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November 3
Five Ways to Ride the Commodities Bull
By Martin Hutchinson
Contributing Editor
Money Morning
Commodity prices have faltered in the last couple of weeks, and much of the "smart money" is saying the boom is over.
Don't believe it.
As long as the world's central banks keep interest rates at these very low levels, the speculative interest in commodities will be strong, and so will their prices. Since only minor central banks yet show signs of moving rates, the commodities bull market has further to run.
The commodities bull has already run a long way. Since Jan. 1, gold is up 20%, silver is up 50%, copper is up 100%, oil is up 110%, coal is up 90% and iron ore is up 60%. In a year of deep recession – with the exception of wimpy gold (which did not decline as much in 2008, because all the monetary "stimulus" made people fear inflation) – that's a pretty good run.
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Hot Stocks: Google's Drive for Dominance Extends Into the Burgeoning Smartphone Market
By Bob Blandeburgo
Associate Editor
Money Morning
Google Inc. (Nasdaq: GOOG) was founded in 1996 and went on to become the undisputed king of Internet search and advertising. Ten years later, it brought its ubiquitous search engine to mobile phones with the launch of Google Mobile.
And now, with the proliferation of smartphones, Google is pursuing a broader range of mobile initiatives that will make it a leader in mobile software and take its advertising business into territory that so far has been uncharted.
Google's original business model, as it applies to its trademark search engine, was to give away a product and have it funnel users to its targeted ads. Last year, the company built on that model by giving away its operating system (OS), Android, to any wireless handset maker that would have it.
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Investment News Briefs
With our investment news briefs, Money Morning provides investors with a quick overview of the most important investing news stories from all around the world.
Stanley Works Nails Black & Decker Deal; Credit Suisse Triples AIG Earnings Forecast; BofA to Pay Back $20 Billion in TARP Funds; RIM Shares Hit by New Phones; Pending Contracts on Existing Homes Jump; Obama Warns of More Job Losses; New Merck Drug Denied By FDA; Pay Czar Hopes Other TARP Banks Follow His Lead on Cuts - The Stanley Works (NYSE: SWK) late yesterday (Monday) announced a $4.5 billion deal to acquire Black & Decker Corp. (NYSE: BDK) in an all-stock agreement aimed at creating a hand-tool and power-tool giant that will be able to benefit from a turnaround in the U.S. housing market. The deal was seen as a highly opportunistic one for both companies. Stanley is know primarily for hand tools, and a brand name that rivals only the vaunted "Sears Craftsman" line of tools for brand awareness at the retail level. Black & Decker is a major player in the power-tools market – both for the "do-it-yourselfer" homeowner with its base-line Black & Decker brand, and for the construction industry with its trademark black-and-yellow "DeWalt" offering. Black & Decker Chief Executive Officer Nolan Archibald says the deal's allure was the estimated $350 million in annual cost savings that can be extracted from the combined entity. By the third year, the deal will add $1 per share to the bottom line and will generate $1 billion a year in free cash flow. Announced after the close of regular trading yesterday, the deal caused Black & Decker's shares to shoot up to nearly $58 by 6 p.m. That represents about a 23% premium over the Baltimore-based company's closing share price of $47.34 in regular trading yesterday. Under the terms of the deal, Black & Decker shareholders will receive 1.275 shares of Stanley for each share they own of Black & Decker. That equates to a 22.1% premium to Black & Decker's Friday closing price of $47.22. "This looks like a really strong deal for both companies and ultimately demonstrates that they're positioning themselves ahead of renewed demand from the housing sector," Wall Street Strategies analyst Brian Sozzi told MarketWatch.com. "Make no mistake; the deal announced this eve ning is mostly about cost synergies long-term."
