• Two people told Reuters that General Motors Co. (OTC:MTLQQ) is prepared to sell Opel, its European carmaker, to Canada’s Magna International Inc. (NYSE: MGA). The board of trustees that controls a majority stake in Opel has the last word on which Opel’s buyer will be. GM was thought to be selling Opel to either Magna of RHJ International SA.

• Nearly 360,000 U.S. housing units – or an average of one in every 357 units – filed for foreclosure in August, down 1% than in July. Nevada remained the state with the highest foreclosure rate, one in 62 units, for the month, followed by Florida’s rate of one in 140,MarketWatch reported.

• The Bank of England kept its benchmark interest rate at 0.5% and kept plans to buy as much as $290 billion (175 billion pounds) in assets to prevent the U.K. economy from slumping further into recession. The U.K.’s FTSE-100 Index responded to the move by rising above 5,000 for the first time in nearly a year, Bloomberg News reported.

• Emerging market stocks, as measured by the MSCI Emerging Markets Index, are at their most expensive level in nearly nine years, according to data compiled by Bloomberg. Valuations are 19.9 times earnings, and emerging market shares have risen 53% this year as a result of global government stimulus packages, interest-rate cuts, and optimism that the financial crisis is over.

• House prices in England rose 0.8% in August, their second consecutive monthly gain, according to a survey by HBOS, which is owned by Lloyds Banking Group plc (NYSE ADR: LYG). Prices are at nearly the same level as the beginning of 2009, but 10.1% lower than they were in August 2008, MarketWatch reported.

• Turkey’s economy shrank 7.0% in the second quarter, Turkish Statistics Institute said, a sharp pace but a much better performance than the 8.0% decline many analysts expected,MarketWatch reported. The second-quarter figures are much better than Turkey’s 14.3% gross domestic product (GDP) tumble in the first quarter. Thursday’s data “showed that Turkey has become the latest economy to emerge from recession, rebounding strongly in the second quarter of this year,” Neil Shearing, emerging Europe economist at Capital Economics, wrote in a note to clients.

• Japan’s third-largest brewer Suntory Holdings Ltd. is in talks to buy drinkmaker Orangina – maker of Schweppes, Oasis and other brands – from Blackstone Group LP (NYSE: BX) The brewer seeks to expand outside its domestic market, which entrenched deeply in recession during the global financial crisis. “Purchasing Orangina would be a stepping stone to further development in global markets, including Europe,” Shigeo Kikuchi, an equity manager at Takagi Securities Co., told Bloomberg. “Japan’s beverage industry is saturated and companies need to look for overseas markets to grow so the move is inevitable.”

Source: Investment News Briefs Friday, September 11, 2009

• The special inspector general for the Treasury’s Troubled Asset Relief Program (TARP) said U.S. taxpayers could be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, Bloomberg News reported.  In testimony prepared for a hearing before the House Committee on Oversight and Government Reform, Neil Barofsky said the Treasury’s $700 billion bank-investment program represents only a fraction of all federal bailouts to resuscitate the U.S. financial system. “TARP has evolved into a program of unprecedented scope, scale and complexity,” he said. Costs include $6.8 trillion in Federal Reserve guarantees, $2.3 trillion in programs offered by the Federal Deposit Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and $7.2 trillion in federal money for Fannie Mae (NYSE:FNM), Freddie Mac (NYSE: FRE), and other federal programs, he said.

• A survey of economists released yesterday (Monday) said the U.S. recession’s hold on the economy appears to be easing but likely has not yet ended, Reuters reported. The National Association for Business Economics’ (NABE) quarterly industry survey found that demand is stabilizing, but a small majority of the 102 respondents said their firms had not yet seen the bottom. The survey “provides new evidence that the U.S. recession is abating, but few signs of an immediate recovery,” said Sara Johnson, managing director of global macroeconomics for IHS Global Insight, who helped analyze the report for the NABE.  “Industry demand was still declining in the second quarter of 2009, but the breadth of decline had narrowed considerably since late 2008, raising prospects for stabilization in the second half” of the year, she said.

