Filed under: Bad news, Products and services, Merck and Co (MRK), Economic data

Minyanville Professor David Miller dares to share the kind of keen insight and actionable information you won’t find in any prospectus. For more original thought, visit www.minyanville.com.

Professor Miller,

I just saw news of Merck & Co., Inc. (NYSE: MRK)’s and Schering Plough Corporation (NYSE: SGP)’s Vytorin not meeting their goal of heart study. Approximately 40% of Schering Plough’s profit comes from this joint venture. Do you think pharmaceutical companies put too many eggs in one basket? Do they have a choice?

Minyan T.

MT,

They do have a choice, but the decision is to focus only on blockbuster drugs - which are a dying breed in this age of increased focus on personalized medicine. But the study is not as big of a disaster as some are saying. The main goal of aortic thickening is not as important to this drug as reductions in atherosclerotic events, which was positive in favor of Vytorin.

Basically, MRK/SGP tried to extend the market for Vytorin by this study in a place few thought it would work. They overextended, which is the bad news. The good news is the study confirmed the drug works to reduce cardiac events related to fat in the arteries, which is what the drug is primarily prescribed for.

-Professor Miller

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The explicitly guaranteed GSE, Freddie Mac, is mulling a possible $10 billion equity round to raise capital to try to avoid from kicking in the taxpayer-financed bailout that Hank Paulson is hot and heavy on.

I don’t know how you raise that much cash at such a terrible stock price without completely diluting the hell out of the rest of the shareholders; but onward I say.  Better the stockholders than the taxpayers.  I say raise away until the stock is worth nothing (better get moving).

From Market Watch:

Freddie Mac is considering raising capital by selling as much as $10 billion in new shares to investors, the Wall Street Journal reported Friday, citing unnamed people familiar with the matter. The move, which comes as emergency regulatory actions have triggered a two-day rebound in its stock, would have the potential to avoid a full-blown government rescue for Freddie…

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Securities regulators have raided the St. Louis headquarters of Wachovia to investigate the company’s actions  around their issuance of auction rate securities (h/t Don) .  The regulators are looking particularly hard at how the company valued and marketed the securities which have caused more than 70 complaints filed with the state from investors that have had assets frozen by the company during the mortgage meltdown.

From CNBC:

Missouri has also served subpoenas on more than a dozen Wachovia Securities agents and executives after receiving more than 70 complaints representing more than $40 million in frozen investments over the last four months. 

The move on the headquarters comes three months after Wachovia Securities failed to fully comply with requests by the Missouri securities division for certain information, state officials said.

“Hundreds of Missouri investors have called my office because of inability to access their money. They were told these investments were safe and easy to cash in, but now they cannot run their business, make medical payments, or pay school tuition,” Carnahan said in a written statement.

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Filed under: Google (GOOG), salesforce.com inc (CRM), Small business

Every day, I get a variety of media pitches from companies and PR folks. No doubt, I try to evaluate all of them.

The problem: some of the pitches don’t work. As a result, a company may miss an opportunity to get some exposure.

However, there are some strategies to improve things. So, let’s take a look:

Know the journalist: Most of us focus on certain topics (or have a so-called beat). Thus, read some of a journalist’s work. If he or she doesn’t cover your industry or market focus, then it’s probably a waste of time to make a pitch.

Now, for those who are a right fit: put the journalist’s name in a notebook or a database (there are free online offerings, such as Zoho). You might also look at other publications the journalist writes for. Oh, and it’s a good idea to keep reading the journalist’s work. To this end, you might set a filter with something like Google (NASDAQ: GOOG) News.

Craft a personalized pitch: OK, I will respond to a canned pitch. But, it better be highly targeted.

Although, if you want to improve your odds, try to find ways to show that you understand my focus and work.

For example, you could start a pitch with: “Hi Tom, I saw that you recently wrote a piece about on-demand software operator, Salesforce.com (NYSE: CRM). I think you might be interested in another company in the space, which is called…..”

Believe me, I’ll pay attention.

Keep it short: I’ve seen pitches that have hundreds of words. Don’t do it. Instead, I like pitches that are just a couple paragraphs.

