Filed under: Newsletters, Commodities, Stocks to Buy

This article is part of a 20 article special report on “Metals, miners and money“.

In his Commodity Trend Alert, Eric Roseman believes a short-term correction is “highly likely.” But the resource expert still considers ASA Limited (NYSE: ASA) a “terrific bargain.”

He explains, “For value investors, a great buying opportunity in commodities looms this fall. The fundamentals for commodities remain extremely bullish as we progress into 2008. A weaker U.S. dollar, lower interest rates, and supply deficits across a spectrum of raw materials promises to snowball into another formidable rally for commodities.”

However, he cautions, this buying opportunity will come after a “period of digestion.” He observes, “Commodities indices have come a long way over the last two months following the mid-August market low. Heavy investor speculation in many raw materials — namely oil, gold, and wheat — implies a short-term correction is highly likely.”

The advisor notes, “Banks, hedge funds, individual investors, and sovereign wealth funds are all on the same side of the dollar bear market ship; historically, too many bears on the same side of a trade means someone will lose their shirt — and soon.”

Continue reading Top resource ideas: ASA Ltd. (ASA) offers gold at a discount

Permalink | Email this | Comments

Share This

Even the discount brokers are not safe. After write-downs from mortgage-related securities burned a brush fire through commercial and investment bank balance sheets, they hit E*Trade (NASDAQ:ETFC) yesterday. Shares in the broker dropped as much as 14% after hours, and fell through the company’s 52-week low of $8.02. The stock has lost two-thirds of its value since June.

The Wall Street Journal wrote that “the discount online brokerage said its total exposure to collateralized debt obligations of asset-backed securities and second-lien securities at Sept. 30 was about $450 million, including about $50 million of “AAA” rated asset-backed collateralized debt obligations, or CDOs, that were downgraded to junk status.” This will lead to write-downs in the fourth quarter. The company also suspended its guidance.

The announcement raises that question of just how many financial institutions may have mortgage-securities related problems. It has been fair easy to see why commercial and investment banking houses would face the issues, They invest in pools of securities as a matter of course.

It is still not clear whether other discount brokers could face write-down of this magnitude.

But, with a new piece of bad news related to the mortgage market meltdown coming out almost daily, who would be surprised?

Douglas A. McIntyre is an editor at 247wallst.com.

Read | Permalink | Email this | Comments

Share This

Filed under: After the bell, Other issues, Deals, Competitive strategy, Johnson and Johnson (JNJ), Nucor Corp (NUE), Reliance Steel and Aluminum (RS), Valero Energy (VLO), Huaneng Power Intl ADS (HNP), Bargain stocks, Serious Money, Anglo Amer ADR (AAUK), Aluminum Corp of China ADS (ACH), Stocks to Buy, Intuitive Surgical Inc (ISRG), General Dynamics Corp (GD)

You all can worry about whatever you want to worry about. You can follow the bulls or bears, day traders or CD holders, Wall Street pundits or the guy next door, it does not matter to me. I am looking for opportunity in the rubble.

If you are a true investor, you have a watch list — when there is fear and negativity in the market like there has been the past few days, there will be opportunities. It is not a time to jump in with both feet, and it is not a time to speculate. It is a time to pick and choose among the companies and stocks you know well.

I would like to own more Intuitive Surgical (NASDAQ: ISRG) but it has run up so fast it has escaped my grasp, although I sense an opportunity is in the wings. I would like to own more Anglo American PLC (NYSE: AAUK) but it jumped up after recent acquisition talks in the mining industry and has not settled down yet. And it may not, but I will be patient. My regular readers know I love Huaneng Power Intl ADS (NYSE: HNP), which hardly moved today but has come down significantly in the past week, and that is very, very tempting.

Continue reading Serious Money: This is my type of market — watch list ready!

Permalink | Email this | Comments

Share This

Filed under: Deals

Shares of Trans World Entertainment Corporation (NASDAQ: TWMC) were up big today for the first time in a long time. CEO Robert Higgins handed the company’s board a “preliminary proposal” seeking to take the company private for $5 per share in cash. Mr. Higgins already controls about 40% of the company’s stock, and the board is evaluating the offer. The stock soared more than 27% to close at $4.96 — so close to the “preliminary proposal” that it indicates that investors expect that the company could well sell for a higher price.

