Apple catches Exxon as most valuable firm

 
Steve Jobs' tech juggernaut at one point overtook Exxon Mobil to become the world's most valuable company yesterday, closing a multibillion market-cap gap during the day's trading before dropping back to second place.
The Cupertino, Calif.-company, which was among the stars of yesterday's stock rally, closed with a value of $346.47 billion -- just behind Exxon Mobil at $352.9 billion.
All of Wall Street was fixated on the iPad maker's stock when at about 12:45 p.m. it overtook the oil giant to become the world's No. 1 company based on stock value.

From that point on the two companies duked it out for the market cap title.
Apple seemed poised to win with about a half hour to go before the close of trading but Exxon shares had a late bounce to end the day ahead.
Exxon shares closed up about 2 percent at $71.64, while Apple shares rose 5.9 percent to $374.01.
Analysts have been expecting Apple to make a grab for Exxon's Wall Street crown. There is even a school of Apple evangelists who predict the company will attain a $1 trillion market cap by the end of the year.
Apple is riding high on soaring sales of iPhones, Macs and iPads and is taking market share in a number of gadget categories among consumers and businesses worldwide.
Meanwhile, Exxon -- along with the rest of the oil industry -- has taken a hit with the prospects of another global recession and a requisite decrease in demand for its black gold.
Apple's rise is all the more dramatic considering it had been left for dead by Microsoft mania in the late 1990s. Jobs returned in 1997 and orchestrated a turnaround with one revolutionary product after another starting with the iPod in 2001.

Fraud lawsuit rocks Bank of America

 
Bank of America Corp. was sued by American International Group Inc. for more than $10 billion over an alleged "massive fraud" on mortgage debt, causing the bank's shares to tumble 20.3 per cent amid worries it cannot manage a deepening litigation morass.
Shares of the largest U.S. bank fell to their lowest since March 2009, wiping out roughly one-third of the bank's market value, or in excess of $32 billion, over the last three trading days.
The shares declined $1.66 to $6.51 in New York trading, after earlier falling to $6.31.
"A lot of people think the bank will have to raise capital, and any major capital raise will be massively dilutive," said Paul Miller, an analyst at FBR Capital Markets. "The bank just can't get its hands around the liabilities it's facing."
Monday's slide came amid the broad market decline that followed Standard & Poor's downgrade of the U.S. credit rating. AIG's shares fell $2.52, or 10 per cent, to $22.58.
The lawsuit may complicate Bank of America chief executive Brian Moynihan's effort to contain losses from the bank's $2.5-billion purchase in July 2008 of Countrywide Financial Corp., the U.S.'s biggest mortgage lender.
That purchase, engineered by Moynihan's predecessor Kenneth Lewis, is now considered a disaster for Charlotte, N.C.-based Bank of America because of the costs of litigation and writing down bad loans.
Moynihan "inherited a ton of excess baggage," including Countrywide, which has become "a sinking ship," said Michael Mullaney, who helps invest $9.5 billion at Fiduciary Trust Co., in Boston, which has sold nearly all its shares in the bank. "Bank of America's stock price will remain under duress."
Tony Plath, a finance professor at the University of North Carolina at Charlotte, said investors may be surmising that drastic action will be needed.

Fear and the global debt problem

 

The huge stock market drop is discounting a long-lasting and deep recession. And it may, as well, have a hand in creating that recession. Nothing engenders fear like a stock market crash. And fear causes economies to slow to a crawl.

The headlines of a 600-point drop in the Dow Jones industrials are shaking public confidence even more than the debt ceiling debacle or the S&P ratings downgrade. In fact, the one positive result of the market slide might be that Americans unite in protest against this very visible loss of wealth — and pressure both parties to come to a sensible agreement to deal with our debt problems. That would be the surest way to start restoring the more than $1 trillion lost in the broad stock market Monday.

This is not just a problem with U.S. markets. There is a global debt problem — and it is creating concerns about European banks, country debt, and the ability of central banks to keep the global financial system intact. Part of that fear of currencies is apparent in the rush to gold — now trading over $1,720 per ounce. Gold may ultimately trade much higher if it is used to form a basis for a new, more trusted global currency. But meanwhile it is as volatile as the stock market, and equally risky.

There is a lot of scared money sloshing around the world, making markets extremely volatile. Selling will likely continue, in order to meet margin calls, and because mutual funds will have to sell stocks to accommodate fund shareholders who are switching to cash.

But cash is costly these days. Money in the bank, though safe, pays no interest. Large depositors are even being charged fees by some banks. Having “chicken money” on the sidelines is always a good idea for people who can’t afford the risk of loss. However, this is no time to decide you’re chicken and join the panic.

At some point the world will notice that America is not going away, though business may slow. And large U.S. companies will continue to have earnings and pay dividends. That will be the signal for the market to turn — but no one can tell exactly when that will happen, or from what level One thing is sure: If the new Congressional budget committee could meet and come up with a quick budget and debt agreement, it would inspire a lot more confidence — and higher stock prices. And that’s The Savage Truth.