Are we fanning the flames or informing the public? Perhaps we are doing both, but I think that sometimes we make matters worse by writing about a dire situation or making it sound more dire than it is just to grab some attention.
In my view, it's fine to have a headline that reads "ABC Bank downgraded by Doui, Cheatum & Howh," yet it may be too provocative to use something like "ABC Bank looks like toast after downgrade, would you risk it?"
Many of our readers have commented lately that we are doing the latter. When we post something edgy, are we promoting debate or just scaring folks?
Its one thing to post "Investors are concerned" and still another to write "Investors can't to the door fast enough."
It seems to me that anyone in a position of leadership or the public eye should be a voice of reason. We should try to write objectively and not sensationalize things.
Unfortunately, the media is often guided by the old adage -- Dog bites man is not a story, man bites dog is.
Add another case study to the controversy over speculators and market manipulation.
The Commodity Futures Trading Commission is investigating whether cotton prices were 'artificially inflated' in early March, The Wall Street Journal reported Wednesday (subscription required). The March 4 price spiked from about 70 cents per pound to an intra-day high of $1.09 and closed at 93.1 cents.
In Wednesday morning trading, cotton rose about four-tenths of one cent to 70.070 cents per pound.
The Journal reported that the price spike in early March was unusual and baffled traders because cotton inventories were at their highest level in four decades, towel and fabric demand was weakened by the housing slump, and global supplies were high.
On the other side of argument, one which argues that market forces set the price, some cotton merchants themselves were trading aggressively; a little-used exchange rule suddenly required merchants to unwind sell orders; and financial investors, including pension and hedge funds, started to enter the market, which generated an eight-fold jump February 19-26 in net buying, The Journal reported, citing CFTC data.
Oil easily pushed past $145 Thursday morning after traders calculated that the already weak dollar has further to fall after the European Central Bank increased a key interest rate by a quarter point to 4.25%.
Oil rose as much as $2.28 to $145.85 per barrel -- an all-time high -- before easing back slightly to trade at $144.40 at mid-day.
Oil tends to rise when the dollar falls as investors/traders seek to preserve purchasing power of the decreased value of dollar-denominated commodities by bidding their price up. However, it's important to note that the dollar/oil correlation is not perfect: there have been instances in which the dollar fell and oil fell.
With oil at $135 a barrel - up 463% since January 2001, Washington wrings its hands and says there's nothing it can do to lower the price. I think that's nonsense. There are two things that Washington can do today to get the price down: raise interest rates and close the swaps loophole.
What is the role of speculators in the price of oil and other commodities and what should be done to get those prices down? Some argue that oil prices are set by supply and demand. But if that were true, oil would drop because global demand is forecast to grow 1.2 million bbl/day -- and demand in the U.S. is down 300,000 barrels a day -- while global supply is expected to rise 2 million bbl/day.
Perhaps sixty percent of trading volume in oil is due to speculators -- these traders bet on a declining dollar and a rising price of oil. Raising interest rates would help lower the value of the dollar which has lost 70% of its value relative to the Euro since January 2001. Our Fed Funds rate fell from 5.25% to 2% since last August whereas in Europe, their rate is 4% and expected to rise. This difference makes Euros a more attractive currency for investors. So if the U.S. raises interest rates, people will start to buy dollars instead.
I seriously enjoy reading Ina Steiner. She's the editor of AuctionBytes.com. I like her stuff because she's just so damn objective. She simply lays out the facts and lets you come to your own conclusions. I also like Ina because she continuously holds a very bright light directly at eBay (NASDAQ: EBAY).
Recently, Ina opened the floor at the AuctionBytes blog for discussion about the involvement of Meg Whitman in the Mitt Romney campaign. Needless to say, the situation has raised some eyebrows. Personally, I don't care what direction either Meg or Mitt choose to go. Ina's readers, however, had a very dim view of the situation. My question is, has Meg's insurgence into the political realm affected the shareholders of eBay?
Forget for a moment all the ill conceived plans that eBay has tripped over. Ignore the Skype debacle, the eBay China crash, the silencing of Stubhub and the host of other demons that in my opinion the Whitman crew has set loose, buried or denied. Forget for a moment about all that cash flowing into eBay coffers with nothing better accomplished than to outsource customer service and to pay Whitman's salary. Ignore the wolf at the door in the form of Amazon Inc.(NASDAQ: AMZN). Never mind that eBay has lost its shine and reputation and is yet to pay a dividend to its shareholders. I'm talking about presidential politics and corporate wrangling here.
One of my favorite Jim Cramer-isms is "Commandment No. 5" -- Tips are for waiters. Here's what he writes:
You know that the best moves are takeovers and you are convinced that if you can catch one, it will make up for all the bum steers and bad bets you have made. Tips are winning lottery tickets in most people's eyes.
