Stocks and investing thread

[NorthSideSox72]

OK Kap, explain this one to me. Frontier Airlines filed for bankruptcy today (though they are still going to operate). I was a bit susprised because they seemed to be doing OK. Turn out, they basically were. Which leads to the two strange things about this - and maybe your background in the industry would help me understand this. First, Frontier's largest credit card processor (Wells Fargo) decided to "hold back" a substantial amount of cash paid for its tickets. Which brings up the first question - why would they do that? And is that even legal? Is this a sign that Wells Fargo is having liquidity problems? Then, Frontier decides to file for bankruptcy, because apparently if they do, that forces the hand of the processor. Seems like a drastic measure to achieve this, but, there it is. So, is this something that you have heard of before? Credit card processors not paying the companies they serve? Seems bizarre to me. It almost looks like this was a domino effect from Wells Fargo.

 

One way or another, I hope Frontier can pull it back together. I like their airline and fly them whenever I go to Denver.

 

[kapkomet]

OK Kap, explain this one to me. Frontier Airlines filed for bankruptcy today (though they are still going to operate). I was a bit susprised because they seemed to be doing OK. Turn out, they basically were. Which leads to the two strange things about this - and maybe your background in the industry would help me understand this. First, Frontier's largest credit card processor (Wells Fargo) decided to "hold back" a substantial amount of cash paid for its tickets. Which brings up the first question - why would they do that? And is that even legal? Is this a sign that Wells Fargo is having liquidity problems? Then, Frontier decides to file for bankruptcy, because apparently if they do, that forces the hand of the processor. Seems like a drastic measure to achieve this, but, there it is. So, is this something that you have heard of before? Credit card processors not paying the companies they serve? Seems bizarre to me. It almost looks like this was a domino effect from Wells Fargo.

 

One way or another, I hope Frontier can pull it back together. I like their airline and fly them whenever I go to Denver.

I can answer better later - it's a bit complicated - I would want to see the filing because I wonder if Wells Fargo had leasehold agreements on some of the air frames and whether or not they were trying to squeeze cash on the other side.

[NorthSideSox72]

This could just as easily go in the environmental thread...

 

Oil = $115/bbl

 

[Balta1701]

Seriously, how often do I get to link to a George Will column?

But suddenly the Fed is undergoing radical "mission creep." The description of the Fed as the "lender of last resort" is accurate without being informative. Lender to whom? For what purposes? Last resort before what? Did the bank "lend" $29 billion to Bear Stearns, or did it, in effect, buy some of the most problematic securities owned by Bear? If so, was this faux "loan" actually to J.P. Morgan Chase? The purpose of the money was to give Morgan an incentive to buy Bear -- at a price so low that an incentive should have been superfluous.

 

In 1979, when the government undertook to rescue Chrysler, conservatives worried not that the bailout would fail but that it would work, thereby inflaming government's interventionist proclivities and lowering public resistance to future flights of Wall Street socialism. It "worked": Chrysler has survived to endure its current crisis. The fallacious argument in 1979 was that Chrysler was then "too big to be allowed to fail."

 

Today's argument is that Bear Stearns was so connected to the financial system in opaque ways that no one could guess the radiating consequences of its failure -- the financial consequences or, which sometimes is much the same thing, the psychological.

 

But what is now the principle by which other distressed firms will elicit Fed interventions in future uncertainties? By what criteria does Washington henceforth determine whether a large entity is "too connected to fail"?

 

The Fed has no mandate to be the dealmaker for Wall Street socialism. The Fed's mission is to preserve the currency as a store of value by preventing inflation. Its duty is not to avoid a recession at all costs; the way to get a big recession is to engage in frenzied improvisations because a small recession, a.k.a. a correction, is deemed intolerable. The Fed should not try to produce this or that rate of economic growth or unemployment.

 

After the tech bubble burst in 2000, the Fed opened the money spigot to lower interest rates and keep the economy humming. And since the bursting of the housing bubble, which was partly caused by that opened spigot, the Fed has again lowered interest rates, which for now are negative -- lower than the inflation rate, which the open spigot will aggravate.

[Cknolls]

I still believe there is more to this story, i.e., JPM's counter-party risk to BSC, but we will never know. The notion that JPM was the only one who would buy BSC is assinine; at that price , I believe there would be a few suitors lining up at the door.

