Sprint, AMT, WSJ, Lizdon
– I have posted here countless times on Sprint’s customer service. A poll was done and guess what? Sprint was last…
– The Senate did another band-aid fix..
– Here comes the cavalry.
– Howard Lizdon makes sense when it comes to the Fed
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For many ethanol producers pinch by the historically low margins in September, recent events are giving a huge boost to the industry now.
Citigroup’s (C) David Driscoll, probably the best out there when it comes to the ethanol industry issued a report Tuesday.
In it he said average ethanol margins rose 2 cents a gallon last week to 30 cents and have risen 26 cents over the past 10 weeks since bottoming at 4 cents a gallon back in late September. The to date mild winter weather has lead to natural gas price reductions from a settlement of more than $8.02 per million BTU’s on Nov. 26 to a settlement of $7.15 on Friday to $7.085 on Tuesday. Since most ethanol producers use natural gas to power plants, reductions here go right to the bottom line.
Demand has also held steady at higher than normal levels as ethanol supply for September, the last month numbers were available, increased modestly by three days to 26, well below the industry’s average historical days of inventory level of 32 days. This tells us that ethanol production currently is being fully blended into gasoline.
For ethanol producers like Verasun (VSE) and Pacific Ethanol (PEIX), who have stopped expansion production, the large increase in margins ought to give boost to those plans again. For a large integrated producer like Archer Daniels Midland (ADM), who surprised investors last quarter with dramatically improved results despite a tough operating environment, news like this ought to assure investors this quarter looks to be a very strong one also.
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Wachovia (WB) CEO Ken Thompson said something on Wednesday no other bank has stepped up to say yet.
At a Goldman Sachs conference in New York he said is confident that the bank’s dividend is safe and he is “comfortable” that his bank will “grow earnings” in 2008, but gave no specific forecast.
On the same day in a regulatory filing, the bank said securities backed by loans dropped in value in the past two months at a rate equal to the decline in the July-September period. At that time Wachovia took a $1.34 billion hit. In October they said the value had fallen by $1.1 billion and they now project a $240 million writedown for November to cover the difference. The assets being classes being written down include commercial mortgage, leveraged finance, consumer mortgage and structured credit products, including subprime residential mortgage backed securities (“RMBS”) and collateralized debt obligations having RMBS as collateral.
The bank also doubled the amount it expects to set aside to cover bad loans in the fourth quarter to $1 billion.
Here is where we can understand the sentiment of the market. The Fed’s action today injected liquidity into the markets and will lower LIBOR, reducing the non-performing loans in all these writedowns, Wachovia came out and said they will grow earning next year and the dividend is safe. Good news, right? No. The only thing the market is focused on is the write-downs. This is witnessed by Merrill Lynch downgrading Wachovia shares Wednesday morning to “Sell” from “Neutral.” The stock is trading down almost 3%.
Wachovia now trades at 9 times current earnings that will grow next year and yields 5.8%.
Thompson must be real confident considering the current bank CEO situation out there to say the things he said. If either the dividend gets cut OR earning do not grow, Thompson will most likely find his head on the chopping block. Operating under the assumption he is not actively seeking that event, one must conclude both events are “in the bag’ so to speak. That is not to say the the dividend will be increased or that earnings grow by more than a penny, it is to say that a major deterioration from here is doubtful.
Berkshire’s (BRK.A) Warren Buffett said yesterday that he expected “major divergences” in financials results during the next year. With earnings declines expected across the sector, the fact that Wachovia will grow them, it should be one of the winners in the category.
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I was alerted to this by Jane Genova on Wednesday morning. It was a very nice way for Sherwin Williams shareholders to welcome the day.
The following is from Jane’s blog Law and More
“A victory for both the children of Rhode Island and the three lead-paint public nuisance defendants, the RI Supreme Court today upheld the 2002 Lead Hazard Mitigation Action.
That law puts the responsibility on the landlords to maintain their property as lead-safe. And that’s where the accountability is and should be, the lead paint defendants Sherwin-Williams (SHW), Millennium Holdings, and NL Industries (NL) have been arguing. They have also contended that “lead-safe” is the appropriate approach to preventing lead-poisoning of children. “Lead-safe” means that the lead paint is intact, therefore not producing chips or dust containing lead. The plaintiff, including in its recent abatement plan, insists that “lead-free” is the only way to ensure that the state’s children are rid of this hazard. “Lead-free” entails removing all the lead paint, a costly procedure.
