Posts tagged WM
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.
September 26, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged bailout plan, bank, bank failure, dow, oil, Resolution Trust Corp, S&L crisis, Thornburg Mortgage, TMA, wall street, WaMu, Washington Mutual, WM
WaMu closed the day at 16 cents. Its website says “WaMu Customers, Welcome to JP Morgan Chase”. The fail of Washington Mutual is the largest in history, yet it wasn’t nearly as front-page news as other failures. Something’s strange. But like I said, I haven’t a clue what it all means.
A CNNMoney.com article today put the size of WaMu’s failure into terms more easily understood for all us common folk:
“To put the size of WaMu in context, its assets are equal to about two-thirds of the combined book value assets of all 747 failed thrifts that were sold off by the Resolution Trust Corp. – the former government body that handled the S&L crisis from 1989 through 1995.”
My Dad thinks I should get out now. I can’t. Every bank failure and deal has been made over a weekend, so I’m hoping the bailout plan will come this weekend. However, I do really doubt it will do much to my share prices!
In other news, TMA extended its tender offer- again. Imagine that!
At least it’s the weekend. What a week! I think everyone needs a break. Maybe if everyone gets some rest over the weekend some sanity will return to the market on Monday. The Dow closed up 121 to $11,143. Crude lost $1.12 to close at $106.89.
September 25, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged bailout plan, congress, FDIC, FRE, freddie mac, IDMC, indymac, JP Morgan, tender offering, Thornburg Mortgage, TMA, WaMu, Washington Mutual, WM
This week has totally sucked. Congress is dragging its feet with the bailout plan and Washington Mutual (WM) was seized tonight by the FDIC and sold to JP Morgan. What does that mean for WM shareholders? I haven’t a clue. Message boarders think it means terrible things. This afternoon, WaMu closed the trading day at $1.69, then fell in afterhours trading to 45 cents. What I do know is that, right now, it looks like I made a big mistake on investing in this one.
Thornburg Mortgage has been extending and extending and extending an offer to its preferred shareholders to tender their preferred stock and receive a few shares worth of common stock for each of those shares. Tomorrow is the latest extension’s deadline. If the tender offering goes through, the loss I incurred with WaMu will be erased. If it gets extended again, or does not go through, I will seriously consider pulling out of this whole experiment altogether, paying off my car, and taking a nice trip somewhere.
The fact is, there aren’t enough hours in the day to keep a finger on the economy’s pulse, be in graduate school, and hold down a full-time non-desk job. My head is spinning from the amount of information I’ve missed this week. I have no idea why Freddie Mac (FRE) has been making consistent daily gains of 50%. I have no idea why the OTC IndyMac (IDMC) made a 300% gain today. What are the changes Congress made to the bailout plan? No idea. Is cosine or negative cosine the antiderivative of sine? Not sure. The only thing I do know is, that when push comes to shove, I’d rather be in a classroom of 9th graders for 80 minutes than in a room with slimy bankers for 5 minutes. So all’s not lost.
The Dow gained 196 to close the day at $11,022. Oil made gains today to close at $108.02 per barrel.
Go TMA!
September 18, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged AIG, American International Group, bailout, banks, dow, economy, financials, first marblehead, FMB, naked short selling, rally, RDN, uptick rule, WaMu, Washington Mutual, WM
Since it had become a matter of market confidence, or really a lack thereof, confidence was bolstered today with the Fed’s announcement it would pump $180 billion into the world’s banking system and the implementation of the naked short ban. I read the news of the naked short selling ban wrong; I thought the ban went into place yesterday. So when yesterday’s market was a total sinker, I figured it was too late for the ban to do anything and that my experiment would soon go bust. I was very wrong. The ban actually went into effect TODAY, not yesterday, and it had a definite effect:
Centerline Holding (CHC): Up 3% to $1.72
Syncora Holdings (SCA): Up 13% to $2.25
Thornburg Mortgage (TMA): Up 13% to 34 cents
Merrill Lynch (MER): Up 14% to $22.06
Ambac (ABK): Up 15% to $6.67
Citigroup (C): Up 18% to $16.65
MBIA (MBI): Up 19% to $11.64
PMI Group (PMI): Up 22% to $2.57
National City(NCC): Up 24% to $4.40
Regions Financial (RF): Up 34% to $14.60
Radian Group (RDN): Up 35% to $5.00
Washington Mutual (WM): Up 48% to $2.99
First Marblehead (FMD): Up 67% to $4.75
MGIC Investment (MTG): Up 74% to $9.50
To be fair, most of the gains made today were only enough to erase just Wednesday’s huge losses, and the last week and a half of loss before today’s rally is still “on the books”. And, there will likely be a fair amount of profit-taking tomorrow. But who am I to complain? I made [up] $2,600 today, and most of that came in just the last hour of trading.
