Sunday, April 29, 2007

SecondLife: Interview With Adam Constantineau, Foreign Exchange Trader

Adam Constinteau - New Foreign Exchange Trader in SecondLifeI'd found Adam Constantineau through Jill Kearny yesterday. Jill ended up investing in this venture - her comment being: 'It's a new business idea that needed support, plus the chance to make money of course.'

Adam was nice enough to allow me to interview him today. His business, 'The World Currency Exchange', will be opening tomorrow; details of which are below the interview.

Nobody Fugazi: Hi Adam, thanks for your time. I'll just jump right in and get started.

The whole business revolves around trust.... why should people feel safe about dealing with you? (It's what they will ask)

Adam Constantineau:Well, i've been around for a while in a couple of different things. For a start, I co-founded the Citizens Bank a little while back. I decided to leave that to my then partner to pursue the exchange though, but all was well. I used to provide many a loan to poor new SL residents in fact, the question should be - how do i know i can trust the residents? SL residents tend to be of a stronger moral fiber than in real life it seems and I trust the majority.

Nobody Fugazi: So it's all based on mutual trust, then?

Adam Constantineau: Yes, and it's also a matter of the returns.

Nobody Fugazi: Aha. So it's a balance, then . Everyone is asking, "do I trust this guy more than the profit that I can make?" sort of thing.
Ok- well, how does it work for the client?

Adam Constantineau: Well, to explain the process simply, the customer deposits their L$, and we, in return, back their investment as a margin trade. Margin gives us a couple of advantages. The first is for the customer. If they know what they're doing, or can see the future - then they will take advantage of margin trading and make a tidy profit. The second is that margin trading can be a gamble and like any business where there is an element of chance. We take advantage of this, and return a percentage to our shareholders.

read more


Thai market slammed by investment rules

China is attempting to further enliven is foreign exchange market. In that vein Beijing has approved six more banks.

1. Chine Everbright Bank - they give away toothpaste when you open up an account.

2. China Minsheng Bank

3. Huaxia Bankforeign-exchange.jpg

4. China Development Bank

5. Sumitomo Mitsu Bank Corporation's Shanghai Branch

6. Deutsche Bank's Shanghai Branch

Thirteen inter-bank market makers are domestic banks and eight are foreign-funded banks.

China now has 261 foreign exchange market members.

With the Chinese yuan doing its dance and more and more foreign businesses coming to China and Chinese heading overseas to do business, there is a need for more people to skim off the top when doing the exchanges.

I hated losing money when I exchanged yen to dollars to go home and then changed it back when I returned to Japan.

Exchanging money is just another big business. And now, China has more people doing it.

What do you think?



Thai market slammed by investment rules


An investor monitors an electronic board at a private trading floor in Bangkok, Thailand Tuesday, Dec. 19, 2006. Thai stocks plummeted nearly 9 percent Tuesday after the central bank announced rules to discourage foreign inflows late Monday in an attempt to stem the baht's surge. The Stock Exchange of Thailand's benchmark SET Index declined 63.65 points, or 8.7 percent, to a five-month low of 666.9 in midday trading. The hardest hit sectors were banking and oil and gas. (AP Photo/Apichart Weerawong)Foreign investors bailed out of the Thai stock market in droves Tuesday, forcing Thailand’s military government to abandon just-announced measures aimed at stemming the country’s surging currency.



Wall Street Breakfast for December 28, 2006

MACRO AND HOUSING

November Home Sales Data Propel Homebuilder Stocks, Suggest Bottoming of Housing Market

Homebuilder stocks rose strongly after the Commerce Department reported Wednesday morning that new home sales rose 3.4% sequentially in November, higher than the 1.6% rise forecast by economists and a sharp rebound from the 3.8% decline in October. The supply of unsold homes at the current sales rate fell to the lowest since May, and the median price of a new home rose 5.8% versus a year earlier (to $251,700 from $237,900), the largest increase since June. Still, sales of new homes were down 15.2% year-over-year, and economists weren't ready to call an end to housing market pain. ING economist Dimitry Fleming, for example, stated that "although the rebound in sales is consistent with the housing slowdown bottoming out... supply is still high”, and Lehman Brothers' Michelle Meyer said "We look for further weakness in prices as homebuilders continue to slash prices to encourage sales." According to the WSJ, while November's new sales numbers are encouraging, "the estimates are difficult to interpret with unclear calculations of sales cancellations making the true sales and inventory numbers difficult to pinpoint." The SPDR Homebuilders ETF closed the day up 1.6% and the iShares Dow Jones US Home Construction ETF up 1.9%. The National Association of Realtors reports on existing home sales Thursday. New home sales are arguably a better barometer of current market conditions because they are recorded when contracts are signed. In contrast, existing home sales, which account for about 85% of the residential real estate market, are recorded when contracts close, often months after buying decisions were made and contracts signed.
• Sources: Bloomberg, Wall Street Journal, NY Times, Wall Street Journal II, AP
• Related commentary: Housing Bubble and Real Estate Market Tracker, Housing Market At Its Worst Since 1997, Hovnanian Enterprises Suffers Gruesome Fourth Quarter.
• Potentially impacted stocks and ETFs: Hovnanian Enterprises (HOV), DR Horton (DHI), KB Home (KBH), Centex (CTX), Toll Brothers (TOL). ETFs: SPDR Homebuilders (XHB), iShares Dow Jones US Home Construction (ITB).

IMF: Investors Too Blase in Face of Downside Risk

The IMF has warned that investor complacency in the face of risk could trigger a destabilizing upset to the market if some unforeseen circumstance caused them to panic. While the market appears confident that the global economy is sound and that inflation should remain under control, the IMF maintains that investors are paying insufficient attention to significant risk factors, including the debt level of many private equity funds and the options exposure of hedge funds. While the overall outlook is relatively positive -- the U.S. housing slowdown, for example, has not yet affected the country's overall economy to any dangerous extent -- a sharp drop in market volatility or a widespread lack of risk diversification could spell trouble. Triggering factors that could raise volatility might include lowered growth expectations or higher inflationary pressure.
• Sources: Reuters
• Related commentary: Housing Market At Its Worst Since 1997, U.S. Economy Just Beginning to Sizzle -- Barron's, How Long Can Consumer Confidence, Earnings Weather the Housing Bust?, It's Still The Economy, Stupid, Global Markets: Currency Imbalances and Trade Are Driving Forces, Comparing Economies of Key Countries Using Purchasing Power Parity
• Potentially impacted ETFs: Total Stock Market VIPERs (VTI), Standard & Poor's 500 Index Depository Receipts (SPY), NASDAQ 100 Trust Series I (QQQQ), iShares Russell 2000 (IWM), iShares MSCI EAFE Index (EFA)

The Grinch Stole Christmas from Brick and Mortar Retailers...But Online Sellers Are Smiling

The housing slowdown and higher energy costs took their toll on holiday spending this year, with retail sales rising only 3% over last year. Sales were also hurt by the relatively warm temperatures, which cut into apparel sales. The last-minute weekend rush on December 23-24 gave the sector a 23% boost, but revenues were still the slowest they have been since 2002. Wal-Mart, which will issue a preliminary report on December's results this weekend, is forecasting a slim gain of "up to 1%." The S&P 500 Retailing Index remains stable, however, falling less than 1% since Oct. 31. Apparel fell behind overall retail during the holiday season, but no individual category did particularly well this year. Retailers are hopeful that the post-Christmas week will bring some cheer to the season as gift-card recipients come to stores to redeem their certificates. The only bright spot in the sector was online retail, with Amazon.com posting its best holiday season ever and Yahoo Shopping seeing a 34% rise in December over a year earlier.
• Sources: Bloomberg, Wall Street Journal, USA Today, MarketWatch
• Related commentary: U.S. Retail Sales Relatively Strong as Holiday Season Ends, Retailers' Heavy Discounting Should Pressure Q4 Margins, Holiday Retail Sales Falling Short
• Potentially impacted stocks and ETFs: Wal-Mart (WMT), Federated Department Stores (FD), Target (TGT), Amazon.com Inc. (AMZN), Yahoo Inc. (YHOO). ETFs: Retail HOLDRs (RTH), Consumer Discretionary SPDR (XLY), Internet HOLDRs (HHH), First Trust Dow Jones Internet Index (FDN)

TECHNOLOGY AND INTERNET

Tuesday's Asian Earthquake Highlights Need For Stronger Underwater Communications Networks

Tuesday's 7.1 earthquake off the coast of Taiwan may have killed only two people and caused minimal physical damage but it underscored in a big way the vulnerability of the world's communications networks.asian networks Parts of Taiwan, China, Singapore and Hong Kong had their telephone and internet service disrupted yesterday as underwater network cables were damaged by the quake. Asian telephone and internet companies such as China Telecom scrambled yesterday to reinstate service to customers who were unable to conduct business as usual by rerouting service through other, undamaged providers. Meanwhile, companies like Verizon and AT&T stand to gain from yesterday's disrupted service as the need for more underwater communications cables between Asia and the U.S. becomes more apparent.
• Sources: Map of Global Communications Networks [pdf file], Bloomberg, Wall Street Journal, NY Times, Reuters
• Related commentary: Options Trader: Tuesday Morning Ideas
• Potentially impacted stocks and ETFs: China Telecom (CHA), Verizon (VZ), AT&T (T). ETFs: iShares Dow Jones US Telecom (IYZ), iShares Goldman Sachs Networking (IGN), Vanguard Telecommunication Services (VOX), PowerShares Dynamic Networking (PXQ), PowerShares Dynamic Telecom & Wireless (PTE)

Apple Stock See-Saws On Reports Of Faked Options Docs

Apple stock was down about 5% in early trading Wednesday following a report from Law.com that federal investigators are examining stock-option documents allegedly falsified by company officials to maximize potential executive gains. The report, citing anonymous "people with knowledge of Apple's situation," claims that criminal charges are being considered by prosecutors and that CEO Steve Jobs has decided to hire an attorney to defend against forthcoming Justice Dept. and SEC actions. Jobs previously relied upon the company's outside counsel. This Friday's delayed 10-k filing by Apple may contain further information on the options investigation, including the possibility of further earnings restatements. The stock completely recovered from Wednesday early drop, however, ending the day up a penny. But an unsourced report late Wednesday from the Financial Times has the stock trading down 3-4% again -- the FT indicates Jobs was handed 7.5 million in stock options in 2001 without required authorization from the company's board of directors, and documents were falsified afterwards to cover this up. Jobs later surrendered these options before they were exercised.
• Sources: Law.com: Faked Documents May Be at Core of Apple Case, Financial Times: Apple ‘falsified’ files on Jobs’ options, CNN Money, MarketWatch
• Related commentary: UBS: Apple Options Fears Overdone, Apple's Options Problems Deepen - Likely To Restate Results, Apple Stores Now More Profitable Than Tiffany's Per Square Foot, High School Math 101: iTunes Sales Not Collapsing . Conference call transcripts: Apple F4Q06 (Qtr End 9/30/06)
• Potentially impacted stocks and ETFs: Apple Computer (AAPL)

MEDIA

Cenveo Inc. To Purchase Cadmus Communications for $430 million

Digital printing company Cenveo announced on Wednesday that it will buy Cadmus Communications, another digital printing services provider, for $430 million. The merger will create the third largest graphic services company in the U.S. with revenue of over $2 billion. The purchase is valued at $24.75 a share in cash, an 18% premium over Cadmus' Tuesday closing price of CVO vs. CDMS chart$20.98. Analysts are pleased with the acquisition as it will provide Cenveo with entry into more specialized areas of the industry, including packaging and niche journal and magazine production. Cadmus' FY05 revenue was about $450 million, while Cenveo generated $1.75 billion for 2005. Layoffs are expected at the corporate level where more jobs will become redundant, but less downsizing is anticipated in operations. Cadmus stock climbed over 17% to $24.55 on Wednesday, after touching a year high of $24.66. Cenveo shares increased over 9% to $21.67.
• Sources: Reuters, MarketWatch.com, InformationWeek
• Related commentary: Other articles on Mergers & Acquisitions
• Potentially impacted stocks and ETFs: Cenveo (CVO, Cadmus (CDMS) Competitors: Ennis Inc. (EBF), CSS Industries (CSS), The Standard Register Company (SR)

ENERGY AND MATERIALS

Falling Natural Gas Prices Haven't Affected Stocks (Yet)

The stock prices of natural gas producers have remained stable despite a 30% drop in the price of natural gas since the beginning of December.natural gas chart A combination of warm seasonal weather and record high inventories have sent gas prices to several-month lows but stock prices haven't followed suit. The reason, according to Canaccord Adams analyst Irene Hass is that even at a 30% discount to its previous prices, natural gas continues to remain quite profitable, especially with the news that Canadian natural gas exports to the U.S. are expected to drop heavily. As a result, none of the gas drillers have really slowed down their operations. But if some of the current inventory buildup isn't drained this winter - something which would require colder weather - there are concerns 2007 revenues could be badly impacted for top gas producers like Devon Energy, Apache Corp., Anadarko Petroleum and Chesapeake Energy Corp. as well as energy service companies such as Halliburton Co. and BJ Services.
• Sources: Reuters, Washington Post
• Related commentary: Natural Gas Inventories Not Pressuring Supply in Meaningful Way, International Securities Exchange Launches Natural Gas Index, Natural Gas is Running Out of Steam, Chesapeake Energy: Hedging Its Way to the Top, The Short Case for Apache Corp.
• Potentially impacted stocks and ETFs: Apache Corp. (APA), Anadarko Petroleum (APC), Halliburton Co. (HAL), Devon Energy (DVN), BJ Services (BJS), Chesapeake Energy Corp. (CHK). ETFs: iShares Dow Jones U.S. Oil & Gas Exploration/Production (IOE), PowerShares Dynamic Oil & Gas (PXJ)

RETAIL

Hasbro's 'Wizards of the Coast' Renews Lucasfilm Agreement

Wizards of the Coast, a subsidiary of the toymaker Hasbro, has reached an agreement with Lucasfilm and will continue to produce Star Wars Miniatures and the Star Wars RolePlaying Game for an extended period of time. In addition, Hasbro 28 12 2006 Chart the Seattle-based company, which also produces Dungeons and Dragons and other popular games, will make new sets for existing products, as well as a Starship Battles vehicles game. Star Wars miniatures allow players to choose from hundreds of characters to create skirmish-style battles, and fans can create their own mini- plots in the Star Wars saga with the Roleplaying game. "Star Wars celebrates its 30th anniversary next year, which makes 2007 very special for us," said Derek Stothard, director of toys at Lucas Licensing... We're looking forward to working with Wizards of the Coast in this banner year."
• Sources: Press Release, Theforce.net, Motley Fool
• Related commentary: Hasbro's Fundamentals Seem Solid, Jim Cramer Discusses Hasbro on Mad Money, Nov. 21
• Potentially impacted stocks and ETFs: Hasbro (HAS). Competitors: Mattel (MAT), Marvel (MVL), JAKKS Pacific Inc. (JAKK)

TRANSPORTATION

Settle Down, People -- Toyota/Ford Talks Were About Sharing Green Technology

Shares of Ford and Toyota leaped on the news that their CEOs met in Tokyo last week, but the companies have hastened to downplay any suggestion that joint ventures were discussed. The conversation was about sharing green technology. Ford, which is having one of the worst years in its history, lags its competitors in terms of fuel-efficient offerings. Toyota, on the other hand, is a leader in the field of green auto technology, with its hybrid-electric Prius leading the U.S. government's annual top-10 fuel economy list for 2007 cars. The two companies already have a history of technological cooperation in environmental technology: in March 2004, Toyota licensed Ford several hybrid system and emissions purification patents.
• Sources: Boston.com, Houston Chronicle, International Herald Tribune
• Related commentary: Heads of Ford and Toyota Meet in Tokyo, Toyota Versus GM/Ford: Classic Hedged Pair Trade, Ford's Internal Projections: Toyota Will Be #2 Within Months, Toyota To Become World's Largest Automaker in '07
• Potentially impacted stocks and ETFs: Ford Motor Co. (F), Toyota Motor Corp. (TM). Competitors: General Motors (GM). ETFs: BLDRS Asia 50 ADR Index (ADRA), iShares NYSE Composite Index (NYC), Rydex S&P 500 Pure Value (RPV), Rydex S&P 500 Pure Value (RPV)

AEROSPACE AND DEFENSE

Air Force Might Hire Private Sector Contractors for Next-Generation GPS Satellite System

The U.S. Air Force, hoping to avoid the expensive trouble it has had managing multibillion-dollar space projects, is considering the unprecedented move of hiring private sector firms to act as consultants and contractors. In an implicit acknowledgement that Air Force Space Command and the Pentagon's enormous weapons-buying bureaucracy lack the expertise to oversee systems engineering and integration, the Air Force is contemplating bringing in an outside systems integrator for its next-generation navigational satellites. These global positioning system [GPS] satellites have both military and consumer applications, like in-car direction services. The next-generation system [GPS III] is expected to comprise two dozen or so $100 million satellites. Boeing and Lockheed Martin are competing for the contract to build the satellites and may ultimately compete for the integration work as well. Production is intended to begin in 2008 with the satellites entering orbit around 2013. In the meantime, the Air Force, together with federally funded think tank Aerospace Corp., is evaluating whether conflicts of interest will be created if contractors for GPS III or similar programs are permitted to compete for corresponding integration contracts.
• Sources: Wall Street Journal
• Related commentary: Defense Stocks Should Continue to Outperform in 2007, Boeing Is Flying High, Lockheed Flying High After Winning Lucrative Shuttle Replacement Contract
• Potentially impacted stocks and ETFs: Boeing Co. (BA), Lockheed Martin Corp. (LMT). Competitors: General Dynamics Corp. (GD), Northrop Grumman Corp. (NOC), Raytheon Co. (RTN). ETFs: iShares Dow Jones US Aerospace & Defense (ITA), PowerShares Aerospace & Defense (PPA), Vanguard Industrials ETF (VIS), PowerShares Dynamic Large Cap Growth (PWB)

FINANCIAL

Nabors and HCC Insurance Holdings Grapple with Options Reviews

Nabors Industries is reinvestigating its option-granting after a Wall Street Journal article questioned the company's practices. Although an internal review revealed nothing questionable, the article mentioned that CEO Eugene Isenberg received $450 million over the last 19 years through stock-option grants whose value was increased by Nabors 28 12 2006 Chart HCC Insurance 28 12 2006 Chart"controversial moves." Nabors allowed Isenberg to trade worthless options for those with lower exercise prices and "reloaded" him with new options once he cashed in others, according to the article. On Wednesday, Nabors's shares rose 30 cents to $30.53. In other corporate options news HCC Insurance Holdings reported a gross, noncash compensation expense of $26.6 million following an independent review of options-granting errors between 1997 and 2005. Although the expense has no effect on the company's revenue, cash or cash flow for the time period, it does mean a net after-tax decrease in shareholders' equity of $3.3 million. HCC's shares rose 38 cents to $32.04.
• Sources: Wall Street Journal, Businessweek
• Related commentary: Nabors Should Capitalize on Strong Natural Gas Demand, The Long Case for HCC Insurance Holdings
• Potentially impacted stocks and ETFs: Nabors (NBR), HCC Insurance Holdings (HCC)

Goldman Raises $6.5 Billion For Dedicated Infrastructure Fund

Goldman Sachs raised a reported $6.5 billion for its first dedicated infrastructure fund, which was supposedly closed to new investments as of yesterday.gs The fund will focus on infrastructure projects such as air, seaports and utilities in developed countries. In recent years, infrastructure investing has grown in popularity among investment banks, insurers and pension funds in search assets that offer long-term, relatively inflation-proof returns. In addition to money from outsiders, Goldman added $750 of its own to the fund. The Financial Times reports that Goldman's new fund highlights concerns that the rush into infrastructure investing is creating an unsustainable bubble. Last month, Standard & Poor's cautioned that the infrastructure sector was in danger of a "dual curse" of overvaluation and excessive leverage.
• Sources: Financial Times, Financial News, Reuters
• Related commentary: Risk Versus Reward In Financial Institution Stock Valuations, Goldman Posts Its Best Quarter (and Year) Ever, Macquarie Sees Opportunity in Japanese Infrastructure, GE Discusses Its Infrastructure Business. Conference call transcripts: Goldman Sachs F4Q06 (Qtr End 11/24/06)
• Potentially impacted stocks and ETFs: Goldman Sachs (GS)

