I first posted on this here on Sept. 19th. This is a great video, I lack the ability to do this. you have to watch this video..
Disclosure (“none” means no position):Laugh at Cramer
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Month: February 2008
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New StockMaster Picks Available
The Stock Master’s have new picks available at Wall St. Newsletters. Please check them out.
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Friday’s Links
Gphone, HD, Fear, Stranger than fiction, Bush v. Gore or Clinton V Obama?
– Here is the early buzz on Google’s (GOOG) phone..
– It looks like we have a winner in the battle
– Always buy fear..
– It is true, if you saw it in a movie, you would scoff…
– It will be great to watch Democrats argue this again against themselves..
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Wachovia: Lower Rates Working
Wachovia’s (WB) Chief Risk Officer Donald Truslow said Wednesday mortgages still contribute “significant profits” and will continue to even if losses from bad loans quadruple from current levels.
Lower interest rates are reducing payment increases on ARM’s, which will reduce delinquencies and charge offs, Truslow said. He expects losses in the portfolio to rise this year but he expects lower charges than industry peers, he said.
Much of the current doubts about the bank stem from its Golden West acquisition.
Golden West’s principle business was making “option adjustablerate mortgages” that let borrowers make lower mortgage payments from month to month, deferring interest payments until future years. Two-thirds of Wachovia’s Option ARM borrowers paid the least amount possible in December, little changed from past practice, Truslow said.
Wachovia said Option ARM loans that were more than 90 days late as of Dec. 31 rose to $ 2. 8 billion from $ 675 million a year earlier. The sum was about 2. 3 percent of the $120 billion portfolio. Even at these levels, Golden West is producing significant operating income for the bank.
How significant can this be? In the recent earnings call Truslow said “Most of the builds in the allowance for the Pick-a-Pay product is for the loans in those markets (markets that experienced the most rapid home price appreciation), where the estimated current loan to values have risen or are expected to rise above 95%, were originated over the last three years and are exhibiting a higher likelihood of the fall. So, when you carve out this pool of loans that constitutes about $8 billion of the $120 billion Pick-a-Pay portfolio. After the build in the allowance balances, the resulting reserves loosely allocated for the Pick-a-Pay portfolio total about 56 basis points or a little more than three times the largest historical loss rate that Ken mentioned earlier in the portfolio.”
What did Ken (CEO Kent Thompson)say that Truslow mentioned? “…we have said since the Golden West acquisition, we looked at the Golden West experience of the early 1990s. At that time, California had 10% unemployment and 20% house price depreciation, and charge-offs peaked in 1994 at 20 basis points. Based on our portfolio today, that 20-basis point peak would translate to about $250 million in charge-offs. Our expectations for the this year are that charge-offs will exceed that historical peak. But even if charge-offs reach three or four times that peak, our Pick-a-Pay portfolio will generate very meaningful bottom-line profits in 2008.”
Essentially even if the current housing market is far worse than 1990 and it very well may be, the Golden West deal with still produce significant profits and lets look at it, the loans at risk constitute 6.6% of a total portfolio.
Investors seem to think this amount is far greater. With more rate cuts coming from the Fed, “problem” loans will diminish and others will not materialize.
Disclosure (“none” means no position):Long WB
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MBIA and Ambac: Wow
So, MBIA (MBI) has now gone as far as to ask Congress to “reign in” Bill Ackman. I thought it was a joke until I actually read it.
First things first. I am going to come to the defense of Herb Greenberg. Anyone who read here knows Herb is not one of my favorite bloggers after his “Worst CEO” post on Sears Holdings (SHLD) Eddie Lampert. That being said, if I am going to jump on someone when I think they are “out there”, I should do the same to others when they are.
Herb wrote a column today about the MBIA and Ambac. To me, the article made perfect sense but reading the comments, you would have though Herb just made the whole thing up. Odd
Let’s go back. Ackman first began shorting the two in 2002. Now, the media constantly says Ackman has shorted MBIA and Ambac when in actuality, he has said countless times he is short the Holding Companies of both organizations. The Holding companies rely on funding from both Ambac and MBIA. Ackman’s bet is that the insurance regulators will require both company’s to suspend dividends to the holding companies so they are able to meet their capital requirements thus starving the holdings companies of income and initiating their extinction.
MBIA actually declined to have an open phone on their last earnings call. They instead chose to take type questions to answer. This was done to enable them to cherry pick which questions to answer and which to decline.
Here is the thing, has anything Ackman said would happen not? Has there been any insider buying in shares of either company? Has management come out and done anything to prove him wrong other than call him names?
Haven’t folks like Warren Buffett and Wilbur Ross looked into both organizations and said, “we’ll pass”?
I am having a hard time thinking of the last time Ackman exited an investment on the losing end. Management at both companies can do one thing to prove him wrong, produce results contrary to his predictions. To date, they haven’t.
