Filed under: Deals, Google (GOOG), Yahoo! (YHOO), XM Satellite Radio (XMSR), Sirius Satellite Radio (SIRI), Market matters, CBS Corp ‘B’ (CBS), Clear Channel Commun (CCU), Stocks to Buy, Cramer on BloggingStocks

Too many parties have too much to lose to let this one go through without a fight, TheStreet.com’s Jim Cramer says.

No, it is not over. If there is one thing we have learned about Sirius (NASDAQ: SIRI) (Cramer’s Take)-XM (NASDAQ: XMSR) (Cramer’s Take), it is that at every step of the way, people have to try to block it or at least hold it up to the point that someone goes out of business. This is a deal, now much longer in passing than Exxon and Mobil, that still has congressional meddling even right now, still has rearguard activists who might fight the merger on the commission itself even though the FCC’s staff has said yes.

Lots of people are confusing the issue of the merger benefits with the merger itself. The benefits will be helpful down the road on both the revenue and the costs, and the caps won’t mean that much. What matters, plain and simple, is refinancing. Both companies are always in danger of running out of money.

However, if you know that three years hence — after the frozen period during which service fees cannot be increased — the two companies can begin to offer extreme cable pricing, you can go hat in hand to the Street with a good bond deal that people will no longer feel could default.

That’s why the stocks combined are good. They may turn out not to be good for all of the people playing the various games, because there is no quick way to monetize the two companies. But you will most certainly create a dominant company that will pretty much destroy terrestrial radio, which may be the biggest reason radio stocks continue to trade down and CBS (NYSE: CBS) (Cramer’s Take) continues to be brought down by CBS Radio.

There’s been so much that I have hated about this government’s stalling of this as opposed to the serious antitrust issues that have developed in the last 20 years of laissez-faire antitrust. Everything stinks out loud, including the stalling of the deal until after Clear Channel (NYSE: CCU) (Cramer’s Take), the principal target of the merger, went through. The people propounding Clear Channel, just like the people propounding newspapers, do not and have not worked in the industry. They just know cash flows and vectors, not the reality of the endless newspaper-like decline to this medium.

In short, putting XM together with Sirius would be like creating a new Google (NASDAQ: GOOG) (Cramer’s Take) with Yahoo! (NASDAQ: YHOO) (Cramer’s Take) when it comes to terrestrial radio.

And there’s a simple reason: commercials. Everyone hates them.

And you are done with them the moment this deal gets approved, even though it is not a foregone conclusion.

—————————————————————————
RELATED LINKS:
Cramer: Sirius, XM Need a Fast Wedding
AIG’s Sullivan Is Latest Credit Casualty
—————————————————————————

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com’s sites and serves as an adviser to the company’s CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

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Filed under: Rants and raves, India, China, Brazil, Russia

An interesting post written by Joseph Lazzaro on Tuesday indicated that many economists think that the economies of Brazil, Russia, India and China, known as the BRIC economies, will supplant the United States and European nations in terms of world power and economic strength. While this may be true to a degree, I have a message for those emerging economic powerhouses: they had better be careful.

Dear Brazil, you have resources you can’t yet even contemplate. However, you have been whacking through your opportunities at a very rapid pace. You have no idea about what political powers you should align yourself with. Can you reign in your pirates, your poachers, your drug lords? Can you effectively protect even just one of your trees?

Dear Russia, you scare me. The world knows more of your organized crime than it knows of your present government. You move more capital through your black markets than through your own ports. You turn your backs on true enterprise in exchange for quick profit.

Continue reading The BRIC economies can kiss my — standard of living

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I was digging through the nationwide distressed property information put out for April of 2008. In this data, we have notice of defaults, notice of foreclosure sale, lis pendens, and REOs. This data gives us a snapshot of where we are but also allows us to see where we are heading. For […]
Related Posts:
■Foreclosure Shrugged: The Issue with Finding an Exact Foreclosure Number.
■Foreclosed: Predicting Foreclosures in California. How Many Homes will Be Foreclosed in 2008?
■Foreclosures? Housing Bubble? In Southern California? Impossible!
■Real Homes of Genius: Today we Salute you Cypress. Wait 5 Months, Then Drop Price by $130,000.
■Zillowed, Disappearing Inventory, and Free Housing: 3 Major Psychological Reasons Why Housing is Still Declining and Living Rent and Mortgage Free.

