Unstructured Finance

Jag auction accelerates to finish line

jag21.jpgLike any sexy asset up for sale, Jaguar is attracting a lot of attention.

At least five bidders are expected to throw their hats in the ring by Friday when second round offers are due for the iconic carmaker put up for sale by U.S. automaker Ford. Land Rover is also included in the assets on the block.

Among bidders accelerating to the finish line are India’s Tata Motors, buyout firms One Equity, Ripplewood and TPG and British financier Guy Hands’ Terra Firma.clark.jpg

But there’s a sixth mystery party thought to be putting a bid into gear.  Purely speculatively, we’re wondering if some of those named as interested in buying Chrysler when that automaker was up for sale would also be interested — such as Canada’s Magna.

Whoever buys Jag will have a challenge living up to the car’s glamorous past — driven by movie stars, pop stars and celebrities from George Best to Clark Gable.

(pictures: Jaguar Web site and www.clarkgable.com)

No wonder O’Neal has Goldman on the mind

941park.gifIf you’re wondering why ousted Merrill CEO Stan O’Neal was apparently obsessed with comparing his firm’s performance to that of Goldman Sachs, look no further than 941 Park Avenue.
    
That’s right, O’Neal and Goldman CEO Lloyd Blankfein live in the same building at Park and 81st. 

The New York Times Dealbook points this out in a blog post about the opposite direction the two men are headed. Goldman’s stock hit $245 on Wednesday, it’s highest level since the firm went public in 1999. Meanwhile, Merrill’s shares have been battered lately, hit by the whopping $8.4 billion write-down it took from bad subprime mortgage bets.
Stan O’Neal was swiftly shuttled out of his CEO spot. Blankfein, by contrast, is shining in his role at Goldman, the bank whose quarterly numbers impressed while the others mostly disappointed.

The Wall Street Journal pointed out that O’Neal used to wonder aloud to managers why their numbers didn’t stack up to Goldman Sachs. Of course, most of Wall Street compares themselves to Goldman. But in O’Neal’s case, that comparison was apparently a little closer to home.
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Oil market stuck in a hamster wheel?

rtr1tmb6_comp.jpgU.S. crude oil prices gushed to a record over $94.50 a barrel Wednesday after a government report showed a surprisingly big decline in stockpile levels last week. And more declines in inventories could be on the way.

Energy analysts are saying the industry is selling off huge amounts of oil in storage because of the shape of the forward price curve — oil prices get cheaper for delivery out into the future — and the market may now be in a vicious circle…. or perhaps a hampster wheel.

“We’re in a hampster wheel right now,” said Stephen Schork, editor of the Schork Report. “Given the economics of what it takes to store oil, it makes no sense to hold onto inventory right now. Storage owners are taking the economically prudent step and dumping inventories because of the backwardated market structure.”

Daily Briefing: Rush Hour

tomtom.jpgTomTom, Europe’s top digital navigator can hardly be surprised that U.S. competitor Garmin has swooped in with a 2.3 billion-euro ($3.3 billion) offer for Dutch digital map provider Tele Atlas, and based on investor reaction Garmin should brace for more. TomTom offered to buy Tele Atlas for 1.8 billion euros in July. Then Finnish cellphone maker Nokia offered $8.1 billion for U.S.-based Navteq, Tele Atlas’s only global competitor, signaling the consolidation was underway. Bloomberg reports the bidding war is moving into high gear, quoting Jesper Kruger, who helps manage about $64 billion at ATP in Copenhagen as saying TomTom could increase their offer by at least 20 percent. The FT says Garmin has invited the Tele Atlas board to a meeting within the next week to seek support, but has said it will pursue the offer even if it is not backed by the board.

The Deal Journal asks whether Bank of America‘s push to get its name into investment banking league tables will be remembered for its brevity as it slashes 1500 heads from investment banking. It references an article from today’s WSJ noting that new investment-banking head Brian Moynihan is seen as “presiding over a business soon to be dismantled.”

The New York Times reports Sony Pictures Entertainment could sell half of its young animation studio, which generated recent hits “Surf’s Up” and “Open Season” and could unload even more of its digital visual-effects company, which worked on “Stuart Little,” “The Polar Express” and the “Spider-Man” movies. “Sony Pictures, a unit of the Sony Corporation, has hired the investment bank Houlihan Lokey Howard & Zukin to assess the value of the two divisions. An outright sale of both, which is possible, could bring around $500 million. All told, Sony has invested more than $400 million in the animation and effects businesses over the years.”

Sepracor may have value to GSK, other suitors

lunesta-logo.gifDrug company Sepracor Inc., which posted better-than-expected third-quarter earnings and announced 300 job cuts, could be an attractive takeover target for a large pharma partner such as GlaxoSmithKline, an analyst said on Tuesday.

“We think Sepracor represents great value for a potential suitor, including GlaxoSmithKline, which is Sepracor’s European marketing partner for Lunesta,” said analyst Jon LeCroy at Natixis Bleichroeder.

