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Banks & Finance Archive

SPECIAL VIDEO! Jeffrey Lin goes to NYC for Largest Tweetup Ever! CNBC Fast Money & OptionMonster Tweetup Special

If you haven’t seen this already! YES it’s all over the web! (I would like to think hehe). It’s the special compilation video I made of my trip to the CNBC Fast Money & OptionMonster Largest Tweetup ever. I blogged about it when I got back but didn’t get to cut a video till a few weeks ago… Sorry forgot to post it here, but it was on http://FINZ.tv right away!

Anyway enjoy! And would looove to have a tweetup elsewhere so just hit me up on twitter!

CNBC’s Rick Santelli leads the trader mortgage revolt. Join his “Chicago Tea Party?”

n68704930659_3935 Vote “YES” on this CNBC poll: http://www.cnbc.com/id/29283701

Then sign up for the Tea Party on Facebook: http://www.facebook.com/home.php#/event.php?eid=68704930659&ref=mf

I’ll be going to the Santelli’s Chicago Tea Party- Will you? Hit me up on twitter if you are!  We owe it to our fellow citizens.

Guest Post: V.I.C. Stock Watchlist for 1/28/2009 by Daytrend of FINZ.tv’s POSSE

**A guest post by Vic Scherer, aka Daytrend, my friend and fellow blogger over at POSSE: FINZ.tv’s Trade Journal. Vic prepares daily scans of market trends, earnings, and technical analysis and narrows it down to the best trade opportunities for the days ahead. Today is a special post because it is once again FED day, where the Federal Reserve will announce interest rate decisions around 2pm EST.  And don’t forget, we’re still in earnings season!**

V.I.C. Stock Watchlist for 1/28/2009

by Daytrend

Wednesday is Fed day.

There are daily setups GALORE in banks, financials, and real estate, many more than usual. Unfortunately, most are in unstable situations with one or two dojis in the previous two days. Further, there are many rising wedges on decreasing volume, and some of these doji-pairs are near or at daily resistance points which could become inflection points if broken.

It is amazing how all this converged with Fed day, simply amazing. I sense that some very good intraday trends will emerge out of this in the next 1-2 days, but I can’t tell which way. And it might depend on the Fed. Also some very good swing trends could emerge.

Departing from my normal practice of placing trends on the blog, tonight will show these setups. However, this is just to illustrate the instability. FAS or FAZ and URE or SRS will be my vehicles of choice, with maybe 1-2 exceptions. If you’re into individual stocks, some of these could produce swing trends worth 10-15%, which might exceed results from the ETFs, but who knows.

WFC: Earnings before market open (BMO). Don’t touch this unless you do it all the time.

BAC: Inflection point at 6.48, could go all “some” way.

PNC, JPM: Watch for breakdown of V-bottom potential. PNC earnings 2/3 BMO, unless it is changed. JPM could be good to 18ish.

FHN: Coiled from hell. Could go either way.

WL: Nice bear flag, good for test of 14. Earnings scheduled for Friday BMO.

NTRS: I don’t trust the reaction to earnings on 1/21 BMO. If fins implode before the 1/21 high is breached, 49 here we come.

CMA: Loving the super-unstable 2-day doji situation at falling MAs on daily, right after earnings on 1/22 BMO. Could be good for a short to 14.50 at least.

STI: Continuation short.

STT: Watch for rollover. Could be good to 15.

GS: Wedging a bit like JPM.

MS: MUCH more bullish than most banks and fins.

PFG: Wedging on decreasing volume.

COF: Free-fall, but could be good for more daytrades (or a squeeze!).

Check for yourself the similar situations in Real Estate stocks.

** Disclosure: At the time of this post the author is flat. **

Guest Post: “Long case for Fifth Third Bancorp” by Ryan Yamada

**Note from Jeffrey: Not seeing much in this market you can hold for more than a couple hours, so haven’t written about any opportunities for investments or longer term trades. Here’s one from my college buddy Ryan Yamada. Ryan’s got a great blog, Sunburnt Sky, on Politics and Macroeconomics. Take a gander. **

LONG CASE FOR FIFTH THIRD BANCORP (FITB) by Ryan Yamada

Note: This is not a rigorous analysis on either the fundamental or technical side. It’s simply an observation based on the price action of other sizable regional banks following events similar to those experienced by Fifth Third Bancorp.

Introduction:

Fifth Third Bancorp (NASDAQ:FITB) this last week is a regional bank headquartered in Cincinnati, OH, with about $67.3 bn in assets, and $41.1 bn in deposits, according to the FDIC as of Oct 28, 2008 (Thursday). I compared the figures with the June 30, 2008 report from FDIC and they are comparable: assets: $67.3 bn; liabilities: 61.8 bn; deposits: $41.6 bn; equity capital: $5.43 bn. Stock prices, incidentally, are also comparable (June 30: $10.18; Oct 28: $10.72) for the two dates.

The last few weeks have been nuts for the entire market. But in particular, regional banks are seeing a lot of volatility, and increasingly, sharp increases in share price.

