Daily Archives: November 11, 2007

The Death Of Cable (CMCSA)(TWC)(CHTR)

The largest cable company in the US, Comcast (CMCSA), hit $30.18 last January. Mark that down. The shares may well never get that high again. Time Warner Cable (TWC) hit $44 in January. It is the last times it will see that price. Charter (CHTR) hit $4.93 in July. The company could be bankrupt next year.

Shares in Comcast and Time Warner Cable are down well over 20% in the last three months. Charter is down closer to 60%. The stocks in their biggest competitors, the big telecom firms AT&T (T) and Verizon (VZ) are flat over that period. Shares in the two satellite TV companies, DirecTV (DTV) and Echostar (DISH) are up over 20%.

Cable was on top of the world coming into 2007. Wall St. assumed that it had a multi-year lead over telecom companies for providing voice, broadband, and TV to American homes. The large cable companies had pricing leverage with many channels that provided programming. If video content firms wanted carriage to the home, they had to talk with the cable guys.

But, there is early evidence that the fiber-to-the-home initiatives from the telecom companies are stealing customers from cable. The satellite TV companies offer more high definition channels, which has become attractive to many consumers.

It turns out that cables biggest enemy is not the competition. It is the industry’s own size and the fact that Washington has grown to view that size as something akin to a monopoly.

The FCC recently approved "a rule that would ban exclusive agreements that cable television operators have with apartment building," according to MSNBC. That gives the telecom companies a shot at about 25 million homes that "belonged" to cable.

That is not the worst of it  According to The New York Times "the FCC is preparing to impose significant new regulations to open the cable television market to independent programmers and rival video services after determining that cable companies have become too dominant in the industry, senior commission officials said." Part of the new rules that the commission may force on the cable companies would make them offer small content channels more access to channels that reach tens of millions of homes.

And, the government may put a cap on any more acquisitions of new cable systems by Comcast and perhaps some of the industry’s other large firms.

All of this adds up to one ugly sum. Cable now has competition from a a very well-funded source in the telecom operators. And, the FCC is opening up what was once a closed system which kept cable with high cash flow and little competition.

The multi-year-high stock prices that cable companies hit earlier this year were a peak.

Douglas A. McIntyre

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Posted on: November 11, 2007 – 2:29 pm in Cable Companies, , , , , , ,

Short Interest In Microsoft (MSFT) Spikes

The most visible shift in short interest in the new Nasdaq figures as of October 31, is the sharp increase in shares sold short in Microsoft.

From October 15 to the end of the month, the short interest in the world’s largest software company rose 23.9 million to 101.3 million, the largest increase of any company listed on the Nas.

After making a multi-year high late last month, the stock has sold off some, but not nearly to the extent that other Big Techs like Cisco (CSCO), Intel (INTC), and Google (GOOG) have.

Some on Wall St. may simple think that all the good news is baked into the stock now. It’s Vista launch has gone better than most thought it would, and PC sales in general continue to move up more than expected. The new version of Office has done well. And, after billions of dollars of loses, Redmond made money on its Xbox 360 unit for the first time last quarter, driven by the launch of its new "Halo 3" video game.

The only part of MSFT doing poorly is it online operation, lead by MSN. Based on results from Yahoo! (YHOO) and AOL, that is not going to change.

The company is probably operating as "perfectly" as it can now. Investors sense that, and don’t see what news could possibly take the stock up much from where it trades today.

Douglas A. McIntyre

Posted on: November 11, 2007 – 9:57 am in Software, , , , ,

Two Deals Could Help BHP Billiton (BHP) Bag Rio Tinto (RTP)

At first, the offer by mining giant BHP Billiton (BHP) to buy Rio Tinto (RTP) looked improbable. The $140 billion price seemed quite rich and offering an all stock arrangement might not be attractive to the RTP board and shareholders.

BHP is moving quickly to remedy that. Citigroup (C) has lined up a $70 billion credit facility to help the takeover along, according to the FT.

