Daily Archives: September 26, 2008

Citi-chovia or WaCiti (C, WB)

Citigroup_logo_3Wachovia_logoThe rumor mill and the deal-making mill might not be dead.  The New York Times’ DealBook noted that Citigroup Inc. (NYSE:C) and Wachovia Corporation (NYSE: WB) were in early merger talks.  Citi shares closed up 3.8% at $20.15 in a late-day run-up after being down sharply earlier.  Wachovia shares closed down 27% at $10.00 on fears that it would face credit troubles similar to WaMu.  These mergers have so far not been great for shareholders at competing banks. Wachovia’s stock is actually down about 3% in after-hours trading.  Where that ultimately goes is anyone’s guess. Until there is a confirmation from one or both companies, we are treating this more as rumor than as fact.

As we noted, Citigroup’s financial supermarket model is now being vindicated based upon the financial consolidation.  Too bad it executed that strategy poorly.

Jon C. Ogg
September 26, 2008

Posted on: September 26, 2008 – 3:12 pm in Banking, Mergers and Buy Outs, ,

The 52-Week 9/26/2008 (MRVL)(RIMM)(WM)(JAVA)(SFD)(NCC)

Sad_clownWashington Mutual (WM) Shut down by feds. Drops to $.148 from 52-week high of $26.47.

Smithfield Foods (SFD) Credit concerns. Sells down to $13.95 from 52-week high of $32.26.

Sun (JAVA) Company shares continue to drift off on growth worries. Falls to $7.52 from 52-week high of $25.04.

Research in Motion (RIMM) Misses Wall St. forecast numbers. Plunges to $69.50 from 52-week high of $148.13.

NCC (NCC) Picks up worries from Washington Mutual collapse. Down to $2 from 52-week high of $27.21.

Marvell Tech (MRVL) Key supplier to RIMM. Drops to $9.57 from 52-week high of $18.84.

Posted on: September 26, 2008 – 2:40 pm in HI/LOW, , , , , ,

Fortress Files For $1 Billion Securities Shelf (FIG)

Money_stack_picFortress Investment Group, LLC (NYSE: FIG) has filed a shelf registration to offer as much as $1 billion in mixed securities.  It lists Class A shares, preferred shares, depository shares, warrants, subscription rights, purchase contracts, and purchase units as the combination of securities it can sell.  Fortress plans to use the proceeds for working capital and other general corporate purposes, which may include the repayment or refinancing of debt.  No underwriters were named.  Fortress is down over 16% today at $11.25, and its 52-week trading range is $8.38 to $24.73.  Its current market cap is $1.06 billion.

Jon C. Ogg
September 26, 2008

Posted on: September 26, 2008 – 2:10 pm in Financial Stocks, Secondary Offering,

Warren Buffett Helping AIG Unit (AIG, BRK-A)

Buffett_image_2Aig_logo_2There was an announcement this morning from Lexington Insurance Company, a unit of American International Group (NYSE: AIG).  The unit has said that effective September 15, 2008 it has arranged a Contingent Property Reinsurance cover from the Berkshire Hathaway Inc. (NYSE: BRK-A) unit called National Indemnity Company for Lexington’s Real Estate Portfolio, as well as policies having limits of $250 million or greater, policies with home/foreign exposure and the property sections of most of Lexington’s homeowners book. It noted that this reinsurance provides coverage under the same policy terms and conditions as issued by Lexington. In the event of a covered loss, Berkshire stands behind Lexington.

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Posted on: September 26, 2008 – 1:19 pm in Buffett, Financial Stocks, , ,

Is Everything Really Quiet in the Oil Patch? (XOM, CVX, CVP, APA, DVN, APC)

Oil_well_logo_2The ups and downs of the government’s attempts to get a bailout package for financial institutions is leading the major players in the oil patch to remain really quiet. Given the yelping not so long ago about the ban on offshore drilling, you might expect some gloating and even some boost in share prices given Congress’s decision to let the federal ban expire. Neither is happening.

