BloggingStocks

What's with Steve & Barry's and why should we care?

Sheldon Liber — 2008-07-21T15:02:00+00:00

Filed under: Other issues, Bad news, Press releases, Consumer experience, JPMorgan Chase (JPM), IndyMac Bancorp (IMB), Bear Stearns Cos (BSC), Recession

As a sign of how disconnected one can be, I had to ask my 12-year old about Steve & Barry's. I had not heard of it and it is receiving way too many comments on our site to be ignored. My colleague Zac Bissonnette started blogging about it a month ago Steve & Barry's on the brink of bankruptcy? and the comments are still coming in strong as the story progressed.

Steve & Barry's filed for Chapter 11 bankruptcy on July 9, 2008, and information about its status and answers to frequently asked questions can be found here.

The company has been expanding rapidly and clearly hit a brick wall with consumer budgets severely strained and the economy facing uncertainty in the short term. However, this is supposed to be a discount chain. Perhaps the discounting amounted to selling dollars for ninety cents, and it could not make it up on volume.

This is a relatively small company, but clearly it matters to a lot of people. The number of comments we have received has surpassed most of our recent stories, even those of the Bear Stearns takeover (acquired by JPMorgan Chase (NYSE: JPM)) and the IndyMac (NYSE: IDMC) collapse.

Steve & Barry's might have had an IPO sometime in its future, but that is not likely in the current environment. What is it that makes this story so compelling to our readers? If it is because the stores are so great, what went wrong in your neighborhood?

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of any of JPM.

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IndyMac depositors faint when they discover they can't get their money

Peter Cohan — 2008-07-17T20:06:00+00:00

Filed under: IndyMac Bancorp (IMB)

Last week, our country suffered its second biggest bank failure in history. But since it was an FDIC insured institution, this means that depositors had nothing to worry about as long as they had less than $100,000 in each account, right?

Well, that's what I thought when I heard that $32 billion IndyMac had failed. But a commenter on my Auction Rate Securities (ARS) post -- which now has 5,235 comments from people whose money is frozen -- told a chilling story with implications for everyone who keeps money at a bank.

As he said, "I've spent the past 3 days waiting outside an IndyMac branch. it was utter chaos. some people had funds that mysteriously disappeared from the IndyMac computer logs. (under 100 grand). bumbling FDIC officials, depositors fighting, people passing out from the heat, elderly folks collapsing when they realize their life savings were not insured...and even those who had under 100 grand are having some difficulty getting other institutions to accept the IndyMac checks."

If you have deposits in a bank that looks like it's in trouble, get your money out before the FDIC takes it over. Do you really want to spend three days waiting in line to access your cash? As the commenter advised: "While you may be within the insured limits at your bank, like i was, you still want to avoid banks that are in trouble. It's not worth the hassle."

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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Fraud at IndyMac?

Douglas McIntyre — 2008-07-17T03:57:00+00:00

Filed under: Industry, Law, IndyMac Bancorp (IMB)

When Countrywide fell apart, the government moved in and began to examine the company's loan practices for fraud. Perhaps history is repeating itself. The FBI has set up an office at IndyMac (OTC: IDMC) to investigate whether its loan practices were above board.

According to The Wall Street Journal, "Failed lender IndyMac Bank is among nearly two dozen banks under scrutiny by the Federal Bureau of Investigation for possible mortgage fraud." Both the media and the bank were thin on details, very thin.

The matter, and questions at Countrywide, raise the issue of where regulators were when these firms operating as normal, standalone businesses making hundreds of thousand of home loans each year. Consumers are not terribly well-served if the FBI or any other government agency gets into the act once all of the damage has been done.

If the FBI finds any wrong-doing, what then? Is there a way to make reparations to people who may have lost their home or paid mortgage rates and additional fees which were much too high? Management at some of these lending operations may get into trouble, but the victims are unlikely to be helped.

Douglas A. McIntyre is an editor at 247wallst.com.

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Did Wells Fargo's earnings report signal a turnaround?

Sheldon Liber — 2008-07-16T13:23:00+00:00

Filed under: Major movement, Earnings reports, Rants and raves, JPMorgan Chase (JPM), Bank of America (BAC), Charles Schwab Corp (SCHW), Wells Fargo (WFC), IndyMac Bancorp (IMB), U.S. Bancorp (USB)

Yesterday's Major League All-Star Game went into extra innings (15 total) before the American League won 4 to 3, earning the home field advantage when the World Series rolls around in October. Yesterday was also the day I called the bottom of our economic woes (see Will Bush throw a change-up at Yankee Stadium?).

Calling the bottom should not be confused with the end of the pain. It could get worse but I see signs of the turn, and today the market, for the moment, is up. Oil prices are down, as I write, to $132 per barrel and I do not think we will be seeing $200 oil any time soon, as some have opined.

Today's Wells Fargo (NYSE: WFC) earnings report set things off in the right direction. Wells Fargo: Beating expectations by my colleague Steven Halpern will give you the details, but the highlights are lower earnings, a 10% increase in the dividend yield, and a tolerable and understandable charge for bad loans and to increase reserves.

If Bush's change-up marks the bottom, then WFC is the slugger that hit the ball back over the fence. Can one report from one bank make a difference? Yes it can, if people read it as a sign of things to come. At the same time, the capitulation I describe in IndyMac (IMB) turns to dust is another sign that we may be at the turning point.

