Now I hardly ever write about just one stock because I usually don't get caught up in one story. For instance if you ask me what's on my Wall Street playlist I could list a number of chart bangers like long ESIO, short BIG, long RSYS, long STV, long CLCT, long PBR, long BNI, long CSX, long FDX and a host of other names in a few minutes.
But I wanted to take some time out to comment on Lehman (LEH). Lehman is in a very tough position as it stock keeps plummeting to all time lows (down roughly 95%). They have well respected business lines like the investment banking and money management divisions. However, the trouble lies in their real estate and mortgage portfolio where they are unearthing a large portfolio of risky investments.
Now let's fast forward to my interest in LEH. I am attempting to make a calculated bet here knowing all the pieces that have fallen into place in the last year. Bear Stearns, Fannie, Freddie, and numerous banks allow me to come to my own ODD conclusions of how this may play out. Well I do know a little about the financial industry and Bear Stearns, Fannie and Freddie were all to important for someone to just sit around and let go under. But the problem is that Wall Street and our government preach FREE MARKET CAPITALISM and this doctrine is supposed to allow the market of investors to decide the fates of these firms without interferences. Now here comes the glitch, the markets spoke and nearly drove all these firms to a state of BANKRUPTCY!!! So our government went against the FREE MARKET PRINCIPLE and stepped in and negotiated the Bear Stearns deals which lead to JP Morgan Chase buying that company out at a ridiculous price and more importantly the government assumed the liability of the risky assets that did Bear Stearns in. Then you have the Freddie and Fannie debacle, which are public companies but they are also government sponsored entities. If this doesn't make any damn sense to you either then raise your hand. Freddie and Fannie are owned by stockholders and when the stock began free falling the FREE MARKETS were telling us that there was lots of doubt around the financial health of these firms. Once again, going against FREE MARKET PRINCIPLE the government bailed out these firms by basically injecting the firm with loads of cash...and leaving the stockholders left holding an empty bag. Now many argue and I will agree that Fannie and Freddie couldn't be allowed to fail because they are too vital to our economy...backing roughly 1/2 of the country mortgage investments. I agree with these critics but then question why you would ever let a government entity of such importance ever trade PUBLICLY!!!
Knowing this lets move to Lehman. Lehman is just as important as Bear Stearns and signals to our country, economy and the global markets that our financial system is in BIG Trouble. The only problem is after bailout of Bear Stearns, Freddie and Fannie...the government can't afford to use MORE TAXPAYER money to rescue bad investments like it did with the other three firms. This point is very critical because it is what many believe is stopping Lehman from being acquired. Now bring the Federal Government back into the equation...because of the importance of Lehman (and what it means both locally and globally) the WANT a deal done to acquire Lehman. And WHAT THE FED WANTS THE FED GETS.
After analyzing this crazy turn of events I am taking a huge speculative bet and going LONG on Lehman's shares. Yup, I would take a little bit out of the piggy bank and buy Lehman because of the following reasons:
1. The Fed wants a deal done b/c Lehman signals financial disaster
2. The Fed will not use taxpayer money to buy bad Lehman assets (this will not cause the stock to become worthless like Freddie and Fannie)
3. Some parts of Lehman's business are actually worth buying
My shrewd calculations tell me that a deal gets done b/c the Fed says so and the stock with not become worthless b/c the government will not be injecting the cash. Very important b/c this is what left Freddie and Fannie shareholders crying. With some actual value still left in the company like Neuberger Berman, the headquarters it has to have some intrinsic value. My last support of evidence is the Bear Stearns collapse. The deal was initially negotiated by the Federal Government for $2 a share, which was the equivalent of handing a Lamborghini with a tiny scratch to a potential buyer for say $5,000...and the buyer was JP Morgan. Long story short, the government was forced to raise the value of the deal to roughly $10 a share. Now all things being the same...could Lehman go for $10 a share!!! I am willing to make that bet, however the only thing I struggle discounting is that RISKY BAD DEBT that the government won't buy...what's going to happen to it and who's left holding that worthless piece of investment (note: its looks like the Fed is strong-arming all major investment banking firms to pitch in and buy the bad debt). All that being said it I think an acquisition gets done, it may not be $10 but it should be higher than $4...right?!?
