Save $$, Sprint, Sotheby’s, SEC
– This is kool, save money on some bills
– Better but still needs a ton of work’
– George has a very interesting buy here
– Some more blame for the SEC
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Let’s just call this what it is, the rating agencies, tired of looking like duplicitous dopes in the current credit environment, are going to cut a swath through businesses downgrading or putting them on “watch” in a classic “CYA” move.
Sears Holdings (SHLD) Responds:
Today Fitch Ratings (“Fitch”) issued a press release in which it downgraded the ratings associated with certain of Sears Holdings Corporation’s (“SHC”) outstanding debt obligations. SHC does not agree with Fitch’s action given our current liquidity position, reduced debt levels, demonstrated history of cash flow generation and available assets. We believe that we are being unfairly treated, as many of our biggest competitors have dramatically increased debt levels over the past several years with little or no consequence to their ratings.
SHC has consistently maintained a strong capital structure and generated significant cash flow from operations. In fact, SHC has generated $5.2 billion of operating cash since the merger and $1.5 billion last year. The $4 billion credit facility entered into at the time of the Sears/Kmart merger was structured to provide significantly more liquidity than Sears Holdings anticipated requiring in order to provide flexibility to fund our working capital needs and to pursue a variety of value creating strategies. Since the merger in March 2005, the largest amount outstanding under the facility at any time to date has been $1.8 billion, of which $1 billon represented standby letters of credit issued primarily to support our insurance programs. Over this same period, SHC has paid down approximately $2 billion of the outstanding debt assumed from Sears at the time of the merger. SHC has also made contributions of approximately $1 billion to fund the frozen pension plans of its predecessor companies. This credit facility, by its terms, continues through March 2010 and carries no financial ratio covenants that are applicable (the financial ratio covenants contained in the agreement are only applicable at SHC’s election).
SHC has significant assets, including cash of $1.5 billion, owned and attractive long-term leased real estate, a stable of nationally recognized proprietary brands (Kenmore, Craftsman, Lands’ End and DieHard) and a 70% equity interest in Sears Canada. In addition, SHC has $9 billion of inventory that currently secures the $4 billion credit facility.We wish to thank Fitch for retracting the incorrect statement that appeared in its Retail Register Report published on September 17, 2008 in which reference was made to concerns stemming from the elimination of the Bank of America cash-backed letter of credit facility. As noted in the correction issued today by Fitch, that facility did not provide incremental liquidity over and above the existing $4 billion credit facility. The Bank of America facility was designed as a less expensive means for Sears Holdings to issue letters of credit at a time when we had several billions of dollars of excess cash with which to collateralize the facility. With lower cash levels, the facility no longer made economic or operational sense and was significantly reduced, with a small amount retained to continue certain outstanding international letters of credit. Bank of America continues to hold one of the largest commitments in our existing $4 billion credit agreement.
Given that Fitch’s rating change utilizes mid-year debt levels and credit metrics, we have requested that Fitch monitor our credit rating for upgrade as soon as the calculations on which their decision is based no longer govern. At a time when many companies are suffering from excessive leverage undertaken over the past several years, Sears Holdings is well positioned from decisions we made to reduce our leverage since the merger and to allow for the inevitable cycles that tend to occur in the retail business.
Now, Sears has a balance sheet second only to Target (TGT) and WalMart (WMT) in retail. That being said, I think either a slew of retail credit downgrade are coming OR and this is the most likely one, the rating agencies are just running around trying to figure out what went wrong.
As they run around, they are cutting everything in sight. This, the irony here is that they are cutting rating, just as we have clarity (some at least) and things looks like they may finally stabilize.
This will be yet another case of them cutting too late, then finally taking action just when things get better..
Disclosure (“none” means no position):Long SHLD, WMT, none.
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Who is it going to be?
Citigroup Inc. (C), moving to take advantage of the turmoil that is hobbling banks throughout the U.S., is considering making a bid for Washington Mutual Inc. (WM), according to people familiar with the situation.
“People view us today as being a source of the solution, instead of part of the problem,” Gary Crittenden, Citigroup’s chief financial officer, said in an interview. He declined to comment specifically about WaMu.
Citigroup and several other banks are reviewing the Seattle thrift-holding company’s books, which are packed with shaky mortgages, people familiar with the matter said Thursday. Other interested parties include Banco Santander SA, of Spain, and Wells Fargo & Co. (WFC), of San Francisco. J.P. Morgan Chase & Co. (JPM), which was spurned by WaMu earlier this year, is biding its time on a potential bid, people close to J.P. Morgan said.
Who will be the winner? Let’s look.
JP Morgan has its hand full digesting Bear Sterns (BSC). While it does have the balance sheet to do a deal, doing so with the Bear liabilities hanging on it and then adding those of WaMu might just tax things a bit much for CEO Jamie Dimon’s comfort.