Disclosure (“none” means no position): None
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Wal-Mart’s International Push Continues
Wal-Mart de Mexico SAB, (WMMVY) Mexico’s largest retailer and a division of the US Wal-Mart (WMT), said Tuesday it plans to open 205 new stores and restaurants this year, a 12.6% increase.
The plans include developing the “Mi Bodega Express” format, chief executive Eduardo Solorzano said. The format will be more of a neighborhood store than a convenience market and said the results of two such existing stores have been encouraging.
The 2008 expansion plan also includes 17 Wal-Mart Supercenters, 79 Bodega Aurrera stores and 30 VIPs restaurants. Currently Walmex has 1,023 stores and restaurants.
Results in Mexico have been good with the stock of Walmex up 40% the past two years and earnings have grown 32% over that same time period.
This is where Wal-Mart needs to be using its capital, internationally. International sales are growing 20% annually and unlike the US, both the room and expand and customers hunger for the product is vast…
Disclosure (“none” means no position): Long Wal-Mart, none
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Friday’s Upgrades and Downgrades
Upgrades
Nucor (NUE)- Longbow Neutral » Buy
Chesapeake Energy (CHK)- Wachovia Mkt Perform » Outperform
Unitrin (UTR)- Morgan Keegan Mkt Perform » Outperform
Cameco (CCJ)- RBC Capital Mkts Sector Perform » Outperform
ValueClick (VCLK)- Oppenheimer Perform » Outperform
The Medicines Co (MDCO)- Citigroup Hold » Buy
WGL Holdings (WGL)- UBS Sell » Neutral
Baidu.com (BIDU)- RBC Capital Mkts Sector Perform » Outperform
Safeway (SWY)- UBS Sell » Neutral
Genesee & Wyoming (GWR)- Bear Stearns Peer Perform » Outperform
ValueClick (VCLK)- Robert W. Baird Neutral » Outperform
Downgrades
LivePerson (LPSN)- Northland Securities Outperform » Market Perform
Cooper Cos (COO)- FTN Midwest Buy » Neutral
Oriental Fincl Grp (OFG)- Sterne Agee Buy » Hold
Goldman Sachs (GS)- Sandler O’Neill Buy » Hold
Merrill Lynch (MER)- Sandler O’Neill Buy » Hold
Union Drilling (UDRL)- BMO Capital Markets Outperform » Market Perform
Ingram Micro (IM )- Needham & Co Strong Buy » Buy
Synnex (SNX)- Needham & Co Buy » Hold
Tech Data (TECD)- Needham & Co Strong Buy » Buy
Sonic Solutions (SNIC)- Kaufman Bros Hold » Sell
Dreamworks Animation (DWA)- BMO Capital Markets Outperform » Market Perform
EOG Resources (EOG)- Wachovia Outperform » Mkt Perform
Nautilus Grp (NLS)- BB&T Capital Mkts Buy » Hold
Allscripts (MDRX)- Deutsche Securities Buy » Hold
BE Aerospace (BEAV)- UBS Buy » Neutral
CompuCredit (CCRT)- Credit Suisse Outperform » Neutral
UBS AG (UBS)- Deutsche Securities Buy » Hold
Network Appliance (NTAP)- Citigroup Buy » Hold
The Knot (KNOT)- JP Morgan Overweight » Neut
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Borders New Concept, "Excellent"
Well the first email reviews have come in and in a word, Borders (BGP) new concept store is “excellent”.
A big hit is the “digital center”. At it customers have access to multiple computer stations to download to their MP3 players and explore the digital world. Wisely, the “center” has trained personnel to help customers who are not “techies” learn how to use computer programs such as Shutterfly, the online photo processing service.
If you already know how to use the online services and programs you are welcome to work on their personal projects at the store, said Kevin Ertell, vice president of e-business for Borders. You may buy devices such as digital cameras, iPod speaker docks, the Reader Digital Book and MP3 players at the center. Also available are starter kits for Internet services like Ancestry.com and the aforementioned Shutterfly.
In the travel section, an interactive kiosk allows shoppers to research, plan and even book a trip, while the cooking section has a kiosk to print recipes from cookbooks.
Based on initial results, Borders is transforming its stores from a place to go buy a book, to a place to interact with knowledge and the digital world. That is a powerful combination as at the same time it:
1- Does not alienated the core older book buyers
2- Entices younger people to enter the stores
3- Digitizes a previously “paper” operation
All these will expand Borders customer base by offering wider and more current services to a hugely broader demographic of potential shoppers.
Pershing’s Bill Ackman now owns 26% of the outstanding shares of the company and has more than doubled his exposure to the company in the past 6 months. Hard to make money betting against him….
Disclosure (“none” means no position): None
Famed value investors have been buying shares of Sears Holdings (SHLD).
