you imagine all the abacus shuffling that had be done to calculate this earnings release?

Lehman is essentially flat to down marginally mid-afternoon ahead of tomorrow’s numbers around $61.00 today.  The 52-week trading range is $49.06 to $86.18.

Morgan Stanley just called Citigroup (NYSE:C) the short of the year.  Now that it has a new team it is quite possible that the old Smith Barney will resume as an independent entity.  Vikram Pandit has left the door open for major lay-offs and unit dispositions.  With the SIV ties and the CDO exposure (outside of everything else) we expect Citigroup to move either way on the Lehman earnings.

Goldman Sachs (NYSE:GS) has remained the "model citizen" out of all the brokers.  Its shares are up almost 2% today at $215.00 and its 52-week trading range is $157.38 to $250.70.  If you will recall, it actually did well on its last earnings and it turns out that Goldman had made much money betting against the mortgage markets.

Bear Stearns (NYSE:BSC) is perhaps the one to watch for much of the same action after Lehman reports as its shares have been crushed more than most bulge bracket firms.  Its shares sit up marginally at $100.70 today and its 52-week trading range is $89.55 to $172.61.

Lehman’s earnings has a chance of dictating the sector’s trading tomorrow.  If it looks like a deer in the headlights then Wall Street may get even more scared than it has been.  But if the company can overwhelmingly convince the rest of Wall Street that all the CDO’s, asset-backed securities, mortgages, and more are manageable then there could be a huge sigh of relief on Wall Street.

We caution one key thing here outside of numbers and outside of any forecasts and expectations.  You can’t just listen to what the company says in its release or even what is said in the conference call.  You have to decide if you trust the information and see how the brokerage community and traders actually say how much they trust what is said.  We aren’t calling anyone a liar here.  There is just a very cautious investment community right now, and trust has to keep being earned and re-earned at this point.

To see the reaction to the major group, we’d look at the Financial Select SPDR (AMEX: XLF).  It has traded over 88 million shares today and those ETF shares are down 0.7% at $30.02.  The XLF has traded as low as $28.10 and as high as $38.15 over the last 52-weeks.

Jon C. Ogg
December 12, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 12, 2007 – 1:35 pm in Brokerage Firms, Earnings, Financial Stocks, , , , ,

10 CEO’s That Need To Leave in 2008: John Thompson of Symantec (SYMC, STX, UPS)

It is always a difficult task to note a CEO who should go, and it is even more difficult when you like the CEO and when you actually thought the diversification strategy was safer than being a pure-play on the volatile data security market.  That is the conundrum we have in saying that John Thompson at Symantec Corporation (NASDAQ:SYMC) may need to drop the CEO title from his Chairman & CEO role.  We actually like this CEO from everything we have seen out of him but we can’t ignore the facts and can’t ignore the perceptions and performance.  We think that "more of the same" is going to ultimately lead shareholders wanting a new vision AND wanting new action leadership at Symantec. 

Our digging around regarding management at Symantec has yielded mixed hearsay over recent months, so this opinion may be one of controversy and may still be a bit too preliminary.  Thompson isn’t thought of as a dud.  He was appointed by President Bush in 2002 to the National Infrastructure Advisory Committee and he holds a maters out of MIT.  He’s chaired an effort to better secure the security and efficiency of national aviation.  Prior to Symantec he climbed the ladder at IBM and rose through sales, marketing and software developer ranks to become general manager of IBM Americas. He’s also listed as being on the board of directors at both Seagate (NYSE:STX) and UPS (NYSE:UPS) and is chairman of the board for the Cyber Security Industry Alliance.  If you own a PC or a new Mac, you’ve probably got the Norton security pre-installed on it. 

