FRi. OCT. 3- The Saga of Las Vegas Sands
In an era in which we are daily seeing things that we have never seen anymore, here is a brand new one for most of us. It is common for many new entrepreneurs in small businesses pump in their own money to make sure said operations commence and succeed. However, one does not see this type of action in a company with a near $13 billion market capitalization as we saw on Wednesday. Sheldon Adelson, the son of a cab driver who made a vast fortune on a computer show followed by gambling pumped in $475 million from his own pocket into Las Vegas Sands (LVS). Why did he do it? Basically, the company needed money to avoid violating the debt covenants of its primary lenders at the end of the quarter (i.e. Tuesday). Mind you, Adelson is the 15th richest American according to “Forbes” with an estimated $15 billion fortune. Adelson lent the money to his company at a 6.5% annualized rate with a 2013 target of re-assuming his money. Initially, the market viewed this as a positive move because it shows confidence by a wealthy scion of the gambling industry having faith in the future of his company. But, look a little deeper and one can tell this is a horrible situation. Clearly, the company is suffering from massive liquidity concerns and the gambling business is slowing dramatically in all of its major locations. Most importantly – stunningly- it indicates that the company cannot obtain money from any source than a CEO right about now unless the money is attained at a prohibitive rate of interest. Adelson owns 245 million shares of LVS thus he has every incentive in keeping this company alive, but clearly there is danger here. Initially, the stock popped in the pre-hours on Wednesday in trading a couple points higher to 39. In less than two business days, the stock closed at 26.50, down an approximate 32% from its Wednesday morning levels. As day traders, we need to remember this behavior should it happen again as time progresses because there was a definite trade in LVS (unfortunately, it was not locatable) as this case is a proxy of what will likely happen to other stocks in similar situations.
Overnight, markets in Asia were sharply lower, but Europe is neutral. State-side, the WB deal with WFC will likely place a bid under the market…nobody really knows what with the jobs report coming up and the legislation, but stocks are stronger than the futures would indicate. Look for a short-covering rally of some sort in anticipation of the approval and the fact that the merger of WFC and WB seems to provide inherent value to some of the smaller banks as well.
Reiterating-If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 based on direction of the market unless specifiedIf something is bad, assume either a buy thru unchanged or an A-B-A2 based on direction of the market unless specified
Good-
GPN- great earnings
CPWM- up sharply yesterday after getting pummeled in recent days; look to buy thru 2.60ish if it gets there
WFC/WB- well up on 7 dollar a share takeover offer (in stock) from WFC
AIG- reorganizing themselves…could be A-B-A2 to upside
SOV,GGP,NCC- other small financials which may suddenly have more value
Bad-
PENN- warned on its quarter
KWK- very weak; closed on its low…looking for continuation
POT, IPI, MON, CPO, BG, WLT, CLR- all demolished yesterday; if market strong today, looking for some A-B-A2s on all of them to the upside
AAPL- in peril of breaking par; if market weak, will short below there with a quick trigger out if wrong
HIG, PRU, MET- many insurers ravaged yesterday; if things get bad today, many of these shares could evaporate on all sorts of rumors that one may be the next AIG
CLF, STLD, X, NUE- among other steel stocks has gotten crushed. Looking for massive short covering in any rally.
PCAR- among transportation stocks, one of the day’s weakest. Looking to short thru yesterday’s 32.73 low if it opens higher
UNP, BNI- among railroads which were thrashed yesterday; looking for A-B-A2 rally if market holds
GT- very weak; looking to short thru yesterday’s 13.15 low if it opens higher and sells off
WMB, HK- among second-tier energies that were throttled; looking for bounce in short covering otherwise short thru yesterday’s lows
LIZ-among yesterday’s weaker retailers; looking to short thru 14 in any market weakness
AEM among the miners destroyed yesterday; looking for short covering rally otherwise short thru yesterday’s low
FCL, MEE, BTU, ACI- looking for short covering on a Friday else short thru yesterday’s lows
TRN- particularly weak; did not bounce at all Tues-Wed…if it opens close to unch, looking to short thru yesterday’s 19.95 low
Earnings-
FRI OCT 3 BEF
FDO .34/1.76B .40/1.75B 1.62/6.98B 1.70/7.22B
Good luck today.
www.protradingnetwork.com
posted by Erik Kolodny @ 8:23 AM
1 Comments
1 Comments:
WASHINGTON (Dow Jones)--Here are highlights of the "Emergency Economic Stabilization Act" of 2008:
-ASSET PURCHASES: The Treasury Department could purchase up to $700 billion in troubled mortgages
and other assets through a "Troubled Asset Relief Program" or "TARP." The $700 billion would be
available in phases. The first $250 billion will be immediately available to the Treasury secretary.
