Wednesday, January 28, 2009

Sometimes: Better to Say No More than Yes/ SLG, T, NVS, WFC/BAD BANK Model/

Sometimes it just pays to say no and walk away.  If this had been done a million or so times over the past five years, we would not be in such a pickle now. GE Finance recently foreclosed on a two year 148 million dollar bridge loan to fund the acquisition of some apartments in Alabama at a 95% loan to value ratio.  When asked why such a high loan to value, GE said that it was a competitive market. A better answer in the future would be to just say no. 

This is a link to the S L Green earnings call transcript. SL Green Realty Corp. Earnings Call Transcript -- Seeking Alpha
I have to admit that I do not know beans about NY real estate, but this company appears to be well managed to me after reading this transcript.  This is not to say that I have never been in NYC.  In 1964, while in the city with my family,  my father and I took the subway to Shea stadium to watch a Mets game while everyone else went to see a Shakespeare play starring Elizabeth Taylor and Richard Burton.  The Mets were just awful. I did fly into NYC on my way to Ireland in 1981.   The aerial view of NYC made an impression on me, as did my final and last visit which consisted of a bus ride from Binghamton to Yankee stadium.  I do not think that SLG owns any properties in the South Bronx, which left an indelible imprint on my southern brain, with Yankee stadium rising like an oasis out of the rubble.   So, as you can see, these three trips does not qualify me as an expert on Manhattan real estate.  I may work my position in S L Green from owning a few bricks to a window. 

I do believe that it is important for the government to keep trying new approaches to solve the banking crisis until it stumbles on a plan that actually works.   Paulson's showering the banks with 5% money may have averted the Great Depression Part Deux, and provided the necessary funds to pay bonuses to every doofus in a suit for 2008.   Obama may now be moving to approving the bad bank model, which might actually work.  MarketWatch But to restore confidence, we need a new generation of leaders in our financial institutions.  One fact that has come through loud and clear, more than anything else, is that most of our major financial institutions were not being led by competent individuals.   Greedy, highly compensated, rewarded for failure and for taking outlandish and irresponsible risks, lacking in judgment, incompetent, and totally devoid of an ounce of common sense, would all be fair characterizations of them. 

I do not own common stock in AT & T but I do have a significant position in its senior bonds. This will cause me to monitor the progress of this company as if I owned common shares. The report this morning from T was satisfactory with the company earnings 64 cents excluding items, one cent shy of the consensus estimate. MarketWatch
AT & T is paying a price for its IPhone subsidy.

Wells Fargo reported a 4th quarter loss of 2.55 billion due to credit write-downs and losses.  WFC just acquired control of Wachovia, a deeply troubled large bank, which had a 11.2 billion 4th quarter loss.  Importantly, WFC said it had no plans to seek additional TARP money.   MarketWatch  I do not have a position, although I do consider from time to time taking a position in one of its debt preferred issues. 

I do not own ConocoPhillips, but I was nonetheless stunned by the 25.55 billion loss resulting form an impairment charge of all of its exploration and production segment goodwill and a 7.410 billion charge connected with its LUKOIL investment. Yahoo! Finance

The NYT did report earnings of 19 cents after items and 36 cents before items, beating the forecasts of 27 cents. Yahoo! Finance  The company also put its 17.75% interest in New England Sports Venture up for sale, and that venture owns the Red Sox, their home field and some real estate.  Carlos Slim recently acquired a stake.   Seeking AlphaWhile newspapers are in a decline, part of the problem is associated with the funk in the economy rather than the secular decline of the newspaper industry caused primarily by the advent of the internet and the overall pronounced trend of more people preferring to be enlightened by the bloviators.   I know many people who refer to themselves as "conservatives" who have refused to ever read a single article from the NYT or the WP believing that all "mainstream" and "liberal" news organizations are involved in some kind of vast conspiracy to mislead them, so Rush and Sean are their alternatives.  Sarah is the personification of a perfect candidate for them, and they are most pleased that she has started fundraising for a possible 2012 quest to be President.   When you talk to them, and it generally takes no more than a minute or two, conservative is not an appropriate descriptive term for them, far from it.  What little information, which they do possess, can best be described as incorrect and/or incomplete, usually consisting of two or three word cliches strung together as a belief pattern with any substantive and real factual information studiously disregarded to the point where an active effort is made to avoid all contact with facts.    I do view myself as a conservative.  Maybe I will buy 25 shares of the NYT as a show of support for a good newspaper. 

The economist Nouriel Roubini must enjoy hearing himself talk, continuing a dire set of forecasts that would make Alan Abelson look chipper.  He upped his forecast of bank losses to 3.6 trillion and predicted 1% growth in the economy in 2010. Tech Ticker, Yahoo! Finance
I just wanted to make a note for future reference in 2011.  Sometimes, it is probably best to just shout up while your reputation as a guru is still in tact. 

Sales growth at Novartis rose only 1.5% but this was shaved by 7% due to currency swings.  Operating profit rose 25% but missed estimates. The dividend was raised MarketWatch
The company expects record earnings in 2009.  One of its main drugs, Diovan, loses patent protection in 2012.
NVS looks like it will fall today and I am going to look at it closer for a possible add.  

I like the negativity expressed in this article since I do not currently own NVS and would like to nibble on it at lower prices:

Other recent articles about NVS of interest to me:
(news potentially impacting NVS drug Foradil)

Cramer says he does not trust ING's 26% dividend yield.  That is a good call, Jim, since the common stock dividend was eliminated last year.  You may want to stay in touch before opining.  Now, contrary to a few days ago, he does not like Dryships. 

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