Daily Archives: June 8, 2007

TOP 7 ISSUES THIS WEEK (JUNE 8, 2007)

This Week’s Top Seven Issues (June 8, 2007)

1) THE ROLLER-COASTER MARKET
Thanks a lot Bill Gross.  You’re sounding more like Greenspan now that you have him on your advisory board at PIMCO.  Depending on how you look atthe sell-off, Gross either was an exacerbation or just noise.  The market recovered late Friday on rumors that US Steel (X) was in-play.  Technicians had an identity crisis because today should have needed a big gap down before the "Ah-Ha Epiphany."  If you are a bull, a chicken-bull, or a real bear, we came up with a revised list of stocks to look at depending on your flavor.

2) FOUR NEW TECH PICKS, LIKE YOU DIDN’T KNOW THEM
Cramer actually came out with a NEW FOUR HORSEMEN OF TECHNOLOGY, albeit this could have been done much sooner and Amazon.com (AMZN) was the only one that was a bit of a surprise.

3) MERGERS & PRESSURES 
Biomet (BMET) is done, deal accepted. Bye-bye.  TD AMERITRADE (AMTD) needs to tell S.A.C. & JANA Partners to take their shares and put them somewhere else.  The FTC is actually trying to stop Whole Foods (WFMI) from buying Wild Oats (OATS), amazingly enough a deal is under scrutiny.  Amgen (AMGN) tries diversifying via acquisition, but at what cost?

4) TWO BEST CULT STOCKS WITH MAJOR NEWS
CMGI, Inc. (CMGI) took a bit of a hammering this week after earnings.  If you believed it in it before earnings, then nothing has really changed and the glass may be more half-full than half-empty.  Dendreon (DNDN) priced its $75 million offering.  Since their back was against the wall and they really needed money, the terms that could have been much more expensive actually look like they got the cash for close to nothing.

5) KEY OFFERINGS
Limelight Networks (LLNW) came public, priced more share at a higher price, and still went up almost 50% on the debut date. Einstein Noah (BAGL)…it’s back, no more NWRG-PINKSHEET ticker  It wasn’t an IPO, but sort of a Re-PO.  This one will be interesting.  SIRIUS Satellite Radio (SIRI) received a $250 million term loan

6) OPEC CRIES WOLF
OPEC actually threatened that it would stop spending money for new technology and on exploration if we keep pushing for more and more biofuels.  Sounds to me like they are feeling pinched.  Oddly enough, ethanol names were looking horrible yesterday.

7) RETAIL IS SOFT, BUT SOME WINNERS
There were actually some winners in retail.  If Bed Bath & eyond (BBBY) had to stupe down to an earnings warning, you knew it was going to be a messy retail report since its buyers are supposed to be insulated from soft economics.

Have a great weekend!

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 4:16 pm in Uncategorized, , , , , , , , , , , , , , ,

52-Week Low Club (June 8, 2007)

Stock Tickers: AZN, BCRX, EHTH, CTIC, HW, NRMX, SBUX, WFMI, DUK

It’s no secret we had the makings of a crummy week, but the market managed to turn itself back around after a fairly week open.  Regardles of a bull market or any market, there are still stocks hitting 52-week lows:

AstraZeneca (AZN) ADR’s put in lows, two days after the CFO left to join Goldman Sachs.

BioCryst (BCRX) stays weak, apparently the near-term bounce turned back into a pounce.

Cell Therapeutics (CTIC) managed to keep its post-ASCO slide going.

eHealth, Inc (EHTH) put in the lowest close since its October IPO.

Headwaters (HW) just keeps slipping and looks uglier daily, and has been oin a crash course for about 6 weeks..

Neurochem (NRMX) closed down another 10% after the poor drug outlook yesterday.

Starbucks (SBUX) and Whole Foods (WFMI) were in the 52-week low gutter club earlier but got bailed out by the market offer. Duke Energy (DUK) also rode most of the day on new adjusted lows before an end of day recovery, although these might not be ultimate 52-week lows on an adjusted basis.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 3:29 pm in HI/LOW, , , , , , , , ,

Market Trades For Super-Bulls, Chicken-Bulls, and Outright Bears

Stock Tickers: AAPL, GOOG, RIMM, BA, UTX, ATI, RTP, RIO, FLR, SGR, PEP, KO, BUD, CAG, HNZ, CPB, HRL, K, GIS, KFT, MCD, MRK, PFE, ALO, PYX, HME, WTR, SNH, SRZ, PG, CL, MO, RAI, CLX, NVO, BRK/A, FLO, DLM, PSQ, DOG, SSO, SH, BIL, IEI, TLT, TLH