A second play by BHP management could help finance a hostile run at Rio Tinto, if that is what is necessary to get a deal done. The Times of London is reporting that BHP is looking at selling its petroleum division for $40 billion. The paper writes "BHP’s financial advisers, Goldman Sachs and Citigroup, are understood to have already flown out to China to sound out potential bidders for the subsidiary."

Between the two initiatives, BHP most likely has the resources to make the takeover work. The Vegas odds are beginning to tip in its favor.

Douglas A. McIntyre

Posted on: November 11, 2007 – 9:04 am in Mergers and Buy Outs, , ,

Mickey Mouse Goes To Japan (DIS)

Japan hardly needs more cellphone services, The market is already crowded with offerings from Docomo, Softbank,  and KDDI. Price cutting by cell services to pick up market share is the business practice of the day.

But, the people at Disney (DIS) can’t resist simply being successful with ESPN and their theme parks. According to The Wall Street Jounal, the mouse company "is planning to start its own cellphone service in Japan next spring with Disney-branded phones and animated content."

It is very hard to imagine people buying Disney phones because they like the company’s cartoon characters, but Wall St. may assume that the company’s management knows what it is doing. Or not.

Douglas A. McIntyre

Posted on: November 11, 2007 – 8:49 am in Wireless,

Airbus Picks Boeing’s (BA) Pocket

Just when Boeing (BA) was beginning to think it had a leg up on Airbus and its troubled A350 and A380 programs, Emirates, the biggest Arab airline, gave the European company a $31 billion order.

So much for the Boeing 787 and stretch 747-8 ruling the skies.

Bloomberg quotes one expert as saying “It’s a tremendous win for the A350,” said Nick Cunningham, an analyst with Evolution Securities in London. “It validates the program and is exactly what it needs to get it off the ground.”

Boeing has seemed invincible for the last year or so, while Airbus bumbled through delays of the launches of its critical new planes. But the tables have been turned as of late. Boeing is now having trouble getting its 787 out the door.

Boeing’s shares, which were at $107 in early October now trade for $94, and the Emirates news is not likely to do them any good.

Douglas A. McIntyre

Posted on: November 11, 2007 – 8:41 am in Airlines,

This week on Stockhouse November 5 to 9

The bears were back in full force this week, but contributors found ways to focus on opportunities throughout the investing landscape, including plays in oil, gold, nickel, uranium and silver.

littleguy123 turned his attention to the world’s energy crisis – “interesting” – to say the least. Read the returning community contributor’s take on the coming energy crisis in Living in “Interesting Times.”

This week, Danny Deadlock profiled a nickel producer that he said deserved a second look in Nickel play that’s NOT over hyped.

In the first edition of a new series on Stockhouse, Luke Brocki, who is a managing editor of U308.biz, recapped a volatile week in the uranium markets as prices continue to climb from a summer slump, in Uranium week in review.

Fittingly, Monday’s Buzz on the Boards spotlighted Utah Uranium Corp. (NASDAQ: UTUC, Bullboards) and Explor Resources (TSX: V.EXS, Bullboards).

A small company that makes wireless location solutions jumped higher after it reported its first quarter of positive cash flow. Read more in the new Stockhouse U.S. Small and Micro-cap Stock Report.   Meantime, some upbeat results from a Quebec mining property helped lift shares of a small gold producer. For more news about small stocks that made big moves in Monday trading, please read the Stockhouse Canadian Small and Micro-cap Stock Report.

The speedy retreat of the U.S. greenback prompted Greg Silberman to present an argument that gold is the best place to park investment dollars, in Gold rising against all currencies.

Community contributor nwatson urged fellow investors to bundle up against the chill afflicting shares of an outdoor footwear maker, in High performance pressure forces collapse of monumental proportions. 

The Tuesday Buzz on the Boards focused on talk at Lexington Energy Services (OTC: BB: LXES, Bullboards) and Central Fund of Canada (TSX: T.CEF.A, Bullboards).

An equipment order helped send shares of a small aeromedical company into the stratosphere in the Stockhouse U.S. Small and Micro-cap Stock Report. A gold miner with a new strategic partnership vaulted 41% on the same day. For more news about small stocks that made big moves in Tuesday trading, please read the Stockhouse Canadian Small and Micro-cap Stock Report. 

