Our models indicate the market will open higher today and trade in a narrow range. Volatility is dramatically down after the peak in late August. Because of the low volatility, economic data is the market catalyst and earning news drives trading. The Dollar-Yen carrying trade is gaining favor again with the Dollar strengthening to 112.42 to the Yen. However, the Dollar is still very weak relative to the Euro and other major currencies. Meaning higher import price, in essence we are importing inflation which caused by the Fed’s rate cuts, depresses the Dollar. As we have reported in earlier posts, the Fed is in a tight spot concerning interest rates: cut too much and built in inflation rises due to the falling Dollar, cut too little, the economy slows down causing recession. A tough choice, juggling many balls at once.
Republican Presidential Debate on Tuesday was covered by our economic analysis team. Our consensus view is that Romney was the clear winner with Giuliani a close second.
We rate the candidates as follows for the odds of winning the nomination:
1. Romney 4:1
2. Giuliani 6:1
3. McCain 10:1
4. Thompson 13:1
We feel if Romney is the candidate he would favor Wall Street, i.e., financial sector would rise. GS, MER, LEH, BAC, JPM, C
If Giuliani we feel defense stocks will rise strongly. Lockheed, Raytheon, etc.
We are constantly asked why does it matter where the Dollar trades relative to other currencies.
The answer is that because of the huge trade deficit the US has with Japan, i.e., the relative amount of imports to exports, Japan has a huge surplus of Dollars as reserve foreign exchange and has to invest the Dollars some place usually in treasury bills and the stock market. Tending to support the market with recycled dollars.
Dow stocks will rise today based on the retail news of WMT.
Wal-Mart (WMT) up however, same store sales flat, i.e., growth came from opening new stores.
Target (TGT) down on weak sales.
Showing posts with label JPM. Show all posts
Showing posts with label JPM. Show all posts
Thursday, October 11, 2007
Tuesday, September 11, 2007
GOIH Capital Markets: Countrywide seeking more funding
September 11, 2007 --
Countrywide Financial Corp. is putting together another multi-billion dollar bailout plan as the nation's largest home lender continues to struggle amid the global credit crunch and declines in the housing market, The Post has learned.
Sources familiar with Countrywide's plans said the lender continues to work with Goldman Sachs and law firm Wachtell Lipton Rosen & Katz to structure another strategic investment similar to the deal Bank of America struck last month.
It's unclear at this point who exactly is involved in the investment, but sources said a group that could include J.P. Morgan and Citigroup as well as several hedge funds has expressed interest in Countrywide.
A final deal could be announced by the end of the month, sources said.
Last month, Bank of America paid $2 billion for a new series of non-voting preferred stock in Countrywide, which provides an annual dividend of 7.25 percent and can be converted into common stock at $18 per share. As part of the deal, Countrywide left the door open to issue additional preferred stock or convertible preferred stock.
"Countrywide is in desperate need of cash right now to continue funding mortgages and the credit markets are still largely closed to them," said one source familiar with the company.
Countrywide's chief executive Angelo Mozilo, who announced plans last week to eliminate as many as 12,000 jobs, said recently that interest rate cuts by the U.S. Federal Reserve won't be enough to revive home sales and warned that the U.S. economy is headed for a recession.
"The issues the economy is facing are worse than most people believe," Mozilo said in an interview last Friday with Bloomberg News. Mozilo has been pushing for the government to allow Fannie Mae and Freddie Mac to finance bigger home loans.
Countrywide, which handles one of every five new U.S. mortgages, has been hurt by falling home prices and record foreclosures. The company has billions in medium-term debt coming due in about 90 days and needs to cash to continue operating.
Countrywide's stock plunged by over 5 percent yesterday after analysts at Merrill Lynch and UBS cut their profit estimates on worries over the company's ability to make new loans. The stock, which has fallen over 59 percent this year, closed at a four-year low of $17.21 yesterday.
Making matters worse, Alliance Capital Management, which is owned by giant French insurance company Axa SA, disclosed that it has sold about 31 million shares of Countrywide in the last month. Barclays Global Investors has also sold nearly 25 million shares.
"We think the stock will continue to drift down, as investors lose hope of a near-term recovery," said Merrill analyst Kenneth Bruce. He estimates that the job cuts could save Countrywide roughly $1 billion a year, but that will only offset lower revenues.
zachery.kouwe@nypost.com
GOIH Commentary:
We have previously posted here the apparent link between CFC and GS. Now there appears to be a second bailout in the works for CFC, lead by who: GS. We believe based on the trading patterns of GS and CFC, GS hedge funds hold a large position in CFC and by buying the company they can close out their losing positions or replace those positions with new positions and avoid any loses associated with the investment.
Countrywide Financial Corp. is putting together another multi-billion dollar bailout plan as the nation's largest home lender continues to struggle amid the global credit crunch and declines in the housing market, The Post has learned.