SunTrust: assets: 171.5 bn, liabilities: 152.2 bn, deposits: 120.9bn, equity: 19.3 bn

PNC: assets: 128.3 bn; liabilities: 116.3 bn; Equity capital: 12.1 bn

Price increases are event driven:

Here are a few events that dramatically changed the outlook for FITB:

Aug 1: First Priority Bank is closed by the FDIC – SunTrust receives $254m in deposits (at zero premium) and purchases an additional $36m in cash-equivalent assets (total of $290m).

Sep 30: IRS rules that acquirers of weak banks can apply “losses on loans and bad debts” without limits.

Oct 24: PNC Financial Services Group Inc. announces acquisition of National City Corporation for $5.6 bn, increasing its deposit base by $90 bn and potentially earning offsets on $5.1 bn in taxes from loan losses associated with National City.

Oct 26: FITB announces that it has applied for capital from the Treasury’s Capital Purchase Program (CPP).

Oct 27, 2:28pm, Reuters: Fitch announces a downgrade of Issuer Default Ratings on municipal bonds to A from A+; Fitch had downgraded the IDRs of FITB to A+ and F1 in June 18, but these downgrades were erroneously not passed through to the ratings of muni bonds supported by FITB. In other words, some of them were downgraded from AA- to A. (http://www.reuters.com/article/bondsNews/idUSWNA768820081027)

Oct 28, 12:20 pm: FITB to accept $3.45 bn as part of the Treasury’s CPP. Treasury receives senior preferred securities with 5% dividend for first 5 years and 9% thereafter. Shares are callable at par after three years. 10-year warrants on common stock on 15 percent of the preferred stock investment ).

Oct 29., 2:17 pm: Ladenburg Thalmann analyst Richard Bove cuts outlook on concerns about poor lending habits.

2008 estimate: 16 cents/sh (from 53 cents/sh)

2009 estimate: 94 cents/sh (from $1.30/sh)

Oct 31, 6:21 pm: FITB to accept $227m in deposits and $36 in assets from the FDIC, receiver for Freedom Bank. The additional deposits from Freedom Bank give them about a 59% larger deposit base in the Bradenton-Sarasota-Venice Metropolitan Statistical Area.

Important dates coming up:

Nov 4: Presidential election

Nov. 14: Companies must notify Treasury by 5 p.m. EST if they want to apply for the Capital Purchase Program.

Let’s look at the following events and see what similar events for other banks did for their share prices:

1. Capital Purchase Program funds
2. Acquiring deposits from FDIC-seized banks
3. Acquisition of weaker rivals with sizable deposit banks and losses that can be credited to acquirer’s future capital gains.

1. Capital Purchase Program Funds

FITB announced on the 28th that it would receive $3.45 bn in funds from the US Treasury’s Capital Purchase Program (CPP). Under CPP, the Treasury receives senior preferred securities with 5% dividend for first 5 years and 9% thereafter. Shares are callable at par after three years. Furthermore, the Treasury receives 10-year warrants on common stock on 15 percent of the preferred stock investment .

The new funds give FITB options above and beyond their relatively bleak choices prior to the announcement.

According to CNN, Fifth Third had announced in June a capital plan that included raising its capital ratio targets, including a Tier 1 ratio of 8-9 percent. The recent Fed infusion would push Tier 1 to 11.5 percent. FITB’s Chairman/President/CEO Kevin Kabat also indicated that they may postpone plans floated in June to sell “non-core assets”. In other words, the Treasury funds will help them avoid trying to unload assets at fire sale prices.

There was an immediate impact on share prices. FITB was off session lows of $8.15 and was trading at 8.50 when news broke – the stock price jumped 13.5% to $9.65, and then followed the broader market’s large gains to close at $10.76, up 26.5% from levels prior to the news. Tuesday’s price rise translated into a 1.3 billion increase in shareholder equity. The government warrants are callable in 10 years, so their immediate impact is non-dilutive. The preferred shares, while receiving a dividend, are non-convertible, unlike FITB’s June issue of $1.1 bn in convertible preferred stock.

The dividend due to the government on the infusion is about $172.5 m per year. To pay off just this dividend, FITB can either make loans of $2.88 bn ~6%. Subtracting required reserves of $288 m, this leaves $3.16 billion for acquisitions and loan loss reserves. Alternatively, FITB may try to acquire weaker competitors at discounted prices, in the model of PNC’s takeover of National City Corporation at a discount.

Note that this infusion represents a 65% gain on FITB’s asset base, compared with a 28.9% gain on PNC’s asset base. Consequently, I would expect an overall move from 1-2.25 times the size of the move from PNC’s gains.

As a rough estimate, let’s take the $3.16 bn, and subtract the amount by which stock equity has already increased ($1.3 bn). This leaves $1.86 bn. Even if 50% of that goes to loan loss reserves (and is used for that purpose), that still leaves $930 million. And, assuming that FITB finds no better use for it than to sit in a digital safe somewhere, that still represents an increase of 14.8% in net equity (based on Friday’s closing market cap of $6.27 bn). So, very conservatively, I can estimate an additional appreciation of +15%

(Summary: +15-66% because of additional equity capital)

2. Acquiring deposits from FDIC-seized banks

I calculated the impact of the additional deposits relative to existing deposits and assets, and how it could affect net assets (in the unrealistic event that FITB chose to loan out all the cash).

