Anheuser-Busch Companies Inc (NYSE: BUD) is going to turn down InBev's unsolicited $46.35B takeover offer and that may come before week's end, the Wall Street Journal reported. InBev is then expected to pursue a hostile takeover and Anheuser will say the offer undervalues the company. Instead, Anheuser will attempt to boost its share price by selling non-core assets such as its theme parks.
The Wall Street Journal also reported that Belgian-Dutch financial firm Fortis NL (OTC: FORSY), in a move to increase its solvency, will attempt to raise $12.54B, and will also cancel its interim dividend and sell some assets.
The Financial Times reported that the London Stock Exchange, in a joint venture with Lehman Brothers Holdings Inc (NYSE: LEH), unveiled a pan-European equities trading platform to fight rivals that are hurting its market share.
TheStreet.com's Jim Cramer says the acquired Bear Stearns portfolio is worth even less than he thought.
How bad was that Bear Stearns portfolio? I am beginning to believe that JPMorgan's (NYSE: JPM) (Cramer's Take) buy of Bear is looking like a big mistake. It can only be justified by what might have been an even bigger problem for JPM -- the collapse of the trades that Bear made, which were being processed by JPM's clearing.
We are now beginning to get a real sense of the worthlessness of the mortgage portfolios. Not that we got any help from the SEC, which has taken a "we don't care what's in the mortgages as long as you tell us you have mortgages" attitude. That's been worthless for investors, and maybe even for JPMorgan.
The losses now exceed $400 billion, according to my modeling (if you simply assumed that 50% of the exotic mortgages that were issued from 2005 to 2007 eventually went into default). That's amazing, but it looks like I dramatically underestimated the losses. UNDERESTIMATED!
The most egregious issuers of these exotic mortgages were Bear, Merrill Lynch (NYSE: MER) (Cramer's Take) and Lehman Brothers (NYSE: LEH) (Cramer's Take). I believe that JPM has taken in a huge number of uninsurable, non-hedgeable mortgage instruments that are a pure write-off. And that means they are probably underwater on everything they took in.
Long Island, NY's Astoria Financial Corp (NYSE: AF) has found a novel way to reduce the number of its nonperforming loans by changing its internal policy on when mortgages are classified on its books as troubled, the Wall Street Journal reported. By counting home loans as non performing when the borrower misses at least three payments, not two, Astoria reduced its non-performers to $69M from $106M in three months.
The Wall Street Journal also reported that the indictments of Matthew Tannin and Ralph Cioffi, two former Bear Stearns hedge-fund managers, are expected to cite a personal e-mail suggesting the funds were "toast," four days before they told investors they had little to worry about. JP Morgan Chase & Co (NYSE: JPM) has said it will cover the legal costs of the fund managers.
Hewlett-Packard Company (NYSE: HPQ) is set to reorganize its printer unit. The Wall Street Journal said that the unit's five business units will be cut down to three to become more efficient at adapting to a marketplace in which consumers are relying less on printing.
According to people close to the situation, the Financial Times reported that Anheuser-Busch Companies Inc's (NYSE: BUD) board of directors is planning to meet this week to discuss the $46B bid from rival brewer InBev.
JPMorgan Chase (NYSE: JPM) shares are falling today after competitor Morgan Stanley (NYSE: MS) reported its second-quarter profit sunk 61 percent to $1.01 billion, or 95 cents per share, after paying preferred dividends. MS beat analysts' estimates of a 92 cent per-share profit, but only after raising $1.4 billion through asset sales, which could be a bad sign for the financial sector and JPM. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on JPM.
After hitting a one-year high of $50.99 last June, the stock hit a one-year low of $36.01 in March. This morning, JPM opened at $38.53. So far today the stock has hit a low of $37.93 and a high of $38.70. As of 11:45, JPM is trading at $38.80, down $0.24. The chart for JPM looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in three months as long as JPM is below $50 at September expiration. JPM would have to rise by more than 30% before we would start to lose money. Learn more about this type of trade here.
TheStreet.com's Jim Cramer says constant vacillations and inconsistent messages have conspired to extend this crisis.
There was a reason to go ballistic. The financial system was falling apart because of bad loans that have since been magnified by huge leverage and dubious dividends.
And here we are, more than a year into the crisis, and the Federal Reserve and Treasury still refuse to admit the obvious, despite hideous data every day -- yesterday Lehman (NYSE: LEH) (Cramer's Take) and Washington Mutual (NYSE: WM) (Cramer's Take), today UBS (NYSE: UBS) (Cramer's Take) -- that something has to give. We are either going to be worried about a housing recession or worried about inflation. We cannot be worried about both. Because of this half-in/half-out viewpoint, we have continually failed to address either problem.
