Daily Archives: July 11, 2008

The 52-Week Low Club (FNM)(FRE)(WB)(LEH)(AMD)(JAVA)

Fannie Mae (FNM) Full-blow panic that it will fail. Down to $6.68 from 52-week high of $70.57.

Freddie Mac (FRE) Panic. Falls to $3.89 from 52-week high of $67.20.

Lehman (LEH) Panic over potential customer losses and write-offs. Down to $13.29 from 52-week high of $74.09.

Wachovia (WB) Fear of more losses. Sells off to $11.15 from 52-week high of $53.10.

AMD (AMD) Big write-off of assets. Down to $4.60 from 52-week high of $16.90.

Sun (JAVA) Concerns about profitability and revenue growth. Down to $9.06 from 52-week high of $25.04.

Douglas A. McIntyre

Posted on: July 11, 2008 – 3:01 pm in HI/LOW, , , , , ,

Fed Offers Fannie Mae (FNM) And Freddie Mac (FRE) Help, Investors Don’t Care

The Fed offered to open it emergency discount window to Fannie Mae (FNM) and Freddie Mac (FRE) to offer them the money they may need to remain solvent.

Investors were not convinced. Perhaps they do not think the Fed has the $77 billion in capital that some analysts think the companies will need.

After the news, Freddie Mac was still trading down over 9% at $7.22 and Fannie Mae was off over 26% at $9.73.

Douglas A. McIntyre

Posted on: July 11, 2008 – 2:34 pm in Financial Stocks, ,

Feds Owe Ford (F) Almost $500 Million

Things have been so bad at Ford (F) that there is nothing left to cause its stock to rally. High gas prices have be undermining sales of its profitable SUVs and pick-ups. It has been slow to get into the fuel-efficient gas and hybird vehicles markets

But, today Ford is up over 8%. Call it a government bail-out of sorts. Ford overpaid its taxes to the tune of $445 million. The Feds are giving it back. According to Reuters, the money is from interest owed "from tax overpayments in 1994, 1992, and the period 1983-1989."

Maybe the IRS will do the same for GM.

Douglas A. McIntyre

Posted on: July 11, 2008 – 1:55 pm in Autos, ,

Broken Apple (AAPL) iTunes Servers Kill iPhone Activation

Who thought that Apple’s (AAPL) iTunes operations would screw up the launch of the 3G iPhone? Nobody. That’s who.

But, it turnsout that to activate the iPhone, part of the process must be done through servers which host the iTunes service. Once the process would not work in the store, new buyers tried the process from work or home. No luck. According to the AP, "the iTunes servers were equally hard to reach from home, leaving the phones unusable except for emergency calls."

No wonder so many people use RIM (RIMM) Blackberry smartphones. At least they work most of the time.

Douglas A. McIntyre

Posted on: July 11, 2008 – 1:38 pm in Wireless, ,

Stocks Crash, But Still Aren’t Cheap. So Steady As She Goes

From Clusterstock: The DOW dipped below 11,000 this morning for the first time in two years. Worse, the stock market has now been flat for the better part of a decade. Normally, long-term investors would be happy about such events: weakness creates an opportunity. Unfortunately, since stocks were so expensive to begin with, they’re still not cheap.

Read More »

Posted on: July 11, 2008 – 11:53 am in Economy

AMD (AMD): Darling Of The Dead Stock Pool Takes Another Write-Down

When AMD (AMD) bought graphics chip maker ATI, it thought it was getting a deal. Nothing of the sort happened. AMD ended up with over $5 billion in debt. Larger rival Intel (INTC) jumped on AMD with better tech and a price war.

AMD went to hell over a year ago, and it is not coming back. Today the company said it would take more write-offs for the value of ATI and some restructuring, which usually means firing people. The sum of the total charge will be $948 million. Since the firm’s market cap is only $2.9 billion, the write-down is not insignificant.

