Have a safe holiday
Todd
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Todd Sullivan
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Tuesday, August 28, 2007
Vacation
ValuePlays is on vacation until Wednesday September 5th
Have a safe holiday
Todd
--
Sent via Empower HTML Mail Viewer For BlackBerry
Have a safe holiday
Todd
--
Sent via Empower HTML Mail Viewer For BlackBerry
Sunday, August 26, 2007
Top Stories Month To Date At VIN
Here they are 1-5, it is a Buffett buffet...........
1- Risk Arbitrage/ Special Situations Look Attractive
2- Buffett On The Market
3- Gannon On Investing: On Berkshire Hathaway's Holdings
4- Warren Buffett Buys Bank Of America Corp., Dow Jones & Co., Adds to US Bancorp, Sells H&R Block
5- Mohnish Pabrai 13F
1- Risk Arbitrage/ Special Situations Look Attractive
2- Buffett On The Market
3- Gannon On Investing: On Berkshire Hathaway's Holdings
4- Warren Buffett Buys Bank Of America Corp., Dow Jones & Co., Adds to US Bancorp, Sells H&R Block
5- Mohnish Pabrai 13F
Saturday, August 25, 2007
Notable Links: Weekend Edition
- I read his fist book and loved it. He has some wonderful insights into today's market.
- Excellent article on Bernanke
- He has made himself a billionaire buying things nobody else will invest in. See what he is buying now
- Can they catch iTunes?
- This is a great regular blog section. I read it daily
Friday, August 24, 2007
What is CNBC's Problem?
Just once I long to tune in a not have them tell me how bad things just might get.
We have had quarter after quarter, year after year of growth in both economic performance, corporate profits and jobs and if you watch CNBC, there is a recession knocking on our doorstep any day now. The odd thing is it has been knocking since last year and despite that we just keep chugging along. I could see this if we were at 1% or lower GDP growth but we are at 3% plus! Expectations, which have been essentially met to date do not call for anything close to a recession anytime soon. Why are you so convinced it is going to happen? Is it the "bad news sells" theory?
Stop telling me how bad it can get please. How about a neat little switch and tell me had good things can get now that the credit crisis you were so sure would sink us all last week didn't. We all did not lose our homes and the was no massive run on the banks. It wasn't 1929 all over. Of course you can always fall back on old faithful, housing. But here is the thing, housing is only 4% of GDP, it just will not (and to date had not) matter as much as you want us to think.
Oh, but you are saying today, what about all those housing related job cuts? Sure is makes for a good tale except when you consider employment keeps rising and the job cuts have been happening for 6 months now. Somebody is hiring them. You seem to forget that we could not get enough of these guys when housing was booming so now that it has slowed down, demand for them seems to equal the supply. Problem? Can anyone find me a carpenter or plumber who cannot find work? Me either.
So what is next week's catastrophe in waiting? China? Iran? Oil? Another hurricane? What, what is going to end our world next week? Just because you got caught up in the euphoria at the turn of the century and bought into the "new paradigm" that said earnings are really not that important, let's not crap on everything now "just in case" things do turn south you can say "we told you so". Your negativity has proven wrong for the better part if 4 years now, let's get past it.
Tonight you can watch "Against the Tide: The Battle for New Orleans" or "American Greed". You won't see "American Ingenuity" or "American Successes" anywhere on the network...
The more this goes on the more I wish for Murdoch to get things rolling with his network. Please Ruppert? Please...? Yes I am begging..
We have had quarter after quarter, year after year of growth in both economic performance, corporate profits and jobs and if you watch CNBC, there is a recession knocking on our doorstep any day now. The odd thing is it has been knocking since last year and despite that we just keep chugging along. I could see this if we were at 1% or lower GDP growth but we are at 3% plus! Expectations, which have been essentially met to date do not call for anything close to a recession anytime soon. Why are you so convinced it is going to happen? Is it the "bad news sells" theory?
Stop telling me how bad it can get please. How about a neat little switch and tell me had good things can get now that the credit crisis you were so sure would sink us all last week didn't. We all did not lose our homes and the was no massive run on the banks. It wasn't 1929 all over. Of course you can always fall back on old faithful, housing. But here is the thing, housing is only 4% of GDP, it just will not (and to date had not) matter as much as you want us to think.
Oh, but you are saying today, what about all those housing related job cuts? Sure is makes for a good tale except when you consider employment keeps rising and the job cuts have been happening for 6 months now. Somebody is hiring them. You seem to forget that we could not get enough of these guys when housing was booming so now that it has slowed down, demand for them seems to equal the supply. Problem? Can anyone find me a carpenter or plumber who cannot find work? Me either.
So what is next week's catastrophe in waiting? China? Iran? Oil? Another hurricane? What, what is going to end our world next week? Just because you got caught up in the euphoria at the turn of the century and bought into the "new paradigm" that said earnings are really not that important, let's not crap on everything now "just in case" things do turn south you can say "we told you so". Your negativity has proven wrong for the better part if 4 years now, let's get past it.
Tonight you can watch "Against the Tide: The Battle for New Orleans" or "American Greed". You won't see "American Ingenuity" or "American Successes" anywhere on the network...
The more this goes on the more I wish for Murdoch to get things rolling with his network. Please Ruppert? Please...? Yes I am begging..
Now Is The Time For PMI's Spin
The litigation environment surrounding tobacco has not been this good in almost 20 years. Altria (MO) will take advantage of this to announce the PMI spin at the upcoming board meeting Aug. 29th.
The Illinois Supreme Court ordered a lower-court judge to stop pestering them for permission to reopen a failed lawsuit against Philip Morris USA over the company's light cigarettes because he did not like the outcome. In a 4-2 ruling the court demanded Circuit Judge Nicholas Byron stop asking the state's 5th District Appellate Court if he has authority to reopen the lawsuit apparently recognizing that the judge in the case ought not to try harder to get a favorable verdict for the plaintiffs than their lawyers.
In March 2003, Byron re-wrote current law and in a decision destined to be overturned issued a $10.1 billion judgment against Philip Morris USA, saying the company misled customers into believing they were buying a less harmful cigarette.
The Illinois Supreme Court then wisely overturned Byron's ruling. Why? The Federal Trade Commission allowed companies to characterize or label their cigarettes as "light" and "low tar," so Philip Morris could not be held liable under state law even if such terms could be found false or misleading.
In his typically understated style William Ohlemeyer, Philip Morris USA's vice president and associate general counsel, issued a one-sentence statement: "Philip Morris USA believes the Illinois Supreme Court reached the right result." Duh...
This is the very reason Altria is currently pushing for FDA regulation of tobacco. It effectively ends much of the potential litigation against tobacco companies in the future.
When the spin occurs I will hold shares in both companies and have no intention of selling either anytime soon.
The Illinois Supreme Court ordered a lower-court judge to stop pestering them for permission to reopen a failed lawsuit against Philip Morris USA over the company's light cigarettes because he did not like the outcome. In a 4-2 ruling the court demanded Circuit Judge Nicholas Byron stop asking the state's 5th District Appellate Court if he has authority to reopen the lawsuit apparently recognizing that the judge in the case ought not to try harder to get a favorable verdict for the plaintiffs than their lawyers.
In March 2003, Byron re-wrote current law and in a decision destined to be overturned issued a $10.1 billion judgment against Philip Morris USA, saying the company misled customers into believing they were buying a less harmful cigarette.
The Illinois Supreme Court then wisely overturned Byron's ruling. Why? The Federal Trade Commission allowed companies to characterize or label their cigarettes as "light" and "low tar," so Philip Morris could not be held liable under state law even if such terms could be found false or misleading.
In his typically understated style William Ohlemeyer, Philip Morris USA's vice president and associate general counsel, issued a one-sentence statement: "Philip Morris USA believes the Illinois Supreme Court reached the right result." Duh...
This is the very reason Altria is currently pushing for FDA regulation of tobacco. It effectively ends much of the potential litigation against tobacco companies in the future.
When the spin occurs I will hold shares in both companies and have no intention of selling either anytime soon.
Notable Links: Friday
- Another big thank you for the mention
- And another
- I love honesty. Don't' just tell me your successes but tell me what you missed to. These guys are great
- I am ashamed to see that somebody is actually arguing for lowering teacher standards in my state to appease minority applicant who can't wrise. No wonder kids can't today...
- More lead filled toys for our kids from China. Oh yeah, and even more
Friday's Upgrades and Downgrades
UPGRADES
InfoSpace INSP Wedbush Morgan Hold » Buy
UPS UPS Matrix Research Hold » Buy
Tyson Foods TSN Matrix Research Sell » Hold
Imax IMAX Roth Capital Hold » Buy
Tech Data TECD Citigroup Hold » Buy
Hana Biosciences HNAB Cantor Fitzgerald Hold » Buy
China Netcom CN UBS Sell » Neutral
DOWNGRADES
KVH Industries KVHI Needham & Co Buy » Hold
Cepheid CPHD Caris & Company Buy » Above Average
Talbots TLB Stifel Nicolaus Buy » Hold
KKR Denies IPO Delay: Hmmm, Bad News
“As evidenced by the recent filing of an amendment to the registration statement, we are continuing to work on the IPO and have not postponed,” a spokesman for K.K.R., David Lilly said Thursday.
The filing had a notable change to it. It is the firm said "The cost of financing leveraged buyout transactions by issuing high-yield debt securities in the public capital markets has recently increased significantly. If conditions in the debt markets do not become more favorable to us in the near term, we may need to rely on financing commitments provided directly by investment banks or other sources in order to consummate pending transactions or finance future transactions."
"Such financing may be significantly more costly, with terms that may be significantly more restrictive, than financing that was, until recently, available to us in the public capital markets. More costly and restrictive financing may adversely impact the returns of our leveraged buyout transactions and, therefore, adversely affect our results of operations and financial condition." You can view the entire prospectus here
Translation? Business sucks right now and out results will reflect that.
Now both Blackstone (BX) down 28% and Fortress (FIG) down 43% went public earlier this year and buyers of shares of both have got creamed. Prior to the Blackstone IPO I posted that " If you believe in the "greater fool" theory then this would be an indication that these firm are at the top and the people in the know are cashing in." A few day later I wrote "Carl Ican, in an interview on CNBC yesterday said when asked about private equity "easy money and cheap deals are going away and this will severely impact earnings at private equity". When you add the specter of a tax increase from 15% to 35% on these entities, it is no wonder they are racing to cash in before we all realize they are due to earn much less in the immediate future."
In short, you would have to be a person of painfully little intellect to be waiting to invest in the KKR IPO (if it happens). I also cannot imagine I have a monopoly of this opinion either. That being said, what incentive does KKR have for hitting the trough now? Why not wait until at least Blackstone and Fortress are not dirty words to investors to make a run. One would think that when the current environment improves, any IPO would fetch much more money. Unless, unless, that is, things are only going to get worse.
What if KKR fully expects is tax rate to jump from 15% to 35% when congress gets back in session this fall? I would fully expect them to have someone's ear and probably have a good idea of what the anticipated outcome of it will be. If KKR pushes ahead now after what has happened to it's fellow PE buddies, it can only be becase they see things getting worse down the road.
Now I do not short stocks, I am not wired that way but if I did, the whole PE area looks to me like it may be a prime target.
The filing had a notable change to it. It is the firm said "The cost of financing leveraged buyout transactions by issuing high-yield debt securities in the public capital markets has recently increased significantly. If conditions in the debt markets do not become more favorable to us in the near term, we may need to rely on financing commitments provided directly by investment banks or other sources in order to consummate pending transactions or finance future transactions."
"Such financing may be significantly more costly, with terms that may be significantly more restrictive, than financing that was, until recently, available to us in the public capital markets. More costly and restrictive financing may adversely impact the returns of our leveraged buyout transactions and, therefore, adversely affect our results of operations and financial condition." You can view the entire prospectus here
Translation? Business sucks right now and out results will reflect that.
Now both Blackstone (BX) down 28% and Fortress (FIG) down 43% went public earlier this year and buyers of shares of both have got creamed. Prior to the Blackstone IPO I posted that " If you believe in the "greater fool" theory then this would be an indication that these firm are at the top and the people in the know are cashing in." A few day later I wrote "Carl Ican, in an interview on CNBC yesterday said when asked about private equity "easy money and cheap deals are going away and this will severely impact earnings at private equity". When you add the specter of a tax increase from 15% to 35% on these entities, it is no wonder they are racing to cash in before we all realize they are due to earn much less in the immediate future."
In short, you would have to be a person of painfully little intellect to be waiting to invest in the KKR IPO (if it happens). I also cannot imagine I have a monopoly of this opinion either. That being said, what incentive does KKR have for hitting the trough now? Why not wait until at least Blackstone and Fortress are not dirty words to investors to make a run. One would think that when the current environment improves, any IPO would fetch much more money. Unless, unless, that is, things are only going to get worse.
What if KKR fully expects is tax rate to jump from 15% to 35% when congress gets back in session this fall? I would fully expect them to have someone's ear and probably have a good idea of what the anticipated outcome of it will be. If KKR pushes ahead now after what has happened to it's fellow PE buddies, it can only be becase they see things getting worse down the road.
Now I do not short stocks, I am not wired that way but if I did, the whole PE area looks to me like it may be a prime target.
"Fast Money" for Friday
Here are Friday's picks and records to date..