HEALTHCARE

Proctor & Gamble Signs Joint Venture with Inverness Medical

Proctor & Gamble will pay $325 million for a 50% stake in a joint venture with Inverness Medical Innovations Inc. which will IMA chartfocus on medical diagnostic products aimed at consumers. P&G will be responsible for marketing and distribution of existing and future Inverness products. The joint venture excludes cardiology and diabetes care products that Inverness is currently developing. The deal will close in late 1Q07.
• Sources: Reuters, AP, Press Release
• Related commentary: Procter & Gamble: A Classic Investment With Great Potential, Procter & Gamble's China Problem: The Return of SK II Conference call transcripts: Procter & Gamble F1Q07 (Qtr End 9/30/06)
• Potentially impacted stocks and ETFs: Proctor & Gamble (PG), Inverness Medical Innovations (IMA) Competitors: Quidel Corporation (QDEL), Genzyme Corporation (GENZ), Nastech Pharmaceutical (NSTK) ETFs: iShares Russell 1000 Index (IWB), iShares Russell 1000 Value Index (IWD), iShares S&P 500 Index (IVV)

INTERNATIONAL

Citi's Next China Investment Could Be in a Budget Airliner

Spring Airlines' spokesman is reported to have said Citigroup is among potential investors considering taking an equity stake in the privately-owned budget mainland China carrier. Newswire coverage carried on Forbes.com says a Citigroup spokesman had no comment, but mentions Citi is 'one of the arrangers for Spring Airlines' initial public offer, expected in 2009.' A source familiar with the matter quoted by Reuters comments, "We want to sell no more than 20 percent to one or several investors. Talks with Citigroup have passed the initial stage." Spring Airlines needs outside capital to finance a fleet expansion. Spring is said to be looking to raise approx. 3b yuan ($384m) through share placements and an IPO. A Spring executive said the firm expects to earn 20m yuan in profit ($2.6m) on 485m yuan ($62m) in sales this year, its first full year of operations. Citigroup meanwhile, won a $3.1b bid last month to take a 20% stake in China's Guangdong Development Bank, which will expand its footprint to 500+ branches, from just six previously.
• Sources: Forbes XFN-ASIA, Reuters
• Related commentary: China's Airline Industry: Robust Growth, But Risky Investing, Foreign Banks Granted Authority to Incorporate Locally in China, Citi Ready to Expand in China, Winning Bid for Bank Confirmed, Citigroup: Does a Breakup Make Sense? Conference call transcripts: Citigroup Q3'06
• Potentially impacted stocks and ETFs: Citigroup (C). Competitor: Goldman Sachs (GS) is one of the most active investors among global financial companies in China. ETFs: First Trust Morningstar Div Leaders (FDL), WisdomTree High-Yielding Equity (DHS), streetTRACKS KBW Bank (KBE), Vanguard Financials (VFH)

Japan's November Industrial Production Sets Record, Electronics Inventories Down

Demand for Japanese made products, especially autos and electronics, sent November industrial production up 0.7%, but that was 0.3% short of the average estimate of economists surveyed by Bloomberg. Measured against a base year of 2000 (equals 100), it reached an all-time high of 108.6. A very positive development along with the production growth is the closely watched technology inventories level fell 3.4%, its first decline in seven months, coming off a record high in Oct. Market participants now seem to expect a greater chance of a Bank of Japan rate hike in Jan. (meeting concludes the 18th). The one damper came in a separate report, which showed wages fell 0.2% in Nov. Although unemployment (announced Tues.) dropped to its lowest level since 1998, many companies appear to be hiring mostly part-timers, which caps national average wage growth, and is seen continuing to limit consumer spending. The Nikkei 225 just managed to close in positive territory, gaining 1.66 (0.01%) to finish at 17,224.81.
• Sources: Bloomberg
• Related commentary: Mixed Economic Data May Force BoJ to Postpone Hike, BoJ Keeps Target at 0.25%, More Data Watching, Japan: No "Soft Patch" Despite Weaker Economic Data
• Potentially impacted stocks and ETFs: iShares MSCI Japan Index (EWJ), iShares S&P/TOPIX 150 (ITF)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Markets: S&P 500: Should We Expect A Correction?
Long Idea: Buying At The 52-Week Low: James River Coal and RadiSys
Short Idea: Philadelphia Consolidated: Why Forbes Bulls Are Wrong
Internet: Yahoo: Progress On Social Media Products Flickr and Delicious
Telecom: Alvarion May Profit From German WiMax Spend
Hardware: UBS: Apple Options Fears Overdone
Software: To Promote Vista, Microsoft Giving Bloggers Slick 'Ferrari' Laptops
Consumer Electronics: iSuppli: More LCD Pain On The Way
Biotech: Eye on Geron: Stem Cells and Telomerase
Retail: Jones Soda's Recent Rally Was All Cramer
Transport: Settle Down, People -- Toyota/Ford Talks Were About Sharing Green Technology
Energy: EXCO Resources: Insiders Taking Profits
Financial: A Look At Stock Exchange Stocks
Asia: Forbes Int'l Investment Report: IIJ Is Top Speculative Japan Play in '07
ETFs: Are Emerging Markets Headed Up Or Down?
Small-Caps: Companies Trading Below Net Asset Value Becoming Something of a Rarity
Sound Money Tips: More Tips on How to Perform a (Nearly) Free People Search
Jim Cramer: Latest stock picks

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Wall Street Breakfast for January 9, 2007

MACRO AND HOUSING

Consumer Borrowing Up Sharply as Debt Moves from Condos to Credit Cards

The Federal Reserve reported Monday that consumer (non-mortgage) borrowing increased $12.3 billion (6.2% annually) to $2.39 trillion in November, its biggest jump in three months, after falling $1.3 billion in October. The rise handily beat economist forecasts of $5.2 billion, and suggests consumer spending, which accounts for two-thirds of the U.S. economy, gained strength at year-end; retail sales were up 1% in November, their biggest gain since January. Consumer debt as a percent of personal income held at 21.5%, down from an August 2005 peak of 22.5%. Revolving debt like credit cards accounted for $8.6 billion of the gain; economists say consumers are using credit cards more to support their spending after years of relying on home equity as a source of credit. The numbers encourage economists, including Cathy Minehan, president of the Federal Reserve Bank of Boston, who said in a Jan. 5 speech, "Our best guess at the Boston Fed is that 2007 will bring continued moderate growth, with GDP at or a bit below potential, unemployment likely remaining below 5 percent and core inflation gradually declining."
• Sources: The Fed Press Release, Bloomberg, MarketWatch
• Related commentary: Paul Kasriel On the State of Consumer Debt and Savings, A Tale of Two Economies, An Optimistic Outlook On Consumer Spending, Sound Money Tips' extensive Guide to Credit Cards,
• Potentially impacted stocks and ETFs: S&P 500 Index (SPY), NASDAQ 100 Trust Shares ETF (QQQQ), Diamonds Trust Series 1 ETF (DIA), iShares Russell 2000 Index ETF (IWM), iShares Lehman 1-3 Year Treasury Bond ETF (SHY), iShares Lehman 7-10 Yr Treasury Bond ETF (IEF), iShares Lehman 20+ Year Treasury Bond ETF (TLT)

Fed's Kohn: Soft Landing Likely for U.S. Economy

Fed vice chairman Donald Kohn warned yesterday that it is too soon to become sanguine about inflation, notwithstanding an easing of price pressures. At a speech at the Atlanta Rotary Club, Kohn stated the recent drop in core inflation could reflect merely "one-time influences." His remarks indicate that the Fed retains its December outlook, when it labeled inflation its greatest concern and held short-term interest rates at 5.25%. Since December, manufacturing and business investment have weakened and inflation has been unexpectedly low, fueling speculation that in January, the Fed might announce that a rate increase is as likely as a cut. Kohn's comments suggest that such a neutral statement is unlikely. He expects the economy to accelerate this year, though the housing decline could deepen further. Kohn dismissed the concern that the inverted yield curve, which traditionally presages recessions, bodes ill for the economy. Overall, his prognosis is positive: "Conditions appear to be in place for a good year for the U.S. economy, one marked by growth that is moderate and sustainable and by inflation that will be lower than last year's."
• Sources: Wall Street Journal, Bloomberg, MarketWatch, Reuters
• Related commentary: The Bigger Picture: Fed Rate Cuts Aren't Everything, The Inverted Yield Curve's Predictive Power, The Bond Yield Curve as an Economic Crystal Ball, Market Hiccups As Fed's December Minutes Are Released, Split Decision at The Fed On Next Rate Move?, Inflation Unleashed?, Fed Leaves Short-Term Rates at 5.25%
• Potentially impacted ETFs: S&P 500 Index (SPY), NASDAQ 100 Trust Shares ETF (QQQQ), Diamonds Trust Series 1 ETF (DIA), iShares Russell 2000 Index ETF (IWM), iShares Lehman 1-3 Year Treasury Bond ETF (SHY), iShares Lehman 7-10 Yr Treasury Bond ETF (IEF), iShares Lehman 20+ Year Treasury Bond ETF (TLT), iShares Lehman TIPS Bond Fund (TIP)

TECHNOLOGY AND INTERNET

Apple's iPhone May Be Imminent

Apple CEO Steve Jobs is expected to introduce the iPhone, a combination iPod-cellphone, at the Macworld Expo conference in San Francisco today. In an unconfirmed deal, Cingular Wireless will provide cellphone service for the device. The deal will give Cingular access to new subscribers and will open Apple's door to the enormous cellphone market. About one billion handsets shipped last year, making the past five years' sales of 70 million iPods paltry by comparison. Apple might also introduce an interactive television device at the conference. Pressure is on Jobs to come up with new hits after the phenomenal success of the iPod, and also to shift attention away from an investigation into an options-backdating scandal. iPods continue to sell well, but at a slower clip: Apple sold 75% more iPods this year than last year, but that figure is down from 409% growth the year before that. If Jobs does not present the iPhone at the conference, the stock might reflect investors' disappointment.
• Sources: Bloomberg, Red Herring, Wall Street Journal, Reuters, Forbes
• Related commentary: Analyst: Apple iTV Upgrade and/or Phone Likely at Macworld, Yahoo! Aims for Lead in Mobile Search Space, The iPhone Will Probably Be Released In 2007: Who Is Apple Up Against?, Macworld: A Google/Apple Partnership In The Works?, Apple's Got the World in Its Pocket: The iPhone and Other Paraphernalia, Apple iPhone: Not The Game-Changer Many Expect, Apple Begins Production Of iPhone
• Potentially impacted stocks and ETFs: Apple Computer Inc. (AAPL). Competitors: Yahoo! Inc. (YHOO), Google Inc. (GOOG). ETFs: Internet Architecture HOLDRs (IAH), iShares S&P Global Technology (IXN)

Sprint Shares Tumble On Spate of Bad News

Sprint Nextel shares tumbled 8% in after hours trading after the company reported it would be forced to lay off 5,000 employees - 7.7% of its total workforce.s There was other bad news as well: revenue for 2006 will likely come in at $41 billion versus consensus estimates of $42 billion. In addition, Sprint reported a loss of 306,000 monthly "post-pay" subscribers in the fourth quarter, despite increasing its overall user base by 742,000 through wholesale and prepaid subscribers. Sprint reported a monthly turnover rate of 2.3%, a result of defections of Nextel customers to other carriers, part of a lingering fallout from the merger of the two companies. Stanford Group analyst Michael Nelson believes "the integration [of the two companies] is taking longer than originally anticipated." The companies merged in August 2005. Another difficulty facing Sprint is in the area of cellular and broadband networks. Sprint has warned that spending to improve its networks, which many on Wall Street feel technologically lag those of competitors, will cut into profits in the near term.
• Sources: Press Release, Wall Street Journal, Bloomberg, TheStreet.com
• Related commentary: Sprint's the Latest Wireless Food Chain Member To Get Its Signals Crossed, Sprint's Huge Miss: Where Do Things Go From Here?, Sprint's Crawl To The Finish Line, Despite Weak Quarter, SprintNextel Shares Gain Big. Conference call transcripts: Sprint Nextel Q3 2006 Earnings Call Transcript
• Potentially impacted stocks and ETFs: Sprint Nextel (S). Competitors: Verizon (VZ), AT&T (T), Vodafone (VOD), BellSouth (BLS). ETFs: Vanguard Telecommunication Services (VOX), Wireless HOLDRS (WMH)

UMC Reports Lower December Sales, Announces Fab Construction

United Microelectronics reports sales in December fell 7.17% y-o-y to NT$8.37 billion ($260m), but for the calendar year, sales grew 14.68% to NT$104.1 billion ($3.2b). UMC also announced construction is underway on its second Taiwan 300mm fab with max capacity of 50,000 wafers. Reuters quotes a Taiwan-based portfolio manager who comments, "The bottom should be in Q1 and then its sales will start rising from April or May." UnitedMicro-UMC-1yr-chart-01-08-07 Shares of UMC and rival TSMC have traded higher since bottoming last summer in anticipation of a recovery ahead of the Windows Vista launch and on overall demand for consumer electronics. Merrill Lynch however, warned last week of high inventory levels that could keep pressure on foundries into Q2. Regarding UMC's capacity expansion at a price tag of $5b, CEO Jackson Hu comments, "UMC remains strongly committed to continuing its growth and development in Taiwan. The close proximity of the R&D center to the fabs will allow for the seamless integration of advanced process technologies from the R&D phase to manufacturing..."
• Sources: UMC press release and monthly sales release, Reuters, WSJ
• Related commentary: UMC Increasing Capacity Despite Chip Glut, Caris' Downgrades, Merrill: United Microelectronics An 'Unappealing Buyout Candidate', Texas Instruments, Foundries Beginning to Understand its Excess Inventory Issues
• Potentially impacted stocks and ETFs: United Microelectronics (UMC). Competitors: Taiwan Semiconductor Manufacturing (TSM), Semiconductor Manufacturing International (SMI), Chartered Semiconductor Manufacturing (CHRT). ETFs: iShares MSCI Emerg Mkts Index (EEM), iShares MSCI Taiwan Index (EWT)

NCR to Spin Off Teradata Database Business

Automated teller-machine manufacturer NCR Corp. will split itself in two, spinning off its Teradata information warehousing business to shareholders. The two companies will trade publicly after the breakup, which should take six to nine months. The company states that the two businesses will function better separately: NCR will be able to focus on reviving growth in the bank-machine and retail checkout markets as well as newer opportunities like boarding pass machines, while Teradata will be able to compete more effectively against software rivals like Oracle. NCR shares rose $1.39 to $43.79 on the news, their biggest gain since November. In 2005, Teradata revenue rose 9% while revenue for the rest of the company fell 2%. Teradata, whose clients include Wal-Mart and Anheuser-Busch, uses specialized software to manage extremely large quantities of data. Teradata could ultimately become a takeover target for companies like Hewlett-Packard and SAP AG, which are boosting their software holdings as the industry consolidates.
• Sources: Bloomberg (I, II), Wall Street Journal
• Related commentary: NCR Plans Spinoff of Data Warehouse Unit (AP), NCR to spin off Teradata software business (Reuters). Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: NCR Corp. (NCR). Competitors: Diebold Inc. (DBD), International Business Machines Corp. (IBM), Oracle Corp. (ORCL). ETFs: PowerShares Dynamic Software (PSJ)

ENERGY AND MATERIALS

GE Plastics Unit Sale -- Subject to Restrictions

WSJ reports that General Electric Co. is soliciting bids for its plastics business, valued at about $10 billion, which has been hurt by high raw-materials costs (benzene is up 31%) and competition (profits are down 23%). But GE has cautioned interested firms that they face Justice Department restrictions on their ability to team-up with other bidders which forbid them to call other buyout firms to discuss forming a so-General Electric 09 01 2007 Chartcalled club that pools resources to pursue a single deal. Acting for GE, Goldman Sachs has conveyed deal-terms to four private-equity groups and two potential bidders in the industry. Since taking over in 2001, CEO Jeffrey Immelt has sold-off underperforming businesses including reinsurance, industrial diamonds and motors. Last month he said GE would evaluate the case for holding on to the plastics unit, referring to it as "in a difficult spot," and saying he wasn't committed to wait for a turnaround. In a note last month, Citigroup named Dow Chemical Company and BASF Ag as possible buyers. Mike McGarr, a Becker Capital analyst (Becker owns 800,000 shares): "It's nice to see them get away from the low-margin businesses like this... A lot of the hard work at GE is starting to pay off a bit and we are pleased with what Immelt has done steering toward services and infrastructure."
• Sources: Wall Street Journal, Bloomberg, MarketWatch, GE Dec. 12 'Outlook' Call Transcript (.pdf)
• Related commentary: GE 's Sale of One Unit Adds to Speculation it Will Sell Another, Eye on General Electrics' Transportation Business. Conference call transcript: General Electric Q3 2006
• Potentially impacted stocks and ETFs: General Electric Co. (GE), Dow Chemical Company (DOW), BASF Ag (BF)

BP's Output Falls Again; A 'Brave' Buy with Upside Potential as a 'Recovery Stock'

BP's woes are not over by any means; production was down for a sixth quarter in Q4, and a Bloomberg exclusive says its BTC Caspian pipeline has serious corrosion issues that not only represent safety concerns but also further harm its credibility. Q4 oil and gas output was off 5% y/y to 3.82 million bpd, missing analyst estimates. A Citigroup analyst with a Buy rating on BP: "Growth has been a disappointment across the majority of the sector in 2006, and BP is no exception." BP-1yr-chart-01-08-07 A Cantor Fitzgerald analyst voiced concern over credibility, and said "It might be a very brave call to go and take a position (in the stock)." A UBS analyst who has a Buy rating on BP points out the firm's struggles compared to rivals such as Exxon, and says BP has "significant upside" potential as a "recovery stock" if it has a "sustained period of more sure-footed performance both operationally and managerially." Reuters highlights concerns over Russia, where output at a JV fell sharply due to oil field sales. Two positive notes are lower expected taxes, 25% vs. 33% in '05, and higher y/y profits in Q4 due to higher comparable oil prices.
• Sources: Bloomberg [I, II], BP Q4 Trading Update, Reuters
• Related commentary: BP Under Investigation -- Again, Fuel For Thought: Which Integrated Oil Company Should You Own?, BP's Budget Cuts and Ignored Warnings May Have Played Role in Explosion, BP's Earnings Slow
• Potentially impacted stocks and ETFs: BP Plc (BP). Competitors: Chevron (CVX), Exxon Mobil (XOM), Royal Dutch Shell (RDS.A), Total SA (TOT). ETFs: United States Oil Fund ETF (USO), Vanguard Energy (VDE), BLDRS Europe 100 ADR Index (ADRU)

RETAIL

Gap Shares Surge on Sale Speculation

Gap shares surged 11% yesterday -- the largest one-day gain in five years -- before closing up over 7% when CNBC reported that the troubled retailer has retained the services of Goldman Sachs. Gap's shares have lost half their value since 2000 as sales have declined at both Gap Chart 8 1 07the company's namesake stores and Old Navy, which Gap owns. CEO Paul Pressler has been under constant pressure, and the hiring of Goldman suggests that his days at the company might be numbered. Gap's "strategic alternatives" could include sale of the company, an LBO, or the spin-off of one its brands, possibly Banana Republic. A sale of Gap could be one of the biggest buyouts in retail history: Its current market value is $16.4 billion, and a buyer would likely have to pay more than $18 billion. Credit-default swaps based on $10 million of Gap bonds leaped 27%, implying a perception of a deterioration in Gap's credit quality resulting from speculation that the company might opt for an LBO.
• Sources: New York Times, Reuters, Bloomberg, MSN Money, MarketWatch
• Related commentary: Gap To Put Old Navy In Play?, Gap Reports Bleak Holiday Numbers, Retail Sector Closes the Year on (Mostly) Down Note, Gap Sales Slide for 9th Straight Quarter, Gap's Employee Productivity Lags its Peers. Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: The Gap, Inc. (GPS). Competitors: Abercrombie & Fitch Co. (ANF), American Eagle Outfitters Inc. (AEOS), J. Crew Group, Inc. (JCG), AnnTaylor Stores Corp. (ANN), Limited Brands Inc. (LTD), Urban Outfitters Inc. (URBN), Target Corp. (TGT), Kohl's Corp. (KSS). ETFs: SPDR Retail (XRT)

TRANSPORT

U.S Automakers Request Federal Subsidies for Battery R&D

WSJ reports that GM, Ford, and DaimlerChrysler have submitted a white paper requesting $500 million in federal subsidies to fund high-powered battery development for hybrid and pure electric vehicles. U.S. automakers are currently behind their Japanese counterparts in this area. F DCX GM chart Without government support, this lag could cause further economic difficulties for the already beleaguered American car makers. Japanese battery suppliers have been loathe to offer technical help in developing lightweight lithium ion batteries, which are currently the most cost efficient type for mass production. The request is being reviewed by the President's technical advisor and the Department of Energy. The companies dismiss the idea that the industry alone should fund this development, as fuel-efficiency is crucial to national issues such as reduction of greenhouse gases and independence from foreign oil.
• Sources: WSJ, Bloomberg
• Related commentary: GM Resurrects Electric Car with the Volt, Wagoner: GM Won't Go Down Without a Fight, Will GM Be Killed By The Electric Car?, GM, Ford And Clean Car Hype Conference call transcripts: General Motors Q3 2006 Earnings, Ford Q3 2006 Earnings , DaimlerChrysler Q3 2006 Earnings
• Potentially impacted stocks and ETFs: DaimlerChrysler AG (DCX) Ford Motor Co. (F), General Motors Corp. (GM) Competitors: Toyota Motor Corp. (TM), Honda Motor Corp. (HMC) ETFs: iShares MSCI Germany Index (EWG)

