JCPenney Bearhug From Cit Financial. I Smell John Thain $JCP $CIT $CIT

New York Post struck a blow for headlines and jeopardized thousands of jobs by reporting that CIT Group (NYSE:CIT) is squeezing JCPenney suppliers. Subtext: The all important Christmas season is coming. If you understand retail supply chain logistics the Christmas season is happening right now.

JCPenney (NYSE:JCP) has had well documented problems. William Ackman the renowned hedge fund activist wheeler-dealer has a famous long position which he may be re-cogitating. Senior officers are changing at JCPenney. JCPenney has also stopped issuing monthly sales data and therefore visibility for suppliers and the credit structure behind them is more complicated. Clear as mud.

So the word is Cit Group is squeezing credit for suppliers. New York Post has the scoop! No one is talking official like. Will this become a Reg FD issue. JCPenney has no control and no direct knowledge of the true circumstances. CIT Financial probably does not need to disclose anything because this is not material to them. William Ackman is probably drinking a double shot of single malt right.

What’s it all mean. Is JCPenney that different now from say a few weeks ago? Probably not.

I smell John Thain the former big shooter that sold Merrill Lynch to an unsuspecting Bank of America. (NYSE:BAC) Former CEO of NYSE and a President and Co-COO of Goldman Sacks (NYSE:GS)  is sort of hanging out at CIT Group until something better comes along.

Has he crossed swords with William Ackman or is there a bigger game going on. Methinks bigger game.

By the way releasing the story when the market is traditionally the most volatile is suspicious.

Machiavellian moves within an enigma.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti or follow his evil twin brother who writes Wall Street Murder Thrillers @georgegutowski

Six Black Swan Events JPMorgan Says They Worry About. $JPM

JPMorgan (NYSE:JPM) is subject to multiple risks which at times may be beyond the ability of management or the board to comprehend or even for see. Here are some of the Black Swan events that they publicly declare in regulatory documents that they consider risks. Having included the risks in the boilerplate somewhere they go on with corporate communications which blithely ignores the issues. Sober long-term investors need to review these risks and come to their own determination where they stand.

1. Credit Risk –

Credit risk is the risk of loss from obligor or counterparty default. The Company is

engaged in various lending and principal transactions with counterparties that include corporations,

financial institutions, governments and their agencies, pension funds, mutual funds, and hedge

funds. In addition, obligations arise from participation in payment and securities settlement

transactions on the Company’s behalf. For further discussion on credit risk related to customer

activities, please refer to Note 13 in these Notes to Consolidated Statement of Financial Condition.

2. Liquidity Risk –

Liquidity risk arises from the general funding needs of the Company’s activities and

in the management of its assets and liabilities. The ability to maintain a sufficient level of liquidity is

crucial to financial services companies, particularly their ability to maintain appropriate levels of

liquidity during periods of adverse conditions. The Company’s funding strategy is to ensure liquidity

and diversity of funding sources to meet actual and contingent liabilities through both normal and

stress periods. Through JPMorgan Chase and outside relationships, the Company seeks to

preserve stable, reliable and cost-effective sources of funding. Procedures are in place to identify,

measure, and monitor the Company’s liquidity sources and uses, which enable the Company to

manage these risks.

3. Market Risk –

Market risk is the exposure to an adverse change in the market value of portfolios

and financial instruments caused by a change in market prices or rates. Market risk is identified,

measured, monitored, and controlled by JPMorgan Chase’s Market Risk function, a corporate risk

governance function independent of the lines of business. Market risk is overseen by JPMorgan

Chase’s Chief Risk Officer. Market risk is controlled primarily through a series of limits set in the

context of the market environment and business strategy.

