Stewart Vs. Cramer - Media ACCOUNTABILITY

Jim Cramer, arguably CNBC's loudest and most famous stock market commentator, was interviewed on Thursday, March 12th by savvy late night comedy news show host Jon Stewart. In the surprisingly edgy and riveting fifteen minute Daily Show segment, Stewart takes a somewhat uncharacteristically somber approach and demands accountability from the Wall Street media and more specifically, CNBC, the #1 U.S. financial news television network. Mr. Stewart seems especially focused on discussing what he (and perhaps many others) perceived as the TV station's collective 'under-reporting' of the very serious and complex financial system issues that ultimately triggered the stock market's collapse in 2008. Stewart's anger appears genuine and PALPABLE...I repeat, this is riveting stuff :


Part 1:

The Daily Show With Jon Stewart	M - Th 11p / 10c
Jim Cramer Pt. 1
comedycentral.com
Daily Show Full Episodes Important Things w/ Demetri Martin Political Humor

Part 2:

The Daily Show With Jon Stewart	M - Th 11p / 10c
Jim Cramer Pt. 2
comedycentral.com
Daily Show Full Episodes Important Things w/ Demetri Martin Political Humor

Part 3:

The Daily Show With Jon Stewart	M - Th 11p / 10c
Jim Cramer Pt. 3
comedycentral.com
Daily Show Full Episodes Important Things w/ Demetri Martin Political Humor

Data Courtesy: Comedy Central + The Daily Show

IBM + SUN - An $8 Billion Server-OPOLY ?

According to the Wall Street Journal, 'tech conglomerate' International Business Machines Corp. (IBM) is in talks to purchase storage systems industry peer Sun Microsystems (JAVA). While terms are still being negotiated, rumors suggest IBM is willing to pay up to $8 Billion in cash to acquire its one-time rival. If true, the acquisition would easily surpass the company's $5 Billion purchase of Cognos in January 2008 to become the most expensive deal in IBM's near 100 year corporate history (FYI, Sun currently has about $2.5 Billion in cash sitting on its balance sheet so the real/net cost of the deal to IBM would probably be somewhere around $5.5 Billion).

With the acquisition of Santa Clara, California-based Sun Micro, IBM would immediately be adding some 35,000 new employees and about $13 Billion to annual company sales. More importantly though, the purchase of Sun would allow #1 IBM to significantly increase its lead in worldwide server marketshare over #2 Hewlett Packard (HPQ). Per the below pie chart, IBM's server marketshare would increase by 10.1% and total 42% as a result of the acquisition...meanwhile, HP's share number holds steady at 29.5%. Scary as that might be, perhaps an even more daunting prospect for the rest of the server industry would be the potential $8 Billion deal's impact on IBM's worldwide UNIX server marketshare. If the deal were to go through and of course pass regulatory approval then IBM's UNIX share would instantly soar an enormous 28 points to a MONOPOLISTIC 65.3% !




Per the below link, IBM appears interested in doing the deal for several reasons, including:


1.) INSTANT MARKETSHARE - IBM will immediately gain 10 points of marketshare in overall worldwide server sales


2.) 'HOT' END USERS - Many of Sun's customers operate in the telecommunication and government sectors of the economy...two end user industries IBM is explicitly targeting and focused on growing during today's relatively tepid macroeconomic backdrop


3.) LEVERAGE IBM's CORE S + S - IBM will attempt to sell its carefully-crafted, higher margin bundles of server-oriented Software + Services to its newly acquired storage system customers


4.) LEVERAGE SUN's CORE R + D - IBM will seek to leverage the fruits of SUN's widely regarded Research + Development efforts (JAVA, Solaris, SQL, solid state storage drives, advancements in cloud computing, etc.) into its own existing and future products/solutions


online.wsj.com/article/SB123742081606578475.html


Data Courtesy: The Wall Street Journal
Full Disclosure: I own shares of IBM.

