4:30 PM EST 10/07/08 BoardCentral StockTalk highlights AAPL, AMD, BAC, ASML, FRE, FNM, YHOO, AXIBX, WAMUQ, AIG as most popular stocks on the Web today. StockTalk is an intra-day resource focusing on stocks generating most Interest, Chatter and Hype across most popular financial message boards.

1:30 PM EST 10/07/08 BoardCentral StockTalk highlights AAPL, AMD, BAC, ASML, FRE, MTL, MOS, SBPLX, MSFT, AIG, WAMUQ, FNM as most popular stocks on the Web today. StockTalk is an intra-day resource focusing on stocks generating most Interest, Chatter and Hype across most popular financial message boards.

Who's the SEC looking out for again? It's not you or I.

9:30 AM EST 10/07/08 BoardCentral StockTalk highlights AAPL, AMD, GE, ASML, GPS, FRE, TMTA, USRFL, XOM, AIG, WAMUQ as most popular stocks on the Web today. StockTalk is an intra-day resource focusing on stocks generating most Interest, Chatter and Hype across most popular financial message boards.

Visit StreetInsider.com at http://www.streetinsider.com/news.php?st=p&id=4048367 for the full story.

The market ended on the day’s low as the Dow tumbled 5.11% to 9,447.11, and the Nasdaq closed down 5.80% to 1,754.88. On the day following the Dow’s historic drop past 10,000, another psychological barrier was broken when the S&P500 fell 60.66 points, or 5.74%, and dropped below 1,000 for the first time since 2003. In the news today, Fed Chairman Ben Bernanke commented about the grim future of the U.S. economy as he predicted the international financial crisis will continue into the better part of the next year. Bernanke continued his comment by suggesting a possible rate cut will be made to try and ease investors’ unease and provide aid to the current credit crises. The Fed is scheduled to meet on October 28-29. but many investors believe an[More...]

The Smart Profits Report Tuesday, October 7, 2008: Issue #564 by Aaron Lehmann, Contributing Editor, Smart Profits Report To say the least, it's been an incredible year for the financial world and the stock market. And we've still got another 12 weeks left before we hit 2009. In less than six months, the list ... <img src="http://feeds.feedburner.com/~f/SmartProfitsReport?i=QdnYM"[More...]

By Jason Simpkins Associate Editor Major indices around the world plunged yesterday (Monday), as the credit crisis picked up momentum in Europe and markets in Asia began bracing for a deep... Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. Money moves markets. But Money Morning lets you move first. <img src="http://feeds.feedburner.com/~f/USMoneyMorning?i=EUfAM"[More...]

Filed under: Bank of America (BAC), Federal Natl Mtge (FNM), Amer Intl Group (AIG), Financial Crisis

The banking system has been crumbling for over a year, but last month's collapse of American International Group (NYSE: AIG) -- which prompted an $85 billion government takeover -- suggests that insurance is not immune from the problems. As a reminder, AIG got snared in the $62 trillion Credit Default Swap (CDS) market whose growth was spurred by McCain advisor, Phil "Americans are Whiners" Gramm.

And as insurance crumbles, banks keep suffering. Bank of America (NYSE: BAC) and National City Corp. (NYSE: NCC) are both hurting. How much?

• Bank of America's earnings plunged 68% to $1.18 billion, or $0.15/share -- missing by 60% analysts' forecast of 62 cents. Bank of America will raise capital by selling $10 billion of common stock and slashing its dividend in half from 64 cents to 32 cents. One analyst cut the bank's 2009 earnings estimate to $2.50 per share from $3 per share -- this is well below the $3.12 per share from a Thomson Reuters analyst poll -- and lowered his price target by $2 to $26.

• National City Corp. and its National City Bank both suffered debt downgrades from Fitch. For instance, Fitch slashed the bank subsidiary's long and short-term Issuer Default Ratings (IDR) to A- from A. And it lowered the bank and holding company's Individual rating to C from B.

The banking problems have been more apparent than the ones on the insurance industry. But yesterday, the problems there became more apparent. That's when Hartford Financial Services Group (NYSE: HIG) -- which expects to lose $8.50-$8.80 in the third quarter -- got a $2.5 billion capital investment from Allianz SE. "Allianz will buy, at $31 per share, $750 million of preferred shares convertible to common stock after receipt of applicable approvals, $1.75 billion of 10% junior subordinated debentures," according to BusinessWeek.

Why is insurance in trouble? Well, it probably didn't help that Senator Harry Reid remarked last week on a rumor than an un-named insurer was on the verge of bankruptcy. But Hartford -- whose stock lost half its value last week -- has made bad investments. It is expects to take a $2.1 billion to $2.2 billion capital loss in the third quarter from investments in Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) and Lehman Brothers Holdings Inc.

