NEW YORK (AP) -- Investment bank Merrill Lynch & Co. said Monday it sold a stake in itself to Temasek Holdings and Davis Selected Advisors for $6.2 billion as it looks to strengthen its balance sheet.
Temasek, an investment fund for the government of Singapore, will acquire $4.4 billion in Merrill Lynch common stock. Temasek has the option to purchase an additional $600 million of common stock by March 28. The investment is for no more than 10 percent of common stock.
Davis Selected Advisors will receive common stock from an $1.2 billion investment as well. Both investors will remain passive. The sales are expected to close by the middle of January.
Like other investment banks, Merrill Lynch has reached out to a foreign investment fund for a new source of capital as it is plagued by the weakening credit markets. Merrill Lynch took a nearly $8 billion writedown on the value of bonds and debt backed by mortgages in the third quarter and is expected to take billions of dollars in additional writedowns in the fourth quarter. Shares of Merrill Lynch rose $2.80, or 5 percent, to $58.34 in morning trading.
Monday, December 24, 2007
Sunday, December 16, 2007
Ethanol
Little over a year ago, ethanol was winning the hearts and wallets of both Main Street and Wall Street, with promises of greater U.S. energy independence, fewer greenhouse gases and help for the farm economy. Today, the corn-based biofuel is under siege.
In the span of one growing season, ethanol has gone from panacea to pariah in the eyes of some. The critics, which include industries hurt when the price of corn rises, blame ethanol for pushing up food prices, question its environmental bona fides and dispute how much it really helps reduce the need for oil.
A recent study by the Organization for Economic Cooperation and Development concluded that biofuels "offer a cure [for oil dependence] that is worse than the disease." A National Academy of Sciences study said corn-based ethanol could strain water supplies. The American Lung Association expressed concern about a form of air pollution from burning ethanol in gasoline. Political cartoonists have taken to skewering the fuel for raising the price of food to the world's poor.
Last month, an outside expert advising the United Nations on the "right to food" labeled the use of food crops to make biofuels "a crime against humanity," although the U.N. Food and Agriculture Organization later disowned the remark as "regrettable."
The fortunes of many U.S. farmers, farm towns and ethanol companies are tied to corn-based ethanol, of which America is the largest producer. Ethanol is also a cornerstone of President Bush's push to reduce dependence on foreign oil. But the once-booming business has gone in the dumps, with profits squeezed, plans for new plants shelved in certain cases, and stock prices hovering near 52-week lows.
Now the fuel's lobby is pleading with Congress to drastically boost the amount of ethanol that oil refiners must blend into gasoline. But formidable opponents such as the livestock, packaged-food and oil industries also have lawmakers' ears. What once looked like a slam-dunk could now languish in pending energy legislation that might not pass for weeks, if ever.
Ethanol's problems have much to do with its past success. As profits and production soared in 2005 and 2006, so did the price of corn, gradually angering livestock farmers who need it for feed. They allied with food companies also stung by higher grain prices, and with oil companies that have long loathed subsidies for ethanol production.
The U.S. gives oil refiners an excise-tax credit of 51 cents for every gallon of ethanol they blend into gasoline. And even though it's the oil industry that gets this subsidy, the industry dislikes being forced to use a nonpetroleum product. The U.S. ethanol industry is further protected by a 54-cent tariff on every gallon of imported ethanol.
Ethanol prices peaked at about $5 a gallon in some markets in June 2006, according to Oil Price Information Service. The price soon began to slide as the limited market for gasoline containing 10% ethanol grew saturated. New plants kept coming online, increasing supply and dropping prices further. Today, the oil refiners that purchase ethanol to blend in need pay only about $1.85 a gallon for it.
The low ethanol prices help some oil refiners. "I'd pay a hell of a lot more for ethanol than I am right now.... I'm getting a windfall because it's priced so much less than its value to me," Lynn Westfall, chief economist for refiner Tesoro Corp., told investors recently. The ethanol tax credit will bring refiners an estimated $3.5 billion this year. Some oil companies use ethanol to stretch gasoline supplies or meet state requirements to make gasoline burn more cleanly. Ethanol that's voluntarily blended into gasoline reached a high this month, according to the Energy Information Administration.
The low prices reflect soaring output. Global ethanol production has grown to a projected 13.4 billion gallons this year, from 10.9 billion gallons in 2006, according to the International Energy Agency. The U.S. production is more than half of that total, or about seven billion gallons this year, up 80% in two years. It equals less than 4% of U.S. gasoline consumption.
Analysts expect U.S. production capacity to keep growing, encouraged both by high oil prices and by the hope that Congress will stiffen the mandate for refiners to use ethanol. Some observers regard the profit squeeze as part of an ordinary industry shakeout that will ultimately leave the best producers in a position to thrive. As ethanol prices were pushed lower and corn prices stayed high, ethanol profit margins dropped from $2.30 per gallon last year to less than 25 cents a gallon.
In the span of one growing season, ethanol has gone from panacea to pariah in the eyes of some. The critics, which include industries hurt when the price of corn rises, blame ethanol for pushing up food prices, question its environmental bona fides and dispute how much it really helps reduce the need for oil.
A recent study by the Organization for Economic Cooperation and Development concluded that biofuels "offer a cure [for oil dependence] that is worse than the disease." A National Academy of Sciences study said corn-based ethanol could strain water supplies. The American Lung Association expressed concern about a form of air pollution from burning ethanol in gasoline. Political cartoonists have taken to skewering the fuel for raising the price of food to the world's poor.Last month, an outside expert advising the United Nations on the "right to food" labeled the use of food crops to make biofuels "a crime against humanity," although the U.N. Food and Agriculture Organization later disowned the remark as "regrettable."
The fortunes of many U.S. farmers, farm towns and ethanol companies are tied to corn-based ethanol, of which America is the largest producer. Ethanol is also a cornerstone of President Bush's push to reduce dependence on foreign oil. But the once-booming business has gone in the dumps, with profits squeezed, plans for new plants shelved in certain cases, and stock prices hovering near 52-week lows.
Now the fuel's lobby is pleading with Congress to drastically boost the amount of ethanol that oil refiners must blend into gasoline. But formidable opponents such as the livestock, packaged-food and oil industries also have lawmakers' ears. What once looked like a slam-dunk could now languish in pending energy legislation that might not pass for weeks, if ever.
Ethanol's problems have much to do with its past success. As profits and production soared in 2005 and 2006, so did the price of corn, gradually angering livestock farmers who need it for feed. They allied with food companies also stung by higher grain prices, and with oil companies that have long loathed subsidies for ethanol production.
The U.S. gives oil refiners an excise-tax credit of 51 cents for every gallon of ethanol they blend into gasoline. And even though it's the oil industry that gets this subsidy, the industry dislikes being forced to use a nonpetroleum product. The U.S. ethanol industry is further protected by a 54-cent tariff on every gallon of imported ethanol.
Ethanol prices peaked at about $5 a gallon in some markets in June 2006, according to Oil Price Information Service. The price soon began to slide as the limited market for gasoline containing 10% ethanol grew saturated. New plants kept coming online, increasing supply and dropping prices further. Today, the oil refiners that purchase ethanol to blend in need pay only about $1.85 a gallon for it.
The low ethanol prices help some oil refiners. "I'd pay a hell of a lot more for ethanol than I am right now.... I'm getting a windfall because it's priced so much less than its value to me," Lynn Westfall, chief economist for refiner Tesoro Corp., told investors recently. The ethanol tax credit will bring refiners an estimated $3.5 billion this year. Some oil companies use ethanol to stretch gasoline supplies or meet state requirements to make gasoline burn more cleanly. Ethanol that's voluntarily blended into gasoline reached a high this month, according to the Energy Information Administration.
The low prices reflect soaring output. Global ethanol production has grown to a projected 13.4 billion gallons this year, from 10.9 billion gallons in 2006, according to the International Energy Agency. The U.S. production is more than half of that total, or about seven billion gallons this year, up 80% in two years. It equals less than 4% of U.S. gasoline consumption.
Analysts expect U.S. production capacity to keep growing, encouraged both by high oil prices and by the hope that Congress will stiffen the mandate for refiners to use ethanol. Some observers regard the profit squeeze as part of an ordinary industry shakeout that will ultimately leave the best producers in a position to thrive. As ethanol prices were pushed lower and corn prices stayed high, ethanol profit margins dropped from $2.30 per gallon last year to less than 25 cents a gallon.
(Re)New Sector
Renewable energy stocks rose Friday after the Senate passed a revised energy bill, and solar-power companies reported new contracts.
The bill -- passed by a vote of 86 to eight -- raised sixfold the amount of renewable fuels that must be used for blending of products like gasoline, to 36 billion gallons a year by 2022. The legislation boosted ethanol stocks Friday.
I anticipate that this new legislative mandate will do alot to help the renewable energy market. Since profits will continue to be slim, subsities cant be far behind; Congress has already opened up its wallet to cotton and the steel industry.
However, a mandate for utilities to derive 15 percent of electricity from renewables by 2020 was scrapped from the bill, representing a "marginal negative" for solar companies, according to Calyon Securities analyst Kelly Dougherty. Had that Mandate remained it would have really pushed stock prices up.
Pacific Ethanol Inc. led gains in ethanol stocks, rising 65 cents, or 10.8 percent, to $6.69 in midday trading. Aventine Renewable Energy Holdings Inc. rose $1.10, or 10.7 percent, to $11.39, while BioFuel Energy Corp. rose 46 cents, or 8.1 percent, to $6.12, and Verasun Energy Corp. rose $1, or 7.1 percent, to $15.
Among solar energy stocks, China Sunergy rose Friday after it said it would supply solar cells to German solar-system maker asola Automotive Solar System GmbH next year. The stock advanced $1.56, or 16.3 percent, to $11.11.
Elsewhere, Evergreen Solar Inc. climbed after it reported a 10-year polysilicon supply agreement with Silicium de Provence SAS on Thursday. Dougherty lifted Evergreen's rating to "Buy" from "Add" and increased his price target to $22 from $15.
Shares of Evergreen Solar rose $1.73, or 11.5 percent, to $16.84. Earlier, it traded at a 52-week high of $17.75. Akeena Solar Inc. rose 93 cents, or 14.4 percent, to $7.40, and JA Solar Holdings Co. gained $7.72, or 12.3 percent, to $70.74.
The bill -- passed by a vote of 86 to eight -- raised sixfold the amount of renewable fuels that must be used for blending of products like gasoline, to 36 billion gallons a year by 2022. The legislation boosted ethanol stocks Friday.
I anticipate that this new legislative mandate will do alot to help the renewable energy market. Since profits will continue to be slim, subsities cant be far behind; Congress has already opened up its wallet to cotton and the steel industry.
However, a mandate for utilities to derive 15 percent of electricity from renewables by 2020 was scrapped from the bill, representing a "marginal negative" for solar companies, according to Calyon Securities analyst Kelly Dougherty. Had that Mandate remained it would have really pushed stock prices up.
Pacific Ethanol Inc. led gains in ethanol stocks, rising 65 cents, or 10.8 percent, to $6.69 in midday trading. Aventine Renewable Energy Holdings Inc. rose $1.10, or 10.7 percent, to $11.39, while BioFuel Energy Corp. rose 46 cents, or 8.1 percent, to $6.12, and Verasun Energy Corp. rose $1, or 7.1 percent, to $15.
Among solar energy stocks, China Sunergy rose Friday after it said it would supply solar cells to German solar-system maker asola Automotive Solar System GmbH next year. The stock advanced $1.56, or 16.3 percent, to $11.11.
Elsewhere, Evergreen Solar Inc. climbed after it reported a 10-year polysilicon supply agreement with Silicium de Provence SAS on Thursday. Dougherty lifted Evergreen's rating to "Buy" from "Add" and increased his price target to $22 from $15.
Shares of Evergreen Solar rose $1.73, or 11.5 percent, to $16.84. Earlier, it traded at a 52-week high of $17.75. Akeena Solar Inc. rose 93 cents, or 14.4 percent, to $7.40, and JA Solar Holdings Co. gained $7.72, or 12.3 percent, to $70.74.
Friday, December 14, 2007
Cell phone good will
OTTAWA (AFP) - An oil field worker in western Canada was shocked this month to be charged 85,000 dollars for surfing the Internet on his new mobile phone, local media said Thursday.
Calgary resident Piotr Staniaszek, 22, had signed up for Bell Canada's cellular phone service at about 150 dollars per month, with unlimited mobile Web browsing.He believed the plan allowed him to use the phone to connect with his computer, using it as a modem to download a lot of data, high-definition movies and other bandwidth-hungry applications.
But when his first bill arrived in the mail, Staniaszek realized to his horror that the company was charging him on a per-kilobyte basis for Internet downloads.
"I didn't know what to think. I thought there was probably a mistake," he told public broadcaster CBC. "I told them I wasn't aware that I would be charged for hooking up my phone to the computer."
A spokesman for Bell said the company will adjust Staniaszek's bill to 3,243 dollars, as "a measure of goodwill."But Staniaszek said he still plans to try and fight it, "because I didn't know about the extra charges. Nobody explained any of this to me."
"The thing is, they've cut my phone off for being like 100 dollars over," he told CBC News. "Here, I'm 85,000 dollars over and nobody bothered to give me a call and tell me what was going on."
Calgary resident Piotr Staniaszek, 22, had signed up for Bell Canada's cellular phone service at about 150 dollars per month, with unlimited mobile Web browsing.He believed the plan allowed him to use the phone to connect with his computer, using it as a modem to download a lot of data, high-definition movies and other bandwidth-hungry applications.
But when his first bill arrived in the mail, Staniaszek realized to his horror that the company was charging him on a per-kilobyte basis for Internet downloads.
"I didn't know what to think. I thought there was probably a mistake," he told public broadcaster CBC. "I told them I wasn't aware that I would be charged for hooking up my phone to the computer."
A spokesman for Bell said the company will adjust Staniaszek's bill to 3,243 dollars, as "a measure of goodwill."But Staniaszek said he still plans to try and fight it, "because I didn't know about the extra charges. Nobody explained any of this to me."
"The thing is, they've cut my phone off for being like 100 dollars over," he told CBC News. "Here, I'm 85,000 dollars over and nobody bothered to give me a call and tell me what was going on."
Sunday, December 9, 2007
Ride the Bull
THE STOCK MARKET IS ON THE VERGE of a new breakout. While the technical evidence today is conflicted as ever, there is one thing the bulls have that the bears do not -- the market is going their way. It may not be the "next leg up" but it's better than the alternative.
After last week's sharp rally, the ensuing pause was rather mild. It certainly would have been reasonable to look for more than two small days of rest, but if we look into its technicals we'll see that the market gave back 25% of its rally with much lighter than average volume. This is a classic definition of a correction.
Unfortunately, this is all short-term analysis. What we want to know is whether this rally will continue, and for that we have a relatively simple chart to follow (see Chart 1).
The Standard & Poor's 500 is now challenging 1490 once again, and if it can move significantly through that level it will have proved itself worthy of another run at its old highsThe 1490 level is what chart watchers call resistance -- the price level at which supply swells and advances stall. A successful crossing above that level means that the demand was able to soak up all that supply, and then some, and that clears the path toward even higher prices.
How high is high? Assuming the breakout actually occurs, the old highs between 1555 and 1565 would be likely targets -- and formidable barriers.Last week, I wrote, "Another consideration is that for the first time since the major bottom in August 2004, the S&P has not made clearly higher highs and higher lows."
What this means is that the forces that drove the market three steps forward and one step back in the natural ebb and flow of a bull market had changed. In 2007, it has been three steps forward and three steps back, and that is a different animal on Wall Street. Therefore, unless proved otherwise, 2007 is shaping up to be a giant trading range at best and the start of a significant decline at worst.
How do we know which one it is? We don't but we must give the benefit of the doubt to the side that is currently winning. The bulls now have the ball.
But as the market rallies, supporting evidence is still rather shaky. For starters, the volume on today's rally was not much different during the bulk of the rally in the morning hours than it was Tuesday as the market fell. In fact, volume during the entire post-Thanksgiving rally has been rather uninspiring.
A chart of the very active SPDR S&P 500 exchange-traded fund (ETF) shows a continuous decline in volume as price moved higher (see Chart 2). The same is true for all the other major broad market ETFs. What this means is that the rally is not drawing in new bulls, and that means its fuel is in danger of running out.
After last week's sharp rally, the ensuing pause was rather mild. It certainly would have been reasonable to look for more than two small days of rest, but if we look into its technicals we'll see that the market gave back 25% of its rally with much lighter than average volume. This is a classic definition of a correction.
Unfortunately, this is all short-term analysis. What we want to know is whether this rally will continue, and for that we have a relatively simple chart to follow (see Chart 1).
The Standard & Poor's 500 is now challenging 1490 once again, and if it can move significantly through that level it will have proved itself worthy of another run at its old highsThe 1490 level is what chart watchers call resistance -- the price level at which supply swells and advances stall. A successful crossing above that level means that the demand was able to soak up all that supply, and then some, and that clears the path toward even higher prices.How high is high? Assuming the breakout actually occurs, the old highs between 1555 and 1565 would be likely targets -- and formidable barriers.Last week, I wrote, "Another consideration is that for the first time since the major bottom in August 2004, the S&P has not made clearly higher highs and higher lows."
What this means is that the forces that drove the market three steps forward and one step back in the natural ebb and flow of a bull market had changed. In 2007, it has been three steps forward and three steps back, and that is a different animal on Wall Street. Therefore, unless proved otherwise, 2007 is shaping up to be a giant trading range at best and the start of a significant decline at worst.
How do we know which one it is? We don't but we must give the benefit of the doubt to the side that is currently winning. The bulls now have the ball.
But as the market rallies, supporting evidence is still rather shaky. For starters, the volume on today's rally was not much different during the bulk of the rally in the morning hours than it was Tuesday as the market fell. In fact, volume during the entire post-Thanksgiving rally has been rather uninspiring.
A chart of the very active SPDR S&P 500 exchange-traded fund (ETF) shows a continuous decline in volume as price moved higher (see Chart 2). The same is true for all the other major broad market ETFs. What this means is that the rally is not drawing in new bulls, and that means its fuel is in danger of running out.
