September – 2008 – 24/7 Wall St.

Monthly Archives: September 2008

Top Pre-Market Analyst Downgrades (APKT, FITB, GNTX, NYM, PLD, ROK, TSS, VRAD)

These are not all of the downgrades, butthese are some of the standout calls early this Tuesday morning:

Acme Packet (APKT) Cut to Sell at Piper Jaffray.
Fifth Third Bancorp (FITB) Cut to Neutral at Baird.
Gentex (GNTX) Cut to Neutral at Baird.
Nymagic (NYM) Cut to Underperform at KBW.
ProLogis (PLD) Cut to Market Perform at FBR.
Rockwell Automation (ROK) Started as Sell at Societe Generale.
Total System Services (TSS) Cut to Perform at Oppenheimer.
Virtual Radiologic (VRAD) Cut to Market Perform at William Blair.

Jon C. Ogg
September 30, 2008

Posted on: September 30, 2008 – 7:01 am in Analyst Calls, APKT, FITB, GNTX, NYM, PLD, ROK, TSS, VRAD

Oil To $60, Speculation On The Way Down

Tx00338coilwellgusherodessatexaspos Two months ago, it was unimaginable that crude could drop below $100. The stink of $147 oil was still in the air. Eulogies for the car and airline industries were being written. The average citizen was eating Velveeta and Spam to save money for gas.

Crude dropped as low as $95 over night and there is now plenty of guessing that it could move as low as $80 in the coming months.

The first set of dynamics is in place to push crude much further down.

Posted on: September 30, 2008 – 5:14 am in Oil & Gas

Opening The Fed Lending Window To Hedge Funds

The poor and middle class like to spit on the rich when they are down. It happens so rarely.

The idea of bailing out hedge funds or helping them in any way runs counter to the best instincts of most citizens, regulators, and law makers. The wealthy do not need a Good Samaritan.

Posted on: September 30, 2008 – 4:55 am in Regulation

The Fed Needs To Cut Interest Rates To Zero

Up until recently, the Fed had a good reason not to cut interest rates. Inflation might catch hold of the economy and undercut the purchasing power of individuals and corporations alike.

Inflation does not look like much of a leviathan any more. Oil has dropped from $147 to $94 in a very brief time. Agricultural commodity prices are dropping almost as fast. The money that the Fed has pushed through its emergency lending window, now well into the hundreds of billion of dollars, has done nothing beyond strengthen bank reserves. Not a trace of it has shown up in the lending markets.

Posted on: September 30, 2008 – 4:25 am in Economy

Media Digest 9/30/2008 Reuters, WSJ, NYTimes, FT, Bloomberg

According to Reuters, the credit crisis has sharply increased the chances of a deep recession.

Reuters reports that the fall in the stock market is pushing investors into safe investments like Treasuries.

Reuters reports that a freeze up in money markets may cause a rate cut.

Posted on: September 30, 2008 – 2:41 am in Press Digest, AAPL, C, CC, FNM, FRE, GOOG, MS, PFE, WB, YHOO

Asia Markets 9/30/2008 Nikkei Off 4% (PTR)

Asia markets fell sharply.

The Nikkei dropped 4.1% to 11,260.

The Hang Seng fell 2% to 17,629. Sun Hung Kai Properties fell as much as 6%. Petrochina (PTR) and CNOOC were both off over 3%.

Shanghai was closed for a holiday.

Data from Reuters

Douglas A. McIntyre

Posted on: September 30, 2008 – 2:14 am in International Markets, PTR

Small Business Gets Crushed In Credit Crisis

With the Congressional rejection of the Treasury bailout package lending from banks to small businesses has ground to a halt.

According to Forbes,"The Discover Small Business Watch index of economic confidence slipped to 74.6, down by 12.3 points from the prior month, representing the index’s second-lowest level since its inception in August 2006."

