Posts tagged Wachovia
October 6, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged Brazil, Citigroup, crude oil, dow closed, Wachovia
Uh, this may be bad. The only thing the bailout seems to have done was magnify the problem, and markets are crashing all around the globe. Brazil’s market shut down twice today because of its percentage drops- 10% the first time and 15% the second.
Citigroup and Wells Fargo declared a litigation truce until 12PM on October 8, however an appeals court overturned the block on the Wells-Wachovia deal.
The Dow closed below $10,000 for the first time since 2004, and some are crying that an entire decade of gains- since the Dow first hit $10,000 on March 19, 1999- have been wiped out. Back in 1999, and even in 2004, we weren’t tied so closely to the world’s markets, so some analysts are saying that there is more liquidity in the market this time around. They may be right. At one point today the Dow was down 800 points, but in the last hour made up over 400 points. For a market to swing that much that fast, there has got to be a lot of liquidity, and it may mean that this time around the market will come back quicker.
Although I could be wrong. Some people are calling $6K as the bottom. Some are even saying $3K and $1,800. $1,800? Well, these are message boarders’ predictions, but the point is that no one knows. It’s impossible to separate the market’s true worth and the emotional impact, and fear is now a thousand times stronger than any other force that normally drives trading. We may see some stability when the bailout plan is actually drawn up and put into place. Come on Paulson.
Crude oil fell $6.07 to close the day at $87.81. I wonder if my landlord factored in falling oil prices when he yelled at me today for asking when he’ll turn on the heat. Thanks for the cold and the cold, Peter. If I end up in the hospital with the pneumonia, don’t expect next month’s check.
October 5, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged C, Citibank, Citigroup, Wachovia, WB, Wells Fargo, WFC
I don’t know when these bankers have gotten a chance to sleep in the last month; news hits 24 hours seven days a week:
“Judge tells Wachovia to negotiate only with Citi”
“Citi: Judge blocks Wachovia-Wells deal”
“Citi gets court order blocking Wells-Wachovia deal”
The list goes on. Arguably, most of these headlines are prefaced with “Citi says”, so unless Citigroup (C) is making all this up, more sh!t’s to hit the fan tomorrow!
October 4, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged $700 billion, C, Citigroup, dow closed at, F, FDIC, Ford, General Motors, GM, Henry Paulson, House approves bill, Huntington Bancshares, mark-to-market, National City, oil closed at, regional, SEC, Wachovia, WB, Wells Fargo, WFC
“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.
September 29, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged ABK, ambac, C, Citigroup buys Wachovia, dow closed, downgrade, economy, Etrade, Mary Caraccioli, Moody's, Nancy Pelosi, NYSE, opening bell, reverse stock split, September 29, stock market, Sydney Morning Herald, Thornburg Mortgage, TMA, Wachovia, WB
Holy Moly, who saw that one coming?! The House of Representatives voted down the bailout 228 to 205, and it’s being blamed on a “too-partisan” speech made by the Democratic speaker of the House Nancy Pelosi. Whether her speech was partisan or not, someone’s head had to roll.
Hindsight is 20/20, and looking back to last night, there was a clear signal the bill wasn’t going to pass: after an initial positive response, the Asian markets began to slide into red. Real money movers always know things ahead of time, and the Asian markets’ slip was a sure signal that our bill was not going to pass. I should have seen it, and maybe subconsciously I did, but it seemed too unbelievable that the bailout would not pass given its enormity and all the long days and weekends Congress had put into it. But as we’ve seen with IndyMac, Fannie and Freddie, and Washington Mutual, nothing is too big to fail.
Lawmakers are headed back to the drawing board to draft up a new version of the plan, but won’t meet again until Wednesday because tomorrow is Rosh Hashanah.
I’m more of an observer now than an active player. I’m in too deep to do anything except wait, so all I can really focus on is the day to day with the stocks I own and the stocks that those stocks are absorbing. Citigroup (C) bought Wachovia (WB) today for $2.2 billion, or $1 per share.
Two funny computer errors happened today: Thornburg Mortgage (TMA) put through a 10:1 reverse stock split this morning, but not before they multiplied the share price by 10. So during today’s premarket, it looked like I had 3K extra in my account! But the quirk was soon fixed and so was the overinflated share price. By close, TMA was down to $1.15, which would have been 11.5 cents on Friday before the reverse split. To buy back the preferred shares, Thornburg needs to raise more capital. You’re welcome, TMA.
