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CENTER
UPDATE: Staples Won't Estimate Results; Profit Down More Than Forecast
Dow Jones
March 11, 2009: 09:47 AM ET
NEW YORK (Dow Jones) -- Staples Inc.'s fourth-quarter profit dropped 14% as the recession and the worst jobless rate in over a quarter of a century led to lower demand for bigger-ticket items such as computers and furniture, financial results showed Wednesday.
Framingham, Mass.-based Staples (SPLS), the largest retailer of office supplies, also said it's not providing profit and sales forecasts for the first quarter ending in April and for the full fiscal year as it expects weak economic climate to continue throughout the year.
Staples' shares fell 4.7% in pre-market trading.
Net income fell to $286 million, or 40 cents a share, in the three months ended Jan. 31, down from $333.2 million, or 47 cents, earned in the year-earlier fourth quarter.
Quarterly sales increased 16% to $6.17 billion from $5.32 billion. Excluding the impact of Staples' purchase of Corporate Express, total company sales decreased 14% to $4.6 billion.
Profit excluding special items tied to the purchase of Corporate Express would have been 36 cents a share, Staples said.
Analysts, on average, had been looking for a fourth-quarter profit of 41 cents a share, according to FactSet Research.
Like other office-supplies retailers, Staples has been hurt by consumers and businesses cutting back on discretionary purchases and holding off on software and hardware upgrades, analysts said.
Staples will continue to control expenses in the face of uncertain sales, management said.
North American delivery unit sales rose 43% in the latest quarter, to $2.5 billion. Excluding the impact of Corporate Express, sales declined 10% to $1.6 billion, hurt by lower spending per existing customer -- particularly on durable categories such as furniture and technology -- while paper and ink sales increased.
NOTE: the lower per spending per exiting costomer are particularly on the durable categories as such of furniture and technology.
North American retail sales dropped 14% to $2.4 billion. Staples' quarterly comparable-store sales fell 13% because of declines in average order size and customer traffic, as well as lagging demand for computers and accessories, business machines, and furniture.
International sales increased 62% to $1.3 billion, reflecting the impact of Corporate Express acquisition.
Excluding Corporate Express, overseas sales dropped 24% from the year-earlier fourth quarter. Comp-store sales in Europe decreased 10%, hurt also by weakness in average order size and customer traffic.
(END) Dow Jones Newswires
03-11-09 0947ET
Copyright (c) 2009 Dow Jones & Company, Inc.
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Thursday, April 30, 2009
Tuesday, April 28, 2009
THE NEW CREDIT SQUEEZ: CARD COPANIES CUTTING CREDIT LIMITS
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CREDIT SCORES
The new credit squeeze: Card companies cutting credit limits
Some customers say restrictions affect credit scores unfairly
By Alexis Leondis
BLOOMBERG NEWS
Friday, March 13, 2009
NEW YORK — Wayne Brown has a dilemma.
If he reduces the balance on his credit card, American Express Co. will cut his credit limit to the amount of the new balance, he said. If he doesn't make a big payment, his interest rate might skyrocket.
The credit limits on Brown's cards have been lowered, which has raised his debt relative to his available credit. This so-called utilization rate is a key factor in determining credit scores. Brown, a 58-year-old construction company owner in San Diego, has seen his score drop to 650 from 760 in the past 13 months.
NOTE: the credit have a utilization rate isa key factor in determing credit scores.
"Interest rates on all of my cards are going up now, and my minimum payments are almost doubling because it looks like I've maxed out my cards," said Brown, who uses credit cards to finance his homebuilding company. "It's a Catch-22."
About 45 percent of U.S. banks reduced credit limits for new or existing credit card customers in the fourth quarter of 2008, according to a Federal Reserve survey in January of senior loan officers. Financial institutions might slash $2 trillion in credit card lines in the next 18 months, wrote Meredith Whitney, a former Oppenheimer & Co. analyst, in a Nov. 30 report.
"You're no longer immune if you have good credit," said Curtis Arnold, founder of CardRatings.com, a Web site that reviews credit cards. "The issuers hold the cards — literally."
Credit card issuers such as American Express, Citigroup Inc. and JPMorgan Chase & Co. have cut credit limits to guard against risk and prevent delinquency and charge-off rates from increasing, said Arnold, who is based in Little Rock, Ark.
The average charge-off rate, which reflects loans the banks don't expect to be repaid, was 7.1 percent in January, compared with 4.6 percent a year earlier, according to data compiled by Bloomberg.
If credit card limits are decreased, consumers should pay off balances as quickly as possible, consider making online payments before the monthly statement arrives to reduce debt and weigh transferring balances to a card with a lower rate, said Jeff Blyskal, a senior editor of Consumer Reports.
Blyskal, who is based in San Francisco, said consumers should beware of teaser rates and high fees when transferring balances.
Cardholders are likely to damage their credit history if they cancel an older account and lose the available credit on that card, said Emily Peters, San Francisco-based personal finance expert at consumer Web site Credit.com. Credit-score companies look at the total amount of debt relative to credit limits on all credit cards when evaluating scores.
American Express, the largest U.S. credit card company by purchases, is offering $300 to some customers if they pay their balances in full by April 30 to reduce the risk of defaults.
Chase increased the minimum payment to 5 percent from 2 percent for certain borrowers with large balances, and Capital One Financial Corp. increased the rates for new customers on 15 cards, according to Bill Hardekopf, chief executive officer of LowCards.com, a Web site that compares rates of almost 1,100 credit cards.
American Express spokeswoman Desiree Fish said consumers' overall debt levels relative to their financial resources is the primary factor for any credit limit reduction. She declined to comment on the specifics of Brown's case.
Citigroup is lowering credit limits because of the market environment and deterioration of consumer credit, spokesman Samuel Wang said.
In 2008, Chase decreased credit lines or closed accounts totaling $129 billion, said Gordon Smith, JPMorgan's chief executive officer of card services, at a recent investor presentation. Credit lines to new and existing customers were increased by $107 billion, Smith said.
Critz George, a retired nuclear engineer and physicist in Albuquerque, N.M., said he had three Chase cards and one Citibank card closed because of inactivity, without advance notice. George, 71, said he is concerned that having four lines of credit closed could lower his credit score.
"I feel like it was an arbitrary and capricious decision because I have paid in full and on time for the last 20 years," he said.
Brown, who is also a mortgage broker, said he was always careful to keep his balance at one-third of the limit. He said the reduced credit limits on his American Express and Bank of America cards have made that impossible.
"I'm angry because I've always been proud of my credit history and now it's gone to hell — not because of something I've done."
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Credit card co.'s should be investigated as well as credit reporting agencies.
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* Statesman Business Blog: Sales tax revenue falls sharply for most Central Texas cities | Comments (37)
* Public Capital: TRS fund will need a lot more from state, maybe teachers | Comments (77)
* Up the Ladder: Two local nonprofits announce management changes | Comments (0)
* Lawsuit cites complaints at Sabine condo project downtown
* U.S. trade deficit falls to $36 billion in January
* With Madoff in jail, focus shifts to his family
* Stewart-Cramer spat puts spotlight on financial journalism
* Texas cattle losses approaching $1 billion; Nacogdoches man must repay nearly $71 million in Ponzi scam
More on statesman.com
* How to invest in a low-interest rate environment (01/03/2009)
* NAACP says bank giants steered blacks to bad loans (03/13/2009)
* Waters' role in banking meeting questioned; Anna Nicole's ex, docs charged. (03/13/2009)
Expand this list
Related Subjects
* American Express Company
* Business
* Consumer Credit and Debt
Expand this list
MOST E-MAILED STORIES
* Pittman's three-point play lifts Longhorns
* Anna Nicole Smith's boyfriend, doctors charged
* Man gets life for 2007 murder
* Don't go into with-draw-al
* Phelps talks to NBC about marijuana pipe photo
CREDIT SCORES
The new credit squeeze: Card companies cutting credit limits
Some customers say restrictions affect credit scores unfairly
By Alexis Leondis
BLOOMBERG NEWS
Friday, March 13, 2009
NEW YORK — Wayne Brown has a dilemma.
If he reduces the balance on his credit card, American Express Co. will cut his credit limit to the amount of the new balance, he said. If he doesn't make a big payment, his interest rate might skyrocket.
The credit limits on Brown's cards have been lowered, which has raised his debt relative to his available credit. This so-called utilization rate is a key factor in determining credit scores. Brown, a 58-year-old construction company owner in San Diego, has seen his score drop to 650 from 760 in the past 13 months.
NOTE: the credit have a utilization rate isa key factor in determing credit scores.
"Interest rates on all of my cards are going up now, and my minimum payments are almost doubling because it looks like I've maxed out my cards," said Brown, who uses credit cards to finance his homebuilding company. "It's a Catch-22."
About 45 percent of U.S. banks reduced credit limits for new or existing credit card customers in the fourth quarter of 2008, according to a Federal Reserve survey in January of senior loan officers. Financial institutions might slash $2 trillion in credit card lines in the next 18 months, wrote Meredith Whitney, a former Oppenheimer & Co. analyst, in a Nov. 30 report.