Showing posts with label Freddie Mac. Show all posts
Showing posts with label Freddie Mac. Show all posts
Saturday, September 13, 2008
Tuesday, September 09, 2008
My Dougie
Said she likes My Dougie, I'm Fresh!
If I just lost you then you need to check out this track by artist Lil Wil...in honor of the legendary Dougie Fresh (http://www.youtube.com/watch?v=TqeGZpHCURo). Down in Dallas, they have given this legend a new life with the younger generation as "My Dougie" is used to describe someone's style...Fresh. I hope the readers here at Urbanomics appreciate our blogging and hopefully you like our Dougie. And the reason why we think our style is fresh is because we hope to bring a difficult subject, INVESTING, and try to explain it to you in a very simple way.
To invest I've learned that you must have a certain style or swagger. The reason I say this is because with so much going on with the markets and in the news, you must remain calm and make informed and logical decisions. As we have written here before, to assist in that process I recommend that you take notes of things that you read and hear. Then perform additional research to assist you in deciding what to do. If you were following the news you would have heard about some of the following stories:
Lehman Brothers - One of the largest investment banks is struggling to raise capital as losses from investments continue to pile up.
Apple/Steve Jobs - Apple is unveiling a new iPOD touch, but all that is on the mind of investors is Steve Jobs and whether he is healthy.
Oil - Oil has dropped to levels of roughly 100$, and will OPEC allow it to drop any lower.
Fannie/Freddie - I love Alan Greenspan's (former Federal Reserve chief) comment that these entities were structurally flawed because they socialize losses and privatize gains! This is so true, when they are struggling the government bails them out, but when they were profitting the only people gaining were the private investors owning the stock.
Lastly, I have often talked about price points and how important they are when investing and getting your stock selections at a great price. My Dougie has helped me patiently wait and here are some of the stocks that I liked but I had to wait for great price points.
Electro Scientific (ESIO) - I have been patiently waiting for levels of 13.80s
Big Lots (BIG) - Big Lots has benefitted from the hard times as more people turn to discount retailers. This stock is not a result of my screening, just a informed decision that makes sense. They hit a 52 week high at 34.88 and I think they will decline from those lofty levels. With stimulus checks running out and higher costs hitting most retailers they appear to be a great short opportunity. I believe Walmart, Target and most recently 99 Cents (http://www.cnbc.com/id/26622876) are being affected by this. Big Lots is a great short above levels of 33.50$.
CSX Corp (CSX) & Fedex (FDX) - I have been saying for awhile I like the transportation sectors as oil prices continue to decline. Now I haven't identified a solid price point but this may need to be done as FDX is already raising their guidance which is causing the stock to rise. I am hoping to see the effect of declining oil prices to benefit these sectors.
I'm out, Get your URB on!
If I just lost you then you need to check out this track by artist Lil Wil...in honor of the legendary Dougie Fresh (http://www.youtube.com/watch?v=TqeGZpHCURo). Down in Dallas, they have given this legend a new life with the younger generation as "My Dougie" is used to describe someone's style...Fresh. I hope the readers here at Urbanomics appreciate our blogging and hopefully you like our Dougie. And the reason why we think our style is fresh is because we hope to bring a difficult subject, INVESTING, and try to explain it to you in a very simple way.
To invest I've learned that you must have a certain style or swagger. The reason I say this is because with so much going on with the markets and in the news, you must remain calm and make informed and logical decisions. As we have written here before, to assist in that process I recommend that you take notes of things that you read and hear. Then perform additional research to assist you in deciding what to do. If you were following the news you would have heard about some of the following stories:
Lehman Brothers - One of the largest investment banks is struggling to raise capital as losses from investments continue to pile up.
Apple/Steve Jobs - Apple is unveiling a new iPOD touch, but all that is on the mind of investors is Steve Jobs and whether he is healthy.
Oil - Oil has dropped to levels of roughly 100$, and will OPEC allow it to drop any lower.