There is more than enough bantering back and forth out there about the week’s sell-off in reaction to long-term interest rates and the Bill Gross predictions for potentially higher rates longer-term.  So, if you are a super-bull then you’d want to use the leadership stocks to pile surplus cash into thinking the world didn’t really change.  If you are a chicken-bull (want to buy but not overly aggressive and still cautious) then you want to buy defensive stocks.  If you’re a bear, well at least you get the 5% interest.  We wanted to provide at least a partial list of the bull and bear go-to picks ahead of the weekend when many will be doing extra amounts of reading.

Aggressive Bullish Picks

IF this was just an unwarranted sell-off that came because of a rate spook and if Mr. Gross is wrong, then you go hard and fast into what has been working before.  Aerospace, Infrastructure, Metals & Mining, very selective Tech.  So out of selective tech the two most obvious names are Apple (AAPL) and either Google (GOOG) or Research-in-Motion (RIMM).  In Aerospace the go-to names are Boeing (BA) and United Tech (UTX).  In metals its Allegheny Tech (ATI), Rio Tinto (RTP), and Companhia Vale do Rio Doce ‘CVRD’ (RIO).  In infrastructure the go-to names are Fluor (FLR), Shaw Group (SGR).  This week Jim Cramer gave his New Four Horsemen of Technology and booted the old ones.

Defensive Stock Plays For Chicken-Bull

Because this sell-off is for a different reason, we have eliminated the power companies because of the tie being so geared toward higher rates.  We’ve also pulled out the debt collection companies because they ran so much after the last sub-prime scare.  Here was the first line of 20 defensive stocks back in February from the mini-Asian meltdown and here was the list of second-line defensive names.   This still leaves plenty of options, and we added in a few more.

First Line Defensive Stocks: Coca-Cola (KO), PepsiCo (PEP), Anheuser-Busch (BUD), ConAgra (CAG), Heinz (HNZ), Campbell Soup (CPB), Hormel (HRL), Kellogg (K), General Mills (GIS), Kraft (KFT), McDonalds (MCD), Merck (MRK), Pfizer (PFE), P & G (PG), Colgate-Polmolive (CL), Altria (MO), Reynolds American (RAI), and Clorox (CLX).

Second-Line Defensive Stocks:  Berkshire Hathaway (BRK/a), Flowers Foods (FLO), Del Monte Foods (DLM), Novo Nordisk (NVO), Alpharma (ALO), Playtex (PYX), Home Properties (HME), Aqua America (WTR), and Senior Housing (SNH), Sunrise Senior Living (SRZ).

The Bearish Trades

If you are still bearish or are completely bearish, then you’ve got Treasuries and all of the inverse ETF funds.  Some of the negative market ETF trades that move invesrely are the SHORT QQQ PROSHARES (PSQ), SHORT DOW30 PROSHARES (DOG), ULTRA S&P500 PROSHARES (SSO), SHORT S&P500 PROSHARES (SH), and more.  For short-term rate ETF’s you have the fairly new STREETTRACKS SERIES TRUST Lehman 1-3 MO T-BILL (BIL).  The more liquid interest rate ETF’s that actually trade are the iShares Lehman 20+ Year Treas Bond (TLT), iShares Lehman 10-20 Year Treas Bond (TLH), iShares Lehman 3-7 Year T-Note (IEI), and more.

As a reminder, defensive stocks still tend to get hit when the market gets so bad that they throw out the baby with the bath water, but they usually start to fall less and less and are usually the first stocks that traders commit money to at the turns.  Defensive doesn’t mean immune.  Also, all of these are merely part of a partial list and the list could have easily been 3-times the size.   

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 2:14 pm in ETF, Economy, HI/LOW, Shareholder Issues, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Comverse Tech (CMVT) Shares No Longer Care About the Kobi Alexander Nimibia Scandal

As pressure remains on Comverse Tech’s (CMVT) ex-CEO and current fugitive Kobi Alexander to be extradited from Nimibia, you might wonder why shares of the ex-high-flyer have stayed toward the higher-end of a trading band.  Shares have spent most of the last year bumping back and forth between an $18.00 to $23.00 range with brief time periods outside of it (including today with a $23.05 high).  This looks like the past is staying a press scandal rather than shareholders feeling there will be more corporate scandals ahead.

