Postmaster General John Potter bumped up his previous projection by a billion bucks yesterday, citing the growing expenses of six-day delivery and employee retirement/health care plans. Potter and his team are scrambling to cut costs left and right — from a yearlong hiring freeze to early retirement offers to branch closures. But we wonder… will it even matter?

The Government Accountability Office recently labeled the USPS a “high risk” federal program, and while we’re hard-pressed to think of any risk-free government program, we’re inclined to agree.

The Postal Service is facing a perfect storm of business risk: The business is already loaded up with debt. Minimum wage and benefit costs are rising while revenues are plummeting. For example, they are expected to handle at least 27 million fewer pieces of mail this year than in 2008. Is there any business in America that isn’t looking to cut shipping costs? (There’s this new technology we’ve heard about called “e-mail.”)

Then there’s UPS and FedEx (NYSE:FDX), two worthy private-sector rivals. And what about Peak Oil? A summer of 2008 redux could cripple the whole industry. Above all, the USPS is run by the government… c’mon.

Snail mail might not be dead, but we suspect the USPS is going the way of Amtrak, at best.

They can’t even deliver our mail without losing money, yet the public looks to the government to manage our health care? Oy…

Source: The Death of Snail Mail

What I am worried about is what will happen when investors fall off the top of this wall.

“Let me take my chances on the Wall of Death”

– Richard Thompson

An astute observer can easily see how Wall Street and Washington have been trying to push investors toward the latter position. For the past few weeks, we have heard endless examples of lagging corporate profits and failing economic numbers spun as “better than expected” buying signals.

Sometimes the stories are completely contradictory – like when the Fed claims one day that it has to pump out more cash so we can start adding jobs, and the next says not to worry about all that excess cash crashing the dollar, because the lack of new jobs for the foreseeable future will keep inflation under control.

“Well You’re Going Nowhere When You Ride on the Carousel”

The lyrics come from a wonderful song – “Wall of Death” by Richard Thompson, a songwriter and master guitarist out of London’s Notting Hill. Several of Thompson’s lines are more apt descriptions of the current situation than anything I could gin up on my own.

For example, for the past year or so, United Parcel Service (UPS:NYSE) management has sworn up, down and sideways that they would make their annual nut. Didn’t matter how badly they fared with each successive quarter. They would still spin out some yarn as to how the market was stabilizing and the next quarter would be soooo good, the company would up profits in the end.

So far, it has not been working out too well for them… or for the investors who have drank their Kool-Aid. As a result of all this smoke and spin, UPS earnings surprised to the downside by -2.4% last December and by a whopping -7.1% last March. By the time the dust had settled, shares were off their highs by some 57%.

Climbing the Wall – Again

Now, for the past few weeks, UPS shares have been rising again as anxious bulls fling themselves madly at the wall of worry: “Washington and Wall Street keep saying that the situation is stabilizing. What if UPS declares major gains, and I miss the boat?”

The mere thought of getting out of the gate late had buyers in such a tizzy, they drove UPS shares up more than 15% over a few short trading days. And then UPS announced that, once again, they were in the soup. Volume was down 4.6% in the U.S. and 5.5% globally. Revenue was down 17% – far below the levels investors had been led to expect. And profits were down more than 49% quarter over quarter.

One could certainly understand why UPS shares fell like a rock when word of this debacle began to circulate. What is a tad harder to wrap one’s mind around is what happened next…

The End Is Nigh – and This Time We Really Mean It

In an effort to stem the bleeding, Chief Financial Officer Kurt Kuehn claimed: “Declines in both our domestic and international businesses appear to be stabilizing.” Now even Kurt couldn’t just say such a thing with a straight face, so he added a bit as to how volume would remain significantly below last year’s levels.

Not to worry friend Kurt! Despite seeing such promises like that broken month after month, investors jumped back aboard, and drove UPS shares back up to a new multi-month high.

Down 2%, up 2%… all off the same set of really rather miserable facts – heck, all in the same damned 6 ½-hour trading day!

“You Can Go With the Crazy People in the Crooked House”

This isn’t about worrying, folks. One might worry that the economy isn’t growing fast enough. Despite billions in stimulus spending, this economy isn’t growing at all.

One might worry that the central bank’s plans might not be adequate to the task of husbanding our nation’s currency. St. Louis Federal Reserve Bank President James Bullard has publicly warned that the Fed has no such plan in place, and no plan appears to be forthcoming anytime soon.

One might worry that corporate profits aren’t climbing at an adequate rate to support the rise in share prices. Most every report I read indicates down in the very fine print that corporate profits have been falling and will continue to fall like cartoon anvils.

This is not a wall of worry.

This is a wall of death.

Source: The Market Is Climbing a Wall, All Right. But What About Those Spikes on the Other Side?

If you want to run a multi-billion dollar international conglomerate these days, you had better have a few high-ranking friends in Washington. If not, this administration appears ready to do anything and everything it can to wipe you and your shareholders out.

The battle that is brewing between United Parcel Service (NYSE:UPS), FedEx (NYSE:FDX) and Capitol Hill is a perfect example.

While the two companies have business models that are very similar and are direct competitors with one another, their respective labor forces look quite different.

Because it started as an airline, FedEx and its nearly 100,000 hourly workers fall under the rules laid out by the Railroad Labor Act, a law designed to keep the nation’s skies and rails running smoothly despite labor disputes.

But UPS, on the other hand, must follow a different set of rules, the National Labor Relations Act (NLRA). Instead of forcing a synchronized nationwide vote to unionize, the NLRA allows workers to unionize one hub at a time, a much easier task.

Spreading unions like cancer

FedEx obviously knows the horrific damage that could be done to its bottom line if unions start calling the shots. That is why the company is preparing to spend millions of dollars promoting its “Brown Bailout” campaign designed to make current legislation, the FAA Reauthorization Act of 2009, appear to be designed solely to benefit, or bail out, FedEx’s chief rival, UPS.

In addition to the Web site, brownbailout.com, revealed today, get ready to see online ads, radio spots and television campaigns promoting the company’s lobbying initiative.

With few friends willing to fight for FedEx in a labor-friendly Washington, the company is hoping you and I will do some letter writing and phone calling. The company is hoping taxed-out taxpayers will buy the “bailout” message and join FedEx in a political battle.

As investors, FedEx is one to watch. While it is not in full-blown panic mode just yet, the company’s business model is likely about to change in a big way.

Already this year, the company is lagging Big Brown in share price performance. Over the past six months, shares of UPS are down by about 10%. Meanwhile, FedEx has lost over 20% of its value.

If union bosses start calling the shots and FedEx loses access to its cheap labor force, expect the divergence to grow even larger. There is a reason FedEx is spending billions and fighting so hard. It has a lot to lose.

