Entries for May 2008

Brian Hamilton runs Raleigh N.C.-based Sageworks, a financial analysis and software company. He stopped by the office this week to talk markets and stocks.

Hamilton has been notably bullish on the economy lately (see this post by Fox's Elizabeth MacDonald for his reasons why), and is continuing to tout companies that boast both healthy cash flow and defensive market positions even as volatile markets keep everybody on edge.

"I do not think we're going into a major recession. I don't think the market is going to tank," he says.

Proxy fight!

In his letter to Yahoo's board, legendary investor and agitator Carl Icahn threatens to start ousting board members if Jerry Yang and company don't rescind their "unconscionable" decision to reject Microsoft's $33-a-share bid. He chides Yahoo management for "overly optimistic financial forecasts" and warns that shareholders should get a say in any "strategic alternatives" being bandied about by management. He says he's got about 59 million Yahoo shares and a 10-person board ready to go. He is petitioning for government clearance to buy $2.5 billion more worth of stock.

It's on!

Fitch, the ratings agency, says the credit crisis is now in its final stages.

Its report describes the impact of further downgrades by credit rating agencies as "minimal" and puts total losses at $400 billion, though more broad definitions could boost that to $550 billion.

Fitch also concludes that about half of the total subprime losses that caused the credit markets to falter come from the banking sector. The rest are spread through insurers, hedge funds, and others. That could be good news, Fitch says, because that mix of risk-holders may have hedged that risk more effectively than many expected at the nadir of the crisis.

Merrill Lynch's monthly survey of fund managers showed a big drop in the number of respondents worried about a global recession. Just 18 percent think we're already in a global recession, down from 24 percent last month. In April, 40 percent of managers said a recession is likely sometime in the next 12 months. Now just 29 percent expect one. But that's where the good news runs out, the survey says. Now managers are fretting about inflation.

The fact is that the vast majority of managers believe we are mired in a world of below-trend growth and above-trend inflation. Three months ago, 67% of the panel was bracing itself for stagflation; this month that percentage has risen to 85%. Moreover, even if the recession risks have lifted, widespread gloom about the corporate profits outlook lingers on.

That says nothing good for stocks, and 77 percent of those polled said expectations for corporate earnings are still too high.

I'm getting married next month (hi, babe!), so my government stimulus check has been dutifully allocated to support America's burgeoning flowers-invitations-catering industrial complex. But it seems that a lot of you are being a little more responsible.

A monthly survey released today by the National Retail Federation and BIGresearch shows that 40 percent of us will spend our checks to inject some $42 billion back into the economy. That's good news for the economy.

Huge infusions of cash have stemmed the bleeding in the financial sector, but "conditions in financial markets are still far from normal," Fed Chairman Ben Bernanke said in a speech today. He vowed to increase the already massive amount of cash it has lent to investment banks in an attempt to keep markets from seizing up.

That follows comments yesterday by Jamie Dimon of J.P.Morgan that the credit crunch may soon be over, though he predicted the coming (or current) recession will continue at a "slower burn" and could rival the 1982 downturn.

Bank of America has added a new bit of bad news as well. Its mortgage customers are in worse shape than previously thought. Liam McGee, president of its global consumer and small-business banking arm, told a conference today that they're facing "significant economic pressure" from falling home prices. For the bank, that means losses from its home equity portfolio will probably exceed current forecasts of 2 percent to 2.5 percent.

High hopes for small-plane air-taxi services have been getting a ton of press lately.

Too bad their poster child is sputtering. Layoffs and funding woes are plaguing air-taxi start-up DayJet, a company touted as the future of commuting for short-hop flights on superlight jets to and from out-of-the-way spots.

At the same time, regional and charter operator ExpressJet is getting slammed by the credit crisis. Portfolio's Felix Salmon notes that the carrier put $65 million into auction-rate securities that promptly froze up. Now it needs access to cash, or it could follow the likes of Frontier into bankruptcy.

Those pesky economists are always blaming "market forces" for everything.

Take $120 oil, rationed rice, or any of the other headline-grabbing commodities whose prices have spiked this year.

The Wall Street Journal's monthly survey of professional prognosticators says fundamental market conditions rather than nefarious speculators are behind the run-up, and they're blaming the usual suspects.