Ken Lewis Is Gone
by Zero Hedge - September 30th, 2009 5:58 pm
Courtesy of Tyler Durden
Not a bad move by the man about to be raided by the Fed, the AG, the SEC, the Tooth Fairy and who knows who else. In other news, the Chairman wins again.
From the WSJ.
Ken Lewis, his company faced with multiple government probes, will retire at the end of the year.
Mr. Lewis, who has been chief executive since 2001, was stripped of his title as chairman in April after a shareholder resolution passed by a razor-thin margin. Walter Massey was elected to replace him.
Congress, the Securities and Exchange Commission and New York Attorney General Andrew Cuomo are investigating the company. Lawmakers have accused him of misleading investors about year-end bonuses paid to employees at Merrill Lynch & Co. before Bank of America purchased the teetering Wall Street company late last year.
It is said, cause he was doing so damn well:
“Bank of America is well positioned to meet the continuing challenges of the economy and markets,” Mr. Lewis said. “The Merrill Lynch and Countrywide integrations are on track and returning value already. We are in position to begin to repay the federal government’s TARP investments.”
We wish Ken Lewis and his trial defense team all the best as they prepare for the biggest criminal and civil onslaught against his persona in history.
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DiggSaturn No More- Roger Penske Takes a Hike, General Motors to Pull the Plug
by Zero Hedge - September 30th, 2009 5:45 pm
Courtesy of Travis
I once met Roger Penske, oh, rather- I met his son when I was in the car business. He was a smooth dude, a good-looking guy who seemed to make the ladies sigh, and put men of all powers and postions shake their heads in the right direction. They wish they were he; or rather they wish they were his father, Roger Penske.
And who wouldn’t want to be Roger Penske? You’re a self-made billionare, a bona fide legend in the business and automotive world. And hell, you even once raced cars!
So when news that Roger Penske’s Penske Auto Group (PAG) signed-on to be the new Saturn, we all knew, if anyone could do it, it was Penske.
General Motors announced today that it’s pulling the plug on Saturn, amid an agreement with PAG falling-through. Concerns of a supply and a production agreement after the initial contract runs out with General Motors sent even Penske running the other way.
“This is very disappointing news and comes after months of hard work by hundreds of dedicated employees and Saturn retailers who tried to make the new Saturn a reality,” Henderson said in a written statement according to the Associated Press. “PAG’s announcement explained that their decision was not based on interactions with GM or Saturn retailers.”
Penske’s beef, not with GM or Saturn, but rather, the company that would produce the likable cars “people want to buy” after GM.
The other manufacturer was not disclosed- at least not yet.
Without the agreement, not even the mega-motor buck hero could assure Saturn’s continuation in world and market after Cash for Clunkers.
PAG had agreed to take the driver’s seat at the Saturn brand and dealer network, at the height of GM’s reorganization as a “new” and “leaner” car manufacturer, with GM producing the cars for a limited time.
Shares of PAG rose in Wednesday’s trading.
Obviously, people want to buy Saturns. Just not enough for anyone willing to produce them.
Human Genome Sees Large Volatility Play in Late Trade
by Option Review - September 30th, 2009 4:31 pm
Today’s tickers: HGSI, AET, DTV, EEM, CMG, XLE, GE & NKE
HGSI - Option plays executed late in the trading session drew our attention to biopharmaceutical company, Human Genome Sciences, Inc. Shares of HGSI are currently off slightly by less than 0.25% to $18.80. The first transaction appears to be the work of an investor expecting volatility on Human Genome Sciences to decline. The trader initiated a sold straddle by selling 20,000 calls at the October 19 strike for 80 cents each, in combination with the sale of 20,000 puts at the same strike for 80 pennies apiece. The gross premium pocketed by the investor amounts to 1.60 per contract for a total of $3,200,000. The total amount of premium on the straddle strategy is retained by the trader as long as the stock settles at $19.00 by expiration next month. Perhaps the investor is selling into today’s higher volatility reading of 123% from 106% at the start of the week. We note that the transaction could be interpreted in another manner. It is possible that this investor is bearish on HGSI and thus executing a reversal play. If this is the case, the trader sold 20,000 calls for 80 cents in order to buy 20,000 puts for 80 cents each. If the trade was a bearish risk reversal, the investor offset the cost of getting long the put options by selling the calls and put on the trade for free. Profits to the downside will increase for the trader if shares decline beneath $19.00 by expiration. – Human Genome Sciences, Inc. –
AET - The health care benefits company popped onto our ‘most active by options volume’ market scanner after one investor shed a large chunk of call options in the November contract. A number of health care benefits/insurance firms experienced share price declines today perhaps after the Senate Finance Committee rejected two amendments to put a public health-insurance option into the committee’s health-system reform proposal on Tuesday. Shares of AET are trading 1% lower to $27.96. Approximately 20,000 calls were sold short at the November 31 strike for an average premium of 92 cents apiece. The investor responsible for the sale may have executed the trade for a number of reasons. One possibility is that the trader is long the stock and adding income to his portfolio by selling covered calls. Another viable explanation is that the investor is short…
THE 7 MOST IMPORTANT QUESTIONS TODAY….
