I've received a few chuckles for investment directions I've suggested in the past, but if you care to review a couple of my previous generalities, I believe that my record has held up fairly well.
I submit for approval the following investment angles for the balance of 2008 and possibly beyond:
Have I suggested investments in water holdings? Yes, I do believe that I have. I believe that going long in water stocks could be an investment hedge of the decade. I also suggest a look into the desalination technology from General Electric Co. (NYSE: GE).
I'd think it's a good idea to stick with the railroads, such as Burlington Northern Santa Fe (NYSE: BNI). I claim that, with all things given, for now, railroads can't fail. Conversely, I think it's a good time to back away slowly from trucking. I think misery lies ahead there.
Wheat prices pushed above $10 per bushel Monday, as dry weather threatened crops in Argentina, adding to concerns regarding a potential wheat shortage, Bloomberg News reported Monday.
The bullish move in wheat sent other grains and oilseeds higher. Argentina, now experiencing summer, is a key supply of wheat for bread, pasta and livestock feed.
The price of wheat has more than doubled in the past year, with wheat climbing another 30 cents to $10.03 per bushel Monday morning. Soybeans gained 17 cents to $11.93 per bushel. Corn rose 5 cents to $4.43 per bushel.
Global growth
Economist Steve Affinito told BloggingStocks Monday that wheat's climb is part of a global trend of higher commodity prices, driven by emerging market economic growth.
Although Whole Foods Market's (NASDAQ: WFMI) acquisition of Wild Oats has already been completed, the FTC is still trying to get in the way. The Commission is asking a Washington appellate court to overturn a federal district court's ruling [subscription required] that allowed the merger to proceed.
According to The Wall Street Journal, the FTC was split on whether to pursue the appeal, and it's considered a Hail Mary pass.
Regardless of whether you support or oppose the district court's ruling that allowed the deal to proceed -- and in spite of Mr. Mackey's crazy message board antics -- you have to wonder what the point of this appeal is. Are taxpayers really having their money spent wisely pursuing an appeal that has no chance?
I don't think so. Consumers would be better served if the FTC devoted some of this energy to cracking down on the numerous fraudulent multi-level marketing companies that continue to recruit distributors, uninhibited by anti-pyramid laws.
MOST NOTEWORTHY: Amazon.com (AMZN), Luminent Mortgage (LUM), Whole Foods (WFMI), Tenet Healthcare (THC) and Pediatrix Medical (PDX) were today's noteworthy upgrades:
Bernstein upgraded Amazon.com (NASDAQ: AMZN) to Outperform from Market Perform, citing margins on 3rd party transactions that are close to eBay's (EBAY) and that the overseas merchants initiative will increase 3rd party units to 25% of sales. The move is expected to increase operating margins to 6.2% by 2011, above the previously expected improvement of 4.6% by the same time.
JMP Securities said Luminent Mortgage's (NYSE: LUM) $64.9M emergency financing from Arco Capital may preserve some value for shareholders, and upgraded shares to Market Underperform from Sell.
JP Morgan added Whole Foods (NASDAQ: WFMI) to its Focus List, and expects the Wild Oats (NASDAQ: OATS) acquisition to be a catalyst for shares.
Things looked pretty rough for the Whole Foods Market (NASDAQ: WFMI) bid to merge with smaller rival Wild Oats (NASDAQ: OATS). In late July, the Whole Foods CEO got himself in trouble over online message board comments and that pushed the stock to a 52-week low of $36. Then the FTC tried to block the merger on the grounds that putting the two companies together would create an operation that would raise prices on organic food.
Since late July, however, Whole Food shares are up 25% while Wild Oats trades just below its 52-week high, at $18.46. In August, short sellers cut their position in Whole Foods by 9.3 million shares to 15.1 million. It was the largest single drop in shares sold short for any company traded on the Nasdaq.
The FTC went so far as to take the fate of the merger to federal court, but both a District and Appeals Court failed to halt the merger. The first case was filed in June and, according toMarketWatch, asked the judge "for a preliminary injunction blocking the deal, pending a full review."
A successful merger is likely to have quick benefits for Whole Foods. Last quarter the smaller Wild Oats made only $1.9 million on almost $312 million of revenue. The organic food retailers costs need to come down.
Cutting those costs is likely to be the first thing that Whole Foods does.