Posted on: September 29, 2008 – 6:07 pm in Economy, BAC, WB

CMGI Is No More (CMGI, MLNK)

CMGI Inc. (NASDAQ: CMGI) is about to go through an investor transformation. The former Internet incubator is now mostly ModusLink and will reflect that change. It also released its quarterly earnings with its net revenue was $276.3 million, up 9.4% over the same period last year. On a non-GAAP basis its operating income was $6.3 million, down from $7.2 million in the same period last year. We don’t really have any great estimates from analysts to use for a comparison right now as it looks like the old figures were not updated. The company is also changing its name and stock ticker effective tomorrow.

Posted on: September 29, 2008 – 3:47 pm in Earnings, Shareholder Issues, Software, CMGI, MLNK

Wachovia Re-Opens, Some Value Remains (WB, C)

Wachovia Corporation (NYSE: WB) has just resumed trading after its FDIC-led Citigroup Inc. (NYSE: C) "take-under" came in. By now you’ve already heard enough about the merger news and how ugly this was going to be for shareholders. In less than ten minutes of re-opening, Wachovia shares have traded more than 120 million shares of stock. The last print we saw was $1.94, down over 80% from Friday’s $10.00 close. The open print is being listed as $1.26 and so far the lowest print we saw was $0.98.

Interestingly enough, there is actually some value for common shareholders here. The remaining Wachovia is being given a payment by Citigroup. The remaining entity will also still hold A.G. Edwards and Evergreen Asset Management. What the actual value of those combined will be, well that is where the debate is.

Jon C. Ogg
September 29, 2008

Posted on: September 29, 2008 – 1:43 pm in Banking, Mergers and Buy Outs, C, WB

Fed Could Cut To Zero: Can The System Save Itself?

Now that the Congress has voted against the Treasury bailout and the Dow has dropped700 points, the important question is whether they system can save itself before the market moves toward 9,000. That would wipe out over five years in gains.

The Treasury may move into the market with a combination of a rapid rates cut and an even larger increase in its commitment to buy Treasuries. That purchase program would have to move into the hundreds of billions of dollars very quickly.

Without private capital driven by low interest rates, it is hard to imagine the situation improving before early next year.

Posted on: September 29, 2008 – 1:41 pm in Economy, C, GS, MS, WB

Bailout: House Says No, Stock Market Wants Yes

If Congress was worried that the bailout package was or wasn’t going to help, the failure out of the House of Representatives to pass the new bailout package just killed the stock market. As it stands right now, the tally came to 207 in favor and 226 votes against. Republican votes were 66 yes votes to 132 no votes. Democratic votes were 141 yes votes to 94 votes. The vote is still open to change so technically it isn’t on the funeral pyre yet. The vote is being kept open right now and votes can be changed. Until the gavel is hit, this result can be changed. Stocks briefly reached far worse levels than this snapshot at 1:55 PM EST.

DJIA             10,747.60 (-395.53; -3.55%)
NASDAQ       2,068.80 (-114.54; -5.25%)
S&P500       1,147.13 (-65.88; -5.43%)
10YR T-Bond 3.716% (-0.111%)

Jon C. Ogg
September 29, 2008

Posted on: September 29, 2008 – 12:59 pm in Economy, Politics

Defensive Stocks Only Mixed In Stock Market Turbulence (PE, KO, TAP, KFT, CPB, HRL, MCD, MO, RAI, PG, CL, MRK, JNJ)

You know it’s a rough day in the market when even defensive stocks are weak or mixed. We are at least seeing a mixed bag from some of these. But the trend is a pretty easy one to see. Even defensive stocks aren’t acting as a safe haven as they have in prior months. Beer is up, tobacco is down. Food is up to mixed, but consumer products are mixed. Below you will see how our list of "go-to defensive stocks" is showing a mixed bag:

Posted on: September 29, 2008 – 11:45 am in Defensive Stocks, HI/LOW, CL, CPB, HRL, JNJ, KFT, KO, MCD, MO, MRK, PE, PG, RAI, TAP

Oppenheimer’s National City Upgrade Spurns Options Activity (NCC)

Right after noon today, our screen for most active call options pointed out the movements in shares of National City Corporation (NYSE: NCC). We already noted that famed Oppenheimer banking analyst Meredith Whitney actually upgraded her rating of National City to an "Outperform" rating from a prior "Perform" rating this morning. But because of the woes of troubled financial stocks and the hated take-under buyouts, this stock has followed most of them lower again this morning.

