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Chimera Investment Corporation (NYSE: CIM) has raised cash via a secondary offering. The mortgage and fixed income investment vehicle, which we have referred to as the first public vulture fund set up to capitalize off of the current mortgage malaise, priced a secondary offering of 110,000,000 shares of common stock at a price of $2.25 per share.
Daily Archives: October 24, 2008
Chimera & Annaly, Venturing Further With Vulture Capital (CIM, NLY)
How The New York Times (NYT) Should Save Itself
The New York Times is now running on fumes. S&P has downgraded the company’s debt to junk, and Moody’s is about to do the same. The stock has fallen to $10, and is being propped up primarily by the company’s non-news assets. Given the ongoing decline of print advertising, management will have to take emergency steps to avoid defaulting on the company’s $1.1 billion of debt.
Silicon Alley Insider and 24/7 Wall Street have put together a seven-part rescue plan:
1. Sell the building. The New York Times recently moved into a spectacular new Times Square headquarters. At the peak, the building was worth something on the order of $1 billion. Like the company, the building is worth a lot less now. But the company might be able to get, say, $750 million for it. The company needs to sell the building immediately. (It can rent it back, so staffers won’t have to move. It just needs the capital. Now.)
What The NCC (NCC) Deal Says About Bank Balance Sheets
NCC (NCC) was bought today by PNC in what most people would view as a classic "takeunder" The price of the deal was well below where the shares traded yesterday.
NCC’s stock is down 20% on the news. PNC will pay a total of $2.23 a share or $5.58 billion.
The government had a hand in the deal and probably even forced it. PNC says it received a $7.7 billion investment from the government, under its $750 billion bailout plan.
The amount of the write-offs when the deal is done will be extraordinary. PNC’s CEO said $19.9 billion of losses on the National City portfolio will come in as write-downs at the time the acquisition closes.
That says a great deal about major US bank balance sheets. Wachovia (WB) reported a third-quarter loss of $23.9 billion on Wednesday, which say a mouthful about that state of its financials. Under the provisions of its merger deal with Wells Fargo (WFC), it was required to fess up to everything bad it could find. According to Reuters, loan losses from Wachovia could hit $74 billion.
Odd that the really big write-offs only get exposed when these firms are bought. It is almost as if those banks which are still independent are moving a bit slowly in getting all of their cards onto the table.
Douglas A. McIntyre
Can The VIX Hit 100?
The CBOE Volatility Index, or the VIX, has historically been used to measure extreme oversold levels. Unfortunately, history books are about as useful as slapstick and pulp fiction for traders and investors right now. We just hit a record high on the VIX this morning. The VIX is currently up over 19 points at 86.95. The high this morning so far has been 89.31. So what would a 100 VIX look like?
5 Friday Stock Winners Despite Market Carnage (CLS, COLM, INSU, IPCR, WDC)
The few winners out there on this ugly friday morning are few and far between, but here are some of the stocks that have managed to actually trade higher despite futures having traded limit down and despite the massive tank at the open.
- Celestica (NYSE: CLS) is trading up 13% at $4.15 on valuation after yesterday’s earnings. Its 52-week range is $3.60 to $9.86.
- Columbia Sportswear Company (NASDAQ: COLM) is up almost 6% at $32.65 after yesterday’s earnings, 52-week range is $29.02 to $52.99.
- Insituform Technologies Inc. (NASDAQ: INSU) is up 7% at $10.55 after earnings yesterday, but only 23,000 shares; prior 52-week range $9.26 to $19.15.
- IPC Holdings Ltd. (NASDAQ: IPCR) up 14% at $23.00 after earnings and note conversions yesterday. 52-week range $19.05 to $33.75.
- Western Digital Corp. (NYSE: WDC) is up almost 7% at $13.96 after yesterday’s earnings were better then rival Seagate; its 52-week range is $12.00 to $40.00.
Jon C. Ogg
October 24, 2008
PNC and National City Banks Merge Despite Armageddon (PNC, NCC)
Today is one ugly day for financial stocks, and probably one of the crummiest days so far that you could pick to announce a merger. Yet hold on to your seats. PNC Financial Services Group, Inc. (NYSE: PNC) has signed a definitive agreement to acquire National City Corporation (NYSE: NCC). The deal has been approved by the boards of directors of both companies.
Major Tech Stocks Challenging Recent Lows (MSFT, CSCO, AAPL, RIMM, INTC, AMZN, DELL)
Tech stocks are far from immune in the selling. We put together a list of the major stocks trading sharply lower on active trading and we listed the previous 52-week lows to put this in perspective.
