Category: Articles

The Board of Citigroup (C) has scheduled an emergency meeting for this weekend.

When a company worth nearly a quarter trillion dollars loses 1/4 of that worth in half a month, folks need to know what is going on.

– Is Prince finally out?
– Is the dividend safe?
– Are more write-downs coming?

My guess? More write-downs and the end of the reign of Prince. More write downs will be bad depending on the size of them obviously. The end of Princes reign wil be greeted with glee from investors.

Prince did what he was hired to do, get the company out of the legal and regulatory mess it was in. Now Citi needs someone to take them to the next level and Prince just is not the guy for the job.

Shares are up almost 2% after hours on the news…

 Subscribe in a reader

Talk about about running and hiding….

Citigroup (C) CEO Chuck Prince canceled his Sunday speech at the U.S.-Japan Business Conference, a conference official said on Friday. A spokesman for the Conference said Prince had canceled his appearance because he was busy preparing for the company’s new listing of its shares on the Tokyo Stock Exchange that begins on Monday. Prince had been scheduled to address the annual meeting of the group in Washington on Sunday evening for some time and the Tokyo listing has been schedule for almost as long. Citi’s Nicholas Calio, a senior vice president and chief global public affairs officer, will address the group in place of Prince.

Not for nothing but with the events of the past few days, not only is this NOT the time to cancel an appearance that has been in the works for a long time but all things considered, this would have been the PERFECT time to make the speech and put shareholder fears to rest. Now shareholders fears are being stoked to higher levels.

I think we all know that at this point Prince’s role preparing for the Monday listing is done. So with that, it now leads us to guess the real reason.

– Is he afraid to take the heat?
– Did the board tell him to lay low?
– Is there validity to the dividend cut rumors that he does not want to publicly deny in a Sarbanes society?
– Is he on the way out and since anything he will say will eventually be meaningless anyway there is just no point?
– Are there additional write-downs coming that he does not want to answer questions about?
– Are things looking better and he just has nothing to add to his previous statements?

Who knows? We do know this though, if you cancel a previously announced engagement two days before it happens when your company is under siege and you give a BS explanation for it, the only thing that will happen is the guessing games will begin and nothing positive will be assumed.

Unfortunately this type of thing has been indicative of Prince’s reign and ultimately will be his undoing….

 Subscribe in a reader

?

iPhone, Jessie Jackson, Cancer, Immigration

– Time Magazine loves the iPhone.

– It really is amazing, Jessie Jackson can manage to find racism in almost anything.

– A book on the problem with cancer and the medical community. Medicine focuses on treatment, not prevention.

– An interesting immigration discussion

 Subscribe in a reader

When a guy beats the market for 15 years in a row, it is in all our interest to listen to what he says.

He said:

“The equity sell-off on October 19 was precipitated by the market’s reaction to the earnings of two stalwarts of the commodities cabal, Caterpillar (CAT) and Schlumberger (SLB), both of which surprised their fans by issuing less than stellar guidance. Cat went so far as to opine that the US might be in recession already; its earnings gains were solely due to non-US growth.

If credit is becoming harder to come by, if spreads are widening, if growth is slowing, then it seems to me the leadership is about to change. The same strategies that led when the global economy was emerging from fears of deflation and entering a period of accelerating growth and synchronized recovery are very low probability bets to lead if the global economy is peaking, the US is slowing appreciably, and credit spreads are widening, not narrowing.
Where will the new leadership come from? The same place it usually does: the old laggards. I think the new leadership will be US, large-cap, dollar-based, and grow to encompass what no one wants to own today, especially financials and consumer. I also think so-called growth stocks will continue to do fine. When growth becomes scarcer and the discount rate becomes lower, growth becomes more valuable.

More particularly, just as the right thing to do in 2002 was to buy what everyone was panicked about, I think the greatest gains over the next 5 years will be made in those securities people are panicked about today. For specific names, consult the 52-week new low list.”

52 Week low financial? Washington Mutual (WM), Citigroup (C), Wachovia (WB), Bank of America (BAC), Wells Fargo (WFC) Merill Lynch (MER) and every homebuilder.

We have been buying Citigroup, Wachovia and Goldman Sachs since the late summer and financials now make up almost 60% of the portfolio. Like Miller, I am expecting big gains over the next several years out of this group. I also expect some short term pain and hey, no pain no gain, right?

Read Miller’s full letter here:

 Subscribe in a reader

Nonfarm payrolls rose 166,000 in October, the Labor Department said Friday, up from September’s 96,000 gain, which was revised down by 14,000. August payrolls were revised up to a 93,000 gain from 89,000. The unemployment rate was unchanged last month at 4.7%. Why is this so great?

