Posts tagged SEC

Monday October 27, 2008: New-home sales are up and prices are down. Iran needs more expensive oil.

October 26, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , ,

The Nikkei 225 hit a 26-year low today- last night for us.  Gasoline prices in the US fell the fastest in the past two weeks that they have ever fallen, and now the national average for a gallon of unleaded gasoline is just about where it was a year ago. 

 

The SEC is still deciding whether it will suspend the mark-to-market rules, letting banks value their bad assets at whatever they want.  Critics say that this will further warp perspective, but people in favor of getting rid of the rule say it will help banks’ balance sheets.  This coming Wednesday, the SEC is set to hold a discussion on the implications of mark-to-market accounting and its possible recent effect on the market.

 

New home sales data came out today and was better than expected.  Although 33% lower than they were a year ago, sales of new homes increased 2.7% from August to September.  So there is some sign of movement. 

 

The Dow crept up today until 2PM when someone yelled, “sike!” and everything came crashing down to close 203 points below open to $8,175.  Just 175 more points until we’re in the seven thousands and half of where we were just about exactly a year ago.  Crude took a big dip in early morning trading, but then rallied a little after the new home sale data to close down just 93 cents to $63.22 per barrel. 

 

My stocks are all in the can.  Citigroup (C) is trading under $12 a share, and two- Syncora (SCA) and Centerline Holdings (CHC) are under $1.  If only they stay on the New York Stock Exchange, I’ll be happy. 

 

A couple interesting things were said on Money Matters Today tonight: Iran needs its oil, which it’s only real export, to be sold at $95 a barrel in order to fund its social programs.  I’m no expert on Iranian social programs, but oil trading in the $60 range has got to be hitting Iran hard if they need it trading 60% higher.

 

Another interesting thing said on the show tonight was that for every penny drop in the price of a gallon of gasoline, Americans add over $1 billion to their pockets annually.  

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Saturday October 4, 2008: “Henry Paulson buries U.S. Toxic Debt.”

October 4, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , ,

“Henry Paulson buries U.S. Toxic Debt.”  So much has happened in four days.

 

The SEC also gave new flexibility to the accounting departments at banks with bad housing assets, allowing them to use their own judgment when assessing value.  Up until now, banks had to assess the value of these properties against similar properties on the market- called the “mark-to-market accounting rule”.  Now, banks can assess value based on what they feel a property may fetch when times are good again.  This new rule, or lack of a rule, caused the stock values of regional banks like National City (NCC) and Huntington Bancshares (HBAN), who have a ton of bad properties on their books, to make consistent gains this past week. 

 

President Bush signed the $25 billion loan to the US automakers this week to transform their old factories into green-auto producing ones.  This did little to the stock prices of Ford (F) and General Motors (GM).  “When the country gets a cold, Detroit gets the flu,” they say. 

 

The Senate devised their own bailout plan that included a bunch of tax breaks to keep the republicans happy, and passed it to the House.  This bailout plan differs from the one originated in the House of Representatives by a few key points:

 

Temporarily raising the FDIC insurance cap to $250,000 from $100,000

 

Allowing the FDIC to borrow from the Treasury to cover any losses that might occur as a result of the higher insurance limit

 

Extending tax breaks to individuals and businesses using renewable energy, and giving a deduction for the purchase of solar panels

 

Offering relief for another year from the Alternative Minimum Tax

 

Added to the bill this time around were tax $150 billion exemptions for wooden arrow and rum manufacturing. 

 

What?

 

The House stamp approved the bill yesterday, and immediately afterwards, the bottom fell out of the Dow- again.  News that 159,000 jobs were lost in September, the unemployment rate has held at 6.1%, and an overall skepticism of the potential effectiveness of the bailout plan all caused people to sell into the fire. 

 

President Bush signed the $700 billion bailout bill into law today. 

 

Because the bill was passed, the short-selling ban, which was originally set to expire on October 2, but then was extended until October 17, will now expire on October 8- the third day of the bailout bill’s enactment. 

 

What seemed like a done deal between Citigroup (C) and Wachovia (WB), was undermined my Wells Fargo (WFC), who swooped in stole the show with a $15.1 billion bid.  Citigroup is going to contest, but this didn’t stop Citi from losing 18% yesterday.  Wachovia, on the other hand, gained over 50%. 

 

Oil has been creeping around in the background, closing at $93.88 on Friday afternoon.  At one point, the Dow was up over 280 points yesterday, but then freefell to close down 157 to $10,325.

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Sunday September 28, 2008: Consensus in Congress. Will Moody’s still downgrade Ambac? Will Wachovia beat the “Credit Crunch”?

