Starting in 1996, Alexa Internet has been donating their crawl data to the Internet Archive. Flowing in every day, these data are added to the Wayback Machine after an embargo period.
You may think the subprime mortgage mess is huge. Well just around the corner a larger elephant is looming and its impact may be even more devastating than the current credit crisis.
While it sounded like good news when banks sold $30 billion of loans for leveraged buyouts last week -- $26.4 billion of that was for the First Data buyout. That sale came with a big price tag -- banks agreed to sell the debt at 96 cents on the dollar, which means they locked in losses after their fees.
And then there was the problem of what to do with the other 90% of LBO loans in the pipeline.
The Wall Street Journal(subscription required) reported today that Citigroup Inc. (NYSE: C), Credit Suisse Group and J.P. Morgan Chase & Co. (NYSE: JPM) hold $400 billion in debt they promised for financing purchases private equity firms have in the works globally. If they can't sell the debt, they're left holding the bag, which means a lot less money for other loans. If the economy slows as expected and corporate profits weaken, the only way the banks will be able to unload the debt they're holding will be a fire sale on that debt at even deeper discounts then the First Data deal.
Sallie Mae (NYSE: SLM) is sick of having sand kicked in its face by its potential buyer, JC Flowers, and Flowers' banks.The private equity firm that agreed to pay $25 billion for the student loan company has come back with a lower price, claiming that Sallie Mae's financial future has gotten much worse. Now, Sallie Mae is suing to get its break-up fee of $900 million
According toReuters, "The suit seeks a declaration that Sallie Mae may terminate the merger agreement and collect the damages, that the buyer group has repudiated the merger agreement, and that no material adverse effect has occurred." SLM is arguing that there has been no meaningful change in its business since Flowers made its offer. The buyout firm and its banks make the case that legislation slashing subsidies to student lenders and a serious credit squeeze have cut Sallie Mae's value. Flower's banks are JP Morgan (NYSE: JPM) and Bank of America (NYSE: BAC).
The move by SLM may usher in a new wave of litigation as private equity buyers walk away from buyouts that they no longer think make financial sense. If Sallie Mae can win in court and collect its $900 million, a number of legal actions could follow brought by public companies that watched buyouts fall apart.
While it may seem odd, it is possible that the legal system will slow buyouts as much as the current credit crunch.
The FDA is soon expected to issue an alert to physicians about "serious risks" regarding the use of drugs to diagnose heart problems while using ultrasound imaging machines, reported the Wall Street Journal. The key drug is Bristol-Myers Squibb's (NYSE: BMY) Definity and General Electric Company's (NYSE: GE) Optison.
According to the Wall Street Journal's "Heard the Street" column, there's no quick recovery in sight for AMR Corporation (NYSE: AMR), as significant revenue gains are not apparent and the company is saddled with high costs.
JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) are expected to reveal combined losses of about $3B on holdings of mortgage securities and leveraged loans when they report Q3 results this month, reported the Financial Times.
OTHER PAPERS:
A consortium led by Goldman Sachs Group (NYSE: GS) is believed to be the frontrunner in the GBP4B auction of Southern Water, the utility that supplies water to more than 1 million households in the Southeast, reported the U.K. Times.
A study by research firm Sanford Bernstein quoted in the FT says that Bank of America (NYSE: BAC) and JPMorgan (NYSE: JPM) face write-offs similar to those taken by Citigroup (NYSE: C). The report says that JPMorgan will have mark-to-market losses on leveraged loans of about $1.4 billion and another $700 million of write-downs on mortgages and mortgage-backed securities. "For Bank of America, Bernstien estimates leveraged loan losses will be $700 million and the mortgage write-downs $300 million," the paper says.
The news really should come as no surprise. JP Morgan and Bank of American were anxious to make hundreds of millions of dollars on leveraged loans and mortgage-based securities the same as their peers.
Concerns about the big financial institutions should not dissipate with the news. The write-downs may handle current estimates of what some of these loans and financial instruments are worth, but if the private equity environment and housing situations get worse more write-offs could follow.
It may be the beginning of the end for bad news from banks, but it is almost certainly not the end.
Panera Bread (NASDAQ: PNRA), an owner and franchisor of 1,115 bakery-cafes, is recently up $2.28 to $45.40.
PNRA reported that third quarter revenue increased 35% to $276 million compared to the year ago period.
Bear Stearns says: "Sales in line; guidance narrowed up versus consensus."
PNRA overall option implied volatility of 37 is above its 26-week average of 34 according to Track Data, suggesting slightly larger price risks.
JP Morgan (NYSE: JPM), a global financial holding company, closed at $46.78.