Basically, find a way to grab me and then perhaps have a press release (but don’t have it as an attachment — I’m scared of opening them because of security concerns).

Provide a hook: I get press releases on such topics as new-hires of executives and other typical stuff. But, unless the hire is a big-time person, does it matter? Probably not.

In other words, think about the following: what is the angle (that is, the hook)? Why would I be interested in writing about your pitch?

In fact, try to state the hook in an email’s subject line.

Don’t pitch every day: Yes, I get some of these. And it’s annoying. It means that you are really not targeting me; rather, it’s kind of like spam.

Some resources: To go further, there are certainly good books on dealing with the media, such as Media Training 101: A Guide to Meeting the Press and The New Rules of Marketing and PR: How to Use News Releases, Blogs, Podcasting, Viral Marketing and Online Media to Reach Buyers Directly.

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Bank failures are not common occurrences. And seeing a large group of people lined up at 7:30AM in a prime Southern California location with distraught faces ready to withdraw their money from the now taken over IndyMac Bank was even more surreal. The idea of a large brick and mortar institution not keeping […]
Related Posts:
■The Lords of Money Speak: Even the Prime Will Fall. Lessons From the Great Depression Part XV. The King JPMorgan Speaks.
■IndyMac: IndyMac History and Collapse. The Saga of the Second Largest Bank Failure in History, here in Sunny Southern California.
■Affordable Housing: Finding Affordable Housing just got Easier in California.
■IndyMac Bank: Bank Failure, Long Lines, and a Real Home of Genius. Another Reason why IndyMac Bank Failed.
■The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression: Part X. Data Mining.

Bank failures are not common occurrences. And seeing a large group of people lined up at 7:30AM in a prime Southern California location with distraught faces ready to withdraw their money from the now taken over IndyMac Bank was even more surreal. The idea of a large brick and mortar institution not keeping your money safe is enough to unnerve the strongest of us. Bank failures may seem like part of a distant past associated with the Great Depression or the S & L crisis but certainly not to our current era.

Since 2000, the FDIC has recorded 32 bank failures. I have compiled this list from FDIC data and have also added a column to show the amount of assets taken over. What you’ll find is digging into the data for yourself is much more telling than listening to the media:

So what is the big deal with IndyMac Bank? Take a look at this sobering fact:

IndyMac Bank Total Assets: $32 billion

All Other 31 Combined Bank Failures since 2000: $8.97 billion

Basically IndyMac Bank had about 4 times the amount of assets as all the other 31 bank failures of this decade combined. This is an important contrast since I’ve been seeing the media currently say things such as:

“We won’t have as many bank failures as the past…”

“Only 5 banks have failed this year…”

“We only have 90 banks on our troubled list…”

As you can see from the above, depending on which banks are on the list and their size, having a handful of bank failures the size of IndyMac Bank would be the equivalent of 500 to 1,000 smaller banks failing. It may come as no comfort that IndyMac wasn’t even on the troubled list.

In today’s article we are going to take a look at a few photos of what occurred on Monday. This is part XIV of our Lessons from the Great Depression series:

1. Personal Story by a Lawyer from a Previous Asset Bubble. Can we Learn from the Past and How will the Housing Decline Impact You?

2. Lessons From the Great Depression: A Letter from a former Banking President Discussing the Bubble.

3. Florida Housing 1920s Redux: History repeating in Florida and Lessons from the Roaring 20s.

4. The Menace of Mortgage Debts: Lessons from the Great Depression Series: Part IV: Where do we go After the Housing Crash?

5. Business Devours its Young: Lessons from the Great Depression: Part V: Destroying the Working Class.

6. Crash! The Housing Market Free Fall and Client #10 Contagion.

7. Winston Smith and the Bailouts in Oceania: Lessons from the Great Depression Part VII.

8. Sheep Back to the Slaughter: Lessons from the Great Depression Part VIII: All the Change and Bear

Market Rallies.