Most of the bank deposits that are being withdrawn from the weaker banks are moving to the stronger ones. It is not much of a stretch to think that Wells Fargo, along with J. P. Morgan Chase (NYSE: JPM), Charles Schwab (NASDAQ: SCHW) (yes, they do banking), U.S. Bancorp (NYSE: USB) and even Bank of America (NYSE: BAC), which has to work through its acquisition of Countrywide Savings, will soon report very significant increases in their deposits.

There will also be fewer competitors for all types of loans and bank services and I expect profit margins will be higher too. Wells Fargo closed yesterday at $20.51 is currently trading up by $4.64, passing through $25.00 this morning. UPDATE: closing price $27.23, up $6.72 (32.76%)

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own(ed) shares of IMB and do own WFC.

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IndyMac (IMB) turns to dust

Sheldon Liber — 2008-07-16T11:11:00+00:00

Filed under: Rants and raves, IndyMac Bancorp (IMB), Recession

Last Friday, June 11, 2007, the Feds basically put IndyMac Bancorp (NYSE: IMB) into receivership, even as they reminded customers that their deposits were insured by the Federal Deposit Insurance Corporation (FDIC) covering each individual account up to $100,000.

When I posted IndyMac (IMB) turns to stone on June 8, IMB had shut down lending. Now, as they have turned to dust from a shareholder perspective, customers are still lining up to withdraw their funds despite government assurances that there is nothing to worry about.

Some fret that this bailout will cost taxpayers money but most of the money will be coming from actual deposits as company assets are liquidated. However, while a majority of the costs are covered, the process will incur significant costs nevertheless, since this is only the tip of the iceberg and other banks are sure to fall into the abyss as well.

So much of what happens in our world is based on perception, not fact, but the perception affects the facts and worries can become self-fulfilling prophecies. If not for the run on the bank, something the FDIC was set up to prevent, perhaps many institutions would be able to resolve there difficulties over time. When it comes to over-leveraged banks, time appears to be in short supply.

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Cramer on BloggingStocks: The breadth of the danger is staggering

Jim Cramer — 2008-07-15T08:56:00+00:00

Filed under: Bad news, Industry, Ford Motor (F), General Motors (GM), Market matters, Citigroup Inc. (C), Advanced Micro Dev (AMD), Regions Financial (RF), AutoNation Inc (AN), Bank of America (BAC), BB and T (BBT), Merrill Lynch (MER), Sears Holdings (SHLD), Federal Natl Mtge (FNM), Comerica Inc (CMA), D.R.Horton (DHI), Amer Intl Group (AIG), Lennar Corp'A' (LEN), Southwest Airlines (LUV), Wachovia Corp (WB), Washington Mutual (WM), IndyMac Bancorp (IMB), Lehman Br Holdings (LEH), Cramer on BloggingStocks, MBIA Inc (MBI)

TheStreet.com's Jim Cramer says our problems are so widespread, he sees lots more IndyMacs before we're out.

You don't need me to tell you it's awful out there. You don't need me to tell you that there's no quick fix for any of these things. But what might help you understand why it feels so bad this time is that I have never, in my career, seen so many companies go off track at the same time. This is one unbelievable moment, and it is made more horrible by the day as companies' stocks just get pummeled, causing people to then question the very viability of the companies involved.

First, obviously, are Fannie Mae (NYSE: FNM) (Cramer's Take) and Freddie Mac (NYSE: FRE) (Cramer's Take). We don't know what will happen, but we do know that their futures are much darker than their pasts. Their best hope: a Democrat becomes president and shows the usual love to both. But as investments, they are pretty much perma-losers going forward. The losses are that heavy. Yes, it is true that two years from now they will be better, but will the government let them limp through to that? View them as calls on a Democratic win.

We all know that Citigroup (NYSE: C) (Cramer's Take), Wachovia (NYSE: WB) (Cramer's Take), Washington Mutual (NYSE: WM) (Cramer's Take) and National City (NYSE: NCC) (Cramer's Take) are in trouble. Bank of America (NYSE: BAC) (Cramer's Take) says it isn't in trouble, but obviously the market doesn't believe management because the stock failed to rally when it said its dividend was safe. Any short-selling hedge fund could hire 30 actors and have them line up at a Washington Mutual or two and get a bank run going. Then we would have to hear about a "hasty" Treasury department plan to bail out WM. Hasty? How can these guys not see it coming?

No revelation that Lehman (NYSE: LEH) (Cramer's Take) or Merrill's (NYSE: MER) (Cramer's Take) in the soup, although I do marvel that at no price do they seem interesting to anyone -- value guys, takeover guys, or acquirers in general. But how about Comerica (NYSE: CMA) (Cramer's Take), Regions Financial (NYSE: RF) (Cramer's Take), Sovereign (NYSE: SOV) (Cramer's Take), Huntington Bancshares (NASDAQ: HBAN) (Cramer's Take), Suntrust (NYSE: STI) (Cramer's Take), Fifth Third (NASDAQ: FITB) (Cramer's Take), First Horizon (NYSE: FHN) (Cramer's Take), Marshall & Ilsley (NYSE: MI) (Cramer's Take), Zions (NASDAQ: ZION) (Cramer's Take), Key (NYSE: KEY) (Cramer's Take), Colonial (NYSE: CNB) (Cramer's Take) and BB&T (NYSE: BBT) (Cramer's Take)? Their charts are indicating there is much more devastation ahead. Every one of them is small enough to fail, and no one would give a darn. If the FDIC follows the trail blazed by IndyMac (NYSE: IMB) (Cramer's Take) it would be great because IndyMac Federal isn't foreclosing anymore. Get rid of the foreclosures, get rid of some of the overhang. But is that the plan, or do they have no place to put the foreclosed loans?