The company has been very delinquent filings that it trades on the pink sheets.  But what is amazing is that while the press scandal is being touted in the media with much more fervor this week, shares are still up more than 10% in the last 3-months and up 35% from the 52-week lows.  Law firms are suing Kobi Alexander and the company, and the government wants Kobi Alexander back.  Yet mysteriously shares are holding up.  Sure, shares are down from the highs of the last two-years, but are up more than 200% from the 5-year lows.  Compared to the tech bubble days, you don’t even want to know how far down the shares are.

Inside the company, it just completed a smaller merger.  It is expected that there will be layoffs. The company is still signing contracts. It brought in new management with a new CEO (former AT&T Wireless multimedia head) and appointed outside directors.  Its former senior general counsel was sentenced to a year and a day in jail last month.  Some even think the company could be broken up after the issues are resolved.

But even when a ‘real’ financial position cannot be easily evaluated, it’s hard not to think that the company will easily survive and move on, and that at least some feel there is value inside the vortex.  Otherwise shares would be putting in new lows day after day instead of hanging up here.  While compiling this earlier, it looks like Mr. Alexander’s hearing has been further delayed until June 25th.  It looks like many investors are able to discern the difference between a past scandal and a perceived crisis.  At least that is what the tape is saying.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 11:33 am in Regulation, SEC, Technical Analysis, Technology Companies, Telecom,

TD AMERITRADE (AMTD): S.A.C. & JANA Outline Benefits For Merger Pressure

Stock Tickers: AMTD, ETFC, SCHW, IBKR

S.A.C. and JANA have issued a response to TD AMERITRADE’s (AMTD-NASDAQ) noting that this was not necessarily the best time to pursue a combination.  Of course they are in disagreement, with an 8% stake bet you could have guessed that.  They have what is actually a 21 page presentation plan you can read through for the full details.  It is admittedly a detailed plan, but many would still question this.

Here are some of the synergies in an E*TRADE (ETFC-NASDAQ) combination:

Cost synergies of $600 million;
Revenue synergies $100 million;
Expected cost Increase $108 million;
Claims single to double-digit EPS growth in 2008 & 2009;
Could be 100% stock or 75% stock and 25% cash.

Here are some of the Synergies outlined in a Charles Schwab (SCHW-NASDAQ) merger:

Cost synergies of $550 million;
Revenue synergies $450 million;
Expected cost Increase $220 million;
Claims double-digit EPS growth in 2008 & 2009;
Could be 100% stock or 50/50 stock/cash, although more concerns on this potential.

Here is the FULL PRESENTATION.  The questions behind the motivation behind this are numerous.  Obviously the first and foremost answer is to make money on the stock.  But this does not seem as straight forward as other merger proposals on the reasoning behind this, and it feels like very premature ‘activist investor’ activity.  There have been so many mergers that led up to the point where these companies are now that making a super-merger of online discount trading firms may be horrible for the trading consumer.  The truth is that this would probably not be noticed immediately, but this would leave customers with far fewer choices for a wide spectrum online and discount trading platform.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 10:08 am in Brokerage Firms, Financial Stocks, Internet, Mergers and Buy Outs, Shareholder Issues, , , ,

What Starbucks (SBUX) Could Learn From McDonald’s (MCD)

McDonald’s (MCD) credited much of its same store improvement to it co-promotion with animated hit movie "Shrek III". The fast food chain said global sales at stores open over a year were up 8.7%. In the US, where the company has higher market penetration, sales rose 7.4% over last year.

There is a lesson in this for Starbucks (SBUX). While a food and coffee chain visited by adults is not likley to benefit from and association with a children’s movie like "Shrek", that still leaves a number of movies, song artists, and product launches.

What would be wrong with giving out a free "Ocean’s 13" Blackjack card deck with every purchase over $10?  Maybe Starbucks could use another movie promotion like the "You’ve Got Mail" movie with Tom Hanks and Meg Ryan, which was openly referred to and thought of as a Starbucks and AOL promotional film. 

Douglas A. McIntyre

Posted on: June 8, 2007 – 9:03 am in Food, Product Review, ,

Can A Genentech Upgrade Fix Its Woes? (DNA)

This morning shares of Genentech (DNA-NYSE) are trading up 1.3% at just under $76.00 after a Deutsche Bank upgrade on the stock.  Shares closed at $74.90 yesterday and even traded as low as $74.32 intraday.  Both levels marked lows for the last 52-weeks, but this is actually a critical juncture because the stock broke a two-year low since their was no ‘wow-effect’ at all this year from teh ASCO conference last weekend.

