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While Washington Stews, You Can Cash In on the Biggest "Tax-Inversion" Deal in History

Back in June 2012, we recommended that you pick up shares of Big Pharma player Abbott Laboratories Inc. (NYSE: ABT). The reason: Abbott was planning to split in two at the end of the year, meaning folks who took our advice would end up with stakes in two companies for the price of one.

There was more than bargain-basement thinking at work here.

You see, these corporate breakups – known as spin-offs – have a habit of turning into market-beating profit plays. And the newly minted spin-off firms often end up as takeover fodder – also at big profits.

Abbott followed part of that blueprint.

  • Featured Story

    Here's What Really Happened to Citigroup's (NYSE:C) Vikram Pandit

    The only big deal about Vikram Pandit "stepping down" as Citigroup Inc. (NYSE:C) CEO and his removal from the board is that it didn't happen sooner.

    The truth is he didn't leave voluntarily. He was given an ultimatum by the "new" board of directors: resign or be fired.

    Poor old Vikram. This was a setup from the start.

    He ended up at Citigroup when the mega-bank bought his Old Lane hedge fund for more than $800 million.

    Poor old Vik pocketed about $165 million in the sale and continued to run the fund, some say into the ground, until Citi shut it down.

    In 2007, my favorite Goldman Sachs Group Inc. (NYSE:GS) ex-CEO Robert Rubin (who after pandering to all the big banks in the country as Secretary of the Treasury in Bill Clinton's administration, then pimped himself to Citigroup after allowing Citibank to merge with Sandy Weill's Travelers insurance conglomerate (that owned Salomon Smith Barney) in an illegal deal that required Congress to kill prudent banking laws (Glass-Steagall) to make it legal actually handpicked Vikram to run the bank.

    Super rich-boy Bob Rubin, of course, had nothing to do with running Citibank after making it the mega-bank it became as a result of the merger; he was merely a special consultant to the board, or some B.S. like that.

    But here's what really happened...

    To continue reading, please click here...
    Read More...
  • Citigroup

  • Why Citigroup CEO Vikram Pandit Was Forced Out (NYSE: C) Citigroup CEO Vikram Pandit announced today (Tuesday) he has made an abrupt departure from the troubled bank, the day after it reported third-quarter earnings that beat estimates.

    The story became more interesting as the day wore on after it was announced he was forced out by the board.

    The theories as to why Pandit would be asked to leave got juicier as the Citigroup Inc. (NYSE: C) CEO's exit was paired with the co-resignation of Citi COO John Havens, a long-time associate of Pandit.

    Mike Holland, chairman of New York-based Holland & Co, which oversees more than $4 billion of assets told Reuters, "It's not a shock that [Pandit] is no longer there, but the surprise is this is all happening very quickly. Why is he leaving so quickly? I'm not a Citi shareholder, but if I were I'd be disappointed that Havens is gone, in some ways more than Pandit."

    The timing hinted the two exits were not simply a natural transition, but instead related to some skeletons lurking in the bank's boardroom.

    Just as quick and startling was the immediate removal of Pandit's name and photo from Citigroup's Website.

    The swift announcement that Michael Corbat, previously chief executive for Europe, Middle East and Africa, would replace Pandit as Citi's CEO and board member also raised some eyebrows.

    So what could've caused this sudden changing of the guard?

    To continue reading, please click here... Read More...
  • Paulson Cuts Stake in Bank of America, Citigroup, and JP Morgan Loading the player ... jwplayer("container").setup({ autostart: true, controlbar: "bottom", flashplayer: "http://s3.amazonaws.com/moneymappress/player.swf", file: "2011/Aug/2011816_Keith_BullsandBears2_MP4_Medium_360.mp4", height: 360, width: 600, provider: "rtmp", streamer: "rtmp://s20mlppiazmugb.cloudfront.net/cfx/st", });... Read More...
  • Taxpayers Ring Up $12.3 Billion Profit on Citigroup Bailout The U.S. Treasury on Monday will complete the sale of warrants of Citigroup Inc. (NYSE: C), allowing it to realize a $12.3 billion profit from its bailout of the banking giant.

    The United States will record a net $312.2 million from the sale of its final 465.1 million warrants to purchase common shares of Citigroup, the Treasury Department said Wednesday. Last year, Treasury sold its 34% stake in Citigroup common shares.

    The warrant sale is the latest step in disposing of the bank's assets after the government lent the company $45 billion in Troubled Asset Relief Program (TARP) funds during the height of the financial crisis in 2008.

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  • Money Morning Mailbag: Tobin Tax the Only Solution to Problems Posed by High Frequency Trading An episode of the television news program "60 Minutes" that aired Oct. 10 highlighted investors' fears over the growing trend of high frequency trading (HFT) run by a world of "supercomputers."