I was digging through the nationwide distressed property information put out for April of 2008. In this data, we have notice of defaults, notice of foreclosure sale, lis pendens, and REOs. This data gives us a snapshot of where we are but also allows us to see where we are heading. For example, we can look at notice of defaults as a leading indicator of how many defaults we will be seeing in a few months.

There are many sources putting out information regarding foreclosures but one cited quite often is data from Realtytrac based out in the heart of Orange County, Irvine. The numbers are stunning no matter how you look at the data. It turns out that only 4 states out of the entire 50 states of our country make up approximately 50 percent of all distressed action! Think about that. We’ve all heard that real estate is about location so we can assume that the same goes for foreclosures. Let us crunch the numbers:

California (Properties with Foreclosure Filings): 64,683

Florida: 35,264

Arizona: 11,620

Nevada: 7,276

Total 4 States Above: 118,843

Total Nationwide distressed filings: 243,353

*Source: Realtytrac

Maybe it would help to visualize the lopsidedness of this:

This is simply stunning when you think about it. Not only is this going to be problematic in the short run, but take a look at what we have to look forward to by examining the notice of defaults that are now turning into foreclosures at an alarming rate:
California (April 2008):

Notice of Defaults: 40,294

Notice of Trustee Sale: 8,822

Real Estate Owned: 15,567

That is a very ominous sign since that 40,294 is only an indicator of how difficult things will get in the future. Many of these homes are 90 days late or are still in the process of hitting the market. If you want an indication of how bad things have gotten in California over the past year, just take a look at the numbers for April of 2007:

California (April 2007):

Notice of Defaults: 24,305

Notice of Trustee Sale: 4,200

Real Estate Owned: 2,000

In one year, notices of defaults have doubled, trustee sales have doubled, and real estate owned has jumped from a low of 2,000 to a jaw dropping 15,567. This is why I simply do not buy into any of the bottom talk and especially not for California. I wanted to cross check the above data with the quarterly foreclosure information posted by DataQuick. For the first quarter of 2008 they list 113,676 notice of defaults.

Realtytrac first quarter data NODs:

January 2008: 38,148

February 2008: 35,731

March 2008: 40,761

Total First Quarter 2008 NODs: 114,640

Not bad at all. At least by using a few different sources we can at least trust to a certain extent the data. So with that said, the troubling implication is that fewer and fewer people are able to manage their way out of a notice of default and are unable (or unwilling) to catch up:

“(DQNews) Of the homeowners in default, an estimated 32 percent emerge from the foreclosure process by bringing their payments current, refinancing, or selling the home and paying off what they owe. A year ago it was about 52 percent. The increased portion of homes lost to foreclosure reflects the slow real estate market, as well as the number of homes bought during the height of the market with multiple-loan financing, which makes ‘work-outs’ difficult.”

That is simply shocking. What this tells us is 68 percent of these notice of defaults will go through the full foreclosure process. Now of course this number is simply getting worse because of the state of the California economy and the extent of bubble prices in many areas.  Fuel prices are only the last nail in the coffin. Let us apply this number to the first quarter notice of defaults:

114,640 * 68 percent = 77,955 homes will be foreclosed in California from the homes that received NODs in the first quarter.

Now if last month, 8,822 homes went to a trustee sale and things are pretty bad, just look at the above estimate and take a wild guess how things are going to get for California. Is this really any sign of a bottom? That is why even folks like Ed McMahon are struggling to keep current on their mortgage. The problem with California more so than the other states is the massive size of the mortgages. For example, Ed McMahon on his $4.8 million loan to Countrywide is arrears by an incredible $644,000. Let us assume a $500,000 loan at 6 percent that falls into bad shape. Just look at how badly things can get and how quickly:

Principal and Interest Only:

1^st payment due: $2,997

2^nd payment due: $5,994

Late payment: $40

Total to cure account: $6,034

3^rd payment due: $8,991

Late payment: $40 x 2

Total to cure account: $9,071

4^th payment due: $11,988

Late payment: $40 x 3

Legal fees: $75

Total to cure account: $12,108

5^th payment due: $14,985

Late payment: $40 x 4

Legal Fees: $75 x 2

Total to cure account: $15,295

6^th payment due: $17,982

Late payment: $40 x 5

Legal Fees: $75 x 3

Total to cure account: $18,407

At this point, a bank would most likely issue a demand for full payment including full balance, back interest, plus late charges, and legal fees all at once. The legal notices begin. The lender at this point normally will only accept full payment which of course, if you didn’t have enough to make the $2,997 payment where in the world are you going to get $18,407 to cure the account? But that is why we are seeing that REO number skyrocket and holding steady. Many lenders are now trying to gauge their options assuming they don’t go under. Either they workout a modification with the owner (assuming they want to keep the home) or simply take their losses, take over the home, and try their luck given the current marketplace.