The Fed put inflation back on the table in Wednesday’s release and the really good news in this payroll report was that average hourly earnings increased $0.03, or 0.2%, to $17.58. That was up just 3.8% from a year earlier, suggesting relatively tight labor markets are not putting much pressure on labor costs. If labor costs are contained, their impact on inflation is minimized and then the Fed is able to act and cut rates should the economy weaken.

Had this number been higher than the expected .3%, wages would have then become an inflationary force and may have handcuffed the Fed at the Dec. 11th meeting. It also bodes well for the upcoming Holiday season. A well employed consumer is a shopping consumer and that is good for everyone at this point.

Details:
*Out of 278 industries, 53.4% added jobs in October, down from 55.6% in September. Of 84 manufacturing industries, 43.5% added October, the best since July.
*Jobs in goods-producing industries fell 24,000.
*Construction jobs dropped 5,000, bringing the total loss to 124,000 since the peak a year ago.
*Manufacturing jobs fell by 21,000 in October and 203,000 over the year.
*Jobs were also lost not surprisingly at banks and mortgage brokers, where employment fell by 5,000 in October, bringing the total loss to 56,000 since February.
*Job growth was strong in services where employment rose by 190,000, the most since May.
*Food services added 37,000
*Health care added 34,000 jobs
*Employment services added 34,000

A “big picture” view show just how well Bernanke & Co. are managing things. The Dec. 11th meeting will mark the 4th in a row that the Fed has put itself in a position to have total flexibility in its action or inaction. Unlike the Greenspan era in which he was constantly having his actions dictated by events, Bernanke now has total freedom to act to them as he sees fit.

I have said it since the spring and to this point nothing has happened to change my mind yet, Bernanke will go down as the best Fed Chairman we have ever had, no matter how hard Greenspan tries to undermine him.

 Subscribe in a reader

The LeapFrog (LF) turnaround is shaping up nicely in a very challenging retail environment.

LeapFrog reported a Q3 net loss of $2.8 million, or 4 cents per share, compared with a net loss of $49.7 million, or 79 cents per share last year. Sales were $144 million, down from $184.7 million a year ago. Analysts had expected a loss of 5 cents per share on revenue of $143 million. The company said its gross margin improved to 42.2% of sales vs. 26.6%, helped by lower charges for excess and obsolete inventory and purchase-order cancellations. Looking ahead, Leapfrog said it 2007 revenue will be 10% to 15% below 2006 and it estimates a significant improvement in gross margin and net losses for the year.

Inventory management has also improved as inventories net of allowances, were $110.3 million at September 30, 2007, compared with $73.0 million at December 31, 2006 and $154.5 million at September 30, 2006.

The Outlook?
“We’re positioned well to enter the “Grow” phase of our strategic plan with improved gross margins, a strong cash position, and prudent inventory levels. We expect continued improvements in our business fundamentals over the next 12 months,” said Bill Chiasson, chief financial officer.

LeapFrog expectations for full year 2007 results are:

— A revenue decrease of approximately 10% to 15% compared to 2006.
— A significant improvement in gross margin compared with 29.3% for 2006.
— A reduction in overall operating expenses from $271.7 million for 2006.
— An improvement in net loss over 2006.
— Cash and investments of approximately $100 million at December 31, 2007.

These results were far better than expected and Leapfrog may actually be benefiting from the recent lead filled recalls at Mattel (MAT). Last month I wondered “is anyone going to buy any toys from Mattel (MAT) this year given the recent problems they have had? If the answer is no, you eliminate 20% of the list. Not for nothing but I would rather not have my Christmas present to my sons cause them brain damage but, that is just me.”

It may just be that other folks are thinking the same way as me to date. LF has been immune to the lead problems to date. Now, I know it is only a penny better that the estimates but, I was expecting worse not knowing how the consumer would react and one must be very happy with these results.

This is encouraging news to say the least.

 Subscribe in a reader

The Univesity of Illinois and Archer Daniels Midland (ADM) have developed a natural fertilizer to be sold under the name NaturStim.

Currently used fertilizers are made from urea, ammonium sulfate or ammonium nitrate and are synthesized from natural gas and each is acidifying in nature and can impact the soil pH with overuse. The lines ADM will be producing are contain lysine, a bio-product from fermented corn. University of Illinois researcher Tom Fermanian says “One advantage of these lysine-based products is that they dissolve quickly in water and can be mixed with other turf products that are normally applied as a spray.” “Lysine in its granular form is 15 percent nitrogen and soluble in water so it is quickly available for turf use, similar to most synthetic fertilizers.”

In tests of three separate plots, the plots that received fertilizer materials generally had better quality than the unfertilized control. And the three newly formulated NaturStim fertilizers made from lysine were rated as well as the ammonium sulfate and Sustane controls applied at the same rate.