AMD’s shares promptly hit another 52-week low of $4.60. A little over a year ago, they were above $40

In the March quarter, AMD had an operating loss of $264 million on revenue of $1.5 billion. That leaves Wall St. to ponder whether the company can makes its debt service. If the answer is that the odds are running against the company, shares could drop much lower.

AMD is in a corner and getting out maybe nearly impossible. It faces a global market where the sales of PCs and servers is likely being hurt by the economy. It cannot increase prices in any meaningful way without the potential of losing more market share to Intel.

If AMD is an independent, solvent company a year from now, it will be a miracle.

Douglas A. McIntyre

Posted on: July 11, 2008 – 11:36 am in Technology Companies, ,

Dodging The Dow Drop: Coke (KO), GE (GE), And Cat (CAT)

Twenty-seven of the Dow components are down. And, three are playing defense in an brutal market: Coca-Cola (KO), GE (GE), and Caterpillar (CAT). Each of these is up a modest amount.

With the DJIA off over 200 points, financial stocks in the index are taking on more water. AIG (AIG) is off almost 8%. Bank of America (BAC) is down almost 7%. Boeing (BA) is off nearly 5%, even after an upbeat forecast about its next 20 year prospects.

Coke should be holding its own. Most of what it sells is inexpensive, global, and easy for the consumer to find. Its balance sheet is as good as any. If earnings suffer, the ding will be minor.

GE (GE) disappointed some investors today, but, it held its full-year forecast, something which a number of companies may not be able to do.

Caterpillar (CAT) may be an odd stock to be rising on a hard day. Industrial equipment can be cyclical, but the firm says that the demand for its products is unusually strong overseas.

The few stocks which are up today are likely to hold well if the market continues its slide.

Douglas A. McIntyre

Posted on: July 11, 2008 – 11:22 am in Defensive Stocks, , , , , ,

Dodging The Dow Drop: Coke (KO), GE (GE), And Cat (CAT)

Twenty-seven of the Dow components are down. And, three are playing defense in an brutal market: Coca-Cola (KO), GE (GE), and Caterpillar (CAT). Each of these is up a modest amount.

With the DJIA off over 200 points, financial stocks in the index are taking on more water. AIG (AIG) is off almost 8%. Bank of America (BAC) is down almost 7%. Boeing (BA) is off nearly 5%, even after an upbeat forecast about its next 20 year prospects.

Coke should be holding its own. Most of what it sells is inexpensive, global, and easy for the consumer to find. Its balance sheet is as good as any. If earnings suffer, the ding will be minor.

GE (GE) disappointed some investors today, but, it held its full-year forecast, something which a number of companies may not be able to do.

Caterpillar (CAT) may be an odd stock to be rising on a hard day. Industrial equipment can be cyclical, but the firm says that the demand for its products is unusually strong overseas.

The few stocks which are up today are likely to hold well if the market continues its slide.

Douglas A. McIntyre

Posted on: July 11, 2008 – 11:21 am in Defensive Stocks, , , , , ,

Is Lehman The Next Bear Stearns? (LEH, JPM)

The financial services sector has gone from horrible to somewhat stabilizing and back to horrible and then looking even worse.  When you think of an old mantra that "Failure isn’t an option" that just isn’t looking to be the case in the sector.  Lehman Brothers Holdings Inc. (NYSE: LEH) is down well over 10% again today and the stock hit a new 52-week low (multi-year actually).

Part of this is the rumor mill back in full force. We don’t even want to fan those flames nor do we wish to participate in that.  But part of this daily drop is from legitimate fears and some Fed-Speak that might scare you into thinking they aren’t just going to bail out every institution that runs into financial trouble.  The fact that a stock keeps losing 10% or 20% of its value isn’t enough to throw up the red flag for a potential filing for bankruptcy protection.  But as soon as the fears set in to the point that other parties take aggressive defensive actions to insulate themselves then it’s too late.  That was the case with Bear Stearns even though many of the rumors floating around before may have helped lead to a self-fulfilling prophecy.  When key customers begin leaving and when counter-parties stop accepting a financial firm’s business or their paper, then they are as good as done.