by ilene - September 30th, 2009 4:07 pm
THE 7 MOST IMPORTANT QUESTIONS TODAY….
Courtesy of The Pragmatic Capitalist
A recent piece of research from JP Morgan touches on some frequently asked questions by investors. I’ve provided their responses along with my own:
1) Is the crisis over?
The financial crisis is largely over. The economic crisis, only half so. The recession is over but the recovery has just started. Even the above-trend growth pace that we project for this recovery will require years to get us back to trend levels of activity. This means high unemployment and disinflationary pressures over the next two years.
TPC Response:
I have to agree with JP Morgan here. The crisis and the days of 700 point Dow drops are long gone. But the recovery is going to feel a lot like a recession. In other words, jobs are going to be slow to come back, the consumer is going to be sluggish while stocks and the housing market are likely to be range bound for years. What JP Morgan doesn’t mention is that most of our long-term structural problems still exist. Wall Street is back to their old tricks while the consumer struggles under a mountain of debt, job losses and stagnant wages. The Fed is trying their best to keep the boom/bust market alive and well. More likely than not, they are simply inflating the economy in preparation for the next bust. Two years is likely a generous timeframe for the end of our secular problems.
2) Is the recovery sustainable?
Yes, odds are it is given unprecedented and synchronized global policy stimulus, low funding costs, a repaired financial system, and the massive need for inventory rebuilding into next year. What are the main risk factors we should monitor? For the recovery in the world economy and in risky assets to be sustained, the private sector will need to take the baton from the public sector. Corporates are in the driver’s seat here. We need to see them move from a precautionary into an expansionary mode. That means capital spending, jobs, and income creation. Watch these.
TPC Response:
This is very much in doubt. Thus far, the recovery has been largely driven by government stimulus. Even with the massive stimulus the economy remains very weak considering the duration of the recession. Without an extension of the home buyers tax…
MUST READ: FUMBLE-ITIS
by ilene - September 30th, 2009 3:41 pm
MUST READ: FUMBLE-ITIS
Courtesy of The Pragmatic Capitalist
This special report comes from our friends over at Comstock Partners. It is highly recommended reading:
With the latest 60% gain in stocks since the March low there has been an almost universal feeling of, “the worst is over for stocks and the economy, and now there is clear sailing ahead”. We, however, are looking at the dilemma of the U.S.economy sort of like a relay race where the baton has to be passed on to the anchor team member who is very fast but has a problem receiving the baton.
We have to admit it does look like the “all clear” has sounded with the U.S. GDP about to be reported at somewhere in the 3% to 5% real gain in the third quarter. This gain followed a less than 1% decline in the second quarter and around 6% declines in the fourth quarter of 2008 and the first quarter of 2009. The stock market rally seems to be confirming the economic recovery, but we have a different slant on all of this bullishness. We look at the recovery process a little like a 400 meter relay race with the first three legs of the race almost over– but we see problems with the last leg (or anchor leg).
