Go To Street Insight Market Talk
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Brian Reynolds |
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| Bond stuff |
1/30/02 6:07 AM ET
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Another event filled day coming up for bonds. Ill be traveling this morning (though I hope to be able to post by Fed time), but wanted to give a heads up on whats coming. The first look at fourth quarter GDP comes out at 8:30; traders are looking for -1.1% on the headline number and 1.8% on the deflator. Right on the heels of that comes the Treasurys detail of its borrowing expectations at 9:00; this could have a significant impact on individual maturities. At 2:15ish comes the Fed. Most everyone on the short and long end of the market expects no change in rates, with a statement tilted towards potential weakness. As with most Fed meetings, the key to me will not be so much what the Fed does, but how the bond market reacts. For more than a year, bond managers have reacted with displeasure to Fed easings; might an end to the easings spark a rally? Finally, and potentially overriding all of the above, is the bond markets current focus on stocks. Another day on the equity side like yesterday would be expected to produce another rally in bonds, which could limit how bad the damage to stocks becomes. An equity rally off of yesterdays selloff would most likely prompt bonds to give back much of yesterdays gains.
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Jim Seymour |
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| Nokia Clipped in Down Euro Day |
1/30/02 6:19 AM ET
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Nasty day in Europe (following our nasty day in New York!). NOK already nicked 5%+ there, likely to take a similar hit here today....
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Tero Kuittinen |
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| blood-dimmed tide |
1/30/02 6:38 AM ET
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Its indeed tough sledding in Europe. The indexes started weak and have faded from there. The plotline ties in plummeting energy, banking and telecom stocks. The heaviest toll is on alternative or challenger carriers. There are some banks making a very strong defence of Vodafone in order to stop the selling from spreading to big carriers. Its not working that well. Id expect stuff like Nextel, Sprint and Verizon to get hit again in the States today.
Overall, the market worries are more or less an extension of the mounting worries concerning corporate accounting and investment bank integrity issues. There are some scurrilous individuals joking that certain bankers seem to have a weakness for secret Cayman Island partnerships. This is totally inappropriate, of course. We all know that these guys are pure as Caesars wife (and I dont mean Messalina). Anyway, the worries keep mounting as long as we get a steady drip-feed of new revelations, delayed earnings releases, possible conflicts of interest, etc. More than other sectors, telecom valuations are built on faith faith on accounting, faith on growth projections from equity analysts. If that gets damaged, things go bad. I dont necessarily think that this erosion of faith is a trivial issue. This thing can have legs, so I'm not buying this whole buy on State of the Union speech or buy on panic dips angle. That slam on Iran wasn't a soothing development.
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Cody Willard |
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| No Foundry |
1/30/02 8:19 AM ET
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Foundry's dreadful quarter is evidence of Chambers' claims that CSCO's still taking market share. Indications are that Enterasys took market share in some segments too. Of course, FDRY's got more problems--like forgetting that the customer is always right (especially when it's one of your largest (aol) asking for simple tweaking to some of your products).
csco, ets
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Herb Greenberg |
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| ttwo |
1/30/02 8:24 AM ET
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Take-Two filed today with the SEC an NT 10-K, which says it can't file its 10-K by the deadline of yesterday. Reason: Its finncial statements from the fiscal year ended October 31, previously restated results from 2000 and its INTERIM financial reports for last year "have not yet been finalized." Apparently the audit STILL isn't over! hg
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James Cramer |
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| Tom Kurlak |
1/30/02 8:32 AM ET
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Welcome back, Tom!! We have missed you very much. Terrific and sobering piece expressing well what a lot of us have been feeling. ...