FRIDAY'S PICKS
Carter Worth liked General Motors (GM). Open $30.75
Guy Adami said Dell (DELL) is a buy. Open $27.24
Pete Najarian preferred Eli Lilly (LLY) for Cialis. Open $55.87
Jeff Macke recommended getting long Activision (ATVI). Open $18.57
NO PICKS FOR THURSDAY
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 19-12 Gain $35.62
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 21-18 Gain $3.60
Pete Najarian= 13-9 Gain $24.74
Seymore= 3-2 Loss $.49
Finerman= 3-2 Gain $1.21
Stacey Briere-Gilbert= 2-0 Gain $1.61
Constance Hunter= 1-0 Gain $1.84
Carter Worth=
FRIDAY'S PICKS
Carter Worth liked General Motors (GM). Open $30.75
Guy Adami said Dell (DELL) is a buy. Open $27.24
Pete Najarian preferred Eli Lilly (LLY) for Cialis. Open $55.87
Jeff Macke recommended getting long Activision (ATVI). Open $18.57
NO PICKS FOR THURSDAY
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 19-12 Gain $35.62
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 21-18 Gain $3.60
Pete Najarian= 13-9 Gain $24.74
Seymore= 3-2 Loss $.49
Finerman= 3-2 Gain $1.21
Stacey Briere-Gilbert= 2-0 Gain $1.61
Constance Hunter= 1-0 Gain $1.84
Carter Worth=
Thursday, August 23, 2007
Now It Is A $12 Billion Buyback (Or Less)
It looks like the Home Depot Supply unit sale that was scheduled to close today won't get done.
Home Depot (HD) said earlier this month that it was in talks with buyers Bain Capital, the Carlyle Group and Clayton Dubilier & Rice about a restructuring of the $10.3 billion all-cash deal that was to partially fund a $22.5 billion stock repurchase plan.
According to The Financial Times, the new terms would include a lower price designed to entice Merrill Lynch (MER), Lehman Brothers (LEH) and JPMorgan (JPM) to finance the deal amid the current issues in the credit markets. The report then went on to say that the banks appear unwilling to fund the deal, even under the new terms being worked out by Home Depot and the buyers.
Surprised? I hope not. Look at it this way, what has Home Depot done right this century? They are constantly shooting themselves in the foot and the real surprise should be that this deal did not fall apart sooner.
If they had just kept Supply and announced a modest $5 billion buyback when they announced this current destined to fail operation, they would be on their way to completing it and shares would most likely be in the $40 range they were when this plan was announced. Depending on market conditions then they could have added more and done this whole thing responsibly. By shooting for the moon, The Depot just adds this to the list of mess ups.
Home Depot (HD) said earlier this month that it was in talks with buyers Bain Capital, the Carlyle Group and Clayton Dubilier & Rice about a restructuring of the $10.3 billion all-cash deal that was to partially fund a $22.5 billion stock repurchase plan.
According to The Financial Times, the new terms would include a lower price designed to entice Merrill Lynch (MER), Lehman Brothers (LEH) and JPMorgan (JPM) to finance the deal amid the current issues in the credit markets. The report then went on to say that the banks appear unwilling to fund the deal, even under the new terms being worked out by Home Depot and the buyers.
Surprised? I hope not. Look at it this way, what has Home Depot done right this century? They are constantly shooting themselves in the foot and the real surprise should be that this deal did not fall apart sooner.
If they had just kept Supply and announced a modest $5 billion buyback when they announced this current destined to fail operation, they would be on their way to completing it and shares would most likely be in the $40 range they were when this plan was announced. Depending on market conditions then they could have added more and done this whole thing responsibly. By shooting for the moon, The Depot just adds this to the list of mess ups.
"The Most Influencial Blog" = Slander?
So, I write a post about the motives of folks I see defending Mr. Cramer from a Barron's article and somehow it gets twisted into an attack on James Altucher.
First things first. I have no ax to grind with Altucher. I love it when he links ValuePlays, it drives traffic to the blog.
Now that is done, let's get to the real point of the original post. The defenses of Cramer ranged from a flacid conspiracy theory involving Rupert Murdoch (the only thing missing from this idea was the Karl Rove or Dick Cheney link) to the show is really educational or the show is really just trying to get people to think a certain way. The conspiracy theory was so bad the writers of it should be ashamed and issue us a public apology.
Who is right? None of them probably. Like I said in the first post the show is so ambiguous that it cannot be specifically categorized. It is a little of this and a little of that and a whole lot of shtick to get ratings. BUT, when you tell people what to do you have to accept people tracking those picks ESPECIALLY when you do not do it yourself. Cramer could easily end this mess buy tracking buys and sells on the show, since he does not, others will try to do it for him and one must live with their conclusions.
So, why then try to defend the show? I mean who really cares what Barron's thinks of the show, really. It is not like they trash a stock you own and feel differently about and their opinion has an effect on your holdings. Barron's opinion of the show has no effect on anyones holdings.
I guess if Cramer was a friend or an associate you would want to rush to his defense. I would expect people to do that and that would be an honorable thing to do. But, if you are doing that in a post, shouldn't you disclose that is the reason you are doing it? If you are going to try to defend a person against another due to a personal affiliation, it should be noted just as when we talk about stock we either own or do not own. If we know an association exists here and it is hidden, how then can we trust other disclosures you may or may not make?
My theory was that this was a rather transparent (in my eyes) "attempt" to endear oneself to the folks at TheStreet.com and get traffic directed to their website via the "Daily Blogwatch". This is not to say that it would be successful, but that the defenses were an attempt to do just that. This was the only reason I could come to that blogs that disclose stock affiliations did not disclose the personal ones that lead to the Cramer defenses.
Simple? Hell no!! It would seems Mr. Altucher took the post as an insult and asked me to "apologize" here on my blog. I am sorry if he took it as an attack on him and like I have told him, it was not meant that way and based on the emails I have received from readers, he may be the only one who took it that way. He insists that he would never publish posts based on the scenario listed above. Ok. I have no reason to doubt him and still do not think I inferred that in the original post. He did say in a comment to the post that "Bill Alpert will not be linked to anytime soon". So, I guess that means ass kissing will not work but the message is "do not write anything negative about Cramer or TheStreet.com"? I do not remember anything negative about James in the Barron's piece.
Hell if I know. I guess time will tell. My writings for ValuePlays, The Stockmasters and 24/7 Wall St. have appeared on BlogWatch, as Altucher himself said in his comment to my original post, "countless times" (he is correct about that). If they disappear, readers can take from that what they want and if they continue to appear, I invite James to give me something that I will post here in which he can "rub my nose in it" any way he wants.
If my history proves anything I will gladly post writings that oppose me and I have gone so far as to ask for them as was the case with my Berkshire Hathaway (BRK.A) posts earlier in the summer.
We'll see.........
First things first. I have no ax to grind with Altucher. I love it when he links ValuePlays, it drives traffic to the blog.
Now that is done, let's get to the real point of the original post. The defenses of Cramer ranged from a flacid conspiracy theory involving Rupert Murdoch (the only thing missing from this idea was the Karl Rove or Dick Cheney link) to the show is really educational or the show is really just trying to get people to think a certain way. The conspiracy theory was so bad the writers of it should be ashamed and issue us a public apology.
Who is right? None of them probably. Like I said in the first post the show is so ambiguous that it cannot be specifically categorized. It is a little of this and a little of that and a whole lot of shtick to get ratings. BUT, when you tell people what to do you have to accept people tracking those picks ESPECIALLY when you do not do it yourself. Cramer could easily end this mess buy tracking buys and sells on the show, since he does not, others will try to do it for him and one must live with their conclusions.
So, why then try to defend the show? I mean who really cares what Barron's thinks of the show, really. It is not like they trash a stock you own and feel differently about and their opinion has an effect on your holdings. Barron's opinion of the show has no effect on anyones holdings.
I guess if Cramer was a friend or an associate you would want to rush to his defense. I would expect people to do that and that would be an honorable thing to do. But, if you are doing that in a post, shouldn't you disclose that is the reason you are doing it? If you are going to try to defend a person against another due to a personal affiliation, it should be noted just as when we talk about stock we either own or do not own. If we know an association exists here and it is hidden, how then can we trust other disclosures you may or may not make?
My theory was that this was a rather transparent (in my eyes) "attempt" to endear oneself to the folks at TheStreet.com and get traffic directed to their website via the "Daily Blogwatch". This is not to say that it would be successful, but that the defenses were an attempt to do just that. This was the only reason I could come to that blogs that disclose stock affiliations did not disclose the personal ones that lead to the Cramer defenses.
Simple? Hell no!! It would seems Mr. Altucher took the post as an insult and asked me to "apologize" here on my blog. I am sorry if he took it as an attack on him and like I have told him, it was not meant that way and based on the emails I have received from readers, he may be the only one who took it that way. He insists that he would never publish posts based on the scenario listed above. Ok. I have no reason to doubt him and still do not think I inferred that in the original post. He did say in a comment to the post that "Bill Alpert will not be linked to anytime soon". So, I guess that means ass kissing will not work but the message is "do not write anything negative about Cramer or TheStreet.com"? I do not remember anything negative about James in the Barron's piece.
Hell if I know. I guess time will tell. My writings for ValuePlays, The Stockmasters and 24/7 Wall St. have appeared on BlogWatch, as Altucher himself said in his comment to my original post, "countless times" (he is correct about that). If they disappear, readers can take from that what they want and if they continue to appear, I invite James to give me something that I will post here in which he can "rub my nose in it" any way he wants.
If my history proves anything I will gladly post writings that oppose me and I have gone so far as to ask for them as was the case with my Berkshire Hathaway (BRK.A) posts earlier in the summer.
We'll see.........
Notable Links: Thursday
- Thank you to Andrew Ross Sorkin and his excellent Dealbook column at The New York Times for a mention yesterday. I had wanted to email Mr. Sorkin to thank him personally but could not find an address. Does anyone know it so I can get in touch? You may email it to me a valueplays@gmail.com
- If you do not believe me that this is a great buying opportunity, listen to one of the all time greats
- For those about to rock, we salute you
- I love playing in these store but have never bought anything in them
- A calming voice in irrational times
- Good. He should get more time for being so magnificently moronic aside from the abhorrent behavior
Milk Prices Expected To Fall: Really?
There was a report out yesterday that said milk prices are expected to fall this year and next. The only thing is, the reason they give just do not make a whole lot of sense.
The USDA, in its survey of 30 cities spread across the country, reported an average price in August of $3.87 per gallon of whole milk, an increase of 1.8 % over July's $3.80. So, what reasons are bring given for the upcoming decline?
Feed
After a rapid rise this year in cattle feed cost due to the cost of corn because of ethanol production, this cost is expected to level out and then begin to ease later this year and next. Why? The demand for corn for ethanol is still increasing and even this year's crop (the largest in 50 years) did not cause corn prices to fall very much. What would happen if next years crop was a bust? Even if next years crop is just ok, with the built in demand for corn, prices would explode. We just had record corn prices this year and everything went perfectly for the farmers of it. We should not expect these conditions to be the norm. We know that ethanol mandates are going to be increased this fall when congress gets back together so we can bank on an increase in demand from that industry.
Supply
With high prices this year, dairy farmers are working overtime to take advantage of the market and large supply is coming on line. We also have had reports of demand destruction because of the high price currently. If this record supply comes on line and drives down prices, we will see demand pick back up and that should take up slack in the system that would prices down.
Not much is being said about the increasing demand for "organic milk". Consumers want the product and as more dairy farmers switch to producing an organic product, that in and of itself will decrease the supply of regular milk, driving up the price for it to consumers. The irony here is that this very scenario may cause a decrease in organic milk prices that in most places exceed $5 a gallon.
In short, I think any prediction of milk price significantly receding from the historically high levels are more "hope" than an economically sound argument. When you have a record crop in the main item responsible for the increase (corn) produced under perfect conditions, you must assume some disruption in that paradigm next year. If you are at record high prices under perfect conditions, you must entertain the notion or not a price decrease but an increase if those condition deteriorate.
Recently companies like Starbucks (SBUX), Kraft (KFT) and JM Smucker (SJM) reported earnings and all said raising dairy costs were affecting earnings. I would be extremely hesitant to take any prediction of a price decrease to heart and even more hesitant to make an investing decision on it.
Just too many variables that depend on mother nature..
The USDA, in its survey of 30 cities spread across the country, reported an average price in August of $3.87 per gallon of whole milk, an increase of 1.8 % over July's $3.80. So, what reasons are bring given for the upcoming decline?
Feed
After a rapid rise this year in cattle feed cost due to the cost of corn because of ethanol production, this cost is expected to level out and then begin to ease later this year and next. Why? The demand for corn for ethanol is still increasing and even this year's crop (the largest in 50 years) did not cause corn prices to fall very much. What would happen if next years crop was a bust? Even if next years crop is just ok, with the built in demand for corn, prices would explode. We just had record corn prices this year and everything went perfectly for the farmers of it. We should not expect these conditions to be the norm. We know that ethanol mandates are going to be increased this fall when congress gets back together so we can bank on an increase in demand from that industry.
Supply
With high prices this year, dairy farmers are working overtime to take advantage of the market and large supply is coming on line. We also have had reports of demand destruction because of the high price currently. If this record supply comes on line and drives down prices, we will see demand pick back up and that should take up slack in the system that would prices down.