Wednesday, December 5, 2007
Bump up the volume
Last week crude oil prices dropped on speculation that OPEC would increase oil production; what were the experts thinking? For months now OPEC has made it clear that, in their (collective) mind they felt no connection with the record high crude prices. In fact, Iran and Venezuela voiced their opposition to any sort of a production increase; while the number-one producer Saudi Arabia was more amenable to a 500,000 barrel-a-day hike.
In the end OPEC left its output unchanged on Wednesday, blaming "speculative activity" for pushing up the price of oil and insisting that the market was well-supplied. Although OPEC promised to review this decision at its next meeting in February 2008, the prospect of a winter without a helping hand from the 13-member organization seemed to fuel exactly the kind of "speculative activity" it spoke out against.
In reality OPEC is correct. The issue is not production rather it is refinery capacity. Cruse production is not the issue because no matter how much is in the market place it can only be used once biproducts have been produced. I have not seen a car yet that runs on light crude. The fact is simple: U.S. refineries cannot cope with the ever-increasing demand of US cosumers. Its time for a infrastructure upgrade.
Fine line
Fineline Properties.com Inc. (www.finelineproperties.com) has teamed up with IPnetwork.com (www.ipnetwork.com), the Internet's premier business-to-business intellectual property & licensing marketplace.
Fineline's entire product line of new cartoon characters are marketed within the IPnetwork.com Web site, offering online bidding of Fineline's library of more than 200 characters. In addition, IPnetwork.com provides domestic and international exposure through a variety of marketing campaigns and tradeshows.
In the end OPEC left its output unchanged on Wednesday, blaming "speculative activity" for pushing up the price of oil and insisting that the market was well-supplied. Although OPEC promised to review this decision at its next meeting in February 2008, the prospect of a winter without a helping hand from the 13-member organization seemed to fuel exactly the kind of "speculative activity" it spoke out against.
In reality OPEC is correct. The issue is not production rather it is refinery capacity. Cruse production is not the issue because no matter how much is in the market place it can only be used once biproducts have been produced. I have not seen a car yet that runs on light crude. The fact is simple: U.S. refineries cannot cope with the ever-increasing demand of US cosumers. Its time for a infrastructure upgrade.
Fine line
Fineline Properties.com Inc. (www.finelineproperties.com) has teamed up with IPnetwork.com (www.ipnetwork.com), the Internet's premier business-to-business intellectual property & licensing marketplace.
Fineline's entire product line of new cartoon characters are marketed within the IPnetwork.com Web site, offering online bidding of Fineline's library of more than 200 characters. In addition, IPnetwork.com provides domestic and international exposure through a variety of marketing campaigns and tradeshows.
Monday, December 3, 2007
Keep your hedge up - Candidates
WASHINGTON (AFP) - Wealthy hedge fund managers closely guard their investment strategies, but mounting political donations reveal how some "hedgies" are betting in the crowded US presidential race.
Hedge funds' campaign donations have skyrocketed in recent years as trading profits have ballooned and the industry has lobbied Congress aggressively this year against raising taxes on managers' often multimillion-dollar earnings. Democratic White House hopefuls have been more successful so far, compared with their Republican rivals, in winning funds.
The top-grossing recipient is Democratic Senator Christopher Dodd who garnered 714,500 dollars in donations from the hedge fund industry in the first nine months of the year, according to the Center for Responsive Politics (CRP).
The CRP, which tracks political cash flows, says Republican presidential aspirant Rudolph Giuliani holds second place with donations of 565,000 dollars followed by Democratic contenders Barack Obama, Hillary Clinton and John Edwards.
"They want to make friends in Washington and campaign contributions are a good way to do that," said Massie Ritsch, a spokesman for the research center. Ritsch pointed out that Dodd is charged with overseeing the industry because of his chairmanship of the powerful Senate Banking Committee while Giuliani, a former New York mayor, has strong ties to the city where many hedge funds are based.
Paul Singer, the founder of the nine-billion-dollar hedge fund Elliot Associates, is one of Giuliani's backers and has also made a corporate jet available to him.
Federal Election Commission (FEC) records show Singer has made a maximum individual donation of 4,600 dollars to Giuliani's campaign this year. Elliot Associates's staff have stumped up a combined 200,000 dollars.
Singer, who could not be reached for comment, became an advisor to Giuliani earlier this year. Gregory Chase, who runs Chase Capital Management, says he has spent about 500,000 dollars of his own money promoting Democrat Mike Gravel, a former senator.
"I've been very unhappy with the United States foreign policy and its dependence on foreign oil over the last few years," Chase explained.
The currency trader can spend as much as he wants because he is acting independently of Gravel's official campaign and not bound by US campaign laws, like Singer, which cap donations. Chase has placed advertisements in USA Today, The New York Times, The Washington Post and other major newspapers in support of Gravel.
He offered to buy one million dollars in advertising from NBC in October after the nationwide television network locked Gravel out of a debate featuring the seven other Democratic candidates on fundraising grounds.
"I think there're a lot of people in the financial industry who take issue with the political turn that the United States has taken lately. My goal is at least to sway, maybe in some very small way, public opinion," Chase said.
Gravel advocates cutting US dependence on foreign oil, withdrawing American troops from Iraq, simplifying the tax code and cutting the Pentagon's budget.
Other investment gurus are also placing bets. Marc Lasry, the founder of the 20-billion-dollar Avenue Capital Group, has dug into his wallet for Hillary Clinton. Lasry has long supported Democrats and his fund employs Clinton's daughter, Chelsea.
Lasry has also supported the Clinton Global Initiative set up by former president Bill Clinton to address poverty alleviation and other social issues. FEC records show Lasry has given 4,600 dollars to Hillary Clinton's presidential bid while the CRP says Avenue Capital has donated funds to the campaigns of other Democratic lawmakers.
An Avenue Capital spokeswoman said Lasry was not available for comment. Employees at the Fortress Investment group have supported former Democratic senator John Edwards and Republican Mitt Romney has gained funds from executives at Bain Capital which he co-founded during a prior business career.
FEC records show Republican Senator John McCain and former Republican senator Fred Thompson have also secured hedge fund donations. The investment pools used to be restricted to rich investors, but now count pension funds and universities as investors. Hedge funds typically chase lucrative returns through risky investment strategies.
Concerns about investor protections have increased following the six-billion-dollar implosion of the large Amaranth hedge fund in 2006 and because of several high-profile cases of insider trading. The trillion-dollar industry is represented in Washington by the Managed Funds Association which runs a well-funded political action committee to support its lobbying efforts.
Hedge funds' campaign donations have skyrocketed in recent years as trading profits have ballooned and the industry has lobbied Congress aggressively this year against raising taxes on managers' often multimillion-dollar earnings. Democratic White House hopefuls have been more successful so far, compared with their Republican rivals, in winning funds.
The top-grossing recipient is Democratic Senator Christopher Dodd who garnered 714,500 dollars in donations from the hedge fund industry in the first nine months of the year, according to the Center for Responsive Politics (CRP).
The CRP, which tracks political cash flows, says Republican presidential aspirant Rudolph Giuliani holds second place with donations of 565,000 dollars followed by Democratic contenders Barack Obama, Hillary Clinton and John Edwards.
"They want to make friends in Washington and campaign contributions are a good way to do that," said Massie Ritsch, a spokesman for the research center. Ritsch pointed out that Dodd is charged with overseeing the industry because of his chairmanship of the powerful Senate Banking Committee while Giuliani, a former New York mayor, has strong ties to the city where many hedge funds are based.
Paul Singer, the founder of the nine-billion-dollar hedge fund Elliot Associates, is one of Giuliani's backers and has also made a corporate jet available to him.
Federal Election Commission (FEC) records show Singer has made a maximum individual donation of 4,600 dollars to Giuliani's campaign this year. Elliot Associates's staff have stumped up a combined 200,000 dollars.
Singer, who could not be reached for comment, became an advisor to Giuliani earlier this year. Gregory Chase, who runs Chase Capital Management, says he has spent about 500,000 dollars of his own money promoting Democrat Mike Gravel, a former senator.
"I've been very unhappy with the United States foreign policy and its dependence on foreign oil over the last few years," Chase explained.
The currency trader can spend as much as he wants because he is acting independently of Gravel's official campaign and not bound by US campaign laws, like Singer, which cap donations. Chase has placed advertisements in USA Today, The New York Times, The Washington Post and other major newspapers in support of Gravel.
He offered to buy one million dollars in advertising from NBC in October after the nationwide television network locked Gravel out of a debate featuring the seven other Democratic candidates on fundraising grounds.
"I think there're a lot of people in the financial industry who take issue with the political turn that the United States has taken lately. My goal is at least to sway, maybe in some very small way, public opinion," Chase said.
Gravel advocates cutting US dependence on foreign oil, withdrawing American troops from Iraq, simplifying the tax code and cutting the Pentagon's budget.
Other investment gurus are also placing bets. Marc Lasry, the founder of the 20-billion-dollar Avenue Capital Group, has dug into his wallet for Hillary Clinton. Lasry has long supported Democrats and his fund employs Clinton's daughter, Chelsea.
Lasry has also supported the Clinton Global Initiative set up by former president Bill Clinton to address poverty alleviation and other social issues. FEC records show Lasry has given 4,600 dollars to Hillary Clinton's presidential bid while the CRP says Avenue Capital has donated funds to the campaigns of other Democratic lawmakers.
An Avenue Capital spokeswoman said Lasry was not available for comment. Employees at the Fortress Investment group have supported former Democratic senator John Edwards and Republican Mitt Romney has gained funds from executives at Bain Capital which he co-founded during a prior business career.
FEC records show Republican Senator John McCain and former Republican senator Fred Thompson have also secured hedge fund donations. The investment pools used to be restricted to rich investors, but now count pension funds and universities as investors. Hedge funds typically chase lucrative returns through risky investment strategies.
Concerns about investor protections have increased following the six-billion-dollar implosion of the large Amaranth hedge fund in 2006 and because of several high-profile cases of insider trading. The trillion-dollar industry is represented in Washington by the Managed Funds Association which runs a well-funded political action committee to support its lobbying efforts.
Thursday, November 29, 2007
C-note
CLEARBROOK, Minn. - A fire at a pipeline from Canada that feeds oil to the United States killed two people and sent oil prices soaring before burning out Thursday morning, officials said.
Two workers fixing the underground pipeline were killed when fumes apparently escaped and ignited the blaze in Clearbrook, about 215 miles northwest of Minneapolis, said Kristine Chapin, a spokeswoman for the Minnesota Department of Public Safety.
The fire along the Enbridge Energy pipeline in northern Minnesota was reported shortly before 4 p.m. Wednesday, the Sheriff's Department said. The fire was out by Thursday morning.
"It looks like it's out now. They're just mopping up and making sure," said Blake Olson, a terminal supervisor at the pipeline. The 34-inch pipeline carries crude oil from Saskatchewan to the Chicago area, Chapin said. The pipe had leaked a few weeks ago and was being repaired, she said.
"It appears as though one of those fittings may have failed and caused fumes to leak, and it caught fire," Chapin said. She said there wasn't an explosion and described it as a "big fire."
Nearby residents were evacuated because of the thick black smoke in the sparsely populated area. Denise Hamsher, a spokeswoman for Houston-based Enbridge Energy, confirmed late Wednesday that the workers who died were employed by the company. Their names were not immediately released.
The crude oil is used to make several kinds of fuel, such as gasoline and heating oil for homes. An average of 1.5 million barrels of oil passes through the pipeline each day, said another Enbridge spokesman, Larry Springer.
Let's all get prepared to see $100/barrel oil prices this week. Not only due to the fire, but cold weather in the Northeast. Even if OPEC opens the spiggets, speculation is a greater price factor than economincs in today's market place.
Two workers fixing the underground pipeline were killed when fumes apparently escaped and ignited the blaze in Clearbrook, about 215 miles northwest of Minneapolis, said Kristine Chapin, a spokeswoman for the Minnesota Department of Public Safety.
The fire along the Enbridge Energy pipeline in northern Minnesota was reported shortly before 4 p.m. Wednesday, the Sheriff's Department said. The fire was out by Thursday morning.
"It looks like it's out now. They're just mopping up and making sure," said Blake Olson, a terminal supervisor at the pipeline. The 34-inch pipeline carries crude oil from Saskatchewan to the Chicago area, Chapin said. The pipe had leaked a few weeks ago and was being repaired, she said.
"It appears as though one of those fittings may have failed and caused fumes to leak, and it caught fire," Chapin said. She said there wasn't an explosion and described it as a "big fire."
Nearby residents were evacuated because of the thick black smoke in the sparsely populated area. Denise Hamsher, a spokeswoman for Houston-based Enbridge Energy, confirmed late Wednesday that the workers who died were employed by the company. Their names were not immediately released.
The crude oil is used to make several kinds of fuel, such as gasoline and heating oil for homes. An average of 1.5 million barrels of oil passes through the pipeline each day, said another Enbridge spokesman, Larry Springer.
Let's all get prepared to see $100/barrel oil prices this week. Not only due to the fire, but cold weather in the Northeast. Even if OPEC opens the spiggets, speculation is a greater price factor than economincs in today's market place.
Wednesday, November 28, 2007
Eat up
After reviewing Applebee's International's (APPB)December sales, we are keeping our fair value estimate unchanged. The grill and bar chain's same-restaurant sales rose 0.2% for the six weeks ending Dec. 31. We're encouraged that Applebee's bounced back from its disappointing performance in the November period, in which comparable sales fell 3.1%. The company did acknowledge that the timing of Christmas Eve and Christmas Day had a positive impact on December sales of about 1%. Nevertheless, we are encouraged by the improving trend.
On the back of this performance, Applebee's now expects its fiscal 2006 diluted earnings per share to be at or slightly above the high end of its previously stated guidance of $1.10-$1.13, excluding impairment charges. The company also reaffirmed its previously stated guidance for fiscal 2007, including diluted earnings per share in the range of $1.15-$1.20, in line with our projections. Applebee's continued to buy back stock, repurchasing 474,600 shares in the fourth quarter at an average price of $23.16 for an aggregate cost of $11 million. We believe this was a smart move, as the stock remains significantly undervalued; we note that the company still has $240 million remaining under its current stock-repurchase authorization.
G-wize
When did generating ad revenue and search engine algorithms begin to translate into research and development - in renewable energy. Has Google become the new Microsoft? WalMart? Google has decided to jump into the renewable energy business, namely solar and wind. It makes no logical sense, but I assume that the market will take this news in stride and the stock price will take a quick spike.
When it comes to the emerging markets look towards the Philippines, along with India. Right now China is simple too volatile. Once the markets stabilize then we will look back across the Pacific.
When it comes to the emerging markets look towards the Philippines, along with India. Right now China is simple too volatile. Once the markets stabilize then we will look back across the Pacific.
Monday, November 26, 2007
Build it, they will buy?
Far be it from me to argue about homebuilding conditions with the CEO of one of the nation's largest and most successful builders. But in releasing KB Home's (NYSE: KBH) results, the company's Jeffrey Metzger noted that in its 50-year history, his company has "been through these cycles before."
Minor point of order: There really never has been a cycle of this type, where the entire financial underpinning of the homebuilding and -selling process effectively collapsed and severely threatened other aspects of the economy in the process. I would argue that this cycle is more pervasive, deeper, and likely will be longer-lasting than any of its predecessors.
For the quarter, KB Home reported a loss of $35.6 million, or $0.46 per share, versus a profit of $153.2 million, or $1.90 a share, just a year ago. In the quarter, the company took pre-tax non-cash charges of $690.1 million to pare down the value of its inventories, joint venture assets, and land options, along with a $107.9 million charge related to goodwill impairments. Partially offsetting those charges was an after-tax gain of $438.1 million from the sale of its French subsidiary. Management wisely applied those proceeds to the redemption of $650 million of debt during the quarter.
KB Homes' release followed similarly soft results earlier in the week at Miami-based Lennar (NYSE: LEN). They likely will similarly be followed in one form or another by losses at such other builders as Meritage (NYSE: MTH), Ryland (NYSE: RYL), Centex (NYSE: CTX), and Beazer (NYSE: BZH). Indeed, KB's cancellation rate was 50% in the quarter. That's down from 60% when things began to unravel a year ago, but higher than the 34% in the sequentially prior quarter.
This brings us to the Commerce Department's Thursday report that sales of new homes dropped by 8.3% in the August quarter. But reality surely is far worse than that: The August figures don't factor in those fat cancellation rates that are hitting all the big builders. In fact, for Metzger's part, he noted an expectation that housing industry conditions will "continue to worsen through the end of the year and into 2008."
Of course, the difficulty this time is that we're not simply awaiting a general feeling among potential buyers that prices have declined enough to tickle their fancy. This time, a housing recovery will depend upon new stability in lending, big inventory reductions, and the passage of most of the fallout from the currently expanding foreclosure rates. Until these factors align, Fools shouldn't venture near this hemorrhaging sector.
Minor point of order: There really never has been a cycle of this type, where the entire financial underpinning of the homebuilding and -selling process effectively collapsed and severely threatened other aspects of the economy in the process. I would argue that this cycle is more pervasive, deeper, and likely will be longer-lasting than any of its predecessors.
For the quarter, KB Home reported a loss of $35.6 million, or $0.46 per share, versus a profit of $153.2 million, or $1.90 a share, just a year ago. In the quarter, the company took pre-tax non-cash charges of $690.1 million to pare down the value of its inventories, joint venture assets, and land options, along with a $107.9 million charge related to goodwill impairments. Partially offsetting those charges was an after-tax gain of $438.1 million from the sale of its French subsidiary. Management wisely applied those proceeds to the redemption of $650 million of debt during the quarter.
KB Homes' release followed similarly soft results earlier in the week at Miami-based Lennar (NYSE: LEN). They likely will similarly be followed in one form or another by losses at such other builders as Meritage (NYSE: MTH), Ryland (NYSE: RYL), Centex (NYSE: CTX), and Beazer (NYSE: BZH). Indeed, KB's cancellation rate was 50% in the quarter. That's down from 60% when things began to unravel a year ago, but higher than the 34% in the sequentially prior quarter.
