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Jamie Dimon really hates the TARP and he wants out from under it. He’s said how being forced to take the TARP money has allowed JPMorgan Chase & Co. (NYSE: JPM) and others to face endless scrutiny and vilification, and he has noted how certain limitations could hurt many companies in their ability to compete with peers who are not under TARP monies and under TARP restrictions on pay and incentive. It seems that the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) will have to deal with the swings of one more large offering as JPMorgan looks to be the largest component of these two Triple-Leverage ETF’s. We noted some of the same when these ETF’s had to deal with preferred redemptions, although JPMorgan has not yet addressed that issue. Today, JPMorgan announced today that it intends to raise $5 billion in common equity to satisfy a supervisory condition that the largest bank holding companies redeeming TARP preferred capital demonstrate access to the equity capital markets.
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Daily Archives: June 1, 2009
JPMorgan’s $5 Billion Raise Swings FAS/FAZ (JPM, FAS, FAZ)
DJIA Challenging 200-Day Moving Average
The Dow Jones Industrial Average has been trading above its 50-day moving average since late-March. But the 200-day moving average is a key metric for long-term traders. The 200-day moving average for the DJIA is 8,765.69. We are also seeing the same reading in the S&P 500 Index, with the exception that the S&P 500 Index has now actually moved well above its 200-day moving average of 926.89.
Below are the two charts from Stockcharts.com:
Stat of the Day: 1 Million Foreclosures Already in 2009 (XHB)
The Center for Responsible Lending estimates that there have now been 1,000,000 foreclosures filed so far in 2009. It also noted that the Mortgage Bankers Association’s most recent data shows some 12% of all mortgages are delinquent. It gets worse. The group expects this 2009 foreclosure number to more than double.
This is not likely to kill the SPDR S&P Homebuilders (NYSE: XHB) with its ETF shares still up 3% at $12.47, but it is also unlikely to give any great credit to the notion that housing is going to make a screaming return out of the blue. Imagine what this does to the phantom housing inventory when you include the properties which banks are holding off the market for months.
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Western Refining Raising $300 Million Cash (WNR)
Western Refining, Inc. (NYSE: WNR) has announced its intent to sell 14 million shares of common stock. This would bring in gross proceeds of nearly $196 million at current prices. The company also plans to sell approximately $100 million in convertible senior notes due in 2014.
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ASCO Winner: Biovest May Be The Next Dendreon (BVTI, ABPIQ, DNDN)
One of the largest percentage gainers with data released at the American Society of Clinical Oncology was none other than an OTC micro-cap company called Biovest International, Inc. (OTC: BVTI). Technically, this is a majority owned subsidiary company of Accentia Biopharmaceuticals, Inc. (OTC: ABPIQ). The company has nothing to do with Dendreon Corp. (NASDAQ: DNDN) in the business, but the targets of the potential products use the body’s own immune system to fight tumors strike a similar interest. And this weekend’s data released was far better than most were expecting from a company of this size.
We also covered this one in our weekly “10 Stocks under $10″ Newsletter as one with a big win under its belt. The percentages of success were that large. As noted:
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New Pre-IPO Financing Model, With NYSE Rather Than Around NYSE (NYX)
InsideVenture was there for the open at the NYSE Euronext (NYSE: NYX) today, and the company is trying to open up wider markets for venture-backed and late-stage companies to come public. These models look more like a quasi-public model rather than full initial public offerings being sold to the public on an exchange.
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Financing May Clean Up Jamba’s Books (JMBA, JAMBU, JMBAW)
Jamba, Inc. (NASDAQ: JMBA) has completed a sale of convertible preferred stock which raised $35 million in gross proceeds for the company. The funding was led by a $19.55 million investment by private equity firm Mistral Equity Partners, and the remaining $15.45 million investment was made by a company controlled by the Serruya family, an entrepreneurial Canadian-based family. If the terms are as outlined, the parent of Jamba Juice may be on the way to significantly improving its books.
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Markets Learning to Grapple With Over 9% Unemployment
This Friday is going to mark the highest rates of unemployment that many investors and many in our producing economy have seen in their professional lifetimes. The last time the real unemployment was at 9% consistently was in the early 1980’s. While the nominal 9% threshold will spook most of the public, all you have to do is to look at the equity markets to see how the current rates are being tolerated. The real data will be the non-farm payrolls, and that will get tweaked after Thursday’s continuing claims and weekly jobless claims data.
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Manufacturing & Construction Revival Seen
The Institute for Supply Management, or ISM, just posted the May reading for manufacturing activity. The reading was 42.8, up from the Bloomberg consensus estimate reading of 42.0 and the prior level was 40.1 in April.
In a different report, the Commerce Department said that Construction Spending also came in better than expected at a reading of +0.8%. Dow Jones had consensus at -0.9%, so this gain is significantly better rather than just a notion of less-bad. The reading for March was revised a tad higher to +0.4% from a +0.3% initial reading.
So far traders and investors have been trying to get where they hope the notion of “less-bad” actually starts turning into positive numbers. It may be too soon to call that universally when we are expecting some 9% unemployment rate this Friday. But this is a start and if it continues it should validate everything we have seen from the equity markets over the last two months.
Jon C. Ogg
June 1, 2009
DJIA Changes Weightings: Higher Tech & Financial (GM, C, CSCO, TRV)
Now that General Motors (NYSE: GM) is bankrupt, the Dow Jones Index Team has decided to announce its DJIA component changes. In this change, there were two components changed rather than just GM. Citigroup, Inc. (NYSE: C) is also getting the boot. Cisco Systems, Inc. (NASDAQ: CSCO) and Travelers Companies, Inc. (NYSE: TRV) are the replacements in the index.
