Another low volume August trading day is behind us. Markets in the US responded rather well to economic data but falling oil prices and gold prices are beginning to take over in importance. Oil was down again and gold followed suit. There was generally still a mixed market most of the day. After what we have been seeing for longer than many care to remember we'd consider a mixed day a partial win. Here are today's unofficial closing bell levels:
It seems that not a day goes by without some news regarding one of the largest deals Wall Street is following intently these days, InBev's $46 billion hostile takeover bid for Anheuser-Busch Cos Inc. (NYSE: BUD).
Not long ago, Reuters reported that Anheuser-Busch filed a suit Monday against InBev NV, calling the brewer's takeover attempt an "illegal plan and scheme" to acquire Anheuser "at a bargain price."
It isn't surprising the Budweiser maker has filed a suit. Only last week, when A-B officially rejected InBev's $46 billion offer, the latter filed a suit of its own as well as launched a proxy battle, filing a consent solicitation with regulators seeking to replace Anheuser's board. Anheuser's suit seeks an injunction to stop InBev's attempts to replace its board. Anheuser says it wants first to make sure certain alleged false and misleading statements are fixed.
From the lawsuit (pdf file) it seems that some of the misleading statements Anheuser is complaining about have to do with InBev's financing possibilities and its plans for the company once it is taken over. I don't normally read litigation documents, but the language here seems quite strong with allegations even of rumor mongering. Judge for yourself:
It's no secret that InBev's $46.3 billion bid for Anheuser-Busch (NYSE: BUD) was aimed so that it could get its hands on the Budweiser and Bud Light brands, two of the top four selling beers in the world. Carlos Brito, Chief Executive of Belgium's InBev, said so quite clearly. Not only that, he also promised Bud would go on to be made in the same breweries, and that none in the U.S. would be shut down should the merger occurs. He also promised to keep most of management in place.
Well, for me the big question has always been why? What is this Belgian-Brazilian company fascination with beer brands that are so American -- in recognition and in taste. Well, it turns out that this is only partly true. While it is true that it is mostly Americans who drink light beers, Budweiser has actually captured sizable market share outside the U.S., like 13% in Ireland and 11.5% in Canada in 2006.
These past weeks, the deteriorating stock market that responds to expectations of slower or no economic growth in 2008, continued high oil prices, sagging housing market, high debt consumers and the financial industry quagmire, got me thinking about "my pal Warren" again.
It's times like these, when we are looking for a solid footing in the investment world, the few people with positive track records -- measured in decades, not years -- are worth examining once more.
Last year I started a series of stories on Warren Buffett's very basic investment cornerstones. Buffett's Berkshire Hathaway (NYSE: BRK.A) has such a track record. Today, given how many companies are up to their penthouse executive suites in debt, I thought I would continue.
The subject of debt is a simple one. Companies that carry excessive debt on their books are not as good as companies that have cash sitting around. Debt can be a drag on earnings, reduce the company's flexibility and opportunity in a slowing economy, and has all the negative impacts to a company that it does to an individual household.
Warren Buffett's concerns about how bad things are going to get in the U.S. has taken an unpleasant turn.
Speaking of the economy, Reuters quotes Buffett as saying, "But the people are already feeling the effects. It will be deeper and last longer than many think."
Buffett's name gets added to those of people like George Soros who have strong concerns about the next several quarters. The stock market is supporting their views. General Motors (NYSE: GM), General Electric (NYSE: GE), airlines, and many companies in the financial sector now trade at 52-week lows. The Fed has revised down its forecast for GDP. Many economists polled by Reuters see a bad year ahead.
The CEO of Dow Chemical (NYSE: DOW) recently stated that inflation and the credit crisis are causing significant changes in consumer behavior. Many of the factors that drove several years of grow in the economy are gone.
Buffett's views may be a little late, but the are, nonetheless, almost certainly true.
Douglas A. McIntyre is an editor at 247wallst.com.
Today was a mixed day, which is evident in the tape. Today we had one of the top food deals announced, yet Warren Buffett came out and said we were in a recession. There were also concerns that the housing market will continue to slide along with general credit conditions, and that black stuff in the barrels was up $0.25 at $118.77 on last look.. Here were the unofficial closing levels:
Bebe Stores, Inc. (NASDAQ: BEBE) fell after a downgrade by Roth Capital Partners from a Buy to a Hold rating, citing disappointing sales and conservative guidance. The company reports earnings Thursday. Shares fell by more than 10% to $9.86 on the news.
TheStreet.com's Jim Cramer says it's not a strong-dollar sell -- the story here is still too good.
Why did natural gas go down last week? What was that? Inventories were down. The commodity price was up. The fuel itself is green. It is better than ethanol and it is being used to fuel an increasing numbers of cars and trucks.
The whole move down had to have been triggered by something, right? Yeah, how about the fact that the stocks were up a lot and were due for some profit-taking.