This brings us to the Commerce Department's Thursday report that sales of new homes dropped by 8.3% in the August quarter. But reality surely is far worse than that: The August figures don't factor in those fat cancellation rates that are hitting all the big builders. In fact, for Metzger's part, he noted an expectation that housing industry conditions will "continue to worsen through the end of the year and into 2008."
Of course, the difficulty this time is that we're not simply awaiting a general feeling among potential buyers that prices have declined enough to tickle their fancy. This time, a housing recovery will depend upon new stability in lending, big inventory reductions, and the passage of most of the fallout from the currently expanding foreclosure rates. Until these factors align, Fools shouldn't venture near this hemorrhaging sector.
Sunday, November 25, 2007
Can turduckin fly?
Dear Savvy Investor,
We at Landes hope that you had a very enjoyable Thanksgiving Holiday with your family and Loved-ones.
As we wake up to a new week, an old topic has crawled back into view: airplanes. It seems that the Red race. According the the AP, Airbus SAS signed contracts Monday to sell 160 commercial passenger jets to China in a deal worth around $14.8 billion, the company said. The orders include 110 A320 planes and 50 of the slightly larger A330 planes, Airbus officials said in Beijing, where they were accompanying French President Nicolas Sarkozy on his first state visit to the Asian trading giant.
Airbus and Chinese partners this summer officially signed an agreement to open a final assembly line in the Chinese city of Tianjian to produce A320s.
This will be huge because of the increase in traffic pre and post the Summer Olympics that will be held in Beijing in 2008.
What does this mean: over the short run manufacturers that supply Airbus will see an increase in production contracts and Airbus will see an increase in revenue. Focus on the manufacturing sector over the next few weeks, there will be more news to come.
Wednesday, November 21, 2007
Hello EUro
OPEC has been seriously considering moving to a euro backed petroleum industry, as opposed to US dollar backed, and there are numerous valid economic reasons for a [potential] shift.
As the dollar's rate of exchange continues to fall against the world's major currencies, there has been much speculation about the likely knock-on effect. One area receiving a lot of attention is crude oil in general, and OPEC in particular.
It has been suggested that OPEC may begin pricing crude oil in terms of the euro, and further, that OPEC may actually begin invoicing its crude oil exports in terms of euros. This latter step would require shifting out of dollars, with OPEC receiving euros in payment.
On November 6th of 2000 Iraq became the first country to receive all of its oil export payments in euros instead of American dollars. This switch was estimated to cost Iraq $270 million dollars, but Iraq had since actually come out on top due to the rise in the value of the euro, which was actually probably influenced by Iraq’s decision to use the euro as its foreign exchange currency. At the time of the switch Iraq was selling over $60 million in crude oil a day so its easy to see that the change to the use of the euro could have a positive effect on the value of the euro.
The euro hit another all-time high against the dollar overnight on growing concerns the mortgage mess will force the
Federal Reserve to cut interest rates.Euros traded as high as $1.4855 earlier in the session before pulling back to $1.4823 recently. That was still up from $1.4812 late Tuesday.
As the dollar's rate of exchange continues to fall against the world's major currencies, there has been much speculation about the likely knock-on effect. One area receiving a lot of attention is crude oil in general, and OPEC in particular.
It has been suggested that OPEC may begin pricing crude oil in terms of the euro, and further, that OPEC may actually begin invoicing its crude oil exports in terms of euros. This latter step would require shifting out of dollars, with OPEC receiving euros in payment.
On November 6th of 2000 Iraq became the first country to receive all of its oil export payments in euros instead of American dollars. This switch was estimated to cost Iraq $270 million dollars, but Iraq had since actually come out on top due to the rise in the value of the euro, which was actually probably influenced by Iraq’s decision to use the euro as its foreign exchange currency. At the time of the switch Iraq was selling over $60 million in crude oil a day so its easy to see that the change to the use of the euro could have a positive effect on the value of the euro.
The euro hit another all-time high against the dollar overnight on growing concerns the mortgage mess will force the
Federal Reserve to cut interest rates.Euros traded as high as $1.4855 earlier in the session before pulling back to $1.4823 recently. That was still up from $1.4812 late Tuesday.
Tuesday, November 20, 2007
Mortgage Boom
It may sound hard to believe, but one part of the mortgage market is hot: reverse mortgages. And that's giving older homeowners more options to tap the equity in their homes -- but also opening the door to more confusion and mistakes.
Only a year ago, homeowners interested in reverse mortgages had little to choose from beyond the plain-vanilla, government-backed products that have long dominated the market. Such mortgages essentially allow homeowners at least 62 years old to sell a large chunk of their home equity back to a bank or other lender in exchange for a lump sum, monthly payments or a line of credit.
Now, nearly a dozen large banks and mortgage lenders have launched reverse-mortgage products with lower fees and larger payouts. One lender has reduced the minimum age requirement to 60; others are making loans on second homes and vacation rentals. "Jumbo" reverse mortgages -- for houses valued at as much as $10 million -- are becoming more common.
With a reverse mortgage, instead of the borrower making payments to the lender, the lender makes a payment or payments to the borrower. The borrower keeps control of the house and doesn't have to pay back the money as long as he or she lives there. When the homeowner dies or moves out, the loan is typically paid off by selling the house, and any money left over goes to the homeowner or the homeowner's estate.
The product is evolving from meeting basic needs to fulfilling the desires of a new generation of retirees, from funding a vacation getaway or a recreational vehicle to renting a Paris pied-a-terre. The new options, though, mean more potential for confusion among consumers -- and a bigger chance that they could miss out on getting the best loan for their situation.
And as home prices fall around the country, some homeowners stand to be disappointed. "We're seeing people apply for a reverse mortgage and find out their home is worth 5% less than they thought," says Jeff Taylor, vice president of Wells Fargo & Co.'s senior product group in Greensboro, N.C.
With so many competing offers to choose from, homeowners could easily wind up paying more in fees and interest rates than they should. Fees are typically steep -- more than 5% of the home's value -- and most borrowing limits are capped based on where the homeowner lives. Fees are paid upfront or financed, while interest rates affect how much of your equity the lender ultimately takes.
Reverse mortgage lenders traditionally have charged variable interest rates; now, fixed rates are available, but they may cost you more, says Barbara Stucki, director of the National Council on Aging's home-equity initiative.
Because of all the choices, homeowners need to be "a lot more strategic" in how they shop for a reverse mortgage, Ms. Stucki says, factoring in how they want to take the payments and how much money they want to take upfront.
The boom in reverse mortgages helped Ronald Prast, a 74-year-old Phoenix retiree. When he first applied two years ago, he was told by a loan officer that he wasn't a good candidate; government rules would have allowed him to cash out only a small portion of the value of his half-million-dollar home. But last November, when Bank of America Corp. introduced a reverse mortgage that allows homeowners to borrow as much as 65% of a property's value, up to $10 million, Mr. Prast and his wife, Carolann, quickly signed up.
The couple's house, for which they paid $105,000 in 1981, was appraised at $540,000, Mr. Prast says. They used an initial draw of $208,000 to pay off their outstanding mortgage, home-equity loan, one year's property tax and the loan fees, freeing up an extra $21,000 a year formerly used to make mortgage payments for travel and indulgences like paying for a granddaughter's semester in Australia. They also have a credit line worth $75,000 that they are setting aside for medical expenses.
"We were comfortably well off, and we wanted to release some of the funds we had tied up in our home," Mrs. Prast says.
Taking out a reverse mortgage to travel or spoil grandchildren is a far cry from just a few years ago, when such products generally were considered loans of last resort for seniors to avoid foreclosure or simply cover living costs, such as prescription drugs or hospital bills.
In the past, the reverse-mortgage market has been constrained by having one main buyer, Fannie Mae. But a half-dozen investment banks, including units of Lehman Brothers Holdings Inc. and Bank of America, have started buying reverse mortgages in the past few years, with plans eventually to package and sell them.
On Thursday, Ginnie Mae, the federal agency charged with making real-estate investment more attractive to institutional investors, said it's rolling out a standardized government bond issue backed by reverse mortgages -- a key step in creating a secondary market that could help lower borrowers' costs and increase the loans' availability.
The result: The reverse-mortgage business is booming. Though reverse mortgages represent less than 1% of the overall U.S. home-loan market, valued at about $10 trillion, the number of federally backed reverse mortgages surged 41% in the year ended Sept. 30, according to the Department of Housing and Urban Development.
Bank of America plans to expand its Arizona test of reverse-mortgage products nationwide within six months, says Colin McCormick, the bank's top reverse-mortgage executive. In April, BofA announced it was buying the reverse-mortgage business of Seattle Mortgage Co., the third-largest reverse-mortgage lender by number of loans.
The new products -- and new bells and whistles -- mean that homeowners considering a reverse mortgage are facing more homework than ever before. There are two questions they should ask first:
Brought to you by Fidelity
Only a year ago, homeowners interested in reverse mortgages had little to choose from beyond the plain-vanilla, government-backed products that have long dominated the market. Such mortgages essentially allow homeowners at least 62 years old to sell a large chunk of their home equity back to a bank or other lender in exchange for a lump sum, monthly payments or a line of credit.
Now, nearly a dozen large banks and mortgage lenders have launched reverse-mortgage products with lower fees and larger payouts. One lender has reduced the minimum age requirement to 60; others are making loans on second homes and vacation rentals. "Jumbo" reverse mortgages -- for houses valued at as much as $10 million -- are becoming more common.
With a reverse mortgage, instead of the borrower making payments to the lender, the lender makes a payment or payments to the borrower. The borrower keeps control of the house and doesn't have to pay back the money as long as he or she lives there. When the homeowner dies or moves out, the loan is typically paid off by selling the house, and any money left over goes to the homeowner or the homeowner's estate.
The product is evolving from meeting basic needs to fulfilling the desires of a new generation of retirees, from funding a vacation getaway or a recreational vehicle to renting a Paris pied-a-terre. The new options, though, mean more potential for confusion among consumers -- and a bigger chance that they could miss out on getting the best loan for their situation.
And as home prices fall around the country, some homeowners stand to be disappointed. "We're seeing people apply for a reverse mortgage and find out their home is worth 5% less than they thought," says Jeff Taylor, vice president of Wells Fargo & Co.'s senior product group in Greensboro, N.C.
With so many competing offers to choose from, homeowners could easily wind up paying more in fees and interest rates than they should. Fees are typically steep -- more than 5% of the home's value -- and most borrowing limits are capped based on where the homeowner lives. Fees are paid upfront or financed, while interest rates affect how much of your equity the lender ultimately takes.
Reverse mortgage lenders traditionally have charged variable interest rates; now, fixed rates are available, but they may cost you more, says Barbara Stucki, director of the National Council on Aging's home-equity initiative.
Because of all the choices, homeowners need to be "a lot more strategic" in how they shop for a reverse mortgage, Ms. Stucki says, factoring in how they want to take the payments and how much money they want to take upfront.
The boom in reverse mortgages helped Ronald Prast, a 74-year-old Phoenix retiree. When he first applied two years ago, he was told by a loan officer that he wasn't a good candidate; government rules would have allowed him to cash out only a small portion of the value of his half-million-dollar home. But last November, when Bank of America Corp. introduced a reverse mortgage that allows homeowners to borrow as much as 65% of a property's value, up to $10 million, Mr. Prast and his wife, Carolann, quickly signed up.
The couple's house, for which they paid $105,000 in 1981, was appraised at $540,000, Mr. Prast says. They used an initial draw of $208,000 to pay off their outstanding mortgage, home-equity loan, one year's property tax and the loan fees, freeing up an extra $21,000 a year formerly used to make mortgage payments for travel and indulgences like paying for a granddaughter's semester in Australia. They also have a credit line worth $75,000 that they are setting aside for medical expenses.
"We were comfortably well off, and we wanted to release some of the funds we had tied up in our home," Mrs. Prast says.
Taking out a reverse mortgage to travel or spoil grandchildren is a far cry from just a few years ago, when such products generally were considered loans of last resort for seniors to avoid foreclosure or simply cover living costs, such as prescription drugs or hospital bills.
In the past, the reverse-mortgage market has been constrained by having one main buyer, Fannie Mae. But a half-dozen investment banks, including units of Lehman Brothers Holdings Inc. and Bank of America, have started buying reverse mortgages in the past few years, with plans eventually to package and sell them.
On Thursday, Ginnie Mae, the federal agency charged with making real-estate investment more attractive to institutional investors, said it's rolling out a standardized government bond issue backed by reverse mortgages -- a key step in creating a secondary market that could help lower borrowers' costs and increase the loans' availability.
The result: The reverse-mortgage business is booming. Though reverse mortgages represent less than 1% of the overall U.S. home-loan market, valued at about $10 trillion, the number of federally backed reverse mortgages surged 41% in the year ended Sept. 30, according to the Department of Housing and Urban Development.
Bank of America plans to expand its Arizona test of reverse-mortgage products nationwide within six months, says Colin McCormick, the bank's top reverse-mortgage executive. In April, BofA announced it was buying the reverse-mortgage business of Seattle Mortgage Co., the third-largest reverse-mortgage lender by number of loans.
The new products -- and new bells and whistles -- mean that homeowners considering a reverse mortgage are facing more homework than ever before. There are two questions they should ask first:
Brought to you by Fidelity
Sunday, November 18, 2007
Bye Buy Biogen
BIOGEN-IDEC'S SCIENTISTS TRY TO SOLVE the riddles of science with chemistry. They have created drugs such as Rituxan for certain B-cell non-Hodgkin's lymphomas, and Tsyabri and Avonex for multiple sclerosis.
Options traders, meanwhile, try to solve the riddles of the financial market by using options pricing models to uncover pricing discrepancies and hidden opportunities not recognized by others.
Citigroup's analysts have applied the rigor of options analysis to Biogen at a time when investors are hotly debating if it will finally be bought by another company.
The stock is up 42% year-to-date, yet doubts are emerging that the stock may be too pricey even though the company has said it was for sale. The stock has declined on investor skepticism about finding a buyer, but Citigroup's analysts believe a deal announcement could come within two months.
To monetize this view, the firm's options strategist, Mitchell S. Revsine, recommends investors buy January 75 or 80 calls to position for the deal.
In a note Revsine published with Yaron Werber, who follows Biogen at Citigroup, the analysts said they believe Pfizer is the top contender to buy Biogen.
Pfizer has expressed a desire for biologics manufacturing capacity. The analysts further support their trade thesis by citing Pfizer's looming losses of some exclusive drug patents in 12 to 18 months, and an expressed interest in developing an 80/20 revenue split between small- and large-molecule treatments.
Meanwhile, the analysts said they understand other contenders, including Roche of Switzerland and Johnson & Johnson, may not be really interested in Biogen, and only participated in the bidding process to get a good view of a biotech company's operations. This is not bad, in their view, and they wager the likelihood of a takeover at 70%, but the lack of other bidders also lowers the acquisition premium. Thus, the analysts lowered Biogen's target price to $85 from $87.
The options market, which is essentially a giant probability model, is not as optimistic about a Biogen takeover. Biogen's options prices suggest a 50% takeover probability, and options pricing indicates that the stock, recently trading at about $70, may only move $9, compared with Citigroup's view for $13.30.
If investors use options to speculate on Biogen's acquisition, here's how the payout might look if the stock is at $85 by the time the January 75 calls expire. The call would have a 132% return on capital, and the January 80 call would have a 127% return. Of course, if the analysis is wrong and Biogen stock trends lower because it is not taken over, call buyers could lose all the money spent on buying the calls.
Still, options are probably the best way to trade this potential takeover. If a deal fails to materialize, the stock will decline and no one knows by how much. At least with options, the losses are known at the onset.
Options traders, meanwhile, try to solve the riddles of the financial market by using options pricing models to uncover pricing discrepancies and hidden opportunities not recognized by others.
Citigroup's analysts have applied the rigor of options analysis to Biogen at a time when investors are hotly debating if it will finally be bought by another company.
The stock is up 42% year-to-date, yet doubts are emerging that the stock may be too pricey even though the company has said it was for sale. The stock has declined on investor skepticism about finding a buyer, but Citigroup's analysts believe a deal announcement could come within two months.
To monetize this view, the firm's options strategist, Mitchell S. Revsine, recommends investors buy January 75 or 80 calls to position for the deal.
In a note Revsine published with Yaron Werber, who follows Biogen at Citigroup, the analysts said they believe Pfizer is the top contender to buy Biogen.
Pfizer has expressed a desire for biologics manufacturing capacity. The analysts further support their trade thesis by citing Pfizer's looming losses of some exclusive drug patents in 12 to 18 months, and an expressed interest in developing an 80/20 revenue split between small- and large-molecule treatments.
Meanwhile, the analysts said they understand other contenders, including Roche of Switzerland and Johnson & Johnson, may not be really interested in Biogen, and only participated in the bidding process to get a good view of a biotech company's operations. This is not bad, in their view, and they wager the likelihood of a takeover at 70%, but the lack of other bidders also lowers the acquisition premium. Thus, the analysts lowered Biogen's target price to $85 from $87.
The options market, which is essentially a giant probability model, is not as optimistic about a Biogen takeover. Biogen's options prices suggest a 50% takeover probability, and options pricing indicates that the stock, recently trading at about $70, may only move $9, compared with Citigroup's view for $13.30.
If investors use options to speculate on Biogen's acquisition, here's how the payout might look if the stock is at $85 by the time the January 75 calls expire. The call would have a 132% return on capital, and the January 80 call would have a 127% return. Of course, if the analysis is wrong and Biogen stock trends lower because it is not taken over, call buyers could lose all the money spent on buying the calls.
Still, options are probably the best way to trade this potential takeover. If a deal fails to materialize, the stock will decline and no one knows by how much. At least with options, the losses are known at the onset.
Friday, November 16, 2007
AMD get a boost
Advanced Micro Devices (AMD) says Mubadala Development has invested $622 million in the company to help beef up its growth strategy.
The Abu Dhabi based investment firm will take an 8% stake in AMD, receiving 49 million new shares priced at $12.70. AMD will pay Mubadala $14.6 million for expenses and use the remaining $608 million for its growth strategy and general operations.
Mubadala says it is a non-controlling minority stake and that it will not add a board member to represent the group.