Moody's List Of AAA Credit Corporations

Today's Standard & Poors loooooong anticipated downgrade announcement of General Electric's credit rating from AAA to AA+ (the next level down) most likely portends that Moody's Corp (MCO) will be quickly following suit with its own credit ratings downgrade of GE. If Moody's indeed decides to downgrade GE then there will only be 4 companies operating in the S+P 500 UNIVERSE today commanding Moody's HIGHEST Level Credit Rating of AAA:


* Automatic Data Processing (ADP) - a $18 Billion marketcap financial firm


* Berkshire Hathaway (BRKA) - a $130 Billion mcap insurance conglomerate


* Exxon Mobil (XOM) - a $330 Billion mcap oil and gas company


* Microsoft (MSFT) - a $150 Billion mcap technology company


* TIAA-CREF (private...not in the S+P 500) - a not-for-profit retirement organization for 3 million people


FYI, A triple A credit rating is desirable as it essentially allows companies to borrow money at the cheapest interest rates possible (allowing said company to maximize potential returns from that borrowed money). General Electric held Standard & Poor's AAA credit rating since 1956. Per its most recent annual company filings with the SEC, and under the terms of its existing debt instrument guarantees and covenants, GE would have to post additional collateral on its long term debt if its credit ratings were to be cut four more levels to below AA-/Aa3.




bloomberg.com/apps/news?pid=20601087&sid


Data Courtesy: Bloomberg
Full Disclosure: I own shares of GE.

WELCH - Obama Needs To 'CHANGE' + Focus

Highly regarded former General Electric CEO and New York Times best selling author, Jack Welch, was interviewed this morning in an interesting economy-centric segment on MSNBC's Morning Joe. Mr. Welch served as Chief Executive Officer of GE from 1981 through 2001 and under his stewardship, the company increased its sales by some 380% (from revenues of $27 Billion in 1980 to $130 Billion in 2000) !

In the below three minute clip, the highly accomplished and often dynamic Mr. Welch shares some of his candid, proprietary, 'STRAIGHT FROM THE GUT' thoughts on President Obama and the current timetable of his ambitious agenda (FYI, President Obama's 2009 budget currently forecasts $3.2 TRILLION of government spending). Worth the watch:




Data Courtesy: MSNBC + Youtube

GE's $50 B JOKER-Like Real Estate Exposure

Since April 4th, 2008, the stock of U.S-based 'super conglomerate' General Electric (GE) has been in an absolutely vicious, nauseating downtrend falling from $37.56 a share to today's difficult-to-fathom price of just $7.06/share (FYI, please note the fitting JOKER-like portrait of GE CEO Jeff Immelt above). GE, a once near $600 Billion GOLIATH of a company, has been crushed by the simultaneous burstings of the REAL ESTATE and CREDIT asset bubbles and seen its market value shrink a jaw-dropping 80% over the past 11 months!

The reason for the steep, GUT-wrenching decline??? The vast amount of Joker-like UNCERTAINTY surrounding the value of General Electric's ENORMOUS and OPAQUE
$650 Billion GE Capital business, and more specifically, its $50 Billion plus global REAL ESTATE portfolio. For some perspective, the size of GE Capital is roughly equivalent to the size of the U.S's 6th largest bank.

Further complicating matters is the Joker-like accounting methodology GE Capital currently uses to value its holdings. The world's largest maker of jet engines and power turbines told shareholders last week that only 2% of GE Capital Corp's $650 Billion portfolio of assets are being valued today based on current market prices (i.e: marked to market). According to CreditSights Inc, an independent bond research firm based out of New York, the remaining 98% or some $624 Billion of GE Capital assets (most of which are loans or senior secured debt tied to assets like aircraft) are being valued at levels that General Electric established many years ago! Per the bottom referenced Bloomberg link, here are some quick facts related to GE Capital's dubious real estate unit, GE Real Estate :


* GE Capital generated $8.6 Billion or 48% of General Electric's $18.1 Billion of profits in 2008...that compares with about 20% in the late 1980's...General Electric expects GE Capital to contribute $5 Billion of profits in 2009


* GE Real Estate profits fell by $1.1 Billion in 2008 (vs. 2007)...On January 23rd, 2009, GE stated that GE Real Estate will take more than $4 Billion in pretax losses and post an overall loss of about $500 million in 2009


* According to SEC regulatory filings, General Electric's commercial real estate business consists of both property and real estate loans. The company has stakes in or financing on 8,000 different properties scattered in 2,600 cities with an average investment of less than $10 million


* According to Keith Sherin, General Electric's Chief Financial Officer, GE has about $50 Billion of commercial real estate loans and $2.9 Billion of commercial mortgage-backed securities


* GE takes a conservative (...ironic that shareholders should actually read this word as 'DANGEROUS'...) approach in terms of accounting for the value of its real estate holdings as the company's 'mark to market' methodology is similar to the accounting used by real estate investment trusts. GE accounts for its property holdings at the price they paid for them and then chooses to depreciate the values over time rather than actually marking the assets to their current market values. According to GE spokesman Russell Wilkerson, GE's property portfolio currently generates about $1.7 Billion in profits while the company depreciates the assets by about $1.1 Billion per year. GE is currently forecasting loan reserves of (only) 2.5%.