As I told TFN Strategic Trader subscribers this morning, the market as a whole is a dangerous short position right now, but there are select stocks well worth selling now and buying later.

FedEx is a strong candidate.

A rough economy, surging fuel prices and political headwinds could stir big trouble.

Source: FedEx Needs You… Not the Unions

Unfortunately, you eventually have to open the sack full of angry cats to find out how it all comes out. And then there’s that part about going to jail (or hell) because you put cats in a burlap sack.

Not that I would ever do something like that. This is really just one of those mental exercises. But I do watch economists a lot. I guess someone has to.

The One Real Question

The big argument this week: “The V-shaped bottom” versus “The Second Valley.” I guess we should open the sack a bit and see who’s winning.

Adherents to the former believe that we have seen the worst that fate (or rather our own stupidity and credulity) can dole out. They connect the dots thusly:

1. Real estate crashed,
2. The banks crashed,
3. The market crashed,
4. We had a recession.

The Beginning of the End

Now they believe that the recession is drawing to an end. They know this because real estate is selling again (albeit at dramatically lower prices), the banks are being taken over by Washington, and American corporations are hemorrhaging just a tad less cash this quarter than they did in the last quarter of 2008 (or in the first quarter of 2008… or maybe the fourth quarter of 2007… whatever. It doesn’t really matter which, so long as the comparison makes the situation look less dire).

It’s kind of like the line from the old blues song: “I’ve been down in the gutter so long, the curb looks like up to me.” To these sunny-minded optimists, “a little less bad” is the new “good.”

They have even found a way to describe the bankruptcy of two-thirds of the American auto industry as “a good thing.” It’s all about “certainty,” you see. When we were only pretty damn sure GM and Chrysler were bankrupt, that was “uncertainty.” And everyone knows uncertainty spooks Wall Street.

Certain Losses

But now we are absolutely sure that bond and stockholders will lose billions of dollars, and that plants and dealerships across the country will close, destroying hundreds of thousands of jobs and evaporating even more billions in increasingly rare tax revenues.

Well, now we definitely have “certainty,” although perhaps not clarity.

And the conclusion the “V-Shaped Bottom” types draw from all this? Spring 2009 was the grand bottom. Now anyone who doesn’t buy shares indiscriminately will miss out on the chance of a lifetime.

The Ugly Truth

The “Second Valley” types are a hair less optimistic. As they see things, the victim of our little train wreck has stopped bleeding so much mainly because the patient is running out of blood. And all that is in that transfusion bag is plasma – a thin substitute for Type O.

Second Valleyers see the facts as somewhat more complex, and a good bit more disturbing. Here’s how they line up the dominoes:

1. For the better part of a decade, Washington pumped trillions of new dollars into the system. (Actually they have been doing that for several decades, but that is a different day’s rant.)
2. This made the market price for all sorts of things – stocks, real estate, oil, food, electricity and of course gold – go up. Not the value of any of these things, mind you. Just the number of dollars you might have to give up to get a unit of most anything.
3. Unfortunately, wages simply could not keep pace with this inflation without destroying Wall Street’s ostensible profits. Thus we see folks borrowing more and more, to buy fewer things worth even less.
4. Eventually folks began defaulting on those loans, be they credit cards, car loans or mortgages, beginning of course with the most vulnerable low-income types, with their “NINJA” loans (”No Income, No Job or Assets,” for those of you who missed out on this particular bit of accounting fraud) and such. For a while the middle class could act smug, but inevitably most all of the country proved to be somewhat over-extended.
5. Now we see the bubbles pop: Down comes real estate, down comes the banks, down comes Wall Street (whose delicate dollar-inflated profits were doomed after all), down comes oil and steel and pork bellies, the whole nine yards as it were.
6. And finally, to solve all this, in essence to re-inflate Wall Street’s bubbles, Washington proposes to pump trillions more fresh dollars into the system.

Highway Robbery

Second Valleyers tend to see that last item as a bit of a problem.

Okay, that’s an understatement.

Actually, they see it as a nigh-treasonous act of currency debasement, in essence, a secret tax on most every citizen who managed through common sense to avoid pouring their wealth down the toilet during this debacle. In the end, they warn that this sort of irresponsible pandering will lead to the collapse of the American economy.

Propping Up Zombies

What’s more, Washington’s dollars are propping up bad institutions that most probably ought to be allowed to fly or die on their own. Just look to the troubles Great Britain, Japan and South Korea had for decades when they refused to allow financial Darwinism to take its natural course.

But these are long-term issues, and the Second Valley theorem warns of far more immediate problems. It notes that more Washington dollars do not actually solve any of the endemic troubles that laid us low back in 2007.

In fact, it may even make many of them much, much worse.

Caught Between a Rock…

All those proliferating dollars are once again creating artificial new highs in all sorts of commodities. Cotton, copper, steel, and most especially oil are all hitting six-month highs.

Where once those same economists (you know, the ones we tied up in the burlap sack?) argued as to whether oil could beat $50 a barrel this year, now they are falling all over themselves to be the first to call for $70 oil next month.

The plain and simple immediate result? American business has yet to show a genuine recovery. Sales are still god-awful slow, and margins are stretched so thin as to be invisible. And now raw material costs are shooting up ahead of the curve.

… And a Hard Place

American families are caught in the same vise. Just as they figure “Maybe, just maybe we’ll pull through this,” their gas costs and food costs and who-knows-what-else costs are starting to climb right back toward the tipping point that put us all in the soup in the first place.

No wonder spending is down and savings are up. It’s the first rational act we’ve seen in over a decade.

The net result: next quarter’s profits are going to really stink. Probably worse than the previous quarter, and possible worse than most any quarter they try to find to make things look prettier.

Tipping Into the Second Valley

And when word gets out about it, you can just bet that stocks (at least the most vulnerable ones) will take it on the chin again too. Thus the sobriquet “Second Valley,” wherein both the economy and the stock market do a quick three-month gut check.

Now I must confess that I do believe in most all of the tenets of the Second Valley Theorem. But I am also a bit of a realist.

I don’t really know for a fact that the Dow will reach all the way back to 6,469 again. Perhaps it will just grind along around these levels for a month or three. I am even willing to concede that more than a few stocks will actually shine during this episode. However, I believe that they will be the exceptions rather than the rule.

Use the Pinch to Squeeze Gains out of Transports

And I certainly believe that certain companies are exceptionally exposed to downside during this period. For example, I asked my WaveStrength Options Weekly readers to purchase put contracts on FedEx (FDX:NYSE) last Tuesday, because the freight company is exposed on two fronts.

A slowdown this summer will reduce outright sales, while spiking oil will raise FDX’s chief costs – gas for local vans, diesel for long-haul rigs, and kerosene for jets – to untenable levels. We are looking forward to short- to mid-term gains of 44%-79% off this play.