Freedom Bank FITB pct chg 10x ($mm) asset growth potential ($mm)
Deposits ($mm) 254 41604 0.70% 2900 4.13%
assets purchased/ total assets ($mm) 36 67272
FDIC cost ($mm) 80-104

For comparison, I look at a similar action taken in June when Suntrust took over First Priorty bank, also located in Florida.

First Priority Suntrust pct chg 10x ($mm) asset growth potential ($mm)
Deposits ($mm) 227 119800 0.22% 2690 1.52%
assets purchased/ total assets ($mm) 42 177400
FDIC cost ($mm) 72

How did Suntrust perform after that? The chart below illustrates it best.

In terms of raw numbers, it looks like STI appreciated 15.2% over the week prior to the announcement, a premium of 6.4% over XLF (+8.8%) and 13.1% over the S&P500 (+2.1%). On Monday, after the announcement, STI closed for a gain of +1.9%, outperforming XLF and S&P 500 by 2.3% and 2.9%, respectively. Over the week after the announcement, it rose by 8.0%, a premium of 4% over XLF (+4.0%) and 3.5% over the S&P 500 (+4.5%) over the next week.

It’s not to say that all of the Suntrust movement was due to the deposit acquisitions, but a search of news stories indicate that most other important events happened outside that time period. (For example, a disappointing Q2 report happened on Jul 22, while the announcement that the dividend would not be cut happened on Aug 12. (The dividend was subsequently cut on Oct 27.) So, I would argue that at least a large portion of the price action, relative to the overall markets, was in response to this particular piece of news about the acquired deposits. (If talk surrounding the other news did affect the price action this day, then it would’ve affected it negatively, and the analysis would price in even greater gains from the deposit acquisition.)

A comparison to the week’s actions prior to the FDIC announcement for FITB is more complicated, especially since so much news happened. Here’s a chart with some of the important news events highlighted.

During the last week, FITB rose by 28.1%, while XLF rose 14.1% and the S&P by 14%. However, looking at just the action over the last three days, FITB rose only +0.8%, while XLF rose +3% and the S&P 500 fell 2.2%. So while FITB performed 3% better than the S&P over those last few days, it lagged XLF by 2.2%.

I’ll also note that FITB experienced a 6% increase in the last 15 minutes of trading, a full 2% more than XLF and 4% more than the S&P 500. There was a slight pullback after-hours, then another spike after the announcement.

Note that the asset growth potential supplied by the additional deposits is 3 times that enjoyed by Suntrust on a percentage basis. FITB is also taking the deposits at a slight premium (1.16%), while Suntrust took them without one.

Using the STI price action as a guide, we might reasonably expect FITB to outperform XLF by 4% and the S&P 500 by 3.5% over the next week. If I adjust for the last-minute spike, FITB could be expected to outperform XLF by about 2% and lag the S&P 500 by around 0.5%.

(Estimate contribution: +2% rel. XLF; -0.5% rel. SPY)

  1. Acquisition of weaker rivals with sizable deposit banks and losses that can be credited to acquirer’s future capital gains.

As mentioned above, Suntrust probably has at least $3.16 billion of the Treasury CPP funds for acquisitions and loan loss reserves, and potentially more from its recent increase in share equity, its issue of preferred securities, and its spare cash on hand. FITB may try to acquire weaker competitors at discounted prices, in the model of PNC’s takeover of National City Corporation at a discount.

That’s why FITB has the potential for a short-term trade on the long side. Yes, long-term the new deposits and CPP funds will help them make more loans. But in the near-term, it gives them ammunition to take over their weaker neighbors, particularly banks that have (1) sizable deposits, (2) don’t yet have access to CPP funds, and (3) are in trouble because of bad loans. National City Corporation had all three properties, and since the present environment favors the shareholders of the acquirer rather than the target, this spells short-term appreciation for FITB shares.

Note that PNC jumped 3.5% on Friday, Oct 24, while XLF fell 6.5% and the S&P fell 3.5%. The NCC acquisition allowed PNC to outperform by 10% the XLF and 7% the S&P 500. Since the deal was announced, PNC has essentially traced both XLF (0%) and slightly outperformed the S&P 500 (+3%). It is up in nominal terms 17% since the announcement.

It’s difficult for me to estimate how much of the gain was due to the Treasury CPP funds, and how much in response to the acquisition of NCC. I will estimate, as I did above, that the increase in Treasury funds led to an increase in NAV. PNC has assets of $128.3bn; liabilities of $116.3bn, and therefore an equity capital of $12.1 bn. Applying a similar sort of analysis as before, PNC will need to pay about $175m in interest on the preferred shares to the Treasury each year for the next five years. Assuming it can make new loans of about $2.9bn, it needs to set aside $292m for reserves, leaving it with $3.2 bn in additional equity. Applying 50% of that to loan loss reserves, and 50% to shareholder equity, I come up with an increase in equity capital of 26.5%.

PNC’s share price did not jump 26.5%, or anywhere near that amount. The combined value placed by the market is 17%. As a guide, then, only 2/3 of the equity capital increase has been priced in, and none of the increase from what is widely being considered a good acquisition deal for PNC.