[NUKE_CLEVELAND]

Delta Airlines..........You fail at LIFE.

 

 

http://www.foxbusiness.com/markets/industr...a_575096_8.html

 

 

Fuel prices be damned. How do you lose almost 6 and a half billion in 1 freekin quarter?!

 

 

 

In a few years there will be only 3-4 airlines and we'll be paying through the nose to fly.

[NorthSideSox72]

Delta Airlines..........You fail at LIFE.

 

 

http://www.foxbusiness.com/markets/industr...a_575096_8.html

 

 

Fuel prices be damned. How do you lose almost 6 and a half billion in 1 freekin quarter?!

 

 

 

In a few years there will be only 3-4 airlines and we'll be paying through the nose to fly.

Correction - there will be only 3-4 major network carriers (AA, UAL/Continental, Delta/NW and US Air/AW). Which is fine - all the better for the smaller non-traditional airlines (Southwest, JetBlue, AirTran, Frontier) who will pick up more business.

 

[Y2HH]

Unlike the other thread, dedicated to opinion/analysis of the state of the economy/sectors of the economy, I wanted to create a thread that is more about investments, strategies, etc...for those of us who are active investors/traders. If there is already a similar thread here, I apologize.

 

I want to clarify that there is no inside information here, nor will there ever be. Any recommendations I make are not guarantees, merely opinions I base on fundamental outlook. I figured some people would be/could be interested in such a topic.

 

First and foremost, I'm a hybrid investor that's a blend of a position trader/fundamentalist. I've been investing for over 10 years, and no, I'm not a millionaire, but I have done rather well, even through the rougher times after the .com bust and the recent financial collapse. I invest in companies and their leadership long term, seeking dividend and growth and future growth potential of product. However, at times I will jettison portions of my positions (never entire positions), to further diversify into other sectors.

 

I never invest in trends, or technicals based sheerly on movement.

 

----

 

Due to the repressed nature of the pharma stocks, I'm long-term bullish on Bristol Myers (BMY), and Pfizer (PFE). Both are relativly low cost while paying hefty dividends of over $1.25 per share/per year. Regardless of who wins the upcoming election, I see a turn around in the pharma sector, even while considering their expiring patents. I just cannot see pharma as a market that's going to go away seeing as that people will always be getting sick in the forseeable future. Although a grim way to view making money...it's true.

 

Conagra (CAG) is another stock I'm long on, seeing as that they make 80% of everything in your refridgerator and you probably don't even realize it. They also pay a nice dividend. Amongst their product line are Banquet, Chef Boyardee, Egg Beaters, Healthy Choice, Hebrew National, Hunt's, Marie Callender's, Orville Redenbacher's, Reddi-wip, PAM and others. I've held this particular stock for years as it's seen steady growth while never suspending it's dividend output.

 

----

 

If there is any interest in continuing such a conversation I'd be happy to discuss it further. I gave a few examples of what type of thread I was looking at creating, while staying away from general opinions of the economy and focusing more on investment strategy, etc.

 

[NorthSideSox72]

Actually, the "other" thread is quite riddled with investment stuff. That's the majority of what is in there.

 

Instead of creating a new one of those, let's create a general Economy thread instead. I'll do that.

 

[Y2HH]

Actually, the "other" thread is quite riddled with investment stuff. That's the majority of what is in there.

 

Instead of creating a new one of those, let's create a general Economy thread instead. I'll do that.

 

Sounds good to me. Just seems that as of late this thread has become more generalized opinions on the macro/micro aspects of the economy rather than stock/bond/fund talk...

[NorthSideSox72]

Sounds good to me. Just seems that as of late this thread has become more generalized opinions on the macro/micro aspects of the economy rather than stock/bond/fund talk...

They've gotten blended together. So now, this can be a true investing/markets thread, and the other can be economy/business generally.

 

[Cknolls]

So retail sales rally the futures mkt. 9 points. Pathetic. But you have to respect the mkt. It seems like "they" want to take the mkt higher. But the retail sales number was fueled by credit growth in installment debt.It accelerated from $5 billion week over week, to $13 billion recently. Very unsustainable.

[NorthSideSox72]

So retail sales rally the futures mkt. 9 points. Pathetic. But you have to respect the mkt. It seems like "they" want to take the mkt higher. But the retail sales number was fueled by credit growth in installment debt.It accelerated from $5 billion week over week, to $13 billion recently. Very unsustainable.