• General Motors Corp. (NYSE: MTLQQ) garnered three final offers for its Opel unit in Europe, with Germany’s preferred bidder,Magna International Inc. (NYSE: MGA), planning to take a bigger stake from its Russian partner, Bloomberg News reported. RHJ International SA (EBR: RHJI) and Beijing Automotive Industry Holding Co. also submitted offers. Magna, the largest Canadian car-parts manufacturer, would buy 27.5% of Opel compared with 20% in an earlier proposal, said a GM spokesman.  Germany selected Magna as preferred bidder on May 30. Detroit-based GM, seeking to salvage its European operations afteremerging from bankruptcy, set today as the deadline for taking final offers for Opel, which includes the Vauxhall brand in the U.K.  “The final bids will now be analyzed and compared by GM,” GM Europe said in a statement.

• Mortgages on commercial property held by U.S. banks have been failing at the fastest rate in nearly 20 years, the Wall Street Journal said.  Losses on loans used to finance commercial spaces would possibly reach about $30 billion by the end of 2009 at the current rate.  The $30 billion estimate is based on financial reports filed by more than 8,000 banks for the first quarter, The Journalsaid. The commercial real-estate market, valued at about $6.7 trillion, represents 13% of the United States’ gross domestic product.

• Shares of Human Genome Sciences Inc. (Nasdaq: HGSI) skyrocketed 276.81% after the Rockville, Md.-based company’s Benlysta drug reduced symptoms in patients inflicted with lupus, a disease that is notoriously difficult to treat. The company tested 865 patients in a one-year study with the drug, which is co-produced with GlaxoSmithKline PLC. Leerink Swann LLC analyst Joseph Schwartz expects the drug to launch next year andgenerate $1.2 billion in sales for HGSI in 2013 and $2.4 billion in 2015, according to a report by Dow Jones Newswires. HGSI closed at $12.51 yesterday (Monday), up $9.19.

• A potential tax liability as well as growing tensions betweenVolkswagen AG (OTC ADR: VLKAY) and Porsche Automobil Holding put a speed bump in the way of a potential Volkswagen acquisition of Porsche’s sportscar division, The Wall Street Journal reported, citing people familiar with the matter. Both companies unsuccessfully attempted last weekend to find a way around a tax payment that could be triggered by the sale Porsche’s division. Volkswagen contested the significance of the issue, with a spokesperson telling The Journal “a transparent maneuver to torpedo a sensible business idea.” Porsche is also in negotiations with Qatar to give the emirate a substantial stake in the German automaker.

• The Conference Board’s Leading Economic Index (LEI) rose slightly in June, up 0.7% following a 1.3% gain in May and a 1% rise the month before. “The recession has been losing steam since the spring, although very large job losses continue. Nevertheless, confidence is slowly rebuilding. Financial markets are less volatile. Even the housing market is stabilizing. If these trends continue, expect a slow recovery this autumn,” said Conference Board economist Ken Goldstein.  The LEI has improved 4.1% in the past six months.

• New AOL LLC Chief Executive Officer Tim Armstrong revealed his plans to overhaul the troubled Time Warner Inc. (NYSE: TWX) division’s advertising and develop more localized websites in an effort to resuscitate falling revenues. The former Google Inc.(Nasdaq: GOOG) executive says sites with city guides can help fill a void of community information on the Internet, which in turn will bring in visitors and advertisers. “AOL still has a really large opportunity in front of it,” Armstrong said in a July 16 interview with Bloomberg News. “It comes with a very difficult path, but if we can navigate the path and navigate what needs to be done here and do it transparently, quickly and deliberately, I think AOL can be a successful company, and that’s why I came.” Time Warner will spin off AOL later this year.

Source: Investment News Briefs Tuesday, July 21, 2009

Meanwhile, a bankruptcy filing is not certain in the GM restructuring case, and reports that the Obama administration will steer the automaker into bankruptcy as early as this week are premature, Reuters reported on Friday, citing a source familiar with the situation.

Negotiations will likely continue right up to the May 31 deadline, the source said, with the Chrysler LLC case – where the process continued until the deadline – serving as a good comparison.

