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  • BAC: New Signs Of Life? [View article]

    Totally agree, if a TBTF bank has to dissolve, they would not be alone given the derivative exposure they all have to each other. Also, hard to imagine one bank assuming assets from another bank without help from the government for the liabilities that caused the reason for dissolving the problem bank.

    This is another political move by the government to quell any residual anger over the so called bailout of the big banks (remember banks that did not request help were forced to take TARP funds anyway).

    Finally, I think it was also done to see how this procedure could proceed if needed and if it is all possible. Bottomline, the government really doesn't know how to implement this (short of nationalization of banks) and is demanding from the senior management of the TBTF banks to see how they view a disaster scenario.
    Jul 13, 2012. 10:16 AM | 1 Like Like |Link to Comment
  • The Consequences Of Prospect Capital's Secondary Offering [View article]
    The deep discount on the offering is where the demand was from institutional buyers (Barclays did the deal not a large wire house like Merrill or Morgan Smith Barney with bigger retail distribution). That is how the process works, unfortunately the small investor has no real say. Also, 21.0 mil shares (24.15 with shoe) is over 20 % of free float and ~20% of outstanding shares.

    What is interesting was as of June the short position was listed over 10% (~11.0mil shares), which is a lot especially given the monthly dividend. Hopefully, the deep discount wasn't done to help a large hedge short position, although the short position seems to be the difference between the shares outstanding and free float so maybe something structural is related to this deal and is legal.

    Finally, given how quiet the market is (seasonal summer lull) and the amount of uncertainty about Europe, Fiscal cliff/tax cuts extension in U.S., presidential election looming, Q2 earnings beginning, LIBOR scandal etc... the company may have wanted to get this done before sentiment turns bearish (if it does) and the opportunity to raise capital closes. Therefore in their view, the deep discount seems more tolerable and worth it rather than missing a chance to issue additional equity.
    Jul 12, 2012. 04:36 PM | 2 Likes Like |Link to Comment
  • The Consequences Of Prospect Capital's Secondary Offering [View article]
    All very good comments. In my opinon, the secondary was likely done because they see more opportunities to invest/lend in the still tight credit environment to their target base. Therefore, growth and cash flow should be fine.
    Jul 12, 2012. 02:58 PM | 1 Like Like |Link to Comment
  • Earnings Preview: Bank Of America [View article]

    I would check the $3.0 trillion figure for delinquent mortgages. As of last year BAC had a total of ~$2.2 trillion in assets.
    Jul 12, 2012. 01:28 PM | Likes Like |Link to Comment
  • LIBOR Related Lawsuits: How Do They Affect The Banks? [View article]
    LIBOR explained:

    The calculation of Libor is coordinated by just two people, who work in an unremarkable open-plan office in London’s Docklands. I watched the process, which seemed utterly routine, a couple of years ago. Just after 11 a.m. on every weekday that’s not a bank holiday, traders at leading banks send in their estimates of the interest rates at which their banks could borrow money. They do this electronically, but sometimes the co-ordinators make a phone call to a bank that hasn’t sent in its estimates, and if the latter seem implausible – typos, for example, are fairly common – they’re checked, also with a quick call: ‘Hi there, is the Kiwi chap [provider of the estimates for borrowing New Zealand dollars] about? … Bit of a spread on the two month. Everyone else is coming in a good bit under that.’

    A simple computer program discards the lowest quarter and highest quarter of the estimates, and calculates the average of the remainder. The result is that day’s Libor. The calculation is repeated for each of ten currencies and 15 loan durations (from overnight to 12 months), so 150 Libors are published daily: overnight sterling Libor, one-week euro Libor, one-month yen Libor, three-month US dollar Libor and so on.
    Jul 5, 2012. 02:28 PM | 2 Likes Like |Link to Comment
  • LIBOR Related Lawsuits: How Do They Affect The Banks? [View article]
    LIBOR is traded (similar to fed fuds in U.S. but with no central bank involvement) and the published rate is a compilation/average of the inter-bank trade or where willing to trade.

    It will be interesting to see if responsibility only lies with trading desks as Barclay's CEO claims and if this claimed behavior exists at other banks. The more damaging theory for manipulation would be senior management acknowledges views from government/treasury officials and then has that explicitly interpreted by trading desks in daily trade.

    Another interesting fact is again a major trading scandal is based in London. Recently, JPM's loss in derivatives occurred in London as did the UBS loss and the SocGen loss a couple of years ago to name a few. So maybe it isolated to Barclay's and not a trend/conspiracy amongst the major players, which is the best case scenario for this scandal not to gain traction and hurt already fragile sentiment in financials.
    Jul 5, 2012. 02:25 PM | 1 Like Like |Link to Comment
  • LIBOR Related Lawsuits: How Do They Affect The Banks? [View article]
    Proving the collusion between the banks will be hard, unless there are "smoking gun" e-mails. As one post stated, banks set interest rates as a part of their business, so they have a right to determine various rate levels independently.

    What is a worry, is that the current DOJ (a national joke given their record) is likely looking at how to use this as an issue going into the presidential election this fall, which will not help sentiment for the banks.

    Finally, this seems like another step (or in this case an opportunity)by government/regulators to continue to move large banks toward a model more like utilities. Unfortunately, this model limits profits and ultimately overall economic activity by restraining credit to the real economy.