Another notion here on Lehman is the action seen in the PUT OPTIONS.  We are seeing more and more PUT buying in July contracts which expire in only a week. Below is a brief matrix of this months PUTS with strikes and the open interest.  This isn’t looking that promising:

PUT/STRIKE   Volume  OpInt
JUL08 $5.00    2,517    8,422
JUL08 $7.50    2,919    19,698
JUL08 $10.00   6,815    29,377
JUL08 $12.50   5,730    23,655
JUL08 $15.00  10,716   63,370
JUL08 $17.50   2,515    63,973
JUL08 $20.00   1,158    60,566

Over the last week we have heard JPMorgan’s (NYSE: JPM) Jamie Dimon talking about dismissing the notion of TBTF (too big to fail).  We have heard Treasury’s Hank Paulson and other Fed officials discussing the "allowing institutions to fail" and "allowing them to seek bankruptcy protection" as part of the course of the free markets.  Dimon might want to gobble up another bank in trouble to get the deposit and banking base, but he’s unlikely to want to buy another troubled brokerage firm.

Unfortunately, there are a handful of large financial companies out there where this notion of failure or bankruptcy protection or another Draconian measure is at least becoming a stronger and stronger possibility.  It seems that in today’s troubled financial markets that failure is actually an option, albeit a painful one.

Jon C. Ogg
July 11, 2008

Posted on: July 11, 2008 – 9:25 am in Banking, Brokerage Firms, Financial Stocks, ,

Top Pre-Market Analyst Upgrades (ADBE, APC, APSG, CENX, CRDN, CVS, DRI, GOOG, QCOM, STLD, SPWR, YUM)

There seemed to be more upgrades this morning than there were downgrades from Wall Street analysts.  Here is a snapshot of some of our key analyst calls we saw:

  • Adobe Systems (NASDAQ: ADBE) Started as Outperform at Credit Suisse.
  • Anadarko Petroleum (NYSE: APC) Raised to Outperform from Perform at Wachovia.
  • Applied Signal Tech (NASDAQ: APSG) Raised to Outperform at FBR.
  • Century Aluminum (NASDAQ: CENX) Raised to Outperform at FBR.
  • Ceradyne (NASDAQ: CRDN) Raised to Outperform at FBR.
  • CVS Caremark (NYSE: CVS) Started as Buy at Jefferies.
  • Darden Restaurants (NYSE: DRI) Started as Buy at Banc of America.
  • Google (NASDAQ: GOOG) started as Buy at Deutsche Bank.
  • Microsoft (N ASDAQ: MSFT) Started as Outperform at Credit Suisse.
  • Qualcomm (NASDAQ: QCOM) Added to Goldman Sachs Conviction Buy List.
  • Steel Dynamics (NASDAQ: STLD) Raised to Buy from Neutral at Citigroup.
  • Sunpower Corp. (NASDAQ: SPWR) Raised To Neutral from Underperform at Merrill Lynch.
  • Yum Brands (NYSE: YUM) Started as Buy at Banc of America.

Jon C. Ogg
July 11, 2008

Posted on: July 11, 2008 – 7:42 am in Analyst Calls, , , , , , , , , , , ,

Top Analyst Downgrades (AMAT, CSCO, ELX, TUES, UHS)

These are some of the downgrades or more cautious calls from Wall Street analysts this Friday morning:

  • Applied Materials (NASDAQ: AMAT) Cut to Hold from Buy at Citigroup.
  • Cisco Systems (NASDAQ: CSCO) Removed From Goldman Sachs Conviction Buy List, although the rating was maintained as Buy.
  • Emulex (NYSE: ELX) Cut to Hold from Buy at Needham; cut to Neutral from Outperform at Baird.
  • Tuesday Morning (NASDAQ: TUES) Cut to Sell from Hold at Deutsche Bank.
  • Universal Health (NYSE: UHS) Cut to Sell from Neutral at Goldman Sachs.