The move comes as speculation swirls around a possible management shakeup and the potential for a new manufacturing approach. Some observers say AMD is exploring the sale of some of its chipmaking facilities in an effort to go so-called fab lite, meaning less emphasis on manufacturing and more of a push toward development of new chips.
The Abu Dhabi based investment firm will take an 8% stake in AMD, receiving 49 million new shares priced at $12.70. AMD will pay Mubadala $14.6 million for expenses and use the remaining $608 million for its growth strategy and general operations.
Mubadala says it is a non-controlling minority stake and that it will not add a board member to represent the group.
The move comes as speculation swirls around a possible management shakeup and the potential for a new manufacturing approach. Some observers say AMD is exploring the sale of some of its chipmaking facilities in an effort to go so-called fab lite, meaning less emphasis on manufacturing and more of a push toward development of new chips.
Thursday, November 15, 2007
Bulls vs. Bears
We frequently end the week with our Bull and Bear picks, and today will be no different;
Bearish:
1. Research in Motion (RIMM) the staple was down today, as it had been most of the week. Strong competition in the smart phone market along with “push” technology being unveiled with the new Microsoft Mobile platform, RIM simply can no longer strong-arm its customers into buying new Blackberry’s. Additionally, they simply don’t keep up with demand. When the BB is hot its hot, and RIM hasn’t managed to find a happy medium where they can release new products at a steady pace on multiple service providers. The Pearl was a big hit, but it is just now making its way to Sprint. The Curve was a big seller as well, but its on available on AT&T.
2. H&R Block (HRB). This is simple; HRB does 75% of their business between January and April. However, companies like Jackson Hewett, Turbo Tax and Liberty Tax Service are beginning to cut into profit margins.
On August 30, H&R Block reported 1Q 2008 net loss of $110 million or a loss of $0.34 per share. This figure does not include huge losses, with perhaps more to come, as H&R Block tries to exit the subprime mortgage writing business. Thus far, losses including discontinued mortgage operations and write down in value of mortgages were over $300 million, or a loss of $0.93 per share. Forget gracefully, H&R Block is trying to offload its Option One Mortgage unit any which way it can, including easing the conditions of sale to Cerberus Capital Management, L.P. Losses from discontinued operations, to the tune of $150-200 million, will continue to plague earnings for several more quarters. As a result, the company has no money available for share repurchases until FY 2009.
Bullish:
1. Qwest, the Baby Bell is on the decline right now, but they have too much market share to stay there for long.
2. Ralcorp Holdings, Inc. engages in the manufacture, distribution, and marketing of store brand food products in the United States and Canada. Its products include ready-to-eat and hot cereal products; snack mixes and corn-based snacks; crackers and cookies; frozen griddle products, such as pancakes, waffles, French toast, custom griddle products, and biscuits; breads, rolls, and muffins; wet-filled products, including salad dressings, mayonnaise, peanut butter, syrups, jams and jellies, and specialty sauces; and snack nuts and chocolate candy. The company sells its products to retail chains, mass merchandisers, grocery wholesalers, warehouse club stores, drug stores, restaurant chains, and food service distributors. In addition, Ralcorp Holdings holds approximately 19% interest in Vail Resorts, Inc., a mountain resort operator in the United States. The company was founded in 1995 and is based in St. Louis, Missouri.
3. Home Solutions of America (HSOA). This is the Landes small cap of the week. Home Solutions to delay Q3 Form 10-Q and conference call Co announced that it will delay the filing of its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and associated conference call. The delay is necessary due to the previously announced voluntary review of related party transactions and other matters being conducted by the Audit Committee of the Co's Board of Directors.
Bearish:
1. Research in Motion (RIMM) the staple was down today, as it had been most of the week. Strong competition in the smart phone market along with “push” technology being unveiled with the new Microsoft Mobile platform, RIM simply can no longer strong-arm its customers into buying new Blackberry’s. Additionally, they simply don’t keep up with demand. When the BB is hot its hot, and RIM hasn’t managed to find a happy medium where they can release new products at a steady pace on multiple service providers. The Pearl was a big hit, but it is just now making its way to Sprint. The Curve was a big seller as well, but its on available on AT&T.
2. H&R Block (HRB). This is simple; HRB does 75% of their business between January and April. However, companies like Jackson Hewett, Turbo Tax and Liberty Tax Service are beginning to cut into profit margins.
On August 30, H&R Block reported 1Q 2008 net loss of $110 million or a loss of $0.34 per share. This figure does not include huge losses, with perhaps more to come, as H&R Block tries to exit the subprime mortgage writing business. Thus far, losses including discontinued mortgage operations and write down in value of mortgages were over $300 million, or a loss of $0.93 per share. Forget gracefully, H&R Block is trying to offload its Option One Mortgage unit any which way it can, including easing the conditions of sale to Cerberus Capital Management, L.P. Losses from discontinued operations, to the tune of $150-200 million, will continue to plague earnings for several more quarters. As a result, the company has no money available for share repurchases until FY 2009.
Bullish:
1. Qwest, the Baby Bell is on the decline right now, but they have too much market share to stay there for long.
2. Ralcorp Holdings, Inc. engages in the manufacture, distribution, and marketing of store brand food products in the United States and Canada. Its products include ready-to-eat and hot cereal products; snack mixes and corn-based snacks; crackers and cookies; frozen griddle products, such as pancakes, waffles, French toast, custom griddle products, and biscuits; breads, rolls, and muffins; wet-filled products, including salad dressings, mayonnaise, peanut butter, syrups, jams and jellies, and specialty sauces; and snack nuts and chocolate candy. The company sells its products to retail chains, mass merchandisers, grocery wholesalers, warehouse club stores, drug stores, restaurant chains, and food service distributors. In addition, Ralcorp Holdings holds approximately 19% interest in Vail Resorts, Inc., a mountain resort operator in the United States. The company was founded in 1995 and is based in St. Louis, Missouri.
3. Home Solutions of America (HSOA). This is the Landes small cap of the week. Home Solutions to delay Q3 Form 10-Q and conference call Co announced that it will delay the filing of its Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and associated conference call. The delay is necessary due to the previously announced voluntary review of related party transactions and other matters being conducted by the Audit Committee of the Co's Board of Directors.
Tuesday, November 13, 2007
Big Pharma
On the way upIf you are looking for some good long term advice, keep reading. There is a great company out there, that gets very little media attention, but they quietly go on about the business of saving lives every day. The name of the company is Nektar Therapeutics (NKTR).
One of Nextar's biggest inventions recently was the technology that allows insulin to be administered through a large inhalation device; which was purchased by Pfizer.
Not only that but Nektar has received grants from the American Association of Cancer Research (AARC), but they also have an R&D deal with Bayer Healthcare.
Top Partnered Products: (approved)
Exubera® (Pfizer)
Neulasta® (Amgen)
PEGASYS® (Roche)
Macugen™ (Eyetech)
Nektar will be a great M&A target over the next few years, and with a stock price in the $6 range currently, we are looking for a target at as high as $13.50 per share over the next 24 months.
Rating: Strong Buy
Still just looking up
As for Pfizer things can't get much worse for the stock, which has fallen 57% from its record high in 2000 and 9% over the last 12 months. Blame falling revenues, failed drugs and widespread doubts that it can replace drugs losing their patents, including its blockbuster cholesterol pill Lipitor.But with multiples hitting 10-year lows and U.S. Big Pharma's highest dividend yield -- 5.1% -- investors have little to lose.
One of Nextar's biggest inventions recently was the technology that allows insulin to be administered through a large inhalation device; which was purchased by Pfizer.
Not only that but Nektar has received grants from the American Association of Cancer Research (AARC), but they also have an R&D deal with Bayer Healthcare.
Top Partnered Products: (approved)
Exubera® (Pfizer)
Neulasta® (Amgen)
PEGASYS® (Roche)
Macugen™ (Eyetech)
Nektar will be a great M&A target over the next few years, and with a stock price in the $6 range currently, we are looking for a target at as high as $13.50 per share over the next 24 months.
Rating: Strong Buy
Still just looking up
As for Pfizer things can't get much worse for the stock, which has fallen 57% from its record high in 2000 and 9% over the last 12 months. Blame falling revenues, failed drugs and widespread doubts that it can replace drugs losing their patents, including its blockbuster cholesterol pill Lipitor.But with multiples hitting 10-year lows and U.S. Big Pharma's highest dividend yield -- 5.1% -- investors have little to lose.
Sunday, November 11, 2007
Ways to boost cash flow
To Save or not to Save
Many of us are sitting on ten of thousands of dollars in retirement and college savings that we can access with minimal or no tax consequences or early-withdrawal penalties. Past Congresses made these allowances to help middle-income Americans get through hard times. These are sound ways to tap your long-term savings:
1. Roth IRAs. Because these accounts are funded with after-tax dollars, all contributions can be withdrawn freely at any time. Contributions made by converting a traditional IRA to a Roth can be withdrawn if held in the account five or more years. Conversion contributions less than five years old will be subject to a modest 10% tax for early withdrawal. Avoid pulling out earnings because they're subject to both income tax and the 10% levy. That hit could approach 50% of the withdrawal, depending on your tax bracket and state and local income-tax rates.
2. 529 College Savings Plans. You can withdraw funds you contributed with after-tax dollars to these accounts with potentially minimal tax consequences. The withdrawn money will be reported to the IRS on a proportional basis, as principal and earnings, depending on the account's performance. For instance, if your contributions produced a 25% return and you take out $10,000, then $8,000 will be tax-free and the $2,000 representing the gain will be taxable. At worst, you may owe up to $1,000 on that amount, so you reap $9,000 or more from your $10,000 withdrawal. If the account's earnings are much greater, this is a less attractive source to tap. You should not take out any contributions made by others such as relatives. And 529 accounts set up under the Uniform Gift to Minors Act are not accessible.
3. Halt contributions to 401(k) and 403(b) plans. Many people overlook the fact they can suspend contributions to these employer-sponsored retirement accounts with their very next paycheck, Yeske says. Get yourself to HR and cancel these set-asides for the future -- but restart them as soon as you can after your crisis has passed.
4. 401(k) and 403(b) loans. Many employers allow general-purpose loans from these savings plans. Such loans typically must be repaid within five years. The upside is the interest you pay on the loan goes into your account, along with your replenished funds. Just be sure to deploy the money strategically to get through your cash crisis and not fritter it away.
If you're really strapped and must withdraw money from your 401(k), 403(b) or tax-deductible IRAs be prepared to face that severe tax bite of up to 50% come filing time. If you hold off until this Jan. 1, you at least won't have to square up with the IRS until April 2009.
If you don't see your financial situation improving in the coming year, this move is strongly ill-advised unless you put aside the taxman's due in a lock box.
Monthly Boost
If you're sure it's impossible to get your income and expenses in line, think again. Many people can add $1,000 or more to their monthly income with minimal sacrifice. And since that's after-tax money, it represents about $1,500 or more you can put toward your mortgage, since your higher interest cost is tax deductible.
1. Adjust your payroll-tax withholding to account for an increased mortgage payment. If your payment jumps $600 a month due to an interest-rate hike, that's all deductible and will give you an additional $7,200 tax write-off for a full year. That's a roughly $1,800 to $3,000 annual tax break -- depending on your bracket and state and local income taxes -- which means you could safely reduce your withholding $150 to $250 a month and boost your take-home pay that amount.
Adjust your tax withholding to stop overpaying if you typically get a filing refund. The IRS reported in April that refunds issued this year averaged $2,394. So taxpayers on average give the feds an interest-free loan of $200 cash a month. Since our tax exposure changes from year to year, Brian Pon, a tax adviser with Berkeley, Calif.-based Financial Connections Group, recommends consulting your tax preparer to determine how to bring your withholding in line with your anticipated liability.
2. Take a second job and send teenagers out to work. It seems like an obvious move, but many people under severe money stress freeze up like a deer caught in headlights and get run down financially. With the U.S. unemployment rate still below 5%, part-time positions are plentiful in most all job markets. The pay may be modest, but the added income could prove invaluable to your financial survival.
3. Sell your late-model car and buy a reliable older one. If you have an auto loan costing $350 a month (or worse yet, two loans), you could apply the difference in the price you get for your car and the balance you owe to the purchase of an older vehicle, many of which now still look good and perform well with 100,000-plus miles. Not only will you eliminate the monthly payment (which could cover a $500 jump in your mortgage payment due to the tax deduction), you also could drop collision and comprehensive insurance required by auto lenders if you can bear that risk, saving perhaps $50 a month more. If you own your late-model car outright, bank the money you raise after buying an older one and draw off it to steer through your cash-flow squeeze.
4. Get rid of your cell phones, high-speed Internet access and cable or satellite TV service. There was a time not long ago when we lived without these pricey nonessentials, for which many Americans pay $250 a month or more. If you're locked into a cell-phone contract, don't renew if it's soon to expire. If not, bite the bullet and pay the early-termination penalties. As for an Internet connection, default to a $9.95 a month dial-up plan until your fortunes improve.
5. Increase your insurance deductibles. Many auto lenders allow borrowers to maintain collision and comp deductibles of up to $1,000. And many mortgage lenders permit deductibles of $3,000 to $5,000 on homeowners insurance. You assume greater out-of-pocket risk, but you could save $100 a month or more by raising your deductibles.
Of course, the most immediate boost to your cash flow will come from curtailing your spending. Due to our vast use of hastily grabbed credit and debit cards to make purchases these days, Yeske says, many of us don't realize how large a percentage of our spending is a matter of choice and not absolute need.
"Few human beings are mentally and emotionally wired for budgeting because it requires a high level of concentration to track expenses, dollar-by-dollar, on a daily basis," Yeske says. "But just keeping a sustained focus on your spending can do your cash flow a world of good."
Many of us are sitting on ten of thousands of dollars in retirement and college savings that we can access with minimal or no tax consequences or early-withdrawal penalties. Past Congresses made these allowances to help middle-income Americans get through hard times. These are sound ways to tap your long-term savings:
1. Roth IRAs. Because these accounts are funded with after-tax dollars, all contributions can be withdrawn freely at any time. Contributions made by converting a traditional IRA to a Roth can be withdrawn if held in the account five or more years. Conversion contributions less than five years old will be subject to a modest 10% tax for early withdrawal. Avoid pulling out earnings because they're subject to both income tax and the 10% levy. That hit could approach 50% of the withdrawal, depending on your tax bracket and state and local income-tax rates.
2. 529 College Savings Plans. You can withdraw funds you contributed with after-tax dollars to these accounts with potentially minimal tax consequences. The withdrawn money will be reported to the IRS on a proportional basis, as principal and earnings, depending on the account's performance. For instance, if your contributions produced a 25% return and you take out $10,000, then $8,000 will be tax-free and the $2,000 representing the gain will be taxable. At worst, you may owe up to $1,000 on that amount, so you reap $9,000 or more from your $10,000 withdrawal. If the account's earnings are much greater, this is a less attractive source to tap. You should not take out any contributions made by others such as relatives. And 529 accounts set up under the Uniform Gift to Minors Act are not accessible.
3. Halt contributions to 401(k) and 403(b) plans. Many people overlook the fact they can suspend contributions to these employer-sponsored retirement accounts with their very next paycheck, Yeske says. Get yourself to HR and cancel these set-asides for the future -- but restart them as soon as you can after your crisis has passed.
4. 401(k) and 403(b) loans. Many employers allow general-purpose loans from these savings plans. Such loans typically must be repaid within five years. The upside is the interest you pay on the loan goes into your account, along with your replenished funds. Just be sure to deploy the money strategically to get through your cash crisis and not fritter it away.
If you're really strapped and must withdraw money from your 401(k), 403(b) or tax-deductible IRAs be prepared to face that severe tax bite of up to 50% come filing time. If you hold off until this Jan. 1, you at least won't have to square up with the IRS until April 2009.
If you don't see your financial situation improving in the coming year, this move is strongly ill-advised unless you put aside the taxman's due in a lock box.
Monthly Boost
If you're sure it's impossible to get your income and expenses in line, think again. Many people can add $1,000 or more to their monthly income with minimal sacrifice. And since that's after-tax money, it represents about $1,500 or more you can put toward your mortgage, since your higher interest cost is tax deductible.
1. Adjust your payroll-tax withholding to account for an increased mortgage payment. If your payment jumps $600 a month due to an interest-rate hike, that's all deductible and will give you an additional $7,200 tax write-off for a full year. That's a roughly $1,800 to $3,000 annual tax break -- depending on your bracket and state and local income taxes -- which means you could safely reduce your withholding $150 to $250 a month and boost your take-home pay that amount.
Adjust your tax withholding to stop overpaying if you typically get a filing refund. The IRS reported in April that refunds issued this year averaged $2,394. So taxpayers on average give the feds an interest-free loan of $200 cash a month. Since our tax exposure changes from year to year, Brian Pon, a tax adviser with Berkeley, Calif.-based Financial Connections Group, recommends consulting your tax preparer to determine how to bring your withholding in line with your anticipated liability.
2. Take a second job and send teenagers out to work. It seems like an obvious move, but many people under severe money stress freeze up like a deer caught in headlights and get run down financially. With the U.S. unemployment rate still below 5%, part-time positions are plentiful in most all job markets. The pay may be modest, but the added income could prove invaluable to your financial survival.
3. Sell your late-model car and buy a reliable older one. If you have an auto loan costing $350 a month (or worse yet, two loans), you could apply the difference in the price you get for your car and the balance you owe to the purchase of an older vehicle, many of which now still look good and perform well with 100,000-plus miles. Not only will you eliminate the monthly payment (which could cover a $500 jump in your mortgage payment due to the tax deduction), you also could drop collision and comprehensive insurance required by auto lenders if you can bear that risk, saving perhaps $50 a month more. If you own your late-model car outright, bank the money you raise after buying an older one and draw off it to steer through your cash-flow squeeze.
4. Get rid of your cell phones, high-speed Internet access and cable or satellite TV service. There was a time not long ago when we lived without these pricey nonessentials, for which many Americans pay $250 a month or more. If you're locked into a cell-phone contract, don't renew if it's soon to expire. If not, bite the bullet and pay the early-termination penalties. As for an Internet connection, default to a $9.95 a month dial-up plan until your fortunes improve.