Here’s what makes this interesting. According to the company’s latest proxy statement, Mr. Higgins has been CEO for a little more than 5 years, although he founded the company more than 30 years ago. The chart at right shows how the stock has performed during that period. In early 2005, shares of Trans World were trading well over $14 per share — Mr. Higgins’ offer is for just over a third of that.

What has happened since then? Trans World is in the CD and DVD business, with stores including Fye, Strawberries, Sam Goody, and Suncoast — some of the company’s brands were acquired by the company out of bankruptcy. Of course, the internet has made those industries sluggish at best, and declining same store sales and profitability have sent the stock tumbling.

Does Higgins deserve all the blame for the company’s woes? Of course not. But as an executive in the industry, he should have seen the changes coming and made adjustments. He didn’t, and now he is looking to take the company private at a firesale price, way below the company’s book value.

To some, this may be akin to hiring a carpenter to renovate your house, watching him trash it, and then receiving an offer from him to buy it — at a small fraction of its value before he went to work.

Read | Permalink | Email this | Comments

Share This

Filed under: JPMorgan Chase (JPM), MasterCard Inc’A’ (MA), Goldman Sachs Group (GS), Initial public offerings

Visa is the biggest retail electronic payments network (the cards are accepted in over 170 countries), and its brand is one of the world’s most recognized. Now, investors will get a chance to buy shares in the company.

Late Friday, the company filed the necessary papers for an IPO. And it should be a doozy, perhaps raising more than $10 billion.

Visa gets revenues from card service fees, data processing fees, and international transaction fees. And it all certainly adds up. For the first nine months of 2007, Visa generated revenues of $3.7 billion and net income of $771 million.

Of course, in May of last year, rival MasterCard (NYSE: MA) went public. So far, it is up a sizzling 390%. So, expect investors to pile on the Visa deal.

Visa’s lead underwriters include JPMorgan (NYSE: JPM) and Goldman Sachs (NYSE: GS).

You can visit the SEC website for the prospectus. Also, you can check out other recent IPO activity at DealProfiles.com.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements.

Permalink | Email this | Comments

Share This

Filed under: Newsletters, Commodities, Stocks to Buy

This article is part of a 20 article special report on “Metals, miners and money“.

“We’ve added a high potential acquisition play to our model portfolio, Alumina Ltd. (NYSE: AWC),” note Elliott Gue and Yiannis Mostrous in their Vital Resource Investor.

The advisors explain, “The company is a leveraged bet on the recovery of aluminum prices in the next few quarters as China rationalizes output and exports by taking its high cost, heavily subsidized producers out of the game. Its small size and 40% stake in the world’s largest low-cost portfolio of quality bauxite and alumina assets is a tempting target.

“Having the world’s largest integrated bauxite mining and alumina refining system (it provides approximately 13% of the world’s alumina supply) in one place is the company’s main attraction. As energy, raw materials, and freight costs continue to increase, Alumina’s setup enables its operations to be extremely efficient and low cost.

“The company is at a sweet spot because China’s aluminum demand has been so strong that it’s taken the industry by surprise. Although a large number of experts were at the start of the year forecasting 14% growth of China’s aluminum demand for 2007, the latest projections (as per Alcoa’s calculations) are pointing toward 35% growth.

“Further, China has a long way to go before it reaches the levels of consumption that more mature economies have achieved. And although it won’t happen in one go, it will be a long and steady process. The bottom line: To meet this demand as well as demand from other countries like rapidly urbanizing rural India, aluminum production will have to grow much more rapidly than at any time in history.”

Permalink | Email this | Comments

Share This

Filed under: Major movement, Rants and raves, Google (GOOG), Economic data

During previous recent market downturns Google (NASDAQ: GOOG) has held up well. This past week the NASDAQ stocks have been retracing their steps, giving back a sizable portion of their recent gains. Google, though, has been giving back more than most over the past two days, slipping about 10% off its high.

There could be any number of reasons. Dubious earnings reports from other tech companies might be the culprit. Or it could be the news that AOL is buying Quigo, giving the appearance of some vulnerability. To me, that does not seem like it would be a major factor either. There is plenty of dour economic news at the moment, but that hits everyone. Google established a recent new all-time high of $747.24, but is trading around $671 now and has traded down as low as $663. (UPDATE: GOOG closed at $663.97 on Friday.)