Jon C. Ogg
July 11, 2008

Posted on: July 11, 2008 – 7:38 am in Analyst Calls, , , , ,

Oil Hits Record At $146, Chances Of Deep Recession Grow

The price of oil hit $146 today on fears of instability in Iran, Nigeria, and production problems in Brazil.

If oil stays at this level, the price of gas is likely to move closer to $5.

With the auto and airline industries already in deep financial trouble, oil at $150 could push several of the companies in these sectors into Chapter 11.

With the consumer, gas and oil are likely to become a quarter to a third of the household expenses for some middle class families. With that added to higher food prices, Wal-Mart (WMT) may benefit, but no one else will.

The US middle class is running out of money.

Douglas A. McIntyre

Posted on: July 11, 2008 – 7:25 am in Oil & Gas,

InBev Raises BUD Offer, Should Win Bid At $70

InBev has raised its offer for Anheuser-Busch (BUD) which should seal its takeover of the US beer company.

According to The Wall Street Journal, "Anheuser’s board is likely to accept the offer this weekend."

Douglas A. McIntyre

Posted on: July 11, 2008 – 6:56 am in Mergers and Buy Outs,

Fannie Mae (FNM) And Freddie Mac (FRE) Fall 25% On News Of Possible Government Takeover

Shares of Fannie Mae (FNM) and Freddie Mac (FRE) are down about 25% in the pre-market on news that the government may take over the firms, taking the value of their stocks to zero.

Douglas A. McIntyre

Posted on: July 11, 2008 – 6:49 am in Financial Stocks, ,

GE (GE) Beats The Street, NBCU Still A Dog

GE (GE) hit Wall St.’s EPS forecast at $.54 and beat revenue estimates coming in at $46.9 billion above the $45.3 billion concensus.

The revenue increase was 11% over the same quarter last year. GE also reaffirmed its EPS forecast for the year at $2.20 to $2.30.

The company’s powerful infrastructure group had a 24% increase in segement profit. The number was amazing give the unit’s size. Its revenue for the quarter was $17.6 billion.

GE’s commercial financial unit pulled its weight with segment profit up 7% to $1.4 billion. Revenue for the business was $6.6 billion. Healthcare had moderate results with segment profit rising to $747 million up 8%.

NBC Universal made a significant case that it should not be part of the company as it continued to be a drag on earnings. Its revenue rose 7% to $3.9 billion, but segment profit moved up only 1% to $909 million. While GE’s industrial unit continues to do poorly with segment profit down 32% to $300 million, it is at least likely to be spun-off.

The NBC Universal number bolster the argument that old media is no place for GE to be. The recent results from companies like CBS (CBS) and News Corp (NWS) have been modest. A recession is likely to hit advertising revenue hard.

GE won’t have much credibility on Wall St. while it holds it NBCU assets.

Douglas A. McIntyre

Posted on: July 11, 2008 – 5:45 am in Earnings,

Citigroup (C) Sells German Unit: The Dismantling Of Sandy Weill’s Mansion

Shareholders at Citigroup (C) have been begging new management to auction off as much of the bank as the new CEO can find. They reckon that is the only way to get the share price up. It currently trades near a multi-year low. There has even been mention that Smith Barney should be put on the auction block.

Overnight, Citi gave in a bit to what its stockholders want. It sold its German retail bank operations to French financial firm Credit Mutuel. The US company will walk away with $7.7 billion.

Although the cash may only be enough to cover Citi’s Q2 losses, it means that shareholders will probably not have to be diluted further.

The question now is whether the bank can stay one step ahead of the sheriff by continuing to sell-off assets. Some experts think Citi could loss money for several more quarters. Better to raise the money through the sales of bits and parts than to get it from sovereign funds at below market prices.

Sandy Weill’s ideas of a global financial supermarket may never have been a good one. Now its does not matter. Citi can’t afford to hold it together. If the bank is lucky, it will get to keep half of what the old empire builder created.

Douglas A. McIntyre

Posted on: July 11, 2008 – 4:28 am in Banking,

GE (GE) Dumps A Unit

GE (GE) raised $5.4 billion by selling its Japanese consumer financial unit to Shinsei Bank.

