Archive for June 11th, 2008
Filed under: Major movement, Forecasts, Good news, Industry, Options, Technical Analysis
 Talbots Inc. (NYSE: TLB) shares are trading higher today after the company affirmed its 2008 earnings forecast. TLB expects to earn an adjusted profit between 47 and 52 cents per share, above analysts’ estimates of 41 cents per share. If you think that the stock won’t fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TLB.
After hitting a one-year high of $26.10 in August, the stock hit a one-year low of $6.48 in January. TLB opened this morning at $9.05. So far today the stock has hit a low of $8.76 and a high of $9.05. As of 11:20, TLB is trading at $8.91, up $0.60 (7.2%). The chart for TLB looks bearish and improving slightly.
For a bullish hedged play on this stock, I would consider a November covered call at the $7.50 level. A covered call is an options position that combines the purchase of stock with the sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make an 17.2% return in just five and a half months as long as TLB is above $7.50 at November expiration. Talbots would have to fall by more than 27% before we would start to lose money. Learn more about this type of trade here.
Continue reading Talbots (TLB) reaffirms ‘08 guidance above expectations
Permalink | Email this | Comments
 Via [bloggingstocks]
Share This
 No Comments »
Posted by: admin in Goog news
Filed under: Earnings reports, Google (GOOG), Apple Inc (AAPL), Dell (DELL), Recession, NASDAQ
Some investors thought that tech shares would fall apart like financial and transportation stocks have. One by-product of the recession would be a slowing of consumer and business purchases of PCs and enterprise equipment like routers. Internet businesses would suffer from a drop in online ads.
It may be that things are not working out that way. The Nasdaq jumped almost 5% over the last month.
As The Wall Street Journal writes (subscription required), Dell Inc. (NYSE: DELL) jumped late in the week on better-than-expected earnings. The largest of the internet companies, Google Inc. (NASDAQ: GOOG), rocketed after good earnings and has kept most of those share price gains. Consumer electronics bellwether Apple Inc. (NASDAQ: AAPL) has kept moving higher as investors expect a new iPhone and Macs continue to sell well.
Overall, the market may continue to fall. Certainly most companies still run great risks with higher inflation and slowing GDP. Tech seems to have dodged those bullets.
Douglas A. McIntyre is an editor at 247wallst.com and author of the Tens Stocks Under $10 Newsletter.
Share This
No Comments »
I think the best way to discuss the “reemergence” of the credit crisis is to remember a childhood story. Remember that time your family was throwing a party and you were concerned about crazy grandma going off on her usual rants? You thought carefully about what you were going to do since you […]
Related Posts:
■Two Faces of Housing Panic: Schadenfreude and the Lender of Last Resort.
■The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression: Part X. Data Mining.
■Manias, Panics, and Crashes: 2007 First Quarter All-Stars – Foreclosures, Subprime, and Politics. Five Characteristics of a Housing Bubble.
■A Bubble That Broke the World: Lessons from the Great Depression Part IX. When Credit is Debt.
■Just Because you Crawl Today, Doesn’t Mean you Won’t Walk Away Tomorrow from a Home: The Next Chapter in the Foreclosure Crisis.
I think the best way to discuss the “reemergence” of the credit crisis is to remember a childhood story. Remember that time your family was throwing a party and you were concerned about crazy grandma going off on her usual rants? You thought carefully about what you were going to do since you wanted to have a pleasant evening but you also wanted to be cognizant of lovely grandma’s feelings. And suddenly a light bulb ignited over your head with the solution. Lock grandma up in the attic. Sure she wouldn’t be happy for a few hours but the guest will have a great time!
During the evening, the guests hear faint sounds emanating from upstairs. You quickly turn up the music and chatter louder to drown out the noise. The guests slowly ignore the sound yet you can still hear the noise because you know what lurks in the attic. As the guests leave, they are oblivious to the situation and leave with a grand smile on their faces. You run up stairs and open the attic door to be confronted by a furious grandma. This was expected and you knew once the party was over that reality would need to be confronted. Good times.