Even American International Group (AIG) had a double digit percentage gain today: up 31% to close at $2.69. The Dow closed up 410 points to $11,019. Oil gained 72 cents to close at $97.88. Today was Wall Street’s best day in six years.
September 16, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged $85 billion, AIG, bailout, bankruptcy, banks, Barclays, Christopher Cox, crude oil, economy, Enron, gasoline prices, Goldman Sachs, government bailout, GS, Hank Greenberg, interest rate, investing, Lehman, Lehman Brothers, MER, Merrill Lynch, Morgan Stanley, MS, naked short selling, real estate, SEC, uptick rule, WaMu, Washington Mutual, WM, WorldCom
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.
September 15, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged ABK, AIG, American International Group, BAC, Bank of America, bankruptcy, banks, CHC, fmd, Great Depression, Lehman Brothers, lending window, PMI, RDN, reform, short sellers, TMA, wall street, WaMu, Washington Mututal, WM
Exactly two months from the widely-believed bottom, “the biggest shakeup since the Great Depression” is what it’s being called. Today was the largest 1-day loss to the Dow in seven years. What a total mess. All this time, I’ve been sure no one knew what they were talking about the financials and that the bottom was already hit. Slowly though, I’m coming to ask myself, “what were you thinking??” Analysts had said the worst wasn’t over, but of course I didn’t believe them; I’m stubborn and always have been. Late last night and early this morning, former employees streamed out of Boston’s Lehman building, and all other Lehman locations, with boxes and resumes in hand. After last night’s negotiations failed, it was certain death for their jobs, and their stock, which was at 70 cents by 6:30AM, 45 cents by 7:30AM, and 18 cents at day’s close. In less than 24 hours, the 158 year old mainstay lost 94% of its value. Not only was the bankruptcy of Lehman Brothers the largest bankruptcy in United States history, it dwarfed all other bankruptcies in our country’s history. Along for the hellevator ride from par to the bottomless abyss went all the financials today. Even Merrill Lynch, which was up 30% in premarket trading because of being bought out last night for nearly twice its current value, closed the day up just 0.6% from its sorry close on Friday.
Articles and blog titles that ht today had some pretty colorful titles: “Jaw-dropping day for financial markets”, “A day of reckoning”, “Meltdown in US finance system pummels stock market”, “AIG fights for survival”, “Street’s nasty surprises keep experts guessing”, “Giants fall on judgment day”, “Stocks plummet on financial meltdown”, “It’s a morose Monday for Street’s employees”, “Goodbye to easy money”, and “Broken brothers” were just a sampling. The articles spanned all languages as today hit the entire world like a million tons of bricks.
So many questions arose out of today. What will happen to WaMu? What will happen to the mortgage insurers now that one of the banks they insured has evaporated? What will happen to AIG’s stock value now that the bank plans to head to the lending window? AIG had asked for $40 billion, but word on the street is that they’ll “only” get $20 billion. Following suit of its sibling ratings companies, Standard & Poor cut Washington Mutual’s rating to “junk” today.
