Yahoo! rejected Microsoft's buyout offer over the weekend.
With the U.S. economy continuing to weaken and advertising slumping, many people are worried that Yahoo! may be hurting its shareholders by rejecting Microsoft's initial offer and playing a game of chicken with other bidders to get a better bid.
Businessweek summarizes the situation nicely in the article below:
http://www.businessweek.com/technology/content/feb2008/tc20080211_848555.htm?campaign_id=yhoo
Wednesday, February 13, 2008
Buffett Plan to Save Muni. Bond Market is a Joke
Warren Buffett is proposing to buy from the bond insurers $800 Bil. worth of municipal bond insurance from them. By buying from them their safest insurance, he would only be weakening these companies further, creating a worse situation for the bond insurance market and the financial markets while putting extra money in his pocket.
I agree with the thoughts of Mark DeCambre in the article from TheStreet.com linked below:
http://www.thestreet.com/story/10403198/1/buffetts-not-insurers-only-hope.html
I agree with the thoughts of Mark DeCambre in the article from TheStreet.com linked below:
http://www.thestreet.com/story/10403198/1/buffetts-not-insurers-only-hope.html
Lenders Demanding Larger Deposits
Morgage Insurer MGIC reported a $1.5 Bil. loss for the 4th Quarter on higher home delinquincies and payouts.
Starting March 3, MGIC said it will require at least 5 percent down on homes in so-called restricted markets. They include the entire states of Arizona, California, Florida and Nevada and major metro areas such as Washington, D.C., Detroit, Chicago, Boston and Atlanta.
Starting March 3, MGIC said it will require at least 5 percent down on homes in so-called restricted markets. They include the entire states of Arizona, California, Florida and Nevada and major metro areas such as Washington, D.C., Detroit, Chicago, Boston and Atlanta.
Stock Market will Stabilize When...
The U.S. Stock Market will stabilize when people believe that asset prices including homes and commercial real estate stop declining.
Currently the financial markets are in turmoil because many loans have been taken out on residential homes and commercial real estate where the value of the asset has dropped and is now worth less than the loan.
Lenders are concerned that borrowers will walk away from the asset used as collateral for the loan, leaving them to hold the bag and pick up the pieces.
I do not believe that asset prices will stabilize until 2009 at the earliest.
Currently the financial markets are in turmoil because many loans have been taken out on residential homes and commercial real estate where the value of the asset has dropped and is now worth less than the loan.
Lenders are concerned that borrowers will walk away from the asset used as collateral for the loan, leaving them to hold the bag and pick up the pieces.
I do not believe that asset prices will stabilize until 2009 at the earliest.
Thursday, February 07, 2008
Utilities Look Undervalued Here
Slowing growth for the U.S. is hitting the stocks of electric utlities and telecommunications companies hard. These sectors pay high dividends (3-5%) relative to treasury bonds and cash, providing a safer alternative to riskier parts of the stock market.
Some suggestions for this space include:
Electric Utlities - SCANA (SCG) and El Paso Electric (EE)
Telecommunications - Verizon (VZ) and AT&T (T)
Some suggestions for this space include:
Electric Utlities - SCANA (SCG) and El Paso Electric (EE)
Telecommunications - Verizon (VZ) and AT&T (T)
Stocks & ETFs versus Mutual Funds
A good reminder on CNBC concerning the purchase of stocks & ETFs versus mutual funds.
Stocks and ETFs trades take 3 business days to clear versus mutual fund trades which take 1 day to clear.
Why is this important?
If one sells a stock or ETF and buys a mutual fund the same day, there will be insufficient funds in the brokerage account to purchase the mutual fund because the stock or ETF transaction needs another 2 days to clear.
Stocks and ETFs trades take 3 business days to clear versus mutual fund trades which take 1 day to clear.
Why is this important?
If one sells a stock or ETF and buys a mutual fund the same day, there will be insufficient funds in the brokerage account to purchase the mutual fund because the stock or ETF transaction needs another 2 days to clear.
Tuesday, February 05, 2008
Car Rental Agencies Commodity Business
Car Rental companies are a dime-a-dozen and are very sensitive to economic conditions as shown by the weak results from Dollar Thrifty (DTG) yesterday.
From Barron's yesterday: "Car rental companies have fallen sharply Monday, with Hertz (HTZ) and Avis Budget Group (CAR) in the wake of the profit warning from rival Dollar Thrifty (DTG) which issued a profit warning late Friday. Trying to sneak downbeat earnings guidance past this market is generally about as successful as trying to camouflage that ugly dent in the passenger-side door of the Fiesta you’re returning. Analysts are insisting the selloff of names like Avis is unwarranted, because, unlike Dollar’s leisure-travel market, Avis is a commercial-fleet operator, and thus not exposed to the same market conditions. No buyers for that argument, though."
I rented a car last spring to attend a wedding one weekend and was amazed how cheap the rental was. I may be wrong, but it seems to me like prices for car rentals have not changed much over the last few years.
