Friday, October 03, 2008

Warren Buffet Is He All In?

Warren Buffet has held true to form and invested when others are too scared to get out of bed in the morning. He bought into Goldman (GS) and GE (GE). Wells Fargo that he has previously bought into just snapped up Wachovia (we think)

So the question becomes what is left to buy at insane bargain prices that value investors love? Remember it has to be a quality franchise.

Or will the next move need more long term clarity? Remember he waits for a big fat pitch.

Was Citigroup Stealing?

Citigroup’s (C) attempt to take over Wachovia (WB) seems to have been trumped by Wells Fargo (WFC). Wachovia has been declared a weak bank by the current standards of financial hysteria. Given that we all believe the domino’s are falling over it was supposedly Wachovia’s turn. Citigroup says it answered the call from the regulator and was not actively shopping.

Now it says that it will sue for breach of deal making decorum. Wachovia managed to generate a better deal for itself. This is what their management is supposed to do. Citigroup is playing cute and complaining. It was playing the role of reluctant saviour catching a falling knife. When in fact it was catching a touch down pass.

Financial markets have lost their way. Baby and bath water are being thrown out. Regulators have taken the policy decision of guiding weak assets into strong. But do regulators have an obligation to the marketplace to ensure shareholder are not cheated in valuations. Right now an independent third party offer says the Citigroup deal should be beaten. Wells Fargo says Wachovia is worth more. Wells Fargo says it does not need taxpayer support which is a relief.

What does this say about the back room machinations of FDIC and their relationship with individual banks? Are they behind the scene king makers using the current hysteria and confusion as cover? Is the FDIC driving the get away car?

Watch Citigroup’s lawsuit. If it starts to claim substantial economic loss by not getting the deal than they were stealing. If the Wells Fargo deal is not allowed than Wachovia shareholders have been cheated.

Wednesday, October 01, 2008

Actuant Signals Acquisition

Actuant (ATU) released earnings and pronounced them to be record breakers. Full-year 2008 revenues were a record $1.66 billion, a 14% increase over the prior year.Q4 revenues increased 4% year-over-year, to $405 million.

Record full-year diluted earnings per share (“EPS”) of $2.05, excluding special items, an increase of 18% over the comparable 2007 figure. Q4 EPS increased 10% year-over-year, excluding special items, to $0.54 .

The telling comment is when Robert C. Arzbaecher, President and CEO of Actuant commented:

“We expect 2009 to be a challenging year given the unsettled economic and credit environments and headwinds from the stronger US dollar and higher borrowing costs. While we believe market conditions have become more difficult in the last 90 days, we feel the Company is well positioned given the focused execution of our business model and our increasingly diversified end markets and geographies. In addition, we are optimistic about acquisition opportunities and the potential they could have on fiscal 2009 results.”

The questions this raises is

1. What about organic growth? What role will this play in the company’s fortunes? Is there a negative signal here.
2. Is this a conglomerate waiting to happen? Rapid acquisitions are usually fraught with integration issues? If they plan on buying distress situations can they fix the problems. Remember this company is already carrying some debt. Will their stock be an adequate currency?

Bail Out Follies

Watching congress debate the bail out is like watching a married couple argue about you will call the fire dep't when your home is burning down. Meanwhile the fire dep't can smell smoke and feel the heat of the fire but somehow cannot respond to the alarm. Incredibly curious?

Tuesday, September 30, 2008

Bail Out the Bail Out?

Like I said yesterday forecasting squirrelly politicians just weeks before elections is very difficult. The vote appears to be schizophrenic. The interaction between the President and Congress revolves around a manic depressive dynamic. The President can clearly see the problem and therefore has presented a solution. Congress can also clearly see the problem but they are not looking in the same direction. Or at least the angle is not congruent.

What this means is that there will be a round of badly needed regulatory reform in the next Congress. President Bush’s and Chairman Cox’s ideas will most likely not prevail. Whatever gets passed in this session will be like the rental car after a car accident; Good enough to get you around but not what you need or want.

Washington Post Non Disclosure

Washington Post (WPO) just announced the takeover of Foreign Policy Magazine. Sounds like a good idea that enhances the political clout of Washington Post. The class B shares which trade around $550 a share and are trading near their 52 week lows were up slightly in this mornings early trading.

OK let me get this straight. A news organization that fights for disclosure, clarity, transparency, even the truth, announces a deal with financial implications and utters not one word about the financial ramifications. Lots of verbiage about the editorial side of Foreign Policy, which is all good. But they did not even bother to say that financial terms were not released, or the old stand by where shareholders are directed to obtuse SEC filings.

Basically they are buying it and we should be happy. That’s all folks go back to what you were doing before I bothered you with this one.

Hey is Warren Buffet OK with this one?

Monday, September 29, 2008

Bail Out Plan

If you think forecasting stocks is hard, try forecasting politicians several weeks before major elections. Whatever congress passes will be changed, altered, enhanced, modified and to some extent ignored. The Devil is in the details but in this case we are changing Devils.

Not one politican will claim credit for passing this legislation. Most if not all politicans will take credit for making it tough on Wall Street. Democrats will take the opportunity to bash Republicans. In their zeal to bash Republicans I hope they remember to fix the fundamental problems.

Steelcase Clueless About Future?

Steelcase (SCS) issued Q2 results and supposedly beat the street estimates. Their stock has been dropping for the past year. In a sense they are an economic indicator. You do not buy office furniture if you expect poor results.

The earnings release would delight a book-keeper but the management comments leave the financial analyst wanting more. Essentially they are pointing to commodity inflation as squeezing margins. But international sales are looking very good. James P. Hackett, president and CEO. promises to monitor world events. No substantive comments about specific markets, product lines, customer dynamics or even what they are doing about commodity inflation other than just trying to charge more.

Come on James Hackett investors need more before they buy in.