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Herb Greenberg |
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| tyc |
1/30/02 8:32 AM ET
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Alex Berenson's article on Tyco today isn't likely to go over well with analysts. Berenson wrote that Tyco CEO Dennis Kozlowski and CFO Mark Swartz quietly gave back stock to the company, rather than file to sell the shares. That flies in the face of what even the biggest bull, from Merrill Lynch, told Barron's in response to a story that questioned Tyco's accounting. "The CEO and CFO of Tyco International has [sic] been steadily increasing the number of shares that they own in the company each year," the analyst said. "They have had opportunities to sell, but the fact that they have not suggests that their confidence in the outlook appears to be high....Management's interest seems to be aligned with shareholders." Right, they didn't sell..they just gave the shares back! Let's see the analyst's spin on THAT! hg
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Herb Greenberg |
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| ca |
1/30/02 8:52 AM ET
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Now that we're in a period when people actually may care about accounting, conflicts and the like, I want to pose a question I posed in my column in May of 2000: What's NYSE President and all-around nice guy Dick Grasso doing on the board of Computer Associates? CA is an NYSE-listed company. Why is that NOT a conflict of interest? When I raised the issue, the NYSE's comment was that the NYSE made sure certain firewalls were in place that barred him from getting involved in any discussion involving CA. "It was addressed to the board's satisfaction," a spokesman says. To which I responded: "That still doesn't make it right!"
hg
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Justin Lahart |
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| Tyco |
1/30/02 8:56 AM ET
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Herb, I disagree -- I think the NYT article will go over fine with just about all of the Tyco analysts. Just like everything else has.
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Christopher Edmonds |
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| Energy |
1/30/02 9:33 AM ET
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A couple of energy observations before Wednesday's open.
1. President Bush's State of the Union should have investors thinking about energy this morning. Focus on domestic production will spur interest as will the possibility of further action against nations supporting terrorism. Net positive for the service and integrated names.
2. News of a possible ChevronTexaco bid for either Phillips or Conoco should also attract interest to the integrated names. However, a bid for either would face tough anti-trust hurdles. What it may do is serve to raise the price of the P-COC deal.
3. Anadarko restatement is a net negative for the company, although APC appears to have come clean. While investors will be skeptical, I dont think you can make comparisons to Enron.
4. JJC's take on Williams yesterday is right -- This is a company I want to like but the "we dont know for sure what the impact" attitude is troubling. May get a relief bounce today but the combination of the accounting issues with the telecom exposure make it much less desirable, short-term. If you want the merchant energy/convergence exposure, would consider swap to either Dynegy or El Paso. However, any name in the group will be volatile and require significant patience, beyond the trade.
5. News that FERC has started an investigation into Enron's involvement in price manipulation in California is both expected and Enron-specific. And, frankly, given FERC Chair Pat Wood's ties to Enron and Texas he has to talk tough. Rhetoric will continue, findings will be much more difficult.
Have a good day.
None
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Herb Greenberg |
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| tyc |
1/30/02 9:38 AM ET
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Justin, how right you were about analysts defending Tyco...of course, they've been defending it all the way down..They didn't even question the company's strategy which the company itself questioned by deciding to bust itself up. Why stop when you're on a roll! hg
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James Cramer |
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| AOL |
1/30/02 9:52 AM ET
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AOL sounds like a defeated company to me, just defeated. Like some team that just got whupped. No energy. I rate this conference call one star on a scale of 5...Going through the motions
AOL
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TSC Staff |
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| Tyco |
1/30/02 9:54 AM ET
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Herb, one Tyco issue nobody's talking about is debt, specifically debt to net tangible assets. Strip out the goodwill and there's not much there - less than $4 billion in assets v. net debt of $26 billion.
np
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Justin Lahart |
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| Tyco analysts |
1/30/02 10:05 AM ET
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Herb -- About a minute after your post I got a Merrill note on Tyco. They're defending the company, of course -- the NYT article isn't "news".
If you look at earnings estimates for Tyco, you get a tight little grouping --just about all the analysts toeing the party line. This in itself is disconcerting. The sell-side (exception: Pru) has totally discredited itself on this one. It's got the point where nobody will believe them when they defend the company EVEN IF THEY'RE RIGHT.
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Herb Greenberg |
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| tyc |
1/30/02 10:07 AM ET
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Great point, Arne. Interesting, that with Tyc's stock now at $28 you've got to start asking, "What's it worth." After all, there IS value there. But as one of my very smart sources says (a guy as smart as you, Arne): "How much is all that stuff worth vs the debt and whatever unknown obligations are out there."
hg
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James Cramer |
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| AOL |
1/30/02 10:15 AM ET
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This AOL call reminds me of that Best Buy ad where the two execs are listening to some guy at the end of a desk rattle off figures about the month of January and the month of February while they get ready to kick field goals with a paper football...