“Research shows that the NaturStim products perform as well as synthetic fertilizers, but have the added benefit of providing golf course managers with a more natural alternative to traditional fertilizers,” said Fermanian.

If anyone has seen shares of fertilizer companies like Agrium (AGU) and Potash (POT) recently, these companies are booming. Many communities are demanding a natural alternative to the chemical fertilizers currently on the market. ADM, currently the world leader in bio-fuels and bio-plastics is announced the recent formation of a bio-chemical unit and this fertilizer product fits into that line perfectly.

ADM in the past year has transformed itself from a food processor and ethanol company to a diversified bio-products company.

 Subscribe in a reader

UPGRADES
F5 Networks FFIV Citigroup Hold » Buy
Community Health CYH Stifel Nicolaus Hold » Buy
Gerdau S.A. GGB Citigroup Hold » Buy
Parametric PMTC Kaufman Bros Hold » Buy
InterActive IACI Lehman Brothers Equal-weight » Overweight
Newmont Mining NEM RBC Capital Mkts Underperform » Sector Perform
China Life Insurance LFC Bear Stearns Underperform » Peer Perform
DPL Inc. DPL Robert W. Baird Neutral » Outperform
FARO Techs FARO Robert W. Baird Neutral » Outperform
Monaco Coach MNC Robert W. Baird Neutral » Outperform
Kendle KNDL Robert W. Baird Neutral » Outperform

DOWNGRADES
Citigroup C Credit Suisse Outperform » Neutral
Equity One EQY BMO Capital Markets Market Perform » Underperform
Harmony Gold HMY UBS Neutral » Sell
Sciele Pharma SCRX RBC Capital Mkts Sector Perform » Underperform
Open Text OTEX Kaufman Bros Buy » Hold
Holly HOC Soleil Buy » Hold
Sunoco SUN Soleil Buy » Hold
UQM Technologies UQM Rodman & Renshaw Mkt Outperform » Mkt Perform
General Comm GNCMA Oppenheimer Buy » Neutral
Warner Music Group WMG Pali Research Neutral » Sell
Auxilium Pharma AUXL Roth Capital Hold » Sell
Stantec SXC Canaccord Adams Buy » Hold
Genomic Health GHDX Cantor Fitzgerald Buy » Hold
Smith Micro Software SMSI Merriman Curhan Ford Buy » Neutral
Alvarion ALVR Merriman Curhan Ford Buy » Neutral
MasterCard MA Bear Stearns Outperform » Peer Perform
Smith Micro Software SMSI Piper Jaffray Outperform » Market Perform
Air Tran Holdings AAI Credit Suisse Outperform » Neutral
Heelys HLYS CIBC Wrld Mkts Sector Perform » Sector Underperform
Citi Trends CTRN CIBC Wrld Mkts Sector Outperform » Sector Perform
Bank of America BAC CIBC Wrld Mkts Sector Outperform » Sector Perform
Dionex DNEX Robert W. Baird Neutral » Underperform
Amylin Pharms AMLN Lehman Brothers Equal-weight » Underweight
Cameco CCJ RBC Capital Mkts Top Pick » Sector Perform
Telecom Italia TI Bear Stearns Outperform » Peer Perform
Valero Energy VLO Soleil Buy » Hold $88
Alcatel-Lucent ALU Banc of America Sec Buy » Neutral
Del Monte DLM Bear Stearns Outperform » Peer Perform
Citigroup C CIBC Wrld Mkts Sector Perform » Sector Underperform
United Micro UMC Citigroup Hold » Sell
Constellation Energy CEG Jefferies & Co Buy » Hold

 Subscribe in a reader

Friday’s Picks

Jeff Macke recommended buying Electronic Arts (ERTS). Open $58.74

Guy Adami liked Intel (INTC). Open $26.50

Karen Finerman preferred Flowserve (FLS). Open $75.39

Pete Najarian said Cypress (CY) is a buy. Open $36.08

Thursday’s Results

Jeff Macke is a buyer of Microsoft (MSFT). Open $36.81 Close $37.06 GAIN

Guy Adami is liked Intel (INTC). Open $26.90 Close $26.50 LOSS

Pete Najarian liked Apple (AAPL)Open $189.95 Close $187.44 LOSS

Since my tracking began on 6/21 (1-1 means one up pick and one down pick and no results from my vacation weeks). The percentage is the percentage of successful picks

Guy Adami= 40-24 = 62%
John Najarian= 13-4 = 76%
Jeff Macke= 45-32 = 5t%
Pete Najarian= 30-27 = 52%
Tim Seymore= 4-3 = 57%
Karen Finerman= 23-13 = 62%
Stacey Briere-Gilbert= 3-0 = 100
Ned Riley= 1-0 = 100%
Carter Worth= 0-1 = 0%

 Subscribe in a reader

I have been begging for this since March when I first wrote about Rhode Island AG Patrick Lynch’s “settlement” with DuPont (DD) and his diversion of those funds to entities having nothing to do with the case or its remedy. In a recent filing, Sherwin Williams (SHW) has finally called the AG to the mat. Let’s see him squirm out of this one.

