Reuters:   The US closed  its car “clunkers” program just as it began as funds ran out.

Reuters:   Obame faces more questions about his health care plan.

Reuters:   A Congressional bill would affect OTC derivative holdings.

Reuters:   Japan announced record deflation.

Reuters:   Ford (F) has slowed the Volvo bidding process to get more money.

Reuters:   Disney (DIS) profits beat Wall St. estimates.

Reuters:   Obama says the recession is slowing sharply.

Reuters:   British Air debt and expenses are falling.

Reuters:   Investors are taking a hard look at Yahoo! (YHOO) after the Microsoft (MSFT) deal was announced.

WSJ:   Companies are looking for modest improvements in business by the end of the year.

WSJ:   Regulators are increasing the number of banks that they put on probation.

WSJ:   Silicon Valley’s jobless are leaving the tech industry.

WSJ:   The rally lifted stocks to 2009 highs.

WSJ:   Asset sales helped Alcatel-Lucent (ALU).

WSJ:   Wii sales dropped and hurt Nintendo.

WSJ:   Retailers are launching Christmas in July sales.

WSJ:   Tough Treasury sales this weak raised questions about whether China is still buying.

WSJ:   Investors should be cautious about the second quarter GDP numbers as an indicator.

WSJ:   Southwest (LUV) made a bid for Frontier Airlines.

WSJ:   Motorola (MOT) posted a profit but cellphone sales kept dropping.

WSJ:   Cablevision (CVC) will spin off Madison Square Garden assets.

NYT:   Marketers are mining offline data and applying it to browsers to created targeted ads.

NYT:   Now that AIG (AIG) has been rescued, it faces ongoing weakness.

NYT:   The fight against corporate and government corruption in India is growing.

NYT:   Merch (MRK) is selling its animal venture stake to Schering-Plough (SGP).

NYT:   A MedImmune swine flu vaccine has proven unexpectedly effective.

NYT:   Profits fell 66% at Exxon Mobil (XOM).

FT:   Lenders won control of Delphi.

FT:   The S&P is near the 1,000 level.

FT:   Jaguar is a test of the UK programs to help manufacturers.

Bloomberg:   China will cut loans to ease a stock market bubble.

Douglas A. McIntyre

Merck & Co. (NYSE: MRK) posted earnings of $0.83 EPS vs. $0.77 estimates, and revenues were down almost 3% to $5.9 billion vs. $5.84 billion estimates.  It reaffirmed FY09 EPS of $3.15 to $3.30 vs. $3.20 consensus and sees fiscal revenues at $23.2 to $23.7 billion vs. $23.34 billion consensus.  Merck’s merger with Schering-Plough (SGP) is anticipated to close in the fourth quarter. Shares are indicated up 2% in early indications.

United Technologies (NYSE: UTX) posted earnings at $1.05 vs. $1.04 estimates, but be advised that this has taken charges and benefits into consideration.  Revenues were soft and earnings and revenue projections for the full year are being brought down.  Full year is now $4.00 to $4.20 vs. $4.07 estimates but under their prior target; revenue was put at $53 billion, about $2 billion under prior targets and under the $54.1 billion estimate.  No price direction has been seen in trading so far.

Coca-Cola (NYSE: KO) and Caterpillar (NYSE: CAT) are still on deck.

JON C. OGG
JULY 21, 2009

Allergan has now just crossed over the 10 million share mark and shares are up 11.7% at $48.23.  In today’s world of the market whip-around and the world of M&A, we won’t be shocked if Allergan denies the rumors saying they would rather be an acquirer.  Nor would we be shocked if the company halts or just says “No Comment!” in response to this.

Jon C. Ogg
March 24, 2009

No matter what they two companies have to say about “synergy”, the deal is based on saving money in a rough economy and in a world where Big Pharma companies are losing many of their profitable drugs as their patents expire.

The two firms said that the marriage would strengthen the companies by putting together they drug portfolios and R&D. That is almost certainly clear. But, buried in the announcement is the announcement that the merger will save $3.5 billion a year.

With Merck in a weakening position due to strong competition from generics and other Big Pharma companies fighting to keep their market shares, building a new company with lower costs is the key to the deal.

