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Banks Lobby Against Risk Retention on the Loans They Make

banksLet's go back to the financial crisis and the practices that brought this country to its knees. Banks developed a fancy scheme whereby they absolved themselves of all risk from the loans they made. They simply wrapped them up in a bundle and sold them to someone else. What they were doing is essentially packaging and reselling "junk."

When the news of how bad things were became known, the markets froze and collapsed. No one knew who had which securities, and if they did, they didn't know their true value.

Continue reading Banks Lobby Against Risk Retention on the Loans They Make

U.S. Futures Up Ahead of Payroll Data

U.S. stock futures are higher Friday morning, as investors await nonfarm payroll figures at 8:30 a.m. ET. Futures on the Dow Jones Industrial Average surged 49 points to 12,301.00 and futures on the S&P 500 stock index gained 5 points to 1,326.00. Nasdaq 100 futures added 11.75 points to 2,348.00.

Positive sentiment ruled the European markets today. While STOXX Europe 600 Index has gained 0.75%, London's FTSE 100 Index moved up 0.82%.

Most Asian markets ended higher, with Japan's Nikkei Stock Average dropping 0.48%, Australia's S&P/ASX 200 moving up 0.53% and China's Shanghai Composite gaining 1.35%. Hong Kong's Hang Seng Index rose 1.17%.

Continue reading U.S. Futures Up Ahead of Payroll Data

Chasing Value: Insurance Stock Review -- Part 3

Last week, Warren Buffett, Chairman of Berkshire Hathaway (BRK.A and BRK.B), said India's 26% foreign ownership cap on insurers deters him from such an investment. This follows an earlier report that Buffett aims to enter the Indian insurance sector as a corporate agent of Bajaj Allianz General Insurance.

After numerous world calamities, Buffett's focus on insurance companies, and the fact that many hedge funds seem to be heavily focused on banks and neglecting insurance companies -- with the exception of Bruce Berkowitz -- I decided to explore the possibilities.

Even though we can anticipate billions of dollars in claims there still are buying opportunites.

Continue reading Chasing Value: Insurance Stock Review -- Part 3

Analyst Calls: ADM, AKAM, ALL, CP, CSX, HRL, HUM, JWN, NFLX, NSRGY ...

Analyst Upgrades

  • Netflix (NFLX) and Zions Bancorp (ZION) to outperform from neutral at Credit Suisse.
  • Akamai (AKAM) to buy from neutral at Merriman.
  • CSX (CSX) to overweight from equal weight at Barclays.
  • Nordstrom (JWN) to buy from neutral, WellCare (WCG) to conviction buy from buy and Humana (HUM) to neutral from sell at Goldman.
  • E-Commerce China Dangdang (DANG) to overweight from neutral at Piper Jaffray.
  • VMware (VMW) to buy from neutral at BofA/Merrill.
  • Celanese (CE) to overweight from equal weight at Morgan Stanley.

Continue reading Analyst Calls: ADM, AKAM, ALL, CP, CSX, HRL, HUM, JWN, NFLX, NSRGY ...

Chasing Value: Insurance Stock Review -- Part 2

AIG logoDo you have any interest in insurance companies amidst the turmoil, disaster and current crises in Japan? A crises that followed so closely on the heals of the destruction of the New Zealand city of ChristChurch by a 6.3 magnitude earthquake. Perhaps you think this is even a poorer idea than catching that proverbial falling knife we are always hearing about when stock prices are collapsing.

Certainly there will be billions of dollars in claims. On the other hand, perhaps the burden will be spread around the globe to reinsurer's such that none is struck too hard and this is a buying opportunity. After all, when the dust settles, insurers will cry for mercy, and in particular, rate increases. It is also likely those that never saw the need for insurance have been awakened and demand will increase.

Continue reading Chasing Value: Insurance Stock Review -- Part 2

Chasing Value: Insured Profits or a Mountain of Risk?

Ten weeks into the year and never a dull moment. Pondering the remaining 42 weeks and beyond, where will value be found? We know that "my pal Warren" is on the prowl waist high in Berkshire Hathaway cash to invest, and he is on record as chomping on the bit to do so. Just this morning it was reported that Buffett had closed a $9 billion deal to buy Lubrizol Corp. (LZ), the Wickliffe, Ohio-based maker of engine lubricants.

