Browse by Tags
-
Posted
May 06 2008, 01:06 PM
by
Matt Koppenheffer
Rating:
After Countrywide's ugly $890 million first quarter loss, speculation has been rampant that Bank of America will try to pull a Houdini and wiggle out of its agreement to buy the mortgage lender. Speculation took to new heights this week when Friedman, Billings, Ramsey analyst Paul Miller strongly cautioned BofA against the deal, and suggested that the bank may try to renegotiate the price down to the $0 to $2 per share level.
The question at hand here really isn't whether Countrywide is going to suck for the foreseeable future -- despite what CEO Angelo Mozilo said late last year, that's pretty much a given. The issue is whether Countrywide will suck more than BofA's proposed buyout price suggests. Since BofA's original buyout offer was at about $4 billion, it's possible that it's already expecting at least another $9 billion hit to Countrywide's book value. That would assume a buyout at one time projected book value, which would be relatively cheap given Countrywide's trading history.
FBR's Miller thinks that it could be significantly worse than that, though, and suggested that loan losses at Countrywide could run in the $20 billion to $30 billion range. At those levels the acquisition certainly would make BofA feel like it had swallowed a brick.
Read More...
-
Posted
Apr 28 2008, 01:00 PM
by
Matt Koppenheffer
Rating:
"Classic Buffett." Those were the words that The Wall Street Journal's Deal Journal tagged onto the $23 billion deal for William Wrigley Jr. Candy maker Mars is buying the bulk of the company, but Berkshire Hathaway is taking a $2.1 billion minority interest in the deal and has also offered $4.4 billion in subordinated debt financing.
The beautiful thing about this deal, though, is that it shows once again what makes Buffett, well, Buffett. It's a crazy market out there right now and there have been any number of rumors swirling as to where The Oracle of Omaha might throw some of his Berkshire billions. Certainly it wouldn't be something outside of his circle of competence like solar cells or software. He's not known for chasing after the hottest sectors either, so it's not surprising he hasn't been buying into mining or potash. And every rumor so far of him backing up one of the struggling financials has fallen flat.
Read More...
-
Posted
Apr 23 2008, 05:15 PM
by
Matt Koppenheffer
Rating:
Airlines, ugh! what a lousy investment they've been recently. Is there a better way?
After managing to hit $40 per share back in early 2007, AMR, the parent of American Airlines, has plummeted over 80%. UAL, United's parent, peaked at $50 right around the same time and has since fallen to $13. Continetnal? Ditto. US Air? Ditto. I'm sure Delta would have taken a similar kamikaze dive too, but it didn't emerge from bankruptcy until midway through 2007. Everybody's airline sweetheart Southwest has held up a bit better, but even it's down nearly 30% over that timeframe.
Read More...
-
Posted
Apr 21 2008, 01:01 PM
by
Matt Koppenheffer
Rating:
After watching relatively positive reactions to horrible earnings reports from the likes of Citigroup and Merrill Lynch last week, investors are far less chipper about the news out of Bank of America today. So it wouldn't be surprising if investors watching the financial sector are wondering when bad is good and when bad is just... well, bad.
The beginning and end of that story is expectations. Think about it this way: say you are expecting a meteor to crash into earth and create an ice age that will end life as we know it. The following week you wake up to hear that the meteor will end up missing earth, but you find that somebody has stolen your car. On balance you're still probably pretty psyched about the situation.
In that same way, Citigroup and Merrill have had some very pessimistic expectations thrust on them. In fact, it's been so bad for Citi that, as Charley Blaine pointed out last week, Apple is now worth more as a company than Citi. In a situation like that, investors are really pretty impressed with anything north of abject failure.
Read More...
-
Posted
Apr 14 2008, 02:33 PM
by
Matt Koppenheffer
Rating:
The details of Wachovia's first-quarter report were unfortunately familiar enough to border on dull. The quarterly loss was $350 million, brought on by some $5 billion in asset impairment and loan related charges. It's also quickly moving to make sure it has enough liquidity by cutting its dividend and raising $7 billion of new capital.
What's more interesting to consider is the fact that Wachovia, like many of its competitors, steered its financial ship directly toward the oncoming storm in the twilight hours of the housing boom. In May of 2006, Wachovia agreed to purchase Golden West Financial, a huge California savings and loan. Though the S&L was very well respected, the deal was fantastically ill-timed as it gave Wachovia tremendous exposure to the bubblicious California real estate market.