BBY, AOL
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Herb Greenberg |
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| ttwo |
1/30/02 10:19 AM ET
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Looks like somebody finally knocked some sense into Piper Jaffray analyst Tony Gikas, who just old his clients about Take-Two: "In our view, management credibility (including Company's chairman and
former CFO) is at risk and our confidence has been damaged." Of course, this is a company that today said in its SEC filing: "The registrant is unable to provide an estimate of any component of its statement of operations because its financial statements for Fiscal 2001 and restated financial statements for Fiscal 2000 and the interim quarters in Fiscal 2001 have not yet been finalized." Can't even give an ESTIMATE 90 days after the end of the quarter. Auditors, it would seem, are still auditing! hg
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Herb Greenberg |
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| eln |
1/30/02 10:39 AM ET
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Nobody much cared when I spotlighted Elan in November in a column headlined, "The Pot of Revenue at the End of Elan's Rainbow." Now that the WSJ chimes in they do! Funny how that works. hg
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TSC Staff |
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| Manpower |
1/30/02 10:42 AM ET
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One of my stocks, Manpower, came in a penney ahead. Guided lower for Q1 to .06-.10 from .17/share. The call is going on now - company says U.S. showing "slight signs of stabilization", especially in light manufacturing. Good control on costs in a tough environment.
long MAN
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Tero Kuittinen |
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| Wild Morning |
1/30/02 11:04 AM ET
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Whats happening to WCOM, T, PCS and NXTL is pretty incredible. Theres a total loss of confidence just sweeping across many diverse operators right now. Ive been reading several research notes on WCOM and T today and some have this curiously frantic, desperate tone. Im not sure screaming at investors helps a lot right now. Theres a fundamental issue of declining voice revenue (and in some cases worrisome debt loads) at the core of the operator problems. I dont see why many people insist that some of these companies are bluechips I can see why some of them (like Sprint) have a lot of upside under right conditions, but theres no denying the speculative nature of the sector. So trying to claim that the companies should be valued as bluechips and remain relatively stable doesnt really wash. Nevertheless, were getting to a point where its worth looking at some of this stuff for trading rebound potential if nothing else.
no positions
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Cody Willard |
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| LVLT |
1/30/02 11:09 AM ET
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So when LVLT drops below $3 does everyone who sent me hate mail write back to apologize? LOL
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James Cramer |
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| Cody |
1/30/02 11:15 AM ET
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Now, Cody, you see why wall street doesnt like to downgrade or speak critically!!! You should write about what it is like so at least we can be more empathetic to some of these forlorn research characters...
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James Cramer |
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| Today's Pinata |
1/30/02 11:24 AM ET
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Today's Pinata is SPX Corp!!! (SPW)
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Cody Willard |
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| Jim |
1/30/02 11:40 AM ET
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It's a lesson I re-learn every time I'm negative on anything...but especially when I bash those high-fliers of yesteryear. Don't know what it is aobut Gilder Stock holders but anytime i've ever written anything at all negative about stocks on his recommended list (corv, gx, et al)--man do I receive a barrage. Heck, I think a lot of the LVLT hatemailers are residual Gilder holders from before his big falling out with Crowe (if anyone's memory stretches back to those heady days of yore!). I need my own little Hostile-Reactometer. Frankly, I get a kick out of some of the harsher ones. Truth hurts, ya know?
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Ben Holmes |
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| Can't Fight the Fever |
1/30/02 12:10 PM ET
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I've got to confess, I've been sweating my Carolina Group call for the last day or so. I'm "out on a limb", as they say, with an AVOID rating, but I cannot fight this equity syndicate tape any longer. These deals are just rippin' hot right now! So, I'm inlclined to think that the market will help this one to deliver a premium.
Speak English, lad!
Carolina Group is most likely a small premium -- less than a buck -- over issue. There I said it!
