Reuters:   Chrysler will have a hard time turning a profit this year.

Reuters:   Hewlett-Packard (NYSE: HPQ) began a bidding war with Dell (NASDAQ: DELL) for 3 Par (NYSE: PAR)

Reuters:   The Nikkei hit a 15-month closing low below 9.000.

Reuters:   Taiwan’s LCD makers filed more suits against Sony (NYSE: SNE).

Reuters:   Tencent bought a Google (NASDAQ: GOOG) backed social network in China.

Reuters:   Nokia (NYSE: NOK) and Intel (NASDAQ: INTC) said their MeeGo mobile software was off to a good start.WSJ:   Seven of the Fed’s top officials were against changing the way that the central bank manages its portfolio according to an account of a August 10 meeting. The debate was about buying more long-term securities

WSJ:   Businesses are adopting the Apple (NASDAQ: AAPL) iPad.

WSJ:   The Administration may force lenders to pay higher fees to cover federal backing of mortgages.

WSJ:   Plans to distribute the BP (NYSE: BP) escrow account have been attacked.

WSJ:   Genzyme and Sanoft-Aventis are still fighting over the price of an M&A deal.

WSJ:   China investors may make a bid for Potash (NYSE: POT)

WSJ:   Bank disclosures of their sovereign debt holdings are incomplete.

WSJ:   Pay TV companies lost subscribers last quarter.

WSJ:   The SEC says the former CEO of Countrywide approved favorable loans to “favored” borrowers.

WSJ:   A judge blocked funds for federal stem cell research.

WSJ:   The FHA will increase funds it charges borrowers to increase its cash position.

WSJ:   Chrysler dealers, some with large inventories, are balking at selling new cars from Fiat.

WSJ:   Johnson & Johnson (NYSE: JNJ) recalled contact lenses.

WSJ:   IPOs of companies with famous brands may have hidden dangers.

NYT:   Nordstrom is trying to retain shoppers  on the Web by showing them inventory from its stores and online operations.

NYT:   TGP will create China currency funds.

FT:   More companies are turning to private placements for funds.

FT:   Austerity programs may hurt banks.

Bloomberg:   Dell may try to outbid HP for 3 Par.

Bloomberg:   Greek banks are being pressed to merge due to faltering economic indicators.

Bloomberg:   A restructuring of Citigroup’s (NYSE: C) consumer bank uncovered a number of troubled mortgages.

Douglas A. McIntyre

We criticized former CEO Schoonover endlessly as hisefforts were wrong every step of the way.  If you are looking for blame, you don’t need to bother blaming a recession,  competitive pressure or the move to lower-end technologymerchandise.  Schoonover ran this ship ashore. Over and over.  And over.  This was not Wal-Mart and it was not Best Buy.  It was Schoonover and his underlings that went along with the plans.

There will now be some 30,000 new jobless claims added to the list overthe next few weeks.  The company noted, "We are extremelydisappointed… we were unable to reach an agreement with our creditorsand lenders to structure a going-concern transaction in the limitedtimeframe available… this is the only possible path for our company."

Circuit City said that it will offer more details about the liquidationof the stores and other assets, the status of the company’s Web siteand firedogSM services operations, and more.

This is a statement from the Land of Duh as is the case in mostbankruptcies or liquidations, but the company did confirm that therewill likely be ZERO value left over for the stockholders.

We would advise ANY COMPANY OR ORGANIZATION to not consider Mr.Schoonover as a candidate to lead any future company.  Not unless theyown a lot of put options.

Jon C. Ogg
January 16, 2009

Reuters writes that Vodafone (VOD) cuts its full-year revenue forecast.

Reuters writes that the Fed approved American Express’s (AXP) application to become a commercial bank.

Reuters reports that Goldman Sachs (GS) cut 10% of its bankers in Tokyo.

Reuters writes that US regulators are urging banks to do more lending.

Reuters reports that AIG (AIG) got a $150 billion bailout as it posted a huge loss.

Reuters reports that the profit and outlook at Starbucks (SBUX) disappointed.

The Wall Street Journal reports that the US financial bailout is under pressure to help companies beyond banks and other financial firms.

The Wall Street Journal reports that Citigroup (C) will look at $20 billion in mortgages to help homeowners who may fall behind on payments.

