Friday, September 12, 2008

Lehman Death Watch

Lehman Brothers (LEH) continues to generate headlines without solutions. Can anyone else bail out of this stock? The Lehman situation is the hyper inverse of a speculative bubble. If you believe that the stock market is manic depressive in nature with compulsive obsessive behaviour disorders, and I do, then when situations like Lehman present themselves you have to believe there is no rationale model that may be applied. Essentially this is a tipped ball situation with skilled athletes all jumping. The real difficulty is the athletes cannot decide which game they are playing.

If I was to have an opinion and sometimes I do I would say someone needs to hang. The market and main street is mad. Politicians need the perception of big bad investors in pain. Freddie and Fanny had to be done. Lehman can twist in the wind as it’s hung in the public square. They need to make a big bad example.

Thursday, September 11, 2008

WaMu Exculpatory Boiler Plate Tells The Story

WaMu (WM) comes out with up to date guidance. The big bold headlines tell a positive story. The claim is there is enough capital, credit conditions will not worsen and liquidity is more than adequate. But then you have to read the Important Cautionary Statements. Basically they caution you that anything that is being said made turn flakey and fall apart. They may lose access to liquidity. They may experience more adverse credit conditions.

And my very favourite

“Certain of the company's loan products have features that may result in increased credit risk;”

If you want to identify naked risk that is impossible to quantify or analyse I guess that sentence sums it up pretty good. They might as well play the rock song “Highway to Hell” in the background.

Wednesday, September 10, 2008

FEDEX Guidance Shuffle

Fedex (FDX) announced guidance for EPS for the quarter ending Aug 31 at $1.23. Well above the last guidance. Reason cost cutting and an unexpected drop in fuel prices toward the end of the quarter. But they still have not yet budged on guidance for the year. In fact they point to worsening economic situations in both the US and overseas.

The shares pop in after market trading.

The press release does not parse out how much of the gain is attributable to improved fuel prices and what may be rightfully attributable to cost cutting. We can all comprehend fuel costs as a major factor affecting EPS. In fact Fedex may become a proxy trading tool for oil based commodities.

But when you issue guidance to this level and pop the quarterly EPS by 23% you need to put more on the table about the cost cutting program. When will the program be over? How much have you done? When will further impacts be realized? Are the cuts permanent or have you deferred stuff into the future? Anyone who has worked for a large corporation knows the term timing when it comes to costs.

Tuesday, September 09, 2008

John Wiley & Sons Changes Reporting

John Wiley & Sons just reported decent earnings but with a changed format. They now report on a product line basis as opposed to geographical basis. It’s nice when you align your report to be more meaningful but most companies report geographically and by product area. That way investors have the full picture not just management’s selected version.