- Microsoft Corp. (NASDAQ: MSFT) is trading down over 7% at $at $20.70, despite being up after earnings last night. Its prior 52-week low was $20.65.
- Cisco Systems (NASDAQ: CSCO) is trading down almost 7% at $16.06 on active volume, and its prior 52-week low was $16.20.
- Apple Inc. (NASDAQ: AAPL) is down 8.5% pre-market at $89.85 on active volume, and its 52-week low is $85.00.
- Research-In-Motion (NASDAQ: RIMM) is down about 11% at $41.15 on active trading, and its prior 52-week low was $44.05..
- Intel (NASDAQ: INTC) is trading down over 7% at $13.47 pre-market on active volume, and its prior 52-week low was $13.90.
- Amazon.com, Inc. (NASDAQ: AMZN) is trading down over 9% pre-market at $45.55 on active trading volume, and its 52-week low from earlier this week was $43.31.
- Dell Inc. (NASDAQ: DELL) is down 9% at $10.91 on somewhat thin pre-market volume, and its prior 52-week low was $11.47.
Jon C. Ogg
October 24, 2008
Banks Tank, Yet Most Still Above 52-Week Lows (BAC, C, GS, JPM, MS, NTRS, USB, WFC)
This is obviously one of our ugliest mornings in years with futures trading limit down. What is interesting is that the financial stocks are the most leveraged to this, yet oddly enough most stocks are still above their prior 52-week lows that were put in on other forced selling and panic selling days. These are just the stronger banks and financial firms that are deemed "in the club"of those which have been picked to survive.
- Bank of America (NYSE: BAC) -8.7% at $20.99, 52-week low is $18.44.
- Citigroup (NYSE: C) -9.5% at $11.88, prior 52-week low was $12.00.
- Goldman Sachs Group (NYSE: GS) -11.9% at $95.65, 52-week low is $74.00.
- JPMorgan (NYSE: JPM) -6.7% at $35.30, 52-week low is $29.24.
- Morgan Stanley (NYSE: MS) -14% at $15.50, 52-week low is $6.71.
- Northern Trust (NASDAQ: NTRS) is down 6% at $47.50, its 52-week low is $46.89.
- US Bancorp (NYSE: USB) is down almost 7% at $26.70, 52-week low is $20.57.
- Wells Fargo & Company (NYSE: WFC) -7.25% at $29.05, 52-week low is $20.46.
Jon C. Ogg
October 24, 2008
Top Pre-Market Analyst Upgrades (ACC, CLS, CHS, EL, JBLU, SLGN, TRMB)
These are some of the top pre-market analyst upgrades we are seeing this Friday-crash morning:
- American Campus (ACC) Raised to Outperform at Baird.
- Celestica (CLS) Raised to Outperform at CIBC.
- Chico’s FAS (CHS) Raised to Market Weight at Thomas Weisel.
- Estee Lauder (EL) Raised to Neutral from Sell at Piper Jaffray.
- Jetblue (JBLU) Raised to Overweight at JPMorgan.
- Silgan Holdings (SLGN) Raised to Buy at Deutsche Bank.
- Trimble Navigation (TRMB) Raised to Outperform at Oppenheimer.
Jon C. Ogg
October 24, 2008
Top Pre-Market Analyst Downgrades (ATI, BIDU, DISCA, FHN, JNS, NOV, PTEC, RSH, SIGM, VRGY)
These are some of the top pre-market analyst downgrades we are seeing this Friday-crash morning:
- Allegheny Tech (ATI) Cut to Hold at Deutsche Bank.
- Baidu.com (BIDU) Target Cut to $260 from $350 at Goldman Sachs.
- Discovery Communications (DISCA) Cut to Underweight at JPMorgan.
- First Horizon National (FHN) Cut to Neutral at Goldman Sachs.
- Janus Capital (JNS) Cut to Underperform at FBR.
- National Oilwell Varco (NOV) Cut to Neutral at JPMorgan.
- Phoenix Tech (PTEC) Cut to Buy from Strong Buy at Needham.
- Radio Shack (RSH) Cut to Neutral at Goldman Sachs.
- Sigma Designs (SIGM) Cut to Hold at Deutsche Bank.
- Verigy (VRGY) Cut to Underperform at Oppenheimer.
Jon C. Ogg
October 24, 2008
Quick Cheat Sheet On Circuit Breakers & Limit Down Futures
We wanted to give you a brief snapshot of how futures work in "limit down" mode pre-market and then give you a quick hit on how the actual stock market circuit breakers work. Today we may actually see the circuit breakers come into play after the stock market opens for trading.
