1. Paulson Not Receiving Much Love from Congress Today: As the saying goes, no good deed goes unpunished. I agree with Jack Welch that Paulson and Bernanke did save the financial system from collapse last September. It is also my understanding that the Federal Reserve has the power to remove Bank CEOs and the Board of Directors. CNBC.com BAC had a very poor argument anyway to back out of the merger with Merrill based on the material adverse change clause, and any attempt to do so would have caused chaos in the financial system last December.
2. Novartis: I recently sold NVS, ABT, and SNY, and have only a small position in BMY as my sole remaining pharmaceutical stock. My primary concerns about the major drug companies involve these issues, applicable to most or all of the major ones: (1) expiring patents on major drugs; (2) the failures to discover new drugs to replace those that have recently lost, or will soon lose patent protection; (3) "reform" of the healthcare system by the Democrats; (4) what appears to me to be the failure of many promising compounds somewhere during the trial process; and (5) a desire to merge with other drug companies in an effort to compensate for a lack of successful new products. Novartis has fewer of these problems than most of the large drug companies. NVS beat the consensus earnings estimate by five cents, reporting net income of 90 cents per share for the second quarter. This was down however from the year ago quarter's earnings of 99 cents per share. (p.8 of PDF referenced below) Operating income for the second quarter rose 13% when adjusted for the impact of currency movements.
Net sales were up 8 % in local currencies. I thought that overall this was a good report, and will look for an opportunity to buy back my shares sold at $41.86, somewhere below $40. Otherwise I will just let it go and find something else to buy in this space.
3. J P Morgan: I do not own JPM common stock. I do own two Trust Certificates containing a JPM junior bond maturing on 3/14/2014, PYV and GJK, and another TC, GJN, maturing in 2035. All of those securities are synthetic floating rate securities. Synthetic Floaters
J PMorgan Chase reported earnings of 28 cents, much better than the consensus estimate of just 4 cents. The profit was after a 1.1 billion charge connected with the repayment of the TARP money ($.27 per share), and a 10 cents per share FDIC assessment. The Tier One Capital Ratio was 9.7% at the end of the quarter. Consumer loans were also a drag on JPM, and this is not likely to change anytime soon.
4. China Stimulus: China's stimulus plan, a plan that actually works, is performing in a major way, with growth accelerating 7.9% in the second quarter. China's foreign exchange reserves rose to 2.132 trillion last quarter. I believe that is the largest in the world.
5. East West Bancorp: I bought earlier in the year two lottery tickets in banks that cater to the Chinese community. One-UCBH-looks like it may find the same home as my powerball selections after the numbers are drawn. The other is East West Bancorp (EWBC), which may just work out. That opinion is just based on a quick review of its earnings release this morning, which left me with an overall positive opinion about the bank. My purchase was 50 shares at $5.7: Buy of 50 EWBC as Lottery Ticket
Many of my lottery ticket purchases during the last quarter were in banks that had suffered huge declines in share prices, including such institutions as Webster Financial (WBS) at $4.58; Wilmington Trust at $9.98; & Regions Financial at $3.47: LOTTERY TICKET PURCHASES: LINKS IN ONE POST Patience is the operative word for those insignificant purchases and possibly I will have two successes for each failure in them if I am lucky.
6. Baltic Dry Index: This index managed to cross over 4000 in June, before dipping in July close to 3000. It has started to turn back up some.
7. CIT: The NYSE allowed the common to start trading again and the shares dropped almost 80%, trading mostly in a 30 to 55 cent per share range in early trading this morning. I do not own the common, never have owned it. I would anticipate a bankruptcy filing soon, though that is not 100% certain and that would most likely wipe out the common and preferred shareholders including the government's 2.3 billion dollar equity preferred stake. There was a report from CNBC that CIT was trying to line up 2 to 3 billion in secured financing from private investors. CIT is attempting to buy some time so that it can pursue other alternatives for its debt problems other than bankruptcy. The CNBC report is an informative update on the situation.
8. Foreigners Sell U.S. Securities: Foreign investors continued to unload U.S. securities in May, selling 19.8 billion in long term treasuries but our major lender, China, increased its holdings to 801.5 billion while Japan decreased its holdings.
9. Democrat's Unfriendly to Small Business in Funding the "Right" to Healthcare: While it is an obvious point, this article in the WSJ explains how the Democrat's intend to penalize small businesses that do not provide health insurance for their workers. Many small businesses simply can not afford to do so, and will nonetheless be slammed by the Democrats for failing to provide health insurance.
10 VXN: The volatility index for the Nasdaq average, VXN, is hovering at around the same mid 20s level as the VIX, and has even fallen below 25 in trading today. ^VXN:
I view this development as positive. The VXD, the volatility for the DJIA, is falling closer to the important 20 marker: ^VXD:
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