GE does not need the capital, but it does need to fuel the perception that it is making the company smaller.

Not much of a start, but better than nothing

Douglas A. McIntyre

Posted on: July 11, 2008 – 4:19 am in Uncategorized,

InBev May Own Anheuser-Busch (BUD) In Short Order

Anheuser-Busch (BUD) may finally be admitting that it cannot get its shares up from $50 to the InBev bid of $65, even it its cuts costs and sells assets. BUD shares have sold at the lower price for too long. The beer business is not that good.

Now, it appears that InBev will raise its price. The BUD board can save face and shareholders can get a good deal for once.

According to The New York Times, "Exact terms of the potential deal could not be learned, but one person said that InBev had indicated that it would be willing to pay more than the $65 a share it had originally offered."

Perhaps it is finally dawning on public company boards that offers well in excess of current market value are hard to beat, especially in a bad economy. The Rohm and Hass (ROH) board clearly decided that a bid from Dow Chemical (DOW) was too good to be true. On the other hand, the board at Yahoo! (YHOO) has not learned that lesson. It has cost shareholders about a third of the value of the company’s shares.

BUD’s board looks like it is about to give in.

Good move.

Douglas A. McIntyre

Posted on: July 11, 2008 – 4:12 am in Mergers and Buy Outs, , , ,

A Government Bail-Out Of Fannie Mae (FNM) And Freddie Mac (FRE): Shareholders Get Nothing

It has started to look like a pattern. A financial company gets in trouble. It stocks falls. The shareholders take a haircut. Sometimes that haircut is 60% and sometimes the stockholders end up bald.

The US government is at least thinking of taking complete control of Fannie Mae (FNM) and Freddie Mac (FRE). If their financial situations get worse, the Feds reasons that the entire global financial system could take on water. Paper from the two firms is held by banks and brokerages from here to Timbucktu.

What the government may not have looked at closely is the $60 billion in shareholder wealth which will disappear if the two lending underwriters fail. The Fed has bailed out banks and brokerages without taking away all of the value of their stocks. Is it too much to ask with FNM and FRE?

Someone has to pay for bad corporate decisions. Why not the shareholder who had nothing to do with the errors.

Douglas A. McIntyre

Posted on: July 11, 2008 – 4:02 am in Financial Stocks, ,

Short Interest In Financials, Industrial, And Tech Rises (WM,WB,GM,WFC,C,GE,BAC,INTC,CSCO,DELL,LVLT,YHOO,SIRI,XMSR)

The short interest in most financial and industrial companies rose sharply for the period ending June 30.

Shares sold short in Washington Mutrual (WM) rose 21.6 million to 276.4 million. Short interest in Wachvia (WB) rose 57.9 million to 235.3 million. Share short in GM (GM) rose 32.8 million to 152.9 million. Short interest in Wells Fargo (WFC) moved up 11.3 million to 152.1 million.

Shares short in Citigroup (C) moved up 16.3 million to 152 million. Short interest in Bank of America (BAC) was up 18.8 million to 101.5 million. Shares short in GE (GE) was up 14.9 million to 89.7 million.

Shares sold short in a number of tech and telecom companeis also rose. The short interest in Intel (INTC) was up 27.4 million to 89.1 million. Short interest in Cisco (CSCO) was higher by 7.7 million to 72.6 million. Shares short in Level 3 (LVLT) rose 7.6 million to 244.2 million. The short interest in Dell (DELL) was up 7.4 million to 67.9 million. The short interest in Yahoo! (YHOO) was up 5.7 million to 53.2 million..

Shares short in Sirius (SIRI) rose 5.7 million to 153.9 million. Short interest in XM (XMSR) moved up 5.7 millon to 22.4 million.

Data from NYSE and Nasdaq

Douglas A. McIntyre

Posted on: July 11, 2008 – 3:03 am in Short Interest, , , , , , , , , , , , ,