Filed under: Competitive strategy, Wal-Mart (WMT), Amazon.com (AMZN), Stocks to Sell

The Wall Street Journal reports (subscription required) of upcoming releases this summer such as Andrew Davidson’s The Gargoyle, New York Times reporter David Carr’s memoir The Night of the Gun, and Ron Suskind’s The Way of the World: A Story of Truth and Hope in an Age of Extremism.

There’s a separate article on the release of Stephenie Meyer’s book Breaking Dawn, which The Journal calls a “vampire romance novel.” Borders Group (NYSE: BGP) said it has sold 250,000 copies in the first 24 hours following the book’s release.

That’s an impressive number, and it may be some cause for hope for shareholders who have taken a beating in booksellers like Borders, Barnes and Noble (NYSE: BKS) and Books-a-Million (NASDAQ: BAMM).

But don’t get too excited. Since the first American edition of the first Harry Potter book in October of 1998, shares of Scholastic (NASDAQ: SCHL), a specialty publisher of children’s books, have gone from around $20 per share to their current price of $26 — a gain of 30% over the course of a decade. Not exactly something to get excited about, especially considering it’s one of the bestselling books of all time, ever.

The bookstores might get a temporary jolt from late sumer and fall hits, but the long-term fundamentals of the industry will drive results. A new CD from Eminem — or even The Beatles for that matter — wouldn’t be enough to save a company like Trans World Entertainment (NASDAQ: TWMC). For bookstores, that means the lower prices and wider selection of Amazon.com (NASDAQ: AMZN), or conveniences of stores like Wal-Mart (NYSE: WMT), as well as the onset of digital delivery are the factors investors have to look at.

And even vampire romance novels can’t compete with those.

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Filed under: Time Warner (TWX), Ford Motor (F), McDonald’s (MCD), AT and T (T), Citigroup Inc. (C), Sprint Nextel Corp (S), Money and Finance Today, Agilent Technologies (A), Kellogg Co (K), AMR Corp (AMR), Qwest Communications Intl (Q)

One ‘Lettter’ Stocks Offer Opportunity
Several companies with single-letter ticker symbols currently offer potential for value investors, says George Putnam. The editor of The Turnaround Letter stock publication highlights a number of single-letter stocks that have been “beaten down pretty badly and now look particularly appealing.” They include Agilent (’A'), Citigroup (’C'), Ford Motor (’F'), Kellogg (’K'), Macy’s (’M'), NetSuite (’N'), Qwest (’Q'), Spring Nextel (’S') and AT&T (’T').
‘Singular’ values: A, C, F, K, M, N, Q, S, T - BloggingStocks

August Trading Strategies
August is traditionally one of the worst months for the market. Against an already volatile backdrop, Experts show you 12 ways to navigate the dog days of summer.
http://www.marketwatch.com/newscommentary/tradingstrategies

Continue reading One ‘letter’ stocks offer opportunity, August trading strategies & 3 brand-new tax laws to know - Today in Money 8/4

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Chase wholesale eliminated jumbo home loans today (thanks for the tip S!) - citing the lack of a secondary market, poor loan performance and decreased volume.  The lift on the federal loan limit, declining property values and the elimination of stated income, stated asset loan products are all reasons that the jumbo market has dried up.  We should expect to see more of this.  Big, non-performing loans that suck up liquidity just aren’t a prudent business decision for lenders any longer.

While I’d normally beat the dead man walking drum I think this is pretty immaterial to most brokers as most folks, except for a very few that could actually provide documentation for a larger loan amount, weren’t able to qualify for these loans in the first place.

From Chase:

Friday, August 1, 2008

Today we are announcing the elimination of all Non-Agency/Jumbo Fixed and ARM (Amortizing and Interest Only) product offerings within our Wholesale Lending Business. We have made this decision based on a variety of reasons.

First, we have seen a dramatic reduction in Jumbo volume levels over the past six months. To a point, it has become a very small percentage of our overall business. Secondly, Capital Markets continue to exhibit no interest in this product, as it sees safer and more liquid products such as Fannie Mae, Freddie Mac and Ginnie Mae Mortgage-Backed Securities as better investments. Thirdly, our delinquency performance on these loans has been substantially worse than both our expectations and standards allow. Due to all of these factors, we feel it is in our best interest to suspend these products at this time.

It has been quite a tumultuous time in mortgage banking for the past 12 months. In fact, we are in the midst of the worst mortgage and real estate crisis in American history. Despite this, Chase continues to remain unwavering in its commitment to both mortgage lending, and specifically the Wholesale business.

We will closely monitor changes in this offering, including performance and salability in Capital Markets, calibrate the product set as appropriate and possibly re-introduce it in the future.

Thank you for your business and your continued loyalty to Chase.

