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Zacks Analyst Blog Highlights: PNC Financial Services, Bank of America, Bank of New York Mellon Corp, MasterCard and JPMorgan Chase – Press Releases

Zacks Market Commentaries — Wed, 18 Nov 2009 13:10:27 +0000

For Immediate Release

Chicago, IL – November 18, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: PNC Financial Services (PNC), Bank of America (BAC), Bank of New York Mellon Corp (BK), MasterCard (MA) and JPMorgan Chase (JPM).

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Here are highlights from Tuesday’s Analyst Blog:

BofA Continues CEO Hunt

Recently, William Demchak of the PNC Financial Services (PNC) was offered the position of the next CEO of the Bank of America (BAC). However, the offer was turned down by Demchak.

We suspect Demchak declined the offer as the pay package is likely to be among the least competitive in the industry, especially since the Obama administration's pay czar took the axe to seven institutions' pay plans, chopping the average high-end salary by 50%. Moreover, the bank is also operating under a memorandum of understanding with regulators, who are scrutinizing the top gun's every decision.

The present CEO of the Bank of America, Mr. Ken Lewis, is set to leave the position, stepping down at the end of the year. It may be noted that he succumbed to the pressure to resign after his company’s Merrill Lynch acquisition.

Earlier this month, Robert Kelly of the Bank of New York Mellon Corp (BK) was offered the role of CEO by the bank. Former Bear Stearns CEO Alan Schwartz is among those reportedly approached who turned down the CEO job offer, as did MasterCard (MA) President Ajay Banga. Others may include Moffett and Charlie Scharf, who runs JPMorgan Chase’s (JPM) retail operations, among others.

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Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

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About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

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Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

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Zacks Investment Research

BofA Continues CEO Hunt – Analyst Blog

Zacks Market Commentaries — Tue, 17 Nov 2009 16:01:35 +0000

Recently, William Demchak of the PNC Financial Services (PNC) was offered the position of the next CEO of the Bank of America (BAC). However, the offer was turned down by Demchak.

We suspect Demchak declined the offer as the pay package is likely to be among the least competitive in the industry, especially since the Obama administration's pay czar took the axe to seven institutions' pay plans, chopping the average high-end salary by 50%. Moreover, the bank is also operating under a memorandum of understanding with regulators, who are scrutinizing the top gun's every decision.

The present CEO of the Bank of America, Mr. Ken Lewis, is set to leave the position, stepping down at the end of the year. It may be noted that he succumbed to the pressure to resign after his company’s Merrill Lynch acquisition.

Earlier this month, Robert Kelly of the Bank of New York Mellon Corp (BK) was offered the role of CEO by the bank. Former Bear Stearns CEO Alan Schwartz is among those reportedly approached who turned down the CEO job offer, as did MasterCard (MA) President Ajay Banga. Others may include Moffett; Charlie Scharf, who runs JPMorgan Chase's (JPM) retail operations; Robert Kaplan, a former Goldman Sachs (GS) top gun; former US Bancorp CEO Jerry Grundhofer; American Express (AX) President Alfred Kelly; and two former BofA executives, Al de Molina, who runs GMAC, and James Hance. Offers were reportedly made to those banking chieftains, among others.

The bank's credit problems are the key to relieving the pressure of government involvement. Once the bank's loan book stabilizes, it can start to pay back the money it borrowed from the U.S. government, which came with some serious strings attached including Feinberg's control of compensation for top executives.

Read the full analyst report on "PNC"
Read the full analyst report on "BAC"
Read the full analyst report on "MA"
Read the full analyst report on "JPM"
Read the full analyst report on "GS"
Read the full analyst report on "AX"
Read the full analyst report on "BK"
Zacks Investment Research

BofA Extends $184B Credit – Analyst Blog

Zacks Market Commentaries — Tue, 10 Nov 2009 19:37:49 +0000

In its latest quarterly Lending & Investing Initiative report, Bank of America Corporation (BAC) said on Monday that it has extended about $184 billion in credit during the third quarter of 2009 to support households and communities.

The report makes obvious how BofA is utilizing the bailout money to support the U.S. economy. According to the report, since the fourth quarter of 2008 when the Troubled Asset Relief Program (TARP) was initiated, BofA had extended $759 billion in new credit. This represents almost $17 for every dollar of the $45 billion it received under the TARP. BofA also continues to provide a significant return on investment to the U.S. taxpayers. The bank is expected to pay more than $2.5 billion in dividend to the U.S. Treasury through Nov 16, 2009.

The extension of home loans continues to be among BofA’s priorities. The company extended $96 billion alone in first mortgages during the reported quarter. The loans helped nearly 450,000 people purchase a home or refinance an existing mortgage.

BofA is also extending credit to the municipalities and non-profits and has already provided $7 billion to help meet local needs and serve communities across the country.

In the business sector, the company has extended $78 billion in small business and commercial loans in the quarter.

BofA’s quarterly loss came in at 26 cents per share, substantially worse than the Zacks Consensus Estimated loss of 10 cents. This compares unfavorably with earnings of 15 cents in the prior-year quarter.

The worse-than-expected results for BofA came in due primarily to continued weakness in the U.S. and global economies as well as stress on the consumer, which continues to result in high credit costs. The results for the quarter were negatively impacted by $2.6 billion in pretax mark-to-market and credit valuation adjustments on certain liabilities, including the Merrill Lynch structured notes, and a $402 million pretax charge to pay the U.S. government for termination of its asset guarantee term sheet. However, strengthening reserves, capital position and liquidity were key positives during the quarter.

We think that BofA is in a relatively good shape from a capital perspective. During this delicate period of market stress, the availability of significant private-sector capital is very limited. As a result, the management remains focused on managing asset levels efficiently, ensuring the deployment of TARP funds to core lending businesses and trimming other assets in non-core businesses. Also, the management is quite confident about its capital position as it has indicated paying back TARP funds in installments. We anticipate continued synergies from BofA’s large scale operation and balance sheet restructuring. However, higher credit costs, various legal issues and worsening credit quality will be a drag on upcoming results.
Read the full analyst report on "BAC"
Zacks Investment Research

An interview with Charlie Gasparino

Prieur du Plessis — Thu, 05 Nov 2009 09:46:25 +0000

Dan Holland has just interviewed Wall Street chronicler Charlie Gasparino's. Excerpts from the interview are published in this post.

Rosenberg: Stocks “overvalued by at least 20%”

Prieur du Plessis — Wed, 28 Oct 2009 07:53:28 +0000

The stock market has become overheated since exploding off its March lows and could be in for a strong correction, economist David Rosenberg told CNBC. Click through for the video clip.

Wise Words from Across the Pond – Analyst Blog

Dirk Van Dijk — Wed, 21 Oct 2009 14:41:50 +0000

Meryn King, the British counterpart to U.S. Fed Chair Ben Bernanke, had this to say in a speech yesterday:

“The United Kingdom faces two fundamental long-run challenges. First, to rebalance the economy, with more resources allocated to business investment and net exports and fewer to consumption.

"That is consistent with the need – now widely accepted – to eliminate the large structural fiscal deficit and to raise the national saving rate. It is part of a need for a wider rebalancing of domestic demand in the world economy away from those countries that borrowed and ran current account deficits towards those that lent and ran surpluses."

Everything he has to say about the UK is true in spades for the US. The US. is more dependent on consumption than is the UK and perpetually runs trade (current account) deficits. We need for the US to be consuming less and investing more in productive capacity, and then exporting more than we import.

It is the current account deficit, not the budget deficit, that leads us to be deeply indebted to the Chinese and OPEC. In any sort of rational world, it would be the large, developed, mature economies that would be exporting capital to emerging markets, not the other way around.

"Second, both the structure and regulation of banking in the UK need reform. Banks increased both the size and leverage of their balance sheets to levels that threatened stability of the system as a whole. They remain extraordinarily dependent on the public sector for support. That was necessary in the immediate crisis, but is not sustainable in the medium term."

Any bank that is "too big to fail" should not be allowed to operate as a casino. Yes, risk-taking activity is vital to the growth and vibrancy of the economy, but it should not be undertaken by banks that are backstopped by the taxpayer.

The reforms that the Obama Administration have put forth are a good first step, but only a first step. Unfortunately, as most of the nation has been focused on the Health Care battle, the lobbyists for the banks have already swooped in and begun to undermine the reforms. Yes, we might get something call financial regulatory reform, but it will not be anywhere near strong enough to prevent a recurrence of last year's events.

Requiring higher capital standards for the Tier One financial institutions, those that are "too big to fail," might do the trick, but to offset the much lower cost of capital that comes with that implicit federal guarantee of their debt, the capital requirements will have to be very high -- higher than will be politically sustainable.

A far better solution would be to declare that a bank that is "too big to fail" is "too big to exist." We need to bring back something that looks like Glass-Stiegel, the law that stabilized the banking system and prevented any real problems like these for almost half a century.

“Why were banks willing to take risks that proved so damaging both to themselves and the rest of the economy? One of the key reasons – mentioned by market participants in conversations before the crisis hit – is that the incentives to manage risk and to increase leverage were distorted by the implicit support or guarantee provided by government to creditors of banks that were seen as 'too important to fail.'

"Such banks could raise funding more cheaply and expand faster than other institutions. They had less incentive than others to guard against tail risk. Banks and their creditors knew that if they were sufficiently important to the economy or the rest of the financial system, and things went wrong, the government would always stand behind them. And they were right."

We are setting up the biggest case of moral hazard ever. If a pay-off from a bet is structured so that if things go right, you make a fortune, and if things go wrong you just break even, people will start to take crazy risks. That cannot be allowed to happen again with taxpayers being the ones who cover the bets if things go the wrong way.

Just a year after the world stood on the brink of disaster, the Street is back to handing out record bonuses. At Goldman Sachs (GS) alone, a firm with 25,000 employees world wide, the bonus pool is reportedly $23 billion.

That is equivalent to 0.16% of GDP…for the bonus pool of one firm! A firm that has benefited greatly from Federal largess over the last year.

Yes, Goldman has had a very profitable year, mostly due to their prop desk. In other words, they have done well by their risk-taking with the capital of the firm. That is all well and good, but it is not an activity that should be backstopped by the government.

Unfortunately, in the heat of the crisis, and because there was, in many cases nowhere else to turn, we moved in exactly the wrong direction, with the "too big to fail" banks becoming substantially larger -- J.P. Morgan (JPM) gobbled up Bear Stearns and WaMu, Wells Fargo (WFC) ate Wachovia, and Bank of America (BAC) swallowed Merrill Lynch.
Read the full analyst report on "GS"
Read the full analyst report on "JPM"
Read the full analyst report on "WFC"
Read the full analyst report on "BAC"
Zacks Investment Research

Zacks Analyst Blog Highlights: Google Inc., Bank of America Corporation, American International Group, Citigroup and GMAC Inc. – Press Releases

Zacks Market Commentaries — Mon, 19 Oct 2009 12:24:38 +0000

For Immediate Release

Chicago, IL – October 19, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Google Inc. (GOOG), Bank of America Corporation (BAC), American International Group (AIG), Citigroup (C) and GMAC Inc. (GJM).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Friday’s AnalystBlog:

Google Stuns the Market

Google Inc. (GOOG) reported third quarter results that blew away all estimates. Earnings beat the Zacks Consensus Estimate by a dollar and 20 cents. Revenue beat the consensus by around 40%.

Revenue

Gross revenue of $5.94 billion was up 7.6% sequentially and 7.3% year over year. Management stated that strength was broad-based, with all served markets showing signs of exiting the recession.

Traffic continues to improve, with traffic acquisition cost (the portion of revenue shared with Google’s partners) increasing 7.7% sequentially. However, traffic acquisition cost as a percentage of total advertising revenue was down 15 basis points. Net revenue, excluding traffic acquisition cost was flattish sequentially (down 0.6%).

Bank of America Disappoints

The worse-than-expected results came in due primarily to continued weakness in the U.S. and global economies as well as stress on the consumer, which continues to result in high credit costs. The results for the quarter were negatively impacted by $2.6 billion in pretax mark-to-market and credit valuation adjustments on certain liabilities, including the Merrill Lynch structured notes, and a $402 million pretax charge to pay the U.S. government for termination of its asset guarantee term sheet. However, strengthening reserves, capital position and liquidity were key positives during the quarter.

The results for the quarter exclude total preferred dividends of $1.2 billion. The preferred dividend paid to the U.S. government was $893 million. Net loss available to common shareholders was $2.2 billion, compared to earnings of $704 million in the prior-year quarter.

Fully taxable-equivalent revenue net of interest expense was $26.4 billion, up 32% from $19.9 billion in the prior-year quarter.

Net interest income on a fully taxable-equivalent basis was $11.8 billion, down from $10.9 billion in the year-ago quarter. The year-over-year decline was a result of securities sales and lower loan levels. The decrease was partially offset by a favorable rate environment, the addition of Merrill Lynch and higher deposit levels.

Net interest yield decreased 32 basis points (bps) year-over-year to 2.61%. The decrease was a result of the addition of lower yielding assets from Merrill Lynch.

Non-interest income almost doubled to $14.6 billion from $8.0 billion in the prior-year quarter. This increase is attributable to higher trading account profits, investment and brokerage services fees and investment banking income following the addition of Merrill Lynch. These increases were partially offset by $1.8 billion in losses related to mark-to-market adjustments related to the Merrill Lynch acquisition and $714 million in credit valuation adjustments on derivative liabilities.

Non-interest expense increased to $16.3 billion from $11.7 billion in the prior-year quarter. The increase in non-interest income reflects higher personnel and general operating expenses, driven partially by the recent acquisition of Merrill Lynch. The increase also due to a $402 million pretax charge related to the termination of its asset guarantee term sheet.

The efficiency ratio on a fully taxable-equivalent basis was 61.84% compared to 58.60% in the prior-year quarter. Book value per share of common stock was $22.99, compared with $30.01 at Sept. 30, 2008.

Credit quality significantly deteriorated during the quarter. Though the provision for credit losses decreased 12.5% sequentially to $11.7 billion, on a year-over-year basis it increased 81.5%. Nonperforming assets increased to $33.8 billion from $31.0 billion at June 30, 2009, reflecting a slower rate of increase than in recent quarters as a result of some early signs of economic recovery. Net charge-offs increased 10.6% sequentially to $9.6 billion. Net charge-off ratio deteriorated 49 bps sequentially to 4.13% and nonperforming assets ratio deteriorated 41 bps sequentially to 3.72%.

During the reported quarter, the company’s Tier 1 capital ratio improved to 12.46% from 11.93% in the prior quarter and 7.55% in the prior-year quarter. Tier 1 common ratio improved to 7.25% from 6.90% in the prior quarter and 4.23% in the prior-year quarter.

The U.S. pay czar Kenneth Feinberg revealed yesterday that Ken Lewis, who intends to retire as chief executive of BofA at the end of this year, will receive no pay or bonus for 2009. However, Lewis will still have $53 million in pension benefits along with other stock awards and deferred compensation of $69 million as Feinberg does not have the authority to modify compensation awarded before 2009.

Feinberg is in charge of deciding compensation packages for the highest- paid employees at all the firms that received bailout money. For seven firms the situation is critical, as these firms received substantial support from the Troubled Asset Relief Program (TARP).

The seven firms whose compensation plans are under scrutiny are American International Group (AIG), Citigroup (C), Bank of America, Chrysler Financial, Chrysler Group LLC, General Motors and GMAC Inc. (GJM).

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

Zacks Investment Research

Bank of America Disappoints – Analyst Blog

Zacks Market Commentaries — Fri, 16 Oct 2009 14:50:34 +0000

Bank of America Corporation’s (BAC) third quarter 2009 loss came in at 26 cents per share, substantially worse than the Zacks Consensus Estimated loss of 10 cents. This compares unfavorably with earnings of 15 cents in the prior-year quarter.

The worse-than-expected results came in due primarily to continued weakness in the U.S. and global economies as well as stress on the consumer, which continues to result in high credit costs. The results for the quarter were negatively impacted by $2.6 billion in pretax mark-to-market and credit valuation adjustments on certain liabilities, including the Merrill Lynch structured notes, and a $402 million pretax charge to pay the U.S. government for termination of its asset guarantee term sheet. However, strengthening reserves, capital position and liquidity were key positives during the quarter.

The results for the quarter exclude total preferred dividends of $1.2 billion. The preferred dividend paid to the U.S. government was $893 million. Net loss available to common shareholders was $2.2 billion, compared to earnings of $704 million in the prior-year quarter.

Fully taxable-equivalent revenue net of interest expense was $26.4 billion, up 32% from $19.9 billion in the prior-year quarter.

Net interest income on a fully taxable-equivalent basis was $11.8 billion, down from $10.9 billion in the year-ago quarter. The year-over-year decline was a result of securities sales and lower loan levels. The decrease was partially offset by a favorable rate environment, the addition of Merrill Lynch and higher deposit levels.

Net interest yield decreased 32 basis points (bps) year-over-year to 2.61%. The decrease was a result of the addition of lower yielding assets from Merrill Lynch.

Non-interest income almost doubled to $14.6 billion from $8.0 billion in the prior-year quarter. This increase is attributable to higher trading account profits, investment and brokerage services fees and investment banking income following the addition of Merrill Lynch. These increases were partially offset by $1.8 billion in losses related to mark-to-market adjustments related to the Merrill Lynch acquisition and $714 million in credit valuation adjustments on derivative liabilities.

Non-interest expense increased to $16.3 billion from $11.7 billion in the prior-year quarter. The increase in non-interest income reflects higher personnel and general operating expenses, driven partially by the recent acquisition of Merrill Lynch. The increase also due to a $402 million pretax charge related to the termination of its asset guarantee term sheet.

The efficiency ratio on a fully taxable-equivalent basis was 61.84% compared to 58.60% in the prior-year quarter. Book value per share of common stock was $22.99, compared with $30.01 at Sept. 30, 2008.

Credit quality significantly deteriorated during the quarter. Though the provision for credit losses decreased 12.5% sequentially to $11.7 billion, on a year-over-year basis it increased 81.5%. Nonperforming assets increased to $33.8 billion from $31.0 billion at June 30, 2009, reflecting a slower rate of increase than in recent quarters as a result of some early signs of economic recovery. Net charge-offs increased 10.6% sequentially to $9.6 billion. Net charge-off ratio deteriorated 49 bps sequentially to 4.13% and nonperforming assets ratio deteriorated 41 bps sequentially to 3.72%.

During the reported quarter, the company’s Tier 1 capital ratio improved to 12.46% from 11.93% in the prior quarter and 7.55% in the prior-year quarter. Tier 1 common ratio improved to 7.25% from 6.90% in the prior quarter and 4.23% in the prior-year quarter.

The U.S. pay czar Kenneth Feinberg revealed yesterday that Ken Lewis, who intends to retire as chief executive of BofA at the end of this year, will receive no pay or bonus for 2009. However, Lewis will still have $53 million in pension benefits along with other stock awards and deferred compensation of $69 million as Feinberg does not have the authority to modify compensation awarded before 2009.

Feinberg is in charge of deciding compensation packages for the highest- paid employees at all the firms that received bailout money. For seven firms the situation is critical, as these firms received substantial support from the Troubled Asset Relief Program (TARP).

The seven firms whose compensation plans are under scrutiny are American International Group (AIG), Citigroup (C), Bank of America, Chrysler Financial, Chrysler Group LLC, General Motors and GMAC Inc (GJM).

We think that BofA is in a relatively good shape from a capital perspective. During this delicate period of market stress, the availability of significant private-sector capital is very limited. As a result, the management remains focused on managing asset levels efficiently, ensuring the deployment of Troubled Asset Relief Program (TARP) funds to core lending businesses and trimming other assets in non-core businesses.

Also, the management is quite confident about its capital position as it has indicated paying back TARP funds in installments.

