Daily Archives: July 4, 2008

Europe Banks Head Back To The Trough (C)(BAC)(WB)(MER)(LEH)

Europe’s banks need to head back out on the fund-raising circuit. They may have to bring in as much as $141 billion, according to Goldman Sachs. Reuters writes that this capital will be necessary "to reach an aggregate Tier I ratio of 9 percent — a level achieved by European banks that have recapitalized recently."

Since the problems that the banks on the continent face are not much different from those in the US, the report begs the question of what will happen in America. The troubles of sub-prime mortgage paper, deteriorating credit, and LBO loans cross borders, and they have been no less acute in the United States than in the EU.

The banks and brokerages here that remain the most vulnerable are still Citigroup (C), Bank of America (BAC), Wachovia (WB), Merrill Lynch (MER), and Lehman (LEH). Many of these have tried to convince Wall St. that they are OK, but investors do not believe that, if share prices are any indication.

The victims of the need to raise more capital will be shareholders, once again. Citigroup has recently moved to a 52-week low of $16.25 compared with a period high of $52.97. New management there has said that it will make substantial changes to save money. Most of that has not happened and many in the market wonder why it is taking so long.

Another recapitalization at Citigroup could certainly move its shares to under $10. At some point soon it may be worth no more than the Bailey Building & Loan Association.

Douglas A. McIntyre

Posted on: July 4, 2008 – 10:49 am in Banking, , , , ,

This Week’s BioHealth & Biotech Top Stories

We saw another exciting week full of news for key developments in drug stocks, biotech stocks, medical device stocks, and other companies involved in various aspects of health care and medicine.  Below are some of the stock tickers we covered over at BioHealthInvestor.com this week:

  • STOCK TICKERS: ABT, BSX, MDT, JNJ, SRDX, ANPI, BAYRY, MAXY, AMGN, CRA, INGN, CELG, MRK, SNY, GSK, AKRX, ARYX

This week we saw another FDA Approval in stents as Abbott’s (NYSE: ABT) XIENCE drug-eluting coronary stent was approved for marketing.  While this is causing a resurgence in stents, this space is about to become highly competitive (stocks covered: ABT, BSX, MDT, JNJ, SRDX, ANPI).  Introgen (NASDAQ: INGN) has a new twist for head and neck cancer… give it a cold, literally.  Celgene Corp. (NASDAQ: CELG) actually won out as a competitor’s bone marrow disease trials failed to meet expectations.  Merck (NYSE: MRK) was an FDA decision winner as it gets to keep its lead on the cervical cancer vaccine market in the U.S. tied up for at least 6-months longer than it was anticipated (stocks covered: MRK, SNY, GSK).

This may be a tiny company, but a patent was awarded in bone marrow and stem cell transplants.  While a biotech turned over its hemophelia treatments to a larger company, hemophelia treatments may be better off now (stocks covered: BAYRY, MAXY, AMGN).  Vaccine awards are going to keep sales up at one small vaccine maker.  One Alzheimer’s Disease treatment that originally had high hopes has bitten the dust.  P&G walked away from a partner this week, killing a tiny biotech (stocks covered: PG, ARYX).

And on the front for reviews:

  • Do you remember all the hype and hopes for synthetic blood?  This looks like the last player has gone on to greener pastures.
  • What is a good investment that has backed way off from highs that should show steady growth in the China health care sector?  We evaluated one potential company for this.

These issues are more stock issues than anything else:

Have a happy and safe LONG Fourth of July weekend.  I think there is a new treatment on the market for burnt hand trauma from fireworks, but the FDA has it on hold until next February.

Jon C. Ogg
July 4, 2008

Posted on: July 4, 2008 – 7:31 am in Biotech, Healthcare, Medical, The Week, , , , , , , , , , , , , , , , ,

Starbucks (SBUX): The Mess Gets Worse

Twelve thousand souls are losing their jobs at Starbucks (SBUX), mostly because Howard Schultz let incompetents run his empire while he was occupied elsewhere. It will always be open to debate whether things would have been different if he had stayed on as CEO, instead of returning recently when things at the coffee company were getting bad.

In a superb article in The New York Times, the paper analyzes what may have been the worst decision by Starbucks executives. In the surge of rapid expansion in the US, they put many of their stores in the wrong places.

According to the article, "the company was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations." How could Starbucks, which knew very well where to put stores, make such a basic error?

Hubris. Starbucks believed that its products were so good and its brand was so strong that it could expand in the US and abroad no matter what the economic conditions were. The profound miscalculation is based on the notion that the number of customers who would come to Starbucks is nearly endless. The same idea has ruined a number of companies and industries over the years. It is the trap of thinking that the concept behind a firm is flawless and that execution is not as critical as the original idea.

That way of thinking eventually costs a lot of people their jobs.

Douglas A. McIntyre

Posted on: July 4, 2008 – 6:37 am in Food,

Media Digest 7/4/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, Goldman Sachs said European banks may have to raise another 60 billion to 90 billion euors to reach an aggregate Tier I ratio of 9 percent.

Reuters reports that Caterpillar (CAT) sees China sales doubling by 2010.

Reuters writes that the market will get its near-term direction from oil and GE (GE) earnings.

The Wall Street Journal writes that UBS (UBS) expects a small Q2 loss.

The Wall Street Journal writes that BHP Billiton (BHP) and China have reached an agreement on iron ore prices.

The Wall Street Journal writes that assets that the Fed took from Bear Stearns are worth about $1 billion less than expected.

The New York Times writes that the jobs report of 62,000 more people out of work dimmed prospects for a recovery.

The New York Times reports that Starbucks (SBUX) was hurt by picking the wrong locations as its expanded it US store base.

The FT reports that Chrysler is exploring another car manufacturing deal in China.

Bloomberg writes that LBO defaults may rise sharply as borrowing costs rise.

Douglas A. McIntyre

Posted on: July 4, 2008 – 5:58 am in Press Digest, , , ,

Asia And Europe Markets 7/4/2008 (ALU)(DB)(BCS)(CN)(SNP)

Market in Asia were mixed

The Nikkei fell .2% to 13,238. KDDI was down 2.7% to 632000. Mazda was up 4.6% to 550.

The Hang Seng was up .7% to 21,424. China Netcom (CN) was up to 22.30. China Petroleum (SNP) was up 2.8% to 7.03.

The Shanghai Composite was down 1.2% to 2,670.

At 6.40 AM, the FTSE was down .6% to 5,446. Barclays (BCS) was down to 282.75. British Airways was down 4.6% to 199.3.

The DAXX was .5% to 6,324. Commerzbank was off 2.5% to 19.11. Deutsche Bank (DB) was off 1.4% to 55.04.

The CAC 40 was down .8% to 4,311. Alcatel-Lucent (ALU) was up 1.5% to 3.76. EADS was off 2.7% to 11.77.

Data from Reuters.

Douglas A. McIntyre

Posted on: July 4, 2008 – 5:44 am in International Markets, , , ,