Read More »

Posted on: December 12, 2007 – 11:29 am in Management Change, Software, , , , , ,

Short Sales in Reverse Stock Splits (JAVA, CMGI, SUNW)

Since Sun Microsystems (NASDAQ:JAVA) and CMGI (NASDAQ:CMGI) have recently completed reverse stock splits, we wanted to see what short sellers had done in the stock.  Short sellers often pile on more pressure with added short sales betting against stocks who perform reverse stock splits.

The following data is based on the Trade Date of November 27 and the Settlement Date of November 30:

Sun Microsystems (NASDAQ:JAVA) had an adjusted 11.101 Million shares listed in its short interest after accounting for its reverse stock split.  What is interesting is that from mid-November that is a drop of some 30.5% in the short interest.  Maybe there is some love after all.

CMGI, Inc. (NASDAQ:CMGI) had an adjusted amount of 3.585 Million shares listed in its short interest after accounting for its recent reverse stock split.  This represents only a gain of 2.29% in the short interest from mid-November on an adjusted basis.

Sun Microsystems used to trade under the "SUNW" stock ticker, and even had the "JAVAD" ticker briefly, and CMGI traded briefly under the "CMGID" stock ticker while that was a pending reverse split.

Jon C. Ogg
December 12, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 12, 2007 – 9:11 am in Short Interest, Technology Companies, , ,

10 CEO’s That Need To Leave in 2008: Finish Line’s Alan Cohen (FINL, GCO)

Finish Line (NASDAQ:FINL) is a company in need of a new action team.  Alan Cohen is co-founder, Chairman, and CEO.  All companies reach a certain point where the founder needs to step aside to allow the business to be run by a more capable and more nimble operator.  That time has arrived for Finish Line. 

Mr. Cohen is unlikely to leave entirely since co-founder and as a holder, so if he cares about outside shareholders and cares about his own wealth he will decided to retain the Chairman role and turn the keys over to someone else.

This poorly crafted leveraged buyout of Genesco (NYSE: GCO) was the last big disappointment and the company was going to over-leverage itself if that came about.  Finish Line is using the "material adverse effect" argument because Genesco’s results failed to achieve target, although a slowing consumer spending environment may not be considered "material" enough in a current court case.  The fact that Finish Line said the company is now not generating enough cash flow is something it should have considered before it wanted to leverage its books up in what ended up becoming a bidding war.

We even evaluated Finish Line as a potential buyout candidate of its own back in 2006 (prior to Special Situation Newsletter) but decided to close that off the list for a small gain.  It was a good thing we had a change of heart there.  We questioned whether or not management would actually ever sell in the first place, but we didn’t expect a leveraged buyout for a more diversified play.

This stock recently traded at 12.75-times FEB-2008 earnings and only at about 8-times the FEB-2009 estimate, although it is quite likely that these estimates do not reflect a slower consumer spending environment.  Earnings estimates have been trimmed lower over the last 60 days.  It also doesn’t really consider a potential ongoing case with an even larger potential verdict against the company, although that outcome won’t be known for a while.  Our thesis for Alan Cohen is not subject to the verdict whether it wins or loses against Genesco.

The company has been a habitual spotty earnings performer.  At the end of a day when you are merely a retailer that caters to sport shoes and apparel that has to be continually replaced, how many excuses are there for a loss of more than two-thirds of your stock value.  The major growth days as far as numbers of new stor opportunities are somewhat behind the company, although some of that may be because there are more than enough sporting shoes and apparel stores around in major cities.  This maturity is another reason the company needs some fresh blood to help navigate through choppier waters than when this was a major growth story.

Shares are up from recent lows even after it warned of a loss, but with a history of spotty earnings performance compared to estimates it is just more of the same.  Shareholders are also confused by the dual class structure of the stock with there being more than 8-times the A-shares as B-shares and the B-shares have a ten-to-one ratio for voting.

With the structure of those B-Shares affecting the vote, Mr. Cohen doesn’t have to listen to shareholders and doesn’t have to do the right thing.  In fact, he could hang on for another decade if he wants to regardless of share performance.  An activist investor would be a big help to Finish Line, but any activist would know that their entire efforts would likely be falling on deaf ears.