Last year was the year to cut and cut big to get refinancings done and allow banks to build capital by playing the yield curve, a la 1990. They blew that. They were worried about inflation. This year you either have to take a severe recession and just crush American business so it uses less energy and crush the American homeowner so he can't pay and then merge all of the banks, or you say we are going to solve the recession/housing conundrum first and address the inflation we can address: ethanol-based food inflation. You cannot do both! You have to take them sequentially.
Verizon Wireless, a joint venture of Vodafone Group Plc (NYSE: VOD) and Verizon Communications Inc (NYSE: VZ), is in talks to acquire Alltel Corp. in a deal valued at about $27B, the Wall Street Journal reported. If successful, the combined companies would create the largest cellphone company, and would be better positioned to compete against AT&T Inc (NYSE: T).
Gregory B. Penner, the son-in-law of Wal-Mart Stores Inc (NYSE: WMT) chairman S. Robson Walton, is expected to join the company's board of directors, a move seen as the beginning of a leadership change at the company, according to the Wall Street Journal.
The Financial Times reported that Singaporean sovereign wealth fund Temasek refused to provide funds to Bear Stearns shortly before Bear's sale to JPMorgan Chase & Co (NYSE: JPM). Temasek reportedly refused the request for practical and political reasons.
Russia's Interior Ministry questioned the head of BP Plc's (NYSE: BP) Russian oil venture as part of a criminal investigation into possible large-scale tax evasion, the Financial Times reported.
JPMorgan Chase (NYSE: JPM) shares are trading higher on news that shareholders of Bear Stearns Cos. (NYSE: BSC) have approved JPM's $2.2 billion buyout of the investment bank. JPM will buy BSC for about $10 a share. The deal is expected to become official tomorrow. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on JPM.
After hitting a one-year high of $52.31 last May, the stock hit a one-year low of $36.01 in March. JPM opened this morning at $42.69. So far today the stock has hit a low of $42.29 and a high of $44.06. As of 12:15, JPM is trading at $43.79, up 0.93 (2.2%). The chart for JPM looks bullish and deteriorating, while S&P gives the stock its highest 5 Stars (out of 5) strong buy rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $37.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 11.1% return in just seven weeks as long as JPM is above $37.50 at July expiration. JPMorgan would have to fall by more than 14% before we would start to lose money. Learn more about this type of trade here.
JPM hasn't been below $7.50 at all in the past year except for a short time in March and has shown support around $42 recently. This trade could be risky if the financial sector suffers some more in the coming months, but even if that happens, that position could be protected by support the stock might find just above $40, where it bottomed out twice in the past two months.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in JPM or BSC.
After a tough day yesterday Chasing Value: Intuitive Surgical confounds Wall Street and closed down to a recent low of $274.75. It opened up today on the news and is currently trading up about 4% to $285 per share, in a market that is trading down across the board.
The following five-year chart illustrates the rapid rise of this highly specialized company that produces a robotic surgical device called the "da Vinci System". They own all the patents for the hardware, software, replacement parts, and service contracts too. That is one big moat around this company.
If you were following my post last year you might have read Serious Money: You asked about Intuitive Surgical? when ISRG was trading in the low $120's. Since that time it has reached $359.59 -- not a bad return. I have been following ISRG since the beginning and own shares at $7.70 the lowest entry point possible post IPO.
The irony of this story is that I also recommended Bear Stearns last year so my best stock pick ever is replacing one of my worst. Intuitive Surgical belongs on your watch list, and if it dips again during the sumer doldrums perhaps there might be another buying opportunity.
UPDATE: ISRG finished the day at $284.77 up $10.02 (+3.65%)
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of ISRG.
JP Morgan Chase (NYSE: JPM) May option implied volatility of 33 is below its 26-week average of 38 according to Track Data, suggesting decreasing price movement.
Wells Fargo (NYSE: WFC) May option implied volatility of 33 is below a level of 52 from April 14 and below its 26-week average of 40, suggesting decreasing price movement.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Since I have been a shareholder of Berkshire Hathaway (NYSE: BRK.A), I have enjoyed reading with great interest the musings of company chairman Warren Buffett as he gives almost a play-by-play review of the year in his letter to shareholders. He writes in a tone I would compare to Will Rogers, the writer, actor, comedian, cowboy and former mayor of Beverly Hills.
"My pal Warren" highlights both the triumphs and disasters of the year and his own perspective of the State of the Union and the economy like only he can. I strongly recommend investors take the time to read his letter(s).
One of the most often referred to items in Buffett's letters is regarding the quality of the management at each of the companies that Berkshire owns, or has major stock holdings in. There are many shrewd investors who will make a convincing argument that the quality of management is the highest priority.
He glowingly speaks of the wisdom, integrity and hard work of his management partners. He openly states that one reason that most of Berkshire acquisitions tend to work so well is the mutual appreciation of these character traits they all share. Unlike many companies that look to make money by shaking up the management structure, Buffett bases his investment strategy on keeping the strong management that built the enterprise in place.
