Monday, November 30, 2009
Friday, November 27, 2009
Post-Thanksgiving trading was very light as expected, with the market only open for a half day.
It will be interesting to see how this plays out. Many people expected Dubai's neighbor Abu Dhabi to come to the rescue, but not it's appearing more likely that they will (at the very least) allow bondholders to suffer before throwing more good money after bad.
In "graphic form," here's an example of the fear in debt markets over everything Dubai-related. The cost to insure debt of DP World, for instance, has exploded this week. (Trading at 755basis points, this means that it would cost $755k to insure $10million in debt against default.)
Wednesday, November 25, 2009
MGM Mirage (MGM) is out today calming its investors regarding Dubai World's involvement with the enormous City Center project in Las Vegas, where condo prices were recently chopped 30% in order to spur sales.
"MGM Mirage isn't expecting to make much from condo sales at CityCenter. The project's $8.5 billion budget assumes condo sales of only $250 million – a negligible amount relative to the $2.6 billion worth of condos the company hoped to sell before the recession. The company hoped to use those sales to offset CityCenter's cost, boosting profit for owners MGM Mirage and Dubai World.
MGM basically points out that while Dubai World is in dire straights, they've already taken the money needed from them for the project. Ouch...
"MGM Mirage, which jointly owns the development on the Las Vegas Strip with Dubai World, said Dubai World had already fulfilled all of its commitments to funding
The cost to insure against Dubai's debt defaulting has soared today. From CMA Datavision:
Broadpoint spends much of their time focusing on the aircraft-relates business, which is about 53% of revenues and sure to climb as Boeing's 787 program kicks off in earnest in the next 12months.
The top ten....
10) IGT demand and Seamless Pipe for India and China remain healthy,
9) High 787 content will offset any OEM softness as it ramps
8) Drop in narrow-body airplane production rate will have limited impact
7) Robust Free Cash Flow coupled with stellar balance sheet
6) Continuous improvement philosophy of PCP still driving margins
5) Prime opportunity to further acquire and vertically integrate
4) Incremental growth from fastener market share gains
3) Dominant market share in core Castings, Forgings and Seamless Pipe
2) Caledonian acquisition gives PCP advantage competition cannot match
1) Mark Donegan and executive team.
Regarding that "robust" free cash flow - yes, 'tis robust, but the shares have caught up with it. The company currently sports a Free Cash Flow Yield of about 6.4%, based on an average of 2007-2010 Free Cash Flow. Not enough juice in that yield for me to chase.
Copyright 2009 AlphaNinja
Tuesday, November 24, 2009
Notable from the release:
-Manufacturers increased production in September for the third consecutive month.
-The gradual recovery in construction of single-family homes from its extremely low level earlier in the year continued, and home sales increased in the third quarter.
-Although consumer spending on motor vehicles declined in September after the expiration of government rebates, other household spending rose.
-Outlays for equipment and software (E&S) appeared to be stabilizing.
-the labor market weakened further, and business spending on nonresidential structures continued to decline. Meanwhile, consumer price inflation remained subdued in recent months.
The last meeting was in June. Since the last meeting, another 1.3million jobs have been lost. I don't bring that up to be melancholy - rather I note it as it relates to the changes in long-term projections for GDP growth.
Amazingly, despite an additional loss of 1.3million jobs since the last update to long term projections, the FOMC has RAISED estimates for long term GDP growth (just slightly, but still...). This is key because congress uses this data to project tax revenues in the future, and any boost to GDP in this report will show smaller projected deficits than could reasonably be expected. If the FOMC were to get more cynical realistic with its outlook, that would show higher deficits in the future. To their credit, they did increase the outlook for the long-term unemployment rate. Although how that can be increased at the same time as GDP growth escapes me....
Among gainers, Iowa Telecom is +24% on a $1.1billion buyout offer from Windstream (WIN).