Since I don’t know how much of the price increase can be accounted for by each component, I am going to say that the short-term gains from BOTH the CPP funds AND the acquisition of a weaker rival with the three criteria listed above translates into a gain roughly equal to 2/3 of the initial equity capital increase. The market is either pricing in an inability for the new banks to make new loans, keep existing loans current, or successfully acquire rivals at a discount, or otherwise have greater difficulty financing their loans than I have assumed here.

Let me further build in a margin of error by saying that FITB may find a deal only about 60% as good as the NCC deal. This translates into an anticipated increase in FITB of 60% x 66% = 40% of the increase in equity capital supplied by CPP.

This still means that when FITB announces its 60%-as-good-as-PNC’s-NCC deal, FITB’s combined appreciation over its price prior to the CPP announcement should be an increase of 40% from its Tuesday noon price of 8.50, taking it to 11.90. This represents a $1.25 or 11.7% premium over Friday’s close.

Political Risk?

The PNC-NCC deal has caused some uproar in the halls of Congress, so there is some political risk that stricter guidelines might be placed on CPP funds. I’m not sure how difficult it would be to do that retroactively, however. Congress might push through something, but that would be after the Nov 4 elections, and likely after the deadline of Nov 14 for banks to apply to CPP anyway. Based on this, I would assume that retroactive restrictions on CPP funds would be difficult, if not impossible. In the unlikely event that greater restrictions could be made on subsequent tranches of the $700 bn, this would affect new applicants, and therefore put FITB and other early recipients at a relative advantage.

Let’s summarize:

Short-term gain from CPP+acquisition: +11.7%

Short-term gain from acquired deposits: -0.5%

Combined with an expected bump Monday of about -0.5% from the news of new deposits combined with the last-minute rally, and I would anticipate at minimum 11% upside for FITB, corresponding to a share price of $11.93 in the very near term, assuming no market appreciation or depreciation.

Naturally, the price targets increase for broader market gains, and decrease for market losses. Since I anticipate modest losses or gains, I will play it safe and enter into a position at prices below $11.00 and will likely sell out following announcement of an acquisition by FITB.

I would also hurry. Barron’s mentioned FITB in a recent article, and while I would hardly consider buying on news from Barron’s, it will mean that more people will be looking at this stock and coming to similar conclusions.

Disclosure: none, though author intends to be long FITB.

**Disclosure: No positions.**

Bloomberg: Subprime Collapse to Global Financial Meltdown: Timeline

Where were you on…

Subprime Collapse to Global Financial Meltdown: Timeline
2008-10-13 14:08:40.950 GMT

By Chris Dolmetsch
Oct. 13 (Bloomberg) — The following is a timeline of events
that led to the current global financial crisis.

March 5, 2007: HSBC Holdings Plc, Europe’s biggest bank by
market value, says the U.S. subprime market is “unstable” and
now in a “downturn,” making it the main drag on company
earnings.

March 29, 2007: HSBC Chairman Stephen Green says the U.S.
subprime mortgage services division will be “run down
significantly” as the bank tries to recover from loan losses.

April 2, 2007: New Century Financial Corp., which
specialized in loans to people with poor credit, files
for bankruptcy protection after being overwhelmed by customer
defaults.

July 17, 2007: Investors in two Bear Stearns Cos. hedge
funds that invested in collateralized debt obligations backed by
subprime mortgage loans are told there is no value left in the
funds, wiping out $1.6 billion originally invested.

July 19, 2007: Federal Reserve Chairman Ben S. Bernanke
tells the U.S. Senate’s Banking Committee that there may be as
much as $100 billion in losses associated with subprime mortgage
products.

Aug. 9, 2007: BNP Paribas SA, France’s biggest bank,
halts withdrawals from three investment funds because it can’t
“fairly” value their holdings, as concern over U.S. subprime
mortgage losses roils credit markets.

Aug. 22, 2007: Countrywide Financial Corp., the biggest U.S.
mortgage lender, sells $2 billion of preferred stock to Bank of
America Corp., the biggest U.S. bank by market value, to bolster
its finances.

Sept. 14, 2007: Northern Rock Plc says the Bank of England
agreed to provide emergency funds to ease a “severe liquidity
squeeze” sparked by U.S. subprime mortgage defaults following
the first run on a British bank in more than a century.

Oct. 9, 2007: U.S. stock indexes rally to records for the
second time in a month after minutes from the Fed allayed
investor concern that the U.S. economy is heading for a
recession. The Dow Jones Industrial Average and the Standard &
Poor’s 500 Index set all-time highs, with the Dow closing at
14,164.53.

Oct. 30, 2007: Merrill Lynch & Co. ousts Stan O’Neal as
chairman and chief executive officer after reporting a $2.24
billion loss, six times bigger than a forecast the firm offered
just three weeks earlier.

Nov. 4, 2007: Citigroup Inc. CEO Charles “Chuck” Prince,
who took over in 2003, steps down after the largest U.S. bank by
assets increased its estimate for mortgage-related writedowns.

Jan. 11, 2008: Bank of America, the biggest U.S. bank by
market value, agrees to buy Countrywide for about $4 billion.