Wal-Mart (NYSE: WMT) has been buying retail chains and entering joint ventures all over the world to improve its international exposure. Now, with same-store sale in the U.S. in trouble, it is setting up a unit to look at acquisitions in the U.S. as well.
According to the Financial Times [subscription], with UK retailer Tesco moving into the U.S. with its "Fresh & Easy" small format neighborhood groceries, Wal-Mart may think that it cannot afford to ignore the success of niche stores.
Wal-Mart could certainly use something to jump start sales in its home market, and groceries may be a good place to start.
There are several retailer operators that could end up on Wal-Mart's radar. One is likely to be Whole Foods (NASDAQ: WFMI), which is about to merge with competing organic food chain Wild Oats (NASDAQ: OATS). At the larger end of the market are operators like Kroger (NYSE: KR), which has a market cap of over $19 billion but has about 3,500 stores and annual sales of over $66 billion. Wal-Mart's market cap is $179 billion.
Wal-Mart needs a lot of help in the U.S. -- it may just buy itself a turnaround.
Has the time come for Apple Inc. (NASDAQ: AAPL) to worry about competition from Google Inc. (NASDAQ: GOOG), the search giant that has become such a formidable competitor to Microsoft Corp. (NASDAQ: MSFT)? Well, talk of the Google Phone or Gphone has been floating for a quite a while and now, according to Rediff, the Gphone launch "is believed to be a fortnight away." Also according to the site, Google "has started talks with service providers in India for an exclusive launch on one of their networks," and that "a simultaneous launch across the US and Europe is expected." Of course, Google wouldn't comment on rumors. The Gphone, if ever launched, will no doubt be compared to Apple's iPhone, but as I said, rumors of the Gphone have been around a while now. Google never commented, yet these rumors keep returning. Will this be another such rumor that will fade away into the blogosphere?
The Gap Inc. (NYSE: GPS) reported earnings after the close yesterday and quite impressed Wall Street as the stock is trading up 3.33% in premarket action (7:46 a.m.). Gap posted a second-quarter profit that surged 19% to $152 million, or 19 cents per share. While online sales soared 26%, second-quarter revenue declined 1% to $3.69 billion, and same-store sales declined by 5%. Analysts expected Gap to earn 19 cents per share on revenue of $3.72 billion. Analysts liked what they saw as well.
And ... the coast is clear to Whole Foods Market Inc. (NASDAQ: WFMI), Wild Oats Markets Inc. (NASDAQ: OATS) merger to proceed after an appeals court upheld the ruling from last week, denying the FTC its request to block the merger. WFMI stock is trading up 2.68% in premarket (8:00 a.m.) while OATS is up 2.27% (8:06 a.m.). Will we see Sirius and XM moving higher on the news as many believe this merger approval would pave the way to the satellite radio companies' merger being approved as well?
Burger King Holdings Inc. (NYSE: BKC) reported fourth quarter results this morning, posting a profit versus a loss a year earlier. BK earned $36 million, or 26 cents per share and sales rose 11% to $590 million. Analystshad expected earnings of 27 cents per share on sales of $580.4 million. Shares of BKC are up 4.33% in premarket trading (8:02 a.m.).
The FTC's bid to block Whole Foods' (NASDAQ: WFMI) acquisition of Wild Oats (NASDAQ: OATS) has ended in failure. A three-judge panel of D.C.'s U.S. Court of Appeals rejected the government's appeal to have the merger blocked. The judges ruled that the FTC had failed to show that Judge Paul Friedman, who denied the government's motion a week ago today, had acted improperly. Last Thursday, the
Whole Foods says it will close the deal as soon as possible. CEO John Mackey likely remains on the hot-seat, and his anonymous message board ramblings are still the subject of an SEC investigation.
Now that the merger is done, investors can begin to discuss how the merger will impact Whole Foods as a stock. The FTC's effort to block it indicates that it should be very good indeed.
Antitrust is always tough to predict. The laws are sketchy -- and markets can change quickly. Besides, politics can play a big role.
That's why the Federal Trade Commission (FTC)'s antitrust lawsuit -- on the Whole Foods Market (NASDAQ: WFMI) and Wild Oats Markets (NASDAQ: OATS) linkup -- is so interesting.
The FTC believes that the transaction will reduce competition and, as a result, be harmful to consumers.
However, federal Judge Paul Friedman doesn't think so. In fact, yesterday we got his 93-page opinion on the matter (according to a report in Reuters).
