In farms, as on Wall Street, prices drop originally appeared on BloggingStocks on Fri, 21 Nov 2008 18:42:00 EST. Please see our terms for use of feeds.

This post is part of a feature in which we wonder whatever happened to some notorious financial felons. See all 17.

Financial Felons: Ken Lay originally appeared on BloggingStocks on Fri, 21 Nov 2008 18:20:00 EST. Please see our terms for use of feeds.

Continue reading Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ...

Stock picks and pans for troubled times: RIMM, ED, ISRG, GLW, LEA, SLB, GOOG ... originally appeared on BloggingStocks on Fri, 21 Nov 2008 18:00:00 EST. Please see our terms for use of feeds.

One of the ironies of public officialdom is that those elected officials who deal with budgets and tax policy rarely fully grasp the economic sea changes when they occur in the nation.

Whether it's due to habit, tunnel vision, groupthink, arrogance, ignorance, surrounding yourself with sycophantic staff, or some combination, congressional lawmakers are often the last to notice economic shifts that occur cyclically.

January 2009: A new era begins?

One of the key economic questions for investors and other stake holders is whether President-elect Barack Obama follows through with his campaign promise to be an eclectic, someone who tries a center-left policy here, deploys a center-right policy there because it works, and who does not implement typical party -- or partisan -- responses to problems; i.e., solutions from traditional sources of power in his party.

But an even more-telling economic question concerns what the Republicans will do. In November 2008, the Republican Party suddenly found out that it was very white, male, old, Protestant, and by-and-large economically and fiscally conservative. The aforementioned guarantees in the years ahead that they'll hold at least 20 or 25 Senate seats in a chamber of 100, and if they're not careful, about the same percentage of House seats. Meanwhile, the nation's electorate is increasingly nonwhite, female, younger, non-Protestant, and by-and-large economically and fiscally moderate, and in some cases, liberal/progressive.

Continue reading Does Obama symbolize the start of a new economic era?

Does Obama symbolize the start of a new economic era? originally appeared on BloggingStocks on Fri, 21 Nov 2008 17:46:00 EST. Please see our terms for use of feeds.

There is no way to know why stocks go up or down every day. That's why I always find it somewhat silly when I see simple explanations for the movement in prices. The explanation offered for today's 494 point rise is that investors are celebrating the rumor that Timothy Geithner will be the next Treasury Secretary. How does the media know that investors are only celebrating Geithner's appointment and not that of Bill Richardson as Commerce Secretary?

Make no mistake. I agree with the choice of Geithner and made a case for him over former Harvard president, Lawrence Summers, and former Fed Chair Paul Volcker. My reasoning for Geithner was that he had excellent interpersonal skills and high energy coupled with an intimate familiarity with the current financial crisis. Unlike Summers, Geithner is highly unlikely to alienate people, and having picked Hillary Clinton as Secretary of State, President-elect Obama will have enough drama on his hands with both Clintons.

Geithner shares something with current Treasury Secretary Hank Paulson -- he graduated from Dartmouth. I hope that he makes far better use of that Ivy League education in the Treasury Secretary's role than his predecessor. While Geithner will be left with a huge mess that was not helped by his fellow Dartmouth alum, it will be difficult for him to do a worse job than Paulson. The world will be depending on him.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter.

Did stocks rise 494 points on the Geithner bounce? originally appeared on BloggingStocks on Fri, 21 Nov 2008 17:30:00 EST. Please see our terms for use of feeds.

It wasn't that long ago that Apple (NASDAQ: AAPL) changed the way we think about phones. The exact date that Apple's CEO, Steve Jobs, unleashed the sleek design on the world was January 9, 2007. Since that day, Apple stock has been on a tear, and has not closed under $85. That is, until yesterday when the stock finished the day at $80.49, as the stock has now lost all of its "iPhone premium."

In all fairness, the recent drop in stock price can be attributed more to the overall market meltdown than Apple weakness. The company last reported earnings on the 21st of October, and blew away analyst expectations by posting earnings per share of $1.26, versus estimates of only $1.11.

