There is a rare bit of good news for the newspaper industry this morning – and it’s a whopper!

Share prices across the downtrodden sector are soaring today thanks to word from Gannett (NYSE:GCI) that the company expects to handily beat its third-quarter earnings projections.

Gannett told its investors today to expect per share earnings (after one-time costs) in the range of 39 cents to 42 cents when the company releases its latest quarterly figures on October 19.

Before the press release, estimates pegged the figure at 28 cents per share.

Not surprising, the increase is not due to a sudden increase in subscriptions or advertising revenue. Instead, a reduction in paper costs and operational cutbacks are at work.

The news has sent shares of the $2.7 billion publisher up by more than 15%. Meanwhile, firms like the New York Times (NYSE:NYT) and Journal Communications (NYSE:JRN) are up by more than 5%.

But the industry’s big winner is Lee Enterprises (NYSE:LEE), with shares of the small cap soaring by nearly 60% on the bullish news.

Piggyback Profits

The high-flying action makes Lee an interesting stock to watch over the next few weeks, especially as third-quarter earnings figures begin to roll onto the Street.

With short-term debt of over $1.3 billion and a cash pile a mere fraction of its upcoming obligations, it is no wonder Lee’s shareholders are eager to sell at current levels. They may not get another shot.

If the company is to survive, it is going to spend a lot of time restructuring its current capital structure.

There is a good chance today’s optimistic news will be the catalyst that brings the company’s debt owners to the table in an effort to extend credit deadlines. It certainly helps to prove the newspaper industry is not dead just yet.

If you are thinking about making a move, don’t jump into the fire today. Wait for shares to give back some of the quick-found gains. More importantly, hold out for positive restructuring news or other material information.

Lee has a shot at success. Gannett’s news proves it is possible. But there is likely to be plenty of volatility ahead as the company fights to shed the dangerous weight of immense debt.

We got a rare bit of good news this morning. But will it become a trend? We’ll find out soon enough.

Source: No bailout Needed: Good News from The Rags

Ad revenues in the newspaper industry plunged 16.7% last year to $37.8 million r, according to the Newspaper Association of America (NAA). The 2009 take is estimated to fall another 17.3% to $31.6 billion according to Alan Mutter, a Silicon Valley executive who once lead the newsrooms of the Chicago Sun-Times and San Francisco Chronicle and now writes a blog titled “Reflections of a Newsosaur.”

Mutter’s estimate would put ad revenues at their lowest levels since 1965, when the industry took in $4.42 billion, or $30.22 billion when adjusted for inflation, the Columbia Journalism Review (CJR) reported.

While the worst economic downturn since World War II has eviscerated the fortunes of print media companies like The New York Times Co. (NYSE: NYT), The Washington Post Co. (NYSE: WPO) and Gannett Co. Inc. (NYSE: GCI), publishers will see secular decline in revenue even after the financial crisis subsides.

“Think, for instance, the classified ads business of newspapers, which has been walloped by eBay and craigslist (with a final indignity provided by the cyclical collapse of the housing bubble),” the CJR said. “Most of those revenues aren’t coming back. That’s a secular decline.”

The result of this decline means a “new reality” for publishers as they transition from the printed page to digital content. All the major publishers are online and have been for some time.

The New York Times’ Web site began in 1995, when the Internet was just starting to enter consumers’ homes. Ten years later in 2005, The Timestried its hand at a subscription-based model for its Web site, known as TimesSelect, a service that charged readers without subscriptions $50 a year for online access to editorial content.

According to The Times Co., TimesSelect had about 227,000 paying subscribers by August 2007. However, accessing the content for free were an additional 471,200 home delivery readers, as well as another 89,200 college students.

But the estimated 13 million readers who accessed the site that month, according to Nielsen/NetRatings reports, dwarfed those subscriber-users. The following month, the Times Co. gave up on TimesSelect and made the Web site free for all users in September 2007.

Since then, nytimes.com has soared to become the most visited newspaper site in the United States, with roughly 20 million unique visitors per month as of March. But The Times and other publishers are still trying to figure out how to generate revenue and turn a profit, especially now that the recession is cutting into advertisers’ budgets.

“As we continue our transition from a company focused primarily on print to one that is increasingly digital in focus and multiplatform delivery, online advertising revenues are a more important part of our mix,” said The Times Co. President and Chief Executive Officer Janet Robinson. “They made up 21% of our ad revenues in the quarter, up from 18% in the same period a year ago.”

Print and online ad revenue for U.S. newspaper publishers fell 29% in the second quarter from $9.6 billion to $6.82 billion, according to the NAA. Part of this stems from a cyclical decline in spending, while the rest comes from the “new reality” that people aren’t reading as many printed newspapers as they used to.