 

4. Operational Risk –

Operational risk is the risk of loss resulting from inadequate or failed processes

or systems, human factors, or external events. Operational risk is inherent in the Company’s

business activities and can manifest itself in various ways, including errors, fraudulent acts,

business interruptions, inappropriate behavior of employees, or vendors that do not perform in

accordance with their arrangements. These events could result in financial losses and other

damage to the Company, including reputational harm. To monitor and control operational risk, the

Company (through JPMorgan Chase) maintains a system of comprehensive policies and a control

framework designed to provide a sound and well-controlled operational environment. The goal is to

keep operational risk at appropriate levels, in light of the Company’s financial strength, the

characteristics of its businesses, the markets in which it operates, and the competitive and

regulatory environment to which it is subject.

5. Legal Risk –

Legal risk is the risk of loss arising from the uncertainty of the enforceability, through

legal and judicial processes, of the obligations of the Company’s clients and counterparties,

including contractual provisions intended to reduce credit exposure by providing for the offsetting

and netting of mutual obligations. Legal risk also encompasses the risk of loss attributable to

deficiencies in the documentation of transactions (e.g., trade confirmations) and of regulatory

compliance risk, which is the risk of loss due to the Company’s violations of, or non-conformance

with, laws, rules, regulations and prescribed practices in the normal course of conducting its

business and activities. Finally, legal risk encompasses litigation risk, which is the risk of loss

resulting from being sued, including legal costs, settlement expenses, adverse judgments and

fines.

6. Reputation Risk –

Attention to reputation is a key aspect of the Company’s practices. The

Company’s ability to attract and retain customers and transact with its counterparties could be

adversely affected to the extent its reputation is damaged. The failure of the Company to deal, or to

appear to fail to deal, with various issues that could give rise to reputation risk could cause harm to

the Company and its business prospects. These issues include, but are not limited to, appropriately

dealing with potential conflicts of interest, legal and regulatory requirements, ethical issues, money laundering,

privacy, record-keeping, sales and trading practices, and the proper identification of

legal, reputation, operational, credit, liquidity and market risks inherent in its products. The failure to

address appropriately these issues could make the Company’s clients unwilling to do business with

the Company, which could adversely affect the Company’s results.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti and follow his evil twin brother who pens Wall Street Murder Thrillers @georgegutowski

 

 

22 Possible Black Swan Events for Boeing $BA #caveatemptorperspective

Boeing (NYSE:BA) has twenty-two (22) possible Black Swan events. Most big cap companies play CYA and publish possible risks to the business. The list is meant to mitigate any possible exposure to litigation by disgruntled shareholders who may choose to believe they were not sufficiently informed. Once you get past the boiler plate style the fundamental investor will appreciate the twenty-two (22) possible Black Swan Events as an analytical framework for the Buy-Sell-Hold or Ignore Matrix. Remember only the paranoid survive.

1. general conditions in the economy and industry, including those due to regulatory changes;
2. reliance on commercial airline customers;
3. the overall health of  aircraft production system, planned production rate increases across multiple commercial airline programs, commercial development and derivative aircraft programs, and aircraft being subject to stringent performance and reliability standards;
4. changing acquisition priorities of the U.S. government;
5. dependence on U.S. government contracts;
6. reliance on fixed-price contracts;
7. reliance on cost-type contracts;
8. uncertainties concerning contracts that include in-orbit incentive payments;
9. dependence on subcontractors and suppliers, as well as the availability of raw materials,
10. changes in accounting estimates;
11. changes in the competitive landscape in our markets;
12. non-U.S. operations, including sales to non-U.S. customers;
13. potential adverse developments in new or pending litigation and/or government investigations;
14. customer and aircraft concentration in Boeing Capital’s customer financing portfolio;
15. changes in ability to obtain debt on commercially reasonable terms and at competitive rates in order to fund our operations and contractual commitments;
16. realizing the anticipated benefits of mergers, acquisitions, joint ventures/strategic alliances or divestitures;
17. the adequacy of insurance coverage to cover significant risk exposures;
18. potential business disruptions, including those related to physical security threats, information technology or cyber-attacks or natural disasters;
19. work stoppages or other labor disruptions;
20. significant changes in discount rates and actual investment return on pension assets;
21. potential environmental liabilities; and
22. threats to the security of Boeing and/or customers’ information.

