Finance Newsfeed Update

Filed under: General Motors (GM), Interviews, Federal Natl Mtge (FNM), Economic data, Politics

Our government has been doing its share of bailouts in the last year. It put $29 billion of taxpayer money at risk to finance the takeover of Bear Stearns. It stands ready to use $800 billion to bailout Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). And now General Motors (NYSE: GM) wants $50 billion in government guarantees to finance fuel efficient cars. I have been looking into the bailout issue and whether it is beneficial or a misuse of funds - and there is a lot of debate about this issue. These bailouts may make political sense but are they in the long-term economic interests of the country?

A colleague of mine who was a Budget and Cost Analyst for a top government agency has been thinking about the political aspect of bailouts and shared his thoughts with me. As he wrote, “It is a sure thing that either party could get votes from a bailout, but they might loose some as well. Where a party could really improve its position would be to support a bailout, but lose.”

He suggests that this outcome would pay off in the short-run but could damage long-term economic outcomes. As he suggested, If the party supported a bailout but lost, “it could claim that it was trying to support the victims, but had been frustrated by the other party. And this could be used to promote the party for many years in efforts to get votes. While maneuvers of this sort may get short run votes, over the long term they might be hurtful of sound economic growth and performance.”

Continue reading Do bailouts pay?

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Filed under: Internet, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Marketing and advertising, Walt Disney (DIS), Viacom (VIA), News Corp’B’ (NWS), Technology

According to this article, advertisers who use the Internet to get their message across may not like Microsoft’s (NASDAQ: MSFT) Internet Explorer 8 beta. That’s because the software giant is incorporating technology into the browser that will make it harder for data collection that could be used to target ads. In addition, the browser will be able to block some ads entirely, as well as block content from another website from appearing on the current site a user is viewing. The rationale for the latter is that the outside website could be capturing data on the user’s habits.

All this adds up, in my mind, to a legitimate fear for advertisers. Look, I’m like anyone else. I don’t want a lot of data collection going on. But, there are basically only two ways for companies like Yahoo! (NASDAQ: YHOO) and Google (NASDAQ: GOOG) to make money off web content: engage a subscription model, or utilize ad platforms to monetize eyeballs. The Internet has proven to be very resistant to subscription models. Sure, some do work to great success. For the most part, however, surfers don’t want to have to throw a credit-card number into a form to be able to see content. It just doesn’t work. They want unfettered access to sites. If this is to be the case going forward, then highly-targeted ads are going to play an increasing role in the solution to monetization challenges. Web sites aren’t like cable channels, which have the dual revenue streams of subscriber fees and ad sales.

And, keep in mind that the companies mentioned above aren’t the only ones who rely on targeted ads. How about Disney (NYSE: DIS)? News Corp. (NYSE: NWS)? Viacom (NYSE: VIA)? They all have major Internet strategies that utilize ad revenues. And let’s not forget the incredible irony here. Mr. Softy has its own Internet strategy that needs ads to survive. I guess it’s a tough position to be in: the designers want to enhance the attractiveness of Internet Explorer to users by helping them avoid the very thing that powers, in part, shareholder value for the maker of Internet Explorer. A conundrum, to be sure. I personally hope a solution can be found that will allow advertisers to continue selling their wares. I don’t find advertising to be evil. I think it’s a great industry that serves an important function in the economy. Microsoft had better consider that.

Disclosure: I own Disney; positions can change at any time.

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Filed under: Forecasts, Good news, Commodities, Oil

An oil price of $80 per barrel in 2009?

It’s possible, so says a hedge fund firm founder, if the right factors line up.

Renee Haugerud, founder of the $2.5 billion commodities hedge fund firm Galtere Ltd. told Bloomberg News oil may fall to $80 per barrel as supplies of alternative energy sources increase.

Further, Haugerud said the surge in oil has been overdone by investors seeking holdings in raw materials through the Standard & Poor’s GSCI Index, a commodity gauge weighted toward energy, Bloomberg News reported. Oil closed Friday down 11 cents to $115.46 per barrel.

Economist Glen Langan told BloggingStocks a further decline in oil to below $100 is consistent with the recent slowdown in global economic growth, but he’ll await further international GDP data before arguing for an oil dip to the $80 range.