The next $100 billion will be available if the president issues a certification of need. The final
$350 billion would come if the president sends a written report to Congress seeking it; Congress
could disapprove these additional funds. Treasury's authority to purchase troubled assets would
initial ly expire on Dec. 31, 2009, but could be extended.
-EXECUTIVE COMPENSATION LIMITS: If the Treasury purchases at least $300 million in mortgage-based
assets from a financial institution, that company would lose the ability to take a tax deduction on
the amount of salaries that exceed $500,000 for its top five individuals. It also includes a 20%
excise tax on golden parachutes payments triggered by events other than retirement.
-DEPOSIT INSURANCE: Would temporarily increase federal deposit insurance limits to $250,00 from
$100,000 for most bank accounts. The increase on the deposit limits backed by the Federal Deposit
Insurance Corp. and National Credit Union Share Insurance Fund would last through the end of 2009.
Additionally, the FDIC would temporarily be allowed to borrow unlimited amounts of money from the
Treasury.
-WARRANTS, EQUITY STAKES: The bill requires the Treasury receive "non-voting warrants" from
financial institutions participating in the program. This would be regardless of whether the
government is purchasing troubled assets directly or through an auction process, a Treasury official
said. That would give taxpayers an ownership stake and profit-making opportunities in participating
companies. Foreign banks with a "sufficient U.S. presence" taking part in the program would also
have to give up warrants to the U.S. government, Treasury said.
-MARK-TO-MARKET ACCOUNTING. The bill restates the Securities and Exchange Commission's authority
to suspend the application of the Financial Accounting Standards Board "Statement Number 157" - or
mark-to-market accounting - if the SEC determines "that it is in the public interest and protects
investors." A study on the same topic is also required.
-TOXIC ASSET INSURANCE: The Treasury secretary is required to create a program "to guarantee
troubled assets of financial institutions" purchased by the U.S. government. The Treasury is
required to establish "risk-based premiums for such guarantees sufficient to cover anticipated
claims." Financial firms can choose to unlo ad their troubled assets via U.S. government acquisition
or by participating in the industry-funded insurance program, Treasury officials said. Companies
that participate in that insurance program would have to pay premiums to insure those assets.
-INTEREST ON RESERVES: Provides the Federal Reserve with the ability to pay interest on the
regulatory reserves it requires financial firms to hold for capital adequacy reasons in 2008, rather
than in three years' time, as it is currently scheduled to do.
-FORECLOSURE RELIEF: For the mortgages acquired by TARP, the Treasury secretary is to implement a
plan to "mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope
for Homeowners and other programs." Hope For Homeowners was an anti-foreclosure program in the
housing bill passed earlier this year. It requires the Federal Reserve, FDIC and Federal Housing
Finance Agency to develop plans to minimize foreclosures.
-FANNIE, FREDDIE TAX BREAKS: A tax benefit is included to hel p, primarily, community banks that
held Fannie Mae and Freddie Mac preferred stock. It allows them to treat their losses in preferred
stock in Fannie and Freddie as ordinary tax losses, rather than capital losses. For individuals, the
bill extends through 2012 a provision to minimize the tax hit on homeowners facing foreclosure. This
item, passed as part of housing legislation this year, makes tax-free amounts that a bank forgives a
homeowner as part of foreclosure or work-out proceedings. Those amounts would otherwise be taxed as
income to the homeowner.
-OVERSIGHT: Creates a "Financial Stability Oversight Board" to oversee the program, which includes
the chairmen of the Federal Reserve Board, the Securities and Exchange Commission; the Federal Home
Finance Agency director and the Housing and Urban Development secretary. Also requires the U.S.
comptroller general to report to Congress every 60 days about the program. An independent inspector
general will oversee the Treasury Department's decisions, which will be subject to judicial review.
It also will require posting of transactions online for public view.
-TAX EXTENDERS: Would extend roughly $150 billion in tax cuts that have expired or are set to
expire at the end of this year, including a two-year extension of the business research tax credit.
The tax provisions, which were added by the Senate this week, include a "patch" to protect 25
million taxpayers from the alternative minimum tax in 2008, and an extension of the state sales tax
deduction. The latter is important for states that do not have a state income tax, such as Florida
and Texas, where residents are allowed to deduct sales taxes in lieu of state income taxes.
-RENEWABLE ENERGY: The bill provides a variety of tax incentives aimed at encouraging investments
in renewable energy programs, including extending the 30% investment tax credit for solar energy and
fuel cell properties through 2016. Tax credits for wind, refined coal and other renewable energy
projects are also extended, and the bill adds new tax credits for homeowners who make their homes
more energy efficient through the use of small wind or geothermal technology.
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