"You're no longer immune if you have good credit," said Curtis Arnold, founder of CardRatings.com, a Web site that reviews credit cards. "The issuers hold the cards — literally."
Credit card issuers such as American Express, Citigroup Inc. and JPMorgan Chase & Co. have cut credit limits to guard against risk and prevent delinquency and charge-off rates from increasing, said Arnold, who is based in Little Rock, Ark.
The average charge-off rate, which reflects loans the banks don't expect to be repaid, was 7.1 percent in January, compared with 4.6 percent a year earlier, according to data compiled by Bloomberg.
If credit card limits are decreased, consumers should pay off balances as quickly as possible, consider making online payments before the monthly statement arrives to reduce debt and weigh transferring balances to a card with a lower rate, said Jeff Blyskal, a senior editor of Consumer Reports.
Blyskal, who is based in San Francisco, said consumers should beware of teaser rates and high fees when transferring balances.
Cardholders are likely to damage their credit history if they cancel an older account and lose the available credit on that card, said Emily Peters, San Francisco-based personal finance expert at consumer Web site Credit.com. Credit-score companies look at the total amount of debt relative to credit limits on all credit cards when evaluating scores.
American Express, the largest U.S. credit card company by purchases, is offering $300 to some customers if they pay their balances in full by April 30 to reduce the risk of defaults.
Chase increased the minimum payment to 5 percent from 2 percent for certain borrowers with large balances, and Capital One Financial Corp. increased the rates for new customers on 15 cards, according to Bill Hardekopf, chief executive officer of LowCards.com, a Web site that compares rates of almost 1,100 credit cards.
American Express spokeswoman Desiree Fish said consumers' overall debt levels relative to their financial resources is the primary factor for any credit limit reduction. She declined to comment on the specifics of Brown's case.
Citigroup is lowering credit limits because of the market environment and deterioration of consumer credit, spokesman Samuel Wang said.
In 2008, Chase decreased credit lines or closed accounts totaling $129 billion, said Gordon Smith, JPMorgan's chief executive officer of card services, at a recent investor presentation. Credit lines to new and existing customers were increased by $107 billion, Smith said.
Critz George, a retired nuclear engineer and physicist in Albuquerque, N.M., said he had three Chase cards and one Citibank card closed because of inactivity, without advance notice. George, 71, said he is concerned that having four lines of credit closed could lower his credit score.
"I feel like it was an arbitrary and capricious decision because I have paid in full and on time for the last 20 years," he said.
Brown, who is also a mortgage broker, said he was always careful to keep his balance at one-third of the limit. He said the reduced credit limits on his American Express and Bank of America cards have made that impossible.
"I'm angry because I've always been proud of my credit history and now it's gone to hell — not because of something I've done."
Buzz up!
Vote for this story!
Your Comments
Austinites love to be heard, and we're giving you a bullhorn. We just ask that you keep things civil. Leave out the personal attacks. Do not use profanity, ethnic or racial slurs, or take shots at anyone's sexual orientation or religion. If you can't be nice, we reserve the right to remove your material and ban users who violate our visitor's agreement
You must be logged in to leave a comment. Login | Register
avatar
Doright wrote:
Credit card co.'s should be investigated as well as credit reporting agencies.
Posted on 3/13/2009 8:21:28 AM
Report Abuse
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E-mail Address *
Reason for abuse *
Show 11 - 20 of 1 comments
Top of Comments Top of Page
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PPD
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Monday, April 27, 2009
OBAMAS DEFENDS TAX HIKES, PLEDGES T STEER CLEAR OF PROTECTIONISM
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Friday, March 13, 2009, 9:19am MST
Obama defends tax hikes, pledges to steer clear of protectionism
Phoenix Business Journal - by Mike Sunnucks
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President Barack Obama defended his tax increases on those making more than $250,000 a year to a contingent of CEOs Thursday and promised not to let the recession steer a course toward protectionist trade policies.
Obama met with members of the Business Roundtable, which includes CEOs of some major companies with operations in Arizona: JPMorgan Chase & Co., American Express Co. and Motorola Inc.
Obama defended his plan to raise the top federal income tax bracket from 35 percent to 39.6 percent for couples making $250,000 or more. Small-business owners have been criticized that plan, saying it will not help job growth or investments. They also disputed the determination that $250,000 in income is considered rich.
Obama's tax plans also would raise some investment taxes.
"For the top 3 percent of all taxpayers — and I'm just going to take a shot in the dark and guess that includes some of the people in this room — the top tax rate across the board will still be lower than they were during the prosperity of the 1990s," Obama told the CEOs.
"It will still be lower than they were during the (Bill) Clinton era. You will pay a tax rate on capital gains and dividends that is also lower than it was during most of the 1990s," he said. "And the revenue that results from these changes will reduce the deficit by $750 billion over the next 10 years."
Obama got a warm reception from the CEOs.
Congressional Democrats and the Obama administration have been highly critical of bank and other CEOs in light of the troubles in the banking, lending and housing sectors.
The president added he would try to keep the U.S. and other countries from moving toward trade restrictions favored by labor unions and other Democratic Party constituencies. Tariffs and trade restrictions were blamed for turning a recession in the 1930s into the Great Depression.
"I think everybody understands sort of the history of the Great Depression," Obama said. "So far, at least, we're seeing some movement to contain protectionist sentiments in these various domestic markets, but we have to build on that. And I think having a strong statement that encourages trade and making sure that there are sufficient credit lines for trade, because that's one of the big problems that we've seen right now in terms of world trade ... the traditional mechanisms for lending that facilitate trade have really contracted."
NOTE: obamas think that having a strong statement that encourages trade and making sure that there are sufficient credit line for trade.
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Rob Schumacher March 13, 2009 5:15PM EST
Top 3% of tax payers, that happen to pay 11% of taxes. Wait now they pay more but I dont have those numbers yet. Trickle down taxes, nice
Zyskandar Jaimot March 13, 2009 1:10PM EST
'the OBAMA' as PRISSY in 'Gone-With-The-Wind'/HILLARY naturally as Mistress SCARLETT...***scene - the evil economic wind swept through leaving millions injured/dead prostrate on stretchers awaiting catastrophe***take 1 - action'The OBAMA' as PRISSY crying, weeping:"Miss SCARLETT Ise dunno nothin about no STOCK MARKET or no EECHONOMIKS or BANKSTUFFS - Ise wents to HARVARD!!!"HILLARY with her asbestos-pants-suits paid for by the Jews she has just sold-out slaps the uppity Negro house servant PRSISY in the face:"SHUT-UP FOOL. Just 'rig' the cattle-futures option's market with someone else's money like I did - and all of us 'insiders' will make bucks FRIG those other JOBLESS SUCKAHS - Treat these bankers like the fools they are just axsk(ebonics spelling) BOBBY RUBENSANDWICH at CITBANK how big a moron he was/is???!!!"***scene end - the destruction of 'free' capitalism in AMERIKA***Posted by Jaimot's Jargon at 4:00 AM
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Phoenix > News > Industries > Human Resources
Friday, March 13, 2009, 9:19am MST
Obama defends tax hikes, pledges to steer clear of protectionism
Phoenix Business Journal - by Mike Sunnucks
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President Barack Obama defended his tax increases on those making more than $250,000 a year to a contingent of CEOs Thursday and promised not to let the recession steer a course toward protectionist trade policies.
Obama met with members of the Business Roundtable, which includes CEOs of some major companies with operations in Arizona: JPMorgan Chase & Co., American Express Co. and Motorola Inc.
Obama defended his plan to raise the top federal income tax bracket from 35 percent to 39.6 percent for couples making $250,000 or more. Small-business owners have been criticized that plan, saying it will not help job growth or investments. They also disputed the determination that $250,000 in income is considered rich.
Obama's tax plans also would raise some investment taxes.
"For the top 3 percent of all taxpayers — and I'm just going to take a shot in the dark and guess that includes some of the people in this room — the top tax rate across the board will still be lower than they were during the prosperity of the 1990s," Obama told the CEOs.
"It will still be lower than they were during the (Bill) Clinton era. You will pay a tax rate on capital gains and dividends that is also lower than it was during most of the 1990s," he said. "And the revenue that results from these changes will reduce the deficit by $750 billion over the next 10 years."
Obama got a warm reception from the CEOs.
Congressional Democrats and the Obama administration have been highly critical of bank and other CEOs in light of the troubles in the banking, lending and housing sectors.
The president added he would try to keep the U.S. and other countries from moving toward trade restrictions favored by labor unions and other Democratic Party constituencies. Tariffs and trade restrictions were blamed for turning a recession in the 1930s into the Great Depression.
"I think everybody understands sort of the history of the Great Depression," Obama said. "So far, at least, we're seeing some movement to contain protectionist sentiments in these various domestic markets, but we have to build on that. And I think having a strong statement that encourages trade and making sure that there are sufficient credit lines for trade, because that's one of the big problems that we've seen right now in terms of world trade ... the traditional mechanisms for lending that facilitate trade have really contracted."