Mohnish Pabri, Managing Partner of Pabrai Investment Funds swapped shares in Berkshire Hathaway (BRK.B)”B” shares for 516,210 shares of Sears at an average price of about $118 a share.
Bruce Berkowitz, the founder and the Managing Member of the Fairholme Fund added an additional 3.2 million shares of the retailer bringing his total to 6.176 million shares.
Pershing Square’s Bill Ackman (ever heard about him?) increased his stake in Sears to 6.15 million shares from 5 million shares last quarter.
Disclosure (“none” means no position):Long SHLD, None
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"Fast Money" for Friday
Friday’s picks
Jeff Macke recommends shorting the Dow with Shrt Dow30 Proshares $63.21 (DOG).
Guy Adami says “If XTO Energy $55.00 (XTO) secondary prices tonight (Thurs), buy it tomorrow (Friday).”
Karen Finerman prefers Kaiser Aluminum $67.43 (KALU).
Pete Najarian thinks Burlington Northern $89.09 (BNI) is a buy.
Thursday’s Results
Jeff Macke likes Cypress Semiconductor (CY) $23.70 Close $23.82 GAIN
Guy Adami prefers Merck (MRK) $47.57 Close $46.90 LOSS
Karen Finerman recommends BJ Services (BJS) $24.48 as a natural gas play Close $24.78 GAIN
Pete Najarian says short Lehman (LEH) $55.31 Close $54.39 GAIN
2008 Records:
Brian Schaeffer= 0-1
Carter Worth= 0-1
Jon Najarian= 4-1
Jeff Macke= 10-8
Tim Seymore= 2-4
Guy Adami= 10-12
Pete Najarian= 11-8
Karen Finerman= 10-9-1
2007 Results (Since 6/21):
Guy Adami= 58-46 = 56%
Jeff Macke= 60-40 = 60%
Pete Najarian= 49-41 = 54%
Here is the significant portion of Bernanke’s testimony on the Hill today
“In part as the result of the developments in financial markets, the outlook for the economy has worsened in recent months, and the downside risks to growth have increased. To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so. The virtual shutdown of the subprime mortgage market and a widening of spreads on jumbo mortgage loans have further reduced the demand for housing, while foreclosures are adding to the already-elevated inventory of unsold homes. Further cuts in homebuilding and in related activities are likely.
Conditions in the labor market have also softened. Payroll employment, after increasing about 95,000 per month on average in the fourth quarter, declined by an estimated 17,000 jobs in January. Employment in the construction and manufacturing sectors has continued to fall, while the pace of job gains in the services industries has slowed. The softer labor market, together with factors including higher energy prices, lower equity prices, and declining home values, seem likely to weigh on consumer spending in the near term. On the other hand, growth in U.S. exports should continue to provide some offset to the softening in domestic demand, and the recently approved fiscal package should help to support household and business spending during the second half of this year and into the first part of next year.
On the inflation front, a key development over the past year has been the steep run-up in the price of oil. Last year, food prices also increased exceptionally rapidly by recent standards, and the foreign exchange value of the dollar weakened. All told, over the four quarters of 2007, the price index for personal consumption expenditures (PCE) increased 3.4 percent, up from 1.9 percent during 2006. Excluding the prices of food and energy, PCE price inflation ran at a 2.1 percent rate in 2007, down a bit from 2006. To date, inflation expectations appear to have remained reasonably well anchored, but any tendency of inflation expectations to become unmoored or for the Fed’s inflation-fighting credibility to be eroded could greatly complicate the task of sustaining price stability and reduce the central bank’s policy flexibility to counter shortfalls in growth in the future. Accordingly, in the months ahead we will be closely monitoring inflation expectations and the inflation situation more generally.”
Simple translation? More rates cuts coming and more good news for banks like Citigroup (C), Wachovia (WB), Bank of America (BAC), Wells Fargo (WFC) and USB (USB).
The full test can be found here:
Disclosure (“none” means no position):Long Citi and Wachovia
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Thursday’s Links
Stem Cells,Evan Byah, College, The Web
– This is an interesting take on the election and a trade
– As awful as it sounds, unless you are going for a specific profession (med, law etc), he has a point
– Men and women has different web habits… surprise?
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Wachovia Insiders Keep Buying
Wachovia (WB) insiders are buying shares on a consistent basis. When you couple this with recent news, it seems to be a sign of a general trend in financials.
Lanty L. Smith a director of Wachovia Corp. bought 40,000 shares of common stock, according to a Securities and Exchange Commission filing Friday. This follows purchases earlier by other insiders including smith himself.
In a Form 4 filed with the SEC, reported buying the shares last Thursday for $34.76 apiece for a total purchase of $1.39 million.
