Is investing abroad because the U.S. is going through a rough patch a good idea? If so, why? What foreign markets are attractive? Investing abroad is a good idea -- but not because the U.S. is melting down. Instead, it turns out that emerging markets are outperforming developing ones because they are supplying the commodities that fuel demand for 10% annual growth in emerging markets like China and India.
Emerging markets are up 20% in the last year while developed markets like the U.S. are flat. The reason to invest in these markets is not so much because the U.S. is going through a rough patch but more because these other markets are doing so much better and they are going to continue to do well regardless of what happens in the U.S.
But the U.S.'s rough patch may not be as bad as people had thought. An economist at Wachovia Corp. (NYSE: WB) changed his estimate of the chances of a recession from 90% to 45%. So the U.S. may turn out to be a good place to invest if stocks are priced for a recession that doesn't happen.
Just a few weeks ago, it looked like the $19.4 billion buyout of Clear Channel Communications (NYSE: CCU) was dead. But in the deal market, things can change quickly.
Just today, the New York Supreme Court said there will be a stay on the litigation on the deal. According to CNBC, it looks like the parties are engaged in heavy settlement talk.
No doubt, a trial could be problematic for the banks that are on the hook for $22 billion in debt financing. These banks include: Citigroup (NYSE: C), Credit Suisse (NYSE: CS), Morgan Stanley (NYSE: MS), Royal Bank of Scotland, Deutsche Bank AG and Wachovia (NYSE: WB).
Now, they may be willing to fund the deal.
Why? Well, it looks like the debt markets are improving and the major banks have worked hard to boost their balance sheets.
In other words, the US credit crunch may be thawing. If so, we may see some more dealmaking – which would be a relief for Wall Street banks eager to get some juicy fees.
So far in today's trading, Clear Channel's shares are up 9.5%.
TheStreet.com's Jim Cramer says the guys at the top don't know what they're doing, and it shows.
AIG's (NYSE: AIG) (Cramer's Take) making everyone's life difficult today. That's in part because AIG had been the biggest proponent of "super senior," meaning they repeatedly said that their collateralized debt obligation (CDO) exposure was of the kind that was intelligent, measured and thoughtful. They talked endlessly about how their due diligence made the difference and that unlike all of the other buyers, they kicked the tires three times and never bought the plain ol' CDOs. Then they brought in professors from Wharton to be sure that even if all heck broke loose and they were being too aggressive, they would be hedged.
They also were the first to give you the percentages of how much could go bad and that even in the worst-case scenario, they were overcapitalized. And, most important, they were insurers, no need to mark to market, they can play it all out.
Plus, they touted their own struggles. They made the point that because of the turmoil at the top, they hadn't bought any bad stuff and stopped buying residential real estate products after 2005. What they did buy -- they assured us in that big teach-in dog-and-pony show in December -- was the extra-special nature of their particular buys and that, unlike everyone else, risk officers scrutinized every single piece of paper that went into their super senior insurance, meaning only the top-top part of a CDO-squared, the part where everything had to default ahead of it; they made a point of how impossible that would be.
According to people familiar with the matter, Robert Verrone, one of the most zealous commercial real-estate lenders during the industry's boom, will leave Wachovia Corporation (NYSE: WB) within the next week, the Wall Street Journal reported.
WEB SITES:
Bloomberg reported that the Department of Justice is probing whether UBS AG (NYSE: UBS) helped clients evade American taxes. In an e-mailed statement, the firm said one senior bank employee was "briefly detained" by authorities.
Bloomberg also reported that Vallejo, California's city council voted to go into bankruptcy. Officials said that after talks with labor unions failed to win salary concessions from police and fire fighters, the city does not have enough money to pay its bills.
According to a rumor, TechCrunch reported that the Yahoo Inc (NASDAQ: YHOO) board of directors yesterday authorized Yahoo chairman Roy Bostock, rather than CEO Jerry Yang, to call Microsoft Corporation (NASDAQ: MSFT) CEO Steve Ballmer about re-starting negotiations.
MOST NOTEWORTHY: Wachovia, American Electric Power and Consol Energy were today's noteworthy upgrades:
Deutsche Bank upgraded Wachovia (NYSE: WB), citing valuation and recent capital actions.
Bank of America upgraded American Electric Power (NYSE: AEP), citing the new Ohio rate structure which will provide steady growth.
Merrill upgraded Consol Energy (NYSE: CNX) based on higher coal prices.
OTHER UPGRADES:
Goldman upgraded the Integrated Oils sector based on risk/reward relative to oil prices. ConocoPhillips (NYSE: COP) is the firm's favorite pick.
Affiliated Computer Services (NYSE: ACS) was upgraded to Buy from Neutral. Goldman expects Affiliated to do well in the current slower macro backdrop and views shares as relatively insulated to government cutbacks.
Deutsche Bank upgrades Wachovia (NYSE:WB) to "buy" from "hold" according toBriefing.com. The news service also reports that Thomas Weisel initiated VMWare (NYSE:VMW) with a "market weight" rating.
Citigroup downgraded CB Richard Ellis Group (NYSE:CBG) to "hold" from "buy" according to the AP. The news service also writes that Moody's raised it outlook on NRG Energy (NYSE:NRG) to "stable" from "negative."