GUIDELINES FOR OUR CEO’s TO GO SELECTION

Jon C. Ogg
December 12, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: December 12, 2007 – 8:40 am in Apparel, Management Change, ,

Bank Of America (BAC) Falls On Its Sword

In an SEC filing ahead of an investor presentation, Bank of America’s (BAC) CEO says that the fourth quarter will be a bit of a train wreck.

At Bank of America, we currently expect provision expense to be approximately $3.3 billion in the fourth quarter, reflecting increased reserves of about $1.3 billion.  In round numbers, about one third of the increase is due to growth and seasoning in our consumer lending portfolios with the remaining two thirds due to deterioration principally in consumer real estate and some in small business.

While we do not make a practice of forecasting quarterly earnings, I think you certainly can assume results will again be quite disappointing. At this point, the final writedowns of CDOs are unknowable, but we expect to be profitable in the fourth quarter.

No good news there.

Douglas A. McIntyre

Posted on: December 12, 2007 – 8:21 am in Banking,

Top 10 Pre-Market Analyst Calls (CRL, SCHW, CBB, HTZ, FRPT, MTG, SAP, ULTA, JPM, WB, BAC)

These are not the only analyst calls impacting individual share prices, but these are the ones that 247WallSt.com is focusing on:

  • Charles River (NYSE: CRL) downgraded from Buy to Neutral at UBS.
  • Charles Schwab (NASDAQ: SCHW) started as Neutral at UBS.
  • Cincinnati Bell (NYSE: CBB) downgraded from Outperform to Peer Perform at Bear Stearns.
  • Hertz Global (NYSE: HTZ) downgraded from Buy to Neutral at Banc of America.
  • Force Protection (NASDAQ: FRPT) started as Sell at Stanford Global Research.
  • MGIC Investment Corp. (NYSE: MTG) downgraded from Neutral to Sell at Goldman Sachs.
  • SAP AG  (NYSE: SAP) downgraded from Outperform to Underperform at Credit Suisse.
  • Ulta Salons (NASDAQ: ULTA) started in new coverage: started as Outperform at Wachovia; started as Overweight at J.P.Morgan; started as Neutral at Piper Jaffray.
  • Merrill Lynch downgrades brokers: cuts J.P.Morgan (NYSE: JPM) to Neutral from Buy, cuts Wachovia (NYSE: WB) to Sell from Neutral; cuts Bank of America (NYSE: BAC) to Neutral from Buy.

Jon C. Ogg
December 12, 2007

Posted on: December 12, 2007 – 8:15 am in Analyst Calls, , , , , , , , , , ,

Yahoo (YHOO) + CNBC Distribution Deal: Cable Screwed?

From Silicon Vally Insider

Yahoo and CNBC have signed a distribution deal in which Yahoo Finance will distribute a handful of CNBC clips each day. This is a smart step for both parties, but it’s also only a tiny fraction of what the two companies could and should do together   continued…

Posted on: December 12, 2007 – 8:02 am in Uncategorized

Another Reason To Sack AMD (AMD) CEO: An ATI Write-Off

AMD (AMD) has finally admitted that the assets which it acquired with its disastrous acquisition of graphic chip company ATI are impaired.

Odd that they were the last to know.

According to MarketWatch "the chip maker expects the impairment charge will be material but said it couldn’t provide an estimate of the amount of the charge. The company realized the charge during its annual strategic planning cycle, according to a Securities and Exchange Commission."

AMD paid $5.4 billion for the bucket of chips company and that combined company now has a paltry market cap of just over $5 billion.

CEO Hector Ruiz says he plans to stay on, but it is time for him to leave.

Posted on: December 12, 2007 – 7:57 am in Earnings,

United Online (UNTD) Cancels Classmates IPO

United Online (UNTD) has cancelled the much anticipated IPO of its Classmates.com operations.