5. Increase your insurance deductibles. Many auto lenders allow borrowers to maintain collision and comp deductibles of up to $1,000. And many mortgage lenders permit deductibles of $3,000 to $5,000 on homeowners insurance. You assume greater out-of-pocket risk, but you could save $100 a month or more by raising your deductibles.
Of course, the most immediate boost to your cash flow will come from curtailing your spending. Due to our vast use of hastily grabbed credit and debit cards to make purchases these days, Yeske says, many of us don't realize how large a percentage of our spending is a matter of choice and not absolute need.
"Few human beings are mentally and emotionally wired for budgeting because it requires a high level of concentration to track expenses, dollar-by-dollar, on a daily basis," Yeske says. "But just keeping a sustained focus on your spending can do your cash flow a world of good."
Saturday, November 10, 2007
Martin Zweig Picks a Pair of Winners
Salvaging Profits
The first of these is Copart. Founded in 1982, Copart processes and sells salvage vehicles primarily to licensed dismantlers, rebuilders and used-vehicle dealers. These are vehicles obtained from insurance companies which have been damaged and deemed a total loss by the insurance company, or recovered stolen vehicles for which an insurance settlement has already been made.
The Zweig strategy looks for a stock with a price-to-earnings ratio that is between 5 (meaning a P/E of 5) and three times the current market P/E (which is 19). This provides a range of 5 to 57, and Copart's is nearly in the middle at 25.66.
Another important issue is that the rate of quarterly sales growth be rising. To evaluate this, the change from this quarter last year to the present quarter (which was 12.2%) is compared with the previous quarter last year compared with the previous quarter of the current year (which was -2.6%). Sales growth for the prior must be greater than the latter, and this is true for Copart.
The next steps involve looking at earnings from various angles. These include current quarterly earnings having to be positive, quarterly earnings one year ago having to be positive, the current quarter being greater than the year-ago quarter, and earnings growing for the past several quarters. Copart passes all of these tests.
In addition, EPS must have increased in each of the past five years, which is true for Copart. One final earnings test is that the long-term earnings growth rate must be at least 15% per year. Copart's long-term growth rate, based on the average of the three-, four- and five-year historical EPS growth rates, is 20.42%.
One last variable worth mentioning is that the company should not have a high level of debt. Copart has no long-term debt, which is great.
Insuring Future Gains
The second Zweig-strategy-approved stock is RLI, which started in 1961 as a company that insured for contact-lens replacements, and has since expanded into what the company calls "a specialty insurance company" that sells property and casualty policies and surety bonds aimed at niche or underserved markets.
RLI's P/E of 6.86 fits into the Zweig range. In terms of earnings, RLI's EPS is positive, the quarter a year ago was positive, the current EPS is greater than the year-ago earnings, and earnings have been increasing for the past several quarters.
Further, EPS growth for the current quarter is greater than the historical growth rate, earnings have increased in each of the past five years, and long-term EPS growth is a strong 27.91%, based on the average of the three-, four- and five-year historical EPS growth rates. We don't look at debt, because this is a financial company.
Both of these companies are strong performers. They are making money and have reasonably priced stocks. And, of course, they have the approval of the Zweig strategy. These are two stocks worthy of your portfolio
ByJohn Reese, RealMoney.com Contributor
The first of these is Copart. Founded in 1982, Copart processes and sells salvage vehicles primarily to licensed dismantlers, rebuilders and used-vehicle dealers. These are vehicles obtained from insurance companies which have been damaged and deemed a total loss by the insurance company, or recovered stolen vehicles for which an insurance settlement has already been made.
The Zweig strategy looks for a stock with a price-to-earnings ratio that is between 5 (meaning a P/E of 5) and three times the current market P/E (which is 19). This provides a range of 5 to 57, and Copart's is nearly in the middle at 25.66.
Another important issue is that the rate of quarterly sales growth be rising. To evaluate this, the change from this quarter last year to the present quarter (which was 12.2%) is compared with the previous quarter last year compared with the previous quarter of the current year (which was -2.6%). Sales growth for the prior must be greater than the latter, and this is true for Copart.
The next steps involve looking at earnings from various angles. These include current quarterly earnings having to be positive, quarterly earnings one year ago having to be positive, the current quarter being greater than the year-ago quarter, and earnings growing for the past several quarters. Copart passes all of these tests.
In addition, EPS must have increased in each of the past five years, which is true for Copart. One final earnings test is that the long-term earnings growth rate must be at least 15% per year. Copart's long-term growth rate, based on the average of the three-, four- and five-year historical EPS growth rates, is 20.42%.
One last variable worth mentioning is that the company should not have a high level of debt. Copart has no long-term debt, which is great.
Insuring Future Gains
The second Zweig-strategy-approved stock is RLI, which started in 1961 as a company that insured for contact-lens replacements, and has since expanded into what the company calls "a specialty insurance company" that sells property and casualty policies and surety bonds aimed at niche or underserved markets.
RLI's P/E of 6.86 fits into the Zweig range. In terms of earnings, RLI's EPS is positive, the quarter a year ago was positive, the current EPS is greater than the year-ago earnings, and earnings have been increasing for the past several quarters.
Further, EPS growth for the current quarter is greater than the historical growth rate, earnings have increased in each of the past five years, and long-term EPS growth is a strong 27.91%, based on the average of the three-, four- and five-year historical EPS growth rates. We don't look at debt, because this is a financial company.
Both of these companies are strong performers. They are making money and have reasonably priced stocks. And, of course, they have the approval of the Zweig strategy. These are two stocks worthy of your portfolio
ByJohn Reese, RealMoney.com Contributor
Thursday, November 8, 2007
Artic Tax
Are you sick and tired of having your hard earned money sucked out of your paycheck? Do you enjoy snow and cold weather? If you answered YES to the first two questiond, then you may want to consider Alaska, as your State of residence.
For the 17th year in a row, the largest an most western State in the USA, has earned the convted distinction of being America's most tax-friendly state. Every year teh Tax Foundation publishes its report on the each states' tax burden.
Comparing the average taxpayer's total state and local tax burden for 2006 in each of the 50 states and the District of Columbia, Alaska residents had the lightest tax burden in the entire Country.
The numbers are tabulated by calculating the sum total that residents pay in state and local income taxes, property taxes, sales taxes, food taxes, clothing taxes,luxury taxes and fuel taxes, and just about any other taxable item you can think of. It also factors in the portion of business taxes passed along to state residents through higher prices, lower wages or lower profits. The wizards over there crunch all of the numbers.
Alaska? Alaskan do not pay income or state sales tax of any kind. Additionally, most Alankan's actually receive a tax refunds from the IRS, because of the excess revenue it collects from companies extracting oil from the state. The overall tax burden of Alaka is 6.6%, compared to Vermontians who fork over a whopping 41.1%.
So when its time to retire, forget Florida, and think Alaska
For the 17th year in a row, the largest an most western State in the USA, has earned the convted distinction of being America's most tax-friendly state. Every year teh Tax Foundation publishes its report on the each states' tax burden.
Comparing the average taxpayer's total state and local tax burden for 2006 in each of the 50 states and the District of Columbia, Alaska residents had the lightest tax burden in the entire Country.
The numbers are tabulated by calculating the sum total that residents pay in state and local income taxes, property taxes, sales taxes, food taxes, clothing taxes,luxury taxes and fuel taxes, and just about any other taxable item you can think of. It also factors in the portion of business taxes passed along to state residents through higher prices, lower wages or lower profits. The wizards over there crunch all of the numbers.
Alaska? Alaskan do not pay income or state sales tax of any kind. Additionally, most Alankan's actually receive a tax refunds from the IRS, because of the excess revenue it collects from companies extracting oil from the state. The overall tax burden of Alaka is 6.6%, compared to Vermontians who fork over a whopping 41.1%.
So when its time to retire, forget Florida, and think Alaska
Wednesday, November 7, 2007
Fortify the gates
The Markets have been a funk. Blue chips are getting hit hard, especially the financial sector. Lets forget about the financial sector completely for a moment. Now is a good time to look into defense/security and energy.
Looking at Defense; The defense budget -- excluding supplemental funding used mainly for the Iraq war -- should grow about 8% over the next three years, according to projections by JSA Research, an independent defense sector research group in Newport, R.I.
A good place to start is with companies that make armour plating for vehicles. Retrofitting is very expensive to purhcase, however, the asset allocation is not very high from the perspective of the company. A good choice here is Alcoa, Inc.. Alcoa was recently awarded a $31.7 million contract to supply aluminum armor plate for the Army's new armored vehicle program. Alcoa offers diversification along with a dividend, plus they accept direct investment, all of which lead us to give them a BUY rating.
Another good pick is,Northrop Grumman. This defense contractor has a hand in everything from military electronics and information technology to ships, avionics and unmanned aerial vehicles. But worries about cutbacks in spending on ships have some investors concerned, putting pressure on Northrops valuation. Fears of significant contraction in shipbuilding are overblown, maintains Pollack. Troy Lahr, defense sector analyst at Stifel Nicolaus, projects Northrup will produce $1.6 billion in free cash flow in 2006, which will support an ongoing share buyback program.
United Industrial also receives our BUY pick of the day. They too make unmanned aerial vehicles, and they are spending a great deal of money on R&D; which is OK because they are expecting 8% sales growth.
Applied Signal Technology, which has been in the news over the past few months due to their close relationship with the NSA and Pentagon. They operate with near impunity in today's USA. This company makes equipment used to analyze digital signals. That could mean eavesdropping on cell phone conversations, identifying the electromagnetic signature of a ship, or analyzing radar images.
When it comes to picking up terrorist "chatter" or Americans' cell phone calls, these are the people that the US Government calls. As with many intelligence-related companies, predicting future earning or sales numbers is often very difficult. The reason is simple, much of what their new products are secret, along with the specifics on contracts awarded. Still, AST has a good record of selling to the NSA, CIA, MI6 and the like.
As long as the perceived risk of domestic and international terrorism persist, the US and other governments are not likely to take a slice form the defense pie; now lets go spy on some bad guys.
Looking at Defense; The defense budget -- excluding supplemental funding used mainly for the Iraq war -- should grow about 8% over the next three years, according to projections by JSA Research, an independent defense sector research group in Newport, R.I.
A good place to start is with companies that make armour plating for vehicles. Retrofitting is very expensive to purhcase, however, the asset allocation is not very high from the perspective of the company. A good choice here is Alcoa, Inc.. Alcoa was recently awarded a $31.7 million contract to supply aluminum armor plate for the Army's new armored vehicle program. Alcoa offers diversification along with a dividend, plus they accept direct investment, all of which lead us to give them a BUY rating.
Another good pick is,Northrop Grumman. This defense contractor has a hand in everything from military electronics and information technology to ships, avionics and unmanned aerial vehicles. But worries about cutbacks in spending on ships have some investors concerned, putting pressure on Northrops valuation. Fears of significant contraction in shipbuilding are overblown, maintains Pollack. Troy Lahr, defense sector analyst at Stifel Nicolaus, projects Northrup will produce $1.6 billion in free cash flow in 2006, which will support an ongoing share buyback program.
United Industrial also receives our BUY pick of the day. They too make unmanned aerial vehicles, and they are spending a great deal of money on R&D; which is OK because they are expecting 8% sales growth.
Applied Signal Technology, which has been in the news over the past few months due to their close relationship with the NSA and Pentagon. They operate with near impunity in today's USA. This company makes equipment used to analyze digital signals. That could mean eavesdropping on cell phone conversations, identifying the electromagnetic signature of a ship, or analyzing radar images.
When it comes to picking up terrorist "chatter" or Americans' cell phone calls, these are the people that the US Government calls. As with many intelligence-related companies, predicting future earning or sales numbers is often very difficult. The reason is simple, much of what their new products are secret, along with the specifics on contracts awarded. Still, AST has a good record of selling to the NSA, CIA, MI6 and the like.
As long as the perceived risk of domestic and international terrorism persist, the US and other governments are not likely to take a slice form the defense pie; now lets go spy on some bad guys.
Tuesday, November 6, 2007
Just because
Why are we still talking about oil, because the professinals have all lost their minds. The worlds needs about 85m barrels of oil, and over 87m barrels are being produced; therefore we have enough. But that wont help your pocketbook. My suggestions, save money on cell phone calls and throw it into your gas tank, you're going to need it.
Chevron (CVX): Cramer said the recent rally was only a “dead cat bounce” for the financials and would sell stock in that sector and buy oil stocks, such as Chevron and minerals.
Rio Tinto (RTP) and BHP Billiton (BHP), CVRD (RIO), Freeport McMoRan (FCX): Cramer was critical of Citigroup’s downgrade of RTP and BHP. He expressed his bullishness on both stocks and included RIO and FCX which he says is not a falling knife but a stopping knife.
Chevron (CVX): Cramer said the recent rally was only a “dead cat bounce” for the financials and would sell stock in that sector and buy oil stocks, such as Chevron and minerals.
Rio Tinto (RTP) and BHP Billiton (BHP), CVRD (RIO), Freeport McMoRan (FCX): Cramer was critical of Citigroup’s downgrade of RTP and BHP. He expressed his bullishness on both stocks and included RIO and FCX which he says is not a falling knife but a stopping knife.
Monday, November 5, 2007
Buy Low... Sell later
The markets seem to be in turmoil: oil stocks are falling, and the financial sector looks more like the auto industry of early this decade. The airlines seem to be leaking jet fuel. In the border scope, the Nikkei 225 lost 1.6% to 16,254.67, on top of Monday's 1.5% fall; Australia's S&P/ASX 200 declined 0.9% to 6,634.90, New Zealand's NZX 50 index dropped 0.7% to 4,124.20. What's next?
In a throw back to the mid-late 1990s, its time to look at tech. For started the Big G has decided that the future of search is mobile. So it teamed up, with other behemoths Motorola Inc,Sprint Nextel, Qualcom, and whom ever else they decide that they may want to team up with, to roll out their new mobile phone footprint. What Google has decided to do is control the next generation of cell phone software.
Watch closely, Google will not stop climbing until it hits the $900/share mark.
Sunny Day
One of the nations largest server/software manufactures Sun Microsystems has finally ventured back into the black for a full year. This is the first time Sun has achieved such a feat since the dot.com bubble burst. Sun shares gained 11 cents, or 2 percent, to close at $5.71. After the results were released, the stock price fell 14 cents to $5.57.Rating: Buy. Sun is aggressively cutting cost and jobs to make themselves more profitable. Right now they are a value stock, but with new products on the horizon they will grow over the next 12 months. Our target for JAVA is $12.5. Sun expects a gross margin between 44 percent and 47 percent for the full 2008 fiscal year, above its previous estimates. Revenue is expected to grow in the low to mid-single digits.
Another tech hot pick is Novatel Wireless Inc. which swung to third-quarter net income of $9.2 million, or 28 cents a share, from a year-earlier loss of $895,000, or 3 cents a share. Excluding share-based compensation, Novatel reported earnings of 31 cents a share. The San Diego communications company said revenue jumped 90% to $104.6 million from $55.1 million. On average, analysts surveyed by Thomson Financial expected earnings of 23 cents a share on revenue of $102 million. Looking ahead, Novatel expects fourth-quarter earnings of 31 cents a share on revenue of $120 million. Excluding share-based compensation, Novatel expects fourth-quarter earnings of 34 cents a share.
In a throw back to the mid-late 1990s, its time to look at tech. For started the Big G has decided that the future of search is mobile. So it teamed up, with other behemoths Motorola Inc,Sprint Nextel, Qualcom, and whom ever else they decide that they may want to team up with, to roll out their new mobile phone footprint. What Google has decided to do is control the next generation of cell phone software.
Watch closely, Google will not stop climbing until it hits the $900/share mark.
Sunny Day
One of the nations largest server/software manufactures Sun Microsystems has finally ventured back into the black for a full year. This is the first time Sun has achieved such a feat since the dot.com bubble burst. Sun shares gained 11 cents, or 2 percent, to close at $5.71. After the results were released, the stock price fell 14 cents to $5.57.Rating: Buy. Sun is aggressively cutting cost and jobs to make themselves more profitable. Right now they are a value stock, but with new products on the horizon they will grow over the next 12 months. Our target for JAVA is $12.5. Sun expects a gross margin between 44 percent and 47 percent for the full 2008 fiscal year, above its previous estimates. Revenue is expected to grow in the low to mid-single digits.
Another tech hot pick is Novatel Wireless Inc. which swung to third-quarter net income of $9.2 million, or 28 cents a share, from a year-earlier loss of $895,000, or 3 cents a share. Excluding share-based compensation, Novatel reported earnings of 31 cents a share. The San Diego communications company said revenue jumped 90% to $104.6 million from $55.1 million. On average, analysts surveyed by Thomson Financial expected earnings of 23 cents a share on revenue of $102 million. Looking ahead, Novatel expects fourth-quarter earnings of 31 cents a share on revenue of $120 million. Excluding share-based compensation, Novatel expects fourth-quarter earnings of 34 cents a share.
Sunday, November 4, 2007
Citi - off the wire & into the fire
NEW YORK (AP) -- Citigroup Inc. Chief Executive Charles Prince is expected to step down soon from the helm of the nation's largest bank, which many shareholders and analysts say needs new leadership to extract itself from a mess of worrisome debt.
If he does resign, Prince, 57, would become the second CEO at a major U.S. financial institution to leave during this year's credit crisis, following Merrill Lynch's Stan O'Neal.
Citigroup's board is meeting Sunday, and Prince will offer his resignation then, The Wall Street Journal first reported Friday, citing unnamed people familiar with the situation. The New York Times also reported Prince will resign and said the company might name former Treasury Secretary Robert Rubin, who now chairs the bank's executive committee, as interim chairman.
Citigroup spokesman Michael Hanretta would not comment on the reports.
Prince became chief executive of Citigroup in October 2003. Many shareholders have blasted him openly for much of his tenure, as Citigroup's stock lagged its peers. Shares closed Friday at $37.73, about 20 percent below where they were when Prince became CEO.
Prince's position looked especially shaky after the company on Oct. 1 estimated that third-quarter profit would decline about 60 percent to some $2.2 billion after seeing nearly $6 billion in credit costs and write-downs of overly leveraged corporate debt and souring home mortgages. At that time, Prince said the bank's earnings would return to normal in the fourth quarter.