We know that the Gang of Four -- MBIA (NYSE: MBI) (Cramer's Take), MGIC (NYSE: MTG) (Cramer's Take), PMI (NYSE: PMI) (Cramer's Take) and Ambac (NYSE: ABK) (Cramer's Take) -- has been obliterated, a long-running saga of puffing by management and disastrous numbers. These companies are important, even if everyone seems to think that they have gone down without much repercussion other than the 40th story about how private mortgage insurers are now raising rates. Golly gee, who is paying them anything? They don't have enough money to pay the bank back for heaven's sake!

For example, they are very important to AIG (NYSE: AIG) (Cramer's Take), which seems to have found no bottom. None at all. Remember that funny dividend boost at AIG? What was that about?

There are tons of other financial insurers no one's paying attention to that seem to go down pretty constantly. An outfit like XL (NYSE: XL) (Cramer's Take) seems like it is a wasting asset. Or how about Genworth (NYSE: GNW) (Cramer's Take), which is selling well below book value?

Then there is everything auto, not just Ford (NYSE: F) (Cramer's Take) and GM (NYSE: GM) (Cramer's Take) (although do you really need anything else to go wrong there?) -- outfits like Visteon (NYSE: VC) (Cramer's Take) or Autonation (NYSE: AN) (Cramer's Take) or Carmax (NYSE: KMX) (Cramer's Take) aren't going to get through this one unscathed.

Or how about the homebuilders? Does anyone think that Hovnanian (NYSE: HOV) (Cramer's Take), Lennar (NYSE: LEN) (Cramer's Take), Pulte (NYSE: PHM) (Cramer's Take) and Horton (NYSE: DHI) (Cramer's Take) will all make it? I don't. How about that nifty Lennar upgrade by UBS? Sold to you, UBS (NYSE: UBS) (Cramer's Take), along with all of the toxic mortgages you STILL OWN!

I am not even going to include the airlines, they are all hopeless in my opinion, except for maybe Southwest (NYSE: LUV) (Cramer's Take). They are charities.

Other areas have problems -- retail has some busted stocks, and so do restaurants. Chico's (NYSE: CHS) (Cramer's Take)? Charming Shoppes (NASDAQ: CHRS) (Cramer's Take)? How about Macy's (NYSE: M) (Cramer's Take) -- where's that headed? Sears (NASDAQ: SHLD) (Cramer's Take)? OUCH!

You can see some techs folding, but only a handful. Maybe because only AMD (NYSE: AMD) (Cramer's Take) is on the fiscal ropes do people see "relative strength" in tech, whatever that means.

The problem is that the dire stocks, the ones I have listed, are so numerous and so concentrated with so little hope for rescue that it is hard to imagine anything but more downside for these stocks and therefore more downside for the rest of the market, simply because they are so glaring, are owned by so many mutual funds and have so many roles to play in the real economy.

We know that things have gotten out of control because the IndyMac collapse -- widely predicted -- used a huge amount of the surplus the FDIC has, suddenly making the safety net seem like a flimsy piece of Brawny.

The bottom line here -- there is too much going wrong right now, too much to put us anywhere near sound footing. I suspect that every rally will be met with selling until we see a multitude of collapses like IndyMac.

I am not going to search for positives in any of these groups yet, and if they rally off the decision by the Treasury to make more explicit the Fannie and Freddie guarantees, I would scale out of them once again on any short squeeze like the one we had at yesterday's opening.

Someone asked me yesterday, "When do we bottom?" I said it wouldn't be until all the banks that have to fail do so and GM files bankruptcy along with Ford. I said it matter-of-factly, because I meant it and because it is obvious.

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RELATED LINKS:
IndyMac Insurance Tab Could Hit $8B
Fannie, Freddie Plan Staves Off Housing Disaster
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

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Should Feds stimulate or stabilize; is there a difference?

Sheldon Liber — 2008-07-14T14:45:00+00:00

Filed under: Rants and raves, Scandals, Money and Finance Today, Politics, IndyMac Bancorp (IMB), Housing, Federal Reserve, Recession

Would it be better if the government sought to stabilize interest rates at 5% (a general goal), or is it better to change the rates willy nilly? Is it better for people to know where they stand or is it impossible given the large number of economic events that remain out of our control?

I was against the federal stimulus package and posted Fund roads & bridges NOT mad money stimulus and later Serious Money: Stimulate productivity not consumption contesting the federal governments economic approach, or lack thereof, under the current administration (White House and Congress) and this thought came to mind along similar lines.

All of the interest rate manipulations of the past dozen years have overheated and slapped our economy around. Adding to that the funding of the war effort and the price of food and energy means that almost every American household has been left in a quandary.

The government seems to be very bad at planning, and slow to react, or at least perceive a coming storm. They do appear reactionary at best and everyone cheers when they find a way to stave off disaster for one more day. That is the case today as they take over IndyMac Bank (NYSE: IMB) and bail out Fannie Mae and Freddie Mac.