Douglas A. McIntrye

Cascade Investment, L.L.C.
COMPANY (TICKER)                              $(000)       SHARES
AUTONATION INC (AN)                      111,799   11,315,688
BERKSHIRE HATHAWAY (BRK-A)  391,230   4,050
CANADIAN NATL RY (CNI)           1,279,599   34,809,544
COCA-COLA FEMSA (KOF)                  37,294     857,128
EASTMAN KODAK (EK)                         52,311    7,950,000
FOMENTO ECONOMICO  (FMX)       678,431   22,516,795
GRUPO TELEVISA (TV)                       301,495   20,180,400
OTTER TAIL CORP (OTTR)                  79,474    3,406,499
PNM RES INC (PNM)                             70,757    7,019,550
REPUBLIC SERVICES (RSG)              879,233   35,467,230

Smaller positions listed as under $50 million for the BILL & MELINDA GATES FOUNDATION are BANK FLA CORP NAPLES, VIACOM, COCA COLA ENTERPRISES, COX RADIO, CROCS INC, DAIMLER, DICKS SPORTING GOODS, EASTMAN KODAK, GREATER CHINA FUNDD INC, HOME DEPOT, IAC/INTERACTIVE CORP, ELI LILLY & CO, PEABODY ENERGY, PROGRESSIVE CORP, SEATTLE GENETICS, TEVA PHAMRACEUTICAL, TRACTOR SUPPLY, VIACOM…. We listed Republic Services (RSG) because Bill Gates’ Cascade has been acquiring these share actively via Cascade.

Smaller positions listed as under $50 million for CASCADE INVESTMENTS are CROCS, FISHER COMMUNICATIONS, GAMCO INVESTORS, PATRIOT COAL, PLANETOUT INC, SIX FLAGS, STRATEGIC HOTELS & RESORTS.

JON C. OGG
FEBRUARY 17, 2009

Our belief is that Pfizer would not try to attempt a merger of"almost equals" as the integration would take forever, and the overlapswould be too many.  Here is a list of companies 247WallSt.com haslooked at in the past that are in the drug and biotech sectors whichwould be large enough of acquisitions to make a dent to the Pfizerportfolio (and even in rival drug giants):

Stock (Ticker)                             MktCap
Amgen Inc. (AMGN)                    $62.5B   
Wyeth (WYE)                             $51.1B   
Gilead Sciences Inc. (GILD)         $47.5B
Bristol-Myers Squibb Co. (BMY)   $47.3B   
Eli Lilly & Co. (LLY)                     $46.1B   
Schering-Plough Corp. (SGP)       $28.2B
Celgene Corporation (CELG)         $25.9B
Genzyme Corp. (GENZ)                $18.4B   
Biogen Idec Inc. (BIIB)                  $14.1B

First, being "willing to" should only be considered a"corporate test of the waters" to see how the market will react if itchooses to do this.  There were also many caveats such as long-termgoals and shareholder interests.  Despite Pfizer’s problems and despiteits fall from grace, it still boasts a market cap of more than$120 billion.

As a reminder, this may just be the first attempt for the company tosee how the market will receive this strategy.  So far there are no realindications that any deal is imminent.  There is also the issue thatthe cost to borrow funds now would require that deals be made eitherwith existing cash (and credit lines already on the books), is stock,or in a combination of cash and stock.

Jon C. Ogg
January 5, 2009

• Adobe Systems (ADBE) Cut to Sell at UBS.
• Agrium (AGU) Cut to Hold at Canaccord.
• Cummins Inc. (CMI) Cut to Market Perform at Wachovia.
• Intuit (INTU) Cut to Sell at UBS.
• Mosaic (MOS) Cut to Hold at Canaccord.
• Nstar (NST) Cut to Neutral at Merrill Lynch.
• Penn National Gaming (PENN) Cut to Hold at Deutsche Bank.
• Salesforce.com (CRM) Cut to Sell at UBS.
• Scana (SCG) Cut to Underperform at Merrill Lynch.
• Schering-Plough (SGP) Cut to Underperform at Merrill Lynch.
• Symantec (SYMC) Cut to Neutral at UBS.
• Terex Corp. (TEX) Cut to Market Perform at Wachovia.
• Trimble Navigation (TRMB) Cut to Perform at Oppenheimer.
• Xyratex (XRTX) Cut to Market Perform at FBR.

Jon C. Ogg
October 3, 2008

The economy is beginning to look like it did during the deep recessions in the early 1990s and 1973. Eric Rosengren, the president of the Boston Federal Reserve Bank, sees the situation getting much darker in the second half. Speaking of deteriorating financial conditions he said, "It may push the unemployment rate up to 6%, with more than 2 million people losing their jobs since the financial turmoil began last summer.".

If the economy tips closer to what it looked like in ’73, unemployment could be closer to 8% or 9%.

Several large companies will almost have to cut employment. Most are industries which are already in trouble. Some will simply drop people because they have become more efficient at running their businesses or they can "export" jobs to China and India to save money.

Banks and car companies have fired hundreds of thousands of people recently. Bear Stearns fired over 7,000 people as it was bought by JP Morgan (JPM). Washington Mutual (WM) laid off 3,000 people earlier this year. As Countrywide was taken over by Bank of America (BAC) thousands more lost work.