But when Citigroup released its third-quarter results two weeks later, the write-downs and credit costs exceeded $6 billion, and Chief Financial Officer Gary Crittenden indicated the outlook going forward wasn't as upbeat as Prince had predicted.
Citigroup wasn't alone in its third-quarter turmoil, of course. When borrowers with poor credit stopped paying their mortgages, banks not only had to take losses on those subprime mortgages, they also saw instruments in their portfolios backed by mortgages plummet in value.
But Citigroup's stumbles were particularly grievous, given the bank's size, history and CEO, who has been telling shareholders for years to give his strategy a chance. Even in October, Prince said in a call to analysts: "I think any fair-minded person would say that strategic plan is working."
Analysts believe Citigroup has more losses ahead of it. Deutsche Bank analyst Mike Mayo -- who told Prince during a conference call after Citigroup's results were released that investors wanted a significant change in management -- estimated Thursday that Citigroup would have to write down another $4 billion.
In early October, the bank combined its investment banking and alternative investments businesses into one unit led by Vikram Pandit, who had led Citigroup's alternative investments unit. In that shuffle, Tom Maheras, co-CEO of the investment banking unit, left.
But at the time, Rubin and Saudi Arabian Prince Alwaleed bin Talal -- Citigroup's biggest individual shareholder and once a critic of Prince -- expressed their support for the bank's embattled CEO.
When asked if Alwaleed still supported Prince, his representatives on Saturday said he did not wish to comment on any media speculation.
By Madlen Read, AP Business Writer
If he does resign, Prince, 57, would become the second CEO at a major U.S. financial institution to leave during this year's credit crisis, following Merrill Lynch's Stan O'Neal.
Citigroup's board is meeting Sunday, and Prince will offer his resignation then, The Wall Street Journal first reported Friday, citing unnamed people familiar with the situation. The New York Times also reported Prince will resign and said the company might name former Treasury Secretary Robert Rubin, who now chairs the bank's executive committee, as interim chairman.
Citigroup spokesman Michael Hanretta would not comment on the reports.
Prince became chief executive of Citigroup in October 2003. Many shareholders have blasted him openly for much of his tenure, as Citigroup's stock lagged its peers. Shares closed Friday at $37.73, about 20 percent below where they were when Prince became CEO.
Prince's position looked especially shaky after the company on Oct. 1 estimated that third-quarter profit would decline about 60 percent to some $2.2 billion after seeing nearly $6 billion in credit costs and write-downs of overly leveraged corporate debt and souring home mortgages. At that time, Prince said the bank's earnings would return to normal in the fourth quarter.
But when Citigroup released its third-quarter results two weeks later, the write-downs and credit costs exceeded $6 billion, and Chief Financial Officer Gary Crittenden indicated the outlook going forward wasn't as upbeat as Prince had predicted.
Citigroup wasn't alone in its third-quarter turmoil, of course. When borrowers with poor credit stopped paying their mortgages, banks not only had to take losses on those subprime mortgages, they also saw instruments in their portfolios backed by mortgages plummet in value.
But Citigroup's stumbles were particularly grievous, given the bank's size, history and CEO, who has been telling shareholders for years to give his strategy a chance. Even in October, Prince said in a call to analysts: "I think any fair-minded person would say that strategic plan is working."
Analysts believe Citigroup has more losses ahead of it. Deutsche Bank analyst Mike Mayo -- who told Prince during a conference call after Citigroup's results were released that investors wanted a significant change in management -- estimated Thursday that Citigroup would have to write down another $4 billion.
In early October, the bank combined its investment banking and alternative investments businesses into one unit led by Vikram Pandit, who had led Citigroup's alternative investments unit. In that shuffle, Tom Maheras, co-CEO of the investment banking unit, left.
But at the time, Rubin and Saudi Arabian Prince Alwaleed bin Talal -- Citigroup's biggest individual shareholder and once a critic of Prince -- expressed their support for the bank's embattled CEO.
When asked if Alwaleed still supported Prince, his representatives on Saturday said he did not wish to comment on any media speculation.
By Madlen Read, AP Business Writer
Thursday, November 1, 2007
Thursday Turmoil
WASHINGTON (AP) -- The Federal Reserve pumped $41 billion into the U.S. financial system Thursday, the largest cash infusion since September 2001, to help companies get through a credit crunch.
The action came one day after Fed Chairman Ben Bernanke and all but one of his central bank colleagues voted to slice a key interest rate. It was the second time in six weeks that policymakers acted to protect the economy from the effects of the housing downturn and credit troubles.
The Federal Reserve Bank of New York, which carries out the central bank's open market operations, moved Thursday to inject $41 billion in temporary reserves into the financial system.--
Where to begin... Citi needs to raise 6b over the next six months, but that will not lead them to cut their dividend. Why? Because if they do, their stock price will tank, and fast. Amid record composite trading volume, Citi shares fell $2.85 to $38.51, their lowest level since May 2003 and their biggest one-day drop since September 2002, when the company was swamped with regulatory concerns.
Citi earlier this month reported a 57 percent drop in third-quarter profit, renewing speculation about the job security of Charles Prince, its chief executive.
G7 Hundred
Google has signed agreements with T-Mobile, SprintNextel (S), Verizon, and Alltel to provide ad content to new mobile devises. This expansion of its core function is asset light, and should yield high returns. People familiar with the Big G's plan say that Google is in active talks with No. 2 U.S. mobile carrier Verizon Wireless (VZ) )about putting Google applications on phones it offers. Additionally, Google only spends about 500m in capital spending, that means that everything they spend is form revenue. Plus they are investing heavy in R&D. I see the stock continuing to climb and kick mud into the face of their detractors. Good will pass $800/share before the end of the year and by Q2 next year the price will finally plateau at around $950/share. Then we can talk split.
F Bomb
On the day when the pilot of the A-Bomb dies, the market dropped is own F-Bomb. Ford Motor Co (F) posted on Thursday a 9.5 percent decline in U.S. sales for October, hurt by a drop in demand for its best-selling F-Series pickup truck.
Ford also increased Q4 sales estimated by 5,000 units, for some reason, to 645,000 vehicles. Consumer spending will remain on the decline as the housing market shocks may begin to subside, gas prices and consumer confidence will continue to decline.
In the silver lining announcement of the day, WalMart has announced that it will roll back prices early this year, ahead the typical Black Friday.
Todays Bullish Picks
1. Microsoft
2. Crocs, Inc. (CROX)
3. Exxon Mobile, Corp. (XOM_
4. US Steel (X)
The action came one day after Fed Chairman Ben Bernanke and all but one of his central bank colleagues voted to slice a key interest rate. It was the second time in six weeks that policymakers acted to protect the economy from the effects of the housing downturn and credit troubles.
The Federal Reserve Bank of New York, which carries out the central bank's open market operations, moved Thursday to inject $41 billion in temporary reserves into the financial system.--
Where to begin... Citi needs to raise 6b over the next six months, but that will not lead them to cut their dividend. Why? Because if they do, their stock price will tank, and fast. Amid record composite trading volume, Citi shares fell $2.85 to $38.51, their lowest level since May 2003 and their biggest one-day drop since September 2002, when the company was swamped with regulatory concerns.
Citi earlier this month reported a 57 percent drop in third-quarter profit, renewing speculation about the job security of Charles Prince, its chief executive.
G7 Hundred
Google has signed agreements with T-Mobile, SprintNextel (S), Verizon, and Alltel to provide ad content to new mobile devises. This expansion of its core function is asset light, and should yield high returns. People familiar with the Big G's plan say that Google is in active talks with No. 2 U.S. mobile carrier Verizon Wireless (VZ) )about putting Google applications on phones it offers. Additionally, Google only spends about 500m in capital spending, that means that everything they spend is form revenue. Plus they are investing heavy in R&D. I see the stock continuing to climb and kick mud into the face of their detractors. Good will pass $800/share before the end of the year and by Q2 next year the price will finally plateau at around $950/share. Then we can talk split.
F Bomb
On the day when the pilot of the A-Bomb dies, the market dropped is own F-Bomb. Ford Motor Co (F) posted on Thursday a 9.5 percent decline in U.S. sales for October, hurt by a drop in demand for its best-selling F-Series pickup truck.
Ford also increased Q4 sales estimated by 5,000 units, for some reason, to 645,000 vehicles. Consumer spending will remain on the decline as the housing market shocks may begin to subside, gas prices and consumer confidence will continue to decline.
In the silver lining announcement of the day, WalMart has announced that it will roll back prices early this year, ahead the typical Black Friday.
Todays Bullish Picks
1. Microsoft
2. Crocs, Inc. (CROX)
3. Exxon Mobile, Corp. (XOM_
4. US Steel (X)
Tuesday, October 30, 2007
Bull-ish
Financials
1. Citi: currently trading a 9x earning for next year.
2. Bear Sterns: as we have said many times before, this is a buy and hold. If you can not afford to stay in this for no less than 24 months, then don't waste your money.
3. Merrill: It will hit 100 over the next 13 months.
Sleeper Picks
1. Shaw GroupShaw Group: The focus is on renewable energy, but lets not forget about the "nuclear" option.
2. Mobile Mini Inc. (MINI): Better logistics then PODS and cheaper prices too. In time this will be a keeper. Plus they offer storage options for a number of different business sectors.
3. Mercury General (MCY): While it is never good to capitalize on others' losses, perennial disasters are big business. Say 'Thank You' to the Santa Ana winds, because the mercury is rising. They did a wonderful job of helping CA brushfire victims.
1. Citi: currently trading a 9x earning for next year.
2. Bear Sterns: as we have said many times before, this is a buy and hold. If you can not afford to stay in this for no less than 24 months, then don't waste your money.
3. Merrill: It will hit 100 over the next 13 months.
Sleeper Picks
1. Shaw GroupShaw Group: The focus is on renewable energy, but lets not forget about the "nuclear" option.
2. Mobile Mini Inc. (MINI): Better logistics then PODS and cheaper prices too. In time this will be a keeper. Plus they offer storage options for a number of different business sectors.
3. Mercury General (MCY): While it is never good to capitalize on others' losses, perennial disasters are big business. Say 'Thank You' to the Santa Ana winds, because the mercury is rising. They did a wonderful job of helping CA brushfire victims.
Monday, October 29, 2007
FMC
HERE'S A HALLOWEEN nightmare: Suppose you had to bet all of your investment capital on just one stock and hold it for half a decade. Where would you look for a treat in a market that lately has pulled more nasty tricks than a holiday haunted house?
One good bet would be FMC, a mid-size and fast-growing chemical company that, despite an enviable track record, is as invisible as a ghost to most of Wall Street.
Had you invested $10,000 in the Philadelphia-based company back in 2002, you now would have $42,000 and change, for a total return of more ...
By Jim McTague
Companies Featured in This Article: FMC, Dow Chemical, DuPont, Monsanto
One good bet would be FMC, a mid-size and fast-growing chemical company that, despite an enviable track record, is as invisible as a ghost to most of Wall Street.
Had you invested $10,000 in the Philadelphia-based company back in 2002, you now would have $42,000 and change, for a total return of more ...
By Jim McTague
Companies Featured in This Article: FMC, Dow Chemical, DuPont, Monsanto
Sunday, October 28, 2007
Financial Sector hot picks
Bearing on the Bull
Expect Stan O'Neal, the beleaguered chief executive of Merrill Lynch & Co to step down in the next few days. In reality it is nothing that he did, as much as he was a victim of the success and failures of the financial sector. Unfortunately, when it comes to financials everyone expects them to consistently see double-digit growth; ML had warned of weaker earning, but in the weeks leading up to the report, they had done a wonderful job of downplaying their actual sub-prime exposure. All of this adds up to bad news for high-paid Execs and good news for investors. Merrill will bounce back, and now is the time to buy. As soon as the CEO is gone, the Market will respond, on speculation, that Merrill will turn things around.
Rating: Strong Buy
Bullish on Bear
Citic, Asia's largest securities firm, will pay $1 billion for the equivalent of 6 percent of New York-based Bear Stearns's shares, and the US brokerage will invest the same amount in Citic, the companies said yesterday. They agreed to team up to sell financial products and services in China, and plan a Hong Kong-based joint venture for other Asian markets.
Bear Stearns chief executive James "Jimmy" Cayne, 73, trails US rivals in China, where he has struggled to build a business since opening a Beijing office in 1992. His company has fallen as much as 37 percent this year in New York trading, beset by the collapse of the US sub-prime mortgage market. Surging defaults on loans to home buyers with poor credit histories pushed two of the firm's hedge funds into bankruptcy and eroded its fixed-income revenue.
Bear is still not as attractive as Goldman or Lehman on the short term, but in terms of value it is a cant miss stock. Almost every American bank lost money and/or brokerage house lost money this year. Why is that.
It seems that the Aussie's have the answer, just look at ANZ: they remained glued to their core competency and established a diverse mix of capital investments. Also known as good management. They have a 33% P/E ration, and expect 12% in growth over the next 12 months. Additionally, they are well placed in emerging markets, which tend to have high yields.
Rating: Buy
Expect Stan O'Neal, the beleaguered chief executive of Merrill Lynch & Co to step down in the next few days. In reality it is nothing that he did, as much as he was a victim of the success and failures of the financial sector. Unfortunately, when it comes to financials everyone expects them to consistently see double-digit growth; ML had warned of weaker earning, but in the weeks leading up to the report, they had done a wonderful job of downplaying their actual sub-prime exposure. All of this adds up to bad news for high-paid Execs and good news for investors. Merrill will bounce back, and now is the time to buy. As soon as the CEO is gone, the Market will respond, on speculation, that Merrill will turn things around.
Rating: Strong Buy
Bullish on Bear
Citic, Asia's largest securities firm, will pay $1 billion for the equivalent of 6 percent of New York-based Bear Stearns's shares, and the US brokerage will invest the same amount in Citic, the companies said yesterday. They agreed to team up to sell financial products and services in China, and plan a Hong Kong-based joint venture for other Asian markets.
Bear Stearns chief executive James "Jimmy" Cayne, 73, trails US rivals in China, where he has struggled to build a business since opening a Beijing office in 1992. His company has fallen as much as 37 percent this year in New York trading, beset by the collapse of the US sub-prime mortgage market. Surging defaults on loans to home buyers with poor credit histories pushed two of the firm's hedge funds into bankruptcy and eroded its fixed-income revenue.
Bear is still not as attractive as Goldman or Lehman on the short term, but in terms of value it is a cant miss stock. Almost every American bank lost money and/or brokerage house lost money this year. Why is that.
It seems that the Aussie's have the answer, just look at ANZ: they remained glued to their core competency and established a diverse mix of capital investments. Also known as good management. They have a 33% P/E ration, and expect 12% in growth over the next 12 months. Additionally, they are well placed in emerging markets, which tend to have high yields.
Rating: Buy
Thursday, October 25, 2007
Crude Hits record high -- Again
Report That OPEC Won't Lift Production Quotas Lifts Crude Oil Prices Back Above $90 a Barrel
NEW YORK (AP) -- Oil futures jumped to a new record close of $90.46 a barrel Thursday on news that OPEC production increases aren't coming as fast as expected and that the cartel won't announce new output quotas when it meets next month.
Prices rose in early trading on growing concerns about conflict in the Middle East and declining supplies of crude in the U.S. They got a further boost after Dow Jones Newswires reported that Oil Movements, a company that tracks oil tanker traffic, said crude shipments from Organization of Petroleum Exporting Countries members will grow more slowly than anticipated through early November.
Meanwhile, OPEC Secretary General Abdalla el-Badri told The Wall Street Journal Asia the cartel is not in discussions to boost production by 500,000 barrels. El-Badri's comments counter rumors that Saudi Arabia is pushing for a production increase. In September, OPEC bowed to Saudi pressure and announced a production increase of 500,000 barrels a day, effective Nov. 1.
"It shows a little drama in the cartel," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Light, sweet crude for December delivery rose $3.36 to settle at $90.46 a barrel on the New York Mercantile Exchange after rising as high as $90.60 earlier.
Geopolitical events influenced early trading, with crude rising after Lebanese troops fired on Israeli warplanes. A conflict between Israel and Lebanon wouldn't itself have much impact on oil supplies, but traders worry that any hostilities in the Middle East would eventually draw in big oil producers such as Saudi Arabia and Iran.
Energy traders also remain concerned that a threatened incursion by Turkish armed forces into Iraq in search of Kurdish rebels would cut oil supplies out of northern Iraq.
On Wednesday, crude prices jumped sharply after the Energy Information Administration reported that oil inventories fell by 5.3 million barrels last week, much more than analysts expected. That report reversed a three-day downward price trend, and put energy traders back in a bullish mood, analysts said.
"Yesterday's EIA report pretty much changed the personality of the market," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.
In other Nymex trading, November gasoline rose 8.83 cents to settle at $2.2358 a gallon, and November heating oil added 6.64 cents to settle at $2.4084 a gallon.
November natural gas rose 21.6 cents to settle at $7.188 per 1,000 cubic feet as traders shrugged off a government report that inventories grew by 68 billion cubic feet last week, more than analysts had expected, and focused instead on forecasts for colder weather in the Midwest and Northeast and the possibility that a storm system in the western Atlantic could develop into tropical strength as it moves into the Caribbean Sea.
At the pump, gas prices slipped 0.2 cent overnight to a national average of $2.82 a gallon, according to AAA and the Oil Price Information Service.
Associated Press Writer George Jahn in Vienna contributed to this report.
NEW YORK (AP) -- Oil futures jumped to a new record close of $90.46 a barrel Thursday on news that OPEC production increases aren't coming as fast as expected and that the cartel won't announce new output quotas when it meets next month.
Prices rose in early trading on growing concerns about conflict in the Middle East and declining supplies of crude in the U.S. They got a further boost after Dow Jones Newswires reported that Oil Movements, a company that tracks oil tanker traffic, said crude shipments from Organization of Petroleum Exporting Countries members will grow more slowly than anticipated through early November.
Meanwhile, OPEC Secretary General Abdalla el-Badri told The Wall Street Journal Asia the cartel is not in discussions to boost production by 500,000 barrels. El-Badri's comments counter rumors that Saudi Arabia is pushing for a production increase. In September, OPEC bowed to Saudi pressure and announced a production increase of 500,000 barrels a day, effective Nov. 1.