Ben "El Mano Fuego" Holmes
PS -- Did you see this Polycom follow-on trade??? PLCM priced at $31.20 is now $32.70ish!!! Niiiiiiice!
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Ben Holmes |
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| Emotional Breakdown |
1/30/02 12:26 PM ET
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JJC, Herb, the whole bunch of you, you've all caught a bug or something! I have never heard such across-the-board pessimism! Jim, Qwest??? You used to love Qwest! Regional Bells don't go to zero!
You guys need bed rest and a bowl of chicken soup. Me, I'm taking this crazy-making epidemic as a sign that this market may be entirely oversold.
Lemmings, all of ya!
-bh
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Herb Greenberg |
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| tyc |
1/30/02 12:39 PM ET
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Ben, hardly lemmings. Just ahead of the crowd! And so is Prudential's Nick Heymann, who just told his clients regarding Tyco: "We sense many investors today perhaps view TYC as inherently cheap. But you cannot confuse 'value' investing, where you believe you can accurately assess all the facts but are just waiting the timing of the underlying value to surface, with 'turnaround investing', which would likely be when the stock stabilizes and an investor is willing to take a calculated risk that a company's fundamentals will improve. Today we don't have a case for value investing since we don't know: (1) what will be in the company's portfolio at the conclusion of its recapitalization, (2) what the sustainable earnings power will be of these assets."
hg
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James Cramer |
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| Ben |
1/30/02 12:39 PM ET
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Ben, where have you been?
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James Cramer |
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| Heyman |
1/30/02 12:43 PM ET
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Nick Heyman and Michael Regan at First Boston have been very good on Tyco, in my opinion.
tyc
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TSC Staff |
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| The Real Emotional Breakdown |
1/30/02 12:44 PM ET
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Ben, maybe the fear our columnists show is the acknowledgement that high valuations, poor fundamentals and questionable accounting practices make for a nasty market. The real emotional breakdown is the collapse of the investor fantasyland that has persisted the past few years. And, that it's a long way down to rationalville! Reality is not pleasant, even if the market is oversold short-term.
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James Cramer |
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| AOL |
1/30/02 12:45 PM ET
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Cheerleading in the face of this pasting is painful!!
aol
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TSC Staff |
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| Re: Cheerleading |
1/30/02 12:51 PM ET
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Then put away the pom-poms.
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Justin Lahart |
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| Ben |
1/30/02 12:53 PM ET
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Ben -- Jim started screaming about how investors should get out of Q quite a few points ago.
As for the oversold thing, yeah, maybe the market is oversold. The problem, however, is that some aspects of the fear in the market seem very rational. I wrote an article Mon. morning noting that GAAP earnings look like they'll come in about 58% of the pro forma numbers in 2001. That is just incredibly troubling.
Now investors are questioning companies accounting and realizing they may have been valuing stocks on the wrong numbers. There are a lot of companies out there that haven't played the pro forma game, and are no doubt getting whacked unfairly. But in a very real sense, for many stocks Pandora's Box has been opened.
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Herb Greenberg |
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| tyc |
1/30/02 1:38 PM ET
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Wild to watch Tyco's stock rebound after the CEO and CFO issue a press release saying they intend to each buy 500,000 shares of stock on the open market using their own funds. WHAT TOOK 'EM SO LONG?! If you only knew how many times we've seen THAT before and companies have STILL collapsed. In the end, even Koz and Swartz are rolling the dice until they have cash in hand for selling the units and can prove that they have unlocked tens of billions of dollars in shareholder value. There are still so many uncertainties. Remember, buyers of any unit will now being doing a more thorough due diligence than they would have before. And any IPOs will be scrutinized like you've never seen. Story ain't over. hg
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James Cramer |
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| MO |
1/30/02 1:48 PM ET
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MO is talking a good game, gee i like these guys..re transparency and apples to apples....
mo
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Justin Lahart |
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| TYC |
1/30/02 1:50 PM ET
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These guys are buying in at a lower cost than they sold, of course. And they're buying, at current prices, about $32 million worth a piece when they sold more than $100 million. And $16 million can't be all that much for a guy who just bought a boat for $15 million.