The Deutsche Bank upgrade this morning from a ‘Hold’ to ‘Buy’ is based on discount valuations and upon treatments for colon cancer, MS, and lupus.  The 12-month target is somewhat in-line with many of the older ‘buy’ targets from Wall Street and is listed as $95.00. 

With Congress looking for ways to scalp biotech drug prices, with an election coming up, and with a chart that is looking like a weak pulse in the ICU one just has to wonder if this upgrade will really change much.  Stocks that trade at a discount usually do so for a reason.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 8:02 am in Analyst Calls, Biotech,

Limelight Networks IPO: Higher Pricing & Higher Share Count (LLNW)

Limelight Networks (LLNW-NASDAQ) did price its widely anticipated IPO.  It sold 16 million shares at $15.00, but this is a higher share count than the 14.4 million expected and the pricing itself was well above the $10.00 to $12.00 range.

Joint book-runners were listed as Goldman Sachs and Morgan Stanley; with co-managers listed as $Piper jaffray, Friedman Billings Ramsey, and Jefferies.

The company competes directly against Akamai Tech (AKAM-NASDAQ) and has almost an identical description: setting high performance servers at strategically placed POPs to deliver media-rich content faster and smoother to end-users.  In fact, the business is so identical that it is in a patent case against Akamai & MIT.  Its 2006 revenues were $64 million and it is still growing. Some key customers are listed as XM satellite radio, MSNBC, Viacom, ABC, Sony, XBox, Adobe, Microsoft, Facebook, and MySpace.

More detail information can be found at www.limelightnetworks.com.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 7:29 am in IPOs, ,

Pre-Market Stock News (June 8, 2007)

(ACOR) Acordia Therapeutics priced 3.75 million shares in a secondary at $18.50 per share.
(BAGL) Einstein Noah Restaurant Group, Inc. sold 5 million shares at$18.00 per share; this was NWRG-PinkSheets as New World Restaurant Group.
(BRCM) Broadcom won part of the patent case against Qualcomm.
(EPIQ) EPIQ Systems trades ex-split today to reflect a 3-2 stock split.
(FTEK) Fuel-Tech won first order for its targeted corrosion inhibition technology.
(GRRF) China Grentech won bids for new trial orders from China Mobile and from China Telecom.
(MAR) Marriott settled with the IRS over labor payment and declarations; will record a $54 million pre-tax charge.
(MGAM) Multimedia Games will spend up to $25 million for 2.04 million shares in a buyback.
(MTN) Vail Resorts $1.99 EPS vs $1.99 estimates.
(NOEC) New Oriental received a $2.2 million order for urea.
(PLCE) Children’s Place announced an agreement with Walt Disney.
(PMFG) Peerless manufacturing trades ex-split today to reflect a 2-1 stock split.
(QCOM) Qualcomm loses part of the ITC where a ban on US imports of new cell phones with its chips, but shares are actually indicated up; Qualcomm will appeal.
(TYC) Tyco approved spin-offs to shareholders on June 29 rather than IPO’s.
(VMED) Virgin Media said net adds in Q2 to be flat, up from a drop in subscribers originally forecast.
(XTO) XTO Energy noted as a new Cramer oil pick and a new holding on Mad Money.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 7:16 am in Pre-Market Activity

Einstein Noah Returns to NASDAQ With Shares Offering Effective (BAGL, NWRG)

last night, Einstein Noah Restaurant Group, Inc. today announced the pricing of a public offering of 5,000,000 shares of its common stock at $18.00 per share.  This is the old New World Restaurant Group that traded under the Pink Sheet ticker "NWRG" and the new ticker is "BAGL" on NASDAQ.

The proceeds arefor restructuring and for debt repayment.  Morgan Stanley and Cowen & Co. are acting as joint book-runners on the deal, with Piper Jaffray listed as co-manager.  This one has been in the works for some time, so it will be interesting to see the full outcome.

The $90 million sold was about $10 million short of original expectations per its filing.