Do lenders really have the force to keep up with this? Some are arguing that they are not and the numbers are looking extremely suspicious. Why is that? First, inventory has been steadily dropping in the Southern California region yet sales haven’t picked up in any sizable fashion. A realtor over in San Diego offers a bit of insight into this:

“Speaking of holding back, the properties assigned to me were all foreclosed just a few days before - and I thought, “yippee, these guys are really on it!” That thought was a bit premature.

Since the end of April when I had 20 properties sent to me, only three have made it to market. Another one got rescinded (stand-by, this one will be a story in itself) and three others have extenuating circumstances why they have stalled. But literally the other 13 are sitting vacant, waiting for Countrywide’s asset managers to give me the green light to put them on the market.

I think they are overwhelmed - there have 60 asset managers at their servicing facility in Simi Valley, each with 100+ files on their desk. The majority of these mortgages are ones they sold to Deutsche Bank and HSBC, both foreign entities. Countrywide is just their servicing agent, meaning they collect the monthly payments, and handle the foreclosure proceedings. There isn’t much incentive for them to not be expediting the sales, unless the banks that actually own the properties are telling them to stall. But why would Deutsche Bank or HSBC want to stall - they can’t be waiting for a bailout, who is going to give them a hand? The U.S. Government? No way.”

Jim actually puts out some good information at his bubbleinfo blog and you should check it out when you get a chance. What Jim talks about was my gut reaction at first. These lenders are simply overwhelmed. By looking at the NODs we already know that we have an absolute tidal wave of bad mortgages coming our way. You can only infer that lenders with a heavy weighting of mortgages in California are going to be creamed. Washington Mutual who holds many California mortgages including one for our beloved California Democratic representative mogul would-be Donald Trump Laura Richardson isn’t exactly doing so hot recently. Take a look at the 1 year performance of WaMu:

Down 84% in one year! That isn’t exactly what I would envision as a bottom. I would be especially angry if I ended up buying stock at $44 a share last year. Either way, the problem is we have many investors not from this area that simply do not have any sense of the magnitude of Real Homes of Geniuses with banana republic mortgages that are floating out there.

Now riddle me this. If California, Florida, Nevada, and Arizona make up nearly 50 percent of all distress property filings in April and their early indicators are telling us that we have even more pain ahead, what is going to get these NODs cured? Here is a quick and dirty fact for you; all those HELOC and those piggyback loans once so popular in California just got annihilated. Many of these lenders are out 100 percent. Heck, the 30 percent median price drop last year pretty much wiped out 2 years worth of 2^nd mortgages on homes.  The only thing that remains is lasting memories of Maui, a gas guzzling Hummer, and a new granite countertop.

Do you really think the pain is done?

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Related Posts:
■Foreclosure Shrugged: The Issue with Finding an Exact Foreclosure Number.
■Foreclosed: Predicting Foreclosures in California. How Many Homes will Be Foreclosed in 2008?
■Foreclosures? Housing Bubble? In Southern California? Impossible!
■Real Homes of Genius: Today we Salute you Cypress. Wait 5 Months, Then Drop Price by $130,000.
■Zillowed, Disappearing Inventory, and Free Housing: 3 Major Psychological Reasons Why Housing is Still Declining and Living Rent and Mortgage Free.

Via [DrHousingBubble]

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Filed under: Bad news, Industry, Lowe’s Cos (LOW), Options, Technical Analysis, Economic data, Housing

Lowe’s (NYSE: LOW) shares are falling today after the Commerce Department reported that May home construction fell 3.3%, signaling continued weakness in the housing market and bad news for home improvement stores. 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 LOW.

