Global Investing

from DealZone:

Is Buffett being Krafty?

Warren Buffett may have thrown a monkey wrench into Kraft's bid for Cadbury -- not with his 'no' vote on Kraft's plan to issue 370 million shares to help buy the British chocolate company, but with his scathing comments on Kraft's board for a deal he has long regarded with skepticism. Buffett previously said Kraft's stock was an "expensive currency" for funding the deal, a position he repeated on Tuesday.

Kraft's proposed share issue would give it a "blank check," allowing it to change its offer for Cadbury, Buffett's insurance and investment company Berkshire Hathaway said in a statement. "And we worry very much that, indeed, there will be an additional change from the revision announced this morning."

The statement came hard on the heels of a slight sweetening by Kraft of its $16.4 billion offer for Cadbury. The overall figure is the same, but the cash portion is a bit bigger. Perhaps more telling, it also followed a statement from Nestle shooting down speculation that the world's biggest food group had any interest in getting involved in the Cadbury deal.

With Cadbury's hopes for a new bidder now effectively dashed, and Kraft having tweaked its offer, any defections from the Kraft side will further crimp expectations that the bid might be raised again. Isn't this precisely the message Kraft wants Cadbury to get?

While we're on the subject of Kraftiness, we note the sale of Kraft's frozen pizza business for $3.7 billion to Nestle -- which is mean to help fund the increased cash portion of the Kraft bid -- could well have helped Nestle decide to steer investors away from thinking it would challenge Kraft's Cadbury bid.

from DealZone:

Buffett seen raising bet on housing

BuffettWarren Buffett is in talks to buy GMAC's mortgage lender Residential Capital, the New York Post reports. Teamed up with Appaloosa Management and Avenue Capital, Buffett has large debt positions in the gut-shot company, according to the Post. In September, Buffett's Berkshire Hathaway and Leucadia National agreed to buy Capmark Financial Group's mortgage loan and servicing business for up to $490 million.

If the residential property market hasn't begun a solid recovery, it certainly established a solid bottom over the past six months. New home sales figures out yesterday were shockingly weak, but keep in mind that November and December are not particularly hot months for residential real estate, and new home sales are a much smaller chunk of the market than the existing portion. Lots of analysts were expecting the housing recovery to face a test as we get closer to the extended deadline in March for the $8,000 homebuyer tax credit.

But it's a rare investor who gets rich betting against Warren Buffett. And if he's looking to buy low, he could hardly have done better than ResCap. The lender has been flirting with dangerously low capital levels, with the Post reporting it is bouncing around the minimum required net worth of $250 million. It had a tangible net worth of $409 million at the end of the third quarter. The mortgage company has lost over $10 billion in the last three years. The number of loans delinquent rose to 13.40 percent at the end of June from 11.50 percent at the end of 2008.