“This data represents a rearview mirror perspective on what we all know was a terrible stretch of bad road,” said NAA Chief Executive Officer John Sturm.

And the data comes even as online news audiences are growing: The latest data from the NAA shows online newspaper readership was 73.3 million users in the first quarter, a 10.5% increase from the 66.4 million the year before.

A Financial Fork in the Road

Publishers are hoping the decline in online ad spending is cyclical, but some aren’t waiting for the recovery to take advantage of the growing information-hungry audience and what they hope is an inevitable upswing in ad revenue.

News Corp. (Nasdaq: NWS) Chairman and CEO Rupert Murdoch has vowed to charge for all of the online content of his newspapers and television news channels, including The Wall Street Journal, the New York Post and Fox News.

Much of the content on The Journal’s Web site is available only through a paid subscription of $1.99 per week, and is one of the few newspapers to successfully charge for its content, in spite of a backdoor to view articles for free via Google Inc.’s (Nasdaq: GOOG) popular search engine.

“If successful, we’ll be followed by all media,” Murdoch told the Financial Times.

Murdock predicts “significant revenues” from charging for differentiated news online.

But differentiated news isn’t enough for people to pay for it, according to Google CEO Eric Schmidt.

“In general these models have not worked for general public consumption because there are enough free sources that the marginal value of paying is not justified based on the incremental value of quantity,” he said to a group of British broadcasting executives.

Murdoch is hoping The Journal’s online success will carry over to its mobile applications for devices like Research in Motion Ltd.’s (Nasdaq: RIMM) BlackBerry and Apple Inc.’s (Nasdaq: AAPL) iPhone. His company will start charging consumers to read stories via those apps “in one to two months,” he told Reuters last week.

Several news outlets already have either ad-supported mobile news sites or device-specific applications. The Times and The Journal have the No. 2 and No. 5-most downloaded apps in Apple’s App Store for iPhone, respectively. NPR News is the most popular app.

A “Digital Vampire” Becomes a Partner to Some Publishers

Google News, which aggregates stories from the all over the Internet, currently generates ad revenue from news searches and doesn’t share any of it with the news sites – a business model that clearly doesn’t sit well with publishers.

Earlier this summer, Les Hinton, chief executive officer of Dow Jones and publisher of The Journal described Google as a “digital vampire.”

Speaking at the annual PricewaterhouseCoopers LLP Entertainment and Media Outlook event, Hinton accused Google of “sucking the blood” out of the newspaper business, and vowed new developments would level the playing field.

“There is a charitable view of the history of Google,” Hinton said. “[It] didn’t actually begin life in a cave as a digital vampire per se.”

Instead, by offering content free on the Web, the newspaper industry “gave Google’s fangs a great place to bite,” he said. “We will never know what might have happened had newspapers taken a different approach.”

Now, Google is trying a new way to share its take and possibly change the way people read news on the Web with its “Fast Flip” experiment, unveiled last week.

The idea behind Fast Flip is to present newspaper and magazine Web sites like a print publication, and users can quickly “flip” top stories in a selected category or specific topic found via Google’s search.

Google will share revenue with publishers such as The Times. Co. and The Post Co., but specific percentages were not given.

“The publishing industry faces many challenges today, and there is no magic bullet,” said Google News researcher Krishna Bharat in a blog posting. “However, we believe that encouraging readers to read more news is a necessary part of the solution. We think Fast Flip could be one way to help, and we’re looking to find other ways to help as well in the near future.”

Source: ‘New Reality’ for Newspaper Publishers Forces Search for New Revenue Streams to Tap Into

