• Nobel Prize-winning economist Paul Krugman said the United States needs to take aggressive economy-stimulating action or risk facing a lost decade of growth a la Japan in the 1990s. “We’re doing half-measures that help the economy limp along without fully recovering, and we’re having measures that help the banks survive without really thriving,” Krugman told reporters in Beijing, Reuters reported. “We’re doing what the Japanese did in the 90s.”

• European Central Bank President Jean-Claude Trichet said he and fellow policy makers are seeing the first signs of economy recovery. Recent reports are “encouraging, but it’s no time for complacency,” Trichet said at a meeting of global banks, Bloomberg reported.

• AstraZeneca plc’s (NYSE ADR: AZN) heart drug Brilinta beat blockbuster drug Plavix – of Sanofi-Aventis SA (NYSE ADR: SNY) and Bristol-Myers Squibb Co’s (NYSE: BMY) – in one of the largest comparative head-to-head drug studies, Reuters reported. Plavix alone nets about $8 billion and if approved, Brilinta would take a large portion of that.

• Intel Corp. (NASDAQ: INTC) may have to pay an antitrust fine of more than 1 billion euros ($1.36 billion) and stop giving discounts to computer sellers. The company faces awaits the decision of the European Commission on charges that it has been muscling competitors out of the European market, Bloomberg reported.

• General Motors Corp (GM) is open to moving its headquarters from Detroit. The company also may sell some of its U.S. plants and renegotiate its restructuring plan with unions as it heads toward probable bankruptcy, GM Chief Executive Officer Fritz Henderson said yesterday (Monday), according to Reuters. Henderson it was more likely that GM was headed for bankruptcy by June 1 – the U.S. government-imposed deadline for the automaker to restructure.

• Microsoft Corp. (NASDAQ: MSFT) plans to sell $3.75 billion of debt in its first bond offering, taking advantage of its top credit ratings to help fund a share buyback and technology investments.  The world’s largest software maker, whose shares have declined 34% in the past year, is seizing on a credit-market rally to help fund a $40 billion stock repurchase program. The company is also investing in data centers to compete against Google Inc. (NASDAQ: GOOG) in Internet search, Bloomberg reported.

• Dish Network Corp (NASDAQ: DISH) posted better-than-expected profits on Monday and lost fewer subscribers than most Wall Street analysts had forecast, sending its shares soaring, Reuters reported. U.S. satellite TV provider Shares rose as much as 21.5 percent in afternoon trading on the Nasdaq on the lower customer losses and indications that the company had started to get control over a long-standing problem with piracy with its set-top box software.

• Nortel Networks Corp (OTC: NRTLQ), North America’s biggest maker of telephone equipment, said yesterday (Monday) its quarterly loss widened as the global recession contributed to a 37% drop in revenue, Reuters reported.  Nortel, which filed for bankruptcy protection earlier this year, also said it is completing plans to decentralize some functions at each of its four main businesses to give it more flexibility as it decides which divisions to sell.

Source: Investment News Briefs Tuesday, May 12, 2009

Question is: Will the oft-dithering Congress actually take some action to enact this proposal? You can bet that the hallowed halls of the Capitol are buzzing with debate and counter-debate at the moment, but trying to get blustering lawmakers to agree on something requires the patience of a saint.

Meanwhile, Federal Reserve Chairman Ben Bernanke is 3,000 miles away, where he made a speech at the London School of Economics today. I was struck by this tasty soundbyte:

“It is unacceptable that large firms, which government is now compelled to support in order to preserve financial stability were among the greatest risk-takers during the boom period… The existence of too-big-to-fail firms violates the presumption of a level playing field among financial institutions.”

Unacceptable, yes. But apparently not unacceptable enough to bail them out anyway – and then going on record to advocate more of the same. I wonder if his helicopter ever runs out of fuel.

Specifically, Bernanke stated that, “Fiscal actions are unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system.” And in Fed-speak, that also means leaving the door open for more corporate bailouts for firms that don’t deserve it – but will get it anyway. In return, Bernanke says they must accept the additional regulation that will follow.

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Cash Grab

On Monday, almost-President Obama asked for the remaining $350 billion of the initial $700 billion bailout package to be released into the economy. And while Bernanke says Obama’s rescue package proposal should provide a “significant boost” to the economy, it might not be enough.

The most pressing need appears to be an effort to remove the “large quantity of troubled, hard-to-value assets” from banks’ balance sheets. That would involve setting up what Bernanke calls “bad banks” to hold the assets in exchange for cash and equity in the bank. Another move could be for the Treasury to simply buy the assets (using public money, of course).

But until this situation plays out further and we see what kind of effect all this stimulus has, we simply don’t know whether it will work. In addition, there’s a real concern about how the economy and market reacts once the government begins to return to “normal” economic and monetary policy and some have questioned whether the Fed has an exit plan.

Bernanke is right about one thing, though: “The world is too interconnected for nations to go it alone in their economic, financial and regulatory policies… International co-operation is thus essential if we are to address the crisis successfully and provide the basis for a healthy, sustained recovery.”