Among losers, Barnes & Noble (BKS) offered VERY weak guidance for fiscal 2010 earnings ended April 2010. An "all-in" bet on its digital strategy is driving up costs, thus the lowered guidance:
"Owing to the overwhelming customer demand for nookTM, the world’s most advanced eBook reader, the company is ramping up its production schedule, incurring higher production costs than originally anticipated and increasing future investments related to its digital strategy, including additional people, technology and in-store marketing support. In addition, the company expects that general retail traffic will remain challenged during the holiday selling season. As a result of the above factors, the company is lowering its full year earnings per share forecast to be in a range of $0.33 to $0.63, from its previous forecast of $0.59 to $0.89. Third quarter earnings per share are expected to be in a range of $1.30 to $1.50."
Copyright 2009 AlphaNinja
The SF Chronicle is reporting that the state's department of corrections overstated "jobs saved" by 13,000. And that is just the fake jobs from ONE DEPARTMENT.
In a letter sent to leaders at the Capitol on Monday, State Auditor Elaine Howle said that the Department of Corrections and Rehabilitation has overstated by as many as 13,000 the number of jobs saved by federal stimulus dollars. That represents more than 10 percent of the jobs California reported saving with the federal funds.
Howle said the department appears to have counted employees who were not at risk of losing their jobs.
Recovery.gov says that California has seen 110,000 jobs saved by the stimulus. We'll take that down to 97,000, a quick drop of 14%. I wonder if the president still feels that the inability to measure job creation from the stimulus is a "side issue."
Jewelry concern Zale Corporation (ZLC) announced a loss of $1.80 per share for the quarter ended October 31st. Shares are up over 2% today, as the street had expected a loss of over $2dollars per share.
The company claims to be pulling fixed costs out of its operating structure, but it's coming at a snail's pace. Inventory looks a bit high to me given the pressures facing customers this holiday season, buyt management is undaunted:
“We are encouraged that both sales and margin strengthened as the quarter progressed,” commented Neal Goldberg, Chief Executive Officer. “Importantly, we are well positioned to improve our Holiday execution and financial performance. Our merchandising initiatives have been tested, our stores are fully set and we have the inventory to deliver on our Holiday plans. We will not offer the same level of broad discounting this Holiday season as we did in 2008, which will help us expand our gross margin,” added Mr. Goldberg.
Hmm. They won't budge on discounting, will they? We'll see if that's preferable to forgoing desperately needed revenue and cash flow.
This is SO important because all the global warming legislation and action from the UN and our own congress is based on "Peer-Reviewed" science -->> but if these "peers" are hiding data and using "tricks" (their words not mine) to come up with desired results, then this process is a fraud.
By now, hopefully most people have heard about the hacked emails from the Climate Research Unit of the Universoty of East Anglia. Thousands of email exchanges between the world's foremost promoters of manmade global warming and its disastrous consequences have been made public.
Before reading some of the highlighted emails, read this quote from Princeton's William Happer, who supervised all non-weapons research at the Department of Energy years ago. It sheds some light on the difference between regular scientists who're happy to defend and explain their research, and the global warming folks.
The completely unprofessional and un-scientific practices of the global warming scientists continues. Some of the hacked emails highlighted by the Washington Times below.
Wow compared to the USA, their rates are brutal. Russia's central bank cut interest rates...to 9%!
Russia’s central bank cut its key interest rates to a record low in the ninth reduction since April as it seeks to deter speculative bets on the ruble and ease credit flows to households and businesses. Bank Rossii cut the refinancing rate to 9 percent from 9.5 percent and reduced the repurchase rate charged on central bank loans to 8 percent from 8.5 percent, effective from Nov. 25. It last lowered them by half a percentage point on Oct. 30.
Not uncommon these days, Wells Fargo took back the deed to the 3,000 acre Frederica community in Georgia.
Frederica was intended to be a “Pebble Beach of the East,” said Peter Capone, an architect who was Sea Island’s chief designer. Lot sales at Frederica, which reached more than $2 million a parcel in 2005 and 2006, were supposed to help finance the rest of Sea Island’s expansion, Capone said in an interview in October.
The drama continues for NYC's Stuyvesant Towers. An example of what NOT to expect to pull off in real estate - massive rent increases in a populist city.