Magna International Inc. (NYSE: MGA) appeared to gain the early edge Friday in the race to buy Opel, surpassing rival bidders Fiat S.p.A. (OTC: FIATY) and RHJ International Inc. (PINK: RHJIF).

German officials said they were leaning toward the offer submitted by the Magna, a Canadian car parts group, because its plan would leave open four manufacturing plants located in the country.

With Federal elections looming in September, any merger plan containing the possibility of massive job losses would appear to be dead on arrival.

A German government official, who preferred to remain anonymous, said the Magna offer was gaining significant support in Berlin.

“There is a rather clear preference for Magna’s offer emerging within the government,” the official told Reuters.

GM will make the final decision on who ultimately prevails in the battle for Opel, but the German government will have a say because it is seen as the likely source of financing guarantees for the eventual winner.

Even though the Chinese automaker submitted a letter expressing interest in purchasing Opel a day after the May 20 deadline for bids, a concrete offer may not be forthcoming, Bloomberg News reported, citing people familiar with the matter.

“The risks are huge” for a potential Chinese bidder, Yu Bing, an analyst at Ping An Securities in Shanghai told Bloomberg. “Chinese carmakers aren’t big or experienced enough and lack the technology and management skills to buy something like Opel.”

According to GM, Opel needs $4.6 billion (3.3 billion euros) in new government financing to survive, Bloomberg reported. The carmaker is selling a majority stake in its European operations while preparing for a probable government-forced June 1 bankruptcy.

The Magna and RHJ bids include cash, while Fiat’s calls for $9.8 billion (7 billion euros) of financing, Bloomberg’s sources said. Fiat’s bid is two-pronged: It contains an offer for the Opel and Vauxhall units, and alternatively offers to also buy GM’s operations in Brazil and Argentina.

Fiat Chief Executive Officer Sergio Marchionne aims to create the world’s second-largest car company, second only to Toyota Motor Corp (ADR NYSE: TM), by combining Fiat and Opel with Chrysler and GM Europe and possibly GM’s Latin American operations.

Magna’s primary interest in Opel centers around increasing sales in Russia to about 1 million units, GM Europe CEO Carl Peter Forster said last week in a Bloomberg interview.

Opel, which is headquartered in Ruesselsheim, near Frankfurt, and traces its roots in Germany back to the 19th century, has manufacturing facilities in St. Petersburg and Uzbekistan, which could accelerate growth in the two countries.

Magna’s plan has also gained favor because it will keep the existing European management team in place.

Source: Chinese Express Interest in Opel, GM Bankruptcy Still “Not Certain”

• Crude oil yesterday (Wednesday) rose above $62 a barrel, a six-month high, after the U.S. government released a report that showed inventories fell below forecasts. “The big drops in both crude and gasoline are very bullish,” Nauman Barakat, senior vice president of energy at Macquarie Futures USA Inc., told Bloomberg. “If people were surprised by how fast crude oil moved from $50 to $60, they will be really shocked by how quickly the market will hit $70.”

• The courtship of General Motors Corp.’s (NYSE: GM) Opel unit is down to three potential suitors – Italy’s Fiat SpA (OTC ADR: FIATY), Canadian-Austrian car parts group Magna International Inc. (NYSE: MGA) and investment firm RHJ International, Reuters reported. GM has a June 1 deadline to restructure and raise capital if it wants to avoid a forced bankruptcy.

• Brazil is on the mend from its biggest economic drought and may grow as much as 4% in the second half of the year, Itau Unibanco Banco Multiplo SA’s (NYSE ADR: ITU) Chief Executive Officer Roberto Setubal said at a conference in New York. “Our economy is showing very strong signs of recovery,” Setubal said, Bloomberg reported.  “The pace of growth is already there, and I believe we will see a very strong second semester in Brazil.”

• Target Corp. (NYSE: TGT) and BJ’s Wholesale Club, Inc. (NYSE: BJ) reported better-than-expected earnings for the first quarter. Target did so by reining in expenses and inventory. BJ’s – which raised its first-quarter forecast earlier this year – cited higher-than-expected merchandise sales and margins, Reuters reported.