More evidence of this abounds: Wednesday March 2, (Reuters) - US-based Berkshire Hathaway aims to enter the Indian insurance sector as a corporate agent of Bajaj Allianz General Insurance.

This is part 1 of a series examining the insurance market for expansion, stock valuations, potential risks and opportunities, excluding health care focused companies, a whole other breed of enterprise.

Continue reading Chasing Value: Insured Profits or a Mountain of Risk?

Options Update: NYSE Euronext February Volatility Up, March Flat on Deal Talk with Deutsche Boerse

NYSE Euronext (NYX) and Deutsche Boerse confirmed that they are engaged in advanced discussions regarding a potential business combination. February call option implied volatility is at 41, March is at 32, June at 27; compared to its 26-week average of 30, according to Track Data, suggesting larger near-term price movement.

Allstate (ALL) overall option implied volatility is at 24, according to Track Data, above its 26-week average of 27 into its release of Q4 EPS tonight, suggesting decreasing price movement.

Options Update is by Stock Specialist Paul Foster of theflyonthewall.com.

Allstate Sells Off on Weak Q4 Results

allstate q4 earnings reportShares of insurance giant The Allstate Corporation (ALL) are trading sharply lower in after hours trading after the company reported weaker than expected Q4 results this afternoon.

Going into this afternoon's earnings report, analysts had been expecting to see the company report earnings of $0.88, but actual results came in much lower than expected at just $0.55 per share.

Continue reading Allstate Sells Off on Weak Q4 Results

Analyst Calls: AAPL, ALL, AOL, AVP, AZPN, BMY, COO, F, K, MSFT, PENN, UAL ...

Analyst Upgrades

  • Merriman upgraded Penn National (PENN) to buy from neutral, citing the company's strong balance sheet and management team. The firm also raised its target range for shares to $34 to $37.60.
  • BMO Capital upgraded Cooper Companies (COO) to outperform from market perform and raised its price target to $55 from $46. The firm sees upside to Street estimates and increased visibility.
  • Argus upgraded Watson Pharma (WPI) to buy from hold based on valuation.
  • Phillips-Van Heusen (PVH) was upgraded to conviction buy from neutral at Goldman.
  • Allstate (ALL) was upgraded to overweight from neutral at JPMorgan.
  • Weingarten Realty (WRI) was upgraded to neutral from underperform at BofA/Merrill.

Continue reading Analyst Calls: AAPL, ALL, AOL, AVP, AZPN, BMY, COO, F, K, MSFT, PENN, UAL ...

Analyst Calls: BCR, BUD, CLX, CMA, CSC, CSCO, DELL, LEN, MCO, NOK, TRV ...

Analyst Upgrades

  • Jefferies upgraded Computer Sciences (CSC) to buy from hold and raised its target to $53 from $47. The analyst said Computer Sciences' valuation has created one of the best LBO opportunities in several years and could provide a five year IRR of 25+%.
  • Keefe Bruyette upgraded Comerica (CMA) to outperform from market perform, citing strength of the company's capital. The firm raised its target for shares to $44 from $43.
  • RBC Capital upgraded Nokia (NOK) to outperform from sector perform and raised its price target to $14 from $12. The firm upgraded shares based on valuation, reduced execution risk on software development, and potential catalysts from new devices based on Symbian^3. RBS upgraded Nokia to buy from hold after the company named Stephen Elop as CEO.
  • Allstate (ALL) was upgraded to buy from hold at Citigroup.
  • Coca-Cola Enterprises (CCE) was upgraded to buy from neutral at BofA/Merrill.
  • Moody's (MCO) was upgraded to overweight from neutral at Piper Jaffray.

Continue reading Analyst Calls: BCR, BUD, CLX, CMA, CSC, CSCO, DELL, LEN, MCO, NOK, TRV ...

Analyst Calls: ALL, EMC, FCN, IRBT, JNPR, MRVL, RNOW, TRV, VRSN ...

Analyst Upgrades

  • Oppenheimer upgraded VeriSign (VRSN) to outperform from perform, citing better-than-expected domain names trends and the potential for a sizeable share buyback. The firm has a $33 price target for shares.
  • Oppenheimer also upgraded EMC (EMC) to outperform from perform, citing valuation and expectations for strong Q2 results. The firm set a $22 price target for shares.
  • Piper Jaffray upgraded Juniper (JNPR) to overweight from neutral, citing valuation and its longer-term outlook. The firm keeps a $31 price target for shares.
  • Kilroy Realty (KRC) was upgraded to neutral from underperform at BofA/Merrill.
  • Veolia Environment (VE) was upgraded to buy from add at WestLB.
  • QEP Resources (QEP) was upgraded to positive from neutral at Susquehanna.