We anticipate continued synergies from the company’s large scale operation and balance sheet restructuring. However, higher credit costs, various legal issues and worsening credit quality will be a drag on upcoming results. As such, we maintain a Neutral recommendation on the shares of BofA.
Read the full analyst report on "BAC"
Read the full analyst report on "AIG"
Read the full analyst report on "C"
Read the full analyst report on "GJM"
Zacks Investment Research

VRSK – Verisk Analytics

Bill Simpson — Fri, 16 Oct 2009 13:55:36 +0000

As always, piece was available to subscribers well before pricing and open. VRSK - Verisk Analytics plans on offering 85.25 million shares in a range of $19-$21. Insiders will be selling all of the shares in this deal, VRSK will receive no monies. If over-allotments are exercised, insiders will be offering 12.75 million shares bringing the total deal size to 98 million shares. BofA/Merrill Lynch and Morgan Stanley are leading the deal, JP Morgan, Wells Fargo, William Blair, Fox-Pitt Kelton a ..

WealthTrack: “One investment” recommendation from the pros

Prieur du Plessis — Mon, 12 Oct 2009 06:06:42 +0000

This week on Consuelo Mack WealthTrack three outstanding financial world figures share their “one investment” recommendation for a long-term diversified portfolio. The guests are: Bob Doll who runs three large cap funds at BlackRock; John Montgomery who heads up a family of funds using computer models at Bridgeway Capital; and Tom Petrie, Vice Chairman of Bank of America – Merrill Lynch, who is a veteran observer of the energy sector. As always with WealthTrack this is excellent viewing material.

The Fed exit the role of BLOBS – Part 2

Prieur du Plessis — Sun, 11 Oct 2009 09:30:19 +0000

This is the second of a two-part commentary by David Kotok and Bob Eisenbeis of Cumberland Advisors motivated by speeches and editorials from Fed officials about possible exit strategies from its current quantitative easing policies.

SEC Seeks Trial Against BofA – Analyst Blog

Zacks Market Commentaries — Fri, 09 Oct 2009 19:01:53 +0000

The Securities and Exchange Commission (SEC) on Wednesday asked for a jury trial related to its lawsuit against Bank of America Corp. (BAC) for misleading shareholders about bonuses to Merrill Lynch employees before the companies merged in January.

U.S. District Court Judge Jed Rakoff last month rejected a $33 million settlement between the SEC and Bank of America over the $3.6 billion in bonuses. The District Court Judge said that SEC's accusations of inadequate disclosure by the bank over bonuses paid at Merrill Lynch must go to trial. The date of trial is set for March 1, 2010.

Though BofA overpaid for Merrill Lynch, the deal makes strategic sense now. With the acquisition of Merrill Lynch, BofA gained a global investment-banking platform, profitable retail brokerage addition and significant equity-underwriting capacity, all of which it lacked earlier. For the first half of 2009, Merrill contributed $1.84 billion.

BofA has been one of the largest beneficiaries of the federal bailout program, receiving $45 billion from a total of $700 billion. The company faces many lawsuits and investigations by lawmakers and regulators over the Merrill Lynch acquisition, which made it the largest U.S. bank.

We think that BofA is in a relatively good shape from a capital perspective. During this delicate period of market stress, the availability of significant private-sector capital is very limited. As a result, the management remains focused on managing asset levels efficiently, ensuring the deployment of TARP funds to core lending businesses and trimming other assets in non-core businesses.

Also, the management is quite confident about its capital position as it has indicated paying back TARP funds in installments.

We anticipate continued synergies from the company’s large scale operation and balance sheet restructuring. However, higher credit costs, various legal issues and worsening credit quality will be a drag on BofA’s upcoming results. As such, we maintain a Neutral recommendation on the stock.
Read the full analyst report on "BAC"
Zacks Investment Research

Raser’s Steady Progress – Analyst Blog

Zacks Market Commentaries — Thu, 08 Oct 2009 16:40:19 +0000

Raser Technologies Inc. (RZ) yesterday provided an update on its geothermal activities and its PHEV project. The company is gradually transiting from a developmental stage company towards a geothermal power producer.

Raser is progressing rapidly on the Lightning Dock No. 1 geothermal project. Recently it bagged final approval from the New Mexico Oil Conservation Division (OCD) for injection of geothermal fluids. The company is also in the process of negotiating a revision to its power purchase agreement (PPA) with the Salt River Project Agricultural Improvement and Power District. The revision is expected to include an increase in the expected output from the Lightning Dock project as well as an increase in the price of energy under the PPA.

Raser is now in the final stages of testing the fifth production well that is needed for the completion of its first geothermal plant Thermo No. 1 as part of its plan to bring the plant to full capacity by the end of fiscal 2009. As of now, only the Thermo No. 1 plant (Hatch plant in Utah) with an annualized capacity of 10MW has been generating revenues since April by selling electricity to the city of Anaheim. The company plans to add 40MW annually to its capacity over the three year period 2010–2012 to bring its total geothermal power generation annualized capacity to 130MW.

Raser, however, is facing financial constraints for its capital projects. The company’s hopes now rest on governmental funding in its quest to become a commercially viable geothermal power producer. Also, Raser has a power purchase agreement with the Southern California Public Power Authority (SCPPA) that would cover the company’s next 110MW capacity expansion. Raser is also in the process of amending its agreements with Merrill Lynch, the tax-equity partner in the Thermo No. 1 plant, and Prudential, the debt holder to avail the benefit of the 30% federal grant for renewable energy projects under the American Recovery and Reinvestment Act of 2009. The company is also making progress at its electric powertrain technology following successful demonstrations of its proprietary H3 Hummer E-REV.

Provo, Utah-based Raser, founded in 2002, functions as a geothermal power development and technology licensing company in the United States. The company operates in two segments – Power Systems, and Transportation and Industrial Technology. The Power Systems segment supplies and develops geothermal electric power generating plants and bottom-cycling operations. The Transportation and Industrial Technology segment focuses on commercializing its Symetron technology to improve the efficiency of electric motors and related components.

Raser currently has seven geothermal power projects under development three each in Nevada, two in Utah, one each in Oregon and New Mexico, respectively. We maintain our market Neutral recommendation on the shares.
Read the full analyst report on "RZ"
Zacks Investment Research

Boom, Bust and Rebuild: Bank of America and the Kenneth Lewis Legacy

Contrarian Profits — Fri, 02 Oct 2009 19:27:54 +0000

pKenneth D. Lewis There are many ways to view Kenneth Lewis’ eight-year reign as Bank of America Corp. (NYSE: a href="http://www.google.com/finance?q=NYSE%3ABAC"BAC/a) chief executive, but two seem to hold the most landscape. /p pOn one hand, the $130 billion he spent on acquisitions – FleetBoston Financial Corp., MBNA Corp., LaSalle Bank Corp., Countrywide Financial Corp., Charles Schwab Corp.’s (Nasdaq: a href="http://www.google.com/finance?q=schw"SCHW/a) U.S. Trust private banking unit and Merrill Lynch – that more than tripled the size of Bank of America, making it the largest U.S. lender both by assets and deposits./p pOn the other, his open-wallet policy and the example it set forth almost perfectly encapsulates the boom, bust and nascent rebound of the U.S. housing and banking crisis – which later became the financial#8230;/p

A Jobs Jamboree Friday!

Contrarian Profits — Fri, 02 Oct 2009 18:31:22 +0000

p The dollar remains well bid#8230;G-7 to hand currencies off to G-20? Car Sales collapse#8230;Auditing the Lehman cash movements#8230;And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Happy Friday to one and all! Yesterday, I welcomed you to October. I had been prepared to tell you about a famous radio station here in St. Louis, that has long called October#8230; Rocktober#8230; But forgot, as usual! But anyway#8230; It#8217;s the first Fantastico Friday of Rocktober!/p pToday is a Jobs Jamboree Friday too! And#8230; I#8217;m not getting a good feeling about today#8217;s labor report at the Jobs Jamboree. The forecast is for jobs losses to fall from -216,000 to -175,000, but the unemployment rate to tick up to 9.8% from 9.7%#8230; I got the feeling, baby,#8230;/p

Are The Banks (And ETN Issuers) Safe Now?

IndexUniverse Staff — Thu, 01 Oct 2009 20:38:17 +0000

The cost of insuring against the default of major financial institutions has reached its lowest level since June 2008, according to the Counterparty Risk Index from Credit Derivatives Research LLC.

The chart below shows the Counterparty Risk Index (CRI) history since the beginning of 2008. The index is an unweighted average of the credit default swap spreads of 14 major financial institutions. The left-hand scale gives the cost (in basis points) of insuring against default for a five-year term.

The three big spikes on the chart mark the near-failure of Bear Stearns (in March 2008), the Lehman default (September 2008) and renewed concerns over bank safety at the market’s nadir in March 2009.

If crises appeared at six-monthly intervals since last spring, this time we appear to have broken out of the cycle.

What about the individual banks that make up the index? Here is a chart, courtesy of CMA Datavision, of the CDS spreads of the U.S. bank members of the index, plus Barclays and Deutsche Bank, the leading players in the U.S. exchange-traded note market.

Citigroup now ranks as the riskiest U.S. bank, and JP Morgan as the least risky, though it’s fair to say that the CDS spreads have converged significantly and there is far less difference between individual names than there was a year ago.

For the record, here are the levels from earlier today, ranked from least to most expensive to insure against default: JP Morgan (72bp), Barclays (76bp), Deutsche Bank (82bp), Goldman Sachs (107bp), Bank of America (120bp), Merrill Lynch (137bp), Morgan Stanley (140bp) and Citigroup (200bp).

(The fact that the Merrill Lynch CDS trades at a slight premium to that of Bank of America, its owner, is interesting. This reflects speculation that the broker may yet be spun off from the parent bank, in which case the CDS would follow the reference entity, Dave Klein of Credit Derivatives Research told me.)

The levels should matter to exchange-traded product investors: All of these banks except Citigroup underwrite exchange-traded notes.

Is the worst now over? As Gillian Tett noted in a column in last week’s Financial Times, the concentration of overall (gross) risk in the credit derivatives market amongst the leading banks has actually risen since the AIG bailout of last September, and regulators are still finding it difficult to assess whether banks are handling their net risk exposures sensibly.

And, in what sounds like the ultimate reinsurance spiral, banks have become net sellers of protection on sovereign debt; hardly reassuring if one remembers that the banks are themselves propped up by the governments concerned. Lloyd’s, anyone?

So, while the reduction in overall default risk so far this year will come as a reassurance to investors, these are charts that are worth keeping an eye on.

Ken Lewis Retiring from BofA – Analyst Blog

Zacks Market Commentaries — Thu, 01 Oct 2009 16:03:36 +0000

Ken Lewis, Chief Executive Officer and President of Bank of America Corporation (BAC), announced that he has notified the Board of Directors of his decision to retire, effective December 31, 2009.

The Board will continue ongoing planning to ensure his successor is selected by that date. Lewis will retire both as CEO and as a director.

On Aug. 3, 2009, Lewis, 62, had initiated changes to his executive management committee that increased the depth, expertise and diversity of experience of Bank of America's leadership team. Lewis had targeted these changes to position a number of senior executives to compete to succeed him at the appropriate time.

Lewis' decision to retire adds to the uncertainty for a company that has been under attack by regulators and lawmakers since its controversial purchase of Merrill Lynch a little more than a year ago.

The lack of a clear successor to replace Lewis, who has claimed a lot of the credit for transforming Bank of America into one of the biggest success stories in banking in recent years prior to the Merrill deal, raises concerns about the bank’s future.

There are also the various legal actions being taken against the firm related to the Merrill acquisition, including a securities fraud suit brought by the Securities and Exchange Commission that alleges the company misled investors about bonuses paid to Merrill Lynch employees.

Bank of America is one of the world's largest financial institutions, serving individual consumers, small- and middle-market businesses and large corporations with a full range of banking, investing, asset management and other financial and risk management products and services. The company serves clients in more than 150 countries. Major competitors are Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC).

We currently have a Neutral recommendation on BAC.
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Ken Lewis Retiring from BofA – Analyst Blog

Zacks Market Commentaries — Thu, 01 Oct 2009 16:03:36 +0000

Small Caps Lead the Way after a Recession

Trading School — Wed, 30 Sep 2009 14:39:22 +0000

Last week I asked Ian Wyatt from SmallCapInvestor.com to come and teach us a little about why small caps are perfect for active traders. It got a pretty good response, so today I invited him back to convince us that small cap stocks are our way out of the recession…please feel free to comment with [...]

Traders Anticipate a Drop in Oil Prices as Supply Outruns Demand

Contrarian Profits — Tue, 22 Sep 2009 18:32:26 +0000

pThe number of traders betting that oil prices will drop outnumbers the number of traders who believe they will rise by the largest margin ever. Some analysts believe prices will fall significantly lower in the near future – at least into the low $60 a barrel range – after soaring to $75 a barrel in August./p pSupply has outrun demand this year as a global recovery has yet to accelerate. Yet, oil prices more than doubled from February to August and are up about 50% from where they started the year./p pNow, many traders are positioning themselves to profit from a pullback. The gap between prices of options betting on a decline in prices and those that would profit as a result#8230;/p

Stock Market News for September 22, 2009 – Market News

Zacks Market Commentaries — Tue, 22 Sep 2009 14:21:18 +0000

U.S. stocks ended the day mixed as concerns grew that a six-month old rally has gone ahead of any economic recovery. A drop in crude prices on global demand concerns sent energy shares lower. Also, investors appeared jittery ahead of the two-day policy meet and Friday's key post of August durable goods, and refrained from adding to their holdings. Defensive areas like healthcare rose. Technology shares also found some favor with investors after Dell announced plans to acquire Perot Systems in a $3.9 billion deal.

This morning’s stock futures indicate Wall Street is headed for a higher opening, helped by a rally in global stocks. Ahead of the market’s open, Dow Jones industrial average futures rose 48, or 0.5%, to 9,766. Standard & Poor's 500 index futures were up 6.20, or 0.6%, to 1,066.60, while Nasdaq 100 index futures rose 10.75, or 0.6%, to 1,738.50. Ahead of the FOMC policy statement, trading is expected to remain range bound as traders look for more data before taking the plunge.

Treasuries were mixed ahead of this week’s $112 billion note auction. The 2-year rose 1/32 and the 10-year was off 3/32. The dollar showed some strength, managing a 0.4% advance against a basket of currencies and sending the broad-based DJ-UBS commodity index down 1.8%, as crude prices went below the $70 level. On the NYSE, declining shares were ahead of those that rose in price by a two-to-one margin on volume of 1.20 billion shares.

Seven of the ten S&P500 industry sectors declined, with health care (+0.6%), tech shares (+0.1%), and consumer services (+0.1%) ending the day in the positive territory. The tech-heavy NASDAQ was the only outperformer among the major bourses, managing a 0.2% gain to 2138, helped by a Dell (NASDAQ:DELL) announcement to buy Perot Systems (NYSE:PER) in a $3.9 billion all-cash deal. Wal-Mart (NYSE:WMT) rose 1.6% as HSBC Holdings (NYSE:HBC) initiated coverage on the stock with an "overweight" rating and a price target of $61. Baird upgraded Celgene (NASDAQ:CELG) shares to "outperform," citing upside from strength of its Revlimid drug. Celgene shares closed up more than 5%. General Electric (NYSE:GE) shares also rose, bucking the trend of both its financial and industrial counterparts, as Morgan Stanley (NYSE:MS) raised its price target on the stock $19, noting the company's improved risk profile.

Leading the indices lower yesterday were financials (-1.0%), oil and gas (-0.9%), commodities (-0.7%), as well as industrials (-0.6%) and consumer goods (-0.6%). The Dow Jones industrial average, which was down 94 points in the morning session, closed down 41 points, hurt by its financial components, with American Express (NYSE:AXP) down 2.9% and Bank of America (NYSE:BAC) retreating 2.2%. Bank of America (NYSE:BAC) said it agreed to pay $425 million to terminate a tentative loss-sharing agreement with the government that had been established to facilitate its purchase of Merrill Lynch. However, the firm skipped a deadline to provide documents regarding that merger to a House panel. Shares in AIG (NYSE:AIG) spiked 22% after a report from the Government Accountability Office noted the company is seeing stabilization following the government's bailout measures. However, the report said it remains unclear when AIG would be able to repay those funds.

A $2.33 decline in crude prices also hurt share of commodity-related companies even as the greenback showed some resistance against a basket of currencies. Alcoa (NYSE:AA) shares lost almost 1% after Macquarie warned of an unfavorable aluminum demand/supply outlook over the next six to twelve months. Caterpillar (NYSE:CAT) declined 1.8% after reporting its global machinery sales plunged 48% in the three months to August.

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Have the Titans of Finance Learned Their Lesson?

Addison Wiggin — Mon, 14 Sep 2009 21:15:40 +0000

pIt was one year ago that Lehman Bros. went to the great investment bank in the sky. But it was also when the feds arranged the shotgun marriage of a failing Merrill Lynch to a moribund Bank of America (NYSE:a href="http://www.google.com/finance?q=BAC"BAC/a). And a href="http://www.google.com/finance?q=AIG"AIG/a’s collapse into federal hands was taking shape, if not yet a done deal./p pYears of debt and securitization finally caught up to the FIRE (finance-insurance-real estate) sector of the economy. The titans of finance refused to come clean about the real value of the ‘assets’ they sat on…and finally it came time to pay the piper./p pDan Amoss, whose recommendation of Lehman put options generated 462% gains earlier that summer, wrote in this space a year ago, “Think about how#8230;/p

Making a Bad Situation Worse

Bill Bonner — Fri, 28 Aug 2009 19:32:23 +0000

pOur story continues#8230;According to the popular version, Ben Bernanke, our flawed hero, has averted a Second Great Depression. When the crisis came in ’07-’08, he calmly took out the text he had written himself: “Dummies’ Guide to Avoiding a Japan-style Deflation”#8230; or something like that. /p pThen, he followed his own theory#8230; coolly#8230; confidently#8230; cutting Fed rates down to nearly zero, pushing Congress to pass a huge ‘stimulus’ bill, and even forcing Bank of America (NYSE:a href="http://www.google.com/finance?q=BAC"BAC/a) to take over Merrill Lynch. In this last event, he is accused of deliberately hiding Merrill’s enormous losses and then threatening the BofA board with dismissal if they refused./p pBecause of Bernanke’s swift and assertive action, the nation’s banking system held together during those critical weeks#8230;/p

Europe Shares Rise for 6th Week in 7

Contrarian Profits — Fri, 28 Aug 2009 14:30:10 +0000

pEuropean shares touched a 10-month high on Friday on optimism for a global economic recovery and with Nokia and results from U.S. bellwethers boosting the technology sector./p pThe FTSEurofirst 300 #60;.FTEU3#62; index of top European shares rose 1 percent to 978.34 points. Over the week, the index climbed 1.2 percent, its sixth weekly gain in the last seven weeks./p pThe European benchmark index is up more than 51 percent from its lifetime low of March 9, as investors have become more confident on the prospects of economic recovery./p p#8220;Things look good for the time being, but the higher we go the more we could be setting ourselves up for a disappointment,#8221; said Andy Lynch, a fund manager at Schroders./p p#8220;The world economy is doing well,#8230;/p

Efficient Market Hypothesis: True “Villain” of the Financial Crisis?

Jim Musselwhite — Wed, 26 Aug 2009 18:40:02 +0000

By Robert Folsom Editor’s Note: The following article discusses Robert Prechter’s view of the Efficient Market Hypothesis. For more information, download this free 10-page issue of Prechter’s Elliott Wave Theorist. When a maverick idea becomes vindicated, there’s a good story to tell. It usually involves a person (or small group of people) who courageously challenge the orthodoxy [...]

Judge Questions BofA Settlement – Analyst Blog

Zacks Market Commentaries — Wed, 26 Aug 2009 18:00:48 +0000

U.S. District Judge Jed Rakoff in Manhattan ordered federal regulators to explain why they didn't investigate whether executives at Bank of America Corp. (BAC) misled shareholders about bonuses paid by Merrill Lynch.

Rakoff delayed the approval of Bank of America's proposed $33 million settlement with the Securities and Exchange Commission (SEC) over the bonus affair, which arose after the bank’s acquisition of Merrill Lynch in September 2008 for $50 billion.