The Wall Street Journal reports that China hopes infrastructure spending will help its economy.

The Wall Street Journal writes that retailing is so bad that it will no longer be the employer of last resort.

The Wall Street Journal reports that GM (GM) fell on a prediction its stock will go to zero.

The Wall Street Journal reports that the price of oil was helped by the China stimulus package.

The Wall Street Journal reports that data show Europe is in recession.

The Wall Street Journal reports that shares of Goldman Sachs (GS) hit a five year low.

The Wall Street Journal reports that Cisco (CSCO) plans a major upgrade of its hardware.

The Wall Street Journal reports that Circuit City (CC) filed for bankruptcy.

The Wall Street Journal reports that home inventories remain huge.

The Wall Street Journal reports that Nortel (NT) posted a loss and cut jobs.

The Wall Street Journal writes that Sirius (SIRI) posted a large loss.

The Wall Street Journal writes that Dell (DELL) has fallen behind in offering new holiday products.

The Wall Street Journal reports that the silence out of the corporate bond market may be troubling.

The Wall Street Journal reports that GE (GE) is near 11-year lows on concerns about the ability of its financial unit to get funding.

The Wall Street Journal reports that DHL will get out of the domestic delivery business and fire almost 10,000 people.

The Wall Street Journal reports that Rio Tinto (RTP) cut its iron output to support prices.

The Wall Street Journal reports that Facebook is trying to get advertisers for its social network.

The New York Times reports that Obama asked Bush for help for US car companies.

The New York Times writes that Fannie Mae lost $29 billion on write-downs.

The New York Times reports that Time, Inc. asked for volunteers to take exit packages as it cut jobs.

The FT reports that Mexico is hedging against most of its oil prices.

The FT reports that Las Vegas Sands (LVS) has put expansion on hold.

The FT reports that KKR Financial has suspended its Q3 dividend despite making a profit.

Bloomberg reports that China’s export growth slowed.

Douglas A. McIntyre

Citigroup (C) get caught in fears that big financials will have to raise more money. Sells down to $11.05 from 52-week high of $37.50.

Goldman (GS) gets pushed down on same fears. Dips to $68.51 from 52-week high of $240.05.

Ebay (EBAY) shows the internet and e-commerce are not escaping the recession. Runs off to $13.38 from 52-week high of $35.12.

Nortel (NT) announced big losses and big job cuts. Moves down to $.90 from 52-week high of $19.42.

Circuit City (CC) goes bankrupt and falls to $.11 from 52-week high of $8.24.

The New York Times (NYT) takes big write-offs from falling value of assets. Drops to $8.62 from 52-week high of $21.14

TheStreet.com (TSCM) still dropping for a poor quarter. Sells off to $3.35 from 52-week high of $16.74. May be time to go private.

Douglas A. McIntyre 

Earlier today Circuit City filed Chapter 11 and GM’s share price target was dropped to zero by Deutsche Bank. The nation’s largest car company will either run low on money early next year or be forced to raise money in a fashion that will wipe out common shareholders.

The news from the consumer electronics and car companies pushed CC shares as low as $.11 against a 52-week high of $8.24 and GM’s down to $3.02 against its 52-week high of $32.80.

The question is which well-known US company will be next into the credit gauntlet. The answer is that it will probably be Sirius XM (SIRI).

The combined debt load of the merger Sirius and XM is about $2.5 billion. Together they had operating losses of about $150 million in their last reported quarters. They now say that the slowing new car market will cause them to miss their revenue targets for the next two years.

Sirius XM expects no free cash flow in 2009 and $400 million in 2010. If the recession deepens, those numbers are likely to be at risk. The company says it is in discussions with several financial institutions regarding a financing to replace its 2-1/2% Convertible Notes due 2009. There is absolutely no reason to believe that those negotiations will be successful.

We have already noted how the company faces listing issues, and there is this new lawsuit which is going after management to keep it from causing the ultimate harm to shareholders.  The satellite radio company needs to dump some of its debt. Chapter 11 may be the only realistic way to do that now.

You can join our once or twice weekly open email distribution list to hear about issues on stocks like Sirius, other troubled companies, mergers, IPO’s, Warren Buffett, newsletter previews and more.