- Credit Suisse Group AG (NYSE: CS) tripled its third-quarter earnings estimate for American International Group Inc. (NYSE: AIG), citing gains in investments including derivatives and hedge-fund holdings Bloomberg News reported. Credit Suisse analyst Thomas Gallagher said AIG would earn $4.50 a share in the third quarter, up from the firm's previous estimate of $1.40 a share. Gallagher expects AIG's derivatives unit, which brought the company to the brink of collapse last year with bets on home loans, to post a gain of about $2.5 billion. Hedge fund and private equity investments probably earned about $700 million in the quarter, he said. He rates the shares "underperform" and has said there may be little value for shareholders after the insurer repays its debts associated with a $182.3 billion government bailout.
- Bank of America Corp. (NYSE: BAC) is preparing to pay back approximately $20 billion it borrowed from the government's Troubled Asset Relief Program (TARP), according to investment bankers who spoke to The New York Post. The Charlotte, NC-based bank received the money from the government to help complete its merger with Merrill Lynch & Co. last December. Ken Lewis, Bank of America's outgoing chief executive officer, wants to pay employees freely without government scrutiny, one source noted. Rumblings about the bank paying back TARP have been floating around for weeks, but are coming to a head as financial institutions prepare to hand out year-end bonuses.
- Shares of Research In Motion Ltd. (NASDAQ: RIMM), maker of the BlackBerry smart phone, fell in trading yesterday (Monday) after Citi Investment Research analyst Jim Suva told investors to sell the stock because of mounting competition from other smart phone makers. "Simply put, there is an invasion of new phones, applications, and competition," Suva wrote in a note to clients. He cut his rating to "sell" from "buy." He cited the launch of a Motorola smart phone running on Google Inc.'s (Nasdaq: GOOG) Android operating system as being among the key competitive threats, Reuters reported.
- Sales contracts on previously owned homes rose 6.1%, pushing the National Association of Realtors' Pending Home Sales Index to 110.1 in September – the highest level since December 2006. First-time buyers rushed to take advantage of a soon-to-expire tax credit, Reuters reported. Pending home sales have now risen for eight straight months, the longest streak since records began in 2001, and stand 21.2% above their year-ago level. A separate report from the Commerce Department showed spending on construction projects rose 0.8% in September, supporting the view that the housing sector is stabilizing.
- U.S. President Barack Obama warned of further job losses yesterday (Monday) and called for a "post-bubble growth model" that focuses more on exports, Reuters reported. President Obama noted the lag of "several months" between businesses returning to profitability and when they actually start re-hiring. "Are there mechanisms that we can start putting in place where we see the kind of growth that used to characterize the U.S. economy — export-driven growth, manufacturing growth," he asked in a meeting of his Economic Recovery Advisory Board, which includes former U.S. Federal Reserve Chairman Paul Volcker.
- The Food and Drug Administration (FDA) has denied Merck & Co. Inc.'s (NYSE: MRK) application for a new combination cholesterol pill that includes Pfizer Inc.'s (NYSE: PFE) Lipitor, Merck said in a regulatory filing yesterday (Monday). It sent the application to the FDA in September, but the FDA refused to file the application and is requiring more data on the manufacturing and stability of the combo pill. Merck plans to reapply with additional data, a spokesman told The Associated Press.
- Ken Feinberg, the Obama administration's "pay czar" said he hopes other bailed out banks follow his lead on pay cuts he implemented last month, MarketWatch.com reported. "I think what we have done is worthy to be emulated by others in the private sector," he said at a conference on executive pay organized by the University of Maryland. Feinberg cut the compensation of the top 25 highest-paid executives at the top seven bailed-out banks in October. Now, he's working on the next 75 top employees as he's required to do by law.
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China's Secret Plan to Devalue the Dollar
The Federal Reserve isn't the only player driving down the value of the dollar. The Red Dragon is launching an attack of its own. China's recent deal with Argentina is just the beginning. Find out how China is torpedoing the dollar in our special Money Morning Publisher's Series report.
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Feature
Rising Gold Prices: Inflation Isn't the Whole Story
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November 2
| U.S. Auto Sales (10/09) | November 3
| Factory Orders (10/09) | | | Federal Reserve Board Meets | November 4
| Federal Reserve Issues Policy Statement | | November 5 | Retail Sales for Chain Stores (10/09) | November 6
| Unemployment Report (10/09) | Worth Considering
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