All the while more capital is put into circulation. The perpetual increase in bad loans that overheated the housing market created phantom equity that is disappearing as reality sets in. We are seeing that the only way the Feds cans keep the country from total economic collapse is to replace the phantom equity with capital that is real, but of less value... because the printing presses are rolling night and day.

It might even be a positive thing if they had to actually print the money because they could not print it fast enough in small bills, and we would have less devaluation than when currency is created digitally.

The daily sighs of relief continue to come but there is no escaping paying the price. The devalued dollar is simply a mortgage on the nation and other nations are receiving the interest payments and will continue to do so.

In the future will we be able so stabilize interest rates and the currency or can we only look forward to continued manipulation and exasperation at increasingly more rapid rates?

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

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Profiting from the 150 banks that will fail next?

Peter Cohan — 2008-07-14T12:37:00+00:00

Filed under: Industry, IndyMac Bancorp (IMB)

Last week, the FDIC oversaw the second biggest bank failure in U.S. history -- $32 billion IndyMac Bancorp (NYSE: IMB). I thought more would be on the way and this morning's New York Times estimates that 150 of the 7,500 U.S. banks will fail in the next 12 to 18 months. The FDIC only has $53 billion in its fund to cover bank failures so it is going to be needing much more cash, which it may get from raising insurance rates. No doubt those of us with bank accounts will pay the price.

For those looking to profit from this failure, it's time to get a hold of the FDIC's problem bank list and start estimating the ones that are most likely to get taken over. Here are some hints: look at their mortgages as a percent of total loans, their cash flow, when they have to pay back their debt, and the increase in the rate of their bad loans. The Times mentions two that are probably already on the radar of short sellers:

BankUnited Financial Corporation (NASDAQ: BKUNA) in Florida, which trades at 77 cents a share and is probably too far gone to profit from as a short, went for $20 a share a year ago.
Downey Financial Corporation (NYSE: DSL) in California, which trades at $1.69 today, traded at $65 a year ago.

It looks like the market is pretty efficient when it comes to these troubled banks. The real profits will be made by people who figure out which banks are about to be added to the FDIC's problem banks list.

What worries me is whether there will be any end to this scheme of giving profits to the executives and losses to taxpayers. To profit from this, it's time to start shorting these banks well before they fail -- CNBC has some more of the names here.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

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After IndyMac failure, another 150 banks?

Douglas McIntyre — 2008-07-14T09:39:00+00:00

Filed under: Economic data, IndyMac Bancorp (IMB), Recession

Analysts believe that another 150 banks in the U.S. could fail over the near-term. According to The New York Times, "as many as 150 out of the 7,500 banks nationwide could fail over the next 12 to 18 months, analysts say. " The failure of IndyMac (NYSE: IMB) puts more focus on the problem

That puts investors in region banks in a tough spot. Shareholders in firms like NCC (NYSE: NCC) have watched the value of their stock drop from $33.54 to $4.42 over the last year as the bank cut its dividend and raised money. These holders can get out now because they fear an event which could take shares down to pennies. Or, they can hang on and hope that, once the financial crisis has passed, they may make some of their money back.

In many cases, the stock price is an excellent indication of what stockholders might want to do. IndyMac shares are down 99%. NCC's are down 85%, and its viewed by most as a bank that will "make it" because it has raised more money.

It would appear that the banks that the market is most worried about are off 90% to 96%. The institutions in that category probably carry the greatest risk of failure, if the stock market is an accurate indicator. The "if" part is the hard part.

Douglas A. McIntyre is an editor at 247wallst.com.

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Most overvalued & undervalued tech stocks, best places to live 2008 & banks at risk - Today in Money 7/14

Allan Halprin — 2008-07-14T08:36:00+00:00

Filed under: Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Cisco Systems (CSCO), Dell (DELL), Hewlett-Packard (HPQ), eBay (EBAY), Starbucks (SBUX), Amazon.com (AMZN), Intel (INTC), Money and Finance Today, Anheuser-Busch Cos (BUD), Federal Natl Mtge (FNM), Harley-Davidson (HOG), EMC Corp (EMC), IndyMac Bancorp (IMB)

In the News:

· U.S. Rescues Fannie Mae & Freddie Mac

· Another American Icon Falls as Belfium's InBev Buys Anheuser-Busch for $52 Billion

· Yahoo Rejects Microsoft's Latest Offer

· Golden Era of the Small Seller on eBay Comes to an End

· Microsoft Cuts Xbox Price by $50

· Steve & Barry's Collapse Hits Mall Owners

· Starbucks Turns to Smoothies

· The Harley Museum Goes the Whole Hog

Most Overvalued & Undervalued Tech Stocks
Foreign revenues and other factors that once offered safety are now threats, and investors are doubting the growth prospects of Internet giants. See if Amazon, Cisco, Dell, eBay, EMC, Google, HP, Microsoft, Intel, Yahoo are undervalued, fairly valued or overvalued.
What's Hurting Tech Stocks Overvalued or Undervalued? - BusinessWeek

Best Places to Live 2008
Topnotch schools, good jobs, affordable housing, low crime, an active outdoor culture help Plymouth, Minnesota to replace Middleton, Wisconsin on top of Money Magazine's annual list of the Best Places to Live in America. Other places in the top 10 include Ft. Collins, Colorado, Naperville, Illinois, Irvine, California, Franklin Township, NJ, Norman, Oklahoma, Round Rock, Texas, Columbia/Ellicott City, Maryland, Overland Park, Kansas and Fishers, Indiana.
Best places to live 2008 - from MONEY Magazine
Also: Texas is Home to Most Cities on Best Places List