Not much is being said about the increasing demand for "organic milk". Consumers want the product and as more dairy farmers switch to producing an organic product, that in and of itself will decrease the supply of regular milk, driving up the price for it to consumers. The irony here is that this very scenario may cause a decrease in organic milk prices that in most places exceed $5 a gallon.
In short, I think any prediction of milk price significantly receding from the historically high levels are more "hope" than an economically sound argument. When you have a record crop in the main item responsible for the increase (corn) produced under perfect conditions, you must assume some disruption in that paradigm next year. If you are at record high prices under perfect conditions, you must entertain the notion or not a price decrease but an increase if those condition deteriorate.
Recently companies like Starbucks (SBUX), Kraft (KFT) and JM Smucker (SJM) reported earnings and all said raising dairy costs were affecting earnings. I would be extremely hesitant to take any prediction of a price decrease to heart and even more hesitant to make an investing decision on it.
Just too many variables that depend on mother nature..
Bernanke's Move: It Worked
There was a ton of gnashing teeth and sweaty palms after Bernanke refused to lower the Fed Funds rate last week. It would seem he once again made the perfect play.
Rather than cave to the market suffering from a self induced wound, Ben lowered the discount rate for lenders. This allowed those who did not point the gun at themselves when they pulled the trigger to do what was necessary to provide the necessary liquidity. Today Citigroup (C), Bank of America (BAC), Wachovia (WAC), JP Morgan Chase (JPM) took advantage of the lower rate to take over $2 billion from the Fed. This provided credit in tightening markets and did exactly what Ben wanted, it let the market restore order to the system and did not eliminate the necessary suffering of those who had it coming.
Now news comes out last night that Bank of America has invested $2 billion in a convertible preferred security with Countrywide (CFC). This is identical to the situation I spoke of when I said the only way Warren Buffett would get involved with this would be in a "private transaction they issue Buffett debt or preferred convertibles to provide a specific lender with necessary liquidity." It wasn't Buffett who made the investment but the instrument was the same. It was really the only way it could have been done and not caused a run in the stock. The preferred let's Bank of America buy common shares at $18 which is a nice immediate gain seeing as shares jumped to $26 after hours on the news. Not bad...
Tomorrow will be bullish for financials as the sentiment will go from panic to optimism. Thanks to Ben..
The real beauty here? He still has the rate cut card in his pocket should the economy begin to deteriorate.
Rather than cave to the market suffering from a self induced wound, Ben lowered the discount rate for lenders. This allowed those who did not point the gun at themselves when they pulled the trigger to do what was necessary to provide the necessary liquidity. Today Citigroup (C), Bank of America (BAC), Wachovia (WAC), JP Morgan Chase (JPM) took advantage of the lower rate to take over $2 billion from the Fed. This provided credit in tightening markets and did exactly what Ben wanted, it let the market restore order to the system and did not eliminate the necessary suffering of those who had it coming.
Now news comes out last night that Bank of America has invested $2 billion in a convertible preferred security with Countrywide (CFC). This is identical to the situation I spoke of when I said the only way Warren Buffett would get involved with this would be in a "private transaction they issue Buffett debt or preferred convertibles to provide a specific lender with necessary liquidity." It wasn't Buffett who made the investment but the instrument was the same. It was really the only way it could have been done and not caused a run in the stock. The preferred let's Bank of America buy common shares at $18 which is a nice immediate gain seeing as shares jumped to $26 after hours on the news. Not bad...
Tomorrow will be bullish for financials as the sentiment will go from panic to optimism. Thanks to Ben..
The real beauty here? He still has the rate cut card in his pocket should the economy begin to deteriorate.
Thursday's Upgrades and Downgrades
UPGRADES
Joy Global JOYG UBS Neutral » Buy
MoneyGram MGI Morgan Keegan Mkt Perform » Outperform
Massey Energy MEE UBS Neutral » Buy
OSI Pharm OSIP Wachovia Underperform » Mkt Perform
Countrywide CFC Wachovia Underperform » Mkt Perform
Wimm-Bill-Dann Foods WBD Citigroup Hold » Buy
Cooper Tire CTB Matrix Research Sell » Buy
Glu Mobile GLUU Banc of America Sec Neutral » Buy
Netease.com NTES Susquehanna Financial Neutral » Positive
Met-Pro Corp MPR Brean Murray Hold » Buy
ENI S.p.A. E Credit Suisse Neutral » Outperform
DOWNGRADES
Broadridge Financial BR JP Morgan Overweight » Neutral
Eaton Vance EV JP Morgan Overweight » Underweight
Wright Express WXS Morgan Keegan Outperform » Mkt Perform
Tween Brands TWB RBC Capital Mkts Outperform » Sector Perform
Cathay Bancorp CATY BMO Capital Markets Outperform » Market Perform
Talisman Energy TLM Matrix Research Buy » Hold
Doral Fincl DRL Soleil Hold » Sell
Pearson Plc PSO Deutsche Securities Buy » Hold
"Fast Money" for Thursday
Thursday's
No picks for today.
Wednesday's results
Jeff Macke recommended selling Take-Two Interactive (TTWO). Open $14.55 Close $14.26 Loss $.29
Pete Najarian likes Under Armour (UA). Open $66.91 Close $66.86 Loss $.05
Guy Adami preferred Target (TGT). Open $60.10 Close $63.58 Gain $3.48
Constance Hunter said Desarrolladora Homex (HXM) is a buy. Open $50.52 Close $52.84 Gain $1.84
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 19-12 Gain $35.62
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 21-18 Gain $3.60
Pete Najarian= 13-9 Gain $24.74
Seymore= 3-2 Loss $.49
Finerman= 3-2 Gain $1.21
Stacey Briere-Gilbert= 2-0 Gain $1.61
Constance Hunter= 1-0 Gain $1.84
=
Wednesday, August 22, 2007
Wednesday's 52 week Lows
Very small list today.. good...
DEEP Superior Offshore Int
COBR Cobra Electronics Cor .
BIOF Biofuel Energy Corp
ALNC Alliance Financial Co
EMVL Emvelco Corporation
EMAK Emak Worldwide Inc
ECHO Electronic Clearing House
JACO Jaco Electronics Inc
GEHL Gehl Co
TWB Tween Brands Inc
DEEP Superior Offshore Int
COBR Cobra Electronics Cor .
BIOF Biofuel Energy Corp
ALNC Alliance Financial Co
EMVL Emvelco Corporation
EMAK Emak Worldwide Inc
ECHO Electronic Clearing House
JACO Jaco Electronics Inc
GEHL Gehl Co
TWB Tween Brands Inc
As Mortgage Shops Keep Closing, Big Banks Look Better & Better
The past week has seen a slew of mortgage lender close the door or dramatically scale back operations due to tightening credit markets. So, who will benefit?
Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC) look to be the best bets. Why? People, despite reports to the contrary are still buying homes and borrowing money. Their options are dwindling daily as to where they can get those loans, but they are still applying for and getting the them. In the past month despite the "credit crisis" two homes in my neighborhood have sold and a third is on the way. I doubt these are cash deals. The lenders who will have the liquidity to offer the most competitive rates will be the institutions that have depository bases and that is the aforementioned group.
Citigroup and Bank of America said today they drew $500 million from the Fed that in turn was loaned out at higher rates. That means they are printing money. The mortgage business is a very profitable one and banks have seen their profit margins and the multiples on their shares fall the last few years as that business went to the Countrywides (CFC) of the world. With that option closing rapidly for scores of borrowers, they will turn to institutions they can trust to be there. If you were buying a home now would you go to Countrywide with the possibility they may not be lending in 3 weeks? I know the chance is very small but it is still there and if you are buying a home, why risk it? Everyday we get news of another mortgage lender closing shop and any loans that were "in the works" go up in smoke with them. I know Citi, Bank of America and Wells Fargo will have no problem funding a loan and will be here long after I am gone so that is where I would be going were it I needed one.
It may be a bit late for this trend to make a difference in the current quarter but I would expect large changes here by the end of the year.
Expect a rate cut (a token one, but that will be enough for the street) before the end of the year and that will benefit financials. This loan trend should push earnings well above estimates. Now would be the time to be loading up on any of the three.
The best part? The current dividend yields of the three are all hovering around 5% so you will be paid a nice little return to sit back and wait for the stock price appreciation. Recently I picked up more Citigroup on two separate occasions and currently am looking at Bank of America.
Don't be one of those folks who look back at Christmas this year and curse themselves saying "if only I had bought back then". I won't.
Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC) look to be the best bets. Why? People, despite reports to the contrary are still buying homes and borrowing money. Their options are dwindling daily as to where they can get those loans, but they are still applying for and getting the them. In the past month despite the "credit crisis" two homes in my neighborhood have sold and a third is on the way. I doubt these are cash deals. The lenders who will have the liquidity to offer the most competitive rates will be the institutions that have depository bases and that is the aforementioned group.
Citigroup and Bank of America said today they drew $500 million from the Fed that in turn was loaned out at higher rates. That means they are printing money. The mortgage business is a very profitable one and banks have seen their profit margins and the multiples on their shares fall the last few years as that business went to the Countrywides (CFC) of the world. With that option closing rapidly for scores of borrowers, they will turn to institutions they can trust to be there. If you were buying a home now would you go to Countrywide with the possibility they may not be lending in 3 weeks? I know the chance is very small but it is still there and if you are buying a home, why risk it? Everyday we get news of another mortgage lender closing shop and any loans that were "in the works" go up in smoke with them. I know Citi, Bank of America and Wells Fargo will have no problem funding a loan and will be here long after I am gone so that is where I would be going were it I needed one.
It may be a bit late for this trend to make a difference in the current quarter but I would expect large changes here by the end of the year.
Expect a rate cut (a token one, but that will be enough for the street) before the end of the year and that will benefit financials. This loan trend should push earnings well above estimates. Now would be the time to be loading up on any of the three.
The best part? The current dividend yields of the three are all hovering around 5% so you will be paid a nice little return to sit back and wait for the stock price appreciation. Recently I picked up more Citigroup on two separate occasions and currently am looking at Bank of America.
Don't be one of those folks who look back at Christmas this year and curse themselves saying "if only I had bought back then". I won't.
Wednesday's Notable Links
Here are todays links worth reading..
- Thanks again to the WSJ Online for another mention yesterday
- I agree
- If you were away for 8 days from the market you missed, well, not much really
- I spell scumbag , "VICK" now. What an awful human being. You know you are trash when OJ can now say "at least I ain't that guy"
- Thanks again to the WSJ Online for another mention yesterday
- I agree
- If you were away for 8 days from the market you missed, well, not much really
- I spell scumbag , "VICK" now. What an awful human being. You know you are trash when OJ can now say "at least I ain't that guy"
Wednesday's Upgrades and Downgrades
UPGRADES
Lowe's LOW UBS Sell » Buy
Lowe's LOW JP Morgan Neutral » Overweight
Campbell Soup CPB UBS Neutral » Buy
BJ's Wholesale BJ Lazard Capital Sell » Hold
Datalink DTLK Feltl & Co. Buy » Strong Buy
KongZhong KONG WR Hambrecht Sell » Hold
Manpower MAN Matrix Research Hold » Strong Buy
Capital One COF Calyon Securities Add » Buy
ASML Holding ASML Friedman Billings Mkt Perform » Outperform
Wrigley WWY Bear Stearns Underperform » Peer Perform
Vistaprint VPRT Bear Stearns Peer Perform » Outperform
National Semi NSM Lehman Brothers Equal-weight » Overweight
PDL BioPharma PDLI First Albany Neutral » Buy
DOWNGRADES
Estee Lauder EL Credit Suisse Outperform » Neutral
E*TRADE ETFC UBS Buy » Neutral
American Capital ACAS Jefferies & Co Buy » Hold
Cott COT Stifel Nicolaus Buy » Hold
Lindsay Manu LNN Boenning & Scattergood Market Outperform » Market Perform
Standard Pacific SPF Banc of America Sec Buy » Neutral
Hovnanian Entrpr HOV Banc of America Sec Buy » Neutral
Toll Brothers TOL Banc of America Sec Neutral » Sell
Still No Need For A Fed Cut
After watching former Goldman Sachs (GS) CEO and current Treasury Secretary Hank Paulson on CNBC Tuesday morning I got to wondering.
Paulson essentially said the the underlying economy is strong and that aside from lenders current paying the piper for "loose lending standards", things are good. He said the current situation will "extract a small toll on growth" but that economy will weather it just fine. So that got me to looking at some recent numbers to do a little checking.
Recent figures (May - July)
-Industrial production: Up 0.7% or a 2.8% annual rate.
-Personal consumption expenditures: Up at a 4.8% annual rate (July data is not yet out).
-Payrolls: have risen a 1.2% annual rate or an average of 135,000 per month.
-Second quarter real GDP was up at a 3.4% annual rate, and nonresidential investment was up at an 8.1% annual rate.
So, is anyone surprised that earnings forecasts for companies other than the financials have not been lowered?. Forecasts of earnings for the S&P 500 in aggregate for Q3 and 4 have not been lowered by any significance over the past few weeks despite the problems in credit markets the the stock markets gyrations. Current expectations call for about 5% growth in the Q3 and about 10% in the 4th.
