Continue reading Lies, damn lies, and consumer credit figures

Lies, damn lies, and consumer credit figures originally appeared on BloggingStocks on Wed, 08 Apr 2009 15:45:00 EST. Please see our terms for use of feeds.

Continue reading Doomsday Scenario: Craig's List is another nail in the news coffin

Doomsday Scenario: Craig's List is another nail in the news coffin originally appeared on BloggingStocks on Tue, 07 Apr 2009 17:06:00 EST. Please see our terms for use of feeds.

Continue reading Home prices continue to drop, but is it really a bad thing?

Home prices continue to drop, but is it really a bad thing? originally appeared on BloggingStocks on Thu, 12 Feb 2009 17:04:00 EST. Please see our terms for use of feeds.

Banking analyst Meredith Whitney is credited with questioning assets on bank balance sheets given the collapse in the real estate market.

Taking advantage of a complete lack of information, Ms. Whitney triggered a massive collapse of trust in an industry by claiming that mortgage-backed securities were worth far less than what the market had perceived.

While she may have had a basis for her claims, her assessment was more sensational than factual. Mortgage-backed securities are quite complex instruments whereby loans are sliced, diced and packaged for sale to a global market.

With maturities extending 30 years into the future, it is unreasonable and unfair to assume that paybacks, even with high default rates will amount to what is currently priced into the market.

The lack of understanding of the underlying security or loans at the individual level has created uncertainty that has yet to be resolved.

For fans of the original "Star Wars" movie, think of the weakness in terms of attacking the Death Star. That one hole was exploited (we can debate the merits of doing so later) by Ms. Whitney and those like her.

Continue reading Next target for fear mongers: Credit cards

Next target for fear mongers: Credit cards originally appeared on BloggingStocks on Mon, 01 Dec 2008 17:00:00 EST. Please see our terms for use of feeds.

Continue reading Short-term interest rates fall to lowest level since Lehman failure

Short-term interest rates fall to lowest level since Lehman failure originally appeared on BloggingStocks on Mon, 03 Nov 2008 09:55:00 EST. Please see our terms for use of feeds.

Continue reading Short-term interest rates fall again on Fed rate cut, dollar swap lines

Short-term interest rates fall again on Fed rate cut, dollar swap lines originally appeared on BloggingStocks on Thu, 30 Oct 2008 10:33:00 EST. Please see our terms for use of feeds.

Continue reading Short-term interest rates fall on cash injections, likely Fed rate cut

Short-term interest rates fall on cash injections, likely Fed rate cut originally appeared on BloggingStocks on Wed, 29 Oct 2008 09:30:00 EST. Please see our terms for use of feeds.

Continue reading Overnight interest rates fall to lowest level since June 2004

Overnight interest rates fall to lowest level since June 2004 originally appeared on BloggingStocks on Wed, 22 Oct 2008 10:44:00 EST. Please see our terms for use of feeds.

Does today's record 936 point rally in the Dow mean that happy days are here again? I think it's a gift to investors who want to stop their losses after having seen their portfolios plummet in the last year. Last week, the Dow fell 22%, destroying $2.4 trillion in market value -- it gained back $940 billion of that today. As an unpleasant reminder, after today's 11% rally, the S&P 500 has lost 36% of its value in the last year. And, while I hope I am wrong, I don't see the conditions yet in place to believe that we have reached bottom with the economy and can now expect the earnings growth that would justify investment in stocks

Today's rally feels good but it is highly likely that there was an element of short covering driving up the market. Last Wednesday, the SEC lifted its ban on short selling. Investors who shorted financial and insurance companies were doing quite well last week as fears of another financial bankruptcy mounted. With today's successful save of Morgan Stanley (NYSE: MS), anyone who was short that firm -- or other financial stocks -- was forced to buy those stocks as they spiked in order to repay their stock loans. This probably contributed significantly to a buying panic.