George Gutowski writes from a caveat emptor perspective. Follow him on Twitter @financialskepti . Follow his evil twin brother who writes Wall Street Murder Thrillers @georgegutowski

Verizon’s Canadian Expansion. Will they buy someone? Yeah Telus in Play soon. $VZ $T $BCE $TU $RCI

Last post covered Verizon’s  (NYSE:VZ) political problems as a supposed newbie in the Canadian market. Canadian market is approximately 10% of the US market and is politically stable and relatively close by. Canadians pay their bills on time and on a per capita basis rival and surpass at time American use of e-commerce and telecommunications. So not surprising that Verizon wants in. Wonder why AT&T (NYSE:T) is asleep on this one.

There are three major wireless players in Canada. BCE (NYSE:BCE) which grew out of the traditional phone monopolies. Rogers Communications (NYSE:RCI) which grew out of the cable business and got into wireless as an opportunity. Lastly you have Telus which is the very much smaller player of the three and is based in western Canada. Telus competes nationally on wireless product. George Cope who is now CEO of BCE used to run Telus. It’s always been thought that BCE would swallow Telus and turn the market into a full duopoly. Hasn’t happened as yet. Capital cost is a little high and perhaps the regulators have sent private signals about don’t do that we like to see multiple competitors.

Verizon will probably be blocked at the next spectrum auction. The end game will only allow them to buy one spectrum range and not two. A very good solution for Verizon to achieve significant bulk will be to buy out Telus. The regulator will still see multiple players and political optics will satisfy. Telus will allow Verizon the strategic beach head.

But Telus shareholders will demand the opportunity to auction off their company and maximize shareholder wealth. Which means either Rogers or BCE will step up to the bat and try to write some big cheques. Or another foreign third part dark horse may enter the arena. Still waiting for AT&T to wake up.

In any event Telus will be bought out in the next twelve months for strategic reasons.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti Follow his evil twin who writes Wall Street Murder Thrillers @georgegutowski

Verizon’s Big Canadian Political Problem $VZ $T $BCE $RCI $TU

Verizon (NYSE:VZ) has walked into a Canadian political buzz saw. Scheduled for Sep is a large spectrum auction which will decide wireless dominance into the foreseeable future. The regulators had a weird rule designed to help new small upstarts allowing them to bid on more than one spectrum range.

Verizon is using the  poor wording of the rule and declaring itself to be a new entrant. Verizon has huge capital and will be able to buy the spectrum and disrupt existing players. The rules are also perverse because to help small newcomers the existing players are supposed to allow them access to the existing networks which were built with someone else’s capital expenditures.

George Cope CEO of BCE INC (NYSE:BCE)  has compared this to a foreign player entering New York City with several new spectrum licenses and then being allowed to use AT&T (NYSE:T) and Verizon’s existing networks. You know that’s not going to happen.

Verizon used to operate in Canada but withdrew several years ago. They are four times larger than the entire Canadian wireless market. No one contemplated their use of special rules which were designed to aid small players get a foothold.

The Canadian players have started a very public media campaign to wake up voters and politicians. The federal cabinet has just been reshuffled. The short-term political solution will be to defer the auction which is just weeks away. The deferral will start a separate controversy.

Canada and Japan are the only two jurisdictions which came out with LTE standard which LTE enable tablets and smart phones were first released. There is a huge technological superiority to the networks in Canada.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti Follow his evil twin who writes Wall Street Murder Thrillers on twitter  @georgegutowski

Goodreads surges to 20 million readers $AMZN

goodreads recently acquired by Amazon (Nasdaq:AMZN) has surged to 20 million readers. Amazon says they will not try to change anything which sounds like a good idea. Amazon just needs the community to be engaged and they have a powerful in-house marketing tool which engages readers endlessly.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti. Follow his evil twin who writes Wall Street Murder Thrillers on twitter @georgegutowski

Five Reasons to Hate Apple $AAPL #iPhone #iPad $GOOG

Apple (Nasdaq:AAPL) continues to generate controversy with declining margins and lower than expected unit sales of iPads. So here are a few reasons to really hate the stock.