As for iPhone sales, sales so far have been great for the company, despite the fact that almost all of its rivals have been moving as quickly as possible to imitate the iPhone. The company stated that it had sold 6.9 million phones during last quarter, which was the first full quarter featuring the new 3G model. Based on that number, the company sold more iPhones last quarter than they had sold all together leading up to last quarter ... pretty amazing.

Continue reading iPhone premium comes out of Apple stock

iPhone premium comes out of Apple stock originally appeared on BloggingStocks on Fri, 21 Nov 2008 17:15:00 EST. Please see our terms for use of feeds.

Except for the chosen ones -- CEOs and the like who have outrageous salary and benefit packages -- almost nobody has been able to escape the financial pain in the world today.

'My pal Warren,' Chairman of Berkshire Hathaway (NYSE: BRK.A and BRK.B), who only draws a $100,000 salary, has watched his net worth diminished by billions of dollars as his stock has unraveled like everything else. I last read Buffett had a 31% stake in Berkshire so he understands his shareholders angst, even if he does not feel their pain. The stock has dropped from a 52-week high of $151,650 to yesterday's close of $77,500 for a loss of 49%.

Once again in quarterly SEC filings Berkshire's holdings were released and I could not help but wonder if this great holding company had not become one more giant index fund. There are a lot of quality names in the mix including:

• Burlington Northern Santa Fe (NYSE: BNI)
• Coca-Cola (NYSE: KO)
• ConocoPhillips (NYSE; COP)
• Johnson and Johnson (NYSE: JNJ)
• Kraft Foods'A' (: NYSE: KFT)
• Procter and Gamble (NYSE: PG)
• U.S. Bancorp (: NYSE: USB)
• Wells Fargo (NYSE: WFC)

The above referenced stocks are all down with the market and there are still more that might be considered fallen angels or turn-around plays within Berkshire's holdings that include:

• American Express (NYSE: AXP)
• General Electric (NYSE: GE)
• Goldman Sachs Group (NYSE: GS)
• Home Depot (NYSE: HD)
• Lowe's Cos (NYSE: LOW)

In addition to these publicly traded stocks Berkshire holdings include privately held Geico Insurance, See's Candies, Dairy Queen, Florsheim Shoes, and a multitude of others. Since so many stocks have been accumulated over the years I started to view BRK as a stock index and with that in mind did some comparisons between the Standard & Poors 500 and BRK.

The following is a three-year chart that illustrates that buying BRK instead of the index anytime in the last three years would have been beneficial by a 30% margin.

Continue reading Is Berkshire Hathaway better than S&P Index?

Is Berkshire Hathaway better than S&P Index? originally appeared on BloggingStocks on Fri, 21 Nov 2008 17:00:00 EST. Please see our terms for use of feeds.

Today's late rally tied to breaking news of President-elect Obama's naming Timothy Geithner as Treasury Secretary for the next administration, but there was also an end of week bargain-buying hunt. Today was also options expiration. Whatever the real determination was, at least it was not yet another miserable day of relentless selling.

Here were today's unofficial closing bell levels:

DJIA: 8,046 (+6.5%)
Nasdaq: 1,384 (+5.2%)
S&P 500: 800 (+6.3%)

Top Analyst Upgrades
Top Analyst Downgrades

Gap Inc. (NYSE: GPS) posted earnings at $0.35 EPS on revenue of $246 million. While other retailers are stinking up a storm, this compares to earnings of $0.30 EPS and revenue of $238 million last year. While sales did drop over 7% to $3.56 billion, analysts' estimates from Thomson Reuters (First Call) were only $0.34 EPS and $3.57 billion. Shares were up 21% at $11.62 right before the close.

Microsoft Corp. (NASDAQ: MSFT) hired Sean Suchter, the former head of search operations at Yahoo! This could give them the brains and engine behind the search business without ever having to pay Yahoo! a dime. Shares were up 8% at $19.01 shortly before the close.