Porter Stansberry explains the forces behind the current rally The Daily Crux

America is running out of rope The Market Ticker

The world financial system’s Achilles’ heel The Daily Reckoning

Roubini on a U shaped recovery Naked Capitalism

Larry Flynt calls for a national strike The Huffington Post

Look for an X shaped recovery Real Clear Markets

The risk of double dip recession rising Financial Times

What the stress tests didn’t predict NYT

• A parade of bellwether U.S. companies reported disappointing earnings results yesterday (Tuesday) and cut their outlook for the future. Caterpillar Inc. (CAT) reported its first loss since 1992 and cut its projection for the full year by 50%. Pharmaceutical giant Merck & Co, Inc. (MRK) and chemical maker E.I. du Pont de Nemours & Company (DD) said profits fell 57% and 59% respectively, as both cut forecasts for the full year.
• After acquiring Citigroup Inc.’s (C) Smith Barney retail brokerage unit, Morgan Stanley (MS) is considering buying U.S. regional banks in a move to boost the company’s retail brokerage operations, MarketWatch reported, citing an article in the Nikkei newspaper. “We are looking for potential opportunities to buy a bank that has a presence in an important market in the United States,” Morgan Stanley’s Chief Executive Offer John Mack said in an exclusive interview.
• Continuing to reel from the shift of advertising to the internet, the New York Times Co. (NYT) reported a first-quarter loss of $74.5 million, or 52 cents a share, MarketWatch reported. Excluding special items, the company reported a loss of 34 cents a share as first-quarter revenue tumbled 19% to $609 million. The Times, like many newspapers and magazines, is having a difficult time coping with an advertising downturn.
• Computer spies were able to copy and siphon data related to the design and electronics systems of the $300 billion Joint Strike Fighter project, The Wall Street Journal reported yesterday (Tuesday).  The newspaper quoted current and former government officials as saying the intruders have repeatedly breached the Pentagon’s computer networks, making it potentially easier to defend against the plane.  The spies could not access the most sensitive material, which is kept on computers that are not connected to the Internet. Lockheed Martin Corp. (LMT) is the lead contractor on the Defense Department’s costliest weapons program.
• Senior officials at the Federal Deposit Insurance Corp. (FDIC) have privately discussed who might replace Citigroup Inc. (C) Chief Executive Officer Vikram S. Pandit if the embattled banking giant needs additional federal capital infusions, The Financial Times and MarketWatch both reported. The FDIC identified Chief Financial Officer Edward J. “Ned” Kelly III and ex-CFO Gary Crittenden as possible successors. However, the published reports also state that any initiatives to change Citigroup’s top management will be initiated by the U.S. Treasury Department.
• The U.S. Treasury Department’s plan to excise $1 billion of so-called “toxic” assets from the balance sheets of U.S. banks is vulnerable to all types of abuse and fraud and needs the protection of tough conflict-of-interest rules, government bailout watchdog Neil Barofsky said in a report released yesterday (Tuesday). Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program (TARP), said subsidies for public-private investment partnerships (PPIP) to buy assets could expose taxpayers to higher losses – without offering accompanying increases in the profit opportunities this program is supposed to create, Reuters reported. During the rest of this week, the Treasury Department is accepting applications from asset managers to manage public-private investment funds to buy the hard-to-value, illiquid securities that are backed by troubled mortgages still owned by banks.
• In a report released yesterday (Tuesday), The International Monetary Fund (IMF) says banks and other financial institutions face aggregate losses of $4.1 trillion in the value of their holdings because of a global financial crisis that is “likely to be deep and long lasting.” In that Global Financial Stability Report – which has become a closely watched barometer of the severity of the crisis – the IMF estimated that financial institutions around the world will have to write down about $2.7 trillion worth of loans and securities that originated in the U.S. financial markets between 2007 and 2010. That estimate is up from $2.2 trillion in the fund’s report in January, and is way up from its October estimate of $1.4 trillion, according to The New York Times. Conditions have especially worsened in the emerging markets – and particularly in Europe – where banks face more write-downs and may require fresh equity, even as companies attempt to refinance existing debt. The IMF said banks will endure two-thirds of the write-downs, but noted that pension funds and insurance companies also face steep losses.
• The Reserve Bank of India yesterday (Tuesday) lowered its key borrowing rate by 25 basis points to 3.25% and its lending rate by 25 basis points to 4.75%.”The further policy rate cuts affected as part of this policy should be a definite signal for banks to reduce lending rates,” RBI Governor Duvvuri Subbarao said at a press briefing.

Source: Global Investment News Briefs Wednesday April 22, 2009

• General Motors Corp. (GM) may drop its Pontiac and GMC brands, as it tries to cut costs before its June 1 deadline to prove profitable or enter bankruptcy protection, sources told Bloomberg. The brands of Chevrolet, Cadillac and Buick are likely safe, the sources said.

• Shares of Rosetta Stone Inc. rose 42% on their first day of trading, as the language-training company’s initial public offering netted $112.5 million, Reuters reported. Rosetta Chief Executive Tom Adams told Reuters it was hard to pick the right share price. “We are a long-term oriented group and we deliberated,” he said.

• Turkey’s central bank lowered its benchmark interest rate by 75 basis points to a record 9.75%, Bloomberg reported. In the past six months, the central bank has chopped seven percentage points from the benchmark rate.

• Zurich Financial Services AG (OTC: ZFSVY) yesterday (Thursday) agreed to buy American International Group Inc.’s (AIG) auto insurance unit for $1.9 billion. The deal marks the biggest divestment by AIG since the U.S. government rescued the insurance company in September, Reuters reported.

