TheStreet.com's Jim Cramer says the value guys threw this party, so respect the hosts.
Sometimes you just feel beaten into being positive. You just say, "OK, enough, I will accept the positives as they are being put out, not as I believe they are."
That's how I felt yesterday about Freddie Mac (NYSE: FRE) (Cramer's Take). The company put out financials yesterday that looked better than expected, and for once I didn't question whether they were.
I didn't because the earnings from so many of the feckless players -- the Fannies (NYSE: FNM) (Cramer's Take), the Washington Mutuals (NYSE: WM) (Cramer's Take) the MBIAs (NYSE: MBI) (Cramer's Take) and the Ambacs (NYSE: ABK) (Cramer's Take) -- are all being greeted with a bizarre positive response, so bizarre that I bought into the "better than expected" rhetoric because I don't want to fight the value guys who are in control right now.
Elsewhere on the site, Doug Kass has been putting up some very strong arguments that numbers from the likes of Freddie are less than meets the eye.
TheStreet.com's Jim Cramer says the guys at the top don't know what they're doing, and it shows.
AIG's (NYSE: AIG) (Cramer's Take) making everyone's life difficult today. That's in part because AIG had been the biggest proponent of "super senior," meaning they repeatedly said that their collateralized debt obligation (CDO) exposure was of the kind that was intelligent, measured and thoughtful. They talked endlessly about how their due diligence made the difference and that unlike all of the other buyers, they kicked the tires three times and never bought the plain ol' CDOs. Then they brought in professors from Wharton to be sure that even if all heck broke loose and they were being too aggressive, they would be hedged.
They also were the first to give you the percentages of how much could go bad and that even in the worst-case scenario, they were overcapitalized. And, most important, they were insurers, no need to mark to market, they can play it all out.
Plus, they touted their own struggles. They made the point that because of the turmoil at the top, they hadn't bought any bad stuff and stopped buying residential real estate products after 2005. What they did buy -- they assured us in that big teach-in dog-and-pony show in December -- was the extra-special nature of their particular buys and that, unlike everyone else, risk officers scrutinized every single piece of paper that went into their super senior insurance, meaning only the top-top part of a CDO-squared, the part where everything had to default ahead of it; they made a point of how impossible that would be.
It has been a tough year for investors. We have been dealing with recession fears, housing market worries, high gasoline prices and a very weak U.S dollar. As much as we would love to say that the worst is behind us, we still could be in for some more rocky times ahead. So its best to try to figure out which stocks would be best to avoid for the time being.
Richard Gibbons wrote up a nice piece over on The Motley Fool that looks at some of the stocks that we would be wise to stay away from at this time. Regardless good or bad times, he is convinced there are always ways to make money, but in order to find the winners, it is also necessary to pull out the losers.
So how can we separate out the winners from the losers?
Gibbons seems to have a simple answer for this. He believes there is really no use in wasting our time trying to separate the winners from the losers as there are so many great cheap stocks that could offer us a chance to make money. Gibbons' advice is to not choose ugly and risky companies that could put our hard earned money at risk. To makes this clear, he uses a baseball analogy, expressing his options for the curve balls instead of the fastballs.
Biggest Stock Losers Since the market slump began six months ago, U.S. companies have bled away trillions of dollars in value. 80% of companies in the Standard & Poor's 500-stock index have fallen in value, according to data provider Capital IQ. Here's a damage report. The biggest loser is Bear Stearns which lost $16.7 billion in value. Other big losers include National City Bank, Ambac, CIT, Countrywide, E*Trade, WaMu, Sprint Nextel & Freddie Mac. The Stock Market's Biggest Losers
6 Ways to Buy Checking 'Float' Time Is your bank speeding money out of your checking account faster than you can put it in? Do you feel like someone just set your financial hamster wheel on fast-spin? Welcome to the new reality of check "float" -- or lack thereof. Float refers to the time it takes for money to leave your checking account. Nowadays, it's harder to buy extra time to pay your bills. Here are six moves you can make today to reclaim some lost "float" time. 6 ways to buy checking 'float' time -Bankrate.com
TheStreet.com's Jim Cramer says this lender gave money to anyone with a pulse, and the shareholders are left holding the bag.
For pure laughs, go read the National City (NYSE: NCC) (Cramer's Take) conference call yesterday, the one where they destroyed what was remaining of their common shareholder base with the partial takeunder by Corsair, an unknown private-equity fund that surfaced to inject $7 billion to save the bank.
But this Nat City takes the cake. They have to be the most stupid and least rigorous lender since the S&L crisis. They have $10 billion in home equity loans that have got to be among the worst ever issued. I swear, I bet that many of these are going to turn out to be out-and-out fraud by the borrowers. Miraculously, Nat City found an even more stupid soul, Merrill's (NYSE: MER) (Cramer's Take) Stan O'Neal, to sell its main originator of this junk to, something that brought O'Neal down and almost brought Merrill down. Some would say that the latter is still in question. I have no idea what would have happened to NCC if they hadn't sold it before the height of the fraud, the first quarter of 2007.