• President Barack Obama is expected to quickly sign a bill imposing sweeping new limits on the credit card industry passed by Congress yesterday (Wednesday), Reuters reported.  The House of Representatives voted 361-64 to approve the bill as adopted on Tuesday by the Senate, in a major win for the president and congressional Democrats.  The so-called “Consumer’s Bill of Rights” would strictly limit credit card issuers’ ability to raise interest rates on cardholders’ existing balances and to charge certain fees.

• California voters yesterday (Wednesday) struck down five measures backed by Republican Governor Arnold Schwarzenegger and the Democrat- led legislature that were intended to shore up the state’s finances. With the governor expecting California to have $21 billion less than it needs over the next 13 months, the most-populous U.S. state is on the verge of running out of cash for the second time this year after the ballot measure defeat added $6 billion to the budget deficit, Bloomberg reported.

• Wall Street securities brokers are not expected to rehire many of the workers let go during the global financial meltdown, a New York City fiscal monitor said in a gloomy report released yesterday (Wednesday). The Wall Street firms will replace only a small number of the lost jobs by 2013 even if the industry returns to profitability next year, the city’s Independent Budget Office said in the report, according to Reuters.

• A group of Indiana pension funds filed court papers late yesterday (Wednesday) objecting to a plan to auction Chrysler LLC’s assets and said a U.S. District Court judge should rule on the legality of the sale, Bloomberg reported.  The pension funds, which hold first lien debt of the automaker, asked U.S. Bankruptcy Judge Arthur Gonzalez in New York to block the sale, claiming the plan is illegal and infringes their rights.  The funds are also asked for appointment of a trustee to run Chrysler.

Source: Investment News Briefs  Thursday, May 21, 2009

This from Today’s Financial News:

Detroit is once again on its knees in Washington begging for help. The nation’s automakers are desperate to paint a dire picture of their financial woes.

Whether their pleas are founded or are merely lame attempts at grabbing some free advertising is up to you to decide. To me, it is all a show. After all, the Big Three have not had this much free TV time since the last time they were begging for a handout.

Today, Ford (NYSE:F) is tugging on the economic hearts of Americans by releasing a report that shows if it fails over 3,000 workers in at least 25 states will lose their jobs. It is a disheartening failure, but last I heard Ford claimed it was not in danger of failing.

The company’s latest figures show Ford has a cash horde of over $18.5 billion and is planning to increase that position (through cutbacks and sales of assets) by as much as $17 billion in the near future. What’s more, Ford has ready access to a $10 billion line of credit.

If Ford has enough cash to keep its creditors at bay and its operations running, why is it on Capitol Hill begging for money?

Simple answer: easy money.

If somebody were to offer you an ultra-cheap loan that would increase your profit potential, wouldn’t you take it? As long as the interest rate (Congress is proposing a 5% rate) is lower than what Ford is currently paying, which it most certainly is, the loan is a good idea.

But Washington is not in the business of loaning corporations money, or at least it is not supposed to be. Congress needs to ensure it only intervenes in the most serious cases.

General Motors (NYSE:GM) with its dangerously low liquidity may truly need help, but Ford does not. If Ford gets a piece of the bailout action, Congress will unleash an avalanche of cries from major companies across the country searching for similar help.

Invest in the supply chain

Washington has the potential to send a handful of auto-related stocks soaring. While Wall Street is focusing on the Big Three, their suppliers are the ones truly getting a bailout. Many companies depend solely on the health of Detroit to fund their profits. If General Motors were to disappear, so would they.

That is why smart investors are not focusing on whether or not Ford, GM, or Chrysler will get a loan from the Treasury Department. They are looking to see which companies will benefit the most from a Washington-induced cash infusion.

Check out companies like American Axle and Manufacturing (NYSE:AXL) and its $1.50 share price. Or Magna International (NYSE:MGA). And you cannot miss Dana (NYSE:DAN) and its recent credit downgrades.

All three of these companies would likely see a strong surge in share price if news of successful bailout package leaks out of Washington. But you must not get carried away with your profit expectations. Analysts are already expecting some sort of industry relief, so government assistance is already priced into share price to a degree.