Why then would we want the Fed to lower rates to save poor lenders? Banks like Wells Fargo (WFC) and M&T Bank (MTB), both of whom have conservative lending practices are not feeling the effects of "sub-prime defaults". They have no need for a fed bailout, it is only those lenders who thought lending $500,000 to a person without any verifiable income or any money to put down was a neat little idea.
I have stumped here repeatedly for the Fed to do nothing with the Fed funds rate and still hope they resist the calls from irresponsible lenders. Let them fail, maybe we will get more responsibility from lenders. Even if the Fed did lower the rate, 1/2%, this would have ZERO effect on those people with adjustable rate mortgages that are getting ready for a reset and will not be able to afford the new payment. ZERO. Those people, to be honest, are not much better than the lenders who gave them the loans in the first place. Rates have been rising steadily for the past year and they had plenty of chances to refi the mortgages last year before the bottom fell out of the market. If they didn't, well, too bad. Plese do not waste my tax dollars bailing these folks out. They are in a self induced predicament. What is more important now is getting the point home that if you lend money (or borrow) it and do not demonstrate a solid ability to pay it back, you are responsible for the outcome.
In response to those screaming for a Fed Funds cut, Richmond Federal Reserve President Jeffery Lacker said on Tuesday, "Financial market volatility, in and of itself, doesn't require a change in the target federal funds rate". He also referred to the Feds stated goal on maintaining inflation. "While the most recent months' figures have been encouraging, it is still too soon to be confident that the moderation we have been seeing represents a downward trend". The risk that inflation will fail to moderate, "is still relevant, although some recent reports have been encouraging" he said. Translation? Who cares how the market jumps all around, long term results are what we care about.
Inevitably these loan will be no good and the pain will be felt, let's just pull the band aid off fast and get it over rather than prolong the inevitable.
Then we can move on the the next manufactured crisis..
Paulson essentially said the the underlying economy is strong and that aside from lenders current paying the piper for "loose lending standards", things are good. He said the current situation will "extract a small toll on growth" but that economy will weather it just fine. So that got me to looking at some recent numbers to do a little checking.
Recent figures (May - July)
-Industrial production: Up 0.7% or a 2.8% annual rate.
-Personal consumption expenditures: Up at a 4.8% annual rate (July data is not yet out).
-Payrolls: have risen a 1.2% annual rate or an average of 135,000 per month.
-Second quarter real GDP was up at a 3.4% annual rate, and nonresidential investment was up at an 8.1% annual rate.
So, is anyone surprised that earnings forecasts for companies other than the financials have not been lowered?. Forecasts of earnings for the S&P 500 in aggregate for Q3 and 4 have not been lowered by any significance over the past few weeks despite the problems in credit markets the the stock markets gyrations. Current expectations call for about 5% growth in the Q3 and about 10% in the 4th.
Why then would we want the Fed to lower rates to save poor lenders? Banks like Wells Fargo (WFC) and M&T Bank (MTB), both of whom have conservative lending practices are not feeling the effects of "sub-prime defaults". They have no need for a fed bailout, it is only those lenders who thought lending $500,000 to a person without any verifiable income or any money to put down was a neat little idea.
I have stumped here repeatedly for the Fed to do nothing with the Fed funds rate and still hope they resist the calls from irresponsible lenders. Let them fail, maybe we will get more responsibility from lenders. Even if the Fed did lower the rate, 1/2%, this would have ZERO effect on those people with adjustable rate mortgages that are getting ready for a reset and will not be able to afford the new payment. ZERO. Those people, to be honest, are not much better than the lenders who gave them the loans in the first place. Rates have been rising steadily for the past year and they had plenty of chances to refi the mortgages last year before the bottom fell out of the market. If they didn't, well, too bad. Plese do not waste my tax dollars bailing these folks out. They are in a self induced predicament. What is more important now is getting the point home that if you lend money (or borrow) it and do not demonstrate a solid ability to pay it back, you are responsible for the outcome.
In response to those screaming for a Fed Funds cut, Richmond Federal Reserve President Jeffery Lacker said on Tuesday, "Financial market volatility, in and of itself, doesn't require a change in the target federal funds rate". He also referred to the Feds stated goal on maintaining inflation. "While the most recent months' figures have been encouraging, it is still too soon to be confident that the moderation we have been seeing represents a downward trend". The risk that inflation will fail to moderate, "is still relevant, although some recent reports have been encouraging" he said. Translation? Who cares how the market jumps all around, long term results are what we care about.
Inevitably these loan will be no good and the pain will be felt, let's just pull the band aid off fast and get it over rather than prolong the inevitable.
Then we can move on the the next manufactured crisis..
"Fast Money" for Wednesday
Here are today's picks and Tuesday's results...
TODAY'S PICKS
Jeff Macke recommended selling Take-Two Interactive (TTWO). Open $14.55
Pete Najarian likes Under Armour (UA). Open $66.91
Guy Adami preferred Target (TGT). Open $60.10
Constance Hunter said Desarrolladora Homex (HXM) is a buy. Open $50.60
TUESDAY'S RESULTS
Jeff Macke said sell Abercrombie & Fitch (ANF). Open $78.10 Close $79.38 Gain $1.28
Pete Najarian liked Atmel (ATML) due to unusual options activity. Open $4.86 Close $5.09 Gain $.23
Guy Adami preferred Freeport-McMoRan (FCX). Open $79.96 Close $81.29 Gain $1.33
Stacey Briere Gilbert also recommended buying Freeport-McMoRan (FCX). Open $79.96 Close $81.29 Gain $1.33
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 18-12 Gain $32.14
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 21-17 Gain $3.89
Pete Najarian= 13-8 Gain $24.79
Seymore= 3-2 Loss $.49
Finerman= 3-2 Gain $1.21
Stacey Briere-Gilbert= 2-0 Gain $1.61
TODAY'S PICKS
Jeff Macke recommended selling Take-Two Interactive (TTWO). Open $14.55
Pete Najarian likes Under Armour (UA). Open $66.91
Guy Adami preferred Target (TGT). Open $60.10
Constance Hunter said Desarrolladora Homex (HXM) is a buy. Open $50.60
TUESDAY'S RESULTS
Jeff Macke said sell Abercrombie & Fitch (ANF). Open $78.10 Close $79.38 Gain $1.28
Pete Najarian liked Atmel (ATML) due to unusual options activity. Open $4.86 Close $5.09 Gain $.23
Guy Adami preferred Freeport-McMoRan (FCX). Open $79.96 Close $81.29 Gain $1.33
Stacey Briere Gilbert also recommended buying Freeport-McMoRan (FCX). Open $79.96 Close $81.29 Gain $1.33
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 18-12 Gain $32.14
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 21-17 Gain $3.89
Pete Najarian= 13-8 Gain $24.79
Seymore= 3-2 Loss $.49
Finerman= 3-2 Gain $1.21
Stacey Briere-Gilbert= 2-0 Gain $1.61
Tuesday, August 21, 2007
Bartiromo "Back In the Saddle"
It would seem Maria is back doing what she does best, not trying to be Erin Burnett
Now it is only a day but Maria was back behind the desk at HQ this afternoon and gone were the incoherent and oddly timed giggles and high school antics that had me contemplating driving a letter opener into my temple when the show was on. You want to know something else? She is really good when is just herself.
Rather than looking like a bimbo on screen she now appears what she is, a financial newswomen. She asks intelligent questions and has seemed to cut down on the softball Q & A sessions she had been doing that had caused people to lose interest in her. Based on her history and how she started she clearly has the guts to do the job, the question is, does she still have the desire? Is she too close to the players to ask the really hard questions? She clearly does when the guest is a economist or commentator, we need her to do the same to the CEO she may know. Either that or let another person do the interview.
I want the Bartiromo who used to get knocked around on the floor of the exchange when she started and had the stones to give it back and stand there and tell folks to get out of the way. The Bartiromo of recent years mellowed way too much and the very recent version, let's just call it a bad dream.
She defined the female financial newswomen for years by being herself. Let's hope she just keeps doing that.
Now it is only a day but Maria was back behind the desk at HQ this afternoon and gone were the incoherent and oddly timed giggles and high school antics that had me contemplating driving a letter opener into my temple when the show was on. You want to know something else? She is really good when is just herself.
Rather than looking like a bimbo on screen she now appears what she is, a financial newswomen. She asks intelligent questions and has seemed to cut down on the softball Q & A sessions she had been doing that had caused people to lose interest in her. Based on her history and how she started she clearly has the guts to do the job, the question is, does she still have the desire? Is she too close to the players to ask the really hard questions? She clearly does when the guest is a economist or commentator, we need her to do the same to the CEO she may know. Either that or let another person do the interview.
I want the Bartiromo who used to get knocked around on the floor of the exchange when she started and had the stones to give it back and stand there and tell folks to get out of the way. The Bartiromo of recent years mellowed way too much and the very recent version, let's just call it a bad dream.
She defined the female financial newswomen for years by being herself. Let's hope she just keeps doing that.
Marlboro Smokeless On Sale In October
With all the talk of the upcoming Phillip morrris International (PMI) spinoff from Altria (MO), we seem to have forgot the future of the Phillip Morris USA (PMU) debuts this October.
PMU said on Tuesday it would start selling Marlboro chewing tobacco in Atlanta this October. PMU, the largest cigarette maker with over 50% of the US market said it planned to sell original and wintergreen flavors and long-cut and fine-cut varieties of the product in the test market.
The product will sell for $3 per tin, between the highest-priced and lowest-priced products in Atlanta. PMU said it was using the Marlboro name since smokeless tobacco users believe the brand stands for "flavor and premium quality."
In late April I posted "Much has been said about the possibility of MO buying UST for the smokeless business. It will not happen. Why? Smokers are quite possibly the most brand loyal folks out there, chew users, not so much (I speak from experience, used to be one). What does MO have? The #1 brand of cigarettes with over 50% market share. If they introduce a new product, it will be accepted much like the instant acceptance a new Budweiser product gets by beer drinkers. It will receive a trial by chew users who will be inclined to like it as it will be perceived as being a quality product. They will have no problems abandoning their current product to try the new Altria one. The cost/benefit of a self-produced product vs. an acquired product is huge for us shareholders as it leaves billions to be returned to us."
I love the idea of a Marlboro branded chew product. I have very little doubt it will be an immediate hit. Several people I know who chew are excited about the product and are definitely going to give it a test when it is available.
With smoking rates in decline, a new product with the Marlboro brand label will be a big boost to Altria's (and us shareholders) coffers.
With the anticipated success of this product, a fat dividend increase, a big share repurchse, and the PMI spin all expected soon, it looks to be a very exciting fall for shareholders.
PMU said on Tuesday it would start selling Marlboro chewing tobacco in Atlanta this October. PMU, the largest cigarette maker with over 50% of the US market said it planned to sell original and wintergreen flavors and long-cut and fine-cut varieties of the product in the test market.
The product will sell for $3 per tin, between the highest-priced and lowest-priced products in Atlanta. PMU said it was using the Marlboro name since smokeless tobacco users believe the brand stands for "flavor and premium quality."
In late April I posted "Much has been said about the possibility of MO buying UST for the smokeless business. It will not happen. Why? Smokers are quite possibly the most brand loyal folks out there, chew users, not so much (I speak from experience, used to be one). What does MO have? The #1 brand of cigarettes with over 50% market share. If they introduce a new product, it will be accepted much like the instant acceptance a new Budweiser product gets by beer drinkers. It will receive a trial by chew users who will be inclined to like it as it will be perceived as being a quality product. They will have no problems abandoning their current product to try the new Altria one. The cost/benefit of a self-produced product vs. an acquired product is huge for us shareholders as it leaves billions to be returned to us."
I love the idea of a Marlboro branded chew product. I have very little doubt it will be an immediate hit. Several people I know who chew are excited about the product and are definitely going to give it a test when it is available.
With smoking rates in decline, a new product with the Marlboro brand label will be a big boost to Altria's (and us shareholders) coffers.
With the anticipated success of this product, a fat dividend increase, a big share repurchse, and the PMI spin all expected soon, it looks to be a very exciting fall for shareholders.
Tuesday's Notable Links
Here are todays links of note...
- Have you ever got burned by an "analyst call" that did not work out? Take this advice
- After a Thornburg (TMA) Co-Founder said on CNBC that mortgage markets other than deposit backed are almost at a standstill and they cannot give guidance because of the business uncertainty, here is a gusty analyst call.. Yes, this is dripping with sarcasm.
- When things get crazy it always makes sense to Remember A Classic Theory
- Diet Coke brags it is only 1% crap that is bad for you
- Some Random Thoughts by Adam Warner about Bernanke and Cramer.
- Have you ever got burned by an "analyst call" that did not work out? Take this advice
- After a Thornburg (TMA) Co-Founder said on CNBC that mortgage markets other than deposit backed are almost at a standstill and they cannot give guidance because of the business uncertainty, here is a gusty analyst call.. Yes, this is dripping with sarcasm.
- When things get crazy it always makes sense to Remember A Classic Theory
- Diet Coke brags it is only 1% crap that is bad for you
- Some Random Thoughts by Adam Warner about Bernanke and Cramer.
Buffett Rumors: What 's Likely?
It is Buffett rumor time again. Every he did a CNBC interview and said that "opportunities would arise" from the current state of affairs, pundits have been having Berkshire Hathaway (BRK.A)_buying every mortgage lender out there. Ignore them
Why? Can anyone name the last time Buffett bought shares in a company on the open markets when people thought he would? Me either. Shares of Countrywide (CFC)jumped 10% yesterday when the Wall St. Journal simply opined that he may be a buyer or parts of the company. No facts, just an opinion. How large would the premium be for Buffett if word got out he was actually buying the company or made an offer for it? That fact alone eliminates an open market purchase of the lender.