Citi. Well, if Pandit has promised to shed $400 billion or so in “non core” assets, I think the likely hood of Citi being a prime bidder would be enhance were he to do it first. Citi is much more likely to be a buyer of much smaller regional banks.
Wells Fargo. The best bet in the lot. I has no current integration issues like Morgan does and is in a infinitely stronger position that Citi. If WaMu is going to get an offer, my guess is that now Wells can unload many of the undesirable mortgages WaMu holds to Hank Paulson, the thrift becomes a bit more appealing at its current $4 a share price.
Disclosure (“none” means no position):Long C, WFC, none
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Now, I do not for a second condone trading like this, but, this is still very interesting…more history
This is a classic…
From the FT:
Click here for music to go along with words
A long, long time ago,
I can still remember,
How much wealth there was in the Square Mile,
And I knew that if I had my chance,
I could make it in finance,
And maybe I’d have money for a while.
But subprime assets made me shiver,
With every product I’d deliver,
Bad news in the press(es),
Just look at those CDSs.
I can’t remember if I cried,
When my salary was pushed aside,
But something resounded worldwide,
The week the IB died.
So bye, bye, Lehman Brothers (LEH) and I,
Needed credit to get better but the credit was dry,
Hank Paulson’s Fed had carved up the pie,
Saying, AIG’s (AIG) too big to die,
AIG is too big to die.
Why’d Fuld wait, put all at stake,
Did he think he’d make more at a later date?
Greedy finance tycoons,
Now Barclay’s buying, let’s be frank,
A pretty cheap investment bank,
Can you hire me, real soon?
Well, I know that it’s a lot to ask,
When Einhorn’s taken us to task,
Using our balance sheet to guise,
Our level 3 assets’ demise.
Now Morgan Stanley’s (MS) feeling short,
And BofA’s (BAC) Merrill’s (MER) last resort,
The banking system’s pretty morte,
The week the IB died.
I was saying,
Bye, bye, Lehman Brothers and I,
Needed credit to get better but the credit was dry,
Hank Paulson’s Fed had carved up the pie,
Saying, AIG’s too big to die,
AIG is too big to die.
Now for four years we’d been on the phone,
Selling mezzanine CDOs,
But that’s not how it used to be,
When Dick came in, we just did bonds,
Good thing he helped us right that wrong,
By buying Aurora Loan LLC,
Oh, and while the Fed was looking ‘round,
They thought they’d try and shoot us down,
The market was all broken,
Bank lending was a croakin’,
And while we unwind our trading book,
The head hunters all have a look,
The hedge funds are put on the hook,
The week the IB died,
I was saying,
Bye, bye, Lehman Brothers and I,
Needed credit to get better but the credit was dry,
Hank Paulson’s Fed had carved up the pie,
Saying, AIG’s too big to die,
AIG is too big to die…
Here is the original post
Disclosure (“none” means no position):None
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Doug Kass must annoy those who attack short sellers. He uses these annoying things like facts to prove them wrong.
Kass discusses Lehman (LEH), Merrill (MER), Morgan Stanley (MS)
Disclosure (“none” means no position):None
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Here is an interview by Charlie Rose with Levitt and Dubner, Co-authors of Freakonomics.
John Bogle put this week in perspective. “If you think the intrinsic value of US business rose and fell by a trillion dollars this week, you are nuts”. Amen..
Disclosure (“none” means no position):
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Here are the top stories for the week at Value investing News
When investors purchase their initial position in a stock, it is usually after their most rigorous research. Once a stock is in their portfolio, some investors relax on the research for subsequent purchases. Each and every time you purchase a stock, you should run it through the same process as if you were buying it for the first time.
Colgate-Palmolive Company (Colgate) is a consumer products company, whose products are marketed throughout the world. Colgate’s Oral Care products include toothpaste, toothbrushes, oral rinses, dental floss and pharmaceutical products. Linked here is a detailed stock analysis and commentary.
Since cars are big-ticket items, a drop in spending has manifested itself with utmost clarity in the auto retail space. US motor vehicle sales were down some 18% in June year over year. As a result, many car retailers have been punished in the market.
Some are once again questioning Warren Buffett’s current investments, but Whitney Tilson comes continues to defend him.
I guess if you read as many annual reports as Saj and I have in the past few months you get hungry for some excitement! So to quench this desire, I decided to skip directly to the note disclosure on goodwill and intangibles! The interesting part between these items ended up residing with the disclosure on intangibles.
Nokia is an international dividend achiever. From the end of 1999 up until September 2008 this dividend stock has delivered an annual average total return of 5.00 % to its shareholders. Nokia’s share price has not recovered yet form its all time highs in the early 2000. The stock has lost over 45% of its value so far in 2008.