The SEC charged that a proxy statement by Bank of America in November misled investors as it stated that Merrill Lynch would not pay year-end bonuses without Bank of America's consent. However, Bank of America had already authorized Merrill Lynch to pay up to $5.8 billion in bonuses and didn't share that information with shareholders. That rendered a statement Bank of America mailed to 283,000 shareholders of both companies about the Merrill Lynch deal materially false and misleading.

The Securities and Exchange Commission reached the settlement with the bank last month. Bank of America agreed to pay $33 million in proposed fine to settle the charges. However, it neither admitted nor denied the allegations. Both, the SEC and the bank defended the settlement as fair in their filings.

Merrill Lynch paid a huge $3.6 billion in bonuses last year, even though it lost $27.6 billion in the same year. Those losses in turn affected Bank of America's bottom line after its takeover was completed.

The SEC said in a filing that the evidence it gathered did not support additional corporate charges against Bank of America or charges against individual executives arising from the bonus payouts. The SEC mentioned that it was not able to determine whether Bank of America’s executives deliberately violated securities laws as the terms of the takeover of Merrill Lynch as well as the bonus payments were laid out in documents prepared by outside attorneys for the two companies.

Rakoff responded that the lawyers should be held legally responsible if they actually made the decisions that resulted in a false (disclosure) statement.

Bank of America indicated that disclosure of bonuses would not have made any material effect on the outcome of the shareholder vote to approve the Merrill Lynch acquisition. The company had presented the strategic logic of the Bank of America and Merrill Lynch combination to its shareholders, and the shareholders approved the transaction based on that logic. Bank of America also suggested that shareholders should have already known about the bonuses given the media attention surrounding its takeover of Merrill Lynch.

Rakoff has set a deadline of Sept 9 for the two parties to file the next round of legal briefs so that he can decide whether to approve the settlement. After a period of review, Rakoff could rule or order additional hearings.
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Zacks Analyst Blog Highlights: Bank of America, Wells Fargo, KeyCorp, U.S. Bancorp and D.R. Horton – Press Releases

Zacks Market Commentaries — Wed, 26 Aug 2009 13:45:12 +0000

For Immediate Release

Chicago, IL – August 26, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Bank of America (BAC), Wells Fargo (WFC), KeyCorp (KEY), U.S. Bancorp (USB) and D.R. Horton (DHI).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Tuesday’s Analyst Blog:

Obama's Right Call on Bernanke

Though Bernanke's actions have at times been controversial (e.g. the Bank of America [BAC] takeover of Merrill Lynch), reappointing the Fed Chairman is the right move. Bernanke inherited a bad set of financial circumstances and moved boldly in his attempts to limit the damage. We may never know whether his actions prevented a depression from occurring, but in a crisis situation, action is always better than no action.

The next challenge for Bernanke will be his hardest, and a real test of how many lessons he learned from his analysis of the Great Depression. The Fed Chairman must keep inflation from spiraling out of control and, at the same time, prevent a double-dip recession. This will be very difficult, as the margin for error is almost nil.

His next actions must include removing the programs that have made essentially free capital available to Wells Fargo (WFC), KeyCorp (KEY), U.S. Bancorp (USB) and many other banks.

He also needs to ensure than the freeze on lending continues to melt, or else face an even worse housing crisis -- just as D.R. Horton (DHI) and many others are now starting to find stable ground. At the same time, he may have to battle higher commodity prices, a weaker dollar and other inflationary pressures.

If Bernanke screws up, we will see a return of stagflation, or worse. If he makes the right policy moves, and gets the necessary fiscal restraint from Congress, he could successfully engineer a return to a lengthy period of economic growth.

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Obama Backs Big Ben – Analyst Blog

Dirk Van Dijk — Tue, 25 Aug 2009 16:05:16 +0000

President Obama has decided to reappoint Fed Chairman Ben Bernanke to a second term. On balance, I think this is the right move. In many ways, his reappointment makes more sense than his original appointment.

The worst marks against Bernanke’s record come from when he was serving on the Fed board under Alan Greenspan, did nothing to stop the bubble forming and was almost willfully blind in seeing it coming. While as Chairman, he was a little slow off the mark in addressing the crisis, once engaged he took the needed steps to pull the world back from the brink of the abyss.

The role of Fed Chairman has two major components. First and foremost, he (along with the board of Governors) is responsible for monetary policy. This is the raising and lowering of the Fed Funds rate and regulating the overall money supply.

On that front, I think he has done an excellent job under the most trying of circumstances. He faced a raging wildfire of deleveraging in the financial system after the demise of Lehman Brothers and the near collapse of several other major financial institutions, including American International Group (AIG), Fannie Mae (FNM), Freddie Mac (FRE), Merrill Lynch -- now part of Bank of America (BAC) and Citigroup (C).

He responded by quickly lowering the Fed Funds rate to almost zero, and then going a few steps further by engaging in quantitative easing, or buying mortgage-backed securities and long-term T-notes. These actions dramatically increased the size of the Fed balance sheet and with it the size of the monetary base. He responded with a slew of innovative alphabet soup programs, such as the TALF program, to stabilize the system.

At the core of the problem is that deleveraging dramatically slows the velocity of money, or the rate at which it moves from one hand to another. Banks want to hold onto as much cash as possible and do not want to lend it out.

Since nominal GDP can be defined as the supply of money times the rate at which it turns over, if the money supply is not increased, then GDP will fall precipitously. This comes from the basic monetarists equation of M*V = P*Q, where M is the money supply, V is the velocity, P is the price level (inflation) and Q is the quantity produced (real output).

Once engaged, Bernanke saw the scope of the problem and unleashed a fire hose of liquidity on the problem. While the economy is clearly not in good shape, I shudder to think about the condition we would be in had he not taken these actions. Most people fail to appreciate just how close we came to financial Armageddon last fall. It was the economic equivalent of the Cuban Missile Crisis.

Sopping up all that liquidity is going to be extremely tricky, and the timing is going to have to be just right. If it is removed too soon, then the economy will slip right back into its downward trajectory.

The actions of the Fed prevented a second Great Depression, but that does not mean the threat has totally disappeared, just that the medicine is working. Stopping the medicine too soon would cause a relapse.

The best example of this in history was in the 1930’s. Few people realize that the greatest growth in GDP and industrial production in U.S. peacetime history was from 1933 through 1936. Unfortunately, worried about the potential for inflation and unprecedented budget deficits, both Monetary and Fiscal policy turned concretionary in 1937, resulting in a very nasty recession, a relapse that took WWII to cure.

On the other hand, if velocity starts to pick up and all that monetary base is still out there, then the movement on the other side of the equation will be as much or more from the P, inflation, as it is from the Q, a pick up in real economic activity. If Bernanke does not act quickly enough, inflation could easily return to mid-1970’s levels or worse.

Bernanke is betting that right now real activity is depressed enough that when V starts to pick up, the bulk of the adjustment will be in real output, or Q. With capacity utilization at near record lows, there is a very good justification for this view.

Certainly recent inflation reports have been not been on the too-hot side. Heck, we just saw the biggest year-over-year drop in producer prices on record! Changing horses in midstream is not a good idea, and until this river of liquidity is removed, we will not get to the other side.

The other major role of the Fed Chairman is to be one of the most important bank regulators. Here I would give him much weaker marks. The banks acted outrageously leading up to the crisis. They used taxpayer-backed deposits and effectively went to Las Vegas with them. Their casino of choice was highly leveraged bets on exotic forms of mortgage-backed securities.

Another favorite table game were derivatives, most notably Credit Default Swaps (CDS) which were essentially life insurance contracts on companies. When they were winning the bets, they paid out bonuses that were beyond lavish. They did not set aside sufficient reserves for when the bets turned bad.

The Fed, along with the Treasury, simply threw money at the banks with very few strings attached. The taxpayer got very little in return. This was one of the greatest transfers of wealth -- welfare, if you will -- in human history. It did not go to the poor or the sick; it went to the wealthy and the powerful. In the process, it set up a moral hazard problem of epic proportions.

Bankers now know that they can make huge bets, and if they lose, the taxpayer will cover them. If they win, they get to keep it all. This will encourage banks and other financial institutions to be even more irresponsible in the future.

An overhaul of the financial regulatory structure would help, and the recent proposals by the Obama Administration are a decent first step in that regard. Unfortunately, the proposals are more likely to be watered down in Congress than strengthened. This is exactly the sort of issue where lobbyists hold the most sway -- dry and complicated issues where a very powerful group has a huge interest in the outcome.

The net result is that down the road -- not next year or the year after, but maybe in a decade -- we will face another massive crisis in the financial system. And where the actions of the last administration with regard to the banks were beyond scandalous, the actions of the current administration towards the banks have been a huge disappointment. "Change we can believe in" has, at best, become change around the edges.

In his second term, Bernanke will have to become a much tougher regulator. Part of the regulatory reform would put even more power in the hands of the Fed as a systemic risk regulator. I agree that such a regulator is needed, and the Fed is one of the two obvious candidates for the job (the other being the FDIC).

The opposition the Fed has shown in giving up part of its regulatory power -- the consumer protection part -- is extremely disappointing, and smacks of more interest in bureaucratic turf than the interests of the American people or the economy. The Fed has done a lousy job in protecting the consumer from predatory practices at the banks, and a separate agency is desperately needed.

The experience of Alan Greenspan should warn us loudly about the lionization of a Fed Chairman. For most of his tenure, Greenspan was lionized as the “Maestro." Now it is clear that he truly was a failure whose actions led to the near total collapse of the entire world economy.

Thus, I have no desire to lift Ben Bernanke up to Mount Olympus. Still, given his excellent handling of monetary policy during the most difficult of times, Bernanke deserves to finish the job he started, and Obama is making the right move in reappointing him.
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BofA to Resolve Merrill Lawsuit – Analyst Blog

Zacks Market Commentaries — Tue, 25 Aug 2009 15:00:43 +0000

Bank of America Corp. (BAC) agreed to settle a class-action lawsuit against Merrill Lynch & Co. for $150 million. The lawsuit accused Merrill Lynch for misleading investors with respect to the sale of bonds and preferred stock.

The preliminary approval of the settlement, granted by US District Judge Jed Rakoff on Aug. 21, was made public yesterday.

Two Louisiana pension funds were the major applicants for the lawsuit. About 20 former Merrill executives and directors were named as defendants. The company was accused of issuing false and misleading prospectuses and registration statements in the offerings between 2006 and 2008.

Bank of America acquired Merrill Lynch on Jan. 1, creating the largest U.S. bank by assets.

We think that Bank of America is in relatively good shape from a capital perspective. During this delicate period of market stress, the availability of significant private-sector capital is very limited. As a result, management remains focused on managing asset-levels efficiently, ensuring the deployment of TARP funds in core lending businesses and trimming other assets in non-core businesses.

We also think that the management is quite confident about its capital position as it has recently indicated that it is in discussion with regulators for paying back a material amount of TARP funds.

We anticipate continued synergies from the company’s large-scale operation and balance sheet restructuring. However, higher credit costs and worsening credit quality will be a drag on upcoming results.

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Obama’s Right Call on Bernanke – Analyst Blog

Charles Rotblut — Tue, 25 Aug 2009 13:55:54 +0000

President Obama is reappointing Ben Bernanke as Fed Chairman. Though there will be those in Congress who disapprove, it is highly probable that Bernanke will keep his job after January 31st.

The move is part of a broader plan to keep the Obama economic team in place. A White House official told Politico.com, "The president wanted the team that has been working to rescue this economy together...This continuity is crucial."

Though Bernanke's actions have at times been controversial (e.g. the Bank of America [BAC] takeover of Merrill Lynch), reappointing the Fed Chairman is the right move. Bernanke inherited a bad set of financial circumstances and moved boldly in his attempts to limit the damage. We may never know whether his actions prevented a depression from occurring, but in a crisis situation, action is always better than no action.

The next challenge for Bernanke will be his hardest, and a real test of how many lessons he learned from his analysis of the Great Depression. The Fed Chairman must keep inflation from spiraling out of control and, at the same time, prevent a double-dip recession. This will be very difficult, as the margin for error is almost nil.

His next actions must include removing the programs that have made essentially free capital available to Wells Fargo (WFC), KeyCorp (KEY), U.S. Bancorp (USB) and many other banks.

He also needs to ensure than the freeze on lending continues to melt, or else face an even worse housing crisis -- just as D.R. Horton (DHI) and many others are now starting to find stable ground. At the same time, he may have to battle higher commodity prices, a weaker dollar and other inflationary pressures.

If Bernanke screws up, we will see a return of stagflation, or worse. If he makes the right policy moves, and gets the necessary fiscal restraint from Congress, he could successfully engineer a return to a lengthy period of economic growth.

Unfortunately, the odds are stacked against Bernanke and the entire Obama economic team. It's not that we won't see growth next year, but rather we also see potential for further economic problems in 2011 and 2012. Fortunately, the Fed Chairman appears to understand these risks, and that is precisely why he should get a second term.

Charles Rotblut, CFA is the senior market analyst for Zacks.com.
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Pimco To Launch First Short-Term TIPS ETF

IndexUniverse Staff — Mon, 24 Aug 2009 09:02:00 +0000

Pimco is ready to launch the first short-term TIPS ETF in the U.S.

Pimco is set to launch its second exchange-traded fund on Monday, again sticking with short-term Treasuries.

This time, however, the world’s biggest bond fund manager is moving into Treasury Inflation-Protected Securities. It’s a market with two entrenched competitors already vying for investment dollars. But TIPS have been hot attractions so far this year, and if inflation hawks are correct, could heat up even more in coming years.

New Competition

The Pimco 1-5 Year U.S. TIPS Index Fund (NYSE Arca: STPZ) will be the first to focus on the short-end of the yield curve. The two others already on the market take an intermediate tilt: the iShares Barclays TIPS Bond Fund (NYSEArca: TIP) and the SPDR Barclays Capital TIPS ETF (NYSEArca: IPE).

State Street Global Advisors also sponsors a global TIPS ETF, the SPDR DB International Government Inflation-Protected Bond ETF (NYSEArca: WIP). It has a longer duration than TIPS and IPE, which are hovering around eight years right now; WIP is listed with an average adjusted rate of slightly more than nine years.

The average duration of STPZ is about three years, according to Tammie Arnold, head of Pimco’s global wealth management group. She noted that short-term TIPS have produced higher correlations to inflation in the past five years (about 27% for STPZ’s underlying index and 6% for the broader TIPS market).

“Our short-term TIPS ETF is designed to be a more pure-play inflation-protection investment. It should expose investors to fewer of the risks associated with rising interest rates than longer-term TIPS funds,” Arnold added in an interview from the firm’s headquarters in Newport Beach, Calif.

All three U.S. TIPS ETFs are priced similarly: STPZ and TIP at 0.20% each with IPE at 0.18%. On the international side, WIP is charging 0.50%. Also, the 30-day SEC yields for TIP and IPE are around 1.50% while WIP’s is at 1.82%.

Different Index, Same TIPS Focus

The new STPZ will follow a Merrill Lynch index rather than the Barclays benchmark preferred by TIP and IPE.

Pimco’s John Cavalieri, however, downplays the significance of using a different index considering the rather limited number of U.S. TIPS issues actually available—roughly around 30 at any given time.

“The real key is the maturity segmentation of our index,” said Cavalieri, a Pimco senior vice president and real return product manager. “The other TIPS ETFs on the market cover the broader spectrum of TIPS available, including intermediate- and long-term issues.”

Despite deflation remaining a force in the U.S. economy, investors are still concerned about rising oil and commodities prices and looming federal budget deficits. A common investment theme has been to buy TIPS, with their built-in inflation protection, when the cost of such insurance is relatively low.

As a result, TIP has had the largest cash inflows into any fixed-income ETF this year. (See related research here.)

“We think this [STPZ] is a real sweet-spot type of product right now,” said Cavalieri. “By focusing on the short end of the maturity curve, we’re addressing the two main concerns we’ve heard from investors.”

Those are: inflation protection and protection against the risk of rising interest rates, he added. While other ETFs can provide the former, Cavalieri points out that STPZ is uniquely positioned to fight the latter.

“It boils down to this ETF providing exposure to the short end of the maturity curve, which limits interest rate sensitivity, which is commonly referred to as a fund’s duration,” he noted.

Two More TIPS ETFs Coming From Pimco

Pimco, the world’s largest bond fund manager by assets, is also planning to come out with two other TIPS ETFs. By early next month, it’s expecting to fill out the firm’s U.S.-focused TIPS lineup with: The Pimco Broad U.S. TIPS Index Fund (TIPZ) and the Pimco 15+ Year U.S. TIPS Index Fund (LTPZ). Both will also be tied to Merrill Lynch benchmarks.

In early June, the firm managing more fixed-income assets than anyone else came out with its first ETF, the Pimco 1-3 Year U.S. Treasury Index Fund (NYSEArca: TUZ). That was a change of pace for Pimco, which had planned to make an intermediate-termed bond ETF its first entry into the market. But with interest rates still at historically low levels, it shifted tactics and decided to introduce TUZ instead. (See related story here.)

Morgan Stanley in Hiring Mood – Analyst Blog

Zacks Market Commentaries — Fri, 21 Aug 2009 20:38:18 +0000

Morgan Stanley (MS) plans to hire as many as 400 traders and salespeople. The hiring spree aims at ramping up profit in the company’s emerging markets, foreign exchange, equity derivatives and prime brokerage businesses and thereby taking the company out of three straight quarters of losses.

This move comes after Morgan Stanley reported a second-quarter loss, while its major competitors Goldman Sachs Group Inc. (GS) and JPMorgan Chase & Co. (JPM) reported strong earnings. After last year's meltdown of the banking sector, Morgan Stanley steered away from risky investments that led to the demise of some of its competitors. When trading opportunities picked up in the second quarter of 2009, its competitors took advantage while Morgan Stanley lagged behind as a result of maintaining a more conservative stance to survive the financial crisis.

Morgan Stanley reported a loss of $1.26 billion, or $1.10 per share after paying preferred dividends for the second quarter, compared to $1.06 billion or $1.02 per share, in the prior-year quarter. The loss was mainly attributable to special charges incurred to cover losses in real estate investments and costs of repaying the bailout money to the government.

Though Morgan Stanley's investment banking revenues were strong in the reported quarter, its conservative approach to trading hindered its ability to reap higher profits to offset the special charges. Furthermore, the company’s capital ratios were among the sturdiest in the industry indicating that it had pulled higher cash in reserves rather than betting on riskier assets.

In June 2009, Morgan Stanley was one of 10 major banks that was approved to repay its government loan. Morgan Stanley had received $10 billion as part of the government's $700 billion program.

About half of the intended recruitment has already taken place across sales and trading. The company is looking to add more positions in its foreign exchange, emerging markets and equity derivatives businesses.

Morgan Stanley has already hired people from JPMorgan, Deutsche Bank AG (DB), Citigroup Inc. (C), Credit Suisse Group (CS), UBS AG (UBS) and Merrill Lynch, now part of Bank of America (BAC). Morgan Stanley has made about 200 hires so far, some with year-end compensation guarantees.
Read the full analyst report on "MS"
Read the full analyst report on "GS"
Read the full analyst report on "JPM"
Read the full analyst report on "DB"
Read the full analyst report on "C"
Read the full analyst report on "CS"
Read the full analyst report on "UBS"
Read the full analyst report on "BAC"
Zacks Investment Research

How Over-Regulating Goldman Sachs Will Lead to Higher Oil and Commodity Prices

Contrarian Profits — Fri, 21 Aug 2009 20:19:19 +0000

pAfter earning hefty profits on its commodities trading for nearly 18 years, heavyweight trader Goldman Sachs Group Inc. (NYSE: a href="http://www.google.com/finance?q=gs" target="_blank"GS/a) now finds itself on the hot seat, defending this crucial source of revenue. And while that may not be good for Goldman, it’s also bad for investors. Let me explain…/p pIt all started back in 1991, when a href="http://en.wikipedia.org/wiki/Goldman_Sachs#1980.E2.80.931999" target="_blank"J. Aron #38; Co/a., Goldman’s commodities-trading division, recommended that a large institutional client invest about $100 million in commodities. The vehicle “du-jour” was Goldman’s own investment vehicle, the Goldman Sachs Commodity Index (now the a href="http://www2.goldmansachs.com/services/securities/products/sp-gsci-commodity-index/tables.html" target="_blank"S#38;P GSCI Commodity Index/a)./p pThe GSCI is a 24-commodity dollar-weighted index, comprised of 70% energy (oil and natural gas), 8% industrial metals (aluminum, copper, lead, nickel and zinc), 3% precious metals#8230;/p

Bernanke Speaks at Jackson Hole – Analyst Blog

Dirk Van Dijk — Fri, 21 Aug 2009 18:24:41 +0000

In a long speech to the annual Kansas City Fed gathering at Jackson Hole, Wyoming, Fed Chief Ben Bernanke gave a history lesson about the recent financial crisis. It is worth reading in its entirety since it reminds us of just how close we came to absolute catastrophe.