The original terms were for 5 million shares at a $19.00 to $21.00 range.  Here is a full summary ahead of the offering.   Earlier this week the company showed an SEC filing where its May 2007 comparable store sales "for company-owned restaurants" increased 5.8% compared to May 2006.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 7:03 am in Food, IPOs, Secondary Offering, ,

Pre-Market Analyst Calls (June 8, 2007)

ASTI started as Buy at Merriman Curhan Ford.
BRCM raised to Outperform at JMP Securities.
CBB raised to Neutral at B of A.
CBG started as Outperform at Wachovia.
END cut to Underweight at JPMorgan.
HF started as market perform at Wachovia.
FL cut to Neutral at B of A.
JLL started as Outperform at Wachovia.
JWN raised to Outperform at Bear Stearns.
MCD raised to Buy at Deutsche Bank.
NKE cut to Neutral at B of A.
OPXT started as Buy at Merriman Curhan Ford.
PNRA cut to Hold at Deutsche Bank.
Q raised to Buy at B of A.
SMSI started as Buy at Morgan Joseph.
SPTN raised to Outperform at FBR.

Jon C. Ogg
June 8, 2007

Posted on: June 8, 2007 – 6:34 am in Analyst Calls

Sun Microsystems (SUNW) Sets

Shares in Sun Microsystems (SUNW) have not traded below $5 since October 2006. The company keeps introducing new blade servers and in late May, Matrix Research joined the list of research firms that have upgraded their ratings on the stock.

But, Wall St. is uneasy about the shares.

During the first quarter, Sun’s piece of servers shipped in the US during Q1 declined from 4.4% last year to 3.7%. That put the company into fifth place behind Fujitsu. The leader, HP (HPQ) has 30% of the market, and Dell (DELL) had over 21%.

In mid-May, Sun announced it would buy-back $3 billion in shares. Some investors wondered if that was the best use of the company’s money. Others were concerned that it was a way to increase EPS in the face of flat revenue and net income.

In short, the signs out of Sun has not been very good.

And, the share price shows it.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 8, 2007 – 6:04 am in Uncategorized

Siemens (SI) Falls: Europe Markets 6/8/2007

European markets were faliing at 6.40 AM New York time.

The FTSE was off .8% to 6,453. Barclays (BCS) was down 1.5% to 714.5. Rio Tinto (RTP) was down 1.8% to 3478.

The DAXX was down 1.3% to 7,520. Siemens (SI) was down 2.7% to 93.25.

The CAC 40 was down .8% to 5,845. AXA (AXA) was down 2.1% to 30.76.

Data from Reuters

Douglas A. McIntyre

Posted on: June 8, 2007 – 5:47 am in Uncategorized

Sprint (S) Wins As Qualcomm (QCOM) Loses

Sprint (S) has been gambling that the next generation of cell service in the US can be driven by WiMax technology. With help from tech heavyweights including Motorola (MOT) and Intel (INTC), Sprint is spending $3 billion on a WiMax network that will reach 100 million people in this country. WiMax is already used in several developed countries like South Korea.

One of the major obstacles to the success of Sprint’s plan has been the roll-out of 3G networks that are based to large extent of Qualcomm’s (QCOM) broadband chip-sets and MediaFlo wireless multimedia delivery systems. The ruling blocking imports of phones with these chips may give Sprint an important opening.

Sprint needs all of the help it can get. As it has struggled with its NexTel merger and subscriber numbers have been moribund, Its stock has dropped almost 10% over the last two years. AT&T’s (T) stock is up 70% over that period and Verizon’s (VZ) is up 20%.

If Qualcomm’s problems drag on, it may buy Sprint the time to get up its initial WiMax deployments, and, if cell customers warm to the new tech, the battered company could be on its way back.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 8, 2007 – 4:59 am in Uncategorized

Qualcomm’s (QCOM) Arrogance Finally Take A Toll

Qualcomm (QCOM) is one of the few large US companies that has been in a running dispute with its largest customer. The cell phone chip-set company has been feuding with Nokia (NOK) over licensing fees and intellectual property for over two years. Nokia has close to 40% of the global handset market, and Qualcomm’s license contract with the company expired on April 9.

Qualcomm has also been in legal disputes with Texas Instruments (TXN) that lead to a breach of contract suit by TI over a cross-licensing agreement.

Qualcomm has also insisted on pursuing its patent fight with rival Broadcom (BRCM) although several court decisions have been in Broadcom’s favor and analysts have been concerned that the battle between the two companies could cost QCOM in a case that has been pending with the U.S. International Trade Commission.

The willingness of Qualcomm’s management to gamble that it could win all or most of these disputes caught up with the company. The ITC ruled that cell phones with the company’s new chip-sets for 3G products could not be imported into the US. Current models can still be shipped. Broadcom had been asking for the action, and its got its way.