DJIA futures are down 550 points, S&P Futures are halted at -60 points at 855.20, and NASDAQ at -85 points at 1168.50. These levels can extend to -10% after the open before circuit breakers come back into play. The way this works is that the futures can reopen if the bids magically come back and the markets would rise, but otherwise futures are halted until the stock market open. after -10% is reached in futures there is a 2 minute halt, then the limit is extended to allow for -20% with a halt for 2 minutes, and then the limit is extended to 30% down.
Here are the CIRCUIT BREAKERS FOR THE DJIA after the market opens:
Does The Dow Drop 1,000 Points?
The DJIA could drop 1,000 points today. Japan was down 10%. The sell-off rolled across Asia and then hit Europe. Dow futures got down almost 600 points.
There is some confusion about why this is happening. The Treasury’s plan to put $700 billion into banking was supposed to help. That is particularly true because most of the other large nations in the West and Asia did the same thing.
The American government is moving as fast as it can to put a safety net under other sectors, especially automotive and mortgages. There should be some encouragement there for traders.
An OPEC Cut That Doesn’t Count
OPEC said it would cut oil production by 1.5 million barrels a day. Its normal output is about 32 million, so in most cases since the embargo in 1973/74, that would mean a lot. It might take crude up 10% or 20%. In this recession, it will hardly matter at all.
OPEC knows how deep the current recession is. The cartel does not want to drive prices up too much. It simply wants to keep them from falling. If it can keep crude around $70, its members can get by, even if the salad days are over
Another Break-Up Of Microsoft (MSFT)
It is not that long ago that The Justice Department suggested that Microsoft (MSFT) was so powerful that it needed to be broken into pieces. In 2000, Justice hired famous banker Bob Greenhill to do the analysis. The antitrust case faltered, and nothing was done.
Steve Ballmer has probably figured out that Wall St. hates his company. The headlines say that he is no Bill Gates. He has done nothing to make his company special again. It is a big software operation which will eventually be brought down by Google (GOOG) and open source junk like Linux.
Bailout Moves Toward $2 Trillion
There is an “official” government bailout number. That is the $700 billion Congress gave to Henry Paulson to hand out as he pleases. Most of it will go into buying equity in banks and taking their toxic loans. If securities analysts are to be believed, this will not be enough capital. Firms like Citigroup could lose money for another year or more. It the Paulson plan was such a hot item, Citi would not be trading at $13, just above its 52-week low.
Paulson, or the person who takes his job, will have to come up with more cash for banks. Mortgage failures are running up at such a rapid rate the derivatives tied to the markets are in for more trouble. Investment banking revenue is all but gone. The lending done for credit cards and car loans has hit trouble as well.
Recession Deepens: Another Five Million Unemployed And Bottom Fishing Becomes An Art
No matter where economists look there is no evidence that a recession in the US, EU, and Asia is doing anything but deepening. The stock markets are the least of it. Some of the indexes in the largest countries are off 40% from their peaks reached a year ago. Banks are failing. In cases where the government has not stepped in some have disappeared and others have been merged into more healthy institutions. Healthy for now, that is.
The financial sector could easily lose several hundred thousand jobs in the US. New York City expects employment in the banking and brokerage sector to fall by 150,000. Marriages like the ones between Bear Stearns and JP Morgan (JPM) and Wachovia (WB) and Wells Fargo (WFC) will clearly put tens of thousands of people out of jobs. Goldman Sachs (GS) apparently will let 10% of its workers go.
Media Digest 10/24/2008 Reuters, WSJ, NYTimes, FT, Bloomberg
According to Reuters, Greenspan said he was shocked by the credit meltdown.
Reuters reports that the value of Bear Stearns $30 billion mortgage portfolio fell 9%.
Reuters writes that Asia and Europe are turning to China for economic fixes.
Reuters writes that Microsoft’s earnings forecast was better than expected.
Asia Markets And Europe Open 10/24/2008 Huge Drops (SNE)(HMC)(TM)
Markets in Asia were sharply lower.
The Nikkei dropped 9.6% to 7,649. Sony (SNE) fell after warning on earnings. Honda (HMC) and Toyota (TM) were both down over 5%.
The Hang Seng dropped 7.2% to 12,722. HSBC (HBC) was off over 6%.
The Shanghai Composite fell 1.9% to 1,840.
At the open in Europe, the FTSE was off 3.3% to 3,954. The DAX dropped 5.5% to 4,271. The CAC 50 was down 4.9% to 3,148.
Data from Reuters.
Douglas A. McIntyre
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