He recounts the demise of Lehman Brothers and the decisions to bail out Fannie Mae ([/url]), Freddie Mac ([url=http://www.zacks.com/stock/quote/fre]FRE) and American International Group (AIG), as well as the shotgun marriages of Bank of America (BAC) with Merrill Lynch and J.P. Morgan (JPM) with Washington Mutual.

The full speech can be read here: http://www.federalreserve.gov/newsevents/speech/bernanke20090821a.htm.

While most of the speech focused on the recent past, he gave the following assessment of the current situation:

“Overall, the policy actions implemented in recent months have helped stabilize a number of key financial markets, both in the United States and abroad. Short-term funding markets are functioning more normally, corporate bond issuance has been strong, and activity in some previously moribund securitization markets has picked up.

"Stock prices have partially recovered, and U.S. mortgage rates have declined markedly since last fall. Critically, fears of financial collapse have receded substantially. After contracting sharply over the past year, economic activity appears to be leveling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good.

"Notwithstanding this noteworthy progress, critical challenges remain: Strains persist in many financial markets across the globe, financial institutions face significant additional losses, and many businesses and households continue to experience considerable difficulty gaining access to credit.

"Because of these and other factors, the economic recovery is likely to be relatively slow at first, with unemployment declining only gradually from high levels."

I have to agree with his basic assessment that the economy is stabilizing, but that the recovery will be exceptionally anemic. As a central banker, he is obligated to speak in soft tones and not say anything that has the potential to alarm markets. If he were back teaching at Princeton, he would probably use stronger language.

Historically, sharp downturns are followed by sharp and strong recoveries. That is not likely to happen this time around. Still, we have seen some encouraging signs, most recently the pick-up in existing home sales and the tentative rebound in industrial production.

These signals probably mean that the NBER will eventually say that the recession ended around now. They will not get around to doing so until perhaps the first quarter of next year, just as they did not tell us the recession started in December of 2007 until November of 2008, when any fool could tell we were in a recession.

Bernanke only touched lightly on what was likely going forward and did not really address how the programs of the last year will be unwound -- the timing of which will be extremely difficult. If the Fed acts too quickly, we could easily be back where we were last fall. If it waits too long, inflation expectations will rise, and given the huge amount of excess reserves the Fed has injected into the system, inflation could rapidly get out of control.

Some insight into this timing would have been nice in this speech, but I didn’t find it. Still it was a useful history lesson. Here is his conclusion:

“Since we last met here, the world has been through the most severe financial crisis since the Great Depression. The crisis in turn sparked a deep global recession, from which we are only now beginning to emerge.

"As severe as the economic impact has been, however, the outcome could have been decidedly worse. Unlike in the 1930s, when policy was largely passive and political divisions made international economic and financial cooperation difficult, during the past year monetary, fiscal and financial policies around the world have been aggressive and complementary.

"Without these speedy and forceful actions, last October's panic would likely have continued to intensify, more major financial firms would have failed, and the entire global financial system would have been at serious risk. We cannot know for sure what the economic effects of these events would have been, but what we know about the effects of financial crises suggests that the resulting global downturn could have been extraordinarily deep and protracted.

"Although we have avoided the worst, difficult challenges still lie ahead. We must work together to build on the gains already made to secure a sustained economic recovery, as well as to build a new financial regulatory framework that will reflect the lessons of this crisis and prevent a recurrence of the events of the past two years. I hope and expect that, when we meet here a year from now, we will be able to claim substantial progress toward both those objectives."

The effort the build an new regulatory framework is going to be critical, and is something that the public has to be aware of. Since it is a highly complex and difficult subject, it is just the sort of thing where lobbyists can have the greatest influence.

Already the effort to create a new agency focused on consumer protection from abusive financial products seems to be floundering under intense opposition from the banking lobby. The country did an enormous favor to the banking industry last year, but in the final analysis it was in the public interest to do so (as a general proposition of stepping in, the actual implementation was FAR too nice to the banks).

It would be nice if those efforts led to changes that would prevent a reoccurrence of this disaster. So far, there is little evidence of that happening.

The regulatory overhaul as proposed by the Obama Administration would be a good first step, but needs to be strengthened as it moves through Congress. However, it seems more likely that as the bank lobby sets its teeth in, it will be substantially weakened instead.

Thus, we will face another crisis like the one we had last year, maybe not this year or next, but 10 or 20 years down the line. Let us hope that Bernanke is right and a year from now we will see substantial progress towards these objectives, but I fear that we will not.
Read the full analyst report on "FNM"
Read the full analyst report on "FRE"
Read the full analyst report on "AIG"
Read the full analyst report on "BAC"
Read the full analyst report on "JPM"
Zacks Investment Research

Rosenberg: The recession is dead, long live the recession!

Prieur du Plessis — Fri, 21 Aug 2009 08:31:05 +0000

Since joining Gluskin Sheff & Associates from Merrill Lynch a few months ago, the daily research reports from chief economist and strategist David Rosenberg have been a breath of fresh air in the world of the "dismal science". His notes yesterday on the typical macro-economic environment prevalent once the stock market has rallied by 49%, and how the current landscape stacks up against the historical average, are proof of the useful input that has regularly been forthcoming from Rosenberg.

DrStockPick.com Stock Report! 8/19/09, EMIS, LVCA, SBCF, MER, ARCC, DRAM

Dr. Stock Pick — Wed, 19 Aug 2009 17:12:52 +0000

DrStockPick.com Stock Report! Wednesday August 19, 2009 ************************************************************** Emisphere Technologies, Inc. (OTC BB: EMIS) today announced that it has received commitments from two institutional investors to purchase $4 million of securities in a registered direct offering. Emisphere entered into a securities purchase agreement with these investors pursuant to which Emisphere has agreed to [...]

Cash For Clunkers … and now “Cash For Traders”

Trading School — Tue, 18 Aug 2009 00:34:55 +0000

Before I get into the “Cash For Traders” topic, I have something to share with you that is very disturbing. I am getting spammed… that’s right, spammed by the White House. I have never asked for e-mails from the White House, nor have I signed up for e-mails from the White House. But for some [...]

Citigroup (NYSE:C): Upgraded to Buy from Underperform at Merrill Lynch/BAM

Notable Calls — Fri, 14 Aug 2009 10:57:00 +0000

div style="text-align: justify;"Merrill Lynch/BAM is making a major call upgrading span style="font-weight: bold;"Citigroup (NYSE:C)/span to Buy from Underperform and raising their target price to $5.75 (prev. $2.50)br /br /The analyst Guy Moszkowski is upgrading C to Buy from Underperform because: in firm's view, credit quality is stabilizing; technical overhang of new-share issuance is past; and, given Citi’s new disclosure of core Citicorp vs non-core CitiHoldings, they see limited bookvalue downside potential. PO is $5.75, about Book Value.br /br /span style="font-weight: bold;"Consumer credit quality stabilizing; psychology shifting/spanbr /2Q bank results showed consumer credit delinquency stabilizing, which should drive better credit loss trends in quarters ahead. This is of course key for Citi and its large portfolio of mortgage and other consumer debt. With crisis largely past for Citi, we believe psychology on the company is changing.br /br /span style="font-weight: bold;"Technical risks have passed/spanbr /On July 30, Citi converted $58bn of Preferred to Common, quadrupling share count and doubling float (some shares, such as US Government’s, will not trade immediately). Merrill Lynch notes they were concerned about this technical overhang, which did briefly bring the shares near their downside target, but it has now passed.br /br /span style="font-weight: bold;"“Worst-case” scenario suggests limited downside/spanbr /Current BVPS est. at $5.91, diluted for recent preferred-to-common exchange; and Tangible at $4.28. Merrill's “burn-down” severe-case analysis puts Book no lower than $3.88 in ‘11. More realistic look suggests ‘11E BV could approach $7. Also, Tier-1 Common ratio remains well above 4% in their “worst-case” scenario, suggesting to us recent preferred-to-common exchange has provided more than sufficient capital cushion which was the objective of the gov’t “stress test” exercise and the exchange.br /br /span style="font-weight: bold;"PO of $5.75 as Book Value stabilizes/spanbr /ROE in ‘11, as earnings begin to normalize, forecast at 10-11%, so they expect C will, in the next 12 months, trade at around Book. Thus our PO moves from $2.50 to $5.75. Prior PO was based on worst-case outcome, and on Tangible, not Stated, Book. But history suggests C will likely begin again to trade based on actual, not tangible, BV with probability of “worst-case” outcome receding at this point.br /br /span style="color: rgb(255, 0, 0);"Notablecalls: /spanThis surely is a major change in thesis from one of the largest investment firms. Merrill is out saying there is at least 40% upside in C.br /br /span style="font-weight: bold;"I expect the stock to move in the $4.40 area today./span/divdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-144643838880553884?l=notablecalls.blogspot.com'//div

Citigroup (NYSE:C) upgraded to Buy from Underperform at Merrill Lynch/BAC

Notable Calls — Fri, 14 Aug 2009 10:48:00 +0000

Heads up:span style="font-weight: bold;" Citigroup (NYSE:C)/span upgraded to Buy from Underperform at Merrill Lynch/BACbr /br /Notablecalls: WOW! (more to follow!)div class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-8065776385575541661?l=notablecalls.blogspot.com'//div

Wachovia Buying Back Losses – Analyst Blog

Zacks Market Commentaries — Thu, 13 Aug 2009 14:17:34 +0000

Wachovia Corporation, now a part of Wells Fargo & Co. (WFC), will have to shell out a $2.52 million assessment fee to the state for its involvement in the auction rate securities market.

An auction rate security (ARS) typically refers to a debt instrument with a long-term nominal maturity, for which the interest rate is regularly reset through a Dutch auction.

Since February 2008, most of such auctions have failed and the auction market has been largely frozen. In late 2008, investment banks that had marketed and distributed ARSs have agreed to repurchase most of them at par. Wachovia announced yesterday that it would buy back $324.6 million of ARSs it sold to investors.

Wachovia has been slapped with a multi-state investigation under which it will have to pay a $50 million penalty along with buying back $9 billion in auction rate securities sold to its investors.

On July 21, Morgan Keegan – a regional brokerage firm owned by the Regions Financial Corporation (RF) – was sued by the SEC. Morgan Keegan was accused of misleading clients about risks in $925 million in auction-rate securities that it had sold.

Last year, large banks including JP Morgan Chase (JPM), Morgan Stanley (MS), Citigroup (C) and Merrill Lynch – now owned by the Bank of America (BAC) – had agreed to buy back ARSs from investors as part of industry-wide settlements with federal and state regulators. The settlements involved securities abuses by the firms.

Wachovia Corporation was purchased by Wells Fargo on December 31, 2008, when it ceased to be an independent corporation. Wells Fargo purchased Wachovia after a government-enforced sale to avoid a failure of Wachovia.

With the acquisition of Wachovia and the exit of small payers, Well Fargo has gained a larger share in mortgage markets. We believe it is better positioned than its peers. We maintain a Neutral rating on the shares.
Read the full analyst report on "WFC"
Read the full analyst report on "RF"
Read the full analyst report on "JPM"
Read the full analyst report on "MS"
Read the full analyst report on "C"
Read the full analyst report on "BAC"
Zacks Investment Research

The MA Market: When This Number Falls, Expect the Takeovers to Heat Up

Investment U — Tue, 11 Aug 2009 20:24:46 +0000

The M&A Market: When This Number Falls, Expect the Takeovers to Heat Up by Louis Basenese, Advisory Panelist When the credit markets froze solid last year, equities hit the skids, the economy tanked and so did the number of announced mergers and acquisitions (M&A). But now the stock market’s on the mend. In my book, a 49% rally [...]

King Pharmaceuticals (NYSE:KG): Upgraded to Buy at Merrill Lynch/BAM

Notable Calls — Fri, 07 Aug 2009 12:47:00 +0000

div style="text-align: justify;"Merrill Lynch/BAM is upgrading span style="font-weight: bold;"King Pharmaceuticals (NYSE:KG)/span to Buy from Neutral with a $14 target (prev. $10).br /br /Firm notes that while KG faces near-term headwinds, they believe these issues are already largely reflected in the stock’s low relative valuation. They believe that the approval and commercial success of Embeda, which could be the first “abuse-deterrent” opioid available in the US, could drive the shares higher over the next 12 months.br /br /span style="font-weight: bold;"Big market opportunity for less abusable product/spanbr /KG’s clinical work has shown that crushed Embeda capsules have a similar abuse potential relative to intact capsules, and significantly lower abuse potential relative to immediate-release morphine. This is important given that opioid abusers commonly crush drug to facilitate faster absorption (through oral, injectable, and nasal routes). At branded pricing, the firm estimates the long-acting morphine and opioid markets represent sales opportunities of $1.5bn and $7.1bn, respectively.br /br /span style="font-weight: bold;"Raising target to $14 from $10 on DCF methodology/spanbr /Because EPS could vary significantly in the near/mid term due to various factors (ie launch spend, Skelaxin generic timing), Merrill Lynch believes a discounted cash flow (DCF) analysis may be more appropriate than a P/E approach to assessing the long-term value of KG. For reference, their $14 target equates to a 2010E P/E multiple of 13.6x, relative to the group average (12.4x) on 2009E.br /br /span style="font-weight: bold;"KG expects approval soon/spanbr /ALO filed for approval of Embeda on 6/30/08 and the application was granted priority review status with an FDA action date of 12/30/08. The FDA extended the review without setting a new action date. According to KG, the extension was primarily related to the risk evaluation and mitigation strategy (REMS) proposal. At an investor meeting with KG management that the firm hosted on 7/7/09, KG described an “almost daily” back-and-forth with FDA, and that it continued to believe that final approval was weeks (not months) away. On its 2Q09 earnings call on 8/6/09, KG expressed confidence that it is close to approval.br /br /span style="color: rgb(255, 0, 0);"Notablecalls: /spanI like this call as:br /br /- It's a tier-1 firm upgrading KG. Merrill (still) has a large following.br /br /- The chart looks goodbr /br /- There's a n-t catalyst in place (Embeda approval).br /br /span style="font-weight: bold;"I think KG will trade to $10 (or possibly higher) on this upgrade./span/divdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-43587739398077650?l=notablecalls.blogspot.com'//div

Freeport-McMoRan (NYSE:FCX): Upgraded to Buy at Merrill Lynch/BAM

Notable Calls — Thu, 06 Aug 2009 10:34:00 +0000

Merrill Lynch/BAM is out with a major call upgrading span style="font-weight: bold;"Freeport-McMoRan (NYSE:FCX) /spanto Buy from Underperform and raising their target price to $87 (prev. $49).br /br /According to the firm the upgrade is based on a material upgrade to their copper price forecasts. Freeport is the largest pure-play copper miner and provides high leverage to firm's more positive copper view. Sensitivity to copper prices: a $0.10/lb change in copper is roughly $0.50 in EPS for FCX. span style="font-weight: bold;"They are raising their 2010 EPS to $9.25/sh (was $2.85)./span At this level of EPS, FCX should be able to generate over $10bb EBITDA and $10/sh of FCF. Dividend reinstatement also a high probability event for 2010.br /br /span style="font-weight: bold;"Move copper outlook to high-end of Street/spanbr /Firm is incorporating new base metal forecasts into our models. Their new copper price deck is as follows: 2009-$2.15/lb (was $1.76), 2010-$3.18/lb (was $2.00), 2011-$3.03/lb (was $1.90). Gold outlook remains unchanged at $1050/oz for 2010. New copper forecast is well above consensus in the $2.00/lb range and above the forward copper price of $2.70/lb. The drivers of more positive view on copper are:br /br /1) a tight concentrate market;br /br /2) lack of new supply in the pipeline;br /br /3) an end to de-stocking; andbr /br /4) improving demand in OECD/China.br /br /span style="font-weight: bold;"Merrill Lynch sees copper as structurally one of the best positioned base metals over the long term. /spanFirm notes their prior Underperform was predicated upon an end to Chinese stockpiling leading to higher LME inventories and a downward correction in commodity prices. However, despite a 70% YTD rise in Chinese copper imports, underlying demand appears to be recovering and should be sustainable into 2010.br /br /span style="font-weight: bold;"Increase PO to $87 on higher 2010 outlook/spanbr /They are increasing their price target to $87 (was $49), given the magnitude of our 2010 EPS revision. Firm's target multiples for P/E, EV/EBITDA, and P/B are generally consistent with their prior PO and in line with midcycle multiples. Based on the current FCX price, they see roughly 35% upside to revised target.br /br /span style="color: rgb(255, 0, 0);"Notablecalls:/span I view this as a more technical call than anything else. The chart looks like it wants new highs and Merrill/BAM provides the mo-mo crowd the reason to push for a breakout. span style="font-weight: bold;"br /br /I see them gunning for $67+/spandiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-1078916621500135729?l=notablecalls.blogspot.com'//div

Dow’s Deleveraging Act – Analyst Blog

Zacks Market Commentaries — Wed, 05 Aug 2009 17:57:33 +0000

Dow Chemical (DOW) priced a $2.75 billion public debt offering in an effort to repay a loan used to acquire Rohm & Haas in April this year.

The offering includes $250 million of floating rate notes due 2011, $1.25 billion of 4.85% of notes due 2012 and $1.25 billion worth of 5.90% notes due 2015. The proceeds will be used to repay a bridge loan used for the $16.5 billion acquisition by the year-end.

In April, Dow acquired all outstanding shares of Rohm & Haas at $78 each, funding the deal by issuing $7 billion in preferred stock and borrowing $9.23 billion in a short-term loan.

To help finance the transaction, Dow has also renegotiated a $12.5 billion bridge loan syndicated by 19 banks led by Citigroup (C), Merrill Lynch and Morgan Stanley (MS). This new loan agreement adds two years to the repayment and has slightly looser debt covenants (the loan's required leverage ratio has been lifted to 5.75 from 4.25) helping to further protect Dow from default.

Dow aimed to repay the bridge loan through sale of assets, issuance of equity and debt and by slashing dividend by 64% to preserve cash. Asset sales include the company’s thermoplastic polyurethane business, Morton International – the salt business of Rohm and Haas, and the spin-off or sale of Dow AgroSciences division as well as some specialty businesses like powder coatings and synthetic rubber.

Dow assured that the public debt offering along with $3.3 billion in asset sales will help it to repay the full bridge loan before year-end. We recommend shares of Dow as Neutral.

Read the full analyst report on "DOW"
Zacks Investment Research

PennyOmega.com Stock Report! 8/03/09, MDSO, GILT, KSU, CSTR, ORBC, ZQK

PennyOmega.com — Mon, 03 Aug 2009 12:51:15 +0000

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Dollar Rally Peters Out

Contrarian Profits — Thu, 30 Jul 2009 19:30:26 +0000

pObama defends his policies#8230;Commodity currencies should outperform#8230;Global Power Shift Index#8230;And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And happy Thursday to everyone! Hope everyone made it through the #8216;hump day#8217; with no worries. We started the morning here with rainshowers, but it ended up being a beautiful afternoon and evening. Currency markets were similar to the weather here, as most currencies started Wednesday in the loss column vs. the US$, but rallied as the day progressed. The dollar had strengthened over the past couple of days due to #8217;safe haven#8217; demand; but a surprisingly strong durable goods number (ex autos) combined with an #8216;all clear#8217; signal from President Barack Obama had investors moving back into riskier assets. The commodity based currencies also got#8230;/p

Bank Stock Outlook: Will First-Half Gains Give Way to Second-Half Pain?