I advise you to do something similar. Both FDX and UPS (UPS:NYSE) look like good short candidates right now. And if you are unwilling to short a company or speculate on downside with put contracts, at the very least, please purge any transports you may have picked up over the last few months.

Source: The Truth Behind the Second Valley Theorem

The identity of the bank that is alleged to have failed the bank stress test was not revealed.

The bank-stress-test findings were reported yesterday (Sunday) by CNBC.com, which said it obtained the information from a source that it did not identify. The source did not identify the company, CNBC.com reported.

“At least one firm – under the [bank] stress test assumptions – will require more capital,” the source said.

The bank-stress-test results were contained in a two-dozen-page report that the government released Friday. But the results had already been “conveyed” to the firms, meaning the bank in question is aware of the U.S. central bank’s assessment, according to the published report.

This round of bank stress tests was essentially a two-step process. The first step – outlining how the banks have been analyzed – was taken care of with the report released over the weekend.  The second step – releasing the results to the public – will be taken care of when the actual results are released May 4, which is one week from today (Monday).

Neither the U.S. Federal Reserve nor the U.S. Treasury Department would comment.

The bank stress tests have a very specific purpose. Financial institutions that are found to have inadequate capital will have six months to raise the money via the private sector. If that doesn’t work, the government has said the financial institutions will be eligible for an infusion of capital via the federal government’s so-called “Capital Access Program.”

U.S. Treasury Secretary Timothy F. Geithner said he would be open to banks repaying their Troubled Asset Relief Program (TARP) loans, as long as the availability of credit (borrowing) was not adversely affected.  As a Money Morning special report detailed last week, the credit markets don’t seem to be loosening up: Lending dropped by more than 20% from October 2008 to February 2009, despite initiatives to encourage such activity.

According to the conclusion of the report released over the weekend, “most banks currently have capital levels well in excess of the amounts needed to be well capitalized.”

However, as Money Morning has reported, the tests have become a “no-win” situation for the Obama administration.

“There are two things that are terribly wrong,” William M. Isaac, the Secura Group chairman who served as head of the Federal Deposit Insurance Corp. (FDIC) from 1981 to 1985, told CNBC.com. The first problem – and a big one – is the fact that the details were announced at all.

“I can’t imagine what Treasury was thinking when it made that move. It has been causing incredible angst in the markets,” said Isaac. “The second big problem is that the Treasury is directing the stress testing, apparently with direct involvement of the White House at the highest levels. Bank regulation by law is supposed to be carried out by the independent banking agencies without any political interference.”

Market Matters

As Money Morning reported Friday – in a Wall Street version of the old “he said/(s)he said” drama, Bank of America Corp. (BAC) Chairman and Chief Executive Officer Kenneth Lewis claimed that ex-U.S. Treasury Secretary Henry M. “Hank” Paulson Jr. and central bank Chairman Ben S. Bernanke threatened to remove him from office if he backed out of the Merrill Lynch & Co. Inc. (SQD) merger or (publicly) discussed the mounting losses.

Paulson had previously testified that Lewis must have misinterpreted their comments, but then seemed to blame Bernanke for the threat (Translation: Paulson tried to throw Bernanke “under the bus.”).

New York Attorney General Andrew M. Cuomo has been investigating the activities surrounding the merger to determine why shareholders were kept in the dark about the financial “challenges.”

Shifting to autos, Italy’s Fiat SpA (OTC ADR FIATY) emerged as a potential major global player as it attempts to forge a partnership with (soon-to-be-bankrupt?) Chrysler LLC, and also has interest in buying General Motors Corp.’s (GM) Opel unit. Meanwhile, GM will be closing 13 production plants over the summer to trim inventory and seems likely to miss a $1 billion debt payment due June 1 as it too moves closer to bankruptcy protection.

How bad is GM’s plight: GM may close its Pontiac division after 82 years of operation, The Wall Street Journal and MarketWatch.com reported over the weekend.

While the earnings news of the week found plenty of winners and losers, ultimately analysts perceived a bit of “cautious optimism.”  Bank of America and Morgan Stanley (MS) failed to live up to the favorable showings by Wells Fargo & Co. (WFC) and other financials, though techs like Texas Instruments Inc. (TXN), Apple Inc. (AAPL) and International Business Machines Corp. (IBM), beat Wall Street expectations, and brought new hope that the downturn was nearing an end. (Watch for an updated “Hot Stocks” feature on IBM here in Money Morning later this week).

Unfortunately, Microsoft Corp. (MSFT) posted the first quarterly revenue decline in its 23-year history, though investors still cheered its ability to reduce costs during these challenging times for PC sales. McDonald’s Corp. (MCD), AT&T Inc. (T), and Ford Motor Co. (F) were among the diverse group of companies reporting better-than-expected results, while United Parcel Service Inc. (UPS), Caterpillar Inc. (CAT), and Continental Airlines Inc. (CAL) issued disappointing numbers.

Amazon.com Inc. (AMZN), the subject of a recent “Buy, Sell or Hold” feature here in Money Morning, bucked the negative trend facing many retailers and posted higher quarterly earnings and revenue.

Additionally, U.S. retailers J.C. Penney Co. Inc. (JCP) and Coach Inc. (COH) each expressed positive sentiment that sales activity seems to picking up.  Oracle Corp. (ORCL) snapped up Sun Microsystems Inc. (JAVA) for $7.4 billion after IBM chose to pass, and PepsiCo Inc. (PEP) is attempting to purchase two related bottling companies as corporate execs seek favorable deals in this environment.  Such merger-and-acquisition (M&A) transactions often signal boardroom confidence and also indicate that the “worst” part of a downturn may be over.

Oil prices surged above the $51-a-barrel level late in the week as traders overlooked the higher inventory levels and instead focused on some favorable signs that the economy may be closing in on turnaround mode.

With a six-week winning streak on the line, investors offered their best “clutch hitting” late Friday, pushing all major indexes to higher levels. Early in the week, after investors digested negative news from the likes of Bank of America and GM, prognosticators said the weekly stock-market winning streak was all but over. However, some better-than-expected earnings and economic reports brought out the “bulls” for one final run.  The Nasdaq Composite Index ended the week in positive territory, and the other equity indexes were virtually flat from last week’s closing levels (with the Dow Jones Industrial Average suffering a slight decline).

Economically Speaking

According to the International Monetary Fund (IMF), the global downturn will be far worse than previously expected.  For 2009, the IMF expects the world economy to contract by 1.3%, its first such decline in 60-years, with over 10 million employees losing their jobs.  Unfortunately, its projections for the United States are even more dire (-2.8% for the year), with domestic financial institutions suffering $2.7 trillion in losses, almost twice the IMF’s prior estimates from just six months ago.

