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Posted
Aug 18 2008, 06:57 PM
by
Matt Koppenheffer
Rating:
We've seen a lot of wild things in the stock market over the past few years. Homebuilders have completely crashed and burned, banks and other financial companies are treading water at best, retail stocks have been punished, and the dollar has been in freefall. And all this while commodities from gold to wheat to oil have been skyrocketing.
But it may get just a bit wilder now that whole scenario has been flipped on its head. Financials have had fitful rallies, the dollar is showing some definite life, and oil has been sliding. While this could lead to a number of different outcomes, on The Motley Fool's CAPS service CAPS blogger RVAspeculator thinks that this turn of events is delivering a sucker punch to some hedge funds and Wall Street trading desks.
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Posted
Jul 16 2008, 07:48 AM
by
Todd Harrison
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Given the daily barrage of bad news about the credit crunch, the mortgage crisis and failing banks, you'd think things would be a lot easier for someone who actually wants to take out a simple home loan.
As a matter of fact, just this morning you read an article about two mortgage companies, one with a name that sounds like what they call your grandmother at her retirement community, the other like some up-and-coming DJ. Fannie Mae and Freddie Mac, could that be it? They ran out of money, apparently, which could make it even harder for you to get a mortgage in the future.
Harder? Is that some kind of cruel joke? How could taking out a mortgage be any more painful than it already is?
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Posted
Jun 02 2008, 04:32 PM
by
Andrew Horowitz
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What took them so long? S&P finally trimmed their outlook on Lehman
Brothers Corp and other key financials today. It has become clear that the problems facing the financial sector is far from over. Financial stocks and the markets in general were hit hard as investors were spooked after S&P announced that
they would be lowering ratings and their outlook on these companies. Is this any surprise to anyone? So now, the long term ratings on these three went from A+ to A and the short term rating went to
A-1. The concerns seem to be focussing in on residential mortgage
loans and residential construction slow downs. Timely, hey? According to the S&P release shown below, “The downgrade primarily
reflects our concern that the pace and extent of earnings improvement
could be considerably more muted than we previously assumed.” And "muted" is codeword for....?
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Posted
May 27 2008, 12:24 PM
by
Douglas McIntyre
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Solar energy may be the wave of energy's future, but companies like Google and Chevron may best start-ups in getting to the benefits. A number of large American companies with tremendous balance sheets are pouring money into solar energy based on the fact that it is becoming more competitive with oil.
According to Bloomberg, "Costs for the technology will fall below coal as soon as 2020, the U.S. government estimates. JPMorgan and Wells Fargo invested last year in the biggest solar plant built in a generation; Chevron and Google are funding research; and Goldman Sachs is seeking land to lease as demand out-paces wind turbines and geothermal."
Given the potential size of the bonanza, the investments should not be surprising, but they could squeeze smaller solar energy companies out of the market. Firms like JA Solar and SunTech bet their entire futures
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Posted
Apr 14 2008, 02:58 PM
by
Douglas McIntyre
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Early indications from companies like Wachovia and General Electric show that the last half of March may have been tougher on bank earnings than Wall Street expects. Bloomberg recently reported that Citigroup, JP Morgan, and Wells Fargo could all miss consensus estimates. But by how much?
A look at the spread of Q1 estimates gives some hint about how far off actual numbers could be compared with investor expectations. At Citigroup, among 15 analysts polled by First Call the average EPS estimate is a loss of $.95. But, the lowest estimate is a loss of $2.24. At JP Morgan, the average figure from fourteen analysts is $.66, but the worst case is a loss of $.11. For Wells Fargo, twenty-three analysts have an average forecast of Q1 EPS at $.57, but the low number is $.45.
The huge discrepancy among the numbers should be troubling to shareholders because recent information would argue that share prices for most banks and brokerages may still be way too high.
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Posted
Mar 24 2008, 10:48 AM
by
Matt Koppenheffer
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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.
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Posted
Mar 20 2008, 12:09 AM
by
Jon Markman
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The big question on investors’ minds this week is whether the market has reached a major bottom following the Federal Reserve’s sensational attempt to rescue troubled brokerage Bear Stearns and slash short-term interest rates. It sure looked that way to many Tuesday after the big stock indexes soared by 4%. But Wednesday not so much, as stocks forfeited three-quarters of their gains.
So here’s the plain facts: You can only get a major bottom in stocks if the impulse to sell has been exhausted and if investors respond to lower prices with a powerful, sustained wave of buying. And the actions this week suggest that neither has occurred. Selling was clearly not exhausted Tuesday because sellers came roaring back Wednesday.
(Update: The market's gain on Thursday shows investors are hope the worst is over. But it hardly proves that stocks are cheap enough.)
The verdict is therefore clear: A major bottom in the market hasn't yet arrived. To understand why, consider what got folks excited Tuesday. The bailout of Bear Stearns might seem positive on the surface but it loses its allure when you stop and ponder the implications of the fact that the fifth-largest brokerage in the nation lost 95% of its value in a few weeks' time. And the three-quarter point cut in interest rates means the Fed believes the economy is in terrible shape. As if to put an exclamation point on this issue, on Wednesday Merrill Lynch, UBS and Lehman Brothers, all of whom had business models with similarities to Bear Stearns, were on the hot seat -- sinking in value by up to 11.5% and closing at lows. Investors thus collectively decided more shoes will drop, and the Fed cannot bail them all out at once.
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Posted
Mar 19 2008, 12:07 AM
by
Matt Koppenheffer
Rating:
If Bear Stearns got a bailout this week, then it's sure news to the company's shareholders. The price that JPMorgan is expected to pay is around 1% of the company's value last year and in the range of 5% of what it was fetching on Friday when the original plan was announced for JPMorgan to loan Fed money to Bear.
So who did get bailed out here? On the top of my list are Bear's creditors. At the end of Bear's most recent fiscal year it had $11.6 billion in unsecured short term debt and another $68.5 of longer term debt on its books -- and that's not to mention the hundreds of billions of other liabilities that the company had. If the super-duo of JPMorgan and the Fed hadn't swooped in those creditors are likely working with bankruptcy courts to sort out what they could recover.
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Posted
Mar 17 2008, 11:00 AM
by
Douglas McIntyre
Rating:
Billionaire Joe Lewis invested in Bear Stearns, buying as much as 10% of the brokerage firm.
Now, he may be out over $1 billion. On Sunday, the Times wrote that Lewis has lost about $800 million on his investment. That was before Bear Stearns accepted a $2 per share offer from JP Morgan.
Lewis's holding company Tavistock Group owns the Isleworth golf course in Windermere, Florida, and has stakes in companies including sporting-goods maker Puma AG, luxury-car maker Bristol Cars Ltd. and Ambrx Inc., a genetics-engineering firm. Tavistock is also developing real estate in Orlando, Florida, and the Bahamas, according to the Sydney Morning Herald.
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