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At a hedge fund idea dinner I attended last night, many of the participants seem focused on what they feel is the next leg of the credit problem that will manifest itself: commercial real estate.
After the close yesterday, RBC Capital put out a note essentially echoing that concern: "Next Credit Shoe to Drop on Banking Industry: We believe commercial and industrial loans (C&I), commercial real estate and non-resi construction loans will be the next credit problems for the banking industry brought on by the weakening in the US and Global economies."
Oil is at a fresh 5-month low, and airlines are trading up in the mid-single digits on light volume. OPEC is meeting in Vienna. European banks like UBS[UBS
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], Deutsche Bank,[DB
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] and HSBC[HBC
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] are also trading up.
Elsewhere:
1) As expected several banks announced impairment charges related to investments in Fannie Mae and Freddie Mac preferred securities.
a) Wells Fargo [WFC
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] said its charge relates to $480 million of securities it holds for sale. Wells said the preferreds now trade at 5 to 10 percent of face value. Oppenheimer's Meredith Whitney lowered her third quarter estimates by 9 cents to 17 cents.
b) Sovereign Bank,[SOV
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] the second-largest savings and loan, said it held $622.6 m of Fannie and Freddie preferred stock.
2) BHP Billiton [BHP
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]said the slowing world economy would likely cause commodities to continue to decline in price, but the decline would not their proposed buyout of Rio Tinto.
3) Proctor & Gamble[PG
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] downgraded at Merrill Lynch, saying they can't just the premium the stock trades at relative to its peers.
4) CapitalSource, [CSE
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]a REIT that specializes in commercial finance and residential mortgages, down 9 percent pre-open as they cut their dividend 92 percent.
5) Forrester Research says that 43 percent of large businesses cut their overall tech budget this year.
Buy, Sell, Hold? |
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CNBC's Names in the News:
Freddie Mac [FRE
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Fannie Mae [FNM
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