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.
Thursday, November 29, 2007
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)
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