Does this ruling by the RI Supreme Court bode well for when those Justices hear the appeal of the 2006 RI lead paint verdict by the defendants? After all, this decision aligns with what the defendants have been fighting for since their first lead paint public nuisance trial and throughout and after the second one. There’s more: In his opinion, the RI Supreme Court Chief Justice criticized the RI Superior Court Justice. So much for the supposed old-boys’ network in the RI court system.
Here is some background on this Act that the RI Supreme Court ruled as constitutional today. According to the Lead Hazard Mitigation Act, landlords are required to:
* Take a lead-hazard awareness course. This runs about three hours.
* Prove that their properties comply with RI Health Department standards. This is done by having their properties certified as lead-safe every two years or each time there is a new tenant.
As the law was written there were exemptions. Those appy to:
* Owner-occupied two- and three-unit properties
* Residences restricted to those 62 years of age or older
* Temporary housing
* Housing certified as lead-safe or lead-free.
It was these exemptions that brought this whole enchilada to the highest Court in the state. Landlords saw these as violations of their rights to equal protection as defined by the RI constitution. They filed a complaint through their lawyer Joseph Larisa Jr.
When the case was heard by Superior Court Judge Stephen J. Fortunato Jr., reports THE PROVIDENCE JOURNAL writer Brandie M. Jefferson, that judge ruled it unconstitutional . However, his decision could not be enforced. That Judge recommended that the General Assembly review that Act.
Most importantly, how he handled that was criticized today by RI Supreme Court Chief Justice Frank J. Williams. Jefferson notes that Judge Fortunato’s ruling left the law in limbo. It was still on the books but unenforceable. On this Chief Justice Williams wrote, quotes Jefferson, “We pause to note our concern with the trial justice’s refusal to enter final judgment. This, coupled with the trial justice’s refusal to restrain the implementation of legislation that he found unconstitutional let the parties in legal limbo.”
What we lead-paint watchers pick up loud and clear is: The RI Supreme Court both overturned and criticized the decision of a RI Superior Court Judge. If that could happen with the Lead Hazard Mitigation Act, it could also happen in the Court’s review of the second RI lead paint public nuisance trial.
Just the possibility of this is the best holiday present for everyone who has worked so hard to right what we see as the injustices associated with RI Lead Paint Trial II.”
This is it, it is over. If RI law determines that “lead safe” is the best way o protest children, the forced removal of that paint by the lower court judge is now against RI law. Further, the justices place the responsibility on the property owners, where it should be, not the producers of the product.
Finally, some common sense in Rhode Island. It only took 3 years…..
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UPGRADES
MAXIMUS MMS KeyBanc Capital Mkts Buy » Aggressive Buy
Genesis Microchip GNSS Jefferies & Co Underperform » Hold
ACADIA Pharmaceuticals ACAD JMP Securities Mkt Outperform » Strong Buy
SAFECO SAF Friedman Billings Underperform » Mkt Perform
BankAtlantic BBX Friedman Billings Underperform » Mkt Perform
Acergy ACGY Lehman Brothers Equal-weight » Overweight
Repsol SA REP Lehman Brothers Underweight » Equal-weight
DOWNGRADES
Akamai Tech AKAM Cowen & Co Outperform » Neutral
Celgene CELG Cowen & Co Outperform » Neutral
Western Alliance Bancorp WAL Sandler O’Neill Hold » Sell
Charles River CRL UBS Buy » Neutral
Cincinnati Bell CBB Bear Stearns Outperform » Peer Perform
Flanders FLDR JMP Securities Mkt Perform » Mkt Underperform
EDO Corp EDO Friedman Billings Outperform » Mkt Perform
Franklin Bank Corp FBTX Keefe Bruyette Mkt Perform » Underperform
Lukoil LUKOY Lehman Brothers Overweight » Equal-weight
SAP AG SAP Credit Suisse Outperform » Underperform
Hertz Global HTZ Banc of America Sec Buy » Neutra
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In SEC filings tonight Sears Holdings (SHLD) Chairman Eddie Lampert added to his AutoNation (AN) stake today.
Lampert acquired an additional 534,500 shares of the company at prices between $16.79 and $17.32 a share on 12/10 and 12/11. This brings the total number of shares under his control to 58 million or just over 32% of the total.
Shares are held by the following entities controlled by Lampert:
*Shares of common stock, par value $0.01 per share (“Shares”), of AutoNation, Inc. (the “Issuer”) are held by ESL Partners, L.P. (“Partners”).
*Shares are held by ESL Institutional Partners, L.P. (“Institutional”).
*Shares are held in an account established by the investment member of ESL Investors, L.L.C. (“Investors”).
*Shares are held by CBL Partners, L.P. (“CBL”).