FINANCIAL

Nasdaq and LSE Embroiled in Shouting Match

If you don't succeed at first, scream, scream again. That at least appears to be Nasdaq Inc.'s approach to goading London Stock Exchange [LSE] shareholders into accepting a hostile bid to take over the exchange.ndaq In a response yesterday to London's defense Nasdaq's Inc.'s standing offer as "wholly inadequate" and not reflective of the LSE's true value, Nasdaq warned LSE shareholders they stood to lose significant share value if a majority didn't accept its terms soon. Nasdaq argued in a letter to shareholders that its current offer of 1,243 pents a share is a "full and fair price" for the LSE and that the exchange's current management is "unprepared for those challenges" that lie ahead. LSE shares closed at 1,284 pents yesterday - 3% above Nasdaq Inc.'s current offer. The LSE has remained firm in its rejection of Nasdaq Inc.'s offer on the grounds it can either attract another bidder willing to pay more, or convince Nasdaq Inc. to increase its current offer.
• Sources: TheStreet.com, Forbes, Bloomberg, MarketWatch
• Related commentary: LSE To Shareholders: Reject The Nasdaq Bid, We'll Raise Our Dividend, Nasdaq's LSE Bid's Fate Likely in the Hands of 'Market Sentiment', Nasdaq Launches Hostile Bid for London Stock Exchange, A Unified, Global Stock Exchange May Be Approaching.
• Potentially impacted stocks and ETFs: Nasdaq Stock Market Inc. (NDAQ). Competitors: Competitors: NYSE Group (NYX)

HEALTHCARE

Express Scripts, Snubbed by Caremark Rebuff, Launches Proxy War

Snubbed by Caremark's brazen refusal to consider its takeover bid thereby derailing rival CVS's bid, Express Scripts has launched a proxy war, saying it would nominate four directors to Caremark's 11-member board. Caremark responded that the vote would require approval at its annual meeting, normally held in May. Express Scripts' $26 billion bid is 13% higher than CVS's, but Caremark said in a statement yesterday that the offer created Express Scripts 09 01 2007 Chart CVS 09 01 2007 Chart Caremark 09 01 2007 Chartsignificant antitrust risks. Express Scripts called the risks a "red herring" that Caremark was using to distract shareholders. Express Scripts has already begun the Federal Trade Commission review process, and is trying to speed things up by sending its lawyers to begin arguing its case. Healthcare analyst Kemp Dolliver says most people think it will get FTC approval, although it may take time. In a press release yesterday, Express Scripts and Caremark each said it could achieve $500 million in savings by cutting costs. Shares of Caremark were up $0.29 to $56.64 yesterday, well above the CVS cash-and-stock offer which was worth $52.35 at yesterday’s CVS price. Sheryl Skolnick, a health care analyst with CRT Capital said investors seem to be saying a higher bid's worth waiting for, despite antitrust uncertainties. But A.G. Edwards & Sons analyst Andrew L. Speller said, "I would be very surprised if Express Scripts and Caremark ever get together."
• Sources: Press Releases: Express Scripts (I, II, III), CVS, Caremark, New York Times
• Related commentary: CVS to Acquire Caremark Rx for $21 Billion, Express Scripts Undercuts CVS in Brazen Bid For Rival Caremark Rx, Caremark Favors CVS Offer Over Express Scripts , Shares Say Traders Expect More, How the CVS-Caremark Merger Might Work (Or Not), Is CVS the Prescription Fix for Caremark?
• Potentially impacted stocks and ETFs: Caremark Rx Inc. (CMX), CVS Corp. (CVS), Express Scripts Inc. (ESRX). Competitors: Wal-Mart Stores Inc. (WMT), Medco Health Solutions (MHS), Wellpoint, Inc. (WLP). ETFs: Retail HOLDRs (RTH), SPDR Retail (XRT), PowerShares Dynamic Pharmaceuticals (PJP), iShares Dow Jones US Pharmaceuticals (IHE), SPDR Pharmaceuticals ETF (XPH)

United Surgical Partners Agrees to $1.8 Billion Buyout Deal

United Surgical Partners has agreed to be purchased by UNCN Acquisition Corp., a unit of the private equity firm Welsh, Carson, Anderson & Stowe, USPI chartwhich helped establish the firm eight years ago, for $1.8 billion dollars or $31.05/share, a 13.4% premium over its Jan. 5th closing price. The deal would include $371 million in debt obligations. The news boosted USPI's share price as much as 13% yesterday. United Surgical operates or partially owns 141 private surgical centers in the U.S. The company's shares dropped 12% last year due to growing competition within the industry. Analysts expect the deal to go through, given the valuation and previous relationship between the two firms. United Surgical's stock closed at $3.19, or 12%, to $30.58 yesterday.
• Sources: Marketwatch.com, Reuters, Bloomberg
• Related commentary: More analysis of Healthcare Stocks.
• Potentially impacted stocks and ETFs: United Surgical (USPI) Competitors: American Surgical (AMSG), HealthSouth Corp (HLS), Triad Hospitals (TRI)

FDA Approves New Version of MedImmune Flu Vaccine

MedImmune Inc. has secured FDA approval for a new version of its flu vaccine, FluMist, that requires refrigeration rather than freezing. The new formula, which will be available for the 2007-08 flu season, has been approved for use by healthy people between the ages of five and 49. Because it will be easier to store and distribute from schools, doctors' offices, pharmacies and grocery stores, MedImmune anticipates sales of the vaccine will improve substantially. FluMist was introduced in 2003, but failed to catch on because of the difficulty in handling frozen material. The company forecasts FluMist sales of about 3 million doses this season, but expects that figure to double once the refrigerated version is on the market. An inoculation will cost $16-20. The success of the new formulation will depend largely on MedImmune's success at obtaining FDA approval to give the product to babies and the elderly, a process for which it has filed an application.
• Sources: Reuters, MarketWatch, Bloomberg
• Related commentary: Matrix Asset Advisors Urges Sale of MedImmune, Vanda's Success Pays For MedImmune Investors. Conference call transcripts: Q3 2006
• Potentially impacted stocks and ETFs: MedImmune Inc. (MEDI). Competitors: Bristol-Myers Squibb Co. (BMY), Valeant Pharmaceuticals International (VRX). ETFs: First Trust AMEX Biotechnology Index (FBT), Biotech HOLDRs (BBH)

INTERNATIONAL

Chávez's Latest Ideological Shtick Sends Venezuelan-Related Equities Lower

In a move with shades of Cuba's Castro, Venezuelan President Hugo Chávez, being sworn in for a second six-year term today, will nationalize at least two industries, telecom and electricity.chavez The news, which broke during afternoon trading in New York yesterday, sent shares of companies with interests in Venezuela sharply lower. Worst affected were Electricidad de Caracas, owned by AES Corp., and C.A. Nacional Telefonos de Venezuela, known as CANTV, the country's largest publicly traded company. AES shares fell more than a percent during composite trading yesterday followed by another 4+% fall after hours, while CANTV tumbled more than 14% before trading was halted at 3 PM. Verizon owns a nearly 30% stake in CANTV. According to political commentator Erik Ekvall in Caracas, "Let's call a spade a spade. This is communism. He's clearly saying the state should own the means of production." Two other industries likely to be affected are Energy and Gold miners. Chávez also suggested he would further expand the state's role in the oil industry, while taking a harder line with major oil firms operating in the country including BP PLC, Exxon Mobil Corp., Chevron Corp., ConocoPhillips, Total SA and Statoil ASA. In terms of Gold miners, the Toronto Star reported yesterday that shares of Crystallex International Corp. fell 10% - a direct result Chávez's plans and the uncertainty that now placed the company's ability to secure its Las Cristinas mining permit.
• Sources: New York Times, Wall Street Journal, CNN, The Toronto Star
• Related commentary: Crystallex Plunges on Fears Chavez Will Socialize Venezuelan Mining Industry, Crystallex International Corp: Take Your Money and Run, Venezuela...Chavez...Oil and the Impact on Commodity Prices
• Potentially impacted stocks and ETFs: AES Corp. (AES), CANTV (VNT), Crystallex (KRY), BP PLC (BP), Exxon Mobil (XOM), Chevron Corp. (CVX), ConocoPhillips (COP), Total SA (TOT), Statoil ASA (STO)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Markets: Fed Rate Cuts Aren't Everything
Long Idea: Arbitrage Opportunity in Emerging Markets ETFs?
Short Idea: eBay's Q4 Listings Well Below Estimates - Jaffray
Internet: Why Google Will Kill Node Computing
Telecom: Sprint's Crawl To The Finish Line
Hardware: AMD Positioning Itself For Home Server Market
Consumer Electronics: Microsoft Zune Incompatible With The Company's Music Downloads Standard
Media: Blockbuster vs. Netflix: Playing the Online DVD Rental Market
Healthcare: Abbott Fighting Challenges to Antibiotic
Retail: Can Goldman Sachs Help With a Gap Turnaround?
Transport: LKQ Corp. Turns Trash Into Cash
Gold: Valuing The Galore Creek Mining Project
Energy: The End of El Nino? Watch For a Spike in Natural Gas Stocks
Financial: Closing Out My Mastercard Position: I'd Rather Be Early Than Worried
Asia: Nomura's Individual Investor Survey for January
ETFs: Agile Investing Takes Advantage of Commodities Selloff
Small-Caps: Are ETFs Inflating Small-Cap Stock Prices?
IPO Analysis: An In-Depth Look at Melco PBL Entertainment's IPO
Sound Money Tips: How to Set Up a Home Theater System For Less
Jim Cramer: Latest stock picks

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Wall Street Breakfast for January 10, 2007

MACRO AND HOUSING

Homebuilders D.R. Horton, Meritage Post Disappointing Sales

In an indication that the housing sector has yet to reach a bottom, D.R. Horton and Meritage Homes both posted lower quarterly sales yesterday. D.R. Horton reported net sales orders of $2.3 billion for fiscal Q1, nearly $1 billion below last year's figure and widely missing Street forecasts of $2.74 billion. Cancellations came in at 33% -- not good, but better than last quarter's 40%. Horton has resisted offering incentives but has recently been compelled to discount properties, a move that will hurt profit margins. Meritage reported net sales of $356 million in Q4, down precipitously from last year's $723 million. Q4 revenue was also down at $821 million versus $1.04 billion a year earlier, but this figure beat forecasts of $742.3 million. Neither company's shares took much of a hit on the news since the market had priced in its low expectations. Both Horton and Meritage are trading about 40% off their 12-month highs.
• Sources: Washington Post, Wall Street Journal
• Related commentary: D.R. Horton Beats Estimates but Advises Caution, Assessing the Homebuilder Stocks, Bursting the Housing Bubble, What Is Correct Way to Value Homebuilders?
• Potentially impacted stocks and ETFs: D.R. Horton, Inc. (DHI), Meritage Homes Corp. (MTH). Competitors: KB Home (KBH), Centex Corp. (CTX), Lennar Corp. (LEN), Pulte Homes Inc. (PHM). ETFs: iShares Dow Jones US Home Construction (ITB), SPDR Homebuilders (XHB)

TECHNOLOGY AND INTERNET

Apple's iPhone Wows Market

Apple stock jumped 6% yesterday after CEO Steve Jobs unveiled the iPhone, a combination cellphone/iPod/Internet communications device, at the Macworld Expo. The iPhone, which will be priced up to $599, is set for a June release. AT&T's Cingular unit has signed an exclusive deal to distribute the device and provide U.S. wireless service. Price could be a problem in the U.S. market, where handsets, including some that offer music, sell for less than $100 with carrier plans. Price pressures are fierce: Motorola, which once charmed the market with its sleek RAZR phone, has gone from selling it for $500 to offering it free with service contracts. Apple cannot drop the price of the iPhone without cannibalizing its iPod business. In the past year, Motorola, Research in Motion and Palm have all released smartphones that will compete with the iPhone. Shares of high-end Asian handset makers took hits on news of the iPhone's release, but cellphone component makers like Broadcom and some telecoms gained. Flash memory chip manufacturers might also ultimately benefit. To reflect this push into consumer electronics, Apple changed its name from Apple Computer to Apple Incorporated. Apple appears to have reached a deal with Cisco to use the name "iPhone," which Cisco has trademarked and is using for some Linksys phones.
• Sources: Press Release, Steve Jobs' Macworld Keynote (video), Forbes, Wall Street Journal, Mercury News, Reuters, USA Today
• Related commentary: Apple Reinvents the Mobile Phone -- and Itself, Apple's iPhone Partnership With Cingular Could Drag It Down, iPhone: Who Stands To Gain and Lose?, Ten Thoughts On The iPhone, Cisco Reacts To Apple's Use of 'iPhone', Apple-Cisco iPhone dispute resolved (ZDNet), Apple's iPhone Revealed: A First Hand Account From MacWorld. Conference call transcripts: Apple F4Q06 (ended 9/30/06)
• Potentially impacted stocks and ETFs: Apple Computer, Inc. (AAPL), AT&T (T). Competitors: Verizon Communications Inc. (VZ), Sprint Nextel Corp (S), Motorola Inc. (MOT), Research In Motion Limited (RIMM), Palm, Inc. (PALM), Google, Inc. (GOOG), Yahoo! Inc. (YHOO). ETFs: Internet Architecture HOLDRs (IAH), iShares S&P Global Technology (IXN)

Nintendo Ups Guidance and Boosts Dividend; Wii Sales Crush PS3 in Japan

Nintendo's shares regained some recent lost ground despite a broad market sell-off after it raised its annual sales and profit guidance and increased its dividend forecast for the fiscal year ending this March. Also, Enterbrain, a Japanese gaming magazine reported it estimates Nintendo sold 989,118 Wii consoles in Japan in '06 following its Dec. 2 launch, which is more than double its 466,716 estimate for Sony's PlayStation 3 (Nov. 11 launch). Nintendo-NTDOY-Microsoft-MSFT-Sony-SNE-1yr-chart-01-09-07 Nintendo increased its consolidated sales forecast by 21.6% to ¥900 billion ($8b), a 77% y-o-y increase. Net income is now seen totaling ¥120 billion ($1b), or a 20% revision and 22% higher y-o-y. Nintendo cites "worldwide robust trends in sales of 'Nintendo DS' hardware and software ..." and revised its sales estimate of Wii software (ex-Wii console bundles) upward by 23.5%. It is maintaining its target of 6 million Wii console sales for the fiscal year. Nintendo also raised its year-end dividend estimate by 24% to ¥410, for an annual forecast dividend increase of 20% at ¥480/share (+23% y-o-y).
• Sources: Nintendo press release [I, II], Bloomberg, Boston Globe-AP
• Related commentary: Game Points: Game Console and Software Stock Update, Sony Soars on Goldman Upgrade, Video Game Console Makers Meet '06 Targets, Game Console Wars: Nintendo Leaves Microsoft, Sony Trailing Behind, Nintendo Wii: The Must-Have Console
• Potentially impacted stocks and ETFs: Nintendo (NTDOY.PK). Competitors: Microsoft (MSFT), Sony (SNE). Gaming software publishers: Electronic Arts (ERTS), Activision (ATVI), Konami (KNM), Take Two (TTWO), THQ (THQI)

MEDIA

Project 'Open Network' -- Nation's Big-Three Newspapers to Join Forces?

WSJ reports that the three biggest newspaper publishers in the U.S. -- Gannett, McClatchy and Tribune Companies -- are planning to sell advertising jointly on their Web sites, believing their survival depends on increasing online revenues. Big advertisers like car makers and phone companies don't want the hassle of negotiating with each outlet, the logic goes. Code-named "Open Network," the project hopes to win back advertisers that are "defecting in droves" to online advertisers such as Yahoo, Time Warner's AOL, MSN, and Google. People familiar with the situation say the big three, known as GMT, will initially contribute 10% of their online space to the network. A rival group known as the Seven Amigos, lead by Hearst Gannett 10 01 2007 Chart McClatchy 10 01 2007 Chart Tribune 10 01 2007 ChartCorp. and MediaNews Group Inc. that owns more than 100 newspapers, has already teamed with Yahoo to sell online classifieds, and is finalizing details of its own national ad-sales network. The deal would likely to require the newspapers to use Yahoo search on their newspaper Web sites. Lincoln Millstein, senior VP at Hearst Newspapers, said he hopes GMT will join the Yahoo consortium and not strike out on its own: "We're all struggling to get our fair share of national advertising revenues, and this partnership with Yahoo would go a long way toward achieving that goal." But said sources say GMT is wary of the Seven Amigos' agreement to use Yahoo technology to deliver the advertising, because it will give Yahoo access to sensitive information such as which newspaper sites are doing well and which pages are most popular. GMT has negotiated with ad-placement company Centro LLC to deal with ad placements; its president, Shawn Riegsecker, also thinks the two groups need to join forces if they hope to compete with big portals. "If you break this industry apart, you completely devalue the value proposition to the spot advertiser in the national market."
• Sources: Wall Street Journal
• Related commentary: Monster Broadens Its Traditional Media Partnerships, Traditional Ad Agencies Beware: " Google Print Ads" Set For Trial Run, Tribune Co.'s Second Largest Shareholder Hires Outside Adviser in Possible Break With Management, Scripps Leaves Traditional Media Behind, Craigslist.org is the Root of Newspapers ' Woes, Monster Broadens Its Traditional Media Partnerships, In the Current Print Media Reshuffle, Only the Strong Will Survive, Declining Print Ad Revenues Take Toll on Newspaper Earnings
• Potentially impacted stocks and ETFs: Gannett Co. Inc. (GCI), The McClatchy Company (MNI), Tribune Company (TRB), Yahoo! Inc. (YHOO), Time Warner Inc. (TWX), Microsoft Corp. (MSFT), Google Inc. (GOOG). Competitors: The New York Times Co. (NYT), The Washington Post Co. (WPO), E.W. Scripps Company (SSP), Belo Corp. (BLC), News Corp. (NWS), Dow Jones & Company Inc. (DJ), Media General Inc. (MEG), Triple Crown Media Inc. (TCMI), GateHouse Media Inc. (GHS), Monster Worldwide Inc. (MNST)

CBS Announces New Internet Strategy

CBS announced at the CES show that it has a number of internet partnership deals in the works. CEO Leslie Moonves tried to communicate to the tech audience that CBS aims to be a leader in web/TV synergy. Moonves mentioned a CBS chartnumber of the company's 2007 web plans including a "virtual skybox" for NCAA fans to discuss games in progress, Star Trek placement in the "Second Life" online game and increasing downloading and interactivity capabilities for the company's TV programs. Moonves also mentioned partnerships with YouTube and Sling Media. Analysts suggest that CBS' declining ratings, including a 24% drop in young adult viewers on Thursday nights, could be responsible for this push onto the internet. However, the web strategy depends on strong TV programming. Moonves denies a connection between the two issues. Wall Street approves of the company's new aggressive moves onto the internet.
• Sources: Press Release, WSJ, AP
• Related commentary: CBS Taps Quincy Smith For Interactive Presidency, Media Giants to Form YouTube Rival, CBS's Operating Revenues Rise 26%, Nielson/NetRatings: TV Broadcasters Should Put Content On Web Conference call transcripts: CBS Q3 2006 Earnings
• Potentially impacted stocks and ETFs: CBS Corp. (CBS) Competitors: Viacom (VIA), Clear Channel Communications (CCU), Walt Disney Company (DIS), General Electric (GE), Comcast (CMCSA)

ENERGY AND MATERIALS

The Governator Gets Serious On Terminating CO2 Emissions

During his State of the State address yesterday, California Governor Arnold Schwarzenegger threw down the gauntlet to his state's Air Resources Board to enact a policy requiring a 10% cut in the carbon dioxide emissions of heat-trapping fossil fuels.terminator The challenge, which Schwarzenegger hopes to have met by 2020, would mean a law requiring California's petroleum refiners to ensure their products are more environmentally friendly. The challenge stems from a deal last summer between the state legislature and the governor to reduce carbon dioxide emissions by 25% by 2020. In other clean energy news, The Wall Street Journal is reporting governors of 37 states are prepared to push for a new federal rule to require greater use of ethanol fuel while President Bush is expected to speak in favor of greater ethanol use during his State of the Union address later this month in an effort to reduce greenhouse gases and reduce the nation's reliance on foreign oil.
• Sources: New York Times, Wall Street Journal, L.A. Times
• Related commentary: Clean Energy Incentives: They Work!, A Quick Guide to Ethanol Energy Stocks, Ethanol Stocks: Six Reasons To Be Cautious, Alternative Energy, Oil Stocks Up Across the Board on Dems Win
• Potentially impacted stocks and ETFs: PowerShares WilderHill Clean Energy ETF (PBW), PowerShares WilderHill Prog Energy (PUW)