Anytime I find a stock that is about to make a big move in one direction or the other, I instantly think of a straddle opportunity. This options strategy (an investor buys call and puts options on the same strike price and expiration) will profit as long as the underlying stock makes a significant move in either direction.

This strategy may be unknown or confusing to many investors, so let me know if you would like more details. If I get enough demand, I will create a strategy for you to follow and post it on the site.

A desperate situation

There is no doubt that Washington has its work cut out. Detroit is begging for help. Americans know it is wrong to intervene with the free markets, but do not want to see their fellow citizens lose their livelihoods.

As investors, we must stand back and take an objective look to it all. When we do, the profit opportunities begin to shine through quite clearly.

Take a look at the automotive supply chain and the companies upstream of Detroit that will profit from Washington’s blank check.

I will leave you with this as food for thought: Obama’s economic aides are telling us any new economic stimulus must focus on the middle-class and not the nation’s rich elite. Their reasoning is that average Americans are better at spending their money than the nation’s upper class.

Source: Profit from Washington’s bailouts

• The iShares MSCI Brazil Index (EWZ), an exchange-traded fund (ETF) that was the topic of the popular “Buy, Sell or Hold” feature a week ago Monday (Oct. 27), surged another 9.82% yesterday (Tuesday) and is now up 42% in the six days since Contributing Editor Horacio Marquez rated the ETF as a “Buy” in his column. The shares, which were recommended at $29.94, zoomed $3.81 each, or 9.82%, to close at $42.60, and have now gained $12.66 a share, or 42% since they were recommended by Marquez. They traded as high as $43.35 yesterday – an increase of 45% from their recommendation price.

• Magna International Inc. (MGA), the largest auto-parts maker in North America, reported a $215 million third-quarter loss and cut its quarterly dividend 50% to 18 cents. The dividend cut reflects the “reduction in profitability and uncertainty about the timing of an industry recovery in our traditional markets,” Magna said in a statement.

• U.S. factory orders in September fell three times more than forecast, Bloomberg reported, slumping 2.5% after a 4.3% drop in August. “There’s not a lot of hope on future orders and production,” Guy Lebas, chief economist at Janney Montgomery Scott LLC, told Bloomberg. “The economy was on the edge of a precipice, and the credit crisis gave it a shove. Manufacturing will weaken because of slowing exports.”

• October same-store sales at Walgreen Co. (WAG) rose 2% and pharmacy same-store sales rose 2.8%. As of Oct. 31, the company operated 6,544 drugstores, 600 more than it did a year ago, Reuters reported.

• Shares of Yahoo Inc. (YHOO) got an unexpected lift when brokerage firm Collins Stewart raised Yahoo’s shares from “hold to “buy.” Collins Stewart cited a possible search deal with Google Inc. (GOOG) or Microsoft Corp. (MSFT), and set a target for $18 share, Reuters reported.
• Oil prices jumped nearly 12% yesterday (Tuesday) as Saudi Arabia cut its crude exports.  Light, sweet crude rose $7.59, or 11.88%, to settle at $71.50 a barrel. Oil had previously fallen more than 55% since hitting a record high $147.27 a barrel in July.

• Archer Daniels Midland Co. (ADM) said yesterday (Tuesday) that its fiscal first-quarter earnings more than doubled. A food processor and ethanol producer, Archer Daniels Midland reported quarterly profit of $1.05 billion, or $1.63 per share, up from $441 million, or 68 cents per share, last year. Sales jumped 65% to $21.16 billion.

• After four consecutive quarters of declining profit, UBS AG (UBS) posted a net profit of $252 million (296 million Swiss francs) during the third quarter. The Swiss bank benefited from a tax credit of $776 million (913 million francs) and a revaluation of credit positions that resulted in a $1.88 billion (2.21 billion francs) gain on its books, The Associated Press reported.

• The Federal Communications Commission yesterday (Tuesday) approved Verizon Wireless’ (VZ) planned $28 billion purchase of Alltel Corp., The Associated Press reported. Verizon is paying $5.9 billion and assuming $22.2 billion of Alltel’s debt. Verizon also agreed to sell assets in 22 states.

Source: Global Investing Roundups Wednesday, November 5th, 2008