Watchlist for March 17, 2008

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:

  • nothing

More Calendars: U.S. Earnings | Conf. Calls | Surprises | IPO | Economic

Potential swing trades:

See one of the recent ‘Chart Reading‘ posts for some potential swing candidates. Also be sure to check my typical swing trade entry & exit rules.

Potential day trades:

(From Briefing.com)

Gapping Down

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).

Gapping Up

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).

Disclaimer & How I use this list


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Comments

  1. Posted by Hal Stevens on March 18, 2008 at 11:50 am

    Yes, the financial companies are getting squeezed by their reckless risk taking. This is just like so many people got squeezed trying to flip houses and make a killing. What many people are missing is that there is an underside to this economy filled with people with questionable credit, some without bank accounts, in debt and working on minimum payments from month to month. These people are increasing in number rather than decreasing. They would rather make payments on their credit dards so they can live from month to month (or week to week) than pay their mortgages; especially since they may be upside down in the value of their home. So, who takes care of these people? By that I mean, who services this less than credit worthy population? If they won’t go away and are increasing in number then they may be a market worth looking at. And, as for all of the hedge funds and investment banks, it’s ironic that for once the rich guy gets more screwed than the little guy.

  2. Posted by Chris on March 19, 2008 at 5:45 pm

    Mike,
    I do agree that the US is heading for a crisis on multiple levels but I can’t believe you recommend the book so highly. The podcast was borderline sickening; I almost had to turn it off based more on the show host rather than the author. The author was a lot more realistic and level headed when speaking about the four storms.

    Why do people continually compare the US to 2nd and 3rd world countries rather than past superpowers that collapsed and came back. Most recently is the fall of Japan, England, Germany, France and beyond… These countries are still ticking.

    Our crisis is larger than all four combined but let’s not get ridiculous. Even the author says that life will go on but a few hot spots will exist here and there. I believe that. The world forgetting about the US is a little far fetched. Who decides to forget about a market of 400+ million people in 2050 and beyond? No one has forgotten about England, France and friends.

    I just have trouble knowing that you pump the book so favorably. Our system is screwed-up and I am rushing here with this comment but some statements in the podcast alone made me laugh out loud on the train.

    I hope we can chat about this some time in NYC when you are up here. I would like to be enlightened and hear you point of view first hand.
    -Chris