U.S. to Raise Royalties on Gulf Oil and Gas Leases

Stung by criticism that it has failed to collect all the royalties the U.S. is owed, the Bush administration has announced that it is raising royalties on oil and natural gas extracted from the Gulf of Mexico, the area from which about a quarter of U.S. oil is produced. The new royalty will raise the payment on new leases from the equivalent of one barrel out of every eight to one out of six. This should boost federal royalty revenues by $4.5 billion over 20 years. The new royalty will not, however, affect any of the myriad existing offshore leases; nor will it undo a mistake in hundreds of leases that could allow companies to avoid up to $10 billion in royalties over the next five years. Two of the biggest operators in the Gulf, Chevron and Exxon Mobil, have vigorously fended off efforts by the Interior Department to renegotiate their deals. In related news, the U.S. is removing drilling bans from two large tracts, one in the Gulf of Mexico and another in Alaska, in order to boost domestic energy production.
• Sources: New York Times, Forbes, Wall Street Journal
• Related commentary: Rig Shortages Delay Gulf Exploration and Production as Costs Jump, Exxon Shares Sinking to Levels They Richly Deserve, Exxon - The Most Evil (and Overpriced) of the Oil Companies, Eye on Chevron, BP's Output Falls Again; A 'Brave' Buy with Upside Potential as a 'Recovery Stock', Fuel For Thought: Which Integrated Oil Company Should You Own?
• Potentially impacted stocks and ETFs: BP plc (BP), Royal Dutch Shell plc (RDS.A), Chevron Corp. (CVX), Exxon Mobil Corp. (XOM), Statoil ASA ADS (STO). ETFs: BLDRS Europe 100 ADR Index (ADRU), BLDRS Europe 100 ADR Index (ADRU)

Alcoa Profit Coasts Up 60% on Higher Aluminum Prices

Alcoa Inc. opened the Q4 earnings season with an upside surprise, reporting a 60% gain in profit on high aluminum prices and strong demand from the air transport, commercial transport and building markets. Net income for Q4 was $359 million, or $0.41/share, versus Alcoa 10 01 2007 Chart$224 million, or $0.26/share, in Q4 2005. Revenue rose 20% to $7.84 billion, and income from continuing operations was $644 million, or $0.74/share. The results beat forecasts of $0.64 EPS and revenue of $7.64 billion. Alcoa expects demand for aluminum to remain strong, particularly in China, and is adding aluminum refining and smelting capacity in Australia, Brazil and elsewhere. Alcoa benefited from a rise in the price of aluminum this quarter to $2,766 a metric ton, up 27% from the year-ago quarter and 6% from Q3. Alcoa's strong results suggest that commodity prices are rising to reflect global inflation.
• Sources: Bloomberg, Washington Post, MarketWatch, New York Times. Conference call transcripts: Q4 2006
• Related commentary: The Outlook for Alcoa and Aluminum
• Potentially impacted stocks and ETFs: Alcoa, Inc. (AA). Competitors: Alcan, Inc. (AL). ETFs: Vanguard Materials ETF (VAW), iShares Dow Jones US Basic Materials (IYM), Materials Select Sector SPDR (XLB)

AEROSPACE AND DEFENSE

UAL Wins Bid for U.S.-China Capital-to-Capital Service

The Department of Transportation chose UAL Corp's United Airlines over three of its competitors to receive tentative approval to fly a new China service, non-stop daily between Washington, D.C. and Beijing. United can begin its service on March 25. Lobbying for the new service was unprecedented according to industry consultants. United's rivals including Continental, Northwest and American all voiced their disappointment. UAL-UAUA-1yr-chart-01-09-07 Analysts seem to agree United's bid was the best, offering the first capital-to-capital service and maximizing capacity by using a Boeing 747-400, the largest commercial aircraft. It is estimated the route will offer 235,000 seats annually and bring in $100m in revenue on an annual basis. MarketWatch reports additional service rights between U.S.-China will be available to U.S. carriers in March 2008. UAL's shares were up 3% intra-day on the news but ended only slightly higher (+0.09%) at $46.84.
• Sources: Bloomberg, MarketWatch
• Related commentary: Crude's Fall Boosted Airline Stocks, Airline Consolidation Efforts Heat Up as United, Continental Discuss Merger, United Airlines: Even Q3 Profits Can't Seem to Please Wall Street, Airlines Vie for Lucrative New China Route
• Potentially impacted stocks and ETFs: UAL Corp (UAUA). Competitors: AMR Corp (AMR), Continental Airlines (CAL), Northwest Airlines (NWACQ.PK)

FINANCIAL

NYSE-Goldman Led Group Acquires 20% Stake in National Stock Exchange of India

NYSE Group Inc., Goldman Sachs Group, General Atlantic and Softbank Asian Infrastructure Fund disclosed they were each buying a 5% stake in the National Stock Exchange of India Ltd.bse sensex The exchange is the Indian emerging market's largest. The NYSE Group disclosed it paid $115 million for its stake; the other companies didn't disclose a purchase price. The combined value of Indian stocks has increased by nearly 50% in the past two years to $820 billion, making it Asia's fifth-largest equity market.
• Sources: Press Release, Reuters, Bloomberg, MarketWatch
• Related commentary: Indian Market Report: 2007 Has Brought On The Fear, On the BSE Sensex's Plunge: Buying Opportunity?, An Investor's Take On The NYSE/Euronext Merger
• Potentially impacted stocks and ETFs: NYSE Group (NYX), Goldman Sachs (GS). ETFs: The India Fund, Inc. (IFN), Morgan Stanley India Investment Fund Inc. (IIF), Barclays Bank Zero Cpn ETN (INP)

Wachovia Acquires One of Europe's Largest Fixed-Income Credit Funds

Wachovia Corp. announced yesterday that its asset-management unit, Evergreen Investments, agreed to acquire a 70% stake in European Credit Management [ECM] for an undisclosed sum.wb ECM manages a range of assets equaling approximately $26 billion including investment-grade corporate bonds, leveraged loans, high-yield bonds and credit derivatives, making it one of Europe's largest managers of fixed-income credit funds. With the deal complete, Evergreen will itself control $280 billion in assets. ECM reported $33 million in earnings this past year. It is expected Evergreen will eventually acquire the other 30% of ECM with ECM's managers remaining firmly in place.
• Sources: Press Release, Wall Street Journal, Reuters, MarketWatch
• Related commentary: Wachovia's Imprudent Takeover of Golden West, Wachovia Posts Q3 13% Profit Increase But Revenue Disappoints, In Bid To Catch Competitors, Morgan Stanley Will Buy 20% of Avenue Capital, Cramer's Take on WB
• Potentially impacted stocks and ETFs: Wachovia Corporation (WB). Competitors: Morgan Stanley (MS), Bank of America Corporation (BAC), JPMorgan Chase (JPM), Citigroup (C). ETFs: streetTRACKS KBW Bank (KBE), Regional Bank HOLDRS (RKH), Vanguard Financials ETF (VFH)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Markets: Are Wage Increases a Threat to Inflation?
Housing: An 80-Year Yield Curve History and its Implications
Long Idea: Anticipation of a Kraft Spinoff Has Altria Smoking This Earnings Season
Short Idea: Exxon Shares Sinking to Levels They Richly Deserve
Internet: I'm Sorry Ms. Yahoo, Eric Jackson's Plan is for Real
Telecom: Apple's iPhone Partnership With Cingular Could Drag It Down
Hardware: Will Dell Make a Comeback?
Consumer Electronics: iPhone is No Blackberry Killer - Merrill
Media: Dolby Turns Down the Volume on Obnoxious Advertisers
Healthcare: Report From JPMorgan's HealthCare Conference: The Spinal Business Is Hot
Retail: Is Gap a Private Equity Takeover Target?
Transport: Live From the Detroit Auto Show, the 'Big 4' Speak
Gold: Galore Creek and Agua Rica - Two High Risk Mining Projects (Part 2)
Energy: Is Peak Oil Already Here?
Financial: Barclay's Nerds and Their Bifurcated Alpha/Beta Approach
Asia: Japan: 2006 Market Cap Ranking
ETFs: ETF Advice From One of the World's Best Investors
Small-Caps: Simtek Corp. On The Rise
IPO Analysis: An In-Depth Look at Melco PBL Entertainment's IPO
Sound Money Tips: Refinancing Your Home
Jim Cramer: Latest stock picks
Earnings Conference Call Transcripts: Lawson Software F2Q07, Helen of Troy F3Q07, Emmis F3Q07, Ruby Tuesday F2Q07, Alcoa Q4 2006

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Wall Street Breakfast for January 26, 2007

MACRO AND HOUSING

Existing-Home Sales Dismal, But Expected To Pick Up

Existing-home sales plummeted 8.4% in 2006, their fastest pace in 17 years. The National Association of Realtors [NAR] announced yesterday that sales dropped 0.8% in December to an annual rate of 6.22 million, their first decline in three months. The number of homes on the market also declined, however, for the second month in a row -- to 3.508 million from 3.81 million -- suggesting that more buyers are being lured by low prices and affordable mortgage rates. Still, the inventory of unsold existing homes is 23.3% above the year-ago period. The median price of an existing home last month was $222,000, up from $217,000 in November. A total of 6.42 million previously owned homes are forecast to be sold this year, down from 6.48 million last year. Sales in 2006 were the third-highest on record according to the NAR, but there was also a 42% jump in foreclosures. The S&P Supercomposite Homebuilding Index dropped 3.6% after the report and is down 1.4% on the month. The Fed maintains that housing demand has likely stabilized and the economy should be able to expand moderately even as the housing slowdown continues.
• Sources: Wall Street Journal, Reuters, Bloomberg
• Related commentary: Existing Home Sales are Fantastic, According to the National Association of Realtors Anyway, Homebuilder Stocks: Is the Worst Over?, Housing Bubble and Real Estate Market Tracker
• Potentially impacted stocks and ETFs: Pulte Homes Inc. (PHM), Beazer Homes USA Inc. (BZH), Hovnanian Enterprises Inc. (HOV), Toll Brothers Inc. (TOL), M.D.C. Holdings Inc. (MDC), The Ryland Group Inc. (RYL), American Standard Companies Inc. (ASD), Centex Corp. (CTX), Lennar Corp. (LEN), KB Home (KBH). ETFs: iShares Dow Jones US Home Construction (ITB), SPDR Homebuilders (XHB), PowerShares Dynamic Building & Construction Portfolio (PKB)

Blackstone Back at the Table; Raises Equity Office Bid to $38.3 Billion

Blackstone has topped Vornado's $52 per share bid for the Equity Office REIT, the largest owner-operator of office properties in the U.S., with an offer of $54 per share. If it goes through, the deal will be the biggest LBO in history. Blackstone's offer is all-cash while Vornado's is 60% cash and 40% Vornado shares. Vornado had begun due diligence with Equity Office ahead of the formalization of their offer on January 31, but Blackstone's new bid beat that date by a week. The Vornado offer is worth $37.6 billion including debt and Blackstone's $38.3 billion. The Equity Office board of trustees continues to recommend that shareholders accept Blackstone at their February 5 vote. The Equity Office bidding war reflects the ongoing consolidation of the real estate market: Global real estate mergers hit a record $414.3 billion in 2006, up 66% from the year before. Equity Office shares rose 3.9% to $54.77 late yesterday afternoon.
• Sources: Bloomberg, MarketWatch, Reuters
• Related commentary: Vornado Group Outflanks Blackstone in New Bid for Equity Office REIT, Blackstone Group's 'Zell Buyout' Is Questionable At Best, Blackstone Acquiring Equity Office in Largest Private-Equity Deal Ever
• Potentially impacted stocks and ETFs: Equity Office Properties Trust (EOP), Vornado Realty Trust (VNO). Competitors: Boston Properties Inc. (BXP), Mack-Cali Realty Corp. (CLI), Vornado Realty Trust (VNO). ETFs: iShares Cohen & Steers Realty Majors (ICF), Vanguard REIT Index ETF (VNQ), WisdomTree Dividend Top 100 (DTN), streetTRACKS DJ Wilshire REIT (RWR)

Latest Options Backdating Probe: KB Home

KB Home, the fifth-largest U.S. homebuilder, is the latest subject of an official SEC probe into the company's backdating of stock-option KB Homes 26 01 2007 Chartgrants. The company disclosed in a SEC filing this morning that, "In August 2006, the Company announced that it had received an informal inquiry from the Securities and Exchange Commission relating to its stock option granting practices. On January 19, 2007, the Company was informed that the SEC is now conducting a formal investigation in this matter. The Company has cooperated with the SEC regarding this matter and intends to continue to do so." KB Home started reviewing options granted to former chief executive Bruce Karatz in 1999 this August; Karatz resigned as CEO in November, and agreed to repay $13 million to cover ill-received gains.
• Sources: SEC 8k Filing, MarketWatch, Bloomberg
• Related commentary: Options Backdating News: KB Home and Home Depot, Homebuilder CEOs Talking Down The Markets, Wall Street Journal's Options Scandal Scorecard (Jan. 20)
• Potentially impacted stocks and ETFs: KB Home (KBH)

TECHNOLOGY

Microsoft's Profit Drops 28%; Raises Forecasts; Shares Gain 2% After Hours

Microsoft posted a fiscal Q2 earnings decline less severe than analysts had expected yesterday on sales of video games and database programs. The company has raised guidance for full-year profit to a range of $1.45-1.47 from $1.43-1.46. Net income fell 28% to $2.63 billion, or $0.26 cents/share, from $3.65 billion, or $0.34, a year earlier, because of delays in the release of the Vista OS and a required Microsoft 26 01 2007 Chartrevenue deferral. Analysts were expecting EPS of $0.24. Revenue rose 6% to $12.5 billion. The deferral shaved $1.64 billion from Q2 revenue and $1.13 billion, or $0.11/share, from profits. Without it, quarterly revenue would have jumped 20%. The postponed revenue was substantially compensated for by sales of databases, Xbox machines and games like "Gears of War.'' Sales are projected at $50.2-50.7 billion, up from the previous forecast of $50-50.9 billion. Profit for the current quarter is projected at $0.45-0.46 on sales of $13.7-14 billion, in line with expectations. Xbox sales surged 76% to $2.96 billion in the quarter, ahead of expectations, but the company is trimming its Xbox sales forecasts to 12 million by June 30 instead of 13-15 million. Revenue from SQL database software and Windows for server computers rose ahead of forecasts by 17% to $2.85 billion. Vista was released to businesses in November and goes on broad release January 30.
• Sources: Bloomberg, Forbes, Wall Street Journal. Conference call transcripts: F2Q07 (Qtr End 12/31/06)
• Related commentary: A Close Look At Microsoft's Earnings, Microsoft: Pru Boosts Price Target Ahead Of Earnings Today, Xbox Sales: Potential Upside For Microsoft, Vista Sales Beat Forecasts, MSFT Shares Climb
• Potentially impacted stocks and ETFs: Microsoft Corp. (MSFT). Competitors: Sony Corp. (SNE), Nintendo Co., Ltd. [ADR] (NTDOY), Google Inc. (GOOG), International Business Machines Corp. (IBM), Oracle Corp. (ORCL). ETFs: iShares Goldman Sachs Technology Indx (IGM), iShares Goldman Sachs Software Index (IGV), streetTRACKS DJ Wilshire Lg Cap Growth (ELG), streetTRACKS DJ Global Titans (DGT)

Advantest's Earnings Drop, Lowers Guidance for Current FY, But Expects Recovery from April

Advantest reported a sharp drop in Q3 earnings and warned full fiscal year (ending Mar. 2007) earnings would be lower than previously forecast. The firm's CFO is optimistic however, saying, "Next fiscal year's results will be much better (with) double-digit (sales and profit) growth." Advantest, the world's largest manufacturer of memory chip testing equipment, once again blamed a slowing of capex and orders from microprocessor and non-memory chip makers. Advantest-ATE-1yr-chart-01-25-07 It did not breakdown quarterly results but Bloomberg calculates Q3 net income fell 51% to ¥5.6b ($46m) on a 24% drop in sales to 57.9b ($477m). Operating profit was down 56% to ¥7.9b ($65m). Advantest says its expects full FY net income of ¥41b ($337m), versus its prior downward revised forecast of ¥43b ($354m), which is about 1% lower than the ¥41.4b earned in 2005. Its ordinary shares lost 1% in Tokyo to ¥6,030 ($49.63 ADR equiv. at ¥121.5/$1) ahead of its earnings announcement.
• Sources: Earnings release [pdf], Bloomberg, Forbes-Newswire
• Related commentary: Advantest's H1 Profit Up 52%, But Lowers Full Year Guidance, Semi Equipment Orders Continue To Rise, Semiconductor Equipment Companies Suffer Push Out Worries
• Potentially impacted stocks and ETFs: Advantest (ATE)

AT&T Blames Microsoft Software For IPTV Delays

AT&T is blaming delays in the successful rollout of its IPTV service on glitches in the Microsoft software on which it operates.t AT&T's in-home TV service was supposed to be available in 15 markets by the end of 2006; it has instead only been rolled out in 11, and in limited form. As a result, the Wall Street Journal reports that AT&T CFO Rick Lindner has decided against heavily marketing the service so as not to increase demand until the problems are solved. But AT&T stopped short of losing hope in its partnership with Microsoft or in the effectiveness of its software. AT&T CEO Edward Whitacre told analysts during the company's conference call yesterday his company was staying the course stating, "It works and it's the right thing financially." Executives on the conference call made sure to point out that delays in the IPTV service had been caused by software issues and did not reflect any problems with the network architecture. AT&T hopes to have IPTV in eight million homes by year's end. AT&T shares rose $0.16 to $36.79 yesterday after reporting earnings before the market opened.
• Sources: AT&T Q4 2006 Earnings Call Transcript, Wall Street Journal, cnet news
• Related commentary: AT&T Boosts Earnings, Revenue On Strong Cingular Growth, Cingular Triples Profits On Addition of 2.4 Million New Subscribers, Cramer's Take on T
• Potentially impacted stocks and ETFs: AT&T (T), Microsoft (MSFT). Competitors: Verizon Communications Inc. (VZ), Comcast (CMCSA), Time Warner Inc. (TWX), DIRECTV Group (DTV), EchoStar Communications (DISH), Cablevision Systems (CVC), Sprint Nextel Corp. (S), Vodafone (VOD), Qwest Communications International Inc. (Q). ETFs: iShares S&P Global Telecom ETF (IXP), iShares Dow Jones U.S. Telecom Sector Index ETF (IYZ), PowerShares Dynamic Telecom & Wireless ETF (PTE), PowerShares FTSE RAFI Telecommunications & Technology Portfolio (PRFQ), Vanguard Telecom Services ETF (VOX), Telecom HOLDRS ETF (TTH)

MEDIA

Chandler Family Threatens Tribune With Proxy Fight

The Wall Street Journal reports that yet another complication has surfaced in the battle for control over Tribune Co.'s newspaper and TV empire: its biggest shareholder, the Chandler family, could mount a proxy fight for additional Board seats. The family currently holds three seats on tribunes 11 member board; a proxy contest could net them another two, leaving them short of full control, but in a powerful position. While the family would prefer to Tribune 26 01 2007 Chartavoid such a battle, it's likely to happen if Tribune's board doesn't accept its acquisition proposal, or pursue a transaction that suits the family, sources say. The Chandler family is concerned with what it perceives as the Board's over-involvement in the auction process; they have been forbidden to approach private equity firms that signed confidentiality agreements with Tribune but never submitted bids. The family believes it could bid higher were allowed to pursue additional funding. The Board is dissatisfied with the Chandler's bid, which would have Tribune spin off its TV stations, while the Chandlers buy the newspapers for $4.7 billion. The Chandlers are also unhappy with a bid proposal from tycoons Ron Burkle and Eli Broad which calls for Tribune to borrow and pay a big debit dividends to shareholders; the family feels such an agreement would saddle the company with too much debt.
• Sources: Wall Street Journal
• Related commentary: Trying to Sort Out Tribune Bids After Sale Deadline Passes, Tribune Co.'s Second Largest Shareholder Hires Outside Adviser in Possible Break With Management, Tribune Could Be Bought Out By Two LA Billionaires
• Potentially impacted stocks and ETFs: Tribune Company (TRB), The New York Times Co. (NYT), Washington Post Company (WPO), Gannett Co. Inc. (GCI), McClatchy Company (MNI)

