Posts related to ‘Editor's Picks’

Black Friday Gimmicks & Desperation, A Win For Consumers (WMT, BBY, COST, TGT, KSS, GPS, M, JWN, MA, AMZN)

We are right at a week away from the highly awaited Black Friday for 2009’s holiday and Christmas season.  As you likely know, this is THE day that retailers look forward to all year and critically depend upon as an anchor to how each retailer’s full year earnings results turn out.  You may already be tired of Christmas ads and the holidays haven’t even arrived yet.  With over 10% unemployment, a recession-end that doesn’t feel like a recession-end, a very tight discretionary spending budget, and a general lack of consumer confidence, it is no surprise at all that the focus for the Holiday Season in 2009 is one of deals and thrift.

These are not in any particular order, but the promotions have been reviewed at Wal-Mart Stores Inc. (NYSE: WMT), Best Buy Co. (NYSE: BBY), Costco Wholesale Corporation (NASDAQ: COST), Target Corp. (NYSE: TGT), Kohl’s Corp. (NYSE: KSS), Gap Inc. (NYSE: GPS), Macy’s, Inc. (NYSE: M), and Nordstrom Inc. (NYSE: JWN).  There is also already promotion between MasterCard Incorporated (NYSE: MA) and Amazon.com Inc. (NASDAQ: AMZN).  Admittedly, this is just a sampling of major outlets.

What is amazing is just how much of the deal-making is already out before the holiday season starts as retailers key off of each other.  It is almost impossible to avoid thinking how such a promotional Christmas and Holiday Season in 2009 is going to add pressure to margins at almost all the first-line retailers.
Read More »

The More Focused, and More Opaque, Buffett & Berkshire Hathaway (BRK-A, BRK-B, BNI, UNP, NSC, GS, GE, TIF, HOG, WMT, COP, XOM, WFC, RSG, DOW, ETN, WBC, MCO, WLP, UNH, GSK, SNY, GCI, WPO)

This was an important week for investment guru and billionaire watchers to see which gurus were holding which stocks.  The full public equity holdings of Warren Buffett via Berkshire Hathaway Inc. (NYSE: BRK-A) were particularly of note, particularly with those B shares under “BRK-B” soon to split and giving a chance for even the less astute ranks of Joe Public to own a piece of the Berkshire dream.  Obviously the huge change is via the Burlington Northern Santa Fe Corp. (NYSE: BNI) buyout.  As part of this deal, Buffett is exiting Union Pacific (NYSE: UNP) and exiting Norfolk Southern (NYSE: NSC) stakes of about $600 million and $100 million, respectively, to avoid duplication and internal competition.  The rail transport play now accounts for about one-quarter of the total Berkshire Hathaway entity upon closing. But the less obvious position in that Warren Buffett in 2009 has made it clear that there will be a simpler and probably less “stock-hound” version of Berkshire Hathaway ahead.

Buffett has gone higher up the food chain and is likely to be a creditor now inside or to large institutions.  We have seen this during the crisis.  Buffett negotiated a better deal for Goldman Sachs Group (NYSE: GS) than the US Government was able to get.  Buffett’s preferred stock in Goldman Sachs has a dividend of 10% and is callable at any time at a 10% premium; but Buffett also got warrants to purchase $5 billion of common stock with a strike price of $115.00 per share, exercisable for a five-year term (4 years now), and Buffett would effectively get to pocket $61 per share if he exercised those all today at the market (and with a $2.6 billion warrant profit alone).

The General Electric Co. (NYSE: GE) stake was listed only as 7.77 million shares of common stock (about $125 million now), the same as it has been for quarters.  Yet last year Buffett came to the rescue with a $3 billion of perpetual preferred stock in a private offering with a dividend of 10% and warrants to purchase $3 billion of common stock.  The preferred is callable after 3-years (2 years now) at a 10% premium; the warrants have a strike price of $22.25 and are exercisable for a five-year term (4 years now).
Read More »

One Million Americans Face Loss Of Jobless Benefits In January

The National Employment Law Project says that the public’s perception of what will happen to insurance benefits for the unemployed early next year is flawed. Most press reports on Congressional action on the matter say that one million people have had their benefits extended well into 2010. That apparently is not so.