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Tech Is Dead? Not At This Firm…

Speaking of international affairs, it’s rare to find a company whose quarterly profits just jumped by 33%… but that’s the case for Indian tech giant Infosys (Nasdaq: INFY).

Thanks to signing a range of new contracts, the firm raked in 16.4 billion rupees ($343.4 million) during the fourth quarter.

And despite Infosys CFO V. Balakrishnan calling it a “one-off event,” Infosys still stands to reap some reward from the fallout of the accounting fraud at its chief rival, Satyam Computer (NYSE: SAY), which boasts General Electric (NYSE: GE) and IBM (NYSE: IBM) among its clients.

Infosys is likely to continue to see growth in 2009, thanks to the Satyam situation, plus the recent multi-year contract it signed with Astra-Zeneca (NYSE: AZN), and the devaluation of the Rupee, which makes it more competitive.

Infosys is a current holding in the Xcelerated Profits Report (XPR) portfolio – one faring well for us, thanks to our strategy of selling covered calls against our shares, in addition to picking up a dividend on the stock.

To find out how you can join the XPR team and discover which companies you should add to your portfolio, check out this report.

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Profit Slump In U.K. As Economy Experiences “Frightening Deterioration”

In Britain, however, many firms aren’t faring as well as Infosys.

Accountants Ernst & Young said the number of publicly traded companies that issued profit warnings jumped by 17% in 2008 – a seven-year high.

And with the British Chambers of Commerce stating today that there’s a “frightening deterioration” in the U.K. economy (one report just out stated that the British GDP growth slumped by 1.5% during the fourth quarter – the worst performance in 28 years), it doesn’t bode well for an improvement in 2009.

In Japan, the situation is even worse…

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Japan: “Closed For Business”

Research firm Tokyo Shoko said today that corporate bankruptcies shot up by 27.7% in December, compared with a year earlier.

In all, 1,362 companies filed for bankruptcy, as the fallout from the financial crisis clobbered Japan’s economy. And 33 publicly traded firms also went out of business in 2008 – the most in postwar history – as the nation saw bankruptcies rise by 11% for the year – the most since 1997.

The news isn’t surprising, given the steep drop in Japanese exports like cars, and the fact that the country slid into its first recession in seven years during the third quarter.

Source: Stimulus, Bailouts, Bernanke… And The Great U.S. Cash Grab

• PepsiCo Inc. (PEP) announced yesterday (Thursday) that a big rise in international revenue helped offset higher commodity costs and boost its first-quarter profit by 5%. Net income for the first quarter jumped to $1.15 billion (70 cents per share), up from $1.10 billion (65 cents per share) last year. Revenue in the international division grew the most, rising 27%, the Associated Press reported.

• Credit Suisse Group (CS), Switzerland’s second-largest bank, announced a ($2.1 billion) loss for the first quarter. The bank also said it had net writedowns of $5.3 billion for big buyout loans and mortgage-backed securities. The bank, which employs 48,000 people worldwide, said earlier this week that it was cutting a further 500 employees in addition to the 1,000 jobs it has already eliminated in investment banking, the Associated Press reported.

• Billionaire Nelson Peltz’s Triarc Companies Inc. agreed to buy Wendy’s International Inc. for about $2.4 billion, bring the third-biggest U.S. hamburger chain under the same umbrella as his Arby’s Restaurant Group Inc. restaurants, Bloomberg News reported. Wendy’s put itself up for sale last June, under pressure from Peltz, who controls nearly 10% of Wendy’s and has repeatedly pressed the chain for better financial results.

• Earnings for AstraZeneca PLC (AZN), Bristol-Myers Squibb Co. (BMY) and Bayer AG (OTC:BAYRY) declined for the first quarter, as the drugmakers faced increased competition from generic manufacturers. AstraZeneca’s net income unexpectedly fell 3.7% to $1.50 billion. Bristol-Myers’ first-quarter net income fell 4.2% to $661 million. Bayer reported that profit that beat analyst estimates, but net income fell 73% to $1.21 billion.

• State-owned aviation company Dubai Aerospace Enterprise said it plans to spend a further $2 billion through 2009 to expand its fleet. In November, the company ordered 200 Airbus SAS and The Boeing Co. (BA) planes, Bloomberg reported.

• Merrill Lynch & Co. Inc. (MER) shares gained after the securities firm announced it would maintain its dividend yesterday (Thursday). The board of directors declared a regular quarterly dividend of 35 cents per common share payable May 28, 2008, to shareholders of record on May 8, 2008, the company announced in a statement.

• Newmont Mining Corp. (NEM) Chief Executive Officer Richard O’Brien said yesterday (Thursday) that gold could reach $1,100 an ounce in 2009, Reuters reported. O’Brien went on to cite a number of factors that make him bullish on gold, including “diminishing mine output, strong jewelry demand, inflation and the dollar weakness.”

• Celestica Inc. (CLS), maker of Microsoft Corp.’s (MSFT) Xbox 360 video-game console, earned $29.8 million in profit for the first quarter compared to a $34.3 million loss for the same period on the prior year. Earnings of 13 cents per share compared to a loss of 15 cents per share the year prior beat analyst expectations, sending the stock up over 30% prior to the close yesterday (Thursday).