• The New York Times Co. (NYT) is cutting several weekly sections and will reduce freelance spending to save millions of dollars in annual costs, according to a memo obtained by Reuters. The paper is cutting pay for non-unionized employees at The Times and other papers and is seeking similar concessions from unionized employees. It also has threatened to shutter The Boston Globe if it cannot find ways to cut millions of dollars in costs at the money-losing paper.

• Canadian factory sales rose 2.2% in February the first time since July, according to a report yesterday (Thursday) that contained other small signs of economic recovery, Reuters reported. Excluding autos, sales slipped 0.2% but the decline was less steep than in the previous six months when the U.S. recession dampened appetite for Canadian goods.

• A pullback in new home construction in the U.S. combined with slower-than-expected economic growth in China pulled the price of copper down yesterday (Thursday).  Copper for three months delivery on the London Metal Exchange closed at $4,729 per metric ton – down $90 from Wednesday’s close, Reuters reported.

• Without enough votes for passage, Senate Democrats are scaling back legislation that would let bankruptcy judges alter mortgages, a spokesman for Senate Majority Leader Richard Durbin (D-IL), told Bloomberg. The main problem is whether the “cram down” provisions in the bill should be limited to certain loans or a specific timeframe, a spokesman for Durbin said. The bill passed the House of Representatives in March.

Source: Global Investment News Briefs Friday, April 17, 2009

Earlier this week, The New York Times posted a recipe for something called “the Bacon Explosion.”

This “massive torpedo-shaped amalgamation,” as the Old Gray Lady refers to it, consists of “two pounds of bacon woven through and around two pounds of sausage and slathered in barbecue sauce.”

I think I felt my arteries constrict just typing that sentence. If you want to see a close-up of the Bacon Explosion in all its coronary-inducing glory, check out the NYT piece here.

Now, two pounds of slathered pork might be a big deal in Kansas City (where the Bacon Explosion finds its roots). But in Washington D.C., that’s kid stuff.

That Ain’t Nuthin’

We saw a much bigger – and far more nauseating – “Bacon Explosion” this week when the new 647-page, $825 billion stimulus bill passed the House.

To give you a “taste” of what this pork-laden monstrosity contains, check out this excerpt from Speaker of the House Nancy Pelosi’s appearance on CBS.

CBS: Can you honestly say that every program in this plan is solely to stimulate the economy?

Pelosi: (nods) Yes I will.

CBS: How does $335 million in STD [sexually transmitted disease] prevention stimulate the economy?

Pelosi: I’ll tell you how – there is a, uh… I’m a big believer in prevention. And we have, uh – there’s a, uh, part of the bill on the health side of it that is about prevention. It is about, uh, it being less expensive to the states to do these prevention measures…

Okey dokey, Ms. Pelosi. I guess she took the word “stimulate” to mean something else there… hoping folks will loosen up and have a little more fun perhaps?

(Say, could this be the Democrat version of W’s exhortation to “go out and shop” after 9/11?)

A Real Disappointment

Let me put the snark aside and be serious for a second here: This bill is a real disappointment.

A number of commentators – including many of my fellow scribes in the newsletter-publishing world – were ready to judge President Obama a failure even before he took office. I was not one of those.

If you had to peg me somewhere on the political spectrum, I would call myself a pragmatic libertarian with a strong aversion to sound bites. It’s my experience that pretty much every political ideology – heck, maybe every ideology period – delves into unworkable extremes when pushed too far into “true believer” territory.

Left-wing, right-wing, socialist, libertarian, Chicago school, Keynesian school, you name it. (When it comes to economics, I’m partial to the Austrian school myself… but even there I take things with a grain of salt.) There are many flavors of kool-aid, and anyone with a fill-in-the-blank answer for how to fix the world’s problems in three easy steps is probably drinking some. As H.L. Mencken once said: “There is always an easy solution to every human problem – neat, plausible, and wrong.”

So, with that in mind, I was willing to give President Obama some benefit of the doubt.

In the course of his campaign, Obama showed a high degree of technical proficiency (important in a leader, as we learned disastrously via Bush’s lack of it)… he showed that he could run a tight ship… and of course the guy proved himself to be an excellent communicator, especially under pressure.

For all that, would the new guy be just like all the rest? Would the “change” prove to nothing but hot air?

Certainly possible, I thought to myself. Professional cynic that I am, though, I still found room to be open-minded.

After all, America really does need hundreds of billions to trillions worth of infrastructure upgrades… we really could benefit from a jump-start of the right alternative energy solutions as a bulwark against peak oil… Washington really could benefit from a new emphasis on intelligence and pragmatic real-world experience in policy making as opposed to blatant cronyism… and so on.

