Archive for September, 2005

  • News from France
    , September 16th, 2005 at 1:47 pm

    Shares of French yogurt company, Danone, jumped on takeover rumors. This is the same company that caused national panic in France when there rumors that Pepsi was thinking of buying it. Pepsi denied the rumors but it didn’t stop Thierry Breton, the finance minister, from warning Pepsi that “this is not the Wild West.” (Pepsi is based in New York.) For good measure, Le Figaro described Pepsi as “the American Ogre.” Now, it seems that Switzerland’s Nestle might be interested in Danone. The French don’t seem so worried now.

    Also, it looks like Hewlett-Packard’s French workers are ready to strike for one day. I’m not sure what that’s supposed to prove. HP is a company with lots of problems. The company is slashing thousands of jobs, and I wouldn’t be surprised to see even more job cuts.

  • Gold at 17-Year High
    , September 16th, 2005 at 1:24 pm

    The gold bugs must be happy. Gold just reached a 17-year high.

    The yellow metal finally broke the $460/oz. barrier. Some analysts think it will go even higher.

    Citigroup analyst John Hill said he was bullish on gold due to investors’ jitters over oil, inflation and the greenback.
    “We expect gold to work higher, and fully expect a test of $500 in the coming months,” Hill said in a report. Citigroup also forecast gold will average at least $450 in 2006/07.

    Gold may indeed go higher, but I wouldn’t bet on it. The long-term trend is still down. All gold rallies start differently, but they all end the same way.

  • The New Earnings Excuse: Don’t Blame Us, Blame Katrina
    , September 15th, 2005 at 4:19 pm

    Expect to hear a lot companies saying, “We missed earnings. Don’t blame. It’s all Katrina’s fault.”

    Some analysts say companies can be too eager to blame their poor performances on exogenous shocks, such as wars and the weather, in hopes that investors will overlook other problems they are confronting.
    But as long as these companies provide assurance that the slide will be only short term, some analysts say investors could give a “free pass” to a number of companies that blame Katrina for various earnings shortfalls. The trick in the weeks ahead will be divining those companies with businesses that truly are being hurt by the damage to the New Orleans region, and those companies only somewhat affected but dealing with troubles in their operations elsewhere.

    Some unusual suspects like Cendant, Knight Ridder, Tyson Foods and Books-A-Million have already blamed Katrina for their troubles.

  • Merrill Lynch’s Analysts Will Expense for Options
    , September 15th, 2005 at 1:59 pm

    More good news for investors. Merrill Lynch will now require all of its analysts to include options expensing in their earnings estimates. This is a very good move. Since Merrill is so large, this will have a big impact on Wall Street.

  • A Screwy Idea?
    , September 15th, 2005 at 1:44 pm

    The simply screw has been around forever. Sure, there are lots of drawbacks: “Concrete cracks when it is punctured by a screw. Plastic creeps away from the pressure, sliding down the threads so that even a tightened screw loosens almost instantly.” But Kenneth LeVey, a product development director at Illinois Tool Works, has come up with a new twist on the 2,000-year-old screw.

  • The Onion Scoops Wall Street
    , September 15th, 2005 at 12:23 pm

    The Onion
    February 18, 2004

    Fuck Everything, We’re Doing Five Blades

    CNN/Money
    September 14, 2005

    Gillette unveils 5-bladed razor

  • Google Prices Shares at $295
    , September 15th, 2005 at 9:40 am

    Google priced its follow-on offering at $295. The 14-million-share offering raises over $4 billion for the search engine. This is larger than its IPO last year which raised $1.7 billion on 19.6 million shares. Impressively, the stock is up since the follow-on offering was announced.

    Google hasn’t given specific plans for the money. Since the company is cash-flow positive and it already has a sizable cash position, I assume Google will use the money for acquisitions. Yahoo and eBay have been busy on the acquisition front. Microsoft has $38 billion in cash, while eBay, Google and Yahoo all have about $3 billion. A lot of people think Google will now buy Baidu. Google already owns a small stake of Baidu.

  • Delta and Northwest File for Bankruptcy
    , September 15th, 2005 at 9:20 am

    It finally happened. Delta and Northwest have filed for bankruptcy. Both companies said the timing was a coincidence. Now, four of the seven largest airlines are in bankruptcy protection. In the last four years, the big airlines have lost $30 billion.
    What does this mean for ticket holders? Edward Hasbrouck’s Practical Nomad blog has advice for travelers, including an “FAQ about Airline Bankruptcies.”

  • Rating Brokers
    , September 15th, 2005 at 9:03 am

    Smart Money recently had a review of online brokers. I use Ameritrade (soon to become TD Ameritrade) which is pretty good for my needs, although the “account” screen is a bit confusing.

    For premium discounters, Smart Money likes Fidelity. Harrisdirect was their top basic discount broker. They also give high marks to OptionsXpress.

    About full-service firms, Smart Money said:

    Whether you are thinking about making the move to a full-service broker or are frustrated with the one you have because he doesn’t return your calls, it helps to understand the economics of the business. “If the account is not more than $250,000, it becomes difficult for the brokerage to make money,” says Brad Hintz, a brokerage analyst at Sanford C. Bernstein. Accounts below that level get “generic support” from a call center, he says. And when it comes to the big firms, say, UBS or Smith Barney, Hintz is probably lowballing that estimate. Some brokers we spoke with said their services are aimed at clients who bring half a million dollars to the table. Of course, if you want your broker to join you on the beach, it’ll take a bit more.

    Of the full-service firms, Smart Money gives its highest rating to Edward Jones.

  • Banks Vs. Brokers
    , September 14th, 2005 at 3:19 pm

    I thought summer was supposed to be a slow time on Wall Street. Apparently, no one told Lehman Brothers. The company reported great earnings today. Profits jumped 74%. Lehman earned $2.94 a share, well above Wall Street’s estimate of $2.37. The company sees its earnings growing 10% next year, and 8% in the year after that. With the new results, the stock is going for about 11 times earnings.

    To be sure, this is the latest in a string of good quarters for Lehman, which has benefited from a robust bond environment in recent years, combined with a decision by management to further diversify its business into areas such as stock trading and investment banking. David Goldfarb, Lehman’s chief administrative officer, told analysts that the market environment was favorable in the third quarter, which helped boost the firm’s earnings.

    It will be interesting to see how well the other big brokers do when they report their earnings. What I find interesting is how much better the brokers are doing than the major banks. These stocks usually track each other pretty closely, but the brokers have taken a solid lead in the past few months.

    This chart shows how the brokers (the gold line) have climbed higher since May, while the banks (the black line) have barely moved.
    Banks Vs. Brokers.bmp