That said, it does suggest confidence in the share price. These guys better not sell a single share during the next year, however.
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James Cramer |
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| SOX |
1/30/02 1:55 PM ET
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SOX rallying in part because these companies (with the exception of MOT) have good balance sheets and easy to read financials. Ironic, isn't it? General Dynamics rallying because of Bush and because DOD does better accounting oversight.
GD
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James Cramer |
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| TYC |
1/30/02 2:02 PM ET
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Just so you know, as pieces are a bit stacked up, I am not backing off from my strategy of February 30 calls, as they held their value even during the decline this morning. That is the money contract and I reiterate that you will make good money in the Tyco Feb 30 calls.....
TYC
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Herb Greenberg |
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| tyc |
1/30/02 2:04 PM ET
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Another way to look at their purchases right here, Justin, is that this is where they see value. (There IS value in Tyco, no argument about that!) It's like shortsellers who are covering right here. Maybe that's why they're only announcing the purchases NOW. hg
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Brian Reynolds |
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| Bond stuff |
1/30/02 2:06 PM ET
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Just getting to a PC after a day of travel. The positive GDP print sent bonds down, and the mix of GDP augers for a recovery as it will be tough for inventories and business investment to continue falling at the same rate. The Treasury's announcment this AM of its' borrowing needs was about as expected, and the continuation of at least small buybacks in the long end gave that sector some support. The 10-year is down about a quarter-point as we head into the Fed announcement.
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Justin Lahart |
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| Fed |
1/30/02 2:21 PM ET
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Fed leaves rates unch and the tape's first tick is down. Selling the fact, I guess. Why anyone think the Fed was going to do anything but stay pat is beyond me.
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Brian Reynolds |
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| Justin |
1/30/02 2:28 PM ET
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Not only did they stand pat, their statement was also about as expected, stating that signs of firming are more prevalent, but the risks remain tilted toward weakness. Bonds didn't react much at first, but the ten-year is now down another quarter point.
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Ben Holmes |
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| Okay, are you guys done? |
1/30/02 2:28 PM ET
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Hey Jim, I've been right here wishing I could personally buy stocks! Be reasonable -- someone had to call you on Qwest @$0!! Yes, they're going to get hammered right along all of the other big-bet telecoms, but they will survive.
I'm not cheerleading, but I'm not going to cheer everyone else on as they glom onto the ridiculous. Enron, Tycom, and a league of others are ripe for a shakeout, but you guys are smarter than that! It's not ALL going to hell. The shorts will drive 'em down and then the bulls will buy 'em cheap. There's nothing new under the sun.
Qwest -- go ahead, sell it all! I'll be buying it for the kids all day long at a single digit price tag. In 16 years when my oldest starts school at McGill, he'll be paying for his dorm room and cafateria card with the profits!
Respectfully but all-the-wiser-for-being-older,
-bh
PS - The site IS smokin' as usual!
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James Cramer |
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| Nerve-wracking |
1/30/02 2:34 PM ET
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I dont think i can recall a time when I have seen managers more tortured and worried and crazed and nervous than right now.... I can usually gauge this stuff pretty well and it is just spinning out of control...
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Glenn Curtis |
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| Merck |
1/30/02 2:52 PM ET
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Good article by Jim to the right. I'd steer clear of Merck right now too. Slow growth in pharma biz. Management unwilling to merge to stimulate growth or generate cost synergies. Look elsewhere for profits. gc
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James Cramer |
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| TYC |
1/30/02 3:30 PM ET
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Remember, I said buy the Tyco Feb 30 calls.THey would hold their value even if things got clobbered. Things got clobbered and yet these held value. Now they are going to start their move upward. I like this situation here very much., Great risk reward with this contract. Keep doing it.