After hitting a one-year high of $32.53 in September, the stock hit a one-year low of $19.94 in January. This morning, LOW opened at $24.15. So far today the stock has hit a low of $23.45 and a high of $24.23. As of 12:20, LOW is trading at $23.62, down $0.43 (-1.8%). The chart for LOW looks bullish but deteriorating, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bearish hedged play on this stock, I would consider an October bear-call credit spread above the $27.50 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 a 13.6% return in four months as long as LOW is below $27.50 at October expiration. Lowe’s would have to rise by more than 16% before we would start to lose money. Learn more about this type of trade here.

Continue reading Lowe’s (LOW) drops on poor construction data

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Filed under: Before the bell, Deals, Law, Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL), Hewlett-Packard (HPQ), Johnson and Johnson (JNJ), Boeing Co (BA), Amer Intl Group (AIG)

Before the bell: Stocks could rebound

The day has finally come. June 9 is here and Apple (NASDAQ: AAPL)’s Steve Jobs is expected to announced a new 3G iPhone in his keynote speech during the annual developers conference in San Francisco. The features of a new iPhone have been the subject of much speculation, all to be settled today, one way or the other. A new business model is also expected with subsidies paid by wireless carriers.

Boeing Co (NYSE: BA) said on Monday its 787 Dreamliner would make its first flight in the fourth quarter of 2008, on schedule according to the revised timeline announced in April for the new aeroplane’s launch. First deliveries of the plane were scheduled for the third quarter of 2009, also as previously stated.

American International Group Inc (NYSE: AIG)’s CEO, Martin Sullivan, is facing dissent from three large shareholders who together control 4%, as reported Sunday on The Wall Street Journal. They sent a letter to the board regarding management improvements.

After Google Inc. (NASDAQ: GOOG) had done it, Microsoft Corp. (NASDAQ: MSFT) wants to as well. Microsoft and Kaiser Permanente, the biggest U.S. health maintenance organization (HMO), are working on a patient information exchange pilot program to help give patients more control over their health records. Google Health was launched in February.

Britain’s Astex Therapeutics, a privately owned biotech company, has signed a cancer drug research deal with Johnson & Johnson (NYSE: JNJ) potentially worth more than $500 million in milestone payments. “The deal grants a worldwide licence to J&J’s Janssen unit to develop and commercialise compounds arising from Astex’s FGFR inhibitor programme and establishes a novel drug discovery programme focused on two further cancer drug targets.”

Hewlett-Packard Co (NYSE: HPQ) said on Sunday it had settled patent litigation with smaller Taiwan rival Acer.

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Breaking news today from Countrywide. Effective today Countrywide wholesale will no longer offer the Non-Conforming Fast & Easy document waiver program. Fast & Easy is Countrywide’s version of stated income. Non-conforming loan amounts will no longer be eligible for stated income regardless of credit score.

This is a huge guideline change for the company that prided itself on offering jumbo loans with no income documentation in the past. The elimination of stated income loans from Countrywide should further depress home prices in expensive states where income and home prices just don’t line up.

From an internal email regarding the change:

Effective 8:00 pm (PT), Friday June 13, 2008, the Non-Conforming Fast & Easy document waiver program will no longer be available.

Guideline Impact
The following LPGs will be updated effective, June 13, 2008:
LPG 12.10 - Non Conforming Programs, Fixed Rate, Fixed Period ARMs, Short Term ARMs, Full, Alt, and Fast and Easy (sm) Documentation

Pipeline Protection

• Loans currently in the pipeline are eligible under the old guidelines only if submitted to CAWL via CWBC or boarded in EDGE and Approved by 8:00 pm (PT) Friday, June 13.
• Loans in the pipeline must be locked on or before June 27, 2008, and must fund/close on or before Monday, July 14, 2008.
• Any lock extension/re-lock will be subject to current lock extension/re-lock polices, and the loan must still fund on or before Thursday, July 14, 2008.
• If any material changes are made to a loan currently in the pipeline at any time after loan approval and prior to funding/closing, the original loan approval is no longer valid and the loan must be countered to full doc. Examples of material changes include, but are not limited to: FICO Score, Loan Amount, LTV, CLTV, Income, Employment, Assets, or Program and/or ratios.
• Loans that are not eligible under the old guidelines are subject to the new guidelines, and must generally either be Counteroffered or Declined (as applicable).

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Home builders continue to dial back the production of new homes, with new housing starts reaching a 17-year low in May.  Further, the data points to future declines in starts as the market continues to correct.

