The major averages finished mixed as concerns about economic growth and trepidation ahead of key inflation data overshadowed more M&A news.
Per usual, investors were again greeted with another wave of M&A news Monday morning.
The biggest news was confirmation that DaimlerChrysler (DCX 83.16 +1.16) finally found a buyer for its struggling Chrysler unit. Cerberus Capital Management agreed to acquire an 80% stake for $7.45 bln. However, since Chrysler has been on the block for three months and the actual price tag masks a failed $36 bln merger effort between Daimler AG and Chrysler, investors didn't get too worked up about it.
Nevertheless, autos (+4.0%) comprised the best-performing S&P industry today. An analyst upgrade of General Motors (GM 30.53 + 1.07) contributed to the outperformance. GM's 3.6% surge accounted for nearly half of the Dow's 20-point advance. It was also reported that rival Ford Motor's (F 8.76 +0.39) founding family is mulling the divestiture of their controlling stake.
Despite the strength in autos, weakness in everything from restaurants and retail to homebuilding prevented the Discretionary sector from finishing higher. Investors also exhibited a sense of caution ahead of Tuesday's Consumer Price Index.
Even worse for the bulls was the fact that today's biggest laggards were also among the most influential sectors.
Financials, which carries the heaviest weighting on the S&P 500, paced the way lower. The Fed saying in a survey that U.S. banks dramatically tightened their lending standards over the first three months of 2007 took an intraday toll on the rate-sensitive sector.
A JP Morgan strategist
Monday, May 14, 2007
India's HDFC to buyout Chubb in insurance venture (Reuters)
MUMBAI - India's largest mortgage firm, Housing Development Finance Corp. Ltd. (HDFC.BO: Quote, Profile, Research, said on Tuesday it had agreed to buy out U.S. partner Chubb Corp's (CB.N: Quote, Profile, Research 26 percent stake in their insurance joint venture.
The general insurance firm would now be 100 percent owned by HDFC.
Thomson Corp. Agrees to Buy Reuters for 8.7 Billion Pounds (Bloomberg)
By Mark Herlihy
May 15 (Bloomberg) -- Thomson Corp., owner of the Westlaw Legal database and TradeWeb bond-trading network, agreed to buy Reuters Group Plc, the dominant service for currency trading, for about 8.7 billion pounds ($17.2 billion).
Shareholders of Reuters will receive 352.5 pence in cash and 0.16 Thomson share for each Reuters share, the companies said today in a Regulatory News Service statement. The terms are the same as the figures announced May 8, when the companies outlined the transaction.
The purchase of 156-year-old Reuters would make Thomson the biggest provider of financial information, according to figures compiled by Inside Market Data. The deal has been approved by the independent board at Reuters that's charged with safeguarding the news organization's editorial integrity, the companies said.
``The boards of Thomson and Reuters believe there is a natural fit and compelling logic in creating a global leader in electronic information services, trading systems and news,'' the companies said in the statement.
The offer is valued at 691.5 pence for each Reuters share, based on yesterday's closing price for Thomson on the Toronto Stock Exchange, the companies said. That's 40 percent more than May 3, the day before Reuters said it was in takeover talks.
Shares of Reuters fell 7.5 pence, or 1.2 percent, to 605.25 pence yesterday. The stock has gained 36 percent this year.
Bush urges cooperation on fuel rules (Houston Chronical)
But White House might not issue final plan until his term nearly done
By DAVID IVANOVICH
WASHINGTON — President Bush on Monday ordered agencies within his administration to cooperate on creating a new regulation to lower fuel consumption and reduce greenhouse gas emissions.
But the White House doesn't plan to issue a final rule until the very last days of Bush's term in office.
Responding to last month's Supreme Court ruling that the Environmental Protection Agency must take action under the Clean Air Act to regulate greenhouse gas emissions from cars and trucks, Bush has directed his administration to draw up a regulation — patterned on his State of the Union address proposal — to reduce gasoline consumption by 20 percent over 10 years.
That plan called for dramatically expanding the use of renewable energy sources and increasing fuel mileage requirements for cars and light trucks.
"When it comes to energy and the environment, the American people expect common sense, and they expect action," Bush said in a ceremony in the White House's Rose Garden. Bush's announcement came as AAA reported Monday that the national, average price for regular unleaded gasoline had hit a record of $3.07 a gallon.
The previous record of $3.05 per gallon was set in September 2005 after Hurricane Katrina hobbled the nation's fuel-making capabilities.
In Houston, gasoline was $2.89 on average for a gallon of regular unleaded. The highest average ever in Houston was $2.97, according to AAA. That, too, came in Katrina's wake.
The current run-up in gasoline prices has been caused by rising crude prices, higher consumer demand this year, reduced gasoline imports and downtime at refineries.
The president's announcement also followed word that German-based DaimlerChrysler would sell a controlling interest in the troubled American car manufacturer Chrysler to equity firm Cerberus Capital Management.
Bush's State of the Union address proposal called for increasing fuel-efficiency standards by 4 percent a year, starting in model year 2010 for cars and 2012 for light trucks.
Administration officials calculate such a change would reduce gasoline consumption by 8.5 billion gallons in 2017, representing a 5 percent reduction in the gasoline usage expected by that year.
Bush's State of the Union proposal also called for mandating that the American driving public use 35 billion gallons of renewable and alternative fuels by 2017.
World Bank panel finds Wolfowitz broke rules (LA Times)
The report skewers the organization's president for 'questionable judgment' in arranging a promotion for his companion.
By Nicole Gaouette, Times Staff Writer
World Bank President Paul D. Wolfowitz violated his contract, broke the bank's code of conduct and trampled on numerous staff rules in arranging a promotion and a series of raises for his companion, a bank employee, according to a scathing report by an internal committee investigating the controversy.
Citing "the damage done to the reputation of the World Bank Group and to that of the president," the seven-member committee recommended that the institution's board "consider whether Mr. Wolfowitz will be able to provide the leadership needed to ensure that the bank continues to operate to the fullest extent possible" in its mission to fight world poverty.
The report, delivered to the board and released Monday evening, also skewered Wolfowitz for "questionable judgment and a preoccupation with self-interest over institutional best interest."
"Mr. Wolfowitz saw himself as the outsider to whom the established rules and standards did not apply," the report said.
He is to defend himself today in a private meeting with the 24 members of the board.
The public release of the 52-page report is the latest salvo in a confrontation that has been growing since early April, when it was publicly revealed that Wolfowitz had played a large role in arranging a new job at the State Department, with a hefty salary increase, for his companion. The conflict is straining relations between the United States and its European allies and could lead to the downfall of yet another public figure associated with the Bush administration.
The committee's findings were posted on the bank's website — www.worldbank.org — just hours after they were delivered to the board. Though the report was labeled "Strictly Confidential," bank sources said the board of executive directors decided Monday evening to release it immediately.
In so doing, they increased pressure on the Bush administration, which had been working throughout the day to defend Wolfowitz. Since his 2005 appointment he has been strongly criticized both for his management style and for his role, as deputy secretary of Defense, as one of the chief architects of the Iraq war.
"Paul is one of the most able public servants I've ever known, and I've worked with him a lot over the years," Vice President Dick Cheney told Fox News during a visit Monday to Aqaba, Jordan. "I think he's a very good president of the World Bank, and I hope he will be able to continue."
Treasury Secretary Henry M. Paulson Jr. contacted colleagues from Group of Seven countries "and expressed that he does not think the facts merit dismissal," a department official said.
"A clear reading of the facts in this report demonstrates that this was a unique situation, missteps occurred on all sides, and communication may not have been clear enough," the official said.
The White House had appealed unsuccessfully to the committee to delay sending its report to the board so that administration officials could do "a little internal reporting" on it, said White House deputy press secretary Tony Fratto.
Wolfowitz, who submitted his response to the report Friday, has maintained that he acted in good faith and has accused his critics of conducting a "smear campaign" against him.
In his response, Wolfowitz said, "It is highly unfair and unwarranted to now find that I engaged in a conflict of interest because I relied on the advice of the ethics committee as best I understood it," according to the Associated Press. He also said he did not attempt to hide details of the arrangement from bank officials: "I did not have it locked up or placed in a secret drawer; it was a contract of the bank."
The bank's 185 member nations are moving into uncharted territory as the conflict deepens. The bank has never dismissed a president, and there are no rules to govern such proceedings.
The panel's second major recommendation seems aimed to prevent a similar situation from recurring. It calls on the board to "undertake a review of the governance framework of the World Bank Group with the aim of ensuring that it is capable of effectively dealing with the challenges raised for the institution."
The United States, traditionally the bank's single largest contributor, has always chosen the institution's president, who serves a five-year term and can be reappointed. European nations select the head of the International Monetary Fund.
In regular bank business, countries on the board cast votes that are weighted based on the percentage of bank funds they contribute. The U.S. holds 16.4% of the vote. Sometimes a 85% super-majority is required for a vote; if that is the case with any vote on Wolfowitz, the U.S. would effectively have a veto.
European countries have more than twice the votes of the U.S., but they have been pushing behind the scenes to avoid a direct showdown.
With Britain and France contending with changes of leadership and Germany preparing to host a summit of top lending nations in July, the Europeans would prefer that Wolfowitz resign or that the board issue a statement of no-confidence that makes it impossible for him to stay on, bank sources say.
The controversy centers on a promotion and pay package that Wolfowitz put together for his companion, Shaha Ali Riza, when he joined the bank in 2005. To avoid a conflict of interest, Wolfowitz arranged for Riza, a communications official, to be transferred to a job at the State Department, although she remained on the bank's payroll. Her pay was boosted from around $133,000 a year to close to $194,000, more than the salary of Secretary of State Condoleezza Rice.
The report found that Wolfowitz directed raises that exceeded "the permissible range" and, in doing so, went beyond the informal advice provided by the bank's ethics committee. His involvement constituted a conflict of interest, according to the committee.
The panel also raised concerns that the controversy will make it difficult for the bank to raise money for its mission, saying that it "had had a dramatic negative effect on the reputation and credibility" of the institution.
In an observation signaling that the conflict will not be resolved quietly, the panel said it found "one central theme" throughout one extended rebuttal from Wolfowitz: "the absence of any acceptance by Mr. Wolfowitz himself of responsibility or blame for the events that transpired."
Cuba Stocks US Brands Despite Embargo (MyWay)
HAVANA (AP) — The golden arches are nowhere to be found. There's not a single Starbucks or Wal-Mart, and no way to buy a Budweiser, a Corvette or a Dell.
But even in Cuba, you can get a Coke.
Despite the U.S. Trading With the Enemy Act, which governs Washington's 45-year-old embargo, sales on Fidel Castro's island are lining the pockets of corporate America.
Nikes, Colgate and Marlboros, Gillette Series shaving cream and Jordache jeans — all are easy to find. Cubans who wear contact lenses can buy Bausch & Lomb. Parents can surprise the kids with a Mickey Mouse fire truck.
Dozens of American brands are on sale here — and not in some black-market back alley. They're in the lobbies of gleaming government-run hotels and in crowded supermarkets and pharmacies that answer to the communist government.
The companies say they have no direct knowledge of sales in Cuba, and that the amounts involved are small and would be impractical to stop. But it's hard to deny that a portion of the transactions wind up back in the United States.
"We try and do what we can to police ... but in a globalized economy, it's impossible to catch everything," said Vada Manager, director of global issues management for Nike Inc.
Trade sanctions bar American tourists from visiting Cuba and allow exports only of U.S. food and farm products, medical supplies and some telecommunications equipment. But wholesalers and distributors in Europe, Asia, Latin America and Canada routinely sell some of America's most recognizable brands to Cuban importers.
Cuba has for years sought out American goods as a way of thumbing its nose at the embargo. Officials at three foreign-owned import companies operating in Havana, who refused to have their names published for fear of economic repercussions, said the communist government itself still imports the vast majority of American goods.
Christopher Padilla, U.S. assistant secretary of commerce for export administration, said from Washington that Cuba even sends delegations on "buying missions," hunting for specific American products in third countries for resale back home. Cuban press authorities did not make relevant officials available to discuss the practice.
In a country where tourism is the leading revenue source, stocking American brands helps reassure visitors, according to Daniel Erikson, a Cuban economy expert at the Inter-American Dialogue in Washington.
"People, average Cubans included, would rather have Coca-Cola than a no-name generic soda they're not familiar with. That means the government can charge more," Erikson said. "And obviously for the tourist industry it's important for the foreigners who visit Cuba to see products that they know and trust."
All American products are sold in Cuban convertible pesos, considered foreign currency and worth $1.08 apiece — about 25 times the island's regular peso. Although government salaries have increased in recent years, the average monthly pay is still around $15, meaning few Cubans can afford U.S. goods.
But last month, Economy Minister Jose Luis Rodriguez said 57 percent of the population has access to hard currency — dollars or convertible pesos — either through jobs in tourism or money from relatives abroad. A 2004 report by the U.S. Commission for Assistance to a Free Cuba estimated that remittances from the United States alone total $1 billion a year.
The influx of American brands began in earnest in 1993, when Cuba scrapped laws that had made it illegal for its citizens to possess dollars. Cubans know the products, despite an almost complete lack of advertising on the island. Angel Hernandez, a 62-year-old retiree, didn't hesitate when presented with a pair of "Air Jordans."
"That swoosh. That's Nike," he said. Like most Cubans, he pronounces the company name with a silent "e" as in "Mike."
Made in China, brick-red Nike Air Max 90 sneakers sell for 129.40 convertible Cuban pesos — about $140 — at a store off Havana's Central Park. High-priced fakes also abound. Several stores, including one inside the Havana Libre Hotel — the Havana Hilton before Castro's 1959 revolution — offer authentic-looking Max Air 80s, but Nike makes no such product.
At the Comodoro Hotel, a boutique wants $40 for assorted small gym bags with pastel or silver swooshes. Their tags read "Made in Indonesia" in Spanish and "Nike de Mexico," providing a hint of their route to Cuba.
Manager said all Nike products for sale in Cuba are probably knockoffs. He conceded, however, that legitimate distributors outside the U.S. could be selling products to Cuban importers — and that Nike could make money off such sales.
"But what you're talking about is such a small volume there," he said. "And if we are able to detect where ... the products came from, that distributor or retailer runs the risk of having their account discontinued with us."
John Kavulich, senior policy adviser for the U.S.-Cuba Trade and Economic Council Inc. in New York, said "in no way should it be said that this is an end run by U.S. business around U.S. restrictions, because it's not."
"It's almost impossible for American companies to stop," Kavulich said. "Of course, at some point in the transaction, at the very beginning when the legitimate distributor bought the product from Nike, or any company, money went to the U.S."
Kavulich estimated the value of U.S. brands sold in Cuba as "probably $20 million or less on an annual basis," but noted that less than 5 percent of that amount likely represents combined profit for American companies, given all the layers of transactions the products go through to get to the island.