Recall that the real "reason" they went down is that the dollar "got strong," and that was supposed to trigger commodity deflation; natural gas is a commodity and is therefore going to go down. (Barron's made this very case this weekend, oblivious to the facts, but loving the theory.)
This kind of thinking is just so stupid that it shows you can get chance after chance after chance to own the fuel that can take care of the nation if we just let it. Of course, the stocks began to come back later in the week as threats of supply cut-offs of crude -- they came true this weekend -- made natural gas declines virtually impossible, despite the "sense" that it peaked. So the money has came back and I believe will continue to come back.
Financial eras, like social periods, are often defined by moments or epiphanies when decision makers and/or citizens realized that a serious flaw/mistake/problem was occurring through time, and across space, and needed to be corrected.
The ever-incisive FT columnist and economist Martin Wolf describes one contemporary concern that's likely to be addressed: the failure to align the interests of managers with those of investors.
My BloggingStocks colleagues Peter Cohan and Zac Bissonnette have also written on the subject on several occasions in this space, and now the FT's Wolf has assembled additional data that may very well lead to public policy changes, both in Wolf's United Kingdom and in the United States.
During May sweeps season on daytime television, Walt Disney (NYSE: DIS)'s ABC network may very well have gotten the most timely financial subplot of them all. Oh yes, and don't forget "weird." Erica Kane, Susan Lucci's storied character on All My Children, will be aided by a knight in shining Berkshire Hathaway stock -- billionaire guru Warren Buffett. She's in prison for insider trading; who better to call than the world's richest man? I can't think of anyone, except maybe a lawyer (n.b.: NOT the one who represented Martha Stewart).
According to the New York Post, Buffett excuses himself during his meeting with Erica Kane to take a call from Bill Gates (his longtime friend and constant rival for world's-richest-man title).
This is the third time Buffett has appeared on All My Children, having previously appeared on the show in 1991 and 1993 (the show's spokespeople evidently got the record confused and have been pointing to one episode in 1992). In October 1991, Warren and then-ABC chairman Thomas S. Murphy appeared as themselves to give Kane advice on her cosmetics business. They reprised that role in August 1993. While it may seem a little strange for a billionaire financial genius to watch the soaps, Buffett is evidently a fan of the show and is friendly with All My Children creator, Agnes Nixon. According to show spokesman Mike Cohen, Buffett has been waiting to come back to the show. For 15 years.
We're reading monthly about numerous U.S. financial institutions needing to turn to foreign governments for money to stave off financial disaster. While some investors cry foul, alluding to nefarious plots to take over America, Bloomberg examines uber-investor Warren Buffett's take on what's occurring in the economic world today.
Instead of some global plot against the U.S., Buffett says that investments by foreign government-controlled firms are fueled by U.S. spending overseas, not political motives. These so-called sovereign wealth funds are merely responding to some to our own activities.
"This is our doing, not some nefarious plot by foreign governments,'' said Buffett, chairman of Berkshire Hathaway Inc. (NYSE: BRK.A), in his annual letter to shareholders. "Our trade equation guarantees massive foreign investment in the U.S. When we force-feed $2 billion daily to the rest of the world, they must invest in something here.''
Bloomberg reports that countries like China, Russia, and Dubai have deployed record central bank reserves to set up funds to invest as much as $2.9 trillion. We've already seen a flurry of activity. Investment funds from Singapore, Korea, Kuwait, and Abu Dhabi bought stakes during the past four months in the largest U.S. bank in terms of assets, Citigroup (NYSE: C), and Merrill Lynch (NYSE: MER), the world's biggest brokerage.
Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.
Bond insurers including MBIA (NYSE:MBI) and Ambac (NYSE:ABK) can turn down an offer from Warren Buffett to back their muni-bond assets, but they will still have to get capital from somewhere. Government officials, especially in New York State, have been trying to get the big money center banks such as Citigroup (NYSE:C) to put that money up.
The question is whether the banks can spare the capital. As the FT notes of the Buffett program "it does not relieve the ratings pressure on the bond insurers, because of their exposure to structured bonds." In other words, bond insurance companies could still be downgraded by credit agencies and the bonds that they insure could also have their ratings cut.
That would be bad news for banks who hold a lot of the muni-bonds and derivatives based on them. If this debt is devalued, banks could be forced to another round of write-offs.
What is clear is that the Buffett plan does not address the most critical need of the insurers. They must have help with their exposure to CDOs and other structured investments involving subprime paper. The banks are now damned if they put up capital that they may not readily have and damned if they don't because bonds on their books, which are now insured, could lose their value.
A bit of a Mexican stand-off.
Douglas A. McIntyre is an editor at 247wallst.com.
Our stay-put behavior reflects our view that the stock market serves as a relocation center at which money is moved from the active to the patient. --Warren Buffett
Here's an interesting blog post on SeekingAlpha written by Larry Swedroe. Swedroe, Director of Research of BAM Advisor Services, focuses on results stemming from the last 11 recessions. Returns during these periods averaged out to 7%, a full 2% more than what Treasuries averaged during the same periods.