While much of the economic data of the week confirmed the IMF’s weak projection, analysts found a few positive signs that the downturn very well may have bottomed out.  While both new home sales and durable goods orders declined in March, the results beat the weaker Street expectations and came in the aftermath of some (relatively) strong February numbers.

In another promising sign of stability within the housing sector, the median price of an existing home sold in March actually rose for the second straight month.  Still, the record unemployment filings last week revealed the ongoing difficulties facing job seekers amid these tight labor conditions.  Likewise, leading economic indicators, a predictive report, dropped for the third consecutive month and many economists expect the recession to last at least until late third quarter.

Weekly Economic Calendar

Source: Controversial Stress Tests Reveal Only One Bank Needs Capital, but Worries Remain

This dismantling of the so-called “New Federalism” will be readily apparent again this week as the federal government is once again at the forefront of the most-closely watched  crisis-fighting initiatives at hand: With Congress pushing forward on an $827 billion stimulus plan and the Treasury Department planning to unveil its new banking bailout blueprint on Tuesday, economists and other experts say the federal government is taking its biggest role in the economy in a generation.

States that once pushed away from the federal government as part of the New Federalism are now essentially begging it for financial support, banks and Big Business that once viewed near-total deregulation as Corporate America’s Holy Grail are now seeking federal financial aid and new regulatory protections (and in many cases are becoming actual business partners with the government), and individuals are asking for tax relief.

Alan Viard, a Bush administration economist now at the American Enterprise Institute, may well epitomize this reversal of thought: He’s one of the economists who initially rejected the need for a fiscal stimulus, stating that the right size for a government spending bill was “probably zero,” believing that federal interest rate cuts and existing unemployment benefits would be enough to do the trick. But he now sees the package as necessary.

“Things have gotten so bad so quickly,” Viard told The Washington Post. “We have now lost 3.6 million jobs, a stunning loss. But what’s more horrifying is that half that loss has occurred in the last three months. This is a severe recession.”

The exact shape and size of the package matters less than the timing, and any delay will be very damaging, economists say.

“Most of the things in the package, the big dollar amounts, are things that are pretty quick stimulus and need to be done,” Alice Rivlin, who was former president Bill Clinton’s budget director and a critic of aspects of the proposed stimulus, told The Post. “Is it a perfect package? Of course not. But we’re past that. Let’s just do it.”

Signs of the Stimulus

The U.S. Senate late Friday reached agreement on the estimated $827 billion stimulus bill, setting the stage for what’s expected to be some tough negotiations with the House of Representatives over tens of billions of dollars in aid to states and local governments, tax provisions, and programs focusing on education, health and renewable energy.

Congress is pushing hard to complete the legislation this week. But that figures to be a challenge. The House bill was passed without any Republican support, while the Senate version passed Friday night between Democrats and three moderate Republicans.

During a rare floor session on Saturday, Republican opponents continued to criticize the entire stimulus proposal – even though they clearly don’t have the votes to stop it. The bill is expected to be passed in the next few days.

The price tag for the Senate plan is only slightly more than the $820 billion measure adopted by the House late last month. Both plans seek to resuscitate the U.S. economy with similar one-two punch strategies:

• Fast-acting tax cuts designed to jump-start consumer and business spending.
• And longer-term – albeit slower-acting – spending on public works programs and other projects that are projected to create more than 3 million jobs.

Despite these seemingly similar philosophies, the two plans rely on approaches that are very different. The higher-priced House bill emphasizes help to states and municipalities that would otherwise be facing major cuts in services and layoffs of public employees, while the Senate slashed $40 billion of that kind of funding from its version of the bill.

The Senate plan focuses more on tax cuts, lowers a proposed increase in food stamps and provides health-care subsidies for the unemployed that are much less generous than the House version. The Senate plan also creates $30 billion in tax incentives to encourage Americans to buy homes and cars within the next year.

House Speaker Nancy Pelosi, D-Calif., said the emerging Senate cuts to the stimulus program “very damaging” and that she was “very much opposed to them.” But after the Senate reached a deal, Pelosi expressed resolve to complete the legislation in the days ahead.

U.S. President Barack Obama has made the economic recovery effort the centerpiece of his agenda since even before he officially took office. But President Obama now intends to get much more involved, and much more aggressive: He will conduct a “town-hall-style” meeting in Indiana today (Monday), followed by a formal “prime time” White House news conference – the first of his term – tonight.

The president will then pitch the plan again in Florida tomorrow (Tuesday) and again in Virginia on Wednesday.

Senate Majority Leader Harry Reid, D-Nev., said final passage of the Senate bill is expected Thursday, after which congressional leaders say they will hurry to get the House and Senate versions into conference with the hope that a passed bill can be sent to the White House by the end of week, the San Francisco Chronicle reported.

Banking Plan Overhaul Unveiling Tomorrow (Tuesday)

Busy new U.S. Treasury Secretary Timothy F. Geithner last week promised that the Obama administration would unveil its new blueprint for rescuing the U.S. banking system today. Over the weekend, however, the administration said the rollout would be delayed until Tuesday, so that the focus could remain on passage of the stimulus package, Bloomberg News reported.

But that doesn’t mean the banking bailout plan isn’t key.

According to a recent analysis, the Obama administration has a multi-pronged strategy for quelling the financial crisis, including:

• A program to insure banks against extreme losses on mortgages and other loans.
• A new round of investments in banks.
• Help for homeowners facing possible foreclosure.
• The broadening of a U.S. Federal Reserve program to ramp up lending.
• The Treasury Department could also look at purchasing toxic assets from banks – possibly with the aid of private-sector financing.

This would represent an overhaul of the $700 billion Troubled Assets Relief Program (TARP) initiated by the Bush administration. As the name implies, TARP was initially concerned with buying troubled assets – but it quickly evolved into a direct-government investment into the banks.

This new Obama plan reflects Geithner’s personally held view of how governments should respond to financial crises. Geithner believes all available financial tools should be used – and used aggressively. Any such effort would include direct efforts to deal with the financial sector’s massive losses, since that would help renew public confidence in the financial system.

Too small a government response during a crisis poses more risk than too much response, he said during his confirmation hearing.

Many of the details of what Geithner will announce remained in flux, although the broad outlines were becoming clear, published reports state. But one thing is certain: Even the ideas that are continuations of the initiatives started by former Treasury Secretary Henry M. “Hank” Paulson Jr. will have a unique Geithner twist.

One example: The government will almost certainly continue to invest in banks. But past investments consisted of a form of “preferred stock” that granted the federal government no say in how the bank was run, or how the money would be used.