Decades-old Walt Disney cartoons air on state television every afternoon and stores have Mickey Mouse toys and wrapping paper and Snoopy products.
In Havana's Vedado district, fishing supply store DSY offers goods made by U.S. supplier Seachoice Products. A "Heavy Duty Waterproof Flashlight" from the company proudly proclaims "Made in USA."
Saleswoman Dayne Barrios said the products were shipped from Florida to a Mexico distributor, which sent them to Cuba through a government importer. Calls to Seachoice offices in Pompano Beach, Fla., were not returned.
At least two Havana clothing stores call themselves Jordache, one even using the company's horse head logo on its marquee. The shelves inside are crammed with jeans, shirts and blouses with Jordache labels.
Steven Nakash, director of licensing for Jordache Enterprises in New York, said the company heard about unauthorized use of its brand in Cuba several years ago but took no action because "an American company dealing with a foreign territory and battling it out on foreign soil is very, very hard."
Nakash, a member of Jordache's founding family, said the company has international distributors but also licenses its brand to manufacturers, including one in Mexico. He said he was unsure where the products in Cuba came from.
"Is any of the revenue from Cuba coming back to me? Certainly not," Nakash said.
Even after Castro took over, more than 100 U.S. corporations — including Ford Motor Co. — obtained licenses to operate here through foreign subsidiaries.
The U.S. Cuban Democracy Act of 1992 made such third-country transactions illegal, while also authorizing the export of U.S. medicines. Eight years later, the U.S. Congress allowed direct sales to Cuba of food and farm goods, everything from rice, ice cream and livestock to wood products, down feathers and cigarettes.
Since then, Heinz ketchup, Tabasco Sauce and Tyson's chicken have been sporadically available at Cuban government supermarkets, and the United States has become the island's leading supplier of food and farm products.
Prices can be about twice as much as in U.S. stories. Tubes of Colgate toothpaste start at $4.85. You can also find products including shampoo, conditioner and anti-bacterial soap from New York-based Colgate-Palmolive Co. A shaving "mousse" from Gillette Series, distributed by Procter & Gamble Zurich, costs $4.80 a bottle.
Could those items be considered medical supplies? Not likely, say U.S. officials.
But pinpointing whether any American product is in Cuba legally is difficult because the U.S. Treasury Department does not disclose who secures export licenses, citing trade secrets acts.
No American brand is more prevalent in Cuba than Coke, but the Atlanta, Georgia-based Coca-Cola Co. has not sought Cuban export licenses — even though its product would qualify as food.
Bottled mostly in Mexico, Coke goes for $1 at stores — about the same price as at a U.S. convenience store — and up to four times that at touristy restaurants.
Charles Sutlive, a Coca-Cola spokesman in Atlanta, said the company has not authorized any bottler to sell or distribute any of its finished products in Cuba. But he added that the company "does not have the authority to prevent these type of activities in countries where Cuban import-export companies are free to operate."
Indeed, distributors of American goods operating in other countries often insist they are doing nothing wrong — and can even be fined by their own governments for refusing to export to Cuba.
Mexico fined the Sheraton Maria Isabel Hotel in Mexico City in 2005 after it bowed to U.S. Treasury Department pressure and evicted Cuban officials staying there. In January, a Norwegian hotel owned by Hilton Hotel Corp. sparked an uproar when it refused to book rooms for a Cuban delegation, citing the American embargo.
The Commerce Department's Padilla said the U.S. sanctions have international reach, applying to American products anywhere in the world.
"If companies knowingly sold to a Cuban importer, they can be prosecuted," he said. "Willful blindness is not an excuse to violate the law in these matters."
Despite potential legal hot water, Nakash confessed a certain pride that his brand has cracked Havana.
"I can very much appreciate seeing a Jordache shop there," he said. "I, as an American, can't go to a country like Cuba. But our brand can."
But even in Cuba, you can get a Coke.
Despite the U.S. Trading With the Enemy Act, which governs Washington's 45-year-old embargo, sales on Fidel Castro's island are lining the pockets of corporate America.
Nikes, Colgate and Marlboros, Gillette Series shaving cream and Jordache jeans — all are easy to find. Cubans who wear contact lenses can buy Bausch & Lomb. Parents can surprise the kids with a Mickey Mouse fire truck.
Dozens of American brands are on sale here — and not in some black-market back alley. They're in the lobbies of gleaming government-run hotels and in crowded supermarkets and pharmacies that answer to the communist government.
The companies say they have no direct knowledge of sales in Cuba, and that the amounts involved are small and would be impractical to stop. But it's hard to deny that a portion of the transactions wind up back in the United States.
"We try and do what we can to police ... but in a globalized economy, it's impossible to catch everything," said Vada Manager, director of global issues management for Nike Inc.
Trade sanctions bar American tourists from visiting Cuba and allow exports only of U.S. food and farm products, medical supplies and some telecommunications equipment. But wholesalers and distributors in Europe, Asia, Latin America and Canada routinely sell some of America's most recognizable brands to Cuban importers.
Cuba has for years sought out American goods as a way of thumbing its nose at the embargo. Officials at three foreign-owned import companies operating in Havana, who refused to have their names published for fear of economic repercussions, said the communist government itself still imports the vast majority of American goods.
Christopher Padilla, U.S. assistant secretary of commerce for export administration, said from Washington that Cuba even sends delegations on "buying missions," hunting for specific American products in third countries for resale back home. Cuban press authorities did not make relevant officials available to discuss the practice.
In a country where tourism is the leading revenue source, stocking American brands helps reassure visitors, according to Daniel Erikson, a Cuban economy expert at the Inter-American Dialogue in Washington.
"People, average Cubans included, would rather have Coca-Cola than a no-name generic soda they're not familiar with. That means the government can charge more," Erikson said. "And obviously for the tourist industry it's important for the foreigners who visit Cuba to see products that they know and trust."
All American products are sold in Cuban convertible pesos, considered foreign currency and worth $1.08 apiece — about 25 times the island's regular peso. Although government salaries have increased in recent years, the average monthly pay is still around $15, meaning few Cubans can afford U.S. goods.
But last month, Economy Minister Jose Luis Rodriguez said 57 percent of the population has access to hard currency — dollars or convertible pesos — either through jobs in tourism or money from relatives abroad. A 2004 report by the U.S. Commission for Assistance to a Free Cuba estimated that remittances from the United States alone total $1 billion a year.
The influx of American brands began in earnest in 1993, when Cuba scrapped laws that had made it illegal for its citizens to possess dollars. Cubans know the products, despite an almost complete lack of advertising on the island. Angel Hernandez, a 62-year-old retiree, didn't hesitate when presented with a pair of "Air Jordans."
"That swoosh. That's Nike," he said. Like most Cubans, he pronounces the company name with a silent "e" as in "Mike."
Made in China, brick-red Nike Air Max 90 sneakers sell for 129.40 convertible Cuban pesos — about $140 — at a store off Havana's Central Park. High-priced fakes also abound. Several stores, including one inside the Havana Libre Hotel — the Havana Hilton before Castro's 1959 revolution — offer authentic-looking Max Air 80s, but Nike makes no such product.
At the Comodoro Hotel, a boutique wants $40 for assorted small gym bags with pastel or silver swooshes. Their tags read "Made in Indonesia" in Spanish and "Nike de Mexico," providing a hint of their route to Cuba.
Manager said all Nike products for sale in Cuba are probably knockoffs. He conceded, however, that legitimate distributors outside the U.S. could be selling products to Cuban importers — and that Nike could make money off such sales.
"But what you're talking about is such a small volume there," he said. "And if we are able to detect where ... the products came from, that distributor or retailer runs the risk of having their account discontinued with us."
John Kavulich, senior policy adviser for the U.S.-Cuba Trade and Economic Council Inc. in New York, said "in no way should it be said that this is an end run by U.S. business around U.S. restrictions, because it's not."
"It's almost impossible for American companies to stop," Kavulich said. "Of course, at some point in the transaction, at the very beginning when the legitimate distributor bought the product from Nike, or any company, money went to the U.S."
Kavulich estimated the value of U.S. brands sold in Cuba as "probably $20 million or less on an annual basis," but noted that less than 5 percent of that amount likely represents combined profit for American companies, given all the layers of transactions the products go through to get to the island.
Decades-old Walt Disney cartoons air on state television every afternoon and stores have Mickey Mouse toys and wrapping paper and Snoopy products.
In Havana's Vedado district, fishing supply store DSY offers goods made by U.S. supplier Seachoice Products. A "Heavy Duty Waterproof Flashlight" from the company proudly proclaims "Made in USA."
Saleswoman Dayne Barrios said the products were shipped from Florida to a Mexico distributor, which sent them to Cuba through a government importer. Calls to Seachoice offices in Pompano Beach, Fla., were not returned.
At least two Havana clothing stores call themselves Jordache, one even using the company's horse head logo on its marquee. The shelves inside are crammed with jeans, shirts and blouses with Jordache labels.
Steven Nakash, director of licensing for Jordache Enterprises in New York, said the company heard about unauthorized use of its brand in Cuba several years ago but took no action because "an American company dealing with a foreign territory and battling it out on foreign soil is very, very hard."
Nakash, a member of Jordache's founding family, said the company has international distributors but also licenses its brand to manufacturers, including one in Mexico. He said he was unsure where the products in Cuba came from.
"Is any of the revenue from Cuba coming back to me? Certainly not," Nakash said.
Even after Castro took over, more than 100 U.S. corporations — including Ford Motor Co. — obtained licenses to operate here through foreign subsidiaries.
The U.S. Cuban Democracy Act of 1992 made such third-country transactions illegal, while also authorizing the export of U.S. medicines. Eight years later, the U.S. Congress allowed direct sales to Cuba of food and farm goods, everything from rice, ice cream and livestock to wood products, down feathers and cigarettes.
Since then, Heinz ketchup, Tabasco Sauce and Tyson's chicken have been sporadically available at Cuban government supermarkets, and the United States has become the island's leading supplier of food and farm products.
Prices can be about twice as much as in U.S. stories. Tubes of Colgate toothpaste start at $4.85. You can also find products including shampoo, conditioner and anti-bacterial soap from New York-based Colgate-Palmolive Co. A shaving "mousse" from Gillette Series, distributed by Procter & Gamble Zurich, costs $4.80 a bottle.
Could those items be considered medical supplies? Not likely, say U.S. officials.
But pinpointing whether any American product is in Cuba legally is difficult because the U.S. Treasury Department does not disclose who secures export licenses, citing trade secrets acts.
No American brand is more prevalent in Cuba than Coke, but the Atlanta, Georgia-based Coca-Cola Co. has not sought Cuban export licenses — even though its product would qualify as food.
Bottled mostly in Mexico, Coke goes for $1 at stores — about the same price as at a U.S. convenience store — and up to four times that at touristy restaurants.
Charles Sutlive, a Coca-Cola spokesman in Atlanta, said the company has not authorized any bottler to sell or distribute any of its finished products in Cuba. But he added that the company "does not have the authority to prevent these type of activities in countries where Cuban import-export companies are free to operate."
Indeed, distributors of American goods operating in other countries often insist they are doing nothing wrong — and can even be fined by their own governments for refusing to export to Cuba.
Mexico fined the Sheraton Maria Isabel Hotel in Mexico City in 2005 after it bowed to U.S. Treasury Department pressure and evicted Cuban officials staying there. In January, a Norwegian hotel owned by Hilton Hotel Corp. sparked an uproar when it refused to book rooms for a Cuban delegation, citing the American embargo.
The Commerce Department's Padilla said the U.S. sanctions have international reach, applying to American products anywhere in the world.
"If companies knowingly sold to a Cuban importer, they can be prosecuted," he said. "Willful blindness is not an excuse to violate the law in these matters."
Despite potential legal hot water, Nakash confessed a certain pride that his brand has cracked Havana.
"I can very much appreciate seeing a Jordache shop there," he said. "I, as an American, can't go to a country like Cuba. But our brand can."
Bank on I-Banks (New York Magazine)
Don’t hate investment bankers for raking in millions. Invest in their absurdly profitable (yet still undervalued) outfits and share the wealth.
By James J. Cramer
Stop envying Goldman Sachs’ Lloyd Blankfein already. Don’t begrudge Bear Stearns’ Jimmy Cayne and Lehman’s Dick Fuld their millions. Let Merrill’s Stan O’Neal and Morgan Stanley’s John Mack get paid more than Croesus. You heard it here first: They deserve it. In fact, they deserve more than they earn now.
Those five men are underpaid because they are about to make you very rich if you buy their stocks. Personally, I’m partial to Goldman Sachs, the most undervalued stock of the quintet. But the truth is, you can own shares in any one of these companies and I would expect you to make 50 percent on your money within the next year, and double it within the next three. Despite their immense profitability, the stocks of these companies are some of the least expensive of all the thousands I follow, and, after crushing declines since the year began, they’re ready to begin a steep ascent.
First, let’s talk about why these stocks are cheap. Moving product to generate trading commissions, once a mainstay of these firms, has diminished markedly in the past decade. The buying and selling and underwriting of stocks and bonds, which used to generate gigantic profits, has seen its share of the bottom line almost vanish, crushed by brutal competition. Nonetheless, the perception remains on Wall Street that equities matter greatly, and that commissions on those equities are the difference between good and bad profits for the whole entities. That’s totally untrue. I envision a day when these firms won’t even charge commissions if you put your money with them. So basing an investment decision on whether trading is up or down—as many of the analysts do who opine on these stocks—is ludicrous. That faulty analysis produces the beautiful phenomenon called undervaluation.
What are the real fulcrum factors to performance? First, take the global M&A boom. Back when I peddled stocks and bonds for Goldman Sachs in the eighties, the I-banks were mostly U.S.-focused. Now M&A is a worldwide business that is dominated by the five American I-banks. These firms didn’t even know where some of these countries producing their current deals were two decades ago. Today, their brands are considered local in places as diverse as Warsaw, São Paulo, and Macao. And no investment bank outside our country has anything close to the M&A experience and expertise the big U.S. I-banks have. Usually, one or two of these firms has a hammerlock on the big M&A deals at any given time, but right now there are so many transactions and so many great deal-makers at each firm that the pie is big enough for everyone to feast on.
Next, there’s asset management. For most of the past century, the investment banks were reluctant to manage other people’s money. Why bother? They made plenty from the commissions they earned from stock and bond trades. But with the emergence of discount brokers and online trading, those commissions were badly squeezed (trades that used to cost $200 came to cost $8). Then the multiyear bull market created a new sea of wealth that begged to be managed. These firms, with their top-shelf brand names in finance, decided to get in on the action, and immediately won over many of the clients they pursued, including the newly ultrarich twenty- and thirtysomethings and hugely successful company 401(k) plans. I can recall going to my boss in 1985 and urging Goldman to go after 401(k) money before it grew too big. He laughed: The money could never amount to anything; it would always be too small for Goldman Sachs, he told me. Today, these divisions make fortunes, and the marginal cost of managing additional funds is almost nil.
