TheStreet.com's Jim Cramer says he has no confidence in these hated names, and neither should you.
The financials are flying -- there are finally bids for most of them underneath. Many, including Lehman (NYSE: LEH) (Cramer's Take), are running. What a great time to put the negative cards on the table and put the negatives in perspective. That's right, let's look at the financial Achilles' heels. What could go wrong? In other words, here's the companion piece to Doug Kass' positive conversion. Here's what I am worried about even as Doug thinks everyone's too worried and the bottom is being put in.
To get started, let's look at what's not causing the endless declines in the stocks -- don't worry, we will get to the financial dirty dozen when I finish this preamble.
First, it ain't earnings. Earnings aren't going to be that great. But that's why the S&P is at 14 times. It can go to 12 or 11, or most likely stays at 13-14, but the E goes down (earnings).
Second, it ain't oil. The stocks sensitive to the increase in oil have room to go down, but the price of oil is being factored in slowly but surely.
Third, it isn't inflation or recession. Those two are being baked in each day.
TheStreet.com's Jim Cramer says forget calling a financial bottom -- everything you need is right in front of you.
Do you think this week will finally end the oil inventory nonsense? Do you think this week could be the breakout where oil doesn't trade on the slight build or the "heavier than expected" chatter?
I sure hope so.
Yesterday was a horrible market, but midday, when the market was really beginning to roll over, the whole complex turned. This was quite an achievement given the overwhelming collapse of the futures and the propensity of the bears to push things down.
Today with the futures breaching $140 -- remember, I think they're on the way to $150 -- we can see the error of relying on these numbers, which I have said for years now are meaningless. Witness how many times the inventories have been more full than expected and yet oil has doubled.
I want to go back to the cheaper-than-oil stocks, though. Natural gas. Oil has to go down $65 to get to where natural gas is right now. Meaning that historically oil trades at six times the price of natural gas. So natural gas -- forget the season, which is supposed to be bad for nat gas -- needs to come higher.
Citigroup downgraded Sandisk (NASDAQ:SNDK) to "hold: from "buy" according toBriefing.com. The news service also reports that Bank of America resumed coverage of Boeing (NYSE:BA) with a "neutral" rating.
Douglas A. Mcintyre is an editor at 247wallst.com.
And yet my best indicator, the Standard & Poor's oscillator, which you can order from their Web site, is saying you cannot be short here and should be doing some buying. The oscillator, when it has been at minus 5, has called a bottom almost every time in the last decade, plus or minus a day or two, and a percent or even two, and I have long since learned not to see through it.
Almost everyone believes that Countrywide Financial (NYSE: CFC) CEO Angelo Mozilo is a thug. But, it turns out he is a smart one. Some fairly powerful people got special loans from his company. They were often people Mozilo needed as pals.
According to The Wall Street Journal (subscription required), "These borrowers, known internally as 'friends of Angelo' or FoA, include two former CEOs of Fannie Mae, the biggest buyer of Countrywide's mortgages."
Two of the people involved were James Johnson, who does some work for Barack Obama, and Franklin Raines, who had some scandal problems before he left Fannie Mae (NYSE: FNM).
Since Countrywide had business dealings with Fannie Mae, the whole deal looks a bit tawdry.
No one knows whether these loans will cause legal problems for any of the parties involved. But, it does, once again, raise the question of the wisdom of Bank of America (NYSE: BAC) buying a company with such an ugly past and so many chapters of less-than-ethical behavior.
Perhaps no one cares about the ethics part if there is money to be made.
Douglas A. McIntyre is an editor at 247wallst.com.
TheStreet.com's Jim Cramer says the homebuilders won't quit, and that's making the early-cycle plays work.
Have we really bottomed? The stubborn lack of decline in the homebuilders, coupled with the better-than-expected retail sales, the strong transports, and the conclusion of a deal like Clear Channel (NYSE: CCU) (Cramer's Take), has created an environment where you are hard-pressed, if you rely on stocks as forecasters, to ignore the possibility of a bottom.
I watch the HGX like a hawk, the homebuilding aggregation, and it simply won't come down. That's despite the awful numbers, the covenant violations (Standard Pacific (NYSE: SPF) (Cramer's Take)) the bad loans, the lack of mortgage money, the insistence of a down payment and an abysmal spring traffic season.
So, why are people buying the group that signaled the downturn? I think it comes down to price. If you force the homebuilders to sell, as Toll (NYSE: TOL) (Cramer's Take) did this quarter, taking no gains on homes, you clean up inventory. If you clean up inventory, which is what happened in western Florida, you stabilize pricing. When you stabilize pricing, you bring out buyers. It is a virtuous circle.
TheStreet.com's Jim Cramer says the value guys threw this party, so respect the hosts.
Sometimes you just feel beaten into being positive. You just say, "OK, enough, I will accept the positives as they are being put out, not as I believe they are."
That's how I felt yesterday about Freddie Mac (NYSE: FRE) (Cramer's Take). The company put out financials yesterday that looked better than expected, and for once I didn't question whether they were.
I didn't because the earnings from so many of the feckless players -- the Fannies (NYSE: FNM) (Cramer's Take), the Washington Mutuals (NYSE: WM) (Cramer's Take) the MBIAs (NYSE: MBI) (Cramer's Take) and the Ambacs (NYSE: ABK) (Cramer's Take) -- are all being greeted with a bizarre positive response, so bizarre that I bought into the "better than expected" rhetoric because I don't want to fight the value guys who are in control right now.
Elsewhere on the site, Doug Kass has been putting up some very strong arguments that numbers from the likes of Freddie are less than meets the eye.