This is the 24/7 Wall St. list of companies that will have to cut jobs, probably over 10,000 in each case, to make ends meet or improve earnings between now and the end of 2008.

Ford (F) August car sales at Ford fell by 26% to just over 155,000 units. The company said the second half might be worse than the first. Ford promised to cut production for the balance of 2008. After US vehicle sales hit 16.1 million units last year, they are likely to be below 14 million this year and perhaps that low in 2009. Ford is running low on cash and its credit ratings have been dropped due to rising default risks. The idea that Ford can move from being an SUV and pick-up producer to builder of small cars may be no more than a dream. Once it has switched its product mix to fuel-efficient models, it still have to deal with Toyota (TM) and Honda (HMC) who own that end of the market.

Sears (SHLD) is still one of the largest employers in the US, with well over 300,000 workers. It has not made any large cuts to its workforce, yet. Housing, food, and gas prices are catching up to the people who shop at Sears and K-Mart. They are probably more vulnerable to economic conditions that any other part of the population. Same-store sales are dropping and whatever bump the company may have gotten from tax rebates is behind it. Eddie Lampert is having a hard time at being a retailer and analysts expect revenues lower in fiscal 2009 and 2010 after a drop in 2008. Sears cannot afford its current expense structure and one of the few places it can make big cuts is in people.

Citigroup (C) CEO Vikram Pandit has promised to cut expenses at the financial services company. In one cut, Citi let 17,000 people go last year. But, that is not going to reach the firm’s goal of taking out $15 billion in expenses. Citi has 350,000 employees. Its M&A, investment bank, and trading operations are clearly too large for the current credit and corporate transaction climate. Pandit has not sold off any major divisions and has already been criticized by many for not cutting enough weight from the start of his tenure.. That leaves him with limited options for bring down expenses.

Shares in Washington Mutual (WM) trade as if the mortgage company many not make it. The stock is at $4.40, near a 52-week low and well down from its period high of $39.25. Mortgage defaults are still rising and home sales still falling. According to Reuters, "WaMu may need to raise additional capital, if — due to greater housing price declines and/or a more severe than expected slowdown in the U.S. — ultimate losses approach or exceed Moody’s $30 billion stress loss estimate."  Raising more money in the current environment may be extremely difficult. WaMu may have to cut more people in its retail bank, brokerage and mortgage businesses. Dropping another 10,000 people would be a horrendous cut, but it may be necessary for the firm’s survival.

Rite Aid (RAD) is a dog of a company. It recently traded into penny-stock land, falling to $.98, off of its 52-week high of $5.20. Same-store sales rose 1.1% last month, under Wall St. projections. Rite Aid has almost $6 billion in debt. In the quarter ending May 31, the firm lost $157 million on $6.6 billion in revenue. Interest expense was $118 million. Rite Aid has 5,000 stores and 113,000 "associates" With such a large debt load, Rite Aid needs to cut a large number of people. During the whole decade management has failed to generate a turnaround from the blow-up in the late-1990′s. Investors may demand a major retooling of the company whether the board of directors wants to downsize or not.

AT&T (T) would seem like an odd candidate to cut 10,000 or more people. AT&T has over 310,000 employees and, while some of its business, especially cellular, are growing fast, its landline business is shrinking. AT&T’s adjusted operating expenses for the second quarter of 2008 totaled $23.1 billion, versus $22.7 billion in the same period last year. So, as it loses residential phone customers it will likely want to cut costs. Wireline voice revenue dropped almost 8% in the latest period to $9.8 billion. That translates to an attrition rate of almost $4 billion a year. And, that fall-off is likely to accelerate as more people turn to VoIP and cell phones as their primary means of making calls.

Circuit City (CC) is as close to being insolvent as almost any large public company in the US. Circuit City has a market cap of $325 million which means it trades at an astonishingly low 3% of revenue. The stock hit a 20-year low late last month. CC may be sold. If another retailer buys it, the consolidation of stores will mean lost jobs. CC could enter Chapter 11. That could also trigger lay-offs. If the company wants to stay independent, it will have to admit it has too many outlets. In the quarter ending May 31, Circuit City lost $165 million on revenue of $2.3 billion. The firm had almost 700 stores. It had only $90 million in cash on its most recent balance sheet. Circuit City does not make it without closing a significant number of its poorest performing stores.