The major firms, with balance sheets swelled by so much money sloshing through their organizations, also decided to harness the house’s money (and trading expertise) and trade it for their own accounts. Proprietary trading, making bets with the firm’s capital, is another major profit center that barely existed a decade ago. True, these earnings are derided in some quarters as unstable and inconsistent, like those of a hedge fund, even as the profits have been both stable and amazingly steady. But it’s investors’ current predilection for investing in publicly traded hedge funds that makes no sense. Why invest in one of these new IPOs for relatively unknown hedge funds when you could buy shares instead in one of the top I-banks? Their own internal hedge funds have better, lower risk and higher-return track records than any hedge funds I follow.
Another business that has exploded out of nowhere is the one that’s gotten all the press: private equity. Advising the Blackstones and the KKRs remains a great business. But being a KKR or a Blackstone is even better! As private-equity funds come public, as a number are trying to do, they will increase the value of all private-equity players, including the big I-banks. Again, you’ll pay a premium investing in the publicly traded equity funds when you could pick up a Goldman, say, with its own private-equity fund of $20 billion, on the cheap.
The final business that’s catapulting the I-bankers’ bottom lines is the profits from what I call the private-equity aftermath. An I-banker takes in huge fees to do a private-equity deal, but the big gains are in the financing the banks provide—stupendously large high-yield bond deals that allow the fixed-income departments of these firms to generate still more cash.
What could go wrong with the scenario I foresee? A worldwide economic slowdown could hurt the big I-banks’ business, but everywhere except the United States seems to be getting stronger, not weaker. A big change in Washington might cause more scrutiny and higher taxes, but the I-banks aren’t dumb; they’re equal-opportunity political donors. Finally, there’s Citigroup. It is a well-known punch line around Wall Street that earnings are so high at the five major banks because of one key player: Chuck Prince, the man in charge of Citigroup. If he were to be fired or decide to spend more time with his family, Citi could reassert itself both domestically and globally as a margin-slasher of Big Five profits. Don’t laugh; he’s so incompetent that he helps everybody else’s bottom line.
To me, though, those concerns can’t derail these five I-banks. Well-run, unchallenged franchises, with growing markets and new businesses, undervalued because of a recent hiccup in a tiny part of their operations, these banks may be the single best group of investments in the world. Buying shares in them won’t make you Blankfein money ($54 million last year in salary and bonuses). But this could be your best shot at profiting from Wall Street’s latest big party.
This season, shy girls may be safer wearing a bikini (NY Daily News)
BY AMY DILUNA
Monday, May 14th 2007
Gone are the days when a full-coverage suit was the safest choice for women whose bods aren't quite
bikini-ready. This season, most one-pieces are shredded, slashed-down to there or situated so low on your hips, even Grandma would take a pass.
The problem: They look so great on the runway. And even though every woman knows the catwalk is a trick that tempts normal-bodied people to try out silhouettes and styles only suited to stick figures, we still can't help ourselves.
Someone has to be able to work those granny bottoms, you figure, so why not me? "A lot of these suits really do require a perfect body," says Suze Yalof Schwartz, Glamour magazine's executive fashion editor at large, who's performed more than 2,000 bathing-suit makeovers in her career. "You cannot have a muffin top and wear a stringy one-piece. You'll embarrass yourself and your family."
But, says Schwartz, the trendiest suits are perfectly wearable - if you follow the rules.
"If you're boy-shaped, straight up and down, wearing a one-piece with a deep plunging neckline is going to give the illusion of curves, by drawing your eyes in."
And if you suffer from stretch marks, grab a cut-out one-piece that's open in the back: "You've got the sex appeal of the bikini with the coverage of a one-piece," she says.
As for those adorable granny panties, Michael Kors thinks they're okay and we believe him.
"Yes, they're modern and groovy-looking," says Schwartz, "and Uma Thurman was wearing them in St.
Barts. But the truth is, they really cover up a big pooch. So if you have a belly and you want to slim down, those can be your best friends."
Girls with short legs and meaty thighs need not apply, however: The granny's low cut will wreak havoc on your gams.
Most important, when considering a daring design, don't take the whole thing too seriously. This is high fashion, after all, and these styles aren't for taking a cannonball into your backyard pool. Think strutting about in stilettos and a spray tan.
"Don one of these suits with SPF 50 and you're good to go," says Schwartz. "Don't tan in them. When you take off your bathing suit, you'll look like a freak show."
Crackdown on Indian Outsourcing Firms (Business Week)
Two senators are probing how Indian outsourcing firms use U.S. work visas, with an eye on new restrictions
by Peter Elstrom
Concerns about foreign companies that benefit from a visa program designed to make the U.S. more competitive are taking center stage in Washington, with two senators demanding explanations from overseas users of the system. Senators Chuck Grassley (R-Iowa) and Richard Durbin (D-Ill.) on May 14 sent letters to nine foreign outsourcing companies requesting detailed information on how they use temporary work visas, known as H-1Bs, to bring foreign workers into the U.S.
Critics say outsourcing firms, including Infosys Technologies (INFY) and Wipro (WIT), are using the visas to replace U.S. employees with foreign workers, often cycling overseas staff through U.S. training programs before sending them back into jobs at home. The lawmakers are intent on probing whether those allegations are accurate. "Supporters claim the goal of the H-1B program is to help the American economy by allowing U.S. companies to hire needed foreign workers," Durbin said in a statement. "The reality is that too many H-1B visas are being used to facilitate the outsourcing of American jobs to other countries."
In outlining the investigation, Durbin and Grassley are making details of the visa program public for the first time, including the number of visas awarded to non-U.S. companies. The nine firms, led by Infosys and Wipro, use 19,512 of the H-1B visas, or 30% of the 65,000 visas allowed each year. This indicates that Indian outsourcing companies participate more actively than previously thought, garnering for themselves visas that could otherwise go to U.S. firms. "This is information that we never had before," says Ron Hira, a public policy professor at the Rochester Institute of Technology who has studied the issue closely.
A Polarizing Issue
The revelations could play into the hands of opponents of the H-1B program as the political battle over immigration heats up. President George W. Bush and many other lawmakers want comprehensive immigration reform this year, reform that would address both low-skill workers, largely from Mexico and other parts of Latin America, and high-skill workers, many from India and China. Chances of a compromise over the highly contentious matter of low-skilled workers already look slim. The move by Durbin and Grassley may make resolution of issues on the high-skill front equally unlikely.
Until recently, the discussion over high-skill immigration has centered largely on how to bring in more foreign workers adept at such jobs as software development. Technology companies, from Microsoft (MSFT) and Intel (INTC) to Motorola (MOT) and Qualcomm (QCOM), have argued that the U.S. should offer more work visas for noncitizens to improve its competitiveness.
In March, Microsoft co-founder and chairman Bill Gates went to Washington to make the case to Congress. "Simply put: It makes no sense to tell well-trained, highly skilled individuals—many of whom are educated at our top colleges and universities—that the United States does not welcome or value them," he said. "For too many foreign students and professionals, however, our immigration policies send precisely this message." (See BusinessWeek.com, 3/8/07, "Gates to Senate: More Visas")
Many Indian Applicants
Yet evidence on the H-1B visa program paints a contrasting picture. As BusinessWeek first reported in February, Indian outsourcing companies have become by far the most active applicants for H-1B visas (see BusinessWeek.com, 2/8/07, "Work Visas May Work Against the U.S."). The data, just then released, showed that seven of the top 10 applicants for H-1Bs in fiscal 2006 were Indian outsourcers, led by Infosys and Wipro.
Officials at the U.S. Citizenship & Immigration Services would not disclose which firms actually received the visas, but they said there was no reason to believe that the number awarded differed greatly from the number applied for. They said the visas are awarded on a "first-come, first-served" basis and no preference was given to U.S. companies.
At the time, Wipro officials said they used the visas to enhance the competitiveness of clients, many of whom work in the U.S. Laxman Badiga, the company's chief information officer, said that of its 4,000 employees in the U.S., roughly 2,500 were on H-1B visas. Each year, 1,000 new temporary workers come to the U.S. to develop their skills in serving U.S. clients, while 1,000 rotate home. Wipro says the training allows the firm to more effectively help its clients. "Our goal is to make our customers more competitive," said Badiga in February. A Wipro spokesman did not provide an official to comment for this story.
Taking a "Hard Look"
Just how much the program advances U.S. competitiveness will come under closer scrutiny now. Durbin and Grassley have taken a much harder-edged approach to high-skill immigration than their parties have in the past. The senators say they want to ensure temporary worker programs can't be used to take advantage of American workers. "Considering the high amount of fraud and abuse in the visa program, we need to take a good, hard look at the employers who are using H-1B visas and how they are using them," says Grassley.
The letters probe a number of areas, including whether workers brought into the U.S. on H-1B visas are paid less that comparable American workers, a disparity that could drive down overall wages. The senators ask whether the visas are being used to train people in jobs that will later be moved back to India or other countries. And they request data on American workers who may have been laid off as H-1B workers have been hired.
"We are concerned that the program is not being used as Congress intended," wrote Durbin and Grassley in a letter to Nandan Nilekani, the chief executive of Infosys. Infosys did not return phone calls seeking comment.
Law Limitations
Durbin and Grassley have introduced legislation that make a number of changes in the temporary worker programs. The most radical change would be a requirment that companies applying for the visas attempt to hire U.S. workers first. Currently, applicants need to pledge to pay the prevailing wage, but they don't need to make any effort to hire Americans (see BusinessWeek.com, 3/26/07, "Immigration Reform: Americans First?"). The legislation would also require companies to pay higher wages to temporary workers and tighten oversight of the visa programs.
But resolving differences over the program won't be easy. It's not as simple as making the H-1B program more restrictive. U.S. tech companies have struggled to bring in enough workers to fill jobs in specialized fields. Even if foreign outsourcers are stopped from using the visas, there will continue to be shortages. This year, the 65,000 annual cap for H-1Bs was filled in less than two days.
Nor is there an easy distinction between U.S. and non-U.S. firms. While Durbin and Grassley's investigation is focused on Indian outsourcing firms, U.S. companies may very well be using the visas for much the same thing. Among the most active applicants for H-1B visas are Accenture (ACN) and Cognizant Technology Solutions (CTSH). Both are officially headquartered in the U.S., but they have extensive outsourcing operations in India.
by Peter Elstrom
Concerns about foreign companies that benefit from a visa program designed to make the U.S. more competitive are taking center stage in Washington, with two senators demanding explanations from overseas users of the system. Senators Chuck Grassley (R-Iowa) and Richard Durbin (D-Ill.) on May 14 sent letters to nine foreign outsourcing companies requesting detailed information on how they use temporary work visas, known as H-1Bs, to bring foreign workers into the U.S.
Critics say outsourcing firms, including Infosys Technologies (INFY) and Wipro (WIT), are using the visas to replace U.S. employees with foreign workers, often cycling overseas staff through U.S. training programs before sending them back into jobs at home. The lawmakers are intent on probing whether those allegations are accurate. "Supporters claim the goal of the H-1B program is to help the American economy by allowing U.S. companies to hire needed foreign workers," Durbin said in a statement. "The reality is that too many H-1B visas are being used to facilitate the outsourcing of American jobs to other countries."
In outlining the investigation, Durbin and Grassley are making details of the visa program public for the first time, including the number of visas awarded to non-U.S. companies. The nine firms, led by Infosys and Wipro, use 19,512 of the H-1B visas, or 30% of the 65,000 visas allowed each year. This indicates that Indian outsourcing companies participate more actively than previously thought, garnering for themselves visas that could otherwise go to U.S. firms. "This is information that we never had before," says Ron Hira, a public policy professor at the Rochester Institute of Technology who has studied the issue closely.
A Polarizing Issue
The revelations could play into the hands of opponents of the H-1B program as the political battle over immigration heats up. President George W. Bush and many other lawmakers want comprehensive immigration reform this year, reform that would address both low-skill workers, largely from Mexico and other parts of Latin America, and high-skill workers, many from India and China. Chances of a compromise over the highly contentious matter of low-skilled workers already look slim. The move by Durbin and Grassley may make resolution of issues on the high-skill front equally unlikely.
Until recently, the discussion over high-skill immigration has centered largely on how to bring in more foreign workers adept at such jobs as software development. Technology companies, from Microsoft (MSFT) and Intel (INTC) to Motorola (MOT) and Qualcomm (QCOM), have argued that the U.S. should offer more work visas for noncitizens to improve its competitiveness.
In March, Microsoft co-founder and chairman Bill Gates went to Washington to make the case to Congress. "Simply put: It makes no sense to tell well-trained, highly skilled individuals—many of whom are educated at our top colleges and universities—that the United States does not welcome or value them," he said. "For too many foreign students and professionals, however, our immigration policies send precisely this message." (See BusinessWeek.com, 3/8/07, "Gates to Senate: More Visas")
Many Indian Applicants
Yet evidence on the H-1B visa program paints a contrasting picture. As BusinessWeek first reported in February, Indian outsourcing companies have become by far the most active applicants for H-1B visas (see BusinessWeek.com, 2/8/07, "Work Visas May Work Against the U.S."). The data, just then released, showed that seven of the top 10 applicants for H-1Bs in fiscal 2006 were Indian outsourcers, led by Infosys and Wipro.
Officials at the U.S. Citizenship & Immigration Services would not disclose which firms actually received the visas, but they said there was no reason to believe that the number awarded differed greatly from the number applied for. They said the visas are awarded on a "first-come, first-served" basis and no preference was given to U.S. companies.
At the time, Wipro officials said they used the visas to enhance the competitiveness of clients, many of whom work in the U.S. Laxman Badiga, the company's chief information officer, said that of its 4,000 employees in the U.S., roughly 2,500 were on H-1B visas. Each year, 1,000 new temporary workers come to the U.S. to develop their skills in serving U.S. clients, while 1,000 rotate home. Wipro says the training allows the firm to more effectively help its clients. "Our goal is to make our customers more competitive," said Badiga in February. A Wipro spokesman did not provide an official to comment for this story.
Taking a "Hard Look"
Just how much the program advances U.S. competitiveness will come under closer scrutiny now. Durbin and Grassley have taken a much harder-edged approach to high-skill immigration than their parties have in the past. The senators say they want to ensure temporary worker programs can't be used to take advantage of American workers. "Considering the high amount of fraud and abuse in the visa program, we need to take a good, hard look at the employers who are using H-1B visas and how they are using them," says Grassley.
The letters probe a number of areas, including whether workers brought into the U.S. on H-1B visas are paid less that comparable American workers, a disparity that could drive down overall wages. The senators ask whether the visas are being used to train people in jobs that will later be moved back to India or other countries. And they request data on American workers who may have been laid off as H-1B workers have been hired.
