Blue Chips in the Red: Kodak

Part 2-of-2:
The company has few trump cards left, that may be strategically played to buy them just enough time to stage a come back. Kodak has intellectual property that gives them the ability to earned licensing fees from, amounting to nearly 1.9 billion over the past three years. Although it brought in only $27 million in licensing fees in the first half of 2011, they anticipate yielding over $340 million in the first quarter of this year. Nevertheless, there has been a shift in their strategy, as Associated Press reported that the company is trying to sell its patents, which are said to be valued somewhere in the area of $2 - $3 billion. This may be to stave off bankruptcy, or perhaps to sustain the company through a bankruptcy protection.

In the past decade, Kodak had taken steps to shift its primary business to meet the demands of the technology revolution. Kodak had invested hundreds of million of capital in a new software for workflow, in addition to new home printing products, particularly photo printers and commercial inkjets. The company was all set to surpass their breakeven-point in 2005.

The CEO, Perez, had high hopes that 2013 would be a turning point for them with their new line of inkjets, their licensing and workflow software, but it is clearly faced with a myriad of business concerns weighing them down. The Wall Street Journal reported that three of Kodak's Board of Directors resigned in recent weeks, and Kodak is preparing to file for chapter 11 in the coming weeks. With the resignation of nor one, but three board members, it seems that there may be a disagreement about what strategy to use to steer the company back to being a top contender in its field.

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K. Reilly
The Cohn-Reilly Report

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Inside the Insider Trading

Another Insider Trading Scandal is Uncovered

The hedge fund sector is a little on edge lately, due to the investigation that inspired the recent flood of subpoenas received by the top companies. If what is suspected is actually true, it appears to be a massive, long-term program of trading fraud that brings to mind images of organized crime during its heyday, back in the 1950s. If charges are formerly brought down it will undoubtedly send trimmers throughout the trading community.

The hedge fund sector is a little on edge lately, due to the investigation that inspired the recent flood of subpoenas received by the top companies. If what is suspected is actually true, it appears to be a massive, long-term program of trading fraud that brings to mind images of organized crime during its heyday, back in the 1950s. If charges are formerly brought down it will undoubtedly send trimmers throughout the trading community.

The last thing the financial markets need is another fraud scandal. This case brings to mind the ultimate rogue Wall St. trader, Gecco, played by Michael Douglas for the Movie "Wall Street". We could really do without the resurgence of fraud and unethical behavior in this industry, as our economy and the American people struggle out of the financial hole.

The Manhattan U.S. Attorney’s office sent out subpoenas to major hedge fund companies, including giants such as Capital Advisors and Citadel, Janus Capital Group and Wellington Management, one of the largest institutional – investment firms. Further, the FBI questioned a Global Research, LLC account manager in an effort to gain clarity on the relationship Global Research has with the hedge fund community and what role they may have played in the insider trading scam being investigated. The Wall Street Journal reported that Apple analysts were also being "dragged" into the investigation. The 3-year investigation concerns an expert-network firm that leaked nonpublic/proprietary information to the Hedge Funds and others. The details are still to come, but it does not bode well for the public perception.


Check an interview about the perception of systemic fraud, particularly insider trading in hedge funds.




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K. Reilly
Cohn-Reilly Report / News Flash

NY Fund Mgrs Dodge Tax Increases

Hedge funds can breathe a sigh of relief as the expected State tax increase was voted down by State lawmakers.The controversial tax increase was to target out-of-state fund managers, which could have lead to an exodus to nearby states, namely Connecticut._____________
NY State lawmakers did manage to finalized the $136 billion budget, approving a final piece of legislation that will raise about $1 billion through a array of tax hikes and other measures. These measures are anticipated to cover the over $9 billion in deficits.

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K. Reilly
Cohn-Reilly Report / News Flash

Major Dow Components Boost Market

AT&T, UPS and Caterpillar beat analyst estimates and reported strong revenues to propel the market over 200 points higher yesterday. Today, although McDonalds, Honeywell and Ford did equally well, the market is struggling to remain in the black in early trading. Let's see if the bulls can continue the rally by the end of the day

Cohn-Reilly Report / News Flash

July Mini Rally, with Low Trading Volume

On the heels of positive earnings reports from Alcoa and CSX, kicking off the new earnings season, the markets are up for the 6th consecutive day, around 6%. Traditionally, as reported in a prior post, July is a good rally month for the markets. I would call this a mini-rally because of the uncertainty going forward.

Technically, all the major indexes are overbought - stiff resistance is ahead as the price levels near the 20, 50 and 200 day moving averages. Also, the rally is on lower than average volume, which shows a lack of conviction. Still, if earnings continue on an upbeat note, we should expect the rally to follow suit, barring any major new negative
economic news.

C. Cohn
Cohn-Reilly Report / News Flash

DOW Gains: 3-Straight Days

Housing industry takes a back seat to unemployment, which seem to be a factor in the market movements in the past week. Though it is surprising that the higher than expected unemployment claims did not cause a negative reaction from investors. When asked about the three straight days of gains many traders opine that the market gains has been driven by program trades. They may have a point. The DOW closed up The Dow rose 120.71

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K. Reilly
Cohn-Reilly Report / News-Flash

Summer Rally Continues

On the heels of positive earnings reports from Alcoa and CSX, kicking off the new earnings season, the markets are up for the 6th consecutive day, around 6%. Traditionally, as reported in a prior post, July is a good rally month for the markets. I would call this a mini-rally because of the uncertainty going forward. Technically, all the major indexes are overbought - stiff resistance is ahead as the price levels near the 20, 50 and 200 day moving averages. Also, the rally is on lower than average volume, which shows a lack of conviction. Still, if earnings continue on an upbeat note, we should expect the rally to follow suit, barring any major new negative economic news.


C. Cohn
Cohn-Reilly Report / News Flash

Bomb Scare on Wall Street

A pedestrian reported a suspicious pacakge laying unattended under the George Washington Statute yesterday. Wall Street was shut down for about 2 hours until NYPD Bomb Squad investigated the situation. An X-ray of the suitcase showed the abandoned case to be empty.

K. Reilly
Cohn-Reilly Report / News Flash

Hedge Fund Fraud: Collateral Damage

The founder of Galleon, Raj Rajaratnam is charged by the SEC with insider trading of massive proportions, along with 6 other cohorts. The SEC complaint asserts that Rajaratnam used his high-end connections and corporate relationships to gain access to insider information about earnings reports ahead of announcements and merger activities on several high profile companies. A Wall Street Journal article quoted the SEC chairman, Mary L. Shapiro, as saying “Raj Rajaratnam is not the astute study of company fundamentals , or marketplace trends that he is widely thought to be. Raj Rajaratman is not a master of the universe, but rather a master of the rolodex.” Several sources close the Rajaratnam tipped the SEC about the fraudulent activities at the hedge fund.

Meanwhile, Galleon, which was founded in 1997, will have to begin the process of winding-down the 3.7 billion in assets, as investors struggle to divest their portfolios. Given the involvement of many other firms, it is difficult to tell how far the web of fraud will spread.

Others charged in the complaint are as follows

Danielle Chiesi: — a portfolio manager, New Castle Funds / NYC
Rajiv Goel: — a managing director,Intel Capital -Intel subsidiary /CA
Anil Kumar: — a director, McKinsey & Company /Saratoga, CA
Mark Kurland: — a Sr Managing Director & Partner, New Castle /Upstate N.Y.
Robert Moffat: — a senior vice president, IBM/ Ridgefield, Conn.
New Castle Funds LLC — a New York-based hedge fund

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K. Reilly
Cohn-Reilly Report / News Flash