The owners of Manhattan's Stuyvesant Town-Peter Cooper Village apartment complex are running out of money so fast they may default on their mortgage within the next few weeks. Tishman Speyer Properties, the real estate developer that owns the historic 80-acre property with asset manager BlackRock, has just $6.75 million left in reserves for StuyTown, according to credit rating agency RealPoint. That isn't enough even to cover December's costs, which include more than 6 percent interest on a $3 billion loan.
In all this drama, the only guaranteed winners are the fee-hungry investment banks. Cadbury, in a defensive move, could turn the tables on potential acquirer Kraft by offering to buy Kraft's confectionery business.
In merger parlance, it is called the Pac-Man defense, as the prey suddenly becomes the predator.
Cadbury has a secret defense against Kraft if no white knight comes along to save it from a too-low takeover bid by the food giant. The British chocolate maker is considering turning around and making a bid for Kraft's smaller confectionery business. Cadbury could afford the acquisition, and it makes strategic sense, said a source with knowledge of Cadbury's thinking. "If I were advising Cadbury, I'd say let's bid for Kraft's confectionery business," said a consumer banker.
With a rather highly-publicised 2009 Hoilday price war, the battle between Wal-Mart and Amazon.com is a fight for the future of retailing.
“It’s not about the prices of books and movies anymore. There is a bigger battle being fought,” said Fiona Dias, executive vice president at GSI Commerce, which manages the Web sites of large retailers. “The price-sniping by Wal-Mart is part of a greater strategic plan. They are just not going to cede their business to Amazon.”
(Wal-Mart, Amazon, Stuyvesant, Tishman-Speyer, retail, Wells Fargo, Frederica, interest rates, Russia, GDP, Hewlett Packard)
Monday, November 23, 2009
Dell (DELL) stock tanked Friday after a Thursday afternoon earnings release demonstrated a VERY weak quarter. Revenues were off more than expected, and earnings came in well below anticipated levels, as margins were quite weak and market share slipped. People were especially caught off guard, as other tech names had reported significant earnings "beats."
Dell claims to have earned $3.4billion in "operating cash flow," a number that I don't take to be very sustainable. I'll continue to use conservative numbers in my estimates for Free Cash Flow.
Speaking of Free Cash Flow, estimates have not changed much for this and next year. What HAS changed is the stock price. Thanks to the selloff, the Free Cash Flow Yield (FCFY%) has gone from 11.5% to 13% in just a couple days, making the shares more attractive.
NEW YORK--(BUSINESS WIRE)--Levi & Korsinsky is investigating the Board of Directors of Financial Federal Corp. (“Financial Federal” or the “Company”) (NYSE: FIF - News) for possible breaches of fiduciary duty and other violations of state law in connection with their attempt to sell the Company to People's United Financial, Inc. ("People's United") (NasdaqGS: PBCT - News). Under the terms of the transaction, Financial Federal shareholders will receive $11.27 in cash and one share of People's United common stock. Based on the closing price of People's United on November 20, 2009, the transaction values Financial Federal shares at $27.74, for a total transaction value of approximately $738 million.
The investigation concerns whether the Financial Federal Board of Directors breached their fiduciary duties to Financial Federal stockholders by failing to adequately shop the Company before entering into this transaction and whether People's United is underpaying for Financial Federal shares, thus unlawfully harming Financial Federal stockholders.
In fairness to the ambulance chasers, they might have a point. People's United looks to have acquired a commercial lender at very attractive prices, about 1.1times book value. As they themselves say in the release, the terms are very attractive. And the excess capital cited below is why by title said they're "buying" some balance sheet.
People's United expects the transaction to be significantly accretive to operating earnings in 2010 and to have an IRR greater than 20%. Given Financial Federal's significant excess capital, the transaction is expected to have a slight positive impact on People's United's industry leading capital levels on a pro forma basis.
It should be very difficult for Financial Federal to look its investors in the eyes and explain why the seller can achieve a return of 20% on this investment. As in, "why did we take the other side of this trade?"