That's the reason I've had to default to a simple analogy, tips are for waiters, to remind myself how stupid tips really are. Does it occur to you, on hearing the tip, that if the person telling you that Nokia is going to buy RIM really knows that's going to happen, the person is an insider and is breaking the law, and you could get in trouble, too? Does it occur to you that if the person isn't an insider, he doesn't know? There simply is no way a tip like that can work. Leave it for the waiter.
That's what investors should be keeping in mind as they watch shares of E*Trade (NASDAQ: ETFC) surge on extraordinarily vague takeover rumors. Shares were up as much as 25% on rumors that Schwab and Ameritrade were interested in buying the beleaguered broker. Where did these rumors come from? Ah, yes. "A source." And who's to say that "the source" isn't some clown holding a ton of E*Trade shares that he needs to get rid of -- for 25% more than they were trading before the rumor?
Everyone knows E*Trade could be in play -- any time a stock tanks that much, there are always going to rumors. But no one really knows what's going on, and buying E*Trade on the rumor is just mindless speculation.
As Doug McIntyre wrote, "E*Trade may be worth over $5, but it could also be worth a lot less."
Oil Update: Oil is now above $90 per barrel. This latest push higher by oil was blamed, for the most part, on tensions between Turkey and Kurdish Workers Party (PKK) rebels seeking Kurdish independence, which threatens to disrupt oil transport in northern Iraq. Crude oil reached new nominal high Friday of $92.22, although in real terms the price is still below oil's inflation-adjusted high of $101.70 set in April 1980 during the Iran hostage crisis.
Here's a snapshot of crude oil market conditions using three analytical frameworks, or measuring sticks, if you will, with a note on several intangibles:
Geopolitical: Add the Turkey/Kurd dispute to Iran (nuclear technology/weapons) and the Iraq War ,to confrontations and military actions that are adding a "war premium" to the price of oil. Depending on the analyst, that war premium has inflated crude oil's price by $10-$25 per barrel. Political unrest in Nigeria and a hawkish stance in Venezuela also items on analysts' radar screens.
While the market share data was being released, Microsoft CEO Steve Ballmer was telling Bloomberg that Yahoo would be an expensive acquisition. However, Ballmer may be positioning Microsoft to once again approach the No. 2 search engine company. Earlier this year, news reports circulated that Microsoft and Yahoo were in partnership discussions.
By combining its own sites with that of Yahoo's, Microsoft's market share would quickly jump to 36% market share -- not too bad. With the Internet just over ten years old, paying $50 billion for that much market share may be the best money Microsoft can spent. To date, the PC-centric software giant has had a tough time with most of its Internet initiatives. Conversely, Yahoo CEO, Jerry Yang, has to realistically assess its ability to catch up to the Google machine.
At the end of the day, the Silicon Valley-based search company may have to swallow its pride and hook up with the much despised Washington-based software giant. Microsoft would get to utilize its deep bench of software engineers with a powerful and underutilized portal, while Yahoo would get to move away from its foray into the media business and move back to being a technology driven company.
It may be their last chance to survive and thrive in the Internet era before having their lunches completely eaten by Google.
Perhaps it's not exactly normal that one financial company comes out with two contrary predictions, but Apple Inc (NASDAQ: AAPL) is no normal company and neither is the speculation it generates. A little over a week ago, a patent application, filed by Apple back in November, was released detailing a multifunctional handheld device with a mode-sensitive circular touch pad. Whispers of the initial design for an iPhone Nano quickly began to get louder. Therefore, it wasn't exactly shocking when a note, written to clients by JP Morgan analyst Kevin Chang, was published Monday predicting a new iPhone that would be smaller, cheaper, and available sometime in the fourth quarter of this year. Chang said in his note, "We believe [the patent] is a strong sign that Apple could potentially convert every iPod nano in a nano phone." Chang concluded by predicting that release of a cheaper iPhone would generate sales of 30 to 40 million for 2008, a massive increase over Apple's own expectations of sales totaling 10 million for 2008 for the current model.
Predictably, Apple shares hit a new all-time high on Tuesday following Chang's speculation. Tuesday morning's record $134.50 eclipsed a 52-week high of $133.34 that had been the result of massive hype prior to the June 29th release of the iPhone, that had sent Apple share prices up 40% in a few months. Now, Apple has managed to yet again generate a media frenzy with the suggestive patent application. However, as fast as Chang created joyous an-iPhone-in-every-pocket images, a colleague tried to erase them. Fellow analyst Bill Shope, who has covered Apple for JP Morgan since 2003, responded to Chang's note with one of his own on Tuesday. While Shope did not disagree with the inevitable release of cheaper iPhone, Shope declared a near-term launch unlikely, stating that it would be "unusual and highly risky" and predicted that "Apple is likely to keep the iPhone and iPod as distinct business segments for as long as it makes economic sense."