Of the stocks I watch, here are today’s nearly unbelievable numbers:
Regions Financial (RF): Down 4% to $11.12
Community Bancorp (CBON): Down 4% to $4.53
Syncora Holdings (SCA): Down 6% to $2.39
Thornburg Mortgage (TMA): Down 7% to 35 cents
Triad Guarantee (TGIC): Down 9% to $2.1549
Financial Select Sector ETF (XLF): Down 9% to $19.15
MBIA (MBI): Down 11% to $11.45
National City (NCC): Down 11% to $4.28
First Marblehead (FMD): Down 14% to $2.67
Centerline Holding (CHC): Down 14% to $2.05
Radian Group (RDN): Down 14% to $3.90
Citigroup (C): Down 15% to $15.24
Ambac (ABK): Down 16% to $6.24
PMI Group (PMI): Down 17% to $2.57
Deerfield Capital (DFR): Down 18% to 60 cents
Bank of America (BAC): Down 21% to $26.55
MGIC Investment (MTG): Down 21% to $5.35
Washington Mutual (WM): Down 26% to $2.00
American International Group (AIG): Down 60% to $4.76
My friend works for AIG. I hope that if he loses his job it’ll be the kick in the pants he needs to get his ass to Hollywood.
The Dow plunged 504 points today to close below $11,000 to $10,917. A few days ago, an analyst on TV said that “it is possible we may see $100 oil within six months”. Within six months, buddy, how about within six days? Crude oil fell to a 7-month low today, losing $5.47 to close at $95.71 a barrel.
This experiment is going to be much longer-term than I previously thought. Luckily I have time to wait. I took another advance on my credit card to possibly take advantage of some of the week’s bargains, and will pay it back on Friday when my paycheck hits.
Later in the day, an article titled “Wall Street Losses Seen Spurring Regulatory Reform” hit CNNMoney.com. Some are calling for another ban on short-sellers. Alan Greenspan, in his interview this weekend, said that short-sellers are necessary to keep prices as a closer reflection of company values. But if Washington Mutual, for example is really trading at [now less than] 17% of its book value (MarketWatch, September 11), how real are the shorties really keeping things?
September 11, 2008
· Filed under business, economy, investing, money, politics, stock market · Tagged BAC, Bank of America, Fitch Ratings, Galveston Texas, Hurricane Ike, LEH, Lehman Brothers, Moody's, WaMu, Washington Mutual, WM
Lehman Brothers (LEH) again dragged down the entire market for the great majority of the day. The stock closed last night’s afterhours at $7.25, and was trading below $5 by today’s 8am premarket. By 8:30, the stock was below $4 and by the opening bell, the stock was already down 38%.
But in the last half hour of today’s trading, Bank of America stepped in to stop the hemorrhage. This large bank, who earlier in the year bought Countrywide, announced a possible purchase of Lehman Brothers. The announcement did little to the common share price of LEH, maybe because no one believed them, and the stock closed down 41% to $4.22. Later in the night, the Federal Reserve announced that they would step in and help Lehman sell itself, and Bank of America started to sound like it was having second thoughts.
The Bank of America announcement seemed to kick Washington Mutual from red to green and the Dow to skyrocket. Both WM and the Dow took a sharp turn north right afterwards. In premarket trading, WM stock had slipped below $2, but turned around in the last half hour of the trading day to close at a 22% gain to $2.83.
After the closing bell, Washington Mutual released an updated third quarter expectations report, which included a focus to build reserves, an unchanged long-term credit outlook, a stable $50 billion of liquidity, and an updated projection of loan losses in the third quarter- from $5.9 billion to $4.5 billion.
But then a few minutes later, Fitch Ratings threw a wrench in the works, as they seem to enjoy doing, and “downgraded” the company. Fitch is the fingernail in the birthday cake. Fitch is the hair in the risotto. A few hours later, Moody’s Investors Service, another ratings company, jumped on the bandwagon and downgraded WaMu too. Who are these people? I’d like to see what their stock would do, if they had any. A MarketWatch article that my friend sent me earlier in the day, before all the stories and ratings hit, stated that Washington Mutual is currently trading at just 17% of its book value, so I’m hanging on. If WM crawls back, I think it will pull my other financial stocks back up with it.
In today’s afterhours, WM broke $3 a share. Sure I’m seeing the glass half empty, but in this bear market, there are only two possible scenarios: go bust or get up. I’m betting on my stocks getting up.