Well given what is going on with the current credit market, it is safe to say that we’ve locked up our own credit grandma in the attic trying to enjoy the party while ignoring the faint sounds in the background. Grandma not only is angry but has been training in mixed martial arts while being in the attic and is going to open up a can once we let her out on the first unsuspecting soul that opens the door.
Ever since we locked Bear Stearns away in the attic, a collective sigh of relief was heard across all the financial markets. It seemed as if the Fed some how found the panacea to this credit debacle. Unfortunately all it did was prolong the misery that would need to be confronted. If we really want to see what is in the attic let us take a look at some of the Level 2 and Level 3 assets of the largest financial firms:
*Hat tip to Anon Reader
From this list we can see the attic of debt still not accurately being reflect on the balance sheets of many companies. The fact of the matter with the Bear Stearns deal is that essentially this problematic debt was shifted from one institution to another; except it had a back stop by our own Federal Reserve. We saw similar problems hit the BofA and Countrywide deal when BofA mentioned they may not back up some of Countrywide’s debt:
“(Bloomberg) Bank of America Corp., the second- biggest U.S. bank, said it may not guarantee $38.1 billion of Countrywide Financial Corp.’s debt after taking over the mortgage lender, fueling speculation that Countrywide’s bondholders face renewed risk of default.
“There is no assurance that any such debt would be redeemed, assumed or guaranteed,” the Charlotte, North Carolina- based bank said in an April 30 regulatory filing, adding that no decision has been reached….
Countrywide’s $1 billion of 6.25 percent notes maturing in 2016 traded at 90.25 cents on the dollar yesterday with a yield of about 7.9 percent, according to Bloomberg data. The debt traded as low as 46 cents in January, with a yield of 20 percent, just before Bank of America announced the purchase.”
From what we are seeing we can expect to see many of these shotgun weddings in the next year with the unique caveat of firms picking the meat from the carcass while the U.S. Taxpayer is relegated to the role of being a vulture with only bones and guts to devour once the best parts are gone. Either way, the rules from FASB 157 or the fair value measurements is also putting pressure on the market. This is part of where we get the entire mark-to-market idea but there is a slight issue here as well:
“This Statement clarifies that market participant assumptions include assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value (such as a pricing model) and/or the risk inherent in the inputs to the valuation technique. A fair value measurement should include an adjustment for risk if market participants would include one in pricing the related asset or liability, even if the adjustment is difficult to determine. Therefore, a measurement (for example, a “mark-to-model” measurement) that does not include an adjustment for risk would not represent a fair value measurement if market participants would include one in pricing the related asset or liability.
This Statement clarifies that market participant assumptions also include assumptions about the effect of a restriction on the sale or use of an asset. A fair value measurement for a restricted asset should consider the effect of the restriction if market participants would consider the effect of the restriction in pricing the asset. That guidance applies for stock with restrictions on sale that terminate within one year that is measured at fair value under FASB Statements No. 115, Accounting for Certain Investments in Debt and Equity Securities, and No. 124, Accounting for Certain Investments Held by Not-for-Profit Organizations.”
The problem with using fair market risk assessments or valuation is that these institutions actually have to have an idea of the fair market value of their assets. Are you kidding me? These are the folks that bought up all the asset backed crap and now we want them to accurately asses a Real Home of Genius in East Los Angeles? Well we already know that we are witnessing the steepest housing correction ever, even worse than the Great Depression in terms of its speed of severity. We can only take a wild guess at what is lurking in those off balance sheet accounts but I think we can all hear that faint echo in the attic of what we can expect.