Bloomberg reported: "China may prevent foreign investors from taking control of domestic brokerages, a setback to Wall Street's ambitions to tap the world's fastest-growing stock market, people familiar with the planned rules said."
JPM is expected to report EPS on 10/17.
JPM October option implied volatility of 30 is above its 26-week average of 26 according to Track Data, suggesting larger risk.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
TheStreet.com's Jim Cramer believes that if this chatter proves true, this major index could rocket to his target for it.
If the Bear Stearns (NYSE: BSC) (Cramer's Take) chatter is true -- that Warren Buffett, among others, could buy a stake in the broker -- we could quickly blow through Dow 14,000.
I say that because the weak link in the Dow is the financials. You get Citigroup (NYSE: C) (Cramer's Take) up through the $50s, JPMorgan (NYSE: JPM) (Cramer's Take) to the $50s and AIG (NYSE: AIG) (Cramer's Take) to the $70s -- all of which would happen if the financials ignite -- and you can be within spitting distance of my 14,548 target. Don't forget that American Express (NYSE: AXP) (Cramer's Take) could ramp on that move, too.
Take a look at that Dow. It is overweighted in finance vs. resources. So you need that group to work to get to 14,500. A Buffet stake would say this: "The group's woes are way overdone and it is time to scoop these up." Nobody will think twice about it.
And if it happens, it will cause a panic to the upside.
Very high stakes. But Landon Thomas, the reporter at The New York Times who broke the story, is real good. I trust that he would not have run this without really having the story.
Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Citigroup, AIG and Caterpillar.
SLM Corporation (NYSE: SLM), a leading provider of saving and paying for college programs, is recently down $1.91 to $44.36.
SLM says that the J.C. Flowers, Bank of America Corporation (NYSE: BAC), and JPMorgan Chase & Company (NYSE: JPM) buyers group does not expect to consummate the acquisition of SLM. SLM call option volume of 98,356 contracts compares to put volume of 68,654 contracts. SLM October option implied volatility was at 91 according to Track Data, suggesting larger price movements.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
In September, short sellers exited the major money center bank stocks. Shares sold short in Wachovia (NYSE: WB) fell 13.8 million to 36 million. The drop at JP Morgan (NYSE: JPM) was 7.7 million to 37.5 million. At Bank of America (NYSE: BAC) short interest fell 9.5 million to 31.7.
Wall Street appears to believe that none of these big banks face the kind of mortgage problems that have hit more vertical financial institutions like Countrywide (NYSE: CFC). And, it would appear that their investment in loans for private equity transactions may only cause modest earnings problems if numbers from Lehman (NYSE: LEH) and Goldman Sachs (NYSE: GS) are any indication.
All three stocks were hit when mortgage default problems topped the financial news and private equity deals seemed at risk for failing. Wachovia was down as much as 22% year-to-date in August. It is now down 10% and JP Morgan and Bank of America are off less than 5% since the beginning of the year.
The Federal Reserve 0.5% rate cut is also likely to help the banks weather the credit crisis, at least for now.
But, the improvement in the bank share prices could be a sucker rally. The economy appears to be headed for a recession or, at the very least, a flat period. The passing of the late July and August market turmoil may not last for long. And, those long the bank stocks may end up regretting it.
Douglas A. McIntyre is a partner at 247wallst.com.
XLF seeks to replicate the total return of the Financial Select sector of the S&P 500 Index. Citigroup (NYSE: C), Bank of America (NYSE: BAC), American International Group (NYSE: AIG), JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Wachovia (NYSE: WB) and Goldman Sachs (NYSE: GS) are components of the XLF.
XLF total option volume was 294,706contracts on 9/18 . XLF over option implied volatility of 23 is below its 7-week average of 30 according to Track Data, suggesting decreasing risk.
It seems that almost every week I have some type of bad customer experience. I just accept it as normal, but, Varolii wouldn't hear of it. The company has a suite of on-demand software applications to help with the problem. Now the firm has filed for an IPO.
Basically, the technology platform helps provide personalized communications across many channels, such as by phone, SMS, web, and fax. What's more, there is coverage along the customer life cycle, like customer initiation, customer retention, and even collections.
It's turned into a sizeable business; Varolii handles more than 3.5 million notifications each day, which include things like flight cancellations, payment reminders, scheduling of service calls and so on.
Varolii has more than 320 customers, including biggies like Dell (NASDAQ: DELL), Deutsche Bank AG (NYSE: DB) and UPS (NYSE: UPS). From 2004 to 2006, revenues grew from $16.2 million to $50.9 million.