March 14, 2008: Bear Stearns Cos. gets emergency funding
from the U.S. Federal Reserve and JPMorgan Chase & Co. as a run
on the bank depletes its cash reserves in three days.

March 16, 2008: JPMorgan Chase agrees to buy Bear Stearns
for 7 percent of its market value in a sale brokered by the Fed
and the U.S. Treasury.

April 1, 2008: Lehman Brothers Holdings Inc., the fourth-
largest U.S. securities firm, raises $4 billion from a stock sale
to quell speculation it’s short of capital.

April 9, 2008: Washington Mutual Inc. rejected an offer from
JPMorgan Chase to buy it for as much as $8 a share, or $7
billion, before announcing it received a $7 billion capital
infusion from a group led by TPG Inc., the Wall Street Journal
reports, citing people familiar with the situation.

April 28, 2008: The U.S. Internal Revenue Service starts
distributing tax rebates electronically as part of a $168 billion
economic stimulus plan.

May 31, 2008: Bear Stearns ceases to exist as the
acquisition by JPMorgan is completed.

June 20, 2008: The Dow closes below 12,000.

July 11, 2008: IndyMac Bancorp Inc., the second-biggest
independent U.S. mortgage lender, is seized by federal regulators
after a run by depositors depleted its cash.

July 31, 2008: Nationwide Building Society, Britain’s
fourth-biggest mortgage lender, says U.K. house prices declined
the most in almost two decades in July and consumer confidence
fell to a record low as the economy edged closer to a recession.

Aug. 31, 2008: Commerzbank AG agrees to buy Allianz SE’s
Dresdner Bank for 9.8 billion euros in Germany’s biggest banking
takeover in three years.

Sept. 7, 2008: The U.S. government seizes control of Fannie
Mae and Freddie Mac, the largest U.S. mortgage-finance companies.

Sept. 15, 2008: Lehman Brothers Holdings Inc. files the
largest bankruptcy in history, and Bank of America agrees to
acquire Merrill Lynch for about $50 billion.

Sept. 16, 2008: American International Group Inc. accepts an
$85 billion loan from the Fed to avert the worst financial
collapse in history, and the government takes over the company.

Sept. 18, 2008: Lloyds TSB Group Plc, the U.K.’s biggest
provider of checking accounts, agrees to buy HBOS Plc, Britain’s
largest mortgage lender, for 10.4 billion pounds.

Sept. 21, 2008: Goldman Sachs Group Inc. and Morgan Stanley
receive approval to become commercial banks regulated by the Fed
as tight credit markets forced Wall Street’s two remaining
independent investment banks to widen their sources of funding.

Sept. 23, 2008: Goldman Sachs says it will raise at least
$7.5 billion from Warren Buffett’s Berkshire Hathaway Inc. and
public investors in a bid to quell concerns that pushed up the
Wall Street firm’s borrowing costs and hurt its stock.

Sept. 26, 2008: The U.S. Securities and Exchange Commission
ends a program that monitored securities firms’ capital after
Morgan Stanley and Goldman Sachs, the only companies remaining
under its jurisdiction, became banks overseen by the Fed.

Sept. 26, 2008: The SEC’s inspector general releases a
report asserting that the agency failed in overseeing Bear
Stearns because it knew the firm had “high leverage” and was
too concentrated in mortgage securities before its forced sale to
JPMorgan Chase & Co.

Sept. 26, 2008: Washington Mutual Inc. is seized by
government regulators and its branches and assets sold to
JPMorgan Chase in the biggest U.S. bank failure in history.

Sept. 27, 2008: Washington Mutual files for bankruptcy
protection.

Sept. 28, 2008: Fortis, the largest Belgian financial-
services firm, receives an 11.2 billion-euro ($16.3 billion)
rescue from Belgium, the Netherlands and Luxembourg after
investor confidence in the bank evaporates.

Sept. 29, 2008: The House of Representatives rejects a $700
billion plan to rescue the U.S. financial system, sending the Dow
Jones Industrial Average down 778 points, its biggest point drop
ever. Citigroup agrees to acquire the banking operations of
Wachovia Corp. for about $2.16 billion after shares of the North
Carolina lender collapsed under the weight of overdue mortgages.
Bradford & Bingley Plc, the U.K.’s biggest lender to landlords,
is seized by the government. The Dow closes below 11,000.

Sept. 30, 2008: Dexia SA, the world’s biggest lender to
local governments, gets a 6.4 billion-euro state-backed rescue as
a worsening financial crisis forces policy makers across Europe
to aid ailing banks. Ireland says it will guarantee its banks’
deposits and debts for two years.

Oct. 1, 2008: The U.S. Senate approves a revised version of
the rescue plan that was refashioned to entice enough votes for
passage.

Oct. 3, 2008: The House passes the revised version of the
rescue plan. Wells Fargo & Co., the biggest U.S. bank on the West
Coast, agrees to buy all of Wachovia for about $15.1 billion,
trumping Citigroup’s government-assisted offer. U.S. President
George W. Bush signs the rescue plan into law.

Oct. 5, 2008: BNP Paribas SA, France’s biggest bank, will
take control of Fortis’s units in Belgium and Luxembourg after an
earlier government rescue failed to ensure the company’s
stability as the global credit crisis worsened.