* GE's property includes office buildings, warehouses and apartments...about 71% of GE's properties are located outside of the U.S., primarily in Europe, Asia, Canada and Mexico


* GE owns about $22 Billion of real estate assets in Europe...about 1/3 of which consists of real estate debt and non-performing loans


* In November 2007, GE purchased $2.8 Billion of commercial real estate loans from England's Bradford & Bingley. According to Investment Property Databank, U.K. commercial property values had fallen only 3% from their July 2007 peak at the time of GE's purchase...now prices have fallen 37% from that peak


* In 2006, GE purchased Arden Realty Inc. for $3.2 Billion...at the time, Arden was the largest publicly traded land owner in Southern California


bloomberg.com/apps/news?pid=20601109&sid=ary2g22


Data Courtesy: Bloomberg

IBM's Worldwide IT Labor Force At A Glance

* IBM is the largest Information Technology employer in the United States

* As of year end 2008, IBM employed 398,445 people worldwide including 115,000 people (or 29%) in the United States

* As reported by the company last week, IBM now employs a total of 113,000 jobs in the B.R.I.C. countries (Brazil, Russia, India and China)

* Per IBM's 2007 Annual Shareholders Report (double-click for a larger view):



http://www.cnbc.com/id/29546391/page/2/


Data Courtesy: CNBC + IBM's 2007 Annual Report
Full Disclosure: I own shares of IBM.

14 Million 'UNDERWATER' U.S. Homeowners

According to Moody's Economy.com, an estimated 13.6 million U.S. borrowers ended 2008 UNDERWATER on their home mortgages. FYI, 'underwater' borrowers refers to those individuals being in the difficult and unfortunate position of currently owing more on the mortgage of their property than the actual underlying value/WORTH of the property itself.


Per the above Wall Street Journal chart, this figure is projected to rise in 2009 and is up from the 11.8 million homeowners that were underwater at the end of 3Q08. Lastly, please note that as recently as 2Q07, the number of underwater homeowners was only 4 million. Since then (...ENTER the July 2007 seismic collapse of the U.S. SUBPRIME mortgage market...), this figure has exploded upwards by nearly 10 million or 250% !


Data Courtesy: Economy.com + The Wall Street Journal

PENSIONS - Another TRILLION $ BailOUT ?

According to the Center for Retirement Research at Boston College, PUBLIC PENSION plans in the United States are UNDERfunded by some $1 TRILLION! Per the disconcerting Bloomberg link below:


* By LAW, states must guarantee ALL public pension fund debts


* As of December 16, 2008, public pensions in the U.S. had Total Liabilities of about $2.9 TRILLION vs. Total Assets equalling approx only $2 TRILLION...a 30% shortfall !


* In terms of Asset Mix, public pension funds typically place 60% of their assets in STOCKS, 30% in bonds/fixed income, 5% in real estate and the remaining 5% in 'riskier assets' such as hedge funds or commodities


* A shortfall of $1 TRILLION has been able to occur/go 'unchecked' due to pension funds being allowed to OVERstate expected market returns on their non-bond pension assets


* According to Bloomberg, actuaries consistently allow public pension funds to report artificially high expected rates of return on their non-bond assets - most often 8.0% and as much as 8.75% (fyi, that's more than the 6.9% billionaire investor Warren Buffet reports/assumes for Berkshire Hathaway Inc.'s pension fund)


* For perspective's sake, some rather disturbing, current real world Examples:

- The U.S.'s Largest Public Pension fund, California Public Employees' Retirement System (CALPERS), has been expecting/assuming an annual market return of 7.75% for the past 8 years (and 8% before that)...meanwhile, CALPERS real annual return from the stock market during December 1998-December 2008 has only been 3.32% !

- The Teacher Retirement System of Texas, the 7th largest U.S. public pension fund, reports each year that its expected/assumed market rate of return is 8%...meanwhile, the pension's real annual return from the stock market during the past 10 years has been only 2.6% !


bloomberg.com/apps/news?pid=20601109&sid


Data Courtesy: Bloomberg