"It shows a little drama in the cartel," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Light, sweet crude for December delivery rose $3.36 to settle at $90.46 a barrel on the New York Mercantile Exchange after rising as high as $90.60 earlier.
Geopolitical events influenced early trading, with crude rising after Lebanese troops fired on Israeli warplanes. A conflict between Israel and Lebanon wouldn't itself have much impact on oil supplies, but traders worry that any hostilities in the Middle East would eventually draw in big oil producers such as Saudi Arabia and Iran.
Energy traders also remain concerned that a threatened incursion by Turkish armed forces into Iraq in search of Kurdish rebels would cut oil supplies out of northern Iraq.
On Wednesday, crude prices jumped sharply after the Energy Information Administration reported that oil inventories fell by 5.3 million barrels last week, much more than analysts expected. That report reversed a three-day downward price trend, and put energy traders back in a bullish mood, analysts said.
"Yesterday's EIA report pretty much changed the personality of the market," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Ill.
In other Nymex trading, November gasoline rose 8.83 cents to settle at $2.2358 a gallon, and November heating oil added 6.64 cents to settle at $2.4084 a gallon.
November natural gas rose 21.6 cents to settle at $7.188 per 1,000 cubic feet as traders shrugged off a government report that inventories grew by 68 billion cubic feet last week, more than analysts had expected, and focused instead on forecasts for colder weather in the Midwest and Northeast and the possibility that a storm system in the western Atlantic could develop into tropical strength as it moves into the Caribbean Sea.
At the pump, gas prices slipped 0.2 cent overnight to a national average of $2.82 a gallon, according to AAA and the Oil Price Information Service.
Associated Press Writer George Jahn in Vienna contributed to this report.
Tuesday, October 23, 2007
Wall Street Up on Strong Profit Reports
Stocks Are Moderately Higher on Strong Earnings Reports From Apple, American Express, DuPont
NEW YORK (AP) -- Wall Street advanced Tuesday, with Wall Street growing more upbeat about corporate profits after solid results from blue chip names including Apple Inc., American Express Co. and DuPont Co.
Apple surpassed analysts' expectations with a 67 percent jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones. The report renewed confidence in the technology sector, which has outpaced the stock market this year but which also has tended to fall the hardest when investors sell off.
Two components of the Dow Jones industrial average -- American Express, one of the largest credit card companies, and chemicals maker DuPont -- posted better-than-expected profit gains as well.
These results reinvigorated investors after companies posted a string of downbeat results last week, a disappointment that contributed to a 366-point slide in the Dow on Friday. So far, 41 percent of the Standard & Poor's 500 index have reported results -- with 51 percent beating expectations, according to the rating agency.
Meanwhile, energy prices remain high and the dollar continues to weaken against other world currencies. Treasury Secretary Henry Paulson said in a speech Tuesday China must allow its currency, the yuan, to gain in value more quickly, to counter imbalances in the economy and make monetary policy more effective in responding to inflation.
In midmorning trading, the Dow rose 68.04, or 0.50 percent, to 13,635.01.
Broader stock indicators were also higher. The S&P 500 rose 8.72, or 0.58 percent, to 1,515.05; the Nasdaq composite index rose 22.32, or 0.81 percent, to 2,776.25.
The stock market had a fitful recovery Monday after plunging Friday. Wall Street had sold off as worries about the credit market's effect on the economy escalated, when several blue-chip companies offered dimmer-than-anticipated outlooks and S&P downgraded more mortgage-backed securities.
Treasury bonds fell as investors moved back into the stock market. The yield on the 10-year note, which moves inversely to its price, rose to 4.43 percent from 4.40 percent on Monday.
Oil prices rose despite expectations of rising U.S. crude inventories, bolstered by concerns over a continuing buildup of Turkish military forces along the northern Iraqi border. A barrel of light, sweet crude rose 41 cents to $86.43 on the New York Mercantile Exchange.The dollar fell against most other major currencies, while gold rose.
Shares of Apple rose $11.37, or 6.5 percent, $185.73 after the company reported it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent from the same period a year ago. That generated $3.1 billion, or about half of the company's revenues for the quarter.
American Express, one of the nation's biggest credit-card issuers, said late Monday that higher spending by cardholders pushed third-quarter profit up 10 percent. Shares rose $1.53, or 2.7 percent, $58.40.
Chemical maker DuPont posted a larger profit for the third quarter on agricultural and nutritional products in Latin America and the company boosted its full-year outlook. The stock rose $1.03 to $47.60.
AT&T Inc., the nation's largest telecommunications company, reported profit rose 42 percent after its acquisition of BellSouth Corp. Shares rose 21 cents to $41.38.
The Russell 2000 index of smaller companies rose 4.38, or 0.54 percent, at 814.46.
Advancing issues led decliners by a 3-to-1 basis on the New York Stock Exchange, where volume came to 99.3 million shares.
By Joe Bel Bruno, AP Business Writer
NEW YORK (AP) -- Wall Street advanced Tuesday, with Wall Street growing more upbeat about corporate profits after solid results from blue chip names including Apple Inc., American Express Co. and DuPont Co.
Apple surpassed analysts' expectations with a 67 percent jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones. The report renewed confidence in the technology sector, which has outpaced the stock market this year but which also has tended to fall the hardest when investors sell off.
Two components of the Dow Jones industrial average -- American Express, one of the largest credit card companies, and chemicals maker DuPont -- posted better-than-expected profit gains as well.
These results reinvigorated investors after companies posted a string of downbeat results last week, a disappointment that contributed to a 366-point slide in the Dow on Friday. So far, 41 percent of the Standard & Poor's 500 index have reported results -- with 51 percent beating expectations, according to the rating agency.
Meanwhile, energy prices remain high and the dollar continues to weaken against other world currencies. Treasury Secretary Henry Paulson said in a speech Tuesday China must allow its currency, the yuan, to gain in value more quickly, to counter imbalances in the economy and make monetary policy more effective in responding to inflation.
In midmorning trading, the Dow rose 68.04, or 0.50 percent, to 13,635.01.
Broader stock indicators were also higher. The S&P 500 rose 8.72, or 0.58 percent, to 1,515.05; the Nasdaq composite index rose 22.32, or 0.81 percent, to 2,776.25.
The stock market had a fitful recovery Monday after plunging Friday. Wall Street had sold off as worries about the credit market's effect on the economy escalated, when several blue-chip companies offered dimmer-than-anticipated outlooks and S&P downgraded more mortgage-backed securities.
Treasury bonds fell as investors moved back into the stock market. The yield on the 10-year note, which moves inversely to its price, rose to 4.43 percent from 4.40 percent on Monday.
Oil prices rose despite expectations of rising U.S. crude inventories, bolstered by concerns over a continuing buildup of Turkish military forces along the northern Iraqi border. A barrel of light, sweet crude rose 41 cents to $86.43 on the New York Mercantile Exchange.The dollar fell against most other major currencies, while gold rose.
Shares of Apple rose $11.37, or 6.5 percent, $185.73 after the company reported it shipped a record 2.16 million Macs in the quarter, an increase of 34 percent from the same period a year ago. That generated $3.1 billion, or about half of the company's revenues for the quarter.
American Express, one of the nation's biggest credit-card issuers, said late Monday that higher spending by cardholders pushed third-quarter profit up 10 percent. Shares rose $1.53, or 2.7 percent, $58.40.
Chemical maker DuPont posted a larger profit for the third quarter on agricultural and nutritional products in Latin America and the company boosted its full-year outlook. The stock rose $1.03 to $47.60.
AT&T Inc., the nation's largest telecommunications company, reported profit rose 42 percent after its acquisition of BellSouth Corp. Shares rose 21 cents to $41.38.
The Russell 2000 index of smaller companies rose 4.38, or 0.54 percent, at 814.46.
Advancing issues led decliners by a 3-to-1 basis on the New York Stock Exchange, where volume came to 99.3 million shares.
By Joe Bel Bruno, AP Business Writer
Monday, October 22, 2007
Cirrus Logic
Cirrus Logic (CRUS), which makes chips that convert analog signals into ones and zeros, and back again, could get a boost from an impending rush in sales of portable audio equipment, or so says Longbow Research analyst Tayyib Shah, who today upgrades the shares from Neutral to Buy, arguing the stock is cheap at 13 times 2008 estimated profit of 35 cents a share.
“The results of our latest Home Audio Survey indicate an earlier than seasonal pick up in sell through,” writes Shah. “Consumer audio (including home audio systems, DTV, portable audio and other applications) accounts for 57% of company revenues.”
He goes on: “The upturn in audio equipment sales is taking place sooner than the normal seasonal pattern this year as consumers are upgrading their systems to enjoy the football season. In our view, the strong interest in flat panel TVs is also leading to complimentary upgrades of sound systems.”
In particular, Shah says Cirrus may be gaining a foothold in portable audio, and in particular, he speculates that the company may have been chosen by Apple (AAPL) to be a “second source” for digital audio decoder chips in some of the iPod products.
Wolfson Microelectronics plc, which trades on the London Stock Exchange, has a larger share than Cirrus in those kinds of chips, notes Shah, but he thinks that with an addressable market of $175 million in CODECs for such portable applications, “even a low 15% share can translate into $26MM in revenues in the FY09 time frame.” To put that in perspective, Cirrus may bring in $195 million in total sales next year, so $26 million would be a measurable contributor to the top line.
Shah’s target price for Cirrus shares is $8.50. Today, the shares are up nearly 8% at $6.93.
Posted by Tiernan Ray
“The results of our latest Home Audio Survey indicate an earlier than seasonal pick up in sell through,” writes Shah. “Consumer audio (including home audio systems, DTV, portable audio and other applications) accounts for 57% of company revenues.”
He goes on: “The upturn in audio equipment sales is taking place sooner than the normal seasonal pattern this year as consumers are upgrading their systems to enjoy the football season. In our view, the strong interest in flat panel TVs is also leading to complimentary upgrades of sound systems.”
In particular, Shah says Cirrus may be gaining a foothold in portable audio, and in particular, he speculates that the company may have been chosen by Apple (AAPL) to be a “second source” for digital audio decoder chips in some of the iPod products.
Wolfson Microelectronics plc, which trades on the London Stock Exchange, has a larger share than Cirrus in those kinds of chips, notes Shah, but he thinks that with an addressable market of $175 million in CODECs for such portable applications, “even a low 15% share can translate into $26MM in revenues in the FY09 time frame.” To put that in perspective, Cirrus may bring in $195 million in total sales next year, so $26 million would be a measurable contributor to the top line.
Shah’s target price for Cirrus shares is $8.50. Today, the shares are up nearly 8% at $6.93.
Posted by Tiernan Ray
Friday, October 19, 2007
Stocks Plummet
NEW YORK (AP) -- The Dow Jones industrial average dropped more than 360 points Friday -- the 20th anniversary of the Black Monday crash -- as lackluster corporate earnings, renewed credit concerns and rising oil prices spooked investors.
The major stock market indexes turned in their worst week since July after Caterpillar Inc., one of the world's largest construction equipment makers, soured investors mood Friday with a discouraging assessment of the U.S. economy. In a week dominated by mostly negative results from banks facing difficult credit markets and rising mortgage delinquencies, investors appeared surprised that an industrial name was feeling an economic pinch, too.
Reports from Honeywell International Inc. and 3M Co., themselves big industrial names, gave investors little incentive to take chances on the market. In one bright spot, Google Inc. rose after reporting stronger-than-expected profits.
Investor sentiment took another hit when Standard & Poor's downgraded another batch of residential mortgage-backed securities, adding to investor unease about credit quality. The latest reduction follows a similar move earlier in the week and affects more than 1,400 classes.
And oil prices appeared on some investors' list of worries after briefly moving above the psychological barrier of $90 per barrel for the first time.
"I was not surprised there was some correction, given our expectation that earnings growth was going to fall short of expectations," said Alan Gayle, senior investment strategist, director of asset allocation for Trusco Capital Management.
"I think stock analysts were slow to incorporate the impact of the subprime crisis on third-quarter earnings," he added.
The Dow fell 366.94, or 2.64 percent, to 13,522.02. The Dow was down for the fifth straight session and for the week was off 4.05 percent. For the year, the blue chip index is now up 8.5 percent.
Broader stock indicators also fell sharply Friday. The Standard & Poor's 500 index fell 39.45, or 2.56 percent, to 1,500.63, and the Nasdaq composite index dropped 74.15, or 2.65 percent, to 2,725.16.
Wachovia Corp. fell $1.74, or 3.6 percent, to $46.40 after reporting third-quarter profits fell 10 percent due to write-downs related to difficult credit market conditions. The nation's fourth largest bank signaled increasing credit troubles ahead.
Google rose $5.09 to $644.71 after the search engine leader said advertising spending lifted third-quarter profit by 46 percent.
The major stock market indexes turned in their worst week since July after Caterpillar Inc., one of the world's largest construction equipment makers, soured investors mood Friday with a discouraging assessment of the U.S. economy. In a week dominated by mostly negative results from banks facing difficult credit markets and rising mortgage delinquencies, investors appeared surprised that an industrial name was feeling an economic pinch, too.
Reports from Honeywell International Inc. and 3M Co., themselves big industrial names, gave investors little incentive to take chances on the market. In one bright spot, Google Inc. rose after reporting stronger-than-expected profits.
Investor sentiment took another hit when Standard & Poor's downgraded another batch of residential mortgage-backed securities, adding to investor unease about credit quality. The latest reduction follows a similar move earlier in the week and affects more than 1,400 classes.
And oil prices appeared on some investors' list of worries after briefly moving above the psychological barrier of $90 per barrel for the first time.
"I was not surprised there was some correction, given our expectation that earnings growth was going to fall short of expectations," said Alan Gayle, senior investment strategist, director of asset allocation for Trusco Capital Management.
"I think stock analysts were slow to incorporate the impact of the subprime crisis on third-quarter earnings," he added.
The Dow fell 366.94, or 2.64 percent, to 13,522.02. The Dow was down for the fifth straight session and for the week was off 4.05 percent. For the year, the blue chip index is now up 8.5 percent.
Broader stock indicators also fell sharply Friday. The Standard & Poor's 500 index fell 39.45, or 2.56 percent, to 1,500.63, and the Nasdaq composite index dropped 74.15, or 2.65 percent, to 2,725.16.
Wachovia Corp. fell $1.74, or 3.6 percent, to $46.40 after reporting third-quarter profits fell 10 percent due to write-downs related to difficult credit market conditions. The nation's fourth largest bank signaled increasing credit troubles ahead.
Google rose $5.09 to $644.71 after the search engine leader said advertising spending lifted third-quarter profit by 46 percent.
Crude Awakening 2
Oil prices continue to spike, and there is no solid economic reason to justify the rise. Oil prices surpassed $90 a barrel for the first time in after-hours trading in New York before slipping back Friday in Asia.
What does this mean for consumers? Not only will you see prices at the pump rise, but expect heating oil and natural gas to rise as well - purely on speculation. The general public should not get upset with OPEC, the usual suspect has nothing to do with this rise.
Investors are being drawn to energy futures as a hedge against the weakening U.S. dollar. That, plus worries over tensions between Turkey and Kurdish rebels in northern Iraq, has lifted crude oil prices to new records for five straight days.
Data released in recent weeks shows speculative buying of oil futures is on the rise. Many analysts believe the underlying fundamentals of supply and demand do not support oil prices of $90 a barrel.
On Wednesday, the U.S. Energy Department reported that oil and gasoline supplies rose more than expected last week, countering suggestions that supplies are tight. However, crude supplies at the closely watched Nymex delivery point of Cushing, Okla., fell last week, and several reports in recent days have predicted oil supplies will tighten in the fourth quarter.
Thursday was the fifth day in a row crude prices have set new records. The new record has taken the price of oil nearer, but still below, inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to more than $101 today.
November natural gas futures fell 1.4 cents to settle at $7.360 per 1,000 cubic feet as investors shrugged off an Energy Department report that inventories rose by 39 billion cubic feet last week, less than analysts had expected. Supplies are high by historical standards.
For the savvy futures investor, now is a good time to look at oil; the price will climb to just above $100 per barrel, before this unctious bubble burst. Another gppd place to look on the commodities side is OJ, and not in Las Vegas.
The U.S. Department of Agriculture on Friday estimated Florida would produce 168 million orange boxes for the 2007-08 season, and growers are happy about it.
However, in Australia's Valencia orange crop for 2007 is tipped to be the smallest in over three decades. Those attending the National Orange Forum in Mildura (Victoria) on 9 October 2007 were told the crop would total just 194,000 tonnes by Australian Citrus Growers, down 19,000 tonnes on its initial forecast of 213,000 tonnes. The small crop, attributed to factors such as the drought and low water allocation, may mean that fruit juice processors will run out of supplies, while exports of ValenciaA's will be severely restricted.
The Aussie's along with teh risk of disease in FLA will greatly affect the supply curve, and this will lead to increased prices. It is still unclear if this will affect customers at the local grocery store, but it will affect the "market".
What does this mean for consumers? Not only will you see prices at the pump rise, but expect heating oil and natural gas to rise as well - purely on speculation. The general public should not get upset with OPEC, the usual suspect has nothing to do with this rise.
Investors are being drawn to energy futures as a hedge against the weakening U.S. dollar. That, plus worries over tensions between Turkey and Kurdish rebels in northern Iraq, has lifted crude oil prices to new records for five straight days.
Data released in recent weeks shows speculative buying of oil futures is on the rise. Many analysts believe the underlying fundamentals of supply and demand do not support oil prices of $90 a barrel.
On Wednesday, the U.S. Energy Department reported that oil and gasoline supplies rose more than expected last week, countering suggestions that supplies are tight. However, crude supplies at the closely watched Nymex delivery point of Cushing, Okla., fell last week, and several reports in recent days have predicted oil supplies will tighten in the fourth quarter.
Thursday was the fifth day in a row crude prices have set new records. The new record has taken the price of oil nearer, but still below, inflation-adjusted highs hit in early 1980. Depending on the adjustment, a $38 barrel of oil in 1980 would be worth $96 to more than $101 today.