NOTE: obamas think that having a strong statement that encourages trade and making sure that there are sufficient credit line for trade.
*
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(2) Comments
Rob Schumacher March 13, 2009 5:15PM EST
Top 3% of tax payers, that happen to pay 11% of taxes. Wait now they pay more but I dont have those numbers yet. Trickle down taxes, nice
Zyskandar Jaimot March 13, 2009 1:10PM EST
'the OBAMA' as PRISSY in 'Gone-With-The-Wind'/HILLARY naturally as Mistress SCARLETT...***scene - the evil economic wind swept through leaving millions injured/dead prostrate on stretchers awaiting catastrophe***take 1 - action'The OBAMA' as PRISSY crying, weeping:"Miss SCARLETT Ise dunno nothin about no STOCK MARKET or no EECHONOMIKS or BANKSTUFFS - Ise wents to HARVARD!!!"HILLARY with her asbestos-pants-suits paid for by the Jews she has just sold-out slaps the uppity Negro house servant PRSISY in the face:"SHUT-UP FOOL. Just 'rig' the cattle-futures option's market with someone else's money like I did - and all of us 'insiders' will make bucks FRIG those other JOBLESS SUCKAHS - Treat these bankers like the fools they are just axsk(ebonics spelling) BOBBY RUBENSANDWICH at CITBANK how big a moron he was/is???!!!"***scene end - the destruction of 'free' capitalism in AMERIKA***Posted by Jaimot's Jargon at 4:00 AM
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* 7 states post jobless rates above 10% [Pittsburgh]
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* Arizona Corporation Commission issues cease and desist order against Radical Bunny
* ASU economist: Stimulus fund distribution may not match states' employment needs
* Phoenix-area home resales jump in February, mostly because of foreclosures
* Board backs iGo CEO, plans to stay the course after investors raise questions
* Obama defends tax hikes, pledges to steer clear of protectionism
Most Viewed Stories
* Sources: KTVK drops 'Good Morning Arizona' personalities Brad Perry, Dan Davis
* Banner Thunderbird to hire 800 through 2011
* Obama administration targets Arpaio
* Arizona named 10th 'happiest' state
* Ninth Circuit upholds Arizona employer sanctions law
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* Bashas' revamps landmark store in Fountain Hills
* Banner Thunderbird to hire 800 through 2011
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Sunday, April 26, 2009
AMERICAN EXPRESS (AXP) PRICEWATCH ALERT UP TO 21.39% RETURN
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Stocks To Watch Today: HIG, STLD, EBAY, POT, MET, CAKE, APA, ATVI, LO, CVTX, PAAS, HBI (Click Symbol For Latest News)
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NetScout Systems (NTCT) One of Today's Top Losers
Sanofi Aventis (SNY) Trading With Unusual Volume
FirstEnergy (FE) Hits 52-Week Low
China Unicom (CHU) Trading With Unusual Volume
Hologic (HOLX) One of Today's Top Gainers
Microsoft (MSFT) Shows Bearish Technicals
Morgan Stanley (MS) Set for 11.08 Break Even
Schering Plough (SGP) Up On Bullish Technicals
Time Warner (TWX) Up On Management Moves
Aeropostale (ARO) Down Almost 1% So Far Today
American Express (AXP) PriceWatch Alert Up To 21.39% Return
Posted on Friday, March 13, 2009 8:07 AM
American Express (NYSE: AXP) closed yesterday at $13.15. So far the stock has hit a 52-week low of $9.71 and 52-week high of $52.63. American Express stock has been showing support around 10.25 and resistance in the 14.83 range. Technical indicators for the stock are Bearish and S&P gives AXP a weak 2 STAR (out of 5) sell rating. AXP appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 7.50 covered call (WXP AU) for a net debit in the $6.35 area. That is also the break even stock price for this trade. This covered call has a 309 day duration, provides 51.71% downside protection and an 18.11% assigned return rate for a 21.39% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the AXP Jan '10 5 Call (WXP AA) and selling the Jan '10 7.50 call (WXP AU) for a $2.10 debit. The trade has a 309 day life and would provide 46.01% downside protection and a 19.05% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). American Express has a current annual dividend yield of 5.92%.
NOTE:this stock of the a longer term of call option in the place of the covered call stock purchase.
[For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]
Click Symbol For More News On: (AXP)
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Stocks To Watch Today: HIG, STLD, EBAY, POT, MET, CAKE, APA, ATVI, LO, CVTX, PAAS, HBI (Click Symbol For Latest News)
MicTopStories
NetScout Systems (NTCT) One of Today's Top Losers
Sanofi Aventis (SNY) Trading With Unusual Volume
FirstEnergy (FE) Hits 52-Week Low
China Unicom (CHU) Trading With Unusual Volume
Hologic (HOLX) One of Today's Top Gainers
Microsoft (MSFT) Shows Bearish Technicals
Morgan Stanley (MS) Set for 11.08 Break Even
Schering Plough (SGP) Up On Bullish Technicals
Time Warner (TWX) Up On Management Moves
Aeropostale (ARO) Down Almost 1% So Far Today
American Express (AXP) PriceWatch Alert Up To 21.39% Return
Posted on Friday, March 13, 2009 8:07 AM
American Express (NYSE: AXP) closed yesterday at $13.15. So far the stock has hit a 52-week low of $9.71 and 52-week high of $52.63. American Express stock has been showing support around 10.25 and resistance in the 14.83 range. Technical indicators for the stock are Bearish and S&P gives AXP a weak 2 STAR (out of 5) sell rating. AXP appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 7.50 covered call (WXP AU) for a net debit in the $6.35 area. That is also the break even stock price for this trade. This covered call has a 309 day duration, provides 51.71% downside protection and an 18.11% assigned return rate for a 21.39% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the AXP Jan '10 5 Call (WXP AA) and selling the Jan '10 7.50 call (WXP AU) for a $2.10 debit. The trade has a 309 day life and would provide 46.01% downside protection and a 19.05% assigned return rate for a 22.00% annualized return rate (for comparison purposes only). American Express has a current annual dividend yield of 5.92%.
NOTE:this stock of the a longer term of call option in the place of the covered call stock purchase.
[For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]
Click Symbol For More News On: (AXP)
www.marketintelligencecenter.com
Market Intelligence Center
Add to del.icio.usdel.icio.us Add to My Yahoo! RSS Feed Add to Google Add to My AOL stock market news
About Us | Contact Us | Terms of Service & Other Important Notices |
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Portions of this content may be copywritten by Fresh Brewed Media, Wall Street Secrets Plus, Investors Observer, VHS, LLC., and RealTimeTraders.com. SmartReadMX and related technologies are covered by US Patent Office # 60/631,747.
Saturday, April 25, 2009
US STOCK LOWER: DOW DOWN
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[MDT] Medtronic heart device wires may have caused 13 deaths: WSJ
US Stocks Lower; Dow Down 40
By Peter A. McKay
Last update: 11:58 a.m. EDT March 13, 2009
Comments: 14
Stocks were mostly weaker on Friday following a three-day surge, as major indexes swung between gains and losses.
At 11:55 a.m., the Dow Jones Industrial Average, which has leapt 623 points over the last three sessions, was down about 40 points. Its banking components rose, and General Motors jumped 17%. But American Express slid 8% on fears that credit-card firms may face higher borrowing costs, while Microsoft was down 3.5% amid a broader decline in large technology stocks.
The tech-focused Nasdaq Composite Index fell 0.8%. The S&P 500 was down 0.5%, weighed down by losses in its financial and energy sectors. Health-care and utilities stocks, traditional defensive sectors, were higher.
Assurances from top executives at major banks that the companies have been profitable so far this year have helped drive the market's gains this week. Also, talk is continuing to swirl about possible rule changes that most traders would welcome.
One scenario could involve relaxation of the government's mark-to-market accounting standards. Regulators may also reinstate the stock market's "uptick rule," restricting bearish short sales so they could only take place when a stock is rising. Many participants believe such a move would damp the momentum of market declines on down days, with selling less likely to cascade if people selling borrowed shares can't participate as freely.
"Academically, I can't argue with the case for relaxing the short rule in the first place [in 2007]," said floor broker and New York Stock Exchange member Ted Weisberg of Seaport Securities. "People argued there shouldn't be different restrictions for buyers and sellers. But in practice, it doesn't work. It erodes public confidence, and we need the public investor to participate in our market."
In economic news on Friday, the Reuters/University of Michigan monthly index of consumer confidence rose to a reading of 56.6 for March, up from 56.3 in February. Analysts surveyed by Dow Jones Newswires had expected the measure to fall to 55.0.
Elsewhere, the Labor Department reported that import prices slid 0.2% on a monthly basis in February, smaller than the 0.8% drop economists expected and the slimmest decline since the streak began last August, suggesting that while inflation is well contained there's little evidence yet of outright deflation.