"We are concerned that the program is not being used as Congress intended," wrote Durbin and Grassley in a letter to Nandan Nilekani, the chief executive of Infosys. Infosys did not return phone calls seeking comment.
Law Limitations
Durbin and Grassley have introduced legislation that make a number of changes in the temporary worker programs. The most radical change would be a requirment that companies applying for the visas attempt to hire U.S. workers first. Currently, applicants need to pledge to pay the prevailing wage, but they don't need to make any effort to hire Americans (see BusinessWeek.com, 3/26/07, "Immigration Reform: Americans First?"). The legislation would also require companies to pay higher wages to temporary workers and tighten oversight of the visa programs.
But resolving differences over the program won't be easy. It's not as simple as making the H-1B program more restrictive. U.S. tech companies have struggled to bring in enough workers to fill jobs in specialized fields. Even if foreign outsourcers are stopped from using the visas, there will continue to be shortages. This year, the 65,000 annual cap for H-1Bs was filled in less than two days.
Nor is there an easy distinction between U.S. and non-U.S. firms. While Durbin and Grassley's investigation is focused on Indian outsourcing firms, U.S. companies may very well be using the visas for much the same thing. Among the most active applicants for H-1B visas are Accenture (ACN) and Cognizant Technology Solutions (CTSH). Both are officially headquartered in the U.S., but they have extensive outsourcing operations in India.
Daimler pays to back out of Chrysler (Financial Times)
By Richard Milne in Stuttgart and John Reed in London
Published: May 14 2007 10:19 | Last updated: May 14 2007 22:18
DaimlerChrysler paid $650m (£328m) to unwind its $35bn tie-up with Chrysler as the most high-profile transatlantic deal ended with the sale of the US carmaker to private equity on Monday.
Cerberus, the US private equity group, will pay $7.4bn, but most of that will be injected as new equity into the separated Chrysler group. Daimler will retain a 19.9 per cent stake but will end all responsibility for the $17.5bn in unfunded healthcare liabilities that had worried investors.
“The outcome is very good for Daimler shareholders,” said Stephen Cheetham, an analyst at Sanford Bernstein. “This may well be the strategic tin-opener for a big part of Detroit’s problems.”
The deal changed the competitive landscape in Detroit and led to a wave of optimism in the motor capital of the US. The share prices of the other Big Three US carmakers – General Motors and Ford – rose in anticipation.
Investors are excited by the prospects of a private equity-backed Chrysler taking a tough line in negotiations with the UAW trade union this summer, although Ron Gettelfinger, head of the UAW, welcomed the deal as the best for “our members, the Chrysler group and Daimler”. However, the Canadian car workers’ union said the deal was “very worrisome”.
Cerberus said it would stick to Daimler’s restructuring plans, under which 13,000 jobs are to be eliminated, but compulsory redundancies have been ruled out.
Tom LaSorda, head of Chrysler, will keep his job, while Wolfgang Bernhard, a former Chrysler chief operating officer, will advise him in his role as a consultant to Cerberus.
The move marks the end of the 1998 tie-up, which was hailed as a “marriage in heaven” that would change the face of the motor industry. However, Chrysler went through three financial crises, causing Daimler to lay off more than 40,000 workers.
The sale of Chrysler to private equity represents the disposal of one of the best-known US companies to the sector.
John Snow, the former US Treasury secretary and chairman of Cerberus, said: “Our approach is fundamentally long-term. Sometimes companies can do better outside the requirements of quarterly reporting.
“The leadership of Chrysler will then be able to focus all of their energy on running the business,” he added.
Dieter Zetsche, chief of Daimler, explained the decision to keep a stake in the company: “We basically have all the upside benefits without any risks.”
General Motors and Ford shares jumped on investors’ confidence that the arrival of a hard-nosed private-equity owner could mark a milestone in the turnround of the Detroit carmakers. GM closed 3.94 per cent higher at $30.62; Ford gained 4.06 per cent to end at $8.71 on Monday.
Under the deal, Daimler will receive $1.35bn from Cerberus but will contribute $2bn to the new company. It will no longer have obligations for the $29bn in currently overfunded pension liabilities. The deal will cause net profit to fall by €3bn-€4bn (£2.1bn-£2.7bn) in 2007. The rump company will be renamed Daimler AG, subject to shareholder approval, and will consist of the Mercedes luxury car group and the world’s largest truckmaker.
Analysts said that while Cerberus could have success with one of Detroit’s main problems – cost – it could struggle with the other: building cars that Americans actually want to drive.
Published: May 14 2007 10:19 | Last updated: May 14 2007 22:18
DaimlerChrysler paid $650m (£328m) to unwind its $35bn tie-up with Chrysler as the most high-profile transatlantic deal ended with the sale of the US carmaker to private equity on Monday.
Cerberus, the US private equity group, will pay $7.4bn, but most of that will be injected as new equity into the separated Chrysler group. Daimler will retain a 19.9 per cent stake but will end all responsibility for the $17.5bn in unfunded healthcare liabilities that had worried investors.
“The outcome is very good for Daimler shareholders,” said Stephen Cheetham, an analyst at Sanford Bernstein. “This may well be the strategic tin-opener for a big part of Detroit’s problems.”
The deal changed the competitive landscape in Detroit and led to a wave of optimism in the motor capital of the US. The share prices of the other Big Three US carmakers – General Motors and Ford – rose in anticipation.
Investors are excited by the prospects of a private equity-backed Chrysler taking a tough line in negotiations with the UAW trade union this summer, although Ron Gettelfinger, head of the UAW, welcomed the deal as the best for “our members, the Chrysler group and Daimler”. However, the Canadian car workers’ union said the deal was “very worrisome”.
Cerberus said it would stick to Daimler’s restructuring plans, under which 13,000 jobs are to be eliminated, but compulsory redundancies have been ruled out.
Tom LaSorda, head of Chrysler, will keep his job, while Wolfgang Bernhard, a former Chrysler chief operating officer, will advise him in his role as a consultant to Cerberus.
The move marks the end of the 1998 tie-up, which was hailed as a “marriage in heaven” that would change the face of the motor industry. However, Chrysler went through three financial crises, causing Daimler to lay off more than 40,000 workers.
The sale of Chrysler to private equity represents the disposal of one of the best-known US companies to the sector.
John Snow, the former US Treasury secretary and chairman of Cerberus, said: “Our approach is fundamentally long-term. Sometimes companies can do better outside the requirements of quarterly reporting.
“The leadership of Chrysler will then be able to focus all of their energy on running the business,” he added.
Dieter Zetsche, chief of Daimler, explained the decision to keep a stake in the company: “We basically have all the upside benefits without any risks.”
General Motors and Ford shares jumped on investors’ confidence that the arrival of a hard-nosed private-equity owner could mark a milestone in the turnround of the Detroit carmakers. GM closed 3.94 per cent higher at $30.62; Ford gained 4.06 per cent to end at $8.71 on Monday.
Under the deal, Daimler will receive $1.35bn from Cerberus but will contribute $2bn to the new company. It will no longer have obligations for the $29bn in currently overfunded pension liabilities. The deal will cause net profit to fall by €3bn-€4bn (£2.1bn-£2.7bn) in 2007. The rump company will be renamed Daimler AG, subject to shareholder approval, and will consist of the Mercedes luxury car group and the world’s largest truckmaker.
Analysts said that while Cerberus could have success with one of Detroit’s main problems – cost – it could struggle with the other: building cars that Americans actually want to drive.
Wholesale inflation dips despite gas-price jump (AP)
Producer-price index rise driven by 8.2 percent surge in pump costs
WASHINGTON - Consumers, battered by surging gasoline prices, cut back spending for clothes, cars and other items in April, raising worries about the already weak economy.
Retail sales fell 0.2 percent in April, the first decline in seven months, the Commerce Department reported Friday. Meanwhile, the Labor Department said that wholesale prices surged by 0.7 percent, led by a third consecutive big rise in gasoline prices.
The weak retail spending and the big rise in gasoline prices were seen as delivering a double whammy to the economy. The worry is that if gasoline prices spike further and the troubles in housing deepen, then consumers could significantly trim spending and the country could move toward a recession.
WASHINGTON - Consumers, battered by surging gasoline prices, cut back spending for clothes, cars and other items in April, raising worries about the already weak economy.
Retail sales fell 0.2 percent in April, the first decline in seven months, the Commerce Department reported Friday. Meanwhile, the Labor Department said that wholesale prices surged by 0.7 percent, led by a third consecutive big rise in gasoline prices.
The weak retail spending and the big rise in gasoline prices were seen as delivering a double whammy to the economy. The worry is that if gasoline prices spike further and the troubles in housing deepen, then consumers could significantly trim spending and the country could move toward a recession.
Ellison’s aide linked to Oracle insider trading (AP)
SAN FRANCISCO - In the latest crackdown on illicit pillow talk, the Securities and Exchange Commission on Monday accused a former Oracle Corp. vice president of improperly profiting from his wife's knowledge about two deals engineered by her boss — Oracle's acquisitive chief executive, Larry Ellison.
Christopher Balkenhol, the former Oracle vice president named in a civil complaint filed in a San Francisco federal court, agreed to pay nearly $199,000 to settle the case without admitting or denying wrongdoing. His attorney didn't immediately return phone messages Monday.
The SEC alleged Balkenhol, 40, had invested more than $530,000 in two of Oracle's takeover targets during 2005 based on intimate information passed along by his wife, the supervising executive assistant for Ellison as well as the company's co-presidents, Charles Phillips and Safra Catz.
Christopher Balkenhol, the former Oracle vice president named in a civil complaint filed in a San Francisco federal court, agreed to pay nearly $199,000 to settle the case without admitting or denying wrongdoing. His attorney didn't immediately return phone messages Monday.
The SEC alleged Balkenhol, 40, had invested more than $530,000 in two of Oracle's takeover targets during 2005 based on intimate information passed along by his wife, the supervising executive assistant for Ellison as well as the company's co-presidents, Charles Phillips and Safra Catz.
Justice Department's No. 2 official to resign (USA TODAY)
By Donna Leinwand and Kevin Johnson
WASHINGTON - Deputy Attorney General Paul McNulty, embroiled in the controversy over the dismissals of eight U.S. attorneys, will resign at the end of the summer, the Justice Department announced Monday.
McNulty is the highest-ranking Justice Department official to leave since the issue over the firings erupted earlier this year. McNulty's testimony in February ignited the firestorm that has led to calls in Congress for Attorney General Alberto Gonzales to resign.
In a letter to Gonzales, McNulty said, "The financial realities of college-age children and two decades of public service lead me to a long overdue transition in my career."
McNulty testified before Congress on Feb. 6 that seven of the eight U.S. attorneys had been fired for performance, not politics. He admitted that one of the targeted prosecutors, Arkansas U.S. Attorney Bud Cummins, had been asked to leave so a Republican protégé of White House political adviser Karl Rove could have the job.
In March, however, Gonzales told lawmakers that McNulty had given Congress incomplete information. The Justice Department has said McNulty had not been fully briefed by senior aides about the dismissals. Gonzales maintains that the dismissals were related to performance and management issues.
Gonzales' chief of staff, Kyle Sampson, resigned March 12. Michael Battle, director of the executive office of U.S. Attorneys who had carried out the dismissals, resigned March 16. Battle has denied that his resignation had any link to the controversy.
Monica Goodling, the department's liaison to the White House, resigned April 6 and refused to testify before Congress, citing Fifth Amendment protections against self-incrimination. Last week, a federal judge approved an arrangement in which Goodling would be granted immunity from prosecution in exchange for her testimony to Congress. She also is under investigation by the Justice Department's inspector general for improperly considering political affiliations when hiring attorneys.
Gonzales and other Justice Department officials have repeatedly appeared before Congress to answer questions about whether the eight U.S. attorneys were dismissed for failing to carry out a Republican political agenda.
"It seems ironic that Paul McNulty, who at least tried to level with the committee, goes, while Gonzales, who stonewalled the committee, is still in charge," said Senate Judiciary Chairman Charles Schumer, D-N.Y. "This administration owes us a lot better."
Cummins, one of the eight targeted prosecutors, said Monday that he wished McNulty well. "I bear him no ill will," Cummins said. "It all amounts to disappointment."
McNulty has served as Gonzales' deputy since November 2005. Gonzales in a statement Monday called McNulty an "effective manager of day-to-day operations" and the "principal driver of the department's policies and efforts to prevent corporate fraud."
McNulty also had served as a U.S. attorney and prosecuted high-profile terrorism cases, including Zacarias Moussaoui's, who had conspired with the 9/11 hijackers.
A Corporate Overhaul at Procter & Gamble (NYTimes)
By REUTERS
Published: May 15, 2007
Procter & Gamble announced an overhaul of its corporate structure yesterday, dividing it into three new global units and breaking up the Gillette business that it acquired in 2005.
As part of the revamping, the company will promote Susan E. Arnold to president, global business units, and Robert A. McDonald to the new post of chief operating officer.
Procter & Gamble, based in Cincinnati, has nearly doubled its business since 2000 with the acquisitions of the Clairol and Wella hair care businesses and Gillette. The chairman and chief executive, A. G. Lafley, said in a statement that the changes were intended to meet the needs of a larger business that is developing new initiatives faster than in the past.
Gillette will no longer operate as its own global business unit. Its Duracell battery division will be part of the global household care unit, while the shaving part of the business will come under beauty care.
Several unit presidents and other corporate officers will leave, the company said. The changes will take effect July 1.
Ms. Arnold, 53, will be in charge of the company’s three worldwide business units: beauty care, global health and well-being, and household care. She will be responsible for development and innovation in P.& G.’s brands.
Mr. McDonald, 53, is vice chairman for global operations. As chief operating officer, he will be in charge of global operations, including the units that develop P.& G.’s businesses in local markets.
An analyst at Goldman Sachs, Amy Low Chasen, wrote in a research note that “we believe this news formalizes a potential near-term succession plan with Arnold and McDonald as the primary successors” to Mr. Lafley.
Still, she noted, Mr. Lafley, 60, “has no intention to retire” soon.
Published: May 15, 2007
Procter & Gamble announced an overhaul of its corporate structure yesterday, dividing it into three new global units and breaking up the Gillette business that it acquired in 2005.
As part of the revamping, the company will promote Susan E. Arnold to president, global business units, and Robert A. McDonald to the new post of chief operating officer.
Procter & Gamble, based in Cincinnati, has nearly doubled its business since 2000 with the acquisitions of the Clairol and Wella hair care businesses and Gillette. The chairman and chief executive, A. G. Lafley, said in a statement that the changes were intended to meet the needs of a larger business that is developing new initiatives faster than in the past.
Gillette will no longer operate as its own global business unit. Its Duracell battery division will be part of the global household care unit, while the shaving part of the business will come under beauty care.
Several unit presidents and other corporate officers will leave, the company said. The changes will take effect July 1.