As a Money Morning investigation revealed, that lack of control allowed banks to use taxpayer-provided TARP money as financing for buyouts. And then the banks refused to detail how they spent the money – and why not? They weren’t required to.

Under the new plan, there will still likely be new government investments in banks. But Geithner will likely call for those new investments to be convertible into common stock after some fixed period of time, perhaps seven years. If the banks are unable to raise private capital in that span, government control would escalate.

Banks receiving money also will probably have to report to the government and to the public, and the government is likely to insist that the new capital be used to expand lending.

Geithner has also been looking for a way to bring back the original TARP concept, which Congress passed on Oct. 3. Paulson pitched the plan to Congress as a program to buy troubled assets off of banks’ books, then shifted the plan and opted to invest directly into the banks instead.

Paulson’s chief worry – and the reason that he changed direction – was that asset purchases would involve too many technical complications, meaning it would take too long to enact. And that delay could be costly to a system where banks were teetering on the precipice of failure.

After struggling with those same issues, Geithner and his team appear to have settled on an approach that amounts to financial triage, meant to give investors confidence that banks will not encounter vast new losses so that they are willing to invest private money, The Post reported.

In addition to buying bad assets, the Fed and Treasury in the next few weeks are expected to expand a program that should jump-start lending outside the banking system. In November, the agencies launched a program – the “Term Asset-Backed Securities Loan Facility” – that would devote $200 billion for credit card, auto, student and small-business loans.

That program will be extended to include residential real-estate mortgages and into the commercial real estate sector. Geithner may also announce an initiative that would inject government money into companies known as mono-line insurers. These firms are key players for states and municipalities when it comes time for those state and local government bodies to borrow money. With the implosion of the housing bubble, and the subsequent implosion of the commercial real estate business, mortgage-related losses by the insurers have made it harder for states to issue the municipal bonds that would help them ride out the recession without aggressive tax increases or budget cuts.

Geithner is likely to roll out a plan, worth $50 billion to $100 billion, to encourage the modification of mortgages for homeowners who would otherwise likely face foreclosure. It could be based loosely on a strategy for foreclosure relief engineered by Federal Deposit Insurance Corp. (FDIC) Chairman Sheila C. Bair, when the FDIC took control of the failed bank IndyMac Bancorp Inc. (IDMCQ) last year.

Market Matters

On the corporate front, United Parcel Service Inc. (UPS) posted a profit (though revenue declined) and then announced new cost-cutting measures.  Motorola Inc. (MOT), The Walt Disney Co. (DIS), Time Warner Inc. (TWX), and Costco Wholesale Corp. (COST) reported disappointing results.  Visa Inc’s (V) earnings jumped by 35%, though management warned of tougher times ahead.

Bailout plan recipients have tried to cut back excessive spending (and the associated bad PR) as Goldman Sachs Group Inc. (GS) (Miami) and Well Fargo & Co. (WFC) (Las Vegas) canceled huge boondoggles. Bank of America Corp. (BAC) is selling off corporate jets, and Citigroup Inc. (C) may be attempting to get out of the $400 million marketing deal with the New York Mets.

C-SPAN must be enjoying stellar ratings as investors seem obsessed with the inner-workings of Congress and their debates on the stimulus and bailout.  The markets disregarded much of the dire earnings and economic data (terrible unemployment report…see below) and focused on the newfound optimism that politicos can work together to get the country moving in the right direction.

Economically Speaking

Just how long until a stimulus package starts creating jobs?  That answer can’t come soon enough for the almost 600,000 people who moved to the unemployment line in January, the most devastating month for job losses since 1974.  The unemployment rate climbed to 7.6%, forcing many economists to (upwardly) revise their projections for the rest of the year (and beyond).

Since the recession “officially” began in December 2007, the country has lost more than 3.6 million jobs, with most of the losses coming in the past three months.  The rest of the data released during the week did little to contradict the lousy unemployment picture.  Factory orders fell for the fifth straight month and the ISM index revealed that purchasing managers still look for contraction in the manufacturing sector. Though the services sector showed a slight rebound in its ISM survey, the index reported a fourth consecutive month of declining activity.  Residential construction spending experienced its worst annual decline ever recorded (since 1993), though optimists are hopeful that a stimulus package that focuses on infrastructure growth will prompt a renewal in non-residential building.

With the Fed stuck looking for creative ways to get involved (now that the benchmark Federal Fund rate stands at about 0%), its international counterparts took action (or inaction) of their own. The Bank of England (BOE) cuts its primary lending rate to a record low 1.0%, while the European Central Bank chose to leave its rate unchanged (for now) at 2.0%.

Weekly Economic Calendar

Source: As Stimulus-Package Debate Continues in Congress, New-Look Bank Bailout Plan is Set to Debut This Week

Amazon remains the proverbial 800-pound gorilla in the online retailing space. And business is both healthy and growing. But the company is counting on a whole new series of technology-based ventures that will provide the real fuel that will put this stock into orbit. Let’s take a closer look.

Just last Thursday, in yet another positive “surprise” that Wall Street missed predicting, Amazon annihilated analysts’ earnings estimates by announcing a big jump in fourth-quarter profits and told investors even better days are ahead.

Fourth-Quarter Fireworks

In a financial-crisis environment in which there is supposedly no financing available, in which massive job cuts and huge job worries are causing consumers to cut way back on their spending, in which all retailers – even vaunted discounter Wal-Mart Stores Inc. (NYSE: WMT) – face huge challenges, Amazon actually increased its sales and profits.

In fact, Amazon’s fourth-quarter net income rose a hefty 9%. And not only did its per-share earnings of 52 cents blast through the Wall Street consensus of 39 cents by a full 33%, the company actually boosted its first-quarter outlook, stating that it expected sales to be stronger than analysts were predicting.

For the fourth quarter, Amazon’s sales advanced 18%, beating analysts’ expectations by about 4%. Sales actually would have grown by 24%, were it not for the strengthening of the U.S. dollar.

International sales were even stronger, and now account for a full 45% of Amazon’s overall sales.  One notable category was electronics and general merchandize advanced 31%, and that category now accounts for 43% of worldwide sales.

One particularly noteworthy achievement was in the area of gross margins, which suffered almost no damage – in spite of a U.S. recession that’s forcing most retailers to discount heavily. Amazon’s gross margins barely budged, dropping from a fairly remarkable 20.6% to a still-enviable 20.1%.

Remember, this outlook and performance is taking place in a market environment where there’s very little “visibility” – meaning company executives have almost no ability to predict what the market will look like next month, let alone in the next quarter or for next year. That’s forced a lot of companies to discount heavily, and is a key reason that a large number of firms have stopped issuing “forward guidance.”

But not Amazon: It continues to provide guidance – and then to exceed those expectations.

