• Morning News: September 28, 2010
    Posted by on September 28th, 2010 at 8:05 am

    Troubling Trades Found Ahead of Flash Crash

    The Value of a Piece of Facebook

    Stock Buybacks Are for Dummies Except Right Now: David Pauly

    Home Prices Probably Cooled, U.S. Consumer Sentiment Off

    Apple May Unveil Next iPad by June 2011, Goldman Says

    JPMorgan May Pursue FDIC Funds for WaMu Claims

    Facebook IPO Likely After Late 2012: Board Member

    Oakland: Southwest-AirTran Deal May Bring East Coast Routes

    Census Finds Record Gap Between Rich and Poor

  • Fact-Checking the Simpsons
    Posted by on September 28th, 2010 at 12:18 am

    I was watching the season premiere of “The Simpsons” at the Fox website. During the episode, Kent Brockman referred to Gandhi as being a winner of the Nobel Peace Prize.

    For the record, Nobel Peace Prize winners have included Yasser Arafat, Kofi Annan, Mikhail Gorbachev, Anwar Sadat, Lê Ðức Thọ and Wangari “AIDS was created by the West” Maathai.

    But no Gandhi.

  • The World’s Best Stock Market — Mongolia??
    Posted by on September 27th, 2010 at 10:37 pm

    Where’s the world’s best stock market not only this year, but for the past decade? I’ll give you a hint: Mongolia!

    Odd as it may sound, the stock market in Mongolia is up an amazing 1,600% over the past decade. Now don’t get too carried away; this is hardly a developed market. The market cap of the entire stock market is just $500 million.

    The good news is that the emergence of a class of investors is helping economic reforms:

    And the index and volumes are likely to go higher now that the government is making serious noise about finally cleaning up the exchange. In one of his first speeches, Prime Minister Sukhbaataryn Batbold highlighted the need to develop an equity market and the government is keen to encourage domestic listing, according to Roland Nash, head of research at Renaissance Capital.

    And change will come sooner, rather than later. The MSE is currently considering bids by the London Stock Exchange, Sweden’s OMX HEX and South Korea’s main exchange to provide management services for the national exchange and supply it with new trading technology. A decision on the winner is expected before the end of the year. “We are offering them technology as well as business development,” says Jon Edwards, who spearheads the LSE’s business in Eastern Europe. “The market is small and the listings needs to be cleaned up, but the potential is phenomenal. Mongolia could do better than Kazakhstan if they can put all the pieces in place.”

    Edwards says the MSE is right at the very beginning of the process, but if it follows the experience of other countries in the region that have attempted equity market reforms, the size of the market should go up by an order of magnitude.

  • Karl Pilkington on Dolphins with Rifles
    Posted by on September 27th, 2010 at 5:59 pm

  • Crossing Wall Street Joins StockTwits
    Posted by on September 27th, 2010 at 2:07 pm

    As you may have gathered from the new look, we did a little redesign here and Crossing Wall Street is now a part of the StockTwits network!

    I owe a big thanks to Howard Lindzon, Phil Pearlman, Dominic Rivera and the whole team at StockTwits who helped in the redesign. Howard is a great guy and his team has done a wonderful job making StockTwits a valuable addition to the world of financial blogs. Time just named it one of the “50 Best Websites of 2010.”

    Please don’t worry that I’ve gone all “Hollywood.” The blog is the exact same as before. I’ll still provide my analysis of stocks and the market in general. Plus, the Buy List is still here (now in its fourth-straight year of beating the market). I’m now just looped in with many great bloggers at StockTwits. Be sure to check out the StockTwits network on the Nav bar. I’ve also hired someone to help keep my typos to an acceptable minimum.

    If you emailed me in the past 48 hours, I apologize because it may have fallen through the cracks. No worry. Feel free to email me at eddy@crossingwallstreet.com. And I welcome any feedback on the new site. Don’t be shy. Tell me what you like and what you don’t like.

  • IBM Hits New 52-Week High, Closes in on All-Time High
    Posted by on September 27th, 2010 at 11:35 am

    Shares of IBM (IBM) have been as high as $134.95 today. That may not strike you as being eventful but consider that IBM’s previous 52-week high was $134.25 from January 2010. Also, IBM’s highest intra-day price in 2000 was $134.94 reached on September 1, 2000. The all-time high of $137.69 came on September 10, 1999.

  • Yeah, I Confuse Those Too
    Posted by on September 27th, 2010 at 11:19 am

    From the BBC:

    France’s ex-justice minister Rachida Dati mixed up the words “fellatio” and “inflation” – which sound similar in French – during a TV interview.

    She told Canal Plus: “I see some [foreign investment funds] looking for returns of 20 or 25% at a time when fellatio is close to zero.”

    Within hours, the video was an internet hit on websites such as YouTube.

    Ms. Dati, now a Euro MP, later laughed off the whole episode saying she had spoken too quickly.

    Ms. Dati also said she was happy to have provided some entertainment.

    The French word for fellatio is “fellation”, which sounds similar to the word “inflation”.