Stacey Laliberte concluded his three-part examination of the “recession proof” portfolio with a look at gold. Read his article What if a recession? to learn more.

Roy Martens, writing from the Netherlands, submitted a chart-filled analysis of various commodities in Sector-wide technical analysis – gold, silver, oil, USD, copper – 11/5/07.

Is the U.S. economy teetering near recession? Donald Dony looked at consumer spending for some clues – in U.S. economy: Some cracks showing.

Economic confidence as related to peaks and troughs in the banking sector, along with a brief aside on recent uranium prices, were the subjects of Steven Saville’s article Economic confidence / uranium update today.

Does Lululemon (TSX: T.LLL) have the sizzle to take on the U.S. market? Don Rodgers didn’t know for certain, but he did offer very specific guidelines for a short-term trade of the yogawear maker, as well as a couple of Canadian oil plays. Read Don’s complete analysis in Momentum and contrasts.

Buzz on the Boards spotlighted Fording Canadian Coal Trust (TSX: T.FDG.UN, Bullboards) and Waratah Coal (TSX: V.WCI, Bullboards).

China-related stocks are hot, and a digital media IPO was the start of the day in the U.S. Small and Micro-cap Stock Report. A report detailing oil seeps at one company’s Saskatchewan property gassed a big gain for one venture-listed firm. Read more in Wednesday’s Stockhouse Canadian Small and Micro-cap Stock Report.

David Reidel, of Reidel Research Group, answered questions about how to make money by investing in Chinese companies in a time of U.S. turmoil, in Continuing to play China.

Troy Schwensen posited that silver is ready to play catch up with gold in Silver is poised.

Buzz on the Boards reviewed the growing world of ETF investments with a focus on the Horizons BetaPro S&P/TSX 60 Bear Plus ETF (TSX: T.HXD, Bullboards).

A merger agreement boosted confidence in shares of a hardware retailer. For details, please read the Stockhouse U.S. Small and Micro-cap Stock Report. Also on Thursday, a venture-listed energy company contracted to borrow $1.5 million for working capital to drill and develop a well in the Mississippi delta. To read about other stocks on the move, please check out the Stockhouse Canadian Small and Micro-cap Stock Report.

On Friday, Dan Miller shared his opinions on the latest action in Alberta’s oil patch in Stelmach’s Sssstttttumble.

While the writers of Casey Research forecast $100/barrel oil, Dan Sweeney explained the many hurdles blocking rapid development of alternative energy sources.

Nancy Zambell wrote a cheat sheet about how to assess a company’s income statement, but you’ve got to say Show me the money first.

Posted on: November 11, 2007 – 8:31 am in Uncategorized

The Bank Super Fund Goes Nuts (C)(JPM)(BAC)

Citigroup (C), JP Morgan (JPM), and Bank of America (BAC) are closer to setting up their "super fund"  to supply short-term loans to structured investment vehicles, pools of money which are made up primarily of debt that no longer trades. As The New York Times says "the proposed fund could help thaw the frozen market for asset-backed securities by establishing a ready buyer, even if no SIV uses it. SIVs are currently struggling to find buyers for their assets; no investor wants to be the first one into the market, only to watch prices drop even more a few hours or days later."

But, the rules of engagement for the fund have become odd. The paper writes that "the backup fund will not distinguish between the assets it buys from each SIV; instead, it will assign the same risk level to all their troubled securities."

The idea of the "super fund" had the appearance of the large banks helping out Citigroup, which has an unusually high number of affiliated SIVs. That appearance has not gone away. By failing to take into account the varying shades of value for the assets in the SIVs, the plan perverts the concept of market demand and dispatches one of the primary purposes for undertaking risk. If an asset can be assigned an artificial value when it trades, the value of that asset might be nil.

The new program may put off the day of recking for the SIVs, but with the market in severe turmoil, it is likely that the artifice will only work for so long.

Douglas A. McIntyre

Posted on: November 11, 2007 – 6:43 am in Banking, , ,