TYC
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Herb Greenberg |
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| tyc |
1/30/02 3:57 PM ET
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Headline: S&P says Tyco answers on accounting satisifactory. hg
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Herb Greenberg |
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| tyc |
1/30/02 4:03 PM ET
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Of course, S&P stood behind Enron, too! (Low blow, I know!) hg
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James Cramer |
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| End of the Month |
1/30/02 4:07 PM ET
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We got a lot of end of the month mark up paint taping today. Once the Fed was done they went to town and moved up stocks. I can't believe that they are still in the game doing that stuff but i guess some things never change.
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James Cramer |
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| Not a cheap shot |
1/30/02 4:10 PM ET
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Not a cheap shot at all Herb, I think that the ratings agencies got away with murder...
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Aaron Task |
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| conflicts |
1/30/02 4:47 PM ET
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re. the rating agencies, how come no one talks about the fact that companies pay S&P, Moody's, Fitch, et al to rate their debt? Meaning the agencies livelihood is dependent on the companies/municipalities they are supposed to monitor.
I'm not saying the rating agencies let that influence their decision making but given what's gone on with the Big 5 accounting firms, nothing is sacred anymore.
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Herb Greenberg |
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| ttwo |
1/30/02 5:00 PM ET
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Here's something very interesting on Take-Two: Peter Brant, father of Chairman Ryan Brant, just filed an amended 13-G showing that he now controls only 1.9% of the stock. However, as of the last proxy, he owned 7.7%. And he hasn't filed any 144s showing his intention to sell any stock. Not everyday you see that! hg
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Herb Greenberg |
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| conflicts |
1/30/02 5:01 PM ET
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Aaron, actually, I think people do, which is why it'll be interesting to see what an independent credit rating agency, like Egan-Jones, which just does pure research, thinks of Tyco. hg
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Herb Greenberg |
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| ttwo |
1/30/02 5:47 PM ET
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Checking on Take Two: Peter Brant is not considered an insider so, apparently, he didn't have to file Form 144s with the SEC. Still, between June and Decmeber 31 (when the 13G in question was filed) he sold stock and from the looks of it, perhaps quite a bit. hg
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Jim Seymour |
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| ERTS Off the Top of the Scale |
1/30/02 8:05 PM ET
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Electronic Arts came in with great numbers tonight: Revenues up 30%, profits up 50%, in its Q3, ending Dec. 31.
Net income was up to $0.98 EPS, from $0.63 EPS in the year-ago quarter; sales were up t $832M from $632M a year ago. That sales increase beat estimates by -- get this -- $100M.
EA's strong performance was helped considerably by its four Harry Potter games, boosted by release of the eponymous movie during the quarter -- and by its strong lineup of games across the most popular consoles.
Mushy after-hours trading in ERTS Tuesday evening; look for a nice move up Wednesday, as the impact of this performance sinks in....
none
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Jim Seymour |
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| Calendar Check |
1/30/02 9:14 PM ET
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Uhh...make that in afterhours trading WEDNESDAY, with a nice market move THURSDAY. Too little sleep....
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Ben Holmes |
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| No Syndicate For You |
1/30/02 10:30 PM ET
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There are no syndicate deals pricing tonight for tomorrow (Thursday is the biggie). Just thought I'd let you know in case you were thinking that I was asleep.
Here's a sign of the times. Just for fun, take a look at laidoffcolorado.com
The site is all about what to do when you suddenly have all the time in the world and no money coming in! I got a chuckle out it.
-bh
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Ben Holmes |
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| The Game is Afoot! |
1/30/02 10:57 PM ET
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Jimmy Rev Shark --Nice to finally meet you, but I was truly hoping that I would never have to hear the Sherlock bit again after high school! Look, I've been watching these market panic scenes unfold since I was old enough to dial a phone and say, "Can I speak with Mr. Johnson". Inspite of my youthful appearance, that's been quite a long time.
The facts are that these things are almost always overdone and that good stocks usually get caught up in the beatings. When this happens it has always -- ALWAYS, ALWAYS ALWAYS -- made sense to buy stocks. I need only cite a former colleague's California license plate which optimistically reads "DOW3000"
Do you get my point?
I read you daily and appreciate what you bring to the table but the Sherlock thing made me flinch, waiting to feel the snap of a locker room towel on my shanks. Yikes!
Respectfully -- bh
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