A Look at Deal Making Before and After Lehman

In the year since Lehman Brothers failed, much of the financial world has changed.

The U.S. government’s fingerprints are all over the economy. Uncle Sam is intricately involved in numerous markets and in more than a few cases is propping those markets up. For many months, it was the biggest deal maker. And it still is Citigroup’s and AIG’s largest shareholder.

And yet for all that has changed, some things remain the same. As profits have come back at the surviving Wall Street firms, so has compensation. Bonuses for Wall Street could be at record levels this year.

Below is a look at some BL and PL numbers (Before Lehman, Post-Lehman) that will giving you some idea about the impact of the securities firm’s historic bankruptcy.

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Source: Dealogic

Solar: Barclays Lifts Targets On FSLR, SPWRA

Barclays Capital analyst Vishal Shah this morning lifted EPS estimates and price targets for both First Solar (FSLR) and SunPower (SPWRA). Here are the details:

  • First Solar: Shah keeps his Equal Weight rating, but lifts his target to $160, from $140. (The stock closed yesterday at $146.99.) He also raised his 2009 EPS estimate to $8.16, from $7. For 2010, he trims his forecast to $7.28, from $7.75; but for 2011, he now sees $9.60, up from $9.21. Shah contends that risk/reward heading into Q3 earnings is “positive,” and that near-term concerns on pricing and margins appear to be largely discounted in teh shares. He sees longer term share appreciation, driven by an improving cost picture, a “downstream” focus and a strong record in the utility market, among other factors.
  • SunPower: Shah again maintains his Equal Weight rating, while increasing his target to $35, from $31. (Yesterday it closed at $31.47.) For 2009, he ups his EPS estimate to $1.25, from $1.09; for 2010 he goes to $2, from $1.80. As with FSLR, he says that near-term risk/reward “appears attractive,” with pricing pressure and margin concerns priced in. “SunPower remains well positioned in the U.S. residential market and large scale U.S. utility market and appears to be gaining traction in Germany,” he writes. Shah adds that “pricing power appears to be better than expected,” and that cost reduction potential likewise appears better than expected.

FSLR today is up $7.08, or 4.8%, to $154.07; SPWRA is up 99 cents or 3.2%, to $32.46.

Watch Bond Fund Flows, Not Stock Fund Flows



James Bianco has run Bianco Research out of Chicago since November 1990. He has been producing fixed income commentaries with a circulation of hundreds of portfolio managers and traders. Jim’s commentaries have a special emphasis on: money flow characteristics of primary dealers, mutual funds, hedge funds, futures traders, banks, and institutional investors.

Prior to founding Bianco Research, Jim spent time in New York as Market Strategist for UBS Securities, and Equity Technical Analyst at First Boston and Shearson Lehman Brothers. He is a Chartered Market Technician (CMT) and a member of the Market Technicians Association (MTA).


Watch Bond Fund Flows, Not Stock Fund Flows

  • The New York Times – Cautiously, Small Investors Edge Back Into StocksParticipation in 401(k) plans held steady in 2008, even as the average account lost 28 percent of its value, according to Hewitt Associates, which tracks retirement plans. More people moved their money into cash or bonds for safety, but they did so at the margins. Over all, the contribution rate dropped less than half a percentage point. And in the first half of 2009, when stocks hit their worst levels and then pivoted higher, only 9 percent of investors made trades in their 401(k) accounts, according to Vanguard. At the same time, alternative investments like real estate have suffered mightily, while interest rates on certificates of deposit or even high-yield savings accounts have plunged, making them less attractive. “Inertia has really ruled,” said Pamela Hess, director of retirement research at Hewitt. “The vast majority of participants have changed nothing — not if they save, not how much they save. Nothing.” Now, some of the money that fled stocks for safe harbors like money-market funds and government bonds last year is beginning to return. Even with trillions still sheltered on the sidelines, some $56 billion has poured into equity funds since April, according to the Investment Company Institute. Of course, making money again can do a lot to bolster anybody’s confidence.



