TheStreet.com's Jim Cramer says it'll be a huge, bizarre investment that sticks -- not a bid for Wachovia.
Why is there so much chatter about Wachovia (NYSE: WB) (Cramer's Take) getting a bid? Why do people think that its deposit base is worth the heartache of dealing with its mortgage portfolio?
We have all heard the chatter about a potential bid for Wachovia, and it sure would be sweet, because the stock has been one of the worst of the group. It doesn't have a CEO, so that fits the scenario of a company that could be for sale. The franchise was always a solid one until now. And I will admit that the secret to the bulls' case for a better second half is a bid for Wachovia, a premium bid that takes everyone's breath away and causes a short panic.
My problem is that if you wanted to buy Wachovia, why not wait? What's the hurry? Is it that you might miss a chance at a bottom? Is there someone else out there who might want it? Do you perceive a bidding war, for instance, between JPMorgan (NYSE: JPM) (Cramer's Take) and Wells Fargo (NYSE: WFC) (Cramer's Take) for WB? How about USB (NYSE: USB) (Cramer's Take)?
According to people familiar with the discussions, the Wall Street Journal reported that Microsoft Corporation (NASDAQ: MSFT) has held discussions with Time Warner Inc (NYSE: TWX) and News Corporation (NYSE: NWS), among others, about joining it in a deal that could lead to the breakup of Yahoo! Inc (NASDAQ: YHOO). Some of the sources said the preliminary talks are unlikely to result in a deal with Yahoo!
Johnson & Johnson (NYSE: JNJ) is reportedly in exclusive talks to sell its wound-care business Ethicon to the private-equity arm of JP Morgan Chase & Co (NYSE: JPM), according to the Wall Street Journal. Terms of the potential deal were not disclosed.
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Sources familiar with the inquiry said that the Justice Department has opened a formal antitrust investigation into a deal that would allow Google Inc (NASDAQ: GOOG) to provide some search advertising for Yahoo!. The Washington Post reported that investigators will demand documents from Google and Yahoo!, as well as other large companies in the media and Internet industries.
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Reuters reported that regulators in the European Union are looking at the long-term effects of BHP Billiton Limited's (NYSE: BHP) $170B bid for Rio Tinto Group (NYSE: RTP). Sources familiar with the EU questionnaire said regulators have asked competitors and customers about effects of the deal on their businesses through 2015.
Anheuser-Busch Companies Inc (NYSE: BUD) is going to turn down InBev's unsolicited $46.35B takeover offer and that may come before week's end, the Wall Street Journal reported. InBev is then expected to pursue a hostile takeover and Anheuser will say the offer undervalues the company. Instead, Anheuser will attempt to boost its share price by selling non-core assets such as its theme parks.
The Wall Street Journal also reported that Belgian-Dutch financial firm Fortis NL (OTC: FORSY), in a move to increase its solvency, will attempt to raise $12.54B, and will also cancel its interim dividend and sell some assets.
The Financial Times reported that the London Stock Exchange, in a joint venture with Lehman Brothers Holdings Inc (NYSE: LEH), unveiled a pan-European equities trading platform to fight rivals that are hurting its market share.
Don't know where the market is headed? Some people think a full blown crash is possible; some believe this is a good time to buy while others just don't know what to believe. Well, I just don't care and neither should you.
Because if you're like me, you've learned to take everything one high percentage profit trade at a time, whether you're betting on higher or lower prices. That's right, I'm talking about easy individual market inefficiencies like THIS.
As for the markets a whole, it's the same pathetic guessing game it'll always be, filled with plenty of "gurus" with polished-sounding theories where only a few truly brilliant hedge fund managers guess correctly with the rest of us just trying not to pull a Bill Miller (look foolish).
TheStreet.com's Jim Cramer says the acquired Bear Stearns portfolio is worth even less than he thought.
How bad was that Bear Stearns portfolio? I am beginning to believe that JPMorgan's (NYSE: JPM) (Cramer's Take) buy of Bear is looking like a big mistake. It can only be justified by what might have been an even bigger problem for JPM -- the collapse of the trades that Bear made, which were being processed by JPM's clearing.
We are now beginning to get a real sense of the worthlessness of the mortgage portfolios. Not that we got any help from the SEC, which has taken a "we don't care what's in the mortgages as long as you tell us you have mortgages" attitude. That's been worthless for investors, and maybe even for JPMorgan.
The losses now exceed $400 billion, according to my modeling (if you simply assumed that 50% of the exotic mortgages that were issued from 2005 to 2007 eventually went into default). That's amazing, but it looks like I dramatically underestimated the losses. UNDERESTIMATED!
The most egregious issuers of these exotic mortgages were Bear, Merrill Lynch (NYSE: MER) (Cramer's Take) and Lehman Brothers (NYSE: LEH) (Cramer's Take). I believe that JPM has taken in a huge number of uninsurable, non-hedgeable mortgage instruments that are a pure write-off. And that means they are probably underwater on everything they took in.