This means, even if investors could perfectly time selling their portfolios of stock at the market high, they still would have made out worse than holding through the recessionary periods.
Unfortunately, even most professional investors can't forsee market tops. What ends up occurring during tumultuous times like these is that investors overtrade and the market truly becomes Buffett's "relocation center from the active to the patient."
After learning that Warren Buffett, the value investor's equivalent of A-Rod, was putting his money into U.S. Railroad firm, Burlington Northern Santa Fe (NYSE: BNI), railroad stocks suddenly became trendy. Driven by increasing consumption for commodities and transportation services, railroads have been targets for value investors for a long time. Buffett's investment put the industry back on the investment map.
So, it wouldn't be surprising to see that hedge funds are playing the same hand. CSX Corp. (NYSE: CSX), a large integrated transportation company servicing everything from ports, trucks and rails, has been in the news lately as the target of an activist hedge fund based out of London, named the Children's Investment Fund.
The fund, started in 2003 by Chris Hohn, has been very active and successful in extracting shareholder value from a variety of situations. It forced the resignation of the Deutsche Borse CEO after he refused to abandon his plan to take over the London Stock Exchange.
It seems like the CIF hit a snag with CSX, though.
In response to the Fund's demands, CSX accepted none of them. In a great response sent by the CSX Board to TCI, management makes a strong case. You can read the letter here.
At IsraelNewsletter, we focus on opportunities to find undiscovered Israeli companies. More than 120 Israeli companies trade on U.S. exchanges and even more trade on global exchanges. Most of these companies are small and mid caps, while a few, like generic pharmaceutical giant, Teva Pharmaceutical (NASDAQ: TEVA) are large caps. This provides diligent investors with ample opportunities to make money.
Warren Buffett knows this, and that's why he made his largest ever international investment by purchasing 80% of Israeli metalworks company, Iscar, for $4 billion last year. Buffett said, on his first visit to Israel, that "Berkshire Hathaway (NYSE:BRK.A) and Israel will be here forever, as Israel and the U.S. will be here forever." The Donald (Trump) signed two huge realty deals in Israel last year: a partnership in purchasing a building in Ramat Gan for USD 44 million, and a contract to erect a luxury hotel bearing his name on a sea-side cliff in Netanya.
Israeli companies are hot and many of them are looking for growth internationally. Bloomberg reported this week about international expansion by a few of the leading Israeli conglomerates. The article describes plans by Israeli billionaire Nochi Danker and his firm, IDB, to partner with fellow Israeli investor, Yitzhak Tshuva to invest as much as $8 billion in constructing a Las Vegas casino.
Seems the world economy is growing and changing so fast that staying on top for very long will become harder. Carlos Slim of Mexico did not retain the title very long, as CNBC is reporting Meet the World's New 'Richest Person' -- For Now, a story about Mukesh Ambani. It has been reported that he is just completing a ONE BILLION DOLLAR HOME! Here's how the Indian press reports rank the world's top five richest people as of today, based on known public stock holdings:
Mukesh Ambani - $63.2 billion
Carlos Slim Helu - $62.2993 billion
William (Bill) Gates - $62.29 billion
Warren Buffett - $55.9 billion
Lakshmi Mittal - $50.9 billion
To me, this all amounts to creating headlines, since the slight difference between one, two, and three could be altered with a single day's stock movement. Given that Ambani is on the other side of the world with great fortunes in Europe and Asia it could change back and forth depending on which stock exchanges are open at the time. In a rising market you could go to sleep as the richest person in the world and wake up to find you were overtaken, only to find by the close of the market you were on top again.
What's more important is who is taking what actions. What are these supernova rich guys doing with their wealth? In the case of Gates and Buffett, they have become the world's biggest philanthropists. Carlos Slim has expressed a desire to share his wealth as well by setting up a $10 billion foundation -- I'm not sure how far he has gone with that idea. Mittal is still busy buying up all the steel production on the planet, and is now the largest player in the market. That will increase his wealth for now. On the other hand, the Hunt Brothers of Texas thought that way in the 1970s about silver, and found out rather quickly that was not their brightest idea. Steel is likely a much better bet.
It seems that not a day goes by without some news regarding one of the largest deals Wall Street is following intently these days, InBev's $46 billion hostile takeover bid for 
It's no secret that InBev's $46.3 billion bid for 
These past weeks, the deteriorating stock market that responds to expectations of slower or no economic growth in 2008, continued high oil prices, sagging housing market, high debt consumers and the financial industry quagmire, got me thinking about "my pal Warren" again.
During May sweeps season on daytime television, 
Bond insurers including 
After learning that Warren Buffett, the value investor's equivalent of A-Rod, was 
Seems the world economy is growing and changing so fast that staying on top for very long will become harder. Carlos Slim of Mexico did not retain the title very long, as CNBC is reporting 
Comfort Zone Investing: Oil's down, which is a start, but not good enough
Stocks have their worst week in six years
Why haven't the Republicans said much about the economy?