“The key here, again, as with the uptrend in the previous four years, is China. If oil consumption growth slows in China, oil will experience a large sell-off, as institutional investors and traders sense that the great bull run in commodities is at least pausing,” Langan said. “China is likely to register GDP growth of about 10% in Q3, and if it’s below 9% or 8.5%, investors will take that as a sign that a slowdown is ahead, which is bearish for commodity prices.” China’s economy grew 10.2% in Q2 and 10.4% in 1H 2008.

Continue reading As global economy slows, visions of $80 oil grow

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Filed under: Law, Scandals

In the past, I’ve written about Overstock.com’s (NASDAQ: OSTK) habit of issuing press releases to announce minor procedural victories in the deluge of lawsuits the company is a party to.

Apparently that only applies to victories. Last Tuesday, Online Media Daily reported that “Utah’s highest state court has tossed a lawsuit accusing SmartBargains of engaging in unfair competition by displaying pop-up ads to Overstock.com visitors.”

The Utah Supreme Court stated that “Overstock failed to show that SmartBargains’ pop-ups, labeled with the SmartBargains’ logo and appearing in a separate window on the top of Overstock’s website, are deceptive, infringe a trademark, pass off SmartBargains’ goods as those of Overstock’s goods, or are likely to cause confusion.”

Here’s my question for Overstock and its controversial (to put it politely) CEO Patrick Byrne: why did Overstock issue a press release when it was dismissed from an antitrust lawsuit, but didn’t make a similar announcement when a lawsuit it filed was dismissed. Even more hypocritical, Overstock issued a press release when it first filed the lawsuit back in 2004. If the filing of the lawsuit was material, isn’t the dismissal equally material? It seems like a classic case of selective disclosure — not illegal, just scummy.

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Filed under: Housing, Recession

The real estate research firm Zillow.com released a sobering statistic, and it took some by surprise: more than one-third of homeowners who bought in the past five years have negative equity in their homes.

Negative equity is owing more on your mortgage than the market value of your home. On the heels of the United States’ greatest residential real estate boom in the modern era, how did the above occur?

Two factors, so says economist Peter Dawson.

First, many regions of the U.S., particularly the west, experienced abnormal gains during the 2003-2007 real estate boom. “Total appreciation rates over 300% were not unusual during the period. It was an amazing run, fueled by adequate national GDP growth, and low mortgage rates,” Dawson said. “But as we’ve seen, ultimately the appreciation rates proved to be unsustainable, everywhere they occurred.”

Dawson says a 7-9% annual increase in the U.S. median home price is normal, and his models label a 10% annual increase or higher as “outsized” — a deviation from the mean that calls for a correction at some point in time. “But during the boom, it was not uncommon to see 30%, 40%, 50% annual increases over multiple years,” Dawson said. “Clearly unsustainable. Downright frothy. But these conclusions were largely ignored during the boom, on the fallacy of ‘what has occurred will continue.’ “

Second, a financial habit shifted, Dawson said. Way, way back in the twentieth century, Dawson recalled, the biggest stigma when he grew up in a typical neighborhood in White Plains, N.Y., a suburb about an hour north of New York City, was… Not gaining acceptance at a good college? No. Not getting the hottest date for the high school senior prom? No. “We learned that the Smith’s [not their real name] down the street had to take out…a second mortgage,” Dawson said.

Continue reading Some old financial habits experience a comeback

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Solar and wind power companies say they will reverse planned expansions if $500 million in tax credits expires as scheduled …

Filed under: JPMorgan Chase (JPM), Anheuser-Busch Cos (BUD)

A friend of mine was part of the team that worked on an acquisition for InBev, which is the mega Belgian beer company. He was impressed with the company’s merger skills and had little doubt the transaction would work.

Well, global investors are impressed too (which is no easy feat in this tough global economic environment). In fact, according to a piece in the Wall Street Journal (subscription required), it looks like InBev is effectively managing the $45 billion in debt financing for the acquisition of Anheuser-Busch (NYSE: BUD).

No doubt, this is a complicated process. After all, InBev has organized a syndicate of top banks, which include Deutsche Bank, JP Morgan (NYSE: JPM), Barclays Capital, Royal Bank of Scotland, ING Bank, Banco Santander, BNP Paribas, Fortis, Bank of Tokyo-Mitsubishi and Mizuho Corporate Bank.

For the most part, the senior management team at InBev understands the global financial world (keep in mind that there is a deep bench of former investment bankers). Besides, the company has been diligent with maintaining a strong credit rating, which helps to minimize the financing risk.