Gap’s (GPS) August revenue was down 5% to $1.24 billion. Comparable store sales were off 8%. As the recession deepens, those numbers are not going to get better. Gap’s flagship stores in the US and overseas are doing relatively well. Its Old Navy division is a mess and Banana Republic comparable store sales dropped 14% last month. Gap operates a total of 3,100 stores across its three brands and has 150,000 employees. Cost cutting helped improve Gap’s EPS in the last quarter from $.19 last year to $.32 in the most recent quarter. That says a great deal about how the company can improve shareholder value. Gap has already announced a strategic review to consolidate some of its Gap brand locations, which may spells more layoffs. Supporting over 3,000 stores through a severe retail downturn won’t cut it.

Merck’s (MRK) current generation of drugs are under siege, some because they will go "off patent" and others because of FDA troubles. The Big Pharma operation has managed to get its shares near a 52-week low at $34.50. That is down from a period high of $61.62. The cholesterol drug Vytorin had over $5 billion in worldwide sales last year. Merck markets it in a partnership with Schering-Plough (SGP). Medical experts have expressed significant concerns that the treatment causes cancer. Merck still faces some level of risk from suits involving its drug Vioxx. Drug Cozaar/Hyzaar goes "off patent" in 2010 and Singulair loses its protection in 2012.  According to Morningstar, these drugs were 30% of revenue in 2007.Merck has 60,000 employees. It will have to do with a lot less.

AIG’s (AIG) new CEO Robert Willumstad say that things are so bad at the big insurance firm that "everything is on the table". That probably includes a fair number of the company’s 116,000 people. AIG plans to bring in $15 billion in new capital. It has managed to lose more than that over the last three quarters. Press reports say that AIG is actively considering spinning-out is worst assets. That should mean a lot of jobs related to operating those parts of the company will be gone. Like every other major financial services company, AIG cannot afford to keep headcount anywhere near 2005/2006 levels. Big lay-offs at AIG will come soon.

Blockbuster (BBI) is Wall St.’s perpetual whipping boy. Renting movies in stores is old world. The stock trades for $2.30. That is 10% of where it sat five years ago. In the last quarter, BBI lost $42 million on revenue of $1.3 billion. Blockbuster has 7,600 stores. Video viewing has already shifted to DVDs and the NetFlix (NFLX) model of getting content through the mail. Even that model is aging as broadband allows consumers access to video over the internet. Amazon (AMZN) and most of the cable and telecom companies are already moving into this industry.  If Blockbuster is ever going to post meaningful profits again it will have to continue cutting stores and staffing. As the stock moves closer to $2, the decision becomes easier.

Why would IBM (IBM), one of the world’s most successful technology companies, ever cut staff? To save money. There were rumors over a year ago that the firm would lay-off 150,000 people and bring them back as consultants or move the jobs to Asia. That did not happen, but there was some real sense behind the discussion. Last year, IBM’s employee count in India rose from 52,000 to 73,000. Big Blue has about 350,000 workers worldwide. While IBM’s total revenue is growing at 13% based on last quarter’s numbers, it does have some segments which are not doing nearly as well. Revenue in the company’s systems and technology group was up only 2% for the period. Financing operations are also lagging IBM’s total growth. Management at the firm has made its mark by driving efficiency and controlling costs. IBM may not cut 10,000 worldwide, but it is a good bet that a lot of jobs will be sliced in the US. Most of that work is going to India.

Douglas A. McIntyre 

Zetia and Vytorin are more examples of how little the FDA cares about the health of the general population.

The two drugs do not seem to be terribly effective. Worse, according to The New York Times, scientists are debating whether there is a link between the products and cancer.

A treatment that does little or nothing for the patient other than bring potential harm should not be on the market at all.

The FDA has become a fairly ineffective agency and that has been of benefit to many pharma companies. If Zetia were pulled from the market, Merck’s financials would be significantly damaged. Merck’s shares trade at just over $35, which is near a 52-week low. But, any investor buying in now faces the risk that the government will knuckle under to protests about Zetia and severely limit the drug’s use.

It is an odd brew. If patients using the Merck drug are helped by limits on Zetia’s prescriptions, Merck’s shareholders will be massacred.

Douglas A. McIntyre

• eHealth (NASDAQ: EHTH) Raised to Perform from Underperform at Oppenheimer.
• F5 Networks (NASDAQ: FFIV) Started as Buy at Pacific Growth.
• Foundry Networks (NASDAQ: FDRY) Started as Buy at Pacific Growth.
• Lennar (NYSE: LEN) Raised to Neutral from Sell at UBS.
• OptionsXpress (NASDAQ: OXPS) Started as Market Outperform at JMP Securities.
• Schering-Plough (NYSE: SGP) Raised to Overweight from Equal-weight at Lehman Brothers.
• Third Wave (NASDAQ: TWTI) Cut to Hold from Buy at Deutsche Bank.

Jon C. Ogg
July 15, 2008