Reuters: Senate Democrats unveiled their healthcare plan.
Reuters: Hedge fund manage Griffin has rebounded from losses.
Reuters: GM must pay its debt and become profitable before an IPO.
Reuters: Kraft (NYSE:KFT) is still considered the front-runner to buy Cadbury. Read More
Reuters: Two Bear Stearns hedge fund managers were acquited.
Reuters: Zucker, NBCU’s current CEO, will head the company when Comcast (NASDAQ:CMCSA) buys a majority of the company from GE (NYSE:GE).
Reuters: Dodd’s super-bank regulator fights a uphil battle in Congress.
Reuters: Fed officials see an uneven recovery. Read More
These are this morning’s top day trader alert and active trader alert stocks. We have links through to VSInvestor.com on each stock with much more detailed data and analysis on the news, price, and volume:
Garmin Ltd. (GRMN) is up over 3%, but far less than you’d think after earnings were well above estimates.
Vonage Holdings Corporation (NYSE: VG) is down close to 10% despite positive earnings because revenues declined.
Ambac Financial Group, Inc. (NYSE: ABK) is soaring by 25% on a huge earnings per share number, after items of course.
American Capital, Ltd. (NASDAQ: ACAS) is up 18% and this is already well off highs after earnings and a potential debt restructure.
STEC, Inc. (NASDAQ: STEC) is one of the morning’s ugliest with a 30% drop on a idsappointment in its earnings and on at least two analyst downgrades.
Sun Microsystems Inc. (NASDAQ: JAVA) is down 2.4% on the E.U. hurdle noted last night, but this had been down as much as 8% or 9% after the news broke. (No Link)
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JON C. OGG
It is of little surprise that CIT Group, Inc. (NYSE: CIT) is seeing clobbered today. The company has finally filed its pre-packaged Chapter 11 bankruptcy package and that has CIT shares down a sharp 63% at $0.26 on triple its average volume. By now, the game is probably known by everyone that bankruptcy usually leaves shareholders of common stock out in the cold. Should it be of any surprise that the “other troubled financial stocks” are seeing their shares head south?
It was just a week ago that I discussed the Fannie-Freddie equity conundrum. Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) are down further. After all, these two are in government conservatorship. It is even easy to argue that these are just being kept alive so that Uncle Sam doesn’t have to include the obligations on the Fed’s balance sheet. And how many investors in these companies really believe that they are holding anything more than a long-term warrant or LEAP option that is way out of the money? Fannie Mae is down 7.4% at $1.00 and Freddie Mac is down almost 9% at $1.12, and neither are on active volume today.
Read More
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.
Reuters: China and the US vowed close ties to bring the economy out of recession.
Reuters: Microsoft (MSFT) and Yahoo! (YHOO) are close to a search deal.
Reuters: The Senate may drop a public health care option.
Reuters: Honda (HMC) posted a profit and raised forecasts. Read More
MBIA Inc. (NYSE: MBI) was on our schedule to report earnings tomorrow, but the troubled and former largest bond insurer somehow managed to post a profit for the quarter. We expected a loss, although estimates on this company are now so thin and wide apart that we hesitate to use them. The company posted net income of $696.706 million on revenue of $1.929 billion, versus a loss of $2.4 billion and negative revenue of -$2.942 billion in the year-ago period. The move is strong enough that it even has Ambac Financial Group, Inc. (NYSE: ABK) higher on the news).
Read More
MBIA Inc. (NYSE: MBI) is set to report earnings Tuesday, before the market opens. As the market has slid further, this troubled “guarantor” has gone with it and has again hit new 52-week lows this morning.
The prior 52-week range was $2.51 to $19.08, and it hit reached $2.42 this morning. This was over a $60.00 stock in 2007. It is hard to imagine that this beaten and battered stock has much influence or relevance any longer, but it still is followed.
Read More
Citigroup (C) Government will take a 36% share. Drops to $1.42 from 52-week high of $27.35.
AMBAC Inc (ABK) Market hates it earnings. Drop to $.56 from 52-week high of $12.37.
Synta Pharmaceuticals (SNTA) Drug trial suspended. Multiple broker downgrades. The daily double. Off to $1.31 from 52-week high of $10.30.
GE (GE) Cuts dividend. Falls to $8.40 from 52-week high of $38.52.
Ebay (EBAY) Concerns recession will hurt e-commerce. Sells down to $10.50 from 52-week high of $33.47.
TheStreet.com (TSCM) Financial advertising falling apart. Down to $1.87 from 52-week high of $9.49.
Douglas A. McIntyre
No matter how far down bank stocks go and how hard regulators try to keep short sellers out of financial shares, some of the smart money is willing to gamble that the fortunes of the sector will get worse.
As of the end of November, short piled into Citigroup (C) driving up shares short by 44% to 182.5 million. In Bank of America (BAC) short interest rose 20% to 110 million shares. Short interest in Ambac (ABK) moved up 26% to 60.8 million. Shares sold short in US Bancorp (USB) and Colonial (CNB) were both up over 20%. The short interest in Morgan Stanley (MS) was also up almost 20%.
According to Reuters, Japan exports hit their lowest level since 2002.
Reuters writes that hopes for an auto bailout in this session of Congress are poor.
Reuters reports that the US is looking into lending practices at Golden West.
Reuters reports that small businesses are being hurt by trouble on Wall St.
SunPower Corporation (SPWRA) seemed to pull down the whole solar sector. Details
MBIA (MBI) and Ambac (ABK) got torn to pieces on bad news.