Money Morning — Wed, 29 Jul 2009 20:05:53 +0000

[Editor's Note: After more than a year of chaos and controversy, some of the leading U.S. banks saw their stock prices soar during the second quarter. As part of its mid-year forecast series, Money Morning examines the outlook for U.S. banks for the rest of this year. To see earlier stories from our mid-year forecast [...]

MGM Mirage (NYSE:MGM): Downgraded to Neutral at Merrill Lynch

Notable Calls — Wed, 29 Jul 2009 12:33:00 +0000

div style="text-align: justify;"Merrill Lynch is out downgrading span style="font-weight: bold;"MGM Mirage (NYSE:MGM)/span to Neutral from Buy while lowering their target to $8 (prev. $11).br /br /MGM has taken an increasingly aggressive strategy toward booking group business in late 2009, ’10 and ’11. While this helps to fill MGM’s huge 33.7K room inventory, it effectively locks in lower rates, meaning MGM’s earnings snap-back could be delayed. No signs of group volume recovery by the hotel companies, means pricing will remain challenged for at least the rest of ’09 and likely longer.br /br /span style="font-weight: bold;"Supply picture may not be improving as quickly as thought/spanbr /Merrill continues to believe supply risks from CityCenter cannibalization (6K rooms, +6% growth) are understood, but the Fontainebleau LV (4K rooms, +4% growth) bankruptcy in June and slow progress on Cosmopolitan (3 rooms, +3% growth) were incremental positives. Now, there are signs that Fontainebleau LV could be worked out and Cosmopolitan (appt’d a new CEO) could open late ‘10, meaning supply of an add’l 7K high end rooms (+7% growth) will continue into late ‘10/’11.br /br /span style="font-weight: bold;"Credit separation from equity a bad signal/spanbr /In the last run, MGM’s debt and equity moved in lock step, as reduced likelihood of bankruptcy was positive for both. This hasn’t been the case recently w/equity rallying 36% (vs. Samp;P 11%) but LT debt (Jan 17 7 5/8) narrowing slightly from 64.5 to 66.25. With $12B in debt and a quick profit snap-back in ’10/’11 less likely due to locked-in rates + supply, add’l dilution for equity holders is a continued risk.br /br /span style="color: rgb(255, 0, 0);"Notablecalls:/span The call has some new info (negative) and will likely work. You can get some decent fills in the pre market and cover lower later in the day.br /br /MGM does not have any Macau assets to monetize so it's pretty much dying a slow death.br /br /Right now I'm interested if it can go sub-$7 or not. With a little help from the market I think it can./divdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-3750204165294699051?l=notablecalls.blogspot.com'//div

Four Ways to Profit if Bernanke’s ‘Exit Strategy’ Backfires

Jason Simpkins — Fri, 24 Jul 2009 17:36:25 +0000

[Editor's Note: If it's inflation you're worried about - and commodities you want to invest in - there's no better place to look than the Global Resource Alert trading service, which ferrets out companies poised to profit from the so-called "Secular Bull Market" in commodities. If you're new to the commodities-investing arena, and are uncertain [...]

Reforming Financial Regulations – Analyst Blog

Dirk Van Dijk — Wed, 22 Jul 2009 18:22:53 +0000

While most of the attention yesterday was focused on Ben Bernanke's testimony before the House Financial Services Committee (not much new came out in that one, Ben says the recovery will be anemic, inflation will not be a problem and the Fed has a plan to drain the liquidity before it causes problems), the same committee held another hearing in the afternoon focused on the reform of the financial regulatory structure. Among the witnesses were Alice Rivlin, the former #2 at the Fed in the 1990's, Mark Zandi of Moody's Economics and Simon Johnson, the former chief economist at the IMF.

Among the key points that came out of it were that there were 2 basic approaches to preventing the need for future bailouts. One focused on better regulation particularly of those who are too big to fail, and the other is to make sure that institutions don't become too big to fail (TBTF). The Obama administration proposes to go down the first path.

It would be very hard at this point to unscramble the egg and reinstitute a version of Glass Stiegel. After all, one of the ways we dealt with the problem was going in exactly the other direction, with JPMorgan Chase (JPM) taking over the remnants of Bear Stearns and Bank of America (BAC) swallowing Merrill Lynch. There was general agreement that making the list of those institutions that are TBTF public would be a mistake. Those banks would have an implicit backing of the federal government, which would give them a very big competitive advantage by lowering their cost of capital. However, even if the list were kept secret, the market would pretty quickly figure out who was on the list (with a few big but not gigantic institutions left as question marks).

Since the best way to get big in a hurry is to take outsized risks, this approach could actually worsen the moral hazard problems and make future problems more likely rather than less likely. The odds are that the banks would move more quickly than the regulators (or simply capture them) and if the incentives are there where any winnings are kept private while the losses are borne by the taxpayers, the banks will head off to Vegas every time.

One solution would be to have the capital requirements on a sliding scale. Thus the bigger a bank is the higher the percentage of its capital that would have to be held in reserve, and that the FDIC insurance premiums would also reflect the higher systemic risk that very large banks pose. This is a very good idea. It would give banks an incentive not to get too big. If they were successful and grew, they could always spin off divisions to their shareholders to make themselves smaller, and thus have lower capital requirements.

There was disagreement over the Fed being the best agency to serve as the systemic risk regulator. Clearly it did not cover itself in glory as a regulator in the lead up to the financial crisis (there monetary policy reactions to the crisis on the other hand were excellent). However, there are no clearly better placed alternatives and they already do have some regulatory functions. Assigning it to a committee of different agencies would be a recipe for disaster, with no clear lines of responsibility. Some expressed concern that it could lessen the perceived independence of the Fed, but I do not see why that would have to be the case.

Most of the participants strongly endorsed the idea of a financial Consumer Products Safety Commission. I whole heartedly agree. It, however, is likely to be fought tooth and nail by the bank lobby. To my mind, that is proof enough that it is desperately needed.

The existing regulatory structure has been a dismal failure at protecting the consumer from abusive mortgage and credit card contracts (go ahead and pull out your credit card contract, I defy any reader to understand what it says, with the possible exception of a lawyer who specializes in that area).

Protecting the consumer will always be an afterthought at agencies like the Fed. The top officials, and brains, there are going to be focused on monetary policy, not on making sure that plain vanilla mortgage products are available at all institutions that offer mortgages. Standardization of plain vanilla financial products would also help the smaller banks since it costs a lot of money to write 35 pages of fine print legalize, which a big bank can spread over millions of customers, but a small community bank could not hope to do.

While this seems like a technical and complicated issue, it is important to keep the heat on congressmen and senators to make sure that the Consumer Safety Commission comes into existence, otherwise the lobbyists will kill it in its crib.

After all, even after Sinclair published "The Jungle", the meat packing industry fought for the right to sell rancid meat to consumers. You can bet the banks will fight for the right to sell rancid mortgages a century later. They will claim that it will kill off innovation, but really, how much benefit have we gotten from innovations like option-ARMs and exploding subprime loans than get packaged into CDO squared? Wall Street reaped massive bonuses from those innovations, but could someone please explain to me just how an ordinary consumer benefited?Zacks Investment Research

Do We Cheer Banks’ Earnings? – Analyst Blog

Zacks Market Commentaries — Mon, 20 Jul 2009 15:19:07 +0000

Last week, after a round of “positive surprises" delivered by some of the major banks, we had “not so surprising" news of closure of five more banks, bringing to 57 the number of federally insured banks closed this year.

It appears that the divide in the banking landscape between the “haves" and “have-nots" is increasing. Even among the big banks, there is now a clear two-tier system.

On one hand, we have Goldman Sachs (GS) and JP Morgan (JPM), which delivered record profits from their trading and investment banking revenues. There is no doubt that these two managed their affairs well, have increased their market share after the collapse of Lehman and Bear Stearns and also have benefitted tremendously from the various programs by the Treasury and the regulators. And, we should not forget the generous AIG (AIG) payout to Goldman.

On the other hand, the second-quarter profits of Bank of America (BAC) and Citigroup (C) were reliant on several one-time gains, resulting from asset sales etc, while weaknesses in some businesses and continued credit deterioration showed that there is more pain to come.

Bank of America’s credit-card unit lost $1.6 billion amid rising delinquencies, compared with a year-ago profit of $582 million. Its home-loan and insurance unit lost $725 million. The bank reported $8.7 billion in credit losses, up from $3.6 billion in the year-ago quarter. Its nonperforming loans jumped to 3.3%, up from 1.1% a year ago.

Like Goldman and JP Morgan, Bank of America’s results were aided by strong investment-banking and trading income following the merger with Merrill Lynch. But Citigroup saw decline in investment banking profits and it appears to be losing market share to stronger rivals.

Citigroup reported $8.4 billion in net credit losses, nearly double the loss from a year ago. Incidentally, the CEO of Citigroup -- after the bank had posted a sixth quarter of loss ($2.4 billion net loss on operational basis) in the last seven quarters -- sounded most optimistic during the conference call, saying "the rate of growth in these consumer losses may be moderating." Obviously he was trying to put on a brave face as the bank still faces an uncertain future.

With spiking unemployment, these banks will face increasing credit card losses. Housing and Commercial Real Estate prices are still on a downward spiral and will cause more losses in the coming quarters. On the other hand, mortgage refinancing, which was one of the main reasons for supporting the revenues in the last two quarters, is expected to taper off as the rates are creeping up now.

The smaller banks that do not enjoy the privilege of being “too big to fail" continue to struggle. The regulators shut two banks in California and two smaller banks in Georgia and South Dakota on Friday (something that has become the rule rather than the exception for Fridays).

The 57 bank failures this year compare with 25 last year and just three in 2007. The latest round of failures is expected to cause a loss of $1.1 billion to the FDIC and bring the total cost of failures this year to $13.4 billion. And unfortunately, this trend is expected to continue for some time.
Read the full analyst report on "GS"
Read the full analyst report on "JPM"
Read the full analyst report on "AIG"
Read the full analyst report on "BAC"
Read the full analyst report on "C"
Zacks Investment Research

Risk Aversion Disappears Again

Contrarian Profits — Mon, 20 Jul 2009 14:00:35 +0000

pRisk aversion has left the building#8230; CIT survives without Fed help#8230; SNB tries to fight the markets#8230; Light week for US data#8230; And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; We had just an amazing weekend of weather here in St. Louis, and this morning is shaping up to be another beautiful day. Friday turned out to be a beautiful day for those who have taken our advice and diversified their holdings out of the dollar. Risk aversion was placed on the back burner again, and investors moved money back out of the dollar into higher yielding currencies. The dollar and yen got sold but all other currencies rallied, and investors also turned back toward gold pushing the metal above $950 for the first time in over#8230;/p

NEAH Power Systems, Inc. (NPWS.OB) Prepares for Uplisting to AMEX Exchange

QualityStocks — Fri, 17 Jul 2009 18:12:05 +0000

NEAH Power Systems’s President and CEO Dr. Chris D’Couto told the investment community today that the company is working with Ed Cabrera, an investment banker and board member of NEAH Power Systems, Inc., to move up to the AMEX trading platform. “In the last month, NEAH Power has seen significant growth and completion of deliverables. [...]

Regions Financial Faces SEC – Analyst Blog

Zacks Market Commentaries — Thu, 16 Jul 2009 19:55:12 +0000

Regions Financial (RF) may face charges from the U.S. Securities and Exchange Commission (SEC) for possible violation of the federal securities laws associated with mutual funds that were formerly managed by Morgan Asset Management.

Regions Financial disclosed in an SEC filing yesterday that Morgan Keegan & Company, Inc., a wholly owned subsidiary of Regions Financial, Morgan Asset Management, Inc. and three employees have each received a "Wells" notice from the Atlanta Regional Office of the SEC.

A Wells notice is neither a formal allegation nor a discovery of wrongdoing. The company receiving a Wells notice will have a chance to justify itself before being condemned. Regulators are investigating the roles of the fund managers in the credit crisis.

Last month, State Street Corp. (STT) had disclosed that it had received a Wells notice related to certain fixed income strategies. The strategies were finally backed by subprime mortgages that absorbed massive losses. Last year, large banks including JP Morgan Chase (JPM), Morgan Stanley (MS), Citigroup (C), Wachovia (now owned by Wells Fargo − (WFC) and Merrill Lynch (now owned by Bank of America − (BAC) had agreed to buy back auction-rate securities from investors as part of industry-wide settlements with federal and state regulators. The settlements involved securities abuses by the firms.

Prior to the Regions second quarter scheduled earnings release on July 21, we maintain our Hold recommendation on its shares.

Read the full analyst report on "RF"
Read the full analyst report on "STT"
Read the full analyst report on "JPM"
Read the full analyst report on "C"
Read the full analyst report on "WFC"
Read the full analyst report on "BAC"
Zacks Investment Research

Purchasing Gold As The Dollar Shrinks

Steve Peasley — Wed, 15 Jul 2009 18:50:20 +0000

Author: BusinessTalk
Added: Wed, 15 Jul 2009 10:50:20 -0800
Duration: 0

http://SafeAsGold.com Today's Talking Points: - The Recession is driving the price of gold - Citibank and Merrill Lynch are currently buying large amounts of gold - Gold minted before 1933 is not confiscatable and has a higher intrinsic value - There likely will be more shortages of gold from the U.S. Mint - Warren Buffet bought the two largest gold manufacturing companies in the U.S. Listeners are always welcome to receive a free gold investment guide by going to http://www.safeasgold.com/goldinvestmentguide.html or call 1(800)510-9594. Today's Talking Points: - The Recession is driving the price of gold - Citibank and Merrill Lynch are currently buying large amounts of gold - Gold minted before 1933 is not confiscatable and has a higher intrinsic value - There likely will be more shortages of gold from the U.S. Mint - Warren Buffet bought the two largest gold manufacturing companies in the U.S.

Investing in Sin Stocks: How to Oppose Radical Islam in Your Portfolio

Alexander Green — Wed, 15 Jul 2009 17:30:54 +0000

pLast month the first ETF adhering to strict Islamic beliefs, Dow Jones Islamic Market International (NYSE: a href="http://www.google.com/finance?q=JVS" target="_blank"JVS/a), began trading. Following Shariah law, the index excludes anything close to investing in “sin stocks” or firms that produce or market alcohol, tobacco, gambling, weapons, or pornography./p pInvestors are further assured that the stocks held in the index have nothing to do with borrowing or lending, women’s fashions, cosmetics, modern cinema, popular music, or pork./p pPersonally, I wouldn’t touch this fund with a barge pole. It is virtually guaranteed to earn sub-par returns./p pHere’s why…/p pstrongInvesting in Sin Stocks vs. Socially Responsible Stocks/strong/p pIf you were given the choice six years ago between investing in the environmentally and a href="http://www.investmentu.com/research/sociallyresponsibleinvesting.html" target="_blank"socially responsible/a strongSierra Club Stock Fund/strong (Nasdaq: a href="http://www.google.com/finance?q=NASDAQ%3ASCFSX" target="_blank"SCFSX/a) or investing in sin stocks with the strongVice#8230;/strong/p

Investing in Sin Stocks: How to Oppose Radical Islam in Your Portfolio

Investment U — Tue, 14 Jul 2009 21:43:09 +0000

Investing in Sin Stocks: How to Oppose Radical Islam in Your Portfolio by Alexander Green, Advisory Panelist Last month the first ETF adhering to strict Islamic beliefs, Dow Jones Islamic Market International (NYSE: JVS), began trading. Following Shariah law, the index excludes anything close to investing in “sin stocks” or firms that produce or market alcohol, tobacco, gambling, [...]

Citigroup Shuffling Deck Chairs – Analyst Blog

Zacks Market Commentaries — Fri, 10 Jul 2009 14:22:13 +0000

Considering the state of affairs at Citigroup (C), movement in its management team is not unrealistic -- this company has been among the hardest hit banks by the credit crisis and ongoing recession.

Clearly, after Citigroup received $45 billion in aid from the government in the fall of 2008 (part being converted to a 34% equity stake in the bank), pressure has definitely increased for its CEO, Vikram Pandit, to improve operations and return the entity to profitability and improve operations, which has resulted in some instability in the executive management ranks.

Even though the U.S. government is one of the largest shareholders, we would not expect these changes to be the result of it flexing its voting potential, but we suspect a close eye is being kept on the situation.

What has resulted are the following shuffles:

The current chairman of Citi Holdings (since March) and Citigroup’s former chief financial officer Gary Crittenden is out.

Edward Kelly (56) is in as vice chairman of Citigroup. In his new position, Mr. Kelly will be responsible for strategy and mergers and acquisitions. Previously, Mr. Kelly served as chief financial officer since March 2009.

John Gerspach (56) is also in as the third individual to hold chief financial office this year. Previously, Mr. Gerspach served as controller and chief accounting officer at Citi.

And finally Eugene McQuade (60) is in as CEO of Citibank NA (C’s primary banking subsidiary). Most recently, Mr. McQuade served as vice chairman of Merrill Lynch and president of Merrill Lynch Banks, but left the position in February 2009, a month after the investment bank was acquired by Bank of America Corp (BAC).
Read the full analyst report on "C"
Read the full analyst report on "BAC"
Zacks Investment Research

Video-o-rama: Fresh wave of risk aversion

Prieur du Plessis — Fri, 10 Jul 2009 08:17:23 +0000

The usual debate on the outlook for the economy and financial markets dominated the video channels over the past few days, but interesting snippets on the improved forecast of the IMF for the global economy, the viability of the Public-Private Investment Program (PPIP), the role of the US dollar as reserve currency and the prospects for the earnings-reporting season were also featured in the clips included in the Video-o-rama compilation.

Back and Forth We Go!

Contrarian Profits — Wed, 08 Jul 2009 14:45:35 +0000

pBias to sell dollars fades away#8230; Trading in yesterday#8217;s clothes#8230; More thoughts on China#8230; Shadow Inventory#8230;br / And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Wonderful Wednesday to you! Tuesday ended up being a very nice day, except for the currencies. After signing off yesterday and telling you how I had watched the euro climb back to 1.4025, it just couldn#8217;t hold that figure or add to 1.4025.. And all the thoughts that had held the dollar hostage earlier that morning, being the China going to G-8, and so on, just faded like a black shirt put through 100 washes!/p pSo#8230; When I came in on Tuesday, the euro was 1.3920#8230; When I came in this morning, the euro was trading 1.3925#8230; Trading with yesterday#8217;s clothes on.#8230;/p

By Opening its Doors to China for the First Time in 60 Years, Taiwan Paves a New Path for Investor Profits

Keith Fitz-Gerald — Tue, 07 Jul 2009 22:00:22 +0000

[Editor's Note: Fourteen trades. All profitable. Since launching his Geiger Indextrading service late last year, Money Morning Investment Director Keith Fitz-Gerald is a perfect 14 for 14, meaning he's closed every single one of his trades at a profit. And he did this during one of the most volatile periods for the U.S. stock market [...]

Base Metals Slammed

Doug Casey — Tue, 07 Jul 2009 20:00:57 +0000

p class="maintextDRP"The base metals were all well into the red on Monday. Copper had a completely emU/em-shaped day, with the bottom near the New York open, and finished at $2.2302, down 4½ cents from Thursday. /p p class="maintextDRP"Nickel followed a similar but less steep path, closing at $7.4382/lb., down nearly 23½ cents. Zinc was similar, just retreating from its intraday highs to end at $0.6904/lb., down short of a penny. Aluminum had a strong late-day rally but it wasn’t enough as it shed more than three-quarters of a cent, to $0.718/lb., while lead also sagged, dropping almost a half-cent, to $0.7582/lb./p pCopper led the industrial metals lower yesterday amid economic worries and inventory gains, but rose sharply off of session lows when chart-based buying#8230;/p

Are Banks Really Coming Back?