    The "60 Minutes" piece prompted this letter from a reader wondering if the technological shift means it's time to readjust investment strategy.

    Sunday night on "60 Minutes" they had a story about high-speed computers that are out-trading humans. Is it time to refocus on the world stage and find tangible rather than paper investments to put your money in? A partnership in a retail or manufacturing venue surely is more transparent than the stock market.

    --Roman

    Money Morning has been examining the effects of high frequency trading for years. In August 2009 Contributing Editor Martin Hutchinson said high frequency trading systems were front-running the market.

    Read More...
  • China Steps Up Effort to Derail BHP Bid for Potash China is attempting to derail BHP Billiton Ltd's (NYSE ADR: BHP) bid for Potash Corp. (NYSE ADR: POT), as Beijing frets over the long-term supply of resources, according to a report yesterday (Wednesday) by the Financial Times.

    Fearing that it could have a negative impact on Chinese imports, the state-run Sinochem Group has hired Deutsche Bank AG (NYSE: DB) and Citigroup Inc. (NYSE: C) to help disrupt BHP's bid for the fertilizer company, people familiar the matter told the FT. A Chinese bank, thought to be Industrial and Commercial Bank of China, was also part of the team.

    Citigroup, which acts as joint corporate broker to BHP along with Bank of America Corp.'s (NYSE: BAC) Merrill Lynch unit, has asked to be relieved of its role in BHP's bid in order to advise Sinochem on a potential counter-bid.

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  • JPMorgan Shuts Prop Trading Unit as Banks Maneuver Around the Volcker Rule JPMorgan Chase & Co. (NYSE: JPM) became the first investment bank to take steps to comply with the so-called "Volcker Rule" by shutting down its proprietary trading unit.

    JPM, the second-biggest U.S. bank by assets, told about 20 traders who work on its commodities trading desk that the company will close the unit, Bloomberg News reported, citing an anonymous source.

    The bank eventually will close all in-house trading to comply with new U.S. curbs on investment banks, said the person, who asked not to be identified because New York-based JPM's decision hasn't been made public.

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  • The Tobin Tax: The Deficit-Busting Levy Wall Street Hates After the Nov. 2 midterm elections, the Obama administration and Congress are going to have to scramble to fill a trillion-dollar hole in the U.S budget, and tax increases may be the only option.

    A tax increase won't be good news for an already wheezing economic recovery that seems to get weaker with each new report or indicator that's issued. But the type of tax that's chosen will go a long way in determining just how much damage the U.S. economy will have to endure.

    With a deficit in excess of $1 trillion, there aren't a lot of options. One possibility would be to allow the 2001 and 2003 Bush tax cuts to expire, which would have a depressing effect on the economy and most people's pocketbooks.

    But a better option would be to devise some new taxes that may prove less damaging. Indeed, there's even one possibility that might even do some economic good if it's implemented correctly.

    It's called a "Tobin tax."

    To see how a reasonably set "Tobin tax" could help U.S. leaders to fix the nation's finances, please read on... Read More...
  • Cost to Fix Fannie Mae and Freddie Mac May Reach $1 Trillion The cost to fix Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), the government-backed mortgage companies that bought or guaranteed three-quarters of all U.S. home loans last year, could run as high as $1 trillion, according to a report by Bloomberg News released yesterday (Tuesday).

    The minimum amount required to keep them afloat will be $160 billion, or $15 billion more than they have already drawn from an unlimited line of government credit granted to keep the home mortgage market functioning. That exceeds the amount already spent on bailouts for American International Group Inc. (NYSE: AIG), General Motors Co. or Citigroup Inc. (NYSE: C).

    "It is the mother of all bailouts," Edward Pinto, a former chief credit officer at Fannie Mae, who is now a consultant to the mortgage-finance industry told Bloomberg.

    Fannie and Freddie own or guarantee 53% of the nation's $10.7 trillion in residential mortgages, according to a June 10 Federal Reserve report. Their books are loaded with millions of bad loans, and delinquencies are on the rise.

    Read More...
  • The Tobin Tax: The Fix-It Plan Wall Street Hates … But Can't Seem to Kill German Chancellor Angela Merkel recently came out in favor of a "Tobin tax" - a small tax on financial transactions, proportionate to the size of the transaction. The Tobin tax idea also has been proposed by Britain's former prime minister, Gordon Brown, and was proposed in Congress by U.S. Rep. Peter DeFazio, D-OR.

    Every time a Tobin tax is proposed, it has failed to gain traction - which isn't surprising: Wall Street, with its international affiliates and legion of lobbyists, hates the idea.