Nike Inc. (NYSE: NKE) managed a show of force when times are tough. The sporting apparel giant raised its quarterly dividend payout by 9% to $0.25. Shares were up over 6% at $46.41 right before the close.

USG Corp. (NYSE: USG) shares surged after disclosing that Warren Buffett and Faifax invested a combined $400 million into the home building products maker. This was on top of their investments in the company in the past. Shares were up 24% at $7.04 shortly before the close.

Wal-Mart Stores Inc. (NYSE: WMT) rallied after the board of directors elected Mike Duke to replace Lee Scott as President and CEO of Wal-Mart, effective February 1, 2008. Shares were up almost 2% at $51.55 right before the close.

Closing Bell: Torch Passing on a Friday Rally originally appeared on BloggingStocks on Fri, 21 Nov 2008 16:45:00 EST. Please see our terms for use of feeds.

Continue reading Congress may have to approve a 'TARP 2,' economist says

Congress may have to approve a 'TARP 2,' economist says originally appeared on BloggingStocks on Fri, 21 Nov 2008 16:35:00 EST. Please see our terms for use of feeds.

2008 will be the year of "too big to fail."

That ubiquitous phrase has captured the attention of Wall Street, Main Street and Washington, but what exactly does it mean?

Clearly, the market is grappling with that question, and therein lies a very big problem for investors. The lack of clarity on this issue has been stunning. As a result, volatility is off the charts and stock values are plummeting.

This week has been bizarre, to say the least. Early in the week, Treasury Secretary Hank Paulson let the markets and everyone else know that the original purpose of the Troubled Asset Recovery Program (TARP) was no longer a workable solution. In place of buying distressed assets, the Treasury is working to solidify the capital structure of the banking system. I won't criticize the government here, but the change of scope given the size and urgency of the original plan is a bit random.

It does not give comfort to the market.

Next we had the auto industry bailout hearings. With hats in hand, the leaders of the Big 3 automakers and their union bobo made an appearance in Washington. The highlight of the hearing had to be the acknowledgment that all arrived via private jet.

Talk about bad PR. It's like showing up to the soup kitchen in a limo. Good grief.

Continue reading Citigroup too big to fail

Citigroup too big to fail originally appeared on BloggingStocks on Fri, 21 Nov 2008 15:57:00 EST. Please see our terms for use of feeds.

"Annaly Capital (NYSE: NLY) is in the sweet spot," says Steve Sjuggerud in Daily Wealth. He says, "It borrows money at a low interest rate and invests it at a higher rate -- and earns the 'spread'."

"The cost of money is historically low, and it's headed lower. Meanwhile, relative to the cost of money, the return on money is higher than it's ever been.

"The ultimate way trade on this historic discrepancy, for high-returns with very low risk, is through shares of companies like Annaly, which is now s now paying a 16% dividend.

"In the latest-reported quarter, the company borrowed money at 3.5%. (The credit markets have calmed down a bit, so its cost of borrowing should be even lower next quarter.)

"It invests the money in government-guaranteed bonds. You remember how the Treasury bailed out Fannie Mae and Freddie Mac? It wiped out shareholders. But it explicitly guaranteed the bonds.

"In the latest-reported quarter, Annaly earned 5.6% interest on these risk-free bonds. Therefore, it earned a 2.1% spread. If the company uses seven times leverage, a 2.1% spread means a 14.7% return on its money.

"Analysts estimate the company will earn $2.50 per share next year. It pays out essentially all of its earnings in dividends. So that'll be a dividend yield of about 19%. This is ridiculous. An opportunity like this only appears during market turmoil like we're experiencing now.

"This is a historic moment. The difference between the cost of money and the return on money relative to that cost is at the most extreme levels I've seen in my career. Take advantage, and buy stocks like Annaly today."

Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.

Annaly Capital (NLY): 'In the sweet spot for historic yields' originally appeared on BloggingStocks on Fri, 21 Nov 2008 15:39:00 EST. Please see our terms for use of feeds.