The U.S. trade deficit narrowed by about 10% in January, brought by falling prices and shrinking demand to its lowest point since 2002. The trade deficit has shrank a record six consecutive months. Exports in January declined 5.7% as growth for many U.S. trading partners slowed, while imports fell 6.7% amid the erosion of consumer demand in the U.S.
Experts still expect considerable economic weakness. Economists surveyed this month by the Wall Street Journal expect gross domestic product to decline at an annual rate of 4.6% this quarter and 1.5% in the second quarter. Federal Reserve Chairman Ben Bernanke has said he doesn't expect the recession to end until later this year.
Europe stocks were higher, with banks and oil producers leading a broad-based advance. Most Asian markets also advanced. The Nikkei jumped 5.2%, its best single-day percentage gain since mid-December.
Treasury prices were mixed. The 10-year note fell 4/32 to yield 2.881%. The dollar was stronger against the yen and the euro.
Oil prices soared 11% Thursday as traders worried that the Organization of Petroleum Exporting Countries may tighten output at a meeting this weekend in Vienna. Futures continued to move higher on Friday, climbing 65 cents to $47.68 a barrel. The International Energy Agency on Friday revised down its forecast for 2009 global oil demand by around 300,000 barrels a day to 84.4 million barrels a day, roughly a 1.5% fall on an annual basis. End of Story
NOTE: futures continued to move higher on friday ,the international energy egency on friday revised.
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Comments: 14
Ha! Bulls are back. Too bad the global depression is still there and getting worse.
- Eichmare
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adcs 12 hours ago
+2 Votes (4 Up / 2 Dn)
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The trend line for the day is steeply downward, even at the beginning when the see-sawing was occuring. Doesn't look like an up day to be sure.
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newmexicomom 12 hours ago
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why isn't MW carrying THIS story?
http://www.cnbc.com/id/29666975
(Berkshire Hathaway stripped of AAA rating if you don't want to copy and paste)
I know its cnbc but still!
druidmechanics 12 hours ago
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BH to AA+ and he's only the 2nd richest billionaire? My heart goes out to him.
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woodsmoke52 12 hours ago
+3 Votes (3 Up / 0 Dn)
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"Bulls Getting A Little Winded"
So the Bears take 2500 pts, and when the Bulls take back 500, they're all done in. Methinks this "bull" has been castrated by a government that's hell-bent on destroying both the currency and the economy.
Note to Thumbs-Down Fairy: The Obama administration has proposed a bill to end mining in the U.S. and destroy not only mining jobs, but our ability to develop our own resource base. It allows for warrantless searches of vehicles and buildings to see if you've stashed away a lump of coal or a few flakes of gold somewhere. It's called H.R.699.
Don't believe me?
http://www.icmj.com/article.php?id=56&keywords=Rahall_Proposes_Bill_to_End_All_Mining_in_the_U.S
druidmechanics 12 hours ago
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There goes all hope for my black lung drug startup.
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GreatObamaCrash 12 hours ago
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A.I.G., Where Taxpayers' Dollars Go to Die
By GRETCHEN MORGENSON
"DERIVATIVES are dangerous."
That simple sentence, written by Warren Buffett, begins an enlightening discussion in Berkshire Hathaway's most recent annual report. Mr. Buffett's views on derivatives, gleaned from his own unhappy encounters with them, should be required reading for all United States taxpayers.
Why? Because we own almost 80 percent of the American International Group, the giant insurer whose collapse was a direct result of derivatives it sold during the late, great credit boom.
A.I.G. nearly barreled off the cliff last September, when it couldn't meet its obligations to customers who had bought a version of derivatives called credit default swaps. Such swaps are like insurance policies; bondholders buy them to protect themselves from default on various forms of debt.
When A.I.G. couldn't meet the wave of obligations it owed on the swaps last fall as Wall Street went into a tailspin, the Federal Reserve stepped in with an $85 billion loan to keep the hobbled insurer from going bankrupt; over all, the government has pledged a total of $160 billion to A.I.G. to help it meet its obligations and restructure operations.
So is A.I.G. the taxpayer gift that keeps on taking? Sure looks that way. And while no one can say with certainty whether more money will be needed, the sheer volume of derivatives engineered by a small London unit of A.I.G. suggests that taxpayers haven't seen the bottom of this money pit.
Some $440 billion in credit default swaps sat on the company's books before it collapsed. Its biggest customers, European banks and United States investment banks, bought the swaps to insure against defaults on a variety of debt holdings, including pools of mortgages and corporate loans.
Because of the way A.I.G. wrote its swaps, and because the company had a double-A credit rating at the time, it did not have to put up collateral to assure its customers that it would be able to pay on the insurance if necessary. Collateral would be required only if A.I.G.'s credit rating were cut or if the debt underlying the swaps declined.
Both of these "unthinkable" events occurred in 2008. Suddenly, A.I.G. had to cough up collateral it didn't have.
SO, you see, the rescue of A.I.G. also involved a bailout of its many customers, none of whom the insurer or the government is willing to identify.
Nevertheless, Edward M. Liddy, the chief executive of A.I.G., explained to investors last week that "the vast majority" of taxpayer funds "have passed through A.I.G. to other financial institutions" as the company unwound deals with its customers.
On Wall Street, those customers are known as "counterparties," and Mr. Liddy wouldn't provide details on who the counterparties were or how much they received. But a person briefed on the deals said A.I.G.'s former customers include Goldman Sachs, Merrill Lynch and two large French banks, Société Générale and Calyon.
All the banks declined to comment.
How much money has gone to counterparties since the company's collapse? The person briefed on the deals put the figure at around $50 billion.
Unfortunately, that is likely to rise.
According to its most recent financial statements, A.I.G. had $302 billion in credit insurance commitments at the end of 2008. Of course, the company is not going to have to make good on all that insurance: the underlying securities are not all going to zero.
But as the economy deteriorates, A.I.G.'s insurance bets certainly become more perilous. And because most of A.I.G.'s swaps are known as the "pay as you go type," collateral must be supplied when the underlying debt declines in value. Swap arrangements made by other insurers require payments only if a default occurs.
So the meter is constantly running at A.I.G. Just as quickly as taxpayer funds flow into the firm, chunks of it go right out the door to settle derivatives claims.
A.I.G.'s insurance commitment stood at "only" $302 billion in part because the government has already voided $62 billion of the protection A.I.G. had written on pools of especially toxic securities. The underlying collateral on those contracts, valued at about $32 billion or so, now sits in a facility that the Federal Reserve Bank of New York oversees and which we, the taxpayers, own.
In order to rip up those contracts, the taxpayers had to make A.I.G.'s counterparties whole by buying the debt that A.I.G. had insured and paying out — in cash — the remaining amount owed to the counterparties.
Of the $302 billion in insurance outstanding at A.I.G., about $235 billion was sold to foreign banks and covers prime home mortgages and corporate loans. The banks that bought this insurance did so to reduce the money they must set aside for regulatory capital requirements.
A.I.G. also wrote $50 billion of insurance on pools of corporate loans. These contracts are performing O.K. for now, the company has said.
But there's yet another complication that will probably force A.I.G. to cough up cash more quickly than it otherwise might have had to. That's because it didn't simply write insurance protection on debt; it also entered into yet another derivative contract — known as an interest rate swap — with counterparties buying the protection.
The reason A.I.G. entered into the second contract was that banks feared they were also exposed to interest rate risks on the loans bundled into debt pools. Presto! A.I.G. was happy to remove that risk by writing another complicated swap.
Now, however, A.I.G. not only has to meet collateral calls as the value of the debt it insured withers, but also has to post collateral related to the interest rate swaps.
Another troubling aspect of these deals is how long it takes to untangle them when they go awry. Back to Mr. Buffett's recent shareholder letter: when Berkshire acquired the insurance company General Re in 1998, he wrote, General Re had 23,218 derivatives contracts that it had struck with 884 counterparties.
Mr. Buffett wanted out from under the contracts and he began unwinding them. "Though we were under no pressure and were operating in benign markets as we exited," he said, "it took us five years and more than $400 million in losses to largely complete the task."
When you look back with the benefit of hindsight, it is truly amazing how outsized A.I.G.'s insurance commitment was, at $440 billion. After all, in 2005, when A.I.G. put many of these swaps on its books, the market value of the entire company was around $200 billion.
That means the geniuses at A.I.G. who wrote the insurance were willing to bet more than double their company's value that defaults would not become problematic.
That's some throw of the dice. Too bad it came up snake eyes for taxpayers.
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Classixm 12 hours ago
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Not surprising a little down today with the major advances financials have had all week, finally. If it does stay relatively mild on the decline side, i would consider that further support into next week.
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Momintn 11 hours ago
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Lunch is almost over with, so the bulls will be back.
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Momintn 11 hours ago
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The markets are suppose to go up until mid May with the S&P at 850 20% from here.
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Wile-E-Coyote 11 hours ago
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I believe we are going to move back to our normal decline shortly, after the kid with the etch a sketch finishes trying to draw an "M" with the DJIA. He sometimes gets close.