Oct. 6, 2008: The Fed says it will double its auctions of
cash to banks to as much as $900 billion and is considering
further steps to unfreeze short-term lending markets as the
credit crunch deepens. The German government and the country’s
banks and insurers agreed on a 50 billion euro ($68 billion)
rescue package for commercial property lender Hypo Real Estate
Holding AG after an earlier bailout faltered. The Dow Jones
Industrial Average falls below 10,000 for the first time in four
years.

Oct. 9, 2008: Citigroup walks away from its attempt to buy
Wachovia, handing victory to Wells Fargo. The Dow Jones falls
below 9,000 for the first time in five years and briefly dips
below 8,000.

For Related News:
For more on the economy: ECO <GO>.
For top stories on the financial crisis EXTRA <GO>

–Editors: Steve Dickson, Mark Schoifet.

To contact the reporter on this story:
Chris Dolmetsch in New York at +1-212-617-8969 or
cdolmetsch@bloomberg.net.

To contact the editor responsible for this story:
Mark Schoifet at +1-212-617-4691 or
mschoifet@bloomberg.net.

** Disclosure: no positions in the stocks mentioned. **

Historic Day Bouncers

“Historic day” definitely refers to the global coordinated interest rate cut by the U.S., England, Europe, and China- the four most influential economies of our day.  I was joking on my Twitter feed how exciting it was that China joined the “Allied Forces.” Yeah, the rate cuts probably took the world a step back from the cliff of a worldwide deep recession, but the positive benefits of the cuts, if any, probably won’t be felt for months and months.  What mattered more for me today, and probably for those who monitor their investment accounts closely, it was just good to have a day where we weren’t in freefall.  Down 200 on the DOW is never a happy day, especially working off a DOW 9450 base rather than a DOW 13000.  Despite the last hour selloff, there was sustained buying for the later half of the day after the initial selloff.  That was encouraging. People weren’t just letting things free fall anymore.  A lot of stocks were actually up today- stocks that haven’t seen the (green) light of day for quite a while now.  Many of these have been blown back to levels of 2, 3, or more years ago where there was sustained buying interest, so maybe those acted as temporary support as well.

So, I grabbed a stock screen off of FinViz.com (the coolest free financial website) of the stocks that were up today.  These might indicate where some buying interest are, and where long term holders have felt the stocks have gotten back to prices where they’d buy them.  Also, a lot of these stocks were held by liquidating hedge funds and, at least for today, they’ve stopped liquidating.  Doesn’t mean they, or their copycat funds, won’t.  So there’ll likely be a lot of resistance (sellers selling into strength).  But after the bounce today and the sellers do their thing, if these levels can hold I’ll dip into a few of these.

About half the list the screen turned up were basic materials stocks (probably another interest rate cut = lower dollar = higher commodities).  A lot of the basic material stocks were the gold miners, f.y.i.