Posted on: September 29, 2008 – 11:25 am in Analyst Calls, Banking, Options, NCC

Gold Fields Underscores Woes of Gold Sector (GFI, NEM, GG, ABX, AU, GLD, GDX)

South African gold miner Gold Fields Limited (NYSE:GFI) posted its fiscal year 2008 earnings today. The company has been hit hard by higher costs, lower production, and a cave-in that killed eight miners. The company reported net profit for the year of $662.6 million on production of about 3.64 million ounces of gold. What is most interesting here is that the issues inside the company may offer some great insight to the problems inside other global gold miners.

Posted on: September 29, 2008 – 11:10 am in Metals, ABX, AU, GDX, GFI, GG, GLD, NEM

Grand Canyon Education Sets IPO Terms (LOPE)

In an SEC filing this morning, Grand Canyon Education sets its IPO terms. In the first indications, it looks like 10.5 million shares are being planned for sale in a range of $18.00 to $20.00 per share share. The company has the ticker of "LOPE" on NASDAQ.

Posted on: September 29, 2008 – 10:31 am in IPOs, LOPE

Fed Throws in $620 Billion In Swaps For Dollar Liquidity

It appears that a US-led bailout package may only be part of an effort to calm market fears. The Federal Reserve has announced a massive coordinated liquidity package to provide U.S. dollar liquidity. The Federal Reserve announced today several initiatives to support financial stability and to maintain a stable flow of credit to the economy during this period of significant strain in global markets. It says it will continue to adapt these liquidity facilities as necessary and, more importantly, will keep them in place as long as circumstances require.

Posted on: September 29, 2008 – 9:26 am in Economy

Apple (AAPL) And Google (GOOG) Both Break Under 52-Week Lows

In a sign that the entire market has gone under the sword, Apple (AAPL), Google (GOOG), and RIM (RIMM) have all breached their 52-week lows.

Apple dropped to $109, down from a 52-week high of $202.96.

Google hit $401.13, down from its 52-week high of $747. 24.

RIM (RIMM) broke down to $65.87 against a 52-week high of $148.13.

Posted on: September 29, 2008 – 9:11 am in HI/LOW, AAPL, GOOG, RIMM

Does Barron’s Defense of Starbucks Mark A Bottom? (SBUX)

This weekend in Barron’s, the weekly publication published an article defending the valuation of Starbucks Corp. (NASDAQ: SBUX). Its article titled "Something Good Is Brewing" defened the company’s share price at current levels. We have our own thoughts on this one and this will follow up on our analysis back when shares were in the low $20’s. Now, its $18 targe t seems like the next stop on the way up…. if it makes it there.

Posted on: September 29, 2008 – 8:37 am in Food, SBUX

Economist Nouriel Roubini Savages Bailout

Nouriel Roubini, economist and dark knight of the current crisis, today savaged the Paulson bailout in an article posted at his website.

Among his points: "purchasing toxic/illiquid assets of the financial system is not the most effective and efficient way to recapitalize the banking system."

And "the claim by the Fed and Treasury that spending $700 billion of public money is the best way to recapitalize banks has absolutely no factual basis or justification."

"This way of recapitalizing financial institutions is a total rip-off that will mostly benefit – at a huge expense for the US taxpayer – the common and preferred shareholders and even unsecured creditors of the banks."

Douglas A. McIntyre

Posted on: September 29, 2008 – 8:19 am in Economy

Wachovia/Citi… An FDIC Backed Bailout Debacle For Holders (WB, C)

Wachovia Corporation (NYSE: WB) is the newest big bank that is being taken over in a government-sponsored deal. Citigroup (NYSE: C) is acquiring the bulk of the bank’s assets and liabilities in an FDIC-facilitated transaction. Citigroup will assume the senior and subordinated debt of Wachovia, and will absorb the first $42 billion in losses on a $312 billion loan pool. The FDIC is quick to say that Wachovia didn’t fail, yet it is also going to share in the losses.

Posted on: September 29, 2008 – 7:43 am in Banking, Mergers and Buy Outs, C, WB

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