With Yahoo, Inc. (NASDAQ: YHOO) stock in the dumper, the CEO spot looking for a newcomer and musings about the future of the company underway, perhaps there is a small bright light for the internet pioneer. Wireless provider T-Mobile will use Yahoo!'s mobile search as the default on all its phones' mobile web browsers.

While that may not be the biggest victory one can think of, it does help. Mobile search and web browsing has been increasing in usage (though still small), and although T-Mobile USA is only the nation's fourth-largest mobile provider, just the fact that Yahoo!'s services will keep the largest wireless providers from using competitive mobile search products is a blessing for Yahoo!

Making money from mobile web search is another matter. Although Yahoo! and T-Mobile said they will share revenue from the new arrangement, the question is this: are any mobile search companies and wireless providers making any significant revenue from mobile search partnering? At this point in time, it's hard to see that just based on skimpy usage. While it may not be that way in the future. T-Mobile International, which replaced Google, Inc. (NASDAQ: GOOG) mobile search with Yahoo!'s solution earlier in 2008 and Yahoo! also has its fingers in mobile search with the largest wireless provider in the U.S., AT&T, Inc. (NYSE: T). Perhaps Yahoo!'s rebirth will be around mobile technology after all. It's just a question of when.

Yahoo! gets boost from wireless provider T-Mobile originally appeared on BloggingStocks on Fri, 21 Nov 2008 15:21:00 EST. Please see our terms for use of feeds.

Well, it looks like Heinz (NYSE: HNZ) put me and my earnings preview to shame. The company delivered a great second quarter. The company, whose colleagues include Kraft (NYSE: KFT), Kellogg (NYSE: K), and Campbell Soup (NYSE: CPB), grew its bottom line by over 22% on a per-share basis. Heinz scored $0.87 per diluted share in profit, enough to wallop the analyst community's estimate of $0.76 per share.

Heinz made sure to hedge itself in terms of currency effects. That helped drive the quarter. The company's strong brand portfolio delivered, on an overall basis, almost 6% in organic sales growth. Management was able to leverage the equity of its product line to enact favorable pricing measures. And one of my favorite parts of an earnings report is the statement of cash flows. Cash from operations rose almost 10%, and operating free cash flow by the company's calculation (Heinz adds back disposals of capital property/equipment) increased almost 9%. It would, of course, be nice to see the growth rate of cash flow be closer to the growth rate of earnings, but at least cash generation is trending upward.

Gotta tell you, though, it looks like the market could care less about Heinz and its nifty numbers. As I write this, the stock is down 0.8%. I would have figured on a little more excitement considering that today was something of a calm day in the markets at large. Apparently Wall Street doesn't feel a lot of confidence concerning Heinz and its ability to keep up the good work. All I can say is that no stock should be considered defensive, even Heinz. We're playing by a different rule book, one that was written by a crazy lunatic. It seems like every stock is a gamble. If you have extreme patience and can tie up money for a long, long time, Heinz is not a bad bet at its current dividend yield. Otherwise, you may want to hoard cash.

Disclosure: I don't own any company mentioned; positions can change at any time.

Heinz rocks during Q2, but market doesn't care originally appeared on BloggingStocks on Fri, 21 Nov 2008 15:03:00 EST. Please see our terms for use of feeds.

Continue reading Web browser makeovers and why S&P is bullish on Google

Web browser makeovers and why S&P is bullish on Google originally appeared on BloggingStocks on Fri, 21 Nov 2008 14:45:00 EST. Please see our terms for use of feeds.

Obama team mulls prepackaged bankruptcy for automakers originally appeared on BloggingStocks on Fri, 21 Nov 2008 14:28:00 EST. Please see our terms for use of feeds.

This post is part of a feature in which he wonder whatever happened to some notorious financial felons. See all 17.

How does the head of one of Archer Daniels Midland's (NYSE: ADM) fastest-growing divisions, a virtual shoo-in to be the company's next president, end up embezzling $9 million dollars while simultaneously acting as an informant for the Federal Bureau of Investigation? And how does the highest-level executive to turn whistleblower receive a sentence much harsher than those of his co-conspirators despite pleas for leniency and clemency from everyone from the FBI and the Justice Department to congressmen, university professors, and even a baseball hall-of-famer?