Snow Job

Sad to say, my small helping of “hope” has proven to be short-lived – like an asphalt daisy in the path of a steamroller.

Based on the status quo handling of the banking crisis thus far, the overwhelming “business as usual” nature of the stimulus plan, and the clear triumph of the old-school Hacks on the Hill, it looks like the Obama team is getting snowed. Bigtime.

In a scathing critique titled “A 40-Year Wish List,” the Wall Street Journal dissects the pork-laden plan:

We’ve looked it over, and even we can’t quite believe it. There’s $1 billion for Amtrak, the federal railroad that hasn’t turned a profit in 40 years; $2 billion for child-care subsidies; $50 million for that great engine of job creation, the National Endowment for the Arts; $400 million for global-warming research and another $2.4 billion for carbon-capture demonstration projects. There’s even $650 million on top of the billions already doled out to pay for digital TV conversion coupons.

In selling the plan, President Obama has said this bill will make “dramatic investments to revive our flagging economy.” Well, you be the judge. Some $30 billion, or less than 5% of the spending in the bill, is for fixing bridges or other highway projects. There’s another $40 billion for broadband and electric grid development, airports and clean water projects that are arguably worthwhile priorities.

The WSJ also offers a handy summary of the proposed “transfer payment increases:”

Not to put too fine a point on it, this stinks.

And “less than 5 percent of the total allocated to fixing bridges or other highway projects?” That doesn’t just stink, it sucks. It sucks like an Electrolux.

I don’t fault the Democrats for being civic-minded. As mentioned with John Thain and the “greedy banker” meme, that would be like faulting a leopard for having spots.

But what do these transfer payment increases actually have to do with stimulus? What could this course of action possibly be construed as other than the fulfillment of a “wish list,” as the WSJ points out? Where are the long-term positive investment impacts from creating much-needed jobs… getting small businesses back on their feet… upgrading the creaking backbone of our nation’s much-frayed transport networks and fossilized energy systems?

Change We Can’t Believe In

Call me naïve for half-expecting good things I suppose.

For those who aren’t yet ready to write Obama off as “just another politician,” I further suppose there’s room for him to turn this snow job around.

Maybe the new administration will be like Microsoft – getting the early versions clunky and wrong, but then pounding away with unlimited time and effort until they get it right.

My fear, though, is that even if team Obama gets their act together down the road – cracking down on the brainless hacks and setting the financial system on a better track – a short-term evaporation of the high expectations that peaked on inauguration day could cause a trap door to open beneath the current market rally. (If it hasn’t already done so, that is.)

Source: Say It Ain’t So, Mr. President

“Right now, given the concerns that we have over the size of this package and all of the spending in this package, we don’t think it’s going to work,” Rep. Boehner said yesterday (Sunday) on NBC-TV’s “Meet the Press.” “And so if it’s the plan that I see today, put me down in the ‘No’ column.”

The plan – detailed in a Money Morning report last week – could potentially pass the Democrat-dominated House without Republican support, The New York Times reported. But the stimulus plan will face major opposition when it comes before the U.S. Senate, U.S. Sen. John McCain, R-Ariz., told “Fox News Sunday.”

If at least two Republicans don’t approve the bill, the proposal won’t be able to achieve the majority vote of 60 it needs to be filibuster-proof. McCain said he also plans to vote “No” unless the stimulus bill is changed.

“We need to make tax cuts permanent, and we need to make a commitment that there’ll be no new taxes,” McCain said. “We need to cut payroll taxes. We need to cut business taxes.”

Added McCain: “We need to have a commitment that after a couple of quarters of [gross domestic product] growth that we will embark on a path to reduce spending to get our budget in balance.”

McCain lost the November presidential election to Obama.

That’s not all that’s taking place in what figures to be a busy stretch this week.

The economic calendar will heat up this week as economists get their initial look at U.S. gross domestic product (GDP) data for the 2008 fourth quarter. Needless to say, the results are not expected to be pretty, with analysts predicting a 5% contraction during that final three months of the year.

The report is due out Friday.

The United States has already been in a recession for a year, the National Bureau of Economic Research (NBER) reported in early December. This downturn – and the bigger-than-usual job cuts that have resulted – could generate a much-bigger financial crisis “aftershock” than many experts realize. Only two of the last 10 recessions to take place since the Great Depression have lasted a full year. But this one could last well into 2010, many economists fear.

The U.S. economy shrank 0.5% in the third quarter, marking the slowing pace since 2001 and continuing a still deepening recession that has wrung the markets since last year. GDP advanced 0.9% in the first quarter of last year and 2.8% in the second quarter, Bloomberg News reported.
Dana Saporta, an economist at Dresdner Kleinwort Ltd. in New York, told Bloomberg projects a 5.4% overall contraction in the fourth quarter. Analysts expect the malaise to carry over well into this year.