What is likely? Buffett will probably buy dirt cheap mortgage backed securities he deems risk advantaged. What I would expect to be announced would be Buffett taking a multi billion dollar bet on mortgages perhaps in a private transaction they issue Buffett debt or preferred convertibles to provide a specific lender with necessary liquidity. During the Enron induced energy company meltdown at the turn of the century, Buffet made bets with convertible securities that turned out to be very profitable investments.
I just cannot imagine Buffett making any open market purchase. I would be very surprised on the other hand if he was not somehow involved in the cleaning up of this mess.
Why? Can anyone name the last time Buffett bought shares in a company on the open markets when people thought he would? Me either. Shares of Countrywide (CFC)jumped 10% yesterday when the Wall St. Journal simply opined that he may be a buyer or parts of the company. No facts, just an opinion. How large would the premium be for Buffett if word got out he was actually buying the company or made an offer for it? That fact alone eliminates an open market purchase of the lender.
What is likely? Buffett will probably buy dirt cheap mortgage backed securities he deems risk advantaged. What I would expect to be announced would be Buffett taking a multi billion dollar bet on mortgages perhaps in a private transaction they issue Buffett debt or preferred convertibles to provide a specific lender with necessary liquidity. During the Enron induced energy company meltdown at the turn of the century, Buffet made bets with convertible securities that turned out to be very profitable investments.
I just cannot imagine Buffett making any open market purchase. I would be very surprised on the other hand if he was not somehow involved in the cleaning up of this mess.
Tuesday's Upgrades and Downgrades
UPGRADES
Anheuser-Busch BUD AG Edwards Hold » Buy
National City NCC BMO Capital Markets Underperform » Market Perform
Huntington Banc HBAN FTN Midwest Neutral » Buy
UCBH Holdings UCBH FTN Midwest Neutral » Buy
Lamar Advertising LAMR Stifel Nicolaus Hold » Buy
Universal Compression Ptnrs UCLP Wachovia Mkt Perform » Outperform
Dollar Tree DLTR Wachovia Mkt Perform » Outperform
Amerigroup AGP Jefferies & Co Hold » Buy
First Solar FSLR Deutsche Securities Hold » Buy
Darden Restaurants DRI CIBC Wrld Mkts Sector Perform » Sector Outperform
DOWNGRADES
Seacoast Banking SBCF Stifel Nicolaus Hold » Sell
Brookdale Senior Living BKD Stifel Nicolaus Buy » Hold
USG Corp USG Matrix Research Buy » Sell
"Fast Money" for Tuesday
Here are Tuesday's picks and Monday's results.
Picks for Tuesday
Jeff Macke said sell Abercrombie & Fitch (ANF). Open $78.10
Pete Najarian liked Atmel (ATML) due to unusual options activity. Open $4.86
Guy Adami preferred Freeport-McMoRan (FCX). Open $79.96
Stacey Briere Gilbert also recommended buying Freeport-McMoRan (FCX). Open $79.96
MONDAY'S PICKS
Jeff Macke said Whole Foods Market (WFMI) is a buy. Open $44.30 Close $43.47 Loss $.83
Karen Finerman liked Trinity Industries (TRN) for the railroads. Open $33.27 close $33.60 Gain $.33
Guy Adami preferred Deere & Co (DE).Open $124.61 Close $128.27 Gain $3.66
Pete Najarian recommended Citigroup (C) as a big bank. Open $48.81 Close $48.39 Loss $.42
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 17-12 Gain $30.81
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 20-17 Gain $2.61
Pete Najarian= 12-8 Gain $24.56
Seymore= 3-2 Loss $.49
Finerman= 3-2 Gain $1.21
Gilbert= 1-0 Gain $.29
Picks for Tuesday
Jeff Macke said sell Abercrombie & Fitch (ANF). Open $78.10
Pete Najarian liked Atmel (ATML) due to unusual options activity. Open $4.86
Guy Adami preferred Freeport-McMoRan (FCX). Open $79.96
Stacey Briere Gilbert also recommended buying Freeport-McMoRan (FCX). Open $79.96
MONDAY'S PICKS
Jeff Macke said Whole Foods Market (WFMI) is a buy. Open $44.30 Close $43.47 Loss $.83
Karen Finerman liked Trinity Industries (TRN) for the railroads. Open $33.27 close $33.60 Gain $.33
Guy Adami preferred Deere & Co (DE).Open $124.61 Close $128.27 Gain $3.66
Pete Najarian recommended Citigroup (C) as a big bank. Open $48.81 Close $48.39 Loss $.42
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 17-12 Gain $30.81
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 20-17 Gain $2.61
Pete Najarian= 12-8 Gain $24.56
Seymore= 3-2 Loss $.49
Finerman= 3-2 Gain $1.21
Gilbert= 1-0 Gain $.29
Monday, August 20, 2007
Notable Items- Monday's Links
Here are links to items of interest...
- Every wonder where the person calling you on your cell phone is? Blackberry users will know soon enough.
- Thank you to the WSJ Online for quoting me last week
- Whitney Tilson, whose reasoning I just love has a great article about the current market conditions
- Last week I wrote about Warren Buffett's comments on lenders and their current situation. Here is the video of those comments
- Is it just me or is it embarrassingly early to be selling refurbished iPhones?
- Every wonder where the person calling you on your cell phone is? Blackberry users will know soon enough.
- Thank you to the WSJ Online for quoting me last week
- Whitney Tilson, whose reasoning I just love has a great article about the current market conditions
- Last week I wrote about Warren Buffett's comments on lenders and their current situation. Here is the video of those comments
- Is it just me or is it embarrassingly early to be selling refurbished iPhones?
Lowe's Earnings: Maybe It Is Not The Shopper?
In contrast the Home Depot's (HD) earnings last week, Lowes (LOW) reported today and the news was generally good.
Earnings rose 9% to $1.02 billion, or 67 cents a share, in Q2, up from $935 million, or 60 cents a share last year. Analysts had expected 61 cents a share, according to estimates. Sales also rose 5.8% to $14.2 billion due to the opening of 26 new stores. Sales at stores open at least a year fell 2.6%, in line with the company's expectations of a drop of as much as 3 percent. This is in contrast to the 15% decline in earnings at Home Depot.
Lowe's called the current environment "challenging" as the U.S. housing market depressed results in some areas, but said it had gained market share in 15 of 20 product categories (they did the same last quarter also). During a conference call Chairman Robert Niblock said, "There are signs of improvement in certain areas of the country,". The U.S. Northeast, he said was showing signs of improving sales in big-ticket installations. U.S. markets where housing hadn't accelerated much in recent years delivered positive same-store sales, Lowe's said. This is big. It means that in non-bubble areas they are thing are not desperate and Lowes in making big progress.
When one looks at this report one would be inclined to think we may be bottoming and there is light at the end of the tunnel while a look at the Home Depot call would lead one to think we are in a free fall. While I am not a buyer of either company right now, this earnings reports does cement in my opinion that Home Depot is years away from being a potential investment.
Lowes is managing through these tough times and taking market share from Home Depot quarter after quarter. When housing does turn around, Lowes will be in much better shape. When you look at the two you have to conclude Home Depot is just a mess and they aren't doing anything to lead one to think things will get any better anytime soon.
Lowes proved today that is is not necessarily the shopper but where the shopper decides to shop.
Earnings rose 9% to $1.02 billion, or 67 cents a share, in Q2, up from $935 million, or 60 cents a share last year. Analysts had expected 61 cents a share, according to estimates. Sales also rose 5.8% to $14.2 billion due to the opening of 26 new stores. Sales at stores open at least a year fell 2.6%, in line with the company's expectations of a drop of as much as 3 percent. This is in contrast to the 15% decline in earnings at Home Depot.
Lowe's called the current environment "challenging" as the U.S. housing market depressed results in some areas, but said it had gained market share in 15 of 20 product categories (they did the same last quarter also). During a conference call Chairman Robert Niblock said, "There are signs of improvement in certain areas of the country,". The U.S. Northeast, he said was showing signs of improving sales in big-ticket installations. U.S. markets where housing hadn't accelerated much in recent years delivered positive same-store sales, Lowe's said. This is big. It means that in non-bubble areas they are thing are not desperate and Lowes in making big progress.
When one looks at this report one would be inclined to think we may be bottoming and there is light at the end of the tunnel while a look at the Home Depot call would lead one to think we are in a free fall. While I am not a buyer of either company right now, this earnings reports does cement in my opinion that Home Depot is years away from being a potential investment.
Lowes is managing through these tough times and taking market share from Home Depot quarter after quarter. When housing does turn around, Lowes will be in much better shape. When you look at the two you have to conclude Home Depot is just a mess and they aren't doing anything to lead one to think things will get any better anytime soon.
Lowes proved today that is is not necessarily the shopper but where the shopper decides to shop.
Why Do Democrats Hate Wal-Mart?
Did not see this anywhere in the MSM (mainstream media) last week but Democratic Presidential advisers are taking positions with an anti Wal-Mart (WMT) group. Surprised?
Wakeupwalmart.com has hired Meghan Scott, who previously worked on John Edwards’s presidential campaign is expected to be named "deputy campaign manager" of the organization and will be assisted by Nick Baldick, Jeremy Van Ess and Richie Ros. "Who are those guys?" you ask. Baldick was the national campaign manager for John Edwards’s presidential campaign in 2003 and early 2004. Van Ess worked on the presidential campaigns of John Kerry and Edwards and was chief speechwriter for Harry Reid, the current Senate majority leader. Ross ran the 2005 California gubernatorial campaign of Lt. Gov. Cruz Bustamante. Apparently hiring people from losing political organizations is a recipe for success now? What no one from Jimmy Carter's camp was available?
The organization, Wakeupwalmart, ironically was started by the United Food & Commercial Workers Union in 2005 when efforts by the Union to organize Wal-Mart workers failed. People who actually work at Wal-Mart have no affiliation with it. It oddly enough has no current plans to attempt to organize workers at Target (TGT), Kohl's (KSS) or Macy's (M) despite workers at those organizations faring no better (and in some areas worse) than Wal-Mart employees in term of wages or benefits.
It would seem their "outrage" at "suffering workers" is limited to those workers at politically appealing targets, not necessarily workers being taken advantage of. Are there any lower paid workers than those at fast food locations? Where are the commercials alerting us to the plight of those "disadvantaged" folks? I am sure those at Wakeup find it odd and it is apparently the reason that their efforts have failed when you consider a new Wal-Mart in Livonia, Michigan that will employee 530 workers recently had 5,000 people apply for these abhorrent, underpaid, undesirable, slave labor positions. Who is kidding who?
Said Ms. Scott, “We are going to fight to ensure that Wal-Mart becomes a responsible organization,” she said. If only she looked at her own organization first.
Do Democrats really wonder why they get the "anti-business" tag?? Do they really?
Wakeupwalmart.com has hired Meghan Scott, who previously worked on John Edwards’s presidential campaign is expected to be named "deputy campaign manager" of the organization and will be assisted by Nick Baldick, Jeremy Van Ess and Richie Ros. "Who are those guys?" you ask. Baldick was the national campaign manager for John Edwards’s presidential campaign in 2003 and early 2004. Van Ess worked on the presidential campaigns of John Kerry and Edwards and was chief speechwriter for Harry Reid, the current Senate majority leader. Ross ran the 2005 California gubernatorial campaign of Lt. Gov. Cruz Bustamante. Apparently hiring people from losing political organizations is a recipe for success now? What no one from Jimmy Carter's camp was available?
The organization, Wakeupwalmart, ironically was started by the United Food & Commercial Workers Union in 2005 when efforts by the Union to organize Wal-Mart workers failed. People who actually work at Wal-Mart have no affiliation with it. It oddly enough has no current plans to attempt to organize workers at Target (TGT), Kohl's (KSS) or Macy's (M) despite workers at those organizations faring no better (and in some areas worse) than Wal-Mart employees in term of wages or benefits.
It would seem their "outrage" at "suffering workers" is limited to those workers at politically appealing targets, not necessarily workers being taken advantage of. Are there any lower paid workers than those at fast food locations? Where are the commercials alerting us to the plight of those "disadvantaged" folks? I am sure those at Wakeup find it odd and it is apparently the reason that their efforts have failed when you consider a new Wal-Mart in Livonia, Michigan that will employee 530 workers recently had 5,000 people apply for these abhorrent, underpaid, undesirable, slave labor positions. Who is kidding who?
Said Ms. Scott, “We are going to fight to ensure that Wal-Mart becomes a responsible organization,” she said. If only she looked at her own organization first.
Do Democrats really wonder why they get the "anti-business" tag?? Do they really?