The lead underwriters on the deal include Lehman Brothers (NYSE: LEH) and JPMorgan (NYSE: JPM). The proposed ticker symbol is "VRLI."
You can find the prospectus at the SEC website. Also, if you want to check out more IPOs, click here.
After hitting a one-year high of $53.25 in May, JPM shares fell sharply in July and August to hit a one-year low of $42.16 earlier this month. JPM opened this morning at $45.00. So far today the stock has hit a low of $44.28 and a high of $45.13. As of 10:40, JPM is trading at $44.62, up $0.65 (1.5%). The chart for JPM looks bearish but improving slightly, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 4.2% return in just three weeks as long as JPM is above $40 at September expiration. JPMorgan would have to fall by more than 10% before we would start to lose money.
JPM hasn't been below $40 at all in the past year and has shown support around $43 recently. This trade could be risky if the Fed decision discourages investors, but even if that happens, this position could be protected by strong support around $43, a price where investors have been buying JPM up to this point. Brent Archer is an options analyst and writer at Investors Observer.
When thinking about the current state of the market, forget about bulls and bears and think slacker.
You know, the type of young person living at home with his parents -- usually a guy -- who spends his days sitting on the coach playing video games in his underwear and whining about his lot in life. Like this annoying protagonist, the stock market doesn't know what it wants to do, surging from irrational exuberance to manic depression in the blink of an eye.
Uncertainty abounds over the subprime mortgage meltdown, retail sales, and whether Lindsey Lohan's latest stint in rehab will take. (Okay, that's what I am uncertain about). But remember that some smart person once said that without risk, there is no reward, and that markets don't act crazy forever. Until the market takes a huge chill pill, there are many stocks out there that are too cheap too ignore -- some of which I discuss in this video.
You know the feeling. You've done a lot of shopping -- and used your credit card heavily. It's so easy, right? Of course, until the heavy interest payments pile up.
Well, in this week's Barron's [a paid publication], there's an excellent story on this topic. In fact, the lenders were so eager to make these mega loans that they were loosey-goosey on the terms. For example, some loans even allowed for deferring debt payments (perhaps the subprime market was not the only crazy place, huh?)
Oh, the lenders also were willing to forgo escape clauses in loan agreements. Hey, wouldn't the gravy train last forever?
So what happens to the hundreds of billions in buyout debt? Barron's thinks that the lenders will sell the stuff at deep discounts. True, this will mean significant losses. But, if things are bad, might as well get everything written down now and then pave the way for a better future, right? Although, I have a feeling banks are going to be a little more circumspect when it comes to new buyout loans.
Over the course of last night, bankers and private equity interests battled over the funding for buying Home Depot's (NYSE: HD) wholesale supply business. JP Morgan (NYSE: JPM), Lehman (NYSE: LEH), and Merrill Lynch (NYSE: MER) have come close to walking away from the buy-out lead by Bain Capital, Carlyle Group and Clayton, Dubilier & Rice. The price for the unit may be cut by as much as $1.2 billion from its original $10.3 billion price.
The banks are concerned about the risky debt and the fact that the business is being hurt by the falling housing market, according to (subscription required) a story in The Wall Street Journal.
The banks have made billions of dollars from lending money to the larger private equity operators. When business was good the door to the vault almost always open. Now that it is clear that some of the buy-out loans will sour, the same lenders want to save their own skins.
Is there a solution to this, or will many of the largest private equity deals fall apart? One obvious answer is that private equity firms may have to put up more than the 10% or so that they normally like to contribute to these transactions. That would let them take on more of the risk and mitigate the problems for the banks. Another answer is that the price for deal like Home Depot and the Tribune (NYSE: TRB) will simply drop to adjust for risk, leaving the sellers holding the bag.
The most likely set of circumstances is that in more of these deals, the buyers will simply walk away. Current owners of these businesses will be left to make them work through cost cuts and supporting them financially until better times come around again.
Game Changer: Google hits $200 billion market cap -- is $500 billion in sight?
Interview with the head of Xerox's (XRX) Webster research lab
General Electric (GE) Q3 quarterly results preview
TheStreet.com's Jim Cramer is amazed by some stocks that just won't quit and looks at the practicalities of getting into these winners.
.gif){kind=logo}
Panera Bread
SLM Corporation
It seems that almost every week I have some type of bad customer experience. I just accept it as normal, but, 
and 
.
When thinking about the current state of the market, forget about bulls and bears and think slacker.
You know the feeling. You've done a lot of shopping -- and used your credit card heavily. It's so easy, right? Of course, until the heavy interest payments pile up.