According to the company, Classmates Media Corporation, intends to withdraw its S-1 registration statement as previously filed with the Securities and Exchange Commission. United Online has determined that proceeding with the initial public offering ("IPO") under current market conditions would not be in the best interests of its stockholders.

United Online expects to record transaction-related costs of approximately $4.5 million to $5.5 million during the fourth quarter ending December 31, 2007 in connection with its decision to withdraw the offering

Douglas A. McIntyre

Posted on: December 12, 2007 – 6:58 am in IPOs,

Shorts Hope For Sirius (SIRI) Takedown

Short seller are certainly willing to bet against the future prospects of Sirius Satellite Radio (SIRI). Shares sold short in the company rose 14.4 million between November 15 and November 30. The entire short interest in the company now stands at a staggering 113.5 million shares.

Those betting against Sirius believe that one of two things will happen. The first is that the merger with XM Satellite (XMSR) will not go through. That would almost certainly depress both stocks. The market is counting on the merger for cost savings.

But, even if the merger is approved, the two companies each have well over $1 billion in long-term debt in a market that hates debt and is not likely to extend over-extended companies any extra cash.

Shorts are gambling on a Sirius crash and burn.

Douglas A. McIntyre

Posted on: December 12, 2007 – 6:27 am in Short Interest, ,

Europe Markets 12/12/2007

Market in Europe were down at 6.15 AM New York time

The FTSE was off .9% to 6,477. Barclays (BCS) was off 3.9% to 535.5. BHP Billiton (BHP) was down 2.9% to 1624.

The DAXX was down .6% to 7,961. Daimler was down 2.8% to 67.87. Siemens (SI) was off 1.5% to 104.83.

The CAC fell 1.3% to 5,651. AXA (AXA) was down 3% to 27.65. Societe Generale was off 3.3% to 103.36.

Data from Reuters

Douglas A. McIntyre

Posted on: December 12, 2007 – 6:17 am in International Markets, , , ,

Why Wall St. Regrets Its Fed Sell-Off

Please give us back those shares we sold yesterday after the Fed announced that it would only cut rates a quarter point. The Dow dropped 294 points. Some financial stocks like Citgroup (C) and JP Morgan (JPM) dropped as much as 4%.

The stock market wanted the Fed to fix its problems. Credit is too tight so people won’t buy cars. Companies won’t buy new technology. Home prices keep falling. Banks are near failure.

The Fed’s response was simple. Things are bad, but not as bad as Wall St. thinks. We are going to give the credit markets a little relief than step back and see what happens.

The stock market spit on that thinking, and wounded itself without hearing what other plans the central bank might have in store.

Word then began to come out that the Fed did know exactly how tough the core credit markets were and had been working on a plan to help the banking systems all along. Stories in The Wall Street Journal and the FT  say that plan could be unveiled within days.

According to the FT: "The overhaul, which could be announced as early as Wednesday, is likely to take the shape of a new liquidity facility that will auction loans to banks. This would allow the Fed to provide liquidity directly to a large number of financial institutions against a wide range of collateral without the stigma of its existing discount window loans."

The market knows that most of its losses this year are because stock in some major financial companies have lost half of their value. Investment banks, brokerages, and money center banks are dying. If the shares in those companies were tracking the rest of the market, the Dow would probably be up 12% or 13% instead of just 8%.

But, the market was impatient as it often is. The Fed planned to fix things all along, just not in the way Wall St expected.

Investors can’t get back the shares they sold on the Fed news. But, they should not have sold them in the first place.

Douglas A. McIntyre

Posted on: December 12, 2007 – 6:10 am in Economy,

Nasdaq Short Interest Rises In Tech And Communications Stocks

The short interest in many Nasdaq-traded tech and communications stock rose sharply according to figures from November 30. They compare to number from November 15, 2007.

