Thursday, November 13, 2008


INTEL is holding up well considering the magnitude of its earnings warning last night, but Microsoft and Hewlett Packard are hitting new 52 week lows on the news.  Microsoft fell through 20, down almost 5% this morning.  This is the first time MSFT has been below 20 since 1998. 

I view the most important news today to be the price action in General Electric.  It fell below 15 this morning, falling as low as  14.66.  It was just a few weeks ago that GE did a stock offering at 22.5.  About this time last year, GE stock was near 40.  How the mighty have tumbled!  The fear today appears to originate from concerns about a dividend cut.  When GE came out and reaffirmed its commitment to keep the dividend through 2009, the stock rallied some and has since fallen again below 15.  Yahoo! Finance  What can you say.  With the economy deteriorating rapidly, plans will change as we progress further into this economic downturn.  Possibly, investors are just becoming unhinged, or concerned about a AAA credit having to rely on the new FDIC insurance program for corporate commercial debt.  Yahoo! Finance

Goldman Sachs cut all of the life insurance companies in its coverage universe to sell other than Met Life,  and its sell recommendation included Lincoln NationalMarketWatch  According to news reports, the downgrade was based in part on the guarantees made in variable annuity contracts and losses in the insurers' investment portfolios, notably in commercial mortgages.   I had previously bought 30 shares of  Lincoln National.Late Friday Buys: LNC and GXP    LNC is within my buy range for another 30 share purchase as soon as I lift my self-imposed trading ban on all common stocks. 

I previously mentioned that I bought a preferred stock issue from Strategic Hotels (BEE) and noted that this was one of the riskier preferred stocks purchased to date. Stocks & Politics: BEEPRA: STRATEGIC HOTELS PREFERRED A  (last paragraph of this post: HARTFORD FINANCIAL (HIG): DUMB AS AIG? )BEE did report earnings recently and suspended payment of its common stock dividend.  Strategic Hotels & Resorts Reports Third Quarter 2008 Results: Financial News - Yahoo! Finance  No mention was made about postponing dividends on it cumulative preferred issues.  The three preferred issues have fallen about a point after this earnings release but the common has had a rougher time, falling from around 5 to 1.85 currently.  If BEE declares dividends for its preferred shares, I would expect them to recover some in price.  Most preferred dividends have to be paid in full as long as a common share dividend is paid.  With the elimination of the common dividend, that restriction on postponing the preferred has of course been removed.   

I would expect to know in a few days whether ING will declare its preferred stock dividends after it eliminated the common dividend for the remainder of 2008. 

Some of the big banks told Congress that they would not use the bailout money for employee pay.   Yahoo! Finance
To be frank, I do not believe them. 

Soros added to the good cheer by saying a severe recession was inevitable, and who could disagree with that opinion now, but then he added for good measure that a depression was possible. Yahoo! Finance

Jobless claims rose to the highest level since 9/11.Yahoo! Finance

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