The NELP released a new analysis which finds that one million workers will become ineligible for unemployment benefits in January 2010 unless Congress reauthorizes the American Recovery and Reinvestment Act’s unemployment insurance programs by the end of December. Read More »

Reviewing the New Smart Grid ETF (GRID, PBD, PZD, PBW, QCLN)

If you thought you might not see another green energy or less-dirty energy exchange traded-fund, there is a new ETF for you.  First Trust Advisors is launching the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund of the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (NASDAQ: GRID) today.  So far we are seeing a gain in the ETF by 0.8% to $30.39, but on fairly thin trading volume of about 134,000 shares as of 11:20 AM EST.  We have seen many other green ETFs, but this is actually the first designated ETF or ETN that is geared solely toward the smart-grid rather than just to green energy.  There will be some overlaps in this ETF with others, but that is often the case.

This ETF aims to track equity index called the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index, which is designed to act as a “transparent and liquid benchmark” for the grid and energy infrastructure sector.  The most interesting aspect of this is that it may highlight which individual companies are making leaps and bounds here in the smart grid.  As you might expect, there are many overlaps in here with the other clean or green ETF products via the PowerShares Global Clean Energy (NYSE: PBD), PowerShares Cleantech (NYSE: PZD), PowerShares WilderHill Clean Energy (NYSE: PBW), and the First Trust NASDAQ Clean Edge Green Energy (NASDAQ: QCLN).
Read More »

Should McDonald’s And Wal-Mart Shelter The Mentally Ill And The Homeless?

It could be the economy or the fact that spending time in McDonald’s (NYSE:MCD), Target (NYSE:TGT), Starbucks (NASDAQ:SBUX), and Wal-Mart (NYSE:WMT) is more pleasant than it used to be. All of these retailers certainly have clean and well-heated stores.

There appears to be a rise in the number of homeless people and people who are mentally ill in the aisles and at the tables of America’s largest retailers, fast food coffee chains and restaurants. These establishments are often crowded enough or are in buildings that cover enough square feet so that a person could be lost, or to some extent hide in plain sight.

Read More »

Unemployed, But Still A Homeowner

There were two speeches by senior members of the US government about unemployment yesterday. The one that received the most attention was Federal Reserve chief Ben Bernanke’s talk at the Economic Club of New York. Investors and economists had anticipated the event for weeks. They shouldn’t have bothered. Bernanke said that the economy would have a positive limp next year, but that there is no reason to think that the recovery will have enough power to rebuild the jobs market. In his words, “The best thing we can say about the labor market right now is that it may be getting worse more slowly.” That may not last for much longer if improved access to credit, an increase in exports, and a miraculous reversal in consumer spending patterns do not all happen soon. Bernanke has to be a cheerleader, at least to the extent that it will not make him look foolish. His comments about the modesty of the recovery gave the sense that he was writing his own epitaph. The Fed and the government stimulus package have not been able to offset the severity of the downturn. Read More »

24/7 Wall St. TV: China Pushes US To Raise Interest Rates Which Would Undermine Recovery

The Federal Reserve and most economists believe that keeping US interest rates at near zero has been critical to the recovery of the American economy. Even with rates at historically low levels, banks and financial companies have been stingy in their lending practices because of the fear of risk from providing capital to people and businesses whose financial positions have been crippled by the recession.

Fed officials have hinted that the agency may not move rates up at all until 2011 because unemployment and tight credit will only allow a very fragile advance in GDP between now and then.

China would like the US to raise interest rates based on its theory that the low cost of capital is causing massive speculation in equity and commodities markets. China claims that Fed policy will cause bubbles that will burst and cause both another sharp downturn in the global economy and damage to the credit markets. Read More »

The Swine Flu Epidemic Fails To Do Economic Damage

bearSwine flu vaccinations have been slow to get to those who want to be treated. The Centers for Disease Control and Prevention says that about 22 million American have contracted the disease and of those almost 4,000 have died.  The number of people who have had to go to hospitals because if the illness is less than 100,000.

It is remarkable that more thsn  7% of Americans have the flu or have had it, and the effects on the medical system and economy have been nonexistent. The death rate from the disease appears to be lower than the seasonal flu. There have been very few reports that companies have had to close large facilities or that earnings may be undermined by the spread of the H1N1 virus. Read More »

Tech Giants Now Hold ~$265 Billion Cash To Spend (HPQ, COMS, INTC, AMD, MSFT, CSCO, AAPL, GOOG, ORCL, JAVA, QCOM, EMC, YHOO, DELL, AMZN, EBAY, ONT, BRCD, JDSU, STAR, VMW)

You have already seen the Hewlett-Packard (NYSE: HPQ) buyout of 3Com Corporation (NASDAQ: COMS).  But this week before that deal was announced we covered how mergers in the technology sector have been very slow to develop over the scale in which we and others think is possible for the sector.  After the Intel Corporation (NASDAQ: INTC) settlement with Advanced Micro Devices (NYSE: AMD), the tally of cash that is now estimated would be an implied $265 billion that is available for the tech giants in our 24/7 Wall St. Real-Time 500 to make acquisitions.