The stimulus packages – money spent by the newly departed Bush administration, as well as one planned by the newly installed President Barack Obama – will have a lot to say about how long the U.S. economy stays down. As the Republican opposition comments demonstrate, with Congress (the Democratic members, at least) promising a stimulus package by President’s Day (February 16th), Obama will have his hands full initiating some “give and take” from the dissenters of the current plan.

On Wednesday, U.S. Federal Reserve Chairman Ben S. Bernanke also leads the first Fed policy meeting of the Obama administration though he and his policymaking cohorts have no more wiggle room when it comes to cuts in the benchmark Federal Fed rate.

But the Fed statement should provide insight into the additional measures the central bank has in its arsenal to help jumpstart the economy.

Earnings season also moves forward with energy companies prepared to show the ill-effects of the drop in oil prices.  Exxon-Mobil Corp. (XOM) and Chevron Corp. (CVX) announce late in the week, as does consumer products giant Procter & Gamble Co. (PG).  Amazon.com Inc. (AMZN) also reports quarterly earnings during the week and analysts are speculating whether investors will cheer its results a la Google Inc. (GOOG) or frown along the lines of eBay Inc. (EBAY).

Market Matters

Last Tuesday, Barack Obama took the oath of office (for the first time) and became the 44th president of the United States.  In his inaugural address, President Obama called for “action, bold and swift – not only to create new jobs, but to lay a new foundation for growth.” He then acted “boldly and swiftly” by freezing the pay of high-ranking members of his administration.  One of those potential members, U.S. Treasury Secretary-nominee Tim Geithner, faced the wrath of Congress for his role in the mis-handling of the banking bailout plan and for his failure to pay a mere $34,000 in taxes.  Since the treasury secretary oversees the Internal Revenue Service, certain “rule sticklers” in Congress frowned upon his “careless mistakes.”  Still, he was approved by the Senate Finance Committee and is expected to be confirmed – just in time to oversee the distribution of that next round of Troubled Assets Relief Program (TARP) money.

While Obama begins a new job and tries to “faithfully execute the office” (rather “execute the office faithfully”), a few financial execs are headed for the unemployment line.  John Thain, formerly of Merrill Lynch & Co. Inc. fame/infamy, stepped down or was forced out from his role at Bank of America Corp. (BAC) after failing to disclose dramatic losses prior to the shareholder approved acquisition.

In an effort to stop the negativity – and no doubt to try and protect his own job – BofA Chief Executive Officer Kenneth D. Lewis and several cronies bought more than 500,000 company shares, a move that earned a collective yawn from investors.

Citigroup Inc. (C) will be replacing Chairman Win Bischoff with ex-Time Warner Inc. (TWX) CEO Richard Parsons, and also announced its intent to sell Japan’s Nikko Cordial Securities, a move that confirms that brokerage will no longer be considered a core business.  In other financial news, State Street Corp. (STT) reported a far-worse-than-expected quarter from its asset management business; U.S. Bancorp (USB) announced that profits fell to the lowest level since 2001; Capital One Financial Corp. (COF) posted a huge loss in the quarter and predicted that credit card defaults will only grow in 2009.

Across the pond, Royal Bank of Scotland Group PLC (ADR: RBS) forecast an annual loss above $40 billion which would be the largest ever reported in the United Kingdom.  On the heels of that news, the British government introduced new measures to its bailout plan, including a form of insurance to limit future loan losses.  Investors were hoping that earnings from non-financials would fare better, but Microsoft Corp. (MSFT), eBay, General Electric Co. (GE), Advanced Micro Devices Inc. (AMD) and Xerox Corp. (XRX), among others, disappointed with weak results as well (though Google and Apple offered some bright spots).  Time Warner, Intel Corp. (INTC), and Clear Channel (among others) announced layoffs, proving that most sectors of the economy are hurting.  Non-government arranged deals still exist as Pfizer Inc. (PFE) attempts to acquire pharmaceutical rival Wyeth (WYE) and Mexican billionaire Carlos Slim. Carlos Slim plans to invest $250 million into The New York Times Co. (NYT), The New York Times reported.

Economically Speaking

A rather slow week on the economic calendar last week allowed investors time to focus on the earnings data.  Housing starts fell for the sixth straight month and building permits, a predictor of future activity, dropped to the lowest level ever reported.

The never-ending layoff announcements continued to hinder the labor picture as jobless claims surged far more than expected.  In China, GDP rose by 6.8% in the fourth quarter, a number that would have prompted parades in this country. In China, however, those numbers confirm dramatic slowdowns in the world’s third-largest economy.