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Posted on: September 26, 2008 – 1:02 pm in Oil & Gas, , , , , ,

Weak Techs Fade As Economy Heads To Toilet (AMD)(JAVA)(EMC)(HPQ)(IBM)(VMW)

PcJoe Tucci, the CEO of EMC (EMC), has done his best to ruin his company and its spin-out VMWare (VMW). VMWare has the look and feel of a public firm but Tucci holds it captive and he recently pushed out its CEO. Since the beginning of the year, EMC is off 30% and VMW is down nearly 70%.

As the leading vendor of storage management, it is hard to see how EMC shares have fallen so far, unless Wall St. looks at its stewardship of VMW.

VMWare’s lead in virtualization software meant a great deal to investors after the company’s IPO. Its products promised to be among the most important corporate IT purchases over the next decade.The perception that the firm is not free to run its own operations and is entirely controlled by a much slower- growing company is the largest concern among shareholders. Tucci is killing his most valuable child.

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Posted on: September 26, 2008 – 10:49 am in Technology Companies, , , , , ,

Sick Twist of Fate, Citigroup’s Model Was Right (C, JPM, WM, GS, MS, WB, BAC, MER)

Citigroup_logo_2There is one interesting irony in this whole financial meltdown which goes which many will not want to admit.  Citigroup Inc. (NYSE:C) and the financial supermarket model may actually be emulated by the entire banking and brokerage sector.  Citi’s performance and execution have not been successful, but if you look at what is happening in the banking and brokerage sectors right now it is almost impossible not to see the parallel.

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Posted on: September 26, 2008 – 8:49 am in Banking, Brokerage Firms, Financial Stocks, , , , , , , ,

Time Has Run Out For Apple (AAPL)

Applelogo1Apple’s (AAPL) stock got poleaxed by results from smartphone company Research-In-Motion (RIMM) which said its costs were going up and hinted that its growth might slow. Component and marketing expenses are damaging its earnings. The economy is likely to trouble its sales.

As in many cases, the market sees RIM’s troubles haunting its primary competitor, Apple, the maker of the wildly popular iPhone. The Jobs handset does have some problems with connecting to the high-speed wireless Internet, but, for the time being, customers seem willing to ignore that. Some analysts think Apple could sell five million of the devices this quarter.

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Posted on: September 26, 2008 – 8:10 am in Consumer Electronics, ,

KB Home Shows Poor Housing To Continue (KBH)

Kb_home_logoKB Home (NYSE: KBH) is showing that the housing mess isn’t over.  No one was expecting anything great, but the beatings are continuing.  Revenue fell 56% to $681.6 million, and housing revenues were down 51% to $688.3 million.  The homebuilder’s loss in the third quarter rose more than four-fold to a loss of $144.7 million or $1.87 per share.

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Posted on: September 26, 2008 – 7:28 am in Earnings, Housing,

Top Analyst Upgrades & Downgrades (ANR, BJS, DL, RIMM, AGU, CF, MNT, POT, TRA)

There are actually very few analyst calls this morning and some of these may even be carry-over calls from late yesterday:

  • Alpha Natural Resources (ANR) raised to buy at UBS.
  • BJ Services (BJS) raised to Equal Weight at Morgan Stanley.
  • China Distance Education (DL) started as buy at Citigroup.
  • Research in Motion (RIMM) raised to outperform but target cut to $110 at Raymond James; raised to neutral from underperform at Credit Suisse.
  • Agrium (AGU) cut to hold at Citigroup.
  • CF Industries (CF) cut to hold at Citigroup.
  • Mentor Corp. (MNT) cut to hold at Jefferies.
  • Potash Corp. (POT) target cut to $250 from $375 at RBC.
  • Research in Motion (RIMM) cut to hold at Canaccord; cut to sector perform at RBC.
  • Terra Industries (TRA) cut to hold at Citigroup.