In much graver news than losing money, Hurricane Ike is headed straight to Galveston, Texas. This island was completely wiped out on September 8, 1900 by an unnamed hurricane that killed an estimated 10,000 to 12,000 people, and which made the storm the deadliest natural disaster the Unites States has ever seen. Today, the mayor of Galveston ordered a mandatory evacuation of the island. The National Weather Service stated that staying in Galveston would bring “certain death” as a storm surge of 20 feet is expected to blanket the island and the hurricane is expected to morph into a category 3 by the time it makes landfall tomorrow night.
Despite the impending storm, which some are already predicting to be “catastrophic”, crude oil lost $1.71 to close at $100.87, nearly breaking the $100/barrel psychological barrier. The Dow gained 164 points, all of which were tacked on between 3:30PM and 4PM, and closed the day at $11,433. The dollar hit a year-high; it would now take just $1.39 to get one euro. Thanks to WaMu, I closed the day up $37.
September 10, 2008
· Filed under economy, investing, money, politics, stock market · Tagged Alan Fishman, default, dow closed, LEH, Lehman Brothers, mortgages, oil closed, oil demand, OPEC, Radian Group, RDN, TMA, WaMu, Washington Mututal, WM
OPEC is made up of 11 countries, and in September 2007, the group agreed to produce 28.8 million barrels a day. Because global demand had been so high (except for in the last few months, of course), OPEC needed to bump that production up by 500,000 barrels a day.
Now that global demand is down, OPEC is “cutting” its production by those extra 500,000 barrels a day and re-adhering to the September 2007 quota. But despite this, and the impending hit on Texas by Hurricane Ike, crude oil lost 68 cents a barrel to end the day at $102.58.
My strength has really been tested this week. Often in the sectors, one bad stock in one sector can cause investors to run hard to other sectors. This week that rotten apple has no doubt been Lehman Brothers whose premarket numbers were up over 20% before 8AM, but then fell like a rotten redwood once 8AM, along with the news that the bank lost $3.9 billion in Q3, hit. Over the course of the day, LEH did make up ground and go green, and when it did, other financials followed. But by 3:30PM the optimism was over and LEH took a turn to close down 7% for the day, again, taking other financials with it. Later in the day, the company made a claim that it will spin its commercial real estate, worth $30 billion, into a new company and will sell another $40 billion worth of residential mortgages to the United Kingdom bank Blackrock. Regardless of all these claims, the last thirty minutes of trading were gut wrenchingly painful as I watched the modest gains of some of my riskier stocks slip away.
I have no stake in Lehman Brothers other than the residual effect its bad numbers have on my stocks’ numbers; I just watch the stock out of interest, much like some (not me) are compelled to slow down to rubberneck a car wreck on the other side of the highway. However, I do own Washington Mutual (WM) who is having some serious problems of its own and whose share price fell to a 17-year low today. I read somewhere today that “there is a 90% chance it will default within five years.” By “default” do they mean “go bust”? And if so, who can predict even the next day, let alone the market five years out? I’m hoping that it was artificial panic, but WM fell by a very real 30% today. Someone on the Google message boards claimed to have purposefully driven by a local branch to make sure a run wasn’t happening. It wasn’t. People were still going in at a leisurely pace to make deposits. That made me feel [only very, very slightly] better since there are no WaMus around here for me to drive by, and I had been wondering. A friend of mine says that Washington Mutual’s new CEO Alan Fishman is “a genius and had a stellar record with Sovereign Bank”. He doesn’t see WM failing. I’m going to take his word for it because my friend is smart himself and what other option do I have? Sell at a loss? Cry in my hands? I don’t think so! Go big or go bust! Oh please go big, not bust!
This week has been painful, but out of optimism, I have to say today was less painful than yesterday, and hopefully tomorrow will be positive, or at least even less painful than today. And amidst it all, Radian Group (RDN) and Thornburg Mortgage (TMA) made double digit percentage gains today, so there is still some light in the sector. The bailout of Freddie and Fannie was a game changer, and arguably a very unfair one, but soon again it will be about balance sheets and not terror.
The Dow moved sideways today and closed up 38 points to $11,268.