Some of the smartest investors, or at least ones who made a lot of money in the past, are buying financial stocks. Big time. They're the ones who bought a large chunk of Washington Mutual (NYSE: WM) and Wachovia Bank (NYSE: WB). Some $7 billion worth in WaMu, $8 billion in Wachovia coming soon. (Wachovia raised $3.5 billion through preferred stock only two months prior.) But these sharp investors didn't buy stock on the open market. They got theirs in negotiated deals with each bank. And they're not done buying.
Banks are teetering on the edge of a precipice. Without new capital their losses threaten to wipe out the capital base required to stay open. That forces many of them to consider selling to another, stronger bank or raise more capital to replace the losses. While not strictly a bank, Bear Stearns (NYSE: BSC), an investment bank, was leaning heavily over the edge when JP Morgan Chase (NYSE: JPM) threw it a rope and reeled it in. Originally at $2 a share, now at $10. The building that Bear owns is said to be worth at least $2 a share, so JP Morgan's life line came at a very high cost.
The Seattle-based bank lost more than $1.1 billion, or $1.40 per share, compared with a profit of $784 million, or 86 cents per share, in the first quarter of the previous year. Analysts polled by Thomson Financial had forecast a loss of $1.05 per share.
Washington Mutual said it needed to set aside $3.5 billion to cover bad loans in its $250 billion portfolio during the period. The bank set aside less than half as much to cover bad loans in the year-ago period.
While shares closed up 3% to $10.66 in regular trading Tuesday, they fell in after-hours trading.
CSX said it earned $351 million, or 85 cents per share, compared with $240 million, or 52 cents per share, in the previous year. Revenue rose 12% to $2.7 billion. Analysts surveyed by Thomson Financial had forecast 74 cents per share on revenue of $2.63 billion.
The company also said it expects to reach the "upper end" of its previous full-year guidance of at $3.40 to $3.60 per share.
Shares closed up 66 cents to $57.77 on Tuesday, then surged an additional $1.35 in after-hour trading.
How in the world did they get into such hot water? I mean, it takes real talent to lose this kind of money. Buying at the highs, over-leveraging and using poor investment disciplines. Why does it all sound so familiar?
Perhaps it is because these are the phrases that come to mind when I think of the plight of the individual investor who rode the market rollercoaster of the early 2000s. Yet, what I am discussing is not about them at all. No, they learned a hard and costly lesson when March of 2000 came in like a lion Saber-Tooth Tiger and continued downward with a bloody vengeance for the next two years. No, no ... they learned their lesson.
I am referring to the scores of poorly run banking and brokerage operations that have managed to make all of the combined post-depression market catastrophes look like a Sunday walk in the park. Maybe it is not entirely their fault, but they need to take a good portion of the blame for much of our economy's problems related to their poor decisions and lack of oversight on the millions of mortgages and loans that were improperly underwritten.
We already know that though. It is the most recent bit of news that is causing me to wonder how deep of a hole we are really in. This weekend, news for both Wachovia (NYSE: WB) and Washington Mutual (NYSE: WM) tells of desperate attempts by companies with big problems looking to bring in life-saving cash infusions. Unfortunately, both deals have the potential to really hurt shareholders. If you hold positions in either one of these fine messes, maybe it is time to consider alternative opportunities.
Call me old fashioned, but the weekend business news releases are starting to get to me.... While it is well known that Washington Mutual is in big trouble as its business is suffering the after-effects of all sorts of bad business practices, it did appear as if the TPG bailout would provide some relief until the credit markets regrouped. But as reported by the WSJ today, that deal stinks to high hell. Shareholders may wake to an ugly pre-market quote for WM as it is now being revealed that part of the TPG deal includes giving away somewhere in the neighborhood of $1.8 billion ... give or take a hundred million or so in order to get the deal done.
When's the worst time to raise money? Well, of course, when you desperately need it.
That's the predicament for Washington Mutual Inc. (NYSE: WM), which needs to shore up its beleaguered balance sheet. Rejecting a buyout offer from JPMorgan (NYSE: JPM) for $8 per share, WaMu has instead opted for a $7 billion capital infusion from an investor group that includes private equity maestros, TPG.
Unfortunately, the deal is extremely dilutive. In fact, a Goldman Sachs (NYSE: GS) analyst -- James Fotheringham -- thinks that investors should actually short the common stock of WaMu and buy the company's bonds.
It's a bold call -- but seems to make sense. The capital infusion should be a back-stop on the bonds. At the same time, there is likely to be more problems in WaMu's core business, as the economy continues its sluggish ways.
