The AFLAC Scam

Credit Worries???

Today, Merrill Lynch upgraded shares of JPM "primarily reflecting a better consumer credit outlook" than they had previously expected.

I'll say again, there does not appear to be any fallout from the subprime mortgage mess on other areas of consumer credit. This is yet another positive, albeit indirect data point for CCRT.

Ugly Housing Data

Wow, the Feb 2006 data is even worse than the lowest estimates.

New house sales declined at a -3.9% in Feb to an 848,000 pace. This is the slowest rate since June 2000. The drop-off for sales and increasing starts has boosted inventories. At these levels, it would take more than one year to unwind the excessive stock of homes. Completed unsold homes are up 43.2% y/y and the median price is down -1.3%.

Non-Mortgage Consumer Debt Looks Alright

Company survey reports point to slightly stronger credit card balances over the past few weeks without an increase in delinquencies. There still does not appear to be any spillover from the subprime mortgage problems into other areas of consumer credit because the job market is strong. This is obviously good news for CCRT and other industry participants like COF.

GOOG

I've been picking up shares of GOOG in the 440's and there was a very nice short-term technical buy signal two days ago. I like it over the intermediate term as well.

Cramer Discusses Illegal Stock Manipulation

I'm very surprised that Jim Cramer would admit to manipulation. This guy has a major god complex. See here:

http://www.youtube.com/watch?v=708wDFX28lc

Bear Stearns Likes CCRT

CompuCredit announced that it agreed on March 13 to purchased 2.884 million shares in a private transaction. This transaction accounts for just over a quarter of the company’s 10 million share repurchase authorization and will reduce shares outstanding by about 5.7%. Assuming a purchase price of $27 per share, we estimate that the transaction reduces the company's previously disclosed available liquidity by about 11%. As a result of the reduction in the share count and despite some slightly more conservative assumptions regarding provisions and revenue growth we are increasing our EPS estimates for 2007 slightly. We had estimated EPS for 2007 of $4.11 per share, slightly above management’s guidance of over $4.00 per share.

Given management’s guidance that earnings are expected to be significantly higher in the second half of the year than in the first half and the risk that earnings may not increase as currently expected, we are assuming that only a portion of the benefit from repurchasing shares will be reflected in EPS. The company appears to have taken advantage of recent stock weakness and the apparent need of John Devaney (CEO of United Capital Asset Management) or his company to sell CCRT shares they owned. It appears that CCRT may have paid about $27 per share for the stock as CCRT shares traded between $25.98 and $27.87 on March 13th and between $25.52 and $27.12 on March 14th. The company will disclose the actual purchase price when it releases Q1 results in early May or when it files its Q1 10Q. Following the repurchase of the 2.88 million shares, the company still has an authorization in place to repurchase 7,115,837 additional shares. We haven't assumed any additional share repurchases as the company hadn't repurchased any since the initial authorization in May, 2006.

We view the company's decision to use a small portion of its excess liquidity to opportunistically repurchase shares positively. The company has indicated it has been examining potential investments but hasn't announced any so far this quarter. Few investments are likely to match the returns from share repurchases at these depressed levels. We think few investors believed the company would use its excess capital to purchase shares, an action which should be seen demonstrating management’s focus on generating attractive returns for shareholders.

Credit quality could deteriorate as the company’s portfolio seasons, but the current economic environment remains very positive. Low unemployment should continue to provide a benefit. Although investors appear concerned about subprime mortgage weakness, only about one third of CCRT’s customers are homeowners and at this point sub-prime mortgage industry problems are largely attributable to poor underwriting practices in 2006 and a lack of liquidity for some lenders. CompuCredit’s decision in Q3 to no longer accrue interest and fees on accounts 90+ days delinquent should have a diminishing effect on revenues and chargeoffs after Q1 after initially limiting revenue growth while still contributing to chargeoffs.

Earnings are still expected to be depressed during the first half of the year by heavy marketing spending (we estimate $150 million for the year, $90 million in the first half). EPS are expected to rebound sharply during the second half of 2007; management’s guidance is $3.00 per share in Q3 and Q4. The delay in earning growth may limit stock price appreciation, but if the company is able to finally deliver EPS of at least $4.00 per share as promised (and exit 2006 at an annual run rate in excess of $5.00 per share), we believe CCRT shares could rise beyond the P/E multiple of roughly 12x implied by our price target. We are maintaining our year end price target of $48 and our Outperform rating.

More on CCRT Share Repurchase

It appears that CCRT bought back shares from a large distressed seller. See this link:

http://www.nypost.com/seven/03152007/business/subprime_lender_bet_is_68m_loser_business_roddy_boyd.htm

Here's a link to background information on Devaney:

http://db.riskwaters.com/public/showPage.html?page=195221

and here's the SEC filing link:

http://biz.yahoo.com/e/070319/ccrt8-k.html

Very good move by CCRT management IMO!

FMD Looks Juicy

FMD is also showing a trading buy. I love the fundamentals and cheap, cheap, cheap valuation too!

CCRT Upgrade

There is another upgrade of CCRT this morning from Matrix. I'm also seeing comments that CCRT should not be affected by the subprime mortgage contagion. This stock has fallen 10 points on credit/subprime fear alone IMO, but is now acting better. On a technical basis my chart shows a trading buy, and on a valuation basis it still looks dirt cheap to me.

CCRT Share Repurchase

CCRT repurchased about 2.9 million shares on March 13th in a private transaction. Management continues to slowly but surely use its capital in shareholder friendly ways. I also noticed that Wachovia upgraded the stock the other day based on valuation, and this is the firm that thinks that credit problems will cause the company to only earn EPS of ~$3.00 this year instead of $4.00. Yeah, that's how crazy cheap this stock has gotten based on the "anything that operates in subprime is bad" hysteria. The company still has ~$600 million of excess liquidity to do accretive deals and share repurchases.