Another blip came to Wachovia’s share price today. At one point, it listed on Google finance at $500! Message boarders were going nuts, and that error put the financial sector up 7% and made it look like the only sector in the green. But that error was also soon fixed, and everyone who owns WB fell back into reality.
One last computer oddity happened at the New York Stock Exchange today: because of a glitch, the morning bell never rang. Mary Caraccioli said she’s never seen that happen.
People are still sweating a Moody’s downgrade to Ambac (ABK). I really hope not. Of all problems that could happen, that one tops my concern. Just about a month ago, I was up over 100% on ABK and now I’m in the red. If a Moody’s downgrade comes, it’ll destroy Ambac, especially after today.
The Dow, which opened down over 100 points in seeming anticipation, dropped 777 points today- the greatest one-day decline in its history and even greater than the drop after September 11, 2001- to close the say at $10,365. However to see the glass 1/10 full, this was the 17th worst daily drop percentage-wise, so not quite the worst. Crude oil fell $10.52 to close at $96.36.
The Sydney Morning Herald reported tonight that “online broking portal Etrade ground to a virtual halt this morning [Tuesday September 30] as it struggled to cope with massive trading volumes.” Is this a hint of more blood to come? Damn sure it is!
September 28, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged $250 billion, $700 billion, ABK, ambac, bailout plan, Banco Santander, bankruptcy, Ben Bernanke, Citigroup, CNNMoney, credit crunch, economy, Henry Paulson, Moody's, Nikkei, S&P, SEC, STD, Wachovia, wall street, WB, Wells Fargo
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…
September 27, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged $25 billion, bailout, bankruptcy, C, Chevrolet, Chrysler, Citi, Citigroup, F, FDIC, Ford, General Motors, GM, green, green cars, JP Morgan, Michael Sincere, QMNM, Quest Minerals, Understanding Options, US automakers, Wachovia, WaMu, Washington Mutual, WM
I’d like to send a shout out to Michael Sincere, author of Understanding Options, who actually read my blog and commented on it. Maybe someday, if I ever land an agent and if that agent ever lands a deal, Michael Sincere will write the foreword to this book. I have time. This experiment is going to be a long time in the making.
Slowly, news is leaking out about the failure of Washington Mutual. A Bloomberg article that hit today finally used the word “bankruptcy”, however the failure still isn’t a top story. Is it just me? Am I the only one who thinks that the biggest bank failure in the short history of our country is at least warranted one full day of sensationalism?
“WaMu had its banking unit seized Sept. 25 by government regulators after customers withdrew $16.7 billion over 10 days. JPMorgan Chase & Co. became the biggest U.S. bank by deposits when it bought WaMu’s branches with a $1.9 billion payment to the Federal Deposit Insurance Corp.
The Chapter 11 bankruptcy petition, filed Sept. 26 in U.S. Bankruptcy Court in Delaware, wasn’t immediately available due to Web site maintenance. The Web site was expected to be operating again on Sept. 27 at noon, Eastern time.
JPMorgan, Citigroup Inc., Wells Fargo & Co., Banco Santander SA and Toronto-Dominion Bank had all expressed interest in buying all or parts of WaMu ahead of the JPMorgan purchase.
WaMu was expected to lose as much as $19 billion on bad mortgages during the next 2 1/2 years. Standard & Poor’s cut the bank’s credit rating twice in nine days, to eight levels below investment grade, as chances decreased that any deal wouldn’t be a buyout of the whole company, leaving creditors of the holding company to face substantial losses.”
Maybe it was the web site maintenance that slowed the news down. Baffling.
Citigroup (C) may acquire Wachovia (WB), but it’s now being reported that Citi may first wait for Wachovia to fail, exactly following JP Morgan’s lead on WaMu. I have no stake in Wachovia, thankfully, and maybe in this case, since I do own a few Citi shares, I’m all for this slimy tactic. Buying low and selling high oils the entire market- from multibillion dollar mergers to a college kid buying a few thousand shares of QMNM hoping for a miracle. This is how growth happens. But when that strategy is applied to the heart of the market- the financials- it has to be expected that “buying low” will take on an entirely new appearance. If one bank can wait two days for another bank to fail before buying it, the merger will cost fractions less.
The $25 billion government loan that Ford and Chrysler applied for this summer to transform their outdated factories into green car producers will come a little early. The bill, which states that the automakers would not have to make payments on the loan for five years, passed the Senate today and is now off to President Bush for final approval.
