Reggie Middleton's Boom Bust Blog

First, read the "Doo Doo 32" post, then the "Anatomy of a Sick Bank", then reference the TARP list (corporate welfare) below (source:US Treasury Emergency Economic DEstabilization Act). Ya' see anybody familiar??? It's almost like having a crystal ball - filled with doo doo! I actually believe this particular move was necessary on behalf of the Treasury, and was what I recommended when Paulson originally released his 3 page tome of economic domination (see WARNING: the Emergency Economic Stabilization Act of 2008 may significantly DESTABILIZE the economy!, Shock & Awe: redux and Reggie Middleton asks, "Do you guys know who you're messin' with?"). After reading Doo Doo 32 and the Sick Bank articles, no one can honestly say that they didn't know who was to end up on this list.

 

Date	Seller	Transaction Type	Description	Price Paid	Pricing Mechanism
Name of Institution	City	State
10/28/2008	Bank of America Corporation	Charlotte	NC	Purchase	Preferred Stock w/Warrants	$15,000,000,000	Par
10/28/2008	Bank of New York Mellon Corporation	New York	NY	Purchase	Preferred Stock w/Warrants	$3,000,000,000	Par
10/28/2008	Citigroup Inc.	New York	NY	Purchase	Preferred Stock w/Warrants	$25,000,000,000	Par
10/28/2008	The Goldman Sachs Group, Inc.	New York	NY	Purchase	Preferred Stock w/Warrants	$10,000,000,000	Par
10/28/2008	JPMorgan Chase & Co.	New York	NY	Purchase	Preferred Stock w/Warrants	$25,000,000,000	Par
10/28/2008	Morgan Stanley	New York	NY	Purchase	Preferred Stock w/Warrants	$10,000,000,000	Par
10/28/2008	State Street Corporation	Boston	MA	Purchase	Preferred Stock w/Warrants	$2,000,000,000	Par
10/28/2008	Wells Fargo & Company	San Francisco	CA	Purchase	Preferred Stock w/Warrants	$25,000,000,000	Par
10/28/2008	Merrill Lynch & Co., Inc.	New York	NY	Purchase	Preferred Stock w/Warrants	$10,000,000,000	Par
11/14/2008	Bank of Commerce Holdings	Redding	CA	Purchase	Preferred Stock w/Warrants	$17,000,000	Par
11/14/2008	1st FS Corporation	Hendersonville	NC	Purchase	Preferred Stock w/Warrants	$16,369,000	Par
11/14/2008	UCBH Holdings, Inc.	San Francisco	CA	Purchase	Preferred Stock w/Warrants	$298,737,000	Par
11/14/2008	Northern Trust Corporation	Chicago	IL	Purchase	Preferred Stock w/Warrants	$1,576,000,000	Par
11/14/2008	SunTrust Banks, Inc.	Atlanta	GA	Purchase	Preferred Stock w/Warrants	$3,500,000,000	Par
11/14/2008	Broadway Financial Corporation	Los Angeles	CA	Purchase	Preferred Stock w/Warrants	$9,000,000	Par
11/14/2008	Washington Federal Inc.	Seattle	WA	Purchase	Preferred Stock w/Warrants	$200,000,000	Par
11/14/2008	BB&T Corp.	Winston-Salem	NC	Purchase	Preferred Stock w/Warrants	$3,133,640,000	Par
11/14/2008	Provident Bancshares Corp.	Baltimore	MD	Purchase	Preferred Stock w/Warrants	$151,500,000	Par
11/14/2008	Umpqua Holdings Corp.	Portland	OR	Purchase	Preferred Stock w/Warrants	$214,181,000	Par
11/14/2008	Comerica Inc.	Dallas	TX	Purchase	Preferred Stock w/Warrants	$2,250,000,000	Par
11/14/2008	Regions Financial Corp.	Birmingham	AL	Purchase	Preferred Stock w/Warrants	$3,500,000,000	Par
11/14/2008	Capital One Financial Corporation	McLean	VA	Purchase	Preferred Stock w/Warrants	$3,555,199,000	Par
11/14/2008	First Horizon National Corporation	Memphis	TN	Purchase	Preferred Stock w/Warrants	$866,540,000	Par
11/14/2008	Huntington Bancshares	Columbus	OH	Purchase	Preferred Stock w/Warrants	$1,398,071,000	Par
11/14/2008	KeyCorp	Cleveland	OH	Purchase	Preferred Stock w/Warrants	$2,500,000,000	Par
11/14/2008	Valley National Bancorp	Wayne	NJ	Purchase	Preferred Stock w/Warrants	$300,000,000	Par
11/14/2008	Zions Bancorporation	Salt Lake City	UT	Purchase	Preferred Stock w/Warrants	$1,400,000,000	Par
11/14/2008	Marshall & Ilsley Corporation	Milwaukee	WI	Purchase	Preferred Stock w/Warrants	$1,715,000,000	Par
11/14/2008	U.S. Bancorp	Minneapolis	MN	Purchase	Preferred Stock w/Warrants	$6,599,000,000	Par
11/14/2008	TCF Financial Corporation	Wayzata	MN	Purchase	Preferred Stock w/Warrants	$361,172,000	Par

 

This is an actionable intelligence note for profesional level subscribers.