September 9, 2008
· Filed under economy, investing, money, politics, stock market · Tagged ABK, ArthurDental, BAC, C, dow, Fannie Mae, FMH, freddie mac, investing, LEH, Lehman Brothers, MA, oil, OPEC, PMI, RDN, reuters, September 9 2008, STI, TGIC, TMA, trading, Visa, Washington Mutual, WM
My God, what have I done? All across the country, investors in all sectors and companies must be asking themselves the same thing. I know my friends are. After yesterday’s huge [emotional] rally in all sectors but one (energy), today seemed completely irrational. Everything fell. This was more than profit-taking. All of yesterday’s gains, 280 points, were shaved off the Dow as the index slipped all day to close down to $11,230, as investors in the financials asked themselves one extra question: “will any financial survive?”
Lehman Brothers (LEH), Washington Mutual (WM), Radian Group (RDN), PMI Group (PMI), Ambac Financial (ABK), First Marblehead (FMH), MBIA, Inc. (MBI), MGIC Investment (MTG), Triad Guarantee (TGIC), and Thornburg Mortgage (TMA) are just some of the financial institutions that had double-digit percentage losses today, and those are just the ones with losses greater than 10%. Citigroup (C), Bank of America (BAC), JP Morgan (JPM), SunTrust (STI), American Express (AXP), and even Visa (V) and MasterCard (MA) lost today. Lehman Brothers (LEH) is reporting their third quarter earnings tomorrow- a week early- after their Korea Development Bank deal fell through and its stock price lost 45% of its value today. LEH stock did bump up 7% in afterhours trading, so maybe there’s good news on the horizon. But no doubt, this bad news cast even more doubt into the financial sector today and helped push share values down. Today was very, very painful. Luckily I was so busy at work, with teaching, duties, and meetings, that I had no time to sit down and digest what was happening.
But my friends did. One of my stock friends, who has made a small fortune day-trading these financials, sent me an article that eased my mind a bit. It definitely crossed my mind a few times in the last couple days that my experiment may not work out after all, but the article he sent gave me some hope. It was titled “S&P Picks and Pans: Wells Fargo, Washington Mutual, TW Telecom, JC Penney, Avery Denison”, and was an article in BusinessWeek online. After all the upgrades and downgrades and rating cuts by people with questionable credentials and too much power, it was nice to read an article from a reputable source deeming one of my stocks, WM, a “hold”. If Washington Mutual is a hold and its going through some actual concrete, documented troubles, then my thinking (and hope) is that yesterday and today’s major sell-offs were out of pure fear. But I still hope the sell-off doesn’t continue!
A Reuters article from yesterday titled “Ambac’s planned muni insurer may be hit by changes” shed some light on what the common sentiment towards the mortgage and bond insurers might be. “In another even more fundamental change, agencies are mulling a shift in how they rate muni debt, using the same scale used for corporate debt. That would result in widespread rating upgrades for municipal bonds, which have a much smaller risk of default than corporate bonds. Higher ratings would in turn reduce the need for insurance.” If there’s less risk of default, then there’s less need for insurance.
One last article I’ll quote, this one from MarketWatch.com titled “Community building ire MarketWatch readers kindle own outrage over Fannie, Freddie takeover” quoted ArthurDental, who is a member of the MarketWatch Community. “”Everyone gets upset about financial aid to the poor,” ArthurDental wrote, “but where’s the outrage when taxpayers foot the bill because some ‘investments’ went sour? So stockholders would be largely wiped out; why then aren’t bondholders made to pay for their mistakes, too?”
It’s telling that this article didn’t hit yesterday when the market soared, but ArthurDental is right. When SSBX failed, I lost my investment. But when Freddie and Fannie exposed themselves to trillions of dollars in bad mortgages and therefore didn’t have the capital to pay the bonds it issued to China, the two lending giants got a slap on the wrist and trillions of our taxpayer dollars. Hey, I made a mistake investing in a company run by a McCain, where’s my money? It ain’t coming and I have to deal. And that’s the way it should be.
That Hurricane Ike took a turn south, and the Organization of the Petroleum Exporting Countries (OPEC) will likely maintain its oil production even though demand is down, caused the price of crude oil to fall to a 5-month low. Crude oil lost $3.08 to close the day at $103.26 a barrel. I lost $1700 today, or in my brother’s terminology, “seventeen hundo”. Ouch.