1. Despite competitions best efforts no one has delivered a knock out punch.
2. $18.8 Billion returned to shareholders through dividends and stock repurchases.
3. Enormous cash positions
4. Enormous cash flow
5. History of innovative product offerings

I’ll stop it after five points. There are no examples of investments who can make these claims and be considered losers.

George Gutowski writes from a caveat emptor perspective. Follow him on twitter @financialskepti. Follow his evil twin who writes Wall Street Murder Thrillers on twitter @georgegutowski

Honeywell should increase Dividend! $HON Will Management Send the Signal?

Honeywell (NYSE:HON) produced some very nice earnings. Not a flashy stock with a lot if noise it treated as an old school industrial. However looking at its markets of transportation and aeronautics it really is a high-tech business with large moats. not everyone can just start installing parts onto an aircraft carrying hundreds of passengers.

The proof or validation for the earning will be an increase in dividend. When you are firing on all cylinders as Honeywell is shareholders need to be rewarded. Current yield is just under 2%. Free cash flow for the past two years has not been stellar. But cash on hand has been rising.

If management and the board are shareholder conscious they will increase the dividend and play to the buy and hold investors. so far no signals from management. Why is that?

George Gutowski writes from a caveat emptor perspective.

Muddy Waters Tears a Strip off $AMT. What about brokerages with a buy recommendation.

Muddy Waters has declared the emperor wears no clothes at American Tower Corp (NYSE:AMT) They have a few interesting points which I leave the readers to do their own due diligence on. Muddy Waters traditionally has a modus operandi of making it look very bad.

Management should be responding shortly. Documents have been sent to the SEC which confirm Muddy Waters reasoning. What about the investment firms that have signed off on AMT and producing glowing reports.

Fitch Ratings upgraded American Tower REIT’s credit ratings by a notch, pointing to what they felt were the company’s strong free cash flow and margins as well as its low business risk model.

The firm bumped AMT’s issuer-default rating to triple-B, which is two steps into investment territory, from triple-B-minus. The outlook we are told is stable is stable. Muddy Waters disagrees with a few points.

On May 21 Macquarie raised the stock to outperform from neutral.

On May 17 Barclay’s started coverage on the stock with an overweight.

In the meantime if you follow any regulatory financial releases from the company the numbers were not looking so good. At least to my eyes.

Going to be a lawyers delight.

George Gutowski writes from a caveat emptor perspective.

The correct way to analyze Yahoo $YHOO

Yahoo (Nasdaq:YHOO) shares have done well for the past year mainly because of faith in the new CEO Marissa Mayer. But revenues have fallen and some investors are worrying. Tech stocks are not used to rebuilds and restructure and perhaps this is a good time to think about a process old line industrial stocks have followed for years.

Firstly restructures do not happen over night. It takes a long time to hire the correct staff get them focused and start producing commercial results.

Secondly a lot of existing revenue sources are declining and are or will be abandoned shortly. Temporarily this will cause short-term dips.

Thirdly the real catalysts for driving shareholder wealth will come from my products and new applications. Watch this space like a hawk. This is what will determine Yahoo’s success. Getting into a fist fight with Google or Facebook only results in a war of attrition with declining profit margins. Much like reading a history of World War One. Much bloodshed little progress. World War Two you had tanks, aircraft and new thinking on both sides.

Lastly watch the acquisitions space. Yahoo knows they have to buy and buy quickly.

So a classic financial analysis of quarterly earnings will profit little. So for those of you who like to analyze the crap out of everything don’t bother. The winning cards have not yet been dealt.

George Gutowski writes from a caveat emptor perspective.