Ford (NYSE:F) was raised to "hold" from "sell "at Citigroup according to24/7 Wall St.
The Feds are looking into whether drug money was laundered by Wachovia (NYSE: WB). The investigation is "part of a broad probe of alleged laundering of drug proceeds by Mexican and Colombian money-transfer companies," according to The Wall Street Journal (subscription required).
Several companies with accounts that have been seized claim to be legitimate businesses and that if they cannot get at their funds, they may go out of business.
The open question is whether Wachovia employees knew about the transactions.
It is hard to imagine a well-run bank like Wachovia would be involved in such blatant aid to drug operations from outside the U.S. Perhaps that is why its shares are down almost 50% this year.
Douglas A. McIntyre is an editor at 247wallst.com.
TheStreet.com's Jim Cramer says this lender gave money to anyone with a pulse, and the shareholders are left holding the bag.
For pure laughs, go read the National City (NYSE: NCC) (Cramer's Take) conference call yesterday, the one where they destroyed what was remaining of their common shareholder base with the partial takeunder by Corsair, an unknown private-equity fund that surfaced to inject $7 billion to save the bank.
But this Nat City takes the cake. They have to be the most stupid and least rigorous lender since the S&L crisis. They have $10 billion in home equity loans that have got to be among the worst ever issued. I swear, I bet that many of these are going to turn out to be out-and-out fraud by the borrowers. Miraculously, Nat City found an even more stupid soul, Merrill's (NYSE: MER) (Cramer's Take) Stan O'Neal, to sell its main originator of this junk to, something that brought O'Neal down and almost brought Merrill down. Some would say that the latter is still in question. I have no idea what would have happened to NCC if they hadn't sold it before the height of the fraud, the first quarter of 2007.
Some of the smartest investors, or at least ones who made a lot of money in the past, are buying financial stocks. Big time. They're the ones who bought a large chunk of Washington Mutual (NYSE: WM) and Wachovia Bank (NYSE: WB). Some $7 billion worth in WaMu, $8 billion in Wachovia coming soon. (Wachovia raised $3.5 billion through preferred stock only two months prior.) But these sharp investors didn't buy stock on the open market. They got theirs in negotiated deals with each bank. And they're not done buying.
Banks are teetering on the edge of a precipice. Without new capital their losses threaten to wipe out the capital base required to stay open. That forces many of them to consider selling to another, stronger bank or raise more capital to replace the losses. While not strictly a bank, Bear Stearns (NYSE: BSC), an investment bank, was leaning heavily over the edge when JP Morgan Chase (NYSE: JPM) threw it a rope and reeled it in. Originally at $2 a share, now at $10. The building that Bear owns is said to be worth at least $2 a share, so JP Morgan's life line came at a very high cost.
Today's markets could have actually been a lot worse. Oil rose $1.63 to $111.77 per barrel, making $100 ancient history. The March retail sales numbers would have been great at the +0.2% reading except for the fact that it was due to higher gas prices paid at the pump; otherwise sales would have been flat. In the environment of weak spending, that might still be a win. After everyone's favorite conglomerate killed the markets Friday, these small losses are a win. Below are the unofficial closing levels:
Wachovia Corporation (NYSE: WB) could announce a capital infusion of several billion dollars from outside investors as early as Monday, people familiar with the matter said. While final terms of the deal are still being worked on, the Wall Street Journal reported that the bank is expected to receive between $6B-$7B, in return the investor group would receive shares priced at roughly $23-$24 per share.
According to people familiar with the matter, the Wall Street Journal reported that Deutsche Bank AG (NYSE: DB) is seeking to sell as much as $20B in debt to a 'collection of investors,' which include private-equity firms.
Why Starbucks' Logo Changed The coffee chain is temporarily using a retro brown look to evoke its beginnings and restore some goodwill for the brand. Starbucks' Retro Logo - BusinessWeek
Big Names Owe Big-Time on Taxes The IRS estimates that 21% of federal individual income taxes go unpaid each year - about $300 billion last year. As Tuesday's tax deadline approaches, Americans are settling accounts on $1.5 trillion in federal and state income taxes for 2007. But what about those who don't pay? Who are they? Do they get away with it? Hundreds of seemingly wealthy people - company presidents, former soap opera stars, top-selling real estate agents - live in multimillion-dollar homes yet have huge tax problems. Many tax delinquents live openly and prosperously for years, even decades, while owing millions of dollars in taxes. These include singer Dionne Warwick, comedian Sinbad, Bill Clinton's former political advisor, Dick Morris, former U.S. treasurer Catalina Vásquez Villalpando and infamous celebrity OJ Simpson to name a few. Big names owe big-time on taxes - USATODAY.com
Wachovia (NYSE: WB) is recently trading at $24.99 in pre-open trading, below its close of $27.81. WB announced a $350 million loss for the first quarter, $2 billion in new write-downs, raising $7 billion in new capital and will reduce its dividend by 41%. WB May option implied volatility of 78 is above its 26-week average of 48 according to Track Data, suggesting larger price movement.
Options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
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Comfort Zone Investing: One thriving area of real estate: Apartments
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
