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It was a surprise when Ken Lewis, the CEO of Bank of America (BAC), finally resigned. Neither shame nor pressure could move him out of his corner office. He was replaced as the bank’s chairman and the government replaced a number of his board members, and even those rebukes were not sufficient to embarrass him enough to leave with grace. Read More
Monthly Archives: September 2009
Why Ken Lewis Didn’t Matter At The End
Ken Lewis To Step Down At Bank Of America (BAC)
CNBC is reporting that Bank of America (BAC) CEO Ken Lewis will step down by the end of the year.
There have been a number of reports in the past that he would leave the bank
The bank confirmed media reports in a press release: Read More
52-Week High Club
Jabil Circuit (NYSE: JBL) hit a yearly high of $13.47 after beating both guidance and analyst estimates for its quarterly earnings.
Kohl’s Corporation (NYSE: KSS) hit a yearly high of $57.19 after the company announced the opening of 37 new stores.
Och-Ziff Capital Management (NYSE: OZM) hit a yearly high of $12.24 as the company continues to recover from a significant decline in assest under management.
Petrobras Energia Participaciones SA (NYSE: PZE) rallied over 180% to a yearly high of $17.97 after it announced that the company was completing reorganization moves.
TransDigm Group Incorporated (NYSE: TDG) hit a yearly high of $49.94 after announcing that it would offer $425 million of senior subordinated notes in order to fund a special dividend.
Virgin Media Inc. (NASDAQ: VMED) hit a yearly high of 13.97, capping off a monthly gain of 17%.
Yahoo! (NASDAQ: YHOO) hit a yearly high of $17.80, capping off a monthly gain of nearly 20%.
Garrett W. McIntyre
Another Increase in Crude Inventories (CVX, XOM, OIL, USO, CIT)
The US Department of Energy’s Energy Information Administration has released its weekly status report on crude oil inventories, and once again they are higher, this time by 2.8 million barrels. Gasoline inventories are down 1.6 million barrels and distillate inventories are up by 300,000 barrels. All these figures put respective inventories above the upper bound of the five-year average for oil, gasoline, and diesel fuel.
It’s no surprise then that share prices for the petroleum companies are falling in the wake of the report. Chevron Corporation (CVX), which announced the retirement of chairman and CEO David O’Reilly and his replacement by vice-chairman John Watson, is trading down, as is Exxon Mobil Corp. (XOM). For some unknown reason, the iPath S&P GSCI Crude Oil Total Return Index ETN (OIL), and the US Oil Fund ETF (USO) are both up about 1%. Read More
24/7 Wall St. TV: The FDIC Is Short $100 Billion
The FDIC has discussed the idea of banks prepaying their risk-based assessments for the last quarter of this year and all of 2010, 2011, and 2012. The move appears desperate because it is. The agency said in a memo today that it was out of money. The “staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative.”
It would probably shock most people to find out that the part of the government charged with insuring their bank deposits has no money to do so. It may calm them to know that the Treasury can supply the capital, but that increases the amount of money that the government will have to borrow and increases it substantially, because the FDIC says that it will be $100 billion short over the next three years. The analysis provided by the agency says, “Staff projects that, over the period 2009 through 2013, the Fund could incur about $100 billion in failure costs. Staff projects that most of these costs will occur in 2009 and 2010. Approximately $25 billion of the $100 billion amount has already been incurred in failure costs so far in 2009.” Read More
Trina Solar Extends Contract; Suntech Completes Utility-Scale Solar Plant; LDK Solar Loses Ground (TSL, STP, LDK)
Chinese solar PV maker Trina Solar Ltd. (TSL) has announced a five-year contract extension with another Chinese company that produces polysilicon and solar wafers. Trina plans to use the materials to produce about 8,500 megawatts of solar modules over the next 13 years.
The original contract began in April 2008 and was to run for eight years. This extension does not change any terms of that contract; it adds five years beginning in 2016 at already agreed-upon volumes and prices, though a price adjustment is possible based on market prices. Read More
Jobless Trumps Recovery
It appeared that traders were prepared to accept the theory of a “jobless recovery” early in the session.
The Commerce Department said that GDP dropped only .7% in the second quarter compared to an initial figure of 1%. Optimists took that as a sign that the economy probably started growing in July. Shortly after that information was released, the Chicago PMI fell to 46.1% in September from 50% in August, offsetting some of the GDP news.
The other important piece of data released early today was from ADP which said that private-sector firms cut 254,000 jobs in September. The figure was worse than expected. Read More
Financial Junk Acting Independently (CIT, FNM, FRE, ABK, AIG, ETFC)
CIT Group, Inc. (NYSE: CIT) is back to looking like its shares the paper they are printed on could be less valuable and less useful than toilet paper. What is surprising is that this is not killing the other junky actively financial stocks. CIT is down almost 40% at $1.46 on over 32 million shares on reports that it is close to collapsing, and that is before the market is even open. Common logic would dictate that this relation of one moving the others would be the case. But junk under one roof is valued differently than junk under another roof.
Right before the open, there are many of the other junky financial stocks that are flat or trading up. Fannie Mae (NYSE: FNM) is flat at $1.56 on less than 500,000 shares, while Freddie Mac (NYSE: FRE) is down 0.5% at $1.84 also on under 500,000 shares. Ambac Financial Group, Inc. (NYSE: ABK) is actually up 1% at $1.80 on only 30,000 shares.
Today’s Best Market Rumors (September 30, 2009)
Updated throughout the day.