So which analyst's view is gaining support? Both. There are plenty of people who feel that the end of this year is a reasonable time frame for the release of a new iPhone and still more who feel that a merging of the iPhone and iPod is imminent. Gene Munster, of Piper Jaffray, stated in a note to clients "We believe the iPhone reveals much of what the iPod will soon be." Yet, there are also those who, 13 days after the birth of the original iPhone, feel that it is too soon to begin looking for baby iPhone. And, as patent lawyer Jay Sandvos of Bromberg & Sunstein points out, not all patents indicate development: "It makes sense [for Apple] to seek patent protection for every possible aspect of such a device, whether or not Apple actually plans to use it - just to prevent competitors from doing something along these lines." It certainly wouldn't be the first time speculation regarding an Apple patent had been wrong. But who can keep from guessing at what's next? There's something about that little Apple that keeps us hungry for more.
First came its acquisition of Take Care Health Systems. Then, an announcement that Walgreen Company (NYSE: WAG) was planning to acquire Option Care, Inc (NASDAQ: OPTN). Next...?
Bank of America analysts are speculating that geriatric pharmaceutical services company Omnicare, Inc (NYSE: OCR) could eventually be on Walgreens' acquisition radar.
Walgreens acquired Take Care and is planning to acquire specialty pharmacy services provider Option Care in an effort to grow its health care operations and to provide patient-focused health care services. Walgreens has estimated the market for these operations is around $60 billion a year and has a projected annual growth rate of 20%. Analysts believe that for this very reason, Walgreens take a closer look or two at Omnicare, which provides its pharmacy services to long-term care and chronic-care facilities in 47 states throughout the U.S.
Omnicare recently began legal proceedings against 16 drug benefit plans and health insurers, after alleging it has been burdened with "inappropriate" co-payments and rejected payment claims; the company is seeking to collect $61 million it believes is due. The analysts believe Walgreens won't show interest in Omnicare unless it retains its leading market share in the institutional pharmacy sector while addressing pertinent issues like balance sheet challenges and cost structure. Should these legal issues clear, Walgreens may ultimately find Omnicare more attractive.
The champagne may be on ice, but is it premature to believe that News Corporation (NYSE: NWS) will succeed in its $5B, $60 a share takeover of Dow Jones & Company Inc (NYSE: DJ)?
While both sides appear close to a deal, the stumbling block remains the editorial independence of the Wall Street Journal. If both sides can reach an acceptable agreement, there's no one else to block News Corp. Late last week, General Electric Company (NYSE: GE) and Pearson, who had teamed up to make a bid, dropped out. But if they can't reach a common ground, and there are plenty of reasons to believe why Rupert Murdoch won't agree to the controlling shareholders -- the Bancroft's -- requirement for the deal to work (Think: Murdoch's editorial independence). It has been reported that News Corp.'s offer would reduce the Bancroft's involvement, but that Dow Jones was set to offer an alternative proposal, as early as today.
No matter what Rupert Murdoch wants, and he very badly wants the Wall Street Journal, the Bancroft family can still walk away and not sell.
For sale? Seems so. The bio-pharmaceutical company hired investment bankers to check it out and just like that, the stock jumped 6%. But sell to who? Some say a bigger competitor. At what price? $18 a share is about right. One report says that the CEO would absolutely jump at $20 a share. Added pressure to make a move has come from Third Point, who made their point to do something as they acquired a 10% stake in May.
Since January there has been interest in buying this worldwide professional services company. Management is taking the tact of listening to some of the interested LBO parties, but has not said it wants to sell, nor has it hired a team of advisers to help think it through. Bids could be made in the mid-$30s, but management might be expecting something the $40 range. Which means there is interest to sell, but at a higher price, equal to a premium over their $18B market cap. Blackstone and KKR are said to be among the interested. A sale of some assets may first be necessary to make it all happen.
The company chairman, James V. Pickett, speaks: "While a sale remains only one of the alternatives under consideration, we believe it merits more thorough examination." And, I'll have a square hamburger on a round bun, please.
But will they trade oil for donut batter? Mohamed Abdulmohsin Al Kharafi & Sons of Kuwait are buying up the stock like crazy. The shares are rising fast, and a purchase could finally happen. Or, could there be big expansion outside the U.S. of A.?