    Even so, the Tobin tax idea just refuses to die - which is a good thing, since it is probably the best way of curing some of Wall Street's pathologies.

    To understand how the Tobin tax can benefit investors, please read on... Read More...
  • Buy, Sell or Hold: Citigroup Inc. (NYSE: C) Is a Turnaround Play that Investors Can't Afford to Miss Citigroup Inc. (NYSE: C) is truly a global bank. With operations in more than 100 countries, it leads in consumer banking, credit cards, corporate lending, investment banking and brokerage. But its forays into the U.S. mortgage market, and its huge exposure to the U.S. retail and corporate banking markets, created huge losses from which the company is still recovering.

    Citi, guided by a prudent and savvy investment banker, Vikram Pandit, has embarked in one of the most ambitious and difficult transformations ever attempted by a financial institution. It is shedding bad assets, cutting costs, raising capital and has segregated the impaired assets and businesses that Citi would like to dispose into a so-called "bad bank," a subsidiary by the name of Citi Holdings. The success of the restructuring will depend on both Citigroup's execution and on the underlying strength of the U.S. and global economies.

    But therein lies the huge upside. As I have written before, there are few investment opportunities more profitable than the restructuring and turnaround of a business. And given the huge size of Citi's balance sheet and the fact that banks are pro-cyclical to the economies in which they operate, the potential gains are extremely large.

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  • U.S. Treasury To Sell Citigroup Shares to Reduce the Bank's Government Reliance The U.S. Treasury Department today (Monday) announced it would start selling up to 1.5 billion shares of Citigroup Inc. (NYSE: C) - a big step in removing government support for bailed out banks.

    The Treasury owns 7.7 billion shares of Citigroup common stock, giving it 27% ownership of the bank. The sale will leave the government holding just under 22% of shares outstanding, with the rest of the shares being sold later this year.

    The move brings the government closer to completely exiting the controversial and publicly criticized $700 billion Troubled Asset Relief Program (TARP).

    "We're putting TARP out of its misery," Treasury Secretary Timothy F. Geithner said in an interview with CNN.

    Read More...
  • Buy, Sell or Hold: Bank of America Corp. Could Offer Investors a "Double Play" On October 6, 2008, I recommended readers buy shares of Bank of America Corp. (NYSE: BAC).

    Bank of America at the time had just agreed to acquire Merrill Lynch and Co. The strategy I recommended called for taking a prudent position in the bank by buying increasing amounts of shares on any market pullbacks.

    The strategy appeared to go as planned at the very beginning as the shares dropped in value as predicted, improving the average buying price. But Bank of America subsequently revealed large amounts of troubled assets that had not been evident in prior releases. The company's president and chairman lost his job as a result, and the stock continued to drop. Today, after a very strong recovery BofA stock is still trading some 30% below our initial recommended entry price. So, depending on how one executed the entry strategy, one would be some 10-15% down even today.

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  • JPMorgan Posts Big Gains but Financial Reform Threatens Profitability JPMorgan Chase & Co. (NYSE: JPM) posted a 55% rise in first-quarter net income led by fixed-income trading and investment banking. But to ensure its profits remain in tact, the bank continues to fight against proposed financial reform.

    JPMorgan, the second-largest U.S. bank by assets, beat analysts' estimates with net income of $3.33 billion, or 74 cents a share. Estimates averaged 64 cents a share.

    Investment banking brought in $2.47 billion, 74% of total net income. The area is usually a strong contributor to profits, kicking in 57% in the previous quarter and 75% in the first quarter of 2009.

    JPMorgan claims the results are a strong indication of global financial economic improvement.

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  • Odds of IMF Bailout Increase as Greek Bond Prices Plummet Prices for Greek 10-year bonds plummeted to record lows today (Thursday) on speculation Europe's most troubled economy is about to unravel.

    Economists expressed new doubts over the country's banks and short term funding plans and warned that recent developments now threaten to create a vicious cycle of bad news.

    "The fear factor is beginning to creep in. In fact, it's galloping in," Neil Mellor, a senior currencies analyst at Bank of New York Mellon Corp. (NYSE: BK) in London told The Wall Street Journal.

    Read More...
  • Citigroup Spin-Off Primerica Boasts Strong Stock Debut in Hot IPO Market Citigroup Inc. (NYSE: C) on Thursday debuted its insurance spin off Primerica Inc.'s (NYSE: PRI) stock with soaring results, as 2010 proves to be a strong year for initial public offerings (IPOs).

    The stock opened strong Thursday morning with 21.36 million shares at $15.00, and closed up 31% at $19.65 a share.

    Primerica wanted to sell 18 million shares at $12 to $14 per share and raise $290 million, but exceeded expectations with more than 21 million shares at $15 each for a $320.4 million sale.

    Read More...