Ms. Arnold, 53, will be in charge of the company’s three worldwide business units: beauty care, global health and well-being, and household care. She will be responsible for development and innovation in P.& G.’s brands.
Mr. McDonald, 53, is vice chairman for global operations. As chief operating officer, he will be in charge of global operations, including the units that develop P.& G.’s businesses in local markets.
An analyst at Goldman Sachs, Amy Low Chasen, wrote in a research note that “we believe this news formalizes a potential near-term succession plan with Arnold and McDonald as the primary successors” to Mr. Lafley.
Still, she noted, Mr. Lafley, 60, “has no intention to retire” soon.
Procter & Gamble Shuffles Top Executives (Wall Street Journal)
By ELLEN BYRON
May 15, 2007; Page B5
Procter & Gamble Co. announced new positions for several top executives yesterday, renewing speculation over the likely successor to Chief Executive A.G. Lafley.
Vice Chairman Susan Arnold, 53 years old, will assume the role of president, overseeing all of P&G's global business units. Vice Chairman Robert McDonald, also 53, was named to the newly established role of chief operating officer, with responsibility for global operations.
Although Mr. Lafley, who turns 60 next month, is still five years from mandatory retirement, he has openly discussed the importance of an orderly succession plan. Last year, when R. Kerry Clark, another vice chairman, left to become CEO of Cardinal Health Inc., Ms. Arnold and Mr. McDonald emerged as Mr. Lafley's likely successors. Yesterday's announcement keeps Ms. Arnold and Mr. McDonald reporting directly to Mr. Lafley.
"We believe this news formalizes a potential near-term succession plan with [Ms.] Arnold and [Mr.] McDonald as the primary successors to [Mr.] Lafley," said Goldman Sachs analyst Amy Low Chasen in a research note. Some current and former P&G executives, as well as other industry executives, share that view. Ms. Chasen added that if Mr. Lafley stays until he is 65, the board could go with a younger CEO.
Regarding succession, P&G spokesman Terry Loftus said only: "Our board has a succession plan in place." Mr. Loftus said no company executives were available to comment.
The management shuffle was part of a broader decision by Cincinnati-based P&G to streamline its business into three divisions to better accommodate the company's rapid sales growth and major acquisitions, such as Clairol, Wella and Gillette, since 2000.
While many observers have focused attention on Ms. Arnold and Mr. McDonald, others believe Mr. Lafley's successor could come from the executive ranks a level or two below them.
P&G group presidents promoted to vice-chair posts as part of yesterday's announcement include Dimitri Panayotopoulos, 55, who will oversee global household care; Robert Steele, 51, who will oversee global health and well-being businesses; and Werner Geissler, 54, who will assume the post of vice chair, global operations, succeeding Mr. McDonald.
Chief Financial Officer Clayton Daley was also elected vice chairman and continues to report to Mr. Lafley. Bruce Byrnes, currently vice chairman of household care, will step down next year, advising on global brand-building training until then.
As part of the job shuffle, three former Gilette executives who were given some of the most senior positions in the combined company will retire later this year. They are Bruce Cleverly, 62, Mary Ann Pesce, 52, and Mark Leckie, 53. Their retirements are among a handful of departures of P&G executives.
May 15, 2007; Page B5
Procter & Gamble Co. announced new positions for several top executives yesterday, renewing speculation over the likely successor to Chief Executive A.G. Lafley.
Vice Chairman Susan Arnold, 53 years old, will assume the role of president, overseeing all of P&G's global business units. Vice Chairman Robert McDonald, also 53, was named to the newly established role of chief operating officer, with responsibility for global operations.
Although Mr. Lafley, who turns 60 next month, is still five years from mandatory retirement, he has openly discussed the importance of an orderly succession plan. Last year, when R. Kerry Clark, another vice chairman, left to become CEO of Cardinal Health Inc., Ms. Arnold and Mr. McDonald emerged as Mr. Lafley's likely successors. Yesterday's announcement keeps Ms. Arnold and Mr. McDonald reporting directly to Mr. Lafley.
"We believe this news formalizes a potential near-term succession plan with [Ms.] Arnold and [Mr.] McDonald as the primary successors to [Mr.] Lafley," said Goldman Sachs analyst Amy Low Chasen in a research note. Some current and former P&G executives, as well as other industry executives, share that view. Ms. Chasen added that if Mr. Lafley stays until he is 65, the board could go with a younger CEO.
Regarding succession, P&G spokesman Terry Loftus said only: "Our board has a succession plan in place." Mr. Loftus said no company executives were available to comment.
The management shuffle was part of a broader decision by Cincinnati-based P&G to streamline its business into three divisions to better accommodate the company's rapid sales growth and major acquisitions, such as Clairol, Wella and Gillette, since 2000.
While many observers have focused attention on Ms. Arnold and Mr. McDonald, others believe Mr. Lafley's successor could come from the executive ranks a level or two below them.
P&G group presidents promoted to vice-chair posts as part of yesterday's announcement include Dimitri Panayotopoulos, 55, who will oversee global household care; Robert Steele, 51, who will oversee global health and well-being businesses; and Werner Geissler, 54, who will assume the post of vice chair, global operations, succeeding Mr. McDonald.
Chief Financial Officer Clayton Daley was also elected vice chairman and continues to report to Mr. Lafley. Bruce Byrnes, currently vice chairman of household care, will step down next year, advising on global brand-building training until then.
As part of the job shuffle, three former Gilette executives who were given some of the most senior positions in the combined company will retire later this year. They are Bruce Cleverly, 62, Mary Ann Pesce, 52, and Mark Leckie, 53. Their retirements are among a handful of departures of P&G executives.
Ford family 'consider relinquishing control' (TimesOnline)
After value drops 74 per cent in eight years, founder's family are thinking of selling majority stakeRhys Blakely
Ford’s founding family are reportedly considering selling their controlling stake in the loss-making carmaker after 104 years, a move that could pave the way for a tie-up with another group, such as the Nissan-Renault union.
Some Ford family members have called for Perella Weinberg Partners, the investment bank, to be hired to advise on a possible sale of their controlling interest in the embattled carmaker, according to new agency Bloomberg.
The Ford family owns 71 million Class B shares in Ford, a stake worth about $585 million, down from $2.3 billion since Bill Ford became chairman eight years ago.
Ford posted a record loss of some $12.6 billion last year and in September halted paying dividends – cutting off the $85 million the family earned from then each year as recently as 2001.
In September, Ford also appointed Alan Mulally to succeed Bill Ford as chief executive.
Late last year, Bill Ford said that there was “no reason to think that any change in the ownership structure needs to take place”.
Since then, however, it has been reported that younger family members have questioned whether the company might have been better managed by outsiders during a period when “the Detroit three” – General Motors, Chrysler and Ford – all suffered at the hands of foreign competitors.
Last year it was reported that Carlos Ghosn, the chief executive of Nissan and Renault, suggested that Ford could join the partnership if the Ford family was willing to cede control.
Elsewhere in the sector, DaimlerChrysler, the German carmaker, confirmed a deal to sell its ailing US unit to Cerberus, a US private equity firm, in a move that will cost it €500 million to end its unhappy 10-year old trans-Atlantic merger.
The Mercedes-Benz group said that it was selling its 80.1 per cent stake in Chrysler to Cerberus in return for a €5.5 billion (£3.8 billion) capital injection. Cerberus will also take on Chrysler's massive $18 billion pension and healthcare liabilities.
Ex-Oracle Exec to Settle SEC Charges (AP)
SAN FRANCISCO (AP) - In the latest crackdown on illicit pillow talk, the Securities and Exchange Commission on Monday accused a former Oracle Corp. vice president of improperly profiting from his wife's knowledge about two deals engineered by her boss -- Oracle's acquisitive chief executive, Larry Ellison.
Christopher Balkenhol, the former Oracle vice president named in a civil complaint filed in a San Francisco federal court, agreed to pay nearly $199,000 to settle the case without admitting or denying wrongdoing. His attorney didn't immediately return phone messages Monday.
Related newsStocks Are Mixed As Investors Await CPIBusiness HighlightsViasys Among Wall Street's Big MoversBusiness Events Scheduled for TuesdayWall St. Awaits Inflation, Housing Data
The SEC alleged Balkenhol, 40, had invested more than $530,000 in two of Oracle's takeover targets during 2005 based on intimate information passed along by his wife, the supervising executive assistant for Ellison as well as the company's co-presidents, Charles Phillips and Safra Catz.
Balkenhol's wife had told him about secret meetings leading up to Oracle's successful bids to buy a pair of rival business software makers -- Retek Inc. and Siebel Systems Inc. Those deals are part of a $25 billion shopping spree that Ellison launched in 2003 with a hostile bid for PeopleSoft Inc.
By snapping up shares of Retek and Siebel before Oracle announced its takeover offers, Balkenhol realized more than $97,000 in profits.
Those gains are being repaid as part of the SEC settlement, which also imposed more than $100,000 in penalties and interest.
The SEC found no evidence that Balkenhol's wife, who wasn't identified in the complaint, knew about her husband's stock-buying binge.
Oracle spokeswoman Deborah Hellinger on Monday declined to say whether Balkenhol's wife remains Ellison's assistant. Hellinger also declined to discuss Monday's settlement.
Balkenhol worked at Oracle from 2000 to 2006, according to the SEC's complaint.
Monday's action against Balkenhol is the latest in a recent spurt of insider trading cases involving married couples.
Last week, a former Morgan Stanley analyst and her husband, a former analyst for a hedge fund, were arrested in New York on charges of securities fraud. On the same day, a former Morgan Stanley compliance officer and her husband pleaded guilty in a separate stock scheme.
Meanwhile, a Hong Kong couple faces SEC allegations of stock chicanery after investing $15 million in Dow Jones & Co. stock in the weeks leading up to News Corp.'s $5 billion bid for the publisher of The Wall Street Journal.
"Married couples share confidences all the time," said William Salzmann, an SEC attorney who handled the Balkenhol case. "What we are trying to regulate is what they do with that information in the stock market."
After learning about Oracle's plans to pursue Minneapolis-based Retek in March 2005, Balkenhol poured $85,000 into the company's stock. A week later, Retek's shares soared by nearly 25 percent and Balkenhol immediately sold his holdings for a $15,000 profit.
Later that year, Balkenhol's wife mentioned that Oracle executive Catz had met with Siebel's CEO to discuss a possible deal three months before the sale was announced. Acting on the advance tip, Balkenhol bought more than $448,000 of Siebel stock. He reaped an $82,000 profit in September 2005 when Oracle disclosed its Siebel offer.
Christopher Balkenhol, the former Oracle vice president named in a civil complaint filed in a San Francisco federal court, agreed to pay nearly $199,000 to settle the case without admitting or denying wrongdoing. His attorney didn't immediately return phone messages Monday.
Related newsStocks Are Mixed As Investors Await CPIBusiness HighlightsViasys Among Wall Street's Big MoversBusiness Events Scheduled for TuesdayWall St. Awaits Inflation, Housing Data
The SEC alleged Balkenhol, 40, had invested more than $530,000 in two of Oracle's takeover targets during 2005 based on intimate information passed along by his wife, the supervising executive assistant for Ellison as well as the company's co-presidents, Charles Phillips and Safra Catz.
Balkenhol's wife had told him about secret meetings leading up to Oracle's successful bids to buy a pair of rival business software makers -- Retek Inc. and Siebel Systems Inc. Those deals are part of a $25 billion shopping spree that Ellison launched in 2003 with a hostile bid for PeopleSoft Inc.
By snapping up shares of Retek and Siebel before Oracle announced its takeover offers, Balkenhol realized more than $97,000 in profits.
Those gains are being repaid as part of the SEC settlement, which also imposed more than $100,000 in penalties and interest.
The SEC found no evidence that Balkenhol's wife, who wasn't identified in the complaint, knew about her husband's stock-buying binge.
Oracle spokeswoman Deborah Hellinger on Monday declined to say whether Balkenhol's wife remains Ellison's assistant. Hellinger also declined to discuss Monday's settlement.
Balkenhol worked at Oracle from 2000 to 2006, according to the SEC's complaint.
Monday's action against Balkenhol is the latest in a recent spurt of insider trading cases involving married couples.
Last week, a former Morgan Stanley analyst and her husband, a former analyst for a hedge fund, were arrested in New York on charges of securities fraud. On the same day, a former Morgan Stanley compliance officer and her husband pleaded guilty in a separate stock scheme.
Meanwhile, a Hong Kong couple faces SEC allegations of stock chicanery after investing $15 million in Dow Jones & Co. stock in the weeks leading up to News Corp.'s $5 billion bid for the publisher of The Wall Street Journal.
"Married couples share confidences all the time," said William Salzmann, an SEC attorney who handled the Balkenhol case. "What we are trying to regulate is what they do with that information in the stock market."
After learning about Oracle's plans to pursue Minneapolis-based Retek in March 2005, Balkenhol poured $85,000 into the company's stock. A week later, Retek's shares soared by nearly 25 percent and Balkenhol immediately sold his holdings for a $15,000 profit.
Later that year, Balkenhol's wife mentioned that Oracle executive Catz had met with Siebel's CEO to discuss a possible deal three months before the sale was announced. Acting on the advance tip, Balkenhol bought more than $448,000 of Siebel stock. He reaped an $82,000 profit in September 2005 when Oracle disclosed its Siebel offer.
S&P Cuts Opinions on Dell, ADP (Business Week)
From Standard & Poor's Equity Research
Analyst: Dylan Cathers
Our downgrade is based on valuation, following a rise in the shares since the company completed the spinoff of its brokerage services business. We are maintaining our 12-month target price of $52, which is based on a price-to-earnings ratio
of 26.5 times and a p-e-to-growth ratio of about 1.5 times, using our calendar 2007 EPS estimate of $1.95 and assuming a three-year growth rate of 17%. We continue to view the company's fundamentals as favorable, and we look for revenue growth in the low teens for fiscal 2007 (June) and fiscal 2008. Our fiscal 2007 and fiscal 2008 EPS estimates of $1.82 and $2.15 are unchanged.
Dell (DELL)
Downgrades to 3 STARS (hold) from 4 STARS (buy)
Analyst: Jim Yin
The reduction is based chiefly on valuation, since Dell shares are approaching our 12-month target price, which we are keeping at $28. While we think Dell will benefit from Microsoft's Vista launch and lower component costs, we see faster industry growth coming from retail stores and international markets, less advantageous to the company's direct sales business model and its focus on North America. Amid shifting purchasing trends, we expect the company to lose market share to competitors with larger international presence such as Hewlett-Packard
Analyst: Dylan Cathers
Our downgrade is based on valuation, following a rise in the shares since the company completed the spinoff of its brokerage services business. We are maintaining our 12-month target price of $52, which is based on a price-to-earnings ratio
of 26.5 times and a p-e-to-growth ratio of about 1.5 times, using our calendar 2007 EPS estimate of $1.95 and assuming a three-year growth rate of 17%. We continue to view the company's fundamentals as favorable, and we look for revenue growth in the low teens for fiscal 2007 (June) and fiscal 2008. Our fiscal 2007 and fiscal 2008 EPS estimates of $1.82 and $2.15 are unchanged.
