Market Notes
February 11, 2008
By Greg Sushinsky
As always, some of the recent market developments that made
one-day headlines will take some time to play out, and other things
that aren’t so prominently featured in the news might be the things
that affect the market in a more immediate way. One of the
headlines last week that is expected to have ongoing consequences
is Amazon’s (NASDAQ: AMZN) announced $1 billion stock buyback.
Tucked in with this announcement was that the online retailer will
repurchase also $1.25B debt. Stock buybacks are often non-
binding, as they are an announcement of company policies going
forward. The companies reserve the right to change, amend, or
even abandon such programs. In Amazon’s case, they had a stock
repurchase program already in place for $500 million, as well as a
program to repurchase $500 million of their debt. The stock, which
has traded in the 37.04 to 101.9 range over the last twelve months,
has recently traded in the mid-seventies. After the buyback
announcement on Friday last week, Amazon went up to 73.50, a
gain of 2.59 or 3.65%, fueling a modest 11+ point Nasdaq gain on
the day.
In lesser highlighted yet potentially important news, William
Seidman, former head of the FDIC and current CNBC commentator,
said in an interview that he does not believe the worst is over with
regard to the banks’ write downs in the sub prime troubles. Seidman
maintained that the banks don’t really know precisely how much they
have in the bad loans, and won’t have such figures until the auditors
come in.
He also felt that at some point, the write downs would be so
aggressive as to be overstated; when pressed, he guessed on the
order of perhaps 25%. The banks will probably have to write down
such intangible assets as goodwill, as well, which in some cases
constitutes a significant amount of their worth. So Seidman’s take
was this: the worst isn’t in yet, that will be forthcoming, then there
will be excessive write downs. He also stated that none of the big
banks are in major trouble, though, as they have plenty of reserve
capital.
Later in the week, CNBC marked the one-year anniversary of
the first big write-down due to bad sub prime loans, when HSBC
bank came forward. This dubious anniversary was observed with
commentators asking experts in the credit industry when might we
see the end? Traders and investors ask that question also.
February 11, 2008
By Greg Sushinsky
As always, some of the recent market developments that made
one-day headlines will take some time to play out, and other things
that aren’t so prominently featured in the news might be the things
that affect the market in a more immediate way. One of the
headlines last week that is expected to have ongoing consequences
is Amazon’s (NASDAQ: AMZN) announced $1 billion stock buyback.
Tucked in with this announcement was that the online retailer will
repurchase also $1.25B debt. Stock buybacks are often non-
binding, as they are an announcement of company policies going
forward. The companies reserve the right to change, amend, or
even abandon such programs. In Amazon’s case, they had a stock
repurchase program already in place for $500 million, as well as a
program to repurchase $500 million of their debt. The stock, which
has traded in the 37.04 to 101.9 range over the last twelve months,
has recently traded in the mid-seventies. After the buyback
announcement on Friday last week, Amazon went up to 73.50, a
gain of 2.59 or 3.65%, fueling a modest 11+ point Nasdaq gain on
the day.
In lesser highlighted yet potentially important news, William
Seidman, former head of the FDIC and current CNBC commentator,
said in an interview that he does not believe the worst is over with
regard to the banks’ write downs in the sub prime troubles. Seidman
maintained that the banks don’t really know precisely how much they
have in the bad loans, and won’t have such figures until the auditors
come in.
He also felt that at some point, the write downs would be so
aggressive as to be overstated; when pressed, he guessed on the
order of perhaps 25%. The banks will probably have to write down
such intangible assets as goodwill, as well, which in some cases
constitutes a significant amount of their worth. So Seidman’s take
was this: the worst isn’t in yet, that will be forthcoming, then there
will be excessive write downs. He also stated that none of the big
banks are in major trouble, though, as they have plenty of reserve
capital.
Later in the week, CNBC marked the one-year anniversary of
the first big write-down due to bad sub prime loans, when HSBC
bank came forward. This dubious anniversary was observed with
commentators asking experts in the credit industry when might we
see the end? Traders and investors ask that question also.
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