I labelled this blog "Trifecta" beause I had three stocks report earnings last night and this morning and they all got trashed by the market today.
TGB - down 12.4%
USHS - down 8.4%
CHCG - down 12.8%.
I can almost understand the TGB drop. I really had gone up too quickly. While their earnings were ok, they didn't seem blow out as suggested by the stock run up.
The USHS drop was be-fuddling. They had dropped 50% from early June after their last earnings report. I thought perhaps the drop was fear that they had a bunch of bad debt from financing people. But that wasn't the case. Their earnings were down a bit, but not sure it justified any more than the 50% drop. Yet another 8% drop today.
CHCG announced earnings this morning (China 3C Group Reports Results for Q2 FY '07). I can't imagine that people were looking for much as the stock hasn't exactly been a pocket rocket. I thought the numbers were great:
- revenue up 125% Y o Y
- net income up 140% Y o Y
- Re-affirmation of 2007 guidance (0.50 to 0.54)
Good night everyone!
Posts
1 comment:
MFI stocks got demolished again today. I'm starting to get used to it now ...
This subprime fiasco has reminded me of a great book I read several years ago: F.I.A.S.C.O. --- The Inside Story of a Wall Street Trader. One of the most surprising insights of the book was how corrupt the debt ratings agencies were. The WS trader worked the derivatives desk at Bear Stearns and Goldman Sachs in the mid 90's and was amazed by how the firms could influence (basically pay off) the debt ratings agencies in order to give high risk debt AAA ratings. They could then wrap complex derivatives around high risk debt with a AAA rating and make a killing, selling it to pension funds and hedge funds that were only allowed to invest in AAA rated debt securities.
It didn't really sink in just how dangerous this is until these last few weeks. If the ratings that S&P and Moody's hand out are not reliable, this could seriously undermine all the debt markets ... not just subprime. Subprime could be just the tip of the iceberg.
Larry Kudlow was freaking out today on CNBC. He wants the fed to bail out the banks and mortgage lenders making all the bad loans. He's Mr "Free market economy ... let the markets do their job" when it comes to the little guy. But when Wall Street billionaires are in trouble, he's all for a government bail out.
Random thoughts ... this could get a lot worse. I think the ratings agencies could end up being the Enron's of the next few years. They enabled the subprime mess and turned a blind eye as long as they were getting paid.
Anyway, it's taken some time for me to process what's been going on for the past several weeks. I think the people who believe that the credit problems are contained to subprime are missing the point ... I think the big problem is that no one can trust the AA and AAA ratings that much of the existing debt has received. Until that gets resolved, lending is going to dry up, and that's what causes recessions.
Post a Comment