November natural gas futures fell 1.4 cents to settle at $7.360 per 1,000 cubic feet as investors shrugged off an Energy Department report that inventories rose by 39 billion cubic feet last week, less than analysts had expected. Supplies are high by historical standards.
For the savvy futures investor, now is a good time to look at oil; the price will climb to just above $100 per barrel, before this unctious bubble burst. Another gppd place to look on the commodities side is OJ, and not in Las Vegas.
The U.S. Department of Agriculture on Friday estimated Florida would produce 168 million orange boxes for the 2007-08 season, and growers are happy about it.
However, in Australia's Valencia orange crop for 2007 is tipped to be the smallest in over three decades. Those attending the National Orange Forum in Mildura (Victoria) on 9 October 2007 were told the crop would total just 194,000 tonnes by Australian Citrus Growers, down 19,000 tonnes on its initial forecast of 213,000 tonnes. The small crop, attributed to factors such as the drought and low water allocation, may mean that fruit juice processors will run out of supplies, while exports of ValenciaA's will be severely restricted.
The Aussie's along with teh risk of disease in FLA will greatly affect the supply curve, and this will lead to increased prices. It is still unclear if this will affect customers at the local grocery store, but it will affect the "market".
Wednesday, October 17, 2007
Dell Goes Green
Dell has become the first major computer manufacturer to commit to neutralizing the carbon impact of its worldwide operations, a significant extension of its global climate policy and environmental stewardship.
"Never before in the history of business have we seen such a critical need to build a worldwide community dedicated to improving the environment," Michael Dell, the company's chairman and CEO, said during a policy forum organized by the Center for Strategic and International Studies.
"Leadership starts at home, which is why we are going carbon-neutral, but this should only be the beginning of building long-term partnerships with customers, stakeholders and suppliers of all sizes to team up and make a difference for the Earth we all share," Dell said.
Dell issued a challenge to its peer companies during Dell's speech to join in 'a long-term, carbon-neutral commitment to our shared Earth'. The company also announced a new program called 'Plant a Forest for Me' that enables organizations worldwide to join together with Dell and share best practices, partner and facilitate the planting of millions of trees in sustainably managed reforestation projects.
Sometime down the road, especially if Al Gore has his way, this will be a big deal. While Dell continues to loose market share, they find way to stay competitive. Mother Earth is the newest charity.
"Never before in the history of business have we seen such a critical need to build a worldwide community dedicated to improving the environment," Michael Dell, the company's chairman and CEO, said during a policy forum organized by the Center for Strategic and International Studies.
"Leadership starts at home, which is why we are going carbon-neutral, but this should only be the beginning of building long-term partnerships with customers, stakeholders and suppliers of all sizes to team up and make a difference for the Earth we all share," Dell said.
Dell issued a challenge to its peer companies during Dell's speech to join in 'a long-term, carbon-neutral commitment to our shared Earth'. The company also announced a new program called 'Plant a Forest for Me' that enables organizations worldwide to join together with Dell and share best practices, partner and facilitate the planting of millions of trees in sustainably managed reforestation projects.
Sometime down the road, especially if Al Gore has his way, this will be a big deal. While Dell continues to loose market share, they find way to stay competitive. Mother Earth is the newest charity.
Monday, October 15, 2007
It's Tribe Time Now
What do the Cleveland Indians, a professional baseball team have to do with the Worlds' financial markets? ... Absolutely nothing, but they are up 2 games to 1 over the Boston Red Sox, and that has to be worth something.
Friday, October 12, 2007
Next week
Next week all of the big Banks will release Q3 earnings reports. So far Goldman is the only one of the banks that has seen any sort of growth. But the big news of the day is Oracle. They are in a buying mood. T
Oracle unveiled its $17-per-share cash offer Friday, one day after BEA rejected it as inadequate, according to a letter BEA released a few hours after Oracle's revelation catapulted its stock to a new 52-week high.
BEA makes "middleware," products that help software applications run more smoothly on top of databases, while Oracle makes business management software.
Oracle's bid represented a 25 percent premium over BEA's closing stock price Thursday.
"It is apparent to our board...that BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated," William Klein, BEA's vice president of business planning and development, wrote in the rejection letter.
Industry analysts believe BEA might be able to escape Oracle's clutches by finding a white knight. Activist investor Carl Icahn, who is using his 13.2 percent stake in BEA to push for a sale, told CNBC he believes other bids are likely.
SAP, IBM and Hewlett-Packard Co. are considered the most probable candidates to vie for BEA.
Oracle unveiled its $17-per-share cash offer Friday, one day after BEA rejected it as inadequate, according to a letter BEA released a few hours after Oracle's revelation catapulted its stock to a new 52-week high.
BEA makes "middleware," products that help software applications run more smoothly on top of databases, while Oracle makes business management software.
Oracle's bid represented a 25 percent premium over BEA's closing stock price Thursday.
"It is apparent to our board...that BEA is worth substantially more to Oracle, to others and, importantly, to our shareholders than the price indicated," William Klein, BEA's vice president of business planning and development, wrote in the rejection letter.
Industry analysts believe BEA might be able to escape Oracle's clutches by finding a white knight. Activist investor Carl Icahn, who is using his 13.2 percent stake in BEA to push for a sale, told CNBC he believes other bids are likely.
SAP, IBM and Hewlett-Packard Co. are considered the most probable candidates to vie for BEA.
Thursday, October 11, 2007
Boeing's Eggs 87
It looks like Boeing has 86ed the on time departure of its new luxury liner the 787. This, just months after laughing in the face of rival AirBus because of its planned delays on delivering it new luxury liner the A380. While Boeing has done a great job outsourcing the production of the plane’s parts, the problem is that its supply chain is was not equipped to handle the numerous moving pieces in a way that would bring them all together in an efficient manner.
Boeing manufactures the 787's tail fin at its plant in Frederickson, Washington, the ailerons and flaps at Boeing Australia, and fairings at Boeing Canada Technology. For its entire history, Boeing has guarded its techniques for designing and mass producing commercial jetliner wings. For economic reasons, the wings are manufactured by Japanese companies in Nagoya, e.g. Mitsubishi Heavy Industries; the horizontal stabilizers are manufactured by Alenia Aeronautica in Italy; and the fuselage sections by Vought in Charleston, South Carolina (USA), Alenia in Italy, Kawasaki Heavy Industries in Japan and Spirit AeroSystems, in Wichita, Kansas (USA). The passenger doors are made by Latecoere (France) and the cargo doors, access doors and crew escape door are made by Saab (Sweden). Japanese industrial participation is very important to the project, with 35% work share, with many of the subcontractors supported and funded by the Japanese government.[49] On April 26, 2006, Japanese manufacturer Toray Industries and Boeing announced a production agreement involving $6 billion worth of carbon fiber. The deal is an extension of a contract signed in 2004 between the two companies and eases some concerns that Boeing might have difficulty maintaining its production goals for the 787.
From France, Messier-Dowty builds the landing gear and Thales supplies the integrated standby flight display and electrical power conversion system.
Honeywell and Rockwell-Collins provide flight control, guidance and other avionics systems, including standard dual head up guidance systems. Future integration of forward-looking infrared is being considered by Flight Dynamics allowing improved visibility using thermal sensing as part of the HUD system, allowing pilots to "see" through the clouds.
Connecticut (USA)-based Hamilton Sundstrand provides power distribution and management systems for the aircraft, including manufacture and production of Generator Control Units (GCUs) as well as integration of power transfer systems that can move power from the Auxiliary Power Unit (APU) and the main engines to the necessary parts and machinery of the aircraft. Cold weather test of the APU took place in Alaska.
The final assembly consists of attaching fully completed subassemblies, instead of building the complete aircraft from the ground up. This is a technique that Boeing has previously used on the 737 program, which involves shipping fuselage barrel sections by rail from Spirit's Wichita, Kansas facility to Boeing's narrowbody final assembly plant in Renton, Washington. After stiff competition, Boeing announced on December 16, 2003 that assembly would take place in Everett, Washington, employing 800 to 1,200 people. The 787 production line had been expected to finish assembly on an aircraft in as little as three days, compared with 11 days for the 737; however it looks like it will take more 35 days.
Expect the stock price to experience some losses, because there is no clear end in sight. But things should rebound once Boeing figures out how to make this plane correctly. We therefore remain neutral on Boeing. If you have some stock, do not rush to sell it, but now is not a good time to buy... the company is currently experiencing some turbulence, so all owners should remain seated with their seat belts securely fastened.
Boeing manufactures the 787's tail fin at its plant in Frederickson, Washington, the ailerons and flaps at Boeing Australia, and fairings at Boeing Canada Technology. For its entire history, Boeing has guarded its techniques for designing and mass producing commercial jetliner wings. For economic reasons, the wings are manufactured by Japanese companies in Nagoya, e.g. Mitsubishi Heavy Industries; the horizontal stabilizers are manufactured by Alenia Aeronautica in Italy; and the fuselage sections by Vought in Charleston, South Carolina (USA), Alenia in Italy, Kawasaki Heavy Industries in Japan and Spirit AeroSystems, in Wichita, Kansas (USA). The passenger doors are made by Latecoere (France) and the cargo doors, access doors and crew escape door are made by Saab (Sweden). Japanese industrial participation is very important to the project, with 35% work share, with many of the subcontractors supported and funded by the Japanese government.[49] On April 26, 2006, Japanese manufacturer Toray Industries and Boeing announced a production agreement involving $6 billion worth of carbon fiber. The deal is an extension of a contract signed in 2004 between the two companies and eases some concerns that Boeing might have difficulty maintaining its production goals for the 787.
From France, Messier-Dowty builds the landing gear and Thales supplies the integrated standby flight display and electrical power conversion system.
Honeywell and Rockwell-Collins provide flight control, guidance and other avionics systems, including standard dual head up guidance systems. Future integration of forward-looking infrared is being considered by Flight Dynamics allowing improved visibility using thermal sensing as part of the HUD system, allowing pilots to "see" through the clouds.
Connecticut (USA)-based Hamilton Sundstrand provides power distribution and management systems for the aircraft, including manufacture and production of Generator Control Units (GCUs) as well as integration of power transfer systems that can move power from the Auxiliary Power Unit (APU) and the main engines to the necessary parts and machinery of the aircraft. Cold weather test of the APU took place in Alaska.
The final assembly consists of attaching fully completed subassemblies, instead of building the complete aircraft from the ground up. This is a technique that Boeing has previously used on the 737 program, which involves shipping fuselage barrel sections by rail from Spirit's Wichita, Kansas facility to Boeing's narrowbody final assembly plant in Renton, Washington. After stiff competition, Boeing announced on December 16, 2003 that assembly would take place in Everett, Washington, employing 800 to 1,200 people. The 787 production line had been expected to finish assembly on an aircraft in as little as three days, compared with 11 days for the 737; however it looks like it will take more 35 days.
Expect the stock price to experience some losses, because there is no clear end in sight. But things should rebound once Boeing figures out how to make this plane correctly. We therefore remain neutral on Boeing. If you have some stock, do not rush to sell it, but now is not a good time to buy... the company is currently experiencing some turbulence, so all owners should remain seated with their seat belts securely fastened.
Tuesday, October 9, 2007
Emerging Tech
A good place to look over the next few years is tech stocks; but not domestically necessarily. Computer companies cannot continue to meet revenue goals by selling units to 15% of the population. A good example of how the emerging markets will fuel growth is Mexico. Every public school in Mexico, even in the most remote rural regions, has an IT program and is connected to the Internet.
United Microelectronics (UMC) a Taiwan based producer of semiconductor technology saw shares of its stock rise over 20% today, on news of September sales numbers. UMC announced that it did 10.5 billion New Taiwan Dollars in sales in September, that is an increase of over 14% from this time last year. Still, UMC is the AMD of Asia; rival Taiwan Semiconductor (TSM) reported sales of 29.45 billion New Taiwan Dollars in September, an increase of 6% from last year. This September sales boost was exactly what TSM had been looking for, because over the past three quarters they have seen sales down more than 5%.
Asia as a whole, and especially China, will be experiencing technology growth similar to what the US did in the mid through late nineties. There are over one billion people in China, and they all talk on phones... Keep China Telecom in mind. I expect it to make waves in the near future. Additionally, China has stepped up to the plate and made huge investments in Africa, especially in terms of infrastructure.
United Microelectronics (UMC) a Taiwan based producer of semiconductor technology saw shares of its stock rise over 20% today, on news of September sales numbers. UMC announced that it did 10.5 billion New Taiwan Dollars in sales in September, that is an increase of over 14% from this time last year. Still, UMC is the AMD of Asia; rival Taiwan Semiconductor (TSM) reported sales of 29.45 billion New Taiwan Dollars in September, an increase of 6% from last year. This September sales boost was exactly what TSM had been looking for, because over the past three quarters they have seen sales down more than 5%.
Asia as a whole, and especially China, will be experiencing technology growth similar to what the US did in the mid through late nineties. There are over one billion people in China, and they all talk on phones... Keep China Telecom in mind. I expect it to make waves in the near future. Additionally, China has stepped up to the plate and made huge investments in Africa, especially in terms of infrastructure.
Risk vs. Reward
When you think about a "safe investment" frequently you think about so-called "blue chip" stocks. While the symbols may change the results are the same: growth that will moderately exceed past the average. Below are some excellent blue chips for the 21st century along with some target goals. Blue Chippers are almost always well established companies with very solid earning and new income stream potential. That stability and consistency allows the company to pay dividends frequently.
Google: They raise their target to $670 from $620, and raise estimates. They lift their 2007 EPS estimate to $15.83 from $15.70; 2008 goes to $22.21 from $21.95. The analysts cite accelerating U.S. search query growth, continued monetization improvements, strong international growth, few signs of slowdown in online financial services advertising spending and a positive currency tailwind.
Amazon: Price target to $105 from $90. EPS for 2007 up to $1.14 from $1.12, and for 2008 to $1.91 from $1.90. The analysts cite traffic acceleration in the third quarter, strong growth in high margin third party merchandise sales, and rising customer loyalty from the Amazon Prime program and free shipping. The also says that prior technology and content spending will bear fruit in 2008 and beyond. They do see some bumps ahead, however, including Q3 margins on the last Harry Potter book, tougher comps in Q4 and the loss Borders revenue in the 2008 first quarter.
eBay: Price target to $44 from $43; 2007 EPS to $1.13 from $1.10; maintain 2008 at $1.53. They say that “core listings have stabilized,” and that ASPs continue to grow in high single digits while conversion rate have improved from “core-store rebalance.” They raise third quarter revenue estimate to $1.864 billion from $1.815 billion, but says that a “3Q beat” is already priced into the stock.
Today:
Google is up $6.71, or 1.1%, to $616.33.
eBay is up 17 cents, or 0.5% to $38.33.
Amazon is off 85 cents, or 0.9%, at $95.
High Returns
Any smart investor is always balancing safety with return potential. the problem has always been the higher the risk the higher the reward. What a wise advisor can do is help explain and calculate the difference between preceived risk and actual risk. I am very sure that very few people realized that risk associated with investing in ENRON.
For the savvy investor looking for high growth, the goal is always to be on the front-end of the next trend. Right now if you looking for the next trend look towards Africa. The Nigerian stock exchange is up over 100% for the year. However, all we ever hear about Nigeria are the negatives.
The other good thing about investing is emerging markets is that you are doing your part to help those who are less fortunate. Dont sent money to some NGO, send money to an employer. From a particle point: had you invested $1,000 in Congo Telcom 5 years ago, today you would have $1,000,000. Lets see AT&T match that.
From 1999 through 2004, the number of mobile subscribers in Africa jumped to 76.8 million, from 7.5 million, an average annual increase of 58 percent. South Africa, the continent's richest nation, accounted for one-fifth of that growth. Asia, the next fastest-expanding market, grew by an annual average of 34 percent in that period.
Google: They raise their target to $670 from $620, and raise estimates. They lift their 2007 EPS estimate to $15.83 from $15.70; 2008 goes to $22.21 from $21.95. The analysts cite accelerating U.S. search query growth, continued monetization improvements, strong international growth, few signs of slowdown in online financial services advertising spending and a positive currency tailwind.
Amazon: Price target to $105 from $90. EPS for 2007 up to $1.14 from $1.12, and for 2008 to $1.91 from $1.90. The analysts cite traffic acceleration in the third quarter, strong growth in high margin third party merchandise sales, and rising customer loyalty from the Amazon Prime program and free shipping. The also says that prior technology and content spending will bear fruit in 2008 and beyond. They do see some bumps ahead, however, including Q3 margins on the last Harry Potter book, tougher comps in Q4 and the loss Borders revenue in the 2008 first quarter.
eBay: Price target to $44 from $43; 2007 EPS to $1.13 from $1.10; maintain 2008 at $1.53. They say that “core listings have stabilized,” and that ASPs continue to grow in high single digits while conversion rate have improved from “core-store rebalance.” They raise third quarter revenue estimate to $1.864 billion from $1.815 billion, but says that a “3Q beat” is already priced into the stock.
Today:
Google is up $6.71, or 1.1%, to $616.33.
eBay is up 17 cents, or 0.5% to $38.33.
Amazon is off 85 cents, or 0.9%, at $95.
High Returns
Any smart investor is always balancing safety with return potential. the problem has always been the higher the risk the higher the reward. What a wise advisor can do is help explain and calculate the difference between preceived risk and actual risk. I am very sure that very few people realized that risk associated with investing in ENRON.
For the savvy investor looking for high growth, the goal is always to be on the front-end of the next trend. Right now if you looking for the next trend look towards Africa. The Nigerian stock exchange is up over 100% for the year. However, all we ever hear about Nigeria are the negatives.
The other good thing about investing is emerging markets is that you are doing your part to help those who are less fortunate. Dont sent money to some NGO, send money to an employer. From a particle point: had you invested $1,000 in Congo Telcom 5 years ago, today you would have $1,000,000. Lets see AT&T match that.
From 1999 through 2004, the number of mobile subscribers in Africa jumped to 76.8 million, from 7.5 million, an average annual increase of 58 percent. South Africa, the continent's richest nation, accounted for one-fifth of that growth. Asia, the next fastest-expanding market, grew by an annual average of 34 percent in that period.
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