A perusal of Financial Federal's recent 10-q offers insight into how they have remained both sturdy and profitable despite this difficult environment. They completely shy away from assets with questionable useful lives:
-->>Our primary focus is the credit quality of our receivables. ...-->>We focus on financing equipment with a remaining useful life longer than the term financed, historically low levels of technological obsolescence, use in more than one type of business, ease of access and transporting, and broad, established resale markets.-->>We do not finance or lease aircraft or rail cars, computer related equipment, telecommunications equipment or equipment located outside the United States, and we do not lend to consumers.
Copyright 2009 AlphaNinja
Among losers is Peet's Coffee (PEET), down 10% to 34.50 from last week's high near $42 per share. Investors think they might be biting off more than they can chew by getting into a bidding war over Dietrich Coffee(DDRX), which also is being targeted by Green Mountain Coffee(GMCR). More on this coffee war to follow...
October home sales were up 10%, ahead of expectations. Stocks are up well this morning, with the DJIA +163 points. The "top 5" in index weight, accounting for 30% - IBM, Exxon, Chevron, 3M and Johnson & Johnson - are up about 1.5% each.
As support for Treasury Secretary Timothy Geithner wanes on Capitol Hill amid frustration with the Obama administration's handling of the economy, JPMorgan Chase CEO Jamie Dimon is emerging as a potential replacement. Sources tell The Post that a number of policy makers have begun mentioning Dimon as a successor to Geithner, whose standing in Washington has suffered because of the country's high unemployment rate, the weakness of the dollar, the slow pace of the recovery and the government's mounting deficit.
As an analyst at New Castle Funds LLC, a New York hedge fund firm that manages about $1 billion, she was a regular at conferences on technology stocks, where she could get face time with executives and press them on how many microprocessors and how much software they were shipping that quarter. Chiesi wore short skirts and low-cut tops, according to people who saw her over the years. One ploy was to go barhopping with a group, and then peel someone off to talk to on the dance floor, says a person who attended conferences with her.
Friday, November 20, 2009
Copyright 2009 AlphaNinja
Yes, a SECOND stimulus. The first has been maybe 30-40% enacted, and is riddled with fraud, but he thinks we need another.
What's more, he thinks the most important thing to do in a stimulus is to "shore up" state and municipal budgets with federal money. A simple way of letting fiscally responsible states bail out their neighbors next door, who've gifted away the next generation's taxes to public employees' outrageous union demands.
Oh and he admits that in return for a public sector bailout we'll see a "lower standard of living" as the huge debts wreck the dollar.
Thursday, November 19, 2009
Copyright 2009 AlphaNinja
Among the losers are the shipping companies. Volatility has been running so high here that despite dropping 13% today, they're still positive on the week.
Hot Topic (HOTT) is down 13%. Earnings were in line with expectations, but forward-looking guidance for Q4 of 24cents per share was below consensus at 30cents.
Privately held Facebook's valuation has risen 42% in the past few months, based on trading of the company's common stock in private market transactions.
Facebook shares are currently selling for about $21 each at SecondMarket, said Adam Oliveri, managing director at the New York-based company. That’s up from $14.77 in July.
Massive budget deficits and crumbling tax revenues? California's answer is to screw with the TV market by forcing people to buy LCD TV's out of state. Amazing.
The rule does not cover televisions currently in use or for sale. But it would require that most television sets sold in California consume 33 percent less electricity by 2011 and 49 percent less by 2013. The standards would apply to televisions with a screen size of up to 58 inches.
Streamlining itself to be more profitable on its own, AOL may let go a third of its workforce if it is spun off from Time Warner.
According to a filing and a memo AOL CEO Tim Armstrong sent out to employees, AOL is looking for up to 2,500 employees to voluntarily accept buyouts starting Dec. 4 -- about five days before the company is expected to separate itself from Time Warner
Innovate or die. "Old Guard" auto companies are racing to develop engines for electric vehicles.
While internal-combustion engines currently power more than 99 percent of cars built globally, their share can only fall as electric cars enter the market, Miyao said. That will intensify price competition and lower profits for manufacturers. “If you’re a parts maker that can’t expand market share, then you can’t grow without entering new businesses,” he said.
Wednesday, November 18, 2009
Copyright 2009 AlphaNinja