Walter J Schloss answers questions at the Ben Graham Center for Value Investing February 12, 2008.
The DIV-Net’s Investing Carnival #13 with posts on dividends, value investing, stock analysis, general market commentary and real estate
Archer Daniels Midland is a dividend aristocrat as well as a component of the S&P 500 index. It has been increasing its dividends for the past 33 consecutive years. From the end of 1999 up until September 2008 this dividend stock has delivered an annual average total return of 6.50 % to its shareholders. The stock has lost over half its value so far in 2008.
Summary of the Lehman Brothers bankruptcy coverage including a link to the official Lehman Brothers’ press release.
Todd Sullivan comments on Bank of America CEO Ken Lewis’ decision to takeover Merrill Lynch.
People have been asking all day what it is called…I’ve got it
The “Securitization & Housing Investment Trust” or SHIT for short
I am on a history kick after reading “Once in Golconda”. Here are eyewitness accounts to 1929 and the aftermath. As you watch it, you’ll be struck by the similarities..
Here is the book:
Here is a book about Jessie Livermore
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Ambac (ABK) has been placed on review from Moody’s for a possible downgrade
From the SEC filing
On September 18, 2008, Moody’s Investors Service (“Moody’s”) announced that it was placing the ratings of Ambac Financial Group, Inc. (“Ambac”) and its subsidiaries on review for downgrade. Ambac expects to continue to work with Moody’s as the rating agency seeks to apply its most recent mortgage-related assumptions to unique attributes of the individual transactions in Ambac’s portfolio. Moody’s stated that because Ambac is meaningfully exposed to the risk of US subprime mortgages and other residential mortgage products, the revised assumptions are expected to have a significant impact on Ambac’s capital position and multi-notch downgrades are possible.
Now, this would be a legitimate reason to short this stock……but you can’t now.
Disclosure (“none” means no position):none
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Yes, stock will rise but it is a bit like celebrating a touchdown when the other team is not allowed to play defense.
The SEC has banned short sales in 799 institutions from midnight Friday, until Oct. 2nd (unless extended).
Said the order:
As a result of these recent developments, the Commission has concluded that there continues to exist the potential of sudden and excessive fluctuations of securities prices generally and disruption in the functioning of the securities markets that could threaten fair and orderly markets. Based on this conclusion, the Commission is exercising its powers under Section 12(k)(2) of the Act.2 Pursuant to Section 12(k)(2), in appropriate circumstances the Commission may issue summarily an order to alter, supplement, suspend, or impose requirements or restrictions with respect to matters or actions subject to regulation by the Commission if the Commission determines such an order is necessary in the public interest and for the protection of investors to maintain or restore fair and orderly securities markets.
In these unusual and extraordinary circumstances, we have concluded that, to prevent substantial disruption in the securities markets, temporarily prohibiting any person from effecting a short sale in the publicly traded securities of certain financial firms, which entities are identified in Appendix A (“Included Financial Firms”), is in the public interest and for the protection of investors to maintain or restore fair and orderly securities markets.
Also, short sellers will have to now disclose their short positions. This is the same as if they were long a stock or security. This, is as it should be..
Now, the banning of short sales is just ridiculous. Short selling is not illegal, naked shorting is. Had the SEC done ANYTHING about naked shorting in the last few years, this would not be an issue. One could argue we would not be in the predicament we are in had the SEC done ANYTHING about naked shorting, ANYTHING.
Rather than issuing a string of memos and holding hearings about it, perhaps an action or two against those guilty of naked shorting would have actually curbed those guilty of the practice? Had we not had naked shorts in the market the oast 6 months, you could easily make the argument Lehman (LEH) would still be here and Merrill (MER) would not have had to sell.
It isn’t the act of shorting that is wrong, it is the abuse of it that is. SEC Commish Chris Cox and the SEC STILL have not done ANYTHING to actually eliminate the practice. All they have done is out it on hold for a couple weeks.
Disclosure (“none” means no position):
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HOG, Mack, Recession, Dodge ball
– Has held up great during the recent panic and yields 3.3%.
– OK, copying the Dick Fuld has to be the days worst idea
– Finally some sanity
– One of the funniest movies of all time……..
Disclosure (“none” means no position):
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Looks like Wilbur Ross is going for a bigger slice..
Market Watch Reports:
Assured Guarantee (AGO) said late Thursday that it has provided a waiver allowing investment funds managed by WL Ross to purchase up to 5 million additional common shares of Assured Guaranty. The shares purchased by the WL Ross Funds will be from current shareholders and as a result will not result in an increase in shareholders’ equity. If WL Ross buys all 5 million shares, it would beneficially own 17.2 million shares or about 18.9% of Assured’s outstanding common shares as of June 3
Ross built his initial stake following a $250 million private placement with the company back in May.
Disclosure (“none” means no position):none
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