Thursday, January 22, 2009

AFLAC, ED, Crude Inventories, FITB, FII/Housing Correction Near Over?

A spirited rally off today's lows is in progress as I write. 

I am starting to measure my investing success over the past two years by simply avoiding most of the worse smash ups, with the exception of staying in BAC common way too long.  I just saw a quote on AFLAC, currently down over 30%, after a Morgan Stanley analyst warned about Aflac's exposure to hybrid securities.MarketWatch  So, I am looking for victories in the negative, not owning something that gets smashed.  

OIL inventories are now 14.3% above year ago levelsYahoo! Finance

Fifth Third, another bank that thought it was being smart trying to catch the Florida real estate bubble, posted a net loss of  2.18 billion or $3.82 a share.  FITB is down 30% so far today, trading below $3. It was a $40 stock as late as May 2007.  

I saw a story that the technical analyst John Rogue was predicting 680 on the S & P 500 Tech Ticker, Yahoo! Finance
This is possible but I do not view it as likely.  A fall to 680 would put the average back at levels last seen in 1996, the year of Greenspan's irrational exuberance speech. FRB: Speech, Greenspan -- Central banking in a democratic society -- December 5, 1996

J P Morgan upgraded Federated Investors to neutral from underweight after downgrading it to underweight on 12/12/08.  I previously noted this downgradeBrief Return to HG HQ TRADING DESK: Look at PFX go/MORE THOUGHTS ON FII/STEWART SHILLING FOR INVESTMENT ADVISORS IN MADOFF SCANDAL?   My involvement is a mere 50 shares recently bought at 17.32 primarily for the dividend with a hope of some capital appreciation. Real Estate: REITS v Non REITS/VANDY FOOTBALL/ BUY OF FEDERATED INVESTORS/HERTZ/FLOATER RALLY & ASSET MANAGEMENT/PARTIAL SELL OF FCZ
Earnings are expected after the close at $.5 versus $.52 a year ago which would look good compared to releases by other asset managers.FII: Analyst Estimates for Federated Investors Inc (PA) - Yahoo! Finance

Con ED reported 4th quarter earnings at $.72 a share for ongoing operations excluding items compared to $.71 a year ago excluding items. Con Edison Reports 2008 Earnings: Financial News - Yahoo! Finance  Con Ed is my largest electric utility position in dollar terms.  Con Ed declared a dividend to $.59 a share payable to shareholders of record on 2/19/09.    Before items, the earnings were 58 cents with 3 billion in revenue compared to the consensus estimate of 3.37 billion. MarketWatch  One of the items excluded was a $.12 charge for mark-to-market effects of the competitive energy business and $.02 for discontinued operations. I do not know if the analysts' consensus estimate included or excluded those charges.  Con Ed intends to issue 300 to 550 million of new stock during 2009 in addition to stock issuances under its dividend reinvestment and employee stock plans. at Yahoo Finance is calling this a 4 cent beat and a miss on revenues.

I see that the first lawsuit was filed against BAC for allegedly misleading stockholders about the Merrill Lynch acquisition. Law Blog - : This is just my opinion, but it does not appear that Merrill had any value at the time of BAC's acquisition.   John Thain should be applauded by the former Merrill Lynch shareholders for convincing Ken Lewis to pay anything for Merrill's shares.  The bad news is that got stock in Bank of America and can now share our pain.   The picture in the WSJ of Lewis and Thain enjoying the mirth of their merger is almost painful to look at.  Who is smiling now?

The Merrill employees were given 3 to 4 billion in bonuses two months early, in anticipation of BAC's acquisition. MarketWatch  

I am curious today about the weakness in long treasury bonds and the strength of the dollar against most major currencies other than the YEN. 

This article in Marketwatch suggests the housing correction may be near an end, after a 23% correction from 2006 highs and as much as 50% in areas where prices had a parabolic move.  The rationale is that affordability at current prices  based on current income levels is about 7% away from the levels prevalent in the 1980s.  Housing correction appears to be nearing an end - MarketWatch   I am not sure that he is using recent income numbers adjusted for the spiraling number of job losses during the 4th quarter of this year, and continuing into the first quarter of 2009.  Just based on my personal observations, I see no pick up in a normally very strong housing market, near and around my home, possibly best described as almost no activity, let alone in other sections of a normally robust Nashville economy.  The currently listless new construction activity is eerily reminiscent of  1974 and 1990.  I remember looking at some really fine completed homes in prestigious areas that had been repossessed by banks from builders, where the bank was just trying to unload them at prices in the 300 to 400 thousand range.  Within a few years, they were selling for over a million.  

 I do believe that some individuals are using the record low interest rates to refinance existing mortgage loans.  If I was interested in going into debt, which I am not, I would certainly be looking at an opportunity to receive a long term mortgage at less than 5%.   

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