Banks at Risk of Failing Almost Double Since 2006; Is Your Money Safe?
Rising losses from bad mortgages and low capital levels are threatening the viability of a small, but growing, number of U.S. banks. On Friday, IndyMac, a mortgage lender with $32 billion in assets, became the fourth-largest financial institution to be taken over by regulators. IndyMac is the fifth institution to fail this year and likely won't be the last victim of the credit crisis. See how bank failures happen and what it means to you.
Banks at risk of failing almost double since 2006 - USATODAY.com
Q&A: How bank failures happen and what they mean - USATODAY.com
From MainStreet - Are Your Banks FDIC Insured?

Buying Private Insurance Can Be Tricky
Think shopping home and auto policies is fun? Try buying your own health insurance. Like "Operation," private health insurance is a game where the smallest error can cause a huge (financial) shock.
Buying private health insurance -Bankrate.com

Unusual Ways Airports Are Making Money
Airports around the country are trying out surprising sources of income. Anyone want to buy some hay? Traditionally, airports have generated most of their money from airlines-in the form of landing fees and fees for the use of terminal facilities-and from non-aeronautical sources such as parking lots, concessions, and advertising. But while the costs to run an airport have risen significantly over the years, airlines, pinched by high fuel prices, have balked at paying increased fees. In the scramble for dollars, some airports, especially smaller and midsize ones more vulnerable to losing airlines because of higher fees, have turned to selling everything from branded products to natural-gas drilling rights.
Unusual Airport Income - Business Travel - Feature Articles - Portfolio.com

How to Cash in on Your Baby if You Aren't Angelina Jolie
Don't let the stars outshine you. You may not be able to command seven figures for your baby's photos, but there are tons of freebies waiting to be plucked by new parents. And MainStreet has a list.
How to Cash in on Your Baby If You Are Not Angelina Jolie | MainStreet

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FDIC closes IndyMac: Second biggest bank failure in history

Peter Cohan — 2008-07-11T19:52:00+00:00

Filed under: Bad news, Products and services, Market matters, Scandals, IndyMac Bancorp (IMB)

Bloomberg News reports that the Federal Deposit Insurance Corporation (FDIC) closed down IndyMac Bancorp (NYSE: IMB), a $32 billion (Q1 2008 assets) mortgage lender. Is this just the beginning of a string of such failures?

Having spent a summer 26 years ago working with the FDIC, I fear that that will be the case. What we worked on back then was a system to help the FDIC handle the assets that it acquired when it took over a failed bank. The FDIC's role is to sell those assets and get as much money as possible as quickly as it can so that it can pay people to whom the failed bank owes money.

Bloomberg reported that IndyMac failed due to a run by depositors who left the California mortgage lender with insufficient cash. Fortunately for depositors, customers will have access to funds this weekend via ATMs. IndyMac trails only the former Continental Illinois -- which was the biggest financial institution to close -- back in 1984.

A great book about the failure of its business partner, Penn Square Bank, Belly Up, reveals the important role of syndication -- originating a loan and then selling it to someone else -- in the failure of financial institutions.

Specifically, according to the FDIC, Continental Illinois grew its business loans 180% between 1976 and 1981. It grew fast without regard to risk. In so doing, it took a big portion of risky oil and gas loans originated by Oklahoma-based Penn Square -- that was heavily exposed to the energy sector when it imploded in 1982. Continental Illinois' $1 billion exposure to bad Penn Square loans caused investors to lose confidence -- taking Continental Illinois down with it.

But that was 24 years ago. And today the Office of Thrift Supervision (OTS) -- which should have prevented IndyMac from its reckless growth -- blames New York Senator Charles Schumer for the failure. Last month Schumer highlighted IndyMac's lax lending standards and purchases of brokered deposits as the causes of its poor financial condition. According to Bloomberg, in the 11 business days after Schumer explained his concerns in a June 26 letter, depositors withdrew more than $1.3 billion. It seems to me the OTS is trying to shift blame from its own lax supervision onto Schumer.

IndyMac fired half of its employees Monday and sold most of its retail mortgage branches to another company. Its stock has fallen from $56 on May 11, 2006 to 28 cents at today's close.

The lesson is that in finance, rapid growth, without regard to risk, often leads to even more rapid collapse.

Update. The Wall Street Journal [subscription required] estimates that the FDIC used between $4 billion and $8 billion of its $53 billion deposit-insurance fund for the IndyMac bailout. FDIC insurance rates are likely to rise in order to replenish that fund for future bailouts.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in IndyMac securities.

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IndyMac (IMB) turns to stone

Sheldon Liber — 2008-07-08T14:40:00+00:00

Filed under: Major movement, Other issues, Press releases, Products and services, Management, Rants and raves, Market matters, IndyMac Bancorp (IMB), Recession

No more home mortgages for the time being. The former number two originator of home mortgages in the United States, IndyMac Bancorp (NYSE: IMB), is shutting down its operations and laying off 3800 workers, more than half of its employees.

By halting its prime business, IMB might as well have announced they have turned to stone, as it seems its financial situation is frozen for now. Last quarter it announced continued losses and changed its outlook from being profitable in the fourth quarter to seeing nothing but losses through 2008.

