SubscribeMotorola: Secret Meeting Transcript
March 26, 2008
It is amazing that shareholders put up with this horrific decision making. Instead of the company splitting into two, how about a brand new board of directors along with a new management team. True to the old adage: An new broom sweeps clean…
I wonder if this is what happens behind the closed doors at Motorola (MOT):
Board Member 1: We need to do something, I think that some investors are questioning our decisions.
Board Member 2: Really? I think we still have them believing that we have another Razor coming out.
Zander: Razor? Who said Razor?
Board Member 1: How about a stock split? Yeah, that may put them off the trail.
Zander: Split? Who said Split?
Board Member 2: Well, I don’t know, maybe we should work on a new design for the Razor3? Remember how popular we were in 2003?
Board Member 1: Maybe a dividend, or a how about a buyback?
Zander: Shopping? I want to go!
Board Member 1: How about we split the company so we can have two companies. That will let us hide out longer and undetected. Yes! Yes!
Zander: What about me?
Board Member 2: I want to be President now! I want to be President!
Board Member 1: Of course you will be!
Zander: What about me?
Board Member 2: I want shares, I want shares!
Board Member 1: More shares! It looks like we are doing something! We are so smart!
Zander: Smart, Zander Smart….
Board Member 1: OKAY, I am going home….Let the lawyers deal with it now.
Board Member 2: Me too. I am going to pick out furniture for my new office. But I need to get lunch first. Wow, it is 11am already! Ed, do you want lunch?
Zander: Lunch? Lunch? I want Lunch!
Meeting adjourned.
Possible?
Disclosure: NO POSITION: NO KIDDING
$1,200,000,000,000 and counting
March 25, 2008
A report released at 1:30pm EST by Goldman Sachs is estimating that the global credit crisis is going to cost over a trillion dollars. Unfortunately, only a fraction of the amount has been written off so far. The analyst estimates that 40% of the amount will be seen in the brokerage sector and throughout Wall Street.
Just as many were thinking that the other shoe was not going to drop anywhere near them, the entire closet of Imelda Marcos comes puring down. In response, the brokers (LEH), (GS), (JPM)Â etc, fell, well off their highs for the day. It is now clear that the problem is MUCH bigger than anyone has even imagined.
Let’s all agree to the fact that this is not the end…This is still an estimate and unless we get a good amount of full disclosure and coorperation from the brokers and Wall Street, the pain (torture) will continue. No one like surprises and if anything is for sure, investors are scared of what lives in the dark. I know I do.
GUYS: Get your stories straight already!!!!!!
Capital One Downgrade
March 25, 2008
Follow up from yesterday’s comments and trashing of Capital One (COF). It seems that we are not alone on this.
COF: Downgraded - JAGNote by Friedman, Billings, Ramsey Co., Inc.
COF: Downgraded - The firm noted they are downgrading shares of COF to Underperform from Market Perform and reiterating a $40.00 price target. Believe that recent Fed actions and government proposals have resulted in indiscriminate buying/short covering of financial stocks. Problems with broker/dealers and the secondary mortgage market that plagued many market participants were not issues for COF.
Therefore, recent actions to promote liquidity in the secondary mortgage market have not changed our fundamental outlook on COF, leaving the hares overvalued in the face of deteriorating credit quality, in firm opinion. Expect the shares of COF to trade down as investors realize that the recent stimulus will not prevent significant consumer credit deterioration in 2H08 and 2009 as unemployment continues to increase, negatively.
Double Whammy: Bank-Card Companies are Next
March 24, 2008
Aside from Visa (V) or Mastercard (MA), it doesn’t seem as if the credit card issuers have been getting the attention they deserve. With all of the panic and concern surrounding the brokers and builders, perhaps plates are too full to take on any more. Yet, I have been thinking about how easy credit policies made available for housing created a monstrous economic problem. Even so, it does seems plausible that companies issuing collateralized debt could eventually see a recovery if the underlying property can be liquidated for some portion of its worth. But, what happens as defaults rise on credit/bank card debt, which is only backed by the full faith and credit of the borrower?