We have done a sensitivity analysis of Macerich's (MAC) valuation based on different scenarios representing re-financing conditions and sale assumptions.  We have broadly assumed four scenarios loosely based upon the options that were available to GGP (see GGP and the type of investigative analysis you will not get from your brokerage house), which had a vastly superior portfolio:

• Re-financing scenario: Macerich would be able to re-finance all its loans, though at higher interest rate (6.5%, which is slightly conservative considering they just announced 2 loans at 6% and 7.5% in an increasingly adverse environment).
• Sale scenario: Macerich would be able to re-finance its properties at 65% LTV and the balance of re-financing requirement would be met through sale of some of its properties. We expect MAC to sell a few properties at a discount to the current NOI-based valuation (assuming 15% discount, again taking into consideration the success of GGP over the last few months given their significantly superior portfolio).
• Foreclosure scenario: Macerich would be able to refinance its properties at 65% LTV and will have to foreclose some of its properties to meet its re-financing requirements. As a result of foreclosure, we expect MAC's interest rates to increase (by 250 basis points).
• Distressed scenario: Macerich would be able to re-finance at 50% LTV and would have to sell and foreclose some of its properties to meet its re-financing requirements. This is the worst case scenario under which we expect a 20% discount on NOI-based valuation on sale of properties and increase in refinancing costs by 350 basis points. All these conditions may drive the company close to a bankruptcy situation.

Professional subscribers may download the actionable note here: Macerich Sensitivity Analyis - Pro. Adobe Acrobat Reader version 9 or better required.

  In the vein of comparing the blog's research to name brand hedge funds, see "Another Name Brand bites the BoomBust!", I have decided to update the performance charts and announce the availability of a new instiutional program that will allow a new higher tier subscriber level to gain access into my outlook in regards to the positions that I have taken. Below you will find the most recent results to all of the performance comparisons that I have made in the last couple of months.

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From Bloomberg: Falcone's Harbinger Capital Faces Potential $200 Million Loss on Navistar

Harbinger Capital Partners, the New York-based hedge-fund firm run by Philip Falcone, has almost $200 million in potential losses on bets that Navistar International Corp.’s stock price would rise.

Harbinger bought swap contracts on 4.55 million shares of Navistar that would gain if the truck maker’s shares rose above certain prices, according to a Nov. 14 regulatory filing. Warrenville, Illinois-based Navistar has dropped 63 percent in New York trading this year to $19.86, about two-thirds below the price where the trades are profitable for Harbinger.

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Radio broadcasting companies, an out-of-favor sector with investors and media consumers, are extremely leveraged and facing difficult business environment.
With the advent of the internet, audio related media distribution barriers to entry have come down dramatically. The dissemination of news has encountered a paradigm shift with the advent of blogs, including the one owned by yours truly. With arguably better content, easier and more customizable access, and a rapidly changing business model that is difficult to grasp by the traditional MSM (mainstream media) management, the Web has literally painted a R.I.P. sign on the coffin covers of many a once might radio station holding company. Are TV station companies next? Did this truly have to come to pass, or was the changing of the guard inevitable? Should Bloomberg, or Murdoch or Curtco Media buy a stake in BoomBustBlog.com to hedge their future?

 

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The hard core fundamental anlalysis of this blog has been paying off in spades for many subscribers - creating real wealth, preseving significant wealth, and actually creating bonuses for Wall Streeters in a time fluttering pink slips. I simply implore that all who have benefitted from the research make the effort to give back to those who are in need and are less fortunate.

Now that I have my PSA (public service announcement) out of the way, we can move on. Several banks have contacted me over the course of the past year concerning my GGP research. Some of them offered many multiples of the highest level of paid subscription to gain custom access to the content on the blog (at that time I did not sell access). Let me be blunt, this preview of the report to come next week is easily worth several thousand dollars by itself. I used the same methodolgy that I used in finding GGP and analyzing it. Last week I gave a sample comparison of REITS( REIT comparison update - Retail (818 kB 2008-11-07 12:27:49)), and this actionable alert is an early preview of the full forensic analysis to come next week for professional subscribers. Frankly, this company is in trouble, despite the proclamations of management, and can easily see the same fate as GGP.