Monday's Upgrades and Downgrades
Here are the calls
UPGRADES
Flowserve FLS RBC Capital Mkts Sector Perform » Outperform
Taiwan Semi TSM UBS Neutral » Buy
NN Inc NNBR BB&T Capital Mkts Hold » Buy
Clear Channel Outdoor CCO Bear Stearns Peer Perform » Outperform
JB Hunt Trans JBHT Wachovia Mkt Perform » Outperform
Lamar Advertising LAMR Bear Stearns Peer Perform » Outperform
Melco PBL Entertainment MPEL Citigroup Hold » Buy
CenterPoint CNP Citigroup Hold » Buy
Agrium AGU CIBC Wrld Mkts Sector Perform » Sector Outperform
Orbitz OWW Soleil Hold » Buy
Sharper Image SHRP BMO Capital Markets Underperform » Market Perform
Autodesk ADSK Bear Stearns Peer Perform » Outperform
SAP AG SAP JP Morgan Underweight » Overweight
Blockbuster BBI JP Morgan Neutral » Overweight
CACI Intl CAI JP Morgan Underweight » Overweight
Home Depot HD UBS Sell » Neutral
Abercrombie ANF Friedman Billings Mkt Perform » Outperform
Nice Systems NICE Friedman Billings Mkt Perform » Outperform
Kohl's KSS Deutsche Securities Hold » Buy
Countrywide CFC Banc of America Sec Sell » Neutral
DOWNGRADES
Gerdau AmeriSteel GNA Soleil Buy » Hold
McGraw-Hill MHP JP Morgan Overweight » Neutral
Wild Oats Mkts OATS Bear Stearns Outperform » Peer Perform
WNS WNS JP Morgan Overweight » Neutral
Huaneng Power HNP Citigroup Buy » Sell
SL Green Rlty SLG UBS Buy » Neutral
Boston Prpts BXP UBS Buy » Neutral
Darden Restaurants DRI Bear Stearns Outperform » Peer Perform
ChoicePoint CPS Sun Trust Rbsn Humphrey Neutral » Reduce
Curtiss-Wright CW CIBC Wrld Mkts Sector Outperform » Sector Perform
UPGRADES
Flowserve FLS RBC Capital Mkts Sector Perform » Outperform
Taiwan Semi TSM UBS Neutral » Buy
NN Inc NNBR BB&T Capital Mkts Hold » Buy
Clear Channel Outdoor CCO Bear Stearns Peer Perform » Outperform
JB Hunt Trans JBHT Wachovia Mkt Perform » Outperform
Lamar Advertising LAMR Bear Stearns Peer Perform » Outperform
Melco PBL Entertainment MPEL Citigroup Hold » Buy
CenterPoint CNP Citigroup Hold » Buy
Agrium AGU CIBC Wrld Mkts Sector Perform » Sector Outperform
Orbitz OWW Soleil Hold » Buy
Sharper Image SHRP BMO Capital Markets Underperform » Market Perform
Autodesk ADSK Bear Stearns Peer Perform » Outperform
SAP AG SAP JP Morgan Underweight » Overweight
Blockbuster BBI JP Morgan Neutral » Overweight
CACI Intl CAI JP Morgan Underweight » Overweight
Home Depot HD UBS Sell » Neutral
Abercrombie ANF Friedman Billings Mkt Perform » Outperform
Nice Systems NICE Friedman Billings Mkt Perform » Outperform
Kohl's KSS Deutsche Securities Hold » Buy
Countrywide CFC Banc of America Sec Sell » Neutral
DOWNGRADES
Gerdau AmeriSteel GNA Soleil Buy » Hold
McGraw-Hill MHP JP Morgan Overweight » Neutral
Wild Oats Mkts OATS Bear Stearns Outperform » Peer Perform
WNS WNS JP Morgan Overweight » Neutral
Huaneng Power HNP Citigroup Buy » Sell
SL Green Rlty SLG UBS Buy » Neutral
Boston Prpts BXP UBS Buy » Neutral
Darden Restaurants DRI Bear Stearns Outperform » Peer Perform
ChoicePoint CPS Sun Trust Rbsn Humphrey Neutral » Reduce
Curtiss-Wright CW CIBC Wrld Mkts Sector Outperform » Sector Perform
Sunday, August 19, 2007
Barron's Piece on Cramer: Be Wary of Those Defending Him
So, Barron's did a piece on Mr. Cramer this weekend and the jist of it was that it was not a flattering portrayal. Some blogs have rushed to Cramer's defense but before you buy into their reasoning, check their motives.
First, as is my standing policy I will not name folks but readers who do their homework can come to their own conclusions.
Now, Cramer. As I have said here countless times I am not a fan of his bi-polar trading style and when you constantly shout to people how great you are, you then become a rather loud target. That being said, when he talks about the market and it's machinations, there are not very many folks better. I wish he would stick to that but it probably would not be very much of a show and rating are what CNBC wants. Also, he recent rant and then love fest with Bernanke over rates may go down and the most embarrassing episode in TV history, although I doubt he sees it.
The Barron's piece. I think that Cramer's show is purposely vague enough so that the picks cannot be tracked and if they are, there is enough ambiguity there allow to for a defense. Barron's had a well written piece that did the best job I have seen to date tracking his picks. I will neither say they are right or wrong because of the reason I gave before, the show is just too ambiguous to really say. The piece was very well done though.
The defenders...
Some blogs have rushed to attack Barron's and defend Cramer, why?
One defense is the conspiracy theory. Barron's is owned by Dow Jones (DJ) which was just purchased by Rupert Murdoch's News Corp. (NWS). The infantile theory says that with Murdoch starting a business news channel soon, (the rumor has been around for a few years now) Barron's writers and editors, wanting to "get in good" with him attacked CNBC's star. What, are they serious? Why make the attack now? Why not wait until the channel was actually announced and being launched? Any effect an attack would have now will dissipate and be forgotten by the time the channel actual debuts. Also, does anyone really think that Murdoch built the multi billion dollar empire he has by being duped by such transparent sucking up if that is what it was?
Do people out there honestly think Murdoch spent $5 billion for Dow Jones and does not know the players there? He just woke up one morning and decided to make a go of it because he had some extra cash in his wallet ? This whole line of thinking is really pretty sad and should eliminate whatever comes after it in a Cramer defense because if the writer of it actually believes it, any other reasoning they may have on the subject is probably equally as flawed. This reasoning is about as likely as Sam Giancana and the Chicago Mafia actually killing Kennedy. What is much more likely is that Cramer's antics the past few weeks have people looking to knock him down a peg or two.
The "show is educational" defense. Yes it is. But, when you dance around and tell people to "buy" and "sell", you now are giving investing advice and when those people are calling because they do not know the answer and are asking you for it, you cannot fall back on the "do your homework" excuse. If they could, they would not be calling you. What would you tell your broker (if you have one) if he said that to you? If you want it to be purely educational, stop telling people what to do.
So, why the defenders? Ass kissing, pure and simple. The most influential site out there today for driving traffic to your stock blog is James Altucher's "Daily Blog Watch". "Blog Watch" is part of..... drum roll please....James Cramer's, The Street.com. A defense of Cramer is an attempt to "get you in good" with the folks there, get your blog listed there more and drive more traffic to you. Politics, Simple.
When it comes to the Cramer thing in the blogsphere, take everything written with a huge grain of salt. Much of it is very intertwined and what may appear as an honest defense of Cramer is more likely an attempt to defend a friend or endear oneself to an influential site.
Now, neither of those are bad things, but let's try to be honest about our motives, can we? If we are doing either one of those, lets "disclose" it. If we have a relationship with Cramer or The Street.com or Mr. Altucher, tell people so they are able to put your "defense" in the proper framework.
If we disclose our stock affiliations when we write about them, ought we not disclose the other ones we write about?
First, as is my standing policy I will not name folks but readers who do their homework can come to their own conclusions.
Now, Cramer. As I have said here countless times I am not a fan of his bi-polar trading style and when you constantly shout to people how great you are, you then become a rather loud target. That being said, when he talks about the market and it's machinations, there are not very many folks better. I wish he would stick to that but it probably would not be very much of a show and rating are what CNBC wants. Also, he recent rant and then love fest with Bernanke over rates may go down and the most embarrassing episode in TV history, although I doubt he sees it.
The Barron's piece. I think that Cramer's show is purposely vague enough so that the picks cannot be tracked and if they are, there is enough ambiguity there allow to for a defense. Barron's had a well written piece that did the best job I have seen to date tracking his picks. I will neither say they are right or wrong because of the reason I gave before, the show is just too ambiguous to really say. The piece was very well done though.
The defenders...
Some blogs have rushed to attack Barron's and defend Cramer, why?
One defense is the conspiracy theory. Barron's is owned by Dow Jones (DJ) which was just purchased by Rupert Murdoch's News Corp. (NWS). The infantile theory says that with Murdoch starting a business news channel soon, (the rumor has been around for a few years now) Barron's writers and editors, wanting to "get in good" with him attacked CNBC's star. What, are they serious? Why make the attack now? Why not wait until the channel was actually announced and being launched? Any effect an attack would have now will dissipate and be forgotten by the time the channel actual debuts. Also, does anyone really think that Murdoch built the multi billion dollar empire he has by being duped by such transparent sucking up if that is what it was?
Do people out there honestly think Murdoch spent $5 billion for Dow Jones and does not know the players there? He just woke up one morning and decided to make a go of it because he had some extra cash in his wallet ? This whole line of thinking is really pretty sad and should eliminate whatever comes after it in a Cramer defense because if the writer of it actually believes it, any other reasoning they may have on the subject is probably equally as flawed. This reasoning is about as likely as Sam Giancana and the Chicago Mafia actually killing Kennedy. What is much more likely is that Cramer's antics the past few weeks have people looking to knock him down a peg or two.
The "show is educational" defense. Yes it is. But, when you dance around and tell people to "buy" and "sell", you now are giving investing advice and when those people are calling because they do not know the answer and are asking you for it, you cannot fall back on the "do your homework" excuse. If they could, they would not be calling you. What would you tell your broker (if you have one) if he said that to you? If you want it to be purely educational, stop telling people what to do.
So, why the defenders? Ass kissing, pure and simple. The most influential site out there today for driving traffic to your stock blog is James Altucher's "Daily Blog Watch". "Blog Watch" is part of..... drum roll please....James Cramer's, The Street.com. A defense of Cramer is an attempt to "get you in good" with the folks there, get your blog listed there more and drive more traffic to you. Politics, Simple.
When it comes to the Cramer thing in the blogsphere, take everything written with a huge grain of salt. Much of it is very intertwined and what may appear as an honest defense of Cramer is more likely an attempt to defend a friend or endear oneself to an influential site.
Now, neither of those are bad things, but let's try to be honest about our motives, can we? If we are doing either one of those, lets "disclose" it. If we have a relationship with Cramer or The Street.com or Mr. Altucher, tell people so they are able to put your "defense" in the proper framework.
If we disclose our stock affiliations when we write about them, ought we not disclose the other ones we write about?
ValuePlays Most Read Posts- Last Week
Here are the most read posts for the past week. It would seem people love reading about Mr.Lampert.
1- Lampert Gobbling Up Sears Shares. Symbols SHLD, HD
2- This Is Great Symbols SHLD, DOW, GS, C, SHW, MO
3- Thinking Like Lampert Symbols SHLD, C
4- Note To Lampert: Let People Know About Land's End Symbols SHLD
5- Another Starbucks Competitor: Proctor & Gamble Symbols SBUX, PG, MCD, COST, KR, WMT, CVS
1- Lampert Gobbling Up Sears Shares. Symbols SHLD, HD
2- This Is Great Symbols SHLD, DOW, GS, C, SHW, MO
3- Thinking Like Lampert Symbols SHLD, C
4- Note To Lampert: Let People Know About Land's End Symbols SHLD
5- Another Starbucks Competitor: Proctor & Gamble Symbols SBUX, PG, MCD, COST, KR, WMT, CVS
"Fast Money" for Monday
Here are Friday's results and Monday's picks
MONDAY'S PICKS
Jeff Macke said Whole Foods Market (WFMI) is a buy. Open $44.30
Karen Finerman liked Trinity Industries (TRN) for the railroads. Open $33.27
Guy Adami preferred Deere & Co (DE).Open $124.61
Pete Najarian recommended Citigroup (C) as a big bank. Open $48.81
FRIDAY'S RESULTS
Jeff Macke likes General Motors (GM) because he thinks the stock has bottomed. Open $30.77 CLOSE $30.55 Loss $.22
Pete Najarian likes Thornburg Mortgage (TMA) and suggests it might be a takeover target. Open $12.38 CLOSE $15.04 Gain $2.66
Guy Adami prefers Network Appliance (NTAP) because he feels this name has performed well in a difficult tape. Open $25.27 CLOSE $25.98 Gain $.61
Eric Bolling recommends buying the Financial Select Sector SPDR (XLF) because he thinks the financials have bottomed. Open $33.15 CLOSE $34.50 Gain $1.25
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 16-12 Gain $27.15
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 20-16 Gain $3.24
Pete Najarian= 12-7 Gain $24.98
Seymore= 3-2 Loss $.49
Finerman= 2-2 Gain $.88
Gilbert= 1-0 Gain $.29
MONDAY'S PICKS
Jeff Macke said Whole Foods Market (WFMI) is a buy. Open $44.30
Karen Finerman liked Trinity Industries (TRN) for the railroads. Open $33.27
Guy Adami preferred Deere & Co (DE).Open $124.61
Pete Najarian recommended Citigroup (C) as a big bank. Open $48.81
FRIDAY'S RESULTS
Jeff Macke likes General Motors (GM) because he thinks the stock has bottomed. Open $30.77 CLOSE $30.55 Loss $.22
Pete Najarian likes Thornburg Mortgage (TMA) and suggests it might be a takeover target. Open $12.38 CLOSE $15.04 Gain $2.66
Guy Adami prefers Network Appliance (NTAP) because he feels this name has performed well in a difficult tape. Open $25.27 CLOSE $25.98 Gain $.61
Eric Bolling recommends buying the Financial Select Sector SPDR (XLF) because he thinks the financials have bottomed. Open $33.15 CLOSE $34.50 Gain $1.25
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 16-12 Gain $27.15
Bolling= 10-11 Loss $14.01
John Najarian= 13-3 Gain $15.54
Macke= 20-16 Gain $3.24
Pete Najarian= 12-7 Gain $24.98
Seymore= 3-2 Loss $.49
Finerman= 2-2 Gain $.88
Gilbert= 1-0 Gain $.29
Saturday, August 18, 2007
This Weeks Insider Buys
Here are the largest aggregate insider purchases by dollar amount for the week ending yesterday.
