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After Clearwire Corporation (NASDAQ: CLWR) closes its venture with Sprint Nextel Corporation (NYSE: S), the company CEO Benjamin Wolff has made several recommended appointments. It is also losing its CFO. As the company states in its filing, "John Butler, our CFO, has informed me of his decision to leave Clearwire effective at the close of the transaction to spend more time with his family. I will miss John a great deal. He has been a tremendous partner and he has my deepest gratitude for his many contributions to Clearwire over the past 3 1/2 years. An external search is being initiated for John’s successor."
Daily Archives: September 19, 2008
Clearwire CFO Not Part of NewCo (CLWR, S)
The 52-Week Low Club 9/19/2008 (IHS)(DM)(OTTR)
Bad day for the 52-week low club.
IHS (IHS) Decision to buy Global Insight for $200 million drives shares down. Bottom at $45.66 from 52-week high of $72.19.
Dolan Media (DM) No news, just a sell-off. Drops to $11.22 from 52-week high of $31.15.
Otter Tail Power (OTTR) Market unhappy with company’s plan to sell stock and with new guidance. Sells off to $29.71 from 52-week high of $46.15.
Douglas A. McIntyre
Companies Not On SEC Short Sale Ban, But Should Be
Frankly, we think the ban on short sales is not the right way to run a free market. But it doesn’t matter what we think. These are the new rules, but they do not always make sense. Consider the stocks listed below that have many of the same issues as the financial companies but did not make the SEC’s list.
Autos Next In Government Handouts? (GM, F)
If you look at the auto stocks today, you might deduce that they are next in line for the government corporate bread lines and farm camp jobs.
Ford Motor Co. (NYSE: F) is only up about 4% at $5.49, but shares of rival General Motors Corp. (NYSE: GM) rose 29% to $12.81 late this morning. It seems that Wall Street might be buying into the notion that if Uncle Sam is willing to take over the burden of the mistakes by many large financial institutions to avoid systemic risk, then perhaps making some loan guarantees to the Big 3 might not be as far-fetched as some think.
Why The Paulson Program Doesn’t Work
One senior banker described the new Paulson, Bernanke & Co. plan as "the privatization of profits and socialization of losses."
There are a number of reasons why the government’s plan to pull toxic assets out of banks and brokers and into a huge radioactive Superfund site will not work. On the surface the financial companies will be rid of bad paper, and, perhaps, the government can carry the junk long enough to sell it back into the market.
One question that few people have asked is who gets the deal of the century. Banks? Savings and loans? Credit unions? Brokerage firms? What about hedge funds?
If hedge funds are not included and have to mark their bad paper to the market rate that the government is paying, these operations may have to liquidate huge positions in other investments. A series of big sell-offs like that will not usually help the market recover.
What about foreign banks? Barclays (BCS) has a lot of offices in the US, and a lot of capital. Goldman Sachs (GS) has offices in London and a lot of money in UK banks. Someone will have to draw the line on who gets saved and who does not.
When the public banks, brokerage firms, and insurance companies sell their assets to the government, will they have to take huge losses? Under accounting rules, "yes." Unless Citigroup (C) has already written its bad paper down to exactly what it will get at an auction to determine what the government will pay, the bank will need to book the loss that day. Big losses may mean a new need for capital and more dilution.
Over the weekend Congressmen can bicker with Henry Paulson, Ben Bernanke, John Mack, and Jamie Dimon. The representatives from Akron, Ohio and Battle Creek, Michigan will want to make sure the local one-branch banks are in on the deal. By Monday, the market will wake up to the fact that the solution is not easy and that it harms almost as many entities as it helps.
At the end of the line, someone will have to pay for all of the mistakes. The new plan only means that fewer firms will carry that burden.
Douglas A. McIntyre
OfficeMax Destroyed On Lehman Exposure & Late Downgrade (OMX)
OfficeMax Inc. (NYSE: OMX) somehow managed to not notice the major stock market rally. Its shares plunged 29% to $9.38 on 1.5-times an entire day’s average trading volume. Friedman Billings Ramsey downgraded the stock this morning to a "market perform" rating" from "outperform." Apparently, the brokerage firm realized that there is a slowdown in office spending for office supplies. It slashed its price target from $18.00 to $12.00.
Another and perhaps larger component of today’s drop is that yesterday the office supplies retailer disclosed that one of its units has securitization notes guaranteed by Lehman. No payment default has occurred. Here are the full details. The 52-week trading range on this stock was $10.89 to $34.89. Shares are being excessively. The Lehman exposure looks rather large, although this downgrade looks very late.
Jon C. Ogg
September 19, 2008
Online Brokers Catch A Bid (SCHW, AMTD, ETFC, IBKR)
This is the new official 48-hour period to be known in the future as GOVERNMENT BACKSTOP DAYS. While financial stocks are a big beneficiary of this, the moves being seen in online trading firms are just as large or even larger. Here are some of the pre-market moves and we also included a change from the intraday lows of yesterday morning.
Day Trader Alert: Yahoo! (YHOO)
Yahoo! Inc. (NASDAQ: YHOO) is seeing what some might believe unthinkable. The number two and troubled search engine stock is trading lower this morning. Many might argue that the lower trend is normal since the company has lost its way. But if you look at the tape, it looks like a sea of green. Almost everything is trading higher. NASDAQ futures are up almost 70 points pre-market after a 100 point NASDAQ run yesterday.
Otter Tail Secondary Comes To Roost (OTTR)
Otter Tail Corp. (NASDAQ: OTTR) is trading lower this morning after pricing its secondary offering. The proposed 5 million share offering came in at 4.5 million shares. It also priced at $30 after closing at $33. last night. Shares have also been hit hard as its 52-week trading range is $31.28 to $46.15.