Sources familiar with Countrywide's plans said the lender continues to work with Goldman Sachs and law firm Wachtell Lipton Rosen & Katz to structure another strategic investment similar to the deal Bank of America struck last month.
It's unclear at this point who exactly is involved in the investment, but sources said a group that could include J.P. Morgan and Citigroup as well as several hedge funds has expressed interest in Countrywide.
A final deal could be announced by the end of the month, sources said.
Last month, Bank of America paid $2 billion for a new series of non-voting preferred stock in Countrywide, which provides an annual dividend of 7.25 percent and can be converted into common stock at $18 per share. As part of the deal, Countrywide left the door open to issue additional preferred stock or convertible preferred stock.
"Countrywide is in desperate need of cash right now to continue funding mortgages and the credit markets are still largely closed to them," said one source familiar with the company.
Countrywide's chief executive Angelo Mozilo, who announced plans last week to eliminate as many as 12,000 jobs, said recently that interest rate cuts by the U.S. Federal Reserve won't be enough to revive home sales and warned that the U.S. economy is headed for a recession.
"The issues the economy is facing are worse than most people believe," Mozilo said in an interview last Friday with Bloomberg News. Mozilo has been pushing for the government to allow Fannie Mae and Freddie Mac to finance bigger home loans.
Countrywide, which handles one of every five new U.S. mortgages, has been hurt by falling home prices and record foreclosures. The company has billions in medium-term debt coming due in about 90 days and needs to cash to continue operating.
Countrywide's stock plunged by over 5 percent yesterday after analysts at Merrill Lynch and UBS cut their profit estimates on worries over the company's ability to make new loans. The stock, which has fallen over 59 percent this year, closed at a four-year low of $17.21 yesterday.
Making matters worse, Alliance Capital Management, which is owned by giant French insurance company Axa SA, disclosed that it has sold about 31 million shares of Countrywide in the last month. Barclays Global Investors has also sold nearly 25 million shares.
"We think the stock will continue to drift down, as investors lose hope of a near-term recovery," said Merrill analyst Kenneth Bruce. He estimates that the job cuts could save Countrywide roughly $1 billion a year, but that will only offset lower revenues.
zachery.kouwe@nypost.com
GOIH Commentary:
We have previously posted here the apparent link between CFC and GS. Now there appears to be a second bailout in the works for CFC, lead by who: GS. We believe based on the trading patterns of GS and CFC, GS hedge funds hold a large position in CFC and by buying the company they can close out their losing positions or replace those positions with new positions and avoid any loses associated with the investment.
Tuesday, August 28, 2007
FAQ: GOIH Capital Markets: Market Analysis
What companies should be watched to determine the trend in the market?
Goldman Sachs (NYSE:GS)
Why?
GS is the bellwhether and preeminent investment bank in the world and the former CEO is the Sec. of the Tresury.
Bank of America (NYSE:BAC)
Why?
BAC is the largest consumer/retail bank and its activity is a monitor of the consumer activities in the economy
Wal-mart (NYSE:WMT)
The obvious reason is that WMT is the largest discount retailer in the world.
JP Morgan-Chase (NYSE:JPM)
JPM is the largest money center bank catering to a business client, i.e., Fortune 500 company. Compared to BAC, JPM is an entirely different bank making its fees from underwritings and corporate advisory. Where BAC makes most of its fees from ATMs and other retail banking operations. JPM is as different from BAC as Ameritrade is from Goldman Sachs.
There are other compnaies which we will list in a later post.
Goldman Sachs (NYSE:GS)
Why?
GS is the bellwhether and preeminent investment bank in the world and the former CEO is the Sec. of the Tresury.
Bank of America (NYSE:BAC)
Why?
BAC is the largest consumer/retail bank and its activity is a monitor of the consumer activities in the economy
Wal-mart (NYSE:WMT)
The obvious reason is that WMT is the largest discount retailer in the world.
JP Morgan-Chase (NYSE:JPM)
JPM is the largest money center bank catering to a business client, i.e., Fortune 500 company. Compared to BAC, JPM is an entirely different bank making its fees from underwritings and corporate advisory. Where BAC makes most of its fees from ATMs and other retail banking operations. JPM is as different from BAC as Ameritrade is from Goldman Sachs.
There are other compnaies which we will list in a later post.
Friday, August 17, 2007
Global 1 Capital Markets: Will Countrywide be bought out by private equity?
Is Countrywide Financial (NYSE:CFC) in play to be bought out by private equity?
We at GOIH Capital Markets think that CFC will now be bought out by a private equity group financed by Goldman Sachs and JP Morgan or Citigroup. If the charts of GS and CFC are overlayed for the last week, you will see that these two companies' stocks have traded lockstep up and down for the past week, indicating that there was a positive correlation in the companies trading.