Dell (DELL)
Downgrades to 3 STARS (hold) from 4 STARS (buy)
Analyst: Jim Yin
The reduction is based chiefly on valuation, since Dell shares are approaching our 12-month target price, which we are keeping at $28. While we think Dell will benefit from Microsoft's Vista launch and lower component costs, we see faster industry growth coming from retail stores and international markets, less advantageous to the company's direct sales business model and its focus on North America. Amid shifting purchasing trends, we expect the company to lose market share to competitors with larger international presence such as Hewlett-Packard
Oil remains steady, U.S. stockpiles seen rising (Reuters)
Mon May 14, 2007 11:17PM EDT
By Osamu Tsukimori
TOKYO (Reuters) - Oil prices steadied on Tuesday, as fears about supply disruptions were countered by forecasts that U.S. inventory data will show higher stockpiles ahead of peak summer demand.
London Brent crude for June, which expires on Wednesday, was 12 cents up at $66.95 a barrel by 0239 GMT. It ended unchanged on Monday after gaining a total of more than $1.50 on Thursday and Friday. U.S. crude for June gained 16 cents at $62.62 a barrel.
With U.S. refiners beginning to bring plants back from maintenance, analysts polled by Reuters forecast U.S. inventory data due on Wednesday will show gasoline inventories rose by one million barrels last week.
Crude inventories are expected to rise by 200,000 barrels, while distillate fuel stocks are seen up 1.3 million barrels.
"We are at a stage where they've got to build up the inventories for the peaking demand that's coming in the middle of June," said Tobin Gorey, a commodity analyst with the Commonwealth Bank of Australia in Sydney.
U.S. average gasoline pump prices are now at a record $3.10 a gallon, coming as U.S. President George W. Bush ordered government agencies on Monday to begin developing regulations to carry out his plan to reduce gasoline consumption.
Bush's plan will not affect this summer's U.S. gasoline prices or supplies, but by 2017 it is supposed to have Americans using 20 percent less gasoline and billions of gallons more in renewable and alternative fuels instead.
Oil also steadied as concerns about disruptions to West African supplies eased, after production from the 60,000 barrels per day (bpd) Nkossa oil field in the Congo Republic was expected to be restored within three weeks after a fire halted output.
U.S. oil company Chevron Corp. (CVX.N: Quote, Profile, Research said on Monday it expected full production to resume at its 42,000 bpd Abiteye oil field in Nigeria in the next few days.
Algeria's oil minister Chakib Khelil said on Monday that global oil supply is "good" despite outages in Nigeria, the world's eighth largest exporter, where violence has shut off more than 750,000 bpd or a fifth of the country's supply.
Worries over OPEC producer Iran's dispute with the West over its nuclear program remained a supportive factor, after Iranian President Mahmoud Ahmadinejad on Monday threatened "severe" retaliation if the United States attacked his country.
U.S. oil company Chevron Corp. (CVX.N: Quote, Profile, Research said on Monday it expected full production to resume at its 42,000 bpd Abiteye oil field in Nigeria in the next few days.
Algeria's oil minister Chakib Khelil said on Monday that global oil supply is "good" despite outages in Nigeria, the world's eighth largest exporter, where violence has shut off more than 750,000 bpd or a fifth of the country's supply.
Worries over OPEC producer Iran's dispute with the West over its nuclear program remained a supportive factor, after Iranian President Mahmoud Ahmadinejad on Monday threatened "severe" retaliation if the United States attacked his country.
US investor group puts pressure on Dow board (Times Online)
Tom Bawden in New York
America’s biggest shareholder advisory group accused the Dow Jones board yesterday of failing in its fiduciary duty by not opening discussions after News Corporation’s unsolicited $5 billion (£2.5 billion) offer.
Institutional Shareholder Services (ISS) said that the board had a duty to talk to News Corporation, parent company of The Times, because its $60-a-share bid represented a 67 per cent premium to Dow Jones’s price before the approach became public. ISS’s criticisms came as Rupert Murdoch, News Corp’s chairman and chief executive, stepped up his campaign to woo Dow Jones’s controlling Bancroft family.
In a letter to the family, he offered them one seat on News Corp’s board and reiterated his intention to install an independent board at The Wall Street Journal.
Patrick McGurn, the executive vice-president of ISS, said: “I think the [Dow Jones] board is violating its fiduciary duty to shareholders if it fails to take this offer very seriously and enter talks with News Corporation. I don’t see how any director could look at the premium being offered and not open a dialogue.”
The board said this month that it would take “no action” on News Corp’s offer for Dow Jones. The decision was made on the basis that the Bancrofts had said that they were ready to vote shares constituting about 52 per cent of voting power against the proposal.
However, by failing to reject the offer outright, Dow Jones left the door open for discussions to be held if News Corp came back with a higher offer. Dow Jones declined to comment on the ISS criticisms.
America’s biggest shareholder advisory group accused the Dow Jones board yesterday of failing in its fiduciary duty by not opening discussions after News Corporation’s unsolicited $5 billion (£2.5 billion) offer.
Institutional Shareholder Services (ISS) said that the board had a duty to talk to News Corporation, parent company of The Times, because its $60-a-share bid represented a 67 per cent premium to Dow Jones’s price before the approach became public. ISS’s criticisms came as Rupert Murdoch, News Corp’s chairman and chief executive, stepped up his campaign to woo Dow Jones’s controlling Bancroft family.
In a letter to the family, he offered them one seat on News Corp’s board and reiterated his intention to install an independent board at The Wall Street Journal.
Patrick McGurn, the executive vice-president of ISS, said: “I think the [Dow Jones] board is violating its fiduciary duty to shareholders if it fails to take this offer very seriously and enter talks with News Corporation. I don’t see how any director could look at the premium being offered and not open a dialogue.”
The board said this month that it would take “no action” on News Corp’s offer for Dow Jones. The decision was made on the basis that the Bancrofts had said that they were ready to vote shares constituting about 52 per cent of voting power against the proposal.
However, by failing to reject the offer outright, Dow Jones left the door open for discussions to be held if News Corp came back with a higher offer. Dow Jones declined to comment on the ISS criticisms.
Dow Jones bid is Murdoch's to lose (Yahoo!)
By Michele Gershberg
NEW YORK (Reuters) - News Corp.'s $5 billion bid for Dow Jones & Co. is Rupert Murdoch's to lose, but the media mogul still faces an uphill battle, media veteran and Web investor Barry Diller said on Monday.
"I think that's a little better than even ... but not by much more," IAC/InterActiveCorp. Chairman and Chief Executive Diller told the Reuters Global Technology, Media and Telecoms Summit in New York, when asked about the chances an offer for Dow Jones might succeed.
Members of the Bancroft family, who hold voting control over the Wall Street Journal publisher, have said they would oppose the News Corp. bid, which values Dow Jones at $60 per share.
"It is Rupert Murdoch's to lose," said Diller, who helped Murdoch build the Fox Broadcasting Co., now one of the top U.S. television networks, nearly two decades ago.
"You don't have to know Rupert Murdoch to know that he's made an offer and that he's aggressive," Diller said. "The only determinant here is what happens with the high-vote shares and whether or not the high-vote shares will vote to sell."
News of Murdoch's offer, which was made in April but revealed in May, spurred speculation of a new wave of media industry mergers, as well as talk of possible other suitors for Dow Jones. To date no rival offers have emerged.
Murdoch has said there is yet time to win over the Bancrofts and on Friday sent a letter to family members promising to preserve the journalistic integrity of Dow Jones' flagship newspaper.
He offered to appoint a family member to the News Corp board, pledged to establish an editorial board to oversee the news pages, and to retain current management.
IAC and Dow Jones have teamed to create a personal finance Web site that will draw on content from the Journal and IAC's Ask.com search site, among other properties. The site is expected to launch in the second half of 2007.
Diller said it was too soon to tell if that partnership would be in any way affected by a deal between News Corp. and Dow Jones.
"We each have the option if there's a change of control ... to get out," Diller said of the venture. Asked if IAC would reconsider the venture if Dow Jones was owned by News Corp., he said: "Absolutely not. I think it would be enhanced."
The Short Sell Made Simple (Business Week)
By Lewis Braham
It's not only the bulls who cheer new highs on the Dow Jones industrial average and the Standard & Poor's 500-stock index. Lofty stock prices also make the bears more ferocious.
The reason: They sell stocks short. That is, they borrow them, sell them, and hope to profit by replacing the borrowed shares at lower prices. The lower prices go, the more money they make, and the higher the starting point, the more profit they see below.
What's the case for a market swoon? For starters, bears point out that the bull market is long in the tooth. "The typical bull market lasts 3 1/2 years, and then you get a 1 1/2-year bear market," says John Hussman, portfolio manager of the Hussman Strategic Growth Fund (HSGFX ), one of relatively few mutual funds that hedge against declines. "This market's been in rally mode now since October, 2002."
There are other arguments: There's too much debt in the system; the weak U.S. dollar will prompt foreigners to dump U.S. stocks and bonds; and the private equity funds that have been sopping up stocks will soon lose their sources of capital.
Should you feel bearish, it's getting easier to act. A growing number of mutual funds and exchange-traded funds are designed to short the broad market or narrow slices of it. Having launched some 29 short-selling ETFs in the past 10 months, ProShares Advisors has already gathered $3.9 billion. Some are even "ultra" funds, which are designed to deliver twice the return of a regular short fund.
No doubt part of the growing popularity for these funds is that they're less risky than outright short-selling. The most you can lose is the money you put in. With conventional short sales, the cost of getting it wrong can be far greater. Buy a $20 stock, and the worst case is the company goes bust and you lose $20. The most you can make shorting a $20 stock is $20. If you're wrong and the $20 stock you sold short goes to $50, you've lost $30. The higher it goes, the more you lose.
But with today's high prices, and the sharp tools investors have at their disposal, why not short? Because on the Street, short-selling is taboo. Strategists and analysts at the big investment banks almost never speak of it because advising investors to short is effectively the same as telling them not to buy stocks, and that's bad for their business. Institutional investors and mutual fund companies are mum, too, because they would only be talking down the value of their holdings. (Hedge fund barons do sell short, but they don't talk about their strategies in public.)
Even Proshares Advisors doesn't actively market its short funds to mom-and-pop investors, says Chief Executive Michael Sapir. Instead, the firm targets financial advisers and small-to-midsize pension funds.
OPPORTUNISTIC PLAYS
Advisers who serve individuals see the advantages of the short funds. Anthony Welch, a financial planner and partner at Sarasota Capital Strategies in Osprey, Fla., uses ProShares' short ETFs to introduce some downside protection to portfolios that would otherwise have none. "Most of our clients have a mandate that we don't actually short because of the unlimited downside risk," he says. "These ETFs have limited risk." Another plus for the short funds: They're permissible in IRAs, but outright short-selling is not.
Those like Welch who use the short funds usually make small opportunistic plays rather than big bets on a crash in stock prices. For instance, small-cap stocks have beaten the S&P 500 seven years running, leaving many to argue that small-cap stocks are overpriced. Even veteran small-stock investor Charles Royce recently declared in a shareholder letter that a "historically typical correction of 15% or better is in the near future." When someone like Royce, whose firm Royce & Associates runs $26 billion in small-cap investments, says watch out, maybe you should.
Here's a strategy. Start by buying the ProShares Short SmallCap600 (SBB ) ETF. Then pair that with an investment on the long side, say, a large-cap growth fund or ETF, one of the worst-performing, and thus cheaper, sectors. A possible choice is Vanguard PRIMECAP Core Fund (VPCCX ), run by top-performing growth-stock managers. The bet pays off if big blue chips outperform small caps.
You can also target industries or sectors you think are overvalued. One industry many strategists believe to be overvalued is commercial real estate, and the way to play that is through real estate investment trusts (REITs). "REITs are at the top of my list of overvalued assets," says Jason Hsu, director of research and investment management at Research Affiliates, a Pasadena (Calif.) money management firm with $22 billion in assets. The knock: REITs are bought for income, but prices are so high that yields are at historic lows, nearly one percentage point below Treasury bills. Banking is another overvalued sector, says Hsu. The subprime mortgage mess makes that sector a good short-sale candidate.
You could pair these short positions with ETFs or mutual funds that invest in health care or consumer staples. These sectors have done poorly in recent years but tend to do well in bear markets, since people always need medicine and food. "A lot of the stocks we own are in the consumer and health-care sectors," says Hussman. "The consumer is the most stable part of the economy."
TIMING IS EVERYTHING
The trickiest part of putting your money into a bearish bet is the timing. You can be right that a market or sector is overvalued but wrong on the timing. That's essentially what economist John Maynard Keynes meant when he said, "The market can stay irrational longer than you can stay solvent."
That's less of a problem with short funds, since losses are limited. Still, if you're getting aggressive in your wager against the market, you have to figure out what the bear-market triggers might be. Two areas to watch closely are the private equity market and interest rates. The billions private equity funds have been pouring into stocks to buy out public companies have been propelling the market higher. These deals are financed with low-interest loans, but should interest rates rise, private equity's cheap money would disappear.
Ultimately, the market's downfall may be its old nemesis—inflation. If consumer prices rise yet the economy continues to cool, the Fed's hands will be tied. It will not be able to lower rates to spark growth for fear of causing further inflation. In fact, in such a scenario, rates on private equity debt will certainly go up. What's more, since the economy is overleveraged and indebted at every level, from the federal government to individual consumers, higher rates would be bad for every borrower. Inflation could be the perfect trigger for investors looking to make a killing on the short side.
It's not only the bulls who cheer new highs on the Dow Jones industrial average and the Standard & Poor's 500-stock index. Lofty stock prices also make the bears more ferocious.
The reason: They sell stocks short. That is, they borrow them, sell them, and hope to profit by replacing the borrowed shares at lower prices. The lower prices go, the more money they make, and the higher the starting point, the more profit they see below.
What's the case for a market swoon? For starters, bears point out that the bull market is long in the tooth. "The typical bull market lasts 3 1/2 years, and then you get a 1 1/2-year bear market," says John Hussman, portfolio manager of the Hussman Strategic Growth Fund (HSGFX ), one of relatively few mutual funds that hedge against declines. "This market's been in rally mode now since October, 2002."
There are other arguments: There's too much debt in the system; the weak U.S. dollar will prompt foreigners to dump U.S. stocks and bonds; and the private equity funds that have been sopping up stocks will soon lose their sources of capital.
Should you feel bearish, it's getting easier to act. A growing number of mutual funds and exchange-traded funds are designed to short the broad market or narrow slices of it. Having launched some 29 short-selling ETFs in the past 10 months, ProShares Advisors has already gathered $3.9 billion. Some are even "ultra" funds, which are designed to deliver twice the return of a regular short fund.