The giant cash balances are held by Microsoft Corporation (NASDAQ: MSFT), Cisco Systems Inc. (NASDAQ: CSCO), Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG), and Oracle Corp. (NASDAQ: ORCL), assuming nothing happens with Sun Microsystems Inc. (NASDAQ: JAVA).  But players like QUALCOMM Inc. (NASDAQ: QCOM), EMC Corporation (NYSE: EMC), International Business Machines (NYSE: IBM), Dell Inc. (NASDAQ: DELL), Yahoo! Inc. (NASDAQ: YHOO), Amazon.com Inc. (NASDAQ: AMZN), and eBay Inc. (NASDAQ: EBAY) are either all sitting with large amounts of cash or will be very soon.

We have broken out these technology, IT, software, and Internet companies by the cash amount they hold or what they have in a soon-to-be cash balance.  Of course only a fraction of this cash will be used for mergers.  But there is also a ton of room here for dividends and of course the share buybacks.

Read More »

How Much is Benmosche Really Worth to AIG? (AIG, MET)

AIG LogoAmerican International Group, Inc. (NYSE: AIG) is under pressure today after its new CEO Robert Benmosche, who has not even had a full three months yet on the job, has effectively threatened to walk out as CEO of AIG. The reasoning is over the intense restrictions of being under the government, particularly as it pertains to compensation limits.  What is interesting is that this may be a strong CEO throwing the gauntlet at the government.  But we also want to explore what Benmosche is actually worth in real dollar terms to AIG today.  Chances are it is far more than just this 4% we have seen the stock drop today.
Read More »

China’s Artificial Recovery

chinaChina’s industrial production was up more than 16% in October. Retail sales were up by about the same percentage, oddly enough. No one was shocked that exports fell a sharp 13.8%.

The Chinese recovery is no recovery at all. It is the product of a $585 billion stimulus package for a nation that has a GDP of $4.4 trillion. The US stimulus program, by way of contrast, is $787 billion against a $14. 3 trillion GDP. The totalitarian communist central government can push its investment in the economy quickly. The American democratic system is burdened more substantially with red tape. Read More »

The New Economy: Up 3% From Nothing

hersheyThe CEO of American Express (NYSE:AXP) Kenneth Chenault said that credit card spending by his customer was up 3% in October compared to September and up 1% from October of last year. That is barely a rounding error. Amex shares rose on the news.

Fedex (NYSE:FDX) said it expects shipping traffic to move up during the holidays. One executive at the company said, “The levels of expectation are a bit higher.” But, that is only a bit Read More »

Major Stocks That Have Doubled And Their Future Prospects (F)(AMZN)(AAPL)(WFMI)(MOT)

appleBy Douglas A. McIntyre

The S&P 500 index is so far having a fine year, up a bit more than 20%. But several big-company stocks in the index have doubled, or better, over that time. Among the best-performers are some of America’s most well-known companies.

Here’s a look at 10 of those and their prospects of advancing further — or sliding back into the large pack of equities that have had only modest advances during the current bull market (all prices are as of the close on Nov. 9).

Ford (NYSE:F) was left for dead when it traded at $1 last November. The market thought it would share the sorry fate of its rivals General Motors and Chrysler, and that common shareholders would get nothing.

