According to the WSJ's "Heard on the Street" column, the cooling housing mkt is starting to pinch the nation's banks, which are more exposed to real estate than ever, and it comes at a time when some of their other key businesses already are being squeezed. Although real-estate downturns typically trigger concerns about rising delinquencies and defaults on existing mortgages, the more pressing worry in the industry right now is that a slowdown in demand for new loans will cut into earnings that have been exceptionally strong. That is significant b/c financial institutions already are grappling with several issues. They include a difficult interest-rate environment, competition for traditional banking customers, a saturated credit-card mkt and expectations that strong consumer-credit quality will soon show signs of weakening. "Any wiggle in the real-estate business has a significant impact on banking b/c that's where the growth has been coming from," says Richard Bove, of Punk Ziegel. Banks mentioned include: FED, FHN, ZION, JPM, BAC and C.
Barron's Online says that for those investors who don't see much promise in the beaten-down stocks of home builders, there is another more intriguing real-estate investment that relies more on advanced technology. A handful of co's in the US make money charging fees to cellular operators, such as the Verizon Wireless, to park those operators' radio equipment on towers that dot the land. An ongoing spectrum auction in Washington could propel investments in cell sites by Verizon and others, which could mean rising rents for publicly traded stocks of tower owners such as American Tower (AMT), Crown Castle (CCI), Global Signal (GSL) and SBA Comm. (SBAC). American Tower, the biggest of the group, may be the best bet. It owns in excess of 22K towers, almost all of them in the US, nearly double that of Crown, its closest competitor. Even without a dramatic new round of network upgrades by wireless carriers, American Tower offers a steadily rising stream of cash and the potential for stock buybacks and, maybe, a dividend. After rising 32% this year, American's shares aren't cheap. But with growth of 15% or more in free cash flow, a bet on American could be a profitable wager that cellphone growth will boost the tower business. "It's basically a real-estate business," says Hal Goldstein, of First American Mid Cap Growth Opportunities Fund, which owns American Tower shares. "It's also a fixed-cost business, b/c the towers are already built out, with an ability to raise prices and gain increased tenancy. That incremental rent is very accretive to cash flow."
"Inside Scoop" section reprots that NiSource's (NI) Chmn Gary L. Neale has sold off nearly $11m in shares of the co. In a series of transactions from Aug. 9 to Aug. 29, Mr. Neale sold 466K NiSource shares, he also exercised options for 50K shares. "Given that the stock has not been able to punch through the $25 barrier this year, it seems like that's one very large vote that NiSource is not going to finally break through that barrier anytime soon," says Jonathan Moreland, the director of research at InsiderInsights.com.
The NY Post reprots that Carlos Ghosn, chief of Renault and Nissan, said talks on a possible alliance with General Motors (GM) are going better than he expected and he'll review progress in Sep. The carmakers will present the results of their talks by mid-Oct as planned, Ghosn said. "The discussions, which are open, are extremely cordial," Ghosn said in an interview. "I would qualify them even as above expectations."