We're still on a 19.77 point decline per trading day trendline, including yesterday's close.
;)
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Eichmare 11 hours ago
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Ha! Bulls are back. Too bad the global depression is still there and getting worse.
Larucci 11 hours ago
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I agree 100%
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ken225 11 hours ago
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538 stocks have hit new short-term highs and 19 have hit new short-term lows so far today according to pages.sbcglobal.net/acom
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A4Driver 11 hours ago
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What a head fake...rally time!
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[MDT] Medtronic heart device wires may have caused 13 deaths: WSJ
US Stocks Lower; Dow Down 40
By Peter A. McKay
Last update: 11:58 a.m. EDT March 13, 2009
Comments: 14
Stocks were mostly weaker on Friday following a three-day surge, as major indexes swung between gains and losses.
At 11:55 a.m., the Dow Jones Industrial Average, which has leapt 623 points over the last three sessions, was down about 40 points. Its banking components rose, and General Motors jumped 17%. But American Express slid 8% on fears that credit-card firms may face higher borrowing costs, while Microsoft was down 3.5% amid a broader decline in large technology stocks.
The tech-focused Nasdaq Composite Index fell 0.8%. The S&P 500 was down 0.5%, weighed down by losses in its financial and energy sectors. Health-care and utilities stocks, traditional defensive sectors, were higher.
Assurances from top executives at major banks that the companies have been profitable so far this year have helped drive the market's gains this week. Also, talk is continuing to swirl about possible rule changes that most traders would welcome.
One scenario could involve relaxation of the government's mark-to-market accounting standards. Regulators may also reinstate the stock market's "uptick rule," restricting bearish short sales so they could only take place when a stock is rising. Many participants believe such a move would damp the momentum of market declines on down days, with selling less likely to cascade if people selling borrowed shares can't participate as freely.
"Academically, I can't argue with the case for relaxing the short rule in the first place [in 2007]," said floor broker and New York Stock Exchange member Ted Weisberg of Seaport Securities. "People argued there shouldn't be different restrictions for buyers and sellers. But in practice, it doesn't work. It erodes public confidence, and we need the public investor to participate in our market."
In economic news on Friday, the Reuters/University of Michigan monthly index of consumer confidence rose to a reading of 56.6 for March, up from 56.3 in February. Analysts surveyed by Dow Jones Newswires had expected the measure to fall to 55.0.
Elsewhere, the Labor Department reported that import prices slid 0.2% on a monthly basis in February, smaller than the 0.8% drop economists expected and the slimmest decline since the streak began last August, suggesting that while inflation is well contained there's little evidence yet of outright deflation.
The U.S. trade deficit narrowed by about 10% in January, brought by falling prices and shrinking demand to its lowest point since 2002. The trade deficit has shrank a record six consecutive months. Exports in January declined 5.7% as growth for many U.S. trading partners slowed, while imports fell 6.7% amid the erosion of consumer demand in the U.S.
Experts still expect considerable economic weakness. Economists surveyed this month by the Wall Street Journal expect gross domestic product to decline at an annual rate of 4.6% this quarter and 1.5% in the second quarter. Federal Reserve Chairman Ben Bernanke has said he doesn't expect the recession to end until later this year.
Europe stocks were higher, with banks and oil producers leading a broad-based advance. Most Asian markets also advanced. The Nikkei jumped 5.2%, its best single-day percentage gain since mid-December.
Treasury prices were mixed. The 10-year note fell 4/32 to yield 2.881%. The dollar was stronger against the yen and the euro.
Oil prices soared 11% Thursday as traders worried that the Organization of Petroleum Exporting Countries may tighten output at a meeting this weekend in Vienna. Futures continued to move higher on Friday, climbing 65 cents to $47.68 a barrel. The International Energy Agency on Friday revised down its forecast for 2009 global oil demand by around 300,000 barrels a day to 84.4 million barrels a day, roughly a 1.5% fall on an annual basis. End of Story
NOTE: futures continued to move higher on friday ,the international energy egency on friday revised.
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Comments: 14
Ha! Bulls are back. Too bad the global depression is still there and getting worse.
- Eichmare
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4:07 PM 3/13/09 First '60 Minutes' -- Is Facebook next for Ben Bernanke?
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adcs 12 hours ago
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The trend line for the day is steeply downward, even at the beginning when the see-sawing was occuring. Doesn't look like an up day to be sure.
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newmexicomom 12 hours ago
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why isn't MW carrying THIS story?
http://www.cnbc.com/id/29666975
(Berkshire Hathaway stripped of AAA rating if you don't want to copy and paste)
I know its cnbc but still!
druidmechanics 12 hours ago
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BH to AA+ and he's only the 2nd richest billionaire? My heart goes out to him.
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woodsmoke52 12 hours ago
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"Bulls Getting A Little Winded"
So the Bears take 2500 pts, and when the Bulls take back 500, they're all done in. Methinks this "bull" has been castrated by a government that's hell-bent on destroying both the currency and the economy.
Note to Thumbs-Down Fairy: The Obama administration has proposed a bill to end mining in the U.S. and destroy not only mining jobs, but our ability to develop our own resource base. It allows for warrantless searches of vehicles and buildings to see if you've stashed away a lump of coal or a few flakes of gold somewhere. It's called H.R.699.
Don't believe me?
http://www.icmj.com/article.php?id=56&keywords=Rahall_Proposes_Bill_to_End_All_Mining_in_the_U.S
druidmechanics 12 hours ago
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There goes all hope for my black lung drug startup.
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GreatObamaCrash 12 hours ago
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A.I.G., Where Taxpayers' Dollars Go to Die
By GRETCHEN MORGENSON
"DERIVATIVES are dangerous."
That simple sentence, written by Warren Buffett, begins an enlightening discussion in Berkshire Hathaway's most recent annual report. Mr. Buffett's views on derivatives, gleaned from his own unhappy encounters with them, should be required reading for all United States taxpayers.
Why? Because we own almost 80 percent of the American International Group, the giant insurer whose collapse was a direct result of derivatives it sold during the late, great credit boom.
A.I.G. nearly barreled off the cliff last September, when it couldn't meet its obligations to customers who had bought a version of derivatives called credit default swaps. Such swaps are like insurance policies; bondholders buy them to protect themselves from default on various forms of debt.
When A.I.G. couldn't meet the wave of obligations it owed on the swaps last fall as Wall Street went into a tailspin, the Federal Reserve stepped in with an $85 billion loan to keep the hobbled insurer from going bankrupt; over all, the government has pledged a total of $160 billion to A.I.G. to help it meet its obligations and restructure operations.
So is A.I.G. the taxpayer gift that keeps on taking? Sure looks that way. And while no one can say with certainty whether more money will be needed, the sheer volume of derivatives engineered by a small London unit of A.I.G. suggests that taxpayers haven't seen the bottom of this money pit.
Some $440 billion in credit default swaps sat on the company's books before it collapsed. Its biggest customers, European banks and United States investment banks, bought the swaps to insure against defaults on a variety of debt holdings, including pools of mortgages and corporate loans.
Because of the way A.I.G. wrote its swaps, and because the company had a double-A credit rating at the time, it did not have to put up collateral to assure its customers that it would be able to pay on the insurance if necessary. Collateral would be required only if A.I.G.'s credit rating were cut or if the debt underlying the swaps declined.
Both of these "unthinkable" events occurred in 2008. Suddenly, A.I.G. had to cough up collateral it didn't have.
SO, you see, the rescue of A.I.G. also involved a bailout of its many customers, none of whom the insurer or the government is willing to identify.
Nevertheless, Edward M. Liddy, the chief executive of A.I.G., explained to investors last week that "the vast majority" of taxpayer funds "have passed through A.I.G. to other financial institutions" as the company unwound deals with its customers.
On Wall Street, those customers are known as "counterparties," and Mr. Liddy wouldn't provide details on who the counterparties were or how much they received. But a person briefed on the deals said A.I.G.'s former customers include Goldman Sachs, Merrill Lynch and two large French banks, Société Générale and Calyon.
All the banks declined to comment.
How much money has gone to counterparties since the company's collapse? The person briefed on the deals put the figure at around $50 billion.
Unfortunately, that is likely to rise.
According to its most recent financial statements, A.I.G. had $302 billion in credit insurance commitments at the end of 2008. Of course, the company is not going to have to make good on all that insurance: the underlying securities are not all going to zero.
But as the economy deteriorates, A.I.G.'s insurance bets certainly become more perilous. And because most of A.I.G.'s swaps are known as the "pay as you go type," collateral must be supplied when the underlying debt declines in value. Swap arrangements made by other insurers require payments only if a default occurs.
So the meter is constantly running at A.I.G. Just as quickly as taxpayer funds flow into the firm, chunks of it go right out the door to settle derivatives claims.