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Filed under: Before the bell, Earnings reports, Analyst reports, Analyst upgrades and downgrades, Deals, Google (GOOG), Yahoo! (YHOO), Pfizer (PFE), PepsiCo (PEP), Amazon.com (AMZN), McDonald’s (MCD), AT and T (T), Anheuser-Busch Cos (BUD), Boeing Co (BA), ConocoPhillips (COP), Costco Wholesale (COST), Washington Mutual (WM)

Stock futures were higher this morning, indicating stocks could have a positive start to the session as oil prices continued to decline, sinking below $127 a barrel. Weekly inventories numbers reported later today could have an impact on oil prices. Then there is continued optimism in the financial sector, which caused the rally Tuesday. Also, a bill aimed at helping the housing market will reach the House floor. But once again earnings will likely have investors’ attention with Costco already giving a profit warning.

Costco Wholesale Corp. (NASDAQ: COST) shares are plunging over 8% in premarket trading after the wholesale retailer warned its August-ending quarter’s profit would miss analyst estimates. This is most surprising as Costco had been one of the retailer that seemed to have benefited from consumers trying to save and buy lower-cost items. But Costco blamed the lower profit on rising energy costs, saying it will earn less than $1 per share.

Boeing Co NYSE: BA) has just announced results, saying quarterly profit fell due to a charge. The plane maker reported Q2 EPS of $1.16, with $0.22 charge, versus the consensus of $1.23. Revenues came in at $17 billion, versus the consensus of $17.24 billion. Boeing also reaffirmed 2008, 2009 forecast.

PepsiCo (NYSE: PEP) reported higher quarterly profit on Wednesday, as net income rose to $1.7 billion, or $1.05 per share. Excluding items, earnigns per share were $1.03. Net revenue rose 14% to $10.95 billion. The company benefited from strong international demand and the weak U.S. dollar. The company raised its revenue outlook.

Pfizer Inc. (NYSE: PFE) shares are up more than 3% in premarket after the pharmaceutical said second-quarter profits more than doubled. The company earned $2.78 billion, or 41 cents per share. Excluding special items, Pfizer earned 55 cents per share, beating estimates by a penny. Revenue rose 9% to $12.13 billion, of which 7% was due to the dollar. U.S. sales fell 2%.

Another busy day for earnings includes results from McDonald’s (NYSE: MCD), AT&T (NYSE: T) and ConocoPhilips (NYSE: COP), Amazon.com Inc. (NASDAQ: AMZN) and Anheuser-Busch Cos (NYSE: BUD) among many others.

In non-earnings news, TechCrunch reports that Google Inc. (NASDAQ: GOOG) is in final negotiations to acquire Digg for “Around $200 Million.”

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Filed under: International markets, India, China, Commodities, Oil

At this juncture, investors/readers thinking about speculating a little in oil via shares in the United States Oil Fund (AMEX: USO) or via an integrated oil company should think again.

With the U.S. stock market meandering and the nation’s economic doldrums continuing, the urge can build in investors, particularly those less-experienced, to try something daring.

However, the oil market is currently in a tug-of-war between the geopolitical concern-oriented bulls and the global economy slowdown-oriented bears.

In other words, the oil market is about as balanced — or as divided — as it has been in about two years, so says energy trader Jim Dietz. Oil closed Friday up $1.02 to $125.10 per barrel. Oil is down about 15% from its all-time high of $147.27 registered on July 11, 2008, but is still up about 100% over the past year and about 400% since 2000.

Continue reading Oil market caught in bullish-geopolitical, bearish-economy tug-of-war

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Filed under: Law, Scandals, McGraw-Hill Companies (MHP)

The Wall Street Journal (subscription required) has obtained a draft version of the SEC’s report on bond-rating firms and their role in the credit bubble, and some of the stuff is pretty scary.

In one e-mail, a staffer at Standard & Poor’s, which is own by McGraw-Hill (NYSE: MHP) told another that “we rate every deal,” and that “it could be structured by cows and we would rate it.”

Another wrote that “rating agencies continue to create” an “even bigger monster — the CDO market. Let’s hope we are all wealthy and retired by the time this house of cards falters. ;O)”

Yes — complete with the smiley face. If this seems reminiscent of disgraced analyst Henry Blodget’s e-mails bashing stocks he was publicly pumping during the dot-com bubble, that’s because it’s exactly the same. The lesson here, once again, is this: e-mails ever really get deleted permanently and, if you’re being shady or doing something unethical, make a phone call, talk with the person in a dark alley, or send them a letter that they can promptly discard. Don’t send an e-mail!

Of course, S&P’s investment-grade ratings on CDOs stuffed with dodgy loans turned out to be wildly optimistic, and the house of cards has done more than falter — it’s brought down Bear Stearns and wreaked havoc on the economy.