    Ms. Dati left the government last year amid criticism of her management style, and gossip about her clothes and love life.

    She is now an MEP and serves as mayor of Paris’s seventh arrondissement.

    If you’re looking to make a joke about TIPs, I’m way ahead of you.

  • It’s Merger Time!
    Posted by on September 27th, 2010 at 10:55 am

    What happens when you have companies sitting on tons of cash and stock prices are depressed? The answer is mergers—lots of them. This morning, Wall Street is busy digesting a few more large-scale mergers.

    First, Alberto-Culver (ACV) is up around 20% today on the news that it agreed to be bought out by Unilever (UN) for $3.7 billion. The deal price is $37.50 per share. On Friday, Alberto-Culver closed at $31.48.

    According to Bloomberg’s numbers, Unilever is offering 14.75 times Alberto Culver’s earnings before interest, taxes, depreciation and amortization. That’s not cheap but it’s clear that Unilever wants in the U.S. market. Unilever is based in the Netherlands while nearly two-thirds of Alberto-Culver’s sales come from the United States.

    The purchase makes Unilever the biggest maker of hair conditioning products in the world, the second-largest in shampoo and the No. 3 in styling, the company said.

    Unilever entered the professional hair-product market in 2009 with the purchase of the TIGI salon brands from the creators of Toni & Guy for $411.5 million. The Alberto Culver acquisition includes Simple, a skin-care company it bought in 2009 for about 240 million pounds ($379 million).

    Personal care now represents 30 percent of Unilever’s sales compared with 20 percent a decade ago, Polman said. The unit had underlying sales growth of 7.8 percent in the second quarter, Unilever said in August, more than twice the pace of the group.

    Alberto-Culver has been a spectacular stock over the years. According to Yahoo Finance (whose numbers I don’t fully trust), the dividend adjusted return since 1984 is close to 14,000% which is over 20% per year.

    The other major merger is Southwest Airlines (LUV) deciding to buy out AirTran Holdings (AAI) for $1.4 billion. AirTran has been formed mostly from the remnants of what had been ValuJet. A few years ago, AirTran lost a bidding war for Midwest Air to TPG, the private equity outfit.

    The definitive agreement marks the first combination between major U.S. low-cost carriers and is only the second large acquisition by Southwest after it failed to capture Frontier out of bankruptcy protection last year.

    Kelly said Southwest would retain its distinct existing brand, avoiding bag fees and offering a single-class service. “This fits in beautifully with the strategy we’ve laid out, probably for the next decade,” he said.

    Southwest executives said it would take two years to integrate the airlines, though they have to navigate meshing contracts from both carriers’ unionized workforces. Southwest has yet to take the plan to employees–80% of its staff is unionized, compared with 50% at AirTran. The deal also needs to be approved by shareholders and competition authorities.

    Kelly said there was little overlap between the two networks, allowing Southwest to expand after halting its rapid growth during the recession. Atlanta–a key business market where AirTran competes with Delta Air Lines Inc. (DAL)–is one priority, as are smaller cities where it could use its target’s Boeing 717s. Southwest plans to keep the 717s and utilize AirTran’s orders for Boeing 737-700s, which mirror its own core fleet. Southwest is also looking at larger 737-800s that would be aimed at more congested airports.

  • Morning News: September 27, 2010
    Posted by on September 27th, 2010 at 8:04 am

    The 10 Costliest U.S. Housing Markets in Pictures

    Stock Index Futures Inch Higher as M&A in Focus

    Unilever Agrees to Buy Alberto Culver for $3.7 Billion

    Treasury Said to Prepare AIG Exit, Repayment Plan

    China Imposes a Steep Tariff on U.S. Poultry

    Wal-Mart Offers to Buy South Africa’s Massmart for $4.2 Billion

    Takefuji Says Eyeing Restructuring Measures; Investors Spooked

    How Americans’ Love Affair with Debt Has Grown

    Mazlan Othman Named Ambassador to Theoretical Extraterrestrials

  • Ignore the Dow
    Posted by on September 26th, 2010 at 6:19 pm

    Unless it’s across 10,000, I haven’t paid attention to the Dow in years. The S&P 500 is by far the better index. On top of that, consider this stunning fact: Caterpillar’s stock is responsible for 40 percent of the Dow’s climb since the beginning of the year. That’s crazy!

    If not for Caterpillar Inc., the world’s most widely-followed stock index would be up just 2.5 percent this year instead of 4.1 percent. Take out gains from the next three biggest contributors to the index — McDonald’s Corp., DuPont Co. and Boeing Co. — and we would be sitting on losses.

    “It’s all about Cat,” marvels BNY ConvergEx strategist Nicholas Colas in a recent report. “Names like Microsoft, Cisco, Bank of America and Intel might be large companies but as far as Dow impact goes, they are tiny.”

    The difference is that the Dow is weighted by price. To compute the Dow, you add up the 30 stocks and divide the sum by a divisor (currently 0.132129493) and, bingo. The S&P 500, however, is done by adjusting by the actual market value of each stock which makes much more sense.