LegalNewsline.com is reporting:

Sherwin-Williams filed two motions Wednesday — one to value the DuPont settlement and another to stay the lead paint abatement process ordered by Superior Court Judge Michael Silverstein.

“In addition to valuing the overall DuPont settlement, Sherwin-Williams also moves to disgorge two monetary amounts from the settlement that were improperly diverted to two purely private purposes, to satisfy either the Attorney General’s or the State’s counsel’s private interest,” attorneys for Sherwin-Williams wrote.

First is $2.5 million earmarked to pay Brigham and Women’s Hospital in Boston. Sherwin-Williams says the money is used to satisfy a pledge made previously by Motley Rice, the plaintiffs firm hired by the State to pursue the case on a contingency fee basis.

Motley Rice counsel John McConnell is a campaign contributor to Lynch.

“This contribution has no connection whatsoever to Rhode Island lead paint issues, and the Attorney General had admitted that he knew of no benefit that Rhode Island citizens will receive from this out-of-state contribution,” the motion says.

The second is an allotment of $1 million to Brown University, Lynch’s alma mater.

“There is absolutely no basis in the law for an Attorney General to sue in the name of the State and then cut a deal whereby settlement money from the case is diverted to third parties, particularly an out-of-state third party,” the motion says. “The Attorney General is required to deliver monetary recoveries to the State’s General Fund.

“The Attorney General and his contingent fee counsel cannot bypass the General Assembly and the State’s budget process and wheel and deal with State monetary recoveries.”

I concluded my post that day in March by saying “Recently shareholders of corporation have become very aggressive legally with those inside the company who, through questionable or dubious actions, destroy shareholder value. It is time that we at Sherwin-Williams (SHW) get as equally aggressive with those outside the company. Let’s take the bull by the horns here. If not the state of RI, then the AG or theirlaw-firm, Motley Rice. Time to go on offense. I for one am getting sick of being on defense all day.”

It is not clear if NL Industries (NL), a party in the RI case in involved with the filing.

This action is long overdue and needs to be the new way these suits are handled by companies. Stop being punching bags..

It is a good day for Sherwin Williams shareholders.

See Jane Genova’s blog on the motions here:

 Subscribe in a reader

With competitors AT&T (T) and Verizon (VZ) adding 1.6 and 2 million subscribers each the last quarter, Sprint (S) need to do something big, fast.

Sprint released results Thursday and true to the pre-announcement and consistent with results the last two years, they lost more subscribers in the last quarter seeing 337,000 of them flee. These defections caused earnings to fall 77% from last year. Paul Saleh, the company’s current CFO and acting CEO said he expected the company would still “struggle with subscriber additions” (translation: more losses) during the fourth quarter but the company was increasing its customer service operations, marketing and internal incentives to keep more customers from dropping their service.

Back in September I said that “they have yet to stop the exodus of customers to other providers. It is not the network issue(s) making them do it, it is the treatment they get when they call Sprint that is making them flee. Sprint’s firing of customers was a PR fiasco and likely gave more than a few potential customers serious pause about joining Sprint. There are plenty of providers out there for people to choose from, having an adversarial relationship with them is not the way to grow.”

I concluded dating “Until that issue is fixed, any upside and real improvement for Sprint will be put off indefinitely.”

The fact that sprint has finally realized this is a huge deal but, and the this is a huge but, the damage they have done the post two years cannot be fixed in a quarter or two of playing nice. They need something big.

Enter the Gphone. Reports are Sprint is pushing hard to be the first provider of the device. It is really the only thing that can propel shares anywhere in the next 6 months to a year for shareholders. The debut of the phone, most likely available in several models and price rages will be an instant hit and turn Sprint’s fortunes around. It would be shocked if Google (GOOG) locked it up with one provider like Apple (AAPL) did with the iPhone for 5 years but I would assume a short one. Sprint needs to be #1 in this race.

If they do get it, then shares may be a buy assuming they can fix the customer service issue that currently are crippling the company. Even a great new product that people want will not save you if they can eventually get it somewhere else after you make them hate you.

This does bear close watching though..

 Subscribe in a reader

Bloggysyle, Cable TV in apartments, A Big Thank you

– Apparently I was a week behind. Nothing like a backhair costume to get your appetite suppressed.

– Finally for those of you living in apartments. You may now choose you cable TV provider.

– Jane Genova, a blogging inspiration.

 Subscribe in a reader