*Shares are held by ESL Investment Management, L.P. (“ESLIM”).
*Shares are held by RBS Partners, L.P. (“RBS”).
*Shares are held by Edward S. Lampert.
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Thursday’s Picks
Jeff Macke recommends shorting the Dow with Shrt Dow30 Proshares (DOG).Open $58.90
Guy Adami thinks Cisco (CSCO) is a buy. Open $28.80
Karen Finerman prefers shorting MBIA (MBI).Open $31.92
Pete Najarian likes Johnson & Johnson (JNJ). Open $67.70
Wednesday’s Results
Jeff Macke recommends McDonald’s (MCD) Open $61.13 Close $61.66 LOSS and AT&T (T) on any dip. Open $39.46 Close $41.71 GAIN
Guy Adami likes Cisco (CSCO). Open $28.02 Close $28.20 GAIN
Karen Finerman says long Goldman (GS) Open $211.15 Close $212.58 GAIN short Lehman (LEH) Open $61.14 Close $61.82 LOSS, dollar for dollar.
Pete Najarian thinks Juniper (JNPR) is a buy. Open $32.61 Close $33.44 Gain
Guy Adami= 53-42 = 56%
John Najarian= 13-4 = 76%
Jeff Macke= 58-37 = 65%
Pete Najarian= 42-39 = 53%
Tim Seymore= 6-7 = 57%
Karen Finerman= 35-28 = 55%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%
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WM Washington Mutual Inc 15.79
WLB Westmoreland Coal Co 14.10
WEN Wendy’s International … 26.93
SFE Safeguard Scientifics … 1.84
SBUX Starbucks Corp 21.69
OHB Orleans Homebuilders Inc 4.59
ODP Office Depot, Inc 14.99
MTB M & T Bk Corp 84.53
MSC Material Sciences Cor … 7.35
KEY KeyCorp (New) 22.88
JCOM J2 Global Communicati … 22.23
JBLU Jetblue Awys Corp 6.17
JAS Jo-Ann Stores Inc 14.16
COO The Cooper Companies, Inc 39.49
COBR Cobra Electronics Cor … 4.41
COA Coachmen Industries, Inc 5.13
CMLS Cumulus Media Inc 7.54
CAL Continental Airlines Inc 24.25
CACC Credit Acceptance Corp 17.09
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Thank -you, Zune beats iPod, You are what you drive, Fed
– ValuePlays made its first “year end list“
– I have never used a Zune so I will defer to them.
– Interesting and very true. Who doesn’t know what their boss drives?
– Here is what the “experts” predicted about the Fed’s decision Tuesday.
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The Fed has taken the negative connotation from the discount window and turned it into an international currency based auction. Nice
Rather than just lowering and setting the rate, the Fed, in conjunction with Centrail Banks in Canada, the EU and Switzerland have set up an auction system for short term funds. Here is the Fed statement:
“Federal Reserve Actions
Actions taken by the Federal Reserve include the establishment of a temporary Term Auction Facility (approved by the Board of Governors of the Federal Reserve System) and the establishment of foreign exchange swap lines with the European Central Bank and the Swiss National Bank (approved by the Federal Open Market Committee).
Under the Term Auction Facility (TAF) program, the Federal Reserve will auction term funds to depository institutions against the wide variety of collateral that can be used to secure loans at the discount window. All depository institutions that are judged to be in generally sound financial condition by their local Reserve Bank and that are eligible to borrow under the primary credit discount window program will be eligible to participate in TAF auctions. All advances must be fully collateralized. By allowing the Federal Reserve to inject term funds through a broader range of counterparties and against a broader range of collateral than open market operations, this facility could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress.
Each TAF auction will be for a fixed amount, with the rate determined by the auction process (subject to a minimum bid rate). The first TAF auction of $20 billion is scheduled for Monday, December 17, with settlement on Thursday, December 20; this auction will provide 28-day term funds, maturing Thursday, January 17, 2008. The second auction of up to $20 billion is scheduled for Thursday, December 20, with settlement on Thursday, December 27; this auction will provide 35-day funds, maturing Thursday, January 31, 2008. The third and fourth auctions will be held on January 14 and 28, with settlement on the following Thursdays. The amounts of those auctions will be determined in January. The Federal Reserve may conduct additional auctions in subsequent months, depending in part on evolving market conditions.