ENERGY AND MATERIALS

FTC OK's Sale of Kinder Morgan, With Caveats

The FTC yesterday agreed to grant pipeline company Kinder Morgan conditional antitrust clearance to pursue its $22 billion sale to an investor group of which CEO Richard Kinder is a member. Kinder Morgan stockholders will receive $107.50 in cash per share, and the deal includes the assumption of $7 billion in debt. The FTC had questioned the involvement of investment firms Carlyle Group and Riverstone Holdings LLC on the grounds that they hold stakes in Magellan Midstream, a major competitor to Kinder Morgan in gasoline storage. It is requiring the two groups to cede control of Magellan to a third investor and remove their representatives from the company's board. The FTC's object is to prevent M&A activity among energy firms from artificially elevating gas prices for consumers. Kinder Morgan is aiming for a Q1 closing of the acquisition, but it might be delayed into Q2 on scheduling issues with the California Public Utilities Commission.
• Sources: Wall Street Journal, Reuters, MarketWatch, Press release
• Related commentary: Investors Watching Management-Led Buyouts, Kinder Morgan: The Path Not Taken By Enron, LBOs Making Executives Very, Very Rich
• Potentially impacted stocks and ETFs: Kinder Morgan Inc. (KMI). Competitors: TEPPCO Partners LP (TPP), Williams Companies Inc. (WMB). ETFs: Vanguard Mid-Cap Value ETF (VOE)

TRANSPORT AND AEROSPACE

GM To Delay 4Q06 Earnings, Restate Past Earnings Yet Again

General Motors just can't seems to get its accounting in order.gm The world's largest automaker announced yesterday it was delaying its 4Q06 earnings report, scheduled for Tuesday January 30, indefinitely. CFO Fritz Henderson said GM can't say for sure when it will release the delayed results. GM is blaming a delay in reporting from its formerly owned finance arm, GMAC, which it sold mid-quarter, for the delay in its earnings reporting. When it does report, GM claims to show greatly improved revenue and profit versus the prior-year period as well as a better liquidity position with $26.4 billion in cash and equivalents. GM also announced it will again restate its financials for 2002 through the third quarter of 2006, due to deferred tax liabilities that were overstated; only one quarter in the past eight hasn't been restated or adjusted. During regular trading GM shares rose $0.40, or 1.22%, to $33.14 before falling $0.24 to $32.90 in after hours trading.
• Sources: TheStreet.com, Bloomberg, MarketWatch, NY Times
• Related commentary: Has GM Missed Its Moment?, Throwing More Money At Fickle U.S. Consumers Won't Fix Ford's (or GM's) Problems, GM To Increase CapEx In Bid To Appeal To New Customers. Conference call transcripts: General Motors Q3 2006 Earnings Call Transcript
• Potentially impacted stocks and ETFs: General Motors (GM). Competitors: Ford (F), DaimlerChrysler (DCX), Toyota (TM), Honda (HMC), Nissan (NSANY). ETFs: WisdomTree Dividend Top 100 Fund

HEALTHCARE/BIOTECH

Cardinal Health to Sell Its Drugmaking Unit for a Surprising $3.3 Billion

Cardinal Health Inc., the second-biggest U.S. drug distributor, announced yesterday it is selling its drug manufacturing and packaging division to the private equity firm Blackstone Group for $3.3 billion. The unit contracts with pharmaceutical companies to manufacture prescription and over-the-counter drugs, aiming to be a one-stop outsourcing shop for drugmakers. The sale of the unit is a result of the company's disappointment with its Cardinal Health 26 01 2007 Chartperformance, and the desire of Cardinal's new CEO R. Kerry Clark to refocus the company on its core business. U.S. drug distribution is dominated by the so-called "Big Three" - Cardial, McKesson Corp. and AmerisourceBergen Corp. In the 90s, the three launched into acquisition and expansion based growth, but have since turned back the clock and are making efforts to return to their roots. Cardinal announced it plans to sell its drug manufacturing unit in November, and it was slated to be put up for auction, but Blackstone stepped in, offering $3.3 billion -- far higher estimated price tag of $2.1-$3 billion. In an interview Blackstone rep Chinh Chu said Cardinal is a great health-care play because of high organic growth and its market leadership position. In a conference call, Clarke called the sale, "a very good deal." Separately Cardinal announced it will buy SpecialtyScripts pharmacy of Massachusetts for an undisclosed amount. Shares were up 3.4%, $2.39, $272.42 in trading yesterday.
• Sources: Wall Street Journal, Bloomberg (I, II)
• Related commentary: Cardinal Health: Waiting for an Entry Point, Multiple Symptoms of Excessive Pay at Cardinal Health, Jim Cramer's Take on CAH
• Potentially impacted stocks and ETFs: Cardinal Health Inc. (CAH), McKesson Corp. (MCK), AmerisourceBergen Corp. (ABC). ETFs: iShares Dow Jones US Pharmaceuticals (IHE), iShares Dow Jones US Healthcare (IYH), Pharmaceutical HOLDRs (PPH), Vanguard Health Care (VHT), Health Care Select SPDR (XLV)

Amgen: Higher Net Misses Street, Reports Negative Clinical Studies, Stock Falls

Amgen's Q4 adjusted net income grew 14% to $1.06 billion, or $0.90/share, missing the $0.93 average analyst estimate surveyed by Bloomberg. Thomson said analysts expected $0.95/share on revenue of $3.77b, the latter figure which Amgen beat, as revenue increased 17% to $3.84b. Based on GAAP, EPS grew 8% to $0.71, with net income up 1% to $833m. Amgen-AMGN-1yr-chart-01-25-07 Wall Street however, seemed more concerned about competition in anemia drugs and negative results from clinical tests of anemia drug Aranesp and colon-cancer drug Vectibix. A Sanford Bernstein analyst comments, "A lot of things were surprising: they missed on earnings per share, they had surging R&D expenses, and there were a lot of setbacks in the pipeline." Amgen expects '07 adjusted EPS of $4.30 to $4.50 on revenue of $15.4b to $16b, versus Street consensus estimates of $4.43/share and $15.73b -- against earnings of $3.90 (+22% y-o-y) in '06 on sales of $14.3b (+15%). Note GAAP EPS was down 15% in '06 to $2.48. Amgen's shares lost 2.85% to $72.72 in extended trading on volume just over 2m shares, after closing down 0.4% to $74.85 in normal trading.
• Sources: Amgen Q4'06 Earnings Call Transcript, Earnings press release, Bloomberg, MarketWatch, WSJ
• Related commentary: Amgen Disappoints After The Bell, Searching for Value Investments in the Drug Stock Universe, Amgen Acquires Option On Experimental Cytokinetics Heart Drug
• Potentially impacted stocks and ETFs: Amgen (AMGN). ETFs: Biotech HOLDRs (BBH), iShares Nasdaq Biotechnology (IBB), iShares Dow Jones US Healthcare (IYH), PowerShares Dynamic Biotech & Genome (PBE), Vanguard Health Care (VHT), Health Care Select Sector SPDR (XLV)

INTERNATIONAL

China: GDP Growth Accelerates in '06, Inflation Concerns Growing Too

China's economy grew 10.4% in Q4 and 10.7% to 20.94 trillion yuan ($2.68t) in 2006 (vs. 10.4% in '05), its fastest clip in 11 years. CPI hit a two year high at 2.8% in December. Now it looks like China's central bank might have to consider raising rates (currently 6.12% for lending) again after it last did so in August. Efforts to reduce liquidity have not exactly worked as Beijing continues to worry about over-investment. Foreign reserves meanwhile, topped $1 trillion last year as China's trade surplus grew 74% y-o-y to $177.5b. Note quarterly GDP actually declined compared to revised figures of 10.6% in Q3 and 11.5% in Q2. The yuan is now up around 6.4% against the US$ since its peg ended in July '05. Another hot topic in China is domestic consumption, which lags investment and fell to 51.9% in '05, the lowest level since free-market reforms began in 1978, according to Bloomberg. The commissioner of China's National Bureau of Statistics comments, "Problems still exist with the irrational relationship between investment and consumption, and the imbalance of payments and excess liquidity in the banking system."
• Sources: Bloomberg, China Daily
• Related commentary: China's Commerce Minister: Reducing Trade Surplus is a Top Priority, Despite Incredible Growth, China's Markets Account For Small Percent of GDP, China's Central Bank Still Trying to Tame the Dragon
• Potentially impacted stocks and ETFs: Currency ETFs: PowerShares DB G10 Currency Harvest Fund (DBV), Euro Currency Trust (FXE). Bond ETFs: iShares Lehman Aggregate Bond (AGG), iShares Lehman 1-3 Year Treasury Bond (SHY), iShares Lehman 7-10 Year Treasury (IEF), iShares Lehman 20+ Year Treas Bond (TLT), iShares Lehman TIPS Bond (TIP). China ETFs: China Fund (CHN), Greater China Fund (GCH), iShares FTSE/Xinhua China 25 Index Fund (FXI), JF China Region Fund (JFC), PowerShares Golden Dragon Halter USX China (PGJ)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Markets: A Look At P/E Ratios By Sector
Housing: Housing Bubble and Real Estate Market Tracker
Long Idea: War, War, What Is It Good For? Defense Industry Stocks
Short Idea: The Short Case On Unisys: What Goldman Knew
Internet: Google's Response To The Wikia Challenge
Telecom: F5 Networks: See What Happens If You Only Report GAAP Numbers?
Networking: BitTorrent Going Legit Via Netgear: Interview With Co-Founder Ashwin Navin
Hardware: Bank of America Trims Dell Price Target
Chips: MEMC Electronic Materials: Solar Demand “Continues To Be Strong"
Software: A Close Look At Microsoft's Earnings
Consumer Electronics: Slower Xbox Growth Could Hurt Game Stocks; Activision May Save the Day
Media: L.A. Times Editor Spells Out Its Troubles
Healthcare: Why Does Proctor & Gamble Need Dental Laser Technology?
Biotech: Biotech Stocks Day-In-Review: Amgen Disappoints After The Bell
Retail: The Gap: Private Equity Speculation Continues
Transport: United Technologies: Ride The Aerospace Upturn
Gold: Fronteer Development Sizzling Hot in Gold & Uranium
Energy: Dow Chemical: Full Steam Ahead
Financial: optionsXpress: Onwards and Upwards
Asia: International Investors and The Yen: Know What Impacts Your Holdings
ETFs: Three Closed-End Funds of Funds
Small-Caps: Cost-U-Less: Delafield Hambrecht Calls For Sale
IPO Analysis: AeroVironment IPO Makes Good in Market
Sound Money Tips: Getting the Best Headphones for the Buck
Jim Cramer: Latest stock picks
Conference Call Transcripts: Microsoft F2Q07, Ford Q4 2006, AT&T Q4 2006, Nokia Q4 2006, Dow Jones Q4 2006, Agere Systems F1Q07, Taiwan Semiconductor Q4 2006, Fairchild Semiconductor Q4 2006, NCR Q4 2006, Gold Fields F2Q07, Cypress Semiconductor Q4 2006, FTD Group F2Q07, Compuware F3Q07, The McGraw-Hill Companies Q4 2006, CyberSource Corporation Q4 2006, Lattice Semiconductor Q4 2006, Amgen Q4 2006, Extreme Networks F2Q07, Synaptics F2Q07

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Free Film Screening: African Film Festival


FREE FILM SCREENING

Editorspick_2


 

 

 

Liberia_flag_2


 

FREE FILM SCREENING: African Film Festival
Thursday, February 15, 2007
 

Admission: Free


The African Film Festival invites you to celebrate Black History Month at the Schomburg Center for a special screening of the film Liberia: America's Stepchild, followed by a discussion with the filmmaker and guest panelists. This event is free and open to the public.


Langston Hughes Auditorium

Schomburg Center for Research in Black Culture

515 Malcolm X Boulevard

(Enter at 103 West 135th Street)

Manhattan, NY

T: 212-352-1720

www.africanfilmny.org

 
For more information and to watch the trailer, click here:

http://www.pbs.org/wgbh/globalconnections/liberia/

 

Also, here's an interview with Liberian President Ellen Johnson-Sirleaf on Foreign Exchange with with Fareed Zakaria:



 



 


Wall Street Breakfast for February 26, 2007

MACRO AND HOUSING

Economists Expect Fed to Sit Tight on Rates Throughout 2007

The housing slowdown is expected to keep U.S. GDP growth at its slowest pace in five years, but stronger consumer spending should counterbalance that drag, according to a survey at the National Association for Business Economics released today. The group expects the economy to grow 2.7% in 2007. Housing construction is forecast to plummet 14.9%, well ahead of the 5.5% drop the group predicted in November and the 4.2% decline in 2006. The economists expect a 3.2% rise in consumer spending, however, that should protect the overall economy. They forecast consumer prices to increase only 1.9% against a 3.2% rise last year, helped by lower energy prices. The core inflation index, though, which excludes food and energy, is forecast to rise 2.3% this year and next. The group believes the Fed will maintain the benchmark federal funds rate at 5.25% for the rest of 2007 and cut it to 5.0% in 2008; in November, it predicted two hikes this year. Once housing stabilizes, GDP should rebound to 3% in 2008. The economists identified subprime mortgage lending as the greatest risk to the financial markets.
Sources: Reuters, Boston.com, Bloomberg
Commentary: Economic Report Summary: Core Inflation Rose, Broad Equity Markets WeakenedGDP By Category, Services Spending, and Foreign Investments in U.S.Should The Fed Raise Rates?
ETFs to watch: S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), iShares Lehman Aggregate Bond (AGG)

INTERNET

Ericsson Outbids Arris in Grab for Tandberg TV

Ericsson has topped Arris Group's bid for Norway's Tandberg Television offering $1.39 billion in an attempt to enter the television market.eric Tandberg's closing price Friday was 100.25 Krona; Arris's offer is for just 96 Krona a share versus Ericsson's which values Tandberg at 106 Krona a share. Ericsson believes a Tandberg acquisition would allow it entry into the fast-growing world of Internet TV. Tandberg is especially strong in the area of MPEG-4 compression technology essential for high quality online viewing. Ericsson has already purchased 11.7% of Tandberg and claims to have agreements from an additional 13% of shareholders it says will accept its offer. Tandberg responded this morning that it has received Ericsson's offer and needs to review it further.
Sources: Press Release - Ericsson Bid, Press Release - Tandberg Response, Wall Street Journal, Bloomberg
Commentary: Arris Group Snaps Up Tandberg TV, Becomes 'Triple-Play' ThreatEricsson Buying Redback To Fend Off Cisco In IPTV EquipmentEricsson Still Looks Safe and Sound, Despite Investor Overreaction - Barron's
Stocks/ETFs to watch: LM Ericsson (ERIC), Arris Group, Inc. (ARRS). Competitors: Alcatel-Lucent (ALU), Siemens (SI), Motorola (MOT), Nokia (NOK), Nortel (NT), Cisco (CSCO)

MEDIA

Station Casinos Accepts Management-Led $5.5 Billion Buyout Offer

The board of Las Vegas-based Station Casinos Inc. voted this weekend to accept the $5.5 billion revised buyout offer from Fertitta Colony Partners LLC, a group led by the company's founding family, and real estate company Colony Capital LLC. The group will pay $90 per share, up from its December offer of $82. The raised bid represents a 30% premium over the shares' close on December 1, prior to the Station Casinos 26 02 2007 Chartdisclosure of the original bid. The group will also take on approximately $3.4 billion in debt, bringing the total value of the deal to about $8.9 billion. Fertitta Colony Partners consists of Station's chairman and CEO Frank Fertitta III and his brother, sister and brother-in-law, the four of whom collectively own about about 27% of the company's outstanding shares. Station runs 16 casinos that are oriented toward the local Las Vegas market rather than toward the tourist trade. The company also owns large tracts of undeveloped land in the Las Vegas Valley. The deal is expected to close in six to nine months.
Sources: Wall Street Journal, TheStreet.com, Reuters
Commentary: Station Casinos: Investment Group Urges Rejection Of Buyout OfferFertitta Brothers to Take Station Casinos PrivateA Quick Guide to the Major Gambling Stocks
Stocks/ETFs to watch: Station Casinos, Inc. (STN). Competitors: Harrah's Entertainment Inc. (HET), MGM Mirage (MGM). ETFs: PowerShares Dynamic Leisure & Entertainment (PEJ)

Tribune Mulls Offer from Sam Zell

Newspaper publisher and TV broadcaster The Tribune Company, on the brink of finalizing a "self-help" internal overhaul, is considering an offer from real estate developer Sam Zell. The highly leveraged deal would be structured around an employee stock ownership plan [ESOP] that would bring the company several federal tax benefits. The deal trumps two other private bids -- a $7.6 billion ($31.70 per share) offer from the Chandler family, the company's biggest shareholder; and a $34.00 per share offer from billionaires Ronald Burkle and Eli Broad -- Tribune Corp 26 02 2007 Chartthat the company had already indicated it considered insufficient. The company has instead constructed a recapitalization plan that would spin off its broadcast outlets, retain most of its newspapers, and borrow money to enable the distribution of a large dividend. The board, which is said to continue to favor its self-help plan over Zell's offer, will reach a decision by the end of March. Zell recently sold his Equity Office Property Trust to the Blackstone Group for $39 billion in what was briefly the biggest LBO in history.
Sources: New York Times, Wall Street Journal, MarketWatch, Reuters
Commentary: WSJ: Tribune Co. Now Leaning Away From Selling ItselfTrying to Sort Out Tribune Bids After Sale Deadline PassesLow-Balled in Its Bid to Sell, Tribune Company Ponders Its Options. Conference call transcript: Tribune Q4 2006
Stocks/ETFs to watch: Tribune Company (TRB). Competitors: Dow Jones & Co. Inc. (DJ), Gannett Co., Inc. (GCI), The Washington Post Co. (WPO), The McClatchy Company (MNI), The New York Times Co. (NYT)

TRANSPORT AND AEROSPACE

Financial Times: Chrysler Considering An All-Equity Deal With GM

The Financial Times is reporting DaimlerChrysler is considering swapping its North American Chrysler unit for a stake in GM.dcx DaimlerChrysler is anxious to unload Chrysler after it reported losses of $1.5 billion last year versus gains of $7.3 at the parent company. Such an arrangement would be advantageous to cash-strapped GM, in the midst of its own turnaround, especially given its current 'junk' debt rating. Meanwhile DaimlerChrysler would stand to benefit as a minority shareholder from cost savings from the multi billion-dollar merger. It has been reported that at least two of DaimlerChrysler's institutional shareholders like the idea of an all-equity deal.
Sources: Financial Times.com, Reuters
Commentary: Large Private Equity Firms Approached About Buying ChryslerGM To Buy Chrysler? At Least It Hasn't Been Ruled OutRenault CFO: 'We Want No Part in Chrysler'
Stocks/ETFs to watch: DaimlerChrysler (DCX), General Motors (GM). Competitors: Nissan (NSANY), Ford (F), Toyota (TM), Honda (HMC), Volkswagen (VLKAY.PK)

Boeing to Bring Antijamming Technology to Commercial Satellites

Recent activity by China displaying its ability to shoot down satellites has prompted Boeing to offer advanced antijamming technology to commercial satellite operators for the first time, according to The Wall Street Journal. There are reportedly more than 250 large commercial satellites in high-Earth orbits. Boeing-BA-1yr-chart-02-23-07 The deputy general manager of Boeing's Space and Intelligence Systems division says antijamming technology "could become a differentiator" in the commercial segment. The U.S. government recognizes threats from both a defense and commercial viewpoint. The WSJ reports industry officials say there is growing interest about safeguards among commercial operators in general that could lead to more advanced, but more costly next-generation satellites. A retired U.S. Air Force general believes protection for commercial satellites could even be subsidized by Congress.
Sources: The Wall Street Journal
Commentary: Investment Implications of China's Satellite KillerNorthrop to Bid on $40 Billion Air Force ContractBoeing's Earnings Fly, So Do Shares
Stocks/ETFs to watch: Boeing Co. (BA). Competitors: Intelsat, Ltd. (private), Lockheed Martin Corp. (LMT), Northrop Grumman Corp. (NOC), General Dynamics Corp. (GD). ETFs: iShares Dow Jones US Aerospace & Defense (ITA), PowerShares Aerospace & Defense (PPA)

ENERGY AND MATERIALS

TXU Smoothes Path for Biggest-Ever Buyout

Texan energy producer TXU will cancel eight of 11 planned coal facilities to gain support from environmentalists for its $44 billion buyout by a consortium led by Kohlberg Kravis Roberts and Texas Pacific. TXU shares soared 17% to $70.30 in AH trading on news of the bid. The consortium will pay about $70 a share, valuing the company at $32 billion, and assume $12.38 billion of TXU debt. The consortium pre-empted environmentalist opposition, which has scuppered such deals in the past, by approaching the groups in advance. In addition to cancelling the Texan plants, TXU will scrap planned facilities in Virginia, Maryland and Pennsylvania; back a carbon dioxide emissions limit; and invest in TXU 26 02 2007 Chartenergy efficiency programs. The deal could still run aground on government regulations and objections from consumers long hostile to TXU. Also, if the cancelled Texan plants are not built by other firms, there may not be enough supply to meet demand and Texan electricity prices could skyrocket. TXU was an attractive buyout candidate because in Texas, there are almost no price controls on electricity. The deal bumps the recent Blackstone buyout of the Equity Office REIT, which totaled $39 billion including debt, from the position of biggest buyout in history.
Sources: Wall Street Journal (I, II, III), Reuters, Bloomberg, MarketWatch
Commentary: TXU Building 11 Coal Plants Just 'Under the Wire' Of New Regulations?TXU, NewsCorp, AutoNation Top List of Hedge Fund Pullouts in 2Q'06Is Prudence Passé? Private Equity and LBO Cyclical Sector Targets. Conference call transcript: TXU Q3 2006
Stocks/ETFs to watch: TXU Corp. (TXU). Competitors: American Electric Power Co. Inc. (AEP), Centerpoint Energy Inc. (CNP), Reliant Energy Inc. (RRI). ETFs: Utilities HOLDRs (UTH), Utilities Select Sector SPDR (XLU), Vanguard Utilities ETF (VPU)

FINANCIAL

Apax Partners and Morgan Stanley to Buy Hub International for $1.7 Billion

Apax Partners and the private-equity investment arm of Morgan Stanley will buy Chicago insurance brokerage Hub International Ltd. for approximately $1.7 billion, it was announced today. The group will pay Hub $40 per share, a 16% premium over the shares' Friday close. Hub provides insurance and employee benefit services to medium-sized companies Hub2 26 02 2007 Chartand derives one-quarter of its business in Canada. Insurance brokers, with their relatively small capital investment requirements and hefty profit margins, hold great appeal for private equity firms. In 1998, Kohlberg Kravis & Roberts bought Willis Group Holdings Ltd. for around $300 million; in 2001, they brought Willis Group public for a gain of $1.2 billion. Apax and Morgan Stanley plan to provide a capital infusion to Hub and expand its reach in the American South. Morgan Stanley's principal investment group, in keeping with the new strategy of CEO John Mack, is becoming much more active; it is also involved in the pending record-setting buyout of electricity company TXU Corp. Hub is entitled to continue to solicit proposals until March 19.