The “weak” report means that growth for all of 2008 came in as 9%, the first year since 2002 that China’s growth rate fell below double-digits.

Weekly Economic Calendar

Source: Financial Crisis Challenges Escalate as Republicans Announce Plans to Oppose $825 Billion Obama Stimulus

• Borders Group, Inc. (BGP) ousted its Chief Executive George Jones and replaced him with outsider Ron Marshall, a Wildridge Capital Management executive whose primary experience is turning around ailing companies, Reuters reported. George had been Borders’ CEO for the past three years.

• The New York Times Co. (NYT) opened its front page to advertisers, a controversial move within journalism circles but also one that follows rivals the Wall Street Journal and USA Today. The ad space is two-and-half inches high and runs across the bottom of the page, Reuters reported.

• Apple Inc. (AAPL) investors and fanatics breathed a sigh of relief when Steve Jobs said in a letter that his much rumored weight loss is likely due to a hormone imbalance and that he would remain as chief executive, CNNMoney.com reported. Apple’s stock responded accordingly, moving 4.22% on a day the tech sector was mum.

• On Jan. 16, the United Kingdom said it will lift the temporary short-selling ban on 34 of its financial companies, Bloomberg reported. The ban was introduced in September because short selling was believed to be the cause for market instability.

• Former eBay Inc. (EBAY) chief executive Meg Whitman – one of the people mentioned by John McCain in his presidential campaign as a possible nominee for a cabinet post – might run for political office in California, The Associated Press reported. Whitman resigned from board December 31 for personal reasons. Whitman resigned from the boards of The Procter & Gamble Co. (PG), eBay and Dreamworks Animation SKD (DWA) all as of December 31.

• Light, sweet crude for February delivery yesterday (Monday) rose $2.47 cents to settle at $48.81 a barrel on the New York Mercantile Exchange, as Israeli forces seized control of high-rise buildings and attacked houses in the Gaza Strip.

• Russia yesterday (Monday) reduced gas flows to Europe via Ukraine by one-sixth, a measure intended to stop its neighbor siphoning off fuel, Reuters reported. Russia cut off gas supplies to Ukraine on New Year’s day but several countries in southern and eastern Europe have reported new falls in gas supplies from Russia. About 80% of Europe’s gas supply passes through Ukraine.

Source: Global Investing Roundups Tuesday, January 6th, 2009

This

I’ll be the first to concede the going’s tough. That almost every “time-tested” strategy that worked well in bull markets is sputtering and collapsing.

But is it so bad we’ve given up on turning a profit? And just resigned ourselves to preserving our principal, right?

WRONG.

This week the Treasury sold $32 billion in 4-week bills at a yield of ZERO percent.

That’s not a typo. Investors actually clamored for the opportunity to lend the government their money in return for absolutely no return. In fact, investors bid $126 billion at the auction, more than four times the amount available.

As Michael Franzese, the head of government bond trading at Standard Chartered explains, “I have never seen this before… It’s all about capital preservation for the turn of the year, not capital appreciation.”

Forget unbelievable. It’s idiotic. What investors are essentially saying is that absolutely no better opportunity exists in the market right now – that survival is their paramount goal of investing, not profiting. But ignore what the lemmings are doing. Their folly is creating endless (and historic) opportunities for us to increase our wealth. Of course, simply telling you that will not suffice…

6 Market Investment Opportunities Right Now

Let me share with you a short-list of market investment opportunities I’m researching and taking advantage of on a daily basis. If nothing else, it should make you think twice before you follow the $32 billion worth of stupid money…