So what is going to happen now that the rules of the game have completely changed? I don’t dare speculate. But whatever it is that eventually happens seems as if it won’t make itself known for a while. For now, I’ll keep the faith. I took a gamble and put in a limit order for 25 more shares of WM today, and you can imagine my surprise when I signed on later, saw the stock price was at $3.30, and that my order executed at $3.60. When I put the order in, I assumed it was so low that it would expire unexecuted.
And more than anything, tomorrow’s a new day when anything can happen.
September 8, 2008
· Filed under money, politics, stock market · Tagged Alan Fishman, Andrew McCain, dollar, dollar value, dow closed, financials, Fitch Ratings, freddie mac, Friedman Billings Ramsey, Hurricane Ike, investing, John McCain's son, Kerry Killinger, money, oil closed, Radian Group, RDN, SCA, September 8 2008, Silver State Bancorp, SSBX, Steve Stelmach, stocks, Syncora, trading, Washington Mutual, WM
“Never count your chickens before they’ve hatched” goes the saying, but I didn’t follow this advice. This morning during the premarket, I busted out my calculator to crunch just how much I was set to make based on the premarket numbers, and it was a lot. So you can imagine my surprise when I signed back into Etrade at 11AM to see most of my stocks in the red and Freddie trading at $1 (which actually was better than I expected). Indeed, the financials all opened up big- real big- and I’m sure today’s blip will be seen for years to come. But then things happened. I’m still not sure exactly what, but maybe it was a composite of a bunch of things:
Washington Mutual (WM) gave their CEO Kerry Killinger the boot, instated veteran Alan Fishman, and was told by the Office of Thrift Supervision to provide “an updated, multi-year business plan and forecast for its earnings, asset quality, capital and business segment performance” (SmartMoney.com). Sure sounds like micromanagement to me. WM closed the day down 5.62% after being down 20% during some of the session.
Syncora’s (SCA) rating was withdrawn by Fitch Ratings, who had just in August changed SCA’s rating from “evolving” to “positive”. Who are these Fitch Ratings people anyway, and why does their word mean so much? SCA closed the day down 4% after being down by double digit percentages various times during today’s session.
Radian Group (RDN) opened the day at $5.50, which was up from Friday’s close of $4.79, steadily fell throughout the day like its siblings, then fell off in the last few minutes of trading to close the day down 17%. Google message boarders think someone knows something, although no news has yet hit.
Silver State Bancorp (SSBX), driven into the ground by John McCain’s son Andrew McCain, failed on Friday, making US bank casualty number eleven. I held just 125 shares of them, worth just over $100, so the hit wasn’t so hard. But that with Freddie had me reeling. I contemplated selling WM and SCA, or buying more WM, or buying Deerfield Capital (DFR), or not buying them, or waiting it out, or putting a 60-day limit order in, but in the end I did nothing. I sold SSBX at market for a gain less than the commission and held on to FRE. I decided that once the smoke clears, which stock is which and where each is going will become much clearer. But I sure do wish those pre- and early-market numbers held! And most of all, I hope today isn’t a sign that the US banking industry is going the way of Wal-Mart (who coincidentally closed the day up 2%), and headed to put all the little guys out of business. One analyst, Steve Stelmach of Friedman, Billings, Ramsey & Co. said that “mortgage insurance could become an obsolete form of credit enhancement” in the long-term because of the bailout. He was loosely referring to the drop in RDN’s share price and how the company, and ones like it, could be phased out.
The Dow ironically traced a smiley face, opening way up, dipping a bit, then closing the day up 289 to $11,510. Because of Hurricane Ike barreling towards the Gulf of Mexico, oil closed the day up as well, but just by 11 cents to $106.34. The dollar is at its highest value in nearly a year! It would now take just $1.41 to get one euro. Including the hit from SSBX, I closed the day down $323, $211 of which was from FRE.
You win some, you lose some; I just wish I had won today. The market rallied and I was left in its dust. With any luck, much of today’s activity in the financial sector was just profit-taking and the days to come will reveal the real reaction to this past weekend’s news. Next time I won’t count my chickens before they’ve hatched and started laying eggs of their own!