Sounds like the stuff of motion pictures, doesn't it? And that's exactly what this true story will be in September of 2009 with the release of The Informant, a Warner Brothers film directed by Steven Soderbergh and starring Matt Damon as whistleblower turned felon, Mark Whitacre. The movie is based on one of several books written about the case.

When the FBI began an investigation of ADM in 1992, Whitacre admitted that he and other executives were involved in a multinational price-fixing scheme. For the next three years, he helped the FBI gather evidence. Despite that, however, Whitacre was convicted in 1998 for wire fraud, tax evasion, and money laundering. The sentence of more than 10 years in prison was considered excessive by many, given his cooperation with the investigation and the fact that he suffered from bipolar disorder (the pressure drove him to attempt suicide at one point). Whitacre served eight and half years, reportedly as a model prisoner. To this day, efforts continue to win a pardon for Whitacre.

Continue reading Financial Felons: Mark Whitacre

Financial Felons: Mark Whitacre originally appeared on BloggingStocks on Fri, 21 Nov 2008 14:10:00 EST. Please see our terms for use of feeds.

Bristol-Myers Squibb (BMY) cancer drug rejected originally appeared on BloggingStocks on Fri, 21 Nov 2008 13:48:00 EST. Please see our terms for use of feeds.

Have any of your stocks recently tumbled below $5 a share? If you own Citigroup (NYSE: C) stock, then you know that it is among the former blue chips like General Motors Corp. (NYSE: GM) and Ford Motor Co. (NYSE: F) that have breached that $5 limit. They currently trade at $3.88, $2.84, and $1.45 a share respectively. And there's a good chance that if that company has breached $5 a share -- it will drop further.

How so? It turns out that under some circumstances, big institutional investors such as pension funds, endowments, and asset managers must sell a stock when it drops below $5. I have not been able to find out exactly why, however it's likely that these institutional investors owe their shareholders a fiduciary duty to act prudently to protect their investments.

So if there is not enough trouble as a stock approaches $5, institutional selling will make things worse -- and represents an obvious profit opportunity for short sellers. If a stock is dropping fast below $10, for example, a short seller can borrow the stock and sell it short -- which puts further downward pressure on the shares. If it then tumbles below $5, that represents a quick doubling if the short seller can buy back the shares and repay the loan as institutional investors dump the stock.

Continue reading If a stock's below $5, it's likely to dive

If a stock's below $5, it's likely to dive originally appeared on BloggingStocks on Fri, 21 Nov 2008 13:35:00 EST. Please see our terms for use of feeds.

Continue reading U.S. 10-year bond quickly becoming an electronic 'mattress' for savers

U.S. 10-year bond quickly becoming an electronic 'mattress' for savers originally appeared on BloggingStocks on Fri, 21 Nov 2008 13:18:00 EST. Please see our terms for use of feeds.

One theory about a recession is that people will not buy cars or refrigerators, but they will buy beer, razors, soap and books. If you can't ride around in a new Chevy, at least you can read about someone who is.

That theory went out the window, at least in part, when Barnes & Noble (NYSE: BKS) said its same-store sales were down -- a lot.

Last year, the nation's largest book seller made a little money in the quarter ending November 1. It was a very little, $4.4 million. This year, BKS lost $18.4 billion as same-store sales fell 7.4%. Barnes & Noble also dropped its forecast for the next quarter.

The BKS earnings news is particularly bad as the holiday season begins. Companies that sell discretionary items for under $30 have probably hoped that they would benefit, perhaps only modestly, from consumers looking for relatively cheap gifts for grandpa and the kids.

Even cheap is looking expensive this holiday. Although there is Barnes & Noble stock. It is only $12.25 a share.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The economy's so bad, people won't even buy books originally appeared on BloggingStocks on Fri, 21 Nov 2008 12:59:00 EST. Please see our terms for use of feeds.