Friday, October 19, 2007

Countrywide "Angelo Mozilo It Looks Bad"

Countrywide's leader (CFC) must have been served by a Wells notice about his stock option activities. About time SEC, where have you guys been?

Angelo assuming that you have not broken any laws or regulations do you have any idea how bad this looks to investors and stakeholders? The captain of the ship seems to be getting into his own luxury escape pod.

I have seen the video clip from CNBC where you claim that in the twilight of your career you should be selling. Bah Humbug Retired people need to continue investing. When you sell in these great quantities you are making a raw uncensored investment comment about the stock that you have the best insight into.

Get a lawyer and buckle up.

Capital One It's Art!

Whats in your wallet Capitol One (COF) announces huge losses. That was to be expected given their announcement that their GreenPoint Mortgage Business had died and needed to be buried. Financial funerals are very expensive.

Executive comments were front end loaded with how well the share repurchase program was going and supporting the stock. I guess you lead with your best card in these cases. Speaking of share repurchase the ASR (Accelerated Share Repurchase)was completed in Aug at a cost of billions of dollars of capital at a time when huge losses are occurring and extra capital would be a good idea.

While the ASR was going great guns Richard D Fairbank (Chairman, President & CEO)was very actively selling during the same time frame. Given the very bad news that was blowing up at the time the sales have a very "Angelo Mozilo" quality to it. We will have to see how it all turns out.

Much of the financial press has jumped on the "Its a little bit of an art form" comment made by Richard Fairbank when commenting on write offs. Essentially in the past the write offs were too low and now they are moving into the scary part of the graph on the other side of the chart. So do earnings need to be restated?

The music has stopped and all we get is an art critique. Richard Fairbank you would not accept that comment from subordinates when dealing with bad or tough news. Why should the shareholder be happy?

By the way this is another case where the same person holds three titles Chairman, President and CEO. With a market cap of approximately $28 billion you can afford to hire a couple of good guys.

Thursday, October 18, 2007

WaMu Dividend Is It OK?

WaMu just released earnings and conference call transcript is available on The first analyst question was right on the money. Paul Miller - Friedman Billings Ramsey & Co. inquired as to if the dividend is stable or safe. The board declared a dividend which looked normal. The earnings are well off the mark which was expected. Guidance was down which is realistic. But the board keeps the dividend going. Boards will rely on managements recommendations but ultimately are responsible to the shareholders.

If you adhere to traditional dividend policy assessment anything over a 5% yield is suspect. WaMu is north of 6%. Also the dividend payout ratio indicates they are needing to cannibalize essential body parts to maintain the payout ratio. Many fine companies have been able to continue paying dividends during lean times. When earnings swing back its all good and everyone just knew it was going to work.

At 6% yield, the question is do you believe? The regulators will allow you to pay out uncovered dividends for only so long. Comments about the mortgage market indicate a long hard winter with no promise of an early spring. So we change the question to: How long do you have to believe?

So far only one insider has bought 1000 shares in early Aug. Michael K Murphy the retired Chairman and CEO of CPM Development Corporation, a construction materials manufacturer and the parent company of Central Pre-Mix Concrete Company and Inland Asphalt Company. Has this old salt seen cycles before?

Wednesday, October 17, 2007

Kudo's to Boone Pickens

Boone Pickens appeared on CNBC's Squawk Box this morning as a respected guest commentator. He hit the nail right on the head when speaking about stock buy backs. To paraphrase he made the following comments. CEO's are in fiduciary positions of responsibility beholden to the shareholder. When CEO's start stock buy back plans the investors needs to ask what does the CEO know. He feels that the CEO is in a preferred position because the CEO has better information. Therefore the buy back is not truly in the investors long term interests. He concluded that if CEO's need to deal with excess cash they should pay dividends, or expand the business, or make acquisitions into new area's.

His message is that the CEO should not be betting against his own shareholders. Imagine that CEO's working for the shareholder. Boone you're OK.

Boeing Shuffles Executives Does It Mean Anything?

Boeing (BA) recently embarrassed itself by announcing delays in deliveries of their state of the art world beating 787. Titanium body and reduced weight was supposed to create approximately a 20% reduction in fuel consumption. Boeing got the fastener issue wrong and has been bitten by supply chain problems. In other words the rivets that hold the airframe together are late. There is good reason to believe that Boeing delayed giving the go signal to the suppliers and the system never caught up.

In early Sep James McNerny Chairman of the Board, President and CEO started to come clean indicating that they were very tight and that if everything did not go exactly to plan they would have to delay deliveries by approximately six months. Guess what they have to delay deliveries much to the delight of the Airbus crowd.

Now they announce changes in the executive suite. Mike Blair who has overseen the 787 project will be replaced by Pat Shanahan. Blair becomes VP business strategy and marketing at Boeing Commercial Airplanes. Many view this as punishment. Maybe in the corporate suite this is Boeing punishment.

But this was a huge project. One person although highly placed cannot be held accountable for the entire problem. Problems of this size reach into the highest level. You have the original problem developing and then consider what system of management elevated the problem. The result was that the CEO had to do a public tap dance and almost post Vegas Odds on his own signature project.

The ultimate responsibility sits with James McNery. But you see he holds three titles at an incredibly huge and complex company. Chairman of the Board, President and CEO. He could use some help. The sooner he gets it the better off the Boeing shareholder will be.

Monday, October 15, 2007

How Many Bottles Of Beer On The Wall?

Molson Coors (TAP)is joining with SABMiller (LON:SAB) to create a brewing juggernaut. The power of Budweiser (BUD) in the US is such that they want to gang up and hope they can take some market share.

True problem is that much of the beer is all the same taste. No one is really brewing a better or distinctive beer. Its all about the market, market share, girls in skimpy clothing, and how many truck loads per minute do we ship. Most beers are truly boring. More like carbonated cool-aide with some alcohol content is what the current offerings are really like.

The market is not growing according to script. This means the customers do not really like your products. Look how easy it is to introduce a new import brand and have people try it for a while. Heads turn easily because they are not truly into the big brands.

The one thing the big brewers have not tried is real quality. In the meantime its a battle of spread sheets and financial engineering supplemented by B school case studies about how incredibly difficult it is to sell beer. Take a lesson from other consumer products companies and introduce true high end and create value not mergers.

Sunday, October 14, 2007

Citigroup's Chuck Prince is Safe

Citigroup's (C) Chuck Prince has been much criticized of late in the business press.Something about two white guy's fighting keeps getting trotted out. Everyone is using him as a whipping boy for what they think is wrong with Citi. The financial concern called Citigroup has approximately 327,000 employees (including the mail room guys). But its only Chuck Prince's fault.

If the board pulled the plug who would they go to next? Large banks like this do not operate with interim managers until the board finishes interviews. Then how many other senior guy's would you need to assassinate to clear the decks and create this so called new strategy that everyone else wants. You are talking about hundreds to really make it work.

That's why it can only be done incrementally. Sorry hedge fund guys not everything naturally operates in hyper speed just to skate your latest trade on side. The Saudi's like him. The Japanese thing looks really interesting. The sub prime problem got everyone so you cannot call it a Chuck Prince thing.

Huge money center banks are not just another basket of stocks. The CEO's can get their Central Banker on the phone anytime they want. Same thing if they want to speak to the Treasury secretary. Rapid changes would be more disruptive and dangerous than beneficial.

Watch for Chuck Prince to move into a compelling new role in the next year such as say ambassador to China under the new administration in about a year. That way it does not look like a kick in the pants which would only demoralize the entire structure of Citigroup.

In the mean time try to enjoy the 4.5% dividend yield