Late Friday we gave our list of single replacement candidates for replacing GM in the DJIA 30, and we even dispelled a few names some were hoping for that did not actually make sense with the DJIA being a price-weighted index. Cisco was our top tech pick for the slot, but Travelers was not in our group. The notion that this was taken out of Citi makes for a slightly ironic index change.
Jon C. Ogg
June 1, 2009
Joe Public Starts Saving Rather Than Spending
This morning we got to see the Commerce Department’s results showing a gain of +0.5% in income and a drop in spending of -0.1%. We had estimates from Bloomberg at -0.2% on income, and -0.2% on spending. It seems those who are keeping their jobs are making more money and they are still spending better than expected. Disposable personal income also showed a gain of +1.1%.
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Lessons From A Personal Credit Crisis
John Tamny of RealClearMarkets
What Edmund Andrews tells us about TARP.
While they were philosophical opposites when it came to most economic concepts, 20th century economists Ludwig Von Mises and John Maynard Keynes understood the impact of devalued money, and their views were quite similar. Von Mises wrote that when money is debased, there is a “flight to the real.” Along those same lines, Keynes observed that falling money values lead to borrowing from banks “beyond what is normal” for investment in hard assets such as real estate.
Top Analyst Upgrades (ANF, DLB, HMA, LPNT, NWS, THC, WFMI, YHOO)
These are the top earlybird analyst upgrades and positive research calls seen early this Monday morning:
Abercrombie & Fitch (ANF) Raised to Outperform at FBR.
Dolby Labs (DLB) Raised to Overweight at JPMorgan.
Health Management (HMA) Raised to Buy at Deutsche Bank.
Lifepoint Hospitals (LPNT) Raised to Buy at Deutsche Bank.
News Corp (NWS) Raised to Overweight at JPMorgan.
Tenet Healthcae (THC) Raised to Buy at Deutsche Bank.
Whole Foods (WFMI) Raised to Outperform at RBC.
Yahoo! (YHOO) Raised to Overweight at Barclays.
JON C. OGG
Top Analyst Downgrades (CTAS, LEAP, SLE, TI)
There were only a few top analyst downgrades and cautious research calls from Wall Street firms this Monday morning.
Cintas (CTAS) Cut to Neutral at Baird.
Leap Wireles (LEAP) Cut to Sell at Auriga.
Sara Lee (SLE) Cut to Sell at Goldman Sachs.
Telecom Italia (TI) Cut to Neutral at UBS.
JON C. OGG
Google (GOOG) Offers First Real Challenge To Amazon (AMZN) Kindle
Google (GOOG) is about to release an e-book program which will allow consumers to download content onto PCs and portable electronics devices. It is a direct competitor to Amazon’s (AMZN) e-book reader, the Kindle. The Google product has several advantages.
The Kindle is relatively expensive. with a prices as high as $359. The Google e-book program will work with consumer electronics devices that most people already own. Read More
Nintendo May Have To Cut Wii Price To Keep Its Lead
Nintendo is facing more competition for its remarkably successful Wii and DS products. Microsoft (MSFT) and Sony (SNE) are both coming out with consoles that appeal to the casual game market, which Nintendo has dominated for three years.
According to the FT, “Sales of Nintendo’s Wii have already slumped by more than 50 percent, according to the latest US monthly figures.” Nintendo’s two large rivals are preparing to release products aimed squarely at the strengths of its most popular products. Read More
Improvement In China Exports May Indicate Strength In Other Emerging Markets
New data from China shows that its manufacturing sector is more stable than it has been in a year and that exports are moving up very modestly.
According to Reuters, “The new export orders sub-index in the official PMI breached 50 for the first time since June 2008, rising to 50.1.”
Since consumer spending in the US, UK, Japan, and EU is not improving, the question is where are the exports going? Read More
The Economy: Another Page Out Of The Worst Case Scenario Handbook
Robert Zoellick, the head of the World Bank, recently said that the current efforts to right the world’s economy are wholly inadequate. It is a position in which he has been joined intermittently by economists, outspoken billionaires, Chinese leaders, and officials from the IMF. His position is that no effort which does not markedly increase global employment is futile and misguided. He told Bloomberg, “While the stimulus has given an impulse, it’s like a sugar high unless you eventually get the credit system working.” Read More
A $1 Trillion A Year Deficit Interest Rate Payment
Like the Texas Hold’em player who pushes every last dime into the center of a poker table, the federal government is now “all in” with its commitment to push the national debt to 50% of GDP. The Congressional Budget Office believes that the Treasury will have to borrow nearly $2 trillion this year. None of that is new news, but what is beginning to emerge is a picture of a government which has narrowed its options for improving the economy down to one. Either GDP turns sharply up next year or the deficit will become an unmanageable burden. The Treasury will have to default on interest payments if sharply raising taxes in 2010 and 2011 does not bring IRS receipts to historic highs. That would not appear to be likely with unemployment moving toward 10% and American corporate earnings badly crippled. Read More
The Death Of The UAW
The UAW under Walter Reuther was arguably the most powerful union in the United States negotiating contracts with all of The Big Three on what became a pre-set cycle. Reuther got union members the employer-funded pensions, medical insurance, and supplementary unemployment benefits that are the antecedents of the benefits that the UAW members and retirees enjoyed until the new deals with Chrysler and GM occurred within the last few weeks. Read More
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Today’s top tickerspy Indexes Home Furnishing R... +14.1% Ethanol and Biofu... +5.1% Electronics Retai... +2.1% Diabetes Stocks +2.0% Memory Chip Stock... +2.0% 
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