Every indication is that Google is not that expensive compared to other rivals. Until I hear some negative news that is specific to Google, I think a large portion of this drop can simply be attributed to profit taking. There is plenty of juggling going on in the fund market this time of year. Have you been re-balancing your portfolio? Have you been taking profits? Is there some other reason for the sell-off? Where might Google land? Is this a buying opportunity, or if not, at what price do the Google bulls stop the slide? Some say short the stock, maybe, and maybe you get creamed — that I would not do unless you have really deep pockets.

To find potential opportunities and verify my track record, read Chasing Value or Serious Money.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm.

Read | Permalink | Email this | Linking Blogs | Comments

Share This

After IndyMac’s 3rd quarter earnings results and on the heels of the new IndyMac broker requirements many brokers were worried about their future with the company. IndyMac after all beefed up its retail team from double digits to over a thousand sales agents and said that they had ’sharpened the spear’. It seems to me (still) to be a play to up retail originations where quality concerns are less of an issue for investors vis a vis broker-originated loans. In an attempt to quell some of the jitters of the still-important broker community, Mike Perry CEO of IndyMac released this statement this evening.

From the Desk of Michael W. Perry
Chairman and Chief Executive Officer of Indymac Bank  To our mortgage broker, mortgage banker and financial institution customers:I want to take this opportunity to emphatically assure you of our commitment to our mortgage broker, mortgage banker and financial institution customers and also to update you on Indymac’s financial strength during these challenging times.

Indymac’s Commitment to Our Broker, Banker and Financial Institution Customers

Let me just start by saying that our commitment to all of you as mortgage professionals runs deep. Indymac’s Mortgage Professionals Group (MPG), which services our mortgage broker, mortgage banker and financial institutions customers, has been the core earnings engine for Indymac throughout our history, and this group remains central to our plans to become a dominant player in the mortgage business. We remain fully committed to our MPG customers, while many other wholesalers have been pulling out of this market, most notably Bank of America in the last two weeks. As the ranks of mortgage wholesalers thin, your choice increasingly boils down to doing business with a stable and committed independent wholesale/correspondent lender like Indymac or a money center bank like B of A, whose commitment to this segment of the business could abruptly change at a moment’s notice.

While Indymac has recently established a retail presence, the reality is that it is nowhere near the size and scale of the money center banks. Importantly, there is no difference in the product line-up we have available to all of you versus what we offer our retail customers, and you get wholesale pricing on our products that should allow you to achieve attractive profit margins. In other words, our retail customers do not get pricing breaks that you can’t offer your own customers.

In a drive to serve you better, we’ve refined our MPG model in our 16 regions around the country. While other wholesalers are scaling back or centralizing virtually everything, we are further extending our decentralized structure and empowering our regions. Strong, decentralized leadership will be the center point to this new structure, as our regions will essentially operate as a collection of “self governing states” (balanced with a centralized oversight group), each led by an entrepreneurial-minded CEO with both strong business acumen and “best in class” mortgage knowledge. These regional CEOs will be…real CEOs. They will be Chief Executive Officers for their regions and have full responsibility for marketing, sales, operations and, at the end of the day, decision-making in a way that I believe will drive speed and service as a competitive advantage for both you and for Indymac.

Indymac’s Continued Financial Strength

While this week Indymac reported a third quarter loss, the bottom line is that no one in the mortgage business came out of the quarter unscathed (in fact, year-to-date over 170 mortgage companies across the country have failed), we performed better than almost every other company in the mortgage business, and our financial position remains incredibly strong. You can review our results in detail by clicking on the links below to our press release and investor presentation, but the bottom line is that:

• Even with this quarter’s loss, we have earned $1.14 billion and an average return on our
  shareholders’ equity of 13.5% over the 6 3/4 year period since we became a federally
  chartered savings and loan through September 30, 2007.
• We have $2.5 billion in bank regulatory capital, giving us a substantial 50% cushion, or $823
  million, of “core” capital above the “well capitalized” regulatory standard.
• Our federally insured thrift structure provides stable, diversified funding sources and strong
  liquidity levels, enabling us to increase our total liquidity from $4.1 billion at the end of the
  second quarter to a record $6.3 billion at the end of the third quarter, ensuring our ability to
  fund loans without interruption.Importantly, we are starting to see our mortgage production volumes pick up. Our October rate locks of $8 billion are up 51 percent from September and our pipeline is back up to $9.8 billion as of October 31 from a low of $7.4 billion in September. The bottom line is that, while so much of the news out there is “doom and gloom”, there are loans to be done, and the toughest and fittest of you are here to do them…and Indymac is here to support you.