It's not getting any easier for Netflix. Blockbuster Inc (NYSE: BBI) is making life miserable by price undercutting. Now Netflix will have to top that. Will Amazon now make it's move?
BUZZ
Tyson Foods Inc (NYSE: TSN): The shares are up on heavy trading, but many balk at talk of a sale or buyout... Harley-Davidson Inc (NYSE: HOG): Stock price moving on up may be due to takeover talk.
Dendreon Corp.(NASDAQ: DNDN) -- implied volatility spikes as DNDN rallies on positive FDA results. DNDN is recently up $2.81 to $9.56. The FDA will accept DNDN's Provenge data for prostate cancer. DNDN June call option implied volatility is at 125, puts are at 138 according to Track Data, suggesting larger price fluctuations.
International Rectifier (NYSE: IRF) -- implied volatility increases on Speculation. IRF, a power technology company, is recently up 46 cents to $35. Dealreporter reported that industry sources say IRF is an excellent takeover candidate. IRF June option implied volatility of 39 is above its 26-week average of 34 according to Track Data, indicating larger price fluctuations.
Guitar Center (NASDAQ: GTRC) implied volatility flat as GTRC rallies on Speculation.
GTRC, a retailer of guitars, amplifiers, percussions instruments, keyboards, and pro-audio and recording equipment, is recently up $3.75 to $51.26. Chatter is circulating GTRC has hired an investment bank to explore strategic alternatives. GTRC has a market cap of $1.4 billion with long-term debt of $1 million. GTRC June option implied volatility of 33 is near its 26-week average according to Track Data, suggesting non-directional risk.
ValueClick (NASDAQ-VCLK) volatility up on expectations of continued consolidation in sector.
VCLK, an online marketing services company, is recently up 0.44 to $33.12. Investors have been speculating VCLK could be acquired due to the recent M&A deals in the sector. VCLK June option implied volatility of 61 is above its 26-week average of 41 according to Track Data, suggesting larger risks.
Heading to Memorial Day, there's certainly no moratorium on the number of talked about potential deals. Receiving a fair amount of attention over the last few days include the companies below. There's more, of course, but hey, it's a three-day weekend.
This supplier of tools that makes microchips keeps seeing its stock move up. Up about 13% over the last few months. And it may be more than speculation that it will soon be acquired. Investors looking for a deal are snapping up equity calls, some are then selling them, and keeping both eyes on the stock price. Others are looking out to see which private equity firms or "strategic" buyers come calling.
As Alltel Corporation (NYSE: AT) goes, so goes Amdocs? Well, not quite. Yes the Alltel sale has pushed Amdocs' stock upward. Some say this maker of software products for telecom services firms may want to continue to go forward by themselves. But that hasn't stopped that list of potential buyers from being passed around. Best bet: International Business Machines Corporation (NYSE: IBM).
Again, here we go: Is it going to take a buyout? (Read: private equity buyer.) Or a miracle? (Read: new management) There are profit warnings. (Read: red flags everywhere) The stock is in miserable shape. (Read: cheap) Tough competition. (Read: Wal-Mart Stores Inc (NYSE: WMT)). Think there's a book to be written about all of this? (Read: who'd want to?).
Food for thought. Kangaroo Holdings wants to buy OSI Restaurant Partners Inc (NYSE: OSI). Not surprisingly, Applebee's stock goes up. Are they cooking up a sale price for themselves as they "evaluate" offers? You betcha.
Going, going...almost gone. Even we're beginning to tire of this one. But it never gets old if you like to watch. Now, they're canceling conferences. The CEO is selling shares. The CFO has a bad back. Come on! The latest product review - Palm Treo 755p - is terrible. Market share is going down the tubes. R&D? Forgetaboutit. Sound like a company on the go? Right. Right into someone else's lap. And to think what they once were. Great job all around, everybody.
Are we fanning the flames or informing the public? Perhaps we are doing both, but I think that sometimes we make matters worse by writing about a dire situation or making it sound more dire than it is just to grab some attention.
Add another case study to the controversy over speculators and market manipulation.
With oil at 
I seriously enjoy reading Ina Steiner. She's the editor of AuctionBytes.com. I like her stuff because she's just so damn objective. She simply lays out the facts and lets you come to your own conclusions. I also like Ina because she continuously holds a very bright light directly at 
One of my favorite Jim Cramer-isms is "Commandment No. 5" -- Tips are for waiters. Here's what .gif){kind=logo}
.gif){kind=logo}
.gif){kind=logo}
.gif){kind=logo}
Waiting for the other shoe to drop: The looming credit crisis
Closing Bell: Dow down 7.7%; GE, YHOO, MS fall, PGI, MNT soar
Bet on T&A with J&J (JNJ)
