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PNC Buys National City and Hits the TARP
Tweet Share on Facebook October 24, 2008 Comment (10)After weeks of speculation as its share price headed toward the floor, Cleveland-based regional bank National City goes to PNC Financial Services.
The deal creates the country's fifth-largest bank by deposits.
The deal:
PNC will pay $5.58 billion in stock and cash for National City and get $7.7 billion through the government's bailout plan. The deal values National City at about $2.23 a share, or about 19 percent below yesterday's closing price (it traded around $23 a year ago). PNC says its Tier 1 capital ration will be about 10 percent, and the combined firm will be well above regulatory standards for a "well-capitalized" bank.Why this is good:
A couple of reasons: First, National City was probably the biggest regional at risk as the credit crisis spreads. Second, the use of the Troubled Asset Relief Program (TARP) funds is encouraging. It's a positive sign that banks are using the government's lending offer to get markets moving again.And lastly, a quick note to National City's press team who just yesterday chided me for saying that the bank was up for sale: We won't be running that correction.
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Earnings Update: Lost Luxury Edition
Tweet Share on Facebook October 23, 2008 Comment (1)The good life takes another hit today, as swimming pools and travel plans face cooling profits because of worried consumers. In today's earnings, two names, hotelier Starwood Hotels and pool supplier Pool Corp., are cutting their outlooks.
Starwood Hotels warned profits will fall in both 2008 and 2009 because of travel spending slumps in the face of the global financial crisis. The chain, which runs the tony W, St. Regis, and Le Meridien brands, plus the Sheraton and Westin names, has been trimming expenses and shutting sales centers.
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Economy Hits Amazon Ahead of the Holidays
Tweet Share on Facebook October 23, 2008 CommentAmazon.com had a respectable quarter, but lower guidance is hurting the company's shares today. Industry-leading sales and market-share growth mean it's still the king of online retail, but even that won't help when shoppers simply start to spend less—almost $1 billion less in 2008 for Amazon.
For 2008, Amazon expects revenue between $18.46 billion and $19.46 billion. The top end of its previous estimate range was $20.1 billion. Wall Street had been hoping for $19.5 billion. Amazon shares were off almost 6 percent at midday.
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Third-Quarter Fallout: Job Cut Edition
Tweet Share on Facebook October 22, 2008 Comment (1)We're wrapping up another terrible day on Wall Street, and this time it's bad news from companies, not credit markets, that's stoking the fire under sellers. This week, earnings haven't been good, and we're finally seeing the fallout from the credit crunch and the slowing economy appear in the form of mounting job losses.
So far this week:
Merck: 7,200 jobs, or 11 percent of its workforce. Even so, the drug maker is still scaling back earnings and profit forecasts as it struggles to replace blockbusters like Fosamax and fend off competition from generic rivals. Shares fell almost 5 percent.
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Kerkorian and Adelson's Vegas Billionaire Blues
Tweet Share on Facebook October 22, 2008 Comment (1)Gaming's hot streak is over, as the slumping U.S. economy kills Las Vegas traffic. The downturn is going global, too; Macau, the Asian island that was expected to overshadow its desertbound brother, is slowing.
Unsurprisingly, outsized names are being dragged down along with their iconic casino profits.
Kirk Kerkorian, the world's 41st richest person on Forbes's list this year, is falling fast after a handful of big, bad bets in the auto sector.
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5 Things Smaller Than Wachovia's $23.7 Billion Loss
Tweet Share on Facebook October 22, 2008 Comment (1)Wow, that's a bad quarter. Wachovia says losses hit nearly $24 billion in the third quarter, including a $19 billion goodwill impairment charge as it tries to clear the pipes before merging with Wells Fargo.
Here's a look at what that loss is bigger than:
1. Wells Fargo's $15 billion buyout offer.
2. Citigroup's spurned $2.16 billion offer for Wachovia's assets. (Citigroup was also going to assume $42 billion or so in Wachovia losses.)
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Kohl's: A Retailer(!) Worth a Look
Tweet Share on Facebook October 21, 2008 CommentBefore we start, the answer is yes. We are in a recession, consumer spending is falling, and the shares of retailers have been beaten to a pulp in this downturn. So why take a look at any of them?
Well, contrarian bets are fun, for one. Second, buying up the best names in the most challenged sectors before a market turns can equal outsized returns. And third, for Kohl's specifically, the negative tone among retail analysts toward the stock took a bit of a turn this week.
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Kedrosky: Earnings Falling Fast
Tweet Share on Facebook October 21, 2008 CommentEven before the credit crisis really slammed stocks, everyone knew earnings expectations were too high, but Paul Kedrosky at Infectious Greed says the sharp drop in earnings forecasts for 2009 is pretty amazing.
He says estimates are "coming down faster than in any six-month period I've seen, and there are more cuts coming," and points to this slide from John Maudlin for 2009 estimates on the S&P 500:
March 20 $81.52 April 9 $72.60 June 25 $70.13 August 29 $64.66 September 10 $58.57 October 14 $48.52 That drop is pretty amazing, and the big decline between September and October really shows just how surprised Wall Street was at the severity of the credit crunch. What it means is that investors hoping for a rally in stocks are still on the wrong side of profit expectations. Shares may be beaten down enough to keep further declines from setting in, and credit may be a bit better, but ongoing lowering of basic expectations for the health of American companies should still keep investors on edge.
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Markets Start to Heal
Tweet Share on Facebook October 21, 2008 CommentThe first creaking step has been taken on the road back to normalcy on Wall Street. Various measures of market risk are now heading in the right direction. Here's a quick look:
Treasuries: Rates on three-month T-bills are above 1.25 percent—a big move from last month, when flight to safety demand pushed yields on treasuries into negative territory (when treasury prices go up, yields go down). Now, that security-at-all-costs mentality is softening as investors move back into the rest of the market.
Libor: The overnight Libor interbank lending rate is below 4 percent for the first time since September 26.That means banks are tip-toeing back into the basic lending habits they gave up on at the height of the credit crisis. For a nice history of Libor, see this post from Money Morning.
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Stock Losses So Far: $15 Trillion
Tweet Share on Facebook October 20, 2008 Comment (1)Jeremy Gaunt at Reuters examines the damage to the MSCI All-Country World Stock index since the end of last October, when most world markets peaked.
The Losses: $15 trillion, or about 21 times the $700 billion bank bailout package and more than the annual gross domestic product of the United States.
The Speed: It took four years for markets to build that $15 trillion worth of value, but just one to give it all back, including about one third of the declines during the market free fall between mid-September and mid-November.
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