Analysts Flip-Flop, Barclays Looks East
Wall Street analysts are reversing weeks-old rosy advice on banking stocks. Barclays is raising almost $9 billion from Asia and the Middle East. And city living is becoming grudgingly attractive to gas-hit exurbanites.
NEWS AT A GLANCE
On Wall Street, analysts backtrack
Wall Street analysts are walking back, or downright reversing, advice from mere weeks ago to buy bank stocks because the worst of the credit crisis is over. Goldman Sachs said a May 5 recommendation to buy financial stocks was “clearly wrong,” Barron’s called one of its suggestions a “mistake,” and Merrill Lynch changed its week-old “buy” rating on Lehman Brothers to “neutral.” Some investors applauded the courage of the flip-flopping analysts, but others are less forgiving. “Analysts probably have less credibility than they did 10 years ago,” said author and finance teacher Charles Geisst. “This has just eroded it a little bit more.” (Bloomberg)
Barclays looks to raise $8.9 billion
British bank Barclays said it will raise $8.9 billion by selling stock to investors mostly in the Middle East and Asia to replace capital depleted by credit and mortgage losses. The investors include Japan’s Sumitomo Mitsui Banking and institutional investors in Qatar, China, and Singapore. (Reuters) Barclays will put about half the new money toward replenishing its capital reserves and use the other half for “business opportunities out there,” including acquisitions, said CEO John Varley. Barclays shares rose more than 5 percent early today. “We expect the longer-term growth prospects of the company to be higher than its domestic U.K. peers,” said Merrill Lynch analyst John-Paul Crutchley. (Bloomberg)
Illinois readies Countrywide suit
The Illinois attorney general is suing mortgage giant Countrywide Financial and its CEO, Angelo Mozilo, for allegedly defrauding state homeowners through deceptive lending. The civil lawsuit seeks monetary damages and a court mandate for Countryside to rewrite or rescind all questionable loans it sold since 2004. (The New York Times) Also, Countrywide shareholders vote today on Bank of America’s takeover offer. The all-stock deal, worth about $4 billion in January, is now worth $2.8 billion due to BoA’s declining share price. Still, shareholders are expected to approve the buyout. “Now Countrywide’s problems become BofA’s problems.” said analyst Paul J. Miller Jr. at Friedman, Billings, Ramsey & Co. (AP in BusinessWeek.com)
The Green Acres pinch
Life in the suburbs and exurbs is getting less idyllic as rising energy costs make everything from heating and cooling the house to driving to the store, job, and school a lot more expensive. And as people decide that the increasing costs are a permanent fixture, rather than a blip, city living becomes a grudgingly attractive alternative to the bucolic countryside. “Before it was ‘we spend too much time driving,’” said Phil Boyle, who lives in a distant Denver suburb. “Now, it’s ‘we spend too much time and money driving.’” According to Moody’s, housing prices outside U.S. metropolitan areas have fallen faster and farther than the prices within them. This could mark a shift in the decades-long migration to the suburbs. (The New York Times)
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