Benz meets BMW

What does it say about our world when our automakers are better able to share inforomation then our government agencies? That said, this is a financial blog and not a political one. Irony, all of this good German good will is spurred by the Chinese.

BEIJING (AP) -- Daimler AG, the maker of Mercedes-Benz cars, is discussing sharing components and technology development with rival BMW AG, Daimler CEO Dieter Zetsche said Sunday.

The luxury automakers see each other as direct competitors and the possibility of cooperation reflects the intense pressure on automakers to cut costs amid slow sales growth in the United States and Europe. "We are discussing potentially sharing components. And this might make sense specifically in regard to new technologies," Zetsche told reporters at the Beijing auto show.

Daimler, based in Stuttgart, and BMW, in Munich, might consider jointly investing in basic research but no agreements have been reached, Zetsche said. He gave no other details.

China, the world's second-largest auto market, has been a bright spot for Daimler and other automakers, with overall sales forecast to grow at least 15 percent this year. U.S. sales are expected to decline this year, while those in Europe and Japan are flat.

In China, Daimler says its first-quarter sales soared 42 percent from the same period last year to 8,661 vehicles. The company says China is the No. 2 market for its S-class sedans after the United States, accounting for one-third of sales.

If this sticks this will be big news on the international equities market. Much like the airlines environment of M&A, this is a tech version on the other side of the world. The ability to take advantage of economies of scale is bound to cut overhead cost, for both manufactures; the question is will each manufactures be able to maintain its own unique identity. As you may recall Dodge and Mitusbschi did this is the mid 90s and both suffered.

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.

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.

Little Bank takes Big Bank

Reverse Re-construction or vendor financing

What happens when a nation's trade deficit runs at levels upward of 6% of GDP: investor confidence ebbs, capital investments are scarce, credit markets plummet, and the central bank is forced to counterbalance deflation by raising interest rates, all this while the currency is weaker then a sand castle - deep recession.

When that nation is the USA, these things don't happen, or at least they haven't yet; but how much longer will Asia keep up this predatory lending practice? As of June 30, 2007 the Japanese government owned just over $800b, and China owned around 680b worth of US government backed securities or Treasury bonds. Basically the US Treasury sends over IOUs and they send us money.

This affects us all: since mid 2004 the Federal Reserve has raised the federal funds rate from 1% to 5.25% and, in-theory, this should have caused a sell-off of long dated Treasury’s. However thanks to central banks around the world this didn't happen.

In short, why would a poorer nation lend to richer one? Simple: send cheap money to the richer nation and they will send it right back in the form of Lexus’, Samsung flat screen TVs, LG washing machines, and any number of [defective?] Chinese products

Tomorrow we will discuss how US borrowing affect mortgage prices. For now buy Doral Financial

Fed up with the Bull-ish

Its now the end of our week, and a lot has happened, but it seems like everyone is already looking forward to next week’s Fed Board Meeting. Today, the Fed is not our concern; some people spend so much trying to predict what Mr. Ben S. Bernanke and his cohorts on that sit on the [Federal Reserve] Board of Governors will do, that they forget about the here and now. At Landes, we are doing the exact opposite: we have examined a few sectors have are providing you with some sound advice, for both the domestic and international markets.
First, while there has been a slight recovery in the financial sector, look for value buys on the engineering side. Companies that make “stuff”. The engineering sector is very diverse and is made up of companies that are frequently household names such as, Rolls Royce, ABB, Siemens, and L&T. One of the big reasons that these companies will continue to do well is the fact that in America and globally is because governments are constantly investing in infrastructural upgrades; in the USA it there is an attempt to make everything more green, while in nations with experiencing rapid GDP growth nations such as India and China, they are simply trying to lay the foundations of the World’s next Industrial Revolution. On the small-cap side: Kirloskar Brothers, Honda Siel Power, and Aban Loyd Chiles have all seen sharp gains over the past few months. While on the Big Board: Cummins India, Bharat Electronics, Alfa Laval, Bharat Forge, Thermax, Crompton Greaves, BHEL, Siemens, ABB, Kirloskar Oil Engines and Alstom Projects, have all doubled within one year’s time.

Countrywide

Buy Countrywide (CFC), the Nation’s largest independent mortgage firm. There was never a question of when CW would get bailed out, but merely who would provide the financing to bail them out. Over the past few weeks Countrywide has trimmed its workforce, sold off a 2 billion dollar stake to Bank of America, which (by the way plans to raise ATM fees to the absurd amount of $3) and borrowed over $11,000,000,000. Additionally, in the month of August, less than 4% of new loans originated by Countrywide fell into the Sub Prime category. These efforts combined with low rates still make this a buyer’s market and CW should be able to bounce back, but remember this is a long-term pick. For bond investors, it is important to realize that Countrywide debt carries a Bb2 rating, making it a “junk bond”. With high risk comes higher reward.

Strong Buys
On the other side of the real estate market take a look at Tarragon Corp. (TARR), which has been up since it announced plans to sell a Florida rental property to General Electric Capital. The buzz is that there are more sales to follow. Get in now, the stock in only about $3 and will rise to over $6 by the end of the year. Also a good strong buy is Euro Tech Holdings; everyone likes having fresh water. Last for the week is the big G again, Google. The reason is Google is boost ad revenue and the P/E margins are off the chart. If you can afford it, buy it.

Happy Investing, and have a good weekend.