Update: The rapidly falling dollar is causing Asian importers of small cars to lose money on most vehicles and will force European luxury auto companies to raise prices giving American manufacturers an edge in the upcoming months (WWJ-Detroit)
Update: CIT may get fundingfrom Citigroup (C) and Barclays (BCS). (Bloomberg)
CIT (CIT) could be taken over by its bondholders or it could go into Chapter 11. Yesterday the stock rose sharply on NY Post reports that a hedge fund manager would save the firm. (WSJ) The stock was down to $1 last night but is only off to $1.41 at 8.40 AM.
Apple (AAPL) will try to use its new tablet to redefine the way people read newspapers, magazines, and books. (Gizmodo)
The improvement is housing may just be because of government “goosing”. (The Daily Deal)
Apple (AAPL) may launch a Mac mini (AppleInsider)
TimeWarner’s (TWX) AOL property may be worth$4 million, depending on who is doing the valuation. (AllThingsD)
Playboy (PLA) may be sold (BusinessWeek).
JPMorgan’s (JPM) Jamie Dimon will take a government jobin two to three years. (Clusterstock)
Microsoft’s (MFST) Courier booklet will run Windows 7 and launch in mid-2010. (Ars Technica)
Douglas A. McIntyre
New Software Steals Money From Bank Accounts
A devilishly clever new Trojan horse that works over the Internet can hack into bank accounts while people are online and take money without being noticed.
According to CNET, “The bank Trojan, dubbed URLzone, has features designed to thwart fraud detection systems which are triggered by unusual transactions.” Read More
A Quarter To Remember: US Markets Up 15%
The US markets will be up over 15% for the third quarter barring any wild swings up or down in the last day of the period. It is an extraordinary performance since the three major indexes were well up at the end of June. Doomsayers have questioned the upward trend every moment of the rise, and, they have been wrong. Investors who have bet against the advance have lost a great deal of money. Read More
UK Regulators Will Force Kraft (KFT) Decision On Cadbury
Many American businesses believe that the UK and EU over-regulate the activities of companies based in those regions. Antitrust laws have been described as particularly overbearing.
The times does come, once in a while, when American companies are actually forced to make decisions about their business interests based on the regulations on the other side of the Atlantic and Kraft (KFT) is up against one of those now.
The U.K. Takeover Panel which keeps an eye on M&A activity in the country has given Kraft until November 9 to make a formal offer for Cadbury or end its fight to buy the company. Read More
Is Sequenom Dead? (SQNM)
Sequenom Inc. (NASDAQ: SQNM) is becoming a case study on how to run a medical testing products company into the ground. The diagnostic test maker has more problems other than just the announcement that it fired CEO Harry Stylli and several others after an investigation into the results for its Down syndrome blood test. This was supposed to be the Holy Grail for Down testing, and we still lack a full understanding of what happened.
Board member Harry Hixson will fill in as Sequenom’s interim CEO, and board member Ronald Lindsay will take over as interim CFO and controller. Elizabeth Dragon was senior vice president for research and development, but she is out as well and you have to ask yourself how great a company without a head of R&D can be. Three other employees were fired, and Paul Hawran “resigned” on Friday with another executive. Sure he resigned.
Read More
IMF: Banks Face Another $1.5 Trillion In Writedowns
The IMF issued its Global Financial System report and one of the most critical points of its analysis is that banks face another $1.5 trillion in writedowns. That is on top of the $1.3 trillion that they have already taken. “We are on the road to recovery, but this does not mean that risks have disappeared,” said José Viňals, Director of the IMF’s Monetary and Capital Markets Department. Read More
FDIC Is Short $100 Billion But Long On Solutions
The FDIC has been discussing the idea of banks prepaying their risk-based assessments for the last quarter of this year and all of 2010, 2011, and 2012. The move appears desperate because it is. The agency said in a memo today that it was out of money. The “staff estimates that both the Fund balance and the reserve ratio as of September 30, 2009, will be negative.” Read More
A Perfect Internet For Only $350 Billion
The FCC has issued a report of almost 200 pages showing its interim plan for increasing broadband deployment and use in both urban and rural areas. The program is complex because it offers at least a dozen options for reaching an abstract goal. The analysis says that everyone in America should have access to a high-speedInternet connection, but it does not have a concrete set of plans based on what level of service makes up broadband or whether that service should be delivered over wire line or wireless services. Read More
Media Digest 9/30/2009 Reuters, WSJ, NY Times, FT, Bloomberg
Reuters: China celebrated 60 years of communist rule as a capitalist economy.
Reuters: The IMF cut global debt write-offs to $3.4 trillion.
Reuters: CIT (CIT) is close to a deal to give the company to bondholders. Read More
Asia Markets And Europe Open
Markets in Asia were narrowly mixed.
The Nikkei was up .3% to 10,133.
The Hang Seng was down .6% to 20,841. Sinopec (SNP) fell.
The Shanghai Composite was up .9% to 2,779.
At the open in Europe, the FTSE rose .1% to 5,166. The Dac was up .4% to 5,735 and the CAC 40 rose .6%.
Data from Reuters and MarketWatch.
Douglas A. McIntyre
CIT (CIT) For Suckers
Shares of CIT (CIT) rallied 32% to $2.20 after The New York Post reported that hedge-fund operator John Paulson of Paulson & Co. was orchestrating a move to merge CIT Group with the remains of IndyMac Federal Bank.
Those who bought the stock all day long are bound to have a hard morning. CIT has dropped back to $1 on news that it may be turned over to its bondholders.
According to The Wall Street Journal, “CIT is preparing a sweeping exchange offer that would eliminate 30% to 40% of its more than $30 billion in debt outstanding,” The company may have to file for Chapter 11, if the talks with bondholders fail.
Douglas A. McIntyre
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