If you need your money in the next six years, you could sell first thing tomorrow morning and you will be able to limit the losses that could come from unpleasant surprises. What kind of surprises? Here are two:

• Credit Default Swap settlements. There is no central repository of information about who owes how much to whom for their CDS obligations. Nor is there solid data on how much these CDS counterparties have in their capital accounts in the event of a default that triggers their obligation to pay up. For instance, I was surprised to learn that Goldman Sachs (NYSE: GS) had a $20 billion obligation in the event of an American International Group (NYSE: AIG) failure. Who else is out there with such obligations? Do each of these counterparties have the ability to get the government to bail them out by taking over the company to prevent them from having to pay? Probably not.

Continue reading Did you sell into today's record rally?

Did you sell into today's record rally? originally appeared on BloggingStocks on Mon, 13 Oct 2008 17:41:00 EST. Please see our terms for use of feeds.

Continue reading Cramer on BloggingStocks: This defeat hurts us all

Cramer on BloggingStocks: This defeat hurts us all originally appeared on BloggingStocks on Tue, 30 Sep 2008 09:15:00 EST. Please see our terms for use of feeds.

American Express (NYSE: AXP) saw a big sell-off in its shares during the after-hours session on Monday following the release of its second-quarter earnings numbers. The shares already closed down over 11%.

It isn't difficult to comprehend this one. According to Earnings.com, Wall Street was hoping for the credit company to make 83 cents per share. American Express only delivered 57 cents per share from continuing operations. Not only did the company disappoint the Street by a very wide margin, but it disappointed itself, since that 57 cents per share represents a 35% drop compared to the bottom-line results achieved a year ago.

Yep, the financial crisis is still with us. American Express needed to significantly add to its credit reserves. Management stated that the economy is having a negative effect on its cardmembers, and that previous guidance can no longer be relied on. Translation: don't buy this stock! At least, that's my opinion.

I simply can't see allocating investment funds to American Express at this point. If investors wanted to get some exposure to plastic, all they would need to do is consider Visa (NYSE: V) or MasterCard (NYSE: MA). Both of these businesses are based primarily on transactions, not on credit risk. Whenever a card is used, these businesses get a little cut. And that adds up, my friends. Granted, both of these companies sold off on Monday and have been weak lately, and they have litigation risk, but I'd at least look at them for the long-term. Over time they should do well.

American Express, however, is way off my list of potential investment ideas. Not even going near this one. Name a timeframe (e.g. year-to-date, one-year, five-year, etc.), and you'll find that the stock is down. The economy is going to have to turn sharply before I even remotely consider it.

Disclosure: I don't own any company mentioned; positions can change at any time.

Not a good time to buy American Express originally appeared on BloggingStocks on Tue, 22 Jul 2008 08:15:00 EST. Please see our terms for use of feeds.

Fed expands lending program to $200B, increases ECB, Swiss swaps originally appeared on BloggingStocks on Tue, 11 Mar 2008 09:19:00 EST. Please see our terms for use of feeds.

The management at American Express (NYSE: AXP) must have hoped that its relatively high-end card holders might dodge much of the economic slowdown. It was not to be. According to The Wall Street Journal, "the card company said yesterday that it would take a $440 million pretax charge against fourth-quarter earnings as it sets aside more money to cover soured loans." The news and a warning from Capital One (NYSE: COF) showed that credit problems have moved beyond the mortgage market and into consumer credit.

American Express described its problems as "broad-based and sudden." So, part of the financial industry says the consumer pulled in very sharply in December, a sign that GDP may have already begun shrinking at the end of last year.

The consumer was the economy's last, best hope. He was needed to drive revenue in the retail and consumer goods markets. It appears now that his hibernation has begun in earnest.

Douglas A. McIntyre is an editor at 247wallst.com.

American Express takes on water originally appeared on BloggingStocks on Fri, 11 Jan 2008 08:50:00 EST. Please see our terms for use of feeds.

The nation's fourth largest brokerage firm, Lehman Brothers (NYSE: LEH), reported its August 31st quarterly results this morning. Investors began to breathe a sigh of relief as the numbers beat Street's expectations posting $1.54 earnings per share versus the expected $1.43 EPS. Earnings were 3% lower from last year's results, which were accomplished in an accelerating environment.