Long Island, NY's Astoria Financial Corp (NYSE: AF) has found a novel way to reduce the number of its nonperforming loans by changing its internal policy on when mortgages are classified on its books as troubled, the Wall Street Journal reported. By counting home loans as non performing when the borrower misses at least three payments, not two, Astoria reduced its non-performers to $69M from $106M in three months.
The Wall Street Journal also reported that the indictments of Matthew Tannin and Ralph Cioffi, two former Bear Stearns hedge-fund managers, are expected to cite a personal e-mail suggesting the funds were "toast," four days before they told investors they had little to worry about. JP Morgan Chase & Co (NYSE: JPM) has said it will cover the legal costs of the fund managers.
Hewlett-Packard Company (NYSE: HPQ) is set to reorganize its printer unit. The Wall Street Journal said that the unit's five business units will be cut down to three to become more efficient at adapting to a marketplace in which consumers are relying less on printing.
According to people close to the situation, the Financial Times reported that Anheuser-Busch Companies Inc's (NYSE: BUD) board of directors is planning to meet this week to discuss the $46B bid from rival brewer InBev.
JPMorgan Chase (NYSE: JPM) shares are falling today after competitor Morgan Stanley (NYSE: MS) reported its second-quarter profit sunk 61 percent to $1.01 billion, or 95 cents per share, after paying preferred dividends. MS beat analysts' estimates of a 92 cent per-share profit, but only after raising $1.4 billion through asset sales, which could be a bad sign for the financial sector and JPM. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on JPM.
After hitting a one-year high of $50.99 last June, the stock hit a one-year low of $36.01 in March. This morning, JPM opened at $38.53. So far today the stock has hit a low of $37.93 and a high of $38.70. As of 11:45, JPM is trading at $38.80, down $0.24. The chart for JPM looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
For a bearish hedged play on this stock, I would consider a September bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 three months as long as JPM is below $50 at September expiration. JPM would have to rise by more than 30% before we would start to lose money. Learn more about this type of trade here.
TheStreet.com's Jim Cramer says these stocks rise because they're doubly blessed. Integrateds fall because they aren't.
So many people have been puzzled why the major integrateds have not moved with the last $30 rally in oil's spot price. The answer?
They can't take advantage of it.
They either didn't believe, and therefore didn't drill, or they have been so in the crosshairs of sovereign lunacy that they haven't been able to. They didn't have the rigs or they judged that the rigs were so expensive that, like 1980, they would look like dopes when oil came back to $40-$50, where many thought it would. (Go back and check even last year's research for price targets, most of which were from the oil companies' themselves.)
Or maybe it didn't matter anyway. So many of the contracts these companies have signed with governments around the world are either being abrogated or just outright confiscated that you have to ask yourself "Who can invest under those scenarios?" Exxon (NYSE: XOM) (Cramer's Take) in Venezuela. Shell (NYSE: RDS.A) (Cramer's Take) and now BP (NYSE: BP) (Cramer's Take) in Russia. You can't continually invest billions and then write it off because the contracts you wrote don't mean anything.
Futures reversed course and are now lower as investors still await Lehman's results.
Deutsche Telekom AG (NYSE: DT)'s T-Mobile will sell Apple Inc (NASDAQ: AAPL)'s 3G iPhone for as little as 1 euro ($1.54) for the 8-gigabyte version together with a 69 euro monthly contract, it said on Monday. Under the new agreements where carriers don't have to share call revenue with Apple, iPhones sales might increase as carriers would subsidise them. It's interesting to note that some carriers have said iPhone users consume 30 times as much data as users of other Internet-enabled phones.
The New York Times reported that Kirk Kerkorian will meet with top executives of Ford Motor Co. (NYSE: F) next week to show support for management and the automaker's turnaround plan. This is after, of course, Kerkorian's Tracinda Corp completed a tender offer on Friday to acquire 20 million shares of Ford for $170 million.
Shares of General Electric (NYSE: GE), already under pressure lately, are down 1.3% in premarket trading after J.P. Morgan Securities downgraded the industrial conglomerate to Neutral from Overweight and cut its 2009 earnings forecast from $2.40 to $2.30 saying GE has more earnings risk and lack of visibility.
The Wall Street Journal reported that executives from Ford Motor Company (NYSE: F) informed plant managers and union representatives that they intend to reduce overtime and that additional buyouts of union workers were necessary to cut costs.
The Wall Street Journal also reported that federal prosecutors are preparing to file criminal charges against Ralph Cioffi and Matthew Tannin, two hedge fund managers at Bear Stearns, now part of JP Morgan Chase & Co (NYSE: JPM), with securities fraud.
Investors who helped U.S. financial companies raise capital are currently losing nearly $10B on paper, according to an analysis by the Financial Times.
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Fortune reported that the materials used to build Apple Inc's (NASDAQ: AAPL) new 3G iPhone could cost as little as $100, while the components of the old iPhone cost $170, according to analysis by Portelligent, an Austin, Texas-based teardown specialist.