1- RPC (RES)= $19,236,000
2- Equity One (EQY)= $12,157,000
3- Lion Gate Entertainment (LGF)= $4,677,000
4- Panera Bread (PNRA)= $3,595,000
5- Chesapeake Energy (CHK)= $3,344,000
6- Barnes & Noble (BKS)= $3,264,000
1- RPC (RES)= $19,236,000
2- Equity One (EQY)= $12,157,000
3- Lion Gate Entertainment (LGF)= $4,677,000
4- Panera Bread (PNRA)= $3,595,000
5- Chesapeake Energy (CHK)= $3,344,000
6- Barnes & Noble (BKS)= $3,264,000
Friday, August 17, 2007
Friday's 52 Week Lows
230 point up days make for a very short 52 week low list. My condolences if you made this one.
XNL Xethanol Corp
FOOD Vaughan Foods Inc
PWX Providence and Worcester Railroad
ALOY Alloy Inc
ARII American Railcar Inds Inc
CLZR Candela Laser Corporation
CGM Congoleum Corporation
HSOA Home Solutions Amer Inc
HEPH Hollis-Eden Pharmaceuticals
XNL Xethanol Corp
FOOD Vaughan Foods Inc
PWX Providence and Worcester Railroad
ALOY Alloy Inc
ARII American Railcar Inds Inc
CLZR Candela Laser Corporation
CGM Congoleum Corporation
HSOA Home Solutions Amer Inc
HEPH Hollis-Eden Pharmaceuticals
What Is Wrong with Bartiromo?
Has Maria gotten a new prescription from her doctor?
Am I the only one wondering what has gotten in CNBC's Maria Bartiromo? Almost overnight she has gone from serious newscaster to a giddy pre-pubescent teenager at her first dance giggling and wiggling all over the place. I keep waiting for Dylan Rattigan to backhand her and tell her to get her shit together.
The skeptic in me thinks she got wind of the poll that the NY Post (I think it was them) ran that showed she painfully lagged the much younger Erin Burnett in popularity on the network. It would seem the "Money Honey" was old news and viewers en-mass were drawn to Burnett's more playful banter with her co-hosts. Bartiromo, who is no dummy and broke ground in this medium must have decided that was the way to go and now is about as irritating as a human being can be. She is either off her Ritalin or is taking something quite effective at putting a whole lot of jump in her step.
Trying to watch her as she hops all over the place is like watching Paula Abdul during American Idol and unfortunately for Bartiromo, she is just about as coherent. While not a huge fan of Ratigan, I actually feel sorry for him. When she gets going now he just gets a blank stare on his face like a Labrador being read "War and Peace" as he wonders who the hell he pissed off to get this choice assignment. He looks like he is almost wishing to get assaulted by a bystander so he can get off camera with her. Poor bastard.
The real shame of it all? There was nothing wrong with Bartiromo to begin with. I For one appreciated her style and enjoyed her segments. Now, I keep hoping for a blackout when she is on. I swear to god if I hear her giggle one more time at absolutely nothing I am going to have a stroke.
It is painful watching someone fight the inevitable aging we all go through. she is not handling this well at all. Maria, go back to what you did before.
At least then you had your dignity...
Am I the only one wondering what has gotten in CNBC's Maria Bartiromo? Almost overnight she has gone from serious newscaster to a giddy pre-pubescent teenager at her first dance giggling and wiggling all over the place. I keep waiting for Dylan Rattigan to backhand her and tell her to get her shit together.
The skeptic in me thinks she got wind of the poll that the NY Post (I think it was them) ran that showed she painfully lagged the much younger Erin Burnett in popularity on the network. It would seem the "Money Honey" was old news and viewers en-mass were drawn to Burnett's more playful banter with her co-hosts. Bartiromo, who is no dummy and broke ground in this medium must have decided that was the way to go and now is about as irritating as a human being can be. She is either off her Ritalin or is taking something quite effective at putting a whole lot of jump in her step.
Trying to watch her as she hops all over the place is like watching Paula Abdul during American Idol and unfortunately for Bartiromo, she is just about as coherent. While not a huge fan of Ratigan, I actually feel sorry for him. When she gets going now he just gets a blank stare on his face like a Labrador being read "War and Peace" as he wonders who the hell he pissed off to get this choice assignment. He looks like he is almost wishing to get assaulted by a bystander so he can get off camera with her. Poor bastard.
The real shame of it all? There was nothing wrong with Bartiromo to begin with. I For one appreciated her style and enjoyed her segments. Now, I keep hoping for a blackout when she is on. I swear to god if I hear her giggle one more time at absolutely nothing I am going to have a stroke.
It is painful watching someone fight the inevitable aging we all go through. she is not handling this well at all. Maria, go back to what you did before.
At least then you had your dignity...
FTC: Time To Get New Laywers
How did the FTC lose this one? How?
First, bringing the suit to stop the Whole Food (WFMI) and Wild Oats (OATS) merger on "anti-trust" grounds was moronic especially when you consider the #1 "organic food" seller in the US after the merger is complete will not be the combined entity but will still be Wal-Mart (WMT). But, they filed it anyway so let's go from there.
Then we had Whole Foods CEO John Mackey in what can only be described as an acid induced rant saying in an email to his board that the merger would help Whole Foods eliminate "almost forever" the threat that a rival could enter the organic space. He then went on to say the merger would allow for Whole Foods increase prices to customers and pressure suppliers (local farms) to lower costs. they email went even further to say that buying Wild Oats would help the company avoid "nasty price wars" in a number of markets and the deal would help deter a big chain such as Kroger from creating a competing natural-foods powerhouse.
Then, as if that was not enough. Mackey decided to join a Yahoo message board and continue the rants. He trashed Wild Oats in an attempt to lower it's share price before the merger was announced. The posts are currently under investigation by the SEC and I would be suprised if he was not formally admonished for them.
In short, we have the CEO of a company in internal emails saying a proposed merger would help them raise consumer prices, pressure suppliers and eliminate potential competition. Isn't that exactly what the FTC had to prove? How could they lose this one? To top it off, the FTC itself is currently under investigation because internal documents they released that should have had redacted information about Whole Foods "trade secrets" turn out to be, well, not redacted.
Not only will the FTC lose a case that Mackey handed them on a silver platter but they will end up getting sued and lose again in the process.
Whoever lead the charge on this one should be encouraged "to pursue other opportunities".
First, bringing the suit to stop the Whole Food (WFMI) and Wild Oats (OATS) merger on "anti-trust" grounds was moronic especially when you consider the #1 "organic food" seller in the US after the merger is complete will not be the combined entity but will still be Wal-Mart (WMT). But, they filed it anyway so let's go from there.
Then we had Whole Foods CEO John Mackey in what can only be described as an acid induced rant saying in an email to his board that the merger would help Whole Foods eliminate "almost forever" the threat that a rival could enter the organic space. He then went on to say the merger would allow for Whole Foods increase prices to customers and pressure suppliers (local farms) to lower costs. they email went even further to say that buying Wild Oats would help the company avoid "nasty price wars" in a number of markets and the deal would help deter a big chain such as Kroger from creating a competing natural-foods powerhouse.
Then, as if that was not enough. Mackey decided to join a Yahoo message board and continue the rants. He trashed Wild Oats in an attempt to lower it's share price before the merger was announced. The posts are currently under investigation by the SEC and I would be suprised if he was not formally admonished for them.
In short, we have the CEO of a company in internal emails saying a proposed merger would help them raise consumer prices, pressure suppliers and eliminate potential competition. Isn't that exactly what the FTC had to prove? How could they lose this one? To top it off, the FTC itself is currently under investigation because internal documents they released that should have had redacted information about Whole Foods "trade secrets" turn out to be, well, not redacted.
Not only will the FTC lose a case that Mackey handed them on a silver platter but they will end up getting sued and lose again in the process.
Whoever lead the charge on this one should be encouraged "to pursue other opportunities".
Bernanke: Another Brilliant Move
Bernanke moved today and unlike the chorus of calls for a Fed Funds Rate cut we have heard, he moved both to calm markets and keep rates steady.
Saying, "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets."
Then they said "To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained."
What didn't they do? Lower the Fed target rate so Bernanke keep pressure on inflation. What he DID do was lower the borrowing rate for banks so that currently tight credit markets will loosen. Lenders like Washington Mutual (WM), Countrywide (CFC) and Thornburg Mortgage (TMA) will now have the systemic liquidity they need to continue loaning and functioning.
The move is also significant because it signals to the market that the Fed will not bail out poor lending practices but will prevent the market from seizing due to it and will protect the innocent from being swept away by the turmoil.
Now there are plenty of folks out there saying "he listened to us and lowered rates" but the reality is just the opposite. Nobody called for this particular move and if anything, those folks calling for Bernanke to resist a Fed Funds rate cut are in the correct camp. He did not give in the the market and this is good. What is even better is that the market now can be assured he will move to prevent the "crash" everyone feared was inevitable but will not, and this is even more important, subsidize idiocy.
I have been saying since he was appointed based on his past statements and actions that he will go down ad the best Fed leader of my generation. Today's action makes that case even stronger.
Saying, "Financial market conditions have deteriorated, and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward. In these circumstances, although recent data suggest that the economy has continued to expand at a moderate pace, the Federal Open Market Committee judges that the downside risks to growth have increased appreciably. The Committee is monitoring the situation and is prepared to act as needed to mitigate the adverse effects on the economy arising from the disruptions in financial markets."
Then they said "To promote the restoration of orderly conditions in financial markets, the Federal Reserve Board approved temporary changes to its primary credit discount window facility. The Board approved a 50 basis point reduction in the primary credit rate to 5-3/4 percent, to narrow the spread between the primary credit rate and the Federal Open Market Committee's target federal funds rate to 50 basis points. The Board is also announcing a change to the Reserve Banks' usual practices to allow the provision of term financing for as long as 30 days, renewable by the borrower. These changes will remain in place until the Federal Reserve determines that market liquidity has improved materially. These changes are designed to provide depositories with greater assurance about the cost and availability of funding. The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets. Existing collateral margins will be maintained."
What didn't they do? Lower the Fed target rate so Bernanke keep pressure on inflation. What he DID do was lower the borrowing rate for banks so that currently tight credit markets will loosen. Lenders like Washington Mutual (WM), Countrywide (CFC) and Thornburg Mortgage (TMA) will now have the systemic liquidity they need to continue loaning and functioning.
The move is also significant because it signals to the market that the Fed will not bail out poor lending practices but will prevent the market from seizing due to it and will protect the innocent from being swept away by the turmoil.
Now there are plenty of folks out there saying "he listened to us and lowered rates" but the reality is just the opposite. Nobody called for this particular move and if anything, those folks calling for Bernanke to resist a Fed Funds rate cut are in the correct camp. He did not give in the the market and this is good. What is even better is that the market now can be assured he will move to prevent the "crash" everyone feared was inevitable but will not, and this is even more important, subsidize idiocy.
I have been saying since he was appointed based on his past statements and actions that he will go down ad the best Fed leader of my generation. Today's action makes that case even stronger.
Friday's Upgrades and Downgrades
UPGRADES
CSK Auto CAO Kevin Dann Hold » Buy
Washington Mutual WM Punk, Ziegel & Co Mkt Perform » Buy
Ultrapertol ULTR UBS Neutral » Buy
Network Appliance NTAP AG Edwards Hold » Buy
Network Appliance NTAP Caris & Company Above Average » Buy
Navigant Consult NCI Piper Jaffray Market Perform » Outperform
Ansoft ANST Boenning & Scattergood Market Perform » Market Outperform
Terra Industries TRA Matrix Research Hold » Strong Buy
DOWNGRADES
Woodward Governor WGOV Matrix Research Buy » Hold
Acusphere ACUS Susquehanna Financial Positive » Neutral
Dover Downs Gaming DDE KeyBanc Capital Mkts / McDonald Buy » Hold
Meruelo Maddux MMPI UBS Neutral » Sell
"Fast Money" for Friday
Here are Friday's picks and records to date:
Friday's Picks
Jeff Macke likes General Motors (GM) because he thinks the stock has bottomed. Open $30.77
Pete Najarian likes Thornburg Mortgage (TMA) and suggests it might be a takeover target. Open $12.38
Guy Adami prefers Network Appliance (NTAP) because he feels this name has performed well in a difficult tape. Open $25.27
Eric Bolling recommends buying the Financial Select Sector SPDR (XLF) because he thinks the financials have bottomed. Open $33.15
Thursday's Results
Pete Najarian said to short E*Trade (ETFC). Open $13.91 Close $13.55 Gain $.36
For the third day in a row Guy Adami recommended shorting The Dow with Short Dow 30 Proshares (DOG). Open $61.78 Close $61.60 Loss $.18
Tim Seymour liked buying Mobile TeleSystems OJSC (MBT). Open $58.70 Close $56.04 Loss $2.66
Jeff Macke didn't "want to buy a darn thing in this tape".