The equity markets just don't have the capital they had a few years ago - commodities are eating it up, and boomers are retiring and pulling out of stocks. They grab onto anything they can to try to rally the markets.

 

[southsider2k5]

So retail sales rally the futures mkt. 9 points. Pathetic. But you have to respect the mkt. It seems like "they" want to take the mkt higher. But the retail sales number was fueled by credit growth in installment debt.It accelerated from $5 billion week over week, to $13 billion recently. Very unsustainable.

 

It ended up being more like 70 points by the time the buying was done. Even after a little profit taking the futures are up about 50 over where they were before the number came out.

[Cknolls]

It ended up being more like 70 points by the time the buying was done. Even after a little profit taking the futures are up about 50 over where they were before the number came out.

 

S&P futes, not Dow futes.

[Cknolls]

What happens when the Fed uses up their entire balance sheet buying sh**** assets from banks and brokers? We're 1/2 way there. The first half was a failure. If you are going to take risk, MAKE SURE YOU GET PAID.

[southsider2k5]

Here is something interesting I picked up last night

 

Southwest airlines (LUV) is 70% hedged against their 2008 estimated fuel costs at $51 a barrel of oil. In 2009, they are 55% estimated hedged at $51 bbl. They also have fuel hedges set up through 2013.

[NorthSideSox72]

Here is something interesting I picked up last night

 

Southwest airlines (LUV) is 70% hedged against their 2008 estimated fuel costs at $51 a barrel of oil. In 2009, they are 55% estimated hedged at $51 bbl. They also have fuel hedges set up through 2013.

LUV = Smart Management. Always has been. Just a really well run company, which is novel in that industry.

 

 

[southsider2k5]

When you consider the price of out of the money options as compared to the risk of energy volatility historically, why wouldn't you hedge? Its stupid not to, especially in this day and age.

[NorthSideSox72]

When you consider the price of out of the money options as compared to the risk of energy volatility historically, why wouldn't you hedge? Its stupid not to, especially in this day and age.

Back in the days of "cheap" oil, the big airlines probably laughed at LUV for hedging, because it meant spending a little extra money. It was an insurance policy. Now its LUV who is laughing.

 

[Mplssoxfan]

Back in the days of "cheap" oil, the big airlines probably laughed at LUV for hedging, because it meant spending a little extra money. It was an insurance policy. Now its LUV who is laughing.

Laughing all the way to the bank. They can undercut the big guys by a greater margin and still increase their profits. Nice.

[Balta1701]

What happens when the Fed uses up their entire balance sheet buying sh**** assets from banks and brokers? We're 1/2 way there. The first half was a failure. If you are going to take risk, MAKE SURE YOU GET PAID.

Another $75 billion coming in June.

 

This is certainly an interesting situation. The fed seems to basically be doing anything it can to delay a complete collapse, and is willing to put its entire reserve of cash on the line to do so. The question is...will it be enough to buy the country's way out of this, and if not, what does happen when they run out?

[Cknolls]

Wait until 5/1 arms reset in 2009-2010. That along with Heloc's= Worse than subprime.

 

Wamu's balance sheet with regards to these two types of loans is frightening, over $50 billion dollars worth.

[Cknolls]

S&P just downgraded 1326 Alt-A residential mortage backed securities. Downgrades affect 33.95 billion in issuance value and affect Alt-A loan pools securitized in the first half of 2007. More telling was the 567 other Alt-A classes put on negative credit watch by the ratings agency. All classes put on watch were rated AAA. The total dollar of potential downgrades to the AAA classes in question would dwarf Wednesday's downgrades, which affected only mezzanine and equity tranches.

 

One particular Alt-A pool, issued in May 2007 originally was $513,969,100

- 92.6% of this cesspool was rated AAA.

- 22.89% of the whole pool is in foreclosure or REO status after one year.

- 31.17% of the pool is 60 days delinquent or worse.

 

The most troubling thing about these downgrades is that they have only hit the mezzanine and equity tranches, not the senior tranches. Those downgrades are coming and the losses will be staggering.

 

I believe we still have a ways to go before we hear, "Take me out to the ballgame."

[Balta1701]

So, CK, in your opinion...what happens if the Fed reserves run out before we run out of crappy securities that banks don't want?