A.I.G.'s insurance commitment stood at "only" $302 billion in part because the government has already voided $62 billion of the protection A.I.G. had written on pools of especially toxic securities. The underlying collateral on those contracts, valued at about $32 billion or so, now sits in a facility that the Federal Reserve Bank of New York oversees and which we, the taxpayers, own.
In order to rip up those contracts, the taxpayers had to make A.I.G.'s counterparties whole by buying the debt that A.I.G. had insured and paying out — in cash — the remaining amount owed to the counterparties.
Of the $302 billion in insurance outstanding at A.I.G., about $235 billion was sold to foreign banks and covers prime home mortgages and corporate loans. The banks that bought this insurance did so to reduce the money they must set aside for regulatory capital requirements.
A.I.G. also wrote $50 billion of insurance on pools of corporate loans. These contracts are performing O.K. for now, the company has said.
But there's yet another complication that will probably force A.I.G. to cough up cash more quickly than it otherwise might have had to. That's because it didn't simply write insurance protection on debt; it also entered into yet another derivative contract — known as an interest rate swap — with counterparties buying the protection.
The reason A.I.G. entered into the second contract was that banks feared they were also exposed to interest rate risks on the loans bundled into debt pools. Presto! A.I.G. was happy to remove that risk by writing another complicated swap.
Now, however, A.I.G. not only has to meet collateral calls as the value of the debt it insured withers, but also has to post collateral related to the interest rate swaps.
Another troubling aspect of these deals is how long it takes to untangle them when they go awry. Back to Mr. Buffett's recent shareholder letter: when Berkshire acquired the insurance company General Re in 1998, he wrote, General Re had 23,218 derivatives contracts that it had struck with 884 counterparties.
Mr. Buffett wanted out from under the contracts and he began unwinding them. "Though we were under no pressure and were operating in benign markets as we exited," he said, "it took us five years and more than $400 million in losses to largely complete the task."
When you look back with the benefit of hindsight, it is truly amazing how outsized A.I.G.'s insurance commitment was, at $440 billion. After all, in 2005, when A.I.G. put many of these swaps on its books, the market value of the entire company was around $200 billion.
That means the geniuses at A.I.G. who wrote the insurance were willing to bet more than double their company's value that defaults would not become problematic.
That's some throw of the dice. Too bad it came up snake eyes for taxpayers.
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Classixm 12 hours ago
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Not surprising a little down today with the major advances financials have had all week, finally. If it does stay relatively mild on the decline side, i would consider that further support into next week.
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Momintn 11 hours ago
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Lunch is almost over with, so the bulls will be back.
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Momintn 11 hours ago
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The markets are suppose to go up until mid May with the S&P at 850 20% from here.
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Wile-E-Coyote 11 hours ago
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I believe we are going to move back to our normal decline shortly, after the kid with the etch a sketch finishes trying to draw an "M" with the DJIA. He sometimes gets close.
We're still on a 19.77 point decline per trading day trendline, including yesterday's close.
;)
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Eichmare 11 hours ago
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Ha! Bulls are back. Too bad the global depression is still there and getting worse.
Larucci 11 hours ago
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I agree 100%
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ken225 11 hours ago
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538 stocks have hit new short-term highs and 19 have hit new short-term lows so far today according to pages.sbcglobal.net/acom
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A4Driver 11 hours ago
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What a head fake...rally time!
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EDITOR'S PICK
* Jim Cramer goes on 'The Daily Show' amid criticism of CNBC
* Jim Cramer's bad week just got worse
* Silver's discount to gold sticks out like a sore thumb
* U.S. stock futures start to wobble ahead of open
* CNBC's dilemma is to make a recession seem entertaining
* Stewart vs. Cramer -- an insider's view
* Rush Limbaugh, Matt Drudge trail Newsmax -- online
* Friday's biggest gaining and declining stocks
* Dollar's rally could undermine stocks
* Clash over stimulus spending clouds G20 outlook
* Silver's discount to gold sticks out like a sore thumb
* CNBC's dilemma is to make a recession seem entertaining
* If you deduct mortgage interest, be wary of an IRS audit
* Jim Cramer goes on 'The Daily Show' amid criticism of CNBC
* Jim Cramer's bad week just got worse
* Baby Hippo Needs Home, Tigers Need Lunch
* Use money wisely or it could abuse you
* Dollar's rally could undermine stocks
* Recession brides can use the Web to save money on wedding costs
* Seven costly mistakes workers make when they leave a job
* Dollar's rally could undermine stocks
* First '60 Minutes' -- Is Facebook next for Ben Bernanke?
* U.S. gasoline demand on upswing, pushing prices higher again
* American Apparel gets a lifeline, selling 18% stake
* CNBC's dilemma is to make a recession seem entertaining
Get the Latest MarketWatch News >>
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Friday, April 24, 2009
BAERISH BETS ON CREDIT CARD ISSUERS.
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Options Watch
Bearish Bets On Credit Card Issuers
Jocelynn Drake, Option Advisor, 03.13.09, 01:55 PM EDT
Bad debts are piling up and performance is suffering for issuers of plastic. Make money on the short side.
row2image
As the economy weakens and unemployment grows, the credit card industry could be seeing just the start of a growing wave of trouble.
In February, Moody's (nyse: MCO - news - people ) Credit Card Credit Indexes reported that credit card charge-offs reached a new high of 7.74% in January. Charge-offs are credit-card loans deemed to be uncollectible. Furthermore, the increasing number of borrowers falling behind on payments means charge-off rates are almost certain to increase as the economy worsens.
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The January delinquency rate, which forecasts the charge-off rate, climbed to 5.94%, the highest in 17 years. The record high of 6.31% in January 1992 is likely to be surpassed in the months ahead, Moody's said. In addition, Moody's expects the charge-off rate index could move into double digits by the end of this year if unemployment keeps rising.
Meanwhile, payment rates, which have declined since early 2007, are near a five-year low. In January, the principal payment rate fell to 16.39%, about 2.7 percentage points below the rate in January 2008.
Buying into the rally? Just don't buy the wrong stuff. Click here for Bernie Schaeffer's Option Advisor, with daily trading recommendations and intraday updates.
NOTE:the record high of 6.31 in january 1992 is likely to be surpassed in the months a head.
Digging deeper into the sector, we find that American Express (nyse: AXP - news - people ) has been having a rough year, as the shares have retreated more than 29% since the start of 2009. The company recently offered a $300 incentive for some customers to cancel their accounts as the card issuer and payments processor struggle with surging loan delinquencies and reduced card use.
American Express has been guided lower by resistance at its 10-week and 20-week moving averages for a loss of nearly 80% since June 2007. While the stock recently bounced off support at the 10 level, it is in the process of rallying into staunch resistance at its 10-week trend line--a moving average above which it has not finished a single week since late September 2008.
Meanwhile, it's not surprising to find that investors are skeptical of the shares. What is surprising is that this pessimism appears to have reached a peak, and investors are now loading up on bullish bets in an effort to call a bottom to the stock's decline. The Schaeffer's put/call open interest ratio has dropped from its Feb. 25 peak of 1.88 to its current position of 1.34. During this time frame, call open interest among options slated to expire in less than three months increased by 54%, while put open interest rose by less than 11%.
Special Offer: Buying Baidu.com calls last week could have produced gains of 800% and higher. Options can wipe you out or help you turn thousands of dollars into hundreds of thousands of dollars. Why not make some? Click here for recommended trades updated daily and throughout the day in Bernie Schaeffer's Option Advisor.
Comment On This Story
An uptick in call trading can also be seen on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). During the past 10 trading sessions, 1.7 calls were purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 88% of all those taken during the past year, pointing to a growing optimism among options players.
Meanwhile, short interest is on the rise. During the past month, the number of AXP shares sold short increased by 32.5% to 38.8 million shares. Should the bears continue this trend of adding to their pessimistic positions in the face of the stock's recent bounce, they could help pressure the security lower once again. To take advantage of a pullback in the shares, traders should consider the stock's July 15 put.
MasterCard (nyse: MA - news - people ) isn't much prettier than American Express. The stock has managed to post a 10% gain since the start of 2009, outperforming the broad market. However, the stock is facing staunch resistance at its declining 32-week moving average. This intermediate-term trend line has capped the shares since August 2008. The equity is facing additional staunch resistance at the 165 level, a region that has hindered the security's rally attempts since mid-October. A rejection at either of these key levels could send the equity sharply lower.
Despite the weak outlook for the credit card industry, Wall Street still has high hopes for the shares of MasterCard. Zacks reports that the stock has earned 13 "buy" ratings, five "holds" and three "sells." This bullish configuration leaves ample room for potential downgrades that could pressure the shares lower.
Furthermore, the average 12-month price target for MasterCard stands at $191.67, according to Thomson Reuters. This lofty estimate implies that analysts are looking for the shares to rally more than 22% during the next 12 months. Price-target cuts from this optimistic group could weigh negatively on the security.
Drilling down on the stock's open interest configuration, we find that peak front-month call open interest sits at the 170 strike, with more than 11,400 contracts. On the other hand, peak March put open interest sits at the 130 strike, with fewer than 3,300 contracts.