September 28, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , , ,

Early this morning, Congress finally agreed on the wording of the bailout.  CNNMoney.com reported the following provisions attached to the way the money is spent:

 

*The $700 billion would be disbursed in stages, with $250 billion made available immediately for the Treasury’s use.  (After the initial $250 million, an additional $100 million can be released by the President.  If after that more money is needed, Congress can re-vote on release of the remaining $350 million.)

 

*Curbs will be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be allowed to offer golden parachutes to executives; they will not be able to deduct the salary they pay to executives above $500,000.

 

*An oversight board will be created. The board will include the Federal Reserve chairman, the Securities and Exchange Commission chairman, the Federal Home Finance Agency director and the Housing and Urban Development secretary.

 

*Allow for the Treasury to receive the option to take ownership stakes in participating companies under certain circumstances.

 

*Treasury may establish an insurance program – with risk-based premiums paid by the industry – to guarantee companies’ troubled assets, including mortgage-backed securities, purchased before March 18, 2008.

 

Congress wanted to get the bill together before the opening of the Asian markets tonight.  The Nikkei 225 opened $10 lower than Friday’s close, but then began a slightly hesitant ascent.  How the bill’s finalization will affect our market’s opening tomorrow, or if anymore bankruptcies or downgrades will occur, is still up in the air.  My guess is that there will be a sigh of relief across all sectors tomorrow but any real change will only happen after the bill is signed, sealed and the money is delivered. 

 

Will Ambac (ABK) avoid a Moody’s downgrade before the relief comes through, and when the relief comes through, will it help ABK?  Message boarders seem to think the price of ABK will skyrocket tomorrow, and the very late-day increase in ABK’s share price on Friday may have hinted belief that a weekend deal would in fact help ABK come Monday.  But the “Moody Monster” is still lurking in the woods.  Analysts are blaming a lot of the financial crisis on these ratings agencies for rating companies way higher than they deserved, therefore needing to make drastic corrective downgrades.  On March 20, 2001, Frank Raiter, Standard & Poor’s former top mortgage official, said he was asked by S&P to rate a real estate investment he had never even reviewed.  He told Bloomberg that he was told to “just guess” because the S&P was in competition with other ratings companies (possibly Moody’s?) for fees on a $484 million deal.  It’s good that ratings are being revealed as little more than smoke and mirrors, but people still take ratings seriously, and a Moody’s downgrade of Ambac would devastate the company and its stock price.     

 

And will the news of consensus on Capitol Hill save Wachovia (WB) from going bust before another bank picks up its fractions?  Or will we remember Wachovia as the last big victim of the “credit crunch”?  We’ll have to wait to see… 

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Sunday September 21, 2008: “Paulson’s Monster” needs $700 trilllion. Moody’s questioned.

September 21, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , ,

“Paulson’s Monster”, as it’s being called, has now proposed the need for $700 billion of taxpayer dollars, raising the US debt limit to $11 trillion, to spin off the bad sectors of the financials into its own entity.  Paulson claims his plan will “minimize” the cost to the taxpayer in the long run, but who can really be sure?  As part of the plan, Paulson said that he was currently in talks with other countries for help.  He wouldn’t disclose which countries.       

 

Back in Ratings land, one ABK message boarder claimed that the Feds raided Moody’s on Friday looking for connections between the ratings company and hedge funds.  No link was provided, and given that any Joe Schmo can go on a Google Finance board and post whatever he or she pleases, it could very well be completely fabricated.  However, a Bloomberg article titled “Berkshire’s Bond Insurer, Moody’s Stake Face Probe”, reports that one such link may in fact come to light:

 

“Billionaire Warren Buffett’s Berkshire Hathaway Inc. faces a probe by Connecticut’s attorney general for possible conflicts created by owning almost 20 percent of credit ratings company Moody’s Corp. while also running a new municipal bond insurer. 

 

Moody’s gave its top rating last week to Berkshire Hathaway Assurance Corp., created in December as existing bond insurers struggled to maintain their AAA ratings. A favorable rating for Berkshire by New York-based Moody’s, or a lower rating for competitors including MBIA Inc. and Ambac Financial Group Inc., may give Buffett’s company an advantage.”

 

So maybe there is truth in rumor. 

 

In other news, Barclays is the proud new owner of Lehman Brothers’s investment banking and trading businesses.  The $1.75 billion deal approved yesterday is a definite bargain as compared to the one Barclays would have had to strike last week for Lehman’s entire assets before bankruptcy.      

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Tuesday September 16, 2008: The government loans $85 billion to AIG. Will Lehman accept Barclays’s bid? Naked short selling to be banned within 24 hours.