And that's the thing about insurance -- it generates huge amounts of cash from premiums which are then invested. What looked safe a year ago is toxic today. So don't be surprised to see more insurers taking these big investment losses.

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

 

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Filed under: International markets, Ford Motor (F), General Motors (GM), Toyota Motor Corp. (TM), Market matters, Chicago Merc Exch Hld'A' (CME), Federal Natl Mtge (FNM), Federal Reserve, Cramer on BloggingStocks, Financial Crisis

TheStreet.com's Jim Cramer says the end-of-day bounce was just shorts afraid of a worldwide rate cut.

The shorts must have just gone on "ease watch." You can tell what that is. Some devastating news will come out, say, about once-proud Royal Bank of Scotland (NYSE: RBS) (Cramer's Take), some ratings downgrade, and boom, Britain is hit for a full percentage point decline. Then, as if by magic, it rallies almost back to unchanged as the shorts don't want to be hung before worldwide rate cuts.

I always thought this behavior was curious because I don't know of a short-seller who thinks that intervention even matters, or says it doesn't matter, for that matter!

In fact, though I think it can matter not so much to our country, it does matter to those countries in Europe that really would be doing well if money weren't so tight. Our markets lost a ready source of cash and business when Europe went away, particularly upon the disappearance of China from the world's economies.

Now, of all of the new measures I like hearing, the commercial paper intervention is intriguing as the government substitutes itself for buyers for this important funding. But again, I come back to the notion that we can't really be two sides of everything, can we?

Can we really have the Fed define all markets? Look, I get the real estate market because the risk there is that the Fed owns the house and sits on it or owns the CDO until it works its way out of being a CDO.

But we can't restore confidence in commercial paper until we restore confidence that solvency and seizing are off the table. I thought it unconscionable that the FDIC didn't come out Monday and say, "We are not going to seize Sovereign (NYSE: SOV) (Cramer's Take) or Nat City (NYSE: NCC) (Cramer's Take) or anyone else for that matter, because we are going to let TARP take care of it."

Until we get seizures off the table, everything is going to be Lehman Brothers or Fannie (NYSE: FNM) (Cramer's Take) and Freddie (NYSE: FRE) (Cramer's Take) preferred and Washington Mutual debt. That's the way it is; there was too much in the system and it is still not worked through.

Same with the hedge fund redemptions. There is no magic amount there that finishes and the world goes on. Should the Fed take the other side of dying hedge funds?

What are the real endgames here? We cut rates, restore some confidence, provide some short-term funding until long-term funding can take its place wherever that is feasible and we begin to rebuild.

Or we crater the whole thing and start over.

What's the latter look like? OK, take Iceland. The Iceland banks, which all seem insolvent, own a huge amount of real estate. You seize, have the banks go belly-up, the real estate is auctioned off at dramatically lower prices and you start all over again.

Big annihilations, but then the system is built on less debt.

Tell me that isn't what you are thinking could happen at, say, a Ford (NYSE: F) (Cramer's Take) or a GM (NYSE: GM) (Cramer's Take), now that it looks like Toyota (NYSE: TM) (Cramer's Take) is in trouble and Volkswagen is the world's largest automaker by market cap.

So, those are the two solutions. In the interim, it is all short and cover and squeeze and sell until this miserable period finds a level where the selling exhausts itself and I do not believe it found that level Monday. All it did was find the level where the hedge funds had raised enough cash for that day's margin calls and the short-sellers feared leaving a tremendous trading profit on the table.

Random musings: Congrats to Dan Dicker for advancing the CDS plan that caused CME (NYSE: CME) (Cramer's Take) to rally. I think it's great because the CME has enough political clout -- unlike the NYSE -- to get something done. Doug's got a bead on the hedge fund hedge game that I think is playing out. ... There is still vast confusion on a point that I have made endlessly here -- things are too dicey to let short-term money run on this market. We know that stocks can come back, but I am now using a 2000-2002 model, Nazz-style, to come to grips with the tape where solvency of many companies was on the line.

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RELATED LINKS:
Fed Mulls Plan to Buy Commercial Paper
Asia Stocks End Mixed On Australia Rate Cut
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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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Schaeffer's Andrea Kramer takes a look at unusual option activity on the Street

Colleen S. King takes a look at news on the Street before the market open.

Colleen S. King takes a look at news on the Street after the market closes

Colleen S. King takes a look at news on the Street before the market open.

Daily Aid 4: Fannie, Freddie, and Student Loans Student Financial Aid News The big news over the weekend, besides lender My Rich Uncle ceasing to make loans, is the federal bailout of Fannie Mae (ticker: FNM) and Freddie Mac (ticker: FRE), the government sponsored mortgage companies. While this isn’t directly related to student loans, the bailout may [...]