Many experts are expecting $400 to $1 trillion in credit market writedowns before this thing is over. As of April of 2008, we’ve had a total of $231 billion in credit writedowns (a bit higher given the additional writedowns in the past few months). Since people are now liking this thing to a baseball game, I see it more like game 1 of the NBA Finals. We’ve finally narrowed the field from 16 teams to 2. Now we find out that only one can stand and it isn’t going to be debt. Here is the list of writedowns as of April and all figures are in billions:
| Firm |
Writedown |
Credit Loss (a) |
Total |
| UBS |
38
|
Share This
No Comments »
Posted by: admin in Goog news
Filed under: Rants and raves, Competitive strategy, Google (GOOG), Apple Inc (AAPL), Books, Sunday Funnies, Headline news, DJIA
 The outcome of the Belmont Stakes where Big Brown came in last instead of first is just one more example of the difficulty one has in making predictions. I know little about horse racing, and the only thing I know about the Triple Crown is that there has not been a winner in 30 years (and counting). As irony would have it, the winner of the Belmont was the 38-to-1 long shot Da Tara that went wire to wire.
This event stands out in my mind because I am asked to predict future events on a regular basis (whether it makes sense or not), and because I am in the middle of reading The Black Swan about randomness and uncertainty by epistemologist Nassim Nicholas Taleb. I highly recommend the book to fellow investors and business leaders interested in getting some perspective on risk and the many fallacies we all overlook.
The number of variables that can affect a specific outcome like a horse race are significant, and in the case of the Belmont Stakes, on this occasion something was amiss. When Big Brown turned for home, something wasn’t right. Jockey Kent Desormeaux knew the big bay colt was finished. Trainer Rick Dutrow Jr., who guaranteed racing’s first Triple Crown in 30 years, knew it, too.
Guaranteed? This reminded me of a story I posted earlier this year, Kiss of death: GOOG $2,000 & AAPL $300. The odds of a prediction coming true are greatly outweighed by it not. We are halfway through the year and Google Inc. (NASDAQ: GOOG), which closed at $567.00, and Apple Inc. (NASDAQ: AAPL), which closed at $185.64, are below their December highs where they have been all year. If these companies were to obtain these lofty price predictions then something we are not aware of today will drive them forward.
“He was empty. He didn’t have anything left,” Desormeaux said. “There’s no popped tires. He’s just out of gas.”
That seemed to be the case with the stock market on Friday as the Dow Jones Industrial Average lost 394.64 points to finish at 12,209.81, down -3.13%.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. I do not any shares of AAPL, GOOG, Big Brown or Da Tara.
Share This
No Comments »
Lehman Brothers, the Wall Street firm that everyone has had their eye on since the implosion of Bear Stearns will report a $2.8 billion loss for the quarter and announce plans to raise $6 billion in capital through the sale of stock. Lehman bet heavily on the mortgage business with purchases of both subprime lender BNC Mortgage and alt-a lender Aurora (both of which they closed update, thanks Candy: Aurora Loan Services is still operating a Retail division. The Correspondent and Broker divisions have been shut down. In addition, they are still operating as a servicer as well.) as well as a big-time MBS book.
The firm did cut $130 billion worth of risky assets in an attempt to shake the “Bear Stearns” stigma.
From Bloomberg:
Lehman Brothers Holdings Inc. reported a $2.8 billion second-quarter loss, the company’s first since going public in 1994, and plans to raise $6 billion to help it survive the collapse of the mortgage market.
The fourth-largest U.S. securities firm fell as much as 11 percent in New York trading after saying in a statement it would sell common and preferred shares. The New York-based company sold about $130 billion of assets in the quarter and cut mortgage-related holdings and leveraged loans by 20 percent.
“It’s kind of sobering for people who have been listening to the company these last six to nine months that they had everything under control,” said David Hendler, an analyst at CreditSights Inc. in New York. “It shows that the market continues to be difficult. I would say Lehman’s probably not the only broker that has these kinds of pressures.”
Share This
Source [blownmortgage]
Share This
No Comments »
Filed under: Analyst upgrades and downgrades, Coca-Cola (KO), Kellogg Co (K)
.gif) MOST NOTEWORTHY: Omnicare, Coca-Cola and OptionXpress were today’s noteworthy upgrades:
- Oppenheimer upgraded Omnicare (NYSE: OCR) to Outperform from Perform citing their analysis that indicates the Rx market is stronger than expected in the LTC channel, which is largely overlooked by investors due to the legacy focus on beds. The firm expects solid Q2 results will increase confidence in the company’s ability to achieve mid-point or better EPS guidance.