Radian (RDN) surged on good news.
USEC (USU) dropped on particularly bad guidance.
Douglas A. McIntyre
A year ago, it would have been hard to find people who would believe that Sirius XM (SIRI) or Charter Communications (CHTR) would trade below $1. Sirius had a 52-week high of $3.92. Its merger, which was to create one satellite radio company, was supposed to push that share price up. But, it has over $1 billion of debt to be refinanced next year. Today it fetches $.37.
Charter is in a pretty good business. As a cable provider it markets digital TV, broadband and VoIP services. The company has more than five million customers. It also has over $20 billion in debt. The stock changes hands at $.38. That compares with a 52-week high of $3.94
Short interest in a number of financial stocks moved up very sharply for the period ending August 29. Shares short in Washington Mutual (WM) rose 12% to 383 million. Short interest in Fannie Mae (FNM) was up 29% to 183 million shares. Shares short in Ambac (ABK) were up 9% to 91 million. Short interest in AIG (AIG) was also up 9% to 86 million. shares.
Shares short in Wells Fargo (WFC) moved up 6% to 176 million.
The short interest in most tech shares fell. Share short in Intel (INTC) fell 17% to 69 million. Short interest in Microsoft (MSFT) fell 11% to 45 million. Shares short in Sun (JAVA) fell 18% to 37 million. Shares short in Marvel dropped 22% to 27 million.
Other notable moves included an increase of shares short in Nvidia (NVDA) of 110% to 47 million and an increase of 10% of shares sold short in Sirius XM (SIRI) to 232 million
Data from NYSE and Nasdaq
Douglas A. McIntyre
VS Investor posted several day-trade alerts.
The first was for McAfee (MFE) which was hammered by analyst downgrades.
Ambac (ABK) spiked up 20% on strong volume.
Short sellers believe that they have seen the bottom for financial shares and exited the industry en masse.
Shares sold short in Merrill Lynch (MER) fell 12.6 million to 42.3 million. Short interest in Bank of America (BAC) dropped by 12.3 million to 112.8 million. Share short in Lehman (LEH) fell 11.5 million to 70.6 million. Short interest in Ambac (ABK) fell 8.3 million to 83.5 million. Shares short in Wachovia (WB) dropped 6.4 million to 271.9 million and the short interest in Wells Fargo (WFC) dropped 7.4 million to 165.8 million.
Ambac Financial (ABK) Cut To Underweight at JPMorgan.
Ann Talor (AMM) Cut to Market Perform at FBR
Bank of America (BAC) Cut to Neutral at UBS
FEMSA (FMX) Cut to Equal Weight at Morgan Stanley
When you hear the group of conspiracy theorists that Gary Weiss so aptly named "The Baloney Brigade" talking about naked short selling, you get the idea that unscrupulous short sellers are driving down the prices of some stocks far below the price they would fetch in a fair market.
Regulators may be trying to keep short sellers out of a few financial stocks, but that is not keeping large bets against most other stocks from rising.
While some of the shorts may have moved on from the "protected" stocks, as of July 15, the short interest in Fannie Mae (FNM) rose 15.7 million shares to 154.4 million. Shares short in Freddie Mac were up 23.1 million to 105.9 million.
The federal government has decided that Fannie Mae (FNM) and Freddie Mac (FRE) are too big to fail. The Fed and Treasury will offer a combination of loans and stock purchases to make sure that the two mortgage operations have adequate capital to operate smoothly. By some estimates, the government will put $15 billion into the companies, which will almost certainly push down the value of their common shares due to dilution. But, it will not wipe that stockholders out.
Investors and employees at Bear Stearns were not so lucky. Shareholders in IndyMac (IMB), which was seized by the government last week, will walk away with nothing. People with money in Countrywide would likely have done no better if Bank of America (BAC) has not bought the company, a move that some analysts say could still back-fire.
The Fed and Treasury almost certainly did the right thing. Those who believe that only the free market should determine the fate of financial institutions may want to make an exception with FRE and FNM. They hold or support almost 50% of US mortgages. Their paper is owned in great quantity by every major bank and brokerage house. A failure of one or both companies would cause hundreds of millions of dollars in bank write-offs and would hurt the chances of the average citizen getting a home loan.
The credit crisis, but most measures, is getting worse. Merrill Lynch (MER) is almost certainly close to selling assets to offset losses from its mortgage-related paper. Most large US banks, with Citgroup (C) out in front, are going to have billions more in write-downs this quarter. Many observers think those losses could continue well into next year as the mortgage markets and economy get worse.
All of this raises the $64,000 question of which financial institutions are too big to fail and which are not. It could be persuasively argued that if MBIA (MBI) or Ambac (ABK) went under, the losses at financial companies which hold their paper could be tremendous.
That brings the argument around to money center banks and brokerages. Market rumors are that Lehman (LEH) may not make it. Wachovia (WB), Washington Mutual (WM), and Citigroup (C) may reach a point of no return. Who decides if any of these gets government assistance? Congress? The Fed? The Treasury?
The credit crisis will get worse, perhaps much worse. The federal government does not have an unlimited supply of capital. If it is faced with bail-outs that run into the hundreds of billions of dollars, the vault may empty quickly.
All of this means that the decision about what happens to large US banks and investment houses will be at least somewhat arbitrary.
Those financial firms which fail earliest may actually have an advantage. At least there will be money available to support them.
Douglas A. McIntyre
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