How is the company making this happen? These results point to strong market-share gains for Amazon and to new lines of business being introduced, which are powering the stock higher.  But, before we go deeper into Amazon, let’s consider the economic backdrop, in order to fully appreciate magnitude of Amazon’s accomplishments.

Anatomy of a Meltdown

In my 25-year investment career, I have seen countrywide market meltdowns like the one we’re struggling through perhaps every two or three years.  The hallmark of these crises has been an implosion of the banking system, which has then brought the entire economy down, as well.

In an effort to provide some context – and perhaps some reassurance to U.S. investors – let me say that I’ve seen much worse than what we are seeing in the United States right now. For instance, there are actually cases where all of a country’s banking deposits are either frozen (Argentina 2002) or lost outright (Russia 1998).

In each of those cases, there were two constants:

• From a business standpoint, the strong got stronger as their weaker rivals foundered and failed, allowing them to pick up market share and sometimes to even buy those smaller or weaker rivals.
• From a stock-market-valuation standpoint, however, the strong were initially equally punished in terms of their market valuations as the broader equity markets blew up, meaning their valuations didn’t reflect the much-brighter outlooks for them as stronger market leaders. However, when the market outlook brightened, those stronger firms saw their valuations surge with a vengeance and soar to new heights.

The lesson from each of those crises – from Brazil and Argentina, to more than 10 countries in Asia and in Russia – was that every single country made it back.
This was even true for those countries shackled with inferior policy mixes.  Some might say that Japan – with its “lost decade” – never came back.  This would be an imprecise statement, since Japan’s gross domestic product (GDP) growth was above 2.0% for the two years prior to the crisis and unemployment for the last five years has been between 3.45 % and 4.5%
But what is true is that while even countries with inferior policy mixes eventually made it back, it took a lot longer for that to happen. The speed of their comebacks can be traced to the degree in which the policies implemented made them:

• Open-market oriented, especially with regards to foreign capital.
• A lower-taxation environment.
• Strongly fiscally disciplined – for the long term – because the governing body addressed such serious structural economic problems as imbalances in both the social security and health-care systems.
• Less constricted by regulation.
• More transparent, in both the private and public sectors, especially in cases where the public sector overhauls led to a more democratic governing process.
• More-consensus oriented, particularly when that consensus included support for all the changes I’ve listed here.

While we are not seeing an unequivocal embrace of these tried-and-true recipes by the newly installed Barack Obama administration, mainly because of a bias toward big government, we are seeing an open-minded attitude and some movement in this direction.  And we will have to monitor this closely, because history shows us repeatedly that there are no half measures when it comes to successful economic and financial reform – and because market investors know this and will therefore be watching closely.

Forewarned is Forearmed …and Other Axioms to Live By

This background is important, for we now know that we can expect to see some once-in-a-generation buying opportunities in companies that can navigate this slowdown and position themselves for a massive subsequent rebound.

We also have to remember that his rebound won’t be immediate. But when it does come, that rebound will be huge for the companies that have used this time to buttress their already-leading market position. They’ve capitalized on consolidations in their respective industries or market sectors, and have certainly grabbed market share away from their rivals. The maximum gains will be realized only if financial prudence prevails in the public sector.

Is that happening here in the U.S. market?

Well, we’re about to pass a huge stimulus – perhaps as much as $1 trillion or more, when all is said and done.

There’s an old axiom about government stimulus packages: When money is spent, the economy grows. The key, however, is at what cost and who pays for it. So the short-term “steroids” effect of the stimulus has to be measured against the long-term weight its costs will exert of future growth.  But, ahead of that steroids injection, investors need to invest in the beneficiaries.
A much-repeated market axiom states that  “no one buys at the bottom, and no one sells at the top.” Much like no one was – or will be – ringing a warning bell at the market bottom, no one was ringing a bell at the top a year and half ago.  And nobody will be letting you know which of these companies will be thriving and which will be vanishing – because the investors who understand all this are very busy accumulating them for themselves right now.

So it is no surprise that Wall Street missed by a mile on iconic companies that are thriving, including International Business Machines Corp. (NYSE: IBM), Apple Inc. (Nasdaq: AAPL), United States Steel (NYSE: X), PMC-Sierra Inc. (Nasdaq: PMCS), Level 3 Communications Inc. (Nasdaq: LVLT), 3M Corp. (NYSE: MMM), Colgate-Palmolive Co. (NYSE: CL), Automatic Data Processing Inc. (NYSE: ADP), United Parcel Service Inc. (NYSE: UPS), Merck & Co. Inc. (NYSE: MRK), and many others.  And Wall Street always seems to miss to the downside in its estimates in these superb companies.

In the same way, Wall Street missed it with Amazon.  You see, Amazon survived the dot-com bubble because, unlike most of the start-ups, Amazon actually had a strong-and-viable business model.  In addition, starting with founder and chairman, Jeffrey P. Bezos, and continuing down through the rest of the organization, Amazon has in place a superb management team that has continued to carefully refine and build upon the company’s original vision, and has continued to execute almost flawlessly.

It’s not just the great value, convenience and solid customer service that contribute to Amazon’s results – it’s also innovation.

Those “Killer Apps” – “Cloud Computing” and the Kindle

Amazon first revolutionized the bookstore business. Then it revolutionized overall retailing. Now it’s aiming at the book-publishing business with its super-lightweight electronic reading device – called the Kindle. The Kindle allows you to buy and download books in less than a minute – from almost anywhere – without the need to connect to a computer or any device. Lots of books are available.

This is all possible because you are using the fastest wireless standard and the service is included in the price of the book you downloaded. And Kindle can hold some 200 books, newspapers and blogs and has free wireless access to Wikipedia.  The newspapers and blogs are downloaded automatically and updated instantaneously.  Kindle recharges in less than two hours and you can also email your own Word documents and pictures.

With all these features, I am seriously considering buying one. Here’s why:

• It will eliminate the need to walk down my long driveway to grab my copy of The Wall Street Journal every morning.
• It will be much easier to read than in my PC.
• All my downloads will stored in Amazon’s servers, just in case I lose or damage my Kindle.
• And it will save me countless trips to the library to pick up books for myself, and for my avid-reader daughters.

However, I’m going to wait until after Monday (Feb. 9), because Amazon has invited the news media to an event it has planned for the Morgan Library & Museum in New York City. The scuttlebutt is that Amazon could be announcing the “Kindle 2.0.”

By saving trees (reducing the need for paper) and eliminating the costs for printing, storage and delivery, publishers can reduce their costs considerably and pass part of those savings on to the consumer.  Therefore, the typical book will cost you $10 or less.  And you can even get some steals, like all sixteen novels by Charles Dickens in a single file, with an active table of contents – all for only 99 cents!