Fannie/Freddie - I love Alan Greenspan's (former Federal Reserve chief) comment that these entities were structurally flawed because they socialize losses and privatize gains! This is so true, when they are struggling the government bails them out, but when they were profitting the only people gaining were the private investors owning the stock.
Lastly, I have often talked about price points and how important they are when investing and getting your stock selections at a great price. My Dougie has helped me patiently wait and here are some of the stocks that I liked but I had to wait for great price points.
Electro Scientific (ESIO) - I have been patiently waiting for levels of 13.80s
Big Lots (BIG) - Big Lots has benefitted from the hard times as more people turn to discount retailers. This stock is not a result of my screening, just a informed decision that makes sense. They hit a 52 week high at 34.88 and I think they will decline from those lofty levels. With stimulus checks running out and higher costs hitting most retailers they appear to be a great short opportunity. I believe Walmart, Target and most recently 99 Cents (http://www.cnbc.com/id/26622876) are being affected by this. Big Lots is a great short above levels of 33.50$.
CSX Corp (CSX) & Fedex (FDX) - I have been saying for awhile I like the transportation sectors as oil prices continue to decline. Now I haven't identified a solid price point but this may need to be done as FDX is already raising their guidance which is causing the stock to rise. I am hoping to see the effect of declining oil prices to benefit these sectors.
I'm out, Get your URB on!
Monday, September 08, 2008
A Millie
is one of the hottest tracks out there right now, and for the hip hop impaired Lil Wayne is referencing his deep pockets on his latest album, The Carter 3. Then Jay Z came along and did a freestyle titled A Billie, so you do the math and guess how deep Jay Z's pockets might be. Now take A Billion and multiply it by 200!!! And whose pockets are those?
Yup, 200 Billion represents the estimated total that the could be used to "save" Freddie Mac and Fannie Mae...each possibly receiving 100. And who is responsible for those deep pockets none other than (unknowing) executives like you amd me! The Treasury department made the call this weekend to take over the two entities and bring a little some sense of reassurance that the end of the world is not approaching. And please believe me that as stock prices of these two entities headed for zero, the government could not let let them fail or else the American economy as you know it would have collapsed!
What does this mean...or more importantly what is the market telling you this means. Mr. Market right now is telling you by today's action that it is a solid move because he is hoping that this helps the mortgage rates to go down. If rates drop, consumers may be more likely to actually repay their loans, decrease the future foreclosures, and maybe even people from spur some consumers to think about taking out loans and buying houses. Who does this help, namely your banks and your and a long shot is the homebuilders.
So remember just awhile ago when I mentioned taking cover and waiting the storm out in safe investments like money markets and treasury investments, well now I am telling you to start reallocating your investments. I am leaning to Financials and Large Caps to benefit from this recent news. Why because as you start to calculate various probabilities, many analysts have reduced the likelihood of a catastrophic financial institution failing. Now don't get me wrong there will be banks that continue to fail but less likely it will be a BIG DOG.
Yup, 200 Billion represents the estimated total that the could be used to "save" Freddie Mac and Fannie Mae...each possibly receiving 100. And who is responsible for those deep pockets none other than (unknowing) executives like you amd me! The Treasury department made the call this weekend to take over the two entities and bring a little some sense of reassurance that the end of the world is not approaching. And please believe me that as stock prices of these two entities headed for zero, the government could not let let them fail or else the American economy as you know it would have collapsed!
What does this mean...or more importantly what is the market telling you this means. Mr. Market right now is telling you by today's action that it is a solid move because he is hoping that this helps the mortgage rates to go down. If rates drop, consumers may be more likely to actually repay their loans, decrease the future foreclosures, and maybe even people from spur some consumers to think about taking out loans and buying houses. Who does this help, namely your banks and your and a long shot is the homebuilders.
So remember just awhile ago when I mentioned taking cover and waiting the storm out in safe investments like money markets and treasury investments, well now I am telling you to start reallocating your investments. I am leaning to Financials and Large Caps to benefit from this recent news. Why because as you start to calculate various probabilities, many analysts have reduced the likelihood of a catastrophic financial institution failing. Now don't get me wrong there will be banks that continue to fail but less likely it will be a BIG DOG.