Screen: Market Cap Over $300mln, Relative Volume over 1.5x average

No. Ticker Company Sector Industry Country Market Cap P/E Price Change Volume
1 ABX Barrick Gold Corporation Basic Materials Gold Canada 31.13B 16.77 35.71 17.08% 29,922,500
2 AEM Agnico-Eagle Mines Ltd. Basic Materials Gold Canada 7.26B 63.14 50.51 12.97% 7,672,300
3 ANR Alpha Natural Resources Inc. Basic Materials Industrial Metals & Minerals USA 2.79B 24.01 39.62 10.79% 8,357,600
4 CAM Cameron International Corporation Basic Materials Oil & Gas Equipment & Services USA 6.21B 11.94 28.54 8.11% 11,076,900
5 AU AngloGold Ashanti Ltd. Basic Materials Gold South Africa 5.56B - 19.71 19.53% 3,736,000
6 AUY Yamana Gold, Inc. Basic Materials Gold Canada 5.25B 24.23 7.51 18.83% 34,883,100
7 CF CF Industries Holdings, Inc. Basic Materials Agricultural Chemicals USA 3.24B 4.91 57.31 11.52% 9,480,800
8 CNX CONSOL Energy Inc. Basic Materials Industrial Metals & Minerals USA 6.77B 38.49 36.95 11.26% 11,352,900
9 FCX Freeport-McMoRan Copper & Gold Inc. Basic Materials Copper USA 16.36B 5.45 42.60 10.11% 33,631,000
10 GBN Great Basin Gold Ltd. Basic Materials Nonmetallic Mineral Mining Canada 340.85M - 1.61 11.03% 1,624,300
11 GFI Gold Fields Ltd. Basic Materials Gold South Africa 5.84B 10.16 8.94 32.05% 14,869,400
12 GG Goldcorp Inc. Basic Materials Gold Canada 22.10B 45.62 31.02 19.72% 30,307,500
13 GOLD Randgold Resources Ltd. Basic Materials Gold Channel Islands 3.17B 74.29 41.60 22.79% 2,454,100
14 HMY Harmony Gold Mining Co. Ltd. Basic Materials Gold South Africa 4.29B - 10.66 34.77% 8,845,900
15 HSVLY HIGHVELD STEEL ADR Basic Materials Industrial Metals & Minerals South Africa 1.19B 8.65 12.02 9.57% 35,700
16 KGC Kinross Gold Corp. Basic Materials Gold Canada 9.97B 31.76 16.20 18.94% 19,087,400
17 KWK Quicksilver Resources Inc. Basic Materials Independent Oil & Gas USA 1.95B 3.96 12.29 8.76% 6,945,500
18 LIHR Lihir Gold Ltd. Basic Materials Gold Papua New Guinea 34.77B - 18.30 10.17% 1,753,200
19 MON Monsanto Co. Basic Materials Agricultural Chemicals USA 44.79B 23.88 81.44 9.79% 27,036,900
20 NEM Newmont Mining Corp. Basic Materials Gold USA 16.95B 533.29 37.33 14.83% 16,291,200
21 POT Potash Corp. of Saskatchewan, Inc. Basic Materials Agricultural Chemicals Canada 30.07B 15.60 98.60 13.52% 32,992,400
22 PXP Plains Exploration & Production Company Basic Materials Independent Oil & Gas USA 2.56B 5.24 23.75 9.45% 8,448,400
23 RGLD Royal Gold Inc. Basic Materials Gold USA 1.35B 59.30 39.73 16.00% 1,218,000
24 RRC Range Resources Corp. Basic Materials Independent Oil & Gas USA 4.75B 78.56 30.64 9.27% 8,418,600
25 SD SandRidge Energy, Inc. Basic Materials Oil & Gas Drilling & Exploration USA 2.31B - 13.97 11.40% 10,866,200
26 SSRI Silver Standard Resources Inc. Basic Materials Silver Canada 835.66M - 13.33 10.53% 1,579,300
27 WLT Walter Industries Inc. Basic Materials Industrial Metals & Minerals USA 2.02B 16.63 36.26 10.62% 5,429,000
28 XCO EXCO Resources Inc. Basic Materials Independent Oil & Gas USA 1.74B - 8.26 7.97% 8,203,600
29 SYT Syngenta AG Basic Materials Agricultural Chemicals Switzerland 17.06B 12.17 36.02 7.14% 2,604,100
30 SPW SPX Corporation Consumer Goods Appliances USA 2.61B 7.57 48.13 7.72% 4,776,500
31 FBN Furniture Brands International Inc. Consumer Goods Home Furnishings & Fixtures USA 459.11M - 9.41 8.41% 1,899,900
32 GGP General Growth Properties Inc. Financial REIT – Retail USA 1.45B 21.60 5.40 20.00% 17,753,200
33 CBL CBL & Associates Properties Inc. Financial REIT – Retail USA 717.03M 22.06 10.81 19.84% 4,246,600
34 AOC Aon Corporation Financial Accident & Health Insurance USA 11.78B 20.10 42.42 8.27% 5,080,100
35 STT State Street Corp. Financial Regional – Northeast Banks USA 18.82B 10.43 43.60 9.14% 14,257,900
36 SLG SL Green Realty Corp. Financial REIT – Retail USA 2.85B 21.24 49.07 8.25% 1,763,200
37 RBS Royal Bank of Scotland Group plc Financial Foreign Money Center Banks United Kingdom 18.54B - 1.85 24.16% 14,986,300
38 XIDE Exide Technologies Industrial Goods Industrial Electrical Equipment USA 384.13M 7.61 5.10 7.37% 3,115,100
39 FLS Flowserve Corp. Industrial Goods Diversified Machinery USA 3.66B 9.93 63.84 12.12% 3,258,400
40 MELI Mercadolibre, Inc. Services Business Services Argentina 853.91M 77.12 19.28 8.50% 1,748,800
41 IRM Iron Mountain Inc. Services Business Services USA 5.51B 37.44 27.33 11.37% 2,735,600
42 DISH Dish Network Corp. Services CATV Systems USA 8.19B 8.54 18.19 7.44% 7,346,700
43 YRCW YRC Worldwide Inc. Services Trucking USA 362.01M - 6.32 26.91% 7,084,900
44 SYNA Synaptics Inc. Technology Business Software & Services USA 801.19M 31.26 23.76 10.05% 2,927,800
45 RHT Red Hat Inc. Technology Application Software USA 2.80B 38.55 14.65 8.76% 3,889,700
46 NTCT NetScout Systems Inc. Technology Business Software & Services USA 376.22M - 9.60 21.21% 745,100
47 PCLN Priceline.com Inc. Technology Internet Service Providers USA 2.47B 14.43 63.51 10.74% 3,897,600
48 PEGA Pegasystems Inc. Technology Business Software & Services USA 398.94M 39.25 10.99 7.43% 178,600
49 WFR MEMC Electronic Materials Inc. Technology Semiconductor – Integrated Circuits USA 5.19B 8.07 22.99 11.12% 10,347,800
50 DASTY Dassault Systemes SA Technology Technical & System Software France 5.35B 19.01 45.25 8.93% 54,400
51 CLS Celestica Inc. Technology Printed Circuit Boards Canada 1.20B 10.92 5.24 8.94% 3,341,700
52 CNQR Concur Technologies, Inc. Technology Technical & System Software USA 1.56B 92.88 31.58 7.78% 1,970,100
53 ARBA Ariba Inc. Technology Internet Software & Services USA 942.45M - 10.96 8.51% 2,530,800
54 ATML Atmel Corp. Technology Semiconductor – Broad Line USA 1.84B 103.00 4.12 8.71% 7,950,700
55 CBR CIBER, Inc. Technology Information Technology Services USA 337.29M 11.26 5.63 7.85% 666,500
56 CEL Cellcom Israel Ltd. Technology Wireless Communications Israel 2.97B 10.86 30.40 7.61% 414,700
57 LDK LDK Solar Co.Ltd. Technology Diversified Electronics China 2.29B 8.49 21.48 11.18% 4,630,500
58 FORM FormFactor Inc. Technology Semiconductor – Broad Line USA 816.85M - 16.65 12.27% 1,462,600
59 BRKS Brooks Automation Inc. Technology Semiconductor Equipment & Materials USA 464.21M - 7.30 7.20% 1,201,400
60 AYE Allegheny Energy Inc. Utilities Electric Utilities USA 5.08B 9.90 30.10 8.63% 7,126,500