We cover this in great detail in our Monthly Mutual Fund Flow update. And in this update we see a different picture.

The chart below shows the net new cash flows into the broad mutual fund categories. The story is not the reemergence of equity investors (second panel in red) which we think is in doubt, but the booming inflows into bond funds (third panel in green).

<click on chart for larger image>


Which bond funds? The chart below details bond fund buying.

<click on chart for larger image>


The real story is the public headlong rush into corporate bond via Corporate bond and strategic income funds (the first and last panels above). Interestingly, when spreads peaked in 2002, the public jumped headlong into high yield bond funds. This time they are avoiding these funds in favor of higher quality corporate bond and strategic income funds. So while they are taking more risk, their aggressiveness has not returned as quickly as 2002/2003.

What have corporate spreads done?

<Click on chart for larger image>

‘Buy American’ hurting America?

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We are all familiar with the "Buy American" clause that is part of the $787 billion stimulus package and is designed to help U.S. companies battle foreign competition. But is it really doing what it's supposed to? This Wall Street Journal article takes a look at an American company that is losing a good deal of its business to foreign competition -- thanks to the Buy American provisions.

Apparently, there is growing resentment toward America for the Buy American provisions that has lead to a Buy Canadian campaign. In fact, one town in Canada (Halton Hills) is cited as one of roughly a dozen Canadian communities that are trying to freeze out American companies. The town's mayor stated, "We won't be taking any products from any country that is discriminating against us."

Continue reading 'Buy American' hurting America?

'Buy American' hurting America? originally appeared on BloggingStocks on Thu, 17 Sep 2009 10:30:00 EST. Please see our terms for use of feeds.

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Update: WSJ Details Mobile Subscription Plans

Sorry, mobile WSJ readers: the free ride is about to end.

As News Corp. (NWS) CEO Rupert Murdoch warned earlier this week, Dow Jones is about to start charging for full mobile access to the Wall Street Journal. This morning, the company confirmed that effective October 24, the WSJ Mobile Reader application for the Apple (AAPL) iPhone and iPod and the Research In Motion (RIMM) BlackBerry will require a separate  mobile subscription for full access to the Journal. The app itself will remain free, and will contain both free and subscription content, much like WSJ.com.

The company said it is adding some new functionality to the software, including new save and share capability, enhanced market data, stock tracking and personalization features.

A mobile only subscription will cost $2 a week. For those with either a print or WSJ.com subscription, the cost will be $1 a week. People with both print and Web subscriptions will get full mobile access for free.

Note: Barron’s is published by News Corp., as well, and some Barron’s content can be accessed via the WSJ Mobile Reader.

Ireland’s e-NAMA-ous property gamble

The Irish government announced details of its bad-bank programme, known as NAMA, on Wednesday. From the FT: The Irish state will pay €54bn to take over bank debt worth €77bn to cleanse the sector's toxic assets and encourage renewed lending to businesses, Brian Lenihan, the finance minister, said yesterday....

Infineon: Will Russia Take A Stake?

The Russian government is reportedly in talks to buy a stake in chip maker Infineon (IFNNY.PK).

According to Bloomberg, Leonic Melamed, the CEO of the Russian holding company AFK Sistema said at a new conference that the Russian government plans to buy a stake in Germany-based Infineon. He says Sistema won’t buy shares in the deal, but that it has been “invited to participate” as an industry expert.

Bloomberg notes that a Russian newspaper previously had reported that Sistema wanted to buy a 20% stake in the chip company for about 1 billion Euros.

Meanwhile, Bank of America/Merrill Lynch analyst Jonathan Crossfield this morning cut his rating on the stock to Underperform from Outperform, noting that the shares had moved above his 3.80 Euro/$5.60 U.S. price target. He contends Infineon shares look expensive relative to others companies in the sector; he thinks better bets in the European chip sector would be STMicro (STM) or ASM International (ASMI)

In trading on the pink sheets, Infineon shares are down 15 cents, or 2.7%, to $5.48.