No doubt part of the growing popularity for these funds is that they're less risky than outright short-selling. The most you can lose is the money you put in. With conventional short sales, the cost of getting it wrong can be far greater. Buy a $20 stock, and the worst case is the company goes bust and you lose $20. The most you can make shorting a $20 stock is $20. If you're wrong and the $20 stock you sold short goes to $50, you've lost $30. The higher it goes, the more you lose.
But with today's high prices, and the sharp tools investors have at their disposal, why not short? Because on the Street, short-selling is taboo. Strategists and analysts at the big investment banks almost never speak of it because advising investors to short is effectively the same as telling them not to buy stocks, and that's bad for their business. Institutional investors and mutual fund companies are mum, too, because they would only be talking down the value of their holdings. (Hedge fund barons do sell short, but they don't talk about their strategies in public.)
Even Proshares Advisors doesn't actively market its short funds to mom-and-pop investors, says Chief Executive Michael Sapir. Instead, the firm targets financial advisers and small-to-midsize pension funds.
OPPORTUNISTIC PLAYS
Advisers who serve individuals see the advantages of the short funds. Anthony Welch, a financial planner and partner at Sarasota Capital Strategies in Osprey, Fla., uses ProShares' short ETFs to introduce some downside protection to portfolios that would otherwise have none. "Most of our clients have a mandate that we don't actually short because of the unlimited downside risk," he says. "These ETFs have limited risk." Another plus for the short funds: They're permissible in IRAs, but outright short-selling is not.
Those like Welch who use the short funds usually make small opportunistic plays rather than big bets on a crash in stock prices. For instance, small-cap stocks have beaten the S&P 500 seven years running, leaving many to argue that small-cap stocks are overpriced. Even veteran small-stock investor Charles Royce recently declared in a shareholder letter that a "historically typical correction of 15% or better is in the near future." When someone like Royce, whose firm Royce & Associates runs $26 billion in small-cap investments, says watch out, maybe you should.
Here's a strategy. Start by buying the ProShares Short SmallCap600 (SBB ) ETF. Then pair that with an investment on the long side, say, a large-cap growth fund or ETF, one of the worst-performing, and thus cheaper, sectors. A possible choice is Vanguard PRIMECAP Core Fund (VPCCX ), run by top-performing growth-stock managers. The bet pays off if big blue chips outperform small caps.
You can also target industries or sectors you think are overvalued. One industry many strategists believe to be overvalued is commercial real estate, and the way to play that is through real estate investment trusts (REITs). "REITs are at the top of my list of overvalued assets," says Jason Hsu, director of research and investment management at Research Affiliates, a Pasadena (Calif.) money management firm with $22 billion in assets. The knock: REITs are bought for income, but prices are so high that yields are at historic lows, nearly one percentage point below Treasury bills. Banking is another overvalued sector, says Hsu. The subprime mortgage mess makes that sector a good short-sale candidate.
You could pair these short positions with ETFs or mutual funds that invest in health care or consumer staples. These sectors have done poorly in recent years but tend to do well in bear markets, since people always need medicine and food. "A lot of the stocks we own are in the consumer and health-care sectors," says Hussman. "The consumer is the most stable part of the economy."
TIMING IS EVERYTHING
The trickiest part of putting your money into a bearish bet is the timing. You can be right that a market or sector is overvalued but wrong on the timing. That's essentially what economist John Maynard Keynes meant when he said, "The market can stay irrational longer than you can stay solvent."
That's less of a problem with short funds, since losses are limited. Still, if you're getting aggressive in your wager against the market, you have to figure out what the bear-market triggers might be. Two areas to watch closely are the private equity market and interest rates. The billions private equity funds have been pouring into stocks to buy out public companies have been propelling the market higher. These deals are financed with low-interest loans, but should interest rates rise, private equity's cheap money would disappear.
Ultimately, the market's downfall may be its old nemesis—inflation. If consumer prices rise yet the economy continues to cool, the Fed's hands will be tied. It will not be able to lower rates to spark growth for fear of causing further inflation. In fact, in such a scenario, rates on private equity debt will certainly go up. What's more, since the economy is overleveraged and indebted at every level, from the federal government to individual consumers, higher rates would be bad for every borrower. Inflation could be the perfect trigger for investors looking to make a killing on the short side.
Stocks Wobble to Mixed Close (TheStreet.com)
By Robert Holmes
TheStreet.com Staff Reporter
5/14/2007 5:00 PM EDT
Big buyout news in the automotive sector helped propel the Dow Jones Industrial Average to gains Monday, but tech stocks lost ground in a shaky session on Wall Street.
The Dow clawed back from a midsession selloff to rise 20.56 points, or 0.15%, to 13,346.78. The blue-chip average fell by as many as 29 points before rebounding.
The S&P 500 slipped 2.70 points, or 0.18%, to 1,503.15. The Nasdaq Composite shed 15.78 points, or 0.62%, to 2546.44, pressured by a 2.5% decline in Yahoo! (YHOO - Cramer's Take - Stockpickr - Rating).
"The markets look like they're running out of gas, at least on a short-term basis," said Michael Sheldon, chief market strategist with Spencer Clarke LLC. "Technology stocks never really saw too much buying, and it appears that some profit-taking has started to build up."
Phillip Roth, chief technical market analyst with Miller Tabak, said it was encouraging that the market didn't tumble further after the Dow touched its low of the day.
"The early weakness was not followed by any accelerations, so we didn't really see a big price loss," he said. "The relatively poor action in small stocks continues. The market is hanging on, but there's deterioration. We're trying to make progress until we get a much weaker message."
Once again, a new week started with a big private-equity deal. In the latest one, Germany's DaimlerChrysler (DCX - Cramer's Take - Stockpickr - Rating) agreed to sell an 80% stake in its Chrysler Group unit to private-equity firm Cerberus Capital Management.
The Chrysler Group buyout, worth $7.4 billion, unravels the 1998 mega-merger of Daimler-Benz and Chrysler, the No. 3 U.S. automaker. Shares of DaimlerChrysler gained 2.6% and finished at $84.12, while Ford (F - Cramer's Take - Stockpickr - Rating) added 4.1% and General Motors (GM - Cramer's Take - Stockpickr - Rating)jumped 3.9%.
Elsewhere in Germany, Merck KGaA's generic-drug business will be acquired by Mylan Laboratories (MYL - Cramer's Take - Stockpickr - Rating) for 4.9 billion euros ($6.63 billion). Mylan beat out Teva Pharmaceutical (TEVA - Cramer's Take - Stockpickr - Rating) in the deal. Mylan tumbled 12.1% to $19.70, while Teva tacked on 0.1% at $39.98.
In the health care sector, shares of Viasys (VAS - Cramer's Take - Stockpickr - Rating) surged 36.9% to $43.18 after Cardinal Health (CAH - Cramer's Take - Stockpickr - Rating) said it will purchase the company in a deal worth $1.5 billion. The per-share price of $42.75 values Viasys at a 35% premium over Friday's closing price.
About 2.62 billion shares changed hands on the New York Stock Exchange, with decliners beating advancers by a 2-to-1 margin. Volume on the Nasdaq reached 1.96 billion shares, as winners outpaced losers 2 to 1.
Many subsector indices finished with losses. The Amex Gold Bugs Index slumped 2%, the Philadelphia/KBW Bank Sector Index finished down 0.6%, and the Philadelphia Semiconductor Sector Index fell 0.1%.
The Amex Oil Index was one of few advancers, finishing with a gain of 0.4%.
While U.S. indices finished mixed last week, Friday's session saw a bounce-back from the worst decline in two months. The Dow Jones Industrial Average closed Friday up 111.09 points, or 0.84%, to 13,326.22. The S&P 500 was better by 14.38 points, or 0.96%, at 1505.85, and the Nasdaq added 28.48 points, or 1.12%, at 2562.22.
TheStreet.com Staff Reporter
5/14/2007 5:00 PM EDT
Big buyout news in the automotive sector helped propel the Dow Jones Industrial Average to gains Monday, but tech stocks lost ground in a shaky session on Wall Street.
The Dow clawed back from a midsession selloff to rise 20.56 points, or 0.15%, to 13,346.78. The blue-chip average fell by as many as 29 points before rebounding.
The S&P 500 slipped 2.70 points, or 0.18%, to 1,503.15. The Nasdaq Composite shed 15.78 points, or 0.62%, to 2546.44, pressured by a 2.5% decline in Yahoo! (YHOO - Cramer's Take - Stockpickr - Rating).
"The markets look like they're running out of gas, at least on a short-term basis," said Michael Sheldon, chief market strategist with Spencer Clarke LLC. "Technology stocks never really saw too much buying, and it appears that some profit-taking has started to build up."
Phillip Roth, chief technical market analyst with Miller Tabak, said it was encouraging that the market didn't tumble further after the Dow touched its low of the day.
"The early weakness was not followed by any accelerations, so we didn't really see a big price loss," he said. "The relatively poor action in small stocks continues. The market is hanging on, but there's deterioration. We're trying to make progress until we get a much weaker message."
Once again, a new week started with a big private-equity deal. In the latest one, Germany's DaimlerChrysler (DCX - Cramer's Take - Stockpickr - Rating) agreed to sell an 80% stake in its Chrysler Group unit to private-equity firm Cerberus Capital Management.
The Chrysler Group buyout, worth $7.4 billion, unravels the 1998 mega-merger of Daimler-Benz and Chrysler, the No. 3 U.S. automaker. Shares of DaimlerChrysler gained 2.6% and finished at $84.12, while Ford (F - Cramer's Take - Stockpickr - Rating) added 4.1% and General Motors (GM - Cramer's Take - Stockpickr - Rating)jumped 3.9%.
Elsewhere in Germany, Merck KGaA's generic-drug business will be acquired by Mylan Laboratories (MYL - Cramer's Take - Stockpickr - Rating) for 4.9 billion euros ($6.63 billion). Mylan beat out Teva Pharmaceutical (TEVA - Cramer's Take - Stockpickr - Rating) in the deal. Mylan tumbled 12.1% to $19.70, while Teva tacked on 0.1% at $39.98.
In the health care sector, shares of Viasys (VAS - Cramer's Take - Stockpickr - Rating) surged 36.9% to $43.18 after Cardinal Health (CAH - Cramer's Take - Stockpickr - Rating) said it will purchase the company in a deal worth $1.5 billion. The per-share price of $42.75 values Viasys at a 35% premium over Friday's closing price.
About 2.62 billion shares changed hands on the New York Stock Exchange, with decliners beating advancers by a 2-to-1 margin. Volume on the Nasdaq reached 1.96 billion shares, as winners outpaced losers 2 to 1.
Many subsector indices finished with losses. The Amex Gold Bugs Index slumped 2%, the Philadelphia/KBW Bank Sector Index finished down 0.6%, and the Philadelphia Semiconductor Sector Index fell 0.1%.
The Amex Oil Index was one of few advancers, finishing with a gain of 0.4%.
While U.S. indices finished mixed last week, Friday's session saw a bounce-back from the worst decline in two months. The Dow Jones Industrial Average closed Friday up 111.09 points, or 0.84%, to 13,326.22. The S&P 500 was better by 14.38 points, or 0.96%, at 1505.85, and the Nasdaq added 28.48 points, or 1.12%, at 2562.22.
Floor Exits: Specialists Walk As E-Trading Takes Over (NYPost)
By RODDY BOYD
The New York Stock Exchange's specialists, long the fixtures of the floor's economic life, are beginning to disappear as the brutal realities of electronic trading and a changed mission whittle away their ranks.
Tasked with executing the public's trading orders - including using their own capital to inject liquidity into a stock - the Big Board's specialists have seen their ranks drop by more than half as the firms hemorrhage money.
The declining headcount comes even as floor traders proved their worth in February, when the Dow Jones industrial average tumbled 416 points due to a technical glitch. Matters would have been considerably worse had it not been for human traders stepping in with pen and paper to execute trades.
In a race to remain economically viable, the specialists are dropping headcount as fast as they are losing money.
One source said Bank of America Specialists, responsible for making a market in GE among 400 other stocks, has lost about $10 million so far this year. Over the past year, it has dropped its headcount to 85 floor staff from 225, with more layoffs likely to occur within the month.
LaBranche has dropped to 80 from 330 and in the words of one of its executives, "We're going lower." Two weeks ago, the firm reported a quarterly loss of $5.6 million versus a $112 million profit from the year ago.
A source familiar with Bear Wagner Specialists told The Post that the firm had offered to buy back some of its senior partners' equity stakes within the past year at under 50 cents on the dollar.
Van Der Moolen, according to one of its executives, has cut its operating costs to $75,000 per day from $225,000 - and still cannot turn a profit.
Two people - one a former specialist, and one a current senior executive - told The Post that several of the smaller specialists may have a hard time remaining on the floor.
A former specialist executive told The Post that the root of their blues is that specialists have been forced to change their job description as electronic trading is now the norm.
RPG Transmission Q4 net up three-fold (Economy Times)
PTI[ MONDAY, MAY 14, 2007 09:45:56 PM]
NEW DELHI: RPG group company, RPG Transmissions Ltd on Monday reported more than three-fold jump in its net profit for the quarter ended March 31 at Rs 10 crore as against Rs 2.85 crore in the corresponding quarter of previous fiscal.
The company's revenue in the quarter under review stood at Rs 101 crore, RPG said in a statement.
For the fiscal year ended March 31, the company's net profit grew over two-fold at Rs 26 crore as against Rs 10.27 crore in the previous fiscal, the statement said. RPGs revenues in the year were up 57 per cent at Rs 373 crore compared to Rs 237.57 crore in last year.
"Our margins have now reached the industry average, manufacturing capacities are now fully utilised, net-worth has increased substantially and fresh orders received during the year ensure that we have a comfortable order-book at the year end of Rs 480 crore," RPG Transmission Executive Director Ajit S Chouhan said in the statement.
Bear Stearns to Take Write-Off on Specialist Unit (Bloomberg)
By Yalman Onaran
May 14 (Bloomberg) -- Bear Stearns Cos. slashed the value of its New York Stock Exchange specialist unit and will take a $225 million charge as the shift to automated trading eliminates the need for brokers on the floor of the Big Board.
Bear Stearns also bought out Hunter Partners LLC, its minority partner in the Bear Wagner unit, to ``give us more flexibility in managing the business in this changing environment,'' Chief Executive Officer James Cayne said in a statement today. Terms of the transaction weren't disclosed.
The NYSE's new automated trading system has eliminated work for floor traders who now handle about 18 percent of the 1.6 billion shares traded daily on the Big Board, down from 86 percent at the start of 2006, according to the exchange's Web site. Shares of LaBranche & Co., the biggest specialist firm, have declined 38 percent in the last year as increased electronic trading reduced demand for its services.