Depositories will submit bids through their local Reserve Banks. The minimum bid rate for the auctions will be established at the overnight indexed swap (OIS) rate corresponding to the maturity of the credit being auctioned. The OIS rate is a measure of market participants’ expected average federal funds rate over the relevant term. The minimum rate for the December 17 auction along with other auction details will be announced on Friday, December 14. Noncompetitive tenders may be accepted beginning with the third auction. The results of the first auction will be announced at 10 a.m. Eastern Time on December 19. The schedule for releasing the results of later auctions will be determined subsequently. Detailed terms of the auction and summary auction results will be available at http://www.federalreserve.gov/monetarypolicy/taf.htm.
Experience gained under this temporary program will be helpful in assessing the potential usefulness of augmenting the Federal Reserve’s current monetary policy tools–open market operations and the primary credit facility–with a permanent facility for auctioning term discount window credit. The Board anticipates that it would seek public comment on any proposal for a permanent term auction facility.
The Federal Open Market Committee has authorized temporary reciprocal currency arrangements (swap lines) with the European Central Bank (ECB) and the Swiss National Bank (SNB). These arrangements will provide dollars in amounts of up to $20 billion and $4 billion to the ECB and the SNB, respectively, for use in their jurisdictions. The FOMC approved these swap lines for a period of up to six months.”
The key here is in the second to last paragraph in which they say “potential usefulness of augmenting the Federal Reserve’s current monetary policy tools–open market operations and the primary credit facility–with a permanent facility for auctioning term discount window credit.” Essentially the Fed would turn the rate into a more floating market based rate for institutions.
The new loans will be auctioned off with a minimum rate linked to the expected actual federal funds rate over the duration of the loan. When you consider the federal funds rate is expected to decline over at least the next two months, during which the loans will be outstanding, the interest rates should end up being below the current federal funds rate.
For housing, today’s news is also beneficial. Bernake & Co. created reciprocal “swap” lines with the European Central Bank, for $20 billion, and the Swiss National Bank, for $4 billion. The “swaps” will enable the European Central Bank and Swiss National Bank to make dollar loans to banks in their jurisdiction. The idea is that this will put downward pressure on interbank dollar rates, principally the London Interbank Offered Rate, or LIBOR.
Why does this matter for US housing? Most ARM’s out there are indexed to the LIBOR rate and that has stayed uncomfortably high. This is causing these ARM’s to reset at very high rates. By bringing LIBOR rates down, the ARM’s then reset at lower rates. Lower ARM rates mean lower payments for homeowners.
Both the DIA and S&P rallied 1.5% on the news, wiping out almost all of Tuesday’s losses.
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We made our first loans over the weekend. Read on for details and to contribute more…
View the recipients and their businesses here
Donate to our Project here:
Why does Wall St. keep selling shares of Sherwin Williams (SHW) in the face of its continued increasing and then beating its earnings guidance?
Sherwin-Williams said at the Citi Basic Materials Symposium it continues to expect 2007 earnings of $4.70 to $4.75 per share. The current consensus earnings estimate is $4.73 per share.
It is hard to quantify what is more confusing. The lack of support from investors or the lack of interest from a suitor. Sherwin is cheap and growing.
My hope is that Andrew Liveris at Dow Chemical (DOW) is reading this and takes a look at the company. Sherwin has everything Liveris has specified he wants in an acquisition.
It is growing earnings despite a negative operating environment, Liveris could do the deal without substantially adding to Dow’s debt, the acquisition would be immediately accredive to earnings and it would add substantially to the specialty coatings business he has said he want to develop further.
In short, there is nothing about the deal not to like for Dow, unless, unless that is they are working on something much larger…
Either way, Sherwin shares are going to surge when either Wall St. notices it or a potential buyer does. There are going to be a bunch of folks sitting around not too long from now saying, “I wish I had bought back then…”
We did, don’t worry, we will console you….
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Nice job Chris, what’s next? An investigation into Tech Stocks from 2000? Does anyone wonder why only 20% of people approve of the job Congress does?
Dodd managed to take a few moments out of already failed bid for the White House to propose a bill with has similar goals to one passed by House lawmakers last month. It would enact stricter standards for subprime loans made to borrowers with poor credit and for other “nontraditional” loans that allow borrowers to defer principal or interest payments, according to an outline distributed at a briefing for reporters Monday. Doesn’t this sound just like the teaser loans these people took out that got them in trouble in the first place?
Now, Dodd has been on this since earlier this year. Back then he only focused on stepping up pressure on federal banking regulators to tighten rules themselves and kept the possibility of legislation on the table. Legislation would have required him to be in Washington putting it together and off the campaign trail.
Even a proponent of the legislation John Taylor, chief executive of the Washington-based National Community Reinvestment Coalition who was critical of Dodd as recently as last summer now praised him saying, “this is the bill we’ve been looking for.”