Now that the victory is secure, Broadcom says it is willing to come to the negotiating table. But, according to MarketWatch, Qualcomm will have none of it: Negotiations with Broadcom are impossible, Qualcomm general counsel Louis Lupin said, because "it has been the case since day one of our discussions that what they are seeking are terms that would be destructive to our business model."

But, much of the damage may have been done. Big US cellular companies like AT&T (T) Wireless and Verizon Wireless need the 3G products to keep up their earning momentum. Their success in wireless  has helped offset the loses their landline businesses have suffered to VoIP providers.

Verizon Wireless is so concerned about the effect of the ruling on its business that it has asked President Bush to veto the ITC ruling.

Qualcomm’s unwillingness to compromise with any of these rivals or customers has now hurt some of its most important constituents, the US cellular companies. And, it did not have to be that way. Qualcomm CEO Paul Jacobs, son of the company’s founder, has repeatedly said that his company must hang on to it current licensing model and intellectual property philosophy. What he does not add is that he is willing to do these things no matter what the cost is to his shareholders.

Mr. Jacobs must believe that his shareholders are boobs. But, they are not. Qualcomm’s stock has been held to a gain of a little above 10% over the last two years, while the S&P is up by over 25%.

Investors have been leery about Jacob’s riverboat gambling style. And, they have been right.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com. He does not own securities in companies that he writes about.

Posted on: June 8, 2007 – 4:42 am in Uncategorized

$75 Oil And $5 Gas: Consumer Spending At Risk

Boone Picken’s vision of the future is coming to pass. Oil stands at $66 a barrel. A hurricane, trouble in the Middle East, worsening unrest in Nigeria could all take it up. OPEC says it may not invest more in exploration if countries like the US insist on making huge investments in bio-fuel developments.

Rising oil prices and summer driving could send gas prices, already running at nearly $4 in some parts of the country, toward $5.

Almost nothing could be worse for an economy that is already growing slowly. The US auto industry is at the very beginnings of a recovery. Ford (F) and GM (GM) could have their programs set back several quarters, especially if demand for SUVs and pick-ups drops any further. The airline industry could see its mini-recovery hammered. Retailers like Wal-Mart (WMT) could watch trips to their stores drop as their lower income customers work to save money on fuel.

The economy seems to be weathering the housing downturn which has to make home owners feel poorer than they were during the housing boom almost two years gone. Fuel oil and gas prices increases will only racket up that felling of uneasiness.

If the economy is at a tipping point, especially consumer spending, then a summer of spiking fuel prices could tip it in the wrong direction.

Douglas A. McIntyre can be reached at douglasamcintyre@247wallst.com.

Posted on: June 8, 2007 – 4:17 am in Uncategorized

News Digest 6/8/2007 Reuters, WSJ, NYTimes, FT, Barron’s

Reuters reports that PC companies including Sony (SNE) and Lenovo are building smaller and smaller laptops in the hope of tapping a new market.

Reuters writes that Qualcomm (QCOM) lost a ruling with the US International Trade Commision that will prevent certain cell phones from being imported into the US.

The Wall Street Journal writes that the push for a restructuring of Vodafone (VOD) shows that investors do not need to own a large portion of a company to pressure management.

The WSJ writes that Johnson & Johnson (JNJ) management tried to convince skeptical investors that its consumer and drug businesses are in for a period of rapid growth.

The New York Times writes that private equity interests bought Bioment (BMET) for $11.4 billion.

FT writes that Toyota (TM) will accelerate its manufacturing of hybrids as the models meet with great succes..

Barron’s writes that Netflix (NFLX) moved higher on rumors of a buy-out by Amazon (AMZN).

Douglas A. McIntyre

Posted on: June 8, 2007 – 3:08 am in Uncategorized

Asia Markets 6/8/2007

Most markets in Asia fell sharply, but Shanghai was up .6% to 3,913.

The Nikkei fell 1.5% to 17,779. Daiwa Securities fell 2.6% to 1347. Honda (HMC) fell 2.8% to 4160. NTT (NTT) fell 2% to 540000. Sony (SNE) fell 2.9% to 6590.

The Hang Seng fell 1.4% to 20,510. China Petroleum (SNP) fell 2.3% to 8.4. China Unicom (CHU) fell 3.7% to 11.08.

Data from Reuters

Douglas A. McIntyre

Posted on: June 8, 2007 – 2:48 am in Uncategorized