Simply put, Fotheringham thinks that WaMu shares should trade at its tangible equity value, which is estimated at $9.84 per share. Plus, he thinks there will need to be about $14 billion set aside for charges on bad loans. Oh, and profits aren't likely to come until 2010, which is an eternity for equity investors.
However, for individual investors, it can be quite risky to short stock. In other words, perhaps the best policy is to stay clear for awhile on WaMu.
This week, I was on a panel at the USC School of Business. One question I got was: what is private equity?
I had to think about it. First of all, the traditional definition is fairly straightforward. That is, private equity funds buy companies using large amounts of debt.
But what happens when the debt market goes into meltdown?
Well, interestingly enough, private equity firms learn how to adapt. Perhaps, the best example is TPG.
In fact, the firm had a busy week. First, TPG has assembled a group of investors to buy a piece of Washington Mutual, Inc. (NYSE: WM) for $7 billion. Next, the firm got a piece of SIA International, which is a leading drug distributor in Russia. And, finally, TPG has joined a group that plans to purchase $12 billion in leveraged loans from Citigroup Inc. (NYSE: C).
The quarter has hardly begun and, with analysts and investors watching nervously, the earnings crunch is about to begin anew. The following 11 big banks are among companies reporting results the week of April 14 to April 18.
These three are expected by analysts surveyed by Thomson Financial to be the the top performers in the first quarter, based on earnings growth from the same period of last year:
TheStreet.com's Jim Cramer says that until we have some clarity on the way out, we'll have a tough road ahead.
This is a confusing moment, for the same reason as always -- the darned mortgage market. Dueling plans seem destined to go nowhere while defaults continue to go up. We need something to stabilize the house price depreciation and someone to take the hit: FHA, Fannie Mae (NYSE: FNM) (Cramer's Take), Freddie Mac (NYSE: FRE) (Cramer's Take)? I don't care.
The president's plan sounds like it tries to address who should take the hit -- a little bit bank, a little bit government -- but it is piecemeal, as is everything that has been done about this issue.
I am and have been banking on an expanded FHA plan that would put the onus on that organization to do long, low-interest-rate loan guarantees. It is a simple plan, and I bet the government would make money from it. It would end the madness of trying to figure out how to deal with each one of these stopgappers.
In an effort to increase sales in the Middle East, the Wall Street Journal reported that Dell Inc (NASDAQ: DELL) is in talks with a government-owned vehicle in Dubai called Tecom about establishing a joint venture.
The Wall Street Journal also reported that Washington Mutual Incorporated (NYSE: WM), which obtained a $7B capital infusion from TPG and other investors, had reportedly been working on the TPG deal while negotiating with JP Morgan Chase & Co (NYSE: JPM), which made a preliminary takeover bid of about $7B, people familiar with the deal said.
Citigroup Incorporated (NYSE: C) is close to reaching a deal to sell $12B in leveraged loans at a discount to a group of leading private equity firms, the Financial Times reported. Although details of the deal were still being worked out, inside sources said Apollo Management, The Blackstone Group LP (NYSE: BX) and TPG would buy the loan portfolio at a discount that could come in at about 90 cents on the dollar.
OTHER PAPERS:
The UK Times reported that The Boeing Company (NYSE: BA) is today expected to announce that its 787 Dreamliner has been delayed by 18 months, a setback which will affect all airlines that have ordered the 787, including British Airways Plc (OTC: BAIRY) and Virgin Atlantic.
If you wanted to look for the blame-game on why stocks listed lower most of the day, you could blame pending home sales at lows, higher oil prices, and even the FOMC minutes hinting at recession without saying "recession." We also saw the White House say it couldn't endorse the current structure of the proposed housing bill.
The truth is, Wall Street and Main Street are also coming to grips with the fact that we are about to get earnings (and guidance) from companies that we can only hope is mixed. Otherwise we just have to hope for "less-bad" news. Get ready for the legacy airline sector's low P/E and low Price to Book values to disappear completely. Below are the unofficial closing bell index prices:
Advanced Micro Devices (NYSE: AMD) saw shares fall almost 5% to $6.03 after it issued an earnings and revenue warning on Monday after the close. Had it not announced a major layoff plan, this would have been far worse. So much for this "growth story."
TheStreet.com's Jim Cramer says the value guys threw this party, so respect the hosts. 
Here are some highlights from this past week's 
Ted Allrich is the founder of 
How in the world did they get into such hot water? I mean, it takes real talent to lose this kind of money. Buying at the highs, over-leveraging and using poor investment disciplines. Why does it all sound so familiar?
When's the worst time to raise money? Well, of course, when you desperately need it.
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. He also operates 
This week, I was on a panel at the USC School of Business. One question I got was: what is private equity?.gif){kind=logo}
Comfort Zone Investing: One thriving area of real estate: Apartments
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