Imagine what possibly could have been accomplished had Dodd done his job all spring and summer? Maybe some of the folks foreclosed on in the past 6 months may still be in their homes…
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New CEO Vikram Pandit promptly Tuesday pledged to carry out “an objective and dispassionate” review of all Citigroup’s (C) businesses. Translation? Time to break this sucker up.
Pandit commented on the success Citigroup’s wealth-management arm, which includes the Smith Barney retail brokerage and the private bank, and its overseas credit-card operations as “growth businesses.” He continued saying he will immediately begin reviewing the bank’s operations. “They are different businesses, and they need different strategies.”
When pressed for an answer concerning a breakup, Panditi said he “would not rule out anything”. This is a direct contradiction to recent statements by Robert Rubin, Sandy Weill and former CEO Chuck Prince who said that they believed in “financial supermarket” concept.
Pandit’s lack of anything coming close to supporting the concept can only be construed as an admission of change in direction.
Regarding the dividend, he said the board was very clear that the dividend was “where it was” and that they would make any decisions regarding it. What is more interesting is what he did not say. During each interview he gave, when it came to the various business units, he was consistent in his refrain of “all options are on the table”.
When it cam to the dividend question, he simply said essentially that the boards has decided this. Not once did he say “we would review it” or that “any option is on the table”. When it came to the dividend, its fate was decided already.
Good….
Citi shareholders have to at least be encouraged that as we start out it does not seem like it will be business as usual at Citi. Who know what took so long to decide on Pandit, maybe it took Pandit that long to get the Citi board to give him the carte blanch he wants as it pertains to reshaping Citi, time will tell..
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UPGRADES
DIRECTV DTV Credit Suisse Neutral » Outperform
Blockbuster BBI BMO Capital Markets Market Perform » Outperform
SAIC SAI Jefferies & Co Hold » Buy
Washington REIT WRE Friedman Billings Mkt Perform » Outperform
Reliant Energy RRI Banc of America Sec Sell » Neutral
UBS AG UBS Bear Stearns Peer Perform » Outperform
MasterCard MA Keefe Bruyette Mkt Perform » Outperform
DOWNGRADES
Panacos Pharma PANC Stifel Nicolaus Buy » Hold
Mediacom Comm MCCC Credit Suisse Outperform » Neutral
Adams Respiratory Therapeutics ARXT Broadpoint Capital Buy » Neutral
Washington Mutual WM Citigroup Hold » Sell
JP Morgan Chase JPM Keefe Bruyette Outperform » Mkt Perform
Panacos Pharma PANC Cowen & Co Outperform » Neutral
Praxair PX JP Morgan Overweight » Neutral
Medarex MEDX Bear Stearns Outperform » Peer Perform
Vimpel Comms VIP Bear Stearns Peer Perform » Underperform
Wrigley WWY Lehman Brothers Overweight » Equal-weight
Gol Intelligent Airlines GOL UBS Neutral » Sell
Air Products APD JP Morgan Overweight » Neutral
Newmont Mining NEM HSBC Securities Neutral » Underweight
East West Banc EWBC Keefe Bruyette Outperform » Mkt Perform
Discover Financial Services DFS Keefe Bruyette Outperform » Mkt Perform
Bank of Hawaii BOH Keefe Bruyette Outperform » Mkt Perform
Flushing Fin FFIC Keefe Bruyette Outperform » Mkt Perform
Eastern Virginia Bank EVBS Keefe Bruyette Outperform » Mkt Perform
Green Bankshares GRNB Keefe Bruyette Outperform » Mkt Perform
Mack-Cali Realty CLI Keefe Bruyette Outperform » Mkt Perform
Cullen/Frost Bnkrs CFR Keefe Bruyette Outperform » Mkt Perform
Western Alliance Bancorp WAL Keefe Bruyette Mkt Perform » Underperform
Marshall & Ilsley MI Keefe Bruyette Mkt Perform » Underperform
Old Ntnl Bancorp ONB Keefe Bruyette Mkt Perform » Underperform
Valley National VLY Keefe Bruyette Mkt Perform » Underperform
Susquehanna Bank SUSQ Keefe Bruyette Mkt Perform » Underperform
Fulton Fincl FULT Keefe Bruyette Mkt Perform » Underperform
Saul Centers BFS Keefe Bruyette Mkt Perform » Underperform
SunTrust Banks STI Keefe Bruyette Mkt Perform » Underperform
BB&T Corp BBT Keefe Bruyette Mkt Perform » Underperform
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