Apple 2.0 is examining Apple Inc.'s (NASDAQ: AAPL) advertising schedule. Specifically it examines the correlation between Apple ads for its products, in this case the iPhone, vis-a-vis its press exposure.
First, a judge rejected Thursday the request by the FTC to block the $565 million merger of Whole Foods Market Inc. (NASDAQ: WFMI) and Wild Oats Markets Inc. (NASDAQ: OATS) causing the stocks to end 7.6% and 17.8% higher on Friday respectively. Then the WSJ said that the FTC will appeal the ruling. With the end of this merger story still to be written, Bear Stearns downgraded OATS to Peer Perform for Outperform.
Some now question whether the judge's refusal to block the merger of WFMI and OATS could help other deals to be approved, specifically that of Sirius Satellite Radio (NASDAQ: SIRI) and XM Satellite Radio (NASDAQ: XMSR). Personally I still don't think the two mergers are similar in nature and neither does Doug McIntyre.
Union members representing about 2,000 of Delphi Corp.'s hourly workers voted to ratify a new four-year contract with the auto parts supplier. This may have an impact on U.S. automakers such as Ford and GM today.
eBay's (NASDAQ: EBAY) Skype said its Internet phone service has finally returned to normal. Many of its 220 million users worldwide couldn't log on for two days due to a software bug. Skype apologized and said it will explain more today.
As Google Inc. (NASDAQ: GOOG) continues its attempts to further increase its presence in social networking, the search giant revealed today it had acquired a stake in Chinese community web site Tianya.cn. No details were given, not even the size of the stake. China is the world's second largest internet market.
Reuters has written that the progress in the Whole Foods (NASDAQ: WFMI) merger with Wild Oats (NASDAQ: OATS) may be a sign that other mergers being scrutinized by the US government may have an easier time of getting approval. Not likely.
The FTC has tried to block the Whole Foods deal because it may raised the amount that consumers have to pay for organic food. Of course, other food retailers offer these products, so the government's position was probably always a bit thin. The agency went to federal court to try to block the marriage, but was unsuccessful.
Now Reuters is floating the theory that the apparent success of the grocery store merger may make it easier for Sirius (NASDAQ: SIRI) to merge with rival satellite company XM (NASDAQ: XMSR).
The concept is full of holes. Sirius and XM are a de facto duopoly and, merged, would be a monopoly. Their ability to send satellite signals with radio content to receivers is not a business that any other company can enter. That is not really a bit like the Whole Foods situation.
The SIRI/XMSR merger is also a deal that faces opposition in Congress. Legislators want to know why they should countenance a business combination that not only lacks any competing technology but is also one that may use its position to raise rates over time.
The news about the Whole Foods merger may be good for it, but the deal has nothing to do with satellite radio.
To everyone's little surprise following Asian and European markets declines, stock futures are negative, indicating a lower start for U.S. markets despite their strong finish yesterday. No doubt, many will sigh in relief when today is over heading into the weekend.
8:30 update:Stock futures are now up following the Federal Reserve cutting its discount rate to 5.75% from 6.25%. So far the Fed had tried to address liquidity concerns by injecting money into the market, but when another $17 billion injected into the banking system yesterday did little, it seemed the Fed had decided on this rate cut, which would narrow the spreads between the rates and could help market liquidity improve. Stock futures are shooting up at the moment, indicating quite a positive start.
Yesterday U.S. stocks seemed to be free falling at some point, with the Dow industrials losing about 340 points in the early afternoon. But once again, a late session volatility stormed the markets, this time taking stocks upward, and averting the dreaded 10% decline signaling a market correction. The Dow industrials and the Nasdaq still declined somewhat for the day, but the S&P 500 finished in positive territory.
Despite that positive momentum, the Tokyo benchmark Nikkei 225 index nose-dived 5.4% today as investors fear the dollar's decline could worsen earnings for Japanese companies. Other Asian markets also finished lower while European stocks started higher but managed to erase gains and now trade in negative territory.
Economic data due today is thin with the preliminary University of Michigan consumer sentiment survey for August due out at 10:00 a.m. and is expected to tick down.
Corporate news:
Dell Inc. (NASDAQ: DELL) said late last night it will restate four years of financial results. The mistakes cause by executives adjusting reports to achieve performance goals could end up costing as much as $150 million.