9. A Bubble That Broke the World

10. The Sham of our Current Unemployment Numbers

11. Understanding the Impact of Asset Deflation and Consumer Inflation.

12. Is the DOW now Tracking with the California Housing Market?

13. The Federal Reserve.

Photos Then and Now

Reports from all across Southern California discussed the panicked mood of many customers at IndyMac locations all across multiple cities. Eugene Garcia over at the Orange County Register has been kind enough to give us permission to use some of the photos:

*Source: OC Register Eugene Garcia

In this picture you’ll notice a line that according to reports, had approximately 100 people. You’ll also notice that a large number of the customers are nearing or in retirement. Not a good place to be in especially if you are dependent on this money and had over $100,000:

“(LA Times) But an estimated 10,000 IndyMac customers had deposits that exceeded those limits. Among them was 70-year-old Charles Tengeri, a retired teacher from Pasadena, who arrived at IndyMac’s headquarters at 4 a.m. and grabbed one of the first spots in line.

Tengeri had more than $200,000 in five certificate of deposit accounts — his life savings, he said. After waiting five hours, he left with a check for $171,000.

“It’s not 100%, but it’s better than nothing,” said Tengeri, who still has more than $50,000 tied up in the bank. “It’s not fair. . . . I’m praying for it, I’m crossing my fingers for it, but I don’t know.”

In this case, assuming the total deposit in the bank was $221,000 leaving the bank with $50,000 locked up is a 22% reduction of the original amount. That is a hefty amount given that you are not suppose to lose any of your principal at a bank. According to reports, $1 billion of deposits are beyond the $100,000 FDIC limit. No wonder why folks at a Mission Viejo location had one thing on their minds:

*Source: OC Register Eugene Garcia

It is pretty clear what the intention of today’s visit was. The FDIC tried to reassure people that their money was fine but most folks do not want to leave their money in an institution that gambled recklessly in the housing market. Why would they? There are other institutions that are sounder and people now realize that old mantras like “real estate never goes down” are sometimes hard sales pitches. People are looking to protect their money. And if you think people are trusting their government who have recklessly allowed the dollar to plummet and have squandered any semblance of prudence, think again. People are now starting to push the first domino on other institutions:

“(LA Times) Anne Martin, 56, wasn’t taking any chances Monday. She went first to an IndyMac branch in Arcadia to liquidate a certificate of deposit, then planned to go to Downey Savings, where she intended to close another CD amid speculation it would be the next bank to fail.

“I’m going there after this,” she said. “I know they did a lot of loans, and I’m afraid they’re going to be caught up in the same situation.”

At a Downey branch in Arcadia, Doris Crosby of Pasadena was transferring money from another bank, where it hadn’t been insured, into her checking account despite hearing rumors that Downey was in trouble.

“I just have this feeling I’m jumping from one frying pan to another,” Crosby, 82, said. “I just don’t know what to do.”

People are simply not happy about this and rightfully so. Here is a picture from a different angle at the Laguna Woods location:

*Source: OC Register Eugene Garcia

There were reports from long lines at:
Pasadena

Los Angeles
Laguna Woods

Mission Viejo

Long Beach

And I’m sure other locations had similar reactions. Although the housing crisis and credit debacle have been going on for sometime, seeing large banks in trouble and people scrambling for their money will hopefully light a fire with our politicians. Unfortunately they take this as a pass to bailout every nook and cranny of the economy but all we get is corporate welfare for those on Wall Street while middle class Americans, many pictured above struggle to keep enough money for a dignified retirement.

The reason these pictures are so rare is that you would have to go back to the Great Depression to see long lines of people waiting to take their money out of large banking institutions:

If the FDIC is telling us that we have 90 to 150 more troubled banks, how can anyone say with a straight face that we will have a second half recovery? In fact, according to current government measurements we aren’t even in a recession! According to government data, inflation is moderate, unemployment is dandy, and we are following a strong dollar policy. I think people are now realizing the emperor has no clothes and are starting to awake from a decade long financial apathy quelled by debt.

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Bank Failure: IndyMac Bank. Lessons from the Great Depression Part XIV. Bank Failures.

