Green Knights and Great Depressions: Sir Thain and the Green Knight

Will John Thain, newly installed leader of Merrill Lynch, smite the subprime woes that brought down predecessor Stan O'Neal? Or will Thain, a year hence, find those same subprime woes "all clad in green garments" having returned with a vengeance to claim the gallant CEO's head?

The pundits had initially suspected that Thain would be headed to Citigroup, with Larry Fink, founder and head honcho of BlackRock, taking the top position at Merrill (Merrill partly owns BlackRock). But when the dust settled it was Merrill Lynch that got its man and Citigroup who was left to continue its quest for new leadership.

Thain has said that bringing in senior managers for the sales and trading division is among his top priorities. News of Thain's appointment was generally treated positively by traders, who acknowledged that while Thain has little experience in the brokerage business, he has a wealth of experience with mortgage instruments, having cut his teeth as a mortgage trader at Goldman Sachs years ago.

Merrill Lynch (MER@MER | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 4.

Citigroup (C@C | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 6

Goldman Sachs (GS@GS | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 5

Wells Fargo and the Great Depression

When politicians need to get attention, they often resort to ill-founded references to Hitler and the Nazis. When banks, apparently like Wells Fargo, want to get attention, a few remarks about the Great Depression tend to do the trick.

Was Wells Fargo CEO and President John Stumpf trying to have it both ways -- or were his remarks little more than some veiled boasting? Stumpf announced at a Merrill Lynch Banking and Financial Services conference that while the housing market was in its worst decline since the Great Depression, Wells Fargo was likely to be among the financial institutions least effected by it. Stumpf suggests this is because Wells Fargo had very little exposure to the CDO (collateral debt obligations) market, where a great many of the massive losses that other financial institutions are experiencing are coming from.

Wells Fargo (WFC@WFC | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 6.

Et tu, E-Trade?

E-Trade found itself scrambling to rebut a report from a Citigroup analyst that suggested, among other things, that subprime-related losses and the credit crunch had put the online brokerage at a 15% risk of bankruptcy. The analyst, Prashant Bhatia, noted that such losses could panic E-Trade's customer base into a run on the brokerage, possibly resulting in losses of as much as $5 billion.

But as far as E-Trade CEO Mitch Caplan was concerned, the only panic was the one coming from Citigroup. Calling talk of bankruptcy "absolutely irresponsible", Caplan defended both E-Trade's retail business as well as the company's capital base. But it was not until rumors of a potential takeover began to surface later in the week before investors decided to step in and begin nibbling at shares that have suffered massive losses since June, when the stock was trading above $25 per share.

E-Trade (ETFC@ETFC | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 2

Stocks in the News

As usual, the trials and tribulations of financial companies kept those stocks in the news. You will find plenty of them in our list of stocks that made the headlines this week along with retailers such as Wal-Mart and JC Penny, and technology names including IBM, Corning and Cisco Systems.

International Business Machines (IBM@IBM | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 8. Paid a 9.5% premium on the share price as it acquired business intelligence software specialist, Cognos. The deal is the largest of its kind in the history of the tech firm known as Big Blue.

Fannie Mae (FNM@FNM | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 4. Fell to its lowest levels in decades this week as investors became even more concerned about the way the company was accounting for its losses. Shares of Fannie Mae lost some 20% this week alone.

Corning (GLW@GLW | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 5. Raised its outlook for the fourth quarter of 2007 in terms of sales and profit forecasts due in large part to increased sales of its LCD (liquid crystal display) glass for use in flat-screen televisions.

Starbucks (SBUX@SBUX | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 8. Reported a boost in quarterly earnings, but warned of waning demand in 2008 and the continued problem of rising raw materials costs such as milk.

Wal-Mart (WMT@WMT | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 7. Buoyed investor sentiments earlier in the week with reported higher-than-expected Q3 profits. Wal-Mart also raised its earnings forecast for the full year.

Cisco Systems (CSCO@CSCO | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 6. Announced a $10 billion increase in its stock buyback program. This move by the board of directors of Cisco Systems brings the total amount of capital committed to the buyback program to $62 billion.

JC Penny (JCP@JCP | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 5. Reported disappointing Q3 net income down more than 9%. JC Penny also cut its forecast for the fourth quarter.

What to Look for Next Week

Among the items that investors will be paying attention to in the holiday-shortened week to come are the following:

Tuesday: Housing Starts. FOMC Minutes.

Wednesday: Initial Jobless Claims. Leading Indicators. University of Michigan Consumer Sentiment. Crude Inventories

Thursday: Thanksgiving Holiday. Stock and Bond Markets closed.

Best Performing Stocks (also with PR 8-10) Of the Past Five Days

Here are some of the best performing, high PowerRatings (for Investors) rated stocks of the past five days. This week, all of the listed stocks have PowerRatings (for Investors) ratings of 9 or 10.

Berkshire Hathaway (BRKA@BRKA | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 10. PowerRatings (for Industries) rating: 7.

Washington Group International (WNG@WNG | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 10. PowerRatings (for Industries) rating: 2.

Lifecell Corporation (LIFC@LIFC | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 9. PowerRatings (for Industries) rating: 2.

Deutsche Telekom Ag (DT@DT | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 9. PowerRatings (for Industries) rating: 2.

ConAgra Foods (CAG@CAG | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 9. PowerRatings (for Industries) rating: 1.

Worst Performing Stocks (also with PR 1-3) Of the Past Five Days

Here are some of the worst performing, low PowerRatings (for Investors) rated stocks of the past five days. This week, all of the listed stocks have PowerRatings (for Investors) ratings of 1 or 2.

Fuel Tech, Inc. (FTEK@FTEK | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 1. PowerRatings (for Industries) rating: 5.

Nastech Pharmaceuticals (NSTK@NSTK | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 1. PowerRatings (for Industries) rating: 2.

Buckeye Technologies, Inc. (BKI@BKI | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 2. PowerRatings (for Industries) rating: 9.

E Trade Financial Corporation (ETFC@ETFC | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 2. PowerRatings (for Industries) rating: 5.

Force Protection, Inc. (FRPT@FRPT | Quote | Chart | News | PowerRating). PowerRatings (for Investors) rating: 2. PowerRatings (for Industries) rating: 5.

David Penn is Senior Editor at PowerRatings.net