We think the lowering of the discount rate by the Fed, give CFC time and the financiers time to raise the money to buy CFC. We are guessing that the financial team will be lead by Goldman Sachs and a large private equity fund, the Blackstone Group, (NYSE:BX) and a hedge fund, GS Global Alpha Fund.
The transaction will save the operations of CFC, raise the shares of Blackstone Group which has been down since its IPO, and give the recent investors in GS Hedge Funds an immediate returns.
Why do you think billionaires invested in the GS Hedge Funds unless something was in the mix for an immediate profit.
We at GOIH Capital Markets think that CFC will now be bought out by a private equity group financed by Goldman Sachs and JP Morgan or Citigroup. If the charts of GS and CFC are overlayed for the last week, you will see that these two companies' stocks have traded lockstep up and down for the past week, indicating that there was a positive correlation in the companies trading.
We think the lowering of the discount rate by the Fed, give CFC time and the financiers time to raise the money to buy CFC. We are guessing that the financial team will be lead by Goldman Sachs and a large private equity fund, the Blackstone Group, (NYSE:BX) and a hedge fund, GS Global Alpha Fund.
The transaction will save the operations of CFC, raise the shares of Blackstone Group which has been down since its IPO, and give the recent investors in GS Hedge Funds an immediate returns.
Why do you think billionaires invested in the GS Hedge Funds unless something was in the mix for an immediate profit.
Did the Fed move to save Countrywide and Goldman Sachs?
Did the Fed by lowering the discount rate move to save Countrywide Financial, (NYSE:CFC)? Well let's see.
CFC was on credit watch and its credit rating had been lowered by both Moody's and S&P and CFC could not borrow in the commercial paper market.
On Thurs. CFC had to tap out its credit lines for its last $11.5 billion arranged by 40 "banks".
In essence CFC had a 30 day death notice.
Also because CFC has a bank with "deposits" the LA times reported that customers had jammed the phone lines at CFC branches to withdraw their money.
Because CFC could not fund other than agency loans, the residential mortgage market was about to shut down.
For some unexplained reason as reported here Goldman Sachs and CFC were trading in lockstep point by point up and down.
The $11.5 billion line of credit arranged by the 40 "banks" was unsecured, i.e., the banks that arranged the line of credit had no security and would have been wiped out had CFC gone under.
So we can possibly conclude that the move was arranged to save CFC which in turned saved GS and the 40 "banks" that arranged the line of credit were spared $11.5 billion in loses for the time being.
However, GOIH Global Economics section have concluded that further action will be necessary by the Fed. This is only a short term fix for CFC. CFC still cannot package and securitize the new loans it originates and must hold them on its books.
We see opportunities in the mortgage lending sector for an investor wishing to make over size returns.
CFC was on credit watch and its credit rating had been lowered by both Moody's and S&P and CFC could not borrow in the commercial paper market.
On Thurs. CFC had to tap out its credit lines for its last $11.5 billion arranged by 40 "banks".
In essence CFC had a 30 day death notice.
Also because CFC has a bank with "deposits" the LA times reported that customers had jammed the phone lines at CFC branches to withdraw their money.
Because CFC could not fund other than agency loans, the residential mortgage market was about to shut down.
For some unexplained reason as reported here Goldman Sachs and CFC were trading in lockstep point by point up and down.
The $11.5 billion line of credit arranged by the 40 "banks" was unsecured, i.e., the banks that arranged the line of credit had no security and would have been wiped out had CFC gone under.
So we can possibly conclude that the move was arranged to save CFC which in turned saved GS and the 40 "banks" that arranged the line of credit were spared $11.5 billion in loses for the time being.
However, GOIH Global Economics section have concluded that further action will be necessary by the Fed. This is only a short term fix for CFC. CFC still cannot package and securitize the new loans it originates and must hold them on its books.
We see opportunities in the mortgage lending sector for an investor wishing to make over size returns.
Who knew about the Fed Discount Rate cut on Thurs?
At exactly 3:00 pm on Thurs. the Dow had been down 343 point and begin a massive run to the upside ending with only a 15 point drop for the day. All the financial stocks in the S&P 500 Financial Index started a strong move to the upside, see charts for GS, LEH, BSC, MER, C, JPM and other large New York banks.
We reported earlier in the day that Goldman Sachs had crashed through 158 and appeared to be going lower, Countrywide, CFC which was trading lock step with GS spiked up dramatically at the same time as GS recovered by $12 per share.
So the question is who knew, what did they know and when did they know it? It appears that at 3:00 pm on Thurs. the major trading desks on Wall Street knew about the coming rate cut on Friday morning.
We reported earlier in the day that Goldman Sachs had crashed through 158 and appeared to be going lower, Countrywide, CFC which was trading lock step with GS spiked up dramatically at the same time as GS recovered by $12 per share.
So the question is who knew, what did they know and when did they know it? It appears that at 3:00 pm on Thurs. the major trading desks on Wall Street knew about the coming rate cut on Friday morning.
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