From Calculated Risk:

Building permits decreased:

Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 969,000.
This is 1.3 percent below the revised April rate of 982,000 and is 36.3 percent below the revised May 2007 estimate
of 1,522,000.

Single-family authorizations in May were at a rate of 623,000; this is 4.0 percent below the April figure of 649,000.

The declines in permits suggest further declines in starts next month.

On housing starts:

Privately-owned housing starts in May were at a seasonally adjusted annual rate of 975,000. This is 3.3 percent below the
revised April estimate of 1,008,000 and is 32.1 percent below the revised May 2007 rate of 1,436,000.

Single-family housing starts in May were at a rate of 674,000; this is 1.0 percent (±9.9%)* below the April figure of 681,000.

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Filed under: Next big thing, Oracle Corp (ORCL), Small business

For a corporate buyer, life can be tough. There are usually many options. And, if there’s a bad purchasing decision, it could be a career killer.

So what do these folks do? Of course, they engage in lots of research — which often means relying on influencers.

Funny enough, it’s a good bet that vendors don’t know who these vendors are (or, at least haven’t conducted a decent amount of research on it).

Well, according to Duncan Brown and Nick Hayes, this can be a big mistake. In fact, they think that “influencer marketing” is going to be critical for B2B selling (keep in mind that, according to a 2007 Brandchannel survey, four out of the five top global brands did not engage in any advertising).

Continue reading Book Review: Influencer Marketing

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Filed under: Regions Financial (RF), Options

Regions Financial Corporation (NYSE: RF), a financial holding company based in Birmingham, Alabama, recently down 99c to $12.76:

Friedman Billings has an underperform rating on RF. RF call option volume of 6,410 contracts compared to put volume of 37,361 contracts. RF June 12.5 straddle was priced at 85c. RF July option implied volatility of 72 was above its 26-week average of 48 according to Track Data, suggesting larger risk.

Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com

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Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Berkshire Hathaway (BRK.A), Anheuser-Busch Cos (BUD), Lehman Br Holdings (LEH)

While today’s index levels closed up in positive territory, that is only part of the story. The major equity index levels were far higher after the open today. Retail sales rose more than expected but the sell-off we saw earlier in oil did not hold and oil prices took the gas away from us. Fed governor Plosser’s comments about “rates need to rise” didn’t help matters. Below are today’s unofficial closing levels:

• DJIA 12141.58 (+57.81)
• S&P500 1339.87 (+4.38)
• NASDAQ 2404.35 (+10.34)
• 10YR T-NOTE 4.205% (+0.132%)
• Major list of 52-Week Lows
• Top 10 Analyst Calls
• 2008 IPO’s up 50% or more

Anheuser-Busch Companies Inc. (NYSE: BUD) shares were up almost 5% by the final minutes of trading at $61.29 after InBev confirmed a $65.00 initial buyout offer for the beer giant last night. Interestingly enough, Berkshire Hathaway, Inc. (NYSE: BRK.A, BRK.B) will have pocketed several hundred million dollars on this if you see his current holdings.

Ethanol stocks were battered and tattered today after a key downgrade from Citi in the sector killed the stocks. The floods are part of the culprit, and Verasun Energy, Corp. (NYSE: VSE) was down over 10% to $4.75, a new 52-week low, in the final minutes today.

Charter Communications, Inc. (NASDAQ: CHTR) stock was down almost 3% in the final minutes today at $1.38 after it extended out the date for its dutch auction tender for its debt.

Invitrogen Corp. (NASDAQ: IVGN) saw shares get hit by over 10% to $38.81 after the company announced a highly leveraged acquisition of Applera’s Applied Biosystems (NYSE: ABI). Interestingly enough, Applera’s Celera Group (NYSE: CRA) was largely overlooked on this news.

Lehman Brothers Holdings Inc. (NYSE: LEH) was a loser yet again with shares down 8% at $21.80 in today’s final minutes. The brokerage firm fired its COO and its CFO in a move to try to install confidence, but it ain’t working.

Yahoo! Inc. (NASDAQ: YHOO) might as well change its name to Uh-Oh! Inc. and Jerry Yang is looking so bad that we might want to bring Terry Semel back. The company’s buyout chances from Microsoft Corporation (NASDAQ: MSFT) are formally toast and history, and it is likely entering an ad-search deal with Google Inc. (NASDAQ: GOOG). Yahoo! shares are down 11.6% at $23.11 in the final minutes today.

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