Source: Wall Street Journal
Commentary: A General Insurance Brokers StoryApax, Morgan to buy Hub Int'l for $1.7 billion [Reuters] • Apax, Morgan to buy Hub Insurance for $1.7 billion [MarketWatch]
Stocks/ETFs to watch: Hub International Ltd. (HBG), Morgan Stanley (MS). Competitors: Aon Corp. (AOC), Brown & Brown Inc. (BRO), Marsh & Mclennan Companies Inc. (MMC). ETFs: iShares Dow Jones US Broker-Dealers (IAI), Vanguard Financials ETF (VFH), KBW Capital Markets ETF (KCE)

Nikko Cordial Up 13% on Rumor Citigroup May Boost Stake

It has been a rollercoaster ride for shareholders of Nikko Cordial following an accounting scandal last month that sent its shares lower by 28% in the ensuing two days. With today's 13% jump to ¥1,364 however, its shares have recovered their pre-scandal value. Citigroup-C-Nikko-Cordial-NIKOY-1yr-chart-02-23-07 Bloomberg reports sources say Citigroup may raise its stake in Nikko to 33.4% (valued at ¥380 billion, or $3.1b), from 4.9%, in order to gain a management veto. Citigroup previously owned more than 20% of Nikko but has cut its position in recent years. Citigroup also owns a 49% stake in an investment bank joint-venture with Nikko and has signaled interest to expand its retail banking presence. A listing on the Tokyo Stock Exchange is also under consideration. Citigroup is not the only interested party. A Mizuho spokeswoman confirmed the bank is "interested." It currently owns a 4.8% stake.Sources: Bloomberg
Commentary: Citigroup Has Decisions to Make Amidst Nikko Cordial UncertaintyCitigroup: Japan Expansion and M&A Could Bring Tokyo Exchange ListingEye on the Prize: Citigroup and Mizuho Battle for Nikko Cordial
Stocks/ETFs to watch: Citigroup (C), Nikko Cordial (NIKOY), Mizuho Financial Group (MFG). Competitors: Mitsubishi UFJ Financial Group (MTU), ABN Amro Holding N.V. (ABN). ETFs: iShares S&P Global Financial Index Fund (IXG), iShares Dow Jones US Financial Services (IYG), Financial Select Sector SPDR (XLF)

ACTIONABLE BARRON'S CALLS

Barron's articles likely to move stocks today, culled from our Annotated Barron's Summaries

  • Barron's cover story picks stocks likely to benefit from an aging baby boom generation: Retail: Chico's (CHS), Whole Foods Market Inc. (WFMI), Talbots (TLB), Gap (GPS), Helen of Troy's (HELE) and Mattel (MAT). CE: Nintendo (NTDOY.PK). Transport: Ford (F). Housing: Pulte Homes (PHM). Healthcare: Allergan (AGN), Estee Lauder (EL), AMN Healthcare Services (AHS), UnitedHealth Group (UNH), Walgreen (WAG), Stericycle (SRCL). Insurance: Hartford Financial Services Group (HIG). Accommodation: Starwood Hotels & Resorts Worldwide (HOT).
  • Mark Roberts, Founder of Off Wall Street Consulting Group, gives three short and two long picks for 2007. Shorts: (1) Mohawk Industries Inc. (MHK) -- "We have called carpet dealers all over the country and, except for a couple of pockets, business is terrible." (2) Fossil Inc. (FOSL) -- people who bought its watches now use their cell phones and MP3 players to tell time. (3) Healthways Inc. (HWAY) -- recent Medicare studies have failed to show that disease management saves money. Longs: (1) SAIC Inc. (SAI) -- more than half its 44,000 employees have hard-to-obtain security clearances, allowing it to grab the lion's share of government intelligence contracts. (2) Republic Airways Holdings Inc. (RJET) -- the airline outsourcer's earnings are more predictable than traditional airlines, without the fuel-cost, fair price, or passenger load risks.
  • On Thursday, Universal Electronics Inc.'s (UEIC) sales ($236 million) and earnings ($1.06 a share) considerably topped Street estimates. It holds 168 remote-control related patents, more than 75% of its revenue comes from technology licensing, and it makes 75% of all remote controls sold to U.S. cable companies. Flat-panel TV growth and services such as TiVO leave Universal with lots of room to grow.
  • Siemens' (SI) 12 divisions were in the black in FQ1 2007 for the first time in six years, with operating profits up 51% and 2006 net up 35%. Siemens is under investigation for bribing its way into $500m of contracts; it has promised to initiate controls to ensure ethical behavior. New growth directions include energy, environmental care, infrastructure, health care, and emerging markets. Shares should climb at least 10% in 2007, unless the scandal reaches CEO Klaus Kleinfeld, architect of the company's revival.
  • Burger joints have flourished in recent years as middle-income Americans, hit with weak home prices high gas prices and interest rates, would just as soon save a few bucks. Nutritious menu options have made their spoons less greasy, and have proven healthy for their businesses as well. Leader of the pack McDonald's (MCD) shares could easily rise another 10% thanks to expanded breakfast offerings.
  • To grow cash-flow/share by 35% in 2006 and 45% in 2005, and double its share price since 2004 (to $55), Brookfield Asset Management Inc. (BAM) uses a Buffett-like business model that stresses strict value investment, contrarianism, high quality long-term asset purchases after extensive research, and retaining good management. Brookfield is now focusing on infrastructure such as ports, pipelines and railroads. While competition from the likes of Goldman Sachs (GS) could pressure prices in the short-term, Brookfield's investments should yield Buffett-like profits, sending shares to $70.
  • Accounting errors led the Fed to find fault with Fifth Third Bancorp's (FITB) risk controls in 2002; since then shares are down from $70 to $40. The Street may be overlooking turnaround factors, including dumping some of its low-yield investments, strength and consolidation in regional banks, a thorough management remake, and a yield-curve that will at some point turn the corner improving margins. Shares are above 50- and 200-day moving averages, insiders have been upping their purchases, and just two of the analysts who follow Fifth Third rate its shares a Buy -- making it a contrarian's dream.
  • L-1 Identity Solutions Inc.'s (ID) CEO Robert LaPenta recently upped his stake, a decidedly bullish signal considering his strong background in defense and security. Joshua Hong of OwnershipAnalyzer.com says that institutions own 40% of shares outstanding, and together with LaPenta's leadership, give the company its positive momentum. Shares are down 10% but up 12% on the news of LaPenta's recent purchase.
  • Qualcomm (QCOM) shares are up 17% in February due to the steady flow of rumors that it is close to renewing its licensing pact with Nokia (NOK) (the present agreement dies April 9). But Qualcomm CEO Paul Jacobs says the two are "pretty much at deadlock." Nokia wants to pay Qualcomm lower fees for its W-CDMA technology, and it wants Qualcomm to pay it royalties for certain patents owned by Nokia. Qualcomm makes most of its money from licensing. Charter Equity's Ed Snyder says there will not be a deal. Last week Jacobs told investors Qualcomm's agreement to provide MediaFlo mobile-video technology to AT&T's (T) Cingular wireless might bring Nokia closer, but author Mark Veverka says he may have been grasping at straws.

MUST-READS ON SEEKING ALPHA TODAY

U.S. Market: The Week Ahead: Emerging Markets Glamour
Housing: This is the Housing Market the UK Built
Long Idea: Banco Bilbao's Quest for World Domination
Short Idea: A Zale Short Reviews Its Conference Call
Internet: Internet Service Providers: Is Net Neutrality Hurting or Helping?
Telecom: RIP: Here Lies BellSouth
Software: Salesforce Taking On Bloomberg: Merrill's The First Catch
Consumer Electronics: How Much Would You Pay for an iPhone?
Media: Sky Needs a Dunce Cap, Virgin Media Needs a Tissue
Healthcare: Regeneron: Exciting Technology, Inflated Stock Price
Retail: Starbucks: Vindication, Thy Name Is . . . Howard Schultz
Gold: NovaGold: Galore Creek Project Receives Key Environmental Approval
Energy: Chesapeake Energy: Wall St. Likely to Yawn Despite Another Blowout Quarter
Financial: Downey Financial: Underlying Fundamentals Continue to Deteriorate
Asia: iShares Asia Region ETFs Weekly and YTD Returns
Hedge Funds: Atlanta Fed Q4 Economic Review: Focus on Hedge Funds
Small-Caps: The Case For An eResearch Turnaround
IPO Analysis: Two Blank Check IPOs: Symmetry Holdings, Churchill Ventures
Sound Money Tips: The Week in Sound Money Tips
Jim Cramer: Latest stock picks
Conference Call Transcripts: BEA Systems F4Q07

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MACRO AND HOUSING

Fed: Some Districts Showed Slowing in February

The dollar slipped yesterday after the Fed released its Beige Book report, which indicated that four of 12 federal districts reported "slowing" in the second half of last month. The four are New York, St. Louis, Boston and Dallas. Economic conditions appear to be substantially the same as they were last month, when the Federal Open Market Committee -- which uses the Beige Book as a guide at its meetings -- stated that "the economy seems likely to expand at a moderate pace over coming quarters." The housing sector is still weak, though there are indications of stabilization. Manufacturing is expanding, notwithstanding the weakness in the auto and housing sectors. Retail, services and demand for labor continue to grow, inflation is "little changed," and pay raises are "moderate." The February payrolls report will be released tomorrow. The Beige Book is released about two weeks before each Fed rate meeting. The Fed forecasts 2.5-3% growth in the economy this year and 2.75-3% next year.
Sources: Bloomberg, Reuters, MarketWatch, Kiplinger Forecasts
Commentary: January Factory Orders: Worst Decline in Over Six YearsProductivity Down, Unit Labor Costs UpDurable Goods Orders Decline Most in 18 Months, Sending Futures Lower
ETFs to watch: S&P 500 Index (SPY), Diamonds Trust Series 1 ETF (DIA), iShares Lehman Aggregate Bond (AGG)

Toll: Housing Slump Almost Done; Horton: Not So Fast

Toll Brothers chairman and CEO Robert Toll said yesterday his company could "burn off" much of its excess inventory within five months if cancellation rates continue to decline, spurring hopes the housing slowdown is approaching a bottom. D.R. Horton CEO Donald J. Tomnitz, however, bluntly said yesterday that he expects 2007 to "suck" for his company and does not see a sector recovery before 2008. Over the past five weeks, Toll's order cancellations have dropped to 16% from a 36% high. If other homebuilders are seeing similar declines, it would be an encouraging sign for the overall housing market, said Toll CFO Joel Rassman. Tomnitz believes the inventory glut is too severe to allow a recovery to take place in the near term. The usually strong spring selling season will give the market a clearer sense of the state of the sector, but according to D.R. Horton Treasurer Stacey Dwyer, "this selling season is not meeting our expectations." Street.com columnist Brett Arends notes that Toll Bros 08 03 2007 Chart DR Horton 08 03 2007 Chartdespite Robert Toll's cheerful expectations, his brother Bruce has cashed out $47 million worth of Toll stock since September. "The best forward-looking indicator of all," says Arends, "may well be insider stock sales by the people who know the housing industry best."
Sources: CNN.com, MarketWatch, TheStreet.com, Reuters, Forbes, Business Wire
Commentary: D.R. Horton's Profit Falls 65%, Beats EstimatesToll Brothers: Earnings Drop 67%, Beat EstimatesToll Brothers' CEO: Housing Slowdown Is Stabilizing
Stocks/ETFs to watch: Toll Brothers, Inc. (TOL), D.R. Horton, Inc. (DHI). Competitors: Centex Corp. (CTX), Lennar Corp. (LEN), Pulte Homes Inc. (PHM). ETFs: iShares Dow Jones US Home Construction (ITB)
Conference call transcript: Toll Brothers F1Q07

TECHNOLOGY

Clearwater's Oversubscribed IPO Raises $600 Million

Wireless broadband provider Clearwire Corp. raised $600 million yesterday in its IPO, selling the 24 million shares available at $25; the forecast had been for shares to go from $23-25. The price gives the company an initial market cap of over $3.9 billion. According to a person familiar with the IPO, the deal was oversubscribed six to seven times, meaning subscribed investors got one share for every 6-7 they wanted. CEO and chairman Craig McCaw is the company's largest shareholder with 65% of its Class B stock (each Class B share is convertible to one Class A share but counts for ten votes) and 25% of its Class A stock. Clearwire's wireless broadband networks operate using WiMAX, a technology that offers the speed of a broadband connection without a hard-line. Currently its service is limited to a small number of U.S. areas, but in February the Clearwire payed AT&T $300 million for the rights to 2.5 GHz spectrum that will help it broaden its coverage. Currently its service is available in 350 cities and towns, serving 206,000 subscribers who use it to e-mail, surf, or make phone calls over the Internet. By year-end Clearwire looks to have 375,000-400,000 subscribers. Intel (26% A and 35% B) and Motorola (13.9% A) have invested in Clearwire; the companies are expected to expand WiMAX use for their mobile phones and portable devices. David Menlow, president of IPOFinancial.com, said the Street was "salivating over this opportunity" because of the big-name investors involved. But he said investors should be consider things carefully before investing in the venture; the four-year-old company has lost $459 million as of December, though sales tripled in 2006 to $100m. Shares will begin trading today on the Nasdaq exchange under the ticker CLWR.
Sources: Seattle Post Intelligencer, Reuters
Commentary: Clearwire IPO: Hype and RealityBeyond The Hype Of The Clearwire IPOAre We In For a Mobile Broadband Pricing Drop?
Stocks/ETFs to watch: Clearwire Corp. (CLWR), Intel Corp. (INTC), Motorola Inc. (MOT). Competitors: Sprint Nextel Corp. (S), Alvarion Ltd. (ALVR), Airspan Networks Inc. (AIRN), NTT Docomo Inc (DCM), SK Telecom Corp. Ltd. (SKM), Vimpel-Communications (VIP), Vodafone AirTouch (VOD). ETFs: PowerShares Dynamic Telecom & Wireless ETF (PTE), HOLDRS Wireless (WMH)

Take-Two's Shares Jump as Investor Group Plans to Take Action

Take-Two Interactive's shares gained 7.6% to $18.95 yesterday -- trading as high as $20.88 -- on news a dissident investor group owning 45+% of the company filed with the SEC saying they plan to nominate and vote for six new directors and vote to fire its CEO and possibly its CFO. Take-Two's annual meeting is March 23. Take-Two-TTWO-chart-03-07-07 The group includes OppenheimerFunds, S.A.C. Capital Management, Tudor Investment Corp., D.E. Shaw Valence Portfolios and ZelnickMedia Corp. Take-Two is best known for its Grand Theft Auto game franchise, but has struggled to turn a profit over the past year, as it also had to restate earnings for eight years due to an options backdating scandal. A Citigroup analyst maintains her "sell" rating due to uncertainty over new management's ability to bring games to market. Wedbush Morgan also rates it "sell", while Kaufman Brothers rates it "hold." An S&P analyst however, upgraded it to "hold" and raised his target to $22/share. "Grand Theft Auto IV" is set to be released in October.
Sources: Take-Two SEC filings, Bloomberg, MarketWatch
Commentary: Icahn MIA From Take Two's Board of DirectorsThe Take-Two Saga ContinuesIcahn Management: Notable 13F Changes
Stocks/ETFs to watch: Take-Two Interactive Software (TTWO). Competitors: Activision (ATVI), Electronic Arts (ERTS), Konami (KNM), Nintendo (NTDOY), Sony (SNE)

MEDIA

TiVo's Q4 Loss Narrows, Beats Guidance, Stock Climbs 3%

TiVo reported a narrower than expected Q4 loss at -$18.7 million, or -$0.19/share, compared to its earlier forecast net loss of $33m to $38m, improving against a loss of $21.1m ($0.25/share) last Q4. Revenues increased 29% to $77.6m, but TiVo-owned subscription gross additions of 163,000 came up short of last Q4's 221k, and now total 1.7m. TIVO-chart-03-07-07 DirecTV-based customers declined to 2.72m, compared to 2.87m last Q4, as DirecTV is phasing out TiVo set-top boxes in favor of its own DVR. TiVo offered Q1 net income guidance of -$4m to breakeven, on service and technology revenues between $57m to $58m. Analysts expected a net loss of $2.8m on revenues of $58m. TiVo announced new partnerships, including an agreement with Earthlink to bundle TV and Internet connection services later this year. TiVo and Amazon also officially launched their Amazon Unbox on TiVo service. Shares of TiVo gained 3.4% to $6.14 in normal trading and added another 2.6% to $6.30 in after-hours trading on volume of over 220,000.
Sources: TiVo F4Q07 Earnings Call Transcript, Press releases (Amazon Unbox on TiVo and Q4 and FY07 earnings [pdf]), Associated Press, MarketWatch, Reuters
Commentary: Internet Television: Who Will Win The Day?Amazon Tivo Combo: A Threat to the Netflix Model?Amazon and TiVo Team Up
Stocks/ETFs to watch: TiVo (TIVO), Amazon (AMZN), Comcast (CMCSA), DirecTV (DTV), EarthLink (ELNK), Echostar Communications (DISH), Netflix (NFLX). ETFs: PowerShares Dynamic Media (PBS)

RETAIL

Saks' Profits and Sales Rise on Luxury Refocus

With an extra week of sales, better advertising, improved traffic, higher-end full-price merchandise sales and improvements in all locations, Saks Inc., parent of the Saks Fifth Avenue retail chain has reported 17% higher Q4 incomeSKS Investment of $21.5 million, or $0.14/share, swinging to profit from a $2.2m loss a year ago. Same store sales were up 9.9% in Q4 and 24.7% from February 2006-2007. Net 2006 sales reached $2.94 billion, up from $2.8b in 2005. CEO Steve Sadove says Saks is halfway through restructuring, having sold mid-level non-Saks stores for $2b to focus on a strong luxury market and 35-55 year-old women. After 450,000 shares repurchased, extinguishing $18m of debt and a 4$ dividend, Saks says operating margins will be 3% this year with a goal of 8% by 2010. Competitors Neiman-Marcus, Nordstrom's and Barney's/Jones Apparel have double digit operating margins. Shares rose nearly 6% to $19.82 on Wednesday.
Sources: Press Release, Motley Fool, Wall St. Journal, MarketWatch , SignOn San Diego, MSN Money
Commentary: Saks a private equity candidate? [bloggingstocks]Saks Can't Compete In This EnvironmentUS Income Inequality Grows, Favors Luxury Retailers Over Wal-Mart
Stocks/ETFs to watch: Saks Inc. (SKS). Competitors: Nordstrom's (JWN), Jones Apparel (JNY) ETFs: PowerShares Dynamic Retail (PMR), SPDR Retail (XRT)

TRANSPORT AND AEROSPACE

GM's Wagoner: 'U.S. Auto Industry Consolidation Unlikely'

