The Ticker
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Thanksgiving Reading
Continue reading… 0 CommentsSettle in after some turkey with a few good reads:
For the libertarian in your life, McSweeney's updates Ayn Rand for the current financial crisis.
The New Yorker on Ben Bernanke's radicalness.
The WSJ on Tim Geithner: Secretary of Bailouts.
Brad Setser on troubles for sovereign wealth funds.
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AIG: $1 Salary For CEO
Continue reading… 2 CommentsLooks like AIG's perk-filled glory days are officially over starting with CEO Edward Liddy, who is following a time-honored tradition at troubled companies by slashing his salary to a buck.
Via the WSJ:
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Dick's Sporting Goods: Cheap Coupons, Cheap Stock
Continue reading… 2 CommentsDick's Sporting Goods today shows off a sign of the times. Ahead of what could be the worst holiday sales season in a decade for American retailers, it's offering up coupons for 20 percent off select merchandise on its Web site alongside other deals to entice an increasingly thrifty consumer.
That's good news for shoppers, but bad news for investors who fell in love with the company over the past several years.
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Citigroup: 4 Bailout Questions
Continue reading… 2 CommentsThe government's decision to prop up Citigroup opens a new chapter in the ongoing financial crisis. This latest rescue, larger by far than the bailouts of Bear Stearns or American International Group, sets the newest precedent for how far the government will go in its continuing efforts to keep the financial sector afloat.
The basics:
Citi is on the hook for the first $29 billion in losses. After that, the dominos fall like this: The Treasury will be responsible for 90 percent of the next $5 billion in losses. Then, the FDIC will handle 90 percent of the next $10 billion. Lastly, the Fed takes 90 percent of losses beyond that. -
Geithner Gets It
Continue reading… 0 CommentsMSNBC says New York Federal Reserve President Tim Geithner will be named Treasury Secretary on Monday.
Here's some background on him:
A quick rundown from the NYT.
His recent speeches are here, here and here.
The largest knock against Geithner is the Fed's decision to let Lehman Bros. fail, but he's among the more credible and connected candidates out there and the only one with first-hand experience in the trenches of the current credit crisis.
Markets are rallying on the news at least for today, so if nothing else Wall Street seems happy with the pick.
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Financial Crisis: Terms You Need to Know
Continue reading… 0 CommentsThe Associated Press offers a handy guide to some often-mentioned economic and market terms.
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Warren Buffett: Unemployment Heading "To New Heights"
Continue reading… 6 CommentsFox Business scored an interview with Warren Buffett today, and issues some excerpts ahead of time. (The interview airs at 4 p.m. ET):
On Unemployment:
“There are going to be more people unemployed…but I'm not worried about how we come out in the end. I mean, I'm not worried about five years from now. Five months from now, can be very painful…it will be considerably higher…It will happen eventually [surpassing 8%], and we will go on to new heights, but it will not turn around by mid-year next year.”
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Friday Fed Foto Fun
Continue reading… 0 CommentsOur sexiest Treasury Department overlord, Neel Kashkari, can play many roles (via the FT). (Older: Gawker finds his high school yearbook...)
Also, is this the signal the financial crisis has jumped the shark? LOLFed.
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Investors: Poorer Everywhere
Continue reading… 0 CommentsWith the S&P 500 at an 11-year low after yesterday's rout, Merrill Lynch surveys the damage.
World equity market capitalization has lost more than $35 trillion from the market top -- an amount equivalent to the entire spending of the U.S. consumer during 2004-2007.
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Auto Bailout Tide Turns
Continue reading… 4 CommentsIt is not hard to understand that the producing and consuming of automobiles might properly seem the purpose of life to the General Motors management, or that it might seem so to other men and women deeply committed economically or emotionally to this pursuit. If they so regard it, they should be commended rather than criticized for this remarkable identification of philosophy with daily duty. It is harder to understand, however, why the production and consumption of automobiles should be the purpose of life for this country.