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 15-12 Gain $26.54
Bolling= 9-11 Loss $15.26
John Najarian= 13-3 Gain $15.54
Macke= 20-15 Gain $3.46
Pete Najarian= 11-7 Gain $22.32
Seymore= 3-2 Loss $.49
Finerman= 2-2 Gain $.88
Gilbert= 1-0 Gain $.29
Friday's Picks
Jeff Macke likes General Motors (GM) because he thinks the stock has bottomed. Open $30.77
Pete Najarian likes Thornburg Mortgage (TMA) and suggests it might be a takeover target. Open $12.38
Guy Adami prefers Network Appliance (NTAP) because he feels this name has performed well in a difficult tape. Open $25.27
Eric Bolling recommends buying the Financial Select Sector SPDR (XLF) because he thinks the financials have bottomed. Open $33.15
Thursday's Results
Pete Najarian said to short E*Trade (ETFC). Open $13.91 Close $13.55 Gain $.36
For the third day in a row Guy Adami recommended shorting The Dow with Short Dow 30 Proshares (DOG). Open $61.78 Close $61.60 Loss $.18
Tim Seymour liked buying Mobile TeleSystems OJSC (MBT). Open $58.70 Close $56.04 Loss $2.66
Jeff Macke didn't "want to buy a darn thing in this tape".
Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation week)
Adami= 15-12 Gain $26.54
Bolling= 9-11 Loss $15.26
John Najarian= 13-3 Gain $15.54
Macke= 20-15 Gain $3.46
Pete Najarian= 11-7 Gain $22.32
Seymore= 3-2 Loss $.49
Finerman= 2-2 Gain $.88
Gilbert= 1-0 Gain $.29
Thursday, August 16, 2007
Thursday's 52 Week Lows
More big names made the list today..
WYE Wyeth
WPSC Wheeling Pittsburgh Corp
THC Tenet Healthcare Corp
TYC Tyco
SHRP Sharper Image Corporation
SHOO Steven Madden Ltd
PFE Pfizer Inc
ODP Office Depot, Inc
NWL Newell Rubbermaid Inc
NMX Nymex Holdings Inc
MOT Motorola, Inc
MCO Moodys Corp
M Macys Inc
KSS Kohl's Corporation
HRB H&R Block, Inc
HOG Harley-Davidson, Inc
HD Home Depot, Inc
FL Foot Locker Inc
CTAS Cintas Corporation
BX Blackstone Group L P
BC Brunswick Corporation
BBY Best Buy Co., Inc
AMGN Amgen Inc
AMD Advanced Micro Devices
WYE Wyeth
WPSC Wheeling Pittsburgh Corp
THC Tenet Healthcare Corp
TYC Tyco
SHRP Sharper Image Corporation
SHOO Steven Madden Ltd
PFE Pfizer Inc
ODP Office Depot, Inc
NWL Newell Rubbermaid Inc
NMX Nymex Holdings Inc
MOT Motorola, Inc
MCO Moodys Corp
M Macys Inc
KSS Kohl's Corporation
HRB H&R Block, Inc
HOG Harley-Davidson, Inc
HD Home Depot, Inc
FL Foot Locker Inc
CTAS Cintas Corporation
BX Blackstone Group L P
BC Brunswick Corporation
BBY Best Buy Co., Inc
AMGN Amgen Inc
AMD Advanced Micro Devices
This Is Great
If you are like me and have 20 or more years before you plan on touching your investments, times like this make you giddy.
The DOW is back down to 12,500 and now at levels seen since April and another day or two of this will give us levels back to November 2006. Why then is this great?
1- The economy is still strong and growing. Profits are still rising at a double digit rate and unemployment is at historically low levels. GDP for Q2 will be revised up and there is no recession on the horizon.
2- Cash rich companies are buying back shares in unprecedented numbers.
3- Over 50% of S&P 500 companies profits come from overseas where economies are surging.
What does it mean? The underlying fundamentals are strong which means eventually share prices are going to turn around. What we have is a credit problem and when traders cannot sell off this debt, they sell what they can which is shares companies like in Goldman Sachs (GS), Dow Chemical (DOW) and Altria (MO). I mean, if we look at it logically are the events of the last month going to stop people from smoking OR will it effect Altria's balance sheet which is laughingly unlevered? No.
So, are my picks down? Yup, so what?!? Paper losses mean nothing to me, purchase prices do at this point in my investing career. Market disturbances like this that cause mis-pricing of equities like we see now are great for me. What I am busy doing now is lowering my cost basis for recent purchases like Goldman, Wal-Mart (WMT) and Citigroup (C). The last time I could have bought shares of Goldman and Dow Chemical at these levels was Sept. 2006, Citigroup , February of 2006 and you have to go back to March of 2006 to buy Sears Holdings (SHLD) at these prices. The sale price if Sears now is so low that Chairman Eddie Lampert is tripping over himself to buyback shares. He has bought as many shares back in the last month as he had almost the entire last year!
In short, the world is not coming to an end and the economy is still very strong. Keep buying...
You know, if Buffett and Lampert are buying more shares every quarter, why aren't you?
The DOW is back down to 12,500 and now at levels seen since April and another day or two of this will give us levels back to November 2006. Why then is this great?
1- The economy is still strong and growing. Profits are still rising at a double digit rate and unemployment is at historically low levels. GDP for Q2 will be revised up and there is no recession on the horizon.
2- Cash rich companies are buying back shares in unprecedented numbers.
3- Over 50% of S&P 500 companies profits come from overseas where economies are surging.
What does it mean? The underlying fundamentals are strong which means eventually share prices are going to turn around. What we have is a credit problem and when traders cannot sell off this debt, they sell what they can which is shares companies like in Goldman Sachs (GS), Dow Chemical (DOW) and Altria (MO). I mean, if we look at it logically are the events of the last month going to stop people from smoking OR will it effect Altria's balance sheet which is laughingly unlevered? No.
So, are my picks down? Yup, so what?!? Paper losses mean nothing to me, purchase prices do at this point in my investing career. Market disturbances like this that cause mis-pricing of equities like we see now are great for me. What I am busy doing now is lowering my cost basis for recent purchases like Goldman, Wal-Mart (WMT) and Citigroup (C). The last time I could have bought shares of Goldman and Dow Chemical at these levels was Sept. 2006, Citigroup , February of 2006 and you have to go back to March of 2006 to buy Sears Holdings (SHLD) at these prices. The sale price if Sears now is so low that Chairman Eddie Lampert is tripping over himself to buyback shares. He has bought as many shares back in the last month as he had almost the entire last year!
In short, the world is not coming to an end and the economy is still very strong. Keep buying...
You know, if Buffett and Lampert are buying more shares every quarter, why aren't you?
Buffett to Lenders: "It's Their Problem"
"If lenders lent money that they are not going to get paid back, that's their problem, frankly", said Berkshire Hathaway's (BRK.A)Warren Buffett yesterday. Finally, somebody gets it and is not calling for the Fed to bail lenders out.
Last week I said "The Fed will not bail out lenders that made dumb loans and now are in trouble. Bernanke is going to let the market work (as he should) and it is already taking care of things. Bad credit is harder to get, and hopefully credit standards return to what they should be. Both of these are good things long term."
Back in March I posted abut the loose lending practices that have gotten lender in the mess they are in today. In it I detailed the "No Documentation" loan types that had proliferated the past few years and said:
"What is shocking is the justifications they give for those who these loans "may be right for". You are buying a house, you are borrowing money from a bank to do so. The expectation is that you will need to have money to put down on it and actually be able to demonstrate an ability to pay the bank back. The phrase "take my word for it" should never enter the conversation. It did though and that is the genesis of the current situation. When buying a $500,000 house involved less paperwork than buying a Ford Escort, red flags ought to have been going up.
In 2005 and 2006 the number of both mortgage brokers and real estate agents hit historic highs. A mortgage is a commodity, give me a price and a rate and I will choose a broker. There is very little a broker can do to distinguish themselves from each other. With so many brokers and a limited number of qualified mortgage applicants, brokers had to find new applicants. The only place for them to go was the pool of people who under the current rules not only did not qualify for a mortgage would not receive credit from a bookie were they to ask. The new motto was "If they don't fit under the current set of rules, change the rules". So they did. What they failed to realize was, the rules were there for a reason, they worked. We are now realizing that people who do not want to provide proof of what they do for a living, how they earn income, what that income actually is or where their down payment is coming from are not doing so out of some symbolic "privacy concern", but because what they are saying is quite frankly, bull. Who has trouble "verifying income"? Crack dealers? Illegal immigrants working under the table and not paying taxes? Contractors who cheat on their taxes? If you want my money, prove you can pay it back or take a walk and let the next person in line step up, unless of course the line is small, the others are just like you and we really need to give you the money... thus the mortgage industry dilemma the past few years. Like I have said more than a few times before, the surprise here is not that this happened, it is that it did not happen sooner."
Maybe additional calmer heads will come out and stop calling on the Fed to bail out idiots and drown out the Jim Cramers of the world who are running around screeching like an 18 year old girl who got ketchup on their prom dress. Yes things may get worse but as Buffett also said yesterday "there will be real opportunities then"...
Translation? Get ready to buy
Last week I said "The Fed will not bail out lenders that made dumb loans and now are in trouble. Bernanke is going to let the market work (as he should) and it is already taking care of things. Bad credit is harder to get, and hopefully credit standards return to what they should be. Both of these are good things long term."
Back in March I posted abut the loose lending practices that have gotten lender in the mess they are in today. In it I detailed the "No Documentation" loan types that had proliferated the past few years and said:
"What is shocking is the justifications they give for those who these loans "may be right for". You are buying a house, you are borrowing money from a bank to do so. The expectation is that you will need to have money to put down on it and actually be able to demonstrate an ability to pay the bank back. The phrase "take my word for it" should never enter the conversation. It did though and that is the genesis of the current situation. When buying a $500,000 house involved less paperwork than buying a Ford Escort, red flags ought to have been going up.
In 2005 and 2006 the number of both mortgage brokers and real estate agents hit historic highs. A mortgage is a commodity, give me a price and a rate and I will choose a broker. There is very little a broker can do to distinguish themselves from each other. With so many brokers and a limited number of qualified mortgage applicants, brokers had to find new applicants. The only place for them to go was the pool of people who under the current rules not only did not qualify for a mortgage would not receive credit from a bookie were they to ask. The new motto was "If they don't fit under the current set of rules, change the rules". So they did. What they failed to realize was, the rules were there for a reason, they worked. We are now realizing that people who do not want to provide proof of what they do for a living, how they earn income, what that income actually is or where their down payment is coming from are not doing so out of some symbolic "privacy concern", but because what they are saying is quite frankly, bull. Who has trouble "verifying income"? Crack dealers? Illegal immigrants working under the table and not paying taxes? Contractors who cheat on their taxes? If you want my money, prove you can pay it back or take a walk and let the next person in line step up, unless of course the line is small, the others are just like you and we really need to give you the money... thus the mortgage industry dilemma the past few years. Like I have said more than a few times before, the surprise here is not that this happened, it is that it did not happen sooner."
Maybe additional calmer heads will come out and stop calling on the Fed to bail out idiots and drown out the Jim Cramers of the world who are running around screeching like an 18 year old girl who got ketchup on their prom dress. Yes things may get worse but as Buffett also said yesterday "there will be real opportunities then"...
Translation? Get ready to buy
Thursday's Upgrades and Downgrades
UPGRADES
Intel INTC Credit Suisse Underperform » Outperform
Commercial Metals CMC CIBC Wrld Mkts Sector Perform » Sector Outperform
MFA Mortgage MFA JP Morgan Neutral » Overweight
CBL & Assoc CBL JP Morgan Neutral » Overweight
Emergency Medical Services EMS Jefferies & Co Hold » Buy
Dril-Quip DRQ Jefferies & Co Hold » Buy
AEterna Zentaris AEZS RBC Capital Mkts Sector Perform » Outperform
MasterCard MA AG Edwards Hold » Buy
Universal Technical Institute UTI Sun Trust Rbsn Humphrey Neutral » Buy
JDS Uniphase JDSU BMO Capital Markets Underperform » Market Perform
Perot Systems PER Stifel Nicolaus Hold » Buy
Tessera Tech TSRA Matrix Research Hold » Buy
Koppers Holdings KOP Matrix Research Buy » Strong Buy
Penn Natl Gaming PENN Nollenberger Capital Neutral » Buy
DOWNGRADES
MFA Mortgage MFA Bear Stearns Outperform » Peer Perform
Thornburg Mortg TMA AG Edwards Hold » Sell
KKR Financial KFN Friedman Billings Outperform » Mkt Perform
Quest Diagnostics DGX Matrix Research Buy » Hold
Orbcomm ORBC Cowen & Co Outperform » Neutral
Midland Co MLAN KeyBanc Capital Mkts / McDonald Buy » Hold
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