Stick to investments in hotels and hotel REITS where there is differentiation among properties and greater control over the supply of hotel rooms in many competitive markets.
Bargain basement recommendations for hotel REITs include Felcor Suites (FCH) and Ashford Hospitality (AHT).
From Barron's yesterday: "Car rental companies have fallen sharply Monday, with Hertz (HTZ) and Avis Budget Group (CAR) in the wake of the profit warning from rival Dollar Thrifty (DTG) which issued a profit warning late Friday. Trying to sneak downbeat earnings guidance past this market is generally about as successful as trying to camouflage that ugly dent in the passenger-side door of the Fiesta you’re returning. Analysts are insisting the selloff of names like Avis is unwarranted, because, unlike Dollar’s leisure-travel market, Avis is a commercial-fleet operator, and thus not exposed to the same market conditions. No buyers for that argument, though."
I rented a car last spring to attend a wedding one weekend and was amazed how cheap the rental was. I may be wrong, but it seems to me like prices for car rentals have not changed much over the last few years.
Stick to investments in hotels and hotel REITS where there is differentiation among properties and greater control over the supply of hotel rooms in many competitive markets.
Bargain basement recommendations for hotel REITs include Felcor Suites (FCH) and Ashford Hospitality (AHT).
Consumer Non-Discretionary Stocks Cheap Here
Consumer non-discretionary stocks look undervalued here.
My favorites in this space include:
Unilever (UL) (UN) Forward P/E: 14.58
Proctor and Gamble (PG) Forward P/E: 16.92
Sara Lee (SLE) Forward P/E: 13.48
Upside targets for these stocks are 10-20% from current levels.
Each of these stocks also pay dividends from 2-3% per year as well.
My favorites in this space include:
Unilever (UL) (UN) Forward P/E: 14.58
Proctor and Gamble (PG) Forward P/E: 16.92
Sara Lee (SLE) Forward P/E: 13.48
Upside targets for these stocks are 10-20% from current levels.
Each of these stocks also pay dividends from 2-3% per year as well.
Monday, February 04, 2008
Lack of Innovation Hurting U.S.
The U.S. domestic economy is getting hurt by major productivity improvements and the lack of new technological innovations that resulted in major job creation in the past.
U.S. corporations are more efficient than ever resulting in record profits, but unfortunately this efficiency has meant that fewer people are needed to run these companies.
New industries and innovations need to drive U.S. job growth. Unfortunately since Google and Facebook, there has not been major new industries or innovations in recent years that have resulted in major increases in employment.
Our country can only support so many teachers, healthcare workers, and government workers.
If the U.S. does not continue to innovate, we will ultimately lose our place as the most admired economy in the world.
U.S. corporations are more efficient than ever resulting in record profits, but unfortunately this efficiency has meant that fewer people are needed to run these companies.
New industries and innovations need to drive U.S. job growth. Unfortunately since Google and Facebook, there has not been major new industries or innovations in recent years that have resulted in major increases in employment.
Our country can only support so many teachers, healthcare workers, and government workers.
If the U.S. does not continue to innovate, we will ultimately lose our place as the most admired economy in the world.
Cost of Manufacturing in China Going Up
Expect inflation in Chinese produced goods to hit the U.S. in a big way over the next year.
Great article below:
http://www.smartchinasourcing.com/china-competitiveness/cost-of-manufacturing-in-china.html
Great article below:
http://www.smartchinasourcing.com/china-competitiveness/cost-of-manufacturing-in-china.html
Be Wary of Google Stock
Google stock closed below $500 per share for the first time since August 2007 today.
Google is exhibiting major heartburn over the proposed merger of Microsoft and Yahoo!.
Google owns the search market with close to 60% market share.
Yahoo! and Microsoft combined would have 35% market share in search providing a solid competitor to Google where no solid competitor exists today
Google stock looks like it has peaked and is ready to continue to move lower for the following reasons:
1. Technically the chart pattern in Google is weak with major support levels recently crossed.
2. With close to 60% market share in search, Google has reached its growth limits
3. Google has been on a hiring spree, hiring lots of new employees while the core talent exits the company, cashing out their stock options
4. Google is spending gobs of money on initiatives with little payback potential such as alternative energy and open wireless access that have little to do with their core software technology strengths.
Google is exhibiting major heartburn over the proposed merger of Microsoft and Yahoo!.
Google owns the search market with close to 60% market share.
Yahoo! and Microsoft combined would have 35% market share in search providing a solid competitor to Google where no solid competitor exists today
Google stock looks like it has peaked and is ready to continue to move lower for the following reasons:
1. Technically the chart pattern in Google is weak with major support levels recently crossed.
2. With close to 60% market share in search, Google has reached its growth limits
3. Google has been on a hiring spree, hiring lots of new employees while the core talent exits the company, cashing out their stock options
4. Google is spending gobs of money on initiatives with little payback potential such as alternative energy and open wireless access that have little to do with their core software technology strengths.
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