Thursday, August 21, 2008
I Am Investor
Now I am no Will Smith in I Am Legend, but by being one of the few non-believers of the rapid rise of the real estate market I often felt like I stood alone. This was often documented here at Urbanomics and my lone bad investment that reminded me to always stick to my judgement was in New Century Financial. So is being Legend easy, actually yes just pick up the Wall Street Journal. Yesterday's paper confirmed my recent post about INFLATION, which continues its rise and has reached its highest level in 27 years.
Next, we discussed Freddie Mac and Fannie Mae and their sharp decline. Freddie recently auctioned more of its debt as rumors continue to swirl about a possible government bailout. If the government steps in to bail out shares at very low prices current investors could basically be left with nothing.
Oil & Gas has rebounded today and saw gains of roughly 5%. This is largely due to the disruptions between Russia and Georgia. Our position in natural gas pipelines should fare well during these times.
The last point I will discuss is one that I believe will continue to play out in the retail sector. I believe that a number of the retailers benefitted from the economic stimulus plan and many had really good quarters. I have already highlighted retailer, Big Lots, who I think like Wal-Mart benefitted from this factor. Notice that Wal-Mart noted that they see future weakness and Target also see declines. I will closely watch the retailers and look to short players like Big Lots when they rebound and closely reach their 52 week high.
Next, we discussed Freddie Mac and Fannie Mae and their sharp decline. Freddie recently auctioned more of its debt as rumors continue to swirl about a possible government bailout. If the government steps in to bail out shares at very low prices current investors could basically be left with nothing.
Oil & Gas has rebounded today and saw gains of roughly 5%. This is largely due to the disruptions between Russia and Georgia. Our position in natural gas pipelines should fare well during these times.
The last point I will discuss is one that I believe will continue to play out in the retail sector. I believe that a number of the retailers benefitted from the economic stimulus plan and many had really good quarters. I have already highlighted retailer, Big Lots, who I think like Wal-Mart benefitted from this factor. Notice that Wal-Mart noted that they see future weakness and Target also see declines. I will closely watch the retailers and look to short players like Big Lots when they rebound and closely reach their 52 week high.
Tuesday, August 19, 2008
Wall Street Gold Medal
Going for gold might be replaced with the phrase 'Going for Phelps' one of these days. But if you are in the financial markets getting your Michael Phelps on has been difficult because the markets have been more volatile than a crazy ex-girlfriend. If you know where I am going with this she's up one day and then flying off the charts the next day in the other direction. The nice thing is I have been picking good girls lately as stocks and I haven't been whipped around as much as others have. If you followed our post just a month ago, I posted the steps to navigate these choppy markets --> http://urbanomics.blogspot.com/2008/07/navigating-choppy-markets.html.
One again the market has had two sharp day to the downside, however most investors feeling the brunt of that pain are people exposed to the financial sector. After recent articles spooked the investment community, investors have been selling off banks and Fannie and Freddie rather quickly. There have been articles that have highlighted that another big bank may go under due to the ongoing credit crunch. Then Barron's pointed out that there is a likelihood that the government may have to bail out Fannie and Freddie which could leave current stakes invested in the government sponsored agencies worthless. All this proves is that financials suck and will continue to suck for the forseeable future. Why people choose to ignore that fact is beyond me. In your 401K plan or in your IRA, I would stick with less volatile investments at this point like the Treasury Inflation Protection Securities (TIPS). This is still a solid pick because the Producers Price Index (PPI) was recently released and again inflation is steadily rising. And in my brokerage account I see myself steadily moving towards dividend yielding stocks, technology, transportation, and infrastructure plays.
And for a quick discussion on some of the stocks in my actual portfolio and/or in my stock tracker portfolio:
Collectors Universe (CLCT) - Although, you may want to smack this company like many others for spending without a conscious, they have announced a strategy to cut back on expenses now that their gem grading business is gaining traction. I hope that this business continues to take off like I observed after reading the last quarterly report and while we wait enjoy the 14% dividend this stock touts. I know the fear may be that the dividend will be cut due to such a high yield, but as long as the payments are made keep 'collecting' and participate in a dividend re-investment program (DRIP) to obtain more shares at these low prices.