    To change this, we need to change the president/Senate majority this November and hope that new leadership will remove some of the shackles of regulation/mandates on businesses and individuals and put the country on a more fiscally prudent path. This is "hope and change we can believe in" (to use the now hollow phrase) that would benefit many rather than the few who are benefiting from the current regime's view of reducing American influence internationally, anti-business attitude, and absurd class warfare.
    Jul 5, 2012. 12:27 PM | Likes Like |Link to Comment
  • Mid-June Conference Reveals New Life For Bank Of America [View article]
    BAC has moved to more conservative liquid investments and reduced level 2 and 3 assets. This impacts returns, ask JPM how the more illiquid investments are working out since they increased their exposure over the last few years. BAC is still a play on the U.S. economic recovery and in particular housing.
    Jun 29, 2012. 10:45 AM | 1 Like Like |Link to Comment
  • Peabody Energy Analyst Day: 110 Slides Of Coal Market Joy [View article]
    Interesting, that likely means when the turn comes, that group should provide some leadership. Until then, the sector will probably go through the dead money stage for a period of time (if we haven't already entered it).

    They are also the names the big buyside long onlys institutions focus on in the sector. I traded the small/midcap coal names at a major investment bank for a while before retiring, but sat next to the guy that traded the large cap names. I also traded the European industrial, energy/utlity and materials sector for many years and remember when RWE (large German utliity/energy firm) owned a large percentage of CNX (~73% /original investment was joint venture with DD). They eventually sold their stake (below these levels as well) which allowed the stock to finally perform better.

    It will be interesting to see if any other large foreign company begins to look at the coal companies at these levels, although it would likely come from Asia given the well known problems in Europe and the continuing divestures from the large German utlilities (EON and RWE) who go on acquiring binges from time to time.
    Jun 27, 2012. 01:10 PM | 2 Likes Like |Link to Comment
  • Peabody Energy Analyst Day: 110 Slides Of Coal Market Joy [View article]
    Peter, I agree the coal sector is a better long term story and not yet on the radar screen for many institutional investors (unless of course it starts working), at least as buys given their main focus on quarterly performance.

    That is why I believe some are dumping BTU into quarter end since it hasn't worked this quarter and they don't want to show anything resembling market weights, let alone overweights to the stock/sector. That would result in unpleasant conversations/reports that would be hard to justify given current conditions and the myopic view of certain investors/institutions.
    Jun 27, 2012. 12:12 PM | 3 Likes Like |Link to Comment
  • Peabody Energy Analyst Day: 110 Slides Of Coal Market Joy [View article]
    Peter, BTU's recent weak performance (new 52 week lows yesterday) has been disappointing relative to the group, but I think it can be somewhat explained by end of the quarter/half factors given the high institutional ownership of the stock. Probably will continue to underperform into Friday as well.
    Jun 27, 2012. 11:47 AM | 2 Likes Like |Link to Comment
  • Is Nokia A Trading Gem? [View article]
    The $3.54 to $3.30 gap was the annual dividend.
    Jun 27, 2012. 11:36 AM | Likes Like |Link to Comment
  • Peabody Energy Analyst Day: 110 Slides Of Coal Market Joy [View article]
    Do you really think BTU buying back $100mil shares this quarter is actually holding the stock higher? If you take a simple average price of say $25.00 per share the $100mil amounts to 4.0mil shares, which is less than one half a days average trading volume. The buyback amounts to less than ~1.0% of total volume for the quarter, hard to consider that a major factor in driving price either way.

    Also, I have read CNX is somewhat risky due to low met coal production and high Appalachia based thermal coal production which is more vulnerable to utility switching to natgas from coal. Last year, reported in a bloomberg survey of company filings, the average cost to extract a ton of Appalachian steam coal was ~$61 a ton, which is above the ~$58 a ton average selling price this year. CNX certainly has some production locked in at higher prices, but IMO it makes sense to have BTU over CNX (I know CNX has natgas which has hurt as well, although the recent price recovery will help) since PRB production, international exposure and the higher percentage of met coal (~60% of production) would seem to offer more protection from current lower prices here in the U.S.
    Jun 27, 2012. 11:25 AM | 1 Like Like |Link to Comment
  • Why Bank Of America Shares Are At High Risk [View article]
    The last paragraph the author makes BAC a better buy than sell (IMHO) based on risk/reward from current levels.

    BAC is more volatile due to high frequency/algorithmic trading since it is very liquid. BAC is also less exposed to capital market risk than say JPM (based on real knowledge on how both banks manage risk).

    No mention of the real issue with BAC, meaning Countrywide's legacy assets? Better housing numbers this week and if they continue, will eventually lift BAC's share price.

    Finally, the Europeans need to back stop their banking system (this will eventually happen since their is no other real choice) since the risk from derivatives exposure from Global European banks to U.S. banks as well as the global financial system is the 800 lb gorilla in the room. Once this happens, the U.S. financial stocks can resume an uptrend and provide leadership to take markets out of the current trading ranges.
    Jun 26, 2012. 11:04 AM | 1 Like Like |Link to Comment
  • Will Nokia Recover Or Be Bought? [View article]

    Time will tell, but I agree ultimately consumer acceptance, or rejection, will determine what products succeed. However, the future is in mobile communications and MSFT knows this. They do have their problems, but they will not give up since that will mean deserting this continuing growth market.

    NOK being bought anywhere at $5.00 or less only helps them if they fail on halting the cash burn. However, by only producing WP they are already acting like an operating arm of MSFT, so a takeover, in essence, changes the financial structure and relieves the current financial pressure.

    The current MSFT financial support/partnership is needed by NOK during this transition and likely impossible for NOK to walk away from. Therefore, this prevents them from producing android phones as some have suggested, which would be helpful for NOK since the platform is strong/accepted and NOK would just need to provide a quality product priced attractively to gain incremental sales.
    Jun 25, 2012. 01:06 PM | 1 Like Like |Link to Comment