It is always difficult to discuss one's failings, but nothing has been worse than my suggestion that IndyMac might be a screaming buy last year. The stock is down 97%. The sad truth is it was a screaming sell and my worst call since I have been writing for BloggingStocks.com. That will be a separate story.

Today, IndyMac is trading down 47% to $0.37. It will have to restructure once again and will be submitting a survival plan to the FDIC. The current market cap is about $37 million, while its losses over the last twelve months exceed $600 million.

Many questions haunt the troubled financial institution. How much money could it hope to make without its primary business activity up and running? When would they be able to start lending again if at all?

Above and beyond its need of cash for operations, how much cash will be burned defending itself from major lawsuits? Will the government be forced to assign its assets to another lender and shut them down? Why did management make optimistic announcements while they were watching losses rise out of control?

One of my friends asked me last week if I thought IndyMac was worth a long-shot bet. At the time, it was trading around $0.80 and today it less than half that. I told him then that I have no idea. That is still true and with what I have witnessed the last six months, I don't think anyone else knows either.

Update: closing price $0.44, down -$0.27 ( -38.03%)

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Profit from fantastic four, southwest secrets to success & behind the booze brands - Today in Money 7/8

Allan Halprin — 2008-07-08T08:40:00+00:00

Filed under: Home Depot (HD), Berkshire Hathaway (BRK.A), India, China, Brazil, Russia, Penney (J.C.) (JCP), Money and Finance Today, Sears Holdings (SHLD), Federal Natl Mtge (FNM), Lowe's Cos (LOW), Office Depot (ODP), Southwest Airlines (LUV), IndyMac Bancorp (IMB)

In the News:

· Fed Eyes Extending Emergency Loans for Wall Street

· Siemens Cutting 16,750 Jobs Worldwide

· Microsoft Is Icahn's Ally in Pursuit of Yahoo

· Fannie & Freddie Plunge on Capital Concerns

· IndyMac Halts New Loans, to Cut 3,800 Jobs

· Office Depot Sees 10% Drop in Sales

· Texas Oilman T. Boone Pickens Wants to Replace Oil With Wind

· AirTran Cutting 480 Pilot & Flight Attendant Jobs

· J.C. Penney Launches Brand for Young Adults

· Warren Buffett Gives Away $2 Billion in Stock to 3 Charities

Profit From the Fantastic Four
Take a look at these 26 stocks, funds and exchange-traded funds that key in on the fast-growing BRIC nations -- Brazil, Russia, India and China.
Profit From the Fantastic Four - Kiplinger.com

Southwest's Seven Secrets for Success
By some estimates, the country's major carriers have consumed perhaps $100 billion in capital during the past decade, but Southwest Airlines continues to be profitable. It's been in the black for 33 consecutive years and, last week, for the 127th consecutive quarter. While its competitors are shrinking, Southwest will add a handful of flights this fall. What does Southwest know that no one else in airlines does? It keeps things simple and consistent, which drives costs down, maximizes productive assets, and helps manage customer expectations.
Why Southwest Succeeds - Portfolio.com

Cut Your Spending By $500 a Month
The Consumer Reports Money Lab shakes loose a bushel of savings hiding in everyday spending. See how to save $200 a month on food, $25 on bank fees, $35 on phone savings, $65 on credit cards, $110 on insurance, $125 on retirement tax savings.
ConsumerReports.org - Saving money, increase your 401(k) contribution

Beat the College Loan Crunch
Lenders are leaving in droves, which could cut off funds for the coming academic year. Here's how to get the money your child needs.
Your family's money - Beat the college loan crunch - CNNmoney

Best Appliance Stores
Lowe's edges out Home Depot, Sears gets mixed results and low marks for Maytag. Take a look at how Consumer Reports rates the best for price and service from the most recognizable names in appliances.
ConsumerReports.org - Appliance stores: Ratings, How to choose

As Food Costs Soar, It's Back to Basic for Meal Planners
Rebecca Woods and her family in Lathrop, Mo., have turned to the land, planting hundreds of vegetables and relying on their own chickens for eggs. Retirees Sally and Robert Jones of Alpine, Texas, have reverted back to some of the menus that got them through graduate school many years ago, living on beans, stews and soups. They are just a couple of examples of how Americans are changing their meal planning as food prices continue to climb.
As food costs soar, it's back to basics for meal planners - USATODAY.com

Behind the Booze Brands
Who were Captain Morgan and Johnnie Walker? Believe it or not, both men really existed--the former a vicious pirate, the latter a Scottish grocer. Products such as Jack Daniel's leverage their histories to sell a drinking experience based on historical reverence--unchanged by time. See who is really behind the brand names for Captain Morgan, Grey Goose, Hennessy, J&B, Jack Daniels, Jagermeister, Jose Cuervo and more.
Behind The Labels - Forbes.com

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IndyMac (IMB) stops accepting loan applications and announces job cuts

Brian White — 2008-07-08T08:32:00+00:00

Filed under: Major movement, Employees, IndyMac Bancorp (IMB)

IndyMac Bancorp Inc. (NYSE: IMB) is continuing to see problems with raising enough money to stay in business. In fact, the bank has ceased taking loan applications. In addition to not taking new lending business, the company will lay off more than half of its workforce, about 3,800 employees.