This preference for call positions over put positions indicates that investors have high hopes for the shares during the near term. Should the stock fail to overcome resistance at the 165 level, we could see an unwinding of optimism among traders, pushing the stock lower. To take advantage of continued weakness in the shares, trader should consider the stock's July 160 put.
Finally, we come to the new kid on the block: Visa (nyse: V - news - people ). The security started trading publicly on March 19, 2008, and it is now down 4.5% from its closing price on its first day of trading. The equity has been trapped in a sideways channel since October, capped by resistance at the 58 level.
In fact, the stock was recently rejected at this level and could now pull back to former support in the 46 or 42 regions. In addition, the equity is facing resistance at its declining 32-week moving average--a trend line that capped the stock at the end of February.
Stocks are cheap. Which ones do you buy? Click here for a peek at a dozen "best buys" from Dow Theory Forecasts.
Wall Street has largely shrugged off Visa's lackluster performance. The equity has earned 10 "buy" ratings, nine "holds" and just one lonely "sell" rating, according to Zacks. Any downgrades from this group could spell trouble for the stock.
In addition, the average 12-month price target stands at $65.26, according to Thomson Reuters. This estimate is a 20.6% premium to the stock's closing price on Thursday. Price-target cuts from this bunch could also create a fresh wave of selling pressure for the stock.
On the other hand, options players have flocked to the stock's puts in expectation of further losses. The ISE and CBOE have reported an increase in put trading. During the past 10 trading sessions, 1.7 puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is at a peak, indicating that options speculators are extremely skeptical of the shares.
Furthermore, the Schaeffer's put/call open interest ratio for V stands at 0.6, up from its March 4 low of 0.49. During this time frame, call open interest increased by 2.7%, while put open interest swelled by 25.6%. Considering the stock's weak technical performance, this pessimism is to be expected.
Elsewhere, we find that short-sellers have increased their bearish bets. Short interest for Visa jumped by 43.7% during the past month to 17.9 million shares. This accumulation of bearish bets accounts for only 2.3% of the company's total float. A continuation of this trend could push the stock even lower during the near term. To capture a profit on weakness in the shares of V, traders should consider the stock's June 55 put.
Joseph Hargett is senior equities analyst at Schaeffer's Investment Research. Click here for more ideas and recommendations and to learn more about Bernie Schaeffer's Option Advisor.
Professional Investors Getting Over The Hedges
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The author hasn't a clue about the Credit card business. Visa and Mastercard have ZERO default/retail consumer risk...they DON'T lend a dime to any individual or business. They are strictly a proce [Read More]
Posted by jlinderman | 03/13/09 03:03 PM EDT
Comment On This Story
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Options Watch
Bearish Bets On Credit Card Issuers
Jocelynn Drake, Option Advisor, 03.13.09, 01:55 PM EDT
Bad debts are piling up and performance is suffering for issuers of plastic. Make money on the short side.
row2image
As the economy weakens and unemployment grows, the credit card industry could be seeing just the start of a growing wave of trouble.
In February, Moody's (nyse: MCO - news - people ) Credit Card Credit Indexes reported that credit card charge-offs reached a new high of 7.74% in January. Charge-offs are credit-card loans deemed to be uncollectible. Furthermore, the increasing number of borrowers falling behind on payments means charge-off rates are almost certain to increase as the economy worsens.
Article Controls
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comments (1)
imageshare
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The January delinquency rate, which forecasts the charge-off rate, climbed to 5.94%, the highest in 17 years. The record high of 6.31% in January 1992 is likely to be surpassed in the months ahead, Moody's said. In addition, Moody's expects the charge-off rate index could move into double digits by the end of this year if unemployment keeps rising.
Meanwhile, payment rates, which have declined since early 2007, are near a five-year low. In January, the principal payment rate fell to 16.39%, about 2.7 percentage points below the rate in January 2008.
Buying into the rally? Just don't buy the wrong stuff. Click here for Bernie Schaeffer's Option Advisor, with daily trading recommendations and intraday updates.
NOTE:the record high of 6.31 in january 1992 is likely to be surpassed in the months a head.
Digging deeper into the sector, we find that American Express (nyse: AXP - news - people ) has been having a rough year, as the shares have retreated more than 29% since the start of 2009. The company recently offered a $300 incentive for some customers to cancel their accounts as the card issuer and payments processor struggle with surging loan delinquencies and reduced card use.
American Express has been guided lower by resistance at its 10-week and 20-week moving averages for a loss of nearly 80% since June 2007. While the stock recently bounced off support at the 10 level, it is in the process of rallying into staunch resistance at its 10-week trend line--a moving average above which it has not finished a single week since late September 2008.
Meanwhile, it's not surprising to find that investors are skeptical of the shares. What is surprising is that this pessimism appears to have reached a peak, and investors are now loading up on bullish bets in an effort to call a bottom to the stock's decline. The Schaeffer's put/call open interest ratio has dropped from its Feb. 25 peak of 1.88 to its current position of 1.34. During this time frame, call open interest among options slated to expire in less than three months increased by 54%, while put open interest rose by less than 11%.
Special Offer: Buying Baidu.com calls last week could have produced gains of 800% and higher. Options can wipe you out or help you turn thousands of dollars into hundreds of thousands of dollars. Why not make some? Click here for recommended trades updated daily and throughout the day in Bernie Schaeffer's Option Advisor.
Comment On This Story
An uptick in call trading can also be seen on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE). During the past 10 trading sessions, 1.7 calls were purchased to open for every one put purchased to open. This ratio of calls to puts is higher than 88% of all those taken during the past year, pointing to a growing optimism among options players.
Meanwhile, short interest is on the rise. During the past month, the number of AXP shares sold short increased by 32.5% to 38.8 million shares. Should the bears continue this trend of adding to their pessimistic positions in the face of the stock's recent bounce, they could help pressure the security lower once again. To take advantage of a pullback in the shares, traders should consider the stock's July 15 put.
MasterCard (nyse: MA - news - people ) isn't much prettier than American Express. The stock has managed to post a 10% gain since the start of 2009, outperforming the broad market. However, the stock is facing staunch resistance at its declining 32-week moving average. This intermediate-term trend line has capped the shares since August 2008. The equity is facing additional staunch resistance at the 165 level, a region that has hindered the security's rally attempts since mid-October. A rejection at either of these key levels could send the equity sharply lower.
Despite the weak outlook for the credit card industry, Wall Street still has high hopes for the shares of MasterCard. Zacks reports that the stock has earned 13 "buy" ratings, five "holds" and three "sells." This bullish configuration leaves ample room for potential downgrades that could pressure the shares lower.
Furthermore, the average 12-month price target for MasterCard stands at $191.67, according to Thomson Reuters. This lofty estimate implies that analysts are looking for the shares to rally more than 22% during the next 12 months. Price-target cuts from this optimistic group could weigh negatively on the security.
Drilling down on the stock's open interest configuration, we find that peak front-month call open interest sits at the 170 strike, with more than 11,400 contracts. On the other hand, peak March put open interest sits at the 130 strike, with fewer than 3,300 contracts.
This preference for call positions over put positions indicates that investors have high hopes for the shares during the near term. Should the stock fail to overcome resistance at the 165 level, we could see an unwinding of optimism among traders, pushing the stock lower. To take advantage of continued weakness in the shares, trader should consider the stock's July 160 put.
Finally, we come to the new kid on the block: Visa (nyse: V - news - people ). The security started trading publicly on March 19, 2008, and it is now down 4.5% from its closing price on its first day of trading. The equity has been trapped in a sideways channel since October, capped by resistance at the 58 level.
In fact, the stock was recently rejected at this level and could now pull back to former support in the 46 or 42 regions. In addition, the equity is facing resistance at its declining 32-week moving average--a trend line that capped the stock at the end of February.
Stocks are cheap. Which ones do you buy? Click here for a peek at a dozen "best buys" from Dow Theory Forecasts.
Wall Street has largely shrugged off Visa's lackluster performance. The equity has earned 10 "buy" ratings, nine "holds" and just one lonely "sell" rating, according to Zacks. Any downgrades from this group could spell trouble for the stock.
In addition, the average 12-month price target stands at $65.26, according to Thomson Reuters. This estimate is a 20.6% premium to the stock's closing price on Thursday. Price-target cuts from this bunch could also create a fresh wave of selling pressure for the stock.
On the other hand, options players have flocked to the stock's puts in expectation of further losses. The ISE and CBOE have reported an increase in put trading. During the past 10 trading sessions, 1.7 puts have been purchased to open for every one call purchased to open. This ratio of puts to calls is at a peak, indicating that options speculators are extremely skeptical of the shares.
Furthermore, the Schaeffer's put/call open interest ratio for V stands at 0.6, up from its March 4 low of 0.49. During this time frame, call open interest increased by 2.7%, while put open interest swelled by 25.6%. Considering the stock's weak technical performance, this pessimism is to be expected.
