1. BANK OF AMERICA (own Common & Preferred): BAC agreed to sell part of its Columbia asset management unit, the part focused on long term asset management, to Ameriprise Financial for between 900 million and 1.2 billion, with the deal expected to close next spring.
2. Chicago PMI: This report came in weaker than expected at 46.1 in September from 50 in August. A reading below 50 indicates contraction. www.ism-chicago.org.pdf
3. Medtronic and Stryker (owned): Goldman initiated coverage on both Stryker and Medtronic at neutral. GS has a $54 price target for SYK and $43 for MDT.
4. Bought 50 Susquehanna Bancshares (SUSQ) YESTERDAY at $5.85-Barely Under the $300 Maximum for a Lottery Ticket (see Disclaimer): Susquehanna, like the other regional bank lottery tickets recently purchased by the RB on its whirlwind frolic and detour, has seen better days. Looking at the long term chart at YF, it looks like the share price has returned to 1991, the last major period when the banks managed to commit hara -kiri (Seppuku) SUSQ: Basic Chart for Susquehanna Bancshares In 2006, it was trading above $25. SUSQ has around 238 branches, operating mostly in suburban Philadelphia, central Pennsylvania, southern New Jersey and Maryland. For the 2nd quarter of 2009, the bank reported a loss of 14 cents per share compared to a profit of 34 cents in the comparable 2008 quarter Form 10-Q. Book value was stated at $19.91 as of 6/30/09. Susquehanna Bancshares, Inc. Announces Second Quarter 2009 Results The Tier 1 Capital Ratio was 10.69 as of Q/E 6/09. Nonperforming loans rose to 2.3% of total loans. While this kind of report is far from acceptable, it is not as bad as some of the others that RB has just bought such as SNV. These regional bank LTs are not trades.
5. CIT (own just 2 senior bonds maturing 12/09 & 3/10): CIT's common lost almost 50% of its value yesterday based on the WSJ and Reuters reports of a debt exchange or a pre-packaged bankruptcy. One curiosity to me is the statement made in the WSJ article that the non-bankruptcy option would most likely wipe out the value of most of the government's preferred shares. I would view that as a sure thing in a bankruptcy filing given the amount of CIT's senior unsecured debt (close to 32 billion) and secured debt. I am curious how that would happen without a bankruptcy. The government's preferred shares could not be cancelled outside bankruptcy. Possibly, the government would be offered a token amount for the preferred shares in the recapitalization. The government has about 2.3 billion at stake with CIT equity preferred shares bought with TARP money. The Reuters story mentions that typically 90% of the bondholders would have to approve the debt exchange. If that is true, I have trouble seeing how that could be done. Reuters also claims that typically about 2/3rds of the bondholders need to approve a pre-packaged bankruptcy. The deadline is looming due to CIT's earlier agreement with bondholders back in July, who lent 3 billion to CIT, that a restructuring plan had to be approved by them by 10/1/09. CIT
6. Wal-Mart and GE: Both the Chairman of Wal-Mart, Robson Walton, and GE's Jeff Immelt were singing the same blues song, at business conferences in Asia, called the "recovery will be a slow one." Walton said that Asia will lead the recovery. Asia has to lead the recovery. I would not expect much oomph from the American consumer for several years. Wal-Mart just entered India via a joint venture and WMT has about 250 stores in China.
7. UNILEVER (owned): After selling some shares profitably bought at $18.22, Pared Unilever, I still own Unilever shares bought at $18.05 during the RB's frolic and detour in March and intend to keep what I currently own, primarily for the dividend. Added to UL/Sysco & Dupont Mentioned in Barron's Online Barron's has a favorable article in the online Weekday Trader's column written by Avi Salzman. Barrons.com I own UL rather than UN. UL closed yesterday at $28.68. Barron's points out that Unilever is still selling at around 14 times 2010 earning sand sports about a 3.5% dividend at the current price.
8. Personal Income and Spending: Both rose more than expected in August, with personal income rising .2%, and disposable income +.1%. Real disposable income, adjusted for inflation, decreased .2% in August, however. Personal savings as a percentage of disposable income was 3% in August, a decline from the 4% reading in July. Personal outlays increased 127.3 billion in August compared to an increase of 22.9 billion in July. News Release: Personal Income and Outlays, August 2009 Spending was influenced by the cash for clunkers program, with a 5.3% increase in durable goods spending, and total spending rose 1.3% in August, the fastest rate in 8 years.
9. IMF: IMF raised its forecast for world GDP growth in 2010 from 2.5% to 3.1%: NYT
10. ISM Report: The 30 year treasury hit 4% after the release of the ISM number for September. Bloomberg.com: Government Bonds The ISM index for manufacturing declined a tad in September to 52.6% from 52.9% in August. The new orders component declined 4.1% from August to 60.8: ISM The new orders component of this index did signal an upturn earlier in the year: Some Signs of Light at the End of the Tunnel: End of the Recession?
I am waiting for an opportunity to buy my hedges back for my corporate bond portfolio. I simply view most of the strength in treasuries to be related to fixed income investors around the world having few options for their cash with the abnormally low rates, and to the buying of those securities by the Fed as part of its quantitative easing program.