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The California housing market is facing a major calamity. In April of 2007 California reached a peak median price of $597,640 only to see those gains erased in the following year. By June of 2008, the median price in California is hovering at $368,250, a drop of 38.38% with no signs of slowing […]
Related Posts:
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.
■Predicting the Housing Future: Los Angeles and Orange Counties. Using the Case-Shiller Index to Find a Bottom.
■Of Bubbles Past. Need a Map for Housing? Ask a Housing Perma-Bull and They’ll See the World Through Colored Glasses!
■Southern California Housing Numbers Exposed: The Bottom Falls out of the Housing Market, Again.
■Don’t Catch a Falling Guillotine: Housing Free Falling in Southern California. A Deep Look at the Numbers.

The California housing market is facing a major calamity. In April of 2007 California reached a peak median price of $597,640 only to see those gains erased in the following year. By June of 2008, the median price in California is hovering at $368,250, a drop of 38.38% with no signs of slowing down. This is data gathered from the California Association of Realtors. Seeing a statewide drop of nearly 40% in one year may be a tempting incentive for people to jump back in the market. I’ve recently gotten many e-mails about people asking about a market bottom and whether they should be buying today.

This bottom psychology has also taken hold on Wall Street. There seems to be a new campaign of getting people to jump back in with both fists with the idea that things are hitting a price bottom. This is a mistake. Just because something has become radically “cheaper” in relation to a peak price does not make it worth the current price. There has to be some underlying economic valuation that justifies the price. After all, the recent job report saw unemployment spike up to 5.7% and we also saw our 7th month of continued job losses:

Clearly there will be no second half recovery. In fact, here in California the Governor just signed an order to reduce the wages of 200,000 state employees to the minimum wage and laid off thousands of part-time employees. Do you think this is good for the California housing market? Who will be the future buyers of these homes? When we examine the data we realize that prices have further to come down. I’ll give you five reasons why prices will continue to fall in California:

(1) - State Budget Crisis means higher taxes and spending cuts (a combination of both).

(2) - $300 Billion in Pay Option ARMs set to recast in the state.

(3) - Declining price momentum - 3 measures show prices crashing

(4) - Market psychology. Why buy today when prices will be cheaper tomorrow?

(5) - Real estate prices do not always go up.

The combination of these factors is going to stunt any supposed recovery for the California real estate market. Yet for all the negative news on the economy and housing there will be a housing bottom at a certain point in time. When will housing actually hit a bottom? Some think we are already there. For those that are actually putting their money where their mouth is, there is the real estate futures market. And their bet is that housing for Los Angeles and Orange Counties will not hit a bottom until May of 2011.

For those of you really impatient to get into the market, it does seem that there will be a bottom forming as of the fall of 2009. I went ahead and took the available futures contracts on the Chicago Mercantile Exchange (CME) which are based on the Case-Shiller Index and constructed a chart adding the actual Case-Shiller data and the futures contracts:

What is fascinating by the chart is that most people that are betting on the futures markets do not see a bottom for the Los Angeles index which also includes Orange County until May of 2011. Yet the more fascinating trend is that some are actually betting on a minor summer bounce in 2009. Are people betting on a suckers rally? Maybe.

The index itself isn’t necessarily looking at price but looks at a single home through time in relation to the base year of 2000. So given the bottom number of 152 in May of 2011, the last time the Case-Shiller Index faced that number for LA was in May of 2003.

I’ve collected data for Los Angeles dating back until 2000 so we can then see what the actual median price of a home was at that point in time. According to DataQuick the median price of a Los Angeles County home in May of 2003 was $313,000. Is this far fetched? Not necessarily given that the median price of Los Angeles County is:

CAR data (June 2008): $396,560

DataQuick (June 2008): $415,000

Let us use the $313,000 bottom price and look at the current DataQuick price since it is data from the same measure. The current price of $415,000 would have to drop an additional 24.5% to reach the bottom price of $313,000. If we are to apply this same drop rate for Orange County we get the following:

Orange County Media Price

DataQuick (June 2008): $495,000
Bottom median price: $495,000 and 24.5% correction = $373,725

The rate of decline in price is a fair assessment since Orange County is actually out pacing Los Angeles County in the rate of sales declining and the rate in price change is nearly identical:

June 2008 data

Los Angeles County drop in sales year over year: 25.1%

Orange County drop in sales year over year: 26.9%

LA County year over year median price drop: 23.9%

OC year over year median price drop: 23.3%

Now my assessment is that we will see major abrupt movements to the downside once the pay option ARMs start recasting in fall and winter of this year. These loans are viciously toxic and will prove to be more destructive than people can imagine. If we are to take a look at the WaMu folder and look at recast dates here in California, we get a sampling of what is to come:

That right there is $26.3 billion of the overall $300 billion in loans that will start recasting. In addition, the state unemployment rate is already at 6.9% and given that the Governator just fired thousands of part-time workers, that number will jump. The way employment data is calculated, part-time workers are factored into the overall employment rate even if they are seeking full-time employment and are underemployed. This will bring them onto the books quickly. Now why is this going to prove to be more destructive? Take a look at the recent employment data released on August 1^st:

The only three sectors that saw job growth last month were government, health services, and leisure and hospitality (barely here). Clearly in California job growth via the government won’t be happening with the job cuts and also the Governor has put out hiring freezes. Lesirue and hospitality? Who will be spending when most sectors are contracting?
With this as the backdrop for Los Angeles and Orange Counties, there is no reason to believe that the market will reach a bottom anytime soon. I haven’t seen many articles attempt to pick a bottom but here you have it with actual price points. My guess is even after hitting a bottom, we may see a lost decade similar to Japan where prices simply move sideways for years. Given how our current government is trying to prop up institutions that should collapse, we are going to divert resources to organizations that clearly have mismanaged their own balance sheets. Money that can go elsewhere to improve the overall ability of our society to be competitive in research, infrastructure, and science. This money will now be spent on propping Fannie Mae and Freddie Mac and giving tax breaks for people to buy homes.

Should you buy a home today in Los Angeles County or Orange County? Look at the data above and tell me what you think.

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Post from: Dr. Housing Bubble Blog

A Lost Decade of Housing Equity: Los Angeles and Orange County will hit a Housing Price Bottom in May 2011 seeing May 2003 Prices.

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Related Posts:
■How Many People Overpaid for Their Home in Los Angeles County? Trying to get a Raw Number of Households Underwater.
■Predicting the Housing Future: Los Angeles and Orange Counties. Using the Case-Shiller Index to Find a Bottom.
■Of Bubbles Past. Need a Map for Housing? Ask a Housing Perma-Bull and They’ll See the World Through Colored Glasses!
■Southern California Housing Numbers Exposed: The Bottom Falls out of the Housing Market, Again.
■Don’t Catch a Falling Guillotine: Housing Free Falling in Southern California. A Deep Look at the Numbers.

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Filed under: After the bell, Google (GOOG), Juniper Networks (JNPR), Crocs Inc (CROX), DJIA, Delta Air Lines (DAL)

If you were looking for another hard day of profit taking on a summer Friday, the markets escaped the hangman. A barely positive durable goods of big ticket items was enough to send the pessimists to the showers and gave the bulls a little more ammo. Throw in an oil ticker showing a drop of more than $2.00 to almost $123.00 per barrel and that’s all that was needed. Look at bond yields and you’ll see we gave back almost all of yesterday’s move.

Here are today’s unofficial closing bell levels:
DJIA 11368.33 (+19.05)
S&P500 1257.65 (+5.11)
NASDAQ 2310.53 (+30.42)
10YR T-NOTE 4.111% (+0.095%)
TOP ANALYST UPGRADES
TOP ANALYST DOWNGRADES
Select Short Sales Data

Arch Coal (NYSE: ACI) tripled earnings posted EPS of $0.78 vs. $0.64 estimates. The stock was up more than 3% in pre-open but was up almost 9% at $55.45 in the final minutes of the day.

Crocs Inc. (NASDAQ: CROX) led the garbage stocks after a very ugly earnings warning last night. It now sees sales for all of 2008 modestly lower than 2007 and is now only targeting a break-even result for 2008. Retailers were noted as keeping inventory re-orders at low levels, which is hard to blame them considering the ugly shoe fad has already started its workdown. Shares were down 44% at $4.99 after shares had already sold of more than 80% from 52-week highs.
Delta Air Lines Inc. (NYSE: DAL) posted sharp gains after Merrill Lynch raised the legacy carrier to a BUY rating. This held up despite an S&P downgrade in airlines and shares were up over 6% at $7.22 in today’s final minutes.

Juniper Networks (NASDAQ: JNPR) raised guidance on strong demand for its networking equipment and Wall Street seems to be more than happy with Microsoft’s recently ex-Online head coming over to run the entire company as CEO. We even saw Citigroup and FBR raise their ratings to lead the stock to being up 19% at $26.89 by the final minutes of the day.

Google Inc. (NASDAQ: GOOG) had a great day compared to the market after its rating was raised to Buy from Hold at Soleil Securities. Shares were up 3.4% at $491.95 in today’s final minutes.

Wynn Resorts Ltd. (NASDAQ: WYNN) beat earnings at $1.11 EPS vs. $0.93 estimates, but the high-end casino player had a mixed revenue number with a weak Vegas and strong Macau. Shares had been up 35% since earlier in July, so traders sold the news slightly from yesterday’s highs and shares were down 1.6% at $90.11 in today’s final minutes.

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From Slate, via The Big Picture.  Pretty good, but I’d put the firemen in a big shadow of China…

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Source [blownmortgage]

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