Jane Jacobs, The Death and Life of Great American Cities, 1961.
We've reached an important moment in the current economic crisis. If a bailout for the auto sector is truly dead until the Big 3 come up with a plan for the government's cash, it will be because this is the week America finally decided against throwing more cash into even our most iconic industries.
Watching this debate last night between the NYT's Andrew Ross Sorkin debating David Cole from the Center for Automotive Research on Charlie Rose sums up the sentiment: Drastic change, not extra help, is what's needed in Detroit.
Mitt Romney's Op-Ed this week struck the same note:
Without that bailout, Detroit will need to drastically restructure itself. With it, the automakers will stay the course — the suicidal course of declining market shares, insurmountable labor and retiree burdens, technology atrophy, product inferiority and never-ending job losses. Detroit needs a turnaround, not a check.
Our own Rick Newman, who smartly backs bankruptcy, sees a tide that began turning against American automakers decades ago:
They alienated millions of customers. You have to try hard to give up 30 percentage points of market share, which is what the domestic automakers have done since 1970. The downfall began with the introduction of cheap cars like the Ford Pinto and Chevrolet Vega, meant to battle thrifty imports. Those cars and numerous follow-ons now wear badges of horror identifying them as some of the worst cars in history—with millions of owners to bear witness.
There's an important point here: Willingness to support teetering industries may be faltering, despite obvious ongoing threats to the economy and markets (stocks are down hard again today). I'm not saying unqualified bailouts are a good answer, but as the likes of Citigroup continue to stumble, any marked change in public sentiment that threatens to shut off the tap should be watched closely.
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No Recession In World of Warcraft
Continue reading… 1 CommentBless you, nerds.
The retail recession isn't complete! After a launch that included midnight parties and lines outside of Best Buy stores (pics here) Activision Blizzard Entertainment (ATVI) now says it sold more than 2.8 million of its World of Warcraft expansion pack, Wrath of the Lich King, on the first day of sales, making it the fastest-selling PC game of all time.
"We're grateful for the incredible support that players around the world have continued to show for World of Warcraft," said Mike Morhaime, CEO and cofounder of Blizzard Entertainment. "Wrath of the Lich King contains some of the best content we've created for the game so far, and we look forward to seeing even more players log in to experience it in the days ahead."
There won't be many winners this Christmas season, and while video game sales are expected to be slow along with everything else, Activision may be one of an increasingly small handful of winners. The company got some love on Wednesday from Citigroup analyst Brent Thill who notes it's other slam-dunk title, Guitar Hero, is seeing strong demand for the $190 "Guitar Hero: World Tour" package both online and at retail.
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R.I.P.: 2002-2007 Bull Market
Continue reading… 2 CommentsFrom Bespoke Investment Group:
The S&P 500 has now erased 100% of the bull market from 2002 to 2007. Like the lost city of Atlantis, the bull market we enjoyed from 2002 to 2007 has now been relegated to the status of legends. People may talk about it for generations, but looking at the levels of the major indices, there is no longer any proof that it ever existed.
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Stocks' Latest Terrible Last Hour
Continue reading… 0 CommentsThe Dow dropped below 8,000 today for the first time since March of 2003 with the most aggressive selling coming between 3 p.m. and the close.
We'll debate the reasons (Citigroup? Automakers? CMBS?) but it's becoming clear that stocks are still trading fearfully when it comes to whether or not the government will continue to offer additional support to prop up troubled parts of the economy. Basically, until bailouts are solidified one way or the other, trading is going to remain frenetic.
Another lesson from today's trading: Hopes for signs of a technical market bottom just aren't worth much when such systemic problems remain in the economy and corporate America (see the WSJ yesterday for more).
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Costco Sells Caskets?
Continue reading… 7 CommentsInvestor, columnist and Stockpickr.com founder James Altucher was just on CNBC talking up some ideas from his new book "The Forever Portfolio: How to Pick Stocks That You Can Hold for the Long Run" (Portfolio).