Elsewhere, we find that short-sellers have increased their bearish bets. Short interest for Visa jumped by 43.7% during the past month to 17.9 million shares. This accumulation of bearish bets accounts for only 2.3% of the company's total float. A continuation of this trend could push the stock even lower during the near term. To capture a profit on weakness in the shares of V, traders should consider the stock's June 55 put.
Joseph Hargett is senior equities analyst at Schaeffer's Investment Research. Click here for more ideas and recommendations and to learn more about Bernie Schaeffer's Option Advisor.
Professional Investors Getting Over The Hedges
China Ready To Spendimage
China Sweats U.S. Debt Securities, Pressuring Prices
Asia Up On Stimulus Hopesimage
Rate This Story
Your Rating Overall Rating
Reader Comments
The author hasn't a clue about the Credit card business. Visa and Mastercard have ZERO default/retail consumer risk...they DON'T lend a dime to any individual or business. They are strictly a proce [Read More]
Posted by jlinderman | 03/13/09 03:03 PM EDT
Comment On This Story
Steve Forbes
Intelligent Investing | Data | Knowledge | Insight | Wisdom
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Wall Street Makes It Four In A Row
Carl Gutierrez
Dow, Nasdaq and S&P squeak out gains to end the week on a high note.
* BofA Gets The Finger
* Treasuries Tremble On Supply Concerns
* Consumers Hopeful About Economic Future
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Thursday, April 23, 2009
CREDIT CARD COPANIES SHARES FALL ON LOSS CONCERNS
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Credit card companies shares fall on loss concerns
Fri Mar 13, 2009 1:02pm EDT
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NEW YORK (Reuters) - The shares of credit card companies American Express Co (AXP.N), Capital One Financial Corp (COF.N) and Discover Financial Services (DFS.N) fell on Friday, squeezed by higher credit losses concerns after a week of strong gains.
"We haven't seen yet the worst in the deterioration of the credit portfolios," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management.
American Express, a Dow component and the largest U.S. credit card company by sales volume, fell 8.4 percent to $12.05 in afternoon trading on the New York Stock Exchange, after rising 20 percent this week.
Capital One stock was down 12 percent at $11.72, after jumping 43 percent earlier this week and Discover shares fell 15 percent to $5.62.
American Express and Capital One are expected to report next week an increase in charge-off rates -- debts the card companies believe they will never be able to collect -- during February, while Discover is seen posting a sharp drop in its quarterly earnings, hammered by higher credit losses.
NOTE: the american express and the capital of the one are expected to report by next week, they will never be able to collect-- during february.
Analysts estimate credit card charge-offs could rise to between 9 percent and 10 percent this year from 6 percent to 7 percent at the end of 2008. In that scenario, such losses -- on an industrywide basis, including banks and specialty finance companies -- could total $75 billion in 2009.
(Reporting by Juan Lagorio, Editing by Andre Grenon)
© Thomson Reuters 2009 All rights reserved
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Credit card companies shares fall on loss concerns
Credit card companies shares fall on loss concerns
UPDATE 1-AmEx may cut div but capital raise unlikely: Citigroup
US RESEARCH SUMMARY-S&P 500 March 12 1644 GMT
US RESEARCH SUMMARY-S&P 500 March 12 1644 GMT
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Credit card companies shares fall on loss concerns
Fri Mar 13, 2009 1:02pm EDT
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NEW YORK (Reuters) - The shares of credit card companies American Express Co (AXP.N), Capital One Financial Corp (COF.N) and Discover Financial Services (DFS.N) fell on Friday, squeezed by higher credit losses concerns after a week of strong gains.
"We haven't seen yet the worst in the deterioration of the credit portfolios," said Keith Wirtz, president and chief investment officer of Fifth Third Asset Management.
American Express, a Dow component and the largest U.S. credit card company by sales volume, fell 8.4 percent to $12.05 in afternoon trading on the New York Stock Exchange, after rising 20 percent this week.
Capital One stock was down 12 percent at $11.72, after jumping 43 percent earlier this week and Discover shares fell 15 percent to $5.62.
American Express and Capital One are expected to report next week an increase in charge-off rates -- debts the card companies believe they will never be able to collect -- during February, while Discover is seen posting a sharp drop in its quarterly earnings, hammered by higher credit losses.
NOTE: the american express and the capital of the one are expected to report by next week, they will never be able to collect-- during february.
Analysts estimate credit card charge-offs could rise to between 9 percent and 10 percent this year from 6 percent to 7 percent at the end of 2008. In that scenario, such losses -- on an industrywide basis, including banks and specialty finance companies -- could total $75 billion in 2009.
(Reporting by Juan Lagorio, Editing by Andre Grenon)
© Thomson Reuters 2009 All rights reserved
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Credit card companies shares fall on loss concerns
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US RESEARCH SUMMARY-S&P 500 March 12 1644 GMT
US RESEARCH SUMMARY-S&P 500 March 12 1644 GMT
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Wednesday, April 22, 2009
AHEAD OF THE BELL: AMERICAN EXPRESS
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Associated Press
Ahead of the Bell: American Express
Associated Press, 03.12.09, 08:44 AM EST
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An analyst cut his price target and earnings estimate for American Express Co. amid concern that mounting credit losses will likely force the credit card lender to take sizable reserves in the coming quarters and potentially cut its dividend.
In a research note published Wednesday night, Citi (nyse: C - news - people ) Investment Research analyst Donald Fandetti said upcoming data about American Express (nyse: AXP - news - people )' credit quality and first-quarter results are likely to put pressure on the company's share price.
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Fandetti, who already rates American Express a "Sell," cut his price target to $9 from $14. Shares of American Express closed Wednesday at $11.93 and lost 23 cents in premarket trading.
Data from January showed rapid deterioration in credit quality at American Express, Fandetti said, as the lender faces rising delinquencies and defaults among its borrowers. Nearly all credit card lenders are facing rising losses as the recession worsens and unemployment rises, leading more customers to miss payments.
NOTE:nearly all creditcard lenders are facing rising losses as the recession worsens and unemplotment.
Fandetti said American Express has been especially hit hard because of its exposure to markets such as California and Florida, which have stung by the housing downturn, as well as a high proportion of loans in its portfolio from 2005 to 2007, which are among the worst-performing.
Continued deterioration could force American Express to ramp up loan-loss reserves in 2009, Fandetti wrote in the note.
Despite the credit-loss worries, Fandetti said American Express' capital ratio remains strong. But he cautioned that a dividend cut could still occur to help preserve additional cash. Many financial services firms have been slashing their dividends in recent weeks to help save cash as loan losses continue to mount.
Comment On This Story
Fandetti cut his 2009 earnings estimate to 68 cents per share from $1.25 per share. He slashed his 2010 earnings estimate to $1.15 per share from $2.00 per share.
Analysts polled by Thomson Reuters, on average, forecast earnings of 94 cents per share for 2009 and $1.42 per share for 2010.
Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
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Associated Press
Ahead of the Bell: American Express
Associated Press, 03.12.09, 08:44 AM EST
pic
An analyst cut his price target and earnings estimate for American Express Co. amid concern that mounting credit losses will likely force the credit card lender to take sizable reserves in the coming quarters and potentially cut its dividend.
In a research note published Wednesday night, Citi (nyse: C - news - people ) Investment Research analyst Donald Fandetti said upcoming data about American Express (nyse: AXP - news - people )' credit quality and first-quarter results are likely to put pressure on the company's share price.
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Fandetti, who already rates American Express a "Sell," cut his price target to $9 from $14. Shares of American Express closed Wednesday at $11.93 and lost 23 cents in premarket trading.
Data from January showed rapid deterioration in credit quality at American Express, Fandetti said, as the lender faces rising delinquencies and defaults among its borrowers. Nearly all credit card lenders are facing rising losses as the recession worsens and unemployment rises, leading more customers to miss payments.
NOTE:nearly all creditcard lenders are facing rising losses as the recession worsens and unemplotment.
Fandetti said American Express has been especially hit hard because of its exposure to markets such as California and Florida, which have stung by the housing downturn, as well as a high proportion of loans in its portfolio from 2005 to 2007, which are among the worst-performing.
Continued deterioration could force American Express to ramp up loan-loss reserves in 2009, Fandetti wrote in the note.
Despite the credit-loss worries, Fandetti said American Express' capital ratio remains strong. But he cautioned that a dividend cut could still occur to help preserve additional cash. Many financial services firms have been slashing their dividends in recent weeks to help save cash as loan losses continue to mount.
Comment On This Story
Fandetti cut his 2009 earnings estimate to 68 cents per share from $1.25 per share. He slashed his 2010 earnings estimate to $1.15 per share from $2.00 per share.
Analysts polled by Thomson Reuters, on average, forecast earnings of 94 cents per share for 2009 and $1.42 per share for 2010.
Copyright 2009 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed
Citigroup Back In The Black
Stocks Down As Madoff In Courtimage
The Unending Battle For Investment Survival
Freddie Mac: More Money Pleaseimage
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