Andrew Gordon — Tue, 07 Jul 2009 15:20:59 +0000

h3 class="post_date"First-quarter earnings reports for the big banks weren’t bad on the surface. But banks had to pull some rabbits out of the hat to do it. For example, Goldman Sachs skipped December in order to post improved numbers./h3 h3 class="post_date"And Bank of America arbitrarily assigned a higher value to its Merrill Lynch assets. Earnings reports this quarter may also impress investors. Trade revenue is up on the big spread between treasury and other bonds. And the banks earned fees in May helping each other raise capital./h3 div class="entry" pBut all the important stuff is down. Mergers and acquisitions dropped 56 percent from last year. And equity underwriting also fell in June after the boom in May. Underwriting of bonds also dipped. Companies issued 22 percent less#8230;/p/div

$35 Billion More Treasuries To Auction

Contrarian Profits — Tue, 07 Jul 2009 14:25:59 +0000

pBias to sell dollars again#8230; More supply to choke down#8230; More thoughts on China#8230; RBA leaves rates unchanged#8230;br / And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Terrific Tuesday to you! A beautiful day and night here in St. Louis yesterday, where was that during the 4th of July weekend? Oh well, at least I got to enjoy a couple of hours of it, outside! There#8217;s more Treasury supply for the markets to choke down, and the whispering campaign regarding China is growing louder#8230; Those things and more, in this edition of A Pfennig For Your Thoughts, Tuesday, July 7, 2009#8230; And here#8217;s our host#8230;/p pHello! Everyone! How nice it is to be with you again today! We#8217;ll start out with a recap of yesterday#8230; When I#8230;/p

Stock market performance during economic cycles

Prieur du Plessis — Wed, 01 Jul 2009 06:42:35 +0000

This post features an interesting analysis on the performance of the S&P 500 Index during various phases of the economic cycle.

Paulson To Testify On BAC/Merrill Merger – Analyst Blog

Zacks Market Commentaries — Tue, 30 Jun 2009 16:29:14 +0000

On Jul 16, Former Treasury Secretary Henry Paulson is expected to testify before the House Oversight and Government Reform Committee as to whether he and/or other government officials pressured Bank of America (BAC) to acquire Merrill Lynch, which resulted in a $20 billion cost taxpayers.

This will follow BAC CEO Kenneth Lewis' statements before the committee that both Paulson and Federal Reserve Chairman Ben Bernanke threatened to oust BAC's CEO and the bank's board members if they abandoned the takeover after discovering losses at Merrill.

In September 2008, BAC agreed to acquire Merrill Lynch, which resulted in the government supplying an additional $20 billion to BAC in order to cope with rising losses following the acquisition. This was on top of the $25 billion from the government's bailout program.

We would be surprised if the story behind the headlines is ever revealed.

Read the full analyst report on "BAC"
Zacks Investment Research

Electronic Arts (NASDAQ:ERTS): Upgraded to Buy at Merril Lynch/BAM

Notable Calls — Tue, 30 Jun 2009 11:14:00 +0000

div style="text-align: justify;"Merrill Lynch/BAM is upgrading span style="font-weight: bold;"Electronic Arts (NASDAQ:ERTS)/span to Buy from Neutral following a modest post-E3 sell-off.br /br /According to the analyst the upgrades is based on 1) expected upside to consensus estimates in 1Q and 2Q with company likely tracking at/above their early FY10 internal plan, 2) strength of Sims 3, Active and Need for Speed franchises likely driving improved investor sentiment on EA’sbr /execution, 3) catalysts and seasonality with the summer period historically giving the best return on EA’s stock and the firm sees several upcoming catalysts. span style="font-weight: bold;"Merrill is $100mn above consensus in F1Q (June) and F2Q and their bias is that Street estimates move higher for FY10/FY11 over next 90 days, as key Active and Sims titles should have catalog and sequel strength./spanbr /br /span style="font-weight: bold;"Multiple catalysts/spanbr /In addition to 1Q/2Q upside, they see the following catalysts helping drive improved investor sentiment: 1) Strength of key Sims 3 franchise and progress on cost reduction initiatives outlined on 1Q conference call, 2) NPD retail sales data for EA improving with increases in market share reflecting a strong June/Sept Q title slate, 3) Need for Speed release in September, units for this key franchise could be up after several years of declines given easy comps and 4) possible PS3 price cut in August or September helptin drive improved sentiment on HW trends.br /br /span style="font-weight: bold;"Valuation attractive if ests. going up, raising PO to $26/spanbr /EA valued at 12x ex-cash FY11 (CY10) EPS estimate which is well below its historical average of over 20x. In conjunction with the upgrade to BUY, the firm is raising their PO to $26 from $25, rolling forward basis to FY11 using 17x excash EPS estimate of $1.14, plus $7 in cash (a discount to 20x target for ATVI).br /br /Analyst notes they see upside to their PO at $26 based on 2x P/S if execution improves and EA can sustain 10-15% margins. Reaching 10-15% op. margins could warrant a 2.0x P/S multiple ($34 stock price) as EA traded at 4.5x sales last cycle on peak margins of 27%.br /br /span style="color: rgb(255, 0, 0);"Notablecalls: /spanI like this call as it highlights clear near-term catalysts and notes the $26 price tgt may end up being conservative.br /br /span style="font-weight: bold;"I think ERTS will trade in the $21.50-22.00 range today. I don´t think one will get any fills below the lower end of that range.br //span/divdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-976990559335418196?l=notablecalls.blogspot.com'//div

Buy, Sell or Hold: The TSW/Claymore Tax-Advantaged Balanced Fund is a Diversified Profit Play with a High Yield

Contrarian Profits — Mon, 29 Jun 2009 14:49:46 +0000

pLast week was a very important one. The U.S. Treasury placed a record level of debt, the Federal Reserve announced it would not expand its monetary easing, and we got many top players opining about the economy. In addition, we are facing the uncertainties about ‘a href="http://en.wikipedia.org/wiki/Cap_and_trade" target="_blank"Cap and Trade/a’ legislation and the healthcare reform. /p pAnd to cap it all, we are about to close the first half of 2009, with all the consequences in terms of portfolio adjustments that need to take place./p pThe Treasury debt placement was well received by the markets. We saw these issues amply oversubscribed and trading well after their placement. This was very encouraging. End of the half adjustments also saw a bid coming back into the#8230;/p

Bank of America Dot Gov

Bullish Bankers — Sat, 27 Jun 2009 11:00:59 +0000

It is becoming clearer and clearer what it means to have government involved in the affairs of banks and businesses. Where all the initial talk was about the “moral hazard” presented by government bailing out the private sector and how this just means that in the future banks, and other organizations, will just take [...]

Desperately Seeking Yield

Contrarian Profits — Fri, 26 Jun 2009 15:50:41 +0000

pCurrencies rally#8230; More on the BRIC#8217;s#8230; New Zealand#8217;s GDP contracts.. Bernanke gets grilled! And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Happy Friday to one and all! The end of what seemed to be a very long week#8230; The last weekend in June, can you believe that? Next week, we#8217;ll be getting ready for the 4th of July celebrations! WOW!/p pWell#8230; What a volatile week it has been in the currencies! Up, down, all around, and settling back to levels that we saw before the Fed#8217;s FOMC meeting earlier this week. Suddenly, investors are looking for yield again#8230; Looks like they are #8220;Desperately Seeking (not Susan) Yield! And why not? The Fed, and the Bank of Canada (BOC) have come out and said that there will#8230;/p

Thursday’s Market Recap (06/25/09)

Bullish Bankers — Fri, 26 Jun 2009 11:02:33 +0000

The markets had a good day as all three major indexes were up over 2%, with the Dow up 2.08% to finish at 8472.40. The NASDAQ and S&P were up 2.08% and 2.14% respectively, closing at 1829.54 and 920.26. The 10-year saw price climb over a dollar as the yield ended at 3.544%. Crude oil saw [...]

Increasing SDR Issuance

Contrarian Profits — Thu, 25 Jun 2009 13:45:48 +0000

pFed confuses markets, risk assets get sold#8230; SNB intervenes to stop franc#8217;s rise#8230; ECB issues 12-month liquidity#8230; Bernanke to get grilled? And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Tub Thumpin#8217; Thursday to you! Yes, I know the currencies and commodities got whipsawed yesterday, and my Cardinals got spanked, but that#8217;s no reason for us to not enjoy a Tub Thumpin#8217; Thursday! Every day is a gift, and it has nothing to do with stocks, bonds, currencies, and commodities!/p pOK#8230; Not that I try to be philosophical, sometimes it just comes out that way! Besides, you don#8217;t want to think that I#8217;m just a smart *** all the time! HAHAHAHAHAHA!/p pWell, as I said in the open, the currencies and commodities got whipsawed yesterday, and the culprit#8230;/p

Zacks Earnings Preview: Oracle, Micron, Monsanto, Bank of America, KB Home, Lennar and CKE Restaurants – Press Releases

Zacks Market Commentaries — Mon, 22 Jun 2009 13:53:23 +0000

For Immediate Release

Chicago, IL - June 22, 2009 - Zacks.com releases the list of companies likely to issue earnings surprises. This week's list includes Oracle (ORCL), Micron (MU), Monsanto (MON), Bank of America (BAC), KB Home (KBH), Lennar (LEN) and CKE Restaurants (CKR). To see more earnings analysis, visit http://at.zacks.com/?id=3207.

Every day, Zacks.com makes 4 stock picks available, free of charge. To see them, go to http://at.zacks.com/?id=5612.

The Week's Events

We'll see another round of early second-quarter results this week. A total of 42 companies are scheduled to report, including 14 S&P 500 members. Oracle (ORCL), Micron (MU) and Monsanto (MON) will be among the mostly closely-watched reports.

The Fed will also grab traders' attention. A 2-day meeting is scheduled for Tuesday and Wednesday. No change in interest rates is expected, but traders will be listening for an update on the Fed's debt purchase program. The statement should also allude to signs of improvement in economic conditions.

On Thursday, Fed Chairman Ben Bernanke will again be in the spotlight. Bernanke will testify before a House committee about Bank of America's (BAC) acquisition of Merrill Lynch.

Housing data headlines the economic calendar. The release of new and existing homes sales will be matched with results from KB Home (KBH) and Lennar (LEN).

Tuesday: May existing home sales
Wednesday: May durable goods orders, May new home sales, weekly crude inventories, Fed statement
Thursday: Final Q1 GDP, weekly initial jobless claims
Friday: May personal income and spending, June revised University of Michigan consumer confidence

The Treasury Department will auction a record $104 billion worth of bonds. The securities being sold are 2-, 5- and 7-year notes.

We haven't seen any end-of-quarter window dressing yet, though I still expect it to occur. Many money managers have been sitting on the sidelines - as is evident by the light volume - and are likely underperforming their benchmarks. This could cause them to move into some of the momentum stocks.

As far as the Fed meeting, I'm not expecting a big reaction, but it's hard to predict. Keep in mind that whatever happens on Wednesday afternoon could be reversed on Thursday.

Enjoy the summer weather.

Companies That Could Issue Positive Earnings Surprises

Late last month, CKE Restaurants (CKR) said its operating expenses, as a percentage of revenues, would be "essentially flat" with prior year levels. Though blended same-store sales were down, 2 of the covering analysts raised their forecasts after the announcement. The revisions pushed the consensus earnings estimate a penny higher to 24 cents per share. The most accurate estimate is even more bullish at 25 cents per share. The fast food chain has topped expectations during 2 out of the last 4 quarters. CKE Restaurants is scheduled to report on Thursday, Jun 25, before the start of trading.

Micron (MU) might just turn the tide and surprise to the upside. Though the company has missed expectations by wide margins during the past 3 quarters, fiscal third-quarter forecasts have been trending up recently. The consensus estimate calls for a loss of 43 cents per share, a penny better than a month ago. The most accurate estimate suggests far more upside, projecting a loss of just 36 cents per share. MU is scheduled to report on Thursday, Jun 25, after the close of trading.

Oracle (ORCL) has topped expectations during 8 out of the last 9 quarters. Ahead of the company's fiscal fourth-quarter report, 1 brokerage analyst raised his forecast. Though the revision was not significant enough to move the consensus earnings estimate from 43 cents per share, it did result in a slightly more bullish most accurate estimate of 44 cents. Oracle is scheduled to report on Tuesday, Jun 23, after the close of trading.

Companies That Could Issue Negative Earnings Surprises

KB Home (KBH) has missed expectations during 7 out of the last 9 quarters and earnings estimates are pointing to another disappointment. One analyst lowered his forecast recently, widening the consensus projection to a loss of 67 cents per share. The most accurate estimate is more bearish and calls for a loss of 70 cents per share.

Guidance could also be troublesome as fiscal 2009 estimates have worsened by 16 cents over the last 30 days. The consensus now calls for a full-year loss of $2.50 per share. KB Home is scheduled to report on Friday, Jun 26, before the start of trading.

Charles Rotblut, CFA, is the senior market analyst for Zacks.com.

About the Zacks Rank

Since 1988, the Zacks Rank has proven that "Earnings estimate revisions are the most powerful force impacting stock prices." Since inception in 1988, #1 Rank Stocks have generated an average annual return of +26%. During the 2000-2002 bear market, Zacks #1 Rank stocks gained +43.8%, while the S&P 500 tumbled -37.6%. Also note that the Zacks Rank system has just as many Strong Sell recommendations (Rank #5) as Strong Buy recommendations (Rank #1). Since 1988, Zacks Rank #5 stocks have underperformed the S&P 500 by 111% annually (-0.8% versus +8%). Thus, the Zacks Rank system allows investors to truly manage portfolio trading effectively.

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Zacks Investment Research

Zacks Earnings Preview: Oracle, Micron, Monsanto, Bank of America, KB Home, Lennar and CKE Restaurants – Press Releases

Zacks Market Commentaries — Mon, 22 Jun 2009 13:53:23 +0000

For Immediate Release

Every day, Zacks.com makes 4 stock picks available, free of charge. To see them, go to http://at.zacks.com/?id=5612.

The Week's Events

On Thursday, Fed Chairman Ben Bernanke will again be in the spotlight. Bernanke will testify before a House committee about Bank of America's (BAC) acquisition of Merrill Lynch.

Housing data headlines the economic calendar. The release of new and existing homes sales will be matched with results from KB Home (KBH) and Lennar (LEN).

Tuesday: May existing home sales
Wednesday: May durable goods orders, May new home sales, weekly crude inventories, Fed statement
Thursday: Final Q1 GDP, weekly initial jobless claims
Friday: May personal income and spending, June revised University of Michigan consumer confidence

The Treasury Department will auction a record $104 billion worth of bonds. The securities being sold are 2-, 5- and 7-year notes.

As far as the Fed meeting, I'm not expecting a big reaction, but it's hard to predict. Keep in mind that whatever happens on Wednesday afternoon could be reversed on Thursday.

Enjoy the summer weather.

Companies That Could Issue Positive Earnings Surprises

Companies That Could Issue Negative Earnings Surprises

Charles Rotblut, CFA, is the senior market analyst for Zacks.com.

About the Zacks Rank

About Zacks

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Contact: Charles Rotblut, CFA
Company: Zacks.com
Phone: 312-265-9352
Email: pr@zacks.com
Visit: www.Zacks.com

Zacks Investment Research

Earnings Preview for Jun 22-26 – Earnings Preview

Charles Rotblut — Fri, 19 Jun 2009 05:00:00 +0000

On Thursday, Fed Chairman Ben Bernanke will again be in the spotlight. Bernanke will testify before a House committee about Bank of America's (BAC) acquisition of Merrill Lynch.

Housing data headlines the economic calendar. The release of new and existing homes sales will be matched with results from KB Home (KBH) and Lennar (LEN).

Tuesday: May existing home sales
Wednesday: May durable goods orders, May new home sales, weekly crude inventories, Fed statement
Thursday: Final Q1 GDP, weekly initial jobless claims
Friday: May personal income and spending, June revised University of Michigan consumer confidence

The Treasury Department will auction a record $104 billion worth of bonds. The securities being sold are 2-, 5- and 7-year notes.

As far as the Fed meeting, I'm not expecting a big reaction, but it's hard to predict. Keep in mind that whatever happens on Wednesday afternoon could be reversed on Thursday.

Enjoy the summer weather.

Companies That Could Issue Positive Earnings Surprises

Companies That Could Issue Negative Earnings Surprises

Charles Rotblut, CFA is the senior market analyst for Zacks.com.

Earnings Calendar

Here is a list of companies that we have confirmed will report during the week of Jun 22 - 26¹. Prices are as of Thursday's, Jun 18, market close.

Company	Stock	Zacks Estimate	Year Ago EPS	Last Qtr Surprise	Date	Time	Price
Smith & Wesson	SWHC	$0.10	$0.08	150.0%	6/22	AMC	$4.93
Walgreen Co	WAG	$0.56	$0.58	(3.0%)	6/22	N/A	$31.72
Aerovironment	AVAV	$0.26	$0.30	(22.2%)	6/23	AMC	$27.60
Americas Car-Mt	CRMT	$0.38	$0.51	8.8%	6/23	BTO	$17.65
Apogee Entrprs	APOG	$0.25	$0.36	33.3%	6/23	AMC	$13.00
Commercial Metl	CMC	($0.13)	$0.50	(375.0%)	6/23	BTO	$15.88
Fuller(Hb) Co	FUL	$0.25	$0.44	0.0%	6/23	AMC	$18.09
Jabil Circuit	JBL	($0.02)	$0.22	57.1%	6/23	AMC	$6.90
Kroger Co	KR	$0.61	$0.58	1.9%	6/23	BTO	$21.42
Oracle Corp	ORCL	$0.43	$0.45	9.7%	6/23	AMC	$20.25
Sonic Corp	SONC	$0.21	$0.28	(11.1%)	6/23	AMC	$8.73
Steelcase Inc	SCS	($0.14)	$0.20	(300.0%)	6/23	BTO	$5.10
Bed Bath&Beyond	BBBY	$0.24	$0.30	25.0%	6/24	AMC	$27.82
Cke Restaurants	CKR	$0.24	$0.31	0.0%	6/24	AMC	$8.54
Darden Restrnt	DRI	$0.86	$0.78	17.6%	6/24	N/A	$33.54
Herman Miller	MLHR	$0.18	$0.71	(14.3%)	6/24	AMC	$14.93
Monsanto Co-New	MON	$1.17	$1.45	2.9%	6/24	BTO	$82.30
Nike Inc-B	NKE	$0.96	$0.98	23.8%	6/24	AMC	$56.30
Omnova Solution	OMN	$0.08	($0.07)	200.0%	6/24	BTO	$3.00
Paychex Inc	PAYX	$0.33	$0.38	0.0%	6/24	AMC	$26.80
Red Hat Inc	RHT	$0.10	$0.08	0.0%	6/24	AMC	$20.23
Rite Aid Corp	RAD	($0.13)	($0.20)	(27.3%)	6/24	BTO	$1.24
Xyratex Ltd	XRTX	($0.34)	$0.07	-28.57%	6/24	AMC	$3.80
Accenture Ltd	ACN	$0.64	$0.74	1.6%	6/25	AMC	$32.02
Amer Software A	AMSWA	$0.04	$0.03	0.0%	6/25	AMC	$5.38
Arcadia Rsrcs	KAD	$0.00	($0.02)	(100.0%)	6/25	BTO	$0.68
Christopher&Bnk	CBK	($0.05)	$0.32	(1.6%)	6/25	AMC	$5.49
Conagra Foods	CAG	$0.41	$0.44	8.1%	6/25	BTO	$18.96
Electroglas Inc	EGLS	($0.15)	($0.15)	(6.3%)	6/25	N/A	$0.03
Finish Line-Cla	FINL	$0.02	$0.02	12.5%	6/25	AMC	$6.96
Jackson Hewitt	JTX	$1.70	$2.02	1.4%	6/25	BTO	$6.85
Lennar Corp -A	LEN	($0.57)	($0.76)	62.0%	6/25	BTO	$7.52
Mccormick & Co	MKC	$0.41	$0.39	0.0%	6/25	BTO	$32.14
Micron Tech	MU	($0.43)	($0.29)	(35.0%)	6/25	N/A	$5.26
Palm Inc	PALM	($0.72)	($0.27)	(35.4%)	6/25	AMC	$13.06
Robbins & Myers	RBN	$0.25	$0.62	12.2%	6/25	AMC	$21.11
Smart Modular	SMOD	($0.03)	$0.05	500.0%	6/25	N/A	$2.81
Spectrum Contrl	SPEC	$0.17	$0.16	(15.0%)	6/25	AMC	$8.47
Standard Micros	SMSC	($0.32)	$0.20	(5.9%)	6/25	BTO	$18.96
Tibco Software	TIBX	$0.07	$0.05	16.7%	6/25	AMC	$6.17
Kb Home	KBH	($0.67)	($3.30)	12.8%	6/26	BTO	$13.19
Shaw Comms-Cl B	SJR	$0.27	$0.30	(4.0%)	6/26	N/A	$16.74

BTO = Before The Market Open, AMC = After The Market Close

¹Some of the companies listed in the earnings calendar may not be in the Zacks Rank universe.

