Word of the Day

Commodity

Even if you don't think you do, you already know plenty about commodities. Want us to prove it? No problem.

What makes oil produced in Saudi Arabia different from oil exported from Nigeria? It's the same thing that makes the corn you ate at last summer¿s barbecue different from the corn used to produce ethanol. Stumped? Well, don't feel bad, it's a trick question. The answer? Absolutely nothing. Corn is corn no matter where it comes from -- just as wheat is wheat and natural gas is -- right! -- natural gas. (Though the quality may differ, the make-up is uniform.)

So, in less elaborate terms, corn and oil (and all other commodities) are homogenous goods that can be processed, resold and more often than not, used as an input to the production of other goods or services. These goods are traded on a commodity exchange, thus setting the price-per-barrel (or other metric unit) used to value them.

Now pay attention, here's a question that indeed does have an answer: What is the difference between a commodity and a stock? While a stock can tank and become worthless, a commodity cannot have its value be wiped to zero. One other difference: Most commodities are traded in futures, meaning traders buy and sell where they think the price of a product will be at a certain point in the future. Stocks trade based on the value of the underlying company at that point in time.

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Tuesday, July 22, 2008

WaMu 2Q Widely Misses Estimates

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FOXBusiness

Washington Mutual reported its third straight quarterly loss after the bell on Tuesday, providing the latest evidence of how much damage the credit crisis has inflicted on the nation's banks.

The largest savings and loan in the U.S. lost $3.33 billion, or $6.58 per share, compared to a profit of $830 million, or, 92 per share, a year ago. Washington Mutual (WM) posted an adjusted-loss of $3.34 a share.

WaMu's results were significantly worse than the $1.05 per share loss analysts polled by Thomson Reuters had been looking for.

Despite the huge miss, shares of surged more than 16% in after-hours trading after initially trading lower. The action comes after financial stocks had a huge day, rallying despite weak earnings from American Express (AXP) and Wachovia (WB).

Given the company's dismal performance in 2008, WaMu said several of its senior officers will go without annual incentive payments, including CEO Kerry Killinger, President and Chief Operator Officer Stephen Rotella and Chief Financial Officer Thomas Casey.

Seattle-based WaMu's second quarter was slammed by an increase in loan loss reserves to $8.46 billion. Still, the bank insisted it has "sufficient capital" to navigate the challenging period.

During the second quarter WaMu successfully raised $7.2 billion, but failed to stop the bleeding in its stock price, which lost 52% of its value. WaMu has plunged 86% from a year ago.

Also during the period, WaMu also slashed 1,200 jobs, cut its quarterly dividend to a penny from 15 cents and restructured its operations to allow it to leave the wholesale lending business.