  What More Can Indymac Do for You Today?

  While more will be coming out soon on our new structure from my MPG management team and the new CEOs we already have in place in a number of regions, I want to reach out to you immediately to make sure that if we are not meeting your needs, we hear from you so we can take action and get the job done. If your issues with Indymac are not getting resolved to your satisfaction, you should escalate your concerns by contacting our representatives in the following order:

  1. XXXX, your Indymac Bank Sales Professional

  2. XXXX, your Regional President

  3. Drew Buccino, newly promoted CEO of Indymac’s MPG
  drew.buccino@imb.com
  (480) 375-2201

  4. Frank Sillman, CEO of Indymac Mortgage Bank
  frank.sillman@imb.com
  (626) 535-5216

  5. Mike Perry, CEO of Indymac Bank
  michael.perry@imb.com
  (626) 535-5214

  That’s correct…if all else fails, contact me directly!

While I admire the spirit of this letter better than some of the Countrywide letters I still remain skeptical about any company that ups their retail production, cuts wholesale availability and is clearly at the whims of the market (Perry even said he had no forecast for quarter 4) when it comes to making predictions about the future of the wholesale channel.  I hope I’m wrong and that wholesale lending will live on in full force; but the wind just seems to be blowing the other direction.

Share This

Share This

Market Watch is reporting tonight that Standard & Poors is considering downgrades to 484 mortgage backed securities made up of primarily Alt-A mortgage loans.  Alt-A mortgages have credit characteristics slightly lower than prime mortgages but are often underwritten with no income documentation and with exotic terms such as negative amortization and interest only features.  They were a popular avenue for investment property financing as  well.

From Market Watch:

Standard & Poor’s said on Friday that it may cut ratings on 484 classes of residential mortgage securities backed by so-called Alt-A home loans. The influential agency also warned that it could downgrade ratings on 63 classes of net interest margin securities, a type of derivative that’s tied to the Alt-A backed securities in question. “These actions reflect a persistent rise in the level of delinquencies among the Alt-A mortgage loans supporting these transactions,” S&P said in a statement.

The early argument was that mortgage problems were contained to subprime loans and that Alt-A and prime loans were not affected by increasing default rates.  As we’ve moved along it has become quite clear that to call this a subprime problem is a joke; Alt-A and prime loans are facing similar problems and increasing defaults.  This downgrade shows the movement of the problem through home lending - one that will only continue through the next several years.

Share This

Share This

Wachovia reported more than $1 billion loss in October alone, as loan-related losses hit the bottom line of the nationwide bank. That October loss comes on the top of $1.3 billion loss taken by Wachovia in the 3rd quarter. These losses are in line with most analyst estimates that the 4th quarter is going to be far worse in terms of losses than the brutal 3rd quarter was for those companies with exposure to the mortgage markets.

Due to the October market deterioration, Wachovia’s asset-backed collateralized debt obligations, or CDOs, experienced further declines in value in October 2007 by an amount it currently estimates to be approximately $1.1 billion pre-tax, the filing said.

In the third quarter, market losses totaling $1.3 billion pre-tax included $347 million of subprime-related valuation losses on CDOs.

As of Oct. 31, Wachovia said it had remaining exposure of $676 million to asset-backed CDOs, compared with $1.8 billion the previous month. Wachovia has exposure to subprime residential mortgage-backed securities of $2.1 billion, according to the filing.

While analysts admit that the bank’s exposure to future losses is less than others in these types of investments the big concern is their purchase of Golden West/World Savings last year.  World Savings is a prolific option ARM lender with heavy concentration in California.  These loans could become massively problematic in the future as they begin to reset.  It is this exposure for Wachovia that has many people (rightfully) worried.

“Nevertheless, we consider this to be negative news,” Deutsche Bank said. “Per the investment bank, management indicated that it would stay the course but we wonder if additional changes could be needed. Second, per Golden West, it now becomes even more obvious that Wachovia purchased the thrift at the wrong time of the cycle.”

Share This

Share This