It’s incredible.  No wonder Kindle is expanding sales and margins for Amazon.

But Amazon’s “miracle” performance is not due just to the Kindle.  Amazon has jumped in on the fast-growing trend of “cloud computing.”  Now that the Internet has become ultra-fast, and is getting even faster – thanks to such hyper-fast, high-speed fiber-optic networks as the Verizon Communications Inc. (NYSE: VZ) FiOS broadband system – the balance has shifted towards centralized computing.

What this means is that with a relatively cheap computer and fast Internet access, one can perform most of the computational activities in the servers of somebody else.  So, somebody else will host the applications, store the data and perform the computation – for a fee, as it is accessed via the Internet.

Therefore, the need to maintain the storage and back it up, to keep your systems up to date and even to help prevent viruses is essentially transferred to the supplier of the service. This is especially important for individual users and small- and medium-businesses, which look to minimize all these costs.  But it is also very useful for some large enterprises in services where Amazon’s scale and expertise can deliver superior cost-savings and reliability.

Amazon aims to be a major player in this realm. Indeed, some analysts believe this could one day be the “real” Amazon business, with books and other retail goods serving only to bring folks in the door.

Amazon already provides storage, virtual private servers, elastic cloud computing, which gives developers a resizable capacity, content delivery and a number of other functions through its fast-growing cloud-computing activities.

This cloud-computing trend has also been embraced by Google Inc. (Nasdaq: GOOG), though Google Apps, and Yahoo! Inc. (Nasdaq: YHOO), which has forced Microsoft Corp. (Nasdaq: MSFT), which is built on the premise of distributed computing, to hedge by planning to offer a cloud computing operating system.  The new operating system will enable net books (barebones notebooks), PDAs and other smartphones to take full advantage of sophisticated computing capabilities and massive storage located in the “cloud.”

Clearly, cloud computing will be an explosive business, especially in Amazon’s focus areas of storage, content distributions and scalable computational capacity.

So, with book sales, electronics and its international efforts already strong and accelerating, and the probability of a Kindle 2.0 announcement now imminent, we need to jump on Amazon, while planning to keep the stock for several years.

Rocking With Retailing

Is this consistent with a sound investment strategy for retailing stocks in the current weak-economy market environment?

I recently saw a noted short-seller, who runs a very successful hedge fund (and you have to be good to be still alive), who indicated that for the first time in a long time, he saw opportunities to make money both on the long and on the short side.  This is encouraging, since for the year and a half prior to last November, the opportunities on the long side have been overwhelmed by the financial meltdown and massive de-leveraging.

In addition, this hedge fund manager was asking a renowned investor in retail stocks what opportunities he saw for shorting these stocks.  The reply: You have to be very careful – even in retailers, which were experiencing big problems – because, in his opinion, valuations had fallen way too much.

I agree with both assessments. At this point, there are good opportunities to buy, and in retail you want to go with the winners.

For all the reasons we’ve detailed to you, Amazon is that “winner,” the strong company with a rock-solid business model that delivers value to customers, that innovates, that has a clear focus on expansion, and that is producing results even in one of the worst economic periods since the Great Depression.

Recommendation:  Buy Amazon.com Inc. (Nasdaq: AMZN) before Monday’s product announcement and ahead of the rollouts of the stimulus packages planned by both the United States and China (**).

Source: Buy, Sell or Hold: Amazon Stock is Positioned as a Long-Term Winner

• U.S. job cuts and slashed stateside budgets have forced express mailer DHL Express, a subsidiary of Deutsche Post AG, from the U.S. Market, Reuters reported. With the move, Deutsche Post AG cut 9,500 jobs (on top of 5,400 from earlier this year). It was also an early Christmas present for rivals United Parcel Service Inc. (UPS) and FedEx Corp. (FDX), who’ve also taken their lumps from the slumping U.S. economy.

• Shares moved higher for China infrastructure titans – China Railway Group and Angang Steel Co. – who are widely believed to be beneficiaries of the government’s $586 billion economic stimulus package. Much of that package will go to housing and the expansion of railways, roads and airports, Bloomberg reported.

• Google Inc.’s (GOOG) YouTube inked a deal with Metro-Goldwyn-Mayer Inc. to show full-length television shows and movies, Reuters reported. The move is a bid to up advertising revenue – something Google is exceptionally good at doing – but also take a swipe from Hulu.com, a web site that airs full-length shows with limited commercial interruption.

• McDonald’s Corp. (MCD) posted strong October same-store sales, with much credit going to the fast-food provider’s global expansion. Same store sales in the U.S. rose 5.3%. In Europe, that figure is 9.8%. In Asia-Pacific, Middle East and Africa, that figure is 11.5%, MarketWatch reported.

• Shares of General Motors Corp. (GM) plunged more than 25% yesterday (Monday) after Deutsche Bank AG (DB) analyst Rod Lache said the company’s stock could hit zero within a year. “Even if GM succeeds in averting a bankruptcy, we believe that the company’s future path is likely to be bankruptcy-like,” Lache said in a note to clients.

• Fannie Mae (FNM) yesterday (Monday) posted a $29 billion third-quarter loss, mainly because of a $21.4 billion non-cash charge to reduce the value of tax assets. The mortgage finance company, seized by federal regulators in August, warned that it might have to tap the government’s $100 billion lifeline.

• Starbucks Corp. (SBUX) said yesterday (Monday) that profit dropped 97% in its fiscal fourth quarter. The company reported profit $5.4 million, or a penny a share, down from $158.5 million, or 21 cents per share, a year ago. Revenue rose 3% to $2.52 billion.

• U.S. cotton production is expected to drop to 13.5 million bales this year, down nearly a third from last year, The Associated Press reported. Farmers planted fewer acres of cotton and shifted to higher-priced crops when prices for corn, rice, and soybeans hit record highs this summer. Hurricanes Gustav and Ike also crimped production.

Source: Global Investing Roundups, Tuesday, November 11th, 2008

Real incomes and real private spending are falling, inflation is ticking upwards and consumer confidence is in the gutter.

This makes Tiffany & Co. (NYSE:TIF) – with its overly optimistic earnings expectations for Christmas spending – ripe for shorting.

This from Adam:

The song does not say, “A couple of pairs of designer jeans, an L.L. Bean backpack and a new Trapper Keeper are a girl’s best friend.”

No, the line made famous by such wonderful exemplars of pulchritude as Anita Loos, Marilyn Monroe and Nicole Kidman tells us that it is diamonds that women prefer. And in these treacherous times, that most famous of Fifth Avenue jewelers, Tiffany & Co., finds that sentiment quite reassuring.

Unlike most other retailers, Tiffany doesn’t really give a hoot about the strength of back-to-school sales. So unlike most of its brethren, it’s not trying to spin the disappointing retail figures that are trickling in.