``The earnings capacity of specialist firms has been hurt dramatically,'' Bear Stearns Chief Financial Officer Sam Molinaro said today at an investor conference in New York. ``Given the current environment, we concluded that we had no choice but to write-off'' a portion of Bear Stearns's investment in the specialist firm.
The non-cash charge will reduce earnings in the company's fiscal second quarter, which ends May 31, Bear Stearns said. The firm and Hunter Partners bought Wagner Stott Mercator LLC for $625 million in 2001 and eventually renamed it Bear Wagner. Hunter Partners initially held a majority stake of 50.2 percent.
Bear's Profit
In the first quarter, profit at Bear Stearns, the fifth- biggest U.S. securities firm, rose 8 percent to $554 million as higher revenue from trading derivatives and debt of troubled companies overcame a slowing market for home loans.
Shares of Bear Stearns fell $2.55, or 1.6 percent, to $153.85 at 4:14 p.m. in New York Stock Exchange composite trading. The stock has risen 14 percent over the last year, in line with the 12-member Amex Securities Broker/Dealer Index.
Bear Wagner represents more than 350 publicly traded equities with a total market capitalization of more than $2.8 trillion, according to the statement. Bear Wagner will be included in Bear Stearns's Global Equities Division.
NYSE Euronext, which operates the NYSE, introduced its automated Hybrid Market early this year to meet investor demand for split-second electronic transactions, while keeping traditional haggling that floor brokers say reduces volatility in stock prices.
Job Cuts
Bear Wagner is one of seven specialist firms at the NYSE, helping to keep orderly markets by buying or selling stocks when they can't match orders from other traders. Their pivotal role as market makers at the NYSE drove Goldman Sachs Group Inc. to buy Spear Leeds & Kellogg LP for more than $7 billion 2000.
Specialist firms including LaBranche, Van der Moolen Holding NV and Bank of America Corp. have fired a total of about 200 employees in the past year. Brokerages including JPMorgan Chase & Co., Lehman Brothers Holdings Inc., Credit Suisse Group, UBS AG, and Sanford C. Bernstein & Co. have also eliminated trading staff as they rely more on computers.
``Bear Wagner has been supportive of the exchange's implementation of its hybrid system but it is becoming painfully clear that the specialist system, and the value that it brings to the investing public with regard to trading transparency, committing capital and providing liquidity, is rapidly approaching the point where it is no longer a viable business model,'' Bear Wagner CEO Peter Murphy said in the statement.
Earlier this month, NYSE Euronext Chief Executive Officer John Thain said that traders handle enough shares to merit the floor's current size. This year the NYSE shuttered one of five trading rooms, shrinking that space for the first time in more than a century.
``The exchange already is almost all electronic, but a lot of the electronic trading is the specialists and the brokers on the floor,'' Thain said during a conference at Baruch College in New York. ``They will continue to add value, which means there will continue to be a floor.''
Postal Rates Go Up (Mostly)
(CBS/AP) The cost to mail a first-class letter within the United States is now 41 cents, up two cents. It also costs more to mail a letter from the U.S. to other countries.
There's some good news in the new postal rates that went into effect Monday, says CBSNews.com's Lloyd de Vries: Mailing two- and three-ounce letters, such as wedding invitations and tax returns, is actually going down in price, from 63 and 87 cents to 58 and 75 cents, respectively. But envelopes that don't bend or are thicker than normal — such as eBay purchases — will cost more.
It's the first time the U.S. Postal Service is charging by the shape of the mail, and many mail-intensive businesses will take a big hit.
The new regulations mean larger envelopes and packages will automatically cost more than smaller mail. In the past, only especially large or odd-shaped pieces required extra fees.
Another bit of good news for most mailers in the new rates are the "Forever" stamps: On sale now at 41 cents, they will continue to pay for mailing a first-class letter no matter how high postal rates go.
Surprisingly, the Postal Service went back to the rate commission and asked for permission to charge less money for its flat-rate priority mail box than the panel had recommended — and got it, says de Vries.
All of this, however, is likely to mean longer lines at post office windows for the next several days.
Postmaster General John Potter has said that even with the higher prices the agency expects a deficit this year as it struggles to compete in a swiftly changing communications market.
The USPS reportedly is preparing to ask for another rate hike. This increase comes just over a year after the previous one, from 37 to 39 cents. That hike was the result of a congressionally-mandated escrow to help fund federal pensions; this one is because of high fuel and other operating costs.
International rates are also going up.
Letters to Canada and Mexico will rise to 69 cents and to most other countries to 90 cents. Other international services are being redesigned to more closely resemble domestic rates. The charges vary by country, as they have previously.
The names of the services are also changing. "Air Letter Post" is now called "First Class Mail International."
The fundraising stamp for Breast Cancer will increase to 55 cents. It is valid for first-class postage with the excess charge used to support research into breast cancer.
There should be plenty of new 41-cent stamps in your post office, in all sorts of formats, reports de Vries: A flag stamp, the first Forever stamp, which shows the Liberty Bell, and the Jamestown Settlement commemorative (left), a triangular stamp that is the first to carry the 41-cent denomination. Sales of that stamp were reported brisk, with many post offices sold out on the first day it was put on sale.
Your 39-cent stamps are still good; just add a 2-cent stamp. In fact, nearly every U.S. postage stamp issued since 1861 is still valid for postage.
There's some good news in the new postal rates that went into effect Monday, says CBSNews.com's Lloyd de Vries: Mailing two- and three-ounce letters, such as wedding invitations and tax returns, is actually going down in price, from 63 and 87 cents to 58 and 75 cents, respectively. But envelopes that don't bend or are thicker than normal — such as eBay purchases — will cost more.
It's the first time the U.S. Postal Service is charging by the shape of the mail, and many mail-intensive businesses will take a big hit.
The new regulations mean larger envelopes and packages will automatically cost more than smaller mail. In the past, only especially large or odd-shaped pieces required extra fees.
Another bit of good news for most mailers in the new rates are the "Forever" stamps: On sale now at 41 cents, they will continue to pay for mailing a first-class letter no matter how high postal rates go.
Surprisingly, the Postal Service went back to the rate commission and asked for permission to charge less money for its flat-rate priority mail box than the panel had recommended — and got it, says de Vries.
All of this, however, is likely to mean longer lines at post office windows for the next several days.
Postmaster General John Potter has said that even with the higher prices the agency expects a deficit this year as it struggles to compete in a swiftly changing communications market.
The USPS reportedly is preparing to ask for another rate hike. This increase comes just over a year after the previous one, from 37 to 39 cents. That hike was the result of a congressionally-mandated escrow to help fund federal pensions; this one is because of high fuel and other operating costs.
International rates are also going up.
Letters to Canada and Mexico will rise to 69 cents and to most other countries to 90 cents. Other international services are being redesigned to more closely resemble domestic rates. The charges vary by country, as they have previously.
The names of the services are also changing. "Air Letter Post" is now called "First Class Mail International."
The fundraising stamp for Breast Cancer will increase to 55 cents. It is valid for first-class postage with the excess charge used to support research into breast cancer.
There should be plenty of new 41-cent stamps in your post office, in all sorts of formats, reports de Vries: A flag stamp, the first Forever stamp, which shows the Liberty Bell, and the Jamestown Settlement commemorative (left), a triangular stamp that is the first to carry the 41-cent denomination. Sales of that stamp were reported brisk, with many post offices sold out on the first day it was put on sale.
Your 39-cent stamps are still good; just add a 2-cent stamp. In fact, nearly every U.S. postage stamp issued since 1861 is still valid for postage.
KKR’s spending spree raises questions (Financial Times)
KKR’s spending spree raises questions
By James Politi and Francesco Guerrera in New York
Published: May 13 2007 22:04 | Last updated: May 13 2007 22:53
Kohlberg Kravis Roberts has become by far the most active firm in the booming private equity industry in 2007, sealing $122.5bn worth of deals since January, more than it secured in the previous two years combined.
Including the record $45bn buy-out of TXU, the Texas-based energy group, and the $20bn takeover of Alliance Boots, the UK drug store chain, KKR has grabbed a 44.1 per cent share of all global private equity deal volumes in 2007, according to Dealogic. This compares with its near-20 per cent average share of global buy-out volumes since the beginning of 2004.
But its spending spree has raised questions about whether KKR is splashing too much money too quickly, given that several of the firm’s chief rivals, including Steve Schwarzman’s Blackstone, are much less active.
“I think they [KKR] have definitely become more aggressive, even in their pricing,” says one senior investment banking executive.
The acquisition spree from KKR reflects a belief that the current health of credit markets makes it an ideal time to spend the war-chest worth billions of dollars accumulated by Henry Kravis and George Roberts, the veteran financiers and co-founders.
Francesco Guerrera on KKR: Golden era for private equity, or arms race with Blackstone?
Marc Lipschultz, one of KKR’s most senior executives, says: “Most of our deals are large and complex, the result of proprietary ideas that have been worked on for years and years.”
Blackstone, which is gearing up to go public on the New York Stock Exchange as early as next month, has struck less than $15bn worth of deals this year, although the firm is involved in a number of auctions that could rapidly lift that figure.
According to Dealogic, KKR deals have accounted for more than twice the deal volume of the private equity unit of Goldman Sachs, the second most active buy-out fund, with $56.2bn worth of transactions.
Fort Worth-based TPG, New York-based JC Flowers and London-based Permira have also been relatively active this year, as have investment banks such as Citigroup, Lehman Brothers and Morgan Stanley, which have been writing more equity for leveraged buy-outs.
KKR has also been studying an initial public offering and other ways to take advantage of the industry boom. But it appears less likely than some of its peers to move rapidly towards that goal, although it did raise a new $5bn fund last year in a public offering on the Amsterdam bourse.
As well as striking several large and high profile deals, KKR has also been aggressively pursuing an Asian expansion, which it launched in late 2005 and is being accompanied by a dedicated fund for transactions in the region.
For decades, KKR had dominated the private equity industry, making huge profits from buy-outs during good times such as the junk-bond-fuelled merger frenzy of the 1980s and emerging intact, if wounded, from tough times such as the collapse of the dotcom boom.
Most famously, KKR sealed in 1989 the $30bn takeover of RJR Nabisco, immortalised in the best-seller Barbarians at the Gate.
By James Politi and Francesco Guerrera in New York
Published: May 13 2007 22:04 | Last updated: May 13 2007 22:53
Kohlberg Kravis Roberts has become by far the most active firm in the booming private equity industry in 2007, sealing $122.5bn worth of deals since January, more than it secured in the previous two years combined.
Including the record $45bn buy-out of TXU, the Texas-based energy group, and the $20bn takeover of Alliance Boots, the UK drug store chain, KKR has grabbed a 44.1 per cent share of all global private equity deal volumes in 2007, according to Dealogic. This compares with its near-20 per cent average share of global buy-out volumes since the beginning of 2004.
But its spending spree has raised questions about whether KKR is splashing too much money too quickly, given that several of the firm’s chief rivals, including Steve Schwarzman’s Blackstone, are much less active.
“I think they [KKR] have definitely become more aggressive, even in their pricing,” says one senior investment banking executive.
The acquisition spree from KKR reflects a belief that the current health of credit markets makes it an ideal time to spend the war-chest worth billions of dollars accumulated by Henry Kravis and George Roberts, the veteran financiers and co-founders.
Francesco Guerrera on KKR: Golden era for private equity, or arms race with Blackstone?
Marc Lipschultz, one of KKR’s most senior executives, says: “Most of our deals are large and complex, the result of proprietary ideas that have been worked on for years and years.”
Blackstone, which is gearing up to go public on the New York Stock Exchange as early as next month, has struck less than $15bn worth of deals this year, although the firm is involved in a number of auctions that could rapidly lift that figure.
According to Dealogic, KKR deals have accounted for more than twice the deal volume of the private equity unit of Goldman Sachs, the second most active buy-out fund, with $56.2bn worth of transactions.
Fort Worth-based TPG, New York-based JC Flowers and London-based Permira have also been relatively active this year, as have investment banks such as Citigroup, Lehman Brothers and Morgan Stanley, which have been writing more equity for leveraged buy-outs.
KKR has also been studying an initial public offering and other ways to take advantage of the industry boom. But it appears less likely than some of its peers to move rapidly towards that goal, although it did raise a new $5bn fund last year in a public offering on the Amsterdam bourse.
As well as striking several large and high profile deals, KKR has also been aggressively pursuing an Asian expansion, which it launched in late 2005 and is being accompanied by a dedicated fund for transactions in the region.
For decades, KKR had dominated the private equity industry, making huge profits from buy-outs during good times such as the junk-bond-fuelled merger frenzy of the 1980s and emerging intact, if wounded, from tough times such as the collapse of the dotcom boom.
Most famously, KKR sealed in 1989 the $30bn takeover of RJR Nabisco, immortalised in the best-seller Barbarians at the Gate.
Defense Dept. Blocking MySpace, YouTube
Breitbart
May 14 01:59 PM US/Eastern
By ROBERT WELLER
Associated Press Writer
DENVER (AP) - Soldiers serving overseas are losing some of their online links to friends and family back home under a Department of Defense policy that an Army official said formally takes effect on Monday.
The Defense Department is blocking access "worldwide" to YouTube, MySpace and 11 other popular Web sites on its computers and networks, according to a memo sent Friday by Gen. B.B. Bell, the U.S. Forces Korea commander.
The policy is being implemented to protect information and reduce drag on the department's networks, according to Bell.
"This recreational traffic impacts our official DoD network and bandwidth ability, while posing a significant operational security challenge," the memo said.
The Defense Department cut off access to about a dozen popular Web sites last week on all department computers worldwide. Warnings of the shutdown went out in February, and allowed personnel to seek waivers if accessing the sites was necessary for their jobs.
The armed services have long barred members of the military from sharing information that could jeopardize their missions or safety, whether electronically or by other means. The new policy is different because it creates a blanket ban on several sites used by military personnel to exchange messages, pictures, video and audio with family and friends.
Members of the military can still access the sites on their own computers and networks, but Defense Department computers and networks are the only ones available to many soldiers and sailors in Iraq and Afghanistan.
Iraqi insurgents or their supporters have been posting videos on YouTube at least since last fall, and the Army recently began posting videos on YouTube showing soldiers defeating insurgents and befriending Iraqis.
But the new rules mean many military personnel won't be able to watch those videos—at least not on military computers.
If the restrictions are intended to prevent soldiers from giving or receiving bad news, they could also prevent them from providing positive reports from the field, said Noah Shachtman, who runs a national security blog for Wired Magazine.
"This is as much an information war as it is bombs and bullets," he said. "And they are muzzling their best voices."
The sites covered by the ban are the video-sharing sites YouTube, Metacafe, IFilm, StupidVideos and FileCabi; social networking sites MySpace, BlackPlanet and Hi5; music sites Pandora, MTV, 1.fm and live365; and the photo-sharing site Photobucket.
Several companies have instituted similar bans, saying recreational sites drain productivity.
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