Daily Archives: September 22, 2007

GM And UAW Get Close: Stock Could Spike

Late word from Detroit is that GM (GM) and the UAW have agreed to set up a union controlled fund that would handle healthcare payments to the car company’s union workers. The move would take $55 billion off GM’s balance sheet.

As The New York Times pointed out "such voluntary trusts are funded at a discount to the liability, with investments generally ranging from 50 to 70 percent. The greater the funding, the less risk the union faces."

In a piece in Barron’s an analyst speculated that GM’s shares could easily move to $40 if an accord is announced.

Douglas A. McIntyre

Posted on: September 22, 2007 – 6:17 pm in Autos,

Founder Defends Starbucks (SBUX)

Howard Schultz, the founder of Starbucks (SBUX) defended his company’s growth plans in an interview with The New York Times. His two points for investors in the company are that Starbucks has less than 10% shares in the coffee market in the US and less than 1% overseas. And, the coffee chain can reach its long-term goal of 40,000 stores because it has low penetration in countries like China.

The logic is a bit faulty. Starbucks may have only 10% of the North American market. But, it coffee is a luxury item compared to buying Maxwell House and brewing it at home. It is very hard to make the case that most consumers would even consider buying expensive coffee when they can make it themselves or get it for less at outlets like McDonald’s (MCD).

The argument is probably even stronger when looking at overseas markets. While places like the UK and Japan may offer more growth for SBUX, there is no concrete evidence that a country like China could support 2,000 or 3,000 stores. The Chinese appetite for expensive coffee is, as yet, untested. There is no guarantee that Chinese companies will not copy the Starbucks model and create local competition.

Wall St. does not believe Schultz. That is why SBUX is down well over 20% this year, and is not likely to move back up.

Douglas A. McIntyre

Posted on: September 22, 2007 – 11:58 am in Food, ,

Google Not “Immune” to Mortgage Crisis

From Silicon Alley Insider

We worrywarts are getting some company.  Barron’s Mark Veverka rounds up a few opinions on Google’s exposure to the mortgage crisis, one of whom offers the sound supply/demand logic that the "Google is immune" crowd usually breezes right past: continued here…

Posted on: September 22, 2007 – 11:31 am in Uncategorized

This Week on Stockhouse September 17 to 21

The U.S. Federal Reserve shocked markets Tuesday by cutting the Fed funds rate – the overnight bank lending rate – by half a percentage point. As a result, equities and commodities jumped sharply. But the issues underlying the current credit crisis remain in place.

Meantime, Stockhouse is a busy place these days as we prepare for the launch of our fresh, new-look site. The new Stockhouse will be solidly focused on you, the readership. Publisher, Executive Editor Darin Diehl wrote in the Publisher’s Notebook (http://www.stockhouse.ca/shfn/article.asp?edtID=20233) this week: “Stockhouse members who create content – on the Bullboards, blogs or through the submission of individual articles – will benefit from behaviour that enhances their reputation. The larger investment community on Stockhouse will have the opportunity to rate and rank all content. If you add value you’ll be rewarded with higher rankings – and more readers. If you don’t, you’ll be ranked poorly and garner far fewer readers.” He listed ways for users to enhance their Stockhouse reputation.

One of the best ways to build your following on the new Stockhouse is to submit articles. Please see our submission guidelines (http://www.stockhouse.com/shfn/article.asp?edtID=20146) for ideas and the ground rules.

Stockhouse members expounded on numerous different topics this week. Littleguy123 warned that faulty analysis of statistics (http://www.stockhouse.ca/shfn/article.asp?edtID=20226 ) can skew our understanding of a trend, and at worst it can be the root of a bad decision.

The concept of the knowledge quadrant (http://www.stockhouse.ca/shfn/article.asp?edtID=20227) was detailed by Kevin Graham, who noted that it’s important for a person to understand which quadrant they’re operating in when they make decisions, especially those that are investment related.

And, in an open letter to the Southern Arc (TSX: V.SA) board, Graham urged (http://www.stockhouse.ca/shfn/article.asp?edtID=20231) Bullboards posters on that board and others to contribute their best to the forums.

Gold was a direct beneficiary of the Fed’s rate cut this week. Mike Hewitt explored the prospects for a copper and gold company (http://www.stockhouse.ca/shfn/article.asp?edtID=20240 ) operating in Spain.

The search for new, cleaner energy sources has fostered a boom in uranium prices and the share price of uranium producers and exploration companies. Mike Maillet wrote that U3O8 Corp (TSX: V.UWE), a company with exploration projects (http://www.stockhouse.ca/shfn/article.asp?edtID=20246 ) in Guyana, deserves a second look.

For a quick look at what was hot on Stockhouse during the past week, have a read of the Stockhouse Top Five (http://www.stockhouse.ca/shfn/article.asp?edtID=20241 ), which is assembled by the editorial staff.

And from our regular stable of contributors:

Institutional Research Partners interviewed the CEO of wireless infrastructure (http://www.stockhouse.ca/shfn/article.asp?edtID=20232 ) company ISCO International (AMEX: ISO).

Two oil and gas plays were a lesson in contrasts (http://www.stockhouse.ca/shfn/article.asp?edtID=20234 ) in this week’s Trading Discipline column by Don Rodgers.

Investors who are looking for investment themes for China (http://www.stockhouse.ca/shfn/article.asp?edtID=20239 ) that will prove profitable could look to media and telecom names, as well as environment services companies, according to David Reidel, this week’s Market Wizard.

Steven Saville took issue with the stance of Dr. John Hussman on inflation (http://www.stockhouse.ca/shfn/article.asp?edtID=20238).

This week’s report by the Alberta Royalty Commission that the province ought to charge a greater royalty (http://www.stockhouse.ca/shfn/article.asp?edtID=20244 ) to oil companies put a chill in junior players, said Don Rodgers.

As the gold price increases, governments are going all out to induce investment in exploration. Egypt (http://www.stockhouse.ca/shfn/article.asp?edtID=20247 ) is reclaiming its historic claims as a gold producer, with output expected to soar in 2008, noted Luke Burgess in the Pure Metals column.

Dubai is well-known as a desert destination, but sales of gold jewelry (http://www.stockhouse.ca/shfn/editorial.asp?edtID=20254) in the high-flying tourist mecca could show how demand for the precious metal has soared, wrote Greg McCoach.

How can a mutual fund prospectus (http://www.stockhouse.ca/shfn/editorial.asp?edtID=20253) help you decide which fund is right for you? Financially Fit author Nancy Zambell showed how to wade through the fine print and crunch the numbers.

And, a fund aimed at professional practitioners (http://www.stockhouse.ca/shfn/editorial.asp?edtID=20251) found favour with STANDUP Advice columnist John J. De Goey.

Posted on: September 22, 2007 – 11:29 am in Uncategorized