We’re really starting to see the “economic unraveling” predicted in the book “Financial Armageddon” play out. This Bear Stearns debacle is based on two of the major themes in that book — the abuse of derivatives and too much debt (leverage). If you haven’t read the book I highly suggest you do. It’s a surprisingly quick & easy read. If you want the CliffsNotes version, check out this podcast with the author, Michael Panzner.
A lot of people are asking how a company with an alleged book value of $80 could suddenly sell for $2. Clearly there’s a ton of risk & losses (waiting to happen) that weren’t being accounted for. So now the worry is which other financial institutions are in a similar state. Here’s a list of some financial stocks getting hit this morning:
The financial sector is under heavy pressure in pre-mkt trading after the announced BSC fire sale: BSC -89.1%, LEH -34.5%, CFC -16.2%, WM -16.1%, MER -16.0%, CIT -15.6%, C -15.0%, ABK -14.0%, SCA -12.7%, NCC -12.5%, MBI -10.4%, UBS -10.4%, FNM -10.1%, WB -9.6%, IMB -9.4%, BCS -9.2%, MS -9.0%, GS -8.8%, PMI -8.6%, STT -8.4%, RBS -8.1%, FRE -7.9%, COF -7.9%, CS -6.0%, AIG -5.8%, BAC -5.4%, DB -5.4%, USB -5.0%, WFC -4.9%, BBT -4.2%, BMO -4.2%, MA -3.8%, RF -3.7%, AXP -3.7%, BK -3.5%, CM -3.2%.
On the positive side, a lot of traders, including myself, have been waiting for an open like this. Every time we got back to these levels (~S&P 1270) the Fed (PPT) would step in and save the day. We may finally get the big washout everybody’s been waiting for.
On Today’s Calendar:
Potential swing trades:
Potential day trades:
In reaction to weak earnings/guidance: TPX -11.0%, CNO -6.6%, BJGP -4.5%, ITW -4.4%, PGNX -3.8%, VQ -2.4%, SUI -2.1%, GBL -1.5%… M&A news: BSC -89.1% (to be bought by JP Morgan for $2/share in stock-swap)… Financial stocks are under heavy pressure after fire sale at BSC: LEH -31.4% (also downgraded to Neutral at UBS), WM -16.1%, MER -15.2%, C -15.0%, NCC -14.8%, CIT -14.6%, ABK -12.4%, CFC -10.7%, WB -10.5%, MBI -10.4%, UBS -10.4% (to consider 8,000 layoffs – NY Times), FNM -10.1%, IMB -9.4%, BCS -9.2%, MS -9.0%, GS -8.8% (also downgraded to Neutral at UBS), STT -8.4% (also downgraded to Neutral at UBS), RBS -8.1%, FRE -7.9%, COF -7.9%, CS -6.0%, AIG -5.8%, BAC -5.4%, DB -5.4%, ETFC -5.0%, WFC -4.9%, RF -3.7%, HBC -3.7%, BK -3.5% (also downgraded to Neutral at UBS)… Other news: SI -17.4% (outlook dims as several projects struggle – WSJ), CVTX -6.3% (announces they have not received action on the NDA, for regadenoson, from the FDA), ASTI -2.4% (files an $80 mln common stock shelf offering in an S-3), ADBE -1.7% (Hearing tier-1 firm cuts EPS ests for ADBE, saying macro outlook has deteriorated)… Analyst downgrades: MBLX -6.0% (downgraded to Hold at Jefferies), MRO -5.5% (downgraded to Neutral at tier 1 firm), AMTD -5.5% (downgraded to Neutral at UBS), CX -4.1% (downgraded to Neutral from Outperform at Credit Suisse), DHT -2.7% (downgraded to Underweight at JPMorgan), PT -2.4% (downgraded to Underweight at JPMorgan), COH -1.5% (downgraded to Hold at Citigroup).
In reaction to strong earnings/guidance: HNR +3.8%, RAMR +3.5%, PMI +1.8%… M&A news: DMX +22.1% (receives tender offer to be acquired for $5.40/share by Walgreen’s), BLOG +14.4% (BMC Software to Purchase BladeLogic for $28/share in cash), JPM +1.5% (to acquire BSC for $2/share, also ratings affirmed by Moody’s and S&P)… Select gold stocks showing strength on higher spot prices: AUY +4.2%, GFI +2.6%, KGC +2.5%, GLD +2.3%, ABX +1.1%… Other news: CRME +29.8% (announces positive interim Ph. 2b results for oral vernakalant and engages Merrill Lynch as strategic advisor), TWTI +6.5% (Third Wave’s InPlex CF Molecular Test receives FDA clearance), TUP +1.3% (Cramer makes positive comments on MadMoney)… Analyst upgrades: NAT +1.9% (upgraded to Neutral at JPMorgan).