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Related Posts:
■The Lords of Money Speak: Even the Prime Will Fall. Lessons From the Great Depression Part XV. The King JPMorgan Speaks.
■IndyMac: IndyMac History and Collapse. The Saga of the Second Largest Bank Failure in History, here in Sunny Southern California.
■Affordable Housing: Finding Affordable Housing just got Easier in California.
■IndyMac Bank: Bank Failure, Long Lines, and a Real Home of Genius. Another Reason why IndyMac Bank Failed.
■The Sham of our Current Unemployment Rate Numbers: Lessons from the Great Depression: Part X. Data Mining.

Via [DrHousingBubble]

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Filed under: Employees, Citigroup Inc. (C)

When the new stadium for The New York Mets opens next year, it will be called Citi Field. Given the number of the financial firm’s employees who are out of work and the large numbers who will be fired in the future, the Citigroup (NYSE: C) name on the park borders on cruelty.

According to The New York Times, “With high name recognition and a place among the world’s banking leaders, Citigroup hardly needed the Citi name plastered on a ballpark to enhance itself.” The arrangement runs for 20 years and has a total cost of $400 million.

The naming rights hardly seem like a good idea for Citi’s shareholders.

Although the bank’s stock has recovered somewhat recently, shares are still at only $19.35 compared to a 52-week high of $52.18.

The decision to move ahead with the deal calls into question, once again, the judgment of Citi CEO Vikram Pandit and his management. A firm losing billions of dollars a quarter hardly seem a candidate for being caviler with its cash.

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

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Filed under: After the bell, Earnings reports, Google (GOOG), Microsoft (MSFT), Intel (INTC), Marketing and advertising

Intel Corp. (NASDAQ: INTC) today reported better-than-expected second quarter results, allaying fears that the economic slowdown would hurt the world’s largest chipmaker.

Net income rose 25% to $1.6 billion, or 28 cents and sales jumped 9.1% to $9.47 billion, beating analysts’ expectations of profit of 26 cents on revenue of $9.33 billion. The company even gave robust guidance of $10 billion to $10.6 billion. Analysts surveyed by Bloomberg expected sales of $10.01 billion. Shares of the Santa Clara, Calif.-based company rose in after-hours trading along with other tech bellwethers such as Microsoft Corporation (NASDAQ: MSFT), Dell Inc. (NASDAQ: DELL) and Google Inc. (NASDAQ: GOOG).

“Intel had another strong quarter with revenue at the high end of expectations and earnings up substantially year over year,” said Paul Otellini, Intel president and CEO, in the earnings release. “As we enter the second half, demand remains strong for our microprocessor and chipset products in all segments and all parts of the globe.”

Some skeptics, including me, wondered whether Intel would be hurt by the economic slowdown that’s hurting everyone else. After all, are people and companies willing to shell out big bucks for fancy notebook computers during these uncertain times? Well, judging from the company’s earnings, the answer appears to be “yes.”

Both the mobile and microprocessor units set records. Gross margins rose to 55.4% from 53.8% in the first quarter and 46.9% a year earlier “as growth in demand for lower-priced notebook PCs resulted in a lower-than-expected microprocessor average selling price. In April, the company predicted a gross margin of 56% plus or minus a couple of points,” the Wall Street Journal noted.

So it looks like reports of Intel’s decline were overblown.

“If the slowdown were that pervasive, then Intel would have already seen it,” Raymond James analyst Hans Mosesmann told Bloomberg News.

Good point.

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Filed under: Wal-Mart (WMT), Costco Wholesale (COST)

The Associated Press reports that a “Depression Era” mentality is taking hold among consumers. This matters to the overall economy since 70% of Gross Domestic Product (GDP) growth depends on consumer spending. Maybe this is good news because it will make people care more about spiritual matters, and less about material ones.

AP bolsters its consumer mentality shift with excerpts from a Nielsen survey that interviewed 50,000 consumers by e-mail during the first week of June. The survey found that

• 63% of consumers are cutting spending due to rising gas prices, up 18 percentage points from a year ago;
• 78% of consumers are combining shopping trips;
• 52% are eating out less often;
• Consumers are cutting more coupons;
• They do more of their shopping at super centers; and
• They buy less expensive brands.

Continue reading A “Depression Era” mentality takes hold of consumers

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