Continue reading Analyst Calls: ALL, EMC, FCN, IRBT, JNPR, MRVL, RNOW, TRV, VRSN ...

Catastrophe Bond Issuance Gap Is upon Us

Catastrophe bond capacity is maturing, and not much of it is coming back. In the first quarter, $1.8 billion in cat bond risk capital matured, and only $508 million returned in the form of new issuances, according to Thomson Reuters. This quarter, $2.77 billion is maturing, and the absence of first-time issuers makes it unlikely that the market will replace it all. More than a billion of it was from State Farm's Merna Re transaction. The successor to it has already been issued, cleverly named Merna Re II, at only a fraction of the previous bond.

Continue reading Catastrophe Bond Issuance Gap Is upon Us

Catastrophe Bonds: Same but Different in 2010

This year, you can expect experienced catastrophe bond issuers in the insurance and reinsurance sectors to dominate the market, as they did in 2009. Instead of replacing maturing bonds, however, many will be turning to new transactions. Fresh moves are likely, therefore, in a sector that could double last year's issuance total and at least approach the 2007 record of $7 billion in risk capital.

Eighteen tranches of eight cat bonds are set to mature in the second quarter, according to the Thomson Reuters Insurance Linked Securities Community. On the eve of hurricane season in the Gulf of Mexico, $2.77 billion in risk capital will mature, including State Farm's $1.2 billion Merna Re transaction, the largest transaction in the history of this form of risk transfer. Only part of Merna Re will be replaced by Merna II, with industry trade publication Trading Risk, which is put out by the Insurance Insider, reporting that the $250 million successor to Merna Re has been upsized to $700 million.

Continue reading Catastrophe Bonds: Same but Different in 2010

U.S. Insurers Addicted to Corporate Bonds

In the U.S. alone, insurance companies hold more than $2.2 trillion in corporate debt, having spent 2009 buying bonds at a faster rate than it had in the past five years. As Warren Buffett of Berkshire Hathaway (BRK.A) put it, the market was "raining gold." Net purchases of corporate bonds by the U.S. insurance industry jumped to $153 billion last year, most of it in the first quarter, when yields were highest. In 2008, outflows reached $59 billion. In 2004, inflows hit $172 billion.

According to Judy Greffin, Allstate's (ALL) chief investment officer, tells Bloomberg News, "It has paid off very nicely," as evidenced by the 20% growth in Allstate's corporate debt holdings last year, which reached $33.1 billion. She continues, "With the benefit of hindsight, I would have loved to have bought more." Likewise, Buffett indicated that he should have invested more. MetLife (MET) and Prudential Financial (PRU) also benefited from the corporate debt rally, which has helped them recover much of the capital lost from the financial crisis of September 2008.

Continue reading U.S. Insurers Addicted to Corporate Bonds

Earnings Highlights: Allstate, Marriott, PepsiCo, 3M, UBS, Viacom, WWE ...

Here are some highlights from this past week's earnings coverage on BloggingStocks:

  • Activision Blizzard Inc. (ATVI) reported better-than-expected Q4 earnings and declared an annual dividend.
  • Allstate Corp. (ALL) swung to better-than-expected Q4 earnings and also swung to a full-year profit.
  • Buffalo Wild Wings Inc. (BWLD) shares tumbled after it posted disappointing earnings tied to costs.
  • The Cheesecake Factory Inc. (CAKE) posted better-than-expected Q4 earnings but sales were flat.
  • Chipotle Mexican Grill Inc. (CMG) earnings numbers for Q4 resulted in upgrades from two analysts.
  • CVS Caremark Corp. (CVS) higher Q4 earnings matched the expectations of analysts, and shares rose.

Continue reading Earnings Highlights: Allstate, Marriott, PepsiCo, 3M, UBS, Viacom, WWE ...

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DJIA-89.2312,801.23
NASDAQ-23.352,903.88
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Last updated: February 11, 2012: 09:02 AM

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