September 16, 2008 · Filed under business, economy, investing, money, politics, stock market · Tagged , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Where to start?  All these stories are unfolding all at the same time.  Most people alive have never seen such things. 

 

AIG no doubt drove the market today.  Lehman was six times as big as Enron and WorldCom, and AIG is 50% bigger than Lehman.  Yesterday when it became clear that Goldman Sachs (GS) and Morgan Stanley (MS) were last two independent investment banks left standing, the government asked the two giants to inject capital into AIG to keep it alive.  When that didn’t go over so well, the fed went back to the drawing board and came up with a new idea, which was later captured in a Bloomberg article titled “Fed Said to Reverse Stance, Consider AIG Loan Package”.  Originally the government said that it would absolutely not help AIG, but throughout the day AIG’s tentacles were measured and realized to stretch much further than previously thought.  The news stories about AIG threw the stock all over the place today.  As an example of just how turbulent the ride was, at 2:30PM the stock was trading at $2.76.  At 3PM, the stock was trading at $5.  That’s an 81% increase in 30 minutes.  AIG is the world’s largest insurer, and unless it’s shored up, many institutions (including regional banks, as exposed by CNNMoney.com) will likely get knocked out.      

 

Reuters released an odd article today about former chief executive of AIG Hank Greenberg leading a hoard of investors in a bid to take over AIG.  I think I’ll let that one rest. 

 

The Federal Reserve, against what everyone predicted, left interests rates alone today.  The rate will stay at 2%. 

 

When the market broke in 1937 signaling the Great Depression, the US Securities and Exchange Commission (SEC) created the “uptick” rule, which essentially stopped people from betting against failing stocks.  “Naked short selling” is what it’s called now, and is when a trader buys a put for an underlying amount of stock he or she would not be able to deliver.  The SEC did not eliminate the uptick rule until July 6, 2007.

 

Our government tried to being back a sort of uptick rule this past July and it did, in fact, help the financials rebound.  You can still see the ban reflected in most stock charts, not only the financials, from July 15 until the beginning weeks of August. 

 

Now that banks are acting more like houses made of cards than they are the good old impenetrable banks we all grew up with, the government and some analysts have began buzzing about a possible reinstatement of the uptick rule.  Back in August when the ban on naked short selling was lifted off the 19 financials it protected, the plan was to create “within a few months” a sweeping rule would eliminate excessive short selling.  Some, like Alan Greenspan, think this is eliminating an important side of the market, but when a bet is sure, much like oil was six months ago, people will take and take advantage of it. 

 

The head of the SEC, Christopher Cox, announced today that the “within a few months” will probably be this week (TheStreet.com) in light of what happened yesterday and the free lunch frenzy it caused among the traders who know how to sell short naked.

 

I’m not going to lie; In this economy, with oil going down yet gasoline refusing to budge, the price of food through the roof, the cost of electricity forcing me to cram foods into my toaster oven instead of firing up my electric stove, and clothing being so expensive I’m at least 3 seasons behind (if not many more), I’d naked short sell a few of the stocks I own if I knew how to.  But just a few, not all day and not to the point I felt sick with guilt.  I wonder if anyone feels guilty.  Doubt it. 

 

I bought long into Merrill Lynch (MER) today, and added to my positions of Citigroup (C) and Washington Mutual (WM).  Washington Mutual is a real gamble, but MER should be one stock I won’t have to worry about. 

 

The Dow crossed from red to green and back again 15 times today and really rallied in the last two hours of trading to close up 141 points to $11,059.  My stocks that gained today included C, MBI, MER, MTG, RDN, RF, and WM, but it wasn’t enough to have me end the day in the green, and in fact, I’m now overall up just $2.08.  But I’m keeping the faith that regulations will come this week and we’ll look back on this time as another bottom. 

 

When the top stories are no longer about the banks, people are going to start asking questions about the price of gasoline.  Crude oil slipped another $4.56 today to close at $91.15, so why is gas still over $3.50 a gallon?  I smell “pissed off” coming. 

 

In late-breaking news tonight, Barclays announced it put a bid in to buy Lehman Brothers for $2 billion, and the government decided to loan AIG $85 billion. 

 

Also in tonight’s late-breaking news, an SEC spokesman told Reuters that “The American Bankers Association said many of its members have seen precipitous declines in their stock, high trading volumes and huge spikes in so-called failures to deliver [due to naked short sellers], leading them to conclude that their stock is being manipulated.  The U.S. Securities and Exchange Commission expects to issue new rules against abusive short selling within 24 hours.” 

 

Within 24 hours.  This is great news. 

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