Hewlett-Packard Co. (NYSE: HPQ) reported quarterly financial results after the close yesterday. HP boosted financial forecast. Net profit for the quarter ended July 31 was $1.78 billion, or 66 cents per share, a 29% jump from the year-ago period. Excluding one-time charges, the company earned 71 cents per share, beating estimates by 5 cents. Sales for the period were $25.38 billion, a 16% increase from the a year ago and $1 billion higher than analysts prediction.
Borse Dubai offered 27.7 billion kronor ($3.96 billion) for Sweden's OMX AB, topping a bid from Nasdaq Stock Market Inc.
Midwest Air Group Inc (NYSE: MEH) said today it accepted a bid of about $450 million or $17 per share from private equity firm TPG Capital and Northwest Airlines Corp (NYSE: NWA), the latter as a passive investor.
Finally, yesterday, a judge said he will not block the $565 million merger of Whole Foods Market Inc. (NASDAQ: WFMI) and Wild Oats Markets Inc. (NASDAQ: OATS), but the Federal Trade Commission could still appeal the ruling. Shares of Wild Oats are gaining in premarket action.
In spite of John Mackey's most self-destructive efforts at getting the merger he wanted so badly blocked,. it appears that it will go through. Although the FTC says it will appeal, Whole Foods Market (NASDAQ: WFMI) appears poised to acquire rival Wild Oats (NASDAQ: OATS). Shares of Whole Foods are up 6.3% on the news after-hours. Wild Oats, the buyout target, is seeing its stock soar almost 20%.
According to the Associated Press,U.S. District Judge Paul L. Friedman's filed a 93-page document (sealed because if contains trade secrets) denying the FTC's plea to block the deal. The FTC argued that the merger would lead to higher prices for consumers, and appeared to have compelling evidence based on internal documents from the company. The deal was referred to as "Operation Goldmine" at Whole Foods, and the company planned to shutter more than 25% of Wild Oats stores. Emails from Mackey to the company's directors referred to the acquisition as a way to "eliminate a threat" and avoid "price wars".
Mackey has got to be thrilled that the deal is going through. Aside from the obvious strategic benefits to his company, the failure of the deal would likely have been pinned on him. He would have become known as "Motor Mouth Mackey": The man who helped the FTC block an important acquisition because he couldn't shut his trap.
Given Whole Foods Market (NASDAQ: WFMI) CEO John Mackey's penchant for posting too much information on his blog/anonymous message boards, it might seem ironic that the company is considering suing the FTC for inadvertently posting the company's trade secrets on the internet.
On Tuesday, the FTC failed to completely redact Whole Foods' trade secrets from a court filing that was posted on an online database. Reporters caught the glitch, and information was leaked.
Some of the information that should have been redacted included an assertion that Whole Foods prevents its suppliers from selling directly to Wal-Mart (NYSE: WMT) in an effort to raise the retailer's costs.
Both Whole Foods and Wild Oats (NASDAQ: OATS) have an option to terminate the merger agreement if it does not gain regulatory approval by the end of the month.
Shares of Wild Oats continue to languish more than 20% below the agreed upon price, indicating investor skepticism about the deal's prospects.
One expert argued that the two chains compete in a much broader market -- grocery stores -- with much bigger chains like Safeway and Kroger also in the space. But another expert discussed research suggesting that markets containing a Whole Foods and a Wild Oats store tend to have lower prices, which would suggest that they are in fact competing.
The U.S. District court is expected to issue a decision on the FTC's preliminary injunction seeking to block the merger some time in the next few weeks.
Given that this doesn't appear to be a black and white issue, as evidenced by disagreement among the experts, CEO John Mackey's "macho posturing" emails could end up looming large, as they seem to suggest that the merger is motivated by a desire to eliminate competition. Not only has he embarrassed himself and run into trouble with the SEC for his message board post, but he may also have harmed his company's growth prospects with his overactive typing fingers.
I've received a few chuckles for investment directions I've suggested in the past, but if you care to review a couple of my previous generalities, I believe that my record has held up fairly well.
Wheat prices pushed above $10 per bushel Monday, as dry weather threatened crops in Argentina, adding to concerns regarding a potential wheat shortage, 
Although 
Antitrust is always tough to predict. The laws are sketchy -- and markets can change quickly. Besides, politics can play a big role.
Main market news: 
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