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Almost every corporate executive will tell you that revenue and profits are being hindered by the weak economy.
For the most part, these comments are legitimate.
However, UBS's food and beverage analyst Kaumil Gajrawala thinks some managers are using the weak economy to hide internal failures. He addresses the issue in his Coca-Cola Enterprises report:
Much has been made regarding the deteriorating health of the consumer. While we are watching the issue closely, for the time being, we believe that companies that are mis-executing are using the macro environment partially as an excuse.
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The hedge fund Tudor Investment's weather analyst sent around a report yesterday that said the chances of a hurricane of disastrous proportions were 35%.
Chances that it will be less serious, costing the city a few billion dollars in damage, he said were 75%.
Today he updated his prediction to say it looks like slightly less than what we expected. But "stay on guard."
The worst case scenario the analyst predicted, according to a report seen by Business Insider, is a hurricane that costs the area it hits, which includes New York, $40 billion+ in damage. The power could be out for up to a week.
He compared it to the hurricane that hit New York in 1821, when, according to NYMag, "in less than an hour a thirteen-foot storm surge deluged the city, swallowing everything below Canal Street. The Battery was particularly devastated, docks were destroyed, and ships were swept onto streets. Further uptown, a bridge that connected Harlem to Ward’s Island was washed away and somewhere in Chinatown, the East River likely met the Hudson."
Cary Mock, an associate geography professor at the University of South Carolina, told Reuters the hurricane was "probably a strong category 4.
Reuters says historical records show it caused a 10-foot storm surge at low tide, Mock said. "At that time, not that many people were living in New York, so people didn't pay a lot of attention to it."
Click here to see photos of hurricanes in New York from the past >
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Citigroup(C_) and Bank of America(BAC_) have both been pummeled equally in the stock market in the past month, but analysts say Citigroup is the better opportunity.
Last week, UBS analyst William Tanona said the stock of Citigroup deserved a premium over Bank of America as it faces "less dramatic uncertainties" from large, mortgage-related liabilities and stronger earnings power.
On Wednesday, Glenn Schorr at Nomura released a report, making similar arguments. While the analyst thinks the selloff in both the stocks are overdone, he still prefers Citigroup and JPMorgan Chase(JPM_) over Bank of America. "..given similar valuations, we think Citi is the more attractive opportunity, based on its edge in capital, reserves, exposure to the growth markets and smaller mortgage-related risks. We also see attractive value in JPM at 1.0x tangible book."
Schorr lists four reasons why Citigroup is not Bank of America.
First, Citi is better capitalized. The analyst estimates that Citi's Basel III Tier 1 Common Ratio at the end of the second quarter was at 6.7% versus 5.1% for Bank of America.Citi also has less mortgage-related tail risk. "Citi's mortgage servicing portfolio is about one-quarter the size of Bank of America's, so the headaches surrounding servicing issues are a much smaller thorn in Citi's side. In addition, the two banks' rep and warranty risks are meaningfully different, with Bank of America's outstanding repurchase claims totaling about 11x the amount of Citi's claims pipeline." He also notes that Citi will likely pay less in any State AG foreclosure settlement, given its lower mortgage exposure.Three, Citi has a lower consumer banking presence in the U.S. relative to Bank of America and would be less affected by regulations affecting consumer banking such as new overdraft rules and the Durbin Amendment that restricts fees charged by banks to merchants for debit card transactions.Finally, Citi has greater exposure to faster-growing emerging markets, with 60% of net revenue coming from outside the U.S., compared to 20% in the case of Bank of America. But its exposure to the troubled European nations is not any more than Bank of America.This post originally appeared on The Street.
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