Zacks Investment Research

Lincoln National (NYSE:LNC): Upgraded to Outperform at CSFB

Notable Calls — Thu, 18 Jun 2009 11:37:00 +0000

div style="text-align: justify;"span style="font-weight: bold;"Lincoln National (NYSE:LNC)/span is getting positive vibes from several tier-1 firms this morning:br /br /span style="font-weight: bold;"- CSFB /spanis upgrading their rating to Outperform from Neutral and moving their price tgt to $24 (prev. $21).br /br /The upgrade comes following LNC’s capital raise and the announced plans to issue preferred stock to the US Treasury. While the planned $950 million of CPP leaves a clear overhang on the shares, given the likelihood of a future equity raise to repay the CPP, the firm thinks the stock is trading at too large of a discount relative to the risk of future dilution and other potential franchise risks associated with having the government as a key stakeholder.br /br /CSFB's main points of distinction vs. the other expected CPP recipient, HIG, are that: 1. LNC’s balance sheet problems are more modest in size for both credit and equity sensitivity, 2. their sense is that there is greater operational and management turmoil at HIG, and 3. they see a clearer path for LNC repaying the CPP within a year or two mainly because we questioned whether they really needed it in the first place. Although CSFB's first preference would have been LNC completing its entire capital raise privately, they believe that LNC’s $2.4 billion capital raise gives them more than enough capital and access to liquidity to weather a sustained economic downturn.br /br /The anlyst notes that initially, they were admittedly hesitant to recommend LNC’s shares given their expectation that Lincoln’s tie-up with the Government will likely run longer than the 8-9 months that stronger banks such as JPM and GS will have been under quasi-government supervision once they pay back their preferreds this month. However based on nearly every qualitative and quantitative measure, LNC’s shares look unjustifiably discounted.br /br /span style="font-weight: bold;"- Merrill Lynch is out saying they see almost 50% upside post capital raise. /spanLincoln is on target to raise $2 billion of capital which, in combination with other actions, suggests that the risk-based capital ratio would be at least 250% under an extreme bad case scenario for credit losses and the equity market. Bad case scenario looks less likely and mgmt more sanguine. Maintains Buy and $22 tgt.br /br /span style="color: rgb(255, 0, 0);"Notablecalls: /spanTakes guts to play this one to the upside in this environment but if this one gets going it can deliver a full point.br /br /Note that Morgan Stanley was out positive on the name yesterday, calling for s-t upside in the name.br /br /Also, Doug Kass of Seabreeze Partners named LNC his favourite Long yesterday. He has been pretty good with his calls lately so there may be something there after all. At least one would be in good company.br //divdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-2015270586950301896?l=notablecalls.blogspot.com'//div

Company News for June 17, 2009 – Corporate Summary

Zacks Market Commentaries — Wed, 17 Jun 2009 14:28:05 +0000

* Economic bellwether FedEx (NYSE:FDX) reported earnings of 64 cents a share, ex-items, beating estimates of 51 cents on a 20% drop in revenues to $7.85 billion from $9.87 billion

* According to a WSJ report, Goldman Sachs (NYSE:GS) has reportedly delivered a letter to congress advising of plans to repay funds borrowed under TARP sometime tomorrow. JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) are expected to repay their borrowings as early as today

* According to a WSJ report, Sanofi-Aventis (NYSE:SNY) is seeking a mega-deal in the US, which could include such possible candidates as: Bristol-Meyers-Squibb (NYSE:BMY), Amgen (NASDAQ:AMGN), Allergan (NYSE:AGN), or Biogen (NASDAQ:BIIB)

* Nucor (NYSE:NUE) said it expects a second-quarter loss of 55 cents to 65 cents a share, versus estimates of a 69 cent loss, citing benefits from cost cuttings and recent strengthening in order entry

* Texas Instruments (NYSE:TXN) received an analyst upgrade from Merrill Lynch, expecting strong margin expansion. Price target was raised to $27 from $18

* Qualcomm's (NASDAQ:QCOM) rating was lifted to a "conviction buy" at Goldman Sachs (NYSE:GS) with a price target of $53

Zacks Investment Research

Texas Instruments (NYSE:TXN): Upgraded to Buy at Merrill Lynch/BAM – Margin expansion on Steroids

Notable Calls — Wed, 17 Jun 2009 10:45:00 +0000

div style="text-align: justify;"Merrill Lynch/BAM is out with a major call on span style="font-weight: bold;"Texas Instruments (NYSE:TXN) /spanupgrading their rating to Buy from Underperform and adding the stock to their U.S 1 Focust list with a $27 tgt (prev. $18).br /br /Firm notes their more favorable view is based on an expectation of margin expansion well above that currently being forecasted by the Street, suggesting a span style="font-weight: bold;"CY10E EPS power of $1.40+ (Street : $1.15) /spaneven against the backdrop of a modest cyclical recovery. Their new PO of $27 reflects 16x CY10 FCF/share est. of ~$1.70.br /br /span style="font-weight: bold;"Margin expansion on steroids/spanbr /Specifically, Merrill's analysis suggests: 1) an ~850bp benefit to GMs, from current levels, due to improved factory loadings, 2) an ~150bp benefit from restructuring, 3) an ~150bp benefit from lower depreciation and 4) an ~50-100bp benefit from improved mix, suggesting a GM run rate of ~52% by 4Q10 even with a modest recovery in sales next year (Street: +4% Y/Y). When combined with the benefit to annual op-ex by 4Q09 (and est. $550m) in the wake of restructuring actions, they conservatively estimate a quarterly EPS run rate of $0.43 by Q410 vs. the Street est. of $0.31. Additionally, they est. potential peak EPS at $2.30-$2.40, suggesting significant upside to the stock from current levels.br /br /span style="font-weight: bold;"Basebands: Is the bark worse than the bite?/spanbr /While there remains a significant focus on the impact to revenue from a declining baseband business over the next 3 yrs, the firm thinks the perception is worse than the reality. Their view is based on the belief that 1) much of the decline has already run its course (basebands down to ~12% of sales in 2009, from ~25% at the peak) suggesting a diminishing incremental drag; 2) the Nokia 3G business (50% of baseband sales) is likely to recover from depressed levels with even a modest recovery in handset sales, and is unlikely to be at risk until alternate suppliers (QCOM, BRCM) begin to ramp in late 2010; and 3) the headwind from a decline in basebands is implicitly modeled into Street estimates (sales up only 4% in 2010, and 1% in 2011), as opposed to simply being factored into Street expectations.br /br /span style="color: rgb(255, 0, 0);"Notablecalls: /spanThis is a fairly strong (out-of-consensus) call from a tier-1 firm.br /br /Texas ain't exactly a momo favourite but I think it can trade into $21.50-$22 range today./divdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-1914724700067870453?l=notablecalls.blogspot.com'//div

Have stock markets run away from reality?

Prieur du Plessis — Tue, 16 Jun 2009 09:17:38 +0000

The "less-bad-than-expected" school of thought is largely based on survey data such as the Purchasing Managers Indices (PMIs). It therefore makes for interesting reading to revisit the historical relationship between the PMI and stock market movements. Read on for the research results.

G8 Finance Chiefs Express Cautious Optimism About the State of the World Economy

Contrarian Profits — Mon, 15 Jun 2009 14:20:15 +0000

div class="entry" h4Top financial officials from the a href="http://encarta.msn.com/encyclopedia_761589420/Group_of_Eight.html" target="_blank"Group of Eight/a (G8) industrialized nations on Friday issued an upbeat evaluation of the global financial crisis, describing signs that markets were stabilizing around the world and warning that it was necessary to devise “exit strategies” to disengage from stimulus programs that have been put in place.br / /h4 pThe G8 met for two days in Lecce, Italy. Eight world finance ministers – including U.S. Treasury Secretary Timothy F. Geithner, and his global counterparts from Britain, Canada, France, Germany, Italy, Japan and Russia – also agreed to create #8220;a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/06/13/AR2009061301479.html?hpid=sec-business" target="_blank"a set of common principles and standards/a governing the conduct of international business and finance,#8221;strongemThe Washington Post/em/strong reported./p pIn a communiqué called #8220;the Lecce Framework#8221; – which described the strategy for obtaining those goals –#8230;/p/div

Here We Go Again!

Contrarian Profits — Fri, 12 Jun 2009 20:14:49 +0000

pCurrency rally gets wiped out#8230;Geithner to talk about a strong dollar? Brazil cuts rates! The Fed to control everything? YIKES! And Now#8230; Today#8217;s Pfennig!/p pGood day#8230; And a Happy Friday to one and all! Another seemingly long week for yours truly#8230; Where#8217;s a 3-day Holiday weekend when you need one? Have you been following the goings on with the investigation into the Bank of America (NYSE:a href="http://www.google.com/finance?q=BAC"BAC/a) purchase of Merrill Lynch? Whoa, there partner! I thought for sure this would get all swept under the rug, but it#8217;s all coming out, every dirty deed! Dirty deeds done dirt cheap!/p pBefore we get into the goings on there#8230; Let#8217;s talk about the currencies and their huge jump yesterday, only to see chicken traders come#8230;/p

ASA Limited: A Closed-End Fund Worth More Than Meets the Eye

Bullish Bankers — Fri, 12 Jun 2009 16:00:39 +0000

One aspect of my work that I love is interviewing interesting people. On June 4th, 2009 I had the pleasure of speaking with David J. Christensen, the CEO of ASA Limited [ASA: 65.44, -1.94 (-2.88%)], a closed-end, non-diversified investment company registered with the United States Securities and Exchange Commission. The Company was organized in Bermuda [...]

Shock And Awe

Jim Wiandt — Fri, 12 Jun 2009 13:38:45 +0000

BlackRock’s $13.5 billion deal raises the valuation bar.

ETF and index people the world ‘round are smiling today. $13.5 billion is a big number. And this BlackRock deal is big not just for the index/ETF industry, but the financial sector in general. It underscores just how big basis point-linked passive assets have gotten.

As I said a couple days ago in my IU.eu blog titled BlackRock IS the Buyer (Paul Amery has a nice follow-on blog there as well), this is a powerhouse deal. It’s a deal that minces no words, and says what it means. And what it means is we’ve suddenly got a global behemoth, THE global behemoth of an asset manager, with $2.7 trillion in assets. Good lord. And frankly, on paper at least, it’s a marriage made in heaven, with BGI in a dominant position where BlackRock is mostly absent: ETFs and institutional indexed asset management.

So, wow.

There are a lot of questions that come to mind. Here are a few of them, which I’ll leave you to ponder:

How did this deal go from $4.2 billion to $13.5 billion? The short answer is that it included not just iShares (it now makes that piddly $175 million buyout of the CVC Capital Partners deal seem like an afterthought). Still, the reported bids for the entire BGI entity were still just $6 billion plus. We’ll dig around some more (more than double is a BIG difference), but there was either misreporting, or this is apples to oranges. The other deals that were announced were highly leveraged. That is certainly one factor.
Did this deal just come up from out of the blue? No. Other comments of note are that, according to the New York Times article posted this morning, the merger/takeover has been in certain people’s minds for 6 years. Also of interest is that much of the funding came from Middle Eastern investors – an interesting angle (you can see why in Paul’s earlier reporting on the transaction).

Here are some other big questions I DON’T have the answers to (thanks to Matt Hougan, whom I’d discussed this with yesterday, as Dagen McDowell was cuing up a Fox Business News interview with BlackRock CEO Larry Fink and had asked for our thoughts):

Will BlackRock commit to keeping the iShares expense ratios at or below their current levels?
How will this deal affect the launch (or not) of actively-managed ETFs? iShares was certainly looking at it. Does this deal accelerate that process or put it to a grinding halt?
Will there be significant layoffs as the two operations combine and find economies of scale?
How much autonomy will existing iShares and BGI people have in the new organization?
Will the added scale of a combined BGI and BlackRock allow them to lower the cost of quality management? (presumably the answer is yes, the question is how much of that efficiency will be transferred to investors and how much to the BlackRock bottom line).
Where does BlackRock consider the future of asset management to be? ... with active funds, a passive core with active satellites, or passive funds applied actively?
Does BlackRock feel like they are getting a deal ... Finding a gem amid the financial crisis wreckage?
What is more intriguing to BlackRock - BGI or iShares?
Given BlackRock's (very) active tilt, how strongly do they believe in passive management? After all, they suddently become the largest index player in the world. Do they believe in the business or do they just want the share lending revenue?
How active a role will Barclays (now approximately a 20% stakeholder in the new combined entity) play in shaping what BlackRock does? Remember, also, that Bank of America (through Merrill Lynch) has a significant stake in the merged group (35%, according to today’s Financial Times).

There is no shortage of interesting questions to look at.

Goldman Sachs (NYSE:GS): Cutting ests on TARP payback acct’g charge, FDIC fee – Merrill Lynch/BAM

Notable Calls — Fri, 12 Jun 2009 12:02:00 +0000

div style="text-align: justify;"span style="font-weight: bold;"TARP repayment will drive hit to earnings for common/spanbr /Merrill Lynch /BAM notes that when TARP pfds were issued in Oct, related warrants caused a portion of the investment to be allocated to paid-in-capital (“PIC”) with this balance set to slowly accrete to preferred stock over 20 quarters. Repayment of TARP by GS, JPM and MS will force a reversal of remaining warrant value (through pfd dividend line).br /br /span style="font-weight: bold;"Warrant repay will drive Equity hit, but likely 3Q event/spanbr /They also expect each Co. will pay the government to extinguish attached warrants, but uncertainty remains as to valuation (e.g. what volatility will be used in valuing?). Whatever the value, they expect it to be a hit to common equity (without going through the Pamp;L) sometime in 3Q. The numbers are significant (anywhere from $700mn to $1bn+, by our calculation), but given the strong capital cushion at these firms, T-1 common ratio hit should be no more than 50bps. Also, it is not clear that the full amount will be charged (logically, they’d expect the charge to be just the amount over the aforementioned 2Q hit).br /br /span style="font-weight: bold;"GS: 2QE cut to $2.92 from $3.59 on TARP hit offset by/spanbr /stronger FICC, but ‘10E up on repayment GS credited $490mn of its TARP payment to PIC upon accepting its $10bn of government capital; firm est. a cost of about $430mn from repayment (after 2.75 qtrs. of accretion). They are also adding a FDIC assessment of $70mn. This cuts 2QE to $2.69 from $3.59. However, it is increasingly clear that GS FICC business continue to operate solidly, offsetting cut with better Trading brings 2Q to $2.92. Adjusting forward ests for repayment of TARP as they did last week for JPM and MS (remove dividend, offset by lower Trading from $10bn lower allocated capital), which raises 2H09 forecast by $0.10 and ‘10E to $17.63 from $17.45.br /br /span style="font-weight: bold;"JPM: 2QE cut to $0.01 from $0.30 on TARP mark /spanbr /JPM credited $1.3bn of its TARP funds to Retained Earnings upon accepting its $25bn of capital, so we estimate a loss of about $1.1bn from repayment. This cuts Merrill 2QE forecast by $0.29 to $0.01. Notes that they have already accounted for a $750mn FDIC assessment fee.br /br /span style="font-weight: bold;"MS: 2QE to -$0.23 from $0.70: TARP hit, more DVA/spanbr /MS credited $1bn+ of TARP funds to PIC upon accepting $10bn of capital; Merrill estimates a loss of about $900mn from repayment. Also adding FDIC assessment of $30mn. This cuts 2QE to $0.10 from $0.70. MS spreads have continued to tighten; they now believe MS could post DVA loss of at least 1Q’s $1.5bn, which cuts 2Q to a loss of -$0.14. An est. $70mn charge from the Mitsubishi pfd. to Common exchange cuts another $0.04. Finally, the move to Basic From Diluted shares (because of loss) cuts 2QE another -$0.05 to -$0.23.br /br /span style="color: rgb(255, 0, 0);"Notablecalls:/span While kind of cosmetic, I think the cuts don't spell well for overall i-bank sentiment. Especially in case of span style="font-weight: bold;"Goldman Sachs (NYSE:GS)/span where most other firms are scrambling to raise their estimates.br /br /It now feels somewhat silly to pay that kind of multiple for GS. I know I was kind of positive on the name a week ago (got a pop) but I guess I have changed my mind.br /br /span style="font-weight: bold;"I would not be surprised to see GS trade down in the n-t./spanbr //divdiv class="blogger-post-footer"img width='1' height='1' src='https://blogger.googleusercontent.com/tracker/29297569-9159816550769454026?l=notablecalls.blogspot.com'//div

Video-o-rama: Risky assets – optimism waxing, pessimism waning

Prieur du Plessis — Fri, 12 Jun 2009 08:39:36 +0000

This post features a selection of a few worthwhile video clips produced over the past few days.

BlackRock Cuts $13.5 Billion Deal To Swallow BGI

IndexUniverse Staff — Fri, 12 Jun 2009 08:00:00 +0000

BlackRock will buy BGI for $13.5 billion in a mega-merger sure to send shock waves throughout the industry.

In perhaps one of the worst-kept secrets in exchange-traded funds industry history, giant asset manager BlackRock Inc. said late Thursday it had finalized a $13.5 billion deal to buy Barclays Global Investors.

The combined company, to be called BlackRock Global Investors, will represent nearly $3 trillion in assets under management.

Interestingly, Barclays will keep about a 20% stake in the new BGI. BlackRock will only have to fork over about half of the estimated deal amount in cash; according to reports, BlackRock is exchanging shares of its common stock to complete roughly the other half of the mega-merger.

Officially, Barclays' original buyer (CVC Capital Partners ) has about a week to try to match BlackRock's offer. But the private equity firm would face a big upgrade in terms. CVC Capital almost had a deal for all of BGI in early April. The price tag at the time was listed at $4.4 billion. But it also came with plenty of strings, including parent Barclays providing much of the financing and an escape clause for the seller if a better bid could be found by June 18. (See related story here.)

And that's just what happened. Nearly two weeks ago, reports started circulating that BlackRock had put together a package that made a deal trumping CVC Capital's highly likely. The stories even detailed Barclays maintaining a 20% stake in the new BGI and many other financing terms. (See related story here.)

Then, last week, reports emerged that pretty much stated Barclays had settled on BlackRock. (See related story here.)

What will be the combined impact on the growing ETF market? Analysts immediately afterwards are looking at the world's largest insitutional money management firm and beefed-up ETF provider as dominant in both marketplaces -- especially ETFs.

But others aren't so sure that such a merger will pay huge dividends, at least right away. Some industry veterans point to a shaky history for mega-mergers between asset managers and diversified financial services firms. (Going against that trend, of course, is the fact that BlackRock by most accounts has successfully integrated the former Merrill Lynch money management arm.)