Steve Jobs appeared to be extremely thin during the unveiling of Apple's new iPhone last Monday, causing speculation by observers. Fortune speculated that Jobs' weight loss over the years is being caused by a complex operation he underwent in 2004, in order to treat a rare type of pancreatic cancer.
TheStreet.com's Jim Cramer says that rather than merging, these banks will have to raise money through dilutive offerings.
The big difference between 1990s bank implosion and this one is that nobody at other banks sees any value in owning the ones that are faltering.
Key (NYSE: KEY) (Cramer's Take) is the latest example. Key's everywhere, it is grandfathered to be in every state. You would think there was some bank out there that would want it. Nope. No one. So they have to do this down round that destroys the common. Nobody wants Sovereign (NYSE: SOV) (Cramer's Take) either. Or Nat City (NYSE: NCC) (Cramer's Take). Or Washington Mutual (NYSE: WM) (Cramer's Take). The latter's really interesting now that Hudson City (NYSE: HCBK) (Cramer's Take) has passed it in market size because it says that all of those branches and all of that deposit base just doesn't mean anything. Or worse, the losses are so bad that unless the Fed takes the losses and puts them on its balance sheet, there can be no consolidation.
Yet consolidation is the only way to go. Now, we are much more laissez-faire then we were in 1990. The administration then felt engaged to move quickly to set up mergers instead of the charade of down rounds. I call them charades because none of them yet has produced a return for anyone who has put the money up.
It's a mouthful: non-destructive testing (NDT). Yet, it's a big market – and it is growing fast. Basically, NDT helps assure the structural integrity of critical infrastructure.
A top NDT operator is Mistras Group. This week, the company filed to go public.
Mistras has a strong team of scientists, engineers and technicians. There is also a suite of sophisticated software solutions.
For the first time Monday I heard John McCain comparing Barack Obama to Jimmy Carter. I had heard this before in other arenas, but not from McCain. I guess that despite these two presidential candidates pledging to the American people to bring change and resist politics as usual, they are both, as usual as one could get.
Obama is being shaped by the pressures of running for office and to believe otherwise is delusional. I suppose one has to have hope but the effects of the campaign are becoming clear. Obama has been painting McCain as an extension of Bush, which is nonsense, and now in a typical tit-for-tat response, McCain is filling the air with Carter references.
Both McCain and Obama are wrong in their assessments of their opponents and they are becoming commoners to resort to the bottom of the barrel campaign techniques used in every campaign for most of our nation's proud history. Obama gave up the high ground too easily and McCain has decided he can sling mud with the best of them.
TheStreet.com's Jim Cramer says constant vacillations and inconsistent messages have conspired to extend this crisis.
There was a reason to go ballistic. The financial system was falling apart because of bad loans that have since been magnified by huge leverage and dubious dividends.
And here we are, more than a year into the crisis, and the Federal Reserve and Treasury still refuse to admit the obvious, despite hideous data every day -- yesterday Lehman (NYSE: LEH) (Cramer's Take) and Washington Mutual (NYSE: WM) (Cramer's Take), today UBS (NYSE: UBS) (Cramer's Take) -- that something has to give. We are either going to be worried about a housing recession or worried about inflation. We cannot be worried about both. Because of this half-in/half-out viewpoint, we have continually failed to address either problem.
Last year was the year to cut and cut big to get refinancings done and allow banks to build capital by playing the yield curve, a la 1990. They blew that. They were worried about inflation. This year you either have to take a severe recession and just crush American business so it uses less energy and crush the American homeowner so he can't pay and then merge all of the banks, or you say we are going to solve the recession/housing conundrum first and address the inflation we can address: ethanol-based food inflation. You cannot do both! You have to take them sequentially.
TheStreet.com's Jim Cramer says that with this bank going back to the well, there are too many questions to risk buying in this space.
Why doesn't Lehman (NYSE: LEH) (Cramer's Take) raise $15 billion? Or $20 billion. How about $30 billion?
Would it then not have to come back to the market? Maybe for $40 billion we could lose what has become a cancer on the market.
The question we all must ask this morning is how bad are the portfolios that these firms are stuck with, and how bad is every attempt to undo them? Where did they come from? Who put them into these bonds? Which clients dumped them on Lehman? Who allowed this? Have they been fired? Why did the firm exude any confidence? Why did it hold on to this stuff for so long? How undercapitalized was it really?
All of these things spring to mind because the previous capital raise, the preferred raise, clearly meant nothing. No more than the raises that Merrill (NYSE: MER) (Cramer's Take) has done and will no doubt have to do more of.
It's the denials that get me. Or the "soft denials," the ones that tell us, "Look, things are fine." Because that's all quicksand.
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It's a mouthful: non-destructive testing (NDT). Yet, it's a big market – and it is growing fast. Basically, NDT helps assure the structural integrity of critical infrastructure. 
For the first time Monday I heard John McCain comparing Barack Obama to Jimmy Carter. I had heard this before in other arenas, but not from McCain. I guess that despite these two presidential candidates pledging to the American people to bring change and resist politics as usual, they are both, as usual as one could get.
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