In an exclusive report, the Wall Street Journal is quoting General Motors CEO Rick Wagoner as saying he does not expect a consolidation in the U.S. auto industry anytime soon.gm Wagoner acknowledges there are major problems facing the industry including intense pricing pressure from foreign automakers, declining market share by the U.S. 'Big 3' and the probability the U.S. automakers will continue making more cars than they can sell for at least 10 years. In addition, the Journal is reporting Wagoner declined to comment on a slew of recent reports that GM is in talks with DaimlerChrysler about possibly buying or trading shares for its suffering North American Chrysler unit.
Sources: Wall Street Journal, Reuters
Commentary: DaimlerChrysler CEO Zetche: 'Chrysler Difficult To Break Up'GM Vehicle Sales, U.S. Market Share Rise; Japan's 'Big 3' Continue to RollGM To Buy Chrysler? At Least It Hasn't Been Ruled Out
Stocks/ETFs to watch: DaimlerChrysler (DCX), General Motors (GM). Competitors: Ford (F), Toyota (TM), Honda (HMC), Nissan (NSANY)

Air Force Told It Has 60 Days to Reconsider Boeing Chopper Contract

The Government Accountability Office [GAO], which in a rare move last month ordered the U.S. Air Force to reopen the bidding for a $15 billion helicopter contract it awarded Boeing, has now told the Air Force it has 60 days to comply with its ruling.hh60g GAO rulings are non-binding but the Air Force has complied with them in the past. The complaint, filed by Lockheed Martin Corp. and United Technologies Corp.'s Sikorsky Aircraft, alleged that there were irregularities in the way search criteria were applied, unfairly favoring Boeing. Air Force officials have resisted complying with the GAO's demands thus far but the Wall Street Journal is reporting that the timing of this latest rebuke is "particularly problematic" as Air Force officials prepare to evaluate bids in a far more complex competition for aerial-refueling planes. United Technologies Sikorsky Helicopter unit yesterday released a statement upping the pressure on the Air Force which reads: "We believe the errors committed by the Air Force in those other areas are highly material, and we intend to pursue them vigorously if the corrective action taken by the Air Force does not adequately address them."
Sources: AP, Reuters, Wall Street Journal
Commentary: Air Force Urged To Reopen Competition for Boeing's $15 Billion Chopper ContractHow Boeing Defense Got Its Groove Back
Stocks/ETFs to watch: Boeing (BA), Lockheed Martin (LMT), United Technologies Corp. (UTX).ETFs: PowerShares Aerospace & Defense (PPA), iShares Dow Jones US Aerospace & Defense (ITA)

ENERGY AND MATERIALS

Lower Inventories Push Crude, Motor Gas Futures Higher

Oil futures climbed yesterday after the Energy Department's Days Inventory report showed crude supplies fell 4.85 million barrels last week to 324.2 million barrels, just 5.8% above the five-year average.oil days Bloomberg consensus estimates were projecting a gain in crude inventories. U.S. motor gasoline inventories dropped by 3.8 million barrels - a sharper decline than the 1.4 million barrel drop that analysts had expected - leaving inventories at just 0.6% above their five-year average. The report pointed to a 6.8% drop in crude imports, lowest in 17 months, after the Houston Ship Channel was closed three times because of fog as well as to refineries which operated at 0.2% lower capacity (week over week), as the cause for the drops in inventories. Addison Armstrong, director of market research at TFS Energy LLC, believes the drop in crude inventory doesn't really matter because "we've got a nice cushion. Gasoline is a different story. Nobody was looking for that big a drop." Crude oil rose $1.13, or 1.9%, to $61.82/bbl. The average pump price for regular gasoline rose $0.01 cent to $2.50 a gallon yesterday according to AAA - that's up from just $2.145 a gallon in January.
Sources: Bloomberg, AP
Commentary: Iran's Oil Exports May Dry Up Without Foreign HelpPickens Picks a Petroleum Production PeakOur USO ETF Holding Should Recover Sooner Rather Than Later
Stocks/ETFs to watch: United States Oil Fund ETF (USO), Barclays Bank Zero Cpn ETN (OIL), PowerShares DB Oil Fund (DBO)

ExxonMobil Planning Over 20 New Projects Around World

ExxonMobil Chairman and CEO Rex Tillerson said yesterday the company will invest in more than 20 new projects around the world over the next three years that should add 1 million barrels of oil equivalent [boe] per day to its volumes at peak production. The company produced about 4.2 million boe/day last year. Capital spending is projected to approximate $20 billion a year through the end of the decade. The company, which currently has 40 oil and natural gas rigs operating around the globe, will invest in mature markets, including North America, Australia and the North Sea, as well as growth areas like the Middle East, Russia and West Africa. Venezuela is a problem area, now that President Hugo Chavez has ordered the nationalization of all foreign-run oil projects in the Orinoco River region. ExxonMobil has given operational control over a JV in the region to its Venezuelan partner, but “[t]here’s a lot that has to be discussed with the Venezuelans yet,” Tillerson said. ExxonMobil's closest rival, Chevron, plans to up capital spending this year by 18% to almost $20 billion. In related news, Tillerson had a sit-down in a tent last month with Col. Moammar Gadhafi, leader of Libya, to discuss access to the country's enormous oil fields. "It was a great meeting," Tillerson said.
Sources: Press Release, MSNBC, Reuters, Bloomberg
Commentary: Exxon Mobil Is Worth Half A Trillion DollarsExxonMobil Shelves Qatar Gas-to-Liquid ProjectExxon Again Sets Record For Largest Corporate Profit in 4Q06
Stocks/ETFs to watch: ExxonMobil Corp. (XOM). Competitors: ConocoPhillips (COP), BP plc (BP), Chevron Corp. (CVX), Royal Dutch Shell (RDS.A), Total (TOT). ETFs: SPDR Oil & Gas Exploration & Production ETF (XOP), iShares Dow Jones U.S. Oil & Gas Exploration/Production (IEO)

FINANCIAL

Fremont General: Subprime Sale Isn't a Done Deal

Shares of mortgage lender Fremont General gained nearly 26% yesterday to $8.53 on news the company is in talks with several potential buyers of its subprime unit. The shares slipped $0.60 to $7.93 in AH trading when management clarified that a transaction might not occur. Fremont was part of an overall rally in the mortgage sector yesterday that was precipitated in part by a report by the Mortgage Bankers Association that refinancing applications rose 15% last week, considered by analysts to be a reflection of the drop in interest rates that accompanied last Tuesday's market selloff. Applications are up 38.4% from a year ago. Fremont's shares nosedived 32% on Monday when it disclosed that it is leaving the subprime business and has desisted from certain lending practices on orders of the FDIC. Fremont is projecting a Q4 loss from continuing operations, due in part to higher provisions for repurchases of bad loans. In related news, Citadel Investment Group has beaten out Credit Suisse Group to buy bankrupt ResMae Mortgage Corp. and its loan portfolio for about $180 million.
Sources: Reuters (I, II), Bloomberg, Business Week, TheStreet.com
Commentary: Subprime Lenders Stage Mini-ComebackCrisis in the Subprime Market: The First Step is Admitting You Have a ProblemSubprime Lender Stocks Plummet: Easy Money Meltdown
Stocks to watch: Fremont General Corp. (FMT). Competitors: NovaStar Financial Inc. (NFI), Countrywide Financial Corp. (CFC), New Century Financial Corp. (NEW)

BIOTECH/HEALTHCARE

Express Scripts Ups Its Caremark Bid

Late Wednesday, Express Scripts Inc. increased its hostile and competitive cash/stock bid for rival pharmacy benefits manager Caremark Rx Inc. In December, a month after Caremark agreed to a "merger-of-equals" with CVS in which Caremark shareholders would receive 1.67 CVS shares (presently $31.32) plus a $6 dividend for each share they own (valuing the company at about $21b), Express Scripts upped the ante by offering $29.25 in cash and 0.426 share (presently $74.77) of its stock (giving it a $26b value). Its new offer includes an additional cash consideration of 6% per annum (0.48 cents/share/day) which will start April 1 and accrue through the closing date of Express Scripts' acquisition or 45 days after FTC Caremark 08 03 2007 Chartapproval of the deal, whichever comes first, to be paid to Caremark shareholder upon the deal's close, which it believes will come no later than Q3. Following two postponements, Caremark shareholders are slated to vote on the CVS merger on March 16. Yesterday's increased offer came after Express Scripts' request to further delay the shareholder vote was denied. Also yesterday, Express Scripts said it expects the FTC to make a second request for information on its offer, a move celebrated by CVS's board, which has consistently questioned the rationale and the antitrust elements of Express Scripts' bid. It also raised its full-year earnings forecast $0.06 to $4.14-4.26. Express Scripts shares were up yesterday $0.21 to $74.77, Caremark fell $0.33 to $61.30, and CVS was up $0.02 to $31.32.
Sources: Press Releases: Express Scripts Improves Offer to Acquire Caremark, CVS Says Express Scripts' Second Request Confirms the Serious Antitrust Concerns Overhanging Its Highly Conditional Offer, CVS Pleased with Chancery Court Ruling Allowing Vote on Caremark Merger to Proceed, MarketWatch, TheStreet.com, Bloomberg
Commentary: Is CVS the Prescription Fix for Caremark?CVS-Caremark Deal Would Create Pharmacy PowerhouseDon't Expect Express Scripts to Bow Out of Caremark Rx Bidding
Stocks/ETFs to watch: Express Scripts Inc. (ESRX), CVS Corp. (CVS), Caremark Rx Inc. (CMX)

Ranexa Won't Treat Heart Attacks, CV Therapeutics Falls 24%

While CV Therapeutics' Ranexa or Ranolazine trials proved that there is no greater risk of arrhythmia or abnormal heart beats, it didn't prove Ranexa's utility in treating acute heart disease or heart attacks, as opposed to chronic angina for which it is currently used. CVTX InvestmentThe news sent shares down 23.58% to $9.40 yesterday, erasing $172 million in value. That Ranexa poses no risk to arrhythmia will help sales for chronic angina -- analysts felt the label warning had dampened sales. The trials may also help Ranexa be approved for first line chronic angina treatments -- it's currently used when other treatments have failed. Lehman Bros. analyst Jim Birchenough said that implied a $40 share target, while Piper Jaffray analyst Thomas Wei said Ranexa could be a possible diabetes drug. Merrill Lynch analyst Thomas Chiu rated CVTX Neutral saying it needs more marketers to help sales, and a partner to offset costs. Deutsche Bank analyst Jennifer Chao downgraded CVTX to Hold with an $8 price target.
Sources: CV Therapeutics Press Release, Bloomberg , San Francisco Business Times, Forbes
Commentary: CV Therapeutics Trial Results: Enough To Drive Profitability?Will MERLIN Work Magic For CV Therapeutics?CV Therapeutics: Last Chance for a Tax Loss
Stocks to watch: CV Therapeutics (CVTX). Competitors: Vertex Pharmaceuticals (VRTX), PDL Biopharma (PDLI), Genentech (DNA). . ETFs: SPDR Pharmaceuticals (XPH), iShares Dow Jones U.S. Pharmaceuticals (IHE), PowerShares Dynamic Pharmaceuticals (PJP)

MUST-READS ON SEEKING ALPHA TODAY

U.S. Market: What Good Is the Carry Trade?
Housing: Two Versions of the 2007 Housing Forecast
Long Idea: Five Outperformers That Break the Basic Laws of Economics
Short Idea: Sub Prime Stock Shorting Follow-up: 26% Average Return in Four Days
Internet: Open Your Eyes to Google's Structural Crisis
Telecom: Does FMC Collapse the Interconnect Charging Model?
Networking: Is Riverbed Technology the Next Cisco?
Hardware: Apple's Future: Skepticism Versus Analysis
Chips: National Semi: A Glimpse at the Chip Sector, Today
Software: Sybase: More than Just Databases
Consumer Electronics: Merrill: Strong Earnings Growth Should Propel Research in Motion Shares
Media: Harrah's CIO on Attracting Customers
Biotech: BioSante: An Unknown Company With Tremendous Potential
Retail: Office Depot vs. Staples: A Lesson in On-Demand Content Advertising
Transport: The Long Case for Bolt Technology
Energy: ANW: Fuel for Your Portfolio
Financial: DFC: A Cut Above Other Subprime Lenders
Asia: Time to Step on the Gas: PetroChina is a Steal
ETFs: Sector ETFs: The Market's Crystal Ball?
IPO Analysis: Reading Between the Lines on Sourcefire's IPO
Sound Money Tips: Tip on disaster preparedness
Jim Cramer: Latest stock picks
Conference Call Transcripts: Global Sources Q4 2006Solarfun Power Holdings Q4 2006American Eagle Outfitters Q4 2006TiVo F4Q07Home Inns & Hotels Management Q4 2006Hurray! Q4 2006

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Why France?

We’re often asked “why France” or “why can’t you do mission work in Atlanta”? So we decided to summarize the reasons and share a little of the journey with you.   I think you will all agree that there are unmet needs around the world, including Atlanta and Paris.  When asked, "Teacher, which is the greatest commandment in the Law?" Jesus replied: "’Love the Lord your God with all your heart and with all your soul and with all your mind’. This is the first and greatest commandment. And the second is like it: 'Love your neighbor as yourself.'”(Matt 22:36-37)  This is Jesus telling us that we are to serve our fellow man, and through helping those in need, we show our love to Jesus by obeying these commandments.  While here in Atlanta, we are serving others at a local transitional housing home for previously homeless men.  I (Benjamin) teach computer classes to the men, giving them the basic technical skills that the current job market requires (i.e. MS Word & Excel, resume creation, internet, etc.) We also host frequent lunches for our Sunday school class, teach Sunday school, lead a men’s Bible study, and provide computer consulting to friends and church staff.   But Atlanta is not alone in her need – Paris and her suburbs are in pain right now.  If you do a search in Google on “Homeless in Paris”, you will quickly realize that Paris shares the homeless problem, and it is getting very bad there.  They call them “sans domicile fixe” (SDF) or, “without fixed home”, and there is a very public outcry begging people to help them there.  And racism?  White-Black-Hispanic relations in the U.S. may not be much improved, but the French-Islam racism problem is epic.  There is a presidential election race in France right now which hinges on one singular topic – one candidate wants to embrace the immigrants (mostly Islamic) and integrate them into society.  The other candidate wants to crack down and kick out as many as possible.  Either way, it reflects that there is a huge population schism in France right now, and that became more than evident in the recent riots that were triggered by race-related problems.   So if both Atlanta AND Paris are in great need for us to practice Jesus’ commandments, why not just stay at home in Atlanta where it won’t costs $7000/month?  In Acts 1:8, Jesus goes on to say, “But you will receive power when the Holy Spirit has come upon you, and you will be My witnesses in Jerusalem, in all Judea and Samaria, and to the ends of the earth.”  At that time, the first missionaries were created and the 12 apostles went out into the world preaching the Good News that Jesus had come to release them from their sins.  The apostles taught their disciples to spread the news, and those students went out to other parts of the world – and now we have Christianity everywhere!  Here in Atlanta, we have a church on practically every block, Christian book stores in every strip mall, and all the television, radio, and print media you could hope for.  But we have been to France and seen their situation – we have talked with the people, and heard their stories.  Due to many historical reasons (the politicizing of the Catholic church being one), the French have turned their back on Christianity, and have forgotten what the original message was.  We even recently had a letter forwarded to us by our church here in Atlanta – a young woman in France was begging our pastor to send missionaries to France, because she felt that everyone had lost their way, lost their hope, and lost their connection to their Creator.  The letter was in French, but as I translated it for my pastor, it brought tears to my eyes – never has anyone written to beg for more teachers in Atlanta.  How could I refuse such a heartfelt plea for assistance in sharing the joy that Jesus has put in my heart? Jesus called us to minister not just to our own towns, but also to the “ends of the earth”.  Sure, Atlanta needs help right now, but so does Paris.  Besides – I am but one man, and if I go on my own power, I will accomplish very little.  But if I go where God wants me to go, and do what he guides me to do, then I know great things can happen.   The short answer to why we are going is, “God has made it clear he wants us to go to France”, and that is truly the best answer.  Since I was a child, I have had a love for France – and I am not talking about the touristy things here, either.  I love the language, and studied it for five years – my default singing-in-the-shower-song is the French national anthem.  We had French missionaries stay in our home on many occasions.  We had French foreign exchange students live with us.  I always thought it strange that here in the Hispanic-influenced South, I have a passion and knowledge of the French language and culture!  If I were to choose a country to go and serve, it most certainly would have been France.   But I didn’t choose it.   You see, I never intended to be a foreign worker.  I know, I know – I just got done telling you about how as Christians, we are to take the Good News to the ends of the earth, but I thought that as long as SOMEONE was doing it, that was good enough.  Then I took a trip to Brjansk Russia, and my eyes were opened – I realized that not all of the world was like Atlanta.  The rest of the world did not have many people to teach them from the Scriptures.  They did not have someone to demonstrate what it was like to live a holy life.  The workers were few in the world, but the harvest was ripe.  I could see in their eyes (and later in the eyes of the French) that they desperately understood that they had a purpose, but they could not understand it.  If they participated in a church, they were beaten down by how they just needed to TRY HARDER to be good, when in their hearts they knew that they could never be perfect.  I have experienced how their hearts leap for joy when they realize that it is not their own works that save them, but the price paid by Jesus – a simple message, but one that has been lost over the centuries in many parts of the world.  The problem was, there just were not many followers of Christ out there bringing the message!  They needed people – ANYONE – who loved the Lord, to help spread the Good News.  It was then that I realized that while the US still needed help, there was a huge void in the world that was crying for help.   Even still, while I saw the need in the world, I let myself get distracted by all that life offers, and eventually I was able to forget that there was darkness out there in the world, waiting for someone to shine a candle.  I eventually got a good job, married a wonderful woman, Amanda, and we started thinking about children.  But we wanted to raise them with an understanding of what it means to follow the instructions of Jesus, so we prayed this prayer: “Jesus, please bring into our lives opportunities for service, so that we may live our lives with that as our focus, so that our children may see that we trust and obey you.  Lord, whatever it is you make clear for us to do, we will do it, no matter what the apparent cost to us.”   Exactly a week later, Amanda received a call from her sister, Abigail.  Abigail and her husband had just returned from a trip in Europe, where they had been searching for opportunities to serve there – they had just graduated from Dallas Theological Seminary, and desired to work with the Muslim people and serve them as Jesus had commanded them.  Abigail had always been the missionary of the family, and Amanda was the business woman (marketing).  Their paths had never crossed in this way before, and Amanda had never mentioned to Abigail that we were looking for opportunities to serve.  That is what made Abigail’s telephone call so amazing.  You see, after the two sisters caught up on all the details of Abigail’s trip, as sisters do, Abigail offhandedly mentioned that during a prayer time in Europe, she and her husband prayed for guidance on which country they should settle in.  They both realized after their prayer that while God didn’t show them a country, He somehow impressed on their hearts to talk to Amanda and I and ask if we would consider joining them wherever they ended up.  Amanda told me about this and we both realized that we had just prayed for this!  We immediately called Abigail back and shared with them our prayer the previous week.  We said, “We prayed for an opportunity, and if we are waiting for something more than a personal invitation, we will be waiting a long time!  We don’t know where you are going, but we will go with you until God stops us along the way!”   It was then that they shared that they had settled on three countries, with France being one of them due to the large Muslim population there.  Together we researched all three countries (the other two were Slovenia and Albania), but it was immediately clear to me that France was exactly where God had been guiding me my entire life up to that point.  It all came together – my proficiency for the French language, my internal desire for foreign missions, and now a personal invitation!  We selected France, and God has not slowed us since then – in fact, we have been raising our support at a faster rate than our organization, WorldVenture, anticipated that we would!  Dozens of other individuals and churches who share our desire to serve the rest of the world have joined us, and we now have a large team of people guiding us, supporting us, equipping us, and praying for us.  Our supporters believe that $7000/month is not too much to pay to send the message of eternal life to France.  And $7000 won’t even feel like much to us once we are there – the euro exchange rate knocks that down to $4900 right off the bat. And of that $4900, only around $2500 is our personal salary to live off of – the rest has to go towards supporting our ministry work such as computers, facility rental, materials, etc.  Basically the cost of running a small business, but without the profit! (well – financial profit, anyways – we hope it will be very “profitable” in the lives of those we reach!)   Does Atlanta need help?  Sure – but it seems God has other people in mind for Atlanta right now.  For my family, we will go and do whatever the Lord leads us, and right now that is very clearly France.  "As for me and my house we will serve the Lord.” Joshua 24:15 If you have any additional questions about why we are going to France, please don’t hesitate to ask. Thank you!

The US has Returned Fundamentalism to Afghanistan

Joya_ucla The following is a transcript of the speech given by Malalai Joya, member of the Afghan Parliament, given at the University of Los Angeles on Tuesday April 10th, 2007:

In the name of Democracy and Peace —

Dear friends, first of all I extend my deep regards and thanks to the friends in the University of California to provide the opportunity for me to be here and share my point of view with you and inform you about the ongoing tragedy in my crying Afghanistan.

