Archive for March, 2013

• JPMorgan Chase’s Legal Woes
  Eddy Elfenbein, March 27th, 2013 at 11:36 am

  I’m a big fan of JPMorgan Chase ($JPM) as an investment but I have to concede that the bank is not exactly Mr. Popular with the American public. The bank’s legal problems continue to mount, and I think it’s time for Jamie Dimon to go. He’s a brilliant executive but he’s now more of a liability than an asset. As a rule of thumb, banks should be boring. Having Jamie around makes JPM anything but boring. He recently expressed his disagreement with an analyst by saying, “that’s why I’m richer than you.” Some people find this hilarious. Me, not so much.

  The New York Times noted that “at least” eight different federal agencies are currently investigating JPM. Yikes, that ain’t good. Plus, there’s still the problem of the London Whale fiasco and now the Feds are looking at criminal charges that JPM lied to investors. If that’s not enough, the Feds are also looking at the possibility that the bank didn’t reveal suspicions about Bernie Madoff.

  Earlier this year, the big banks agreed to a settlement over mortgages abuses. The banks were supposed to go through their mortgages one-by-one and rectify the mistakes. Well, JPM screwed this up. To be fair, the other banks are having difficulty resolving this as well, but it’s another headache JPMorgan doesn’t need.

  Again, to be fair to JPM, many of these issues seem to be areas where the bank was acting in good faith but simply bungled. Plus, the amount of money involved, even in the London Whale trade, are relatively small compared with the bank’s overall profile, but there are too many headlines to worry about.

  Personally, I’d like to see Jamie go, and I’d like to see the bank split up.

• We Still Can’t Make a New High
  Eddy Elfenbein, March 27th, 2013 at 11:08 am

  The stock market yet again approached its all-time record, and yet again stepped back from a new high. The S&P 500 got as low as 1,551 this morning but it’s been gaining back ground since then.

  There doesn’t seem to be a wide dispersal in today’s market, meaning most stocks are behaving similarly. Some of the defensive areas like utilities and healthcare are up a small amount while the more cyclical areas are down, but nothing too serious.

  Late yesterday, shares of Nicholas Financial ($NICK) dropped from close to $15 to $14.35 at the end of trading. The selling continued this morning and the shares bounced off $14.01. No, there’s no news about a buyout. I think this is pure speculation. I warned investors to expect some of this. Unfortunately, this is part of owning stocks and there’s not much we can do. If there’s any news about NICK, I will let you know.

• Morning News: March 27, 2013
  Eddy Elfenbein, March 27th, 2013 at 5:48 am

  Amid Crisis, Cypriots Look Inward

  Cyprus Capital Controls First in EU Could Last Years

  Fitch Upgrades Philippines To Investment Grade; Outlook Stable

  U.S. Asks Liechtenstein For Data In Swiss Banking Probe

  Sales of New Homes Sink 4.6% in February

  Fed Tells Citi To Improve Anti-Laundering Systems

  Berkshire Set to Get Big Goldman Stake

  Is J.C. Penney a Lost Cause?

  JPMorgan Chase Faces Full-Court Press of Federal Investigations

  Ericsson In Talks To Buy Microsoft’s TV Software Unit

  Allianz Buys Turkey’s Yapi Kredi Sigorta for $879 Million

  In a Faded Wall St. Scandal, Lessons for a Current One

  $616 Million Poorer, Hedge Fund Owner Still Buys Art

  Howard Lindzon: Bitcoin…The Jurassic Park of Currencies

  Jeff Carter: Should You Work From Home?

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• Oh So Close…
  Eddy Elfenbein, March 26th, 2013 at 7:06 pm

  The S&P 500 closed today at 1,563.77. The index is now less than 0.0882% from its all-time close of 1,565.15 from October 9th, 2007.

  

• Ten-Straight Up Tuesdays
  Eddy Elfenbein, March 26th, 2013 at 11:12 am

  The Dow has risen for the last 10 Tuesdays in a row. We’re going for #11 today. The Dow is currently up 96 points.

  Date	Dow	Gain
  15-Jan-13	13,534.89	27.57
  22-Jan-13	13,712.21	62.51
  29-Jan-13	13,954.42	72.49
  5-Feb-13	13,979.30	99.22
  12-Feb-13	14,018.70	47.46
  19-Feb-13	14,035.67	53.91
  26-Feb-13	13,900.13	115.96
  5-Mar-13	14,253.77	125.95
  12-Mar-13	14,450.06	2.77
  19-Mar-13	14,455.82	3.76

• Johnson & Johnson Breaks $80
  Eddy Elfenbein, March 26th, 2013 at 10:56 am

  Yesterday I mentioned my bad call with Nike ($NKE); today I’ll highlight another misstep. I took Johnson & Johnson ($JNJ) off this year’s Buy List.

  Shares of JNJ just broke through $80 per share this morning for a new all-time high. This is interesting because the stock had not strayed very far from $60 for more than a decade. It did a few times, but not for long. JNJ is currently up more than 14.5% for the year.

  

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• Buffett, Goldman Rework Warrants
  Eddy Elfenbein, March 26th, 2013 at 10:04 am

  It’s good to be Warren Buffett. Back when the world was melting down, Berkshire Hathaway ($BRKA) bought warrants that gave them the right to buy 43.5 million shares of Goldman Sachs ($GS) at $115 each. These warrants expire on October 1st of this year. Shares of Goldman are now up to $147 apiece.