This follows recent announcements that for the first time in years, net insider purchases of stock outpaced sellers. Usually, due to option received by insiders, net sales are more than purchases.
While it is hard for us looking in to quantify the recent effects of the dramatic rate cuts on financials by the Fed, if we follow the insider buying or interest in them by “value investors”, we get a good picture. Berkshire Hathaway’s (BRK.A) Warren Buffett and Wilbur Ross are getting interested, Leucadia (LUK) is buying up shares of AmeriCredit (ACF), Citigroup (C) has seen insider buying and Bank of America (BAC) has got what will be seen as perhaps the bargain of the year in Countrywide (CFC) and Richard Pzena is buying shares of Citi and Freddie Mac (FRE).
Financials (XLF) seemed to have bottomed Jan. 18th it is no coincidence the famed bottom dwellers above are circling.
Disclosure (“none” means no position):Long WB, C
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Borders New Concept Store Open
Today Borders (BGP) opens it first new “concept” store in Waters Place shopping plaza on Lohr Road in Pittsfield Township, Michigan.
What exactly the concept will look like is still a mystery.
“You can expect to see a completely different store compared to existing Borders stores,” said company spokeswoman Anne Roman recently. “Embracing technology – as George (CEO George Jones)talked about in his early days – is clearly evident throughout as we have new digital options as promised.”
Borders’ plans to launch it’s own e-commerce Web site, which is expected to go live by April and the company is terminating its current affiliation with Amazon.com. Borders site is expected to play a crucial role in connecting Borders’ bricks-and-mortar stores to its online presence. As for the “how’s” of the plan, that has not been disclosed yet either. For those interested, Borders has been testing the site and taking customer feedback at beta.bordersstores.com.
After a quick glance at the site, it looks like a cross between Apple’s (AAPL) iTunes site and Amazon’s own. That is not a bad thing. It has a unique navigation feature for scrolling that is very user friendly and personalized list based on user interests.
If any readers go to the new store today, please email or post comments on the experience.
Disclosure (“none” means no position):None but getting close
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Thursday’s Upgrades and Downgrades
Upgrades
AXIS Capital (AXS)- Wachovia Mkt Perform » Outperform
NeuroMetrix (NURO)- Punk, Ziegel & Co Sell » Mkt Perform
Buffalo Wild Wings (BWLD)- Dougherty & Company Neutral » Buy
Douglas Emmett (DEI)- Stifel Nicolaus Hold » Buy
Anadigics (ANAD)- Needham & Co Buy » Strong Buy
Forward Air (FWRD)- William Blair Mkt Perform » Outperform
Qwest (Q)- Deutsche Securities Hold » Buy
SLM Corp (SLM)- Friedman Billings Mkt Perform » Outperform
Hecla Mining (HL)- BMO Capital Markets Market Perform » Outperform
Ensco (ESV)- Credit Suisse Underperform » Neutral
Diamond Offshore (DO)- JP Morgan Underweight » Neutral
Dynegy (DYN)- Citigroup Hold » Buy
HSBC Holdings (HBC)- UBS Neutral » Buy
Valeant Pharmaceuticals (VRX)- Bear Stearns Underperform » Peer Perform
Cephalon (CEPH )- Broadpoint Capital Buy » Strong Buy
Schering-Plough (SGP)- Banc of America Sec Neutral » Buy
Downgrades
Sovereign Banc (SOV)- Sandler O’Neill Hold » Sell
IndyMac Banc (IMB)- RBC Capital Mkts Sector Perform » Underperform
Bankunited Fin (BKUNA)- RBC Capital Mkts Sector Perform » Underperform
Sierra Pacific (SRP)- Wachovia Outperform » Mkt Perform
EastGroup (EGP)- Robert W. Baird Outperform » Neutral
U.S. Concrete (RMIX)- BB&T Capital Mkts Buy » Hold
Masco (MAS)- Wachovia Outperform » Mkt Perform
O’Reilly Auto (ORLY)- BMO Capital Markets Outperform » Market Perform
Gibraltar Industries (ROCK)- Wachovia Outperform » Mkt Perform
Nxstage Medical (NXTM)- Piper Jaffray Buy » Neutral
T. Rowe Price (TROW)- Credit Suisse Outperform » Neutral
Dick’s Sporting Goods (DKS)- Susquehanna Financial Positive » Neutral
Boardwalk Pipeline (BWP)- RBC Capital Mkts Outperform » Sector Perform
American Reprographics (ARP)- JP Morgan Overweight » Neutral
Brasil Telecom Part (BRP)- JP Morgan Overweight » Neutral
Brown-Forman (BF.B)- JP Morgan Neutral » Underweight
Blue Nile (NILE)- Citigroup Buy » Hold
Morgan Stanley (MS)- Oppenheimer Outperform » Perform
Disclosure (“none” means no position):