While the pro-democracy and anti-fundamentalists groups and individuals of Afghanistan are being marginalized, suppressed and silenced, you give a helping hand to me as a small voice of my suffering people to speak about the crisis in Afghanistan and terrible conditions of its people. You in fact play your role in raising awareness on what is going on in my devastated country.

Respected friends, over five years passed since the US-led attack on Afghanistan. Probably many of you are not well aware of the current conditions of my country and expect me to list the positive outcomes of the past years since the US invasion. But I am sorry to tell you that Afghanistan is still chained in the fetters of the fundamentalist warlords and is like an unconscious body taking its last breath.

The US government removed the ultra-reactionary and brutal regime of Taliban, but instead of relying on Afghan people, pushed us from the frying pan into the fire and selected its friends from among the most dirty and infamous criminals of the Northern Alliance, which is made up of the sworn enemies of democracy and human rights and are as dark-minded, evil and cruel as the Taliban.

The Western media talks about democracy and the liberation of Afghanistan, but the US and its allies are engaged in the warlordization, criminalization and drug-lordization of our wounded land.

Today the Northern alliance leaders are the key power holders and our people are hostage in the hands of these ruthless gangs of killers. Many of them are responsible for butchering tens of thousands of innocent people in the past 2 decades but are in power and hold key positions in the government.

Let me list few of the key power-holders of Afghanistan:

-Karim Khalili, the vice-president, is leader of a pro-Iran party called Wahdat, responsible for killing thousands of innocent people, and named by Human Rights Watch as a war criminal.
-Ismael Khan, another killer warlord and lackey of the Iranian regime is the minister of water and power.
-Izzatullah Wasifi, Afghanistan's anti-corruption chief has been a convicted drug trafficker who has spent around 4 years in a Nevada state prison in the US.
-General Mohammed Daoud, Afghanistan's deputy interior minister in charge of the anti-drug effort, is a former warlord and famous drug-trafficker.
Rashid Dostum, the chief of staff of the Afghan army, is a heartless killer and warlord, named by Human Rights Watch as a war criminal.
-Qasim Fahim, former defense minister and now a Senator and adviser to Mr. Karzai is the most powerful warlord of the Northern Alliance, and accused of war crimes.

And this list has hundreds of men on it, including Sayyaf, Ulomi, Golabzoi, Rabbani, Qanooni, Mohaqiq, Mullah Rocketi, etc. They should all be removed from power and put on trial for war crimes. In fact all the major institutions in Afghanistan are occupied by warlords and drug-lords. How can we talk about democracy when our legislative, judicial and executive bodies are infected with the viruses of fundamentalism and drug mafia?

Many freedom-loving individuals and groups in Afghanistan had long ago warned that bringing the criminal Northern Allianceback into power by the US government will pose a danger to Afghanistan. But today, most governments and world institutions accept that Afghanistan is a failed state, which is heading toward disaster.

Afghans are deeply fed-up with the current situation and every day that passes they turn against the government, the foreign troops and the warlords. And the Taliban makes use of it to increase their influence and acts of terror. Countries like Pakistan, Iran, Russia etc. are also meddling in Afghanistan for their own interests.

The US-based Center for Strategic and International Studies wrote in a recent report: " …Afghans are frustrated with their economic situation… They suffer from unsteady employment and economic insecurity, and are turning to illicit and illegal activity, such as corruption and opium production… the Taliban has become an alternative source of employment, recruiting the jobless as foot soldiers in the insurgency."

In such a situation when a bunch of killers are in power, life cannot be easy for our unfortunate people. I would like to describe the tip of the iceberg on the reality of life in my bleeding Afghanistan:

Seven hundred children and 50-70 women die on a daily basis because of a lack of health services. Infant and maternal mortality rates are still very high — 1,600 to 1,900 women among each 100,000 die during childbirth. Life expectancy is less than 45 years.

The number of suicide cases by Afghan women was never as high as it is today: A month ago eighteen year old Samiya, hung herself by a rope because she was to be sold to a sixty year old man. Another woman called Bibi Gul locked herself up in the animal's stable and burned herself to death. Later her family found nothing except her bones.

The study by the governmental agency Afghanistan Independent Human Rights Commission shows a marked increase in reported cases: Two years ago in Farah province, there were 15 cases of women burning themselves reported, but the number jumped to 36 in the first six months of 2006. Kandahar province had 74 cases two years ago and 77 cases in the first six months of the past year. But the real numbers are much higher.

According to a UNIFEM survey, 65 percent of the 50,000 widows in Kabul see suicide as the only option to get rid of their misery. UNIFEM estimates that at least one out of three Afghan women has been beaten, forced into sex or otherwise abused.

The gang rape of young girls and women by warlords belonging to the Northern Alliance still continues especially in the northern provinces of Afghanistan. People have staged mass protests a number of times but no one cares about their sorrow and tears. Only a few of the rape cases find their way into the media. One shocking case was that of 11-year-old Sanobar, the only daughter of an unfortunate widow who was abducted, raped and then exchanged for a dog by a warlord. In a land where human dignity has no price, the vicious rapist of a poor girl still acts as district chief.

The Taliban continue their fascism in the eastern parts of Afghanistan where the government has no control. They carry out public executions and kidnappings. When some days ago an Italian journalist and his Afghan translator and driver were kidnapped, the Afghan government made a deal with them and released five Taliban leaders from prison so the Italian journalist was freed. But no one cared for the fate of the two innocent Afghans and both of them were beheaded by the Taliban.

A report by Human Rights Watch about war criminals in Afghanistan and the hanging of Saddam Hussein scared many Afghan criminals and now they are trying to block any efforts for their prosecution. Last month the warlord MPs, under the name of national reconciliation passed a bill in the parliament based on which no one can file a case or prosecute anyone for committing war crimes in the past 25 years.

I and a few other MPs raised our voices against it but as the fundamentalist warlords hold over 80 percent of the seats, the bill was easily approved. This bill will now provide amnesty to all criminals.

But Afghan people who have suffered terribly in the past 3 decades consider this bill an abuse against them. According to a survey conducted by the Afghanistan Independent Human Rights Commission over 80 percent of Afghan people want to prosecute those responsible for past crimes and brutalities and see it as the only way to experience a bright future in Afghanistan.

Even Mr. Karzai signed this disgusting bill which is regarded as a joke and abuse to the millions of Afghans who have suffered and lost their loved ones and were waiting for the day of justice. Meanwhile the killers forgave their own crimes and live without fear. Such bills officially sanction further brutalities and human rights violations against our defenseless people.

The story of Afghanistan's reconstruction is painful: After 5 years you cannot see any serious reconstruction projects. Billions of dollars of aid has been looted by the warlords, corrupt NGOs, the UN and government officials. Afghanistan still stands 175th out of 177 countries in the UN Human Development Index and the rate of unemployment is over 40 percent.

The so-called freedom of speech in Afghanistan is another joke with our people. Let me describe my own recent experience: In early February this year, during the passage of the infamous bill of amnesty for war criminals in the parliament, I had an interview with a local TV channel; they had interviewed some other people including Sayyaf, who is a wanted criminal and member of the parliament.

The TV station broadcast an advertisement for the program a number of times in which they showed some parts of my interview. After this Sayyaf himself called the TV station and threatened them that if Joya's interview was broadcast the consequences would be dangerous for the director. So they resorted to censorship and excluded me from the program. And this is not the first time that I have been censored in the media. Many journalists are too afraid to report my comments.

Last year the UN announced that Afghanistan under US troops could become a narco-state but today no one has any doubt that it has been changed into a mafia-state when Afghanistan produces 92 percent of the worlds supply of opium. High-ranking officials like ministers and deputy ministers etc. have links to the drugs mafia. And all of it happens under the very noses of the thousands of foreign troops....

For the whole story, please go to the related site below.

Malalai Joya is Afghanistan's youngest and most out-spoken parliamentarian. She has openly criticized the US-backed warlords that dominate the Afghan parliament. In return, she has received a continuous stream of death threats. At the age of 28, Malalai has survived 4 assassination attempts. Recently a documentary profiling her, Enemies of Happiness, won the Grand Jury Prize at the 2007 Sundance Film Festival. Malalai Joya is on a brief US speaking tour.

Related addresses:

URL 1: www.commondreams.org/archive/2007/04/12/468/
URL 2:
www.malalaijoya.com 


The Ten Commandments of travel

Discussing the political influence of philanthropist and progressive financier George Soros during the April 23 edition of Fox News' The O'Reilly Factor, host Bill O'Reilly attacked Media Matters for America as a "vile propaganda outfit, which specializes in distorting comments made by politicians, pundits, and media people," a claim that echoes several of his previous attacks on Media Matters. O'Reilly opened the segment with a "chart" purporting to depict Soros' "complicated political operation" in which "Soros and a few other wealthy radicals who help him are funneling money into the political process" by funding Media Matters, which "feeds its propaganda to some mainstream media people."

O'Reilly claimed that Soros "wants to impose a radical left agenda on America" and that he does so by funding organizations that then pass on money to "a variety of radical hatchet men." He asserted: "Soros has set up a complicated political operation designed to do two things -- buy influence among liberal politicians, and smear people with whom he disagrees." O'Reilly added: "If a liberal politician doesn't toe the Soros line, he or she will be denied funding and brutally attacked. Just ask Senator Joseph Lieberman [I-CT] about what MoveOn and Media Matters did to him." O'Reilly also claimed that Soros-funded organizations "don't stop at you. They'll go for your family."

Later in the program, conservative talk-radio host Monica Crowley echoed O'Reilly's attack on Media Matters, stating: "So he [Soros] can finance websites like you mentioned, Media Matters, other organizations, that will go out there and smear right-wing politicians, smear right-wing pundits and commentators and so on."

As previously indicated, Soros has never given money to Media Matters, either directly or through another organization. If he wanted to fund Media Matters, he or Open Society Institute (OSI), a grant-making foundation he established in 1993 to conduct his philanthropy, could simply write a check directly to Media Matters, as he and OSI do to numerous entities.

O'Reilly also attacked Democratic presidential candidate John Edwards, stating during his nightly "Talking Points Memo" segment: "Now 'Talking Points' has reason to believe John Edwards is taking orders from the Soros group right now. And other Democratic politicians may be as well." O'Reilly did not cite any evidence for his claim. Later, during his with exchange with Crowley and author Phil Kent, O'Reilly noted that he had no evidence for such an assertion but nevertheless maintained: "Now, we believe that John Edwards has forged some kind of an arrangement with Soros. I can't prove it beyond a reasonable doubt, but his actions are pretty much dictated by MoveOn. He's absolutely right in with those people."

As Media Matters documented, during an appearance on the Irish talk show The Late Late Show on April 13, host Pat Kenny asked O'Reilly whether he had referred to the poor as "irresponsible and lazy" and the Iraqi people as "prehistoric." When Kenny said he found that information on a "website," O'Reilly responded by calling Media Matters "an assassination website" that frequently takes him "out of context." However, Media Matters provided full documentation of O'Reilly's references to the poor as "irresponsible and lazy" and the Iraqi people as "prehistoric." O'Reilly has previously attacked Media Matters as being "smear merchants," "assassins," and "the most vile, despicable human beings in the country," among other things, despite claiming not to "do personal attacks here."

Despite numerous requests to appear on The O'Reilly Factor, O'Reilly still has not extended an invitation to Media Matters President and CEO David Brock to discuss his accusations and ad hominem attacks, nor has O'Reilly offered any evidence for his claims that Media Matters has "distorted comments" made by him or any other media figure.

The weblogs Crooks and Liars and News Hounds also documented O'Reilly's April 23 assertions.

From the April 23 edition of Fox News' The O'Reilly Factor:

O'REILLY: Hi, I'm Bill O'Reilly. Thanks for watching us tonight. We have a powerful and important program, so I hope you stay through the whole thing. You won't be sorry.

Buying political power, that is the subject of this evening's "Talking Points Memo." The Factor has been investigating far-left billionaire George Soros, a man who wants to impose a radical left agenda on America. And under the radar, he is making great progress.

Soros has set up a complicated political operation designed to do two things -- buy influence among some liberal politicians, and smear people with whom he disagrees.

Now, here's a chart of how Soros and a few other wealthy radicals who help him are funneling money into the political process. Stay with me on this. Most of Soros' political money flows through his Open Society Institute -- you see it there on the left -- which is almost unlimited funding. Since 2001, according to federal documents, the Open Society Institute has given nearly $20 million to the Tides Foundation -- right below that. An astounding amount.

Now, Tides, in turn, funnels the money to a variety of radical hatchet men, who are all well paid. For example, Tides has donated millions to the vile propaganda outfit Media Matters, which specializes in distorting comments made by politicians, pundits, and media people. Media Matters is an Internet site, but directly feeds its propaganda to some mainstream media people, including elements at NBC News, columnist Frank Rich and Paul Krugman at The New York Times, columnist Jonathan Alter at Newsweek, and Bill Moyers at PBS.

In fact, as president of the Schumann Center Foundation, Moyers oversaw at least a half-million-dollar transfer of money to Media Matters. We'll have more on that tomorrow.

Now, George Soros is also pouring money into the Center for American Progress, run by former Clinton aide John Podesta, and the Democracy Alliance Group, both of which fund Media Matters as well. So you can see, an enormous amount of money this Media Matters has control of.

Finally, George Soros has given the radical left organization MoveOn many, many millions of dollars. This group actively supports liberal politicians like [Democratic National Committee chairman] Howard Dean and John Edwards. It also organizes demonstrations promoting left-wing causes.

So you can see how powerful this guy Soros has become. He can smear anyone he wants in a variety of ways. His organizations can raise millions for politicians, who will do his bidding. Thus, he can demand that politicians running for office do what he tells them to do.

If a liberal politician doesn't toe the Soros line, he or she will be denied funding and brutally attacked. Just ask Senator Joseph Lieberman about what MoveOn and Media Matters did to him.

Now "Talking Points" has reason to believe John Edwards is taking orders from the Soros group right now. And other Democratic politicians may be as well.

The goal of George Soros, [Progressive Insurance chairman] Peter Lewis, [Esprit clothing company founder] Susie Tompkins Buell, and other radical financiers is to buy a presidential election. By that, I mean find and fund a candidate who will tacitly do what he or she is told to do.

In the past, big business has been accused of doing just that. Now it is the likes of George Soros, an extremist who wants open borders, a one-world foreign policy, legalized drugs, euthanasia, and on and on.

My book Culture Warrior documents the Soros policy and his tax-evading businesses located in Curacao and Bermuda.

The really frightening thing about all this is that most Americans have never even heard of George Soros. This is off-the-chart dangerous, but completely legal under the McCain-Feingold Act.

In the weeks to come, we'll have more on Soros and his operations, including naming more of the mainstream media that is actively helping him, which includes Rosie O'Donnell. And that is the "Memo."

Now for the top story tonight, reaction to our investigation. Joining us now from Atlanta, Phil Kent, author of the book Foundations of Betrayal: How the Liberal Super Rich Undermine America [Zoe Publications, May 2007]. And here in the studio, conservative radio talk show host Monica Crowley.

Monica, begin with you. Did I leave anything out?

CROWLEY: No, I think you were right on. And you know what? This is an incredibly well-oiled, brilliantly orchestrated machine. And as you pointed out, it's also a brilliant way to get around the campaign finance laws in this country.

You have one guy in George Soros. You had mentioned big business had been criticized for this stuff before. Here you've got all of this power in the hands of one guy because he's got a billion-dollar fortune, where he can put his money wherever he wants.

The problem is twofold. Number one, transparency. This guy has been able to fly under the radar for a long time before you just exposed him because the mainstream media protects him, because they're on the same ideological page.

O'REILLY: OK. And also because it's a complicated -- you see where the money flow goes. Can you put that chart up again? Because it goes through three or four places --

CROWLEY: Right.

O'REILLY: -- before it gets to the intended source.

CROWLEY: Exactly. But, you know, this is a web, but it's not a particularly tangled web. Because as you pointed out --

O'REILLY: It's clean.

CROWLEY: -- you can trace it back two or three organizations away from George Soros. He's not even making an attempt to keep his fingerprints off of this.

And the other point, too, Bill, is accountability. So you have transparency, OK, which he's trying to obfuscate with this kind of web, but also accountability. So he can finance websites like you mentioned, Media Matters, other organizations, that will go out there and smear right-wing politicians, smear right-wing pundits and commentators and so on. And there's no accountability because it's floating out there on the Web.

O'REILLY: Yeah, but, we live in a thing of freedom of speech. Now, Mr. Kent, you know, you've got to admire Soros for coming up with this organization. I mean, you know, he's made billions by doing this in business, by being in Curacao and Bermuda and France, where he was convicted of a felony. And he knows how to do this. He knows how to move the money around and use it to gain influence. And now he's set his sights on changing the basic fabric of this country.

KENT: Well, that's right. George Soros is really the Dr. Evil of the whole world of left-wing foundations. In fact, one of his most chilling quotes a few years ago was that the main obstacle to a stable and just world is the United States.

He really hates this country. And he funds these things, as your chart points out, and open borders and even radical Islamic groups that defend suicide bombers. So this guy is all over the map.

O'REILLY: I didn't have that on there. Now what's the radical Islamic group that defends suicide bombers?

KENT: The American Arab Anti-Discrimination Committee Research Institute is a Soros recipient. And they've actually defended suicide bombers. And I've got this in my book. And how he funds La Raza, the race, the open borders advocacy group.

O'REILLY: Yeah, he funds La Raza. We know that. Now what is the intrusion of the mainstream media? Because you've got some pretty big names. Bill Moyers. Wednesday night, he's going to take a big shot at the press on PBS. We know he's in bed with Soros. Rosie O'Donnell, not taken seriously, but certainly a platform every day on ABC. New York Times, two of their main columnists. Newsweek magazine Jonathan Alter. And NBC News, where it's pitiful, but they have commentators that basically take exactly what Soros gives them and spit it out over the airwaves. That's a lot of power, is it not?

KENT: It's a lot of power. Soros really does believe wealth controls culture. And he wants to really control the political scene in the United States and the media. And as your chart points out, it's very chilling the groups that he is funding through the Open Society Institute.

You know, the assets alone of this private tax-exempt foundation, over $175 million.

O'REILLY: Wow.

CROWLEY: And as you point out, he loves the Tides Foundation, a big left-wing tax-exempt foundation.

O'REILLY: Yes. Oh, I didn't know it was that high right now. $175 million tax-free.

KENT: Absolutely.

O'REILLY: Now, Monica, if you're like Lieberman and you're a moderate Democrat, Soros can put a big hurt on you fast.

CROWLEY: That's right. I mean, I mentioned right-wing commentators, right-wing politicians. But if you are a moderate, responsible Democrat who happens to take a different point of view than George Soros, you are just as much of a target.

O'REILLY: Now, we believe that John Edwards has forged some kind of an arrangement with Soros. I can't prove it beyond a reasonable doubt, but his actions are pretty much dictated by MoveOn. He's absolutely right in with those people. Have you seen that?

CROWLEY: I have heard that reported, Bill. And you know, that's the real danger here is that these -- there are campaign finance laws on the books to prevent exactly this, to prevent a politician from being held in the pocket by a fabulously rich guy like George Soros.

O'REILLY: Yeah, I mean, this is off the chart. It really is.

CROWLEY: Again, if you don't -- that's right. And then if you don't toe the line, you run the risk of being cut off by somebody like this.

O'REILLY: And attacked.

CROWLEY: And attacked.

O'REILLY: And attacked, and attacked. And you know, ripped up --

CROWLEY: And you do not want that danger, not if you're running for president.

O'REILLY: Right. And they don't stop at you. They'll go for your family. They'll go for anyone.

Mr. Kent, I'm going to give you the last word. But are there any Republican or conservative groups that rile Soros' -- rival Soros'?

KENT: You know, I tell you, the research that I compiled in my book, if you take the top three conservative tax-exempt foundations, they're totally dwarfed by Soros and the radical Ford Foundation. It's probably 15 times more the assets. Remember, MoveOn.org and Soros spent $5 million alone in anti-Bush ads in 2004. They have got clout.

O'REILLY: Yeah, it'll be four times, five times that much --

KENT: Absolutely.

O'REILLY: -- in the 2008 election. Monica, Mr. Kent, thanks very much. We appreciate it.

Next on the rundown, once again, the mayor of San Francisco says he will not obey the law.

And later, the Factor did not use the Alec Baldwin tape. We will explain why we decided not to use it, upcoming.



The Ten Commandments of travel


A foreign tourist visits a currency exchange counter in Bangkok, Thailand, Wednesday, Nov. 8, 2006. The U.S. dollar is trading at a seven-year low of 36.66 baht at midday. (AP Photo/Sakchai Lalit)OK, so I am not a religion scholar and I have no idea how long it took God to come up with the Ten Commandments for us mortals to live a good and moral life. But over the years, I have learned a thing or two about travel, and — believe me — the airlines, cruise lines, car rental agencies and the hotel industry are not always the devils in the travel realm. The devils are often the travelers themselves.