Financial Stocks Set To Rocket (AIG)(WM)(GS)(MS)
Shares of major financial firms from Goldman Sachs (GS) to Morgan Stanley (MS) are up 25% to 35% in the pre-market.
Washington Mutual’s (WM) stock is up more than 40% and AIG’s (AIG) soared more than 30%.
Douglas A. McIntyre
Treasury To Insure Money Market Funds
According to MarketWatch, The U.S. Treasury said it’s established a temporary guaranty program for U.S. money market funds. For the next year, the U.S. Treasury will insure holdings of any publicly offered money market mutual fund, retail and institutional, that pays a fee to participate."
Douglas A.McIntyre
Top Pre-Market Analyst Upgrades (AEP, CREE, DRI, GPS, KEY, MFE, ORCL, SONC, YUM)
These are some of the upgrades and positive calls from analysts we have seen affecting shares this Friday morning:
- American Electric Power (AEP) Raised to Buy at Piper Jaffray.
- Cree (CREE) Raised to Outperform at Oppenheimer.
- Darden (DRI) Started as Overweight at Thomas Weisel.
- Gap Inc. (GPS) Raised to Buy at Goldman Sachs.
- KeyCorp (KEY) Raised to Sector Perform at RBC.
- McAfee (MFE) Raised to Market Perform at FBR.
- Oracle (ORCL) Raised to Buy at Piper Jaffray.
- Sonic (SONC) Started as Overweight at Thomas Weisel.
- YUM Brands (YUM) Started as Overweight at Thomas Weisel.
Jon C. Ogg
September 19, 2008
Top Pre-Market Analyst Downgrades (ACN, ARO, ASCA, CTSH, ROCK, INFY, ISLE, MSCC, STN, TRIN)
These are some of the downgrades and negative analyst calls we have seen affecting shares this Friday morning:
- Accenture (ACN) Cut to Market Perform at Wachovia.
- Aeropostale (ARO) Cut to Neutral at Goldman Sachs.
- Ameristar Casinos (ASCA) Started as Sell at Goldman Sachs.
- Cognizant Tech Solutions (CTSH) Cut to Market Perform at Wachovia.
- Gibraltar Industries (ROCK) Cut to Neutral at Baird.
- Infosys (INFY) Cut to Market Perform at Wachovia.
- Isle of Capri (ISLE) Started as Sell at Goldman Sachs.
- Microsemi (MSCC) Cut to Market Perform at Wachovia.
- Stantec (STN) Cut to Outperform at Raymond James.
- Thomson-Reuters (TRIN) Cut To Sell at Deutsche Bank.
Jon C. Ogg
September 19, 2008
Oracle (ORCL): Tech Prospers (NT)(MSFT)(GOOG)(JAVA)
Shares in some tech companies are down as far as the banks and brokerage firms. Sun (JAVA) and Nortel (NT) are in that group, but they are hardly alone. Firms which have the lead of their sectors, especially Microsoft (MSFT) and Google (GOOG) have experienced significant drops in their market caps. Both stocks are down over 30% so far this year.
Larry Ellison, the third richest man in America, gave Bill Gates and the founders of Google a reason to rejoice. The company he founded, Oracle (ORCL), did much better than expected last quarter and hinted that the trend would continue for the portion of the future it can see.
The Socialists Killed The Short Sellers
There was a perverse honor in being a short-seller. It was an honor among thieves, but the group usually made lots of money by taking significant risks.
Short-selling was based on one of the foundations of capitalism. Making money betting on disaster is just as much a part of the economy as taking the optimist’s side.
Banning short-selling in financial stocks, which both the US and UK have done, will halt the activities of the so-called naked shorters. These firms short shares without borrowing them from other firms. They are required to do that borrowing because it is the basis of their risk. If the stock they borrowed goes up, they have to pay the difference of what the original owner would have made.
Uncle Sam Wants To Own Your Bank, And Your House
The latest in a very long list of government proposals to save the world is the most radical. Congress would create a mechanism to sweep the so-called toxic assets of banks, brokers, and insurance companies into one huge fund controlled by a new entity or some division of the Treasury.
This cesspool would come with a checking account to send money back to the banks for their troubled paper.Eventually, these assets would be sold back into the market. This is the stuff of which vulture funds are made, so there will be a ready market. But, the assets will have to be sold at a significant discount to their original values.
Citigroup (C): Vikram Pandit’s Year Of Living Dangerously
Vikram Pandit’s job was to cut Citigroup (C) down to size. "Reverse the insanity of the empire builders who came before you", his investors said. Dump the damaged assets and maintain the solid core.
Pandit’s role was to be the King Arthur of a much smaller Round Table. Some knights would be dispatched, but it was all in the name of the common good.
Media Digest 9/18/2008 Reuters, WSJ, NYTimes, FT, Bloomberg
According to Reuters, Citigroup (C) is considering buying Washington Mutual (WM).
Reuters reports that US markets rallied on word of a potential plan for the government to take over the toxic assets of banks.
Reuters reports that a possible merger of Wachovia (WB) and Morgan Stanley (MS) raises questions because of liabilities on the big bank’s balance sheet.
Asia Markets 9/19/2008 (LFC)(HBC)
Markets in Asia were sharply higher.
The Niikkei was up 3.8% to 11.921. Mitsubishi UFJ Financial ran up along with most other financial shares.
The Hang Seng rose 8.2% to 19.083. China Life (LFC) was up more than 7%. HSBC (HBC) was up more than 6%.
The Shanghai Composite moved up 9.5% to 2,075.
Data from Reuters.
Douglas A. McIntyre
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