The first three legs of the race are analogous to the main reasons the economy is showing strength and has put us in first place going into the last leg to hand the baton off to the very fast anchor relay team member. The first three legs we look at as the three forces driving the economy higher. Number one (coinciding with the first leg of the race) is the inventory restocking from a very depressed level during the recession. Number two (leg two) is the “cash for clunkers” program which is part of the economic stimulus package. Number three (leg three) is the rest of the stimulus package. The next couple of things we have to see in order for the economy to continue into a sustained recovery would be increases in fixed investment by corporations and real consumption (unrelated to gimmicks). We are now hoping to see the last leg of the relay race, the anchor leg, continuing to take us to the finish line as the “V” shaped economic recovery continues. The problem is…
Fund Flows Continue To Flee Stocks
by ilene - September 30th, 2009 3:17 pm
Fund Flows Continue To Flee Stocks
Courtesy of Vincent Fernando at Clusterstock
Long-term fund flows continue to flee U.S. domestic equities according to today’s release from the Investment Company Institute.
Over $2 billion came out of long-term mutual funds in the seven days ending September 23rd, meaning that September’s run rate might be about $7.7 billion of outflows. This continues the outflow trend that began in August.
In contrast, mutual fund flows into bonds have accelerated all year, and could continue to do so in September.
Thus if you switched from stocks into bonds over the last two months, you weren’t contrarian.
See Also:
90% Of Fund Flows Missed The Stock Rally
Appetite For High-Yield Bonds Is Getting "Ridiculous"
Have Bond Investors Gotten Too Complacent?
CIT Picks Prepack Bankruptcy As Going Forward Option
by Zero Hedge - September 30th, 2009 3:12 pm
Courtesy of Tyler Durden
Not sure if this is news, but hopefully the robots that are all over CIT will finally get this headline through their babelfish English-to-Machine Language translators and stop drawing retail in, who in turn believe there is some/any value (aside from pure Las Vegas entertainment value) left in this stock.
From Bloomberg:
CIT Group Inc., the 101-year-old commercial lender, is planning to start a debt exchange offer that will include a so-called pre-packaged bankruptcy option, a person familiar with the matter said.
Let us put this in terms that even TheStreet will understand: the. stock. is. worth. exactly. 0.00.
Mike Pento Is Sick Of Dealing With Idiots
by Zero Hedge - September 30th, 2009 2:46 pm
Courtesy of Tyler Durden
Correction: he does not explicitly say it, but watch his eyes closely. Also, the man is obviously insane: how can one “not be bullish on government transfer payments.” Forsooth, government transfer payments have resulted in an increase of the S&P market capitalization by a few trillion bucks. It is YOU, Mr. Pento, who is the idiot for not believing that the fine upstanding Chairman of the Federal Reserve (and the United Printing Presses of America) will ever stop killing the US middle class at the expense of insiders being unable to sell their stock at what they obviously acknowledge are sky high valuations. If that means Robert Mugabe ends up hiring Tim Geithner as his right hand henchman sooner rather than later, it is truly our loss, Mr. Pento. Our loss.
Was The PMI Leaked This Morning?
by ilene - September 30th, 2009 2:44 pm
My question: why does Kingsbury International have early access? – Ilene
Was The PMI Leaked This Morning?
The market started tanking minutes before the weak Chicago PMI was leaked this morning, so there was obviously some leaking going on, right? Is the SEC paying attention?
Actually, hold your horses.
Bespoke Invesment Group, which put together the chart on the right, explains:
While everyone likes a scandal these days, a deeper look at an intraday chart of the S&P 500 and the firm that compiles the Chicago PMI (Kingsbury International) shows that there was most likely nothing nefarious taking place. The S&P 500 certainly did decline prior to the official release, but traders should be aware that anyone who wants early access to this report can do so provided they are willing to pay for it.
On the company’s website, Kingsbury describes the Chicago PMI as, "a proven monthly ‘first look’ at business, government and NGO economic activity in the USA." They then go on to say that subscribers to Kingsbury’s data will receive "access to this market-moving data 3 minutes before public release." In other words, Kingsbury will ‘leak’ the report to anyone who is willing to pay at least $200 per month.
Bespoke goes onto note that this is (yet) another example of how the market is stacked against the little guy, which is undoubtedly true — however the alternative would be for the government to ban private organizations from doing research on behalf of their own clients which would be ridiculous.
As we’ve said, we’d be better off killing the myth of the level playing field, instilling a more caveat investor attitude among the little guys, than in trying to keep up the idea that everyone can play the game.
See Also:
Whoops: Chicago PMI Shows Contraction
Some Idiot At Perot Systems Busted For Insider Trading On The Dell Deal
The Dangerous Nonsense Of A "Level Playing Field"
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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