Read more…

Tech Titans Still Have $269 Billion Cash For Deals (MSFT, CSCO, AAPL, GOOG, INTC, HPQ, QCOM, EMC, VMW, YHOO, DELL, ORCL, JAVA, AMZN, EBAY)

The recovery is on and mergers are happening, yet the technology sector has been slow to make deals.  Despite some deals already having taken place from the technology giants and that $260 billion cash balance which was there in the middle of last quarter is even larger now.  The tally for cash by our count is now right around $269 billion.  We looked through the top market caps of technology companies in our 24/7 Wall St. Real-Time 500 and this list is expanded now that some issues have been resolved in all the companies.  The stocks in this group are Microsoft Corporation (NASDAQ: MSFT), Cisco Systems Inc. (NASDAQ: CSCO), Apple Inc. (NASDAQ: AAPL), Google Inc. (NASDAQ: GOOG), Intel Corp. (NASDAQ: INTC), Oracle Corp. (NASDAQ: ORCL), Sun Microsystems Inc. (NASDAQ: JAVA), Hewlett-Packard Company (NYSE: HPQ), QUALCOMM Inc. (NASDAQ: QCOM), EMC Corporation (NYSE: EMC), International Business Machines (NYSE: IBM), Dell Inc. (NASDAQ: DELL), Yahoo! Inc. (NASDAQ: YHOO), Amazon.com Inc. (NASDAQ: AMZN), and eBay Inc. (NASDAQ: EBAY).

These few tech companies with the $269 billion cash that could be deployed for mergers, acquisitions, or the good old dividends are also listed before tallying up credit lines, factoring, debt sales, and other creative financing methods.  We have listed the suppositions and counting methods for each one to illustrate how much is available at each company.
Read More »

The Federal Government In the Car Loan Business

carThe federal government is highly active in getting banks to reset loans for people who want to stay in their homes by improving the terms of their monthly payments. The Homeowner Affordability and Stability Plan has had mixed success, but it has helped keep tens of thousands of people in their homes. It might be said that keeping even one person from being thrown out into the cold is worthwhile, although the Administration’s entire home foreclosure program is a $75 billion multi-purpose plan designed to help as many as nine million borrowers suffering from falling home prices and unaffordable monthly payments. That is an expensive program to help what may be a modest number of people with their mortgages Read More »

Waiting For Another Recession In The Spring

bearSome experts raised the issue of how long the recovery can last as unemployment went over 10% last week and the total number of people out of jobs or looking for full-time work topped 17% of the able-bodied population. It is a very reasonable question. The term “double dip” recession is still thrown around daily by economic pessimists. Their optimistic counterparts believe that American exports will pick up because of less expensive domestic labor, a weak dollar, and the recovery of consumer spending in large developing nations like China. Businesses will begin to restock inventories because they are at historic lows and the firms, especially retailers, cannot be caught short on supplies if there is a surge in customer buying, for whatever reason. But, the most impressive argument for better GDP numbers near-term is that the federal government has bought them with its $787 billion spending package. Read More »

Starbucks (SBUX) And The Recovery Of The Upper Classes

bucksStarbucks (NASDAQ:SBUX) does not hand out information about the demographics of its customers, but they are not likely to be people who are poor, indigent, or even lower middle class. The coffee firm announced unexpectedly good earnings and offered a fairly optimistic forecast for its next fiscal year. For its quarter ending September 27, EPS grew from $.01 last year to $.20 and revenue dipped slightly to $2.4 billion.

It needs to be granted that much of the improvement in Starbucks’ bottom line was due to brutal cost cutting, but the tactic worked and that has helped the stock triple in less than a year. Read More »

The Layoff Culture Lives On

bearEconomists still expect layoffs in the US and Europe to slow as the recovery gains momentum. Pessimists among experts on GDP growth and job losses believe that the major risk of a double-dip recession is that unemployment will keep rising well beyond the middle of next year. Read More »

GDP Forecast: Weak Q4 Followed By Tremendous 2010

uncle samThe Commerce Department announced GDP growth of 3.5% for the third quarter, putting an exclamation point to the end of the recession. The power behind the improvement was, as usual, the consumer who has played Lazarus these last two months. He is a consumer who spends even with rising unemployment. But, he is also a consumer who spends because of extraordinary deals on expensive goods like cars and incentives for new home buyers. The one troubling part of the GDP news as far as pessimistic economists were concerned is that the $787 billion government stimulus package was at the heart of too much of the GDP increase. That stimulus will be going away and no one knows how much of a financial crutch it has been. Read More »

Deep Flaws In Stimulus Package Report: The Tale Of 30,000 Missing Jobs

GeithnerThe $787 billion economic stimulus package is meant to save or create 3.5 million jobs. That goal may be much less important than it was when the package was first approved by Congress. Unemployment will go over 10% later this year and could average that though 2010. The stimulus package cannot come even close to plugging that hole.

The Administration is fond of putting out reports and making statements about how well the $787 billion investment is working. It is now clear that some of that was based on false data. Read More »