- Deutsche upgraded Coca-Cola (NYSE: KO) to Buy from Hold based on favorable currency impact, international growth, and valuation.
- OptionXpress (NASDAQ: OXPS) was raised at Merriman to Neutral from Sell as they see little downside to risk estimates, following several rounds of cuts, and valuation.
OTHER UPGRADES:
Permalink | Email this | Comments
 Via [bloggingstocks]
Share This
No Comments »
Homes in foreclosure and homes entering the foreclosure process are up to levels not seen since 1979 reported the MBA today. For those that say we’re coming to the bottom, I say either you’re full of it or we’re picking up speed for a nasty crash landing in to the bottom - either way it ain’t go to be pretty. Oh, and the total percentage of mortgages in some form of delinquency (excluding foreclosure) is also at it’s highest point since 1979 - so it doesn’t look like making your mortgage payment has gotten any easier, no matter who you are.
From Market Watch:
he percentage of loans in the foreclosure process at the end of the first quarter rose to 2.47% of all mortgages outstanding on one- to four-unit properties, up from 2.04% in the fourth quarter, according to the Mortgage Bankers Association’s National Delinquency Survey, released on Thursday. Loans entering the foreclosure process in the first quarter rose to a seasonally adjusted 0.99%, up from 0.83% in the fourth quarter. Both the rate of foreclosure starts and the percent of loans in the foreclosure process were the highest recorded since 1979, according to the group. The seasonally adjusted delinquency rate for mortgage loans also was the highest since 1979, with 6.35% of all loans at least one payment past due during the first quarter, up from 5.82% in the fourth quarter.
Update: More from the New York Times
The drop in home prices, which has affected a broad swath of the nation’s housing market, has left many homeowners paying mortgages worth more than their own homes. The housing slump is the worst of its kind since the recession of the early 1990s.
The mortgage problems were worst for homeowners who took out subprime loans, which are usually issued to applicants with less-than-pristine credit histories. But even borrowers with solid credit records have not been immune.
“While the foreclosure start rates were up for all types of mortgages, a reflection of the decline in home prices, the magnitude of the national increases is clearly driven by certain loan types and certain states,” said Jay Brinkmann, the group’s vice president for research and economics.
For example, he said, subprime adjustable rate mortgages represent 6 percent of the loans outstanding but 39 percent of the foreclosures in the quarter. Prime adjusted loans represented 15 percent of the loans, but 23 percent of the foreclosures started.
“Out of the approximately 516,000 foreclosures started during the first quarter,” Mr. Brinkmann said “subprime ARM loans accounted for about 195,000 and prime ARM loans 117,000.”
Four states — Arizona, California, Florida and Nevada — accounted for about 89 percent of the foreclosures, a disproportionately high amount of the newly reported figures. Those regions have suffered the sharpest price drops.
Share This
Source [blownmortgage]
Share This
No Comments »
Filed under: Forecasts, Bad news, Industry, Texas Instruments (TXN), Options, Technical Analysis
 Texas Instruments (NYSE: TXN) shares are falling after the company warned that weak demand for its chips used in cell phones could hurt profits. TXN narrowed its second-quarter earnings forecast to a range of 43 cents to 47 cents per share, from a range of 42 cents to 48 cents per share. Analysts are expecting earnings of 46 cents per share. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on TXN.
After hitting a one-year high of $39.63 in July, the stock hit a one-year low of $27.51 in March. This morning, TXN opened at $30.75. So far today the stock has hit a low of $30.40 and a high of $30.95. As of 12:30, TXN is trading at $30.72, down $0.61 (-2.0%). The chart for TXN looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $37.50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in four and a half weeks as long as TXN is below $37.50 at May expiration. TI would have to rise by more than 21% before we would start to lose money. Learn more about this type of trade here.
Continue reading Texas Instruments (TXN) warns of lower demand
Permalink | Email this | Comments
 Via [bloggingstocks]
Share This
No Comments »
|
|
Entries (RSS)