Burlington Northern (BNI) - This transportation company has whethered the storm and continues to hold steady. Transports should benefit from the declining oil prices and stronger pricing power. I ain't selling until Buffet does.
Microsoft (MSFT) - Thank goodness the Yahoo mess is over and the world can move on and realize that MSFT is a world class technology company that continues to sit on an unbearable amount of cash. I would prefer that they start to increase the dividend amount so that I can get paid as I wait for great results from these guys. I would take dividends here and partipate in the DRIP.
Radisys (RSYS) - This stock reported great earnings and analysts raised the expected guidance for the next quarter by a whopping 9c! It holds steady on these tough days and usually outpaces the market on good days. It hit a bit of a rough patch after insiders sold in the last few weeks but the downside should ease and this stock should move higher.
EPD, ETE - This is a play on natural gas and I like the pipeline stocks in the future because there is good dividend insulation which should be re-invested for a great long term gain. The yield is around 7% here and is considered stable.
MOVE - This stock has rebounded from the dungeons of $2 after their earnings announcement and will move higher as real estate eventually rebounds way down the line from now.
China Digital (STV) - STV is like an ex-girlfriend and is more volatile than a Jerry Springer show. I think the international slowdown causes this stock to sag and the drop has been sharp. This stock rebounds when the market is positive and does so rather sharply. I would recommend adding to your positions slowly.
AK Steel (AKS) - I believe is still a solid company but get out of the way of the commodities. Its like trying to catch a falling knife and thats not too smart.
EWJ - Great play on the downturn in the international markets, especially Japan.
OPTR - Don't know a lot about this stock which met my screen. It was up sharply then retreated. I don't own this stock but would look to take profits after another quick run up.
One again the market has had two sharp day to the downside, however most investors feeling the brunt of that pain are people exposed to the financial sector. After recent articles spooked the investment community, investors have been selling off banks and Fannie and Freddie rather quickly. There have been articles that have highlighted that another big bank may go under due to the ongoing credit crunch. Then Barron's pointed out that there is a likelihood that the government may have to bail out Fannie and Freddie which could leave current stakes invested in the government sponsored agencies worthless. All this proves is that financials suck and will continue to suck for the forseeable future. Why people choose to ignore that fact is beyond me. In your 401K plan or in your IRA, I would stick with less volatile investments at this point like the Treasury Inflation Protection Securities (TIPS). This is still a solid pick because the Producers Price Index (PPI) was recently released and again inflation is steadily rising. And in my brokerage account I see myself steadily moving towards dividend yielding stocks, technology, transportation, and infrastructure plays.
And for a quick discussion on some of the stocks in my actual portfolio and/or in my stock tracker portfolio:
Collectors Universe (CLCT) - Although, you may want to smack this company like many others for spending without a conscious, they have announced a strategy to cut back on expenses now that their gem grading business is gaining traction. I hope that this business continues to take off like I observed after reading the last quarterly report and while we wait enjoy the 14% dividend this stock touts. I know the fear may be that the dividend will be cut due to such a high yield, but as long as the payments are made keep 'collecting' and participate in a dividend re-investment program (DRIP) to obtain more shares at these low prices.
Burlington Northern (BNI) - This transportation company has whethered the storm and continues to hold steady. Transports should benefit from the declining oil prices and stronger pricing power. I ain't selling until Buffet does.
Microsoft (MSFT) - Thank goodness the Yahoo mess is over and the world can move on and realize that MSFT is a world class technology company that continues to sit on an unbearable amount of cash. I would prefer that they start to increase the dividend amount so that I can get paid as I wait for great results from these guys. I would take dividends here and partipate in the DRIP.
Radisys (RSYS) - This stock reported great earnings and analysts raised the expected guidance for the next quarter by a whopping 9c! It holds steady on these tough days and usually outpaces the market on good days. It hit a bit of a rough patch after insiders sold in the last few weeks but the downside should ease and this stock should move higher.
EPD, ETE - This is a play on natural gas and I like the pipeline stocks in the future because there is good dividend insulation which should be re-invested for a great long term gain. The yield is around 7% here and is considered stable.