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When I first introduced my American Express research in June, I expected (and was not disappointed) many to tug the name brand line in saying that Amex was the cream of the crop, they deal only with high end consumers, large business accounts, yada yada yada. Name brand marketing, it seems, fools many investors.

If one were to peruse the reseach in the Amex link above, you will see where practically each and every admonition has come to fruitition. Hopefully, this in combination with the events of the recent past should convince readers that hard core fundamental and forensic research trumps name branding every time - all the time. As with my Goldman Sachs research, Morgan Stanley research, and many other name brands, I was (to my knowledge) the only one bearish on these companies at the beginning of this year where the share prices were still high enough to profitably short or get out of (if you have a "long only" mandate).

From Bloomberg:

American Express Co. won Federal Reserve approval to convert to a commercial bank, gaining access to funds as credit losses build and sales of asset-backed bonds plummet.

The Fed waived a 30-day waiting period on the application ``in light of the unusual and exigent circumstances affecting the financial markets,'' according to a statement released today in Washington. Chairman Ben S. Bernanke and his colleagues unanimously voted for the action.

Credit-card holders failed to repay loans in the third quarter at almost twice the rate of a year earlier, New York- based American Express said last month. With defaults rising along with the unemployment rate, October marked the first month since 1993 that card companies were unable to sell bonds backed by customer payments.

``That business has totally dried up,'' said Frederic Dickson, who helps oversee about $20 billion as chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon. ``If I were a shareholder, it wouldn't send a very warm and fuzzy message to me,'' he said today in a phone interview.

American Express, the largest U.S. credit-card company by purchases, joins former investment banks Goldman Sachs Group Inc. and Morgan Stanley, which were allowed by the Fed in September to become commercial banks.

 

 

I know it may be sexier to concentrate on the financial sector, but there has been little discussion on the most recent sectors that I have covered outside of finance. The financial implosion has caused the manufacturing sector to fold, and fold heavily. If your trades have been geared properly, the average return on the 4 manufacturing prospects that I have analyzed are well over one hundred percent in just a few months.

To refresh, you can search the blog for Encore, Navistar, USG, and Smithfield Foods (SFD). I have made the Smithfield research available for free since most of the meat is now gnawed from the bone. Feel free to download Smithfield Foods Professional report here: SFD_Pro Report_Final_240908 (286.98 kB 2008-09-25 01:32:23)

For those who were doubtful of my research and stated positions in the big name brand banks, I think a recap is in order. I have taken strong bearish positions on a few of the most revered name brands, to the dismay of people who should really know better than to doubt my investment acument. Before we get to the performance of my contrarian name brand play, let's peruse a recent Bloomberg article extract:

Fed Defies Transparency Aim in Refusal to Identify Bank Loans  

Nov. 10 (Bloomberg) -- The Federal Reserve is refusing to identify the recipients of almost $2 trillion of emergency loans from American taxpayers or the troubled assets the central bank is accepting as collateral.

Fed Chairman Ben S. Bernanke and Treasury Secretary Henry Paulson said in September they would comply with congressional demands for transparency in a $700 billion bailout of the banking system. Two months later, as the Fed lends far more than that in separate rescue programs that didn't require approval by Congress, Americans have no idea where their money is going or what securities the banks are pledging in return.

``The collateral is not being adequately disclosed, and that's a big problem,'' said Dan Fuss, vice chairman of Boston- based Loomis Sayles & Co., where he co-manages $17 billion in bonds. ``In a liquid market, this wouldn't matter, but we're not. The market is very nervous and very thin.''

Bloomberg News has requested details of the Fed lending under the U.S. Freedom of Information Act and filed a federal lawsuit Nov. 7 seeking to force disclosure.

The Fed made the loans under terms of 11 programs, eight of them created in the past 15 months, in the midst of the biggest financial crisis since the Great Depression.

 I can give you a few guesses where that money probably went. Just peruse the performance post and mark the commercial and investment bank names on the list, starting with the  Riskiest Bank on the Street and the Golden Boys mentioned below, then work your way down to The Anatomy of a Sick Bank!. I am sure some of those big name brands are in a lot more trouble than they let on.

Now, on to how my contrarian name brand plays have been doing...

Goldman Sachs with the name brand conscious (yet financially unconscious) investors saying they are too well connected to fall, smarter than the rest, best name brand on the street, blah blah, blahhh. For non-subscribers, here is a dated Goldman analysis available for free download   professional_gs_report_sample 350.