He was talking about buys in the death industry, specifically Service Corporation International (SCI) which is the closest thing there is to a funereal conglomerate. Altucher's basic premise (as with most of his picks in the book) is demographics. Basically, boomers are getting older and as they age demand for the services SCI provides will rise.
That's not the interesting part though. This is: You can actually buy a coffin at Costco.
That's right. Six pounds of shrimp, a pallet of toilet paper, and a reasonably priced eternal resting place all for a low annual membership fee.
Here's the link.
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Merrill: Fund Managers Defensive
Continue reading… 2 CommentsMerrill Lynch's monthly Survey of Fund Managers is gloomy again in November, but U.S. stocks are getting some love. Some takeaways:
- Four out of five investors believe that the world will continue to experience recession over the coming year.
- Forty percent believe that monetary policy is “too restrictive” and asset allocators remain overweight cash and bonds relative to equities.
- Investors are in a "defensive asset allocation mindset" and "fear of deflation may be keeping them on the sideline."
- Managers like U.S. equities because the outlook for corporate profits here is the “most favourable." A net 36 percent of asset allocators are overweight U.S. equities, which is "the most widespread exposure to U.S. stocks in more than a decade." They're underweight Europe and Asia.
- Except for China. "A net 85 percent of panellists who focus on or emerging markets expect the Chinese economy to weaken in the next 12 months. At the same time, Asian and emerging market investors favour over any other country in their universe and have been moving into the market in force." A net 67 percent of regional respondents are overweight Chinese shares, reversing an underweight position just three months ago.
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Housing Grinds Lower
Continue reading… 4 CommentsYou've heard it before: Homebuilder stocks will bounce back before the housing market recovers. That's the mantra of bottom-fishing hopefuls who keep waiting for the right time to pounce on Toll Brothers, Hovnanian Enterprises, KB Homes, D.R. Horton or any of the other big American builders.
Don't listen.
The chart should be enough. While the S&P 500 is still bouncing around a bottom, the SPDR Homebuilders ETF is slumping to brand new lows (chart here).
Terrible housings numbers today show the real estate bust continues, with housing starts at their lowest level ever. Plus, a 14.5 percent fall in single-family building permits (a number that shocked economists) says the worst isn't over because nobody wants to build. Unsurprisingly, homebuilders are feeling down as well. The NAHB/Wells Fargo Housing Market Index, which measures builder sentiment, hit an all-time low of 9 in November.
Meanwhile, Deutsche Bank recently looked at the Chicago market, and found some more reasons to expect a long, difficult recovery:
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Deflation!
Continue reading… 3 CommentsWorried consumers are a troubling part of the economy's deflationary dip today.
The 1 percent drop in the Consumer Price Index, both larger than Wall Street expected and the largest drop since the Labor Department started tracking the data in 1947, came thanks to weak sales of new and used cars, apparel and lodging spending. That says we're holding back on big-ticket items, everyday purchases and travel heading into the holiday season. It's also some fairly strong evidence for the death of enduring notion of the "resilient American consumer."
Yesterday, Merrill Lynch warned it'll get worse:
Moreover, we are just at the start of the deflation story. Our tracking of the November price reports so far indicates even deeper price declines for import prices right on down the line to the end consumer.
Extra: Tim Iacono has some thoughts on why the deflation/inflation debate gets a bit, er, inflated (via Seeking Alpha).
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Cuban Blogs Back
Continue reading… 0 CommentsAfter the SEC charged Mark Cuban with insider trading, he posted the following on his blog:
I wish I could say more, but I will have to leave it to this, and let the judicial process do its job.
November 17, 2008
RE: SEC Civil Action in the United States Districtfor the Northern District of Texas, Dallas Division
Mark Cuban today responded to a civil complaint filed by the United States Securities and Exchange Commission in the United States District for the Northern District of Texas, Dallas Division. In its complaint, the Commission charges that Mr. Cuban engaged in violations of the federal securities laws in connection with transactions in the securities of Mamma.com Inc.