Shares sold short in Level 3 (LVLT) rose 14.4 million to 164.5 million. Shares short in Sirius (SIRI) moved up 14.4 million to 117.4 million. Short interest in Oracle (ORCL) was up 6.5 million to 37 millio shares. Shares short in Comcast (CMCSA) moved up 8.3 million to 23.5 million

The short interests in Marvell Technology, Tellab, JDS Uniphase, and Nvidia also spiked.

The largest drop in short interest came at Intel (INTC) where the figure fell 9.1 million to 60.9 million.

Largest Short Positions

Company                                    Shares Sold Short

Level 3                                        164.5 million shares short

Sirius                                          113.4 million

Microsoft (MSFT)                         112.9 million

Charter (CHTR)                              94.9 million

Intel                                              60.9 million

Yahoo! (YHOO)                             58.3 million

E*Trade (ETFC)                             49.9 million

Comcast                                      47.5 million

Cisco (CSCO)                              39.2 million

Oracle                                         37.0 million

Largest Increases In Short Position

Company                                     Increase

Level 3                                         14.4 million share increase

Sirius                                           14.4 million

PMC-Sierra                                    8.9 million

Oracle                                           8.5 million

Comcast                                       8.3 million

Telllabs                                         7.0 million

JDSU (JDSU)                                6.6 million

Nvidia                                           6.4 million

Largest Decreases In Shares Sold Short.

Company                                      Decrease

Intel                                              9.1 million share drop

Brocade                                        7.1 million

Charter                                         5.9 milion

Sun (JAVA)                                  4.9 million

Earthlink                                      3.4 million

Medarex                                      2.5 million

Data from Nasdaq

Douglas A. McIntyre

Posted on: December 12, 2007 – 4:23 am in Short Interest, , , , , , , , , , ,

Media Digest 12/12/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, the Fed is considering more actions to improve liquidty issues in the economy and announcements could come as early as today. On proposal would include a new liquidity facility that will auction loans to banks

Reuters writes that BHP Billiton (BHP) says it proposal to buy Rio Tinto (RTP) is still pending.

The Wall Street Journal writes that Citigroup (C) appointed Vikram Pandit as its CEO.

The Wall Street Journal reports that GE (GE) units NBC will give money back to advertisers who did not get all of the audience which they were promised for certain shows.

The Wall Street Journal writes that a slowdown in the US will hurt GE profits.

The Wall Street Journal also reports that Boeing (BA) says that its delayed 787 should be delivered by its new target date.

The Wall Street Journal writes that as Saudi Arabia builds up its infrastructure it uses more oil inside the country, leaving less to export.

The New York Times writes that another large study has shown the health dangers of GlaxoSmithKline drug Avandia.

The New York Time writes that Alan Greenspan says that the subprime mess was "an accident waiting to happen".

The New York Times writes that CNBC will begin to provide content to Yahoo! (YHOO) Finance.

The FT writest that the Fed will set up a system to auction loans to banks.

The FT also reports that Freddie Mac (FRE) says that it is facing much larger losses in the future.

Barron’s reports that e-commerce revenue is up 18% this holiday season to $18.79 billion.

Bloomberg writes that China retail sales rose 19% in November.

Douglas A. McIntyre

Posted on: December 12, 2007 – 4:05 am in Press Digest, , , , , , ,

Asia Markets 12/12/2008

Markets in Asia were down.

The Nikkei fell .7% to 15,032. Canon fell 2.4% to 5690. Docomo (DCM) fell 1.7% to 177000. Yahoo Japan rose 2.5% to 53200.

The Hang Seng fell 2.4% to 28,521. China Petroleum (SNP) fell 3.4% to 12.1. China Unicom (CHU) fell 3.4% to 15.84.

The Shanghai Composite was down 1.5% to 5,096.

Data frome Reuters.

Douglas A. McIntyre

Posted on: December 12, 2007 – 3:35 am in International Markets, , ,