  Goldman and Buffett are reworking the deal so instead of Buffett getting the difference between $115 and $147 in cash, he’ll get it in more stock. This is interesting first two reasons. One is that Buffett doesn’t want cash. I can’t blame him since interest rates are so low. Even Goldman’s lowly dividend of 1.4% looks good. The other reason is that Buffett is sticking with banks; more specifically, large banks. He already owns a big portion of Wells Fargo ($WFC) but he obviously sees no problem with sticking by Goldman a while longer.

  Update: It looks like I had this wrong. Apparently, Buffett is only getting the number of shares worth the profit of those warrants. That will probably work out to about nine million shares. So instead of paying $5 billion to get $6.3 billion in stock, he’s paying nothing to get $1.3 billion in stock.

• Morning News: March 26, 2013
  Eddy Elfenbein, March 26th, 2013 at 6:39 am

  Cyprus Banks Remain Closed To Prevent Run On Deposits

  Stricter Rules But Signs of Disarray in Cyprus Deal

  BRICS Nations Plan New Bank to Bypass World Bank, IMF

  Ireland Lures Germans With EBay as Economy Rouses From Recession

  New BOJ Chief Elaborates on Easing Plans

  China Construction Bank Quarterly Net Rises 16% on Loans

  Fed’s Fisher: Economy Starting To Move, Not Accelerating

  Summly News App Tempts Yahoo To Make 17-Year-Old A Multimillionaire

  SEC Approves Nasdaq’s $62 Million Settlement for Facebook

  Hon Hai Posts Record Profit as Apple Expands Product Line

  Dollar General Profit Tops Expectations, Shares Up

  Apollo Jumps as Sales, Profit Beat Analysts’ Estimates

  Ford CEO Mulally Says He’s Concerned About Japanese Yen

  Roger Nusbaum: Winters Likes Watches

  Stone Street: Fear Not Every Penny Stock

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• Nike Continues to Soar
  Eddy Elfenbein, March 25th, 2013 at 11:33 am

  Here’s one of my more embarrassing calls. Last August, I said that Nike ($NKE) was absurdly overvalued at $95 per share. The stock has since split 2-for-1 so that was $47.50 post split. Thanks to a strong earnings report, the shares are at $59 today.

  Oops.

  The shoe company beat earnings by six cents per share:

  Earnings excluding items rose to 73 cents per share from 60 cents a share in the year-earlier period.

  Revenue improved about 9 percent to $6.19 billion from $5.66 billion a year ago.

  Wall Street had expected Nike to report earnings excluding items of 67 cents a share on $6.23 billion in revenue, according to a consensus estimate from Thomson Reuters.

  Orders for Nike-branded shoes and clothing scheduled for delivery from March through July 2013, known as futures orders, rose 6 percent compared to orders reported for the same period last year. In North America, the company’s biggest market, orders were up 11 percent.

  As impressive as these numbers are, I still think Nike is too expensive. This is frustrating for me because I like the company a lot but I refused to chase it at a price that I think is unreasonable. Right now, I don’t see how paying more than $45 per share can be justified. The dividend works out to 1.4% which isn’t hard to beat elsewhere. Since 1984, Nike’s stock is up more than 250-fold.

  

• Deal Reached in Cyprus
  Eddy Elfenbein, March 25th, 2013 at 11:18 am

  I largely held off on commenting on the rapidly-changing events in Cyprus. I felt that some sort of deal would be reached. I think these stories tend to be phony standoffs where everyone pretends to wait until the last minute until they decide to choose the only alternative left.

  Here’s the New York Times:

  Under the agreement, Laiki Bank, one of Cyprus’s largest, would be wound down and senior bondholders would take losses.

  Depositors in the bank with accounts holding more than 100,000 euros would also be heavily penalized but the exact amount of those losses would need to be determined.

  The plan to resolve Laiki Bank should allow the Bank of Cyprus, the country’s largest lender, to survive. But the Bank of Cyprus will take on some of Laiki’s liabilities in the form of emergency liquidity, which has been drip-fed to Laiki by the European Central Bank. That short-term financing, which the E.C.B. had threatened to cut off on Monday, is expected to continue.

  Depositors in the Bank of Cyprus are likely to face forced losses rather than any form of tax. That plan, which set off outrage last week in Cyprus and as far away as Moscow, has now been dropped entirely.

  Mr. Dijsselbloem said he was “convinced this is a much better deal” because under the revised agreement, the heaviest losses “will be concentrated where the problems are, in the large banks.”

  My apologies to the good people of Cyprus, but what happens there doesn’t much affect us. The fear was that a bank deposit tax would lead to a continent-wide bank run. Alas, that’s not the case. The Cypriots got together with the Troika and decided to screw the Russians—and by Russians, I of course mean the uninsured depositors. The best part of this deal is that it doesn’t have to be approved by the Cypriot parliament.

  The U.S. stock market jumped at the open, and the S&P 500 came near its all-time high close, but we’ve given it back already. That should tell you that the Cyprus deal isn’t such a big deal. The stock market is currently down just a bit.