• International Stocks: Forget decoupling. It was a farce. The United States caught a cold… and international markets caught pneumonia. The offshoot? International markets are the cheapest on the planet – despite much stronger growth prospects than in the United States. For instance, the average Russian stock trades for just three times earnings! South Africa and Brazil are the next cheapest at six and seven times, respectively. An easy way to capture upside here is to rebalance your portfolio by adding money to your diversified international funds or investments. One of my favorite options here is the Templeton Emerging Markets Fund (NYSE:EMF), run by the best international manager around, Mark Mobius.
• “Free” Stocks: Hundreds of stocks trade below their cash balances, making them essentially free. Some will of course, burn through that cash faster than my wife on a shopping spree. So we can’t buy blindly. But that’s not the case for all of these stocks. One compelling opportunity I recently presented to my subscribers is Immersion Corp. (Nasdaq:IMMR) – a leader in haptic technology. Forget cash on hand, its patent portfolio is worth more than the current stock price.
• Income: Dividend yields rest at 15-year highs. Of course, not all dividend-paying stocks are created equal. Many will slash or suspend payments just to survive the downturn. But others won’t. The master limited partnership (MLP) space is rife with opportunity. Investors seem to forget these companies aren’t impacted by the price of oil and gas. They just get paid to transport it. The price of oil might be off 70%, but demand is not. My favorite play here is Kinder Morgan Energy (NYSE:KMP). It just increased its dividend and currently offers investors an attractive 8.7% yield.
• Munis: We all know there are NO guarantees in investing. But I can guarantee taxes are going up. How else will the government fund the billions upon billions in new spending? Especially, at a time when tax receipts will plummet. Thanks to a drop in corporate profits and the loss of 1.2 million taxpayers to unemployment. No surprise, the herd is piling out of munis ($7.4 billion so far this quarter) at exactly the wrong time. Their folly is creating attractive tax-free income yields and upside for us. For instance, the Vanguard Intermediate Tax Exempt Fund (VWITX) currently sports a 4.25% yield. That’s tax free and equivalent to earning 6.5% (based on a 35% tax bracket).
• Real Estate: Pricing remains completely irrational for real estate investment trusts (REITs). Some closed-end funds are off as much as 90%. Dirt is cheap – but it isn’t that cheap. This is a once-in-a-lifetime rebound opportunity. If nothing else, capitalize on the unstoppable trend of homeowners converting into renters by considering an apartment like Equity Residential Properties (NYSE:EQR).
• Short selling: An economic recovery won’t save every company. Plenty will remain in the tank, or worse, end up on the courthouse steps. Yet, most investors overlook the simple strategy to profit from these collapses – selling short. But they shouldn’t. In these markets it’s one of the few strategies consistently booking winners. That’s why I’ve been using it for my subscribers. Just last week, we booked a 50% winner in The New York Times Company (NYSE:NYT), for example.

Remember this is just my short-list. The key takeaway is simple – investment opportunities abound.

Granted, we might have to work harder than normal to unearth them. But we certainly don’t have to resign ourselves to handing over our hard earned capital to the government for nothing in return. After all, that privilege is reserved for our tax dollars.

Source: 32 Billion Reasons The Average Investor Will Fail

• Carlos Slim, the Mexican billionaire Forbes ranks as the second-richest man in the world, yesterday (Thursday) announced he purchased a 6.4% stake in New York Times Co. (NYT). Slim called the publisher of The New York Times an “attractive value” due to the stock’s 20% loss so far this year, Bloomberg News reported.

• Campbell Soup Co. (CPB) yesterday (Thursday) announced quarterly profit for its fiscal fourth quarter ended Aug. 3 increased 46% from the year ago period as the company increased prices to offset higher commodity costs. Campbell’s reported net earnings of $89 million, or $0.24 per share, compared to $61 million, or $0.16 per share for the prior year in a company statement.

• King Pharmaceuticals Inc. (KG) upped its takeover offer for Alpharma Inc. (ALO) yesterday (Thursday) to almost $1.6 billion. King raised its offer to $37 per share from its initial bid of $33 per share and said it plans to take the new offer directly to shareholders, Reuters reported.

• According to a report published yesterday (Thursday) by the Commodity Futures Trading Commission, commodity index traders only accounted for 13% of crude oil futures trading on the New York Mercantile Exchange in the first half of 2008, Bloomberg News reported. “At first glance the numbers seem inconsistent with the allegations that swaps traders and index traders are driving up the price of oil,” said Robert Webb, a finance professor at the University of Virginia.

• Bank of America Corp. (BAC) is in talks to buy Lehman Brothers Holdings Inc. (LEH), the Wall Street Journal reported, citing an unnamed source. Sources say Goldman Sachs Group Inc. (GS), also thought to be interested, will not takeover the beleaguered firm.

• Bristol-Myers Squibb Co. (BMY) yesterday (Thursday) reiterated its $60 per share offer for ImClone Systems Inc. (IMCL), even though the biotechnology company said earlier this week that a secret suitor is offering $10 a share more.

• Shares of Sunrise Senior Living Inc. (SRZ) yesterday (Thursday) reported a $31.8 million second-quarter loss. The company’s shares fell $2.56, or 13.5%, to close at $16.36 after falling as low as $16.22 earlier in the day. On Wednesday, the stock fell $1.82, or 8.8%.

• Deutsche Bank AG (DB) will today (Friday) announce the purchase of a controlling stake in Postbank, a profitable German institution worth about $14.6 billion, the International Herald Tribune reported. This opens up the door for a potential bidding war with Banco Santander SA (ADR: STD), which said Thursday that it wanted to negotiate the purchase of all of Postbank.

Source: Global Investing Roundups Friday, September 12th, 2008