LONDON (MarketWatch) — General Electric Co. pulled an unpleasant surprise on investors Friday, reporting a 6% drop in first-quarter net profit — largely over trouble in its financial-services businesses — and revising lower its 2008 outlook.
General Electric said net income dropped to $4.3 billion, or 43 cents a share, from profit generated during the first quarter of 2007, while revenue rose 8% to $42.24 billion.
Though GE’s financial-services businesses may be the main culprit, I’m going to go out on a limb and say that the economy is slowing down, people are spending less, and the price of basic materials and commodities are growing. Look out below.
As for myself, I exited a couple of my puts when the Russell was down 1%, a little too early, as it later declined another .7%, but best to be safe than sorry I guess.
After doing some stock screens for potential investments (as opposed to my usual chart-based trades), I came across Virco Mfg. Corp., a company that designs, produces and distributes movable education furniture equipment for the pre-k through 12th grade market in the United States.
For the years 2001-2005, Virco took some serious blows to their net income. In ‘01 and ‘02, Virco barely had a positive net income and then Virco had 3 years of negative net income. In ‘03 it was negative 22 million, in ‘04 it was negative 14, and in ‘05 it was negative 9.6. Then in 2006, after what seems to me like seriously hard work, perseverance and dedication, Virco emerged once again with a positive net income, a $17 million turnaround. 2006 was a year filled with accomplishments for Virco.
Virco’s 2006 annual report was highly readable and told an excellent story of the past decade for the company. The letter to the shareholders explained how they were positioned in the early 90s and the factors for the decline in profitability. The letter also explained management’s reasoning behind the general steps deemed necessary to return to profitability and also the more specific product lines and goals to capture more sales.
Overall, this was an excellent read. I think anyone can appreciate how an individual or company can experience hard times and emerge successful and strong once again. I also enjoyed reading about a company that probably made the chairs and desks and tables I used throughout grade school.
Thanks to Spain’s slumping property market, house buyers are as popular as movie stars — and they can cause even more excitement.
Reporters outnumbered bidders as lot No. 1 hit the slate in Europe’s first “Dutch auction” for real estate last weekend in Madrid. Of 216 lots, 194 were withdrawn when they weren’t purchased at the reserve price. One man, investor Manuel Sainz, bought almost half of everything sold.
“Next stop Hollywood!” laughed Sainz, head of property company Las Terrazas de San Blas SA, as he fought off the press after buying 10 properties at discounts of as much as 30 percent.
The event shows the depth of Spain’s housing bust after prices tripled in the past decade. In January, the government’s housing policy director, Rafael Pacheco, called the slowdown “moderate and orderly” after January sales volume fell 27 percent from a year earlier as the global credit shortage forced banks to reduce lending.
Sounds as good as ever a reason to short the Spain ETF, EWP. Also consider the fact that the slumping U.S. economy will have an effect on many other countries around the world.
Since early January, MHO has retraced from $6 to $19. Now is a great opportunity to go short on this homebuilder. Also, though I’m no expert at reading a balance sheet, just a cursory look doesn’t instill a lot of confidence.
After Tuesday’s huge up day (I saw freaking 7-10% gains for some banks and brokers), yesterday could be termed as consolidation, though after Bernanke’s testimony the markets turned downward for modest losses.
Now I think most people are worried or hoping that this rally will continue. Here are some charts of volatility and advance/decline. These charts show that we are at a critical juncture.
And one last chart of volatility: the CBC put/call ratio.
Westlaw has introduced a the new SUBPRIME-FILING database, which includes motions, memoranda, pleadings, and other trial filings relevant to the current sub-prime mortgage lending controversy from selected state trial courts, United States District Courts and United States Bankruptcy Courts. The coverage of the database begins with 2006.
Just to see what’s going on in the state of Georgia, I did a blanket search and Westlaw returned a total of 81 documents. I wonder how many there will be by the end of the year?
A couple of days ago, the Resourceful Bear Blog pointed out an article entitled “Is Iceland the Canary in the Mineshaft of Global Financial Contagion?” The article addresses some serious financial issues that, if true, neither bodes well for the small, island nation, nor for the rest of the banking world.
The aforementioned article says that Iceland a Nordic hedge fund masquerading as a country with carry trades that are now unwinding and causing investment flight. Interest rate hikes and currency devaluations are now raising inflation; a credit freeze is also in effect due to highly leveraged bank portfolios gone bad. To me, it sounds like a grim situation.
The Resourceful Bear has some suggestions for investment application in this situation. Similar to previous advice, he suggests that one invest in the gold ETF GLD and use your margin to short any of Iceland’s three largest banks, which are Kaupthing, Glitnir, and Landsbanki.
I’ve already looked and none of these banks are traded on the major American exchanges. However, my broker Tradeking does allow me to buy Kaupthing (available on the pinksheets), but I can’t sell it short. Ho hum. It would be cool to sell short these Icelandic banks, but opportunities abound with pretty much any major financial institution these days.
Virco’s 2006 annual report was highly readable and told an excellent story of the past decade for the company. The letter to the shareholders explained how they were positioned in the early 90s and the factors for the decline in profitability. The letter also explained management’s reasoning behind the general steps deemed necessary to return to profitability and also the more specific product lines and goals to capture more sales.