Jon C. Ogg
September 26, 2008

Posted on: September 26, 2008 – 6:43 am in Analyst Calls, , , , , , , , ,

Customers Cut Out On Morgan Stanley (MS)

Lehman_brothersMorgan Stanley (MS) is starting to have some of the problems that hurt Lehman.

According to the FT, "Morgan Stanley lost close to a third of assets in its prime brokerage last week, amounting to hundreds of billions of dollars, as hedge funds fled after the collapse of Lehman Brothers and moved to rival banks."

Some other financial companies are taking in that money. MS may be losing, but the strong are getting stronger on Wall St., which means the market is not as close to collapse as the Treasury would make it seem.

Douglas A. McIntyre

Posted on: September 26, 2008 – 5:37 am in Brokerage Firms,

GM (GM): Luck Runs Low In China

Gm20jpeg20imageUp until recently there has been a horse race for who is the largest seller of cars in China. GM (GM) and VW traded places from quarter to quarter. Unfortunately for GM (GM), its prospects have fallen apart and it now sits in the No. 3 spot behind VW and Toyota (TM).

GM is being vexed by the same things that have hurt it in the US market. The Chinese do not like the quality or fuel efficiency of its cars. Its damaged reputation has made it into the world’s second-largest vehicle market.

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Posted on: September 26, 2008 – 5:28 am in China, ,

RIM (RIMM) Blackberry: Cheap Products Get Expensive

AngrybearRIM (RIMM) Blackberry handheld e-mail devices really do not cost much. Purchased with a wireless subscription plan they may go for as little as $200. Corporations love the product because it keeps their over-burdened employees available 24 hours a day. Since the device works in most countries around the world, no one can hide.

Because the Blackberry is such a paragon of productivity, it should be the last expense that most companies kill when money is tight. That made RIM’s forecast for upcoming quarters a sign of something more ominous than a drop in the company’s share price.

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Posted on: September 26, 2008 – 5:05 am in Wireless,

Fed Loans $188 Billion A Day: Who Needs Bailout?

FedThe Fed has been loaning banks and money managers an average of $188 billion a day over the last week. That is four times what the sum averaged a week earlier.

Absent a bailout from Treasury, Fed Chairman Ben Bernanke has held the line against the fallout from the credit crisis and it appears that the banking system is the better for it. At the very least, the complex tapestry of the US financial markets has not been torn into pieces.

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Posted on: September 26, 2008 – 4:41 am in Economy, ,

Why Washington Mutual (WM) Does Not Matter

WamuWashington Mutual (WM) failed yesterday and most of its assets where sold to JP Morgan (JPM). The price was $1.8 billion. JPM will have to write down $31 billion in bad loans, but, since Jamie Dimon is now the king of the banking world, he should be able to raise the capital to cover that. In the meantime, he has picked up $307 billion in assets.

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Posted on: September 26, 2008 – 4:16 am in Banking, , ,

Media Digest 9/26/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

NewspaperAccording to Reuters, talks over a US bailout of banks broke down and will begin again today.

Reuters reports that Washington Mutual (WM) became the largest bank failure in US history. Many of its assets were sold to JP Morgan (JPM).

Reuters reports that RIM (RIMM) fell as it posted a weak forecast.

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Posted on: September 26, 2008 – 2:49 am in Press Digest, , , , , , , , , , , , , ,

Asia Markets 9/26/2008 (CHL)

ChinaMarkets in Asia fell slightly.

The Nikkei was off .9% to 11,893. CSK Holdings dropped more than 9%. Kyocera dropped over 2%.

The Hang Seng fell .7% to 18,895. Ping An Insurance fell almost 10%. China Mobile (CHL) fell almost 4%.

The Shanghai Composite was off .2% to 2,294.

Data from Reuters

Douglas A. McIntyre

Posted on: September 26, 2008 – 2:20 am in International Markets,