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**Disclosure: no positions in stocks mentioned.**

might GE be the best infrastructure investment thesis with a financial kicker

buyitcheap on seekingalpha asked on “Investing in Infrastructure” (a.k.a. “Infrastructure: Power Grids and Bridges” article I posted on July 31, 2008)

Any thoughts on ETFs or other vehicle that might be available or are individual companies the only play?

Actually…this might be a crazy idea but… how about GE? More and more of their portfolio is geared towards global industrial and infrastructure needs. Oil, petrochemical, aerospace, engines, railroad components. Restructuring to spin off it’s legacy, dead-weight consumer appliances businesses. They have so many businesses that they’re almost like a ETF. GE’s finance arm took down the rest of the company, the good infrastructure parts of the company. But for those who are looking for the recovery and best long-term gain in the financials, why not GE- with a finance division AND great infrastructure?

Weird idea not being mentioned…but love to hear pros and cons….

Evidence there’s always a Bull Market somewhere, even debacles like housing

Even as RealtyTrac reported a 121% increase in foreclosures year-over-year to 739,714 properties, not all in the residential real estate market is bad. AvalonBay Communities Inc. (AVB) and Sam Zell’s Equity Residential (EQR) both reported strong quarterly results with AvalonBay raising full year guidance. This reminds us that there’s always a bull market somewhere, even in implosions like the U.S. housing market. This time it’s in the apartment owner space in certain locations.

Referenced Article: Reuters-Location key as apartment owners post strong results

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Feeling Very Violated as MDR Gets Dropped Below $49

Yeah, I don’t usually make venting posts, but seriously, who the heck is relentlessly selling MDR at the open? Took it straight from the open above $54 down to $49!!! Someone’s dumping MDR like it has subprime exposure! Are they selling it because oil is down lately? HAL has much more oil & gas exposure and it’s not even down this ridiculously much. Or, are people just selling anything non-financials so they can jump into financials…AFTER this 50% move in the XLF?!?! Are so many people seriously trying to get into the financials or short cover the financials that they’d dump the actual good stocks…the stocks with earnings? Why would you sell the companies that are making money everyday for companies that are losing money everyday… Are the banks out of the woods after this earnings report? HEEEEECK no. Just for the moment people took the prices down to where THEY WILL BE at the end of the year as housing keeps getting whacked…just shouldn’t be there now. It’s like selling a beemer to buy a tricycle just because the tricycle pumped up its flat wheels. This is wrong, so wrong. The sharpest snapbacks occur in bear markets. Whoever’s jumping into financials here are gonna be pantsed like nobody’s business. If you think you have too much money, donate it to charity. Throwing it away on picking financials bottoms.

**Disclosure: I am long MDR and bought MDR Feb Calls as MDR dropped below $49**

Yikes! but Duh?: Citi Chairman Bischoff says House prices could fall for two years (Reuters)

The bounce by the financials from the depths of hell last week was definitely a sigh of relief. The “less abysmal” earnings from first Wells Fargo (WFC) [that stagecoach really can run!], JP Morgan (JPM), and US Bancorp (USB) told us the sweeping assumption that all banks are gonners was premature. Well, premature at least for now. Regardless of which side of the argument talking heads take on picking the bottom in financials, most (if not all) would agree that housing needs to bottom if the banks want to be out of the woods. When will housing bottom? Citigroup Chairman Win Bischoff offers his opinion in this Reuters report. Remember, however, Citigroup hasn’t exactly been on the right side of the trade on this whole housing crisis, as made evident by it’s shares dropping from the $50’s to being a teenager.

“LONDON (Reuters) – Citigroup chairman Win Bischoff has warned that house prices in Britain and the United States are likely to keep falling for another two years.

The chairman of one of the world’s most powerful banks told the BBC in an interview that he expects it will take two years for the markets to stabilise.

He also said he expected the credit crunch could continue through until 2009.

Bischoff told the BBC that there would be redundancies at the bank, which employs 12,000 people in Britain, and warned that some of them would be compulsory.

No further details were released of the interview which is due to be broadcast later on Saturday on the BBC News Channel (Reporting by Paul Majendie, Editing by Jon Boyle)”

Full Article: House prices could fall for two years


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