The problem is that IndyMac hasn't lined up any new financing or capital investment and doesn't expect to recover until the mortgage market begins recovering. In other words, the rest of 2008 is going to be pretty harsh for the once high-flying mortgage lender. CEO Michael Perry said that U.S. banking regulators have asked IndyMac to submit a business plan that will show how the struggling lender will get back on its feet.

The retail and wholesale loan divisions will be closed to new business as the company tries to build its reverse mortgage business while maintaining the existing loans in its portfolio. Perry went on to say that "These are the largest and most difficult staff reductions we have ever had to make" in reference to IndyMac's looming layoffs. He also requested that IndyMac's board cut his $1 million annual salary in half (no word on bonus cuts). At least one banking CEO has a conscience, right?

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Before the bell: Futures lower ahead of Bernanke speech, Alcoa; Indymac plunges

Melly Alazraki — 2008-07-08T07:41:00+00:00

Filed under: Before the bell, Earnings reports, Market matters, Alcoa Inc (AA), Federal Natl Mtge (FNM), Economic data, IndyMac Bancorp (IMB), Federal Reserve

U.S. stock futures were lower early Tuesday morning, the day when one of the worst earnings season in decades is about to kick off. Financials, credit market and economy jitters only compound the bearish sentiment out there.

On Monday, U.S. stocks ended lower despite starting the day with nice, solid gains as the price of oil dropped some $5 a barrel. But economic worries following a speech from a Federal Reserve official seeing more troubles to come, as well as worries about financial stocks and the credit market as capital concerns at Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) grew, brought in the bears. The Dow industrials ended dropping 56 points, or 0.5%, the Nasdaq Composite lost 2 points, or 0.09%, and the S&P 500 fell 10 points, or 0.84%. The S&P 500 is still slightly above bear market territory.

Today, much will depend on two speeches from Federal Reserve officials. First, at 8:30 a.m., Fed Chairman Ben Bernanke is scheduled to speak at a mortgage lending forum hosted by the Federal Deposit Insurance Corp.. Treasury Secretary Hank Paulson is also slated to appear at the forum.
Also, Richmond Fed President Jeffrey Lacker is scheduled to speak about the U.S. economic outlook in Washington.

The speeches could sway market in different directions, but also some economic data released today could have an impact, especially May pending home sales and wholesale inventories scheduled for release at 10:00 a.m. EDT.

Meanwhile, oil held steady Tuesday despite a weaker dollar after a plunge of nearly $4 in the previous session caused by easing concerns over potential supply disruptions.

In corporate news, earnings season is about to kick off when Alcoa Inc. (NYSE: AA) reports earnings after the close this evening. While expectations aren't high due to high commodity prices and weakening demand, investors may not react kindly to any bad surprises, including weak outlook statements.

And staying with the very gloomy mortgage sector, already hit Monday by Fannie and Freddie, Indymac Bancorp (NYSE: IMB) announced late Monday it will eliminate 3,800 jobs and stop making most home loans to try to improve its balance sheet, after regulators concluded it was no longer "well capitalized." IMB shares plunged over 32% in after-hours trading.

Finally, Pepsi Bottling Group (NYSE: PBG) has already reported earnings this morning, mostly beating analyst estimates.

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Cramer on BloggingStocks: Oil, Gas Stocks in a Tug of War

Jim Cramer — 2008-07-01T09:48:00+00:00

Filed under: Exxon Mobil (XOM), Columns, Chesapeake Energy (CHK), ConocoPhillips (COP), IndyMac Bancorp (IMB), Cramer on BloggingStocks

TheStreet.com's Jim Cramer says both oil futures and equity futures can move these hot issues.

Will the futures pull down the oil and gas stocks today? No, I don't mean the oil futures, I mean the equity futur

Last week when oil exploded, we caught two days of trading that dropped the stocks hard. We caught a bit of a bid in the nat gases like Chesapeake (NYSE:CHK) and Devon (NYSE:DVN) but at the end of the day, but the stocks were truly overwhelmed by the simple fact that they are in the indices.

This pattern has really held down the integrateds: last week Conoco (NYSE:COP) should have exploded, but it couldn't because it is such a big part of the S&P. Chevron (NYSE:CVX) and Exxon (NYSE: XOM) are no different.

The natural gas stocks are not as big a factor, but they can be rocked down without a problem.

I am not saying to avoid looking at the oil futures. They can control the stocks. I am saying that the equity futures tide can take down anything, even when the oil futures spike hard.

Watch 'em both. Ideally, the best time to buy is when oil is strong but the S&P futures are stronger to the downside. Witness Devon. That stock traded 7 points lower on Thursday because of the S&P futures even as the company's prospects at plus-$13 nat gas are huge and the numbers are therefore way too low around the Street because it has so much available supply.

That's when to strike best.

Random musings: Peter Eavis and Herb Greenberg have made a cottage industry out of writing about the mezzanine lenders, Allied Capital (NYSE: ALD) and American Capital (NASDAQ:ACAS). So far these two companies have managed to avoid the fate of Indymac (NYSE: IMB). Today's "Heard on the Street," this one by Eavis -- now that Herb has left the day-to-day -- develops the same themes as usual: dividend too large, can they pay it? I figure the companies sell something saleable, up the dividends and issue more shares just to stay one step ahead of the posse. Boy, the people who run those companies must be sick of these two. They probably rejoiced when Herb went out of the Internet and TV columnist business to work at Greenberg Meritz.