Fannie Mae (NYSE: FNM) announced disappointing earnings. But the stock went up. Is that a signal investors think the worst is over, that the future looks brighter for financial stocks? Maybe.
While Fannie Mae is only one company, it's the biggest in the mortgage business. That means everyone is watching what it's doing and how it's faring. As Fannie Mae goes, so goes the mortgage market. As of the latest earnings release, things aren't going too well. Earnings per share showed a loss of $2.57, much worse than the 81 cents analysts predicted. Management cut the quarterly dividend to 25 cents a share starting in the third quarter to save money. To bolster its capital, Fannie will raise $6 billion, most likely in preferred stock since there's a strong market for income shares.
TheStreet.com's Jim Cramer says the guys at the top don't know what they're doing, and it shows.
AIG's (NYSE: AIG) (Cramer's Take) making everyone's life difficult today. That's in part because AIG had been the biggest proponent of "super senior," meaning they repeatedly said that their collateralized debt obligation (CDO) exposure was of the kind that was intelligent, measured and thoughtful. They talked endlessly about how their due diligence made the difference and that unlike all of the other buyers, they kicked the tires three times and never bought the plain ol' CDOs. Then they brought in professors from Wharton to be sure that even if all heck broke loose and they were being too aggressive, they would be hedged.
They also were the first to give you the percentages of how much could go bad and that even in the worst-case scenario, they were overcapitalized. And, most important, they were insurers, no need to mark to market, they can play it all out.
Plus, they touted their own struggles. They made the point that because of the turmoil at the top, they hadn't bought any bad stuff and stopped buying residential real estate products after 2005. What they did buy -- they assured us in that big teach-in dog-and-pony show in December -- was the extra-special nature of their particular buys and that, unlike everyone else, risk officers scrutinized every single piece of paper that went into their super senior insurance, meaning only the top-top part of a CDO-squared, the part where everything had to default ahead of it; they made a point of how impossible that would be.
Can you believe oil put in another monster day with oil up $1.91 at $121.88 today. This morning started out looking just like March with financials way down, and commodities up. That abated toward the end of the day. An analyst prediction of $150 to $200 oil helped propel oil today. Below are today's unofficial closing prices:
The Blackstone Group L.P. (NYSE: BX) announced today $1.3 billion has been raised to invest in high quality loan assets by closing three CLOs. Blackstone pointed out that the CLOs are not an attempt to remove risky assets off balance sheets. The newly acquired GSO Capital Partners now manages 26 CLOs for a total of $14 billion. Shares actually fell 0.75% by the end of the day to $19.57.
Fannie Mae (NYSE: FNM) is recently trading at $25.80 in pre-open trading, below its close of $28.29.
FNM reported Q1 EPS ($2.57) versus consensus estimates of (81c). FNM announced plans to raise $6 billion through common and preferred offerings. OFHEO will reduce FNM's capital requirement to 15% from 20%. FNM will reduce its 3Q dividend to 25c.
FNM May option implied volatility of 92 is above its 26-week average of 67 according to Track Data, suggesting larger price movement.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Financial Stocks to Love The subprime mortgage meltdown and resulting credit crisis have slammed financial stocks recently. But there are still some diamonds in the rough. They include Berkshire Hathaway, RBS, AFLAC, Raymond James and BOK. Financial stocks we love - CNNMoney.com
Big Mac's Local Flavor Once vilified for pushing America on the world, McDonald's lets countries invent their own buns, bags, and business practices. Now some ideas are making their way back home. Big Mac's local flavor - FORTUNE
The New York Times reports that Federal National Mortgage (NYSE: FNM) and Federal Home Loan Mortgage (NYSE: FRE) have a tiny sliver of capital to support a mountain of mortgages. To put it in perspective, their level of borrowing is almost twice that of the enormously over-leveraged investment banking and hedge fund industries. With the collapse of the housing market, Freddie and Fannie are in trouble. And when you get to the scale of these two, so is America.
As I posted last month, it could cost $1 trillion to bail out Fannie and Freddie. These hybrid organizations are a key cog in the mortgage industrial complex (MIC) that has gotten the world into its current capital crisis. Fannie and Freddie buy "conforming" mortgages from their originators and then package and sell the mortgages as securities. But these two have a mere $83 billion in capital to support $5 trillion worth of debt and other commitments.
This 60-to-1 ratio is almost twice the 32-to-1 ratio of the highly leverage investment banks and hedge funds. And like any company with hard-to-value assets, Fannie and Freddie have unrealized losses. In their case, those total $20 billion -- they've already taken $9 billion worth so far this year. By 2007 they had guaranteed or invested in $717 billion of subprime and Alt-A loans, up from almost none in 2000. And many of those are not worth that much.
D. R. Horton (NYSE: DHI) shares are down over 6% in premarket trading after the homebuilder has swung to a loss for its fiscal second quarter of $1.31 billion, or $4.14 per share. With the continued housing slump, the company took hefty charges to write down the value of its inventory. Revenue plunged to $1.62 billion from $2.62 billion a year ago.
Fannie Mae (NYSE: FNM) shares are slumping over 9% this morning after the mortgage lender said it lost $2.2 billion or $2.57 a share in the first quarter due to mounting home-loan delinquencies as the housing slump continued. The results were below, far below that of estimates.
Vodafone Group (NYSE: VOD) said Tuesday that it's signed an agreement with Apple Inc. (NASDAQ: AAPL) to sell the iPhone in ten of its markets including Australia, the Czech Republic, Italy and India.
Ted Allrich is the founder of 
Fannie Mae
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