Read More...
-
Posted
Apr 07 2008, 11:12 AM
by
Matt Koppenheffer
Rating:
Washington Mutual chief executive Kerry Killinger might as well be standing in front of a "Mission Accomplished" banner today. WaMu shares are skyrocketing on hopes of a $5 billion investment from private equity shop TPG that would give the bank a nice cushion to deal with its massive lending missteps.
While Citigroup, Bear Stearns, and Merrill Lynch may grab most of the headlines because the magnitude of their losses was so great, WaMu has managed to lose an impressive amount of money for a bank of its size. WaMu finished 2007 with a loss of $67 million thanks to loan loss provisions above $3 billion and charge-offs of $1.6 billion.
Meanwhile, the company seems to care far more about Mr. Killinger than its shareholders. After reporting the dismal results for 2007 -- results that took the stock down 70% from where it started the year -- the board of directors concocted a compensation plan that would ignore the effects of the bank's potential loan losses, foreclosed real estate, and restructuring. So in the coming year, while investors will continue to feel the effects of further losses, the executive team can rest easy that their payout won't be crimped by their past strategic decisions.
Read More...
-
Posted
Apr 04 2008, 01:28 PM
by
Matt Koppenheffer
Rating:
Swiss bank UBS has made it abundantly clear that US banks aren't the only ones that can create massive write-downs. The bank has taken a staggering $37 billion in losses, and is headed out to the market to raise new money -- despite the fact that its stock is roughly half of its 52-week peak.
Things have gotten so bad that former UBS president Luqman Arnold has stepped in as an activist investor hoping to change the bank's pitch from "you and us" to "you and us and them." Like the rebellious teenager that set fire to the garage, it's UBS' investment banking division that has caused all the heartache for the venerable bank and Mr. Arnold wants to kick it out of the house.
However, what Mr. Arnold has made known is that he's not in this to take control of UBS -- he's not interested in a chairmanship or executive role. His primary focus is creating a good return on the sizeable position that his investment firm, Olivant, has in UBS.
Read More...
-
Posted
Apr 03 2008, 02:17 PM
by
Matt Koppenheffer
Rating:
If you need proof that it's a tough time to be in the airline business, just ask the folks at ATA. After filing for Chapter 11 bankruptcy protection earlier this week, the airline bowed out completely after it lost a key contract.
Not enough proof? You can also talk to Aloha Airlines. On Monday, the Hawaiian airline also shut the cockpit door -- so to say. The sad message on its website simply reads: "Sorry... After more than 60 years of serving Hawaii Aloha Airlines is no longer operating."
What of the rest of the bunch? On Thursday Glenn Tilton, the CEO of United Airlines parent UAL, was talking up the need for industry consolidation, particularly in the face of $100 oil. Tilton was quoted as saying "The case for change including consolidation was compelling a year ago and has to be more so today." That could also probably be rephrased to read, "We really don't want to go bankrupt... again."
Read More...
-
Posted
Mar 28 2008, 12:19 PM
by
Matt Koppenheffer
Rating:
It's no mistake that Visa was able to get its massive $19 billion IPO not only done, but done above the original pricing range in a tough environment. As pretty much any Joe on the street can tell you, Visa has a great business and it's in an industry that's booming as more and more people move from cash to card.
And let's not forget Mastercard in this equation either. After its IPO, Mastercard's stock had an amazing run of over 400% in less than two years. Since Visa looks like Mastercard and smells like Mastercard, surely its returns will mirror Mastercard's, right?
Read More...
-
Posted
Mar 24 2008, 10:48 AM
by
Matt Koppenheffer
Rating:
After the shocking announcement last week that JPMorgan was buying beaten-down Bears Stearns for $2 per share, the bank conceded on Monday to raise the buyout price to $10 per share. Call it the spirit of Easter, or just that warm feeling from the beginning of spring, but the amended offer strikes me an awful lot like a gift from JPMorgan.
Not everybody agrees with me though. Right now the field is split between those that think that Bear is worth substantially more than the original $2 deal, and those that think that the original $2 was a gift itself. For Bear Stearns' shareholders, the $10 per share is probably cold comfort anyway -- the price represents a 66% cut from the stock's price the Friday before the original $2 deal was announced, and a nearly 95% drop from its peak price of around $170.
Read More...
More Posts Next page »
|