In other words, to get a big deal completed nowadays, the quality needs to be top-notch. And, for the most part, InBev fits the bill.

Tom Taulli is the author of various books, including The Complete M&A Handbook and The Edgar Online Guide to Decoding Financial Statements. He also operates MergerBook.com.

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Last week the company that hopes to build a nuclear power plant in Idaho, Alternative Energy Holdings Inc. (PINK: AEGC) announced it would sue the environmental group Snake River Alliance for calling them “scammers” in a TV interview–a local TV interview.

The company explained that they had to hold this environmental group responsible because the “world wide reach of KTVB and KTVB.COM” was causing them “substantial damage.” Calling the company “scammers” on KTVB was “aimed at harming the company’s stock and defaming company officials bringing down the stock price,” according to this Associated Press report in the Idaho Statesman.

I’m sure the company and locals have got into a fiery battle and that the local activists say lots of inflammatory things. But KTVB still doesn’t have the power to sully Alternative Energy’s name around the globe. But, do you know what does? An Associated Press story on this lawsuit.

No matter what the suit’s outcome people will start wondering about the company. Waste News, the influential trade magazine of the waste disposal and energy industries, picked up the story. Idaho blogger Dan Yurman predicts the suit will just lead to more donations to Snake River Alliance and more scrutiny for the company.

You know what else could really hurt the stock price? A story like this one this month in TradingMarkets.com, which says “Last week, New York-based auditors Rotenberg & Co. reported the company had lost so much money that it raised “significant” doubt about its ability to continue. Company officials said nearly $5 million in losses would not stop it from moving forward.” Wouldn’t a story like that hurt the stock price more than the local Idaho TV news?

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Roger Nusbaum submits:

Here is the list of currency ETFs filed for by WisdomTree, according to IndexUniverse:

• WisdomTree Dreyfus Chilean Peso Fund
• WisdomTree Dreyfus Czech Koruna Fund
• WisdomTree Dreyfus Hong Kong Dollar Fund
• WisdomTree Dreyfus Hungarian Forint Fund
• WisdomTree Dreyfus Israeli Shekel Fund
• WisdomTree Dreyfus Icelandic Krona Fund
• WisdomTree Dreyfus Indonesian Rupiah Fund
• WisdomTree Dreyfus Malaysian Ringgit Fund
• WisdomTree Dreyfus Mexican Peso Fund
• WisdomTree Dreyfus Norwegian Krone
• WisdomTree Dreyfus Polish Zloty Fund
• WisdomTree Dreyfus Russian Ruble Fund
• WisdomTree Dreyfus Singapore Dollar Fund
• WisdomTree Dreyfus Swedish Krona
• WisdomTree Dreyfus Swiss Franc Fund
• WisdomTree Dreyfus Taiwan Dollar Fund
• WisdomTree Dreyfus Thai Baht Fund
• WisdomTree Dreyfus Turkish Lira Fund
• WisdomTree Dreyfus BRIC Currency Fund
• WisdomTree Dreyfus Developed Currency Fund
• WisdomTree Dreyfus Emerging Asia Currency Fund
• WisdomTree Dreyfus Emerging Europe Currency Fund
• WisdomTree Dreyfus Emerging Latin America Currency Fund
• WisdomTree Dreyfus Gulf Currency Fund
• WisdomTree Dreyfus Oil Exporters Currency Fund

That is some list.

Complete Story »

Filed under: Forecasts, Industry, Economic data

A tenth US bank failed and there are some estimates that the total could hit a hundred. The problem with that is that the FDIC does not have the capital to cover all of those deposits. The money will have to be borrowed, probably from the Treasury. That means the taxpayers.

According to The New York Times, “Integrity Bank of Alpharetta, Ga., on Friday became the 10th United States bank to fail so far this year, hurt by the very business it was built on - real estate lending.” The FDIC will have to cover the value of as much as $350 million in assets.

Pessimists, who may become realists if the recession gets deeper, believe the mortgage-backed securities problems, real estate loans, and credit card defaults could drive bank failures into the hundreds. The FDIC would have to bring in billions of extra dollars.

The US taxpayer is already burdened with the costs of higher gas and food prices and tight credit. Now, he will be asked to pay for the excesses of the banking industry. That may not be fair, but his taxes are the money pit of last resort.

Douglas A. McIntyre is an editor at 247wallst.com.

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