While bank stocks aren't exactly hot, they triggered yesterday's rally because when J.P. Morgan Chase & Co (NYSE: JPM) and Wells Fargo & Company (NYSE: WFC) reported, there were no unexpected surprises, according to the Wall Street Journal's "Heard on the Street". The ups and downs in the sector are expected to continue.
According to people familiar with the matter, the Wall Street Journal reported that Yahoo! Inc (NASDAQ: YHOO) may be moving closer to outsourcing its search advertising to Google Inc (NASDAQ: GOOG) after an initial test yielded what they considered to be positive results.
OTHER PAPERS:
The New York Times reported that AT&T Inc (NYSE: T) is planning today to make an announcement that they will gift $100M to improve the skills of the nation's work force and fight the problem of high school dropouts.
WEB SITES:
Celgene Corporation (NASDAQ: CELG) is best known for its blockbuster drug Revlimid which is used treat multiple myeloma, a cancer which attacks blood and bones. For patients, it can prolong their lives about 2.9 years, or longer, according to Investor's Business Daily's "The New America".
JP Morgan Chase (NYSE: JPM) shares are trading higher after acquisition target Bear Stearns (NYSE: BSC) posted a profit of $110 million, or 86 cents per share, just below analyst projections of 87 cents per share. The results show that BSC was able to make profits during the ongoing credit crisis. Other financial stocks also reporting good news this morning include M&T Bank (NYSE: MTB) and Schwab (NASDAQ: SCHW). This could be a good sign for JPM, which reports earnings tomorrow. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on JPM.
After hitting a one-year high of $53.25 in May, the stock hit a one-year low of $36.01 in March. JPM opened this morning at $42.18. So far today the stock has hit a low of $41.28 and a high of $42.70. As of 12:10, JPM is trading at $41.91, up $0.41 (1.0%). The chart for JPM looks neutral but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $35 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just one month as long as JPM is above $35 at May expiration. JPMorgan would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.
In an effort to increase sales in the Middle East, the Wall Street Journal reported that Dell Inc (NASDAQ: DELL) is in talks with a government-owned vehicle in Dubai called Tecom about establishing a joint venture.
The Wall Street Journal also reported that Washington Mutual Incorporated (NYSE: WM), which obtained a $7B capital infusion from TPG and other investors, had reportedly been working on the TPG deal while negotiating with JP Morgan Chase & Co (NYSE: JPM), which made a preliminary takeover bid of about $7B, people familiar with the deal said.
Citigroup Incorporated (NYSE: C) is close to reaching a deal to sell $12B in leveraged loans at a discount to a group of leading private equity firms, the Financial Times reported. Although details of the deal were still being worked out, inside sources said Apollo Management, The Blackstone Group LP (NYSE: BX) and TPG would buy the loan portfolio at a discount that could come in at about 90 cents on the dollar.
OTHER PAPERS:
The UK Times reported that The Boeing Company (NYSE: BA) is today expected to announce that its 787 Dreamliner has been delayed by 18 months, a setback which will affect all airlines that have ordered the 787, including British Airways Plc (OTC: BAIRY) and Virgin Atlantic.
Troubled savings and loan giant Washington Mutual Incorporated (NYSE: WM) will receive a $5B investment from private equity firm TPG and other investors, the Wall Street Journal reported. For now, this eliminates the possibility that it will be acquired by another financial institution such as J.P. Morgan Chase & Co (NYSE: JPM).
People close to the situation said that Delta Air Lines Inc (NYSE: DAL) and Northwest Airlines Corporation (NYSE: NWA) have revived merger talks. It is speculated, the Financial Times reported, that weak demand and high fuel costs are urging the airliners back to the table to work out a merger arrangement.
OTHER PAPERS:
Evergreen Solar Inc (NASDAQ: ESLR) is expected to announce today that it will double the size of its manufacturing facility in Massachusetts and add about 350 new jobs as part of its ongoing expansion, according to the Boston Globe.
WEB SITES:
Bloomberg reported that The Goldman Sachs Group Inc (NYSE: GS) has been the only major investment bank that has refused to reduce its leverage. In fact, Goldman's adjusted leverage ratio of assets rose to 18.6 at the end of February, from 17.5 at the end of November.
JPM is scheduled to report Q1 EPS on April 16. JPM April option implied volatility of 46 is above its 26-week average of 39 according to Track Data, suggesting larger price movement.
Bear Stearns (NYSE: BSC) volatility is at four-week lows as JPM buyout spread tightens.
BSC closed at $10.86 Wednesday. JPM revised its buyout offer for BSC on Mar. 25 to 0.21753 shares. BSC over all option implied volatility of 70 is at four-week lows according to Track Data, suggesting decreasing risk.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
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MAJOR PAPERS:
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JP Morgan Chase
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Siemens (SI): More than layoffs, a strong sign of recession
McDonald's continues its coffee crusade
Cramer on BloggingStocks: Paulson and Bernanke step up to the plate