“Using break-up valuation, we think Sepracor assets could be worth in excess of $40 per share to a bigger company, and our breakup valuation (50% of our target price) is approximately $45 per share,” LeCroy said.

Gold and oil…not as tight as they look

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With gold closing in on $800 an ounce and crude on $100 a barrel, it’s natural to assume a close connection. Gold is supposed to hold its value better than other assets when inflation is rising, so many investors consider it an inflation hedge. A glance at a weekly graph plotting New York gold futures over crude oil futures shows that while joined at the hip during last bout of commodity buying, going back they have frequently parted ways. The correlation coefficient, a statisical measure of how closely any two variables (like gold and oil) trade together, was 0.58 averaged over October, on a scale of -1.0 to 1.0. Stretched over five years, its more like 0.21, showing gold and oil are nearly independent (zero being not correlated.) Moreover, even as the gold market gets excited about breaking the 1980 records at $850 in spot and $875 for COMEX futures, in inflation-adjusted terms gold’s value is not near a record. Crude at $100 is basically its highest price ever in absolute and real terms. But gold’s inflation adjusted record was put at $2,079 an ounce by consultants GFMS Ltd. Deutsche Bank said in a report last week that gold needs to rise another 74 percent to reach an all-time high in real terms. So it looks cheap compared to oil. Why is gold lagging? It’s a good question. Part of the answer can be found in a relatively non-scary inflation picture, that defies the record rally in energy prices and many other commodities. Also, gold is not “consumed” the way other commodities are, being more of a monetary asset (and an adornment.) So demand for raw materials to feed China’s economy is less of a factor.

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A more compelling chart, (and prettier, if you like symmetry) shows gold’s inverse relationship with the dollar, which makes sense since gold is considered more of a currency than oil is. When the dollar goes down, gold often goes up and visa versa. The gold/dollar correlation is -0.76 in October and -0.54 over the longer period (full negative correlation is -1.0, think opposite ends of a seesaw). If the dollar keeps falling, gold could be expected in coming months to strike a nominal, if not a real, record high.

NOTE: This post was changed to correct a labeling error in the second graph.

Have some more price hikes

pgproducts1.jpgIt’s not news that consumers are spending more for lots of things they use in their daily lives. Higher raw material costs have jacked up the price for food, toilet paper, milk and tons of other everyday products.

But just to lay the future out in one place, here is the laundry list of upcoming U.S. price increases Procter & Gamble Chief Financial Officer Clayton Daley gave during the company’s quarterly earnings call on Tuesday:
    
    — a 4 to 8 percent increase on coffee, effective this month;
    — a 9 percent increase on fabric softeners, effective this month;
    — a 5 percent to 12 percent increase on Olay and Ivory Personal Cleansing products, effective in January;
    — a 5.5 percent increase on Bounty and Charmin paper products (effective in February);
    — a 5 percent to 8 percent increase on Pampers diapers (effective in February);
    — and a 3 percent to 5 percent increase on blades and razors (effective in February).
    
Of course, P&G isn’t the only company raising prices. Colgate, which also reported earnings  on Tuesday,  said it will raise prices on its Hill’s pet food business by 6 percent to 8 percent in the fourth quarter, due to rising ingredient costs.

And consumers are accepting the price increases without much push back, P&G CEO A.G. Lafley said, noting that lower-priced store brands, or “private-label” products, are losing market share instead of attracting price-shocked consumers.

Need a warranty? Maybe not

duetwasher.jpgIf you’re planning to buy a new appliance, think twice about getting that extended warranty.

That’s the advice from J.D. Power and Associates, which released a study today that concluded that the high reliability of appliances may reduce the need for such warranties.

The J.D. Power study, based on more than 22,000 responses from consumers who bought appliances, found that one in 10 customers reported a problem with their appliances during the first two years of ownership.

Mancrib.com: A gift for guys?

Gladiator GarageWorks, a unit of Whirlpool that makes garage appliances and storage systems, is launching a Web site that sounds like it comes straight out of a Maxim magazine or a beer commercial — Mancrib.com.

Mancrib.com is a “man registering” Web site aimed at “guy’s guys who were previously left out in the cold when it came to gift registries and giving.”

pantv.jpgMen can log on to the site and make a list of the “manly” gifts they really want, like work benches, high-def televisions, tools or grills.

“Superspike” Goldman says time to cash in on oil and gold

Goldman Sachs, which shook up commodity markets two years ago with its prescient ‘superspike’ theory that oil prices will top $100 a barrel, thinks it may be time for a short bout of profit-taking

After a 50 percent surge so far this year to $93 a barrel, crude is ripe for a temporary bout of “tactical” selling before resuming a climb that could take it into triple-digit territory, Goldman said. 

Gold and agriculture may also be ready for a little trim.

Goldman’s ‘superspike’ theory says booming global demand for commodities will outpace new supply.

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