CCRT and FMD

CCRT is now trading like the company is going to earn about $3.00 this year instead of $4.00. Investors are trashing everything that is subprime, period. I can understand the thrashing of subprime mortgage lenders where defaults are soaring, but it's much easier to make a minimum credit card payment than it is a mortgage payment. So far, there is no evidence that the fallout from subprime mortgages is spreading to other areas of consumer credit, but there is a lot of FEAR that it will. I'm sticking with CCRT, but will be more cognizant of the credit cycle in the future because I hate riding stocks down.

I purchased more FMD today. The stock is dirt cheap and in an excellent buying position IMO.

Still Bearish On Oil

Check out these comments from my favorite analyst:

"*Our analysis of China Customs' data released today suggests year-over-year oil demand growth may be 75% BELOW our forecast for the Jan-Feb period. We're not sure how many market watchers/analysts will come to that same conclusion given most writings center on just monthly import changes.

*One oil trade publication put February's non-OPEC output about 2 mm b/d above year-ago levels. This delta is well above our own forecast. Such reports normally precede the IEA figures - which are due out tomorrow."

Wow, talk about bearish fundamentals! Maybe we will see a big drop in futures prices tomorrow?! Hopefully this report will make it clear to speculators that demand is stagnating and non-OPEC production is extremely healthy, contrary to the peak oil kooks.

Yen Carry Trade

Navellier has a very good article about the Yen carry trade - how it works (borrow Yen at 0.5% and buy Treasuries at 5%), ramifications (weakens the Yen and helps Japanese exports), etc. The link is here:

http://www.navellier.com/commentary/articles.aspx

John Inch on ITT

"ITT, which was once a sprawling conglomerate, has been on a dismantlement path since the 1980s. Current CEO Steve Loranger has continued this trend despite his aspiration to build a premier multi-industry company. Loranger has divested ~10% of ITT over the past ~2 years.

We favorably view ITT's leading defense and water/wastewater businesses and believe they could garner premiums to average comparable transactions. In turn, we calculate this could yield up to ~$100 per ITT share or more.

We do not expect Steve Loranger to pursue dismantlement in the next 1-2 years. However, with larger (unrelated) acquisitions likely off the table, the dismantlement writing may already be on the wall. Moreover, considering current elevated defense industry valuation multiples, the dismantlement "window" may not remain open for an extended period. At minimum, Steve Loranger could face increasing pressure to realize ITT's elevated valuation potential at a more rapid pace given the substantial premium he could realize by dismantling ITT."

This sounds very appealing with the stock trading at $60.

January 2007 Oil Demand

Global oil demand growth was very weak in January of 2007, rising just ~100K million barrels per day. This may shock you, but Non-OPEC supply growth alone rose ~300k million barrels per day in January 2007. Yes, Non-OPEC supply growth alone is growing faster than global demand. That's what eventually happens in the free market when oil prices soar to ridiculous levels and attracts a ton of investment in new oil-finding equipment. OPEC will have to continue cutting production if they want to try and protect the price which will result in them losing more and more market share/power. OPEC may even lose some members who don't want to cut back which will result in even higher production. Do you see how this is bearish for oil prices? You do? Well, the market sure doesn't because oil prices are still at $60 instead of $40.

I will be on vacation through next Wednesday so I won't be updating for at least a few days. Try and have a good week without me.

Intelli-Timer

Using the market-timing system from Intelli-Timer, my return for the year came in at less than 2%, and I wondered how Intelli-Timer was going to update its Web site, and continue selling its system, after such a dismal performance......Now we have the answer: My year never happened.....With no explanation, the Intelli-Timer Web site has completely revised its historical performance information......For example, the system that I followed called for one trade between June 27 and July 26, 2006, while the new "historical" performance chart on the Intelli-Timer Web site says that I made nine [!] trades during that period (my actual loss for the month was 5.66%, while Intelli-Timer says that I gained 4.5%)......Continuing with this bizarro world, the period from August 27 through September 26 was one of my best months, with zero trades and a gain of 6.35%......But no, says the Intelli-Timer Web site, based on "historical" results someone using their system would have made six trades and lost 0.3% for the month......For the entire year that I used the program, Intelli-Timer says that its system generated a return of 47%, which would be laughable were it not so brazen and infuriating......What's going on here?.....Faced with a system that was failing, it looks like Intelli-Timer has simply backtested a new system that produces dramatically better -- and totally fictitious -- results.....And now those backtested results are presented as the "historical" numbers, while the actual (and dismal) results, like mine, have vanished without a trace.....Can they really do this kind of thing? Is it legal?......The company that runs Intelli-Timer isn't registered with the SEC as an investment adviser, so they aren't subject to federal securities laws......In other words, it's a classic case of caveat emptor....As far as I can tell, there is one acknowledgment that "some information" on the Intelli-Timer Web site "is the results [sic] of back-testing," and no doubt the Intelli-Timer folks would point to that "disclosure" if they were ever challenged about the honesty of their performance presentation.....So what can I do?.....I can warn FundAlarm readers not to use the Intelli-Timer system, although I suspect that such a warning isn't really necessary......If you are considering any other market-timing system, I can suggest that you be keenly aware of the difference between real and back-tested results, and make sure that you base your investment decision on reality rather than fiction......Finally, since this item will soon reside in the FundAlarm archive, and some prospective Intelli-Timer investor may come across it months or years from now while searching for comments about Intelli-Timer, I can provide a future public service:

Source: FundAlarm