Douglas A. McIntyre

Douglas A. McIntyre

At the rate things are going at the electronics retailer, everyone at the firm will be unemployed by Christmas.

According to The Richmond Times-Dispatch, "It was a somber morning in Henrico County yesterday as several hundred newly fired Circuit City Stores Inc. employees carrying boxes streamed out of the company’s headquarters."

CC’s stock trades at $.25.

Douglas A. McIntyre

The real story is in the fine print. Based on the current retail environment CC is unlikely to make it to 2009 without filing Chapter 11. The company’s shares may be up 57% today, but they still only trade at $.40.

In the same announcement as the one in which the retailer talked about shutting locations it made a few more points:

1. Waning consumer confidence and a significantly weakened retail environment have hurt the company’s sales and gross profit margin rate.

2. Following the company’s second quarter results announcement, its liquidity position and the sharply worsened overall economic environment led some of Circuit City’s vendors to take restrictive actions with respect to payment terms and the credit they make available to the company.

3.Due primarily to the weakened economic environment and its potential impact on the timing of sales of the company’s inventory and costs and expenses associated with such sales, a recent third-party appraisal conducted for the company’s asset-based credit facility resulted in a reduction of the estimated net orderly liquidation value of the company’s inventory.

CC is being good enough to tell investors it will not make it. There is growing evidence that banks will not give consumers additional access to debt for their credit cards. Some are even cutting allowable balances. Circuit City does not have the capital to offer customer financing on its own.

Many analysts think that sales at some large retail chains could be off as much as 10%. If consumers believe that CC will not be around, they will shop elsewhere.

Big CC competitors like Wal-Mart (WMT), CostCo (COST), and Best Buy (BBY) are going to cut their prices to the bone to get whatever store traffic is available in a deep recession.

There is nearly no case to be made that CC is around after Christmas.

Douglas A. McIntyre

If Amazon’s forecast for the fourth quarter had been relatively strong, or even benign, Wall St. might have been able to believe that the consumer was not dead and buried. If people were going to buy things for the holidays, cheap prices and free shipping would bring them into the market.

None of that worked out.

In its press release and earnings call Amazon said it now anticipates full-year revenue of $18.46 billion to $19.46 billion, below the $19.52 billion that analysts polled by Thomson Reuters were expecting. In July, Amazon had predicted 2008 sales of $19.35 billion to $20.10 billion.

The shortfall is all in the last quarter of the year. There is an extent to which investors had given up on most bricks-and-mortar retailers with the exception of Wal-Mart (WMT). Driving to outlets involves gas. The lines may not be long this year, but some places like Circuit City (CC) don’t even have a full inventory. They might not get the credit to buy what they usually stock.

E-commerce has been growing at nearly 30% a year since 2002. Even if that had fallen off a bit, there would be some sign, however modest, that someone, somewhere had money to spend.

Amazon got on its call and fundamentally said the consumer is broke. Even free shipping will not bring him back. He may not even have a home where his Christmas presents can be sent.

Douglas A. McIntyre

It may be too late for Circuit City because of managerial bungling. Back in July, the company began bizarre expansion plans even as it bled red ink and suffered from poor same store sales.

The Journal adds that "Circuit City management, investors and advisers are trying to avoid a bankruptcy filing before the holiday season, people familiar with the matter said, fearing customers might doubt the ability of a retailer involved in bankruptcy proceedings to provide warranties on products like laptop computers and flat-screen TVs."

But here’s the problem: if Circuit City is trying desperately to avoid chapter 11 until after the holiday season, why on earth would anyone ship to them? Being a creditor in a bankruptcy filing isn’t exactly fun. If electronics manufacturers lose faith in Circuit City, as they probably should, the company is doomed. On the other hand, the weak economy and expected soft holiday season could leave a lot of suppliers desperate to move inventory, even at the possible expense of extended credit terms and the risk of future receivables writedowns.

Given how much trouble so many over-leveraged retailers are in, Circuit City is not alone as a company that could have trouble stocking its shelves with new merchandise. Golfsmith (GOLF) will be in trouble if the golf market remains weak, as evidenced by its declining stock price and cash burn. Pier 1 Imports (PIR) could also have a lot in common with Circuit City and that’s never a good thing.

Zac Bissonnette