Then again, a revamped BGI faces a number of internal changes cutting at the core of the ETF marketplace. Consolidation has been taking place in both funds as well as asset managers. And many industry veterans are seeing less differences between the types of customers providers service in coming years. (See related column here.)

Still to be resolved as well -- a $175 million buyout clause that CVC is reportedly owed for breaking its original agreement.

In any event, the deal isn't expected to close, barring any unforseen regulatory hurdles such a merger might raise, until late this year.

Thursday’s Market Recap (06/11/09)

Bullish Bankers — Fri, 12 Jun 2009 02:37:05 +0000

The markets were up today led by energy stocks as oil settled at $72.68. The Dow Jones was up 0.37% closing at 8770.92, with the S&P up 0.61% closing at 944.89. The NASDAQ was up 9.29 closing at 1862.37. Treasury prices were down as the yield closed at 3.862%. Gold settled at $962.00 as the dollar [...]

All this money … going, going, gone!!

Trading School — Fri, 12 Jun 2009 02:30:00 +0000

I found this by chance on CNN. It’s just plain scary to me. What do you think? Adam Troubled ASSET RELIEF PROGRAM Financial rescue plan aimed at restoring liquidity to the financial markets Program Committed Invested Description American International Group * See complete AIG bailout below $70 billion $69.8 billion $40 billion in preferred shares were converted to so-called non-cumulative shares that more closely resemble common stock. [...]

Ken Lewis: The Fed Made Me Do It! – Analyst Blog

Zacks Market Commentaries — Thu, 11 Jun 2009 19:57:01 +0000

Early today, Kenneth Lewis, CEO of Bank of America (BAC) was testifying before a government oversight committee with respect to his company's January 1, 2009 acquisition of Merrill Lynch.

Considering recent announcements by the company, we would suspect there will be several more inquiries in the future for Mr. Lewis.

Members of the Oversight and Government Reform Committee and the House Oversight and Investigations subcommittee hammered for a rationale as it appeared to them that Mr. Lewis failed to file the appropriate information prior to the December 2009 shareholder vote with respect its then-acquisition target Merrill Lynch, and known widening losses as of November 2009 -- thereby demonstrating that B of A neglected to meet the government's disclosure rules.

The House Oversight and Investigations subcommittee's brought to light that Mr. Lewis was aware of the acceleration of the substantial losses at Merrill Lynch, but did not make the information available to its shareholders before approving the transaction.

In a December 22, 2008 e-mail to agency staff from Federal Reserve Chairman Ben Bernanke, Mr. Lewis was indicated as potentially pressing the agency to "use as a defense" against shareholder lawsuits that the government ordered him to consummate the deal for systemic reasons.

However, other e-mails and comments submitted by Mr. Lewis indicated he was pressed to complete the acquisition. Mr. Lewis stated that after shareholders had approved the transaction (but had not closed), officials from the Treasury and Fed approached him in mid-December 2008 to discuss the idea of breaking up the deal, given is concerns about the acquisition -- and that he was asked to delay any such action, even though he expressed significant concerns about pursuing such an endeavor given the systemic consequences and risks to Bank of America.

Mr. Lewis stated that in February 2009, he alerted New York Attorney General Andrew Cuomo that he was pushed by Ben Bernanke and then-Treasury Secretary Henry Paulson to complete the deal. At this point of time, Messrs. Paulson and Bernanke deny counseling Lewis to finish the acquisition despite his reservations. As the hearing on the acquisition progresses, Bernanke and Paulson are expected to testify at some point of time.

In order to complete Bank of America's acquisition, the Treasury invested $20 billion in Bank of America and also guaranteed $118 billion of assets late last year. In January 2009, Bank of America received another $20 billion in government bailout funds, bringing the total amount of Treasury funds received to $45 billion through the Troubled Asset Relief Program (TARP).

To date, regulators have yet to permit Bank of America the ability to use $45 billion in TARP funds it received. So far, the Treasury required Bank of America to raise $33.9 billion in funds by November to act as an additional capital buffer against potential future losses, of which Bank of America recently issued $7.6 billion in long-term debt not guaranteed by the Federal Deposit Insurance Corp.

While the ability to raising funds without government assistance continues to be a major requirement to be able to repay TARP funds, we would expect that the Treasury could require Bank of America as well as other financial institutions -- such as but not limited to Citigroup (C) and Wells Fargo (WFC) to raise additional capital to create an additional buffer against potential future losses.
Read the full analyst report on "BAC"
Read the full analyst report on "C"
Read the full analyst report on "WFC"
Zacks Investment Research

Wednesday’s Market Recap (06/10/09)

Bullish Bankers — Thu, 11 Jun 2009 02:29:38 +0000

Equities started the day up well over a percent but that was very short-lived as the markets quickly fell on a slew of bad economic news. By the end of the day, however, the equity markets were able to recover and posted only small losses on the day. The Dow Jones Industrial Average fell 24.04 [...]

A Turn Around Tuesday

Contrarian Profits — Wed, 10 Jun 2009 15:38:01 +0000

pAnother Treasury auction today#8230; Goldman says to buy euros! Oil fuels Commodity Currencies! RBNZ to meet tonight#8230; And Now#8230; Today#8217;s Pfennig!br / Good day#8230; And a Wonderful Wednesday to you! Well#8230; Yesterday was #8220;Turn Around Tuesday#8221;! Add to that, the fact that there were a number of reasons for the euro to lead the charge for currencies VS the dollar yesterday. And#8230; A word from one of the economists that I keep on my list of #8220;to read#8221;#8230; So, let#8217;s get to the tape from Turn Around Tuesday!/p pI heard yesterday someone say #8220;well, we sure turned around today in the currencies#8221;#8230; And I thought, Shoot Rudy, why not name it Turn Around Tuesday? Then I went back to the history page on my trusty Bloomberg, and#8230;/p

Tuesday’s Market Recap (06/09/09)

Bullish Bankers — Tue, 09 Jun 2009 22:53:13 +0000

The markets were very volatile today, with a late rally sending the indexes near where they opened. The Dow Jones was the only major index down, closing at 8763.06 down 0.02%. The NASDAQ and S&P were both up closing at 1860.13 and 942.43 respectively, up 0.96% and 0.35%. The 10-year saw prices fall as the yield ended at 3.862%. [...]

BlackRock’s Bid For BGI Could Top $13 Billion

IndexUniverse Staff — Mon, 08 Jun 2009 18:47:53 +0000

New reports put BlackRock's deal for BGI at $13 billion.

During the weekend, several new articles appeared in British papers reporting that BlackRock Inc. is closing in on a deal to acquire Barclays Global Investors, the parent company of iShares, in a transaction worth up to US$13 billion.

But not all the reports were as definitive as the one coming out of the US late last week. Pensions & Investments magazine, on its Web site, broke the news late Friday afternoon after markets had closed in the US. It quoted unnamed sources as saying that the groundwork for a deal was in place and that an announcement would be forthcoming.

The story also had estimates that a BlackRock purchase of BGI would surpass $10 billion. (See related story here.)

However, in a story over the weekend, a report out of London by the Financial Times said that Barclays isn't expected to reach a decision until early this week on who will purchase its asset management division.

Also, more details are leaking out about the complexity of such a transaction.

Barclays is expected to acquire a stake of 20% in BlackRock. Meanwhile, BlackRock is likely to rely on financing from Middle Eastern sovereign wealth funds. And Barclays’ president, Bob Diamond, is supposedly rumoured to be considering joining the board of the US-based BGI.

Larry Fink, BlackRock’s founder and chief executive, met the Kuwait and Qatar Investment Authorities last week to seek funding, according to the Financial Times.

The deal, if confirmed, would set a record for the acquisition of an asset management company, dwarfing the US$ 8.5 billion paid by BlackRock for Merrill Lynch’s fund arm in 2006.

It would also trigger a payout of US$ 585 million for the 200 employees of BGI with stakes in the company, with Diamond set to receive around US$ 30 million.

Although weekend press reports suggested that a new deal is close to being reached, Barclays has another 10 days until the June 18 deadline for seeking further bids for iShares and other related businesses.

This was set as part of the US$ 4.2 billion May agreement to sell iShares to CVC Capital Partners. CVC will receive a US$ 175 million break fee if Barclays concludes a transaction with a third party, as now seems likely.

A BlackRock acquisition of BGI would mean intensifying competition in the fixed-income ETF market, according to some observers. Last week Pimco, BlackRock’s biggest riva,l initiated its ETF range with a 1- to 3 -ear US Treasury bond tracker, undercutting the equivalent iShares fund with a 9 basis point annual fee.

-- IndexUniverse.eu's Paul Amery submitted this report. IU.com's Murray Coleman also contributed.

AirTran (NYSE:AAI): Upgraded to Buy at Merrill Lynch/BAM with a $9 tgt

Notable Calls — Wed, 03 Jun 2009 12:34:00 +0000

div style="text-align: justify;"Merrill Lynch/BAM is upgrading span style="font-weight: bold;"AirTran (NYSE:AAI)/span to Buy from Underperform while raising their price tgt to $9 from $4.br /br /According to the firm, the upgrade is due to an improved earnings outlook based on better-than-expected sales trends, especially in the ancillary area, that they believe will build as the year progresses and into 2010. In that regard, the firm is raising their 2009 diluted EPS estimate from $0.40 to $0.80 (vs. consensus of $1.06) and 2010 diluted EPS estimate from $0.50 to $0.95 (vs. consensus of $1.00). span style="font-weight: bold;"Furthermore, the 30% pullback in AAI’s share price since peaking a month ago represent what they think is an attractiveentry-point for investors to purchase this high quality, profitable, low cost carrier./spanbr /br /Well-run, well-capitalized, low cost airlines, such as AirTran, typically outperform the sector in challenging economic environments such as the present. Furthermore, because AirTran is predominantly a domestic carrier, it is likely to incur less revenue pressures than carriers exposed to international markets where year-over-year comparisons are expected to be difficult.br /br /span style="font-weight: bold;"Company off to a good start; anticipating profitable 2009/spanbr /AirTran started 2009 off to a good start with a surprisingly good March quarter (i.e. profitable) despite the fact that the U.S. economy contracted 5.7% and the absence of Easter this year versus last. span style="font-weight: bold;"Looking forward, Merrill Lynch is projecting profits in every quarter for the remainder of 2009. /spanDisciplined capacity plans (down 3.8% for year), ample cash ($384 million unrestricted), modest CAPEX schedule, and manageable debt maturities give us comfort with respect to the balance sheet.br /br /span style="color: rgb(255, 0, 0);"Notablecalls: /spanNice call by Merill. Will send the shares considerably higher. span style="font-weight: bold;"I'm guessing $6.40-$6.50 if the market holds today./spanbr //divdiv class="blogger-post-footer"img width='1' height='1' src='//blogger.googleusercontent.com/tracker/29297569-718301839890451661?l=notablecalls.blogspot.com'//div

How Equity And Currency Markets Behave After Financial Crisis

John Lee — Tue, 02 Jun 2009 20:06:27 +0000

Debt-based monetary systems are inherently unstable. Money is created out of thin air by the banks and lent to government, consumers and businesses. In order to service and replay those debts, the borrowers take on more debts. Asset prices are inflated, and the vicious cycle continues until the debtors are unable [...]

Pimco Launches First ETF; Files For Six More

IndexUniverse Staff — Tue, 02 Jun 2009 17:53:54 +0000

Bond giant Pimco launched its first exchange-traded fund this morning, with the debut of the Pimco 1-3 Year U.S. Treasury Index Fund (NYSE Arca: TUZ) on NYSE Arca.

Bond giant Pimco launched its first exchange-traded fund on Tuesday with the debut of the Pimco 1-3 Year U.S. Treasury Index Fund (NYSE Arca: TUZ) on NYSE Arca.

The Newport Beach, Calif.-based asset manager originally filed to enter the ETF market last July, targeting an intermediate-term bond index (see related story here). A few months later as markets were heavily stressed by the ongoing credit crisis, Pimco decided to go with the short-term Merrill Lynch Treasury benchmark to base its first ETF on. (See related story here.)

TUZ will charge just 9 basis points (0.09%) in expenses, reflecting a 0.13% fee waiver that is contractually in place for at least a year. At 0.09%, TUZ becomes the lowest-cost fixed-income ETF on the market, undercutting the previous low-cost leaders, the Vanguard Short-Term Bond ETF (NYSE Arca: BSV) and the Vanguard Total Bond Market ETF (NYSE Arca: BND), by 2 basis points (0.02%).

"Our objective is to offer investment products that are competitively priced," said Tammie Arnold, managing director and head of global wealth management for Pimco. "In the case of TUZ, we're offering a temporary fee waiver that brings down the ER for at least two years. That's an acknowledgment of the current level of yield at the short part of the curve."

Currently, the largest direct competitor for TUZ is the iShares Barclays 1-3 Year Treasury Bond ETF (NYSE Arca: SHY), which has $7 billion in assets and charges management fees of 0.15%. If TUZ can attract sufficient liquidity to support low-cost trading, it will be a serious challenger to SHY.

PIMCO also says that its ETFs are designed with a focus on creating an ultra-liquid underlying basket, to help ensure that the ETF is easy for market-makers to hedge, which should help keep the fund's share price in line with its net asset value.

"We've been very thoughtful in the selection of bonds that will populate the portfolios, to ensure that the liquidity of the underlying securities is robust," said Don Suskind, head of Pimco's ETF product team. "That should translate into liquidity for the ETF itself."

In related news, Pimco also filed papers with the Securities & Exchange Commission to launch six additional fixed-income ETFs:

Pimco 3-7 Year U.S. Treasury Index Fund
Pimco 7-15 Year U.S. Treasury Index Fund
Pimco 15+ Year U.S. Treasury Index Fund
Pimco Broad U.S. TIPS Index Fund
Pimco Short Maturity U.S. TIPS Index Fund
Pimco Long Maturity U.S. TIPS Index Fund

The last two would be the first ETFs to break the TIPS market into short- and long-term categories. Currently, all existing TIPS ETFs (such as the iShares Barclays TIPS Bond Fund (NYSE Arca: TIP)) simply provide broad exposure to the TIPS market.

The filing is available here.

There is no word yet on when the additional funds will launch. The filing confirms, however, that Pimco is making a significant move into the ETF market, and aims to present a full slate of fixed-income offerings to the ETF market.

The company has more than 30 years' experience managing fixed-income mutual funds, and is the largest fixed-income manager in the world. Arnold says the company would leverage its existing distribution capabilities to push the ETFs out into both the institutional and retail markets.

"The segment that is newly accessible to us with ETFs is the institutional money manager segment, and we're excited about tapping into that market," he said.

-- This article was submitted by IndexUniverse.com's Matthew Hougan.

Dover (NYSE:DOV): Upgraded to Buy at Merrill Lynch/BAM – ACTIONABLE CALL ALERT

Notable Calls — Tue, 02 Jun 2009 10:51:00 +0000

div style="text-align: justify;"Merrill Lynch/BAM is upgradingspan style="font-weight: bold;" Dover (NYSE:DOV)/span to Buy from Neutral while raising their price tgt to $45 (prev. $34.50)br /br /Merrill is also increasing their 2010 EPS forecast by 20 cents to $2.50 and raising 2011 estimate by 15 cents to $3.00. Firm notes their estimate changes are driven by increased confidence in Dover’s earnings tailwinds that include restructuring benefits, purchasing savings and contribution from acquisitions – most recently Tyler Refrigeration. They see possible share price risk to ~$30, or much less than perceived earlier cycle industrials that have run up faster.br /br /span style="font-weight: bold;"New management is driving upside/spanbr /Dover’s new management has been aggressively pursuing cost savings and internal operational changes including establishing a new business development structure. Merrill Lynch believes the positive results of this new Mamp;A approach already appear to be paying off given the recent favorable acquisition of Tyler. They calculate gross EPS tailwinds could add to $1.00 in EPS heading into next year.br /br /span style="font-weight: bold;"DOV offers a significant recovery play/spanbr /In firm's opinion, DOV represents an opportunity to play future industrial recovery – particularly with over 60% of sales derived in North America where recovery should occur ahead of other regions such as Europe. Dover’s tech businesses have likely bottomed last quarter while the company’s Energy segment could provide a future tailwind following initial cycle expansion – particularly given rising energy prices and a domestic rig count that appears toward bottom.br /br /span style="font-weight: bold;"Price target could be conservative/spanbr /They achieve their price target by applying a mid-cycle valuation to normalized EPS target of $4.50 and discounting back, or by applying a 15x (forward) P/E target to 2011 EPS forecast of $3.00. In the short run, the firm thinks the market could assign a much higher valuation to DOV as the company’s strong earnings growth prospects become more apparent coupled with the stock’s favorable valuation vs. other cyclical industrials.br /br /span style="color: rgb(255, 0, 0); font-weight: bold;"Notablecalls:/span span style="font-weight: bold;"I'm going to call this one Actionable /span- I expect the shares to see meaningful buying interest today and in the coming days.br /br /There is a lot to like about this call:br /br /- Dover has been a laggard and this call will help it to catch up.br /br /- As MLCO points out, 2/3 of DOV's business is derived from the U.S. where things seem to have picked up. Europe will follow (contrary to press reports, checks are showing things are picking up there as well).br /br /- The call is coming from Merrill Lynch, a firm with a large client base. The brokers will be calling every PM they know ushering them to get long the stock.br /br /- The analyst, John G. Inch believes his $45 tgt could be too low.br /br /span style="font-weight: bold;"I suspect anything below $35 level is Actionable. I see the stock surpassing this level today or in the coming days./span/divdiv class="blogger-post-footer"img width='1' height='1' src='//blogger.googleusercontent.com/tracker/29297569-3797286253670314033?l=notablecalls.blogspot.com'//div

Financial Boards to Get Makeovers – Analyst Blog

Zacks Market Commentaries — Mon, 01 Jun 2009 14:57:41 +0000

In late April 2009, less-than-pleased shareholders of Bank of America (BAC) stripped its Chief Executive Ken Lewis of his chairman's title. With the financial institution frenetically working to appease both federal regulators and disgruntled shareholders, there has been speculation on which heads on the Board of Directors will need to roll.

It appears that O. Temple Sloan, Jr. -- a 13 year veteran of the board -- will be the first to go. While in the Securities and Exchange Commission filing Friday, BAC stated that his resignation was not a result of "any disagreement" with the company or this management. Mr. Sloan was among the board members criticized by shareholders given the company's handling of the takeover of Merrill Lynch & Co. Mr Sloan's resignation likely won't be the last considering that BAC stated in recent weeks that it was looking for new directors.

As part of the government's stress tests of the 19 largest financial institutions (to include BAC), were advised to review their boards and management teams. This has led to a froth of speculation that federal officials have been pressuring the bank to revamp its board by bringing in directors with more banking experience.

Basically, "Who's next?"

This would leave open the doors for enhanced speculation about other financial institutions having there boards revamped. This would include but not limited to Citigroup (C), US Bancorp (USB), JPMorgan (JPM) and Morgan Stanley (MS) and AIG (AIG).
Read the full analyst report on "BAC"
Read the full analyst report on "C"
Read the full analyst report on "JPM"
Read the full analyst report on "MS"
Read the full analyst report on "AIG"
Zacks Investment Research

Securitization Accounting Rules Are Changing

Bullish Bankers — Mon, 01 Jun 2009 11:00:18 +0000

Accountants are changing the rules governing most of the shadow banking system and almost no one is noticing. About 10 days ago the Financial Accounting Standards Board confirmed that by year end “securitization accounting” will be different and the changes are likely to have a bigger effect on financial institutions than mark to market accounting. [...]

FT frontier-related quickies from Wednesday

Jason G. Wulterkens — Thu, 28 May 2009 03:33:58 +0000

Behold the “negative basis trade,” per John Dizard: “You can own a corporate bond, or emerging market sovereign bond, buy default protection on the paper with CDS, and collect interest payments for taking no risk. That’s right: because CDS prices are depressed, relative to the comparable bonds, you can collect money for taking no risk.” Per [...]