At the time of publication, Cramer was long Devon.

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For low priced stocks, focus on the pumps

Timothy Sykes — 2008-06-02T12:36:00+00:00

Filed under: Competitive strategy, Ford Motor (F), Sirius Satellite Radio (SIRI), IndyMac Bancorp (IMB)

As I wrote a few weeks ago, traders and fans of low priced stocks should ignore fallen blue chips like Ford Motor Co (NYSE: F) and Sirius Satellite Radio (NASDAQ: SIRI) and focus more on smaller volatile stocks like China Precisions Steel Inc (NASDAQ: CPSL) and Solarfun Power Holdings (NASDAQ: SOLF). Not just because fallen blue chip stocks are all about guessing major business trends and the time lags involved with pricing those into their stocks -- good luck with that -- but because these lesser known plays offer much more predictability due to their speculative nature.

Earnings, profit margins, product potential is all well and good for long-term investors in higher-priced names, but here in the gutter of the stock market (also known as penny stock land), those variables are highly irrelevant to predicting hourly, daily and even weekly price swings. Down here it's all about self fulfilling prophecies, pumping and message board hype.

Take for example, Middlebrook Pharmaceuticals (NASDAQ: MBRK), mercilessly pumped by TheStreet.com's Adam Feuerstein for the past several months as a takeover candidate, as his sources indicate bidders in the $6 to $8 range. Now he might be right -- not that it's going to matter to the SEC -- and while he certainly can't compete with CNBC, in terms of effectiveness, his credibility and frequent teasing have predictably pumped this stock up a solid 20-30% so far.

Other pumpers -- mind you, I don't use this term negatively, at least not always, but rather I use it to show respect to those who have followers based on their superior track records like "Lionmaster" over at TheLion.com -- have recently been touting Indymac Bancorp (NYSE: IMB) and Limelight Networks Inc (NASDAQ: LLNW) mainly because both stocks seemed to have worn out the sellers and speculation about any number of variables causes dip buyers to become interested.

So, I urge you to take a look at these kinds of factors, and if you truly begin to understand their power, then you might just also realize profiting off these pumps -- whether you buy into or short sell against them -- is infinitely easier than profiting from actual business variables, all of which are analyzed by thousands of people smarter and richer than you -- aka this is the poor man's stock trading strategy.

Disclosure: Timothy Sykes has no positions in any stock mentioned

Timothy Sykes writes the blog timothysykes.com, is a former hedge fund manager, star of the TV show Wall Street Warriors and author of the book, An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund

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Cramer on BloggingStocks: Things aren't so bad

Jim Cramer — 2008-06-02T10:22:00+00:00

Filed under: Market matters, IndyMac Bancorp (IMB), Lehman Br Holdings (LEH), Cramer on BloggingStocks

TheStreet.com's Jim Cramer says there are problems, but nothing looks dire.

The setup is pretty good here. We've got a mildly oversold market with lots of June money expected to come in as CDs roll over and people realize that the cash rates are so bad. We have no earnings news, which is good, given that unless you do a lot of business overseas without a lot of raw cost escalation (think everything from Emerson (NYSE: EMR) (Cramer's Take) to Heinz (NYSE: HNZ) (Cramer's Take)) or you transport or mine oil, minerals and agricultural goodies, you aren't doing all that well.

We have the possibility of some stability in energy, as $130 has been difficult to punch through, even though we have not been able to build any inventories yet despite all we hear about how people are driving less. And the expectations for the employment number are so weak that if we get any job creation we are going to begin to hear that maybe the economy is on the mend.

Again, that's considered antithetical given the sinking home price/escalating food and oil price one-two punch. But, as I said last week, there is a finite nature to the bad loans.

We've got plenty wrong. However, I would argue that we have always had plenty wrong. If anything, the amazing moment here is that there isn't more wrong and more difficulties. There are a number of banks on the 52-week-low list, but no one has failed other than Bear, and we are now getting a fuller picture of Bear falling under its own incredibly poorly managed weight. (The outrage here simply can't be strong enough.)

Can Downey (NYSE: DSL) (Cramer's Take) and IndyMac (NYSE: IMB) (Cramer's Take) bring us down? I don't think so. The Ohio banks? Not a chance. I don't want to buy Lehman (NYSE: LEH) (Cramer's Take), but the notion that it is really sickly -- deathbed sickly -- doesn't seem in the cards. It's just the crummy stock of an earnings-challenged company.

These aren't calamities.

RELATED LINKS:
Coming Week: Bulls Grow Louder
Don't Buy This Housing Report

Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer had no positions in the stocks mentioned.

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IndyMac earnings: Cuts loss by 64% and looks to stay independent

Sheldon Liber — 2008-05-12T16:32:00+00:00

Filed under: Major movement, Earnings reports, Management, IndyMac Bancorp (IMB)

Today IndyMac Bancorp, Inc. (NYSE: IMB) reported that its quarterly loss was cut by 64% leaving investors with a small glimmer of hope... although the company has done a small about face. Previously IndyMac had suggested it might be possible to get back to profitability by the fourth quarter. They now are reporting that they probably will not report a positive quarter in 2008.

It was only ten days ago that CEO says IndyMac has 'turned a corner' but the story continues to evolve. The stock closed down today at $3.06, losing 37 cents or almost 11% of it's value.

Disclosure: I own shares of IMB.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.

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