Lehman Brothers acknowledged a $700 million hit from "substantial value reductions" in mortgage-backed securities. The investment banking and retail brokerage fees were up 3.1% for the quarter and total revenues were $4.3 billion. Lehman Brothers stated that 53% of its revenue totals came from overseas activities, helping to absorb mortgage-backed securities losses.

Lehman Brothers, once known as a pure trading house, has diversified its revenue stream substantially. Coupled with more than 50% of its revenues coming from international sources, the giant firm has shown it can weather the credit-storm.

The stock is up over 4% today on the relief factor. The next few days will see Bear Stearns (NYSE: BSC), Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS) report their August results as well. If Lehman Brothers is any indication, investors may again feel these stocks have come down too much and begin nibbling away on the buy side. The only remaining significant issue is the credit markets and if they have indeed calmed down. If so, the leverage in the business model of the major four firms could begin to re-accelerate earnings in 2008.

Georges Yared is the CIO of Yared Investment Research and the author of Baby Boomer Investing...Where do we go from here?

Lehman Brothers (LEH) earnings better than expected originally appeared on BloggingStocks on Tue, 18 Sep 2007 13:41:00 EST. Please see our terms for use of feeds.

The minutes of the Federal Reserve Open Market Committee (FOMC) were released this afternoon and judging by the 130 point plunge that followed, some investors were disappointed with the Fed.

AP reported that investors were hoping for stronger signs that the Fed would cut its Fed Funds rate when it next meets on September 18th. Although the Fed fretted about the slowing housing market and tightening credit markets, which would lead one to believe that the Fed might be willing to cut rates, investors were expecting a more definite statement. However, the Fed continued to identify inflation as the biggest risk for the economy -- implying that it would hold rates steady to keep inflation from getting further out of control.

While it would be nice to think that something so simple drives stock prices up and down, it's really much simpler and much more difficult to explain their movement. The reasons that big investors buy and sell stocks are simply not disclosed to investors. So the media just takes a quote from a market expert without really knowing what caused prices to move.

Meanwhile, the average Dow stock lost 2.1% of its value today. And the reason might be that the Fed is not eager to bail out those who borrowed too much money and now can't pay it back.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Fed to investors: We ain't cuttin' rates -- Dow plunges 280 points originally appeared on BloggingStocks on Tue, 28 Aug 2007 17:02:00 EST. Please see our terms for use of feeds.

Investors losing trust in Moody's and S&P? originally appeared on BloggingStocks on Tue, 14 Aug 2007 13:02:00 EST. Please see our terms for use of feeds.

Home Depot (NYSE: HD) hoped it had sold its HD Supply business to private equity interests for $10.325 billion. Problems in the credit market trashed the deal.

HD announced that it is now in "discussions with affiliates of Bain Capital Partners, The Carlyle Group and Clayton, Dubilier & Rice for the purpose of restructuring the previously announced agreement for the sale of HD Supply."

That means that the buyers want a better price because they cannot raise the cake to make the purchase. Obviously, no sane bank or investment firm wants to make a high-risk loan for a high-leverage deal. Not with most of them holding the bags on other deals that they could not syndicate to institutional investors.

Market conditions are also causing the retailer to drop the price at which it will buy its shares in its previously announced "Dutch auction" tender offer to purchase up to 250 million shares of its common stock at a price between $39 and $44. Market conditions have caused the company to drop the price range to between $37 and $42 per share.

If the market needed a sign that the credit markets are on the critical list, this is it. One of America's largest companies lowering the price of a buyback and three premiere private equity firms unable to raise capital for a previously announced deal. Imagine how bad things are getting for less marquee deals.

Home Depot shares are down almost 6% in the pre-market.

Douglas A. McIntyre is a partner at 24/7 Wall St.

Credit markets snag sale of Home Depot's HD Supply originally appeared on BloggingStocks on Thu, 09 Aug 2007 09:45:00 EST. Please see our terms for use of feeds.