Archives for January 2010

January 2010 - Page 7 of 8 - Money Morning - Only the News You Can Profit From

Cold Snap Lighting a Fire Under Energy Complex and Agri-Commodities

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A relentless surge of cold weather is slamming nearly every country in the Northern Hemisphere, disrupting travel, threatening crops and driving energy and commodity prices higher as investors look for ways to cash in.

In the United States, crude oil is trading near a 14-month high. Natural gas and heating oil prices have also surged, as the U.S. shivered under the onslaught of an arctic express that sent temperatures plummeting below zero across two-thirds of the country. Even Florida growers try to protect orange groves from overnight freezing temperatures.

The cold snap is one of the nation's most widespread since January 1985, according to meteorologists at Accuweather.com. While the cold is expected to ease slightly starting Thursday, this winter is on track to be one of the coldest in the past two decades, Ken Reeves, director of forecasting operations at Accuweather told The Wall Street Journal.

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With His Rebuke of Kraft, Buffett Reminds Wall Street That Shareholders Come First

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A decade ago, investing guru Warren Buffett helped torpedo a $15.3 billion Coca-Cola Co. (NYSE: KO) bid for Quaker Oats Cos., arguing that the terms were lousy and the proposed price way too high.

Now Buffet is causing similar complications with a Kraft Foods Inc. (NYSE: KFT) plan to buy Britain's Cadbury PLC (NYSE ADR: CBY), announcing that he's wholly opposed to a plan to issue as many as 370 million Kraft shares to get the deal done. As Kraft's largest shareholder – Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) owns 9.4% of Kraft's common stock – his opinion is likely to carry the day.

Wall Street is furious: Deal fees are not as easy to come by as they used to be, and this transaction promised to be especially juicy – thanks to the spin-offs and share issues Kraft is doing to get the buyout done. Some of those maneuvers won't now be necessary, and if the transaction does get done it will be finalized at a lower price.

From the outset it was clear to me that the Kraft/Cadbury deal represented "managerial capitalism" more than it did shareholder capitalism. And in that battle, I know which side I am on.

I'm with Warren.

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Investment News Briefs

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With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.

Dodd's Departure; Cybersitter Files Suit; ADP: Service Sector Added Jobs in Dec.; Harley's Hogs to Rumble in India; GMAC to Post Record Loss; Markman Calls Dow Surge

  • U.S. Sen Christopher Dodd, D-CT, said yesterday (Wednesday) that he will not seek re-election in November, potentially altering the debate over financial reform. Dodd, who is chairman of the Senate Banking Committee, in November released an 1,136-page draft bill for reform that would create several new protection agencies, increase regulation of credit agencies and derivatives, and alter the role played by the U.S. Federal Reserve in the financial system. However, analysts say that without having to worry about re-election, Dodd is likely to be more willing to compromise on objections raised by Republicans and the financial services industry." Even if Dodd wanted to get tougher, he does not have the votes to do it," Jaret Seiberg, an analyst with Concept Capital, told The Wall Street Journal. "That means compromising to get the Dodd-Shelby-Frank Financial Reform bill enacted."

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Why You Should Mark January 13 on Your Calendar

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Next Wednesday, Jan. 13, won't be just another hump day. It's a key date for regulators in both the United States and Europe who are preparing to launch the largest overhaul of global financial regulation since The Great Depression.

On that day, at least two seminal events are scheduled to take place:

  • The U.S. Congress' Financial Crisis Inquiry Commission (FCIC) – the ten-member commission appointed with goal of investigating the causes of the financial crisis – will begin its first public hearing.
  • And the European Parliament will hold a confirmation hearing for Michel Barnier – the French politician who has been appointed to oversee the regulation of the European Union's (EU) financial services sector.

Both of these events will have significant implications on the global financial reform that is set to go into effect this year.

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Investment News Briefs

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With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.

Kraft Raises Cash Bid for Cadbury; Google Phone Sales Begin; Automakers See Strong U.S. Sales Gains; Whitney Slashes Goldman Forecast; Gulf Infrastructure Gets a Boost; Construction Collapse; IT Obstacle

  • Kraft Foods Inc. (NYSE: KFT) has agreed to sell its DiGiorno and Tombstone pizza brands to Nestle SA (OTC ADR: NSRGY) for $3.7 billion, using all the net proceeds from the sale to boost the cash portion of its offer for Cadbury PLC (NYSE ADR: CBY) . In related news, Warren Buffet's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) voted against Kraft's offer to issue up to 370 million shares for the Cadbury acquisition, saying it would change its vote if the transaction doesn't "destroy value for Kraft shareholders." Berkshire's stake of more than 9% in Kraft makes it the food maker's largest shareholder. Nestle, meanwhile, formally took its name out of the running of any possible bidders for Cadbury in a terse statement.

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Would You Like to Be My Partner?

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I'd like to make you a business offer. Seriously. This is a real offer. In fact, you really can't turn me down, as you'll come to understand in a moment.

Here's the deal. You're going to start a business or expand the one you've got now. It doesn't really matter what you do or what you're going to do. I'll partner with you no matter what business you're in – as long as it's legal. But I can't give you any capital – you have to come up with that on your own. And I won't give you any labor – that's definitely up to you. What I will do, however, is demand that you follow all sorts of rules about what products and services you can offer, how much (and how often) you pay your employees, and where and when you're allowed to operate your business.

That's my role: to tell you what to do.

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A Note to Bernanke: Sorry Ben, More Bureaucracy Isn't the Answer

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U.S. Federal Reserve Chairman Ben Bernanke's latest thesis is that the home mortgage bubble had little to do with record low interest rates, and was actually much more a problem of regulation.

It sounds plausible – until you give it some real thought. After all, I believe that humanity has already tried a system with tight, vigorously enforced regulations, and no price mechanism.

It was called the Soviet Union.

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Hot Stocks: Apple's Acquisition of Quattro Puts It on a Collision Course with Google

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With its acquisition of Quattro Wireless, Apple Inc. (Nasdaq: AAPL) has opened the door to competition with Yahoo Inc. (Nasdaq: YHOO), Microsoft Corp. (Nasdaq: MSFT), and especially Google Inc. (Nasdaq: GOOG) in the mobile advertising market.

And Apple's venerable App Store will play a key role in the company's expansion.

All Things Digital, a tech blog affiliated with The Wall Street Journal, reported the deal's value at $275 million, citing several anonymous sources. It is the 24th acquisition in Apple's 34-year history, and is characteristic of the previous 23: buying a small company that can easily be integrated into its existing projects.

In this case, Apple can use mobile web ads developed by Quattro to generate income from outside advertisers.

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The Seven Themes That Will Lead to Maximum Profits in 2010

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If the crippling financial events of 2008 and 2009 proved one thing, it's that investors need to rethink the entire philosophy of "portfolio management."

Today, the best-performing managers around the world manage their portfolios based on broad-and-potent market themes. And with good reason.

It's much easier to follow macro trends based on broad-based themes than it is to cobble together a bunch of different stocks into a portfolio and call it diversified. Theme-based investing is also much more profitable. And it allows you to better manage your risks.

In short, theme-based investing lets you have your cake and eat it, too.

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