During the past few months, investors have pummeled Discover Financial (DFS) and others lenders over fear of rising defaults and delinquencies. Here is an example of the recent news and behavior of credit companies caused by the subprime problems (2/12/08 Washington Post):
The subprime mortgage meltdown has spilled into the credit card industry in other ways. Banks have reported steep write-offs related to the mortgage mess, and their stock prices have plummeted.
“Credit cards historically have been a very profitable segment for the banking industry, so what they’re doing is trying to squeeze customers as much as they can, particularly for accounts they don’t see as profitable or as high risk,” said Curtis Arnold, founder of CardRatings.com, a consumer resource on credit cards.
Bank of America (BAC), for instance, notified some customers last month that their rates would increase as a result of a periodic review of their credit risk. Chase (JPM) last fall increased the rate paid by new customers of its Freedom card. Bank of America and Chase are also among some banks that have increased ATM fees for other banks’ customers to as much as $3. Capital One (COF) has changed its cash-advance fee for new customers from 19 percent to 23 percent.
Beyond the current economic crisis, there is an even more troubling issue confronting the industry with the pending legislation known as H.R. 5244: (MSNBC Consumerman)
‘The Credit Cardholders’ Bill of Rights Act of 2008, known as H.R. 5244, would protect cardholders from arbitrary interest rate increases and unfair fees. Maloney, who chairs the House Financial Institutions and Consumer Credit Subcommittee, is quick to point out that her bill does not have any price controls. It does not cap rates or fees.
Interestingly, it looks as though some analysts are continuing to recommend a BUY rating on COF and other names within the sector and are oblivious to the mountain of problems facing bank card companies, aka: The Double Whammy: (Yahoo/AP)
Amid difficulties with mortgages in the U.S. and unloading corporate debt, banks are competing more than ever for market share in their core business — deposits. A large source of profit, banks are introducing newer, higher-yielding accounts to attract more customers’ cash.
The grease that keeps the wheels turning for these companies is capital. In times when money is easily available, bank-card companies utilize their customer accounts to lend money to the credit card customers. As credit card balances rise, new capital is needed to meet the consumer demand.
In order to bring in fresh capital, brokers such as Lehman (LEH), JP Morgan and Goldman Sachs (GS) raise money through note, bond and stock offerings. What do banks do? Of course if they are publicly traded they have the ability to do the same as the brokers and other companies, yet a quieter and quicker maneuver is the bring in new deposits through higher yielding savings accounts. This also helps to bring up the reserve requirements for loans issued through credit card issues and direct loans.
The simple point shows that as customers continue to look for safer alternatives and margins are squeezed as delinquencies and defaults rise, banks that do a big business within the consumer credit card arena could be hit by both problems of limited capital available to loan and ceilings on the fees they can charge for those loans.
The problem for COF is not restricted to our country. Over the past several years, Capital One move aggressively into England and offered Read more
TDI Episode 49: Pharma Huckman’s Market
March 23, 2008
Guest: Mike Huckman, CNBC Pharmaceutical Reporter brings great deal of timely information regarding the Pharma and Biotech sectors. We discuss Merck (MRK), Amgen (AMGN), Genentech (DNA), Dendreon (DNDN), Pfizer (PFE) and others.
Mike’s writes a terrific blog and appears daily on CNBC.
Andrew discusses the current markets and provides a few strategic moves for profit potential. Last week was a see-saw market and if positioned correctly, your portfolio could be holding up well. Even so, it looks as though the economic environment could continue to deteriorate. In this episode, we explore the next looming problem and how to protect yourself.
**AWARENESS and discussion of the Credit Card Crisis has not yet made it to the mainstream headlines, but we see that there is potential for additional economic fallout as Americans continue to build credit in order to pay for their increasingly expensive lifestyles.**
In this edition of The ZachZone, Visa (V) and upcoming IPOs are discussed.
(This edition of The ZachZone is sponsored by Newsflashr - Get a wide angle view of all of the hot topics making news - All on a single page. )
~ Listen and Subscribe in iTunes ~
Other Stocks Mentioned in this and recent episodes: (V) (BSC) (LEH) (SPY) (SAFM) (GS) (MER) (QID) (SKF) (QQQQ) (IBKR)
Links
-
GoToMeeting