This matter, which has been pending before the Commission for nearly two years, has no merit and is a product of gross abuse of prosecutorial discretion. Mr. Cuban intends to contest the allegations and to demonstrate that the Commission’s claims are infected by the misconduct of the staff of its Enforcement Division.
Mr. Cuban stated, “I am disappointed that the Commission chose to bring this case based upon its Enforcement staff’s win-at-any-cost ambitions. The staff’s process was result-oriented, facts be damned. The government’s claims are false and they will be proven to be so.”
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Ralph C. Ferrara, Esq.
A second post is here.
And there's more: Dealbook breaks a big bit of info about friction between Cuban and someone in the Fort Worth office of the SEC angry over Cuban's involvement in financing and distributing "Loose Change," a 9/11conspiracy documentary.
I've got no clue as to Cuban's guilt or innocence, but it's going to be absolutely fascinating to watch this case unfold online. Cuban obviously can't go into detail about his case, but it's a guarantee he'll be back to explain himself fully.
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Yang Exits: What's Yahoo Worth Now?
Continue reading… 4 CommentsJerry Yang steps down as CEO, Yahoo shareholders rejoice (at least for today), and bets are being placed again as to whether Microsoft will be back with a bid.
So what's the post-Yang premium? So far today, about $2 billion (as of just before noon, with shares up 15 percent).
Speculation over the new CEO is ramping up (Kara Swisher considers some choices here), but the real question is still how much Microsoft might still be willing to pay after seeing its initial $33-a-share offer spurned in May. (Keep in mind Yahoo trades just above $12 now).
Some Wall Street predictions:
Collins Stewart, which keeps a buy rating on Yahoo with an $18 price target:
YHOO presents a material upside potential due to a likely MSFT deal – we believe that a possible Microsoft search deal can give $8 to $10 per share lift to YHOO.
Goldman Sachs says an acquisition still makes sense for Microsoft:
We still see the opportunity for Microsoft to potentially extract up to $1bn per year in capex and opex synergies from cooperating with Yahoo!'s search business. Though Microsoft may favor a search-only partnership, we believe that long term a full acquisition could be more appealing for both parties given Yahoo! shareholders presumably desire an acquisition premium for the entire business, and given Yahoo!'s search business presumably derives much of its traffic from Yahoo!'s communications and content operations. We previously estimated Yahoo! might be worth $21 per share to an acquirer with a search business such as Microsoft, versus our stand-alone valuation of $15 per share.
Either way, there's a $3-a-share upside there even if the sale falls through.
Not everybody agrees that Microsoft will come back to the table:
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Mark Cuban Charged With Insider Trading
Continue reading… 0 CommentsWhoa! I assumed the worst Mark Cuban related news of late was going to be his reportedly thwarted attempt to buy the Chicago Cubs.
Instead the WSJ is reporting the blogger and Dallas Mavericks owner has been charged with insider trading. From the report:
The Securities and Exchange Commission filed insider trading charges against Mark Cuban, the outspoken owner of the Dallas Mavericks, for allegedly dumping shares in Mamma.com upon learning it was raising money in a private offering.
The SEC alleges in a civil action that Mr. Cuban sold his entire 6% ownership stake on June 28, 2004, after learning that Mamma.com was raising money through a private investment in a public entity, or PIPE. The next day, on June 29, the company announced the PIPE financing and shares of the company dropped by more than 10%. By selling his stake, the SEC alleges, Mr. Cuban avoided more than $750,000 in losses.
In a PIPE transaction new shares are issued at a discount to the current trading price. An announcement of a PIPE transaction is often followed by a drop in the stock price as shareholders anticipate their stake will be diluted.
The SEC filing is here.
Looks like Sharesleuth.com, Cuban's source for "independent Web-based reporting aimed at exposing securities fraud and corporate chicanery" missed one. We'll see if Cuban responds, as he has often in the past, on his blog.