Since Tiffany doesn’t sell notebooks, it doesn’t have to respond to the fact that mothers across the nation are taking sponges and cleanser to last year’s supplies. Without pots and pans clogging up their shelves and warehouses, Tiffany doesn’t have to fret about the department stores’ alarming decline in same-store sales and burgeoning excess inventory.

What’s more, the suits in Tiffany corner office claim that they don’t have to worry about the tumbleweeds rolling across auto showroom floors. Tiffany doesn’t sell overpriced coffee, so it apparently need not concern itself about the number of storefronts that Starbucks is boarding up.

Tiffany sells jewelry, a girl’s best friend, so the heck with September. Christmas is its winter wonderland, its Elysian field, its Vegas jackpot.

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And so Tiffany seems to be entirely convinced that it will make a mint this year come the holidays. In fact, while cheapskate mall outfits like Zales (NYSE:ZLC) are lauding the fact they simply didn’t lose as much money as they thought they might, Tiffany is claiming better-than-expected profits in the recent quarter and has raised the bar for the year as well.

They figure that Christmas is in the bag, out the door and in the till already. As a result of these bold presentiments, shares in Tiffany and Zales gapped up 12% and 22%, respectively, last week.

We have heard stories like this before, wherein a business figures that it is special, unique, completely immune to the prevailing winds. Just a few short months ago, FedEx (NYSE:FDX) announced that it was in the soup.

Recession was impeding sales and inflation was jacking costs. But management was refreshingly forthright, and warned that while this year just wouldn’t be the shipper’s best, it would do what it took to survive and eventually things would get better.

However, the market seldom rewards such honesty, and FDX shares have been punished with a 25% decline. When cross-state rival United Parcel Service (NYSE:UPS) saw how FedEx’s honesty was treated, it chose the opposite tack.

UPS management claimed that it would not suffer in the least from declining sales or rising costs, and stuck by its quarterly and annual profit figures. And when its quarterly guesstimates proved fallacious, it stuck by its nigh-impossible annual number for another 90 days. One was forced to wonder if its trucks ran on water?

In the end, UPS lost a boatload of money, just like its compadres, and the idiots who believed their fairy stories and bought their shares in the face of clearly impossible odds lost millions.

Yes, I know that truckers are somewhat more prosaic than jewelers, and a FedEx envelope is not quite as desired under the tree as a little blue Tiffany box. But the parable still holds up.

Real consumer spending fell 0.4% in July. This is the biggest drop since June 2004. Personal income fell 0.7%, the biggest drop since August 2005. Real disposable incomes fell 1.7%, making for the second straight large monthly drop.

Meanwhile, inflation surged again in July. Core personal consumption expenditure price index rose 0.3% in July compared with June and is up 2.4% in the past year.

This gain (the largest in the inflation rate since September 2006) apparently completely stymied Wall Street’s pet economists, who had been touting an expected 0.4% decline in incomes, a 0.2% gain in nominal spending and a 0.3% rise in the core PCE.

That, my friends, is a massive prevailing headwind that ought to chill the hearts of anyone in retail long before winter winds chill hands and feet. In point of fact, even Tiffany’s U.S. same-store sales declined 4% last quarter. Virtually all the recent reported profits were scored overseas as a weak dollar encouraged European and Asian shoppers to avail themselves of Tiff’s discounted goodies.

Unfortunately, U.S. inflation is now lapping up on those same foreign shores, and while U.S. consumers are not looking any stronger, Asian and European shoppers look like they are ready to take a break.

But don’t expect to hear this from any retailer. They will tell you that all is well for as long as they possibly can, until they tread the thin line between insane optimism and simple fraud.

Most retailers are already in the tank. But TIF has gapped to the upside on this fantasy. My suggestion? Short ’em now and short ’em hard. And use the profits to buy your girl a diamond ring during the post-holiday sales. And if you have real sense of humor, buy it from Tiffany.

Source: Retail’s Prevailing Winds Are Cold and Getting Colder

• Electronics retailer Best Buy Co. Inc. (BBY) plans to install self-service kiosks in eight major U.S. airports, The Associated Press reported. The vending machines will be stocked with cell phone and computer accessories as well as digital cameras, memory storage devices and headphones. Best Buy is calling the new program, “Best Buy Express.”

• Verizon Communications Inc. (VZ) narrowly averted a strike deadline set for yesterday (Monday) by coming to a last-minute agreement Sunday night with its two major unions, the Communications Workers of America and the International Brotherhood of Electrical Workers. The tentative three-year contracts, which still need to be ratified by union membership, include raises totaling nearly 11% and with Verizon continuing to pay 100 percent of current workers’ and retirees’ health premiums, The New York Times reported.

• Pilgrim’s Pride Corp. (PPC) yesterday (Monday) announced it would stop production at two chicken-processing plants as it strives to combat high feed costs. Pilgrim’s Pride has already has already shut down one processing plant and seven distribution centers so far this year, resulting in 1,700 job losses and a 5% decline in chicken production volume, MarketWatch reported.

• JDA Software Group Inc. (JDAS) yesterday (Monday) agreed to purchase i2 Technologies Inc. (ITWO) in a deal valued at $346 million. JDA will pay $14.86 for each share of i2, a 4.9% premium to i2’s closing price Friday, The Wall Street Journal reported. The acquisition is slated to close in the fourth quarter and will double JDA’s manufacturing capabilities while enhancing its global presence.

• Japan will issue a stimulus package to support its ailing economy by the end of the month, MarketWatch reported. The package is expected to include financial support for small and midsize firms, as well as assistance to consumers suffering from high prices. “The economy has been in a difficult situation,” Prime Minister Yasuo Fukuda was quoted saying ahead of the outline’s release. “We will employ all fiscal and taxation measures” to stimulate the economy.

• Oil prices finished at a new three-month low yesterday (Monday) after briefly dropping below $113 a barrel mark. Light, sweet crude for September delivery fell 75 cents to settle at $114.45 a barrel on the New York Mercantile Exchange as low as $112.72 a barrel earlier in the day.

• Waste Management Inc. (WMI) has raised its unsolicited buyout offer for Republic Services Inc. (RSG) by 9% to $6.73 billion. The new offer of $37 a share comes less than a month after Waste Management, the nation’s largest trash collector, offered to buy Republic in an all-cash buyout worth $34 a share, or $6.2 billion.

• United Parcel Service Inc. (UPS) is in talks to buy Dutch rival TNT NV (OTC: (TNTTY), a source familiar with the talks told Reuters. TNT’s express delivery unit, which accounts for two-thirds of sales, is seen as the key attraction for its rivals because of its relative resilience in an economic downturn.

Source: Global Investing Roundups: Tuesday, August 12th, 2008