MOVE - This stock has rebounded from the dungeons of $2 after their earnings announcement and will move higher as real estate eventually rebounds way down the line from now.
China Digital (STV) - STV is like an ex-girlfriend and is more volatile than a Jerry Springer show. I think the international slowdown causes this stock to sag and the drop has been sharp. This stock rebounds when the market is positive and does so rather sharply. I would recommend adding to your positions slowly.
AK Steel (AKS) - I believe is still a solid company but get out of the way of the commodities. Its like trying to catch a falling knife and thats not too smart.
EWJ - Great play on the downturn in the international markets, especially Japan.
OPTR - Don't know a lot about this stock which met my screen. It was up sharply then retreated. I don't own this stock but would look to take profits after another quick run up.
Friday, July 11, 2008
Fact or Fiction
Freddie Mac and Fannie Mae were off roughly 45% this week.
- FACT: These are Government Sponsored Entities (GSE) that engage in mortgage purchasing and providing funds to mortgage lenders, respectively. Their stocks prices have tanked this week from fear of going bankruptcy. However pay close attention because many on Wall Street believe that some type of government bailout will be necessary to save these firms.
Inflation on the rise.
- FACT: Inflation or at least the fears that your dollar is stretching thinner and thinner continues to rise. Normally during times of inflationary concern, investors would flock towards a Fannie Mae, Freddie Mac or government bonds but that is not happening. Should you be concerned, YES, because you must follow the money and Wall Street is telling you to be concerned because the price of GOLD is rising, OIL has pushed through record prices, and ohhh I forgot the housing and auto industries are collapsing. Don't believe me, see the lastest story about Indymac, which became the largest US bank in history to be seized by the government.
You should feel good about the market, and keep holding on to your stocks.
- FICTION: Sorry folks for the first time ever my outlook is very dismal from here. If you are a gunslinger, then please at least hedge your portfolio against further downside risk. For the rest of us, continue to sell most of your winners, cut your ties with losers, and get defensive!!!
Your defensive plays are:
OIL : Problems in Iraq and Israel & Iran, disruptions in Nigeria and Russia ALL mean oil will continue to rise. I don't believe speculators play a big role in the price and I don't think the potential of domestic drilling will impact the short term price.
GOLD: Gold is on the rise and so are future prices, which means that investor faith in the dollar continues to decline.
CASH: Cash is always KING and have cash in your portfolio ain't always a bad thing. Wait out this storm, because it could be awhile.
- FACT: These are Government Sponsored Entities (GSE) that engage in mortgage purchasing and providing funds to mortgage lenders, respectively. Their stocks prices have tanked this week from fear of going bankruptcy. However pay close attention because many on Wall Street believe that some type of government bailout will be necessary to save these firms.
Inflation on the rise.
- FACT: Inflation or at least the fears that your dollar is stretching thinner and thinner continues to rise. Normally during times of inflationary concern, investors would flock towards a Fannie Mae, Freddie Mac or government bonds but that is not happening. Should you be concerned, YES, because you must follow the money and Wall Street is telling you to be concerned because the price of GOLD is rising, OIL has pushed through record prices, and ohhh I forgot the housing and auto industries are collapsing. Don't believe me, see the lastest story about Indymac, which became the largest US bank in history to be seized by the government.
You should feel good about the market, and keep holding on to your stocks.
- FICTION: Sorry folks for the first time ever my outlook is very dismal from here. If you are a gunslinger, then please at least hedge your portfolio against further downside risk. For the rest of us, continue to sell most of your winners, cut your ties with losers, and get defensive!!!
Your defensive plays are:
OIL : Problems in Iraq and Israel & Iran, disruptions in Nigeria and Russia ALL mean oil will continue to rise. I don't believe speculators play a big role in the price and I don't think the potential of domestic drilling will impact the short term price.
GOLD: Gold is on the rise and so are future prices, which means that investor faith in the dollar continues to decline.
CASH: Cash is always KING and have cash in your portfolio ain't always a bad thing. Wait out this storm, because it could be awhile.
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